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DENBURY RESOURCES INC.
187,070 COMMON SHARES
75,000 COMMON SHARE PURCHASE WARRANTS
Denbury Resources Inc. (the "Company" or "Denbury") is a Canadian
corporation engaged in the business of oil and natural gas exploration,
development and production in the states of Mississippi, Louisiana and Texas
through its indirectly wholly owned subsidiary, Denbury Management, Inc.
("Denbury Management"), a Texas corporation. The dollar disclosures contained
herein are reported in U.S. dollars unless otherwise noted and all share
information contained in this prospectus has been adjusted to reflect a
one-for-two reverse split of the Common Shares, effective on October 10, 1996.
This Prospectus relates to the resale from time to time by shareholders
("Selling Shareholders") of up to 112,070 common shares (the "Common Shares") of
the Company acquired by the Selling Shareholders upon the exercise of an equal
number of Special Warrants. The Special Warrants were issued in 1995 to a
limited number of accredited investors pursuant to exemptions from the
registration and prospectus delivery requirements under applicable Canadian and
U.S. laws. The Company will not receive any proceeds from the sale of these
securities. Of the Common Shares issued upon the exercise of the Special
Warrants, 29,036 were issued to Southcoast Capital Corporation pursuant to an
Agency Agreement with the Company in payment of their fee for the placement of
the Special Warrants.
This Prospectus also relates to the resale of up to 75,000 Common Share
Purchase Warrants and the 75,000 Common Shares to be issued upon exercise of the
75,000 Common Share Purchase Warrants. The 75,000 Common Share Purchase Warrants
were issued to Internationale Nederlanden (U.S.) Capital Corporation ("INCC")
effective May 5, 1995, as part of the consideration for the extension of credit
by INCC to Denbury Management. Each Common Share Purchase Warrant entitles INCC
to acquire one Common Share for Cdn. $8.40 at any time within five years of
issuance.
The Common Shares may be offered from time to time by the Selling
Shareholders, a limited number of United Stated and Canadian institutional
investors and one individual, who have acquired them upon exercise of the
Special Warrants and who will acquire them upon exercise of the Common Share
Purchase Warrants. Common Share Purchase Warrants may also be offered from time
to time by INCC.
Since the beginning of this offering, 518,572 Common Shares have been
sold by the selling shareholders, including 75,000 Common Shares issued to INCC
on the exercise of 75,000 Common Share Purchase Warrants. Thus, originally
705,642 Common Shares and 150,000 Common Share Purchase Warrants were covered by
the registration statement of which this Prospectus is a part.
The outstanding Common Shares of the Company are listed on The Toronto
Stock Exchange (the "TSE") under the trading symbol "DNR" and on the Nasdaq
National Market System ("NASDAQ") under the symbol "DENRF". The closing price of
the Common Shares on the TSE and NASDAQ (as reported by such exchange) on April
24, 1997, was Cdn. $18.85 and U.S. $13.50, respectively. The Company has applied
for listing on the New York Stock Exchange with trading expected to commence on
May 8, 1997 under the trading symbol "DNR", at which time the Company will
suspend trading on NASDAQ.
INVESTMENT IN THE COMMON SHARES OR THE COMMON SHARE PURCHASE
WARRANTS SHOULD BE CONSIDERED SPECULATIVE. SEE "RISK FACTORS" ON PAGE 5 OF THIS
PROSPECTUS FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN
EVALUATING AN INVESTMENT IN THESE SECURITIES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS APRIL 29, 1997.
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AVAILABLE INFORMATION
The Company is subject to the information requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "SEC"). Such reports, proxy statements and other information can
be inspected and copied at the public reference facilities maintained by the SEC
at 450 5th Street, N.W., Room 1024, Washington, D.C. 20549, and at the following
regional offices of the SEC: 7 World Trade Center, 13th Floor, New York, New
York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, at prescribed rates. In addition, such materials filed
electronically by the Company with the SEC are available at the SEC's World Wide
Web site at http://www.sec.gov. The Company's Common Shares will be traded on
the NASDAQ National Market System through at least May 7, 1997 and such reports,
proxy statements and other information may be inspected at the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006. The Company's Common Shares are expected to commence trading on the New
York Stock Exchange on May 8, 1997 and thereafter, such reports, proxy
statements and other information may be inspected at the offices of the New York
Stock Exchange, Inc., 20 Broad Street, New York, NY 10005.
