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Denbury Reports Second Quarter 2021 Results

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PLANO, Texas, August 05, 2021--(BUSINESS WIRE)--Denbury Inc. (NYSE: DEN) ("Denbury" or the "Company") today provided results for the second quarter of 2021.

FINANCIAL AND OPERATING HIGHLIGHTS

2Q 2021

YTD 2021

(in thousands, except per-share and volume data)

Total

Per Diluted
Share

Total

Per Diluted
Share

Net loss

$(77,695)

$(1.52)

$(147,337)

$(2.91)

Adjusted net income(1)(2) (non-GAAP)

33,266

0.61

55,616

1.05

Adjusted EBITDAX(1) (non-GAAP)

72,453

154,369

Cash flows from operations

90,882

143,538

Adjusted cash flows from operations(1) (non-GAAP)

71,225

151,741

Development capital expenditures

54,102

74,181

Average daily sales volumes (BOE/d)

49,133

48,250

Blue Oil (% oil volumes using industrial-sourced CO2)

26%

23%

Industrial-sourced CO2 injected (thousand metric tons)

833

1,568

  • Commenced installation of the 105-mile Greencore CO2 Pipeline extension to the Cedar Creek Anticline ("CCA") enhanced oil recovery ("EOR") project.

  • Progressed negotiations with multiple parties for long-term transport and/or storage of CO2, representing the potential for more than 50 million metric tons per year.

  • Advanced discussions to acquire rights to store CO2 in multiple potential sequestration sites, both onshore and offshore, representing storage capacity of over 1 billion metric tons of CO2.

  • Received $18 million from the divestiture of undeveloped, unconventional deep mineral rights covering approximately 13,000 net acres at the Company’s Hartzog Draw Field in Wyoming.

  • Reduced debt by $57 million, resulting in $69 million in total debt and $531 million in liquidity at the end of the second quarter.

(1)

A non-GAAP measure. 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)

Calculated using weighted average diluted shares outstanding of 54.3 million and 52.7 million for the three and six months ended June 30, 2021, respectively.

EXECUTIVE COMMENT

Chris Kendall, the Company’s President and CEO, commented, "Our strong operational execution, along with improved oil prices, delivered another solid quarter for Denbury. In addition, we initiated field development of our low-carbon, blue oil CCA EOR project during the quarter. Construction crews are progressing the Greencore CO2 Pipeline extension, which remains on budget and on schedule for completion by the end of the year. The CCA EOR development is expected to provide many years of strong cash flow to Denbury while also contributing to our goal of being Scope 3 carbon-negative by the end of this decade.

"We also meaningfully progressed multiple CCUS value opportunities during the second quarter. Our Denbury Carbon Solutions team is in the midst of a number of negotiations for future CO2 transport and storage services, and I am highly confident we will have several deals to announce by the end of 2021. The potential CO2 volumes covered by our negotiations are well in excess of our existing capacity, supporting our plans for future pipeline takeaway expansion and the acquisition and development of a portfolio of sequestration sites. Combined with the Company’s ideally positioned infrastructure, our multi-decade expertise in managing CO2 provides a significant advantage in the developing CCUS industry. We see broad and expanding support for CCUS development as a practical, economic, and massively scalable means of reducing CO2 emissions, and we are highly confident in this significant growth opportunity for our Company."

FINANCIAL AND OPERATING RESULTS

Total revenues and other income in the second quarter of 2021 were $301 million, a 20% increase from the first quarter of 2021, supported by strong oil price realizations and sales volumes. Denbury’s second quarter 2021 average pre-hedge realized oil price was $64.70 per barrel ("Bbl"), representing a differential of $1.32 per Bbl below NYMEX WTI oil prices, which was driven by better than expected realizations in the Company’s Rocky Mountain and Gulf Coast regions.

Denbury’s oil and natural gas sales volumes averaged 49,133 barrels of oil equivalent per day ("BOE/d") during the second quarter of 2021, an increase of nearly 4% from the first quarter 2021 average. Higher second quarter production was primarily due to a full quarter’s contribution from the Wind River Basin assets acquired in March 2021, as well as the impact of winter storms on the first quarter of 2021. Oil represented 97% of the Company’s second quarter 2021 volumes, with approximately 26% of the Company’s oil produced through the injection of industrial-sourced CO2 in its EOR operations, resulting in carbon-negative or blue oil.

