Denbury Resources Sets 4Q02 Production Record
Denbury Resources Inc. reported a new quarterly production record of 35,894 BOE/d and an annual production average of 35,573 BOE/d, a 14% increase in annual production in 2002 over 2001. The Company sustained this production increase even though its total capital spending, net of dispositions, was less than its cash flow from operations (excluding the change in other assets and liabilities). The Company posted earnings for the full year 2002 of $46.8 million or $0.88 per common share, and fourth quarter 2002 net income of $15.3 million, or $0.29 per share. Cash flow from operations for 2002 (excluding the change in other assets and liabilities) was $164.6 million, with fourth quarter of 2002 cash flow from operations of $48.4 million. The Company previously announced record quantities (130.7 MMBOE) and valuation ($1.426 billion) for its proved reserves.
Denbury's fourth quarter oil production averaged 20,706 Bbls/d and 91.1 MMcf/d, with the drop in natural gas production from approximately 105 MMcf/d earlier in the year due primarily to the temporary halt of offshore natural gas production related to Hurricane Lili and Tropical Storm Isidore. The decrease in natural gas production resulted in a fourth quarter oil and natural gas production ratio of 58% oil to 42% natural gas. The Company expects this ratio to return to around 50/50 for the first quarter of 2003 as the Company expects its natural gas production to return to prior levels and its oil production to decline due to the Company's sale of Laurel Field, which closed last week. Laurel Field was producing approximately 1,600 to 1,700 Bbls/d at the time of the sale. The Company expects its 2003 production to average approximately 37,500 BOE/d after adjusting for the sale of Laurel Field, a 5% increase over the average 2002 production levels.
Most of the production increase in the fourth quarter is attributable to the properties acquired from COHO in August 2002, partially offset by the suspended production due to Hurricane Lili. Oil production from the Company's CO2 tertiary activities was relatively unchanged from the third to fourth quarter of 2002, averaging just under 3,900 Bbls/d in both quarters. The oil production from these fields is expected to increase in 2003 as the Company has corrected its temporary shortfall in CO2 production by the addition of an incremental 25 million cubic feet of CO2 production per day in December 2002, resulting from the hookup of its first recently drilled CO2 well. The Company expects to complete its second CO2 well within the next 30 days and has already commenced the drilling of a third well. Production is expected to increase to approximately 200 million cubic feet of CO2 per day by year-end 2003. The increased CO2 production will be used primarily by the Company in its tertiary recovery operations and will enable the Company to continue its expansion of these tertiary floods, which is expected to lead to increased oil production.
Along with the growth in production, the Company's proved reserves quantities increased 19% from 109.5 MMBOE as of December 31, 2001 to 130.7 MMBOE as of December 31, 2002. During 2002, the Company added 35.1 MMBOEs of estimated reserves from drilling, extensions, acquisitions and net revisions. With total capital expenditures for 2002 of $155.6 million (excluding expenditures on CO2 properties), of which $56.4 million related to acquisitions, the Company's finding cost for 2002 was $4.43 per BOE. Approximately 7.4 MMBbls of these reserves were sold in February 2003 with the sale of Laurel Field for $27 million in cash and other consideration with an estimated value of $1.0 million.