8-K 1 denbury8k072004.txt FORM 8-K - JULY 20, 2004 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): July 20, 2004 DENBURY RESOURCES INC. (Exact name of Registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 1-12935 20-0467835 (Commission File Number) (I.R.S. Employer Identification No.) 5100 Tennyson Parkway Suite 3000 Plano, Texas 75024 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (972)673-2000 Item 2. Completion of Acquisition or Disposition of Assets. -------------------------------------------------- On July 20, 2004, the Company completed the sale of all of the outstanding stock of Denbury Offshore, Inc. ("Offshore"), a wholly-owned subsidiary of the Company, to Newfield Exploration Company for $200 million, before adjustments, with the stock of Offshore valued as of April 1, 2004. The Company retained Offshore's exploratory well at High Island A-6, certain deep rights at West Delta 27 and related assets. All of Offshore's other assets were included in the sale. Offshore's operating net revenue, net of any capital expenditures, between April 1, 2004 and July 20, 2004, other purchase price adjustments, and expenses associated with the sale will be deducted from the acquisition price, which is expected to result in an estimated net adjusted sales price of between $180 and $185 million. The Company plans to retire its bank debt with the proceeds from the sale, reducing total debt to $225 million, consisting entirely of the Company's 7 1/2% senior subordinated notes due 2013. The Company's bank borrowing base is expected to be adjusted from $220 million to $175 million as a result of the sale. The Company estimates that the sale will generate between $70 million and $75 million of excess cash after repayment of its bank debt, estimated income taxes and other fees and expenses of the sale. The Stock Purchase Agreement for the sale of Offshore, excluding the Schedules, is attached hereto as Exhibit 2.1. Item 7. Financial Statements and Exhibits. --------------------------------- (a) Not Applicable. (b) Pro Forma Financial Information to give effect to sale of Denbury Offshore, Inc. The following unaudited pro forma consolidated statements of operations for the year ended December 31, 2003 and the three months ended March 31, 2004, and unaudited pro forma condensed consolidated balance sheet as of March 31, 2004, give effect to the sale of Denbury Offshore, Inc. described in Item 2, which closed on July 20, 2004, and was valued as of April 1, 2004, subject to final purchase price adjustments. The pro forma statement of operations for the year ended December 31, 2003 is presented as if the transaction had occurred on January 1, 2003. The pro forma statement of operations for the three months ended March 31, 2004 is presented as if the transaction had occurred on January 1, 2004. The pro forma condensed balance sheet is presented as if the transaction had occurred on March 31, 2004. The unaudited pro forma information is presented for illustrative purposes only and may not be indicative of the results that would have been obtained had the transaction occurred on the pro forma dates assumed, nor is it necessarily indicative of future consolidated results of operations. This unaudited pro forma financial information should be read in conjunction with Denbury's historical financial statements and related notes, which are included in its Annual Report on Form 10-K for the year ended December 31, 2003, and its Quarterly Report on Form 10-Q for the three months ended March 31, 2004.
