Denbury Resources (DNR) Adds $250M to Buyback Plan; Updates on Hedges

January 3, 2014 7:31 AM EST
Denbury Resources Inc. (NYSE: DNR) announced that its Board of Directors has approved an increase of $250 million to the Company's authorized share repurchase program, leaving $422 million of authorized repurchases remaining as of December 31, 2013. The increase raises the total amount authorized under the program since it commenced in October 2011 to $1.162 billion, of which Denbury has spent $740 million as of December 31, 2013, to acquire a total of approximately 48 million common shares, or about 12% of shares outstanding at September 30, 2011, at an average cost of $15.55 per share. Of the total amount spent on repurchases, $78 million was spent in the fourth quarter of 2013 to acquire approximately five million common shares at an average cost of $16.22 per share. There is no set expiration date for the program and no requirement that the entire authorized amount be used.

Commodity Hedge Update

Denbury also announced it has converted all of its 2014 oil derivative contracts to fixed price swaps from collars. The Company's 2014 fixed price oil swaps now cover 58,000 barrels of oil production per day, or approximately 80% of estimated 2014 average daily oil production, at average NYMEX prices of approximately $93.50 per barrel ("Bbl") for the first half of 2014 and approximately $92.50 per Bbl for the second half of 2014. The Company's 2014 oil hedges were previously all costless collars with NYMEX price floors of $80 per Bbl and average NYMEX price ceilings of approximately $102 per Bbl in the first half of 2014 and approximately $98 per Bbl in the second half of 2014. No cash was paid or received to convert the hedge contracts. The conversion significantly tightens the estimated range of Denbury's anticipated cash flow from operations in 2014 from the range previously provided in Denbury's November 2013 analyst day presentation which was based on estimated average 2014 NYMEX oil prices of between $85 per Bbl and $95 per Bbl. The Company has also added natural gas hedges to its hedge portfolio and is considering adding hedge positions that extend beyond its typical duration of 18-to-24 months. Additional information on Denbury's commodity hedges will be available in an updated corporate presentation which will be posted to the Company's website today.

Riley Ridge Startup

Lastly, Denbury announced the successful startup of the Riley Ridge gas processing plant prior to year-end 2013, as the plant initially separated and sold methane from a produced raw gas stream expected to average approximately 65% carbon dioxide, 20% methane, less than 1% helium, plus various other gases. This startup occurred slightly ahead of the Company's most recently estimated start date in the first quarter of 2014. As the plant was placed in service in 2013, Denbury expects to record certain associated tax benefits in the fourth quarter of 2013. Following the planned construction of additional capture equipment and a pipeline to the facility later this decade, the Riley Ridge plant is expected to become Denbury's anchor source of carbon dioxide in the Rocky Mountain region.

Management Comment

Phil Rykhoek, Denbury's President and CEO commented, "With our continued confidence in our focused strategy and favorable outlook, we believe our common shares represent a highly attractive investment. As a result, we continue to opportunistically repurchase our common shares and have increased the amount authorized under our repurchase program. With our oil hedge conversion and current outlook for 2014, we are well positioned to more than fund our planned capital expenditures and dividends for the year with estimated cash flow from operations. We look forward to expanding our shareholder value proposition to include both growth and income with the payment of our first regular quarterly dividend to common shareholders in the first quarter of 2014. Lastly, I would like to thank our Riley Ridge team for their tremendous efforts in safely and successfully commencing operations at this facility which will play a critical role in our Rocky Mountain region tertiary oil production growth plans."


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