e424b2
Prospectus
Filed pursuant to Rule 424(b)(2)
Registration No. 333-133395
3,492,595 Shares
Denbury Resources Inc.
Common stock
This is an offering of 3,492,595 shares of common stock of
Denbury Resources Inc. You should read this prospectus carefully
before you invest.
Our common stock is traded on the New York Stock Exchange under
the symbol “DNR.” The last reported sales price of our
Common Stock on the New York Stock Exchange on April 19,
2006 was $36.60 per share.
Investing in the common stock involves risks. See “Risk
Factors” on page 8.
The underwriter will purchase the common stock from us at a
price of $35.79 per share, resulting in $125 million
aggregate proceeds. The underwriter may offer the common stock
from time to time in one or more transactions in the
over-the-counter market
or through negotiated transactions at market prices or at
negotiated prices. If the underwriter sells more than
3,492,595 shares of common stock, the underwriter has an
option for a period of 30 days to purchase up to an
additional 523,889 shares of common stock at $35.79 per
share.
If the over-allotment is exercised in full, we will receive
additional aggregate proceeds of $18.75 million.
We expect that delivery of the shares to investors will be made
on or about April 25, 2006.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities, or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
JPMorgan
April 20, 2006
Table of contents
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This prospectus relates to the offer and sale by us of our
common stock. You should rely on the information contained or
incorporated by reference into this prospectus. We have not, and
the underwriter has not, authorized any other person to provide
you with different information. If anyone else provides you with
different or inconsistent information, you should not rely on
it. We and the underwriter are not making an offer to sell our
common stock in any jurisdiction where the offer or sale is not
permitted. You should assume that the information contained in
this prospectus and the documents incorporated by reference is
accurate only as of their respective dates. Our business,
results of operations, financial condition and prospects may
have changed since those dates.
i
Forward-looking statements
Some of the information included in this prospectus, any
prospectus supplement and the documents we have incorporated by
reference contain forward-looking statements. Forward-looking
statements use forward-looking terms such as
“believe,” “expect,” “may,”
“intend,” “will,” “project,”
“budget,” “should” or “anticipate”
or other similar words. These statements discuss
“forward-looking” information such as:
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| • |
CO2
availability, deliverability and tertiary production targets; |
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| • |
other anticipated capital expenditures and budgets; |
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| • |
future cash flows and borrowings; |
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| • |
pursuit of potential future acquisition or drilling
opportunities; and |
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| • |
sources of funding for exploration and development. |
These forward-looking statements are based on assumptions that
we believe are reasonable, but they are open to a wide range of
uncertainties and business risks, including the following:
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| • |
fluctuations of the prices received or demand for oil and
natural gas; |
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| • |
uncertainty of drilling results, reserve estimates and reserve
replacement; |
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| • |
operating hazards; |
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| • |
acquisition risks; |
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| • |
availability and deliverability of
CO2; |
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| • |
reservoir response to
CO2
injections; |
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| • |
unexpected substantial variances in capital requirements; |
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| • |
environmental matters; and |
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| • |
general economic conditions. |
Other factors that could cause actual results to differ
materially from those anticipated are discussed in our periodic
filings with the SEC, including our Annual Report on
Form 10-K for the
year ended December 31, 2005.
When considering these forward-looking statements, you should
keep in mind the risk factors and other cautionary statements in
this prospectus, any prospectus supplement and the documents we
have incorporated by reference. We will not update these
forward-looking statements unless the securities laws require us
to do so.
ii
Where you can find more information
We are subject to the informational requirements of the
Securities Exchange Act of 1934, which requires us to file
annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any
document that we file at the Public Reference Room of the SEC at
100 F Street, N.E., Washington, D.C. 20549. Please call the
SEC at 1-800-SEC-0330
for further information on the operation of its public reference
room. You may view our reports electronically at the SEC’s
Internet site at http://www.sec.gov, or at our own website at
http://www.denbury.com.
This prospectus constitutes part of a Registration Statement on
Form S-3 filed
with the SEC under the Securities Act of 1933. It omits some of
the information contained in the Registration Statement, and
reference is made to the Registration Statement for further
information with respect to us and the securities we are
offering. Any statement contained in this prospectus concerning
the provisions of any document filed as an exhibit to the
Registration Statement or otherwise filed with the SEC is not
necessarily complete, and in each instance reference is made to
the copy of the filed document.
The SEC allows us to “incorporate by reference” the
information we file with them, which means that we can disclose
important information to you by referring you to those
documents. Any information referred to in this way is considered
part of this prospectus from the date we file that document. Any
reports filed by us with the SEC after the date of this
prospectus and before the date that the offering of the
securities by means of this prospectus is terminated will
automatically update and, where applicable, supercede any
information contained in this prospectus or incorporated by
reference in this prospectus. We incorporate by reference
(excluding any information furnished pursuant to Items 2.02
or 7.01 of any report on
Form 8-K) the
documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 until we sell all the securities covered by
this prospectus:
1. Our Annual Report on
Form 10-K for the
year ended December 31, 2005 filed on March 8,
2006; and
2. Current Reports on
Form 8-K filed
January 27, 2006, February 3, 2006, February 23,
2006, and February 24, 2006.
