Denbury Inc. (NYSE: DEN) (“Denbury” or the “Company”) today provided results for the third quarter of 2021.

FINANCIAL AND OPERATING HIGHLIGHTS

• Progressed installation of the 105-mile extension of the Greencore CO₂ Pipeline to the Cedar Creek Anticline (“CCA”) EOR project ahead of plan, with completion expected before the end of November 2021.
• Completed the Oyster Bayou A1 CO₂ development expansion with initial production commencing late in the third quarter.
• Reduced total debt by $52 million during the third quarter, exiting the quarter with no outstanding long-term debt and liquidity of $565 million.
• Issued Denbury’s 2021 Corporate Responsibility Report, highlighting the Company’s net negative combined Scope 1 and 2 CO₂ emissions for 2019 and 2020 and its target to be fully negative through Scope 3 within this decade.

RECENT CCUS HIGHLIGHTS

• Executed a term sheet with Mitsubishi Corporation for the transport and storage of CO₂ captured from Mitsubishi’s proposed ammonia project along the U.S. Gulf Coast. The agreement covers a 20-year period, and Mitsubishi’s project is targeted to produce associated CO₂ emissions of approximately 1.8 million metric tons per year (“MMTPA”), beginning in the latter half of the decade.
• Commenced a joint evaluation with Mitsui E&P USA LLC of potential opportunities across the U.S. Gulf Coast to develop carbon-negative oil assets utilizing anthropogenic CO₂. As part of the evaluation, the parties seek to jointly pursue CO₂ offtake opportunities from Mitsui’s potential projects along the U.S. Gulf Coast.
• Announced joint development of a Texas Gulf Coast sequestration site with Gulf Coast Midstream Partners. Located in close proximity to Denbury’s existing CO₂ Green Pipeline, the location has the potential to store up to 400 million metric tons of CO₂ at a rate of up to 9 MMTPA. The EPA Class VI permitting process has been initiated and sequestration is estimated to be available by early 2025.

EXECUTIVE COMMENT

Chris Kendall, the Company’s President and CEO, commented, “Denbury’s strong operational execution and continued safety focus, combined with support from higher oil prices, delivered exceptional results for the third quarter. We advanced both near and long-term resource development projects, and I am particularly proud that the CCA CO₂ development, the largest tertiary project in Denbury’s history, is ahead of schedule with zero recordable safety incidents incurred to date.”

“The third quarter was also a significant period for our CCUS business, as the initial term sheets we executed represent the first steps towards solidifying this substantial growth opportunity for our Company. We have advanced negotiations for additional CO₂ transport and storage arrangements, and I remain confident in further announcements by the end of 2021. Our successes in 2021 have set the stage for a very exciting future, as we execute on our strategy to grow the CCUS opportunity while maintaining a strong EOR-focused production business.”

FINANCIAL AND OPERATING RESULTS

Total revenues and other income in the third quarter of 2021 were $344 million, a 14% increase over second quarter 2021 levels, supported predominantly by higher oil price realizations and also slightly higher oil volumes. Denbury’s third quarter 2021 average pre-hedge realized oil price was $68.88 per barrel (“Bbl”), which was $1.75 per Bbl below NYMEX WTI oil prices, consistent with the Company’s guidance. As compared to the second quarter of 2021, the Company’s average oil differential widened from the $1.32 per Bbl below NYMEX WTI last quarter, primarily as a result of Gulf Coast crudes in comparison to WTI.

Denbury’s oil and natural gas sales volumes averaged 49,682 barrels of oil equivalent per day (“BOE/d”) during the third quarter of 2021. In comparison to the second quarter 2021, third quarter sales volumes were up 1% primarily attributable to the Wind River Basin properties, Oyster Bayou performance, and non-tertiary sales at Conroe Field. Oil represented 97% of the Company’s third quarter 2021 volumes, and approximately 25% of the Company’s oil was attributable to the injection of industrial-sourced CO₂ in its EOR operations, resulting in carbon-negative or blue oil.

Lease operating expenses (“LOE”) in the third quarter of 2021 totaled $117 million, or $25.50 per BOE, in line with expectations. On a per BOE basis, LOE expense increased approximately 3% from the second quarter of 2021 due in part to higher power and fuel, contract labor, and workover costs.

