Denbury Reports Third Quarter 2015 Results

PLANO, Texas, Nov. 05, 2015 (GLOBE NEWSWIRE) — Denbury Resources Inc. (NYSE:DNR) (“Denbury” or the “Company”) today announced adjusted net income(1) (a non-GAAP measure) of $63 million for the third quarter of 2015, or $0.18(1)(2) per diluted share.  On a GAAP basis, the Company recorded a net loss of $2.2 billion, or $6.41 per diluted share.  Adjusted net income(1) for the third quarter of 2015 differs from GAAP net income due to the exclusion of (1) a $1.8 billion ($1.1 billion after tax) write-down of oil and natural gas properties, (2) a $1.3 billion ($1.2 billion after tax) impairment of goodwill, (3) a $69 million ($43 million after tax) loss on noncash fair value adjustments on commodity derivatives(1) (a non-GAAP measure), and (4) a $14 million lease operating expense reduction due to insurance and other expense reimbursements.

Sequential and year-over-year comparisons of selected quarterly financial items are shown in the following table:

    Quarter Ended
(in millions, except per share and unit data)   Sept. 30, 2015   June 30, 2015   Sept. 30, 2014
Net income (loss)   $ (2,244 )   $ (1,148 )   $ 269  
Adjusted net income(1) (non-GAAP measure)     63       47       91  
Net income (loss) per diluted share     (6.41 )     (3.28 )     0.77  
Adjusted net income per diluted share(1)(2) (non-GAAP measure)     0.18       0.13       0.26  
Cash flows from operations     273       289       340  
Adjusted cash flows from operations(1)(3) (non-GAAP measure)     243       252       316  
             
Revenues   $ 300     $ 374     $ 633  
Receipt (payment) on settlements of commodity derivatives     161       124       (25 )
Revenues and commodity derivative settlements combined   $ 461     $ 498     $ 608  
             
Average realized oil price per barrel (excluding derivative settlements)   $ 45.74     $ 56.92     $ 94.78  
Average realized oil price per barrel (including derivative settlements)   $ 71.32     $ 76.30     $ 90.92  
             
Total production (BOE/d)     71,410       73,716       73,810  
 
(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 average diluted shares outstanding of 350.9 million and 351.1 million for the three months ended September 30, 2015 and June 30, 2015, respectively.
(3) Adjusted cash flows from operations reflects cash flows from operations before working capital changes but is not adjusted for nonrecurring items.

Sequentially, adjusted net income(1) increased $16 million for the third quarter of 2015 compared to second quarter of 2015 levels, primarily driven by lower operating costs and lower depletion, depreciation and amortization expense, offset in part by the impact of lower oil and natural gas revenues and commodity derivative settlements combined.  Adjusted net income(1) for the third quarter of 2015 decreased $28 million from the prior-year third quarter, due to a decrease in oil revenues (including commodity derivative settlements) between the quarters, largely offset by reductions in all categories of expenses during the third quarter of 2015.  Adjusted cash flows from operations(1)(3) (a non-GAAP measure) decreased $9 million on a sequential-quarter basis and decreased $73 million from the level in the prior-year third quarter, primarily as a result of the same drivers of the changes in adjusted net income(1).

MANAGEMENT COMMENT

Phil Rykhoek, Denbury’s President and CEO, commented, “We are continuing to see the benefits from the work of our innovation and improvement teams and cost reduction efforts, which have helped mitigate the impact of lower oil prices.  These efforts have resulted in the seventh consecutive quarterly drop in lease operating expenses, to a normalized level in the third quarter of $19.43 per barrel (“Bbl”) of oil equivalent (“BOE”), and a decrease of 26% from the fourth quarter of 2013 level.  A major factor in our operating expense improvement is the continued reduction in our use of carbon dioxide (“CO2”), which is down 11% sequentially and 31% from the first quarter of 2015 levels.  Also, as a result of our cost reduction efforts and capital discipline, we have been able to reduce our estimated 2015 development capital budget by a total of $95 million.  We reduced our 2015 capital estimate by $50 million a couple of months ago and, as of today, we are lowering it an additional $45 million.  We now estimate our 2015 total capital spending at $475 million, comprised of $370 million in development capital spending and $105 million of other capital costs, including capitalized internal costs, capitalized interest and pre-production startup costs.  Although we experienced a slight decrease in our production this quarter, primarily attributable to Tinsley and Cedar Creek Anticline (“CCA”) fields, a portion of this drop is temporary and is expected to come back online in the fourth quarter.  Also, we currently estimate that we have approximately 1,100 BOE per day (“BOE/d”) of uneconomic production shut-in.  Due largely to this shut-in production and the weather impacts at Thompson Field in the second and third quarters of 2015, we refined our 2015 production expectations earlier in the third quarter to indicate that we expect production will be in the lower half of our guidance range.  The bottom line is that we are making decisions and taking actions that will improve our business every day, even if those decisions and actions may have some temporary impacts on production.

