Denbury hurt by pending acquisition
by Wally Northway
Published: February 24,2010
DALLAS, Texas — Denbury Resources Inc., during the fourth quarter of 2009, saw net income of $3.5 million, or $0.01 per basic common share, compared to $43.8 million, or $0.18 per basic common share in the fourth quarter of 2008.
Net income adjusted to exclude non-cash gains and losses in the fair value of commodity derivatives and merger related expenses associated with the planned acquisition of Encore Acquisition Company was $45.8 million, or $0.18 per basic common share in the fourth quarter of 2009, compared to adjusted net income of $35.3 million, or $0.14 per basic common share in the prior year fourth quarter, after adjustments principally for non-cash fair value commodity derivative gains and a full cost ceiling test write-down. The higher adjusted net income for the quarter was principally attributable to higher oil prices, partially offset by higher operating costs and lower production levels due to the sale of the company’s Barnett Shale assets in 2009.
Dallas-based Denbury, the largest independent oil and gas company operating in Mississippi, reported a net loss for the full year 2009 of $75.2 million, or $0.30 per basic common share, compared to net income of $388.4 million, or $1.59 per basic common share in 2008. Net income adjusted to exclude non-cash gains and losses in the fair value of commodity derivatives and other lesser non-recurring items was $174.0 million, or $0.70 per basic common share in 2009, as compared to $388.1 million, or $1.59 per basic common share in 2008 after adjustments principally for non-cash fair value commodity derivative gains, a full cost ceiling test write-down and abandoned acquisition costs.
Denbury’s 2010 stand-alone development and exploration budget (excluding acquisitions) remains unchanged at $650 million; however, assuming the successful completion of the Encore acquisition in early March 2010, the company currently expects a combined company 2010 capital expenditure budget of approximately $1 billion. Currently, approximately 90 percent of the company’s 2010 stand-alone budget is expected to be spent on tertiary related operations, while approximately 60 percent of the Denbury/Encore combined budget would be spent on tertiary related operations.
Phil Rykhoek, Denbury CEO, said, “We weathered the economic storms of the last 12 to 18 months without incident, thanks to our strong balance sheet, and seized the opportunity to make three strategic company-changing acquisitions. We acquired two significant future enhanced oil recovery (EOR) floods in our Gulf Coast region during the year, Conroe and Hastings Fields, adding over 200 MMBbls of EOR potential to our existing inventory. We also entered into an agreement to acquire Encore Acquisition Company, expected to close on or around March 9, expanding our opportunities to apply our EOR expertise to the Rocky Mountain region. The Encore acquisition nearly doubles our potential oil recoverable with EOR and gives us opportunity for growth in another core area. We are working to put together sale packages that we plan to launch following closing, and have targeted raising between $500 million and $1.0 billion from these sales, depending on offers received and commodity prices. Our goal is to reduce our leverage incurred to fund the acquisition and to concentrate our focus on assets that are core to our strategy.”
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