PLANO, Texas, May 6, 2014 (GLOBE NEWSWIRE) -- Denbury Resources Inc. (NYSE:DNR) ("Denbury" or the "Company") today announced adjusted net income (a non-GAAP measure) (1) of $89 million for the first quarter of 2014, or $0.25 per diluted share. First quarter of 2014 net income (the GAAP measure) was $58 million, or $0.17 per diluted share. Adjusted net income for the first quarter of 2014 differs from GAAP net income by $31 million of expenses for the noncash fair value adjustments on commodity derivatives. Sequential and year-over-year quarterly comparisons of selected financial items are shown in the following table:
|(in millions, except per share amounts)||March 31, 2014||Dec. 31, 2013 (3)||March 31, 2013|
|Net income (GAAP measure)||58||90||88|
|Adjusted net income (1)||89||100||123|
|Net income per diluted share (GAAP measure)||0.17||0.25||0.23|
|Adjusted net income per diluted share (1)||0.25||0.27||0.33|
|Cash flow from operations (GAAP measure)||215||349||269|
|Adjusted cash flow from operations (1)(2)||289||295||316|
Sequentially, adjusted net income (1) for the first quarter of 2014 decreased by $11 million from the fourth quarter of 2013 level primarily as the benefit of 3% higher production volumes and lower lease operating expense was more than offset by seasonally higher general and administrative expense, higher interest expense due to less capitalized interest, and a higher income tax rate compared to the below normal rate in the prior quarter. Adjusted cash flow from operations (a non-GAAP measure) (1)(2) for the first quarter of 2014 was also lower sequentially, but would have been higher than that measure in the prior quarter except for the current income tax benefit of $13 million that was recorded in the prior quarter resulting from additional tax deductions for placing the Riley Ridge gas processing plant into service in 2013.
Compared to the prior-year first quarter, 2014 first quarter adjusted net income (1) decreased by $34 million primarily due to a 7% decrease in realized oil prices and higher cash payments for the settlement of commodity derivative contracts, which more than offset the benefits from the 16% increase in production volumes that resulted primarily from the acquisition of additional interests in Cedar Creek Anticline ("CCA") in late March 2013. These comparative first quarter results were also impacted by higher lease operating expense and depletion, depreciation and amortization ("DD&A"), both of which were primarily due to the CCA acquisition, and a lower amount of capitalized interest in the current quarter.(1) See accompanying Schedules that reconcile GAAP to non-GAAP measures along with a statement indicating why the Company believes the non-GAAP measures provide useful information for investors. (2) Adjusted cash flow from operations reflects cash flow from operations before working capital changes but is not adjusted for nonrecurring items. (3) The GAAP to non-GAAP reconciliations for the fourth quarter of 2013 are part of the Company's fourth quarter 2013 earnings release, which is an exhibit to its February 20, 2014 Form 8-K. Management Comment Phil Rykhoek, Denbury's President and CEO, commented, "2014 is off to a positive start with our quarterly production up 3% sequentially from fourth quarter of 2013 levels, driven by a new record level of 39,892 barrels per day ("Bbls/d") for tertiary production. Tertiary production growth was driven by increased production response at several fields in the Gulf Coast region and at Bell Creek Field in the Rocky Mountain region. Bell Creek's tertiary production continues to benefit from the step up in carbon dioxide ("CO 2") injections following the completion of our Greencore Pipeline interconnect in late January, averaging 578 Bbls/d in the first quarter of 2014, up from 177 Bbls/d in the fourth quarter of 2013 and recently exceeding 900 Bbls/d. Non-tertiary production was boosted by our development work in several fields and increased natural gas sales from our Riley Ridge gas processing plant. "We generated $289 million of adjusted cash flow from operations during the first quarter of 2014 and currently estimate that our full year 2014 adjusted cash flow from operations will exceed combined full year 2014 capital expenditures and dividend payments. Also, just last week, we improved our capital structure with our issuance of $1.25 billion of 5½% senior subordinated notes due 2022 to refinance $996 million principal amount of 8¼% senior subordinated notes due 2020, while reducing the outstanding borrowings on our bank credit facility to $450 million as of April 30 with the additional proceeds. The issuance pushes the next significant maturity of our senior subordinated notes out to 2021 and reduces our interest on the principal amount of the 8¼% notes by over $27 million per year; however, after factoring in the incremental subordinated debt we issued and the higher interest rate on subordinated debt versus bank debt, our net annual interest savings are estimated at about $17 million.