þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 20-0467835 | |
(State or other jurisdictions of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
5320 Legacy Drive Plano, TX |
75024 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
Class | Outstanding at August 1, 2011 | |
Common Stock, $.001 par value | 402,350,295 |
2
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
ASSETS |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 121,792 | $ | 381,869 | ||||
Accrued production receivable |
255,034 | 223,584 | ||||||
Trade and other receivables, net of allowance of $486 and $456, respectively |
153,018 | 114,149 | ||||||
Short-term investments |
88,220 | 93,020 | ||||||
Derivative assets |
19,322 | 24,242 | ||||||
Deferred tax assets |
22,097 | 27,454 | ||||||
Total current assets |
659,483 | 864,318 | ||||||
Property and equipment |
||||||||
Oil and natural gas properties (using full cost accounting) |
||||||||
Proved |
6,508,928 | 6,042,442 | ||||||
Unevaluated |
952,452 | 870,130 | ||||||
CO2 and other non-hydrocarbon gases properties |
572,957 | 523,423 | ||||||
Pipelines and plants |
1,445,214 | 1,378,239 | ||||||
Other property and equipment |
138,671 | 120,641 | ||||||
Less accumulated depletion, depreciation, amortization, and impairment |
(2,403,741 | ) | (2,197,517 | ) | ||||
Net property and equipment |
7,214,481 | 6,737,358 | ||||||
Derivative assets |
17,609 | 12,919 | ||||||
Goodwill |
1,232,418 | 1,232,418 | ||||||
Other assets |
215,432 | 218,050 | ||||||
Total assets |
$ | 9,339,423 | $ | 9,065,063 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities |
||||||||
Accounts payable and accrued liabilities |
$ | 333,953 | $ | 345,998 | ||||
Oil and gas production payable |
172,837 | 143,145 | ||||||
Derivative liabilities |
81,627 | 78,184 | ||||||
Current maturities of long-term debt |
8,622 | 7,948 | ||||||
Other liabilities |
4,070 | 4,070 | ||||||
Total current liabilities |
601,109 | 579,345 | ||||||
Long-term liabilities |
||||||||
Long-term debt, net of current portion |
2,288,112 | 2,416,208 | ||||||
Asset retirement obligations |
86,109 | 81,290 | ||||||
Derivative liabilities |
3,378 | 29,687 | ||||||
Deferred taxes |
1,687,839 | 1,547,992 | ||||||
Other liabilities |
24,562 | 29,834 | ||||||
Total long-term liabilities |
4,090,000 | 4,105,011 | ||||||
Commitments and contingencies (Note 7) |
||||||||
Stockholders equity |
||||||||
Preferred stock, $.001 par value, 25,000,000 shares authorized, none issued and outstanding |
| | ||||||
Common stock, $.001 par value, 600,000,000 shares authorized; 402,508,885 and
400,291,033 shares issued, respectively |
403 | 400 | ||||||
Paid-in capital in excess of par |
3,074,335 | 3,045,937 | ||||||
Retained earnings |
1,581,198 | 1,336,142 | ||||||
Accumulated other comprehensive loss |
(3,429 | ) | (488 | ) | ||||
Treasury stock, at cost, 193,177 and 78,524 shares, respectively |
(4,193 | ) | (1,284 | ) | ||||
Total stockholders equity |
4,648,314 | 4,380,707 | ||||||
Total liabilities and stockholders equity |
$ | 9,339,423 | $ | 9,065,063 | ||||
3
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenues and other income |
||||||||||||||||
Oil, natural gas, and related product sales |
$ | 591,099 | $ | 488,028 | $ | 1,097,291 | $ | 818,914 | ||||||||
CO2 sales and transportation fees |
5,343 | 4,690 | 10,267 | 9,187 | ||||||||||||
Gain on sale of interests in Genesis |
| (28 | ) | | 101,540 | |||||||||||
Interest income and other income |
4,955 | 4,520 | 8,004 | 6,390 | ||||||||||||
Total revenues and other income |
601,397 | 497,210 | 1,115,562 | 936,031 | ||||||||||||
Expenses |
||||||||||||||||
Lease operating expenses |
129,932 | 127,743 | 257,029 | 223,963 | ||||||||||||
Production taxes and marketing expenses |
39,688 | 38,100 | 72,439 | 57,417 | ||||||||||||
CO2 discovery and operating expenses |
1,869 | 1,681 | 4,023 | 3,049 | ||||||||||||
General and administrative |
30,900 | 31,192 | 74,746 | 63,901 | ||||||||||||
Interest, net of amounts capitalized of $13,194, $23,850,
$24,151 and $45,162, respectively |
42,249 | 43,483 | 91,026 | 69,899 | ||||||||||||
Depletion, depreciation, and amortization |
103,495 | 129,209 | 197,089 | 211,081 | ||||||||||||
Derivatives income |
(172,904 | ) | (128,674 | ) | (2,154 | ) | (169,899 | ) | ||||||||
Loss on early extinguishment of debt |
348 | | 16,131 | | ||||||||||||
Transaction and other costs related to the Encore Merger |
2,018 | 22,784 | 4,377 | 67,783 | ||||||||||||
Total expenses |
177,595 | 265,518 | 714,706 | 527,194 | ||||||||||||
Income before income taxes |
423,802 | 231,692 | 400,856 | 408,837 | ||||||||||||
Income tax provision |
||||||||||||||||
Current income taxes |
12,028 | 6,941 | 11,180 | 7,610 | ||||||||||||
Deferred income taxes |
152,528 | 74,422 | 144,620 | 150,694 | ||||||||||||
Consolidated net income |
259,246 | 150,329 | 245,056 | 250,533 | ||||||||||||
Less: net income attributable to noncontrolling interest |
| (14,962 | ) | | (18,278 | ) | ||||||||||
Net income attributable to Denbury stockholders |
$ | 259,246 | $ | 135,367 | $ | 245,056 | $ | 232,255 | ||||||||
Net income per common share |
||||||||||||||||
Basic |
$ | 0.65 | $ | 0.34 | $ | 0.62 | $ | 0.67 | ||||||||
Diluted |
$ | 0.64 | $ | 0.34 | $ | 0.61 | $ | 0.66 | ||||||||
Weighted average common shares outstanding |
||||||||||||||||
Basic |
398,631 | 395,548 | 398,032 | 345,126 | ||||||||||||
Diluted |
403,919 | 400,867 | 403,703 | 350,326 |
4
Six Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
Cash flows from operating activities |
||||||||
Consolidated net income |
$ | 245,056 | $ | 250,533 | ||||
Adjustments needed to reconcile to net cash provided by operating activities |
||||||||
Depletion, depreciation, and amortization |
197,089 | 211,081 | ||||||
Deferred income taxes |
144,620 | 150,694 | ||||||
Gain on sale of interests in Genesis |
| (101,540 | ) | |||||
Stock-based compensation |
18,132 | 17,130 | ||||||
Non-cash fair value derivative adjustments |
(11,508 | ) | (226,899 | ) | ||||
Loss on early extinguishment of debt |
16,131 | | ||||||
Other, net |
5,755 | 5,871 | ||||||
Changes in operating assets and liabilities |
||||||||
Accrued production receivable |
(35,068 | ) | 52,075 | |||||
Trade and other receivables |
(28,258 | ) | 10,058 | |||||
Other assets |
(2,920 | ) | (3,134 | ) | ||||
Accounts payable and accrued liabilities |
(48,471 | ) | 12,066 | |||||
Oil and natural gas production payable |
30,135 | 11,236 | ||||||
Other liabilities |
(7,340 | ) | (4,880 | ) | ||||
Net cash provided by operating activities |
523,353 | 384,291 | ||||||
Cash flows used for investing activities |
||||||||
Oil and natural gas capital expenditures |
(471,601 | ) | (317,173 | ) | ||||
Acquisitions of oil and natural gas properties |
(32,482 | ) | (24,243 | ) | ||||
Cash paid in Encore Merger, net of cash acquired |
| (801,489 | ) | |||||