“During the third quarter, we announced the suspension of our dividend in light of the current low oil price environment and our desire to maintain financial strength and flexibility.  Although we have generated over $300 million of excess cash flow after incurred capital expenditures and dividends during the first nine months of this year, the cash flow benefit from our hedges will begin to diminish in the fourth quarter, and the suspension of the dividend frees up $88 million in cash annually that we can judiciously deploy elsewhere.  We have applied much of our free cash this year to reducing our bank debt, which is down to $210 million at the end of the third quarter, from $395 million at year-end 2014.  We remain committed to living within cash flow for 2016 and prudently managing our bank debt, which means, among other things, that our development capital spending will likely be in the $300 million to $350 million range for 2016 based on current oil price projections. I am excited about our progress in this lower oil price environment and am confident that we are paving the way for a much stronger Denbury when oil prices recover.”

PRODUCTION

Denbury’s total production for the third quarter of 2015 averaged 71,410 BOE/d, which included 40,834 Bbls per day (“Bbls/d”) from tertiary properties and 30,576 BOE/d from non-tertiary properties.  Total production during the third quarter of 2015 decreased 3% both sequentially and when compared to the third quarter of 2014, primarily due to natural production declines at the Company’s mature tertiary properties in the Gulf Coast region and CCA in the Rocky Mountain region, as well as a temporary production decline at Tinsley Field and a contractual reversionary interest assignment at Delhi Field, each of which is discussed in further detail below.  In addition, the Company currently estimates that approximately 1,100 BOE/d of production (excluding Riley Ridge) is shut-in due to wells that are uneconomic to either produce or repair at this time.  These decreases in production were partially offset by production increases at Oyster Bayou Field in the Gulf Coast region and Bell Creek Field in the Rocky Mountain region.  Third quarter of 2015 production was 95% oil, compared to 96% oil in the same prior-year period.

Tertiary oil production during the third quarter of 2015 decreased 4%, or 1,750 Bbls/d, on a sequential-quarter basis and 2%, or 793 Bbls/d, from levels in the third quarter of 2014.  On a sequential-quarter basis, the tertiary oil production decrease was primarily driven by facility processing constraints and impacts of warmer temperatures restricting CO2 injection and recycling at Tinsley Field; however, current production from the field is increasing and fourth quarter production is expected to be higher than production in the third quarter of 2015.  The sequential decrease was partially offset by a production increase at Bell Creek Field.  The year-over-year quarterly production decrease was also impacted by the contractual reversionary assignment in Delhi Field occurring on November 1, 2014, which reduced third quarter of 2015 production by approximately 1,200 Bbls/d, partially offset by production growth at Oyster Bayou Field.

Non-tertiary oil-equivalent production was down 2%, or 556 BOE/d, on a sequential-quarter basis and 5%, or 1,607 BOE/d, from third quarter of 2014 levels.  These decreases are the result of natural production declines at CCA and the Company’s other non-tertiary Rocky Mountain properties, as well as the impact of shutting in certain uneconomic non-tertiary wells.  The year-over-year quarterly decrease was partially offset by increases in production at Conroe Field.

