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Q1 2013 Earnings Call – Denbury Resources Inc.

Denbury Resources Inc. · May 2, 2013 · 45 slides

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Slides

  1. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 1
    All Oil Companies Are Not Alike. Corporate Presentation NYSE: DNR May 2013
  2. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 2
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  3. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 3
    A Different Kind of Oil Company Proven CO2 EOR is one of the most efficient tertiary oil recovery methods Process 29% compound annual growth rate (CAGR) in our EOR production since 1999 We have produced over 90 million barrels…
  4. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 4
    Denbury at a Glance Pro forma(1) Total 3P Reserves (12/31/12) 1.1 BBOE 1.2 BBOE % Oil Production (1Q13) 93% 94%(2) Total Daily Production BOE/d (1Q13) 63,823 74,323(2) Proved PV-10 (12/31/12) 94.71 NYMEX Oil Price 9.9 billion 11.0…
  5. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 5
    What is CO2 EOR & How Much Oil Does It Recover Secure CO2 Supply Transport via Pipeline Inject into Oilfield CO2 EOR Delivers Almost as Much Production as Primary and Secondary Recovery(1) Tertiary Recovery Remaining (CO2…
  6. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 6
    Our Two CO2 EOR Target Areas: Up to 10 Billion Barrels Recoverable with CO2 EOR Denbury Rocky Mountain Region 331 Million 3P CO2 EOR Barrels(2) Estimated 1.3 to 3.2 MT ND Billion Barrels Recoverable in Rocky Mountain Region(1)…
  7. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 7
    CO2 EOR in Gulf Coast Region: Control of CO2 Sources & Pipeline Infrastructure Provides a Strategic Advantage Summary(1) Tinsley(4) Delhi(4) 46 MMBbls Proved 201 36 MMBbls Tinsley Jackson Potential 386 Dome…
  8. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 8
    CO2 EOR in Rocky Mountain Region: Control of CO2 Sources & Pipeline Infrastructure Provides a Strategic Advantage Summary(1) CO2 Sources Cedar Creek Anticline Area Proved --- Existing or Proposed CO2 Source Existing CCA Fields(1)…
  9. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 9
    Texas CO2 Pipeline Infrastructure Economies of Scale Hastings Oyster Bayou Webster Conroe Thompson 14 12 70 MMBbls Pipeline cost per tertiary Bbl 10 95 8 MMBbls 6 163 4 MMBbls 293 338 MMBbls 2 MMBbls -…
  10. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 10
    Strategic and Value-Driven M&A Transactions Divestitures Est. Est. Proved Impact on Est. Potential Est. Proved Production(1) Reserves Est. PDP Current Reserves(2) PV10(3) Assets (Quarter close date) (BOE/d) (MMBOE) % FCF(4) (MMBOE)…
  11. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 11
    Acquisition of Cedar Creek Anticline Fields Transaction Terms NORTH DAKOTA Glendive North 989 million cash, after working capital adjustments MONTANA Glendive Gas City Acquisition closed on 3/27/13 with a 1/1/13 effective…
  12. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 12
    More than a Billion Barrels of Oil Potential 46 1,250 717 ..... ..... 1,214 100% 89% 100% Oil 100% Natural 1,000 Oil Oil Gas 750 MMBOE 462 451 500 409 ..... 77% 82% Oil 80% Oil 250 Oil 0 12/31/11 12/31/12…
  13. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 13
    Proven Track Record Net Daily Oil Production Tertiary Operations (through 3/31/13) Mature Properties Tinsley Heidelberg Delhi Oyster Bayou Hastings 40,000 35,000 Average Daily Production (Bbls/D) 30,000 25,000 20,000…
  14. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 14
    Highest Operating Margin in the Peer Group (1) /BOE 12-Months ended 12/31/2012 70 93% oil + high LLS exposure = Premium Pricing 60 50 40 30 20 10 0 DNR Peer A Peer B Peer C Peer D Peer E Peer F Peer G Peer H Peer I…
  15. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 15