The Company has filed with the SEC a Registration Statement on Form S-3
(of which this Prospectus is a part) under the Securities Act of 1933, as
amended, with respect to the securities offered hereby. This Prospectus does not
contain exhibits and schedules and certain other information which is part of
the Registration Statement and which have been omitted from this Prospectus as
permitted by the rules and regulations of the SEC. Statements contained herein
concerning the contents of any contract, agreement or other document filed as an
exhibit to the Registration Statement are necessarily summaries of such
contracts, agreements or documents and are qualified in their entirety by
reference to each such exhibit. The Registration Statement and the exhibits and
schedules forming a part thereof can be obtained from the SEC.
INFORMATION INCORPORATED BY REFERENCE
The following documents which have been filed with the Commission are
incorporated herein by reference: The Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 and the description of the Common Shares
contained in the Company's prospectus dated October 24, 1996, filed as part of
the Company's Form S-1 Registration Statement No. 33-12005.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of Common Shares to be made hereunder
shall be deemed to be incorporated herein by reference and made a part hereof
from the date of filing.
Any statement contained herein or in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained therein or in any other subsequently filed document which also is or
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
Any person receiving a copy of this Prospectus may obtain without
charge a copy of any document or part thereof incorporated herein by reference
(other than exhibits to such documents unless such exhibits are specifically
incorporated by reference into the information the Registration Statement
incorporates), upon written or oral request. Requests should be directed to Phil
Rykhoek, Chief Financial Officer and Corporate Secretary, Denbury Resources
Inc., 17304 Preston Road, Suite 200, Dallas Texas, 75252, (972)713-3000.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety and should be read
in conjunction with the detailed information appearing elsewhere in this
Prospectus. Investors should carefully consider the information set forth under
"Risk Factors". All dollar amounts in this Prospectus, unless otherwise
indicated, are expressed in United States dollars and all financial data is
presented in accordance with generally accepted accounting principles in Canada.
All share information contained in this Prospectus has been adjusted to reflect
a one-for-two reverse split of the Common Shares, effective on October 10, 1996.
The terms "Denbury" and the "Company" refer to Denbury Resources Inc., a
Canadian corporation, and all references to the operations and assets of the
Company include those of its wholly-owned subsidiaries. Certain terms used
therein are defined in the Glossary included elsewhere in this Prospectus. The
executive offices of the Company are located at 17304 Preston Road, Suite 200,
Dallas, Texas 75252, and its telephone number is (972) 713-3000. The Company's
Canadian office is located at 2550, 140 Fourth Avenue, S.W., Calgary, Alberta
T2P 3N3, and the telephone number is (403) 266-1101.
THE COMPANY
Denbury is an independent energy company engaged in acquisition,
development and exploration activities in the U.S. Gulf Coast region. Since
1993, after having disposed of its Canadian oil and natural gas properties, the
Company has focused its operations primarily onshore in Louisiana and
Mississippi. Over the last three years, the Company has achieved rapid growth in
proved reserves, production and cash flow by concentrating on the acquisition of
properties which it believes have significant upside potential and through the
efficient development, enhancement and operation of those properties.
For the three-year period ended December 31, 1996, the Company
increased its proved reserves by 56% per annum, from 11.2 MMBOE at December 31,
1994 to 27.4 MMBOE. Over the same three-year period, the Company also increased
its average daily production by 69% per annum, from 2,858 BOE/d to 8,167 BOE/d.
For the three-year period ended December 31, 1996, Adjusted EBITDA grew at an
annual rate of 120%, from $7.2 million to $34.9 million.
As of December 31, 1996, the Company had proved reserves of 15.1 MMBbls
and 74.1 Bcf. At such date, the PV10 Value was $316.1 million, of which $267.7
million was attributable to proved developed reserves. Denbury operates wells
comprising approximately 68% of its PV10 Value. The twelve largest fields owned
by the Company constitute approximately 80% of its estimated proved reserves and
within these twelve fields, Denbury owns an average working interest of 84%.
THE OFFERING
COMMON SHARES ISSUED
AND OUTSTANDING: 20,118,796 Common Shares of the Company were outstanding as
of March 31, 1997. As of the same date, an additional
2,392,275 shares were issuable pursuant to outstanding
subscriptions, warrants, options or other rights to purchase
Common Shares.
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SECURITIES OFFERED
FOR RESALE: 112,070 Common Shares owned by the Selling Shareholders
resulting from exercise of the Special Warrants and 75,000
Common Shares issuable upon the exercise of 75,000 Common
Share Purchase Warrants.
75,000 Common Share Purchase Warrants.