REVIEW OF FINANCIAL RESULTS

Oil and natural gas revenues, excluding the impact of derivative contracts, decreased 53% when comparing the third quarters of 2015 and 2014, primarily due to a 50% decline in realized commodity prices and a 3% decrease in production.  Denbury’s average realized oil price, excluding derivative settlements, was $45.74 per Bbl in the third quarter of 2015, compared to $56.92 per Bbl in the second quarter of 2015 and $94.78 per Bbl in the prior-year third quarter.  Including derivative settlements, Denbury’s average realized oil price was $71.32 per Bbl in the third quarter of 2015, compared to $76.30 in the second quarter of 2015 and $90.92 per Bbl in the prior-year third quarter.  The oil price realized relative to NYMEX oil prices (the Company’s NYMEX oil price differential) in the third quarter of 2015 was $0.96 per Bbl below NYMEX prices, compared to a differential of $0.89 per Bbl below NYMEX in the second quarter of 2015 and $2.53 per Bbl below NYMEX in the third quarter of 2014.

The Company’s total lease operating expenses in the third quarter of 2015 averaged $17.34 per BOE, which includes insurance and other expense reimbursements recognized during the quarter totaling approximately $14 million, comprised of a reimbursement for a retroactive utility rate adjustment ($10 million) and an insurance reimbursement for previous well control costs ($4 million).  Lease operating expenses, excluding these nonrecurring amounts, averaged $19.43 per BOE in the third quarter of 2015, a decrease of 1% from the $19.70 per-BOE average in the second quarter of 2015 and 20% from the $24.32 per-BOE average in the third quarter of 2014.  These decreases in lease operating costs are primarily due to the Company’s cost reduction efforts throughout 2014 and 2015, as well as general market decreases in the prices of many of the components of these costs.

Taxes other than income, which includes ad valorem, production, and franchise taxes, decreased $8 million on a sequential-quarter basis and decreased $14 million from the prior-year third quarter level.  The levels of taxes other than income during most periods are generally aligned with fluctuations in oil and natural gas revenues.

General and administrative expenses were $33 million in the third quarter of 2015, decreasing $7 million, or 18%, from the prior-year third quarter level.  This reduction is due largely to an approximate 11% reduction in headcount since January 1, 2015, which has resulted in lower employee compensation and related costs, as well as other cost reduction efforts.

Interest expense, before capitalized interest, was $47 million in the third quarter of 2015, compared to $51 million in the third quarter of 2014, due primarily to a $196 million decrease in average debt outstanding.  Capitalized interest was $8 million in the third quarter of 2015, compared to $6 million in the prior-year third quarter, resulting in net interest expense of $39 million in the third quarter of 2015, compared to $45 million in the prior-year third quarter.  Excess cash flow from operations was used to pay down borrowings on the Company’s bank credit facility, which ended the third quarter of 2015 at $210 million, down from $395 million as of December 31, 2014.

As a result of the significant decrease in commodity pricing from fourth quarter 2014 levels, the Company recognized full cost pool ceiling test write-downs of $1.8 billion, $1.7 billion and $0.2 billion during the three months ended September 30, 2015, June 30, 2015, and March 31, 2015, respectively.  In determining these write-downs, the Company is required to use the average of rolling first-day-of-the-month oil and gas prices for the preceding 12 months, after adjustments for market differentials by field.  The preceding 12-month price averaged $56.74 per Bbl for crude oil and $3.64 per thousand cubic feet (“Mcf”) for natural gas for the period ended September 30, 2015.  The Company currently estimates that the full cost ceiling test write-down in the fourth quarter of 2015 will be in a range of similar magnitude to the write-down recorded in the third quarter of 2015 if oil and natural gas prices remain at or near late-October 2015 levels for the remainder of 2015, depending further, in part, upon changes relative to proved oil and natural gas reserve volumes, future capital expenditures and operating costs.

Based on the results of the Company’s goodwill impairment test performed for the third quarter of 2015, the Company recorded a goodwill impairment charge of $1.3 billion to fully impair the carrying value of the Company’s goodwill.  Of the Company’s $1.3 billion goodwill balance, approximately $1.0 billion was associated with the Company’s 2010 merger with Encore Acquisition Company.  The significant decline in the Company’s enterprise value (market capitalization and fair value of debt) at a rate greater than the decline in NYMEX oil futures prices between June 30 and September 30, 2015, was a primary cause of the impairment.

Denbury’s overall depletion, depreciation, and amortization (“DD&A”) rate was $18.48 per BOE in the third quarter of 2015, compared to $21.58 per BOE in the prior-year third quarter and $22.05 per BOE in the second quarter of 2015, with the decreases primarily driven by a reduction in depletable costs associated with the Company’s reserves base resulting from the full cost pool ceiling test write-downs recognized during the first half of 2015.  Based on full cost pool ceiling test write-downs recognized during the nine months ended September 30, 2015, the DD&A rate for the fourth quarter of 2015 is expected to decrease further from the third quarter of 2015 rate.