    Highest Capital Efficiency in Peer Group(1) Adjusted 3-Year Finding & Development Cost (/BOE)(2) 60.26 60.00 50.15 50.00 40.00 33.57 32.26 30.00 23.23 22.82 21.14 19.57 19.39 20.00 18.42 10.00 7.17 0.00 Peer J Peer H Peer…
  16. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 16
    CO2 EOR Superior Production Profile 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…
  17. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 17
    CO2 EOR Compelling Economics WTI Breakeven Price for a 20% Before-Tax Rate of Return ( per Bbl)(1) 100 90 87 83 83 80 74 76 68 70 70 64 65 63 60 50 50 40 30 20 10 0 (1) Source: KeyBanc as of March 2013. Defined…
  18. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 18
    CO2 Supply to Support Gulf Coast Growth 1,800 Additional CO2 Potential (not reflected in graph) Probable & Possible Reserves: 3 TCF 1,600 Improved Recovery of Proved Reserves: 0.8 TCF Recycle: 3 TCF ANTHROPOGENIC SUPPLY- Executed…
  19. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 19
    Gulf Coast Industrial Partners Currently Producing or Under Construction Air Products PCS Nitrogen Mississippi Power (Under Construction) Port Arthur, Texas Geismar, Louisiana Kemper County, MS Hydrogen Plant Ammonia Products…
  20. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 20
    CO2 Supply to Support Rocky Mountain Growth LaBarge Area 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 28,000 acre…
  21. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 21
    Strong Financial Position 1.3 billion availability under Debt to Capitalization credit facility on 3/31/13 (3/31/13) 39% Debt Unused Credit 100% 82% Facility 1.6 billion borrowing base + (3/31/13) Cash 60 million 22
  22. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 22
    2013 Summary Guidance(1) 2013 Capital Budget 1.06 Billion(2) 2013 Production Estimate 2012 2013E 2013E All Other Operating area 170 MM (BOE/d) (BOE/d) Growth Tertiary Floods 36,500- Tertiary Oil Fields 35,206 4-12% CO2 Sources…
  23. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 23
    Hedges Protect Against Downside in Near-Term(1) Crude Oil (2) 2013 2014 2015 2nd Quarter 3rd Quarter 4th Quarter 1st Half 2nd Half 1st Quarter Volumes hedged (Bbls/d) 56,000 56,000 54,000 56,000 54,000 30,000 Principal price…
  24. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 24
    A Decade of CO2 EOR Production Growth(1) Anticipating Average Annual Percentage Growth Rate in the Low Teens 120,000 2,300 Estimated CO2 EOR Production Estimated CO2 EOR Capital 100,000 100,000 1,800 Expected Peak CO2 EOR…
  25. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 25
    CO2 EOR Proven Free Cash Flow Generator Cumulative Gulf Coast Tertiary Free Cash Flows (1) Cumulative Free Cash Flow (MM) +/- 1.7 Billion First Year of Free Cash Flow 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E…
  26. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 26
    Estimated CO2 EOR Peak Production Rates Estimated Peak Production Rate Produced Proved Potential First (Net MBOE/d) Expected Operating Area to date(1) Remaining(1) Remaining(2) Production Peak…
  27. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 27
    IN SUMMARY: A Different Kind of Oil Company Leading CO2 Enhanced Oil Recovery Company in the U.S. with a Unique Profile Significant strategic advantage in CO2 EOR Well defined and focused long-term growth strategy Highest operating…
  28. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 28
    Corporate Information Corporate Headquarters Denbury Resources Inc. 5320 Legacy Drive Plano, Texas 75024 Ph: (972) 673-2000 Fax: (972) 673-2150 denbury.com Contact Information Phil Rykhoek President & CEO (972) 673-2000 Mark…
  29. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 29
    Appendix
  30. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 30
