-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, I2EUZw2kivyC5iV0t/eGMQ47NORiSxNDAym5/mLbB1CFNPrJoWoG2jJFXMTQnv3W rTehVGU3ytrJtvkIJqQRfQ== 0000945764-97-000008.txt : 19970514 0000945764-97-000008.hdr.sgml : 19970514 ACCESSION NUMBER: 0000945764-97-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970513 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DENBURY RESOURCES INC CENTRAL INDEX KEY: 0000945764 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12935 FILM NUMBER: 97601626 BUSINESS ADDRESS: STREET 1: 17304 PRESTON RD STREET 2: STE 200 CITY: DALLAS STATE: TX ZIP: 75252 BUSINESS PHONE: 2147133000 MAIL ADDRESS: STREET 1: 17304 PRESTON RD STREET 2: STE 200 CITY: DALLAS STATE: TX ZIP: 75252 FORMER COMPANY: FORMER CONFORMED NAME: NEWSCOPE RESOURCES LTD DATE OF NAME CHANGE: 19950627 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ---------------------- (Mark One) X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 1997 Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission file number 33-93722 --------------------------- DENBURY RESOURCES INC. (Exact name of Registrant as specified in its charter) Canada Not applicable (State or other jurisdiction (I.R.S. Employer of incorporation or Identification No.) organization) 17304 Preston Rd., Suite 200 75252 Dallas, TX (Zipcode) (Address of principal executive offices) Registrant's telephone number, including area code: (972)713-3000 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at April 30, 1997 Common Stock, no par value 20,120,296 DENBURY RESOURCES INC. INDEX Part I. Financial Information Page Item 1. Financial Statements (unaudited) Consolidated Balance Sheets 3 Consolidated Statements of Income 4 Consolidated Statements of Cash Flows 5 Notes to Consolidated Financial Statements 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-13 Part II. Other Information 14 2 DENBURY RESOURCES INC. CONSOLIDATED BALANCE SHEETS (Amounts in thousands of U.S. Dollars)
March 31, December 31, 1997 1996 --------- --------- (Unaudited) Assets Current assets Cash and cash equivalents $ 17,066 $ 13,453 Accrued production receivable 6,941 11,906 Trade and other receivables 4,676 3,643 --------- ---------- Total current assets 28,683 29,002 --------- ---------- Property and equipment (using full cost accounting) Oil and gas properties 173,630 159,724 Unevaluated oil and gas properties 7,649 6,413 Less accumulated depreciation and depletion (37,476) (31,141) --------- ---------- Net property and equipment 143,803 134,996 --------- ---------- Other assets 2,770 2,507 --------- ---------- Total assets $ 175,256 $ 166,505 ========= ========== Liabilities and Shareholders' Equity Current liabilities Accounts payable and accrued liabilities $ 12,902 $ 10,903 Oil and gas production payable 3,446 5,550 Current portion of long-term debt 47 67 --------- ---------- Total current liabilities 16,395 16,520 --------- ---------- Long-term liabilities Long-term debt 121 125 Provision for site reclamation costs 749 613 Deferred income taxes and other 9,799 6,743 --------- ---------- Total long-term liabilities 10,669 7,481 --------- ---------- Shareholders' equity Common shares, no par value, unlimited shares authorized; outstanding - 20,118,796 and 20,055,757 shares at March 31, 130,796 130,323 1997 and December 31, 1996, respectively Retained earnings 17,396 12,181 --------- ---------- Total shareholders' equity 148,192 142,504 --------- ---------- Total liabilities and shareholders' equity $ 175,256 $ 166,505 ========= ==========
(See accompanying notes to Consolidated Financial Statements) 3 DENBURY RESOURCES INC. CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands except per share amounts) (Unaudited - U.S. dollars)
Three Months Ended March 31, ------------------------- 1997 1996 --------- --------- Revenues Oil, gas and related product sales $ 21,141 $ 9,017 Interest and other income 512 75 --------- --------- Total revenues 21,653 9,092 --------- --------- Expenses Production 5,053 2,044 General and administrative 1,521 825 Interest 79 105 Imputed preferred dividends - 375 Provision for loss on early extinguishment of debt - 440 Depletion and depreciation 6,625 2,925 Franchise taxes 97 53 --------- --------- Total expenses 13,375 6,767 --------- --------- Income before income taxes 8,278 2,325 Provision for income taxes (3,063) (945) --------- --------- Net income $ 5,215 $ 1,380 ========= ========= Net income per common share Primary $ 0.26 $ 0.12 Fully diluted 0.24 0.12 Average number of common shares outstanding 20,094 11,469 ========= =========
(See accompanying notes to Consolidated Financial Statements) 4 DENBURY RESOURCES INC. CONSOLIDATED STATEMENTS OF CASH FLOW (Amounts in thousands of U.S. dollars) (Unaudited)