Receipts on settlements of oil and natural gas derivative contracts were $161 million in the third quarter of 2015, compared to receipts of $124 million in the second quarter of 2015 and payments of $25 million in the prior-year third quarter.  These settlements resulted in an increase in average net realized oil prices of $25.58 per Bbl in the third quarter of 2015, an increase of $19.38 per Bbl in the second quarter of 2015, and a decrease of $3.86 per Bbl in the third quarter of 2014.  Changes in the fair values of the Company’s derivative contracts in the third quarter of 2015 resulted in a noncash pre-tax loss of $69 million, compared to a loss of $173 million in the second quarter of 2015 and a gain of $277 million in the prior-year third quarter.

Denbury’s effective tax rate for the third quarter of 2015 was 24.6%, down from 38.4% in the prior-year third quarter primarily as a result of the impairment of goodwill during the quarter.  As a significant portion of the $1.3 billion goodwill balance that was written off for financial reporting purposes did not have a related tax basis, there was no corresponding tax benefit realized related to the impairment.  The Company’s estimated statutory rate remained at 38%, consistent with the prior-year third quarter.

2015 PRODUCTION AND CAPITAL EXPENDITURE ESTIMATES

Based on year-to-date production levels and estimates for the remainder of 2015, the Company currently estimates total annual production volumes will average in the lower half of the Company’s prior estimated total production range shown in the following table.

Operating Area   2015 Estimated Production
(BOE/d)
Tertiary   42,100 – 43,700
Cedar Creek Anticline   18,000 – 18,800
Gulf Coast Non-Tertiary   8,300 – 8,700
Other Rockies Non-Tertiary   4,100 – 4,300
Total Production   72,500 – 75,500

In the second half of 2015, the Company has reduced its estimated 2015 development capital expenditure budget by $95 million, offset in part by higher capitalized interest, lowering its overall 2015 estimated capital spending budget to $475 million, down from the previously estimated total capital spending amount of $550 million.  The capital budget consists of approximately $370 million of tertiary, non-tertiary, and CO2 supply and pipeline projects, plus approximately $105 million of estimated capitalized costs (including capitalized internal acquisition, exploration and development costs; capitalized interest; and pre-production startup costs associated with new tertiary floods).  Of this combined capital expenditure amount, approximately $313 million (66%) has been incurred through the first nine months of 2015.

DIVIDEND SUSPENSION AND SHARE REPURCHASE PROGRAM

In light of the continuing low oil price environment and its desire to maintain the Company’s financial strength and flexibility, on September 21, 2015, the Company’s Board of Directors suspended the Company’s quarterly cash dividend following payment of its third quarter dividend on September 29, 2015.  Separately, the Company’s Board of Directors authorized the reinstatement of the ability to repurchase shares under the Company’s share repurchase program, which authorization had been suspended in November of 2014.  During September and October of 2015, the Company repurchased 4.4 million shares of Denbury common stock for approximately $12 million.  Approximately $210 million remains authorized for repurchases under the program.  The Company expects that any future repurchases would be funded out of excess cash flow.  There is no set expiration date for the program and no requirement that the entire authorized amount be used.

CONFERENCE CALL INFORMATION

Denbury management will host a conference call to review and discuss third quarter 2015 financial and operating results, as well as financial and operating guidance for the remainder of 2015 and preliminary estimates of 2016 capital expenditure levels, today, Thursday, November 5, at 10:00 A.M. (Central).  Additionally, Denbury has published presentation materials which will be referenced during the conference call.  Individuals who would like to participate should dial 800.230.1096 or 612.332.0725 ten minutes before the scheduled start time.  To access a live webcast of the conference call and accompanying slide presentation, please visit the investor relations section of the Company’s website at www.denbury.com.  The webcast will be archived on the website, and a telephonic replay will be accessible for at least one month after the call by dialing 800.475.6701 or 320.365.3844 and entering confirmation number 324019.

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.

