PLANO, Texas, Aug. 07, 2018 (GLOBE NEWSWIRE) -- Denbury Resources Inc. (NYSE: DNR) today announced net income of $30 million, or $0.07 per diluted share, for the second quarter of 2018. Adjusted net income⁽¹⁾ (a non-GAAP measure) was $61 million, or $0.13⁽¹⁾⁽²⁾ per diluted share, with the difference from GAAP net income primarily due to the exclusion of $41 million ($31 million after tax) of expense from noncash fair value adjustments on commodity derivatives⁽¹⁾ (a non-GAAP measure), with the GAAP and non-GAAP measures reconciled in tables beginning on page 7.

2018 SECOND QUARTER HIGHLIGHTS

• Production of 61,994 barrels of oil equivalent (“BOE”) per day in Q2 2018, up 3% from Q1 2018 and 4% from Q2 2017
• Adjusted cash flow from operations⁽¹⁾ (a non-GAAP measure) of $134 million for Q2 2018, up 7% from Q1 2018 and 106% from Q2 2017
• Adjusted EBITDAX⁽¹⁾ (a non-GAAP measure) of $153 million for Q2 2018, up from $142 million in Q1 2018 and $86 million in Q2 2017
• Reduced debt principal by $189 million in Q2 2018, and over $1 billion since Q4 2014
• Continued improvement in leverage metrics, debt to annualized Q2 2018 Adjusted EBITDAX of 4.1x (including hedge settlements) and 3.0x (excluding hedge settlements)
• Sanctioned the enhanced oil recovery (“EOR”) development project at Cedar Creek Anticline, with total recoverable oil potential estimated to be in excess of 400 million barrels

MANAGEMENT COMMENT

Chris Kendall, Denbury’s President and CEO, commented, “Denbury’s performance in the second quarter improved across the board from what was already an outstanding first quarter. Enhanced by further reductions in our cost structure, solid operational performance, and stronger oil prices, our operating margin increased to nearly $40 per BOE. We continued to rapidly strengthen our balance sheet, reducing debt by nearly $200 million and our leverage ratio by another full turn, with total debt principal reduction exceeding $1 billion since the end of 2014. The sanction of EOR development at Cedar Creek Anticline provides a clear line of sight to the near-term development of this significant, low-risk, long-lived oil asset.

“We are committed to retaining the focus and discipline put in place while oil was at $50, even with today’s oil prices well above that point. That focus and discipline will make us even more profitable in today’s environment, and well prepared to succeed for the long term.”

REVIEW OF OPERATING AND FINANCIAL RESULTS

Denbury’s production averaged 61,994 BOE/d during second quarter 2018, up 4% from second quarter 2017 due principally to higher production from the redevelopment project at Hastings Field in mid-2017, production response from continued expansion at Bell Creek Field, and a full quarter of production from the mid-2017 acquisition at Salt Creek Field. Sequentially, production increased 3% from first quarter 2018, due primarily to production increases at Cedar Creek Anticline, which benefited from the strong performance of two new Mission Canyon wells completed during March and April of 2018, and also due in part to higher production in the Gulf Coast region due to non-recurring weather downtime which lowered first quarter 2018’s production. Further production information is provided on page 12 of this press release.

The Company’s average realized oil price during second quarter 2018 was $0.39 per Bbl above NYMEX oil prices, compared to $1.29 per Bbl above NYMEX in the prior quarter, and $1.16 per Bbl below NYMEX in second quarter 2017. The sequential decrease was primarily attributable to a lower LLS to NYMEX index premium in the second quarter of 2018, with the year-over-year improvement driven both by improvement in LLS index prices relative to NYMEX and continued improvement in Rocky Mountain region differentials.