Lease operating expenses ("LOE") in the second quarter of 2021 totaled $110 million, or $24.65 per BOE, in line with expectations. Second quarter expense includes a full quarter of LOE from the Wind River Basin assets, as well as higher seasonal workover and maintenance activities as compared to the first quarter of 2021. Certain of the Company’s LOE costs, including the cost of legacy CO2 contracts, power and fuel, are linked to commodity prices, which increased during the second quarter. First quarter 2021 LOE included a $15 million non-recurring benefit resulting from the power disruption during Winter Storm Uri.

Commodity derivatives expense was $173 million in the second quarter of 2021, a result of strengthened oil prices during the period. Cash payments on hedges that settled in the second quarter of 2021 totaled $63 million, with the remaining expense representing the noncash mark-to-market change in the value of the Company’s hedging portfolio.

General and administrative expenses were $15 million in the second quarter of 2021, in line with expectations, and depletion, depreciation, and amortization ("DD&A") was $36 million, or $8.14 per BOE. DD&A was better than expected due to an uplift in proved reserves, primarily resulting from an increase in the trailing 12-month average oil price used to quantify proved reserves.

The Company’s effective tax rate for the second quarter of 2021 was negligible, as the tax expense/benefit generated is currently fully offset by a change in valuation allowance on its federal and state deferred tax assets.

CAPITAL EXPENDITURES

Second quarter 2021 development capital expenditures totaled $54 million. Year to-date development capital expenditures totaled $74 million, or about 29% of the Company’s annual capital budget. Second quarter expenditures included $19 million spent on the Greencore CO2 Pipeline extension and infield distribution system installation at CCA. In addition, the Company’s development projects at the Oyster Bayou and Tinsley fields progressed substantially towards completion, which is anticipated early in the third quarter of 2021.

GUIDANCE

The Company has reiterated its 2021 sales volume range for the year of between 47,500 BOE/d and 51,500 BOE/d. Denbury anticipates third quarter sales volumes will increase from the second quarter of 2021, driven primarily by the Company’s Rocky Mountain region, including the impact from workover projects and continued response from the previous development of Bell Creek Phase 6. Fourth quarter 2021 sales volumes are anticipated to be slightly higher than the third quarter, driven primarily by the Company’s Gulf Coast Region, where the developments at the Oyster Bayou and Tinsley fields are anticipated to contribute to increased volumes.

Development capital expenditures for 2021 are still expected to range from $250 million to $270 million. Third quarter capital expenditures should increase from the second quarter of 2021, primarily due to continued activity supporting the extension of the Greencore CO2 Pipeline and CCA EOR field development. Fourth quarter capital expenditures are anticipated to be relatively consistent with the third quarter of 2021.

Additional guidance details are available in the Company’s supplemental second quarter 2021 earnings presentation, which is available in the Investor Relations section of the Company’s website, www.denbury.com.

CONFERENCE CALL AND WEBCAST INFORMATION

Denbury will host a conference call and webcast to review and discuss its results and outlook today, Thursday, August 5, at 11:00 a.m. Central Time. Additionally, Denbury will post presentation materials on its website before market open today. The presentation webcast will be available, both live and for replay, on the Investor Relations page of the Company’s website at www.denbury.com. Individuals who would like to participate in the conference call should dial the following numbers shortly before the scheduled start time: 877.705.6003 or 201.493.6725 with conference number 13696088.

Denbury is an independent energy company with operations and assets focused on Carbon Capture, Use and Storage (CCUS) and Enhanced Oil Recovery (EOR) in the Gulf Coast and Rocky Mountain regions. For over two decades, the Company has maintained a unique strategic focus on utilizing CO2 in its EOR operations and since 2012 has also been active in CCUS through the injection of captured industrial-sourced CO2. The Company currently injects over three million tons of captured industrial-sourced CO2 annually, and its objective is to fully offset its Scope 1, 2, and 3 CO2 emissions within this decade, primarily through increasing the amount of captured industrial-sourced CO2 used in its operations. For more information about Denbury, visit www.denbury.com.