You may request a copy of these filings at no cost, by writing
or telephoning Phil Rykhoek, Senior Vice President and Chief
Financial Officer, Denbury Resources Inc., 5100 Tennyson
Pkwy., Ste. 1200, Plano, Texas 75024, phone:
(972) 673-2000.
iii
Summary
In this prospectus, when we use the terms
“Denbury,” the “Company,” “we” or
“our,” we mean Denbury Resources Inc. and its
subsidiaries on a consolidated basis, unless otherwise indicated
or the context requires otherwise. Reference oil and natural gas
prices used in this prospectus, mean the NYMEX WTI oil price and
the Henry Hub natural gas cash price per MMbtu, unless otherwise
indicated. Oil and natural gas terms used in this prospectus are
defined in the “Glossary” section. Principal executive
offices of the Company are located at 5100 Tennyson Pkwy.,
Suite 1200, Plano, Texas 75024. The phone number is
(972) 673-2000.
The company
We are an independent oil and gas company engaged in
acquisition, development and exploration activities in the
U.S. Gulf Coast region. We are the largest oil and natural
gas producer in Mississippi, own the largest reserves of carbon
dioxide
(“CO2”)
used for tertiary oil recovery east of the Mississippi River,
and hold significant operating acreage onshore Louisiana and in
the Barnett Shale play near Forth Worth, Texas. Our goal is to
increase the value of acquired properties through a combination
of exploitation, drilling and proven engineering extraction
processes, including secondary (waterflood) and tertiary
recovery operations.
Since we acquired our first carbon dioxide tertiary flood in
Mississippi over six years ago, we have gradually increased our
emphasis on these types of operations. We particularly like this
play because of its risk profile, rate of return and lack of
competition in our operating area. Generally, from East Texas to
Florida, there are no known significant natural sources of
carbon dioxide except our own, and these large volumes of
CO2
that we own drive the play. Please refer to
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and the section
entitled “Oil and Gas Operations—Our
CO2
Assets” contained in our
Form 10-K for the
year ended December 31, 2005 for further information
regarding these operations, their potential, and the
ramifications of this focus.
Recent acquisition
On January 31, 2006, we completed an acquisition of three
producing oil properties that are future potential
CO2
tertiary oil flood candidates: Tinsley Field approximately
40 miles northwest of Jackson, Mississippi, Citronelle
Field in Southwest Alabama, and the smaller South Cypress Creek
Field near the Company’s Eucutta Field in Eastern
Mississippi. We expect to begin our initial tertiary development
work at Tinsley Field during 2006, with more extensive
development planned for 2007. The timing of tertiary development
at Citronelle Field is uncertain as we will need to build a 60
to 70 mile pipeline extension of our
CO2
line to East Mississippi before flooding can commence, and South
Cypress Creek will probably be flooded following our initial
development of our other East Mississippi properties.
The preliminary adjusted purchase price for these three
properties was approximately $248 million, after adjusting
for interim net cash flow and minor purchase price adjustments.
The acquisition was funded with proceeds of the
$150 million of senior subordinated notes issued in
December 2005 and bank financing under the Company’s
existing credit facility, bringing the outstanding balance of
the Company’s bank debt as of January 31, 2006 to
approximately $100 million ($120 million as of
April 14, 2006).
1
These three fields are currently producing approximately 2,200
BOE/d net to the acquired interests, and have proved reserves of
approximately 14.4 million BOEs. We operate all three
fields and own the majority of the working interests.
First quarter 2006 production estimate
Based on preliminary estimates, the Company’s production
for the first quarter of 2006 is expected to be between 35,000
to 36,000 BOE/d. Production by area is expected to be
approximately 12,400 BOE/d from the
non-CO2
floods in Mississippi, 9,750 BOE/d from
CO2
floods, 8,350 BOE/d from Louisiana, 4,000 BOE/d from
the Barnett Shale, and approximately 1,000 BOE/d from
Alabama, in each case plus or minus up to 250 BOE/d. First
quarter preliminary estimates include two months of production
from the three properties acquired in late January 2006,
production from which is estimated to contribute approximately
1,400 BOE/d to estimated total first quarter production.
First quarter 2006 estimated preliminary financial data
Each fiscal quarter we charge to earnings any changes in the
fair value of our derivative contracts. We preliminarily
estimate that this non-cash charge for the first quarter of 2006
will be approximately $10.9 million; for the quarter we
also will record for the first time a non-cash charge to
earnings estimated to be up to $3.0 million to reflect the
adoption on January 1, 2006 of SFAS No. 123(R) related
to compensation expense for share-based compensation.