DENBURY RESOURCES INC. PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET MARCH 31, 2004 (Amounts in thousands except share amounts) (Unaudited) Pro Forma Adjustments for Sale of Denbury Pro Forma Historical Offshore, Inc. After Sale --------------- --------------- ------------- Assets Current assets Cash and cash equivalents $ 17,208 $ 102,000 (1) $ 119,208 Accrued production receivables 39,487 (10,809)(2) 28,678 Related party accrued production receivable - Genesis 8,810 - 8,810 Trade and other receivables 19,307 - 19,307 Deferred tax asset 39,518 (2,813)(6) (22,383)(3) 14,322 --------------- --------------- ------------- Total current assets 124,330 65,995 190,325 --------------- --------------- ------------- Property and equipment Oil and natural gas properties (using full cost accounting) Proved 1,456,736 (173,894)(4) 1,282,842 Unevaluated 46,082 (24,376)(4) 21,706 CO2 properties and equipment 105,779 - 105,779 Less accumulated depletion and depreciation (722,508) - (722,508) --------------- --------------- ------------- Net property and equipment 886,089 (198,270) 687,819 --------------- --------------- ------------- Investment in Genesis 7,226 - 7,226 Other assets 22,185 (3,564)(2) 18,621 --------------- --------------- ------------- Total assets $ 1,039,830 $ (135,839) $ 903,991 =============== =============== ============= Liabilities and Stockholders' Equity Current liabilities Accounts payable and accrued liabilities $ 63,672 $ (6,537)(2) $ 57,135 Oil and gas production payable 24,013 - 24,013 Derivative liabilities 46,791 - 46,791 Current income taxes - 22,000 (3) 22,000 --------------- --------------- ------------- Total current liabilities 134,476 15,463 149,939 --------------- --------------- ------------- Long-term liabilities Long-term debt 303,251 (80,000)(5) 223,251 Asset retirement obligations 42,199 (24,106)(2) 18,093 Derivative liabilities 2,121 - 2,121 Deferred revenue - Genesis 20,957 - 20,957 Deferred tax liability 88,732 (44,383)(3) 44,349 Other 2,077 - 2,077 --------------- --------------- ------------- Total long-term liabilities 459,337 (148,489) 310,848 --------------- --------------- ------------- Stockholders' equity Preferred stock, $.001 par value, 25,000,000 shares authorized; none issued and outstanding - - - Common stock, $.001 par value, 100,000,000 shares authorized; 54,681,382 and 54,190,042 shares issued at March 31, 2004 and December 31, 2003, respectively 55 - 55 Paid-in capital in excess of par 406,534 - 406,534 Retained earnings 68,960 (7,402)(6) 61,558 Accumulated other comprehensive loss (29,271) 4,589 (6) (24,682) Treasury stock, at cost, 17,921 and 8,162 shares at March 31, 2004 and December 31, 2003, respectively (261) - (261) --------------- --------------- ------------- Total stockholders' equity 446,017 (2,813) 443,204 --------------- --------------- ------------- Total liabilities and stockholders' equity $ 1,039,830 $ (135,839) $ 903,991 =============== =============== ============= See accompanying notes to unaudited pro forma financial information
DENBURY RESOURCES INC. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003 (Amounts in thousands except per share amounts) (Unaudited) Pro Forma Adjustments for Sale of Denbury Pro Forma Historical Offshore, Inc. After Sale --------------- --------------- --------------- Revenues Oil, natural gas and related product sales Unrelated parties $ 336,521 $ (93,038)(1) $ 243,483 Related party - Genesis 48,942 - 48,942 CO2 sales and transportation fees Unrelated parties 7,512 - 7,512 Related party - Genesis 676 - 676 Loss on settlements of derivative contracts (62,210) 16,167 (2) (46,043) Interest income and other 1,573 - 1,573 ----------------- --------------- -------------- Total revenues 333,014 (76,871) 256,143 ----------------- --------------- -------------- Expenses Lease operating expenses 89,439 (20,456)(3) 68,983 Production taxes and marketing expenses 14,819 (2,415)(3) 12,404 CO2 operating expenses 1,710 - 1,710 General and administrative expenses 15,189 - 15,189 Interest 23,201 (3,043)(5) 20,158 Loss on early retirement of debt 17,629 - 17,629 Depletion and depreciation 94,708 (23,393)(6) 71,315 Amortization of derivative contracts and other non-cash hedging adjustments (3,578) (7)(7) (3,585) ----------------- --------------- --------------- Total expenses 253,117 (49,314) 203,803 ----------------- --------------- --------------- Equity in net income of Genesis 256 - 256 ----------------- --------------- --------------- Income before income taxes 80,153 (27,557) 52,596 Income tax provision Current income taxes (91) - (91) Deferred income taxes 26,303 (10,196)(8) 16,107 ----------------- --------------- --------------- Net income before cumulative effect change in accounting principle $ 53,941 $ (17,361) $ 36,580 ================= =============== =============== Net income per common share before change in accounting principle Basic $ 1.00 $ 0.68 Diluted 0.97 0.66 Weighted average common shares outstanding Basic 53,881 53,881 Diluted 55,464 55,464 See accompanying notes to unaudited pro forma financial information
