UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 20, 2004
DENBURY RESOURCES INC.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction
of incorporation or organization)
1-12935 20-0467835
(Commission File Number) (I.R.S. Employer
Identification No.)
5100 Tennyson Parkway
Suite 3000
Plano, Texas 75024
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (972)673-2000
Item 2. Completion of Acquisition or Disposition of Assets.
--------------------------------------------------
On July 20, 2004, the Company completed the sale of all of the outstanding
stock of Denbury Offshore, Inc. ("Offshore"), a wholly-owned subsidiary of the
Company, to Newfield Exploration Company for $200 million, before adjustments,
with the stock of Offshore valued as of April 1, 2004. The Company retained
Offshore's exploratory well at High Island A-6, certain deep rights at West
Delta 27 and related assets. All of Offshore's other assets were included in the
sale.
Offshore's operating net revenue, net of any capital expenditures, between
April 1, 2004 and July 20, 2004, other purchase price adjustments, and expenses
associated with the sale will be deducted from the acquisition price, which is
expected to result in an estimated net adjusted sales price of between $180 and
$185 million.
The Company plans to retire its bank debt with the proceeds from the sale,
reducing total debt to $225 million, consisting entirely of the Company's 7 1/2%
senior subordinated notes due 2013. The Company's bank borrowing base is
expected to be adjusted from $220 million to $175 million as a result of the
sale. The Company estimates that the sale will generate between $70 million and
$75 million of excess cash after repayment of its bank debt, estimated income
taxes and other fees and expenses of the sale.
The Stock Purchase Agreement for the sale of Offshore, excluding the
Schedules, is attached hereto as Exhibit 2.1.
Item 7. Financial Statements and Exhibits.
---------------------------------
(a) Not Applicable.
(b) Pro Forma Financial Information to give effect to sale of Denbury Offshore,
Inc.
The following unaudited pro forma consolidated statements of operations for
the year ended December 31, 2003 and the three months ended March 31, 2004,
and unaudited pro forma condensed consolidated balance sheet as of March
31, 2004, give effect to the sale of Denbury Offshore, Inc. described in
Item 2, which closed on July 20, 2004, and was valued as of April 1, 2004,
subject to final purchase price adjustments.
The pro forma statement of operations for the year ended December 31, 2003
is presented as if the transaction had occurred on January 1, 2003.
The pro forma statement of operations for the three months ended March 31,
2004 is presented as if the transaction had occurred on January 1, 2004.
The pro forma condensed balance sheet is presented as if the transaction
had occurred on March 31, 2004.
The unaudited pro forma information is presented for illustrative purposes
only and may not be indicative of the results that would have been obtained
had the transaction occurred on the pro forma dates assumed, nor is it
necessarily indicative of future consolidated results of operations. This
unaudited pro forma financial information should be read in conjunction
with Denbury's historical financial statements and related notes, which are
included in its Annual Report on Form 10-K for the year ended December 31,
2003, and its Quarterly Report on Form 10-Q for the three months ended
March 31, 2004.
