Denbury Replaces 271 Percent of 2002 Production at Approximately $4.60 per BOE; Announces Agreement to Sell Laurel Field Earnings Release Scheduled for February 20th.Business Editors DALLAS--(BUSINESS WIRE)--Jan. 31, 2003 Denbury Resources Inc. (NYSE NYSE See: New York Stock Exchange :DNR See dynamic noise reduction and domain name resolver. ) today announced that its total proved oil and natural gas reserves as of December 31, 2002 were 130.7 million barrels of oil equivalent (MMBOE MMBOE Million Barrels of Oil Equivalent (energy and petroleum industry) ), consisting of 97.2 million barrels (MMBbls) of crude oil and 200.9 billion cubic feet (Bcf) of natural gas, a 19% increase over its proved reserve quantities at December 31, 2001. DeGolyer and MacNaughton, an independent reservoir engineering Reservoir engineering is a branch of petroleum engineering, typically concerned with maximizing the economic recovery of hydrocarbons from the subsurface. Of particular interest to reservoir engineers is generating accurate reserves estimates for use in financial reporting firm, prepared Denbury's year-end reserve report. Proved Reserve Analysis Denbury added 35.1MMBOE of proved reserves proved reserves The quantity of minerals expected to be recoverable under current economic and operating conditions. The amount of proved reserves is important in valuing the stock of a company with significant holdings in natural resources. during 2002, replacing 271% of its 2002 production at a preliminary finding cost estimate of approximately $4.60 per BOE BOE Based on Experience BOE Board of Education BOE Boletín Oficial del Estado (Spanish) BOE Bank of England BOE Board of Equalization BOE Board of Elections BOE Barrel of Oil Equivalent BOE Bind on Equip . The most significant reserve additions were 9.7 MMBbls relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the Company's tertiary oil recovery projects in Mississippi and 15.5 MMBOE relating to the properties acquired from COHO Energy Inc. in August 2002. The biggest increase in the tertiary oil reserves Oil reserves refer to portions of oil in place that are claimed to be recoverable under economic constraints. Oil in the ground is not a "reserve" unless it is claimed to be economically recoverable, since as the oil is extracted, the cost of recovery increases incrementally were 8.3 MMBbls booked at McComb field, a field acquired during 2002 with initial tertiary development planned for 2003. Preliminary estimates of capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. during 2002 are $105 million for development and exploration expenditures and $56 million expended on acquisitions. The Company also spent an estimated $16 million on its CO2 producing wells and facilities and had net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). from the sale of properties of approximately $8 million; however, these items are not included in the finding cost calculation. Approximately 66% of the 2002 year-end proved reserves are categorized as proved developed. In accordance with SEC requirements, Denbury's proved reserves at December 31, 2002 were computed using unescalated year-end 2002 NYMEX See New York Mercantile Exchange. NYMEX See New York Mercantile Exchange (NYM). commodity prices of $31.20 per barrel of oil and $4.79 per MMBtu of natural gas, adjusted to account for field variances in order to arrive at the proper net price received by the Company. Using these prices, the discounted net present value of the proved reserves, before projected income taxes, at December 31, 2002, using a 10% discount rate ("PV-10 Value") is $1.426 billion, 2.5 times the Company's PV-10 Value a year earlier. Proved reserves at the prior year-end were computed using unescalated commodity prices of $19.84 per barrel of oil and $2.57 per MMBtu of natural gas. Using an intermediate unescalated price deck of $25.00 per barrel of oil and $4.00 per Mcf of natural gas, the PV-10 Value at December 31, 2002 would be approximately $1.02 billion. In order to measure the change in net asset value per share each year and eliminate the effect of changing commodity prices, the Company has recomputed its proved reserves for the prior three years using the same $25.00 per barrel and $4.00 per MMBtu price scenario, subtracted the total debt outstanding at each year-end and then divided the result by the common shares outstanding at that date. Based on this calculation, the Company has increased its proved net asset value per share by a compounded average growth rate of 20% over the last three years. The details of this calculation will be posted to the Company's web site on or before Monday February 3rd. Following is a preliminary reconciliation of the Company's proved reserve quantities between December 31, 2001 and December 31, 2002:
MMBOE
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Balance at 12/31/2001 109.5
Revisions due to price changes 3.4
Acquisitions 25.9
Extensions, discoveries and other
revisions 5.9
Property sales (1.0)
Estimated 2002 production (13.0)
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Balance at 12/31/2002 130.7