CO2 and other non-hydrocarbon gases capital expenditures |
(31,731 | ) | (44,274 | ) | ||||
Pipelines and plants capital expenditures |
(98,669 | ) | (108,177 | ) | ||||
Net proceeds from sales of oil and natural gas properties and equipment |
| 881,344 | ||||||
Net proceeds from sale of interests in Genesis |
| 162,622 | ||||||
Other |
1,643 | (7,224 | ) | |||||
Net cash used for investing activities |
(632,840 | ) | (258,614 | ) | ||||
Cash flows from financing activities |
||||||||
Bank repayments |
(130,000 | ) | (1,514,000 | ) | ||||
Bank borrowings |
130,000 | 1,149,000 | ||||||
Repayment of senior subordinated notes |
(525,000 | ) | (609,424 | ) | ||||
Premium paid on repayment of senior subordinated notes |
(13,137 | ) | (7,214 | ) | ||||
Net proceeds from issuance of senior subordinated notes |
400,000 | 1,000,000 | ||||||
Net proceeds from issuance of common stock |
9,203 | 5,540 | ||||||
Costs of debt financing |
(13,274 | ) | (76,232 | ) | ||||
ENP distributions to noncontrolling interest |
| (12,209 | ) | |||||
Other |
(8,382 | ) | (14,255 | ) | ||||
Net cash used for financing activities |
(150,590 | ) | (78,794 | ) | ||||
Net increase (decrease) in cash and cash equivalents |
(260,077 | ) | 46,883 | |||||
Cash and cash equivalents at beginning of period |
381,869 | 20,591 | ||||||
Cash and cash equivalents at end of period |
$ | 121,792 | $ | 67,474 | ||||
5
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Consolidated net income |
$ | 259,246 | $ | 150,329 | $ | 245,056 | $ | 250,533 | ||||||||
Other comprehensive income, net of income tax |
||||||||||||||||
Net unrealized loss on available-for-sale securities,
net of tax of $(4,375) and $(1,824), respectively |
(7,139 | ) | | (2,976 | ) | | ||||||||||
Interest rate lock derivative contracts reclassified to income,
net of tax of $10, $10, $21, and $21, respectively |
18 | 17 | 35 | 34 | ||||||||||||
Change in deferred hedge loss on interest rate swaps, net of tax of $8 and $18,
respectively |
| (60 | ) | | (87 | ) | ||||||||||
Consolidated comprehensive income |
252,125 | 150,286 | 242,115 | 250,480 | ||||||||||||
Less: comprehensive income attributable to noncontrolling interest |
| (14,950 | ) | | (18,235 | ) | ||||||||||
Comprehensive income attributable to Denbury stockholders |
$ | 252,125 | $ | 135,336 | $ | 242,115 | $ | 232,245 | ||||||||
6
7
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
In thousands | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Basic weighted average common shares |
398,631 | 395,548 | 398,032 | 345,126 | ||||||||||||
Potentially dilutive securities: |
||||||||||||||||
Stock options and SARs |
3,946 | 3,980 | 4,251 | 3,835 | ||||||||||||
Performance equity awards |
23 | 146 | 12 | 312 | ||||||||||||
Restricted stock |
1,319 | 1,193 | 1,408 | 1,053 | ||||||||||||
Diluted weighted average common shares |
403,919 | 400,867 | 403,703 | 350,326 | ||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
In thousands | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Stock options and SARs |
2,412 | 4,223 | 2,297 | 4,785 | ||||||||||||
Restricted stock |
24 | 35 | 15 | 413 |
8
9
In thousands | ||||
Oil and natural gas properties |
$ | 19,646 | ||
CO2
and other non-hydrocarbon gases properties |
10,907 | |||
Pipelines and
plants |
72,070 | |||
Prepaid construction and drilling costs |
9,346 | |||
Other assets |
19,300 | |||
Asset retirement obligations |
(472 | ) | ||
Goodwill |
1,460 | |||
Total |
$ | 132,257 | ||
10
Pro Forma Results | ||||||||
Three Months Ended | Six Months Ended | |||||||
In thousands, except per share amounts | June 30, 2010 | June 30, 2010 | ||||||
Pro forma total revenues |
$ | 497,210 | $ | 1,112,481 | ||||
Pro forma net income attributable to Denbury stockholders |
135,494 | 247,423 | ||||||
Pro forma net income per common share: |
||||||||
Basic |
$ | 0.34 | $ | 0.63 | ||||
Diluted |
0.34 | 0.62 |
June 30, | December 31, | |||||||
In thousands | 2011 | 2010 | ||||||
Bank Credit Agreement |
$ | | $ | | ||||
71/2% Senior Subordinated Notes due 2013, including discount of $437 |
| 224,563 | ||||||
71/2% Senior Subordinated Notes due 2015, including premium of $427 |
| 300,427 | ||||||
91/2% Senior Subordinated Notes due 2016, including premium of $13,222 and $14,589,
respectively |
238,142 | 239,509 | ||||||
93/4% Senior Subordinated Notes due 2016, including discount of $19,996 and $22,139,
respectively |
406,354 | 404,211 | ||||||
81/4% Senior Subordinated Notes due 2020 |
996,273 | 996,273 | ||||||
6⅜% Senior Subordinated Notes due 2021 |
400,000 | | ||||||
Other Subordinated Notes, including premium of $37 and $41, respectively |
3,842 | 3,848 | ||||||
NEJD financing |
165,550 | 167,331 | ||||||
Free State financing |
80,953 | 81,188 | ||||||
Capital lease obligations |
5,620 | 6,806 | ||||||
Total |
2,296,734 | 2,424,156 | ||||||
Less current obligations |
(8,622 | ) | (7,948 | ) | ||||
Long-term debt and capital lease obligations |
$ | 2,288,112 | $ | 2,416,208 | ||||
11
12
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
In thousands | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Oil |
||||||||||||||||
Payment on settlements of derivative contracts |
$ | 16,972 | $ | 13,829 | $ | 22,000 | $ | 77,379 | ||||||||
Fair value adjustments to derivative contracts expense (income) |
(187,194 | ) | (145,099 | ) | (20,130 | ) | (206,920 | ) | ||||||||
Total derivative expense (income) oil |
(170,222 | ) | (131,270 | ) | 1,870 | (129,541 | ) | |||||||||
Natural Gas |
||||||||||||||||
Receipt on settlements of derivative contracts |
(6,030 | ) | (16,630 | ) | (12,646 | ) | (20,379 | ) | ||||||||
Fair value adjustments to derivative contracts expense (income) |
3,348 | 19,909 | 8,622 | (19,109 | ) | |||||||||||
Total derivative expense (income) natural gas |
(2,682 | ) | 3,279 | (4,024 | ) | (39,488 | ) | |||||||||
Ineffectiveness on interest rate swaps |
| (683 | ) | | (870 | ) | ||||||||||
Derivative income |
$ | (172,904 | ) | $ | (128,674 | ) | $ | (2,154 | ) | $ | (169,899 | ) | ||||
13
NYMEX Contract Prices Per Bbl | ||||||||||||||||||||||||
Type of | Weighted Average Price | |||||||||||||||||||||||
Year | Months | Contract | Bbls/d | Swap | Floor | Ceiling | ||||||||||||||||||
Oil Contracts |
||||||||||||||||||||||||
2011 |
July - Sept | Swap | 625 | 79.18 | | | ||||||||||||||||||
Collar | 42,500 | | 70.35 | 100.09 | ||||||||||||||||||||
Put | 6,625 | | 69.53 | | ||||||||||||||||||||
Total July - Sept 2011 | 49,750 | |||||||||||||||||||||||
Oct - Dec | Swap | 625 | 79.18 | | | |||||||||||||||||||
Collar | 45,500 | | 70.33 | 101.74 | ||||||||||||||||||||
Put | 6,625 | | 69.53 | | ||||||||||||||||||||
Total Oct - Dec 2011 | 52,750 | |||||||||||||||||||||||
2012 |
Jan - Mar | Swap | 625 | 81.04 | | | ||||||||||||||||||
Collar | 52,000 | | 70.00 | 106.86 | ||||||||||||||||||||
Put | 625 | | 65.00 | | ||||||||||||||||||||
Total Jan - Mar 2012 | 53,250 | |||||||||||||||||||||||