Three Months Ended March 31, ------------------------ 1997 1996 --------- --------- Cash flow from operating activities: Net income $ 5,215 $ 1,380 Adjustments needed to reconcile to net cash flow provided by operations: Depreciation, depletion and amortization 6,625 2,925 Deferred income taxes 3,063 945 Imputed preferred dividend - 375 Provision for loss on early extinguishment of debt - 440 Other 19 - --------- --------- 14,922 6,065 Changes in working capital items relating to operations: Accrued production receivable 4,965 (1,364) Trade and other receivables (1,033) (327) Accounts payable and accrued liabilities 1,999 1,934 Oil and gas production payable (2,104) 1,326 --------- --------- Net cash flow provided by operations 18,749 7,634 --------- --------- Cash flow from investing activities: Oil and gas expenditures (14,965) (4,633) Acquisition of oil and gas properties (177) (2,540) Net purchases of other assets (430) (243) --------- --------- Net cash used for investing activities (15,572) (7,416) --------- --------- Cash flow from financing activities: Issuance of common stock 473 423 Costs of debt financing (6) (46) Other (31) (52) --------- --------- Net cash provided by financing activities 436 325 --------- --------- Net increase in cash and cash equivalents 3,613 543 Cash and cash equivalents at beginning of year 13,453 6,553 --------- --------- Cash and cash equivalents at end of year $ 17,066 $ 7,096 ========= ========= Supplemental disclosure of cash flow information: Cash paid during the quarter for interest $ 60 $ 75
(See accompanying notes to Consolidated Financial Statements) 5 DENBURY RESOURCES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) March 31, 1997 and 1996 1. ACCOUNTING POLICIES Interim Financial Statements The results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the fiscal year. In the opinion of management of Denbury Resources Inc. (the "Company" or "Denbury"), the accompanying unaudited financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position as of March 31, 1997, and the results of operations for the three months ended March 31, 1997 and 1996 and cash flow for the three months ended March 31, 1997 and 1996. These financial statements and the notes thereto should be read in conjunction with the Company's annual report on Form 10-K for the year ended December 31, 1996. Net Income per Common Share Net income per common share is computed by dividing the net income by the weighted average number of shares of common stock outstanding, after adjusting for the one-for-two reverse split effective on October 10, 1996. In accordance with Canadian generally accepted accounting principles ("GAAP"), the imputed dividend during 1996 on the Convertible First Preferred Shares, Series A ("Convertible Preferred") has been recorded as an operating expense in the accompanying financial statements and thus is deducted from net income in computing earnings per common share. The stock options, warrants, and the conversion of the conversion of the convertible debt were included in the calculation of fully-diluted earnings per share. The conversion of the Convertible Preferred was anti-dilutive and was not included in the calculation of earnings per share. 2. NOTES PAYABLE AND LONG-TERM INDEBTEDNESS
March 31, December 31, 1997 1996 -------- --------- (Amounts in thousands) (Unaudited) Senior bank loan $ 100 $ 100 Other notes payable 68 92 Less portion due within one year (47) (67) -------- --------- Total long-term debt $ 121 $ 125 ======== =========
Bank Credit Agreement In April, 1997, the Company amended its bank credit facility (i) to extend the revolver by one year to May 31, 1999, (ii) to extend the termination date by one year to May 31, 2002, and (iii) to reduce the commitment fee percentages. As of March 31, 1997, the Company had $100,000 outstanding on this line of credit with a borrowing base of $60 million. 6 DENBURY RESOURCES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) March 31, 1997 and 1996 3. DIFFERENCES IN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES BETWEEN CANADA AND THE UNITED STATES The consolidated financial statements have been prepared in accordance with Canadian GAAP. The primary difference between Canadian and U.S. GAAP affecting the Company's first quarter financial statements result from the different methodology for computing earnings per common share. Under U.S. GAAP, the primary and fully-diluted earnings per common share for the first quarter of 1997 would be $.25, as compared to the $.26 and $.24, respectively, as reported under Canadian GAAP. The earnings per share would be the same under both U.S. and Canadian GAAP for the first quarter of 1996. In February 1997 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128 Earnings Per Share, ("SFAS 128"). SFAS 128 simplifies the standards for computing earnings per share ("EPS") and makes them more comparable to international EPS standards. SFAS 128 replaces the presentation of primary EPS with a presentation of basic EPS. Basic EPS excludes dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised, converted into common stock or resulted in the issuance of common shares that then shared in the earnings of the entity. Diluted EPS is computed similarly to fully