Denbury Resources Inc. Reports Operating Results (10-Q)
Denbury Resources Inc. has a market cap of $7.47 billion; its shares were traded at around $18.71 with a P/E ratio of 34 and P/S ratio of 8.4. Denbury Resources Inc. had an annual average earning growth of 8.1% over the past 10 years.DNR is in the portfolios of RS Investment Management, Ron Baron of Baron Funds, NWQ Managers of NWQ Investment Management Co, Columbia Wanger of Columbia Wanger Asset Management, Diamond Hill Capital of Diamond Hill Capital Management Inc, Jim Simons of Renaissance Technologies LLC, Louis Moore Bacon of Moore Capital Management, LP, Steven Cohen of SAC Capital Advisors, Mario Gabelli of GAMCO Investors.
Highlight of Business Operations: Net cash settlements received on our commodity derivative contracts during the third quarter of 2010 were $10.0 million, compared to $18.5 million of cash settlements received during the third quarter of 2009. During the third quarter of 2010, we had a non-cash fair value loss on our commodity derivative contracts of $42.5 million, compared to a non-cash fair value loss of $22.3 million during the third quarter of 2009. Together these cash settlements and non-cash fair-value losses lowered our pretax income by $28.1 million more during the third quarter of 2010 than in the third quarter of 2009.
General and administrative (G&A) expenses totaled $37.1 million during the third quarter of 2010, compared to $24.0 million during the prior year quarter, principally due to incremental administrative expense from the ownership of Encore offset by the $3.6 million incentive compensation expense for management of Genesis incurred in the prior year quarter. During the quarter, we incurred $11.5 million of transaction costs associated with the Encore Merger, primarily associated with employee severance. These Encore Merger related fees are included in our income statement under the caption Transaction costs and other related to the Encore Merger. Interest expense also increased during the third quarter of 2010, due primarily to our $1.0 billion issuance of 2020 Notes in February 2010, Encore debt assumed in the Encore Merger, and $10.0 million less interest capitalization.
Our capital expenditures for the first nine months of 2010, excluding the Encore Merger, were funded with $592.8 million of cash flow from operations, along with net proceeds of approximately $163 million from the sale of our interests in Genesis, approximately $884 million from the Southern Assets sale, and $32 million from the Cleveland Sand Play assets sale. See Overview Merger with Encore Acquisition Company for a discussion of the financing of the Encore Merger. Our capital expenditures for the first nine months of 2009 were funded with $406.4 million of cash flow from operations, $259.8 million of net proceeds from the sale of a portion of our Barnett Shale natural gas assets, and $381.4 million of proceeds from the February 2009 issuance of the 9.75% Senior Subordinated Notes.
As discussed above in Overview Merger with Encore Acquisition Company, the primary sources of cash for the Encore Merger were (1) our new $1.6 billion Credit Agreement, which replaced our previously existing $750 million commitment from banks under our prior revolving credit agreement, and (2) $1.0 billion of new 2020 Notes. We structured the financing of the Encore Merger to provide $600 million to $700 million of availability under the new Credit Agreement upon closing the transaction in order to provide a level of liquidity similar to that available to us prior to the Encore Merger.
In conjunction with the Encore Merger, we acquired certain of Encores commitments including: senior subordinated notes, derivative contracts, operating leases, and asset retirement obligations. The Encore Merger is discussed in Note 3 to the Unaudited Condensed Consolidated Financial Statements, asset retirement obligations are discussed in Note 4 to the Unaudited Condensed Consolidated Financial Statements, long-term debt is discussed in Note 5 to the Unaudited Condensed Consolidated Financial Statements, and derivative contracts are discussed in Notes 6 and 7 to the Unaudited Condensed Consolidated Financial Statements. Operating leases assumed in the Encore Merger require payments of approximately $1.0 million in the remainder of 2010, $5.4 million in 2011 through 2012, and $1.8 million in 2013. In addition, we have entered into a new lease for our corporate headquarters with a 12-year term that has total minimum monthly payments which aggregate approximately $64.3 million. Please refer to Managements Discussion and Analysis of Financial Condition and Results of Operations and the section entitled Off-Balance Sheet Arrangements Commitments and Obligations contained in our Annual Report on Form 10-K for the year ended December 31, 2009 for further information regarding our commitments and obligations.
We spent approximately $0.21 per Mcf in operating expenses to produce our CO2 during the first nine months of 2010, comprised of $0.20 per Mcf during the first quarter of 2010, $0.22 per Mcf during the second quarter of 2010, and $0.21 during the third quarter of 2010. This rate is up significantly from our $0.16 per Mcf cost during the first nine months of 2009, due primarily to increased CO2 royalty expense as a result of higher oil prices.
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