Apr-June | Swap | 625 | 81.04 | | | |||||||||||||||||||
Collar | 53,000 | | 70.00 | 119.44 | ||||||||||||||||||||
Put | 625 | | 65.00 | | ||||||||||||||||||||
Total Apr - June 2012 | 54,250 | |||||||||||||||||||||||
July-Sept | Swap | 625 | 81.04 | | | |||||||||||||||||||
Collar | 53,000 | | 80.00 | 128.57 | ||||||||||||||||||||
Put | 625 | | 65.00 | | ||||||||||||||||||||
Total July - Sept 2012 | 54,250 | |||||||||||||||||||||||
Oct - Dec | Swap | 625 | 81.04 | | | |||||||||||||||||||
Collar | 53,000 | | 80.00 | 128.57 | ||||||||||||||||||||
Put | 625 | | 65.00 | | ||||||||||||||||||||
Total Oct - Dec 2012 | 54,250 | |||||||||||||||||||||||
14
Type of | Weighted Average Swap | |||||||||||||||
Year | Months | Contract | MMBtu/d | Price per MMBtu | ||||||||||||
Natural Gas Contracts |
||||||||||||||||
2011 |
July - Sept | Swap | 33,500 | $ | 6.27 | |||||||||||
Total July-Sept 2011 | 33,500 | |||||||||||||||
Oct - Dec | Swap | 33,500 | 6.27 | |||||||||||||
Total Oct - Dec 2011 | 33,500 | |||||||||||||||
2012 |
Jan - Dec | Swap | 20,000 | 6.53 | ||||||||||||
Total Jan - Dec 2012 | 20,000 | |||||||||||||||
Estimated Fair Value | ||||||||||||
Asset (Liability) | ||||||||||||
June 30, | December 31, | |||||||||||
Type of Contract | Balance Sheet Location | 2011 | 2010 | |||||||||
(In thousands) | ||||||||||||
Derivatives not designated as hedging instruments |
||||||||||||
Derivative asset |
||||||||||||
Oil contracts |
Derivative assets current | $ | 1,462 | $ | 3,050 | |||||||
Natural gas contracts |
Derivative assets current | 17,860 | 21,192 | |||||||||
Oil contracts |
Derivative assets long-term | 11,281 | 1,301 | |||||||||
Natural gas contracts |
Derivative assets long-term | 6,328 | 11,618 | |||||||||
Derivative liability |
||||||||||||
Oil contracts |
Derivative liabilities current | (67,196 | ) | (55,256 | ) | |||||||
Deferred premiums |
Derivative liabilities current | (14,431 | ) | (22,928 | ) | |||||||
Oil contracts |
Derivative liabilities long-term | (2,228 | ) | (25,906 | ) | |||||||
Deferred premiums |
Derivative liabilities long-term | (1,150 | ) | (3,781 | ) | |||||||
Total derivatives
not designated as
hedging instruments |
$ | (48,074 | ) | $ | (70,710 | ) | ||||||
15
| Level 1 Quoted prices in active markets for identical assets or liabilities as of the reporting date. | ||
| Level 2 Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category include non-exchange-traded oil and natural gas derivatives that are based on NYMEX pricing. | ||
| Level 3 Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in managements best estimate of fair value. Instruments in this category include non-exchange-traded natural gas derivatives swaps that are based on regional pricing other than NYMEX (e.g., Houston Ship Channel). |
Fair Value Measurements Using: | ||||||||||||||||
Significant | ||||||||||||||||
Quoted Prices | Other | Significant | ||||||||||||||
in Active | Observable | Unobservable | ||||||||||||||
Markets | Inputs | Inputs | ||||||||||||||
In thousands | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
June 30, 2011 |
||||||||||||||||
Assets |
||||||||||||||||
Short-term investments |
$ | 88,220 | $ | | $ | | $ | 88,220 | ||||||||
Oil and natural gas derivative contracts |
| 30,293 | 6,638 | 36,931 | ||||||||||||
Liabilities |
||||||||||||||||
Oil and natural gas derivative contracts |
| (69,424 | ) | | (69,424 | ) | ||||||||||
Total |
$ | 88,220 | $ | (39,131 | ) | $ | 6,638 | $ | 55,727 | |||||||
December 31, 2010 |
||||||||||||||||
Assets |
||||||||||||||||
Short-term investments |
$ | 93,020 | $ | | $ | | $ | 93,020 | ||||||||
Oil and natural gas derivative contracts |
| 20,683 | 16,478 | 37,161 | ||||||||||||
Liabilities |
||||||||||||||||
Oil and natural gas derivative contracts |
| (81,162 | ) | | (81,162 | ) | ||||||||||
Total |
$ | 93,020 | $ | (60,479 | ) | $ | 16,478 | $ | 49,019 | |||||||
16
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
In thousands | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Balance, beginning of period |
$ | 15,346 | $ | 50,518 | $ | 16,478 | $ | | ||||||||
Unrealized gains/(losses) on commodity derivative
contracts included in earnings |
(7,386 | ) | 126 | (7,076 | ) | 14,899 | ||||||||||
Commodity derivative contracts acquired from Encore |
| | | 38,093 | ||||||||||||
Receipts on settlement of commodity derivative contracts |
(1,322 | ) | (10,361 | ) | (2,764 | ) | (12,709 | ) | ||||||||
Balance, end of period |
6,638 | 40,283 | $ | 6,638 | $ | 40,283 | ||||||||||
17
June 30, 2011 | December 31, 2010 | |||||||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||||||
In thousands | Amount | Fair Value | Amount | Fair Value | ||||||||||||
71/2% Senior Subordinated Notes due 2013 |
$ | | $ | | $ | 224,563 | $ | 228,375 | ||||||||
71/2% Senior Subordinated Notes due 2015 |
| | 300,427 | 310,500 | ||||||||||||
91/2% Senior Subordinated Notes due 2016 |
238,142 | 249,942 | 239,509 | 249,661 | ||||||||||||
93/4% Senior Subordinated Notes due 2016 |
406,354 | 476,446 | 404,211 | 475,380 | ||||||||||||
81/4% Senior Subordinated Notes due 2020 |
996,273 | 1,085,938 | 996,273 | 1,080,956 | ||||||||||||
6⅜% Senior Subordinated Notes due 2021 |
400,000 | 400,000 | | |
June 30, | December 31, | |||||||
In thousands | 2011 | 2010 | ||||||
Accounts payable |
$ | 72,830 | $ | 47,660 | ||||
Accrued exploration and development costs |
96,910 | 101,758 | ||||||
Accrued compensation |
26,760 | 39,757 | ||||||
Accrued lease operating expense |
25,100 | 23,557 | ||||||
Accrued interest |
61,166 | 57,077 | ||||||
Taxes payable |
16,537 | 34,371 | ||||||
Other |
34,650 | 41,818 | ||||||
Total |
$ | 333,953 | $ | 345,998 | ||||
Six Months Ended | ||||||||
June 30, | ||||||||
In thousands | 2011 | 2010 | ||||||
Cash paid for interest, expensed |
$ | 72,774 | $ | 43,296 | ||||
Cash paid for interest, capitalized |
24,151 | 45,162 | ||||||
Cash paid for income taxes |
31,072 | 11,920 | ||||||
Cash received for income tax refunds |
20,841 | 13,093 | ||||||
Increase in liabilities for capital expenditures |
25,141 | 46,170 | ||||||
Issuance of Denbury common stock in connection with the Encore Merger |
| 2,085,681 |
18
19
20
| A $103.1 million ($63.9 million after tax), or 21%, increase in revenue, made up of $214.4 million of additional revenue from higher realized commodity prices in the 2011 second quarter, partially offset by a decrease of $111.3 million of revenue primarily attributable to the absence in the most recent quarter of production from properties sold starting in May 2010; | ||
| A $58.6 million increase in the non-cash fair value adjustment in the mark-to-market valuation of our commodities derivatives, principally attributable to oil futures (non-cash income of $183.8 million in the second quarter of 2011 compared to $125.2 million of such non-cash income in the second quarter of 2010); and | ||
