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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

 

Filed by the Registrant  ☒    Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to §240.14a-12

PENN VIRGINIA CORPORATION

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

 

     

  (2)  

Aggregate number of securities to which transaction applies:

 

     

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

     

  (4)  

Proposed maximum aggregate value of transaction:

 

     

  (5)  

Total fee paid:

 

     

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount Previously Paid:

 

     

  (2)  

Form, Schedule or Registration Statement No.:

 

     

  (3)  

Filing Party:

 

     

  (4)  

Date Filed:

 

     

 

 

 


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LOGO

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON APRIL 17, 2019

AT DENBURY RESOURCES INC.

5320 LEGACY DRIVE

PLANO, TEXAS 75024

NOTICE IS HEREBY GIVEN that a special meeting of stockholders of Denbury Resources Inc. (“Denbury”) will be held on April 17, 2019, at 10:00 a.m., Central Time, at 5320 Legacy Drive, Plano, Texas 75024, to consider and vote on a proposal:

 

   

to approve the issuance of shares of Denbury common stock, par value $0.001 per share (“Denbury Common Stock”) (which we refer to as the “Denbury Issuance Proposal”), in connection with the merger (the “Merger”) between a wholly owned subsidiary of Denbury and Penn Virginia Corporation (“Penn Virginia”), as contemplated by the Agreement and Plan of Merger, dated October 28, 2018 among Denbury, Penn Virginia, DR Sub LLC and Dragon Merger Sub Inc. (which, as it may be amended from time to time, we refer to as the “Merger Agreement”); and

 

   

to approve an amendment to Denbury’s Second Restated Certificate of Incorporation to increase the number of shares of Denbury Common Stock authorized for issuance from 600,000,000 shares to 984,000,000 shares (the “Denbury Charter Amendment Proposal”).

Denbury stockholder approval of the Denbury Issuance Proposal and the Denbury Charter Amendment Proposal is required to complete the Merger. Denbury will transact no other business at the Denbury special meeting. The record date for the Denbury special meeting has been set as February 19, 2019. Only Denbury stockholders of record as of the close of business on such record date are entitled to notice of, and to vote at, the Denbury special meeting or any adjournments and postponements of the Denbury special meeting. For additional information regarding the Denbury special meeting, see the section entitled “Special Meeting of Denbury Stockholders” beginning on page 64 of the joint proxy statement/prospectus accompanying this notice.

The Denbury board of directors unanimously recommends that you vote “FOR” the Denbury Issuance Proposal and “FOR” the Denbury Charter Amendment Proposal.

The Denbury Issuance Proposal and the Denbury Charter Amendment Proposal are described in more detail in the accompanying joint proxy statement/prospectus, which you should read carefully and in its entirety before you vote. A copy of the Merger Agreement is attached as Annex A to the accompanying joint proxy statement/prospectus.

PLEASE VOTE AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE DENBURY SPECIAL MEETING. IF YOU LATER DESIRE TO REVOKE OR CHANGE YOUR PROXY FOR ANY REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS. FOR FURTHER INFORMATION CONCERNING THE PROPOSALS BEING VOTED UPON, USE OF THE PROXY AND OTHER RELATED MATTERS, YOU ARE URGED TO READ THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS.


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Your vote is very important. Approval of the Denbury Issuance Proposal by Denbury stockholders is a condition to the Merger and requires the affirmative vote of the holders of a majority of the shares of Denbury Common Stock represented in person or by proxy at the Denbury special meeting and entitled to vote on the proposal. Approval of the Denbury Charter Amendment Proposal by Denbury stockholders is also a condition to the Merger and requires the affirmative vote of holders of a majority of the outstanding shares of Denbury Common Stock entitled to vote on the proposal. Denbury stockholders are requested to complete, date, sign and return the enclosed proxy in the envelope provided, which requires no postage if mailed in the United States, or to submit their votes by phone or the Internet. Simply follow the instructions provided on the enclosed Denbury proxy card. Abstentions will have the same effect as a vote “AGAINST” the Denbury Issuance Proposal and broker non-votes will have no effect on the outcome of the vote. Abstentions, failure to submit a proxy or vote in person at the Denbury special meeting and broker non-votes will have the same effect as a vote “AGAINST” the Denbury Charter Amendment Proposal.

