DENBURY RESOURCES INC.

DENBURY RESOURCES INC.

February 24, 2005 08:30 ET

Denbury Resources Announces 2004 Results; Tertiary Oil Production Hits New High


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: DENBURY RESOURCES INC.

NYSE SYMBOL: DNR

FEBRUARY 24, 2005 - 08:30 ET

Denbury Resources Announces 2004 Results; Tertiary Oil
Production Hits New High

DALLAS--(CCNMatthews - Feb 24, 2005) -

Denbury Resources Inc. (NYSE:DNR) ("Denbury" or the "Company") today
announced its fourth quarter and 2004 financial and operating results.
The Company posted earnings for the full year 2004 of $82.4 million or
$1.50 per share, a 46% increase over 2003 net income of $56.6 million or
$1.05 per share, the increase primarily due to higher commodity prices.
Fourth quarter 2004 net income was $22.5 million, or $0.41 per share, a
48% increase over fourth quarter 2003 net income of $15.2 million or
$0.28 per share.

Adjusted cash flow from operations (cash flow from operations before
changes in assets and liabilities, a non-GAAP measure) for the fourth
quarter of 2004 was $48.6 million, slightly higher than fourth quarter
2003 adjusted cash flow from operations of $47.8 million. Net cash flow
provided by operations, the GAAP measure, totaled $17.7 million during
the fourth quarter of 2004, as compared to $51.8 million during the
fourth quarter of 2003. The difference between fourth quarter 2004
adjusted cash flow and cash flow from operations is due to the
significant reduction of accounts payables and accrued liabilities
during the quarter. (Please see the accompanying schedules for a
reconciliation of net cash flow provided by operations, as defined by
generally accepted accounting principles (GAAP), which is the GAAP
measure, as opposed to adjusted cash flow from operations, which is the
non-GAAP measure).

Review of Financial Results

Denbury's fourth quarter 2004 production averaged 19,644 Bbls/d and 56.0
MMcf/d, or 28,977 BOE/d, a 4% increase over third quarter 2004 levels
and a 4% increase over fourth quarter 2003 production levels, all after
adjusting for the sale of offshore properties. Production from the
Company's tertiary recovery operations set another quarterly record in
the fourth quarter of 2004, averaging 7,242 BOE/d, a 4% increase over
third quarter 2004 levels, and a 30% increase over the fourth quarter of
2003 average of 5,579 BOE/d. During the month of January 2005,
production from these tertiary operations continued to increase,
averaging over 8,300 BOE/d (approximately 27% of the Company's total
production). Production from the Barnett Shale averaged 5.8 MMcf/d (962
BOE/d) during the fourth quarter of 2004, an almost threefold increase
over the 1.6 MMcf/d (268 BOE/d) average production during the fourth
quarter of 2003. Production during the fourth quarter of 2004 was 68%
oil as compared to 55% oil for the comparable quarter of 2003, primarily
as a result of the sale of Denbury's offshore properties in July 2004.

Despite an overall lower production level as a result of this offshore
sale, total revenues in the fourth quarter of 2004 increased $7.7
million (9%), as compared to revenues in the fourth quarter of 2003,
primarily as a result of higher commodity prices, partially offset by
higher hedging payments and lower production levels. In the fourth
quarter of 2004, NYMEX oil prices averaged approximately $48.34 per Bbl,
and natural gas NYMEX prices averaged approximately $7.25 per Mcf, as
compared to NYMEX averages of approximately $31.20 per Bbl and $5.40 per
Mcf in the fourth quarter of 2003. Denbury's weighted average price
received per BOE was $13.82 higher per BOE (excluding hedges) in the
fourth quarter of 2004 than in the comparable period of 2003. However,
the Company paid $8.31 more per BOE on hedges during the 2004 quarterly
period than payments a year earlier, reducing the net realized per BOE
price increase between the respective fourth quarters to $5.51 per BOE.