| $22.8 million of transaction and other costs related to the Encore Merger incurred in the 2010 period ($14.1 million after tax), which costs were negligible in the most recent quarter. |
21
22
| $450 million allocated for tertiary oil field expenditures; | ||
| $350 million in the Bakken area of North Dakota; | ||
| $250 million to be spent on our CO2 pipelines; | ||
| $200 million to be spent on CO2 sources in the Jackson Dome and Riley Ridge areas; and | ||
| $100 million on drilling, completion and other development activities in our other areas. |
23
Six Months Ended | ||||||||
June 30, | ||||||||
In thousands | 2011 | 2010 | ||||||
Oil and natural gas exploration and development: |
||||||||
Drilling |
$ | 244,466 | $ | 155,503 | ||||
Geological, geophysical, and acreage |
14,339 | 15,121 | ||||||
Facilities |
123,742 | 73,712 | ||||||
Recompletions |
104,878 | 91,534 | ||||||
Capitalized interest |
18,652 | 13,681 | ||||||
Total oil and natural gas exploration and development expenditures
|
506,077 | 349,551 | ||||||
CO2 and other non-hydrocarbon gases capital expenditures: |
||||||||
Drilling |
28,768 | 27,113 | ||||||
Geological, geophysical, and acreage |
10,195 | 4,299 | ||||||
Facilities |
13,737 | 12,245 | ||||||
Total CO2 and other non-hydrocarbon gases capital expenditures |
52,700 | 43,657 | ||||||
Pipelines and plants capital expenditures: |
||||||||
Pipelines and plants |
61,292 | 92,500 | ||||||
Capitalized interest |
5,499 | 31,481 | ||||||
Total pipelines and plants capital expenditures |
66,791 | 123,981 | ||||||
Total capital expenditures excluding acquisitions |
625,568 | 517,189 | ||||||
Oil and natural gas property acquisitions |
32,482 | 24,243 | ||||||
Consideration for the Encore Merger(1) |
| 2,952,515 | ||||||
Total |
$ | 658,050 | $ | 3,493,947 | ||||
(1) | Consideration given in the Encore Merger includes $2.09 billion for the fair value of Denbury common stock issued. |
24
25
Average Daily Production (Bbls/d) | ||||||||||||||||||||||||
First | Second | Third | Fourth | First | Second | |||||||||||||||||||
Quarter | Quarter | Quarter | Quarter | Quarter | Quarter | |||||||||||||||||||
Tertiary Oil Field | 2010 | 2010 | 2010 | 2010 | 2011 | 2011 | ||||||||||||||||||
Phase 1: |
||||||||||||||||||||||||
Brookhaven |
3,416 | 3,277 | 3,323 | 3,699 | 3,664 | 3,213 | ||||||||||||||||||
McComb area |
2,289 | 2,160 | 2,484 | 2,433 | 2,161 | 1,983 | ||||||||||||||||||
Mallalieu area |
3,443 | 3,628 | 3,279 | 3,164 | 2,925 | 2,646 | ||||||||||||||||||
Other |
2,817 | 3,282 | 3,343 | 3,361 | 3,290 | 3,196 | ||||||||||||||||||
Phase 2: |
||||||||||||||||||||||||
Heidelberg |
1,708 | 1,857 | 2,806 | 3,422 | 3,374 | 3,548 | ||||||||||||||||||
Eucutta |
3,792 | 3,625 | 3,284 | 3,286 | 3,247 | 3,114 | ||||||||||||||||||
Soso |
3,213 | 3,207 | 3,016 | 2,828 | 2,582 | 2,317 | ||||||||||||||||||
Martinville |
927 | 764 | 606 | 586 | 500 | 416 | ||||||||||||||||||
Phase 3: |
||||||||||||||||||||||||
Tinsley |
4,419 | 5,248 | 6,024 | 6,614 | 6,567 | 6,990 | ||||||||||||||||||
Phase 4: |
||||||||||||||||||||||||
Cranfield |
936 | 811 | 855 | 1,043 | 991 | 1,085 | ||||||||||||||||||
Phase 5: |
||||||||||||||||||||||||
Delhi |
63 | 648 | 511 | 703 | 1,524 | 2,263 | ||||||||||||||||||
Total tertiary oil production |
27,023 | 28,507 | 29,531 | 31,139 | 30,825 | 30,771 | ||||||||||||||||||
Tertiary operating expense per Bbl |
$ | 22.67 | $ | 21.37 | $ | 22.54 | $ | 22.26 | $ | 25.40 | $ | 23.35 | ||||||||||||
26
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
In thousands, except per share and unit data | 2011 | 2010(1) | 2011 | 2010(1) | ||||||||||||
Operating results: |
||||||||||||||||
Net income attributable to Denbury stockholders |
$ | 259,246 | $ | 135,367 | $ | 245,056 | $ | 232,255 | ||||||||
Net income per common share basic |
0.65 | 0.34 | 0.62 | 0.67 | ||||||||||||
Net income per common share diluted |
0.64 | 0.34 | 0.61 | 0.66 | ||||||||||||
Cash flow from operations |
398,521 | 271,123 | 523,353 | 384,291 | ||||||||||||
Average daily production volumes: |
||||||||||||||||
Bbls/d |
59,538 | 65,942 | 59,002 | 55,185 | ||||||||||||
Mcf/d |
32,283 | 109,014 | 31,579 | 81,108 | ||||||||||||
BOE/d |
64,919 | 84,111 | 64,265 | 68,703 | ||||||||||||
Operating revenues: |
||||||||||||||||
Oil sales |
$ | 575,928 | $ | 443,984 | $ | 1,068,766 | $ | 749,188 | ||||||||
Natural gas sales |
15,171 | 44,044 | 28,525 | 69,726 | ||||||||||||
Total oil and natural gas sales |
$ | 591,099 | $ | 488,028 | $ | 1,097,291 | $ | 818,914 | ||||||||
Commodity derivative contracts: (2) |
||||||||||||||||
Net cash receipts (payments) on settlement of commodity derivative contracts |
$ | (10,942 | ) | $ | 2,801 | $ | (9,354 | ) | $ | (57,000 | ) | |||||
Non-cash fair value adjustment income |
183,846 | 125,190 | 11,508 | 226,029 | ||||||||||||
Total income from commodity derivative contracts |
$ | 172,904 | $ | 127,991 | $ | 2,154 | $ | 169,029 | ||||||||
Operating expenses: |
||||||||||||||||
Lease operating |
$ | 129,932 | $ | 127,743 | $ | 257,029 | $ | 223,963 | ||||||||
Production taxes and marketing |
39,688 | 38,100 | 72,439 | 57,417 | ||||||||||||
Total production expenses |
$ | 169,620 | $ | 165,843 | $ | 329,468 | $ | 281,380 | ||||||||
Unit prices including impact of derivative settlements: (2) |
||||||||||||||||
Oil price per Bbl |
$ | 103.17 | $ | 71.68 | $ | 98.02 | $ | 67.26 | ||||||||
Natural gas price per Mcf |
7.22 | 6.12 | 7.20 | 6.14 | ||||||||||||
Unit prices excluding impact of derivative settlements: (2) |
||||||||||||||||
Oil price per Bbl |
$ | 106.30 | $ | 73.99 | $ | 100.08 | $ | 75.00 | ||||||||
Natural gas price per Mcf |
5.16 | 4.44 | 4.99 | 4.75 | ||||||||||||
Oil and natural gas operating revenues and expenses per BOE: |
||||||||||||||||
Oil and natural gas revenues |
$ | 100.06 | $ | 63.76 | $ | 94.33 | $ | 65.85 | ||||||||
Oil and natural gas lease operating expenses |
$ | 21.99 | $ | 16.69 | $ | 22.10 | $ | 18.01 | ||||||||
Oil and natural gas production taxes and marketing expense |
6.72 | 4.98 | 6.23 | 4.62 | ||||||||||||
Total oil and natural gas production expenses |
$ | 28.71 | $ | 21.67 | $ | 28.33 | $ | 22.63 | ||||||||
(1) | Includes the results of operations of Encore properties and ENP from March 9, 2010 through the end of the period. | |
(2) | See Item 3, Qualitative and Quantitative Disclosures about Market Risk, for additional information concerning our commodity derivative contracts. |
27
Average Daily Production (BOE/d) | ||||||||||||||||||||||||||||
First | Pro Forma | Second | Third | Fourth | First | Second | ||||||||||||||||||||||
Quarter | First Quarter | Quarter | Quarter | Quarter | Quarter | Quarter | ||||||||||||||||||||||
Operating Area | 2010(1) | 2010(2) | 2010 | 2010 | 2010 | 2011 | 2011 | |||||||||||||||||||||
Gulf Coast Region: |
||||||||||||||||||||||||||||
Tertiary oil fields |
27,023 | 27,023 | 28,507 | 29,531 | 31,139 | 30,825 | 30,771 | |||||||||||||||||||||
Non-tertiary fields: |