 

BY ORDER OF THE BOARD OF DIRECTORS,

LOGO

 

Christian S. Kendall

President and Chief Executive Officer

Denbury Resources Inc.


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LOGO

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD ON APRIL 17, 2019

AT HOUSTON MARRIOTT ENERGY CORRIDOR

16011 KATY FREEWAY

HOUSTON, TEXAS 77094

NOTICE IS HEREBY GIVEN that a special meeting of shareholders of Penn Virginia Corporation (“Penn Virginia”) will be held on April 17, 2019, at 10:00 a.m., Central Time, at Houston Marriott Energy Corridor, 16011 Katy Freeway, Houston, Texas 77094, to consider and vote on a proposal:

 

   

to approve the Agreement and Plan of Merger, dated October 28, 2018 (which, as it may be amended from time to time, we refer to as the “Merger Agreement”), among Penn Virginia, Denbury Resources Inc. (“Denbury”), DR Sub LLC and Dragon Merger Sub Inc. (which we refer to as the “Penn Virginia Merger Proposal”); and

 

   

to approve, by a non-binding advisory vote, certain compensation that may be paid or become payable to Penn Virginia’s named executive officers that is based on or otherwise relates to the merger contemplated by the Merger Agreement (which we refer to as the “Penn Virginia Non-Binding Compensation Advisory Proposal”).

Penn Virginia shareholder approval of the Penn Virginia Merger Proposal is required to complete the merger between a wholly owned subsidiary of Denbury and Penn Virginia (the “Merger”), as contemplated by the Merger Agreement. Penn Virginia shareholders will also be asked to approve the Penn Virginia Non-Binding Compensation Advisory Proposal. Penn Virginia will transact no other business at the Penn Virginia special meeting. The record date for the Penn Virginia special meeting has been set as February 19, 2019. Only Penn Virginia shareholders of record as of the close of business on such record date are entitled to notice of, and to vote at, the Penn Virginia special meeting or any adjournments and postponements of the Penn Virginia special meeting. For additional information regarding the Penn Virginia special meeting, see the section entitled “Special Meeting of Penn Virginia Shareholders” beginning on page 71 of the joint proxy statement/prospectus accompanying this notice.

The Penn Virginia board of directors unanimously recommends that you vote “FOR” the Penn Virginia Merger Proposal and “FOR” the Penn Virginia Non-Binding Compensation Advisory Proposal.

The Penn Virginia shareholder proposals are described in more detail in the accompanying joint proxy statement/prospectus, which you should read carefully and in its entirety before you vote. A copy of the Merger Agreement is attached as Annex A to the accompanying joint proxy statement/prospectus.

PLEASE VOTE AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE PENN VIRGINIA SPECIAL MEETING. IF YOU LATER DESIRE TO REVOKE OR CHANGE YOUR PROXY FOR ANY REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS. FOR FURTHER INFORMATION CONCERNING THE PROPOSALS BEING VOTED UPON, USE OF THE PROXY AND OTHER RELATED MATTERS, YOU ARE URGED TO READ THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS.


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Your vote is very important. Approval of the Penn Virginia Merger Proposal by Penn Virginia shareholders is a condition to the Merger and requires the affirmative vote of the holders of more than two-thirds of the outstanding shares of Penn Virginia common stock entitled to vote on the proposal. Penn Virginia shareholders are requested to complete, date, sign and return the enclosed proxy in the envelope provided, which requires no postage if mailed in the United States, or to submit their votes by phone or the Internet. Simply follow the instructions provided on the enclosed Penn Virginia WHITE proxy card. Abstentions, failure to submit a proxy or vote in person at the Penn Virginia special meeting and broker non-votes will have the same effect as a vote “AGAINST” the Penn Virginia Merger Proposal.

 

BY ORDER OF THE BOARD OF DIRECTORS,

LOGO

 

John A. Brooks

President and Chief Executive Officer

Penn Virginia Corporation


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REFERENCES TO ADDITIONAL INFORMATION

This joint proxy statement/prospectus incorporates by reference important business and financial information about Denbury Resources Inc. (which we refer to as “Denbury”) and Penn Virginia Corporation (which we refer to as “Penn Virginia”) from other documents that are not included in or delivered with this joint proxy statement/prospectus, including documents that Denbury and Penn Virginia have filed with the U.S. Securities and Exchange Commission (which we refer to as the “SEC”). For a listing of documents incorporated by reference herein, see the section entitled “Where You Can Find More Information” beginning on page 221. This information is available for you to review free of charge at the public reference room of the SEC located at 100 F Street, N.E., Washington, DC 20549, and through the SEC’s website at www.sec.gov.