diluted EPS pursuant to Accounting Principles Board Opinion No. 15. SFAS 128 is effective for financial statements issued for periods ending after December 15, 1997, including interim periods. Earlier application is not permitted. Basic EPS for the first quarter of 1997 under SFAS 128 would be $.26 per common share. SFAS 128 does not affect the computation of EPS for the first quarter of 1996. During the first quarter of 1996, the Company expensed $440,000 of debt issue cost relating to the Company's prior bank credit agreement with ING Capital Corporation and $375,000 relating to the imputed preferred dividend on the Convertible Preferred. Under U.S. GAAP, a loss on early extinguishment of debt is reported as an extraordinary item rather than as an operating expense and the preferred dividend is reported as a deduction from net income to arrive at the net income attributable to the common shareholders rather than deducted as an operating expense. While net income per common share and all balance sheet accounts are not affected by this difference in GAAP, the net income for the first quarter of 1996 under U.S. GAAP would be $1,755,000 while under Canadian GAAP the amount reported was $1,380,000. Since the Convertible Preferred was converted into Common Shares on October 30, 1996, this difference in GAAP did not affect the first quarter of 1997 financial results. 7 DENBURY RESOURCES INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Denbury is an independent energy company engaged in acquisition, development and exploration activities in the U.S. Gulf Coast region. Since 1993, after having disposed of its Canadian oil and natural gas properties, the Company has focused its operations primarily onshore in Louisiana and Mississippi. Over the last three years, the Company has achieved rapid growth in proved reserves, production and cash flow by concentrating on the acquisition of properties which it believes have significant upside potential and through the efficient development, enhancement and operation of those properties. Capital Resources and Liquidity During the first quarter of 1997, the Company made total capital expenditures of $15.1 million, which was primarily funded by the cash generated by operations ($14.9 million). The Company has budgeted capital expenditures for 1997 of between $60 and $70 million. Although the Company's projected cash flow is highly variable and difficult to predict as it is dependent on product prices, drilling success, and other factors, these projected expenditures are expected to exceed the Company's cash flow during 1997. However, as of March 31, 1997, the Company has available working capital of $12.2 million as well as a virtually unused borrowing base of $60.0 million to fund any potential cash flow deficits. If external capital resources are limited or reduced in the future, the Company can also adjust its capital expenditure program accordingly. However, such adjustments could limit, or even eliminate, the Company's future growth. In addition to its internal capital expenditure program, the Company has historically required capital for the acquisition of producing properties, which have been a major factor in the Company's rapid growth during recent years. There can be no assurance that suitable acquisitions will be identified in the future or that any such acquisitions will be successful in achieving desired profitability objectives. Without suitable acquisitions or the capital to fund such acquisitions, the Company's future growth could be limited or even eliminated. Sources and Uses of Funds During the first quarter of 1997, the Company spent approximately $15.0 million on oil and natural gas development expenditures and approximately $177,000 on acquisitions. The development expenditures included approximately $6.2 million spent on drilling, $2.3 million on geological, geophysical and acreage expenditures and the balance of $6.5 million was spent on workover costs. These expenditures were funded by available cash and cash flow from operations. During the first quarter of 1996, the Company spent approximately $4.6 million on oil and gas development expenditures and $2.5 million on acquisitions. The development expenditures included approximately $500 thousand on geological and geophysical expenditures and the balance on drilling and workover costs. The acquisition expenditures were for an additional working interest in one of the Company's existing Southern Louisiana fields, plus interests in two additional fields in the same area. These expenditures were funded entirely by available cash and cash flow from operations. 8 DENBURY RESOURCES INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Operating Income Operating income increased significantly for the quarter ended March 31, 1997 as compared to the first quarter of 1996 as outlined in the following chart. Oil and gas revenue increased primarily as a result of the increased oil and gas production and an increase in oil product prices.