2
The offering
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Issuer |
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Denbury Resources Inc. |
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Common stock offered |
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3,492,595 shares (4,016,484 shares if the
underwriter’s over-allotment option is exercised in full) |
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Common stock outstanding immediately after this offering |
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119,027,350 shares (119,551,239 shares if the
underwriter’s over-allotment option is exercised in full) |
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Use of proceeds |
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We will use the net proceeds from this offering to repay our
outstanding $120 million of bank debt, with the balance to
be used for general corporate purposes, which may include
additions to working capital. See “Use of proceeds”
below. |
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Dividend policy |
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We have never declared or paid dividends on our common stock. We
do not expect to pay any dividends in the foreseeable future. We
currently intend to retain our earnings for the development of
our business. |
The common stock outstanding immediately after the offering is
based on 115,534,755 shares outstanding as of
April 14, 2006 and excludes 8,495,741 shares of common
stock subject to options and 360,231 shares of common stock
subject to stock appreciation rights outstanding as of
April 14, 2006 at a weighted average option price of
$8.36 per share and a weighted average stock appreciation
right base price of $25.23.
Except as otherwise stated, the information in this prospectus
does not take into account the exercise of the
underwriter’s over-allotment option to purchase additional
shares in the event the underwriters sell more than
3,492,595 shares.
3
Summary consolidated financial data
The summary historical consolidated financial data set forth
below as of and for each of the years ended December 31,
2003, 2004 and 2005 have been derived from our audited
consolidated financial statements. The summary consolidated
financial data are qualified in their entirety by and should be
read in conjunction with our consolidated financial statements
and related notes and “Management’s Discussion and
Analysis of Financial Condition and Result of Operations”
that are incorporated by reference into this prospectus.
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| Year ended December 31, |
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| (in thousands) |
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2003 | |
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2004 | |
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2005 | |
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Statement of operations
data:
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Revenues:
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Oil, natural gas and related
product sales
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$ |
385,463 |
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$ |
444,777 |
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$ |
549,055 |
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CO
2
sales
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|
8,188 |
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|
6,276 |
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8,119 |
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Loss on effective hedge contracts
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(62,210 |
) |
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|
(70,469 |
) |
|
|
— |
|
| |
Interest income and other
|
|
|
1,573 |
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|
|
2,388 |
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|
|
3,218 |
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Total revenues
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333,014 |
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|
|
382,972 |
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560,392 |
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Expenses:
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Lease operating expenses
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89,439 |
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87,107 |
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108,550 |
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| |
Production taxes and marketing
expenses
|
|
|
14,819 |
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18,737 |
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|
27,582 |
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CO
2
operating expenses
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|
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1,710 |
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|
|
1,338 |
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|
|
2,251 |
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General and administrative
|
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|
15,189 |
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|
|
21,461 |
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|
28,540 |
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Depreciation, depletion, and
accretion
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|
94,708 |
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|
97,527 |
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|
|
98,802 |
|
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Interest, net of amounts capitalized
|
|
|
23,201 |
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|
|
19,468 |
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|
|
17,978 |
|
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Loss on early retirement of debt
|
|
|
17,629 |
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|
|
— |
|
|
|
— |
|
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Commodity derivative expense
(income)
|
|
|
(3,578 |
) |
|
|
15,358 |
|
|
|
28,962 |
|
| |
|
|
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Total expenses
|
|
|
253,117 |
|
|
|
260,996 |
|
|
|
312,665 |
|
| |
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|
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Equity in net income (loss) of
Genesis Energy
|
|
|
256 |
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|
|
(136 |
) |
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|
314 |
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|
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Income before income taxes
|
|
|
80,153 |
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|
|
121,840 |
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|
248,041 |
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Income tax provision (benefit):
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|
|
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|
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Current
|
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(91 |
) |
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22,929 |
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27,177 |
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Deferred
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|
26,303 |
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|
16,463 |
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|
54,393 |
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Total income taxes
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|
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26,212 |
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|
|
39,392 |
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|
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81,570 |
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4
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| Year ended December 31, |
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| (in thousands) |
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2003 | |
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2004 | |
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2005 | |
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Income before cumulative effect of
change in accounting principle
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53,941 |
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82,448 |
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166,471 |
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Cumulative effect of change in
accounting principle, net of income taxes of $1,600
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2,612 |
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— |
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— |
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Net income
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$ |
56,553 |
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$ |
82,448 |
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$ |
166,471 |
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Other financial data:
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Oil and gas capital expenditures
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$ |
(158,444 |
) |
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$ |
(178,070 |
) |
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$ |
(379,236 |
) |
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CO
2
capital expenditures
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(22,673 |
) |
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(50,265 |
) |
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(78,720 |
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Net cash provided by operating
activities
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197,615 |
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168,652 |
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|
360,960 |
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Net cash used for investing
activities(1)
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(135,878 |
) |
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(93,550 |
) |
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|
(383,687 |
) |
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Net cash provided by (used for)
financing activities
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|
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(61,489 |
) |
|
|
(66,251 |
) |
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154,777 |
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Balance sheet data (at end of
period):
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Oil and gas properties, net(2)
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$ |
765,249 |
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$ |
659,855 |
|
|
$ |
940,786 |
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Total assets
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|
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982,621 |
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|
|
992,706 |
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|
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1,505,069 |
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Long-term debt, including current
portion(3)
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|
|
298,203 |
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|
|
227,956 |
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|
380,035 |
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Stockholders’ equity
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|
|
421,202 |
|
|
|
541,672 |
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|
733,662 |
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(1) Includes $187.5 million of proceeds from sale of
Denbury Offshore, Inc. for the year ended December 31, 2004.
