Denbury today provided results for the second quarter of 2021.

FINANCIAL AND OPERATING HIGHLIGHTS

• Commenced installation of the 105-mile Greencore CO2 Pipeline extension to the Cedar Creek Anticline (“CCA”) enhanced oil recovery (“EOR”) project.
• Progressed negotiations with multiple parties for long-term transport and/or storage of CO2, representing the potential for more than 50 million metric tons per year.
• Advanced discussions to acquire rights to store CO2 in multiple potential sequestration sites, both onshore and offshore, representing storage capacity of over 1 billion metric tons of CO2.
• Received $18 million from the divestiture of undeveloped, unconventional deep mineral rights covering approximately 13,000 net acres at the Company’s Hartzog Draw Field in Wyoming.
• Reduced debt by $57 million, resulting in $69 million in total debt and $531 million in liquidity at the end of the second quarter.

Chris Kendall, the Company’s President and CEO, commented, 
“Our strong operational execution, along with improved oil prices, delivered another solid quarter for Denbury. In addition, we initiated field development of our low-carbon, blue oil CCA EOR project during the quarter. Construction crews are progressing the Greencore CO2 Pipeline extension, which remains on budget and on schedule for completion by the end of the year. The CCA EOR development is expected to provide many years of strong cash flow to Denbury while also contributing to our goal of being Scope 3 carbon-negative by the end of this decade.

"We also meaningfully progressed multiple CCUS value opportunities during the second quarter. Our Denbury Carbon Solutions team is in the midst of a number of negotiations for future CO2 transport and storage services, and I am highly confident we will have several deals to announce by the end of 2021. The potential CO2 volumes covered by our negotiations are well in excess of our existing capacity, supporting our plans for future pipeline takeaway expansion and the acquisition and development of a portfolio of sequestration sites. Combined with the Company’s ideally positioned infrastructure, our multi-decade expertise in managing CO2 provides a significant advantage in the developing CCUS industry. We see broad and expanding support for CCUS development as a practical, economic, and massively scalable means of reducing CO2 emissions, and we are highly confident in this significant growth opportunity for our Company.”

FINANCIAL AND OPERATING RESULTS

Total revenues and other income in the second quarter of 2021 were $301 million, a 20% increase from the first quarter of 2021, supported by strong oil price realizations and sales volumes. Denbury’s second quarter 2021 average pre-hedge realized oil price was $64.70 per barrel (“Bbl”), representing a differential of $1.32 per Bbl below NYMEX WTI oil prices, which was driven by better than expected realizations in the Company’s Rocky Mountain and Gulf Coast regions.

Denbury’s oil and natural gas sales volumes averaged 49,133 barrels of oil equivalent per day (“BOE/d”) during the second quarter of 2021, an increase of nearly 4% from the first quarter 2021 average. Higher second quarter production was primarily due to a full quarter’s contribution from the Wind River Basin assets acquired in March 2021, as well as the impact of winter storms on the first quarter of 2021. Oil represented 97% of the Company’s second quarter 2021 volumes, with approximately 26% of the Company’s oil produced through the injection of industrial-sourced CO2 in its EOR operations, resulting in carbon-negative or blue oil.

Lease operating expenses (“LOE”) in the second quarter of 2021 totaled $110 million, or $24.65 per BOE, in line with expectations. Second quarter expense includes a full quarter of LOE from the Wind River Basin assets, as well as higher seasonal workover and maintenance activities as compared to the first quarter of 2021. Certain of the Company’s LOE costs, including the cost of legacy CO2 contracts, power and fuel, are linked to commodity prices, which increased during the second quarter. First quarter 2021 LOE included a $15 million non-recurring benefit resulting from the power disruption during Winter Storm Uri.

Commodity derivatives expense was $173 million in the second quarter of 2021, a result of strengthened oil prices during the period. Cash payments on hedges that settled in the second quarter of 2021 totaled $63 million, with the remaining expense representing the noncash mark-to-market change in the value of the Company’s hedging portfolio.

General and administrative expenses were $15 million in the second quarter of 2021, in line with expectations, and depletion, depreciation, and amortization (“DD&A”) was $36 million, or $8.14 per BOE. DD&A was better than expected due to an uplift in proved reserves, primarily resulting from an increase in the trailing 12-month average oil price used to quantify proved reserves.

The Company’s effective tax rate for the second quarter of 2021 was negligible, as the tax expense/benefit generated is currently fully offset by a change in valuation allowance on its federal and state deferred tax assets.

CAPITAL EXPENDITURES

Second quarter 2021 development capital expenditures totaled $54 million. Year to-date development capital expenditures totaled $74 million, or about 29% of the Company’s annual capital budget. Second quarter expenditures included $19 million spent on the Greencore CO2 Pipeline extension and infield distribution system installation at CCA. In addition, the Company’s development projects at the Oyster Bayou and Tinsley fields progressed substantially towards completion, which is anticipated early in the third quarter of 2021.

GUIDANCE

The Company has reiterated its 2021 sales volume range for the year of between 47,500 BOE/d and 51,500 BOE/d. Denbury anticipates third quarter sales volumes will increase from the second quarter of 2021, driven primarily by the Company’s Rocky Mountain region, including the impact from workover projects and continued response from the previous development of Bell Creek Phase 6. Fourth quarter 2021 sales volumes are anticipated to be slightly higher than the third quarter, driven primarily by the Company’s Gulf Coast Region, where the developments at the Oyster Bayou and Tinsley fields are anticipated to contribute to increased volumes.

Development capital expenditures for 2021 are still expected to range from $250 million to $270 million. Third quarter capital expenditures should increase from the second quarter of 2021, primarily due to continued activity supporting the extension of the Greencore CO2 Pipeline and CCA EOR field development. Fourth quarter capital expenditures are anticipated to be relatively consistent with the third quarter of 2021.

KeyFacts Energy: Denbury Resources US country profile