This press release, other than historical information, contains forward-looking statements that involve risks and uncertainties including estimated 2021 production and capital expenditures, timing of completion of the Greencore pipeline extension, and results of ongoing negotiations of CCUS arrangements, and other risks and uncertainties detailed in the Company’s filings with the Securities and Exchange Commission, including Denbury’s most recent report on Form 10-K. These risks and uncertainties are incorporated by this reference as though fully set forth herein. These statements are based on financial and market, engineering, geological and operating assumptions that management believes are reasonable based on currently available information; however, management’s assumptions and the Company’s future performance are both subject to a wide range of risks, and there is no assurance that these goals and projections can or will be met. Actual results may vary materially. In addition, any forward-looking statements represent the Company’s estimates only as of today and should not be relied upon as representing its estimates as of any future date. Denbury assumes no obligation to update its forward-looking statements.

FINANCIAL AND STATISTICAL DATA TABLES AND RECONCILIATION SCHEDULES

The following tables include selected unaudited financial and operational information for the comparative three and six-month periods ended June 30, 2021 and 2020. References to "Successor" refer to the new Denbury reporting entity after the Company’s emergence from bankruptcy on September 18, 2020, and references to "Predecessor" refer to the Denbury entity prior to emergence from bankruptcy. All sales volumes and dollars are expressed on a net revenue interest basis with gas volumes converted to equivalent barrels at 6:1.

DENBURY INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

The following information is based on GAAP reporting earnings (along with additional required disclosures) included or to be included in the Company’s periodic reports:

Quarter Ended

Quarter Ended

Six Months Ended

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

In thousands, except per-share data

Successor

Predecessor

Successor

Predecessor

Revenues and other income

Oil sales

$

280,577

$

108,538

$

513,621

$

337,115

Natural gas sales

2,131

849

4,532

1,896

CO2 sales and transportation fees

10,134

6,504

19,362

14,532

Oil marketing revenues

7,819

1,490

13,945

5,211

Other income

707

494

1,067

1,322

Total revenues and other income

301,368

117,875

552,527

360,076

Expenses

Lease operating expenses

110,225

81,293

192,195

190,563

Transportation and marketing expenses

8,522

9,388

16,319

19,009

CO2 operating and discovery expenses

1,531

885

2,524

1,637

Taxes other than income

22,382

10,372

41,345

30,058

Oil marketing expenses

7,738

1,450

13,823

5,111

General and administrative expenses

15,450

23,776

47,433

33,509

Interest, net of amounts capitalized of $1,168, $8,729, $2,251 and $18,181, respectively

1,252

20,617

2,788

40,563

Depletion, depreciation, and amortization

36,381

55,414

75,831

152,276

Commodity derivatives expense (income)

172,664

40,130

288,407

(106,641)

Gain on debt extinguishment

(18,994)

Write-down of oil and natural gas properties

662,440

14,377

734,981

Other expenses

3,214

11,290

5,360

13,784

Total expenses

379,359

917,055

700,402

1,095,856

Loss before income taxes

(77,991)

(799,180)

(147,875)

(735,780)

Income tax provision (benefit)

Current income taxes

(260)

598

(451)

(5,809)

Deferred income taxes

(36)

(102,304)

(87)

(106,513)

Net loss

$

(77,695)

$

(697,474)

$

(147,337)

$

(623,458)

Net loss per common share

Basic

$

(1.52)

$

(1.41)

$

(2.91)

$

(1.26)

Diluted

$

(1.52)

$

(1.41)

$

(2.91)

$

(1.26)

Weighted average common shares outstanding

Basic

50,999

495,245

50,661

494,752

Diluted

50,999

495,245

50,661

494,752

DENBURY INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Quarter Ended

Quarter Ended

Six Months Ended

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

In thousands

Successor

Predecessor

Successor

Predecessor

Cash flows from operating activities

Net loss

$

(77,695)

$

(697,474)

$

(147,337)

$

(623,458)

Adjustments to reconcile net loss to cash flows from operating activities

Depletion, depreciation, and amortization

36,381

55,414

75,831

152,276

Write-down of oil and natural gas properties

662,440

14,377

734,981

Deferred income taxes

(36)

(102,304)

(87)

(106,513)

Stock-based compensation

2,552

1,087

20,232

3,540

Commodity derivatives expense (income)

172,664

40,130

288,407

(106,641)

Receipt (payment) on settlements of commodity derivatives

(63,343)

45,629

(101,796)

70,267

Gain on debt extinguishment

(18,994)

Debt issuance costs and discounts

685

4,995

1,370

9,921

Other, net

17

(969)

744

(1,642)

Changes in assets and liabilities, net of effects from acquisitions

Accrued production receivable

(12,131)

(4,874)