(2) Excludes net book value of
CO2
related property and equipment.
(3) We purchased certain oil and gas properties in January
2006 for approximately $248 million. After giving effect to
the borrowings made for the acquisition, as of April 14,
2006 we have approximately $501 million of long-term debt
outstanding.
5
Summary oil and natural gas reserve data
The following table summarizes our estimates of net proved oil
and natural gas reserves as of the dates indicated and the
present value attributable to the reserves at such dates.
Estimates of our net proved oil and natural gas reserves as of
December 31, 2003, 2004 and 2005 were prepared by DeGolyer
and MacNaughton, an independent petroleum engineering firm
located in Dallas, Texas.
All reserve estimates were prepared using constant year-end
prices and costs in accordance with the guidelines of the SEC
based on the prices received on a field-by-field basis as of
December 31 of each year. Reserve estimates do not include
any value for probable or possible reserves which may exist, nor
do they include any value for undeveloped acreage. The reserve
estimates represent our net revenue interest in our properties.
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December 31, | |
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December 31, | |
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December 31, | |
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2003 | |
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2004 | |
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2005 | |
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Estimated proved
reserves:
|
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|
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|
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|
|
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Oil (MBbls)
|
|
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91,266 |
|
|
|
101,287 |
|
|
|
106,173 |
|
| |
Natural gas (MMcf)
|
|
|
221,887 |
|
|
|
168,484 |
(1) |
|
|
278,367 |
|
| |
Oil equivalent (MBOE)
|
|
|
128,247 |
|
|
|
129,369 |
|
|
|
152,568 |
|
|
Percentage of total
MBOE:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Proved producing
|
|
|
43% |
|
|
|
39% |
|
|
|
40% |
|
| |
Proved non-producing
|
|
|
18% |
|
|
|
16% |
|
|
|
16% |
|
| |
Proved undeveloped
|
|
|
39% |
|
|
|
45% |
|
|
|
44% |
|
|
Representative oil and gas
prices:(2)
|
|
|
|
|
|
|
|
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|
|
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|
| |
Oil — NYMEX WTI per Bbl
|
|
$ |
32.52 |
|
|
$ |
43.45 |
|
|
$ |
61.04 |
|
| |
Natural gas — Henry Hub
cash price per MMBtu
|
|
|
5.97 |
|
|
|
6.18 |
|
|
|
10.08 |
|
|
Present values (in
thousands):(3)
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|
|
|
|
|
|
|
|
|
|
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|
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Discounted estimated future net
cash flow before income taxes (PV-10 Value) (thousands)
|
|
$ |
1,566,371 |
|
|
$ |
1,643,289 |
|
|
$ |
3,215,478 |
|
| |
Standardized measure of discounted
future net cash flows after income taxes (thousands)
|
|
|
1,124,127 |
|
|
|
1,129,196 |
|
|
|
2,084,449 |
|
|
Average reserve life
index(4)
|
|
|
10.1 |
|
|
|
10.7 |
|
|
|
14.0 |
|
| |
(1) Decrease in natural gas reserves in 2004 is primarily
related to the sale of Denbury Offshore, Inc. in July 2004.
(2) Oil and natural gas reference prices as of each
respective period end were based on NYMEX WTI oil prices per Bbl
and Henry Hub cash prices per MMBtu, with these representative
prices adjusted for differentials by field to arrive at the
appropriate net price we receive.
(3) Determined based on period-end unescalated prices and
costs in accordance with the guidelines of the SEC, discounted
at 10% per annum.
(4) Average reserve life index is calculated by dividing
total reserves by our actual production for the period.
6
Summary operating data
The following table shows certain summary information with
respect to production and sales of oil and natural gas for the
periods indicated.
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| |
| Year ended December 31, |
|
2003 |
|
2004 |
|
2005 |
| |
|
Average daily production
volumes:
|
|
|
|
|
|
|
| |
Oil (Bbls)
|
|
18,894
|
|
19,247
|
|
20,013
|
| |
Natural gas (Mcf)(1)
|
|
94,858
|
|
82,224
|
|
58,696
|
| |
BOE(2)
|
|
34,704
|
|
32,951
|
|
29,795
|
|
Unit sales prices (excluding
impact of derivative settlements):
|
|
|
|
|
|
|
| |
Price per Bbl of oil
|
|
$27.47
|
|
$36.46
|
|
$50.30
|
| |
Price per Mcf of natural gas
|
|
5.66
|
|
6.24
|
|
8.48
|
|
Unit sales prices (including
impact of derivative settlements):
|
|
|
|
|
|
|
| |
Price per Bbl of oil
|
|
$24.52
|
|
$27.36
|
|
$50.30
|
| |
Price per Mcf of natural gas
|
|
4.45
|
|
5.57
|
|
7.70
|
|
Per BOE data:(2)
|
|
|
|
|
|
|
| |
Oil, natural gas and related
product sales
|
|
$30.43
|
|
$36.88
|
|
$50.49
|
| |
Loss on settlements of derivative
contracts
|
|
(4.91)
|
|
(7.01)
|
|
(1.54)
|
| |
Lease operating expenses
|
|
(7.06)
|
|
(7.22)
|
|
(9.98)
|
| |
Production taxes and marketing
expenses
|
|
(1.17)
|
|
(1.55)
|
|
(2.54)
|
| |
|
|
| |
|
Production netback
|
|
17.29
|
|
21.10
|
|
36.43
|
| |
Operating margin from CO
2
operations
|
|
0.51
|
|
0.41
|
|
0.54
|
| |
General and administrative expense
|
|
(1.20)
|
|
(1.78)
|
|
(2.62)
|
| |
Net cash interest expense
|
|
(1.61)
|
|
(1.34)
|
|
(1.28)
|
| |
Current income taxes and other
|
|
(0.01)
|
|
(1.78)
|
|
(1.50)
|
| |
Changes in assets and liabilities
relating to operations
|
|
0.62
|
|
(2.63)
|
|
1.62
|
| |
|
|
| |
|
Cash flow from operations
|
|
$15.60
|
|
$13.98
|
|
$33.19
|
| |
(1) Decrease in natural gas production in 2005 is primarily
related to the sale of Denbury Offshore, Inc. in July 2004.