COMMON SHARE PURCHASE
WARRANTS: A total of 150,000 Common Share Purchase Warrants were
issued effective May 5, 1995, to Internationale Nederlanden
(U.S.) Capital Corporation ("INCC") which gives INCC the
right to acquire one Common Share at any time until May 5,
2000, for a price of Cdn. $8.40. As of the date of this
Prospectus, 75,000 of the Common Share Purchase Warrants had
been exercised.
TRADING MARKET: The Common Shares are listed on NASDAQ under the symbol
"DENRF" and on the Toronto Stock Exchange under the symbol
"DNR". The Company has applied for listing on The New York
Stock Exchange with trading expected to commence on May 8,
1997 under the trading symbol "DNR", at which time the
Company will suspend trading on NASDAQ.
RISK FACTORS: An investment in the Common Shares involves certain risks.
See "Risk Factors."
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RISK FACTORS
In addition to other information set forth elsewhere in this
Prospectus, the following factors relating to the Company should be considered
when evaluating an investment in the Common Shares and Common Share Purchase
Warrants offered hereby.
PRICE FLUCTUATIONS AND MARKETS
The Company's revenue, profitability and future rate of growth are
substantially dependent upon the price of, and demand for, oil, natural gas and
natural gas liquids. Historically the markets for oil and natural gas have been
volatile and are likely to continue to be volatile in the future. The prices for
oil and natural gas are subject to wide fluctuations in response to relatively
minor changes in the supply of and demand for oil and natural gas, market
uncertainty and a variety of additional factors that are beyond the control of
the Company. These factors include the level of consumer product demand, weather
conditions, domestic and foreign governmental relations and taxes, the price and
availability of alternative fuels, political conditions in the Middle East and
other petroleum producing areas, the foreign supply of oil and natural gas, the
price of foreign imports and overall economic conditions. It is impossible to
predict future oil and natural gas price movements with any certainty. Declines
in oil and natural gas prices would not only reduce revenue, but could reduce
the amount of the Company's oil and natural gas that can be produced
economically and could, therefore, have a material adverse effect on the
Company's financial condition, results of operations and reserves. In an effort
to minimize the effect of price volatility, the Company has in the past entered
into hedging arrangements from time to time. The Company did not have any
financial hedging contracts in place as of the date of this Prospectus, although
it may have such contracts in the future.
The availability of a ready market for the Company's oil and natural
gas production also depends on a number of factors, including the demand for and
supply of oil and natural gas and the proximity of reserves to, and the capacity
of, oil and natural gas gathering systems, pipelines or trucking and terminal
facilities. Wells may be temporarily shut- in for lack of a market or due to
inadequacy or unavailability of pipeline or gathering system capacity.
NEED TO REPLACE RESERVES
The Company's future success depends on its ability to find, develop or
acquire additional oil and natural gas reserves that are recoverable on an
attractive economic basis. Unless the Company successfully replaces the reserves
that it produces (through development, exploration or acquisitions), the
Company's proved reserves will decline. Furthermore, approximately 49% of the
Company's proved developed reserves at December 31, 1996 are located in the
lower Gulf Coast geosyncline in southern Louisiana which is characterized by
relatively rapid decline rates. Approximately 55% of the Company's total proved
reserves at December 31, 1996 were either proved undeveloped or proved developed
non-producing. Recovery of such reserves will require significant capital
expenditures and successful drilling operations. There can be no assurance that
the Company will continue to be successful in its effort to develop or replace
its proved reserves.
DRILLING AND OPERATING RISKS
Drilling activities are subject to many risks, including the risk that
no commercially productive reservoirs will be encountered. There can be no
assurance that new wells drilled by the Company will be productive or that the
Company will recover all or any portion of its investment. Drilling for oil and
natural gas may involve unprofitable efforts, not only from dry wells but from
wells that are productive but do not produce sufficient net revenues to return a
profit after drilling, operating and other costs. The cost of drilling,
completing and operating wells is often uncertain. The Company's drilling
operations may be curtailed, delayed or canceled as a result of numerous
factors, many of which are beyond the Company's control, including title
problems, weather conditions, compliance with governmental requirements and
shortages or delays in the delivery of equipment and services.