Oil price differentials (Denbury's net oil price received as compared to
NYMEX prices) deteriorated during 2004, particularly in the last
quarter, as the price of heavy, sour crude produced primarily in the
Company's East Mississippi properties dropped significantly relative to
NYMEX prices. The Company's average NYMEX differential increased from
$3.54 per Bbl during the fourth quarter of 2003 to $6.48 per Bbl during
the fourth quarter of 2004, a $2.94 per Bbl decrease in the price the
Company received relative to NYMEX prices. For the full year periods,
the average oil price differential was $3.60 per Bbl during 2003 as
compared to $4.91 per Bbl during 2004.

Overall, expenses were lower in the fourth quarter of 2004 than in the
prior year's comparable quarter. Lease operating expenses were $1.3
million less on a gross basis as a result of the offshore sale, but
increased from $6.78 per BOE in the fourth quarter of 2003 to $7.60 per
BOE in the fourth quarter of 2004. The primary reasons for the higher
cost per BOE were continued expansion of CO2 tertiary projects, which
typically have a higher operating cost per BOE than conventional oil
operations, higher lease fuel costs to inject and recycle CO2 due to
high natural gas prices, and the cost of leased recycling facilities.
Production taxes and marketing expenses also increased primarily as a
result of the higher commodity prices.

General and administrative expenses increased $1.8 million (38%) between
the fourth quarter of 2003 and 2004, averaging $2.38 per BOE in the
fourth quarter of 2004, up from $1.44 per BOE in the comparable quarter
of 2003. The biggest portion of the increase relates to higher bonus
levels for employees in 2004 as a result of the Company's strong
performance during the year, non-cash amortization of the deferred
compensation related to restricted stock issued to the officers and
directors during the last half of 2004, increased litigation expenses,
and incremental costs related to the Sarbanes-Oxley Act.

Interest expense decreased 12% in the fourth quarter of 2004 as compared
to the fourth quarter 2003, due to lower overall debt levels following
the Company's $50 million debt reduction during 2003 and $75 million
debt reduction during 2004. At Dec. 31, 2004, the Company had
approximately $140 million of net debt (long-term debt less working
capital), one of the lowest leverage positions in the Company's history.

Depletion, depreciation and amortization ("DD&A") expenses decreased
$4.2 million (16%) in the fourth quarter of 2004 as compared to DD&A in
the prior year fourth quarter. The DD&A rate in the fourth quarter of
2004 was $7.98 per BOE, about the same as the $8.00 per BOE in the prior
year fourth quarter. DD&A expense on a per BOE basis decreased due to
the sale of the Company's offshore properties in July 2004, which was
partially offset by increasing estimates of future development costs due
to rising industry costs.

During 2004, the Company paid out $84.6 million on its hedges and
incurred a net expense of $1.3 million primarily related to hedging
transactions surrounding the Company's sale of its offshore properties.
The total of $85.9 million is reflected in the income statement as $70.5
million of payments on the Company's effective hedges and $15.4 million
of expenses on the Company's ineffective hedges. This compares to total
payments during 2003 of $62.2 million and $3.6 million of other non-cash
income relating to hedging. The hedge payments are expected to be
substantially less in 2005 as most of the Company's existing hedges are
price floors, which means the Company will retain any commodity price
increases. Effective Jan. 1, 2005, the Company plans to no longer use
hedge accounting, which means that any changes in the fair value (i.e.
mark-to-market) of the Company's derivative contracts will be charged to
earnings each quarter rather than being charged to other comprehensive
income.

2005 Outlook

Denbury's 2005 development and exploration budget (excluding
acquisitions) is currently set at $305 million, including $45 million to
build the Company's CO2 pipeline to East Mississippi which the Company
may finance on a long-term basis upon completion. Over 60% of the
combined 2005 capital budget is related to tertiary operations, as
compared to approximately 43% of 2004 capital expenditures. The Company
has adjusted its 2005 forecasted average production to approximately
31,000 BOE/d, an increase of approximately 500 BOE/d to adjust for the
anticipated production from its High Island A-6 well, a well excluded
from the offshore sale package that should commence production late in
the first quarter. The adjusted production target represents an 11%
increase in production over the Company's 2004 production levels,
excluding 2004 offshore production. Production from the Company's
tertiary operations is expected to increase from a 2004 average of 6,784
BOE/d to a projected 2005 average of almost 10,000 BOE/d, a 47%
increase.