(2) Barrel of oil equivalent using the ratio of one Bbl of
oil to six Mcf of natural gas.
7
Risk factors
Investing in our common stock involves risks. Before purchasing
any securities we offer, you should carefully consider the risk
factors that are incorporated by reference herein from
Item 1.A., captioned “Risk Factors,” of our
Annual Report on
Form 10-K for the
year ended December 31, 2005.
Price range of common stock and dividend policy
The following table summarizes the high and low reported sales
prices of our common stock on the New York Stock Exchange
(NYSE), for each quarterly period for the last two completed
fiscal years and the first and second quarters of 2006. The
sales prices are adjusted to reflect our
2-for-1 stock split on
October 31, 2005. On April 19, 2006, the last reported
sales price of our common stock, as reported on the NYSE, was
$36.60 per share.
| |
|
|
|
|
|
|
|
|
|
| | |
| |
|
Price | |
| |
|
| |
| |
|
High | |
|
Low | |
| | |
|
Year ended December 31,
2004
|
|
|
|
|
|
|
|
|
| |
First Quarter
|
|
$ |
8.47 |
|
|
$ |
6.63 |
|
| |
Second Quarter
|
|
|
10.87 |
|
|
|
8.36 |
|
| |
Third Quarter
|
|
|
13.10 |
|
|
|
9.30 |
|
| |
Fourth Quarter
|
|
|
14.65 |
|
|
|
12.03 |
|
|
Year ended December 31,
2005
|
|
|
|
|
|
|
|
|
| |
First Quarter
|
|
$ |
18.32 |
|
|
$ |
12.37 |
|
| |
Second Quarter
|
|
|
20.53 |
|
|
|
14.02 |
|
| |
Third Quarter
|
|
|
25.71 |
|
|
|
19.95 |
|
| |
Fourth Quarter
|
|
|
25.50 |
|
|
|
19.36 |
|
|
Year ended December 31,
2006
|
|
|
|
|
|
|
|
|
| |
First Quarter
|
|
$ |
32.65 |
|
|
$ |
23.57 |
|
| |
Second Quarter (through
April 19)
|
|
|
36.60 |
|
|
|
31.66 |
|
| |
We have never paid any dividends on our common stock and we
currently do not anticipate paying any dividends in the
foreseeable future. Also, we are restricted from declaring or
paying any cash dividends on our common stock under our bank
loan agreement.
Use of proceeds
We estimate that the net proceeds from this offering will be
approximately $124.7 million after deducting the expenses
of the offering.
We intend to use most of the net proceeds from this offering to
repay current borrowings under our bank credit facility, which
were approximately $120 million as of April 14, 2006.
The remaining $4.7 million of net proceeds will be used for
general corporate purposes, which may include additions to
working capital, development and exploration expenditures or the
financing of acquisitions. As of April 14, 2006, the
average interest rate on borrowings under our bank credit
facility, which matures on April 30, 2009, was 6.09%.
