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Q2 2012 Earnings Call – Denbury Resources Inc.

Denbury Resources Inc. · Aug 2, 2012 · 41 slides

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Slides

  1. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 1
    All Oil Companies Are Not Alike. Corporate Presentation NYSE: DNR May/June August 2012
  2. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 2
    A Different Kind of Oil Company Leading CO2 Enhanced Oil Recovery (EOR) Company in the U.S. with a Unique Profile 8.7 billion enterprise value Scale 72,337 BOE/d production (2Q12) Highest operating margins and capital efficiency in…
  3. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 3
    Denbury at a Glance Total 3P Reserves (12/31/11) 1.3 BBOE % Oil Production (2Q12) 93% Market Cap (7/31/12) 5.8 billion Total Net Debt (6/30/12) 2.9 billion Total Daily Production (2Q12) 72,337 BOE/d Proved PV-10 (12/31/11)…
  4. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 4
    What is CO2 EOR & How Much Does It Recover Secure CO2 Supply Transport via Pipeline Inject into Oilfield EOR Delivers Almost as Much Production as Primary or Secondary Recovery(1) Tertiary Recovery Remaining (CO2 EOR) Oil…
  5. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 5
    Our Two EOR Target Areas: Up to 10 Billion Barrels Recoverable with EOR Denbury Rockies Region 233 Million 3P EOR Barrels Estimated 1.3 to 3.2 MT ND Billion Barrels Recoverable Greencore ID Pipeline SD Lost Cabin WY IL…
  6. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 6
    Gulf Coast Region: Control of CO2 Sources & Pipeline Infrastructure Provides a Strategic Advantage Summary(1) Tinsley Delhi 3 46 MMBbls Proved 202 5 36 MMBbls Tinsley Probable (2) 324 Jackson Dome Produced-to-Date 64 Delhi…
  7. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 7
    Rocky Mountain Region: Control of CO2 Sources & Pipeline Infrastructure Provides a Strategic Advantage CO2 Sources Cedar Creek Anticline 197 MMBbls(1) Existing Anthropogenic (Man-made) Proposed Coal to Gas or Liquids MONTANA DGC…
  8. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 8
    More than a Billion Barrels of Oil Potential 1,400 46 557 ..... 100% .....1,312 87% 1,200 100% Oil Oil Natural 1,000 Gas MMBOE 800 193 85% ..... 600 516 462 81% ..... Oil 400 77% Oil Oil 200 0 12/31/11 6/30/12…
  9. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 9
    Proven Track Record Net Daily Oil Production Tertiary Operations (through 6/30/12) Bbls/d Phase 1 Phase 2 Phase 3 Phase 4 Phase 5 Phase 7 Phase 8 40,000 36,000 32,000 28,000 24,000 30% CAGR 20,000 (1999-2011) 16,000…
  10. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 10
    Highest Operating Margin in Peer Group(1)(2) 100 Realized Avg. Price - All Production (/BOE) 90 80 70 68 60 50 57 60 60 40 41 37 39 30 44 33 33 20 23 18 30 10 19 17 13 16 14 12 12 8 10 8 8 0 DNR Peer A Peer B…
  11. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 11
    Highest Capital Efficiency in Peer Group(1) Adjusted 3-Year Finding & Development Cost (/BOE)(2) 30.00 26.90 25.53 24.54 24.24 23.58 25.00 22.69 21.74 20.83 20.45 20.00 16.75 15.00 12.80 10.00 7.26 5.00 0.00 Peer G Peer…
  12. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 12
    Compelling Economics(1) EOR Bakken 575,000 BOE / Well Gulf Coast 9.6 Million / Well(2) Model Averages 20% Royalty NYMEX oil price 90.00 90.00 Finding & development cost: Field 9.00 21.00 Infrastructure 4.50 --- Total capital…
  13. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 13
    Complementary Production Profiles Projected Production Profile with Same Capital Spending Capital Spending per Year Based on EOR Spending Pattern 12,000 Year MM Gulf Coast EOR Field 1 83 2 83 Bakken 3 60 10,000 4 60 5 68 6 52…
  14. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 14