You may request copies of this joint proxy statement/prospectus and any of the documents incorporated by reference herein or other information concerning Denbury or Penn Virginia, without charge, upon written or oral request to the applicable company’s principal executive offices. The respective addresses and phone numbers of such principal executive offices are listed below.

 

For Denbury Stockholders:    For Penn Virginia Shareholders:

Denbury Resources Inc.

5320 Legacy Drive

Plano, Texas 75024

Attention: Investor Relations

Telephone: (972) 673-2000

ir@denbury.com

  

Penn Virginia Corporation

16285 Park Ten Place, Suite 500

Houston, TX 77084

Attention: Investor Relations

Telephone: (713) 722-6540

invest@pennvirginia.com

To obtain timely delivery of these documents before the Denbury special meeting, Denbury stockholders must request the information no later than April 10, 2019 (which is five business days before the date of the Denbury special meeting).

To obtain timely delivery of these documents before the Penn Virginia special meeting, Penn Virginia shareholders must request the information no later than April 10, 2019 (which is five business days before the date of the Penn Virginia special meeting).

In addition, if you have questions about the Merger (as defined below) or this joint proxy statement/prospectus, would like additional copies of this joint proxy statement/prospectus or need to obtain proxy cards or other information related to the proxy solicitation, contact MacKenzie Partners, Inc., the proxy solicitor for Denbury, toll-free at (800) 322-2885 or, for brokers and banks, collect at (212) 929-5500, or Okapi Partners LLC, the proxy solicitor for Penn Virginia, toll-free at (855) 305-0856 or, for brokers and banks, collect at (212) 297-0720. You will not be charged for any of these documents that you request.


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ABOUT THIS JOINT PROXY STATEMENT/PROSPECTUS

This document, which forms part of a registration statement on Form S-4 filed with the SEC by Denbury (File No. 333-228935), constitutes a prospectus of Denbury under Section 5 of the Securities Act of 1933, as amended (which we refer to as the “Securities Act”), with respect to the shares of common stock of Denbury, par value $0.001 per share (which we refer to as “Denbury Common Stock”), to be issued to Penn Virginia shareholders pursuant to the Agreement and Plan of Merger, dated October 28, 2018 (which, as it may be amended from time to time, we refer to as the “Merger Agreement”), among Penn Virginia, Denbury, Dragon Merger Sub Inc. (which we refer to as “Merger Sub”) and DR Sub LLC (which we refer to as “LLC Sub”).

This document also constitutes a notice of meeting and proxy statement of each of Denbury and Penn Virginia under Section 14(a) of the Securities Exchange Act of 1934, as amended (which we refer to as the “Exchange Act”).

Denbury has supplied all information contained or incorporated by reference herein relating to Denbury, and Penn Virginia has supplied all information contained or incorporated by reference herein relating to Penn Virginia. Denbury and Penn Virginia have both contributed to the information relating to the Merger Agreement contained in this joint proxy statement/prospectus.

You should rely only on the information contained in or incorporated by reference herein in connection with any vote, the giving or withholding of any proxy or any investment decision in connection with the Merger Agreement. Denbury and Penn Virginia have not authorized anyone to provide you with information that is different from that contained in or incorporated by reference herein. This joint proxy statement/prospectus is dated March 4, 2019, and you should not assume that the information contained in this joint proxy statement/prospectus is accurate as of any date other than such date unless otherwise specifically provided herein. Further, you should not assume that the information incorporated by reference herein is accurate as of any date other than the date of the incorporated document. Neither the mailing of this joint proxy statement/prospectus to Denbury stockholders or Penn Virginia shareholders nor the issuance by Denbury of shares of Denbury Common Stock pursuant to the Merger Agreement will create any implication to the contrary.

All currency amounts referenced in this joint proxy statement/prospectus are in U.S. dollars.