The Company’s total lease operating expenses in second quarter 2018 were $120 million or $21.34 per BOE, an increase of $2 million, or 2%, on an absolute-dollar basis and a decrease of nearly $0.50, or 2%, on a per-BOE basis compared to the prior quarter, and an increase of $9 million, or 8%, on an absolute-dollar basis and $0.88, or 4%, on a per-BOE basis, compared to second quarter 2017. The sequential per-BOE basis decrease was driven by an increase in quarterly production. The year-over-year increase was primarily impacted by operating expenses related to the Company’s non-operated working interest in Salt Creek Field, which was acquired in June 2017, as well as higher CO₂ expense due to increases in oil prices and an increase in power and fuel costs, partially offset by lower workover expense during the current-year period.

Taxes other than income, which include ad valorem, production and franchise taxes, were consistent with the first quarter of 2018 and increased $7 million from the prior-year second quarter, generally due to the impact of higher oil prices on production taxes.

General and administrative expenses were $19 million in second quarter 2018, a 4% decrease from the prior quarter and a 25% decrease compared to second quarter 2017, with the year-over-year decrease attributable to lower employee-related costs as a result of the August 2017 workforce reduction and other cost savings initiatives.

Interest expense, net of capitalized interest, was $16 million in second quarter 2018, a decrease of $1 million from first quarter 2018 and a decrease of $8 million from the prior-year second quarter. Interest expense excludes approximately $22 million and $13 million in the second quarters of 2018 and 2017, respectively, of interest recorded as a reduction of debt for financial reporting purposes instead of as interest expense, due to the accounting associated with debt exchange transactions completed in 2016, 2017, and 2018. A schedule detailing the components of interest expense is included on page 14 of this press release.

Depletion, depreciation, and amortization (“DD&A”) increased slightly to $53 million in second quarter 2018, compared to $51 million in second quarter 2017. The slight increase was primarily driven by an increase in depletable costs.

Denbury’s effective tax rate for the second quarter of 2018 was approximately 24%, consistent with the Company’s estimated statutory rate of 25%. The Company’s statutory rate decreased from the prior year rate of 38% due to reduction of the federal income tax rate from 35% to 21% as enacted by the Tax Cut and Jobs Act in December 2017.

BANK CREDIT FACILITY AND OTHER RECENT DEBT REDUCTION

The Company had $415 million outstanding under its $1.05 billion senior secured bank credit facility as of June 30, 2018, a decrease of $35 million from the level outstanding as of March 31, 2018 and a decrease of $60 million from December 31, 2017. At June 30, 2018, the Company had $573 million of liquidity available under its bank credit facility after consideration of $62 million of outstanding letters of credit. In addition to reductions of senior secured bank credit facility debt outstanding, the Company has reduced the outstanding principal of its long-term notes by $329 million over the last 7 months through a series of exchange transactions completed in December 2017 and January 2018 and related conversions of all of its convertible notes into equity in April and May 2018.

2018 CAPITAL BUDGET AND ESTIMATED PRODUCTION

The Company’s 2018 capital budget, excluding acquisitions and capitalized interest, remains unchanged from the previously estimated range of approximately $300 million to $325 million, which, based on current projections, is expected to be significantly less than the Company’s estimated 2018 cash flow from operations. The capital budget consists of approximately $270 million for tertiary and non-tertiary field costs and CO₂ supply, plus approximately $45 million of estimated capitalized costs (including capitalized internal acquisition, exploration and development costs and pre-production tertiary startup costs). Of this combined capital expenditure amount, approximately $129 million (41%) has been incurred through the second quarter of 2018, which was fully funded with $246 million of cash flow from operations. Denbury’s estimated 2018 production is also unchanged from the previously disclosed range of 60,000 to 64,000 BOE/d.

Denbury is an independent oil and natural gas company with operations focused in two key operating areas: the Gulf Coast and Rocky Mountain regions. The Company’s goal is to increase the value of its properties through a combination of exploitation, drilling and proven engineering extraction practices, with the most significant emphasis relating to CO₂ enhanced oil recovery operations. For more information about Denbury, please visit www.denbury.com.