8
Capitalization
The following table sets forth our cash and capitalization as of
December 31, 2005:
|
|
| • |
on an actual basis. |
| |
| • |
on a pro forma basis to give effect to our purchase of three oil
and gas properties in January 2006 for approximately
$248 million, comprised of $123 million paid from
available cash (from our December 2005 sale of $150 million
of senior subordinated notes), $25 million previously paid
as a deposit in November 2005 and $100 million of
borrowings under our bank credit facility as of January 31,
2006. |
| |
| • |
on an as adjusted basis to give effect to this offering and the
repayment of borrowings under our bank credit facility. |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| | |
| December 31, 2005 | |
|
Pro Forma | |
|
|
| (in thousands) |
|
Actual | |
|
for Acquisition | |
|
As Adjusted | |
| | |
|
Cash and cash equivalents
|
|
$ |
165,089 |
|
|
$ |
42,089 |
|
|
$ |
66,789 |
|
| |
|
|
|
Long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital lease obligations
|
|
$ |
5,870 |
|
|
$ |
5,870 |
|
|
$ |
5,870 |
|
|
Bank credit facility
|
|
|
— |
|
|
|
100,000 |
|
|
|
— |
|
|
71/2% Senior
Subordinated Notes due 2013
|
|
|
225,000 |
|
|
|
225,000 |
|
|
|
225,000 |
|
|
71/2% Senior
Subordinated Notes due 2015
|
|
|
150,000 |
|
|
|
150,000 |
|
|
|
150,000 |
|
| |
|
|
| |
Total long term debt
|
|
|
380,870 |
|
|
|
480,870 |
|
|
|
380,870 |
|
|
Stockholders’ equity
|
|
|
733,662 |
|
|
|
733,662 |
|
|
|
858,362 |
|
| |
|
|
| |
Total capitalization
|
|
$ |
1,114,532 |
|
|
$ |
1,214,532 |
|
|
$ |
1,239,232 |
|
| |
9
Description of capital stock
General
As of April 14, 2006, we are authorized to issue up to
275,000,000 shares of stock, including up to
250,000,000 shares of common stock, par value
$.001 per share, and up to 25,000,000 shares of
preferred stock, par value $.001 per share. As of
April 14, 2006, we had 115,534,755 shares of common
stock and no shares of preferred stock outstanding. This
excludes 8,495,741 shares of common stock subject to
options under our option plans, and 360,231 shares of
common stock subject to stock appreciation rights outstanding as
of April 14, 2006 at a weighted average option price of
$8.36 per share and a weighted average stock appreciation
right base price of $25.23.
Common stock
The following is a summary of the key terms and provisions of
our common stock. You should refer to the applicable provisions
of our Restated Certificate of Incorporation, as amended, bylaws
and the Delaware General Corporation Law for a complete
statement of the terms and rights of our capital stock.
Voting rights. Each holder of common stock is entitled to
one vote per share. Subject to the rights, if any, of the
holders of any series of preferred stock pursuant to applicable
law or the provision of the certificate of designation creating
that series, all voting rights are vested in the holders of
shares of common stock. Holders of shares of common stock have
non-cumulative voting rights, which means that the holders of
more than 50% of the shares voting for the election of directors
can elect 100% of the directors, and the holders of the
remaining shares voting for the election of directors will not
be able to elect any directors.
Dividends. Dividends may be paid to the holders of common
stock when, as and if declared by the board of directors out of
funds legally available for their payment, subject to the rights
of holders of any preferred stock. We have never declared a cash
dividend and intend to continue our policy of using retained
earnings for expansion of our business.
Rights upon liquidation. In the event of our voluntary or
involuntary liquidation, dissolution or winding up, the holders
of our common stock will be entitled to share equally, in
proportion to the number of shares of common stock held by them,
in any of our assets available for distribution after the
payment in full of all debts and distributions and after the
holders of all series of outstanding preferred stock, if any,
have received their liquidation preferences in full.
Non-assessable. All outstanding shares of common stock
are fully paid and non-assessable. Any additional common stock
we offer and issue under this Prospectus will be fully paid and
non-assessable when distributed.
Anti-takeover measures. Our Restated Certificate of
Incorporation, as amended, requires a two-thirds majority vote
by the Board on many significant transactions, including
amending our charter or bylaws, issuing equity securities,
creating any series of preferred stock, issuing debt in excess
of 10% of our assets, making acquisitions or dispositions with a
purchase price in excess of 20% of our assets, or increasing or
decreasing the size of our Board. Because a smaller number of
directors than a majority can join together to block future
transactions, issuances of securities or changes in our
organizational documents, there is an increased possibility that
these transactions will not be accomplished.
10
No preemptive rights. Holders of common stock are not
entitled to preemptive purchase rights in future offerings of
our common stock.
Listing. Our outstanding shares of common stock are
listed on the New York Stock Exchange under the symbol
“DNR.” Any additional common stock we offer and issue
under this Prospectus will also be listed on the New York Stock
Exchange or any other exchange on which our common stock is then
traded.
Underwriting
We are offering the shares of common stock described in this
prospectus through J.P. Morgan Securities Inc., the
underwriter. We have entered into an underwriting agreement with
the underwriter. Subject to the terms and conditions of the
underwriting agreement, we have agreed to sell to the
underwriter, and the underwriter has agreed to purchase, at the
purchase price set forth on the cover page of this prospectus,
3,492,595 shares of common stock.
The underwriter is committed to purchase all the common shares
offered by us if it purchases any shares.
The underwriter proposes to offer the shares of common stock
from time to time for sale in one or more transactions in the
over-the-counter
market, through negotiated transactions or otherwise at market
prices prevailing at the time of the sale, at prices related to
prevailing market prices or at negotiated prices, subject to
receipt and acceptance by it and subject to its right to reject
any order in whole or in part. In connection with the sale of
the shares of common stock offered hereby, the underwriter may
be deemed to have received compensation in the form of
underwriting discounts. The underwriter may effect such
transactions by selling shares of the common stock offered
hereby to or through dealers, and such dealers may receive
compensation in the form of discounts, concessions or
commissions from the underwriter and/or purchasers of shares of
common stock for whom they may act as agents or to whom they may
sell as principal.