    Why is CO2 EOR our core focus High Confidence of Oil Target Over 90 million barrels (gross) produced by Denbury to date Net upward adjustments to reserves-to-date CO2 Flooding Recovers Oil (CO2 s Crude Oil) First commercial CO2 EOR…
  31. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 31
    CO2 EOR is a Proven Process Significant CO2 EOR Operators by Region Significant CO2 Suppliers by Region Gulf Coast Region Gulf Coast Region Denbury Resources Jackson Dome, MS (Denbury Resources) Permian Basin Region Permian Basin…
  32. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 32
    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…
  33. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 33
    CO2 EOR Proven Value Creation Investments Inception-to-12/31/2012 () Billions Gulf Coast EOR Fields 3.0 Gulf Coast CO2 Sources & Pipelines 2.0 Less Undeveloped: EOR Fields 0.1 CO2 Pipelines 0.2 (0.3) Net Investment-to-Date…
  34. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 34
    Denbury vs. Peer Group Trading Multiples 14 12 10 8 P/CFPS Denbury 6 Median 4 2 - 0% 50% 100% 150% 200% 250% 300% P/NAV Source: KeyBanc report dated 4/29/13 Net Asset Values (NAVs) based on…
  35. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 35
    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 36
  36. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 36
    Encore Acquisition was Highly Profitable Purchase price: (Billions) Equity 2.8 Debt assumed 1.0 (1) Total value 3.8 Value: (Estimated values at 94.71/Bbl 12/31/12 SEC Pricing) Proved reserves at 12/31/12 1.5 (2) Value…
  37. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 37
    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 38
  38. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 38
    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…
  39. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 39
    Production by Area (BOE/d)(1) Operating area 1Q12 2Q12 3Q12 4Q12 2012 1Q13 2013E Tertiary Oil Fields 33,257 35,208 34,786 37,550 35,206 39,057 36,500 39,500 (2) Cedar Creek Anticline 8,496 8,535 8,490 8,493 8,503 8,745 16,200…
  40. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 40
    Tertiary Production by Field Average Daily Production (BOE/d) Field 2009 2010 2011 2012 1Q13 Brookhaven 3,416 3,429 3,255 2,692 2,305 Little Creek Area 1,502 1,805 1,561 1,091 1,002 Mallalieu Area 4,107 3,377 2,693 2,338 2,116…
  41. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 41
    Analysis of Tertiary Operating Costs Correlation 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 w/Oil /BOE /BOE /BOE /BOE /BOE /BOE /BOE /BOE /BOE CO2 Costs Direct 5.39 5.43 4.87 4.53 5.76 5.14 4.96 5.21 6.78 Power & Fuel Partially…
  42. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 42
    NYMEX Differential Summary Crude Oil Differentials 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 Tertiary Oil Fields 4.33 9.69 14.84 19.44 9.80 13.60 10.61 15.57 15.82 Mississippi (4.50) 1.32 7.25 6.98 2.44 8.63 2.48 10.82…
  43. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 43
    Tracking Oil Prices We currently sell 55% of our oil production based on LLS index price and 25% at prices partially tied to the LLS index price, most of which have also improved relative to WTI, but to a lesser degree 135 Light…
  44. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 44
    Crude Oil Hedge Detail 2013 Crude Oil Hedges (BOPD) 2014 Crude Oil Hedges (BOPD) Average(1) Ceiling Average(1) Ceiling Instrument Volume Basis Floor Ceiling Low High Instrument Volume Basis Floor Ceiling Low High Q2 Collars 4,000…
  45. Q1 2013 Earnings Call – Denbury Resources Inc. – slide 45
    Strong Financial Position (MM) 12/31/12 3/31/13 Cash and cash equivalents(1) 99 62 Bank credit facility(2) (Borrowing base of 1.6 billion, matures May 2016) 700 275 9.75% Sr. Sub Notes due 2016 413 -- 9.50% Sr. Sub Notes due 2016…

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