Denbury Resources Sets Quarterly Production Record



    Announces Near-Record Second Quarter Earnings

    Announces Officer Changes

    DALLAS, August 2 /CNW/ - Denbury Resources Inc. (NYSE symbol: DNR)
("Denbury" or the "Company") today announced its second quarter 2007 financial
and operating results. Production in the second quarter of 2007 was a Company
record 41,916 BOE/d, a 12% increase over second quarter of 2006 production,
and a 9% increase over first quarter 2007 production levels. The Company also
posted near-record earnings for the quarter of $62.6 million, or $0.52 per
basic common share, as compared to earnings of $44.3 million, or $0.38 per
basic common share, for the second quarter of 2006. The increase in net income
was primarily the result of higher production levels, a non-cash gain on
mark-to-market fair value adjustments relating to the Company's commodity
derivative contracts (as compared to a charge during the second quarter of
2006), and higher overall commodity prices, all of which more than offset
higher expenses. On a six month basis, net income was $79.2 million in the
first half of 2007 as compared to $88.0 million in the first half of 2006, as
the higher production levels in 2007 were more than offset by higher expenses
and overall lower commodity prices than in 2006.

    During the second quarter of 2007, the Company recorded a $13.3 million
non-cash pre-tax mark-to-market gain, primarily related to an increase in the
market value of the Company's natural gas swaps for 2007 because of the
decrease in natural gas price futures between March 31, 2007 and June 30,
2007. In comparison, the Company recorded a $9.3 million non-cash pre-tax
charge to earnings in the second quarter of 2006 related to the oil swaps in
place at that time and the increase in oil prices between those quarter-ends.

    The percentage increase in adjusted cash flow from operations (cash flow
from operations before changes in assets and liabilities, a non-GAAP measure)
for the second quarter of 2007 was not as significant as the percentage
increase in net income, primarily due to non-cash mark-to-market valuation
adjustments. Adjusted cash flow from operations for the second quarter of 2007
was $130.5 million, slightly higher than second quarter 2006 adjusted cash
flow from operations of $128.8 million. Net cash flow provided by operations,
the GAAP measure, totaled $102.3 million during the second quarter of 2007, as
compared to $106.4 million for the same measure during the second quarter of
2006. Adjusted cash flow and cash flow from operations differ in that the
latter measure includes the changes in receivables, accounts payable 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).

    Production

    Production for the quarter was 41,916 BOE/d, a 12% increase over the
second quarter of 2006 average of 37,474 BOE/d and a 9% increase over first
quarter 2007 levels. Oil production from the Company's tertiary operations in
the second quarter of 2007 increased 32% over 2006 second quarter tertiary
production levels to 13,683 BOE/d, and 16% over first quarter 2007 tertiary
production levels. Production from the three new floods in Phase II (Soso,
Eucutta and Martinville) contributed 2,229 BOE/d (approximately two-thirds) of
the increase over the second quarter of 2006 levels, with the balance from all
of our Phase I fields except for Little Creek Field, which is on a gradual
decline.

    Average production from the Barnett Shale in the second quarter of 2007
increased 81% over the prior year's second quarter level to 8,368 BOE/d, up
from 4,621 BOE/d for the second quarter of 2006 and from 6,971 BOE/d in the
first quarter of 2007, due to the Company's successful drilling activity there
over the last year. During 2006, the Company drilled 46 horizontal wells in
the Barnett Shale and in the first half of 2007 drilled and completed 19
additional wells. The Company had four rigs working in the area during most of
the first quarter of 2007, but during the second quarter of 2007 reduced its
rig count in this area to three rigs, a level which the Company plans to
retain for the remainder of 2007.

    Partially offsetting higher production from the Company's tertiary
operations and Barnett Shale was a decline in the Company's onshore Louisiana
production, which averaged 5,391 BOE/d during the second quarter of 2007, as
compared to 8,623 BOE/d during the second quarter of 2006 and 5,591 BOE/d
during the first quarter of 2007. The Louisiana decline rates are normal and
expected for reservoirs in this area.

    Second Quarter 2007 Financial Results

    Oil and natural gas revenues, excluding any non-cash income or expense
items from marking-to-market of derivative contracts, increased 15% between
the respective second quarters as the higher production levels increased
revenues by 12% and higher commodity prices increased revenue by 3%. The
Company collected $1.7 million on its derivative contract settlements in the
second quarter of 2007 as compared to cash payments made of $2.2 million on
derivative contracts during the second quarter of 2006.