This press release, other than historical financial information, contains forward-looking statements that involve risks and uncertainties including estimated 2015 production and capital expenditures, estimated cash generated from operations in 2015, estimated 2016 capital expenditures, 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 engineering, geological, financial 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 business 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

Following are unaudited financial highlights for the comparative three and nine month periods ended September 30, 2015 and 2014.  All production volumes and dollars are expressed on a net revenue interest basis with gas volumes converted to equivalent barrels at 6:1.

DENBURY RESOURCES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 
The following information is based on GAAP reported earnings, with additional required disclosures included in the Company’s Form 10-Q:
 
    Three Months Ended   Nine Months Ended
    September 30,   September 30,
In thousands, except per share data   2015   2014   2015   2014
Revenues and other income                
Oil sales   $ 285,742     $ 615,745     $ 939,744     $ 1,876,524  
Natural gas sales   4,646     6,260     15,005     26,356  
CO2 and helium sales and transportation fees   9,144     11,378     23,268     33,961  
Interest income and other income   4,068     4,274     9,926     14,680  
Total revenues and other income   303,600     637,657     987,943     1,951,521  
Expenses                
Lease operating expenses   113,902     155,198     387,156     488,827  
Marketing and plant operating expenses   14,458     15,328     40,358     50,263  
CO2 and helium discovery and operating expenses   1,017     11,434     2,909     22,229  
Taxes other than income   25,607     39,966     85,841     136,761  
General and administrative expenses   32,907     40,366     117,134     123,011  
Interest, net of amounts capitalized of $8,081, $5,862, $25,228 and $17,413, respectively   39,225     44,752     119,187     140,136  
Depletion, depreciation, and amortization   121,406     146,560     419,304     435,854  
Commodity derivatives expense (income)   (92,028 )   (252,265 )   (126,178 )   (825 )
Loss on early extinguishment of debt               113,908  
Write-down of oil and natural gas properties   1,760,600         3,612,600      
Impairment of goodwill   1,261,512         1,261,512      
Total expenses   3,278,606     201,339     5,919,823     1,510,164  
Income (loss) before income taxes   (2,975,006 )   436,318     (4,931,880 )   441,357  
Income tax provision (benefit)                
Current income taxes   1,184     214     1,063     532  
Deferred income taxes   (732,064 )   167,356     (1,432,572 )   168,967  
Net income (loss)   $ (2,244,126 )   $ 268,748     $ (3,500,371 )   $ 271,858  
                 
Net income (loss) per common share                
Basic   $ (6.41 )   $ 0.77     $ (10.01 )   $ 0.78  
Diluted   $ (6.41 )   $ 0.77     $ (10.01 )   $ 0.77  
                 
Dividends declared per common share   $ 0.0625     $ 0.0625     $ 0.1875     $ 0.1875  
                 
Weighted average common shares outstanding                
Basic   350,052     348,454     349,787     348,993  
Diluted   350,052     350,918     349,787     351,347  

DENBURY RESOURCES INC.
SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES (UNAUDITED)
 
Reconciliation of net income (loss) (GAAP measure) to adjusted net income (non-GAAP measure)(1):
 
    Three Months Ended   Nine Months Ended
    September 30,   June 30,   September 30,
In thousands   2015   2014   2015   2015   2014
Net income (loss) (GAAP measure)   $ (2,244,126 )   $ 268,748     $ (1,148,499 )   $ (3,500,371 )   $ 271,858  
Noncash fair value adjustments on commodity derivatives   68,649     (277,179 )   173,077     307,115     (103,080 )
Lease operating expenses – nonrecurring amounts   (13,715 )   (9,906 )       (13,715 )   (9,906 )
Loss on early extinguishment of debt                   113,908  
Write-down of oil and natural gas properties   1,760,600         1,705,800     3,612,600      
Impairment of goodwill   1,261,512             1,261,512      
Estimated income taxes on above adjustments to net income (loss)   (769,497 )   109,093     (713,973 )   (1,563,874 )   (350 )
Valuation allowance on deferred taxes           30,500     30,500      
Adjusted net income (non-GAAP measure)   $ 63,423     $ 90,756     $ 46,905     $ 133,767     $ 272,430  
 
(1)  See “Non-GAAP Measures” at the end of this report.