The Company's operations are subject to all of the risks normally
incident to the operation and development of oil and natural gas properties and
the drilling of oil and natural gas wells, including encountering unexpected
formations or pressures, blow-outs, the release of contaminants into the
environment, cratering and fires, all of which
<PAGE>
could result in personal injuries, loss of life, damage to property of the
Company and others, and the imposition of fines and penalties pursuant to
environmental legislation. The Company is not fully insured against all of these
risks, nor are all such risks insurable. Although the Company maintains
liability insurance in an amount which it considers adequate, the nature of
these risks is such that liabilities could exceed policy limits, or as in the
case of environmental fines and penalties, be uninsurable, in which event the
Company could incur significant costs that could have a material adverse effect
upon its financial condition. The Company believes that it has proper procedures
in place and that its operating staff carries out their work in a manner
designed to mitigate these risks.
The Company has focused its oil and natural gas operations in certain
key areas and currently receives approximately 80% of its production from 12
fields. Any interruption to these key areas could materially adversely affect
the operations of the Company. In the majority of the Company's Mississippi
fields, significant amounts of saltwater are produced which require disposal.
Currently, the Company is able to dispose of such saltwater economically, but
should it be unable to do so in the future, production from these fields would
become uneconomical.
UNCERTAINTY OF ESTIMATES OF OIL AND NATURAL GAS RESERVES
Estimates of the Company's proved developed oil and natural gas
reserves and future net revenues therefrom are based on reserve reports prepared
by independent petroleum engineers. The estimation of reserves requires
substantial judgment on the part of the petroleum engineers, resulting in
imprecise determinations, particularly with respect to new discoveries.
Different reserve engineers may make different estimates of reserve quantities
and revenues attributable thereto based on the same data. The accuracy of any
reserve estimate depends on the quality of available data as well as engineering
and geological interpretation and judgment. The Company's reserves are primarily
water- drive reservoirs which can increase the uncertainty of the estimates that
have been prepared. Results of drilling, testing and production or price changes
subsequent to the date of the estimate may result in revisions to such
estimates. The estimates of future net revenues reflect oil and natural gas
prices as of the date of estimation, without escalation. There can be no
assurance, however, that such prices will be realized or that the estimated
production volumes will be produced during the periods indicated. Future
performance that deviates significantly from the reserve reports could have a
material adverse effect on the Company.
ACQUISITION RISKS
The Company's rapid growth in recent years has been attributable in
significant part to acquisitions of producing properties. The Company expects to
continue to evaluate and, where appropriate, pursue acquisition opportunities on
terms management considers favorable to the Company. There can be no assurance
that suitable acquisition candidates will be identified in the future, nor that
they will be integrated successfully into the Company's operations or successful
in achieving desired profitability objectives. In addition, the Company competes
against other companies for acquisitions, and there can be no assurance that the
Company will be successful in the acquisition of any material property
interests.
The successful acquisition of producing properties requires an
assessment of recoverable reserves, exploration potential, future oil and
natural gas prices, operating costs, potential environmental and other
liabilities and other factors beyond the Company's control. In connection with
such an assessment, the Company performs a review of the subject properties that
it believes to be generally consistent with industry practices. Nonetheless, the
resulting assessments are necessarily inexact and their accuracy inherently
uncertain, and such a review may not reveal all existing or potential problems,
nor will it necessarily permit a buyer to become sufficiently familiar with the
properties to fully assess their merits and deficiencies. Inspections may not
always be performed on every platform or well, and structural and environmental
problems are not necessarily observable even when an inspection is undertaken.
Additionally, significant acquisitions can change the nature of the
operations and business of the Company depending upon the character of the
acquired properties, which may be substantially different in operating and
geologic characteristics or geographic location than existing properties. While
it is the Company's current intent to concentrate on acquiring producing
properties with development and exploration potential located in the Gulf Coast
region, there is no assurance that the Company will not pursue acquisitions or
properties located in other geographic regions.
<PAGE>
SUBSTANTIAL CAPITAL REQUIREMENTS
In the future, the Company will require additional funds to develop,
maintain and acquire additional interests in existing or newly-acquired
properties. During the last three years, the Company's capital expenditures have
averaged five times more than its cash flow from operations (exclusive of the
changes in non-cash working capital balances). Historically, the Company has
funded these expenditures principally through debt and equity. As of March 31,
1997, the Company had a $60.0 million borrowing base on its Credit Facility,
$59.3 million of which was available. The borrowing base on this facility will
be redetermined semi-annually by the lender in its sole discretion and there can
be no assurance the borrowing base will be maintained at its present level.
Although the Company carefully monitors its capital requirements and
plans its expenditures accordingly, and believes that it will be able to meet
all of its obligations in the future, there can be no assurance that additional
capital will always be available to the Company in the future or that it will be
available on terms that are acceptable to the Company. Should outside capital
resources be limited, the rate of Company growth would substantially decline,
and there can also be no assurance that the Company would be able to continue to
increase its oil and natural gas production or oil and natural gas reserves.