    Company-wide oil price differentials (Denbury's net oil price received as
compared to NYMEX prices) improved significantly during the second quarter of
2007, averaging $1.61 per Bbl less than NYMEX prices, as compared to $6.64 per
Bbl below NYMEX prices during the second quarter of 2006 and $3.73 per Bbl
below NYMEX prices during the first quarter of 2007. This improvement in the
NYMEX differential was related to higher prices received for the Company's
production as compared to NYMEX prices, primarily as a result of NYMEX (WTI)
prices being depressed due to lack of available storage capacity in the
mid-continent area, an oversupply of crude from Canada,
capacity/transportation issues in moving crude oil out of the national hub in
the Cushing, Oklahoma area and unanticipated refinery outages. Based on July
2007 prices, there are preliminary indications that this trend of improvement
in the NYMEX oil differential is reversing itself in the third quarter and
that NYMEX oil differentials have begun to return to historic levels.

    The Company's average NYMEX natural gas differential was a positive
variance of $0.07 per Mcf in the second quarter of 2007 as compared to a
positive variance of $0.25 per Mcf during the second quarter of 2006.

    Lease operating expenses increased between the comparable second quarters
on both a per BOE basis and on an absolute dollar basis. Lease operating
expenses averaged $15.00 per BOE in the second quarter of 2007, up from $12.24
per BOE in the second quarter of 2006, and up slightly from an average of
$14.66 per BOE during the first quarter of 2007. The increase over prior
year's second quarter level was primarily a result of (i) the Company's
increasing emphasis on tertiary operations with their inherently higher
operating costs, (ii) higher overall industry costs, (iii) the timing impact
of the continued expansion of the Company's tertiary operations in which the
cost of CO2 injection and other operating costs are expensed even though
production lags behind the injections, and (iv) additional lease payments for
certain of our new tertiary operating facilities.

    General and administrative expenses decreased 28% on a per BOE basis
between the two second quarter periods, averaging $3.07 per BOE in the second
quarter of 2007, down from $4.27 per BOE in the prior year's second quarter.
The decrease is largely attributable to a $5.3 million charge to earnings in
last year's second quarter related to stock compensation associated with the
departure of the Company's former Senior Vice President of Operations.
Partially offsetting this decrease are increases related to higher personnel
costs due to salary increases and continued growth in the Company's total
number of employees.

    Interest expense increased 45% to $8.4 million in the second quarter of
2007 as a result of a 47% increase in average debt levels between the second
quarters of 2006 and 2007. The debt levels increased to fund property
acquisitions in 2006 and 2007 and to fund the Company's budgeted capital
spending which is higher than the Company's cash flow from operations. The
Company's capitalized interest was $4.3 million for the second quarter of 2007
as compared to $2.7 million in the second quarter of 2006, the increase due
primarily to the significant increase in unevaluated properties acquired
during 2006 and 2007.

    Depreciation, depletion and amortization expense ("DD&A") on the
Company's oil and natural gas properties increased to $10.94 per BOE, a 14%
increase over the second quarter 2006 rate of $9.62 per BOE, and a 3% increase
over the first quarter 2007 rate of $10.64 per BOE, primarily due to rising
costs. In the second quarter of 2007, the Company booked approximately 7.2
MMBbls of proved reserves related to its Phase II tertiary properties, based
on production response to date, and approximately 10.7 MMBOEs related to the
Barnett Shale properties. However, future development costs, other capital
spending, and reclassification of unevaluated costs into the full cost pool
more than offset the higher reserves, causing a slight increase in the DD&A
rate. In addition to the DD&A on oil and natural gas properties, the Company
incurred an average of $1.18 per BOE for DD&A on its CO2 and other fixed
assets for the second quarter of 2007.

    2007 Outlook

    Primarily as a result of the strong production results from the Barnett
Shale, the Company is increasing its production guidance for 2007 to 42,000
BOE/d, an increase of 1,300 BOE/d. The revised total represents total growth
of approximately 14% over average 2006 production levels. The revised guidance
includes the incremental production associated with the Company's acquisitions
to date and does not adjust for any potential sale of the Company's Louisiana
properties before year-end 2007. The Company is reaffirming its tertiary
production guidance, which is projected to average 14,750 BOE/d, a projected
46% increase over average 2006 tertiary production levels.

