Denbury Resources Inc. (NYSE:DNR) announced record quarterly Bakken sales volumes of 15,114 barrels of oil equivalent per day, a 164 percent increase from last year’s first quarter and a 29 percent increase from fourth quarter levels, the company said May 3 in a news release prior to a first quarter webcast and conference call.
Denbury, which focuses predominantly on CO2 enhanced oil recovery in the Gulf and Rockies with the exception of its Bakken properties, credited its rapid growth in Bakken production to its active drilling program in the region.
Company-wide first quarter production averaged 71,532 boe per day, up 12 percent from 63,604 boe per day produced in the prior year period, and up 6 percent from the 67,234 boe a day produced in the fourth quarter of last year.
In 2012, Denbury estimated Bakken production would be between 14,350 and 16,350 boe per day.
The Plano, Texas-based independent’s capital expenditure budget for this year was increased by $150 million to $1.5 billion, bumping its spending in the Bakken from $400 million to $480 million, as Denbury now plans to keep a fourth operated rig running in the second half of the year.
Average oil sales price of $102.52
Denbury said it realized an average oil sales price of $102.52 per barrel in the first three months of the year, down from $103.08 per barrel in fourth quarter 2011, as Denbury’s average realized oil price differential — the average price at which the company sold its production compared to NYMEX price — moved to a negative 37 cents per barrel in first quarter, compared to a positive $9.14 per barrel in the last three months of 2011.
Denbury’s oil price differential improved only slightly from the prior year’s first quarter (59 cents) because improvements in the Light Louisiana Sweet, or LLS, index premium were partly offset by widening Bakken differentials.
For the first quarter, the LLS index differential averaged a positive $12.55 per barrel on a trade-month basis, compared to a positive $9.28 in last year’s first quarter.
In the Bakken, differentials averaged $16.96 per barrel below NYMEX in the first quarter, down from $11.55 per barrel in the same quarter last year.
By March 31, “both differentials had improved, with the LLS to NYMEX premium increasing and Bakken to NYMEX discount shrinking,” Denbury said.
During first quarter, the company sold approximately 40 percent of its crude oil at prices based on the LLS index price, approximately 20 percent at prices tied to a combination of the LLS index price and other indexes, and the balance at prices based on various other indexes tied to NYMEX prices, primarily in the Rocky Mountain region.
Bakken reserves up 4 million barrels
The company added estimated proved reserves of approximately 18 million boe, including about 14 million boe at Oyster Bayou field in southeast Texas, based on its response to CO2 injections, and about 4 million boe in the Bakken in North Dakota.
“We are off to a strong start in 2012 as production from our tertiary oil and Bakken operations both reached new record levels in the first quarter. We expect continued tertiary production growth in 2012, while the rate of our Bakken production growth is expected to slow as we reduce our operated rig count in the area to four by mid-year from a peak of seven in 2011,” said Phil Rykhoek, Denbury’s president and CEO.
“As a result of our strong start to the year, we expect that our tertiary and total production will both be in the upper half of our estimated 2012 production ranges. Our quarterly revenue reached a new record level in the first quarter, increasing approximately 5 percent from fourth quarter 2011 levels, as higher oil production and NYMEX oil prices offset the impact of lower oil price differentials.”
In regard to Denbury’s increased capex, he said, “The additional spending will have an impact on our Bakken production late in 2012 and early 2013, while the higher tertiary spending will benefit 2013 production.”
$161 million earned in first quarter
Denbury announced adjusted net income of $161 million for the first quarter, or 41 cents per diluted share, on record quarterly revenues of $640 million.
This compares to $104 million of adjusted net income, or 26 cents per diluted share, on revenues of $511 million for the prior year’s first quarter, and $175 million, or 45 cents per diluted share, on revenues of $612 million for fourth quarter 2011.
Higher finding costs in Bakken
In first quarter, Denbury’s depletion, depreciation and amortization of oil and gas properties was $16.71 per boe, as compared to $14.61 per boe in 2011’s first quarter.
The increase was “primarily due to higher finding costs per barrel associated with the company’s Bakken assets and upward revisions in estimated future development costs primarily in the Bakken,” Denbury said.