    Secure CO2 Supply to Support Gulf Coast Growth 2,500 Possible 2,000 2 Tcf Probable 1,500 2.5 Tcf MMCFPD CO2 Recycle 1,000 3.3 Tcf (Proved Only) Jackson Dome Anthropogenic Supply 500 Proved 6.7 Tcf 165 MMCFPD (as…
  15. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 15
    Secure CO2 Supply to Support Rocky Mountain Growth LaBarge Field Estimated Field Size: 750 Square Miles Estimated 100 TCF of CO2 Recoverable Riley Ridge Denbury Operated 100% WI in 9,700 acre Riley Ridge Federal Unit 33% WI in…
  16. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 16
    Third Growth Platform (Bakken Area) Bakken Area 200,000 net acres 300 MMBOE of total potential Nesson Anticline 107 MMBOE Proved as of 6/30/2012 2011 Production 8,788 BOE/d 2Q12 Production 15,208 BOE/d 99% increase vs. 2Q11…
  17. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 17
    Strong Financial Position 1.1 billion availability under Debt to Capitalization credit facility on 6/30/12 (6/30/12) 36% Debt Unused Credit 100% Facility 1.6 billion borrowing base + (6/30/12) Cash 28 million Net of cash,…
  18. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 18
    2012 Summary Guidance 2012 Capital Budget 1.5 Billion(1) 2012 Production Estimate All Other 1Q12 2Q12 2012E 2012E Operating area Tertiary Floods (BOE/d) (BOE/d) (BOE/d) growth 100MM 430MM 33,000- Tertiary Oil Fields 33,257…
  19. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 19
    Hedges Protect Against Downside in Near-Term(1) Crude Oil (2) 2012 2013 2nd 4th 2nd Half 1st Quarter 3rd Quarter Quarter Quarter Volumes hedged (Bbls/d) (3) 54,250 55,000 50,000 50,000 38,000 Principal price support 80 70 75 75…
  20. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 20
    CO2 EOR Compelling Economics WTI Breakeven Price for a 15% After-Tax Rate of Return ( per Bbl)(1) 100 90 86 83 79 80 75 76 70 64 65 59 61 58 60 50 50 51 50 40 30 20 10 0 (1) Source: ISI Group report dated June…
  21. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 21
    Capital Spending Flexibility in Low Oil Price Environment Unique characteristics of CO2 EOR provides significant capital flexibility We attempt to balance development expenditures with free cash flow In contrast to shale plays, a…
  22. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 22
    Sustainable EOR Growth through 2020 (1) 140,000 1,400 Expected Peak EOR Cap-Ex Estimated EOR Production (Bbls/d) Estimated EOR Capital Budget (MM) 120,000 120,000 1,200 100,000 100,000 1,000 EOR 2012E Cap-Ex 80,000…
  23. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 23
    CO2 EOR Generates Significant Free Cash Flow Cumulative Gulf Coast Tertiary Free Cash Flows(1) +/- 2 Billion Cumulative Free Cash Flow (MM) First Year of Free Cash Flow 2005 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E…
  24. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 24
    Estimated EOR Peak Production Rates (as of 12/31/11)(1) Estimated Peak Production Rate Produced Proved 2P&3P First (Net MBOE/d) Expected Operating Area to date(2) Remaining(2) Remaining(3) Production Peak…
  25. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 25
    IN SUMMARY: A Different Kind of Oil Company Leading CO2 Enhanced Oil Recovery (EOR) Company in the U.S. with a Unique Profile Significant strategic advantage in CO2 EOR Well defined and focused long-term growth strategy Highest…
  26. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 26
    Corporate Information Corporate Headquarters Denbury Resources Inc. 5320 Legacy Drive Plano, Texas 75024 Ph: (972) 673-2000 denbury.com Contact Information Phil Rykhoek Chief Executive Officer (972) 673-2000 Mark Allen…
  27. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 27
    Appendix
  28. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 28
