EARNINGS / Denbury Resources Inc. Announces Second Quarter 1998
Results
TSE, NYSE SYMBOL: DNR
AUGUST 5, 1998
DALLAS, TEXAS--Denbury Resources Inc. ("Denbury" or the "Company")
is pleased to report its operating and financial results for the
second quarter of 1998 with comparatives. All dollar amounts are
in U.S. dollars and production volumes and dollars are expressed
on a net revenue interest basis with gas volumes converted to
equivalent barrels at 6:1 ("BOE").
/T/
FINANCIAL HIGHLIGHTS
(Amounts in thousands of U.S. dollars)
Three Months Ended
June 30,
------------------------
Percent
1998 1997 Change
------ ------ --------
Revenues:
Oil sales 14,655 11,474 + 28
Gas sales 7,853 7,288 + 8
Interest and other income 375 253 + 48
------ ------ ---------
Total revenues 22,883 19,015 + 20
------ ------ ---------
Expenses:
Production 8,109 5,259 + 54
General and administrative 1,677 1,599 + 5
Interest 3,978 73 + /a
Depletion and depreciation 16,071 8,473 + 90
Franchise taxes 232 108 + 115
Writedown of oil and natural
gas properties 165,000 - + /a
------- ------ ---------
Total expenses 195,067 15,512 + /a
------- ------ ---------
Income (loss) before
income taxes (172,184) 3,503 - /a
Provision for income taxes 50,245 (1,296) - /a
------- ------ ---------
NET INCOME (LOSS) (121,939) 2,207 - /a
------- ------ ---------
------- ------ ---------
Earnings (loss) per common share:
Basic (4.57) 0.11 - /a
Fully diluted (4.57) 0.11 - /a
Average common shares
outstanding 26,690 20,156 + 32
Production (daily - net of royalties)
Oil (barrels) 15,649 7,543 + 107
Gas (mcf) 37,665 35,166 + 7
BOE (6:1) 21,927 13,405 + 64
Unit sales price
Oil (per barrel) 10.29 16.71 - 38
Gas (per mcf) 2.29 2.28 + 0
Three Months Ended
June 30,
------------------------
Percent
1998 1997 Change
----- ----- --------
Cash flow from operations /b 9,052 12,001 - 25
Cash flow per common share:
Basic /c 0.33 0.60 - 45
Fully diluted /d 0.32 0.55 - 42
Oil & gas capital
investments 49,843 21,014 + 137
BOE data (6:1)
Revenue 11.28 15.38 - 27
Production expenses (4.06) (4.31) - 6
------ ------ --------
Production netback 7.22 11.07 - 35
General and administrative (0.96) (1.40) - 31
Interest (1.72) 0.17 + /a
------ ------ --------
Cash flow /c 4.54 9.84 - 54
------ ------ --------
------ ------ --------
/a Greater than 1000 percent.
/b Exclusive of the net change in non-cash working capital
balances.
/c Cash flow from operations excluding change in working capital
balances divided by average common shares outstanding.
/d Assumes conversion or exercise of all securities as of
beginning of period and investment of any pro forma proceeds.
Six Months Ended
June 30,
------------------------
Percent
1998 1997 Change
---- ---- -------
Revenues:
Oil sales 30,828 24,351 + 27
Gas sales 16,868 15,552 + 8
Interest and other income 742 765 - 3
------- ------- ---------
Total revenues 48,438 40,668 + 19
------- ------- ---------
Expenses:
Production 15,963 10,312 + 55
General and administrative 3,453 3,120 + 11
Interest 8,369 152 + /a
Depletion and depreciation 28,458 15,098 + 88
Franchise taxes 432 205 + 111
Writedown of oil and natural
gas properties 165,000 -- + /a
------- ------- ---------
Total expenses 221,675 28,887 + /a
------- ------- ---------
Income (loss) before
income taxes (173,237) 11,781 - /a
Provision for income taxes 50,618 (4,359) - /a
-------- ------- ----------
NET INCOME (LOSS) (122,619) 7,422 - /a
-------- ------- ----------
-------- ------- ----------
Earnings (loss) per common share:
Basic (4.89) 0.37 - /a
Fully diluted (4.89) 0.35 - /a
Six Months Ended
June 30,
------------------------
Percent
1998 1997 Change
----- ---- --------
Average common shares
outstanding 25,066 20,125 + 25
Production (daily -- net of
royalties)
Oil (barrels) 15,191 7,345 + 107
Gas (mcf) 38,963 32,933 + 18
BOE (6:1) 21,685 12,833 + 69
Unit sales price
Oil (per barrel) 11.21 18.32 - 39
Gas (per mcf) 2.39 2.61 - 8
Cash flow from operations /b 20,507 26,923 - 24
Cash flow per common share:
Basic /c 0.82 1.34 - 39
Fully diluted /d 0.78 1.23 - 37
Oil & gas capital
investments 76,253 36,156 + 111
BOE data (6:1)
Revenue 12.15 17.18 - 29
Production expenses (4.07) (4.44) - 8
----- ----- ---------
Production netback 8.08 12.74 - 37
General and administrative (0.99) (1.43) - 31
Interest (1.87) 0.28 + 768
----- ----- ---------
Cash flow /b 5.22 11.59 - 55
----- ----- ---------
----- ----- ---------
/a Greater than 1000 percent.