(48,881)

62,063

Trade and other receivables

(6,443)

6,752

(5,578)

(16,162)

Other current and long-term assets

3,836

(7,091)

1,294

(4,552)

Accounts payable and accrued liabilities

28,694

12,312

27,292

(60,295)

Oil and natural gas production payable

7,429

(6,269)

20,224

(22,217)

Other liabilities

(1,728)

1,191

(2,554)

237

Net cash provided by operating activities

90,882

10,969

143,538

72,811

Cash flows from investing activities

Oil and natural gas capital expenditures

(33,784)

(33,881)

(53,411)

(79,897)

Acquisitions of oil and natural gas properties

(146)

(10,811)

Pipelines and plants capital expenditures

(4,393)

(4,668)

(4,851)

(10,962)

Net proceeds from sales of oil and natural gas properties and equipment

18,453

428

18,456

40,971

Other

(1,243)

4,416

(4,159)

(105)

Net cash used in investing activities

(21,113)

(33,705)

(54,776)

(49,993)

Cash flows from financing activities

Bank repayments

(283,000)

(65,000)

(485,000)

(226,000)

Bank borrowings

243,000

330,000

450,000

491,000

Interest payments treated as a reduction of debt

(24,295)

(42,506)

Cash paid in conjunction with debt repurchases

(14,171)

Pipeline financing and capital lease debt repayments

(17,001)

(3,325)

(33,510)

(7,015)

Other

278

(6,576)

(2,735)

(9,529)

Net cash provided by (used in) financing activities

(56,723)

230,804

(71,245)

191,779

Net increase in cash, cash equivalents, and restricted cash

13,046

208,068

17,517

214,597

Cash, cash equivalents, and restricted cash at beginning of period

46,719

39,574

42,248

33,045

Cash, cash equivalents, and restricted cash at end of period

$

59,765

$

247,642

$

59,765

$

247,642

DENBURY INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

In thousands, except par value and share data

June 30, 2021

Dec. 31, 2020

Assets

Current assets

Cash and cash equivalents

$

13,565

$

518

Restricted cash

1,000

Accrued production receivable

140,302

91,421

Trade and other receivables, net

24,740

19,682

Derivative assets

187

Prepaids

12,454

14,038

Total current assets

191,061

126,846

Property and equipment

Oil and natural gas properties (using full cost accounting)

Proved properties

949,128

851,208

Unevaluated properties

103,088

85,304

CO2 properties

188,700

188,288

Pipelines

143,633

133,485

Other property and equipment

97,699

86,610

Less accumulated depletion, depreciation, amortization and impairment

(120,073)

(41,095)

Net property and equipment

1,362,175

1,303,800

Operating lease right-of-use assets

19,000

20,342

Intangible assets, net

92,814

97,362

Other assets

85,044

86,408

Total assets

$

1,750,094

$

1,634,758

Liabilities and Stockholders’ Equity

Current liabilities

Accounts payable and accrued liabilities

$

163,905

$

112,671

Oil and gas production payable

69,390

49,165

Derivative liabilities

223,212

53,865

Current maturities of long-term debt

34,498

68,008

Operating lease liabilities

2,596

1,350

Total current liabilities

493,601

285,059

Long-term liabilities

Long-term debt, net of current portion

35,000

70,000

Asset retirement obligations

226,615

179,338

Derivative liabilities

22,164

5,087

Deferred tax liabilities, net

1,187

1,274

Operating lease liabilities

18,157

19,460

Other liabilities

26,172

20,872

...

Total long-term liabilities

329,295

296,031

Commitments and contingencies

Stockholders’ equity

Preferred stock, $.001 par value, 50,000,000 shares authorized, none issued and outstanding

Common stock, $.001 par value, 250,000,000 shares authorized; 50,017,491 and 49,999,999 shares issued, respectively

50

50

Paid-in capital in excess of par

1,125,143

1,104,276

Accumulated deficit

(197,995)

(50,658)

Total stockholders equity

927,198

1,053,668

Total liabilities and stockholders’ equity

$

1,750,094

$

1,634,758

DENBURY INC.
OPERATING HIGHLIGHTS (UNAUDITED)

All sales volumes and dollars are expressed on a net revenue interest basis with gas volumes converted to equivalent barrels at 6:1.