    Denbury's 2007 development and exploration budget is currently
approximately $690 million, of which approximately 60% is related to tertiary
operations. Any acquisitions made by the Company would be in addition to these
current capital budget amounts.

    Denbury's total debt (principal amount excluding capital leases) as of
July 31, 2007 was approximately $725 million, consisting of $525 million of
subordinated debt and $200 million of bank debt outstanding on the Company's
$500 million borrowing base.

    Gareth Roberts, Chief Executive Officer, said: "We are pleased to see oil
production from our three new floods in Phase II continue to increase,
anchoring the 16% increase in our tertiary oil production this quarter. We
forecasted strong production growth for our tertiary floods in 2007 and we are
pleased to be generally on forecast. We are continuing the expansion of our
CO2 pipeline infrastructure, expect the CO2 pipelines to Tinsley and Cranfield
to be operational by the end of this year, and are working on acquiring
right-of-ways for the proposed Green Pipeline from Southern Louisiana to
Hastings Field near Houston. While we are extremely busy and still have
occasional issues with shortages of goods and services in our industry, we are
doing better at managing the process. Our Barnett Shale team has been ahead of
forecast all year long, prompting the decision to spend additional funds in
that area in 2007 and keep a third rig there, as the production results in
this area are the primary reason for the upward adjustment to our overall 2007
production forecast. Our master limited partnership, Genesis Energy, continues
to move forward, having just completed the acquisition of the Davison assets.
We expect to "drop-down" our CO2 pipelines to Genesis in the next few months,
with an estimated transaction size of between $200 million and $250 million.
These "drop-down" transactions will likely include a combination of property
sales with associated transportation or service arrangements and direct
financing leases. If accomplished this year, the Genesis transactions and sale
of our Louisiana assets would provide us with significantly more capital than
we require to cover the estimated shortfall between our 2007 capital budget
and our projected cash flow. We continue to expand our tertiary operations and
pursue the acquisition of additional mature oil fields that are potential
future tertiary flood candidates. Our program is working, our plans and
strategy have not changed, and we continue to be enthusiastic about the
future."

    Management Changes

    The Company announced that Jim Sinclair, Vice President of Exploration
and Geosciences, resigned as an officer of the Company effective August 1,
2007. Mr. Sinclair is expected to remain a non-officer employee through
January 31, 2008, after which time he plans to pursue other interests. Mr.
Sinclair has been employed with the Company since 1993.

    The Company also announced the appointment of three new Vice Presidents.
Brad Cox is being promoted to Vice President - Business Development, Charlie
Gibson to Vice President - Reservoir Engineering and Barry Schneider to Vice
President - Production and Operations.

    Gareth Roberts said: "Jim Sinclair has been instrumental in helping build
this Company over the last 14 years into one that is now perhaps among the
best growth opportunities in North America through our CO2 strategy. The Board
of Directors are appreciative of his contribution to Denbury and we wish him
well in his new endeavors. As we continue to grow, we see the need to further
expand our executive group to better oversee and manage our day-to-day
operations. Our three new vice presidents have been with us on average for
approximately seven years and have demonstrated their leadership and technical
expertise. We welcome them to the executive team and look to them to provide
leadership over their respective areas and to help Denbury carry out its
growth strategy."

    Conference Call

    The public is invited to listen to the Company's conference call set for
today, August 2, 2007 at 10:00 A.M. CDT. The call will be broadcast live over
the Internet at the Company's web site: www.denbury.com. If you are unable to
participate during the live broadcast, the call will be archived on the
Denbury web site for approximately 30 days and will also be available for
playback for one week by dialing 888-203-1112 or 719-457-0820, passcode
9392249.

    Financial and Statistical Data Tables

    Following are financial highlights for the comparative three and six
month periods ended June 30, 2007 and 2006. All production volumes and dollars
are expressed on a net revenue interest basis with gas volumes converted at
6:1.