Gareth Roberts, Chief Executive Officer, said: "2004 was one of our best
years ever. During the year we (i) sold our offshore division for a good
price, which also allowed us to further reduce debt, (ii) added
approximately 1 Tcf of additional proven CO2 reserves, (iii) initiated
Phase II (East Mississippi phase) of our CO2 program by commencing the
construction of a CO2 pipeline to East Mississippi, (iv) accelerated our
Phase I (Southwest Mississippi phase) CO2 program, (v) drilled five
successful horizontal wells in the Barnett Shale with plans to
accelerate this program during 2005, (vi) saw most of our
out-of-the-money hedges expire, and (vii) completed a dramatic
improvement in our float over the last two years with the final sale of
stock by our former largest shareholder, the Texas Pacific Group. All of
these factors, combined with high commodity prices, helped our stock
reach new highs during 2004.

"Our decision to focus on tertiary operations continues to be a winning
strategy and the backbone of our Company. Tertiary oil production
continues to grow and we added almost 19 million barrels of proved
tertiary oil reserves at Brookhaven Field this past year, and we expect
our growth in tertiary oil production and reserves to continue. We are
enthusiastic about the inventory of assets we have compiled, while
continuing to look for additional tertiary opportunities for a future
Phase III and IV program. With the proceeds from the offshore sale, we
have reduced our debt to minimal levels and historically low leverage
ratios, giving us the ultimate financial flexibility for the future. We
expect to grow our tertiary oil production almost 50% during 2005 and
our total corporate production by approximately 11%, all from internal
organic growth. We are bullish on oil prices even though we still use
much lower oil prices for our internal economic evaluations. With our
significant inventory of oil projects, we believe we have ideally
positioned Denbury as any price increase will enhance the value of both
our current proved reserves and our future potential reserves."

Conference Call

The public is invited to listen to the Company's conference call set for
today, Feb. 24, 2005, at 10:00 a.m. CST. The call will be broadcast live
over the Internet at our Web site: www.denbury.com. If you are unable to
participate during the live broadcast, the call will be archived on our
Web site for approximately 30 days and will also be available for
playback for one month after the call by dialing 888-203-1112 or
719-457-0820.

Annual Meeting

The Company today announced its 2004 Annual Meeting of Shareholders will
be held on Wednesday, May 11 at 3:00 p.m., local time, at the offices of
the Company located at 5100 Tennyson Parkway, Plano, Texas. The record
date for determination of shareholders entitled to vote at the annual
meeting will be the close of business on March 31, 2005.

Financial and Statistical Data Tables

Following are financial highlights for the comparative fourth quarters
and annual periods ended Dec. 31, 2004 and Dec. 31, 2003. All production
volumes and dollars are expressed on a net revenue interest basis with
gas volumes converted to equivalent barrels at 6:1.



FOURTH QUARTER FINANCIAL HIGHLIGHTS
(Amounts in thousands of U.S. dollars, except per share and unit data)



Three Months Ended
December 31,
------------------ Percentage
2004 2003 Change
--------- -------- -------------------
Revenues:
Oil sales 75,645 48,444 56%
Gas sales 36,757 41,747 -12%
CO2 sales and transportation
fees 1,654 1,316 26%
Loss on effective hedge
contracts (24,012) (9,138) greater than 100%
Interest and other income 830 840 -1%
--------- --------
Total revenues 90,874 83,209 9%
--------- --------

Expenses:
Lease operating expenses 20,268 21,589 -6%
Production taxes and marketing
expense 5,256 3,695 42%
CO2 operating costs 730 257 greater than 100%
General and administrative 6,338 4,577 38%
Interest 4,551 5,155 -12%
Depletion, depreciation and
accretion 21,262 25,459 -16%
(Gain) loss on ineffective
hedge contracts (1,282) 124 greater than 100%
--------- --------
Total expenses 57,123 60,856 -6%
--------- --------

Income before income taxes 33,751 22,353 51%

Income tax provision (benefit)
Current income taxes 884 (214) greater than 100%
Deferred income taxes 10,386 7,357 41%
--------- --------

NET INCOME 22,481 15,210 48%
========= ========

Net income per common share:
Basic 0.41 0.28 46%
Diluted 0.39 0.27 44%

Weighted average common shares
outstanding:
Basic 55,259 54,051 2%
Diluted 58,076 55,714 4%