Quarter Ended

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

Average daily sales (BOE/d)

Tertiary

Gulf Coast region

24,680

26,220

24,481

27,576

Rocky Mountain region

8,772

7,108

7,984

7,518

Total tertiary sales

33,452

33,328

32,465

35,094

Non-tertiary

Gulf Coast region

3,415

3,805

3,518

4,379

Rocky Mountain region

12,266

13,057

12,267

13,604

Total non-tertiary sales

15,681

16,862

15,785

17,983

Total Company

Oil (Bbls/d)

47,653

48,900

46,834

51,774

Natural gas (Mcf/d)

8,882

7,737

8,494

7,818

BOE/d (6:1)

49,133

50,190

48,250

53,077

Unit sales price (excluding derivative settlements)

Gulf Coast region

Oil (per Bbl)

$

64.90

$

24.83

$

60.72

$

36.86

Natural gas (per mcf)

2.86

1.66

3.15

1.74

Rocky Mountain region

Oil (per Bbl)

$

64.44

$

23.74

$

60.40

$

34.13

Natural gas (per mcf)

2.50

0.71

2.80

0.83

Total Company

Oil (per Bbl)(1)

$

64.70

$

24.39

$

60.59

$

35.78

Natural gas (per mcf)

2.64

1.21

2.95

1.33

BOE (6:1)

63.23

23.95

59.33

35.09

(1)

Total company realized oil prices including derivative settlements were $50.10 per Bbl and $34.64 per Bbl during the three months ended June 30, 2021 and 2020, respectively, and $48.58 per Bbl and $43.23 per Bbl during the six months ended June 30, 2021 and 2020, respectively.

DENBURY INC.
SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES (UNAUDITED)

Reconciliation of net loss (GAAP measure) to adjusted net income (loss) (non-GAAP measure)

Adjusted net income (loss) is a non-GAAP measure provided as a supplement to present an alternative net income (loss) measure which excludes expense and income items (and their related tax effects) not directly related to the Company’s ongoing operations. Management believes that adjusted net income (loss) may be helpful to investors by eliminating the impact of noncash and/or special or unusual items not indicative of the Company’s performance from period to period, and is widely used by the investment community, while also being used by management, in evaluating the comparability of the Company’s ongoing operational results and trends. Adjusted net income (loss) should not be considered in isolation, as a substitute for, or more meaningful than, net income (loss) or any other measure reported in accordance with GAAP, but rather to provide additional information useful in evaluating the Company’s operational trends and performance.

Quarter Ended

Quarter Ended

June 30, 2021

June 30, 2020

Successor

Predecessor

In thousands, except per-share data

Amount

Per Diluted
Share

Amount

Per Diluted
Share

Net loss (GAAP measure)(1)

$

(77,695)

$

(1.52)

$

(697,474)

$

(1.41)

Adjustments to reconcile to adjusted net income (loss) (non-GAAP measure)

Noncash fair value losses on commodity derivatives(2)

109,321

2.01

85,759

0.17

Write-down of oil and natural gas properties(3)

662,440

1.34

Severance-related expense included in general and administrative expenses(6)

2,361

0.00

Expense associated with restructuring(7)

7,875

0.02

Noncash fair value adjustment - contingent consideration(8)

1,640

0.03

Other(9)

1,206

0.00

Adjustments to reconcile effect of dilutive securities(10)

0.09

Estimated income taxes on above adjustments to net loss and other discrete tax items(11)

(94,529)

(0.19)

Adjusted net income (loss) (non-GAAP measure)

$

33,266

$

0.61

$

(32,362)

$

(0.07)

Six Months Ended

Six Months Ended

June 30, 2021

June 30, 2020

Successor

Predecessor

In thousands, except per-share data

Amount

Per Diluted
Share

Amount

Per Diluted
Share

Net loss (GAAP measure)(1)

$

(147,337)

$

(2.91)

$

(623,458)

$

(1.26)

Adjustments to reconcile to adjusted net income (loss) (non-GAAP measure)

Noncash fair value losses (gains) on commodity derivatives(2)

186,611

3.54

(36,374)

(0.07)

Write-down of oil and natural gas properties(3)

14,377

0.27

734,981

1.49

Accelerated depreciation charge(4)

37,368

0.08

Gain on debt extinguishment(5)

(18,994)

(0.04)

Severance-related expense included in general and administrative expenses(6)

2,361

0.00

Expense associated with restructuring(7)

7,875

0.02

Noncash fair value adjustment - contingent consideration(8)

1,640

0.03

Other(9)

325

0.01

2,610

0.01

Adjustments to reconcile effect of dilutive securities(10)

0.11

Estimated income taxes on above adjustments to net loss and other discrete tax items(11)

(111,311)

(0.24)

Adjusted net income (loss) (non-GAAP measure)

$

55,616

$

1.05

$

(4,942)

$

(0.01)

(1)

Diluted net income (loss) per common share includes the impact of potentially dilutive securities including nonvested restricted stock units and warrants during the Successor period and includes nonvested restricted stock, nonvested performance-based equity awards, and shares into which the Predecessor’s previous convertible senior notes were convertible.