Reconciliation of cash flows from operations (GAAP measure) to adjusted cash flows from operations (non-GAAP measure)(1):
 
    Three Months Ended   Nine Months Ended
In thousands   September 30,   June 30,   September 30,
  2015   2014   2015   2015   2014
Net income (loss) (GAAP measure)   $ (2,244,126 )   $ 268,748     $ (1,148,499 )   $ (3,500,371 )   $ 271,858  
Adjustments to reconcile to adjusted cash flows from operations                    
Depletion, depreciation, and amortization   121,406     146,560     147,940     419,304     435,854  
Deferred income taxes   (732,064 )   167,356     (634,472 )   (1,432,572 )   168,967  
Stock-based compensation   7,670     8,887     7,118     22,637     26,104  
Noncash fair value adjustments on commodity derivatives   68,649     (277,179 )   173,077     307,115     (103,080 )
Loss on early extinguishment of debt                   113,908  
Write-down of oil and natural gas properties   1,760,600         1,705,800     3,612,600      
Impairment of goodwill   1,261,512             1,261,512      
Other   (1,129 )   1,820     620     (647 )   5,396  
Adjusted cash flows from operations (non-GAAP measure)   242,518     316,192     251,584     689,578     919,007  
Net change in assets and liabilities relating to operations   30,158     24,200     37,373     9,819     (33,910 )
Cash flows from operations (GAAP measure)   $ 272,676     $ 340,392     $ 288,957     $ 699,397     $ 885,097  
 
(1)  See “Non-GAAP Measures” at the end of this report.

DENBURY RESOURCES INC.
SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES (UNAUDITED)
 
Reconciliation of commodity derivatives income (expense) (GAAP measure) to noncash fair value adjustments on commodity derivatives (non-GAAP measure)(1):
 
    Three Months Ended   Nine Months Ended
    September 30,   June 30,   September 30,
In thousands   2015   2014   2015   2015   2014
Receipt (payment) on settlements of commodity derivatives   $ 160,677     $ (24,914 )   $ 124,151     $ 433,293     $ (102,255 )
Noncash fair value adjustments on commodity derivatives (non-GAAP measure)   (68,649 )   277,179     (173,077 )   (307,115 )   103,080  
Commodity derivatives income (expense) (GAAP measure)   $ 92,028     $ 252,265     $ (48,926 )   $ 126,178     $ 825  
 
(1)  See “Non-GAAP Measures” at the end of this report.

OPERATING HIGHLIGHTS (UNAUDITED)
 
    Three Months Ended   Nine Months Ended
    September 30,   June 30,   September 30,
    2015   2014   2015   2015   2014
Production (daily – net of royalties)                    
Oil (barrels)   67,900     70,619     69,837     69,424     70,504  
Gas (mcf)   21,066     19,147     23,273     22,357     22,671  
BOE (6:1)   71,410     73,810     73,716     73,150     74,283  
Unit sales price (excluding derivative settlements)                    
Oil (per barrel)   $ 45.74     $ 94.78     $ 56.92     $ 49.58     $ 97.49  
Gas (per mcf)   2.40     3.55     2.44     2.46     4.26  
BOE (6:1)   44.20     91.60     54.69     47.81     93.83  
Unit sales price (including derivative settlements)                    
Oil (per barrel)   $ 71.32     $ 90.92     $ 76.30     $ 72.31     $ 92.22  
Gas (per mcf)   2.87     3.61     2.89     2.89     4.13  
BOE (6:1)   68.66     87.93     73.20     69.51     88.79  
NYMEX differentials                    
Gulf Coast region                    
Oil (per barrel)   $ 0.92     $ 2.15     $ 1.86     $ 0.88     $ 1.97  
Gas (per mcf)   (0.22 )   (0.18 )   (0.10 )   (0.18 )   0.09  
Rocky Mountain region                    
Oil (per barrel)   $ (4.73 )   $ (11.96 )   $ (6.48 )   $ (6.33 )   $ (10.52 )
Gas (per mcf)   (0.55 )   (0.66 )   (0.68 )   (0.52 )   (0.48 )
Total company                    
Oil (per barrel)   $ (0.96 )   $ (2.53 )   $ (0.89 )   $ (1.52 )   $ (2.16 )
Gas (per mcf)   (0.34 )   (0.40 )   (0.30 )   (0.30 )   (0.16 )