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

                                 Three Months Ended
                                      June 30,
                                ---------------------       Percentage
                                   2007       2006            Change
                                ----------  ---------   ------------------
    Revenues:
       Oil sales                  151,178    136,118   +               11%
       Gas sales                   66,301     53,286   +               24%
       CO2 sales and
        transportation fees         3,394      2,374   +               43%
       Interest and other income    1,637      1,788   -                8%
                                ----------  ---------
          Total revenues          222,510    193,566   +               15%
                                ----------  ---------

    Expenses:
       Lease operating expenses    57,207     41,751   +               37%
       Production taxes and
        marketing expenses         10,386      9,436   +               10%
       CO2 operating expenses       1,204        785   +               53%
       General and
        administrative             11,694     14,574   -               20%
       Interest, net                8,356      5,751   +               45%
       Depletion and
        depreciation               46,235     36,152   +               28%
       Commodity derivative
        expense (income)          (15,049)    11,529   + greater than 100%
                                ----------  ---------
          Total expenses          120,033    119,978   +                -
                                ----------  ---------

    Income before income taxes    102,477     73,588   +               39%

    Income tax provision
       Current income taxes         7,343     (2,349)  + greater than 100%
       Deferred income taxes       32,567     31,675   +                3%
                                ----------  ---------

    NET INCOME                     62,567     44,262   +               41%
                                ----------  ---------

    Net income per common share:
       Basic                         0.52       0.38   +               37%
       Diluted                       0.50       0.36   +               39%

    Weighted average common
     shares:
       Basic                      119,793    116,471   +                3%
       Diluted                    124,769    122,988   +                1%

    Production (daily - net of
     royalties):
       Oil (barrels)               26,172     23,362   +               12%
       Gas (mcf)                   94,459     84,671   +               12%
       BOE (6:1)                   41,916     37,474   +               12%

    Unit sales price (including
     derivative settlements):
       Oil (per barrel)             63.01      62.99   +                -
       Gas (per mcf)                 8.04       6.92   +               16%

    Unit sales price (excluding
     derivative settlements):
       Oil (per barrel)             63.48      64.03   -                1%
       Gas (per mcf)                 7.71       6.92   +               11%
    

    

                                 Three Months Ended
                                      June 30,
                                ---------------------       Percentage
                                  2007        2006            Change
                                ---------  ----------   ------------------

    Non-GAAP Financial Measure
     (1)
    Adjusted cash flow from
     operations (non-GAAP
     measure)                    130,493     128,793   +                1%
    Net change in assets and
     liabilities relating to
     operations                  (28,241)    (22,376)  +               26%
                                ---------  ----------
    Cash flow from operations
     (GAAP measure)              102,252     106,417   -                4%
                                ---------  ----------

    Oil & gas capital
     investments                 167,813     193,427   -               13%
    CO2 capital investments       37,011      17,143   + greater than 100%
    Proceeds from sales of
     properties                    5,835       2,038   + greater than 100%

    BOE data (6:1)
       Oil and natural gas
        revenues                   57.02       55.54   +                3%
       Gain (loss) on
        settlements of
        derivative contracts        0.45       (0.65)  - greater than 100%
       Lease operating expenses   (15.00)     (12.24)  +               23%
       Production taxes and
        marketing expenses         (2.72)      (2.77)  -                2%
                                ---------  ----------
         Production netback        39.75       39.88   -                -
       Non-tertiary CO2
        operating margin            0.57        0.47   +               21%
       General and
        administrative             (3.07)      (4.27)  -               28%
       Net cash interest
        expense                    (1.65)      (1.18)  +               40%
       Current income taxes and
        other                      (1.39)       2.87   - greater than 100%
       Changes in asset and
        liabilities relating to
        operations                 (7.40)      (6.56)  +               13%
                                ---------  ----------
    Cash flow from operations      26.81       31.21   -               14%
                                ---------  ----------

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

    

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

                                          Six Months Ended
                                              June 30,
                                         ------------------    Percentage
                                           2007      2006        Change
                                         --------  --------   ------------
    Revenues:
       Oil sales                          269,310   249,559  +          8%
       Gas sales                          117,303   115,388  +          2%
       CO2 sales and transportation fees    6,485     4,362  +         49%
       Interest and other income            3,567     3,403  +          5%
                                         --------  --------
          Total revenues                  396,665   372,712  +          6%
                                         --------  --------

    Expenses:
       Lease operating expenses           107,764    77,923  +         38%
       Production taxes and marketing
        expenses                           20,590    17,523  +         18%
       CO2 operating expenses               1,907     1,430  +         33%
       General and administrative          23,128    24,441  -          5%
       Interest, net                       14,431    14,005  +          3%
       Depletion and depreciation          87,262    68,895  +         27%
       Commodity derivative expense        11,858    23,159  -         49%
                                         --------  --------
          Total expenses                  266,940   227,376  +         17%
                                         --------  --------