    CO2 EOR is a Proven Process History of CO2 EOR Significant CO2 EOR Operators by Region 1910s-1970s CO2 Field Discoveries (Bravo Dome, Gulf Coast Region McElmo Dome, Jackson Dome, Sheep Mountain) Denbury Resources 1950s-1960s…
  29. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 29
    CO2 Operations: Oil Recovery Process CO2 PIPELINE - from Jackson Dome INJECTION WELL - Injects CO2 in dense phase PRODUCTION WELLS Produce oil, water and CO2 Oil Formation (CO2 is recycled) CO2 moves through formation…
  30. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 30
    CO2 EOR Generalized Type Curve Plateau Production Rate Incline (Yrs) Plateau (Yrs) Decline (Yrs) Large Fields 6 6.5 30 Average Fields 4.5 5.5 25 Small Fields 4 5 20 31
  31. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 31
    Capital Spending Range for CO2 Floods 100 90 80 % of Total Capital 70 60 50 40 30 20 10 0 1 2 3 4 5 Year 32
  32. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 32
    Production by Area (BOE/d) Operating area 2Q11 3Q11 4Q11 2011 1Q12(1) 2Q12(1) 2012E(1),(2) Tertiary Oil Fields 30,771 31,091 31,144 30,959 33,257 35,208 33,000 - 36,000 Mississippi 5,642 5,636 4,746 5,486 4,573 4,095 4,450 Texas…
  33. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 33
    Tertiary Production by Field Average Daily Production (BOE/d) Field 2Q11 3Q11 4Q11 1Q12 2Q12 Phase 1 Brookhaven 3,213 3,030 3,121 3,014 2,779 Little Creek Area 1,636 1,533 1,445 1,216 1,131 Mallalieu Area 2,646 2,620 2,587 2,585…
  34. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 34
    Analysis of Tertiary Operating Costs Correlation 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 w/Oil /Bbl /Bbl /Bbl /Bbl /Bbl /Bbl /Bbl /Bbl /Bbl CO2 Costs Direct 4.73 4.52 5.38 5.39 5.43 4.87 4.53 5.76 5.14 Power & Fuel Partially…
  35. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 35
    Potential Carbon Gasification Projects Denbury purchase contracts (contingent on plants being completed) Initial production expected +/- 4 years after construction begins (not before 2015) Gulf Coast Sources (0.29 to 0.44/Mcf 60 Oil)…
  36. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 36
    Rockies Anthropogenic CO2 Rocky Mountain Purchase Contracts MMCFD COP Lost Cabin (Central Wyoming) (Q1 2013) Currently Under +/- 50 Construction XOM LaBarge (SW Wyoming) (1) (Q3 2012) +/- 50 DKRW Medicine Bow (SE Wyoming) (2) (+/-…
  37. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 37
    Bakken Area Production Zones Approx. Net Productive Zone Estimated Acreage Area MB TFS Wells/DSU (1,000s) Charlson 6 15 Murphy Creek 6 18 Bear Creek 6 10 Cherry 6 66 Lone Butte 6 9 Camp/Indian Hills 6 16 NE Foothills 3…
  38. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 38
    Thompson Field, Fort Bend County, Texas Thompson Field Acquired in June 2012 for 366 million cash(1) Denbury is the operator with a nearly 100% working interest and 84.7% net revenue interest Original oil in place of 650 MMBbls, with…
  39. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 39
    Encore Acquisition was Highly Profitable Purchase price: (Billions) Equity 2.8 Debt assumed 1.0 (1) Total value 3.8 Value: (Estimated values at 79.43/Bbl 12/31/10 SEC Pricing) Proved reserves at 12/31/10 2.0 (2) Proceeds…
  40. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 40
    Crude Oil & Natural Gas Hedge Detail 2012 Crude Oil Hedges (BOPD) (1) 2013 Crude Oil Hedges (BOPD) (1) Average (2) Ceiling Average (2) Ceiling Instrument Volume Price Floor Ceiling Low High Instrument Volume Price Floor Ceiling Low…
  41. Q2 2012 Earnings Call – Denbury Resources Inc. – slide 41
    Capital Structure (MM) 6/30/12 Cash 28 Bank credit facility (Borrowing base of 1.6 billion, matures May 2016) 520 9.750% Sr. Sub Notes due 2016 (Callable March 2013 at 104.875% of par) 411 9.500% Sr. Sub Notes due 2016 (Callable…

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