Transportation and marketing expenses for the quarter totaled $6 million, an improvement of $3 million from the second quarter of 2021, primarily as a result of a change in transportation and marketing arrangements for certain of the Company’s Rocky Mountain region oil volumes.

General and administrative expenses were $15 million in the third quarter of 2021, in line with expectations and consistent with the second quarter of 2021. Depletion, depreciation, and amortization (“DD&A”) was also in line with expectations at $38 million, or $8.25 per BOE for the quarter.

Commodity derivatives expense totaled $42 million in the third quarter of 2021. Cash payments on hedges that settled in the third quarter of 2021 totaled $78 million, offset by a $36 million noncash gain representing mark-to-market changes in the value of the Company’s hedging portfolio. No new hedges were added by the Company during the third quarter of 2021.

Other income for the third quarter of 2021 included a $7 million gain related to the sale of non-producing Houston-area surface acreage outside of the Company’s planned development area.

The Company’s effective tax rate for the third quarter of 2021 was negligible, as virtually all of the tax expense/benefit generated is currently fully offset by a change in valuation allowance on its federal and state deferred tax assets.

CAPITAL EXPENDITURES

Third quarter 2021 development capital expenditures totaled nearly $100 million, bringing year to-date capital expenditures to a total of $174 million. Approximately 60% of the third quarter total was dedicated to the CCA tertiary project, including the Greencore CO₂ Pipeline extension, the infield CCA distribution system installation, and field work to begin converting water injection wells to CO₂ injection. The Greencore CO₂ Pipeline extension project is running ahead of schedule, and completion is now anticipated before the end of November 2021. Initial CO₂ injection into CCA is expected in the first quarter of 2022, with production response estimated to commence in the second half of 2023.

Also during the quarter, the Company completed drilling and injection work at the Oyster Bayou A1 CO₂ development expansion in the Gulf Coast. In addition, the Company drilled a horizontal infield development well at Coral Creek in the Cedar Creek Anticline area of the Rocky Mountain region. Production response from these projects commenced late in the third quarter of 2021.

GUIDANCE

Development capital expenditures for the fourth quarter of the year are expected between $75 million and $95 million, with the full year unchanged at a range of $250 million to $270 million. Planned fourth quarter capital expenditures include the completion of the Greencore CO₂ Pipeline extension and CCA CO₂ infield distribution system, as well as additional field development activities. For the fourth quarter of 2021, LOE per BOE is anticipated to be consistent with the unit rate in the third quarter and sales volumes are anticipated to average nearly 50,000 BOE/d.

Additional fourth quarter guidance details are available in the Company’s supplemental third quarter 2021 earnings presentation, which is available in the Investor Relations section of the Company’s website, www.denbury.com.

CONFERENCE CALL AND WEBCAST INFORMATION

Denbury will host a conference call and webcast to review and discuss its results and outlook today, Thursday, November 4, at 11:00 a.m. Central Time. Additionally, Denbury will post presentation materials on its website before market open today. The presentation webcast will be available, both live and for replay, on the Investor Relations page of the Company’s website at www.denbury.com. Individuals who would like to participate in the conference call should dial the following numbers shortly before the scheduled start time: 877.705.6003 or 201.493.6725 with conference number 13696090.

Denbury is an independent energy company with operations and assets focused on Carbon Capture, Use and Storage (CCUS) and Enhanced Oil Recovery (EOR) in the Gulf Coast and Rocky Mountain regions. For over two decades, the Company has maintained a unique strategic focus on utilizing CO₂ in its EOR operations and since 2012 has also been active in CCUS through the injection of captured industrial-sourced CO₂. The Company currently injects over three million tons of captured industrial-sourced CO₂ annually, and its objective is to fully offset its Scope 1, 2, and 3 CO₂ emissions within this decade, primarily through increasing the amount of captured industrial-sourced CO₂ used in its operations. For more information about Denbury, visit www.denbury.com.