    Income before income taxes            129,725   145,336  -         11%

    Income tax provision
       Current income taxes                 8,961     7,437  +         20%
       Deferred income taxes               41,581    49,859  -         17%
                                         --------  --------

    NET INCOME                             79,183    88,040  -         10%
                                         --------  --------

    Net income per common share:
       Basic                                 0.66      0.77  -         14%
       Diluted                               0.63      0.72  -         13%

    Weighted average common shares:
       Basic                              119,395   114,820  +          4%
       Diluted                            124,730   121,912  +          2%

    Production (daily - net of
     royalties):
       Oil (barrels)                       25,119    22,790  +         10%
       Gas (mcf)                           90,007    82,076  +         10%
       BOE (6:1)                           40,120    36,469  +         10%

    Unit sales price (including
     derivative settlements):
       Oil (per barrel)                     59.02     59.78  -          1%
       Gas (per mcf)                         7.87      7.77  +          1%

    Unit sales price (excluding
     derivative settlements):
       Oil (per barrel)                     59.23     60.50  -          2%
       Gas (per mcf)                         7.20      7.77  -          7%
    

    

                                  Six Months Ended
                                      June 30,
                               ----------------------       Percentage
                                  2007        2006            Change
                               ----------  ----------   ------------------

    Non-GAAP Financial
     Measure: (1)
    Adjusted cash flow from
     operations (non-GAAP
     measure)                    234,720     236,642   -                1%
    Net change in assets and
     liabilities relating to
     operations                  (39,123)    (27,713)  +               41%
                               ----------  ----------
    Cash flow from operations
     (GAAP measure)              195,597     208,929   -                6%
                               ----------  ----------

    Oil & gas capital
     investments                 345,969     564,436   -               39%
    CO2 capital investments       68,427      28,167   + greater than 100%
    Proceeds from sales of
     properties                    5,840       2,038   + greater than 100%

    Cash and cash equivalents     32,577      30,812   +                6%
    Total assets               2,466,851   1,869,468   +               32%
    Total long-term debt
     (excluding discount,
     premium & capital leases)   695,000     445,000   +               56%
    Total stockholders' equity 1,210,992     974,263   +               24%

    BOE data (6:1)
       Oil and natural gas
        revenues                   53.24       55.29   -                4%
       Gain (loss) on
        settlements of
        derivative contracts        1.37       (0.45)  - greater than 100%
       Lease operating
        expenses                  (14.84)     (11.80)  +               26%
       Production taxes and
        marketing expenses         (2.84)      (2.65)  +                7%
                               ----------  ----------
         Production netback        36.93       40.39   -                9%
       Non-tertiary CO2
        operating margin            0.63        0.44   +               43%
       General and
        administrative             (3.18)      (3.70)  -               14%
       Net cash interest
        expense                    (1.43)      (1.61)  -               11%
       Current income taxes
        and other                  (0.62)       0.33   + greater than 100%
       Changes in asset and
        liabilities relating
        to operations              (5.39)      (4.20)  +               28%
                               ----------  ----------
    Cash flow from operations      26.94       31.65   -               15%
                               ----------  ----------

    (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. Adjusted
cash flow from operations is not a measure of financial performance under GAAP
and should not be considered as an alternative to cash flows from operations,
investing, or financing activities, nor as a liquidity measure or indicator of
cash flows. For a further discussion, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Operating Results"
in the Company's 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 significant operating acreage onshore
Louisiana, Alabama, in the Barnett Shale play near Fort Worth, Texas, and
properties in Southeast Texas. The Company's goal is to increases the value of
acquired properties through a combination of exploitation, drilling and proven
engineering extraction practices, including secondary and tertiary recovery
operations.

    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 and
probable 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
2007, pricing assumptions based on current and projected oil and natural gas
prices, anticipated transactions, 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.




For further information:

For further information: Denbury Resources Inc. Gareth Roberts,
972-673-2000 President and CEO or Phil Rykhoek, 972-673-2000 Sr. VP and Chief
Financial Officer www.denbury.com

Organization Profile

DENBURY RESOURCES INC.

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