Denbury Replaces 271 Percent of 2002 Production
Denbury Resources reports that its total proved oil and natural gas reserves as of December 31, 2002 were 130.7 million barrels of oil equivalent (MMBOE), consisting of 97.2 million barrels (MMBbls) of crude oil and 200.9 billion cubic feet (Bcf) of natural gas, a 19% increase over its proved reserve quantities at December 31, 2001. DeGolyer and MacNaughton, an independent reservoir engineering firm, prepared Denbury's year-end reserve report.
Denbury added 35.1MMBOE of proved reserves during 2002, replacing 271% of its 2002 production at a preliminary finding cost estimate of approximately $4.60 per BOE. The most significant reserve additions were 9.7 MMBbls relating to the Company's tertiary oil recovery projects in Mississippi and 15.5 MMBOE relating to the properties acquired from COHO Energy Inc. in August 2002. The biggest increase in the tertiary oil reserves were 8.3 MMBbls booked at McComb field, a field acquired during 2002 with initial tertiary development planned for 2003. Preliminary estimates of capital spending during 2002 are $105 million for development and exploration expenditures and $56 million expended on acquisitions. The Company also spent an estimated $16 million on its CO2 producing wells and facilities and had net proceeds from the sale of properties of approximately $8 million; however, these items are not included in the finding cost calculation. Approximately 66% of the 2002 year-end proved reserves are categorized as proved developed.
In accordance with SEC requirements, Denbury's proved reserves at December 31, 2002 were computed using unescalated year-end 2002 NYMEX commodity prices of $31.20 per barrel of oil and $4.79 per MMBtu of natural gas, adjusted to account for field variances in order to arrive at the proper net price received by the Company. Using these prices, the discounted net present value of the proved reserves, before projected income taxes, at December 31, 2002, using a 10% discount rate ("PV-10 Value") is $1.426 billion, 2.5 times the Company's PV-10 Value a year earlier. Proved reserves at the prior year-end were computed using unescalated commodity prices of $19.84 per barrel of oil and $2.57 per MMBtu of natural gas. Using an intermediate unescalated price deck of $25.00 per barrel of oil and $4.00 per Mcf of natural gas, the PV-10 Value at December 31, 2002 would be approximately $1.02 billion.
In order to measure the change in net asset value per share each year and eliminate the effect of changing commodity prices, the Company has recomputed its proved reserves for the prior three years using the same $25.00 per barrel and $4.00 per MMBtu price scenario, subtracted the total debt outstanding at each year-end and then divided the result by the common shares outstanding at that date. Based on this calculation, the Company has increased its proved net asset value per share by a compounded average growth rate of 20% over the last three years. The details of this calculation will be posted to the Company's web site on or before Monday February 3rd.
The company has entered into a purchase and sale agreement to sell Laurel Field in eastern Mississippi for $27 million, plus other consideration which includes an additional interest at Atchafalaya Bay Field in southern Louisiana and 3-D seismic over that area. The Company estimates that the other consideration has an estimated value of approximately $1.0 million. The sale is scheduled to close in mid- February, subject to normal and customary conditions for transactions of this type. As of December 31, 2002, Laurel Field had 7.4 MMBbls of proven reserves, just less than 50% of the total proved reserves of the COHO properties acquired in August 2002. Following closing and after using anticipated proceeds to pay down bank debt, the Company' s total debt will be reduced to approximately $320 million, consisting of $120 million of bank debt, with approximately $100 million available on the borrowing base, and $200 million of subordinated debt.
Gareth Roberts, Chief Executive Officer, said: "We are pleased with our year-end reserves. During 2002 we replaced production 2.7 times at a reasonable finding cost, with a significant portion of our new reserves coming from our ongoing CO2 tertiary recovery program in Mississippi. We expect this trend to continue as we intend to keep expanding our development program in that area. We believe that we have 50-65 MMBbls of additional potential from tertiary recovery in that area in the fields that we now own. Given the current natural gas price environment, we also believe that we have the possibility to ultimately double our natural gas reserves by developing our 22,000 acres in the Barnett Shale play west of Fort Worth, Texas. As a result, these two areas combined with our other opportunities provide Denbury a good inventory of both oil and natural gas projects for the next several years.
We are also excited to reach an agreement to sell Laurel Field, acquired in the COHO acquisition in August. We are well on our way to achieving our debt target of $300 million by mid-year 2003."