Three Months Ended March 31, - -------------------------------------------------------------- 1997 1996 - -------------------------------------------------------------- OPERATING INCOME (THOUSANDS) Oil sales $ 12,877 $ 3,115 Natural gas sales 8,264 5,902 Less production expenses (5,053) (2,044) --------- -------- Operating income $ 16,088 $ 6,973 --------- -------- UNIT PRICES Oil price per barrel ("Bbl") $ 20.03 $ 16.67 Gas price per thousand cubic feet 2.99 3.18 ("Mcf") NETBACK PER BOE (1): Sales price $ 19.17 $ 18.17 Production expenses (4.58) (4.12) --------- -------- $ 14.59 $ 14.05 --------- -------- AVERAGE DAILY PRODUCTION VOLUME: Bbls 7,143 2,053 Mcf 30,674 20,397 BOE 12,256 5,453 - -------------------------------------------------------------- (1) Barrel of oil equivalent using the ratio of one barrel of oil to 6 Mcf of natural gas ("BOE").
Production increases have been fueled by both internal growth from the Company's development and exploration programs and from the acquisition of producing properties during 1996, particularly the $37.2 million acquisition of producing properties from Amerada Hess in May, 1996 (the "Hess Acquisition"). The properties included in the Hess Acquisition during May and June, 1996, the first two months of ownership, was approximately 2,945 BOE per day ("BOE/d"). During the first quarter of 1997, the production from these properties averaged 4,385 BOE/d, a 49% increase. Total corporate production on a BOE/d basis increased 21% from the fourth quarter of 1996 average of 10,132, almost solely as a result of internal development, as the Company had only $177,000 of acquisitions during the first quarter of 1997. 9 DENBURY RESOURCES INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Oil and gas revenue has increased not only because of the large increase in production, but also due to improved oil product prices. Between the first quarter of 1996 and 1997, oil product prices increased 20% while natural gas product prices declined by 6% between the two periods. Production expenses increased between the first quarters of 1996 and 1997 along with the increases in production. On a BOE basis, production expenses increased 11% from the first quarter of 1996 to the comparable quarter in 1997. The increase was largely attributable to the changes in the mix of properties as the Mississippi oil properties tend to have a higher operating cost per BOE than the Louisiana gas properties. During the first quarter of 1996, approximately 38% of the Company's production on a BOE basis was oil while during the first quarter of 1997, approximately 58% of the Company's production on a BOE basis was oil. General and Administrative Expenses General and administrative ("G&A") expenses have increased as outlined below along with the Company's growth.
