Interactive 2009 Annual Report (PDF 7.56 MB) - Denbury Resources ...

Denbury Resources Inc. 2009 Annual Report 107Year Ended December 31, 2007Denbury DenburyResources Inc. Onshore, LLC Denbury(Parent and (Issuer and Guarantor Resources Inc.In thousands Co-Obligor) Co-Obligor) Subsidiaries Eliminations ConsolidatedCash flow from operations $ 33 $ 570,098 $ 83 $ — $ 570,214Cash flow from investing activities (183,204) (762,513) — 183,204 (762,513)Cash flow from financing activities 183,204 198,533 — (183,204) 198,533Net increase in cash 33 6,118 83 — 6,234Cash, beginning of period 1 52,225 1,647 — 53,873Cash, end of period $ 34 $ 58,343 $ 1,730 $ — $ 60,107Note 15. Subsequent Events (Unaudited)Encore MergerOn October 31, 2009, the Company entered into a definitive merger agreement providing for Encore AcquisitionCompany (“Encore”) to merge with and into the Company. Under the terms of the definitive agreement, Encorestockholders will receive $50.00 per share for each share of Encore common stock, comprised of $15.00 in cash and$35.00 in Denbury common stock subject to both an election feature and a collar mechanism on the stock portion of theconsideration. Consummation of the merger is subject to shareholder approval as well as other customary conditions.Denbury and Encore each scheduled March 9, 2010 as the date for their respective upcoming special stockholdermeetings, at which time shareholders will vote on, among other items, the merger of Encore with and into Denbury.New Senior Subordinated NotesOn February 10, 2010, Denbury issued $1.0 billion of 8.25% Senior Subordinated Notes due 2020 (“2020 Notes”).The 2020 Notes, which carry a coupon rate of 8.25%, were sold at par. The net proceeds of approximately $980 millionwere deposited into escrow. If the merger with Encore does not occur on or prior to May 31, 2010, or if the mergeragreement is terminated at any time, we will be required to redeem the 8.25% Senior Subordinated Notes at 100% ofpar, plus accrued and unpaid interest. After the merger, to the extent that fewer than $600.0 million principal amountof Encore senior subordinated notes are tendered for repurchase by August 1, 2010, we will be required to redeem anamount of the 2020 Notes equal to such shortfall.The 2020 Notes mature on February 15, 2020, and interest is payable on February 15 and August 15 of each year,beginning August 15, 2010. We may redeem the 2020 Notes in whole or in part at our option beginning February 15,2015, at the following redemption prices: 104.125% after February 15, 2015, 102.75% after February 15, 2016,101.375% after February 15, 2017, and 100% after February 15, 2018. Prior to February 15, 2013, we may at our optionredeem up to an aggregate of 35% of the principal amount of the 2020 Notes at a price of 108.25% with the proceedsof certain equity offerings. In addition, at any time prior to February 15, 2015, we may redeem 100% of the principalamount of the 2020 Notes at a price equal to 100% of the principal amount plus a “make whole” premium and accruedand unpaid interest. The indenture contains certain restrictions on our ability to incur additional debt, pay dividends onour common stock, make investments, create liens on our assets, engage in transactions with our affiliates, transferor sell assets, consolidate or merge, or sell substantially all of our assets. The 2020 Notes are not subject to any sinkingfund requirements. All of our significant subsidiaries fully and unconditionally guarantee this debt.Newly Committed Credit FacilityOn October 31, 2009, Denbury received a financing commitment from JP Morgan, subject to customary conditions,to underwrite a new senior secured revolving credit facility. The newly committed credit facility, together with theproceeds from the 8.25% Senior Subordinated Notes, will be used to fund a portion of the cash consideration for themerger with Encore, repay amounts outstanding under Denbury’s existing $750 million revolving credit facility,potentially retire and replace a portion of Encore’s outstanding senior subordinated notes and to pay other mergerrelatedexpenses. The aggregate commitment of the senior secured lenders is $1.6 billion and the term of the newlycommitted credit facility is four years.Notes to Consolidated Financial StatementsForm 10-K Part II