DENBURY RESOURCES INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 2004
(Amounts in thousands except share amounts)
(Unaudited)
Pro Forma
Adjustments
for Sale of
Denbury Pro Forma
Historical Offshore, Inc. After Sale
--------------- --------------- -------------
Assets
Current assets
Cash and cash equivalents $ 17,208 $ 102,000 (1) $ 119,208
Accrued production receivables 39,487 (10,809)(2) 28,678
Related party accrued production receivable - Genesis 8,810 - 8,810
Trade and other receivables 19,307 - 19,307
Deferred tax asset 39,518 (2,813)(6)
(22,383)(3) 14,322
--------------- --------------- -------------
Total current assets 124,330 65,995 190,325
--------------- --------------- -------------
Property and equipment
Oil and natural gas properties (using full cost accounting)
Proved 1,456,736 (173,894)(4) 1,282,842
Unevaluated 46,082 (24,376)(4) 21,706
CO2 properties and equipment 105,779 - 105,779
Less accumulated depletion and depreciation (722,508) - (722,508)
--------------- --------------- -------------
Net property and equipment 886,089 (198,270) 687,819
--------------- --------------- -------------
Investment in Genesis 7,226 - 7,226
Other assets 22,185 (3,564)(2) 18,621
--------------- --------------- -------------
Total assets $ 1,039,830 $ (135,839) $ 903,991
=============== =============== =============
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 63,672 $ (6,537)(2) $ 57,135
Oil and gas production payable 24,013 - 24,013
Derivative liabilities 46,791 - 46,791
Current income taxes - 22,000 (3) 22,000
--------------- --------------- -------------
Total current liabilities 134,476 15,463 149,939
--------------- --------------- -------------
Long-term liabilities
Long-term debt 303,251 (80,000)(5) 223,251
Asset retirement obligations 42,199 (24,106)(2) 18,093
Derivative liabilities 2,121 - 2,121
Deferred revenue - Genesis 20,957 - 20,957
Deferred tax liability 88,732 (44,383)(3) 44,349
Other 2,077 - 2,077
--------------- --------------- -------------
Total long-term liabilities 459,337 (148,489) 310,848
--------------- --------------- -------------
Stockholders' equity
Preferred stock, $.001 par value, 25,000,000 shares authorized; none
issued and outstanding - - -
Common stock, $.001 par value, 100,000,000 shares authorized;
54,681,382 and 54,190,042 shares issued at March 31, 2004 and
December 31, 2003, respectively 55 - 55
Paid-in capital in excess of par 406,534 - 406,534
Retained earnings 68,960 (7,402)(6) 61,558
Accumulated other comprehensive loss (29,271) 4,589 (6) (24,682)
Treasury stock, at cost, 17,921 and 8,162 shares at March 31, 2004 and
December 31, 2003, respectively (261) - (261)
--------------- --------------- -------------
Total stockholders' equity 446,017 (2,813) 443,204
--------------- --------------- -------------
Total liabilities and stockholders' equity $ 1,039,830 $ (135,839) $ 903,991
=============== =============== =============
See accompanying notes to unaudited pro forma financial information
DENBURY RESOURCES INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
(Amounts in thousands except per share amounts)
(Unaudited)
Pro Forma
Adjustments
for Sale of
Denbury Pro Forma
Historical Offshore, Inc. After Sale
--------------- --------------- ---------------
Revenues
Oil, natural gas and related product sales
Unrelated parties $ 336,521 $ (93,038)(1) $ 243,483
Related party - Genesis 48,942 - 48,942
CO2 sales and transportation fees
Unrelated parties 7,512 - 7,512
Related party - Genesis 676 - 676
Loss on settlements of derivative contracts (62,210) 16,167 (2) (46,043)
Interest income and other 1,573 - 1,573
----------------- --------------- --------------
Total revenues 333,014 (76,871) 256,143
----------------- --------------- --------------
Expenses
Lease operating expenses 89,439 (20,456)(3) 68,983
Production taxes and marketing expenses 14,819 (2,415)(3) 12,404
CO2 operating expenses 1,710 - 1,710
General and administrative expenses 15,189 - 15,189
Interest 23,201 (3,043)(5) 20,158
Loss on early retirement of debt 17,629 - 17,629
Depletion and depreciation 94,708 (23,393)(6) 71,315
Amortization of derivative contracts and other
non-cash hedging adjustments (3,578) (7)(7) (3,585)
----------------- --------------- ---------------
Total expenses 253,117 (49,314) 203,803
----------------- --------------- ---------------
Equity in net income of Genesis 256 - 256
----------------- --------------- ---------------
Income before income taxes 80,153 (27,557) 52,596
Income tax provision
Current income taxes (91) - (91)
Deferred income taxes 26,303 (10,196)(8) 16,107
----------------- --------------- ---------------
Net income before cumulative effect change in accounting principle $ 53,941 $ (17,361) $ 36,580