Three months ended March 31, - ------------------------------------------------------------ 1997 1996 - ------------------------------------------------------------ NET G&A EXPENSES (THOUSANDS) Gross expenses $3,342 $1,612 State franchise taxes 97 53 Operator recoveries (1,168) (533) Capitalized exploration expenses (653) (254) ------- -------- Net expenses $1,618 $ 878 ------- -------- Average G&A cost per BOE $ 1.47 $ 1.77 Employees as of March 31 129 54 - ------------------------------------------------------------
On a BOE basis, these G&A costs decreased 17% from the first quarter of 1996 to the comparable quarter in 1997. Average production on a BOE/d basis increased 125% from the first quarter of 1996 to the first quarter of 1997 while gross G&A expenses increased only 107%. Since the fourth quarter of 1996, average production on a BOE/d basis increased 21%, while gross G&A expenses increased only 18% as the Company has made minimal increases to its staff levels since year-end. Further, as a result of increased drilling activity, the Company was able to recover a slightly higher percentage of gross G&A through its operator recoveries during the first quarter of 1997 (36%) as compared to the first quarter of 1996 (34%). 10 DENBURY RESOURCES INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Interest and Financing Expenses
Three Months Ended March 31, - --------------------------------------------------------------- AMOUNTS IN THOUSANDS EXCEPT PER UNIT AMOUNTS 1997 1996 - --------------------------------------------------------------- Interest expense $ 79 $ 105 Non-cash interest expense (19) - -------- -------- Cash interest expense 60 105 Interest and other income (512) (75) -------- -------- Net interest expense (income) $ (452) $ 30 - --------------------------------------------------------------- Average interest cost (income) per BOE $(0.41) $ 0.06 Average debt outstanding $ 180 $ 3,600 - --------------------------------------------------------------- Imputed preferred dividend $ - $ 375 Loss on early extinguishment of debt - 440 - ---------------------------------------------------------------
During the first quarters of 1996 and 1997, the Company had minimal debt outstanding as virtually all of the bank debt had been retired during the previous fourth quarter. In 1995, the bank debt was repaid with proceeds from the December 1995 private placement of equity with the Texas Pacific Group ("TPG") and in 1996, the debt was repaid with proceeds from a public offering of Common Shares completed in October, 1996. However, in 1996 the Company did incur debt during the year in order to fund property acquisitions. The private placement of equity in December 1995 with TPG included 1.5 million shares of Convertible Preferred. During the first quarter of 1996, the Company recognized $375,000 of charges representing the imputed preferred dividend on these shares. On October 30, 1996 the Convertible Preferred was converted into 2.8 million Common Shares. Under Canadian GAAP, this dividend was reported as an operating expense, while under U.S. GAAP this would not be an expense but it would be deducted from net income to arrive at net income attributable to the common shareholders. In addition to paying off its bank debt and converting the Convertible Preferred into common equity during the fourth quarter of 1996, the Company also converted its remaining subordinated debt into common equity, leaving the Company essentially debt-free as of December 31, 1996. During the first quarter of 1996, the Company had a $440,000 charge relating to a loss on early extinguishment of debt. These costs related to the remaining unamortized debt issue costs of the Company's prior credit facility which was replaced in May 1996. Under U.S. GAAP, a loss on early extinguishment of debt would be an extraordinary item rather than a normal operating expense as required by Canadian GAAP. Depletion, Depreciation and Site Restoration Depletion, depreciation and amortization ("DD&A") has increased along with the additional capitalized cost and increased production. DD&A per BOE has increased only slightly (2%) from the first quarter of 1996 to the first quarter of 1997. The Company used the same DD&A rate per BOE for the first quarter of 1997 as was used for the year ended December 31, 1996, as there was insufficient data to justify any change in the rate. The Company also provides for the estimated future costs of well abandonment and site reclamation, net of any anticipated salvage, on a unit-of-production basis. This provision is included in the DD&A expense and has increased each year along with an increase in the number of properties owned by the Company. 11 DENBURY RESOURCES INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three Months Ended March 31, - -------------------------------------------------------------- AMOUNTS IN THOUSANDS EXCEPT PER UNIT AMOUNTS 1997 1996 - -------------------------------------------------------------- Depletion and depreciation $ 6,488 $ 2,891 Site restoration provision 137 34 ------- ------- Total amortization $ 6,625 $ 2,925 ------- ------- Average DD&A cost per BOE $ 6.01 $ 5.89 - --------------------------------------------------------------
Income Taxes Due to a net operating loss of the U.S. subsidiary each year for tax purposes, the Company does not have any current tax provision. The deferred tax provision as a percentage of net income has varied depending on the mix of Canadian and U.S. expenses. The rate increased slightly in 1996 due to the non-deductible imputed preferred dividend and interest on the subordinated debt.
