Denbury Resources Inc. Reports Operating Results (10-Q)
Denbury Resources Inc. has a market cap of $6.09 billion; its shares were traded at around $16.12 with a P/E ratio of 9.9 and P/S ratio of 2.6. Denbury Resources Inc. had an annual average earning growth of 12.8% over the past 10 years. GuruFocus rated Denbury Resources Inc. the business predictability rank of 2.5-star.
Highlight of Business Operations:Oil prices during the second quarter of 2012 were 9% lower than prices during the second quarter of 2011, with average NYMEX oil prices averaging $93.49 per Bbl in the second quarter of 2012, compared to average NYMEX prices of $102.58 per Bbl during the second quarter of 2011. Our average realized oil price received per barrel, excluding the impact of commodity derivative contracts, was $95.63 per Bbl during the second quarter of 2012, compared to $106.30 per Bbl during the second quarter of 2011, a 10% decrease between the comparative periods. In spite of the decrease in realized prices, the Company s oil and natural gas revenues increased slightly during the second quarter of 2012 compared to the same period in 2011. See Results of Operations – Operating Results – Oil and Natural Gas Revenues below for more information on our oil prices received and differentials to NYMEX prices.
In June 2012, we acquired a nearly 100% working interest and 84.7% net revenue interest in Thompson Field for $366.2 million after preliminary closing adjustments. The field is located approximately 18 miles west of Denbury s Hastings Field which is currently being flooded with CO2, and which is the current terminus of the Green Pipeline which transports CO2 from Denbury s source in Jackson Dome, Mississippi. Thompson Field is similar to Hastings Field, producing oil from the Frio zone at similar depths, and is also expected to be an ideal candidate for a CO2 flood. Under the terms of the agreement, after the initiation of CO2 injection, the seller will retain approximately a 5% gross revenue interest (less severance taxes) once average monthly oil production exceeds 3,000 Bbls/d. We funded the purchase principally with cash proceeds from property sales earlier this year and the remainder from borrowings under our revolving credit facility.
During the second quarter of 2012, our CO2 production at Jackson Dome averaged 915 MMcf/d, compared to an average of 992 MMcf/d produced during the second quarter of 2011 and 1,047 MMcf/d produced during the first quarter of 2012. We used 90% of this production, or 828 MMcf/d, in our tertiary operations during the second quarter of 2012, and sold the balance to our industrial customers or to Genesis Energy, L.P. pursuant to our volumetric production payment contracts. Refer to Management s Discussion and Analysis of Financial Condition and Results of Operations – Capital Resources and Liquidity – Off-Balance Sheet Arrangements – Commitments and Obligations in our Form 10-K for further discussion of our CO2 delivery obligations. The reduction in CO2 production during the second quarter of 2012 compared to the prior quarter is a result of lower demand for CO2 at our tertiary oil fields as part of our ongoing process to maximize the utilization of CO2; however we expect the production volume to fluctuate depending on the various stages of tertiary field development. With the acquisition of Thompson Field in 2012, we will likely need to develop some of our probable and possible CO2 reserves at Jackson Dome so that we have sufficient proved reserves to flood this newly acquired field. We anticipate an ongoing exploration and development program at Jackson Dome designed to increase both the CO2 production rate and proved reserves that will be available to us until substantial anthropogenic sources are developed, which is currently expected to first occur several years in the future. At December 31, 2011, our proven CO2 reserves at Jackson Dome were approximately 6.7 Tcf on a gross working interest basis, of which Denbury s net revenue interest was approximately 5.3 Tcf, and include reserves dedicated to volumetric production payments of 84.7 Bcf.
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