||||||||||||||||||||||||||||
Mississippi |
7,829 | 7,829 | 8,967 | 7,965 | 7,293 | 7,586 | 7,333 | |||||||||||||||||||||
Texas |
5,235 | 5,235 | 5,148 | 4,824 | 4,564 | 4,371 | 4,202 | |||||||||||||||||||||
Louisiana |
662 | 662 | 775 | 714 | 687 | 767 | 659 | |||||||||||||||||||||
Alabama and other |
997 | 997 | 1,078 | 1,091 | 1,026 | 1,026 | 1,084 | |||||||||||||||||||||
Total Gulf Coast Region |
41,746 | 41,746 | 44,475 | 44,125 | 44,709 | 44,575 | 44,049 | |||||||||||||||||||||
Rocky Mountain Region: |
||||||||||||||||||||||||||||
Cedar Creek Anticline |
2,537 | 9,830 | 9,967 | 9,791 | 9,328 | 9,163 | 8,925 | |||||||||||||||||||||
Bakken |
890 | 3,549 | 4,500 | 4,657 | 5,193 | 5,728 | 7,626 | |||||||||||||||||||||
Bell Creek |
252 | 966 | 997 | 994 | 957 | 890 | 936 | |||||||||||||||||||||
Paradox |
173 | 675 | 702 | 738 | 716 | 635 | 690 | |||||||||||||||||||||
Other |
777 | 2,925 | 2,944 | 2,889 | 2,809 | 2,613 | 2,693 | |||||||||||||||||||||
Total Rocky Mountain Region |
4,629 | 17,945 | 19,110 | 19,069 | 19,003 | 19,029 | 20,870 | |||||||||||||||||||||
Total Continuing Production |
46,375 | 59,691 | 63,585 | 63,194 | 63,712 | 63,604 | 64,919 | |||||||||||||||||||||
Disposed Properties: |
||||||||||||||||||||||||||||
Legacy Encore properties |
4,479 | 17,853 | 11,684 | 5,906 | 4,156 | | | |||||||||||||||||||||
ENP |
2,271 | 9,034 | 8,842 | 8,630 | 8,567 | | | |||||||||||||||||||||
Total Production |
53,125 | 86,578 | 84,111 | 77,730 | 76,435 | 63,604 | 64,919 | |||||||||||||||||||||
(1) | Includes production of Encore and ENP from March 9, 2010 through March 31, 2010. | |
(2) | Represents pro forma production assuming we had reported the production from the Encore Merger beginning January 1, 2010. |
28
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2011 vs. 2010 | 2011 vs. 2010 | |||||||||||||||
Percentage | Percentage | |||||||||||||||
Increase | Increase | Increase | ||||||||||||||
(Decrease) in | (Decrease) in | Increase (Decrease) | (Decrease) in | |||||||||||||
In thousands | Revenues | Revenues | in Revenues | Revenues | ||||||||||||
Change in oil and natural gas revenues due to: |
||||||||||||||||
Increase in commodity prices |
$ | 214,398 | 44 | % | $ | 331,259 | 40 | % | ||||||||
Decrease in production |
(111,327 | ) | (23 | %) | (52,882 | ) | (6 | %) | ||||||||
Total increase in
oil and natural gas
revenues |
$ | 103,071 | 21 | % | $ | 278,377 | 34 | % | ||||||||
Three Months Ended | Three Months Ended | Six Months Ended | ||||||||||||||||||||||
March 31, | June 30, | June 30, | ||||||||||||||||||||||
2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |||||||||||||||||||
Net Realized Prices: |
||||||||||||||||||||||||
Oil price per Bbl |
$ | 93.67 | $ | 76.53 | $ | 106.30 | $ | 73.99 | $ | 100.08 | $ | 75.00 | ||||||||||||
Natural gas price per Mcf |
4.81 | 5.40 | 5.16 | 4.44 | 4.99 | 4.75 | ||||||||||||||||||
Price per BOE |
88.42 | 69.21 | 100.06 | 63.76 | 94.33 | 65.85 | ||||||||||||||||||
NYMEX Differentials: |
||||||||||||||||||||||||
Oil per Bbl |
$ | (0.59 | ) | $ | (2.08 | ) | $ | 3.72 | $ | (4.13 | ) | $ | 1.64 | $ | (3.36 | ) | ||||||||
Natural gas per Mcf |
0.61 | 0.37 | 0.78 | 0.09 | 0.70 | 0.06 |
29
Three Months Ended June 30, | ||||||||||||||||||||||||
2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |||||||||||||||||||
Oil | Natural Gas | |||||||||||||||||||||||
In thousands | Derivative Contracts | Derivative Contracts | Total Commodity Derivative Contracts | |||||||||||||||||||||
Non-cash fair value gain (loss) |
$ | 187,194 | $ | 145,099 | $ | (3,348 | ) | $ | (19,909 | ) | $ | 183,846 | $ | 125,190 | ||||||||||
Cash settlement receipts (payments) |
(16,972 | ) | (13,829 | ) | 6,030 | 16,630 | (10,942 | ) | 2,801 | |||||||||||||||
Total |
$ | 170,222 | $ | 131,270 | $ | 2,682 | $ | (3,279 | ) | $ | 172,904 | $ | 127,991 | |||||||||||
Six Months Ended June 30, | ||||||||||||||||||||||||
2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |||||||||||||||||||
Oil | Natural Gas | |||||||||||||||||||||||
In thousands | Derivative Contracts | Derivative Contracts | Total Commodity Derivative Contracts | |||||||||||||||||||||
Non-cash fair value gain (loss) |
$ | 20,130 | 206,920 | (8,622 | ) | 19,109 | $ | 11,508 | $ | 226,029 | ||||||||||||||
Cash settlement receipts (payments) |
(22,000 | ) | (77,379 | ) | 12,646 | 20,379 | (9,354 | ) | (57,000 | ) | ||||||||||||||
Total |
$ | (1,870 | ) | $ | 129,541 | $ | 4,024 | $ | 39,488 | $ | 2,154 | $ | 169,029 | |||||||||||
30
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
In thousands, except per BOE data and employees | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Gross cash G&A expense |
$ | 60,137 | $ | 57,909 | $ | 127,834 | $ | 106,183 | ||||||||
Gross stock-based compensation |
9,687 | 7,363 | 21,024 | 17,302 | ||||||||||||
State franchise taxes |
1,668 | 965 | 2,827 | 2,035 | ||||||||||||
Operator labor and overhead recovery charges |
(31,423 | ) | (29,086 | ) | (61,139 | ) | (51,131 | ) | ||||||||
Capitalized exploration and development costs |
(9,169 | ) | (5,959 | ) | (15,800 | ) | (10,488 | ) | ||||||||
Net G&A expense |
$ | 30,900 | $ | 31,192 | $ | 74,746 | $ | 63,901 | ||||||||
G&A per BOE: |
||||||||||||||||
Net cash G&A expense |
$ | 3.73 | $ | 3.15 | $ | 4.78 | $ | 3.81 | ||||||||
Net stock-based compensation |
1.22 | 0.79 | 1.41 | 1.17 | ||||||||||||
State franchise taxes |
0.28 | 0.13 | 0.24 | 0.16 | ||||||||||||
Net G&A expense |
$ | 5.23 | $ | 4.07 | $ | 6.43 | $ | 5.14 | ||||||||
Employees as of June 30 |
1,283 | 1,304 | 1,283 | 1,304 | ||||||||||||
31
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
In thousands, except per BOE data and interest rates | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Cash interest |
$ | 50,509 | $ | 60,966 | $ | 104,715 | $ | 105,940 | ||||||||
Non-cash interest |
4,934 | 6,367 | 10,462 | 9,121 | ||||||||||||
Less: capitalized interest |
(13,194 | ) | (23,850 | ) | (24,151 | ) | (45,162 | ) | ||||||||
Interest expense, net |
$ | 42,249 | $ | 43,483 | $ | 91,026 | $ | 69,899 | ||||||||
Interest income and other |
$ | 4,955 | $ | 4,520 | $ | 8,004 | $ | 6,390 | ||||||||
Net cash interest expense and other income per BOE (1) |
$ | 5.54 | $ | 4.43 | $ | 6.31 | $ | 4.53 | ||||||||
Average debt outstanding |
$ | 2,305,104 | $ | 3,152,564 | $ | 2,409,284 | $ | 2,689,894 | ||||||||
Average interest rate (2) |
8.8 | % | 7.7 | % | 8.7 | % | 7.9 | % |
(1) | Cash interest expense less capitalized interest less interest income and other income on a per BOE basis. | |
(2) | Includes commitment fees but excludes debt issue costs and amortization of discount and premium. |
32
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
In thousands, except per BOE data | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Depletion, depreciation, and amortization (DD&A) of oil and natural gas properties |
$ | 91,961 | $ | 116,034 | $ | 174,047 | $ | 187,231 | ||||||||