Three Months Ended March 31, - -------------------------------------------------------------- 1997 1996 - -------------------------------------------------------------- Deferred income taxes (thousands) $3,063 $ 945 Average income tax costs per BOE $ 2.78 $1.90 Effective tax rate 37% 41% - --------------------------------------------------------------
Net Income Primarily as a result of increased production and improved oil product prices, net income and cash flow from operations increased substantially on both a gross and per share basis between the first quarter of 1996 and the first quarter of 1997 as outlined below.
Three Months Ended March 31, - -------------------------------------------------------------- AMOUNTS IN THOUSAND EXCEPT PER SHARE AMOUNTS 1997 1996 - -------------------------------------------------------------- Net income $ 5,215 $ 1,380 Net income per common share: Primary $ 0.26 $0.12 Fully diluted 0.24 0.12 Cash flow from operations (1) $ 14,922 $ 6,065 - -------------------------------------------------------------- (1) Represents cash flow provided by operations, exclusive of the net change in non-cash working capital balances.
New Accounting Pronouncement In February 1997 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128 Earnings Per Share, ("SFAS 128"). SFAS 128 simplifies the standards for computing earnings per share ("EPS") and makes them comparable to international EPS standards. SFAS 128 replaces the presentation of primary EPS with a presentation of basic EPS. Basic EPS excludes dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted 12 EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised, converted into common stock or resulted in the issuance of common shares that then shared in the earnings of the entity. Diluted EPS is computed similarly to fully diluted EPS pursuant to Accounting Principles Board Opinion No. 15. SFAS 128 is effective for financial statements issued for periods ending after December 15, 1997, including interim periods; earlier application is not permitted. Basic EPS for the first quarter of 1997 under SFAS 128 would be $.26 per common share rather than the $.25 per common share as computed under U.S. generally accepted accounting principles ("GAAP"). SFAS 128 does not affect the EPS for the first quarter of 1996. 13 Part II. Other Information Item 5. Other Information. The Company commenced trading on the New York Stock Exchange on May 8, 1997. The trading symbol changed on that same date from DENRF, as previously used on NASDAQ, to DNR. Item 6. Exhibits and Reports on Form 8-K during the First Quarter of 1997 Exhibits: 10 First Amendment to Credit Agreement and Waiver dated April 1, 1997 to the credit agreement dated May 31, 1996 between the Company and NationsBank of Texas N.A. as agent. Reports on Form 8-K: None 14 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. DENBURY RESOURCES INC. (Registrant) /s/ Phil Rykhoek ------------------------------- By: Phil Rykhoek Chief Financial Officer Date: May 12, 1997 15 EX-10 2 FIRST AMENDMENT TO CREDIT AGREEMENT EXHIBIT 10 FIRST AMENDMENT TO CREDIT AGREEMENT 15 FIRST AMENDMENT TO CREDIT AGREEMENT AND WAIVER This First Amendment to Credit Agreement and Waiver (this "First Amendment") is entered into as of the 1st day of April, 1997, by and among Denbury Management, Inc. ("Borrower"), Denbury Resources, Inc., ("Resources"), Denbury Holdings, Ltd., ("Holdings", together with Resources, the "Guarantors"), NationsBank of Texas, N.A., as Agent ("Agent"), and NationsBank of Texas, N.A., Bankers Trust Company and Internationale Nederlanden (U.S.) Capital Corporation, as Banks (the "Banks"). W I T N E S E T H: WHEREAS, Borrower, Guarantors, Agent and the Banks are parties to that certain Credit Agreement dated as of May 31, 1996 (as amended, the "Credit Agreement") (unless otherwise defined herein, all terms used herein with their initial letter capitalized shall have the meaning given such terms in the Credit Agreement); and WHEREAS, pursuant to the Credit Agreement the Banks have made certain Loans to Borrower, and Agent has issued certain Letters of Credit on behalf of Borrower; and WHEREAS, Borrower has requested that (i) certain definitions in the Credit Agreement be amended in certain respects, (ii) the Banks extend the Revolver Conversion Date to May 31, 1999, (iii) the Banks extend the Termination Date to May 31, 2002, (iv) the Commitment Fee Percentage be reduced in certain respects and (v) the requirement of additional Title Opinions be waived until further notice from Agent; and WHEREAS, subject to the terms and conditions herein contained, the Banks have agreed to Borrower's requests. NOW THEREFORE, for and in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, Borrower, Agent and each Bank hereby agree as follows: Section 1.Amendments. Subject to the satisfaction of each condition precedent set forth in Section 3 hereof and in reliance on the representations, warranties, covenants and agreements contained in this First Amendment, the Credit Agreement shall be amended effective April 1, 1997 (the "Effective Date") in the manner provided in this Section 1. 1.1.Amendment to Definitions. The definitions of "Commitment Fee Percentage", "Loan Papers", "Revolver Conversion Date" and "Termination Date" contained in Section 1.1 of the Credit Agreement shall be amended to read in full as follows: "Commitment Fee Percentage" means, on any date, an amount determined by reference to the ratio of Outstanding Credit to the Borrowing Base on such date in accordance with the table below:
Ratio of Outstanding Credit to Borrowing Base Commitment Fee Percentage - --------------------------------------- --------------------------------------- Less than/equal to .50 to 1 .30% Greater than .50 to 1 and less than/equal to .75 to 1 .35% Greater than .75 to 1 .375%
"Loan Papers" means this Agreement, the First Amendment, the Notes, the Facility Guarantees, the Parent Pledge Agreement, the Holdings Pledge Agreement, the Borrower Pledge Agreement, the Assignment and Amendment to Mortgages, all Mortgages now or at any time hereafter delivered pursuant to Section 5.1, and all other certificates, documents or instruments delivered in connection with this Agreement, as the foregoing may be amended from time to time. "Revolver Conversion Date" means May 31, 1999. "Termination Date" means May 31, 2002. Section 2.Borrowing Base. Effective as of April 1, 1997 and continuing until the next Scheduled or Special Redetermination, the Borrowing Base under the Credit Agreement shall be $60,000,000. Section 3.Limited Waiver. As of the date hereof, Borrower has delivered to Agent Title Opinions covering approximately sixty-one percent (61%) of the Recognized Value of the Proved Mineral Interests. Agent and Banks hereby agree to temporarily waive the requirement that Title Opinions be delivered with respect to the remaining portion of the Required Reserve Value of the Proved Mineral Interests. Until further notice from Agent, Borrower shall only be required to deliver Title Opinions to Agent and the Banks covering Proved Mineral Interests up to the Required Reserve Value as Agent shall reasonably request. The waiver set forth in this Section 3 is expressly limited as follows: (a) such temporary waiver is limited solely to requirements to deliver Title Opinions in the Credit Agreement, (b) such temporary waiver shall not be applicable to any provision of any Loan Paper other than requirements to deliver Title Opinions in the Credit Agreement, and (c) such temporary waiver is a limited, one-time waiver, and nothing contained herein shall obligate Banks to grant any additional or future waiver of requirements to deliver Title Opinions in the Credit Agreement or any other provision of any Loan Paper. Section 4. Conditions Precedent to Effectiveness of Amendments. The amendments to the Credit Agreement contained in Section 1 of this First Amendment shall be effective only upon the satisfaction of each of the conditions set forth in this Section 4. If each condition set forth in this Section 4 has not been satisfied by the Effective Date, this First Amendment and all obligations of the Banks and Agent contained herein shall, at the option of Required Banks, terminate. 4.1 Corporate Existence and Authority. Borrower shall have delivered to Agent such resolutions, certificates and other documents as Agent shall request relative to the authorization, execution and delivery by Borrower and Guarantors of this First Amendment. 4.2 Certificate Regarding Representations and Warranties. Borrower shall have delivered to Agent a certificate of its vice president of finance, chief financial officer or chief accounting officer certifying that each representation and warranty contained in (a) the Credit Agreement, (b) this First Amendment, and (c) each of the other Loan Papers is true and correct and will be true and correct after giving effect to the amendments contained in Section 1 hereof. Section 5. Representations and Warranties of Borrower. To induce the Banks and Agent to enter into this First Amendment, Borrower and Guarantors hereby represent and warrant to Agent as follows: (a)Each representation and warranty of Borrower and Guarantors contained in the Credit Agreement and the other Loan Papers is true and correct on the date hereof and will be true and correct after giving effect to the amendments set forth in Section 1 hereof. (b)The execution, delivery and performance by Borrower and Guarantors of this First Amendment are within the Borrower's and each Guarantor's corporate powers, have been duly authorized by necessary action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not violate or constitute a default under any provision of applicable law or any Material Agreement binding upon Borrower, the Subsidiaries of Borrower or the