Denbury Inc. (NYSE: DEN) (“Denbury” or the “Company”) today provided results for the second quarter of 2021.

• 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.

EXECUTIVE COMMENT

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.

Additional guidance details are available in the Company’s supplemental second quarter 2021 earnings presentation, which is available in the Investor Relations section of the Company’s website, www.denbury.com.

CONFERENCE CALL AND WEBCAST INFORMATION

Denbury will host a conference call and webcast to review and discuss its results and outlook today, Thursday, August 5, at 11:00 a.m. Central Time. Additionally, Denbury will post presentation materials on its website before market open today. The presentation webcast will be available, both live and for replay, on the Investor Relations page of the Company’s website at www.denbury.com. Individuals who would like to participate in the conference call should dial the following numbers shortly before the scheduled start time: 877.705.6003 or 201.493.6725 with conference number 13696088.

Denbury is an independent energy company with operations and assets focused on Carbon Capture, Use and Storage (CCUS) and Enhanced Oil Recovery (EOR) in the Gulf Coast and Rocky Mountain regions. For over two decades, the Company has maintained a unique strategic focus on utilizing CO₂ in its EOR operations and since 2012 has also been active in CCUS through the injection of captured industrial-sourced CO₂. The Company currently injects over three million tons of captured industrial-sourced CO₂ annually, and its objective is to fully offset its Scope 1, 2, and 3 CO₂ emissions within this decade, primarily through increasing the amount of captured industrial-sourced CO₂ used in its operations. For more information about Denbury, visit www.denbury.com.

This press release, other than historical information, contains forward-looking statements that involve risks and uncertainties including estimated 2021 production and capital expenditures, timing of completion of the Greencore pipeline extension, and results of ongoing negotiations of CCUS arrangements, and other risks and uncertainties detailed in the Company’s filings with the Securities and Exchange Commission, including Denbury’s most recent report on Form 10-K. These risks and uncertainties are incorporated by this reference as though fully set forth herein. These statements are based on financial and market, 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 risks, and there is no assurance that these goals and projections can or will be met. Actual results may vary materially. In addition, any forward-looking statements represent the Company’s estimates only as of today and should not be relied upon as representing its estimates as of any future date. Denbury assumes no obligation to update its forward-looking statements.

FINANCIAL AND STATISTICAL DATA TABLES AND RECONCILIATION SCHEDULES

The following tables include selected unaudited financial and operational information for the comparative three and six-month periods ended June 30, 2021 and 2020. References to “Successor” refer to the new Denbury reporting entity after the Company’s emergence from bankruptcy on September 18, 2020, and references to “Predecessor” refer to the Denbury entity prior to emergence from bankruptcy. All sales volumes and dollars are expressed on a net revenue interest basis with gas volumes converted to equivalent barrels at 6:1.

DENBURY INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

The following information is based on GAAP reporting earnings (along with additional required disclosures) included or to be included in the Company’s periodic reports:

DENBURY INC.

OPERATING HIGHLIGHTS (UNAUDITED)

All sales volumes and dollars are expressed on a net revenue interest basis with gas volumes converted to equivalent barrels at 6:1.

DENBURY INC.

SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES (UNAUDITED)

Reconciliation of net loss (GAAP measure) to adjusted net income (loss) (non-GAAP measure)

Adjusted net income (loss) is a non-GAAP measure provided as a supplement to present an alternative net income (loss) measure which excludes expense and income items (and their related tax effects) not directly related to the Company’s ongoing operations. Management believes that adjusted net income (loss) may be helpful to investors by eliminating the impact of noncash and/or special or unusual items not indicative of the Company’s performance from period to period, and is widely used by the investment community, while also being used by management, in evaluating the comparability of the Company’s ongoing operational results and trends. Adjusted net income (loss) should not be considered in isolation, as a substitute for, or more meaningful than, net income (loss) or any other measure reported in accordance with GAAP, but rather to provide additional information useful in evaluating the Company’s operational trends and performance.

DENBURY INC.

SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES (UNAUDITED)

Reconciliation of net loss (GAAP measure) to Adjusted EBITDAX (non-GAAP measure)

Adjusted EBITDAX is a non-GAAP measure which management uses and is calculated based upon (but not identical to) a financial covenant related to “Consolidated EBITDAX” in the Company’s senior secured bank credit facility, which excludes certain items that are included in net loss, the most directly comparable GAAP financial measure. Items excluded include interest, income taxes, depletion, depreciation, and amortization, and items that the Company believes affect the comparability of operating results such as items whose timing and/or amount cannot be reasonably estimated or are nonrecurring. Management believes Adjusted EBITDAX may be helpful to investors in order to assess the Company’s operating performance as compared to that of other companies in the industry, without regard to financing methods, capital structure or historical costs basis. It is also commonly used by third parties to assess leverage and the Company’s ability to incur and service debt and fund capital expenditures. Adjusted EBITDAX should not be considered in isolation, as a substitute for, or more meaningful than, net loss, cash flow from operations, or any other measure reported in accordance with GAAP. The Company’s Adjusted EBITDAX may not be comparable to similarly titled measures of another company because all companies may not calculate Adjusted EBITDAX, EBITDAX or EBITDA in the same manner. The following table presents a reconciliation of the Company’s net loss to Adjusted EBITDAX.

DENBURY INC.

SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES (UNAUDITED)

Reconciliation of cash flows from operations (GAAP measure) to adjusted cash flows from operations (non-GAAP measure) and free cash flow (non-GAAP measure)

Adjusted cash flows from operations is a non-GAAP measure that represents cash flows provided by operations before changes in assets and liabilities, as summarized from the Company’s Unaudited Condensed Consolidated Statements of Cash Flows. Adjusted cash flows from operations measures the cash flows earned or incurred from operating activities without regard to the collection or payment of associated receivables or payables. Free cash flow is a non-GAAP measure that represents adjusted cash flows from operations less interest treated as debt reduction, development capital expenditures and capitalized interest, but before acquisitions. Management believes that it is important to consider these additional measures, along with cash flows from operations, as it believes the non-GAAP measures can often be a better way to discuss changes in operating trends in its business caused by changes in sales volumes, prices, operating costs and related factors, without regard to whether the earned or incurred item was collected or paid during that period. Adjusted cash flows from operations and free cash flow are not measures of financial performance under GAAP and should not be considered as alternatives to cash flows from operations, investing, or financing activities, nor as a liquidity measure or indicator of cash flows.

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