Depletion and depreciation of CO2 assets |
4,588 | 5,680 | 9,178 | 10,980 | ||||||||||||
Asset retirement obligations |
1,696 | 1,692 | 3,259 | 2,799 | ||||||||||||
Depreciation of other fixed assets |
5,250 | 5,803 | 10,605 | 10,071 | ||||||||||||
Total DD&A |
$ | 103,495 | $ | 129,209 | $ | 197,089 | $ | 211,081 | ||||||||
DD&A per BOE: |
||||||||||||||||
Oil and natural gas properties |
$ | 15.85 | $ | 15.38 | $ | 15.24 | $ | 15.28 | ||||||||
CO2 assets and other fixed assets |
1.67 | 1.50 | 1.70 | 1.69 | ||||||||||||
Total DD&A cost per BOE |
$ | 17.52 | $ | 16.88 | $ | 16.94 | $ | 16.97 | ||||||||
33
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
In thousands, except per BOE amounts and tax rates | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Current income tax provision |
$ | 12,028 | $ | 6,941 | $ | 11,180 | $ | 7,610 | ||||||||
Deferred income tax provision |
152,528 | 74,422 | 144,620 | 150,694 | ||||||||||||
Total income tax provision |
$ | 164,556 | $ | 81,363 | $ | 155,800 | $ | 158,304 | ||||||||
Average income tax provision per BOE |
$ | 27.85 | $ | 10.63 | $ | 13.39 | $ | 12.73 | ||||||||
Effective tax rate |
38.8 | % | 35.1 | % | 38.9 | % | 38.7 | % |
34
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
Per BOE data | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Oil and natural gas revenues |
$ | 100.06 | $ | 63.76 | $ | 94.33 | $ | 65.85 | ||||||||
Gain (loss) on settlements of derivative contracts |
(1.85 | ) | 0.37 | (0.80 | ) | (4.58 | ) | |||||||||
Lease operating expenses |
(21.99 | ) | (16.69 | ) | (22.10 | ) | (18.01 | ) | ||||||||
Production taxes and marketing expenses |
(6.72 | ) | (4.98 | ) | (6.23 | ) | (4.62 | ) | ||||||||
Production netback |
69.50 | 42.46 | 65.20 | 38.64 | ||||||||||||
Non-tertiary CO2 operating margin |
0.59 | 0.39 | 0.53 | 0.49 | ||||||||||||
General and administrative expenses |
(5.23 | ) | (4.07 | ) | (6.43 | ) | (5.14 | ) | ||||||||
Transactions and other costs related to the Encore Merger |
(0.34 | ) | (2.98 | ) | (0.38 | ) | (5.45 | ) | ||||||||
Net cash interest expense and other income |
(5.54 | ) | (4.43 | ) | (6.31 | ) | (4.53 | ) | ||||||||
Current income taxes and other |
(0.74 | ) | 0.10 | 0.28 | 0.66 | |||||||||||
Changes in assets and liabilities relating to operations |
9.22 | 3.95 | (7.90 | ) | 6.23 | |||||||||||
Cash flow from operations |
67.46 | 35.42 | 44.99 | 30.90 | ||||||||||||
DD&A |
(17.52 | ) | (16.88 | ) | (16.94 | ) | (16.97 | ) | ||||||||
Deferred income taxes |
(25.82 | ) | (9.72 | ) | (12.43 | ) | (12.12 | ) | ||||||||
Gain on sale of interests in Genesis |
| | | 8.17 | ||||||||||||
Loss on early extinguishment of debt |
(0.06 | ) | | (1.39 | ) | | ||||||||||
Non-cash fair value derivative adjustments |
31.12 | 16.45 | 0.99 | 18.25 | ||||||||||||
Net income attributable to noncontrolling interest |
| 1.95 | | 1.47 | ||||||||||||
Changes in assets and liabilities and other non-cash items |
(11.30 | ) | (9.53 | ) | 5.85 | (11.02 | ) | |||||||||
Net income attributable to Denbury stockholders |
$ | 43.88 | $ | 17.69 | $ | 21.07 | $ | 18.68 | ||||||||
35
Carrying | Fair | |||||||||||||||||||||||||||||||
In thousands, except percentages | 2014 | 2015 | 2016 | 2017 | 2020 | 2021 | Value | Value | ||||||||||||||||||||||||
Variable rate debt: |
||||||||||||||||||||||||||||||||
Bank Credit Agreement |
$ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||||
Fixed rate debt: |
||||||||||||||||||||||||||||||||
9.5% Senior
Subordinated Notes due
2016 |
| | 224,920 | | | | 238,142 | 249,942 | ||||||||||||||||||||||||
9.75% Senior
Subordinated Notes due
2016 |
| | 426,350 | | | | 406,354 | 476,446 | ||||||||||||||||||||||||
8.25% Senior
Subordinated Notes due
2020 |
| | | | 996,273 | | 996,273 | 1,085,938 | ||||||||||||||||||||||||
6.375% Senior
Subordinated Notes due
2021 |
| | | | | 400,000 | 400,000 | 400,000 | ||||||||||||||||||||||||
Other Subordinated Notes |
1,072 | 485 | | 2,250 | | | 3,843 | 3,807 |
36
Crude Oil | Natural Gas | |||||||
Derivative | Derivative | |||||||
Contracts | Contracts | |||||||
In thousands | (Payment) | Receipt | ||||||
Based on: |
||||||||
NYMEX futures prices as of June 30, 2011 |
$ | (9,390 | ) | $ | 24,508 | |||
10% increase in prices |
(81,222 | ) | 18,312 | |||||
10% decrease in prices |
(2,952 | ) | 30,703 |
37
Total Number of | Approximate Dollar | |||||||||||||||
Total | Shares Purchased | Value of Shares | ||||||||||||||
Number of | Average | as Part of Publicly | that May Yet Be | |||||||||||||
Shares | Price Paid | Announced Plans or | Purchased Under the | |||||||||||||
Month | Purchased | per Share | Programs | Plans or Programs | ||||||||||||
April 2011 |
17,272 | $ | 23.97 | | $ | | ||||||||||
May 2011 |
9,466 | 21.28 | | | ||||||||||||
June 2011 |
14,479 | 19.95 | | | ||||||||||||
Total |
41,217 | 21.94 | | $ | | |||||||||||
Exhibit | Description | |
3.1 | Amended and Restated Bylaws of Denbury Resources Inc. effective as of June 17, 2011
(incorporated by reference as Exhibit 3.1 of our Form 8-K filed on June 21, 2011). |
|
4.1 | Fifth Amendment to Credit Agreement dated as of March 9, 2010, dated as of May 19, 2011,
among Denbury Resources Inc., as Borrower, JPMorgan Chase Bank, N.A., as Administrative Agent,
and the financial institutions party thereto (incorporated by reference as Exhibit 99.1 of our
Form 8-K filed on May 20, 2011). |
|
31.1* | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002. |
|
31.2* | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002. |
|
32* | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002. |
|
101* | Interactive Data Files. |
* | Filed herewith. |
38
DENBURY RESOURCES INC. |
||||
By: | /s/ Mark C. Allen | |||
Mark C. Allen | ||||
Senior Vice President, Chief Financial Officer, Treasurer, and Assistant Secretary | ||||
By: | /s/ Alan Rhoades | |||
Alan Rhoades | ||||
Vice President and Chief Accounting Officer | ||||
39
1. | I have reviewed this quarterly report on Form 10-Q of Denbury Resources Inc. (the registrant); | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions) |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
August 8, 2011 | /s/ Phil Rykhoek | |||
Phil Rykhoek | ||||
Chief Executive Officer | ||||
40
1. | I have reviewed this quarterly report on Form 10-Q of Denbury Resources Inc. (the registrant); | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
August 8, 2011 | /s/ Mark C. Allen | |||
Mark C. Allen | ||||
Senior Vice President, Chief Financial Officer, Treasurer, and Assistant Secretary | ||||
41
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; |
and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Denbury. |
Dated: August 8, 2011 | /s/ Phil Rykhoek | |||
Phil Rykhoek | ||||
Chief Executive Officer | ||||
Dated: August 8, 2011 | /s/ Mark C. Allen | |||
Mark C. Allen | ||||
Senior Vice President, Chief Financial Officer, Treasurer, and Assistant Secretary | ||||