DENBURY RESOURCES INC.
OPERATING HIGHLIGHTS (UNAUDITED)
 
    Three Months Ended   Nine Months Ended
    September 30,   June 30,   September 30,
Average Daily Volumes (BOE/d) (6:1)   2015   2014   2015   2015   2014
Tertiary oil production                    
Gulf Coast region                    
Mature properties                    
Brookhaven   1,712     1,767     1,691     1,672     1,820  
Eucutta   1,922     2,224     2,054     1,961     2,185  
Mallalieu   1,427     1,869     1,537     1,512     1,848  
Other mature properties (1)   5,885     6,189     5,888     5,828     6,209  
Total mature properties   10,946     12,049     11,170     10,973     12,062  
Delhi   3,676     4,377     3,623     3,617     4,542  
Hastings   5,114     4,917     5,350     5,054     4,766  
Heidelberg   5,600     5,721     5,885     5,836     5,553  
Oyster Bayou   5,962     4,605     5,936     5,920     4,361  
Tinsley   7,311     8,310     8,740     8,320     8,419  
Total Gulf Coast region   38,609     39,979     40,704     39,720     39,703  
Rocky Mountain region                    
Bell Creek   2,225     1,648     1,880     2,025     1,108  
Total Rocky Mountain region   2,225     1,648     1,880     2,025     1,108  
Total tertiary oil production   40,834     41,627     42,584     41,745     40,811  
Non-tertiary oil and gas production                    
Gulf Coast region                    
Mississippi   1,592     2,346     1,400     1,584     2,391  
Texas   6,508     5,537     6,304     6,434     6,160  
Other   846     1,083     906     919     1,056  
Total Gulf Coast region   8,946     8,966     8,610     8,937     9,607  
Rocky Mountain region                    
Cedar Creek Anticline   17,515     18,623     18,089     18,038     18,927  
Other   4,115     4,594     4,433     4,430     4,938  
Total Rocky Mountain region   21,630     23,217     22,522     22,468     23,865  
Total non-tertiary production   30,576     32,183     31,132     31,405     33,472  
Total production   71,410     73,810     73,716     73,150     74,283  
 
(1) Other mature properties include Cranfield, Little Creek, Lockhart Crossing, Martinville, McComb and Soso fields.

DENBURY RESOURCES INC.
PER-BOE DATA (UNAUDITED)
 
    Three Months Ended   Nine Months Ended
    September 30,   September 30,
    2015   2014   2015   2014
Oil and natural gas revenues   $ 44.20     $ 91.60     $ 47.81     $ 93.83  
Receipt (payment) on settlements of commodity derivatives   24.46     (3.67 )   21.70     (5.04 )
Lease operating expenses – excluding nonrecurring amounts   (19.43 )   (24.32 )   (20.08 )   (24.59 )
Lease operating expenses – nonrecurring amounts   2.09     1.46     0.69     0.49  
Production and ad valorem taxes   (3.19 )   (5.34 )   (3.69 )   (6.22 )
Marketing expenses, net of third-party purchases, and plant operating expenses   (1.91 )   (1.63 )   (1.75 )   (1.82 )
Production netback   46.22     58.10     44.68     56.65  
CO2 and helium sales, net of operating and exploration expenses   1.24         1.02     0.57  
General and administrative expenses   (5.01 )   (5.94 )   (5.87 )   (6.07 )
Interest expense, net   (5.97 )   (6.59 )   (5.97 )   (6.91 )
Other   0.43     1.00     0.67     1.08  
Changes in assets and liabilities relating to operations   4.59     3.56     0.49     (1.67 )
Cash flows from operations   41.50     50.13     35.02     43.65  
DD&A   (18.48 )   (21.58 )   (21.00 )   (21.49 )
Write-down of oil and natural gas properties   (267.99 )       (180.90 )    
Impairment of goodwill   (192.02 )       (63.17 )    
Deferred income taxes   111.43     (24.65 )   71.74     (8.33 )
Loss on early extinguishment of debt               (5.62 )
Noncash fair value adjustments on commodity derivatives   (10.45 )   40.82     (15.38 )   5.08  
Other noncash items   (5.57 )   (5.14 )   (1.59 )   0.12  
Net income (loss)   $ (341.58 )   $ 39.58     $ (175.28 )   $ 13.41  