This press release, other than historical information, contains forward-looking statements that involve risks and uncertainties including estimated 2021 production, capital expenditures, and costs, the timing of completion of the Greencore pipeline extension to CCA, and results of ongoing negotiations of CCUS transport and storage arrangements, and other risks and uncertainties detailed in the Company’s filings with the Securities and Exchange Commission, including Denbury’s most recent report on Form 10-K. These risks and uncertainties are incorporated by this reference as though fully set forth herein. These statements are based on financial and market, engineering, geological and operating assumptions that management believes are reasonable based on currently available information; however, management’s assumptions and the Company’s future performance are both subject to a wide range of risks, and there is no assurance that these goals and projections can or will be met. Actual results may vary materially. In addition, any forward-looking statements represent the Company’s estimates only as of today and should not be relied upon as representing its estimates as of any future date. Denbury assumes no obligation to update its forward-looking statements.

FINANCIAL AND STATISTICAL DATA TABLES AND RECONCILIATION SCHEDULES

References below to “Successor” refer to the new Denbury reporting entity after the Company’s emergence from bankruptcy on September 18, 2020, and references to “Predecessor” refer to the Denbury entity prior to emergence from bankruptcy. The following tables include selected unaudited financial and operational information for the Successor three and nine-month periods ended September 30, 2021, Successor period from September 19, 2020 through September 30, 2020, Predecessor periods from July 1, 2020 through September 18, 2020 and January 1, 2020 through September 18, 2020, and certain Combined information for the three and nine months ended September 30, 2020, in order to assist investors in understanding the comparability of the Company’s financial and operational results for the applicable periods. All sales volumes and dollars are expressed on a net revenue interest basis with gas volumes converted to equivalent barrels at 6:1.

DENBURY INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

The following information is based on GAAP reporting earnings (along with additional required disclosures) included or to be included in the Company’s periodic reports:

DENBURY INC.

OPERATING HIGHLIGHTS (UNAUDITED)

All sales volumes and dollars are expressed on a net revenue interest basis with gas volumes converted to equivalent barrels at 6:1.

DENBURY INC.

SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES (UNAUDITED)

Reconciliation of net income (loss) (GAAP measure) to adjusted net income (non-GAAP measure)

Adjusted net income is a non-GAAP measure provided as a supplement to present an alternative net income (loss) measure which excludes expense and income items (and their related tax effects) not directly related to the Company’s ongoing operations. Management believes that adjusted net income may be helpful to investors by eliminating the impact of noncash and/or special or unusual items not indicative of the Company’s performance from period to period, and is widely used by the investment community, while also being used by management, in evaluating the comparability of the Company’s ongoing operational results and trends. Adjusted net income should not be considered in isolation, as a substitute for, or more meaningful than, net income (loss) or any other measure reported in accordance with GAAP, but rather to provide additional information useful in evaluating the Company’s operational trends and performance.

DENBURY INC.

SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES (UNAUDITED)

Reconciliation of net income (loss) (GAAP measure) to Adjusted EBITDAX (non-GAAP measure)

Adjusted EBITDAX is a non-GAAP measure which management uses and is calculated based upon (but not identical to) a financial covenant related to “Consolidated EBITDAX” in the Company’s senior secured bank credit facility, which excludes certain items that are included in net income (loss), the most directly comparable GAAP financial measure. Items excluded include interest, income taxes, depletion, depreciation, and amortization, and items that the Company believes affect the comparability of operating results such as items whose timing and/or amount cannot be reasonably estimated or are nonrecurring. Management believes Adjusted EBITDAX may be helpful to investors in order to assess the Company’s operating performance as compared to that of other companies in the industry, without regard to financing methods, capital structure or historical costs basis. It is also commonly used by third parties to assess leverage and the Company’s ability to incur and service debt and fund capital expenditures. Adjusted EBITDAX should not be considered in isolation, as a substitute for, or more meaningful than, net income (loss), cash flow from operations, or any other measure reported in accordance with GAAP. The Company’s Adjusted EBITDAX may not be comparable to similarly titled measures of another company because all companies may not calculate Adjusted EBITDAX, EBITDAX or EBITDA in the same manner. The following table presents a reconciliation of the Company’s net income (loss) to Adjusted EBITDAX.