================= =============== ===============
Net income per common share before change in accounting principle
Basic $ 1.00 $ 0.68
Diluted 0.97 0.66
Weighted average common shares outstanding
Basic 53,881 53,881
Diluted 55,464 55,464
See accompanying notes to unaudited pro forma financial information
DENBURY RESOURCES INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2004
(Amounts in thousands except per share amounts)
(Unaudited)
Pro Forma
Adjustments
for Sale of
Denbury Pro Forma
Historical Offshore, Inc. After Sale
----------------- -------------- ---------------
Revenues
Oil, natural gas and related product sales
Unrelated parties $ 91,274 $ (26,541)(1) $ 64,733
Related party - Genesis 18,962 - 18,962
CO2 sales and transportation fees
Unrelated parties 284 - 284
Related party - Genesis 1,077 - 1,077
Loss on settlements of derivative contracts (14,268) 2,171 (2) (12,097)
Interest income and other 419 - 419
----------------- -------------- ---------------
Total revenues 97,748 (24,370) 73,378
----------------- -------------- ---------------
Expenses
Lease operating expenses 22,528 (4,680)(3) 17,848
Production taxes and marketing expenses 4,067 (606)(3) 3,461
CO2 operating expenses 144 - 144
General and administrative expenses 4,748 (495)(4) 4,253
Interest 5,081 (451)(5) 4,630
Depletion and depreciation 27,324 (8,209)(6) 19,115
Amortization of derivative contracts and other
non-cash hedging adjustments 818 (24)(7) 794
----------------- -------------- ---------------
Total expenses 64,710 (14,465) 50,245
----------------- -------------- ---------------
Equity in net income (loss) of Genesis (93) - (93)
----------------- -------------- ---------------
Income before income taxes 32,945 (9,905) 23,040
Income tax provision
Current income taxes 2,119 - 2,119
Deferred income taxes 8,522 (3,665)(8) 4,857
----------------- -------------- ---------------
Net income $ 22,304 $ (6,240) $ 16,064
================= ============== ===============
Net income per common share
Basic $ 0.41 $ 0.30
Diluted 0.40 0.29
Weighted average common shares outstanding
Basic 54,388 54,388
Diluted 56,313 56,313
See accompanying notes to unaudited pro forma financial information
Notes to Unaudited Pro Forma Financial Information related to sale of
Denbury Offshore, Inc.
Explanation of adjustments to Unaudited Pro Forma Condensed Consolidated
Balance Sheet at March 31, 2004:
(1) To record the increase in cash resulting from the estimated net cash
proceeds received from the sale, after transaction costs, of
approximately $182 million, and repayment of Denbury's bank debt of
$80 million. The final purchase price is subject to closing
adjustments.
(2) To record transfer of assets and liabilities as a result of the sale.
(3) To reclassify estimated current and deferred taxes as a result of the
sale.
(4) To record estimated reduction to full-cost pool and unevaluated
properties.
(5) To record re-payment of outstanding bank debt as a result of the sale.
(6) To record estimated adjustments for natural gas commodity hedges that
no longer qualify for hedge accounting due to the sale of associated
production in the sale transaction.
Explanation of adjustments to Unaudited Pro Forma Condensed Consolidated
Statement of Operations for the year ended December 31, 2003 and the three
months ended March 31, 2004:
(1) To remove oil and natural gas revenues related to properties owned by
Denbury Offshore, Inc. and disposed in the sale transaction.
(2) To adjust loss on settlements of natural gas commodity hedges related
to properties owned by Denbury Offshore, Inc. and disposed in the sale
transaction.
(3) To remove operating expenses related to properties owned by Denbury
Offshore, Inc. and disposed in the sale transaction.
(4) To remove employee severance expense related to the sale.
(5) To reduce interest expense for outstanding bank debt repaid with cash
proceeds from the transaction.
(6) To reduce depletion and depreciation for impact of disposed properties
to depletion full-cost pool.
(7) To record estimated adjustments for natural gas commodity hedges that
no longer qualify for hedge accounting due to the sale of associated
production in the sale transaction.
(8) Estimated income tax effects related to the pro forma adjustments in
(1) - (7) above.
(c) Exhibits. The following exhibits are filed with this report on Form 8-K:
Exhibit No. Exhibit Description
---------- -------------------
2.1 Stock Purchase Agreement made as of July 19, 2004 between Denbury
Resources Inc. and Newfield Exploration Company
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: August 4, 2004
Denbury Resources Inc.
(Registrant)
By: /s/ Phil Rykhoek
------------------------------------------
Phil Rykhoek
Sr. Vice President and CFO