42
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $)
|
Jun. 30, 2011
|
Dec. 31, 2010
|
---|---|---|
Current assets | ||
Allowance for trade and other receivables | $ 486,000 | $ 456,000 |
Stockholders' equity | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 25,000,000 | 25,000,000 |
Preferred stock, shares issued | 0 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 600,000,000 | 600,000,000 |
Common stock, shares issued | 402,508,885 | 400,291,033 |
Treasury stock, shares | 193,177 | 78,524 |
Condensed Consolidated Statements of Operations (Unaudited) (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
|
Revenues and other income | ||||
Oil, natural gas, and related product sales | $ 591,099,000 | $ 488,028,000 | $ 1,097,291,000 | $ 818,914,000 |
CO2 sales and transportation fees | 5,343,000 | 4,690,000 | 10,267,000 | 9,187,000 |
Gain on sale of interests in Genesis | 0 | (28,000) | 0 | 101,540,000 |
Interest income and other income | 4,955,000 | 4,520,000 | 8,004,000 | 6,390,000 |
Total revenues and other income | 601,397,000 | 497,210,000 | 1,115,562,000 | 936,031,000 |
Expenses | ||||
Lease operating expenses | 129,932,000 | 127,743,000 | 257,029,000 | 223,963,000 |
Production taxes and marketing expenses | 39,688,000 | 38,100,000 | 72,439,000 | 57,417,000 |
CO2 discovery and operating expenses | 1,869,000 | 1,681,000 | 4,023,000 | 3,049,000 |
General and administrative | 30,900,000 | 31,192,000 | 74,746,000 | 63,901,000 |
Interest, net of amounts capitalized | 42,249,000 | 43,483,000 | 91,026,000 | 69,899,000 |
Depletion, depreciation, and amortization | 103,495,000 | 129,209,000 | 197,089,000 | 211,081,000 |
Derivatives expense (income) | (172,904,000) | (128,674,000) | (2,154,000) | (169,899,000) |
Loss on early extinguishment of debt | 348,000 | 0 | 16,131,000 | 0 |
Transaction and other costs | 2,018,000 | 22,784,000 | 4,377,000 | 67,783,000 |
Total expenses | 177,595,000 | 265,518,000 | 714,706,000 | 527,194,000 |
Income (loss) before income taxes | 423,802,000 | 231,692,000 | 400,856,000 | 408,837,000 |
Income tax provision (benefit) | ||||
Current income taxes | 12,028,000 | 6,941,000 | 11,180,000 | 7,610,000 |
Deferred income taxes | 152,528,000 | 74,422,000 | 144,620,000 | 150,694,000 |
Consolidated net income (loss) | 259,246,000 | 150,329,000 | 245,056,000 | 250,533,000 |
Less: net income attributable to noncontrolling interest | 0 | (14,962,000) | 0 | (18,278,000) |
Net income (loss) attributable to Denbury stockholders | $ 259,246,000 | $ 135,367,000 | $ 245,056,000 | $ 232,255,000 |
Net income (loss) per common share | ||||
Basic | $ 0.65 | $ 0.34 | $ 0.62 | $ 0.67 |
Diluted | $ 0.64 | $ 0.34 | $ 0.61 | $ 0.66 |
Weighted average common shares outstanding | ||||
Basic | 398,631,000 | 395,548,000 | 398,032,000 | 345,126,000 |
Diluted | 403,919,000 | 400,867,000 | 403,703,000 | 350,326,000 |
Supplemental Information (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2011
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Information (Tables) [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Payable and Accrued Liabilities |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Information |
|
Document and Entity Information
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Document And Company Information [Abstract] | |
Entity Registrant Name | Denbury Resources Inc. |
Entity Central Index Key | 0000945764 |
Document Type | 10-Q |
Document Period End Date | Jun. 30, 2011 |
Amendment Flag | false |
Document Fiscal Year Focus | 2011 |
Document Fiscal Period Focus | Q2 |
Current Fiscal Year End Date | --12-31 |
Entity Well-known Seasoned Issuer | Yes |
Entity Voluntary Filers | No |
Entity Current Reporting Status | Yes |
Entity Filer Category | Large Accelerated Filer |
Entity Common Stock, Shares Outstanding | 402,350,295 |
Basis of Presentation (Details Textuals) (USD $)
Share data in Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | |||||
---|---|---|---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
Dec. 31, 2010
|
Dec. 30, 2010
ENP LP Investment [Member]
|
Dec. 30, 2010
GP LLC [Member]
|
|
Business Acquisition [Line Items] | |||||||
Ownership percentage in subsidiaries | 46.00% | 100.00% | |||||
Cost basis of investment in VNR | $ 93,000,000 | ||||||
Interest in guarantor subsidiaries | 100.00% | 100.00% | |||||
Basis of Presentation (Textuals) [Abstract] | |||||||
Net income attributable to noncontrolling interest | 0 | 14,962,000 | 0 | 18,278,000 | |||
Weighted average common shares - basic restricted stock | 3.40 | 3.50 | 3.60 | 3.30 | |||
Net unrealized gains on available-for-sale securities, net of tax | 7,139,000 | 0 | 2,976,000 | 0 | |||
Unrealized gain (loss) on short term investment, tax | 4,375,000 | 0 | 1,824,000 | 0 | |||
Distribution on Vanguard common units | $ 1,700,000 | $ 3,500,000 |
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Derivative Instruments and Hedging Activities
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Derivative Instruments and Hedging Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities | Note 4. Derivative Instruments and Hedging Activities
Oil and Natural Gas Derivative Contracts
We do not apply hedge accounting treatment to our oil and natural gas derivative contracts, and therefore the changes in the fair values of these instruments are recognized in income in the period of change. These fair value changes, along with the cash settlements of expired contracts are shown under “Derivatives expense (income)” in our Unaudited Condensed Consolidated Statements of Operations. From time to time, we enter into various oil and natural gas derivative contracts to provide an economic hedge of our exposure to commodity price risk associated with anticipated future oil and natural gas production. We do not hold or issue derivative financial instruments for trading purposes. These contracts have consisted of price floors, collars and fixed price swaps. The production that we hedge has varied from year to year depending on our levels of debt and financial strength and expectation of future commodity prices. We currently employ a strategy to hedge a portion of our forecasted production for a period generally ranging from approximately 12 to 18 months in advance, as we believe it is important to protect our future cash flow to provide a level of assurance for our capital spending in those future periods in light of current worldwide economic uncertainties and commodity price volatility.
We manage and control market and counterparty credit risk through established internal control procedures that are reviewed on an ongoing basis. We attempt to minimize credit risk exposure to counterparties through formal credit policies, monitoring procedures, and diversification. All of our commodity derivative contracts are with parties that are lenders under our Bank Credit Agreement.