Numerous factors affect the cost and availability of capital, including market
conditions, the Company's results of operations and the rate of the Company's
drilling successes.
CONTROLLING SHAREHOLDER
In December 1995, the Company completed a $40.0 million private
placement of securities to partnerships affiliated with the Texas Pacific Group
("TPG") consisting of convertible preferred shares, Common Shares and warrants
(the "TPG Placement"). The convertible preferred shares were converted into
approximately 2.8 million Common Shares in October, 1996. TPG also bought an
additional 800,000 Common Shares directly from the Company in October 1996 as
part of a public offering. As of the date of this prospectus, TPG is the
beneficial owner of approximately 41% of the Common Shares outstanding. TPG is
entitled to nominate a minimum of three of seven representatives to the
Company's Board of Directors as long as TPG maintains certain ownership levels.
The current Board of Directors has six members of which three members were
nominated by TPG. In addition, certain transactions, including changes to the
number of board members, amendments to the Company's Articles of Continuance,
certain issuances of debt, certain acquisitions and dispositions, and most
issuances of equity, require the two-thirds majority of the Board of Directors,
which cannot be obtained without the approval of at least one TPG
representative. Additionally, TPG has the right, but not the obligation to
maintain its pro rata ownership interest in the equity securities of the Company
in the event the Company issues any additional equity securities or securities
convertible into Common Shares of the Company by purchasing additional shares on
the same terms and conditions. However, this right expires should TPG's
ownership interest fall below 20%.
SHARES ELIGIBLE FOR FUTURE SALE
The Company had 20,118,796 Common Shares outstanding as of March 31,
1997. As of such date, TPG had beneficial ownership of 8,408,038 Common Shares
of which 7,608,038 Common Shares are "restricted" securities within the meaning
of the Securities Act as a result of the issuance thereof in a private
transaction. The Company believes that such "restricted" Common Shares are
eligible for sale on the open market from time to time under Rule 144.
In addition, the Company has granted certain registration rights to
TPG. After December 21, 1997 and until December 21, 2000, TPG has the right,
subject to certain conditions, to demand that its stock be registered under the
Securities Act on one occasion. TPG also has "piggyback" registration rights
and, subject to certain conditions, may participate in a future registration by
the Company of Common Shares (or securities convertible into or exchangeable
for, or options, warrants or other rights to acquire, Common Shares) under the
Securities Act.
The sale of a substantial number of Common Shares or the availability
of a substantial number of shares for sale may adversely affect the market price
of the Common Shares and could impair the Company's ability to raise additional
capital through the sale of its equity securities.
<PAGE>
DEPENDENCE ON KEY PERSONNEL
The Company believes that its continued success will depend to a
significant extent upon the abilities and continued efforts of its board of
directors and its senior management, particularly Gareth Roberts, its Chief
Executive Officer and President. The Company does not have any employment
agreements and does not maintain any key man life insurance. The loss of the
services from any of its key personnel could have a material adverse effect on
the Company's results of operations. The success of the Company will also
depend, in part, upon the Company's ability to find, hire and retain additional
key management personnel who are also being sought by other businesses. The
inability to find, hire and retain such personnel could have a material adverse
effect upon the Company's results of operations.
COMPETITION
The Company operates in a highly competitive environment. The Company
competes with major integrated and independent energy companies for the
acquisition of desirable oil and natural gas properties, as well as for the
equipment and labor required to develop and operate such properties. Many of
these competitors have financial and other resources substantially greater than
those of the Company.
GOVERNMENTAL AND ENVIRONMENTAL REGULATION
The production of oil and natural gas is subject to regulation under a
wide range of United States federal and state statutes, rules, orders and
regulations. State and federal statutes and regulations require permits for
drilling, reworking and recompletion operations, drilling bonds and reports
concerning operations. Most states in which the Company owns and operates
properties have regulations governing conservation matters, including provisions
for the unitization or pooling of oil and natural gas properties, the
establishment of maximum rates of production from oil and natural gas wells and
the regulation of the spacing, plugging and abandonment of wells. Many states
also restrict production to the market demand for oil and natural gas and
several states have indicated interest in revising applicable regulations in
light of the persistent oversupply and low prices for oil and natural gas
production. These regulations may limit the rate at which oil and natural gas
could otherwise be produced from the Company's properties. Some states have also
enacted statutes prescribing ceiling prices for natural gas sold within the
state.
