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Denbury Inc., First Quarter 2023 Results

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   |    Thursday,May 11,2023

Denbury Inc., announced first quarter 2023 results.


  • First quarter 2023 net cash flows provided by operating activities totaled $89 million, and adjusted cash flows from operations(1) totaled $140 million.
  • Net income for the quarter was $89 million, or $1.66 per diluted share, and adjusted net income(1)(2) was $73 million, or $1.36 per diluted share.
  • Ended the first quarter with $68 million borrowed on the Company's bank credit facility and $672 million of financial liquidity (including cash on hand and borrowing capacity under the credit facility).
  • Commissioned the first CO2 recycle facility at the Cedar Creek Anticline ("CCA") Enhanced Oil Recovery ("EOR") project in March 2023; initial EOR production expected in 2Q23.
  • Drilled first stratigraphic test well in the Orion CO2 sequestration site in Alabama. Subsequent to quarter-end, Denbury expanded its dedicated CO2 storage portfolio with the addition of a 30,000-acre site in Texas, southwest of Houston.
Denbury Inc., provided its first quarter 2023 results. Supplemental materials for the quarter are also available at The Company will host a webcast to review its results tomorrow, May 4, at 11:00 a.m. Central Time (12:00 p.m. Eastern Time) on its website.
Chris Kendall, the Company's President and CEO, commented, "Denbury's performance in the first quarter was strong, and we achieved significant milestones in both our EOR operations and CCUS businesses. At our anchor CCA EOR project, we have progressed the installation of our initial CO2 recycle facilities, and first tertiary production from this multi-decade asset is expected in the second quarter. Production from CCA will drive volume growth and margin expansion for our Company, while also significantly increasing the production of our carbon-negative "blue" oil, a unique commodity that we believe will be highly sought after for the production of low-carbon fuels. In our CCUS business, we expanded our dedicated CO2 sequestration portfolio with a new strategic site added in southeast Texas, and we drilled our first U.S. Gulf Coast stratigraphic test well. Negotiations with industrial customers for CO2 transportation and storage services continue to progress, and I look forward to announcing new agreements in the coming months. I remain convinced that Denbury is uniquely positioned to provide the most certain, most reliable, and most efficient CO2 transportation and storage system in the U.S."

First quarter 2023 sales volumes were consistent with expectations, slightly above the midpoint of the Company's annual guidance range. As compared to the fourth quarter of 2022, higher sales volumes were mostly related to the recovery of production lost due to late 2022 severe winter storms and an increase at Tinsley primarily due to the sale of inventory built in the fourth quarter. Approximately 56% of total volumes were from the Company's Gulf Coast assets with the remaining 44% from the Rocky Mountain region. Gulf Coast production benefited from strong sales volumes at Oyster Bayou and Soso Rodessa Phase 1. Rocky Mountain region sales volumes included continued strong CO2 flood response at the Wind River Basin assets and recent horizontal development at CCA in the Mission Canyon reservoir. The Company's average oil price differential in the first quarter of 2023 was $1.28 below the West Texas Intermediate average, in line with the Company's guidance.

CO2 revenues for the quarter of nearly $11 million were slightly below expectation as a result of third-party purchaser downtime.

Lease operating expenses in first quarter 2023 totaled $129 million, or $30.12 per barrel of oil equivalent ("BOE"), and depletion, depreciation, and amortization ("DD&A") was $42 million, or $9.80 per BOE for the quarter, both within the Company's annual guidance range. General and administrative expenses totaled $23 million, slightly below expectation.

First quarter 2023 oil & gas development capital expenditures, excluding capitalized interest, totaled $100 million, consistent with expectation. Capital spend in the Gulf Coast region included the drilling and completion of horizontal wells in the Webster field and well conversion work for Soso Rodessa Phase 2 development. In the Rocky Mountain region, capital activities included a waterflood expansion project in the Charles formation within the Cabin Creek field of CCA, as well as the completion of two new wells in the Bell Creek field.

Cedar Creek Anticline EOR Development

Slightly more than 40% of Denbury's first quarter 2023 oil & gas development capital was spent on the CCA EOR project, primarily focused on the construction of four CO2 recycle facilities planned for 2023, well conversions, and completion of the Pennel CO2 pilot well. Curtailed production averaged slightly more than 500 Bbl/d at CCA during the first quarter 2023, which is anticipated to return to production as the CO2 recycle facilities startup.

Commissioning of the first CO2 recycle facility was completed in March 2023, with the commissioning of a second CO2 recycle facility currently underway. Commissioning is planned for two additional CO2 recycle facilities in the latter part of the third quarter 2023. Associated with the startup of the first CO2 recycle facility, the Company is anticipating initial EOR production response in second quarter 2023. As CO2 recycle facilities are brought online and expanded, Denbury anticipates incremental EOR production from CCA to reach 2,000 Bbl/d by the end of this year and 7,500 to 12,500 Bbl/d by the end of 2024.

During first quarter 2023, the Company finalized a definitive agreement for the right to develop a dedicated CO2 sequestration site on nearly 15,000 acres in Campbell County, Wyoming, directly underneath the Company's Greencore CO2 Pipeline. Denbury estimates potential CO2 sequestration capacity of the site (named Corvus) to be 40 million metric tons. In April 2023, the Company acquired exclusive development rights over a dedicated CO2 sequestration site southwest of Houston in Matagorda County, Texas. The approximately 30,000-acre site, known as project Dorado, is estimated to have a storage potential of more than 115 million metric tons. A 60-mile CO2 pipeline is required to connect the site to the Company's existing CO2 pipeline network and would also provide access to additional markets and customers for CO2. Including the acquisition of the Dorado site, the Company's dedicated CO2 sequestration portfolio now exceeds 2.1 billion metric tons of CO2.

During first quarter 2023, Denbury executed agreements with two eFuels companies, HIF Global and Monarch Energy Development LLC, to source and transport up to 2.4 million metric tons per year of CO2 to planned projects in southeast Texas. Also during the first quarter, the Company invested a combined $7 million into two emerging carbon capture technology companies, ION Clean Energy, an industry leader in liquid solvent technologies, and Aqualung Carbon Capture, a leader in membrane CO2 capture and separation technology.

First quarter 2023 capital expenditures for CCUS included the drilling of a stratigraphic test well in the Orion dedicated CO2 sequestration site in Alabama, as well as various costs for seismic licensing and acreage acquisition on both existing and new dedicated CO2 sequestration sites. The Orion stratigraphic test well was drilled to a total depth of 11,415 feet. Initial results from the well are consistent with expectations, and the Company is analyzing the core taken during drilling operations. In late April 2023, the Company submitted an additional application to the EPA for 6 Class VI well permits for the Company's Leo CO2 sequestration site in Mississippi, which is directly underneath the Company's NEJD CO2 Pipeline.

Updated Outlook

Second quarter 2023 sales volumes are anticipated to be similar to the first quarter based on increased production associated with the commencement of the CCA EOR flood, along with new production from the Charles development wells at CCA, primarily offset by a planned Delhi facility turnaround and the timing of inventory sales at Tinsley. Associated with the startup and ramp of EOR production at CCA, the Company anticipates DD&A and LOE per BOE to increase from first quarter levels, driven by the expected recording of initial tertiary reserves at CCA and the conversion of CO2 injection to LOE rather than capital.

Second quarter 2023 capital expenditures are anticipated to be modestly higher than the first quarter of the year, led by CCUS capital expenditures, which should increase based on CO2 storage site acquisition and pre-development spend. Oil & gas development capital is expected to be at similar levels as the first quarter of the year.

Additional guidance details are available in the Company's supplemental earnings materials on its website.

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