The following is a summary of “Derivatives expense (income)” included in the accompanying Unaudited Condensed Consolidated Statements of Operations for the periods indicated:
Commodity Derivative Contracts Not Classified as Hedging Instruments
The following tables present outstanding commodity derivative contracts with respect to future production as of June 30, 2011:
As of June 30, 2011 and December 31, 2010, we had $15.6 million and $26.7 million, respectively, of deferred premiums payable, which relate to various oil and natural gas floor contracts and are payable on a monthly basis through January 2013. These premiums are excluded from the above tables. Additional Disclosures about Derivative Instruments
At June 30, 2011 and December 31, 2010, we had derivative financial instruments recorded in our Unaudited Condensed Consolidated Balance Sheets as follows:
|
Acquisitions and Divestitures (Details) (Riley Ridge [Member], USD $)
|
Oct. 15, 2010
|
---|---|
Riley Ridge [Member]
|
|
Riley Ridge Purchase Price Allocation | |
Oil and natural gas properties | $ 19,646,000 |
CO2 and other non-hydrocarbon gases properties | 10,907,000 |
Pipelines and plants | 72,070,000 |
Prepaid construction and drilling costs | 9,346,000 |
Other assets | 19,300,000 |
Asset retirement obligations | (472,000) |
Goodwill | 1,460,000 |
Assets Acquired (Liabilities Assumed), Total | $ 132,257,000 |
Basis of Presentation (Details 1)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
|
Stock Options and SARs [Member]
|
||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Total | 2,412,000 | 4,223,000 | 2,297,000 | 4,785,000 |
Restricted Stock [Member]
|
||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Total | 24,000 | 35,000 | 15,000 | 413,000 |
Significant Accounting Policies (Policies)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Policy Text Block [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
Interim Financial Statements - Basis of Accounting | The accompanying unaudited condensed consolidated financial statements of Denbury Resources Inc. and its subsidiaries have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and do not include all of the information and footnotes required by Accounting Principles Generally Accepted in the United States (“U.S. GAAP”) for complete financial statements. These financial statements and the notes thereto should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2010. Unless indicated otherwise or the context requires, the terms “we,” “our,” “us,” or “Denbury,” refer to Denbury Resources Inc. and its subsidiaries.
|
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Interim Financial Statements - Use of Estimates | Accounting measurements at interim dates inherently involve greater reliance on estimates than at year-end and the results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the year. In management's opinion, the accompanying unaudited condensed consolidated financial statements include all adjustments of a normal recurring nature necessary for a fair statement of our consolidated financial position as of June 30, 2011, our consolidated results of operations for the three and six months ended June 30, 2011 and 2010, and our consolidated cash flows for the six months ended June 30, 2011 and 2010. Certain prior period items have been reclassified to make the classification consistent with the classification in the most recent quarter. |
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Noncontrolling Interest | Noncontrolling Interest
From March 9, 2010 to December 31, 2010, we owned approximately 46% of Encore Energy Partners LP (“ENP”) outstanding common units and 100% of Encore Energy Partners GP LLC (“GP LLC”), which was ENP's general partner. Considering the presumption of control of GP LLC in accordance with the Consolidation topic of the Financial Accounting Standards Board Codification (“FASC”), the results of operations and cash flows of ENP were consolidated with those of Denbury for this period. On December 31, 2010, we sold all of our ownership interests in ENP and, therefore, we did not consolidate ENP in our Unaudited Condensed Consolidated Balance Sheets as of December 31, 2010 and June 30, 2011, nor do our Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2011 or our Unaudited Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2011 include ENP's results of operations or cash flows. As presented in the Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2010, “Net income attributable to noncontrolling interest” of $15.0 million and $18.3 million, respectively, represents ENP's results of operations attributable to third-party ENP limited partner interest owners, other than Denbury, for the portion of that period for which we consolidated ENP. |
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Net Income Per Common Share | Net Income Per Common Share
Basic net income per common share is computed by dividing net income attributable to our stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted net income per common share is calculated in the same manner, but also considers the impact of the potential dilution from stock options, stock appreciation rights (“SARs”), unvested restricted stock, and unvested performance equity awards. For the three and six months ended June 30, 2011 and 2010, there were no adjustments to net income attributable to our stockholders for purposes of calculating diluted net income per common share. Basic weighted average common shares excludes 3.4 million and 3.6 million shares for the three and six months ended ended June 30, 2011, respectively, and 3.5 million and 3.3 million shares for the three and six months ended June 30, 2010, respectively, of unvested restricted stock. As these restricted shares vest or become retirement eligible, they will be included in the shares outstanding used to calculate basic net income per common share, although all restricted stock is issued and outstanding upon grant. For purposes of calculating diluted weighted average common shares, unvested restricted stock is included in the computation using the treasury stock method, with the deemed proceeds equal to the average unrecognized compensation during the period, adjusted for any estimated future tax consequences recognized directly in equity.
The following securities could potentially dilute earnings per share in the future, but were excluded from the computation of diluted net income per share as their effect would have been anti-dilutive:
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Short-term Investments | Short-term Investments
Short-term investments are available-for-sale securities recorded at fair value with any unrealized gains or losses included in accumulated other comprehensive income. At June 30, 2011 and December 31, 2010, short-term investments consisted entirely of our investment in Vanguard Natural Resources LLC (“Vanguard”) common units obtained as partial consideration for the sale of our interests in ENP to a subsidiary of Vanguard on December 31, 2010. The cost basis of this investment is $93.0 million. We received distributions of $1.7 million and $3.5 million on the Vanguard common units we own for the three and six months ended June 30, 2011, respectively, which distributions are included in “Interest income and other income” on our Unaudited Condensed Consolidated Statements of Operations. The unrealized loss on our short-term investment of $7.1 million (net of a tax benefit of $4.4 million) and $3.0 million (net of a tax benefit of $1.8 million) for the three and six months ended June 30, 2011, respectively, is included in our Unaudited Condensed Consolidated Statements of Comprehensive Operations. |
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Derivatives, Policy [Policy Text Block] | We do not apply hedge accounting treatment to our oil and natural gas derivative contracts, and therefore the changes in the fair values of these instruments are recognized in income in the period of change. These fair value changes, along with the cash settlements of expired contracts are shown under “Derivatives expense (income)” in our Unaudited Condensed Consolidated Statements of Operations. From time to time, we enter into various oil and natural gas derivative contracts to provide an economic hedge of our exposure to commodity price risk associated with anticipated future oil and natural gas production. We do not hold or issue derivative financial instruments for trading purposes. These contracts have consisted of price floors, collars and fixed price swaps. The production that we hedge has varied from year to year depending on our levels of debt and financial strength and expectation of future commodity prices. We currently employ a strategy to hedge a portion of our forecasted production for a period generally ranging from approximately 12 to 18 months in advance, as we believe it is important to protect our future cash flow to provide a level of assurance for our capital spending in those future periods in light of current worldwide economic uncertainties and commodity price volatility.
We manage and control market and counterparty credit risk through established internal control procedures that are reviewed on an ongoing basis. We attempt to minimize credit risk exposure to counterparties through formal credit policies, monitoring procedures, and diversification. All of our commodity derivative contracts are with parties that are lenders under our Bank Credit Agreement.
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Fair Value of Financial Instruments, Policy [Policy Text Block] | Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). We utilize market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable. We primarily apply the market approach for recurring fair value measurements and endeavor to utilize the best available information. Accordingly, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. We are able to classify fair value balances based on the observability of those inputs. The FASC establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows:
• Level 1 - Quoted prices in active markets for identical assets or liabilities as of the reporting date.
• Level 2 - Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category include non-exchange-traded oil and natural gas derivatives that are based on NYMEX pricing.
• Level 3 - Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management's best estimate of fair value. Instruments in this category include non-exchange-traded natural gas derivatives swaps that are based on regional pricing other than NYMEX (e.g., Houston Ship Channel).
We adjust the valuations for nonperformance risk, using our estimate of the counterparty's credit quality for asset positions and Denbury's credit quality for liability positions. We use multiple sources of third-party credit data in determining counterparty nonperformance risk, including credit default swaps.
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Condensed Consolidated Statements of Comprehensive Operations (Unaudited) (Parenthetical) (USD $)
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3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2011
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Jun. 30, 2010
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Jun. 30, 2011
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Jun. 30, 2010
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Other comprehensive income (loss), net of income tax: | ||||
Tax effect of changes in value on available-for-sale securities | $ (4,375,000) | $ 0 | $ (1,824,000) | $ 0 |
Tax for interest rate lock derivative contracts reclassified to income | 10,000 | 10,000 | 21,000 | 21,000 |
Tax for change in fair value of interest rate lock derivative contracts designated as a hedge | $ 0 | $ 8,000 | $ 0 | $ 18,000 |
Derivative Instruments and Hedging Activities (Details Textual) (USD $)
In Millions |
6 Months Ended | 12 Months Ended |
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Jun. 30, 2011
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Dec. 31, 2010
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Derivative Instruments and Hedging Activities (Textuals) [Abstract] | ||
Deferred premiums payable | $ 15.60 | $ 26.70 |
Supplemental Information
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Jun. 30, 2011
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Supplemental Information [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Information | Note 6. Supplemental Information
Accounts Payable and Accrued Liabilities
The following table summarizes our accounts payable and accrued liabilities as of the periods indicated:
Supplemental Cash Flow Information
The following table sets forth supplemental cash flow information for the periods indicated:
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Acquisitions and Divestitures (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Table Text Block Supplement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Riley Ridge Purchase Price Allocation |
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Proforma revenue and net income (loss) |
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