Denbury Resources’ CEO Extracts a Lucrative Exit…

July 8, 2009

On June 30th, company founder Gareth Roberts stepped down as the president and CEO of Denbury Resources Inc. (DNR), an oil and natural gas company that operates in Mississippi, Louisiana, Alabama, and Texas. And, based on the 8-K the company filed yesterday, we know that the concept of the Golden Parachute is alive and well. (We also know that Roberts will continue to serve as the co-chairman of the board of directors and in the “non-officer role” as the “Chief Strategist of the Company”.) Since the company had a succession plan in place, the move was not unexpected.

Roberts signed a “Founder’s Retirement Agreement” that provides for:

  • a payment (made June 30) in the sum of $3.65 million in cash;
  • the Company’s issuance to him of $6.35 million of the Company’s 93/4% Senior Subordinated Notes due 2016;
  • the sum of $250,000 per year for serving as Co-Chairman of the board through 2012;
  • payment for serving as “Chief Strategist” in the sum of another $250,000 per year, through 2012;
  • the right to participate in the Company’s insurance plans through 2012; and
  • assuming that he continues to work as the company’s Chief Strategist, Roberts “will be entitled to vest over time in his currently existing, unvested equity awards granted under the Company’s 2004 Omnibus Stock and Incentive Plan as per the existing terms and conditions of those awards”; and
  • Roberts also “entered into a 10b5-1 trading plan providing for the sale of up to 30,000 shares of the Company’s common stock at a specified minimum price between September 14, 2009 and December 31, 2009.”

The company’s press release (quoting board co-chair Wieland Wettstein) on the change credits Roberts for growing the company “from no more than an idea into its present stature into a leader in tertiary recovery with over 800 employees.”

However, the recent headlines about the company might lead one to conclude that the retirement agreement is extremely generous. For instance, this article from early May looks at the company’s 1Q 2009 loss of $18.3 million (compared to a net income gain of $73 million for the same period last year). At the time, Roberts noted that commodity prices had fallen, but the company had made money “if you adjust for the non-cash fair value adjustments on our derivatives.” He also noted that the company had increased its productions levels.

The production factor may have changed, though. Yesterday this article reported that Denbury Resources lowered its production outlook for the rest of 2009. The company sold a majority of its stake in the Barnett Shale natural gas assets to Talon Oil & Gas, LLC. Now Denbury Resources says that it expects to reduce its production by 3,500 barrels of oil equivalent per day.

Fortunately for Roberts, the pipeline of cash flowing to him looks a lot more reliable.

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