Denbury Inc.

Good day, ladies and gentlemen, and welcome to Danbury's fourth quarter and full year 2021 results and 2022 Outlook conference call. My name is Sherry, 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. I would now like to turn the conference over to your host for today's call, Brad Whitmarsh, Head of Investor Relations, Please proceed, sir.

Good morning, everyone, and thank you for joining us today. I hope you've had a chance to review our news releases this morning as well as the supporting materials that are available on our website at denbury.com. 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 those measures are provided in today's earnings release and supplemental materials as well. This morning, our prepared comments will come from Chris Kendall, President and CEO, Mark Allen, CFO, David Shepherd, SVP of Operations, and Nick Wood, SVP of Carbon Solutions. Matt Dahan, SVP of Business Development and Technology, is here to participate in the Q&A. 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. We have a lot to talk about today. I'm incredibly excited about our team's accomplishments since our last update, and we are similarly excited to share details of our progress with you this morning. I'll begin with a brief overview, and then Mark, David, and Nick will provide more detail. To begin, I am extremely proud of our employees. Their sustained dedication and resilience as they continued to achieve great results in the face of the impacts from the COVID pandemic is inspirational. Our relentless focus on safety in everything we do, again, drove record performance. What made this achievement all the more impressive is that it was accomplished while managing through not only the pandemic, but also a significant construction project, the installation of our CO2 pipeline to CCA. We recently completed two major milestones in the CCA EOR development. The first was the completion of the 105 mile CCA CO2 pipeline in November, followed shortly thereafter with the beginning of phase one CO2 injection on February 1st. These accomplishments have us on track for first incremental production in the second half of next year, followed by decades of strong production and development opportunities from this amazing asset. Through the exclusive use of industrial source CO2 in this project, all production will be carbon negative blue oil. You will recall that we've been working on a third-party verification of the carbon intensity of our blue oil. We recently completed that work for Denbury's two largest producing EOR fields, West Hastings in Texas and Bell Creek in Montana. Significantly, and as expected, the CI score is negative for our blue oil production and second lowest behind only dairy RNG when compared to a range of typical fuels. We expect that this negative CI score, blue oil production, will ultimately drive incremental value for Denberry, and we are working on several promising pathways to realizing that value. Before I turn to CCUS, I want to emphasize how the EOR-focused side of Denberry's business is what makes most everything possible for us to realize our CCUS vision. Financially, it drives strong cash flows that can be directed toward CCUS investments. Technically, The skill sets that make us experts in EOR are the exact same skill sets needed for reliable CO2 sequestration. Operationally, we're able to utilize the same infrastructure for both our EOR operations and CO2 sequestration, and we have the immediate ability to inject captured CO2 into our EOR fields under existing permits and regulations. For many years, Denver has been the only public company of scale with a primary focus on CO2 EOR. And through that sustained focus, we were able to build a deep talent base of experts with similar passions and knowledge around all aspects of CO2 management. Today, those experts are helping Denbury accelerate into CCUS, leveraging the technical project and operational know-how that has positioned Denbury so well in this emerging industry. I would also like to touch on U.S. government policy support for CCUS. Some have asked our thoughts on what comes next on any potential increases to the 45Q tax credits and how important those increases may be to our business. I have heard occasional concerns from investors that some emitters may be on the CCUS sidelines until 45Q is increased. First and foremost, we remain very excited about the high level of engagement and activity with industrial emitters that is based on the current 45Q levels And we are confident our CCUS business will grow strongly, even if we were to see no changes from the current levels. To underscore this point, the goals and priorities we communicated today are based on the current tax credit levels, as are the new CO2 offtake agreements we announced this morning. I'm looking forward to sharing more positive and exciting developments in the coming weeks and months that will further highlight this progress. Considering the strong bipartisan support for CCUS, I believe that in time, favorable changes to the tax credit will be implemented. In my view, higher tax credits will accelerate CCUS from what we already see as a rapidly growing business, and most importantly, will accelerate progress in achieving the ultimate objective of reducing carbon emissions. My confidence in the opportunity we have in CCUS has steadily grown over the last year and last quarter, and quite frankly, even during the last several weeks. While Nick will provide details around how this exciting business is developing in a few minutes, I'd first like to share a few high-level thoughts here. My fundamental belief is that a reliable, redundant, and secure transportation and storage system downstream from the capture facilities is essential for a successful CCUS project. Our strategy is to bring a solution to our industrial partners that economically provides those elements, leveraging the extensive backbone of our industry-leading CO2 pipeline infrastructure. In the coming months and beyond, we plan to continue to strategically add dedicated storage sites along that backbone just as we announced today, providing both significant storage capacity as well as the great redundancy that will give our industrial partners the most reliable service possible. That service will be backed by our deep technical and operational CO2 handling bench strength, which is unmatched in the industry. When combined with our ability to provide CO2 offtake certainty today in EOR, as dedicated storage is being permitted and developed, Denbury offers more than a compelling combination for anyone preparing to make significant capture investments. Utilization of CO2 is an exciting area of CCUS technology development, And this morning, we announced a strategic alliance with Infinium, a company that has developed an innovative technology to produce ultra-low carbon fuels using captured CO2. In addition to supplying CO2, Denver has the opportunity to potentially participate as a partner in Infinium's ultra-low carbon fuel projects. We have set aggressive goals for our CCUS business in 2022 that support our strategy to lead the CCUS industry. For CO2 storage sites, our goal is to reach at least 1.2 billion tons of potential capacity by the end of 2022, with storage sites strategically located across our network. For the transportation and storage of CO2 received from industrial emitters, our goal this year is to reach agreements representing an excess of a cumulative 10 million tons per year. The agreements announced today have moved us further toward that target, And based on our current negotiations, I am highly confident that we will meet and will hopefully meaningfully exceed our goal. Based on our encouraging progress, we are allocating significant capital to CCUS this year. We are planning on spending around $50 million, but we are prepared to flex that number higher depending on our continued or accelerated progress. Capital spend in this area could include lease acquisition costs, pre-development activities on sequestration sites, and potentially even some capital for equity investment or joint ventures in the CCUS value chain. Building on the great accomplishments of last year, 2022 will be transformational for our business. In the course of this year, I am confident investors will have a much more defined view of Denbury's significant industry leadership and the incredible potential of what this business can become in the coming years. I will now turn it over to Mark for a review of our 2021 results and 2022 outlook.