Denbury Resources (DNR) Sees FY17 Capital Budget of $300M

Denbury Resources Inc. (NYSE: DNR) (“Denbury” or the “Company”) today announced that its 2017 capital budget, excluding acquisitions and capitalized interest, is currently estimated at approximately $300 million, 44% over 2016 capital spending levels. The budget provides for:

• $175 million allocated for tertiary oil field expenditures;
• $60 million allocated for other areas, primarily non-tertiary oil field expenditures;
• $10 million to be spent on CO2 sources and pipelines; and
• $55 million for other capital items such as capitalized internal acquisition, exploration and development costs and pre-production tertiary startup costs.

In addition, capitalized interest for 2017 is currently estimated at approximately $20 million. At this spending level, the Company anticipates 2017 production of between 58,000 and 62,000 barrels of oil equivalent per day (“BOE/d”), with the mid-point of such range roughly flat with the Company’s 2016 exit rate of just under 60,000 BOE/d.

MANAGEMENT COMMENT

Phil Rykhoek, Denbury’s CEO commented, “We are pleased with our progress over the past year, especially the improvements we made in reducing costs and enhancing the efficiency of our operations. We also completed a robust review of all of our fields and identified multiple areas that we can exploit in the coming years, including both tertiary expansions and other opportunities. We continue to be vigilant with our balance sheet and are limiting our capital spending to an amount near our expected cash flow. Our capital spending in the current price environment continues to be primarily focused on expanding our existing CO2 floods and other infill opportunities and, importantly, our planned 2017 capital projects have strong economics at $50 oil. With our improved efficiencies, this $300 million capital budget should hold full-year 2017 production essentially flat with our 2016 exit rate and should put us on a trajectory to resume slight production growth in 2018, based on current assumptions and expectations. We are encouraged by our future opportunities and are looking forward to 2017 as we continue to pursue ways to enhance our operating efficiency and de-lever our balance sheet.”

PRELIMINARY 2016 FOURTH QUARTER AND ANNUAL PRODUCTION

Denbury’s continuing production averaged 60,685 BOE/d during the fourth quarter of 2016, in line with our expectations, and was 96% oil, with CO2 tertiary properties accounting for 62% of overall production. On a sequential-quarter basis, continuing production in the fourth quarter of 2016 was essentially flat with continuing production in the third quarter of 2016, with production from our CO2 tertiary properties increasing slightly.

Excluding sold properties, Denbury’s continuing production for full-year 2016 averaged 62,998 BOE/d, down 11% from the prior-year’s level. Approximately one-third of the production decline was attributable to production shut-in due to economics and weather-related shut-in production at Thompson and Conroe fields, with the remainder largely due to natural production declines. Further production information is provided on page 7 of this press release.

PRELIMINARY 2016 CAPITAL EXPENDITURES

Denbury’s 2016 development capital expenditures totaled $209 million, consisting of $206 million spent on oil and natural gas development, including $56 million related to capitalized internal acquisition, exploration and development costs and pre-production tertiary startup costs, with the remainder spent primarily on CO2 source wells and CO2 infrastructure and pipelines. These estimated capital expenditures exclude property acquisition costs of $11 million and capitalized interest of $26 million.

A breakdown of preliminary estimated 2016 capital expenditures is shown in the following table:

(1) Capital expenditure amounts include accrued capital.(2) Includes capitalized internal acquisition, exploration and development costs and pre-production tertiary startup costs.

2016 PROVED RESERVES

The Company’s total estimated proved oil and natural gas reserves at December 31, 2016 were 254 million barrels of oil equivalent (“MMBOE”), consisting of 247 million barrels of crude oil, condensate and natural gas liquids (together, “liquids”), and 44 billion cubic feet (or 7 MMBOE) of natural gas. Reserves were 97% liquids and 82% proved developed, with 58% of those reserves attributable to Denbury’s CO2 tertiary operations. Total proved reserves declined by a net 35 MMBOE during 2016 primarily due to 23 MMBOE of production, with 7 MMBOE of downward revisions of previous estimates associated with changes in commodity prices, operating costs and performance, and 5 MMBOE due to properties sold during the year.

Year-end 2016 estimated proved reserves and the discounted net present value of Denbury’s proved reserves, using a 10% per annum discount rate (“PV-10 Value”)(1) (a non-GAAP measure), were computed using first-day-of-the-month 12-month average prices of $42.75 per Bbl for oil (based on NYMEX prices) and $2.55 per million British thermal unit (“MMBtu”) for natural gas (based on Henry Hub cash prices), adjusted for prices received at the field. Comparative prices for year-end 2015 were $50.28 per Bbl of oil and $2.63 per MMBtu for natural gas, adjusted for prices received at the field. The preliminary standardized measure of discounted estimated future net cash flows after income taxes of Denbury’s proved reserves at December 31, 2016 (“Standardized Measure”) was $1.4 billion compared to $1.9 billion at December 31, 2015. PV-10 Value(1) was $1.5 billion at December 31, 2016, compared to $2.3 billion at December 31, 2015. See the accompanying schedules for an explanation of the difference between PV-10 Value(1) and the preliminary Standardized Measure and the uses of this information.

Denbury’s estimated proved CO2 reserves at year-end 2016, on a gross or 8/8th’s basis for operated fields, together with its overriding royalty interest in LaBarge Field in Wyoming, totaled 6.5 trillion cubic feet (“Tcf”), slightly lower than CO2 reserves of 6.7 Tcf as of December 31, 2015. Of these total CO2 reserves, 5.3 Tcf are located in the Gulf Coast region and 1.2 Tcf in the Rocky Mountain region. In addition to these proved CO2 reserves, in the Gulf Coast region Denbury is currently purchasing CO2 from two industrial facilities and expects purchases to begin in the near future from Mississippi Power’s Kemper County plant; and in the Rocky Mountain region Denbury has the ability to purchase CO2 from a gas processing facility, all under long-term contractual agreements. Although there are no proved CO2 reserves associated with these long-term agreements, they currently supply approximately 65 million cubic feet per day (“MMcf/d”) of the CO2 Denbury is using for its tertiary operations and could increase up to approximately 225 MMcf/d in a few years once the Kemper County plant is fully operational.

(1) A non-GAAP measure. See accompanying schedules that reconcile GAAP to non-GAAP measures along with a statement indicating why the Company believes the non-GAAP measures provide useful information for investors.

CONFERENCE PRESENTATION

Phil Rykhoek, CEO, Chris Kendall, President and COO, and Mark Allen, Sr. VP and CFO, will be attending the 22nd Annual Credit Suisse Energy Summit and delivering a Company presentation on Thursday, February 16, 2017 at 10:20 A.M. Mountain Time. A link to the live webcast of the presentation and the presentation slides will be available the morning of Tuesday, February 14th in the investor relations section of the Company’s website at www.denbury.com.

FOURTH QUARTER AND FULL-YEAR 2016 RESULTS CONFERENCE CALL

Denbury management will host a conference call to review and discuss fourth quarter and full-year 2016 financial and operating results, together with its financial and operating outlook for 2017, on Thursday, February 23, 2017 at 10:00 A.M. (Central). Additionally, Denbury will publish presentation materials on its website which will be referenced during the conference call. Individuals who would like to participate should dial 800.230.1074 or 612.332.0226 ten minutes before the scheduled start time. To access a live audio webcast of the conference call and accompanying slide presentation, please visit the investor relations section of the Company’s website at www.denbury.com. The webcast will be archived on the website, and a telephonic replay will be accessible for at least one month after the call by dialing 800.475.6701 or 320.365.3844 and entering confirmation number 361971.

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