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Agreement to Sell Laurel Field The Company has entered into a purchase and sale agreement to sell Laurel Field in eastern Mississippi for $27 million, plus other consideration which includes an additional interest at Atchafalaya Bay Atchafalaya Bay Inlet of the Gulf of Mexico on the Louisiana coast, U.S. Together with Four League Bay, it extends about 21 mi (34 km). The Atchafalaya River links the bay with Morgan City on the Gulf Intracoastal Waterway. The area includes many natural gas and oil fields. Field in southern Louisiana and 3-D seismic over that area. The Company estimates that the other consideration has an estimated value of approximately $1.0 million. The sale is scheduled to close in mid- February, subject to normal and customary conditions for transactions of this type. As of December 31, 2002, Laurel Field had 7.4 MMBbls of proven reserves, just less than 50% of the total proved reserves of the COHO properties acquired in August 2002. Following closing and after using anticipated proceeds to pay down bank debt, the Company' s total debt will be reduced to approximately $320 million, consisting of $120 million of bank debt, with approximately $100 million available on the borrowing base, and $200 million of subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". . Management Comments Gareth Roberts, Chief Executive Officer, said: "We are pleased with our year-end reserves. During 2002 we replaced production 2.7 times at a reasonable finding cost, with a significant portion of our new reserves coming from our ongoing CO2 tertiary recovery program in Mississippi. We expect this trend to continue as we intend to keep expanding our development program in that area. We believe that we have 50-65 MMBbls of additional potential from tertiary recovery in that area in the fields that we now own. Given the current natural gas price environment, we also believe that we have the possibility to ultimately double our natural gas reserves by developing our 22,000 acres in the Barnett Shale play west of Fort Worth, Texas Fort Worth is the fifth-largest city in the state of Texas, 18th-largest city in the United States[1], and voted one of "America’s Most Livable Communities. . As a result, these two areas combined with our other opportunities provide Denbury a good inventory of both oil and natural gas projects for the next several years. We are also excited to reach an agreement to sell Laurel Field, acquired in the COHO acquisition in August. We are well on our way to achieving our debt target of $300 million by mid-year 2003." Upcoming Presentations Mr. Gareth Roberts, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , will be presenting at the Credit Suisse First Boston Credit Suisse First Boston was originally the trading name of the Financière Crédit Suisse-First Boston, a London-based 50-50 investment banking joint venture formed in 1978 between the First Boston Corporation and Credit Suisse. Energy Conference next Tuesday, February 4th. The slide presentation that will be used at both of these conferences will be available on Denbury's website, prior to February 3rd, and will include updated operational and financial data. The presentation by Mr. Roberts will also be webcast, available from and archived on our web site for approximately 30 days thereafter. 2002 Earnings Release The Company will announce its 4th quarter and 2002 annual results on Thursday, February 20, 2003. You are invited to listen to our conference call broadcast live over the Internet on that same day, Thursday, February 20, 2003 at 10:00 a.m. CST CST abbr. 1. Central Standard Time 2. convulsive shock treatment CST Central Standard Time Noun 1. . Gareth Roberts, President and Chief Executive Officer, Phil Rykhoek, Senior Vice President and C.F.O., Mark Worthey, Senior Vice President - Operations and Tracy Evans, Senior Vice President of Reservoir Engineering, will lead the call. The call may be accessed at the Company's Web site at www.denbury.com. If you are unable to participate during the live broadcast, the call will be archived on Denbury's Web site for approximately 30 days. The audio portion of the call will also be available for playback by phone for one month after the call by dialing 888-203-1112, passcode 430890. About the Company Denbury Resources Inc. (www.denbury.com) is a growing independent oil and gas company. The Company is the largest oil and natural gas operator in Mississippi and holds key operating acreage in the onshore Louisiana and offshore Gulf of Mexico Noun 1. Gulf of Mexico - an arm of the Atlantic to the south of the United States and to the east of Mexico Golfo de Mexico Atlantic, Atlantic Ocean - the 2nd largest ocean; separates North and South America on the west from Europe and Africa on the east areas. The Company increases the value of acquired properties in its core areas through a combination of exploitation drilling and proven engineering extraction practices. This press release, other than historical financial information, contains forward looking statements that involve risks and uncertainties including expected reserve quantities and values, net asset value per share, production levels, capital expenditures and other risks and uncertainties detailed in the Company's filings with the Securities and Exchange Commission, including Denbury's reports on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and Form 10-Q Form 10-Q See 10-Q. . These risks and uncertainties are incorporated by this reference as though fully set forth herein. These statements are based on engineering, geological and operating assumptions that management believes are reasonable based on currently available information; however, management's assumptions and the Company's future performance are both subject to a wide range of business risks, and there is no assurance that these goals and projections can or will be met. Actual results may vary materially. |
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