SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to
FORM 8-K
Filed on December 8, 1997
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event December 8, 1997
DENBURY RESOURCES INC.
(Exact name of Registrant as specified in its charter)
Canada
(State or other
jurisdiction
of incorporation or
organization)
33-93722 Not applicable
(Commission File (I.R.S. Employer
Number) Identification No.)
17304 Preston Road
Suite 200
Dallas, TX 75252
(Address of principal (Zip code)
executive offices)
Registrant's telephone number, including area code: (972)713-3000
<PAGE>
Denbury Resources Inc. filed an 8-K on December 8, 1997 to report the
agreement to acquire oil and gas properties from Chevron U.S.A. Inc. (the
"Chevron Acquisition"). Audited statements of revenues and direct operating
expenses attributable to the Chevron Acquisition and pro forma results of
operations of Denbury Resources Inc. adjusted for this acquisition were not
available at that time and are filed herewith.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Audited statements of revenues and direct operating expenses
attributable to the Chevron Acquisition for the years ending December
31, 1995 and December 31, 1996 and the nine months ended September 30,
1997.
(b) Pro forma results of operations of Denbury Resources Inc. for the year
ended December 31, 1996 and nine months ended September 30, 1997 as if
the acquisition had occurred at the beginning of each respective
period and a pro forma balance sheet as of September 30, 1997.
(c) Exhibits:
Exhibit No.
(23) Consent of Price Waterhouse LLP
2
<PAGE>
Item 7 (a)
Statement of Revenues
and Direct Operating Expenses
of Chevron Properties
3
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Denbury Resources Inc.
We have audited the accompanying statement of revenues and direct operating
expenses of Chevron U.S.A. Inc.'s working interest in the Heidelberg Fields (the
"Properties") acquired by Denbury Resources Inc. (the "Company") for each of the
two years in the period ended December 31, 1996 and for the nine months ended
September 30, 1997. This statement is the responsibility of the Company's
management. Our responsibility is to express an opinion on this statement based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of revenues and direct
operating expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statement of revenues and direct operating expenses. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the statement of
revenues and direct operating expenses. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying statement of revenues and direct operating expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission (for inclusion in the registration statement
on Form S-3 of Denbury Resources Inc.) as described in Note 1 and is not
intended to be a complete presentation of the Properties' revenues and expenses.
In our opinion, the statement of revenues and direct operating expenses
referred to above presents fairly, in all material respects, the revenues and
direct operating expenses of the Properties described in Note 1 for each of the
two years in the period ended December 31, 1996 and for the nine months ended
September 30, 1997, in conformity with generally accepted accounting principles.
/s/ Price Waterhouse LLP
San Francisco, California
December 19, 1997
4
<PAGE>
Statement of Revenues and Direct Operating Expenses of Properties
<TABLE>
<CAPTION>
Nine Months
Year Ended Ended
December 31, September 30,
-------------------
1995 1996 1997
------- --------- --------
(Amounts in thousands)
<S> <C> <C> <C>
Revenues:
Oil, natural gas and related
product sales..................... $17,460 $ 23,662 $14,034
Direct operating expenses:
Lease operating expense........... 5,825 6,650 5,237
------- --------- --------
Excess of revenues over direct
operating expense.................... $11,635 $ 17,012 $ 8,797
======= ========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
NOTES TO STATEMENT OF REVENUES AND
DIRECT OPERATING EXPENSES OF PROPERTIES
1. Basis of Presentation
Denbury Resources Inc. (the "Company") agreed on November 25, 1997 to
acquire Chevron U.S.A. Inc.'s working interest in the Heidelberg Fields for
approximately $202 million. The Properties are located in the state of
Mississippi. The acquisition closed on December 30, 1997. These acquired
Properties will be consolidated in the Company's financial statements effective
January 1, 1998. Other owners of working interests in the Properties covered by
the acquisition agreement have the preferential right to acquire the Properties,
which if exercised could reduce the interest acquired by the Company.