Various federal, state and local laws and regulations relating to the
protection of the environment may affect the Company's operations and costs. In
particular, the Company's production operations, its salt water disposal
operations and its use of facilities for treating, processing or otherwise
handling hydrocarbons and wastes therefrom are subject to stringent
environmental regulation. The majority of the Company's Louisiana activity is
conducted in a marsh environment where environmental regulations are somewhat
greater. Although compliance with these regulations increases the cost of
Company operations, such compliance has not had a material effect on the
Company's capital expenditures, earnings or competitive position. Environmental
regulations have historically been subject to frequent change by regulatory
authorities and the Company is unable to predict the ongoing cost of complying
with these laws and regulations or the future impact of such regulations on its
operations. A significant discharge of hydrocarbons into the environment could,
to the extent such event is not insured, subject the Company to substantial
expense.
AUTHORIZATION AND DISCRETIONARY ISSUANCE OF PREFERRED SHARES; ANTI-TAKEOVER
PROVISIONS
The Company's Articles of Continuance authorize the future issuance of
an unlimited number of First Preferred Shares and Second Preferred Shares
(collectively, the "Preferred Shares"), with such designations, rights,
privileges, restrictions and conditions as may be determined from time to time
by the Board of Directors. Accordingly, the Board of Directors is empowered,
without shareholder approval, to issue Preferred Shares with dividend,
liquidation, conversion, voting or other rights that could adversely affect the
voting power or other rights of holders of the Company's Common Shares. In the
event of issuance, the Preferred Shares could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. Such actions could have the effect of discouraging bids
for the Company, thereby preventing shareholders from receiving the
<PAGE>
maximum value for their shares. Although the Company has no present intention to
issue any additional Preferred Shares, there can be no assurance that the
Company will not do so in the future.
The Investment Canada Act includes provisions that are intended to
encourage persons considering unsolicited tender offers or other unilateral
takeover proposals to negotiate with the Company's Board of Directors rather
than pursue non-negotiated takeover attempts. These existing anti-takeover
provisions may have a significant effect on the ability of a shareholder to
benefit from certain kinds of transactions that may be opposed by the incumbent
Board of Directors.
NO DIVIDENDS
During the last five fiscal years, the Company has not paid any
dividends on its outstanding Common Shares, nor does the Company intend to do
so. In addition, the Company is restricted from doing so under its Credit
Facility. The Company currently intends to retain its cash for the continued
expansion of its business, including exploration, development and acquisition
activities.
FORWARD-LOOKING INFORMATION
All statements other than statements of historical fact contained in
this Prospectus are forward-looking statements. Forward-looking statements in
this Prospectus generally are accompanied by words such as "anticipate,"
"believe," "estimate," "project" or "expect" or similar statements. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, no assurance can be given that such expectations will
prove correct. Factors that could cause the Company's results to differ
materially from the results discussed in such forward-looking statements include
the aforementioned risks described under "Risk Factors," such as the
fluctuations of the prices received or demand for the Company's oil and natural
gas, the uncertainty of drilling results and reserve estimates, operating
hazards, acquisition risks, requirements for capital, general economic
conditions, the competition from other exploration, development and production
companies and the effects of governmental and environmental regulation. All
forward-looking statements in this Prospectus are expressly qualified in their
entirety by the cautionary statements in this paragraph.
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DESCRIPTION OF SECURITIES
GENERAL
The authorized share capital of Denbury consists of an unlimited number
of Common Shares, of which 20,118,796 were issued and outstanding as of March
31, 1997, and two classes of preferred shares, unlimited in number and issuable
in series. In addition to the issued and outstanding Common Shares, options to
purchase Common Shares and other forms of convertible securities for Common
Shares are outstanding.
There are no limitations imposed by Canadian legislation or regulations
or by the Articles of Continuance or By-laws of the Company on the right of
holders of either the Common Shares or the Common Share Purchase Warrants who
are not residents of Canada to hold or vote the Common Shares or to hold the
Common Share Purchase Warrants.
The following is a general description of the material rights,
privileges, restrictions and conditions attaching to the securities being
offered hereby.
COMMON SHARES
The holders of the Common Shares are entitled to one vote for each
Common Share held at all meetings of shareholders of the Company, other than
meetings of the holders of any other class of shares meeting as a class or the
holders of one or more series of any class of shares meeting as a series; are
entitled to any dividends that may be declared by the board of directors
thereon; and in the event of liquidation, dissolution or winding-up of the
Company, are entitled, subject to the rights of the holders of shares ranking
prior to the Common Shares, to share rateably in such assets of the Company as
are available for distribution. The holders of Common Shares have no preemptive
rights. TPG was granted certain demand and "piggyback" registration rights and
preemptive rights in connection with the TPG Placement.
