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

24 Denbury Resources Inc. 2009 Annual ReportDecember 31,2009 2008 2007Estimated Proved Reserves:Oil (MBbls) 192,879 179,126 134,978Natural gas (MMcf) 87,975 427,955 358,608Oil equivalent (MBOE) 207,542 250,452 194,746Reserve Volumes:Proved developed producing:Oil (MBbls) 93,833 73,347 73,457Natural gas (MMcf) 67,952 270,824 216,455Oil equivalent (MBOE) 105,158 118,484 109,533Proved developed non-producing:Oil (MBbls) 22,359 23,399 23,549Natural gas (MMcf) 1,561 27,290 9,816Oil equivalent (MBOE) 22,619 27,947 25,185Proved undeveloped: (1)Oil (MBbls) 76,687 82,380 37,972Natural gas (MMcf) 18,462 129,841 132,337Oil equivalent (MBOE) 79,764 104,020 60,028Percentage of Total MBOE:Proved producing 51% 47% 56%Proved non-producing 11% 11% 13%Proved undeveloped 38% 42% 31%Representative Oil and Natural Gas Prices: (2)Oil – NYMEX $ 61.18 $ 44.60 $ 95.98Natural gas – Henry Hub 3.87 5.71 6.80Present Values (thousands): (3)Discounted estimated future net cash flow beforeincome taxes (“PV-10 Value”) (4) $ 3,075,459 $ 1,926,855 $ 5,385,123Standardized measure of discounted estimatedfuture net cash flow after income taxes 2,457,385 1,415,498 3,539,617(1) Certain of our proved undeveloped reserves related to our tertiary properties have a development period that extends beyond 5 years. In each of these tertiaryproperties, the majority of the spending on facilities has been completed and a response to CO 2 injections has occurred. Therefore, these tertiary oil reserves havebeen included as proved undeveloped, and will be further classified as proved developed as the remaining field development is completed. In addition, at December31, 2009, a total of approximately 3.6 MMBOE of tertiary reserves at Brookhaven Field and McComb Field have been held as proved undeveloped for a period greaterthan five years. It is expected that these reserves will become proved developed reserves during the next several years as the remaining tertiary development atthese two fields is completed.(2) The reference prices for 2009 were based on the average first-day-of-the-month prices for each month during 2009. The reference prices for 2008 and 2007 werebased on respective year-end prices. For all the periods presented, these representative prices were adjusted for differentials by field to arrive at the appropriatenet price Denbury receives.(3) Determined based on the average first day of the month prices for each month during 2009 and year-end unescalated prices for 2008 and 2007, in all cases adjustedto prices received by field in accordance with the guidelines of the FASC.(4) PV-10 Value is a non-GAAP measure and is different from the Standardized Measure in that PV-10 Value is a pre-tax number and the Standardized Measure is anafter-tax number. The information used to calculate PV-10 Value is derived directly from data determined in accordance with FASC topic 932. The difference betweenthese two amounts, the discounted estimated future income tax (in thousands) was $618,074 at December 31, 2009, $511,357 at December 31, 2008 and $1,845,506 atDecember 31, 2007. We believe that PV-10 Value is a useful supplemental disclosure to the Standardized Measure because the Standardized Measure can beimpacted by a company’s unique tax situation, and it is not practical to calculate the Standardized Measure on a property by property basis. Because of this, PV-10Value is a widely used measure within the industry and is commonly used by securities analysts, banks and credit rating agencies to evaluate the estimated futurenet cash flows from proved reserves on a comparative basis across companies or specific properties. PV-10 Value is commonly used by us and others in our industryto evaluate properties that are bought and sold and to assess the potential return on investment in our oil and gas properties. PV-10 Value is not a measure offinancial or operating performance under GAAP, nor should it be considered in isolation or as a substitute for the Standardized Measure. Our PV-10 Value and theStandardized Measure do not purport to represent the fair value of our oil and natural gas reserves. See Note 16 to our Consolidated Financial Statements foradditional disclosures about the Standardized Measure.There are numerous uncertainties inherent in estimating quantities of proved oil and natural gas reserves and theirvalues, including many factors beyond our control. See “Item 1A. Risk Factors – Estimating our reserves, productionand future net cash flow is difficult to do with any certainty.” See also Note 16, “Supplemental Oil and Natural GasDisclosures,” to the Consolidated Financial Statements.Form 10-K Part I