CAPITAL EXPENDITURE SUMMARY (UNAUDITED) (1)
 
    Three Months Ended   Nine Months Ended
    September 30,   September 30,
In thousands   2015   2014   2015   2014
Capital expenditures by project                
Tertiary oil fields   $ 36,845     $ 156,414     $ 133,439     $ 442,810  
Non-tertiary fields   22,620     63,727     75,199     186,708  
Capitalized interest and internal costs (2)   23,736     21,735     72,235     67,437  
Oil and natural gas capital expenditures   83,201     241,876     280,873     696,955  
CO2 pipelines   3,839     12,256     10,135     24,612  
CO2 sources (3)   7,204     9,265     17,686     37,502  
CO2 capitalized interest and other   1,213     779     3,816     2,831  
Capital expenditures, before acquisitions   95,457     264,176     312,510     761,900  
Acquisitions of oil and natural gas properties   796     1,683     22,755     1,683  
Capital expenditures, total   $ 96,253     $ 265,859     $ 335,265     $ 763,583  
 
(1) Capital expenditure amounts include accrued capital.
(2) Includes capitalized internal acquisition, exploration and development costs; capitalized interest; and pre-production startup costs associated with new tertiary floods.
(3) Includes capital expenditures related to the Riley Ridge gas processing facility.

DENBURY RESOURCES INC.
SELECTED BALANCE SHEET AND CASH FLOW DATA (UNAUDITED)
 
    September 30,   December 31,
In thousands   2015   2014
Cash and cash equivalents   $ 12,212     $ 23,153  
Total assets   7,355,152     12,727,802  
         
Borrowings under bank credit facility   $ 210,000     $ 395,000  
Borrowings under senior subordinated notes (principal only)   2,852,250     2,852,735  
Financing and capital leases   295,095     323,624  
Total debt (principal only)   $ 3,357,345     $ 3,571,359  
         
Total stockholders’ equity   $ 2,136,332     $ 5,703,856  

    Nine Months Ended
    September 30,
In thousands   2015   2014
Cash provided by (used in)        
Operating activities   $ 699,397     $ 885,097  
Investing activities   (427,540 )   (788,923 )
Financing activities   (282,798 )   (88,925 )
         
Cash dividends paid   65,422     65,241  

NON-GAAP MEASURES

Adjusted net income is a non-GAAP measure provided as a supplement to present an alternative net income measure which excludes expense and income items (and their related tax effects) not directly related to the Company’s ongoing operations.  The excluded items for the periods presented are those which reflect the write-down of oil and natural gas properties, impairment of goodwill, noncash fair value adjustments on the Company’s commodity derivative contracts, nonrecurring lease operating expenses, the cost of early debt extinguishment, and a valuation allowance on deferred taxes.  Management believes that adjusted net income may be helpful to investors, 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 should not be considered in isolation or as a substitute for net income reported in accordance with GAAP, but rather to provide additional information useful in evaluating the Company’s operational trends and performance.

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 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.  Management believes that it is important to consider this additional measure, along with cash flows from operations, as it believes the non-GAAP measure can often be a better way to discuss changes in operating trends in its business caused by changes in production, prices, operating costs and so forth, without regard to whether the earned or incurred item was collected or paid during that period.

Noncash fair value adjustments on commodity derivatives is a non-GAAP measure and is different from “Commodity derivatives expense (income)” in the Consolidated Statements of Operations in that the noncash fair value adjustments on commodity derivatives represents only the net change between periods of the fair market values of open commodity derivative positions, and excludes the impact of settlements on commodity derivatives during the period.  Management believes that noncash fair value adjustments on commodity derivatives is a useful supplemental disclosure to “Commodity derivatives expense (income)” because the GAAP measure also includes settlements on commodity derivatives during the period; the non-GAAP measure is widely used within the industry and by securities analysts, banks and credit rating agencies in calculating EBITDA and in adjusting net income to present those measures on a comparative basis across companies, as well as to assess compliance with certain debt covenants.

CONTACT: DENBURY CONTACTS:
Mark C. Allen, Senior Vice President and Chief Financial Officer, 972.673.2000
Ross M. Campbell, Manager of Investor Relations, 972.673.2825