COMMON SHARE PURCHASE WARRANTS
A total of 150,000 $8.40 Common Share Purchase Warrants have been
registered under the registration statement of which this Prospectus is a part.
Each Common Share Purchase Warrant entitles the holder to purchase one Common
Share at a price of Cdn. $8.40 per share, subject to adjustment in certain
circumstances, during the period that commenced on May 5, 1995, and which ends
on May 5, 2000. As of March 31, 1997, there were 75,000 Common Share Purchase
Warrants outstanding with these terms. The $8.40 Common Share Purchase Warrants
are being registered hereby in accordance with a Registration Rights Agreement
between the Company and Internationale Nederlanden (U.S.) Capital Corporation
which required the Company to maintain a continuously effective registration
statement for a two-year period.
In addition, there are 625,000 Common Share Purchase Warrants
outstanding entitling the holder to purchase Common Shares at a price of U.S.
$7.40 per share, subject to adjustment in certain circumstances, during the
period that commenced on December 21, 1995 and which ends on December 21, 1999.
The exercise price and number of Common Shares issuable on exercise of
the $8.40 Common Share Purchase Warrants are subject to adjustment in certain
circumstances, including in the event of a stock dividend or other distribution
to all shareholders of assets or debt instruments of the Company,
recapitalization, reorganization, merger or consolidation of the Company.
Additionally, such adjustments shall be made upon the issuance of rights,
options or warrants to all or substantially all of the holders of outstanding
Common Shares entitling them to purchase Common Shares at a price per share that
is less than 92.5% of the Current Market Prices (as defined in the $8.40 Common
Share Purchase Warrant Certificate).
<PAGE>
SELLING SECURITY HOLDERS AND
PLAN OF DISTRIBUTION
In April 1995, the Company privately offered and sold to investors in
the United States and Canada (collectively, the "Selling Shareholders"),
consisting of certain institutional investors and one individual, 614,142
Special Warrants to purchase Common Shares of the Company. During May 1995, the
Company also issued 150,000 Common Share Purchase Warrants to Internationale
Nederlanden (U.S.) Capital Corporation (INCC). Each of the Special Warrants
were, and the Common Share Purchase Warrants may be, exchanged for one Common
Share for each warrant. In both cases, the Company agreed to file with the
Securities and Exchange Commission a Registration Statement covering resales of
the Common Shares and, in the case of the Common Share Purchase Warrants,
covering resales of the Common Share Purchase Warrants themselves. No Selling
Shareholder has had a position, office or other material relationship with the
Company or any of its affiliates within the three years preceding the date of
this Prospectus, except that INCC, as part of the transaction whereby it became
a security holder, extended a $22,000,000 credit facility to Denbury Management,
and contemporaneously therewith, entered into an oil swap contract with Denbury
Management for varying amounts of oil per month at $18.83. As of the date of
this Prospectus, INCC was one of three banks that is a party to the Company's
bank credit agreement. The Company did not have any type of hedging contracts in
place as of the date of this Prospectus. None of the Selling Shareholders owned
any Common Shares or warrants prior to the April and May 1995 purchases.
Assuming each Selling Shareholder sells all the Common Shares and/or the Common
Share Purchase Warrants to be offered for its account pursuant hereto and
acquires no additional Common Shares or warrants, none of the Selling
Shareholders, except for Roytor & Co. as indicated below, will own any Common
Shares after completion of the resale.
The following table sets forth information, as of the date hereof,
regarding the Selling Shareholders, the number of securities to be offered for
the account of each and the type of securities owned.
<TABLE>
<CAPTION>
AMOUNT AND TYPE TO BE
OFFERED FOR SELLING AMOUNT AND % OF CLASS
SHAREHOLDERS' ACCOUNT TO BE OWNED AFTER RESALE
----------------------- --------------------------
<S> <C> <C>
Lester F. Alexander 540 Common -0-
Frank Bracken 915 Common -0-
Janet F. Clark 810 Common -0-
Richard Funchess 203 Common -0-
Mathew P. LeCorgne 810 Common -0-
G. Walter Lowenbaum 332 Common -0-
Stephen A. Neal 2,077 Common -0-
Roytor & Co. 106,383 Common 71,950 *
Internationale Nederlanden (U.S.) 75,000 Common -0-
Capital Corporation Purchase Warrants
and/or Common Shares
<FN>
* Represents less than 1% of the outstanding Common Shares
</FN>
</TABLE>
All or a portion of the Common Shares or Common Share Purchase Warrants
may be sold from time to time (i) on any exchange on which the Company is listed
at prevailing market prices, (ii) otherwise than on any exchange on which the
Company is listed at prevailing market prices or negotiated prices, (iii) in
block transactions, ordinary brokerage transactions, sales-to-broker dealers
acting as principals or otherwise, (iv) in underwritten transactions, or (v) by
a combination of the foregoing methods of sale. The Company will receive no
portions of the proceeds of any sales of Common Shares or Common Share Purchase
Warrants by the Selling Shareholders, but will bear all expenses of registering
the Common Shares under the Securities Act of 1933, as amended.