(2)

The net change between periods of the fair market values of open commodity derivative positions, excluding the impact of settlements on commodity derivatives during the period.

(3)

Full cost pool ceiling test write-downs related to the Company’s oil and natural gas properties.

(4)

Accelerated depreciation related to impaired unevaluated properties that were transferred to the full cost pool.

(5)

Gain on debt extinguishment related to the Company’s 2020 open market repurchases.

(6)

Severance-related expense associated with the Company’s May-2020 involuntary workforce reduction.

(7)

Expenses related to advisor and professional fees associated with review of strategic alternatives and comprehensive restructuring of the Company’s indebtedness.

(8)

Expense related to the change in fair value of the contingent consideration payments related to our March 2021 Wind River Basin CO2 EOR field acquisition.

(9)

Other adjustments include $0.5 million of costs associated with the helium supply contract ruling and $0.7 million of costs associated with the Delta-Tinsley CO2 pipeline incident during the three months ended June 30, 2020. The six months ended June 30, 2021 were impacted by a $0.3 million write-off of trade receivables during the three months ended March 31, 2021, and the six months ended June 30, 2020 were further impacted by $0.5 million of costs associated with the helium supply contract ruling and $0.9 million of costs associated with the Delta-Tinsley CO2 pipeline incident during the three months ended March 31, 2020.

(10)

Represents the impact to the per-share calculation using weighted average dilutive shares of 54.3 million and 52.7 million during the three and six months ended June 30, 2021, respectively, as a result of the adjustments to the Company’s net loss (GAAP measure) to derive adjusted net income (non-GAAP measure).

(11)

The estimated income tax impacts on adjustments to net income for the three months ended June 30, 2020 are computed based upon the actual effective tax rate for the six months ended June 30, 2020, with other discrete tax adjustments totaling $84 million during the three months ended June 30, 2020 primarily comprised of the tax effect of the ceiling test and accelerated depreciation, impacts of the CARES Act, and the periodic tax impacts of a shortfall (benefit) on the stock-based compensation deduction.

DENBURY INC.
SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES (UNAUDITED)

Reconciliation of net loss (GAAP measure) to Adjusted EBITDAX (non-GAAP measure)

Adjusted EBITDAX is a non-GAAP measure which management uses and is calculated based upon (but not identical to) a financial covenant related to "Consolidated EBITDAX" in the Company’s senior secured bank credit facility, which excludes certain items that are included in net loss, the most directly comparable GAAP financial measure. Items excluded include interest, income taxes, depletion, depreciation, and amortization, and items that the Company believes affect the comparability of operating results such as items whose timing and/or amount cannot be reasonably estimated or are nonrecurring. Management believes Adjusted EBITDAX may be helpful to investors in order to assess the Company’s operating performance as compared to that of other companies in the industry, without regard to financing methods, capital structure or historical costs basis. It is also commonly used by third parties to assess leverage and the Company’s ability to incur and service debt and fund capital expenditures. Adjusted EBITDAX should not be considered in isolation, as a substitute for, or more meaningful than, net loss, cash flow from operations, or any other measure reported in accordance with GAAP. The Company’s Adjusted EBITDAX may not be comparable to similarly titled measures of another company because all companies may not calculate Adjusted EBITDAX, EBITDAX or EBITDA in the same manner. The following table presents a reconciliation of the Company’s net loss to Adjusted EBITDAX.

