Denbury Expects Production Increase in 2002
Denbury Resources Inc. announced its estimated 2002 daily production volumes and projected 2002 development and exploration expenditures ("CAPEX") budget. Daily production next year is estimated to average 36,000 barrels of oil equivalent ("BOE"), or 216 million cubic feet equivalent ("MMcfe") of natural gas, which would be a new production benchmark for the Company. Capital expenditures in 2002 are preliminarily set at $120 million.
The 2002 CAPEX budget is balanced among the Company's core areas, risk and commodities. Approximately 20% is budgeted to be spent in each of the Company's core areas: Eastern Mississippi, Western Mississippi (CO2 area), onshore Louisiana and offshore Gulf of Mexico. The balance is set aside for discretionary spending, corporate overhead and other areas. The budget also follows the Company's normal practices, with 10% to 15% budgeted for exploratory drilling and the remainder predominately related to lower risk development drilling, completion costs, facilities, waterfloods and tertiary recovery operations. The budget will be funded from internally generated cash flow. Denbury does not factor acquisition opportunities into its annual budget.
Based on this CAPEX budget and current commodity prices using the Company's normal methodology, risking and assumptions, the Company's targeted production for 2002 would be a Company record 36,000 BOE per day, comprised of an estimated 16,000 barrels of oil per day and 120 million cubic feet of natural gas per day. This would represent a 15% increase from Denbury's anticipated average production results for 2001. The funds to be spent for new tertiary recovery operations (approximately 20% of the budget) are not expected to generate any significant production increases until 2003 and beyond.
Mr. Gareth Roberts, Chief Executive Officer of Denbury, said, "In keeping with our fiscal policy to budget less than our anticipated cash flow for CAPEX and in light of lower anticipated oil and natural gas prices for next year, our preliminary 2002 CAPEX budget has been set at $120 million. Based on this budget and our other assumptions as outlined herein, our 2002 spending, excluding any potential acquisitions, should be comfortably less than our discretionary cash flow. We have already identified at least $150 million of additional investment opportunities which are currently targeted for 2003. Some of these opportunities could be added to the 2002 budget if 2002 commodity prices turn out to be higher or 2002 costs turn out to be lower than currently anticipated."