 


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TABLE OF CONTENTS

 

     Page  

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETINGS

     1  

SUMMARY

     15  

Information About the Companies

     15  

The Merger and the Merger Agreement

     16  

Merger Consideration

     16  

Risk Factors

     16  

Treatment of Penn Virginia Equity Awards

     17  

Recommendation of the Denbury Board of Directors and Reasons for the Merger

     17  

Recommendation of the Penn Virginia Board of Directors and Reasons for the Merger

     17  

Opinions of Financial Advisors

     18  

Special Meeting of Denbury Stockholders

     19  

Special Meeting of Penn Virginia Shareholders

     21  

Board of Directors and Management of Denbury Following Completion of the Merger

     23  

Interests of Penn Virginia Directors and Executive Officers in the Merger

     24  

Conditions to the Completion of the Merger

     24  

No Solicitation

     26  

Adverse Recommendation Changes

     29  

Termination

     31  

Termination Fees

     32  

Regulatory Approvals

     33  

Specific Performance; Remedies

     33  

No Dissenters’ or Appraisal Rights

     33  

Material U.S. Federal Income Tax Consequences of the Integrated Mergers

     34  

Litigation Relating to the Merger

     34  

Comparison of Stockholders’ Rights

     35  

Listing of Denbury Common Stock; Delisting and Deregistration of Penn Virginia Common Stock

     35  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF DENBURY

     36  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF PENN VIRGINIA

     41  

SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

     46  

SUMMARY PRO FORMA COMBINED OIL AND NATURAL GAS RESERVE DATA

     47  

COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

     48  

COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

     49  

RISK FACTORS

     51  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     61  

INFORMATION ABOUT THE COMPANIES

     63  

SPECIAL MEETING OF DENBURY STOCKHOLDERS

     64  

Date, Time and Place

     64  

Purpose of the Denbury Special Meeting

     64  

Recommendation of the Denbury Board of Directors

     64  

Record Date and Outstanding Shares of Denbury Common Stock

     64  

Quorum; Abstentions and Broker Non-Votes

     64  

Required Vote

     65  

Methods of Voting

     65  

Adjournment

     66  

Revocability of Proxies

     66  

Proxy Solicitation Costs

     67  

No Dissenters’ or Appraisal Rights

     67  

Other Information

     67  

Assistance

     67  

 

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Vote of Denbury’s Directors and Executive Officers

     68  

Attending the Denbury Special Meeting

     68  

Results of the Denbury Special Meeting

     68  

DENBURY PROPOSALS

     69  

SPECIAL MEETING OF PENN VIRGINIA SHAREHOLDERS

     71  

Date, Time and Place

     71  

Purpose of the Penn Virginia Special Meeting

     71  

Recommendation of the Penn Virginia Board of Directors

     71  

Record Date and Outstanding Shares of Penn Virginia Common Stock

     71  

Quorum; Abstentions and Broker Non-Votes

     71  

Required Vote

     72  

Methods of Voting

     72  

Agreements with Certain Penn Virginia Shareholders

     73  

Adjournment

     73  

Revocability of Proxies

     74  

Proxy Solicitation Costs

     74  

No Dissenters’ or Appraisal Rights

     74  

Other Information

     74  

Assistance

     75  

Vote of Penn Virginia’s Directors and Executive Officers

     75  

Attending the Penn Virginia Special Meeting

     75  

Results of the Penn Virginia Special Meeting

     76  

PENN VIRGINIA PROPOSALS

     77  

THE MERGER

     79  

Transaction Structure

     79  

Consideration to Penn Virginia Shareholders

     79  

Election Deadline

     79  

Form of Election

     80  

Impact of Selling Shares of Penn Virginia Common Stock as to which an Election Has Already Been Made

     80  

Election Revocation and Changes

     80  

Non-Electing Holders

     81  

Proration and Adjustment Procedures

     81  

Background of the Merger

     82  

Recommendation of the Denbury Board of Directors and Reasons for the Merger

     93  

Opinion of Guggenheim, Denbury’s Financial Advisor

     97  

Summary of Financial Analyses

     101  

Other Considerations

     111  

Recommendation of the Penn Virginia Board of Directors and Reasons for the Merger

