Denbury Inc.

Greetings and welcome to Dunbarry's third quarter 2021 results conference call. My name is Daryl and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. To ask a question at that time, please press star 1 on your telephone keypad. I would now like to turn the conference call over to your host for today's call, Brad Whitmarsh, Head of Investor Relations. Please go ahead, sir.

Good morning everyone and thank you for joining us today. I hope you've had a chance to review our earnings release and supporting materials that we released this morning. They're available on our website at denberry.com and we may reference certain slides as we make our prepared comments. I want to remind everyone that today's call will include forward looking statements that are based on our best and most reasonable information. There are numerous factors that could cause actual results to differ materially from what is discussed on today's call. You can read our full disclosures on forward-looking statements and the risk factors associated with our business in the slides accompanying today's presentation, our most recent SEC filings, and today's news release. Also, please note that during the course of today's call, we may reference certain non-GAAP measures. Reconciliation and disclosure relative to these measures is provided in today's earnings release as well. This morning, our prepared comments will come from Chris Kendall, President and CEO of Mark Allen, CFO, David Shepard, SVP of Operations, and Nick Wood, SVP of Carbon Solutions. And with that, I'll turn the call over to Chris.

Thanks, Brad. Good morning, everyone, and thank you for joining us on today's call. In last quarter's call, I noted three key areas to watch in the second half of the year where Denberry would be unlocking substantial value for our shareholders and propelling our company toward an exciting future. This morning, I will provide a brief update on each, and then Mark, David, and Nick will provide more detail. The first of those key catalysts was strong execution on our base EOR-focused business. I'm incredibly pleased with our results across the board. Safety performance is better than it has ever been. We've continued to deliver on the plan with quarterly operating and financial results meeting or exceeding expectations in all areas. We exited the quarter with no borrowings on our credit facility and we anticipate having zero debt on the balance sheet early next year. The second catalyst was executing on our flagship CCA development project. David will share more detail, but the project is ahead of schedule is at or below budget and is on track for initial CO2 injection in the first quarter of next year. Importantly, We have incurred zero recordable safety incidents over the entire project to date, a remarkable achievement by the team, which underscores our core emphasis on safety. All production from this project will be carbon negative blue oil, and we continue to believe that our enhanced oil recovery business, utilizing industrial source CO2 emissions, produces the most environmentally friendly barrel of crude oil on the planet. We are progressing the blue oil third-party verification and CI score process that I mentioned on last quarter's call with completion of that project planned around year end. The third key catalyst I noted last quarter was progressing agreements with companies seeking to capture their CO2 emissions as well as agreements with the owners of potential storage sites in each case to begin unlocking the massive value potential that we have for CCUS with our carbon solutions business. During the third quarter, our carbon solutions team executed initial term sheets for our CO2 transport and storage services, including the previously announced ammonia project with Mitsubishi and the joint evaluation agreement for low carbon solutions with Mitsui. These are just the first of what I am confident will be many agreements. I am excited and encouraged by the number of agreements we're negotiating, as well as the cumulative volume potential. I anticipate we will have executed even more agreements for CO2 transport and storage by the end of the year. At the same time, we've continued work to secure underground CO2 storage access along our infrastructure to provide long-term safe sequestration of CO2 for our customers. The agreement with Gulf Coast Midstream Partners that we announced this morning represents the first of these sites, providing a substantial storage opportunity in the Houston area. Total storage potential at this location could be up to 400 million metric tons, and we're thrilled to be working with Gulf Coast Midstream partners on this project. We're also working to add sites across our infrastructure network, and I expect that the proximity of these locations to our pipeline system will provide a very economic, reliable, and flexible storage solution for our customers. I often get asked about the competitive landscape in CCUS. Considering the magnitude of the CCUS opportunity, I expect there may be many potential competitors who will work to enter this market. That being said, I do not see another company capable of providing the complete package that Denbury provides today, ranging from our industry-leading CO2 infrastructure footprint, our deep technical expertise in the complete spectrum of transporting and storing CO2, and the certainty that our currently operating system can provide. Before handing over to Mark, I wanted to comment briefly on the latest draft of the House reconciliation package, which includes enhancements to the 45Q tax credit. While there are many details to work through in the language, and the entire package is, of course, subject to congressional approval, These enhancements are consistent with our expectations for increased CO2 emission capture incentives with greater support for both dedicated storage and EOR storage. The proposed increased tax credit levels should begin to incentivize higher cost of capture industries like cement and steel manufacture, as well as certain other post-combustion emissions. The draft package also includes other enhancements to 45Q, such as an extension of the capture construction period, a reduction in the minimum facility size that qualifies for the credit, and a shift from a tax credit structure to direct pay. If passed, I believe these changes will expand and accelerate the growth of the U.S. CCUS industry, leading to significant reductions in industrial CO2 emissions. Before I wrap up, if you haven't had a chance to read our corporate responsibility report that we issued in September, it is available on our website, highlighting our progress in mitigating direct and indirect emissions, as well as enhancements in safety and governance. DenBerry has a unique and impactful ESG strategy, and we are dedicated to being a leader in sustainability as we all work to create a new energy future.