In thousands

Quarter Ended

Quarter Ended

Six Months Ended

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Successor

Predecessor

Successor

Predecessor

Net loss (GAAP measure)

$

(77,695)

$

(697,474)

$

(147,337)

$

(623,458)

Adjustments to reconcile to Adjusted EBITDAX

Interest expense

1,252

20,617

2,788

40,563

Income tax expense (benefit)

(296)

(101,706)

(538)

(112,322)

Depletion, depreciation, and amortization

36,381

55,414

75,831

152,276

Noncash fair value losses (gains) on commodity derivatives

109,321

85,759

186,611

(36,374)

Stock-based compensation

2,552

1,087

20,232

3,540

Gain on debt extinguishment

(18,994)

Write-down of oil and natural gas properties

662,440

14,377

734,981

Severance-related expense

476

2,361

476

2,361

Noncash, non-recurring and other

462

10,231

1,929

12,595

Adjusted EBITDAX (non-GAAP measure)(1)

$

72,453

$

38,729

$

154,369

$

155,168

(1)

Excludes pro forma adjustments related to qualified acquisitions or dispositions under the Company’s senior secured bank credit facility.

DENBURY INC.
SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES (UNAUDITED)

Reconciliation of cash flows from operations (GAAP measure) to adjusted cash flows from operations (non-GAAP measure) and free cash flow (non-GAAP measure)

Adjusted cash flows from operations is a non-GAAP measure that represents cash flows provided by operations before changes in assets and liabilities, as summarized from the Company’s Unaudited Condensed Consolidated Statements of Cash Flows. Adjusted cash flows from operations measures the cash flows earned or incurred from operating activities without regard to the collection or payment of associated receivables or payables. Free cash flow is a non-GAAP measure that represents adjusted cash flows from operations less interest treated as debt reduction, development capital expenditures and capitalized interest, but before acquisitions. Management believes that it is important to consider these additional measures, along with cash flows from operations, as it believes the non-GAAP measures can often be a better way to discuss changes in operating trends in its business caused by changes in sales volumes, prices, operating costs and related factors, without regard to whether the earned or incurred item was collected or paid during that period. Adjusted cash flows from operations and free cash flow are not measures of financial performance under GAAP and should not be considered as alternatives to cash flows from operations, investing, or financing activities, nor as a liquidity measure or indicator of cash flows.

In thousands

Quarter Ended

Quarter Ended

Six Months Ended

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Successor

Predecessor

Successor

Predecessor

Cash flows from operations (GAAP measure)

$

90,882

$

10,969

$

143,538

$

72,811

Net change in assets and liabilities relating to operations

(19,657)

(2,021)

8,203

40,926

Adjusted cash flows from operations (non-GAAP measure)

71,225

8,948

151,741

113,737

Interest on notes treated as debt reduction

(20,912)

(42,266)

Development capital expenditures

(54,102)

(21,259)

(74,181)

(60,044)

Capitalized interest

(1,168)

(8,729)

(2,251)

(18,181)

Free cash flow (deficit) (non-GAAP measure)

$

15,955

$

(41,952)

$

75,309

$

(6,754)

CAPITAL EXPENDITURE SUMMARY (UNAUDITED)(1)

Quarter Ended

Six Months Ended

June 30,

June 30,

In thousands

2021

2020

2021

2020

Capital expenditure summary

Cedar Creek Anticline tertiary development

$

10,224

$

797

$

10,260

$

2,151

Other tertiary oil fields

16,694

4,397

20,774

17,769

Non-tertiary fields

11,181

2,294

19,523

13,248

Capitalized internal costs(2)

7,185

9,463

14,785

18,344

Oil and natural gas capital expenditures

45,284

16,951

65,342

51,512

Cedar Creek Anticline CO2 pipeline

8,818

4,199

8,839

8,374

Other CO2 pipelines, sources and other

109

158

Development capital expenditures

54,102

21,259

74,181

60,044

Acquisitions of oil and natural gas properties(3)

146

38

10,811

80

Capital expenditures, before capitalized interest

54,248

21,297

84,992

60,124

Capitalized interest

1,168

8,729

2,251

18,181

Capital expenditures, total

$

55,416

$

30,026

$

87,243

$

78,305

(1)

Capital expenditure amounts include accrued capital.

(2)

Includes capitalized internal acquisition, exploration and development costs and pre-production tertiary startup costs.

(3)

Primarily consists of working interest positions in the Wind River Basin enhanced oil recovery fields acquired on March 3, 2021.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210805005174/en/

Contacts

Brad Whitmarsh, Executive Director, Investor Relations, 972.673.2020, brad.whitmarsh@denbury.com
Susan James, Manager, Investor Relations, 972.673.2593, susan.james@denbury.com

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