The underwriter has an option to buy up to 523,889 additional
shares of common stock from us to cover sales of shares by the
underwriter which exceed the number of shares specified above.
The underwriter has 30 days from the date of this
prospectus to exercise this over-allotment option. If any
additional shares of common stock are purchased, the underwriter
will offer the additional shares in the same manner as those on
which the shares are being offered.
We estimate that the total expenses of this offering, including
registration, filing and listing fees, printing fees and legal
and accounting expenses, will be approximately $300,000.
We, our directors and executive officers have entered or will
enter into lock-up
agreements with the underwriter pursuant to which we and each of
these persons, with limited exceptions, for a period of
75 days after the date of this prospectus, may not, without
the prior written consent of the underwriter, (1) offer,
pledge, announce the intention to sell, sell, grant any option,
right or warrant to purchase, or otherwise transfer or dispose
of, directly or indirectly, any shares of our common stock
(including, without limitation, common stock which may be deemed
to be beneficially owned by such directors and executive
officers in accordance with the rules and regulations of the SEC
and securities which may be issued upon exercise of a stock
option or warrant) or (2) enter into any swap or other
agreement that transfers, in whole or in part, any of the
economic consequences of ownership of the common stock, whether
any such transaction described in clause (1) or
(2) above is to be settled by delivery of common
11
stock or such other securities, in cash or otherwise. The
lock-up agreement
described above will not apply to sales or transfers of common
stock by our directors and executive officers, so long as the
aggregate number of shares of common stock sold or transferred
by them during the 75 days after the date of this
prospectus does not exceed 200,000 shares.
We have agreed to indemnify the underwriter against certain
liabilities, including liabilities under the Securities Act of
1933.
Our common stock is listed on the New York Stock Exchange under
the symbol “DNR”.
In connection with this offering, the underwriter may engage in
stabilizing transactions, which involves making bids for,
purchasing and selling shares of common stock in the open market
for the purpose of preventing or retarding a decline in the
market price of the common stock while this offering is in
progress. These stabilizing transactions may include making
short sales of the common stock, which involves the sale by the
underwriter of a greater number of shares of common stock than
it is required to purchase in this offering, and purchasing
shares of common stock on the open market to cover positions
created by short sales. Short sales may be “covered”
shorts, which are short positions in an amount not greater than
the underwriter’s over-allotment option referred to above,
or may be “naked” shorts, which are short positions in
excess of that amount. The underwriter may close out any covered
short position either by exercising its over-allotment option,
in whole or in part, or by purchasing shares in the open market.
In making this determination, the underwriter will consider,
among other things, the price of shares available for purchase
in the open market compared to the price at which the
underwriter may purchase shares through the over-allotment
option. A naked short position is more likely to be created if
the underwriter is concerned that there may be downward pressure
on the price of the common stock in the open market that could
adversely affect investors who purchase in this offering. To the
extent that the underwriter creates a naked short position, it
will purchase shares in the open market to cover the position.
The underwriter has advised us that, pursuant to
Regulation M of the Securities Act of 1933, it may also
engage in other activities that stabilize, maintain or otherwise
affect the price of the common stock.
These activities may have the effect of raising or maintaining
the market price of the common stock or preventing or retarding
a decline in the market price of the common stock, and, as a
result, the price of the common stock may be higher than the
price that otherwise might exist in the open market. If the
underwriter commences these activities, it may discontinue them
at any time. The underwriter may carry out these transactions on
the New York Stock Exchange, in the
over-the-counter market
or otherwise.
The underwriter and its affiliates have provided in the past to
us and our affiliates and may provide from time to time in the
future certain commercial banking, financial advisory,
investment banking and other services for us and such affiliates
in the ordinary course of their business, for which they have
received and may continue to receive customary fees and
commissions. In addition, from time to time, the underwriter and
its affiliates may effect transactions for their own account or
the account of customers, and hold on behalf of themselves or
their customers, long or short positions in our debt or equity
securities or loans, and may do so in the future. As an
affiliate of the underwriter is expected to receive a portion of
the net proceeds from this offering, this offering is being
conducted pursuant to NASD Conduct Rule 2710(h).
12
Legal matters
Certain legal matters with respect to the common stock offered
hereby will be passed upon for us by Jenkens &
Gilchrist, A Professional Corporation, Houston, Texas. Simpson
Thacher & Bartlett LLP, New York, New York, is acting as
counsel for the underwriter in connection with this offering.
Experts
The consolidated financial statements of the Company as of
December 31, 2003 and for the year ended December 31,
2003 incorporated by reference in this prospectus have been
audited by Deloitte and Touche LLP, an independent registered
public accounting firm, as stated in their report, which is
incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The financial statements and management’s assessment of the
effectiveness of internal control over financial reporting
(which is included in Management’s Report on Internal
Control over Financial Reporting) incorporated in this
prospectus by reference to the Annual Report on Form 10-K
for the year ended December 31, 2005 have been so
incorporated in reliance on the report of PricewaterhouseCoopers
LLP, an independent registered public accounting firm, given on
the authority of said firm as experts in auditing and accounting.