Production (daily - net of
royalties)
Oil (barrels) 19,644 19,020 3%
Gas (mcf) 56,002 93,424 -40%
BOE (6:1) 28,977 34,590 -16%

Unit sales price (including
hedges)
Oil (per barrel) 29.63 24.85 19%
Gas (per mcf) 5.64 4.37 29%

Unit sales price (excluding
hedges)
Oil (per barrel) 41.86 27.69 51%
Gas (per mcf) 7.13 4.86 47%


Three Months Ended
December 31,
------------------ Percentage
2004 2003 Change
--------- -------- -----------------

Reconciliation of Non-GAAP
Financial Measure to GAAP (1)
Adjusted cash flow from
operations (non-GAAP measure) 48,632 47,836 2%
Net change in assets and
liabilities relating to
operations (30,951) 3,939 greater than 100%
--------- --------
Cash flow from operations (GAAP
measure) 17,681 51,775 -66%
========= ========

Oil & gas capital investments 48,464 38,860 25%
CO2 capital investments 7,299 6,665 10%
Proceeds from sales of oil and gas
properties 9,296 82 greater than 100%

BOE data (6:1)
Revenue 42.16 28.34 49%
Loss on settlements of derivative
contracts (11.18) (2.87) greater than 100%
Lease operating costs (7.60) (6.78) 12%
Production taxes and marketing
expense (1.97) (1.16) 70%
--------- --------
Production netback 21.41 17.53 22%
CO2 operating cash flow 0.35 0.33 6%
General and administrative (2.38) (1.44) 65%
Net cash interest expense (1.28) (1.36) -6%
Current income taxes and other 0.14 (0.03) greater than 100%
Changes in asset and liabilities (11.61) 1.24 greater than 100%
--------- --------
Cash flow from operations 6.63 16.27 -59%
========= ========

(1) See "Non-GAAP Measures" at the end of this report.


TWELVE MONTH FINANCIAL HIGHLIGHTS
(Amounts in thousands of U.S. dollars, except per share and unit data)


Twelve Months Ended
December 31,
---------------------- Percentage
2004 2003 Change
----------- ---------- -----------------
Revenues:
Oil sales 256,843 189,442 36%
Gas sales 187,934 196,021 -4%
CO2 sales and transportation
fees 6,276 8,188 -23%
Loss on effective hedge
contracts (70,469) (62,210) 13%
Interest and other income 2,252 1,829 23%
----------- ----------
Total revenues 382,836 333,270 15%
----------- ----------

Expenses:
Lease operating expenses 87,107 89,439 -3%
Production taxes and
marketing expense 18,737 14,819 26%
CO2 operating costs 1,338 1,710 -22%
General and administrative 21,461 15,189 41%
Interest 19,468 23,201 -16%
Loss on early retirement of
debt -- 17,629 greater than 100%
Depletion, depreciation and
accretion 97,527 94,708 3%
(Gain) loss on ineffective
hedge contracts 15,358 (3,578) greater than 100%
----------- ----------
Total expenses 260,996 253,117 3%
----------- ----------

Income before income taxes 121,840 80,153 52%

Income tax provision (benefit)
Current income taxes 22,929 (91) greater than 100%
Deferred income taxes 16,463 26,303 -37%
----------- ----------

Income before cumulative
effect of change in
accounting principle 82,448 53,941 53%

Cumulative effect of change in
accounting principle, net of
income taxes of $1,600 -- 2,612 greater than 100%

NET INCOME 82,448 56,553 46%
=========== ==========

Net income per common share -
basic:
Income before cumulative
effect of change in
accounting principle 1.50 1.00 50%
Cumulative effect of change
in greater than 100%
accounting principle -- 0.05 greater than 100%
Net income per common share
- basic 1.50 1.05 43%
=========== ==========

Net income per common share -
diluted:
Income before cumulative
effect of change in
accounting principle 1.44 0.97 48%
Cumulative effect of change
in accounting principle -- 0.05 greater than 100%
Net income per common share
- diluted 1.44 1.02 41%
=========== ==========