Historical financial statements reflecting financial position, results of
operations and cash flows required by generally accepted accounting principles
are not presented, as such information is neither readily available on an
individual property basis nor meaningful for the Properties acquired because the
entire acquisition cost is being assigned to oil and natural gas properties.
Accordingly, the statement of revenues and direct operating expenses is
presented in lieu of the financial statements required under Rule 3-05 of
Securities and Exchange Commission Regulation S-X.
The accompanying statement of revenues and direct operating expenses (the
"Statement") relates only to the working interest in the Properties acquired and
may not be representative of future operations. The Statement includes revenues
from natural gas sales and direct operating expenses for each of the periods
presented. The Statement does not include federal and state income taxes,
interest, depletion, depreciation and amortization or general and administrative
expenses because such amounts would not be indicative of those expenses which
would be incurred by the Company.
Revenues in the Statement are recognized on the entitlement method.
The accompanying Statement has been prepared on the accrual basis in
accordance with generally accepted accounting principles. Preparation of the
Statement in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts reported in
the Statement and accompanying notes. Actual results could differ from those
estimates.
2. Commitments and Contingencies
Chevron U.S.A. Inc. is a defendant in numerous lawsuits, including, along
with other oil companies, actions challenging oil royalty and severance tax
payments based on posted prices. Plaintiffs may seek to recover large and
sometimes unspecified amounts, and some matters may remain unresolved for
several years. The amount of such future cost is indeterminable. Such liability
for events occurring prior to the effective date of the acquisition shall be
retained by Chevron U.S.A. Inc. and Chevron U.S.A. Inc. has indemnified the
Company for any costs incurred by it in conjunction with these suits.
Given the nature of the Properties acquired and as stipulated in the
purchase agreement, the Company is subject to loss contingencies, if any,
pursuant to existing or expected environmental laws, regulations, and leases
covering the acquired Properties. Management does not believe such matters will
have a material impact on the Statement.
3. Concentration of Customers
During the year ended December 31, 1996 and the nine months ended September
30, 1997, approximately 67% and 31% of the Properties' production was sold to
Hunt Refining Company and Southland Oil Company, respectively. During the year
ended December 31, 1995, approximately 88% and 10% of the Properties' production
was sold to Amerada Hess Corporation and Hunt Refining Company, respectively.
While management believes that its relationships with these purchasers is good,
any loss of revenue from these purchasers due to nonpayment or late payment by
the purchaser would have an adverse effect on the Statement.
6
<PAGE>
NOTES TO STATEMENT OF REVENUES AND
DIRECT OPERATING EXPENSES OF PROPERTIES -(Continued)
4. Oil and Natural Gas Reserves Information (Unaudited)
The Properties' proved oil and natural gas reserves at December 31, 1997,
1996 and 1995 have been estimated by the Company's petroleum consultants,
Netherland & Sewell, in accordance with guidelines established by the Securities
and Exchange Commission ("SEC"). The December 31, 1997 reserves have been
adjusted by production from the Properties to estimate the September 30, 1997
reserves.