/b Exclusive of the net change in non-cash working capital
balances
/c Cash flow from operations excluding change in working capital
balances less the imputed preferred dividend, divided by
average common shares outstanding.
/d Assumes conversion or exercise of all securities as of
beginning of period and investment of any pro forma proceeds.
/T/
Denbury's operating results for the second quarter of 1998
remained strong with its twenty-first consecutive quarterly
increase in production, continued low operating costs per BOE and
one of its lowest ever administrative expense per BOE ($0.96 per
BOE). Production for the second quarter of 1998 averaged 21,927
BOE/d, an increase of 64 percent from the second quarter of 1997,
and production for the first half of 1998 averaged 21,685 BOE/d,
an increase of 69 percent over the comparable period in 1997.
However, the financial results were significantly impacted by the
29 percent drop in oil and gas product prices (on a BOE basis)
between the two six month periods consisting of a $7.11 per Bbl
drop in oil prices (39 percent) and a $0.22 per Mcf drop in gas
prices (8 percent).
As a result of the decline in oil prices since December 31, 1997
and based on internal estimates, the estimated proved reserves
decreased approximately 7.2 million barrels as of June 30, 1998 as
oil wells reached the end of their economic life sooner and
certain proved undeveloped locations became uneconomical. This
decline in reserve quantities caused depreciation and amortization
on a BOE basis to increase to $7.25 per BOE for the first six
months of 1998 as compared to a rate of $6.50 per BOE for the
comparable period in 1997. Futhermore, due to (i) the additional
decline in oil price during the second quarter, (ii) a widening of
the margin between the NYMEX oil price and the net realized field
price and (iii) the effect of these low prices on the horizontal
drilling program, the application of the full cost ceiling test
required the Company to take a $165 million writedown of its oil
and natural gas properties. Of this total, $134 million related to
the recently acquired Heidelberg Field which was first included in
the ceiling test calculation as of June 30, 1998. As required by
U.S. generally accepted accounting principles, this ceiling test
was computed using June 30, 1998 prices which were equivalent to
a NYMEX oil price of $14.00 per Bbl and an average net realized
oil price of $8.90 per Bbl. Although the Company believes that
this oil price is well below the price that it expects to receive
over the life of the reserves, this reduction of the book value
provides a solid base for subsequent earnings growth if the
Company is able to produce its reserves at higher prices in the
future.
At Heidelberg Field, the Company spent approximately $11 million
on acquisitions and $14 million on development and facilities
during the first six months of 1998 drilling 8 horizontal wells
and 3 horizontal injection wells. The Company plans to spend about
$14 million at this field during the remainder of 1998 on
facilities, injection wells and 9 vertical wells. The Company also
plans to conduct a carbon dioxide tertiary recovery pilot project
during 1998 to test the feasibility of CO2 injection into the
Christmas sands. An additional 14 horizontal wells that were
originally scheduled have been postponed pending higher oil
prices. Gareth Roberts, President and Chief Executive Officer
noted the following, "The geological results to date at Heidelberg
Field are meeting or exceeding expectations. Obviously we are
disappointed with the oil prices, but as they recover we have no
doubt that Heidelberg Field will prove to be a tremendous asset."
During the first half of 1998, the Company spent a total of
approximately $63 million on development and exploration and $13
million on acquisitions with a current development and exploration
budget for 1998 of approximately $100 million. Although the
spending level is almost the same as the original budget, the
focus has changed from horizontal drilling on Mississippi oil
properties to expenditures on leasehold, seismic, injection wells
and other facility work in both Mississippi and Louisiana and
projected increased drilling expenditures during the last half of
1998 in Louisiana. A substantial portion of these expenditures are
directed to long term projects and are expected to provide benefit
to the Company in 1999 and beyond.
Denbury is a natural resource company with operations in the
states of Louisiana, Mississippi and Texas.
This press release, other than historical financial information,
contains forward looking statements that involve risks and
uncertainties including budgeted capital expenditures and expected
production results and other risks and uncertainties detailed in
the Company's SEC reports, including the reports on Form 10-Q.
Actual results may vary materially. |