Twelve Months
Ended
December 31,
----------------- Percentage
2004 2003 Change
-------- -------- -----------------

Weighted average common shares
outstanding:
Basic 54,871 53,881 2%
Diluted 57,301 55,464 3%

Production (daily - net of
royalties)
Oil (barrels) 19,247 18,894 2%
Gas (mcf) 82,224 94,858 -13%
BOE (6:1) 32,951 34,704 -5%

Unit sales price (including hedges)
Oil (per barrel) 27.36 24.52 12%
Gas (per mcf) 5.57 4.45 25%

Unit sales price (excluding hedges)
Oil (per barrel) 36.46 27.47 33%
Gas (per mcf) 6.24 5.66 10%

Reconciliation of Non-GAAP
Financial Measure to GAAP: (1)
Adjusted cash flow from
operations (non-GAAP measure) 200,353 189,802 6%
Net change in assets and
liabilities relating to
operations (31,701) 7,813 greater than 100%
-------- --------
Cash flow from operations (GAAP
measure) 168,652 197,615 -15%
-------- --------

Oil & gas capital investments 178,070 158,444 12%
CO2 capital investments 50,265 22,673 greater than 100%
Proceeds from sales of oil and gas
properties 197,575 29,410 greater than 100%

Cash and cash equivalents 54,889 24,188 greater than 100%
Short-term investments 35,321 -- N/A
Total assets 992,706 982,621 1%
Total long-term debt (excluding
discount) 229,184 300,000 -24%
Total stockholders' equity 541,672 421,202 29%

BOE data (6:1)
Revenue 36.88 30.43 21%
Loss on settlements of derivative
contracts (7.01) (4.91) 43%
Lease operating costs (7.22) (7.06) 2%
Production taxes and marketing
expense (1.55) (1.17) 32%
-------- --------
Production netback 21.10 17.29 22%
CO2 operating cash flow 0.41 0.51 -20%
General and administrative (1.78) (1.20) 48%
Net cash interest expense (1.34) (1.61) -17%
Current income taxes and other (1.78) (0.01) greater than 100%
Changes in asset and liabilities (2.63) 0.62 greater than 100%
-------- --------
Cash flow from operations 13.98 15.60 -10%
======== ========

(1) See "Non-GAAP Measures" at the end of this report.



Non-GAAP Measures

Adjusted cash flow from operations is a non-GAAP measure that represents
cash flow provided by operations before changes in assets and
liabilities, as summarized from the Company's Consolidated Statements of
Cash Flows. Adjusted cash flow from operations measures the cash flow
earned or incurred from operating activities without regard to the
collection or payment of associated receivables or payables. The Company
believes that it is important to consider this measure separately, as it
believes it can often be a better way to discuss changes in operating
trends in its business caused by changes in production, prices,
operating costs and so forth, without regard to whether the earned or
incurred item was collected or paid during that period. For a further
discussion, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Operating Results" in our latest
Form 10-Q or Form 10-K.

Denbury Resources Inc. (www.denbury.com) is a growing independent oil
and gas company. The Company is the largest oil and natural gas operator
in Mississippi, owns the largest reserves of CO2 used for tertiary oil
recovery east of the Mississippi River, and holds key operating acreage
in the onshore Louisiana and Texas Barnett Shale areas. The Company
increases the value of acquired properties in its core areas through a
combination of exploitation drilling and proven engineering extraction
practices.

This press release, other than historical financial information,
contains forward-looking statements that involve risks and uncertainties
including expected reserve quantities and values relating to the
Company's proved reserves, the Company's potential reserves from its
tertiary operations, forecasted production levels relating to the
Company's tertiary operations and overall production levels, estimated
capital expenditures for 2005, and other risks and uncertainties
detailed in the Company's filings with the Securities and Exchange
Commission, including Denbury's most recent reports on Form 10-K and
Form 10-Q. These risks and uncertainties are incorporated by this
reference as though fully set forth herein. These statements are based
on engineering, geological, financial 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 business risks, and
there is no assurance that these goals and projections can or will be
met. Actual results may vary materially.

-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Denbury Resources Inc., Dallas
    Gareth Roberts, 972-673-2000
    or
    Phil Rykhoek, 972-673-2000
    www.denbury.com