Guarantors or result in the creation or imposition of any Lien upon any of the assets of Borrower or the Subsidiaries of Borrower or the Guarantors except Permitted Encumbrances. (c)This First Amendment constitutes the valid and binding obligation of Borrower and the Guarantors enforceable in accordance with its terms, except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditor's rights generally, and (ii) the availability of equitable remedies may be limited by equitable principles of general application. (d)Borrower and Guarantors have no defenses to payment, counterclaims or rights of set-off with respect to the Obligations existing on the date hereof. (e)With the exception of the Amerada-Hess Acquisition, Borrower has not acquired any material Mineral Interests since May 31, 1996. (f)Agent, for the benefit of the Banks, has a first and prior Lien (subject only to Permitted Encumbrances) covering and encumbering Proved Mineral Interests owned by Borrower with a Recognized Value of not less than eighty five percent (85%) of the Recognized Value of all Proved Mineral Interests owned by Borrower. Section 6. Miscellaneous. 6.1 Reaffirmation of Loan Papers; Extension of Liens. Any and all of the terms and provisions of the Credit Agreement and the Loan Papers shall, except as amended and modified hereby, remain in full force and effect. Borrower and Guarantors hereby extend the Liens securing the Obligations until the Obligations have been paid in full, and agree that the amendments and modifications herein contained shall in no manner affect or impair the Obligations or the Liens securing payment and performance thereof. 6.2 Parties in Interest. All of the terms and provisions of this First Amendment shall bind and inure to the benefit of the parties hereto and their respective successors and assigns. 6.3 Legal Expenses. Borrower hereby agrees to pay on demand all reasonable fees and expenses of counsel to Agent incurred by Agent, in connection with the preparation, negotiation and execution of this First Amendment and all related documents. 6.4 Counterparts. This First Amendment may be executed in counterparts, and all parties need not execute the same counterpart; however, no party shall be bound by this First Amendment until all parties have executed a counterpart. Facsimiles shall be effective as originals. 6.5 Complete Agreement. THIS FIRST AMENDMENT, THE CREDIT AGREEMENT AND THE OTHER LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 6.6 Headings. The headings, captions and arrangements used in this First Amendment are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify or modify the terms of this First Amendment, nor affect the meaning thereof. IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be duly executed by their respective authorized officers on the date and year first above written. BORROWER: DENBURY MANAGEMENT, INC., a Texas corporation By:________________________________________ Name:______________________________________ Title:_____________________________________ By:________________________________________ Name:______________________________________ Title:_____________________________________ GUARANTORS: DENBURY HOLDINGS, LTD., a corporation incorporated under the Business Corporations Act (Alberta) By:________________________________________ Name:______________________________________ Title:_____________________________________ By:________________________________________ Name:______________________________________ Title:_____________________________________ DENBURY RESOURCES, INC., a corporation incorporated under the Canada Business Corporations Act By:________________________________________ Name:______________________________________ Title:_____________________________________ By:________________________________________ Name:______________________________________ Title:_____________________________________ AGENT: NATIONSBANK OF TEXAS, N.A. By:________________________________________ J. Scott Fowler Vice President BANKS: NATIONSBANK OF TEXAS, N.A. By:________________________________________ J. Scott Fowler Vice President BANKERS TRUST COMPANY By:________________________________________ Name:______________________________________ Title:_____________________________________ INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION By:________________________________________ Name:______________________________________ Title:_____________________________________ GW02/219412.03 EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DENBURY RESOURCES INC. MARCH 31, 1997 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 0000945764 Denbury Resources Inc. U.S. DOLLARS 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 1 17,066 0 11,617 0 0 28,683 181,279 (37,476) 175,256 16,395 0 0 0 130,796 17,396 148,192 21,141 21,653 0 13,296 0 0 79 8,278 3,063 5,215 0 0 0 5,215 .26 .24
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