     112  

Opinion of Jefferies, Penn Virginia’s Financial Advisor

     115  

Denbury Unaudited Forecasted Financial Information

     126  

Penn Virginia Unaudited Forecasted Financial Information

     129  

Financing of the Merger

     133  

Regulatory Approvals

     133  

Board of Directors and Management of Denbury Following Completion of the Merger

     134  

Interests of Penn Virginia Directors and Executive Officers in the Merger

     134  

Treatment of Penn Virginia Equity Awards

     134  

Executive Officer Severance Arrangements

     135  

280G Mitigation Actions

     136  

Voting and Support Agreements

     136  

Quantification of Potential Payments

     137  

Indemnification and Insurance

     139  

 

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Listing of Denbury Common Stock; Delisting and Deregistration of Penn Virginia Common Stock

     140  

Accounting Treatment of the Merger

     140  

Treatment of Indebtedness

     140  

Litigation Relating to the Merger

     141  

THE MERGER AGREEMENT

     142  

Explanatory Note Regarding the Merger Agreement

     142  

The Merger

     142  

Closing and Effective Time of the Merger

     143  

Organizational Documents; Directors and Officers

     143  

Effect of the Merger on Capital Stock; Merger Consideration

     144  

Election Procedures

     145  

Payment for Securities; Exchange

     146  

No Dissenters’ or Appraisal Rights

     149  

Representations and Warranties

     149  

Interim Operations of Penn Virginia and Denbury Pending the Merger

     152  

No Solicitation; Adverse Recommendation Changes

     157  

Preparation of the Form S-4 and the Joint Proxy Statement/Prospectus

     167  

Special Meetings

     169  

Access to Information

     170  

Required Actions

     170  

Equity Awards

     172  

Indemnification; Directors’ and Officers’ Insurance

     173  

Fees and Expenses

     175  

Certain Tax Matters

     175  

Transaction Litigation

     175  

Section 16 Matters

     175  

Governance Matters

     176  

Public Announcements

     176  

Stock Exchange Listing

     176  

Stock Exchange De-Listing

     176  

Employee Matters

     177  

Financing

     177  

Financing Cooperation

     178  

Conditions to the Completion of the Merger

     178  

Termination

     180  

Effect of Termination

     183  

Specific Performance; Remedies

     183  

Amendment

     184  

Governing Law

     184  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE INTEGRATED MERGERS

     185  

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

     189  

COMPARISON OF STOCKHOLDERS’ RIGHTS

     200  

NO DISSENTERS’ OR APPRAISAL RIGHTS

     209  

SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT/DIRECTORS OF DENBURY

     210  

SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT/DIRECTORS OF PENN VIRGINIA

     212  

VALIDITY OF COMMON STOCK

     214  

TAX OPINIONS

     215  

EXPERTS

     216  

HOUSEHOLDING OF PROXY MATERIALS

     217  

 

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FUTURE STOCKHOLDER PROPOSALS

     218  

WHERE YOU CAN FIND MORE INFORMATION

     220  

Annex A—Agreement and Plan of Merger, dated as of October  28, 2018

     A-1  

Annex B—Opinion of Guggenheim Securities, LLC

     B-1  

Annex C—Opinion of Jefferies LLC

     C-1  

Annex D—Form of Denbury Charter Amendment

     D-1  

Annex E—Voting and Support Agreement (Strategic Value Partners, LLC)

     E-1  

Annex F—Voting and Support Agreement (KLS Diversified Asset Management LP)

     F-1  

Annex G—Voting and Support Agreements (Directors and Executive Officers of Penn Virginia)

     G-1  

 

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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETINGS

The following are answers to certain questions that you may have regarding the Denbury and Penn Virginia special meetings. Denbury and Penn Virginia urge you to read carefully the remainder of this document because the information in this section may not provide all the information that might be important to you in determining how to vote. Additional important information is also contained in the annexes to, and the documents incorporated by reference in, this document.

 

Q:

Why am I receiving this joint proxy statement/prospectus?