<PAGE>
No underwriter has been engaged by the Company to participate in the
resale of the Common Shares or Common Share Purchase Warrants, although the
Selling Shareholders may, at their discretion, engage an underwriter. The
Selling Shareholders will bear all commissions and other fees payable to brokers
and dealers and all taxes payable in connection with resales of the Common
Shares or Common Share Purchase Warrants.
LEGAL MATTERS
The legality of the Common Shares offered hereby have been passed upon
for the Company by Burnet, Duckworth & Palmer, Calgary, Alberta.
EXPERTS
The consolidated financial statements and schedule, incorporated in this
Prospectus by reference to the Annual Report on Form 10-K of Denbury Resources
Inc. for the year ended December 31, 1996, have been audited by Deloitte &
Touche, Chartered Accountants, Calgary, Alberta, Canada, as stated in their
reports appearing therein and have been so included in reliance upon the reports
of such firm given upon their authority as experts in accounting and auditing.
<PAGE>
GLOSSARY
The terms defined in this section are used throughout this Prospectus.
ADJUSTED EBITDA. Adjusted EBITDA represents earnings before interest
income, interest expense, income taxes, depletion and depreciation, gain on sale
of oil and gas properties, imputed preferred dividends and losses on early
extinguishment of debt.
BBL. One stock tank barrel, of 42 U.S. gallons liquid volume, used herein
in reference to crude oil or other liquid hydrocarbons.
BBLS/D. Barrels of oil produced per day.
BCF. One billion cubic feet of natural gas.
BOE. One barrel of oil equivalent using the ratio of one barrel of crude
oil, condensate or natural gas liquids to 6 Mcf of natural gas.
BOE/D. BOEs produced per day.
BTU. British thermal unit, which is the heat required to raise the
temperature of a one-pound mass of water from 58.5 to 59.5 degrees Fahrenheit.
CDN. Canadian.
MCF. One thousand cubic feet of natural gas.
MCF/D. One thousand cubic of natural gas produced per day.
MMBBL. One million barrels of crude oil or other liquid hydrocarbons.
MMBOE. One million BOEs.
PV10 VALUE. When used with respect to oil and natural gas reserves, PV10
Value means the estimated future gross revenue to be generated from the
production of proved reserves, net of estimated production and future
development costs, using prices and costs in effect at the determination date,
without giving effect to non-property related expenses such as general and
administrative expenses, debt service and future income tax expense or to
depreciation, depletion and amortization, discounted using an annual discount
rate of 10% in accordance with the guidelines of the SEC.
PROVED DEVELOPED RESERVES. Reserves that can be expected to be recovered
through existing wells with existing equipment and operating methods.
PROVED RESERVES. The estimated quantities of crude oil, natural gas and
natural gas liquids which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions.
<PAGE>
NO DEALER, SALESMAN, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING SHAREHOLDER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES NOR DOES IT
CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY OFFER OR SALE MADE HEREUNDER AT ANY TIME SHALL IMPLY THAT INFORMATION HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
--------------------
TABLE OF CONTENTS
PAGE
AVAILABLE INFORMATION........................................................ 2
INFORMATION INCORPORATED BY REFERENCE........................................ 2
PROSPECTUS SUMMARY........................................................... 3
THE COMPANY.................................................................. 3
THE OFFERING................................................................. 3
RISK FACTORS................................................................. 5
DESCRIPTION OF SECURITIES.................................................... 10
SELLING SECURITY HOLDERS..................................................... 11
LEGAL MATTERS................................................................ 12
EXPERTS...................................................................... 12
GLOSSARY..................................................................... 13
<PAGE>
187,070
COMMON SHARES
75,000 COMMON SHARE
PURCHASE WARRANTS
PROSPECTUS
[GRAPHIC OMITTED]
April 29, 1997