<TABLE>
<CAPTION>
Oil Gas
Estimated Quantities of Proved Reserves (MBbl) (MMCF)
---------- ---------
<S> <C> <C>
January 1, 1995 31,331.1 3,303.7
Production....................... 1,321.5 290.6
---------- ---------
December 31, 1995........................ 30,009.6 3,013.1
Production....................... 1,252.0 245.1
---------- ---------
December 31, 1996........................ 28,757.6 2,768.0
Production....................... 793.6 160.1
---------- ---------
September 30, 1997....................... 27,964.0 2,607.9
========== =========
Proved Developed Reserves:
As of January 1, 1995.................... 17,230.8 3,303.7
As of December 31, 1995.................. 15,909.3 3,013.1
As of December 31, 1996.................. 14,657.3 2,768.0
As of September 30, 1997................. 13,863.7 2,607.9
</TABLE>
Standardized Measure of Discounted Future Net Cash Flows and Changes Therein
Related to Oil and Natural Gas Reserves
The standardized measure of discounted future net cash flows ("Standardized
Measure") relating to oil and natural gas reserves acquired is calculated in
accordance with regulations prescribed by the SEC. The Standardized Measure has
been prepared assuming year-end selling prices adjusted for future fixed and
determinable price changes, year-end development and production costs and a 10%
annual discount rate. The reserves and the related Standardized Measure at
September 30, 1997 were adjusted for production during the nine-months ended
September 30, 1997 and the years ended December 31, 1996 and 1995, and in
addition, the Standardized Measure was also adjusted for price changes to derive
reserves and the Standardized Measure as of September 30, 1997, December 31,
1996 and December 31, 1995. The Standardized Measure is not a fair market value
of the mineral interests purchased and the Standardized Measure presented for
the proved oil and natural gas reserves does not purport to present the fair
market value of the oil and natural gas properties. An estimate of such value
should consider, among other factors, anticipated future prices of oil and
natural gas, the probability of recoveries of existing proved reserves, the
value of probable reserves and acreage prospects, and perhaps different discount
rates. It should be noted that estimates of reserve quantities are inherently
imprecise and subject to substantial revision.
<TABLE>
<CAPTION>
December 31,
------------------ September 30,
1995 1996 1997
--------- ------- ----------
(Amounts in thousands)
<S> <C> <C> <C>
Future cash inflows......................... $470,689 $613,780 $ 426,489
Future production and development costs...... (201,520) (204,876) (189,243)
--------- --------- ----------
Future net cash flows undiscounted........... 269,169 408,904 237,246
10% annual discount for estimated timing of
cash flows................................... (142,503) (203,206) (113,931)
--------- --------- ----------
Standardized measure of discounted future net
cash flows................................... $126,666 $205,698 $ 123,315
========= ========= ==========
</TABLE>
7
<PAGE>
NOTES TO STATEMENT OF REVENUES AND
DIRECT OPERATING EXPENSES OF PROPERTIES -(Continued)
The following are principal sources of changes in the standardized measure
of discounted future net cash flows:
<TABLE>
<CAPTION>
Nine Months
Year Ended Ended
December 31, September 30,
-----------------
1995 1996 1997
------- ------- -----------
(Amounts in thousands)
<S> <C> <C> <C>
Standardized measure of discounted future net
cash flows at beginning of period............. $ 97,753 $126,666 $ 205,698
Changes resulting from:
Net change in prices .................. 30,772 83,377 (89,014)
Sales of oil and natural gas produced . (11,635) (17,012) (8,797)
Accretion of discount ................. 9,776 12,667 15,428
--------- --------- ----------
Standardized measure of discounted future net
cash flows at end of period.................. $ 126,666 $205,698 $ 123,315
========= ========= ==========
</TABLE>
8
<PAGE>
Item 7(b)
Unaudited Pro Forma Consolidated
Statements of Income and
Balance Sheet
9
<PAGE>
DENBURY RESOURCES INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma consolidated statements of income for the
year ended December 31, 1996 and the nine months ended September 30, 1997 and
the unaudited pro forma consolidated balance sheet as of September 30, 1997
(collectively, the "Pro Forma Financial Statements") are based on the historical
consolidated financial statements of the Company and the historical financial
statements of the properties acquired by the Company ("Chevron Properties") in
the Chevron Acquisition which closed on December 30, 1997.
The Unaudited Pro Forma Consolidated Statement of Income for the year ended
December 31, 1996 gives effect to the Chevron Acquisition as if it had occurred
as of January 1, 1996, and the Unaudited Pro Forma Consolidated Statement of
Income for the nine months ended September 30, 1997 gives effect to the Chevron
Acquisition as if it had occurred as of January 1, 1997. The Unaudited Pro Forma
Consolidated Balance Sheet gives effect to the Chevron Acquisition as if it had
occurred as of September 30, 1997. The pro forma adjustments are described in
the accompanying notes and are based upon available information and certain
assumptions that management believes are reasonable.