Certain estimates of our oil and natural gas reserves and
related information as of December 31, 2003, 2004 and 2005
included in this prospectus and/or incorporated by reference in
this prospectus have been derived from engineering reports
prepared by DeGolyer and MacNaughton, and all such information
has been so included on the authority of such firms as experts
regarding the matters contained in their reports.
Commission position on indemnification for
Securities Act liabilities
Section 145 of the Delaware General Corporation Law (the
“DGCL”), empowers us under specified circumstances, to
indemnify our directors, officers, employees and agents in
connection with actions, suits or proceedings brought against
them or threatened by reason of the fact that they were our
directors, officers, employees or agents, so long as they acted
in good faith and in a manner that they reasonably believed to
be in, or not opposed to, the best interests of our Company, and
with respect to any criminal action, that they had no reasonable
cause to believe their conduct was unlawful. With respect to
suits by or in the right of our Company, however,
indemnification is generally limited to attorneys’ fees and
other expenses and is not available if such person is adjudged
to be liable to us, unless a court determines that
indemnification is appropriate.
Article IX of our Restated Certificate of Incorporation, as
amended requires indemnification of directors, officers and
other employees to the fullest extent permitted by
Section 145 of the DGCL. Furthermore, Article IX
explicitly provides that:
|
|
| • |
we may advance expenses, including reasonable attorneys’
fees, to individuals entitled to indemnification; |
13
|
|
| • |
we may not take any action to diminish or reduce the rights of
individuals entitled to indemnification after the occurrence of
the events to which the indemnification relates; and |
| |
| • |
any person entitled to indemnification by us may bring suit
against us if we do not pay them within 30 days after
receiving a written demand for indemnification and, if
successful, such person may recover their expenses for such
suit, including attorneys’ fees, from us. In the suit, we
will have the burden of proving any defense that the person is
not eligible for indemnification under the DGCL. |
Additionally, we maintain directors and officers insurance which
includes coverage for liability under the federal securities
laws.
Article X of our Restated Certificate of Incorporation, as
amended limits the personal liability of a director to us or our
stockholders for monetary damages for breach of fiduciary duty
as a director provided that a director’s liability may not
be limited (i) for any breach of the director’s duty
of loyalty to us or our stockholders, (ii) for acts or
omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under
Section 174 (relating to liability for unauthorized
acquisitions or redemptions of, or dividends on, capital stock)
of the DGCL or (iv) for any transaction from which the
director derived an improper personal benefit.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, we have been advised that in the
opinion of the SEC such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore,
unenforceable.
14
Glossary
The terms defined in this section are used throughout this
prospectus:
|
|
|
|
Bbl |
|
One stock tank barrel, of 42 U.S gallons liquid volume, used
herein in reference to crude oil or other liquid hydrocarbons. |
| |
|
BOE |
|
One barrel of oil equivalent using the ratio of one barrel of
crude oil, condensate or natural gas liquids to 6 Mcf of
natural gas. |
| |
|
BOE/d |
|
BOEs per day. |
| |
|
Btu |
|
British thermal unit, which is the heat required to raise the
temperature of a one-pound mass of water from 58.5 to 59.5
degrees Fahrenheit. |
| |
|
CO2 |
|
Carbon Dioxide. |
| |
|
MBbls |
|
One thousand barrels of crude oil or other liquid hydrocarbons. |
| |
|
MBOE |
|
One thousand BOEs. |
| |
|
Mcf |
|
One thousand cubic feet of natural gas or
CO2. |
| |
|
MCFE |
|
One thousand cubic feet of natural gas equivalent using the
ratio of one barrel of crude oil, condensate or natural gas
liquids to 6 Mcf of natural gas. |
| |
|
MMBtu |
|
One million Btus. |
| |
|
MMcf |
|
One million cubic feet of natural gas or
CO2. |
| |
|
PV-10 Value |
|
When used with respect to oil and natural gas reserves,
PV-10 Value means the
estimated future gross revenue to be generated from the
production of proved reserves, net of estimated production and
future development costs and abandonment, using prices and costs
in effect at the determination date, and before income taxes,
discounted to a present value using an annual discount rate of
10% in accordance with the guidelines of the Securities and
Exchange Commission. |
| |
|
Proved Developed Reserves* |
|
Reserves that can be expected to be recovered through existing
wells with existing equipment and operating methods. |
| |
|
Proved Reserves* |
|
The estimated quantities of crude oil, natural gas and natural
gas liquids that geological and engineering data demonstrate
with reasonable certainty to be recoverable in future years from
known reservoirs under existing economic and operating
conditions. |
15
|
|
|
|
Proved Undeveloped Reserves* |
|
Reserves that are expected to be recovered from new wells on
undrilled acreage or from existing wells where a relatively
major expenditure is required. |
|
|
| * |
This definition is an abbreviated version of the complete
definition as defined by SEC in Rule 4-10(a) of
Regulation S-X.
See www.sec.gov/divisions/corpfin/forms/regsx.htm#gas for the
complete definition. |
16
3,492,595 shares
Denbury Resources Inc.
Common stock
Prospectus
JPMorgan
April 20, 2005