DENBURY RESOURCES INC. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2004 (Amounts in thousands except per share amounts) (Unaudited) Pro Forma Adjustments for Sale of Denbury Pro Forma Historical Offshore, Inc. After Sale ----------------- -------------- --------------- Revenues Oil, natural gas and related product sales Unrelated parties $ 91,274 $ (26,541)(1) $ 64,733 Related party - Genesis 18,962 - 18,962 CO2 sales and transportation fees Unrelated parties 284 - 284 Related party - Genesis 1,077 - 1,077 Loss on settlements of derivative contracts (14,268) 2,171 (2) (12,097) Interest income and other 419 - 419 ----------------- -------------- --------------- Total revenues 97,748 (24,370) 73,378 ----------------- -------------- --------------- Expenses Lease operating expenses 22,528 (4,680)(3) 17,848 Production taxes and marketing expenses 4,067 (606)(3) 3,461 CO2 operating expenses 144 - 144 General and administrative expenses 4,748 (495)(4) 4,253 Interest 5,081 (451)(5) 4,630 Depletion and depreciation 27,324 (8,209)(6) 19,115 Amortization of derivative contracts and other non-cash hedging adjustments 818 (24)(7) 794 ----------------- -------------- --------------- Total expenses 64,710 (14,465) 50,245 ----------------- -------------- --------------- Equity in net income (loss) of Genesis (93) - (93) ----------------- -------------- --------------- Income before income taxes 32,945 (9,905) 23,040 Income tax provision Current income taxes 2,119 - 2,119 Deferred income taxes 8,522 (3,665)(8) 4,857 ----------------- -------------- --------------- Net income $ 22,304 $ (6,240) $ 16,064 ================= ============== =============== Net income per common share Basic $ 0.41 $ 0.30 Diluted 0.40 0.29 Weighted average common shares outstanding Basic 54,388 54,388 Diluted 56,313 56,313 See accompanying notes to unaudited pro forma financial information
Notes to Unaudited Pro Forma Financial Information related to sale of Denbury Offshore, Inc. Explanation of adjustments to Unaudited Pro Forma Condensed Consolidated Balance Sheet at March 31, 2004: (1) To record the increase in cash resulting from the estimated net cash proceeds received from the sale, after transaction costs, of approximately $182 million, and repayment of Denbury's bank debt of $80 million. The final purchase price is subject to closing adjustments. (2) To record transfer of assets and liabilities as a result of the sale. (3) To reclassify estimated current and deferred taxes as a result of the sale. (4) To record estimated reduction to full-cost pool and unevaluated properties. (5) To record re-payment of outstanding bank debt as a result of the sale. (6) To record estimated adjustments for natural gas commodity hedges that no longer qualify for hedge accounting due to the sale of associated production in the sale transaction. Explanation of adjustments to Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 2003 and the three months ended March 31, 2004: (1) To remove oil and natural gas revenues related to properties owned by Denbury Offshore, Inc. and disposed in the sale transaction. (2) To adjust loss on settlements of natural gas commodity hedges related to properties owned by Denbury Offshore, Inc. and disposed in the sale transaction. (3) To remove operating expenses related to properties owned by Denbury Offshore, Inc. and disposed in the sale transaction. (4) To remove employee severance expense related to the sale. (5) To reduce interest expense for outstanding bank debt repaid with cash proceeds from the transaction. (6) To reduce depletion and depreciation for impact of disposed properties to depletion full-cost pool. (7) To record estimated adjustments for natural gas commodity hedges that no longer qualify for hedge accounting due to the sale of associated production in the sale transaction. (8) Estimated income tax effects related to the pro forma adjustments in (1) - (7) above. (c) Exhibits. The following exhibits are filed with this report on Form 8-K: Exhibit No. Exhibit Description ---------- ------------------- 2.1 Stock Purchase Agreement made as of July 19, 2004 between Denbury Resources Inc. and Newfield Exploration Company SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: August 4, 2004 Denbury Resources Inc. (Registrant) By: /s/ Phil Rykhoek ------------------------------------------ Phil Rykhoek Sr. Vice President and CFO