 

A:

You are receiving this joint proxy statement/prospectus because Denbury, Penn Virginia, Merger Sub and LLC Sub have entered into the Merger Agreement, pursuant to which, on the terms and subject to the conditions included in the Merger Agreement, Denbury has agreed to acquire Penn Virginia by means of a merger, pursuant to which Merger Sub will merge with and into Penn Virginia, with Penn Virginia surviving the merger as a direct wholly owned subsidiary of Denbury (the “Merger”). Immediately following the effective time of the Merger, the surviving corporation in the Merger will merge with and into LLC Sub, with LLC Sub surviving the merger as a direct wholly owned subsidiary of Denbury (the “LLC Sub Merger”).

Your vote is required in connection with the Merger. The Merger Agreement, which governs the terms of the Merger, is attached to this joint proxy statement/prospectus as Annex A.

Denbury. In order for the Merger to be consummated, Denbury stockholders must approve (i) the issuance of shares of Denbury Common Stock in connection with the Merger in accordance with the rules of the New York Stock Exchange (which we refer to as the “NYSE”) and (ii) an amendment to the Second Restated Certificate of Incorporation of Denbury (which we refer to as the “Denbury certificate of incorporation”) to increase the number of shares of Denbury Common Stock authorized for issuance thereunder. Denbury is holding a special meeting of its stockholders (which we refer to as the “Denbury special meeting”) to obtain that approval. Your vote is very important. We encourage you to submit a proxy to have your shares of Denbury Common Stock voted as soon as possible.

Penn Virginia. In order for the Merger to be consummated, Penn Virginia shareholders must approve the Merger Agreement in accordance with the Virginia Stock Corporation Act (which we refer to as the “VSCA”). Penn Virginia is holding a special meeting of its shareholders (which we refer to as the “Penn Virginia special meeting”) to obtain that approval. Your vote is very important. We encourage you to submit a proxy to have your shares of common stock, par value $0.01 per share, of Penn Virginia (“Penn Virginia Common Stock”) voted as soon as possible.

 

Q:

When and where will the special meetings take place?

 

A:

Denbury. The Denbury special meeting will be held at 10:00 a.m., Central Time, on April 17, 2019, at 5320 Legacy Drive, Plano, Texas 75024.

Penn Virginia. The Penn Virginia special meeting will be held at 10:00 a.m., Central Time, on April 17, 2019, at Houston Marriott Energy Corridor, 16011 Katy Freeway, Houston, Texas 77094.

 

Q:

What matters will be considered at the special meetings?

 

A:

Denbury. Denbury stockholders are being asked to consider and vote on:

 

   

a proposal to approve the issuance of shares of Denbury Common Stock in connection with the Merger (the “Denbury Stock Issuance”) as contemplated by the Merger Agreement (which we refer to as the “Denbury Issuance Proposal”); and

 

   

a proposal to approve an amendment to the Denbury certificate of incorporation (the “Denbury Charter Amendment”) to increase the number of shares of Denbury Common Stock authorized for issuance from 600,000,000 shares to 984,000,000 shares (which we refer to as the “Denbury Charter Amendment Proposal”).

 

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Penn Virginia. Penn Virginia shareholders are being asked to consider and vote on:

 

   

a proposal to approve the Merger Agreement (which we refer to as the “Penn Virginia Merger Proposal”); and

 

   

a proposal to approve, by a non-binding advisory vote, certain compensation that may be paid or become payable to Penn Virginia’s named executive officers that is based on or otherwise relates to the merger contemplated by the Merger Agreement (which we refer to as the “Penn Virginia Non-Binding Compensation Advisory Proposal”).

 

Q:

Is my vote important?

 

A:

Denbury. Yes. Your vote is very important. The Merger cannot be completed unless (i) the Denbury Issuance Proposal is approved by the affirmative vote of the holders of a majority of the outstanding shares of Denbury Common Stock represented in person or by proxy at the Denbury special meeting and (ii) the Denbury Charter Amendment Proposal is approved by the affirmative vote of the holders of a majority of the outstanding shares of Denbury Common Stock entitled to vote on the proposal. Only Denbury stockholders as of the close of business on the record date are entitled to vote at the Denbury special meeting. The board of directors of Denbury (which we refer to as the “Denbury board” or the “Denbury board of directors”) unanimously recommends that such Denbury stockholders vote “FOR” the approval of the Denbury Issuance Proposal and “FOR” the approval of the Denbury Charter Amendment Proposal.