The Pro Forma Financial Statements do not purport to represent what the
Company's results of operations or financial condition would actually have been
had the Chevron Acquisition in fact occurred on such dates or to project the
Company's results of operations or financial condition for any future date or
period. The Pro Forma Financial Statements should be read in conjunction with
the historical consolidated financial statements of the Company and the
historical statements of revenues and direct operating expenses of the Chevron
Properties.
10
<PAGE>
DENBURY RESOURCES INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1997
----------------------------------------
Historical
-----------------
Chevron
Company Chevron Acquisition Pro
Historical Properties Adjustments Forma
-------- ------- --------- --------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Revenues:
Oil, natural gas and
related product sales.. $60,083 $14,034 $ - $ 74,117
Interest and other....... 986 - - 986
-------- ------- --------- --------
Total revenues...... 61,069 14,034 - 75,103
-------- ------- --------- --------
Expenses:
Production............... 15,737 5,237 - 20,974
General and
administrative......... 4,535 - 514 (b) 5,049
Interest................. 387 - 10,289 (c) 10,676
Depletion and
depreciation........... 23,224 - 3,942 (d) 27,166
Franchise taxes.......... 308 - - 308
-------- ------- --------- --------
Total expenses.. 44,191 5,237 14,745 64,173
-------- ------- --------- --------
Income before income taxes.. 16,878 8,797 (14,745) 10,930
Provision for income taxes.. (6,245) (3,255)(a) 5,456(a) (4,044)
-------- -------- --------- --------
Net income.................. $10,633 $ 5,542 $ (9,289) $ 6,886
======== ======== ========= ========
Net income per common share
Primary.................. $ 0.53 $ 0.34
Fully diluted............ 0.50 0.33
Average common shares
outstanding............. 20,175 20,175
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Information
11
<PAGE>
DENBURY RESOURCES INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31, 1996
----------------------------------------
Historical
-----------------
Chevron
Company Chevron Acquisition Pro
Historical Properties Adjustments Forma
-------- ------- --------- --------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Revenues:
Oil, natural gas and
related product Sales.. $52,880 $23,662 - $ 76,542
Interest and other....... 769 - - 769
-------- -------- --------- ---------
Total revenues.. 53,649 23,662 77,311
-------- -------- --------- ---------
Expenses:
Production............... 13,495 6,650 - 20,145
General and
administrative......... 4,267 - 687 (b) 4,954
Interest................. 1,993 - 15,716 (c) 17,709
Imputed preferred 1,281 - - 1,281
dividend....................
Loss on early 440 - - 440
extinguishment of debt......
Depletion and
depreciation......... 17,904 - 6,697 (d) 24,601
Franchise taxes.......... 213 - - 213
-------- -------- --------- ---------
Total expenses.. 39,593 6,650 23,100 69,343
-------- -------- --------- ---------
Income before income taxes.. 14,056 17,012 (23,100) 7,968
Provision for income taxes . (5,312) (6,294)(a) 8,547(a) (3,059)
-------- -------- --------- ---------
Net income.................. $ 8,744 $10,718 $ (14,553) $ 4,909
======== ======== ========= =========
Net income per common share
Primary.................. $ 0.67 $ 0.37
Fully diluted............ 0.62 0.37
Average common shares
outstanding.............. 13,104 13,104
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Information
12
<PAGE>
DENBURY RESOURCES INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
As of September 30, 1997
---------------------------------
Chevron
Company Acquisition Pro
Historical Adjustments Forma
--------- ---------- ---------
(in thousands, except share amounts)
<S> <C> <C> <C>
Assets:
Current assets
Cash and cash equivalents..... $ 2,236 $ - $ 2,236
Accrued production receivable 7,097 - 7,097
Trade and other receivables... 14,507 - 14,507
--------- ---------- ---------
Total current assets....... 23,840 - 23,840
--------- ---------- ---------
Property and equipment (using
full cost accounting)
Oil and gas properties........ 230,521 127,000 (e) 357,521
