Denbury Resources Inc. is a Canadian corp. organized under the Canada Business Corp Act engaged in the acquisition development operation and exploration of oil and gas properties primarily in the Gulf Coast region of the U.S. through its wholly-owned subsidiary Denbury Management Inc. Denbury\'s production is primarily from developed fields close to major pipelines or refineries and established infrastructure. As a result Denbury has not experienced any difficulty in finding a market for all of its product as it becomes available or in transporting its product to these markets. Denbury Resources Inc. has a market cap of $4.07 billion; its shares were traded at around $16.36 with a P/E ratio of 15.43 and P/S ratio of 2.98. Denbury Resources Inc. had an annual average earning growth of 14.9% over the past 10 years. GuruFocus rated Denbury Resources Inc. the business predictability rank of 3-star.
Highlight of Business Operations:Second Quarter Operating Highlights. During the second quarter of 2009 we recorded a net loss of $87.2 million, as compared to net income of $114.1 million in the second quarter of 2008. Included in the 2009 second quarter loss was $194.8 million ($120.8 million after tax) expensed for non-cash fair value adjustments related to our oil and natural gas derivative contracts and $10.0 million ($6.2 million after tax) expensed in conjunction with Gareth Roberts retirement as CEO of the Company under a Founders Retirement Agreement. See further discussion regarding this Founders Retirement Agreement under Recent Management Changes below.
Despite the increase in our oil and natural gas production volumes over second quarter 2008 levels, our oil and natural gas revenues were 49% lower in the second quarter of 2009 than in the prior year second quarter, as the average price we received for our production on a per BOE basis was 55% lower in the current year period. Since over 70% of our production is oil, oil prices have a much larger impact on our revenues than natural gas prices. NYMEX oil prices moved from $44.60 per barrel at December 31, 2008 to as low as $34.00 per barrel in mid-February 2009, up to $49.66 per barrel at March 31, 2009 and $69.89 per barrel at June 30, 2009. NYMEX natural gas prices have decreased from year-end 2008, falling from $5.62 per Mcf at December 31, 2008 to $3.78 per Mcf at March 31, 2009 and $3.835 per Mcf at June 30, 2009.
Our 2009 budget incorporates significantly reduced spending in the Barnett Shale, and in other conventional areas such as the Heidelberg Selma Chalk, and a slower development program for our tertiary operations. Based on our current cash flow projections using futures prices as of the end of July 2009, and including the expected cash settlements on our 2009 oil derivative contracts, we anticipate that our projected 2009 capital expenditures of approximately $750 million, plus our already closed $201 million Hastings acquisition could, in the aggregate, exceed projected cash flow by as much as $450 million to $550 million. We expect this shortfall to be funded by the $381.4 million of net proceeds from our February 2009 subordinated debt issuance and the estimated $235 million of net proceeds from the sale of 60% of our Barnett Shale properties; however, we ultimately expect to utilize the net proceeds from the Barnett Shale assets to increase our capital expenditures in our tertiary operations during 2010.
On February 2, 2009, we closed our $201 million purchase of Hastings Field. Under the agreement, we are required to make aggregate net cumulative capital expenditures in this field of approximately $179 million over the next six years cumulating as follows: $26.8 million by December 31, 2010, $71.5 million by December 31, 2011, $107.2 million by December 31, 2012, $142.9 million by December 31, 2013, and $178.7 million by December 31, 2014. If we fail to spend the required amounts by the due dates, we are required to make a cash payment equal to 10% of the cumulative shortfall at each applicable date. Further, we are committed to injecting at least an average of 50 MMcf/d of CO2 (total of purchased and recycled) in the West Hastings Unit for the 90 day period prior to January 1, 2013. If such injections do not occur, we must either (1) relinquish our rights to initiate (or continue) tertiary operations and reassign to Venoco all assets previously purchased for the value of such assets at that time based upon the discounted value of the fields proved reserves using a 20% discount rate, or (2) make an additional payment of $20 million in January 2013, less any payments made for failure to meet the capital spending requirements as of December 31, 2012, and a $30 million payment for each subsequent year (less amounts paid for capital expenditure shortfalls) until the CO2 injection rate in the Hastings Field equals or exceeds the minimum required injection rate.
We spent approximately $0.16 per Mcf to produce our CO2 during the first six months of 2009, comprised of $0.14 per Mcf during the first quarter of 2009 and $0.18 per Mcf during the second quarter of 2009. This rate is down significantly from $0.25 per Mcf during the first six months of 2008, due primarily to decreased CO2 royalty expense as a result of lower oil prices (upon which royalties are based) in the first half of 2009. Our estimated total cost per thousand cubic feet of CO2 during the first half of 2009 was approximately $0.24, after inclusion of depreciation and amortization expense, down from the 2008 first six months average of $0.33 per Mcf. Our estimated total cost per thousand cubic feet of CO2 during the second quarter of 2009 was approximately $0.26, after inclusion of depreciation and amortization expense.
During the second quarter of 2009, our operating costs for our tertiary properties averaged $20.86 per Bbl, lower than the prior years second quarter average of $24.67 per Bbl, but slightly higher than our first quarter 2009 average of $20.48 per Bbl. For the first six months of 2009, our tertiary properties averaged $20.68 per Bbl as compared to $22.82 per Bbl in the prior year period. While our costs have increased on a gross basis due to our new tertiary floods and ongoing expansion of existing floods, they have decreased on a per Bbl basis from the second quarter and first six months of 2008, primarily due to our increased production and to the reduced cost of CO2 in the current year periods. On a per Bbl basis, our cost of CO2 decreased by $3.22 per BOE, from $6.90 per Bbl in the second quarter of 2008 to $3.68 in the second quarter of 2009, primarily due to the reduction in oil prices to which our CO2 costs are partially tied. In addition, our workover costs were lower in the second quarter of 2009 on a per BOE basis than in the prior year period. The slight increase from the first quarter of 2009 on a per BOE basis is primarily due to our new floods in Cranfield and H
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