Unevaluated oil and gas
properties................. 6,389 75,000 (e) 81,389
Less accumulated depreciation
and depletion................. (53,527) - (53,527)
---------- ---------
Net property and equipment. 183,383 202,000 385,383
--------- ---------- ---------
Other assets.................... 3,201 - 3,201
--------- ---------- ---------
Total assets............ $210,424 $ 202,000 $412,424
========= ========== =========
Liabilities and Shareholders'Equity:
Current liabilities
Accounts payable and accrued
liabilities.................... $ 16,858 $ - $ 16,858
Oil and gas production payable. 4,060 - 4,060
Current portion of long-term
debt....................... 23 47,000 (f) 47,023
---------- ---------- ---------
Total current
liabilities......... 20,941 47,000 67,941
--------- ---------- ---------
Long-term liabilities
Long-term debt................. 20,005 155,000 (g) 175,005
Provision for site reclamation
costs...................... 938 - 938
Deferred income taxes and
other...................... 12,982 - 12,982
--------- ---------- ---------
Total long-term
liabilities......... 33,925 155,000 188,925
--------- ---------- ---------
Shareholders' equity
Common shares, no par value;
unlimited shares authorized;
20,364,799 outstanding........ 132,744 - 132,744
Retained earnings............. 22,814 - 22,814
--------- ---------- ---------
Total shareholders'
equity............... 155,558 - 155,558
--------- ---------- ---------
Total liabilities and
shareholders'
equity....... $210,424 $ 202,000 $412,424
========= ========== =========
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Information
13
<PAGE>
DENBURY RESOURCES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
1. Pro Forma Adjustments
(a) Income taxes were computed using the federal statutory rate of 35%
plus a 2% provision for state income taxes.
(b) Reflects an increase of $687,000 and $514,000 for the year ended
December 31, 1996 and the nine months ended September 30, 1997,
respectively, in general and administrative expense for additional
personnel and associated costs relating to the properties acquired in
the Chevron Acquisition, net of anticipated allocations to operations
and capitalization of exploration costs.
(c) Reflects an increase in interest expense for the period presented to
reflect the $202 million of borrowing under the Credit Facility (at an
assumed annual interest rate of 7.8% and 6.8% for the year ended
December 31, 1996 and the nine months ended September 30, 1997,
respectively) that would have been required to fund the Chevron
Acquisition had it occurred as of the beginning of each respective
period.
(d) Depreciation, depletion and amortization ("DD&A") and site reclamation
expenses have been computed using the unit of production method and
reflects the Company's increased investment in oil and natural gas
properties, which investment excludes $75 million of the Chevron
Acquisition purchase price as the Company intends to classify this
amount as unevaluated properties at December 31, 1997. The December
31, 1997 estimated proved reserves prepared by Netherland & Sewell
were used in the DD&A computation for the Chevron Acquisition.
(e) Reflects the purchase price paid in the Chevron Acquisition of which
the Company intends to classify $75 million as unevaluated properties.
(f) Reflects the incurrence of indebtedness under the acquisition tranche
of the Credit Facility to finance a portion of the Chevron
Acquisition.
(g) Reflects the incurrence of indebtedness under the revolving portion of
the Credit Facility to finance a portion of the Chevron Acquisition.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on it behalf by the
undersigned thereunto duly authorized.
Denbury Resources Inc.
(Registrant)
DATE: January 20, 1998 By: /s/ Bobby J. Bishop
------------------------------------
Bobby J. Bishop
Chief Accounting Officer
15
Item 7(c)
Exhibit (23)
Consent of Price Waterhouse LLP
16
<PAGE>
CONSENT OF PRICE WATERHOUSE LLP
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-1006) of Denbury Resources Inc. of our report
dated December 19, 1997 apprearing on page 4 of this Current Report on Form
8-K/A.
/s/ PRICE WATERHOUSE LLP
San Francisco, California
January 20, 1998
17