Penn Virginia. Yes. Your vote is very important. The Merger cannot be completed unless the Penn Virginia Merger Proposal is approved by the affirmative vote of the holders of more than two-thirds of the outstanding shares of Penn Virginia Common Stock entitled to vote on the proposal. Only Penn Virginia shareholders as of the close of business on the record date are entitled to vote at the Penn Virginia special meeting. The board of directors of Penn Virginia (which we refer to as the “Penn Virginia board” or the “Penn Virginia board of directors”) unanimously recommends that such Penn Virginia shareholders vote “FOR” the approval of the Penn Virginia Merger Proposal and “FOR” the approval of the Penn Virginia Non-Binding Compensation Advisory Proposal.

 

Q:

If my shares of Denbury and/or Penn Virginia Common Stock are held in “street name” by my broker, bank or other nominee, will my broker, bank or other nominee automatically vote those shares for me?

 

A:

If your shares are held through a broker, bank or other nominee, you are considered the “beneficial holder” of the shares held for you in what is known as “street name.” The “record holder” of such shares is your broker, bank or other nominee, and not you. If this is the case, this joint proxy statement/prospectus has been forwarded to you by your broker, bank or other nominee. You must provide the record holder of your shares with instructions on how to vote your shares. Otherwise, your broker, bank or other nominee may not vote your shares on any of the proposals to be considered at the Denbury special meeting or the Penn Virginia special meeting, as applicable. A so-called “broker non-vote” will result if your broker, bank or other nominee returns a proxy but does not provide instruction as to how shares should be voted on a particular matter.

Under stock exchange rules, brokers, banks or other nominees do not have discretionary authority to vote on the Denbury Issuance Proposal or the Denbury Charter Amendment Proposal because they are “non-routine” proposals. If there are any broker non-votes, they will have (i) no effect on the Denbury Issuance Proposal and (ii) the same effect as a vote “AGAINST” the Denbury Charter Amendment Proposal.

Under stock exchange rules, brokers, banks or other nominees do not have discretionary authority to vote on the Penn Virginia Merger Proposal or the Penn Virginia Non-Binding Compensation Advisory Proposal because they are “non-routine” proposals. If there are any broker non-votes, they will have (i) the same effect as a vote “AGAINST” the Penn Virginia Merger Proposal and (ii) no effect on the Penn Virginia Non-Binding Compensation Advisory Proposal.

 

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Q:

What Denbury stockholder vote is required for the approval of the Denbury Issuance Proposal and the Denbury Charter Amendment Proposal?

 

A:

The Denbury Issuance Proposal. Approval of the Denbury Issuance Proposal requires the affirmative vote of the holders of a majority of the shares of Denbury Common Stock represented in person or by proxy at the Denbury special meeting. Abstentions will have the same effect as a vote “AGAINST” the proposal, and broker non-votes will have no effect on the outcome of the vote.

The Denbury Charter Amendment Proposal. Approval of the Denbury Charter Amendment Proposal requires the affirmative vote of holders of a majority of the outstanding shares of Denbury Common Stock entitled to vote on the proposal. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” the proposal. Failure to vote on the Denbury Charter Amendment Proposal will have the same effect as a vote “AGAINST” the proposal.

 

Q:

What Penn Virginia shareholder vote is required for the approval of the Penn Virginia Merger Proposal and Penn Virginia Non-Binding Compensation Advisory Proposal?

 

A:

The Penn Virginia Merger Proposal. Approval of the Penn Virginia Merger Proposal requires the affirmative vote of the holders of more than two-thirds of the outstanding shares of Penn Virginia Common Stock entitled to vote on the proposal. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” the proposal. Failure to vote on the Penn Virginia Merger Proposal will have the same effect as a vote “AGAINST” the Penn Virginia Merger Proposal.

The Penn Virginia Non-Binding Compensation Advisory Proposal. Approval of the Penn Virginia Non-Binding Compensation Advisory Proposal requires that the number of votes cast “FOR” the proposal exceed the number of votes cast “AGAINST” the proposal. Abstentions, broker non-votes and failure to vote will not count as votes cast and will have no effect on the outcome of the vote. As an advisory vote, this proposal is not binding upon Penn Virginia or the Penn Virginia board or Denbury or the Denbury board, and approval of this proposal is not a condition to the completion of the Merger.

 

Q:

Who will count the votes?

 

A:

The votes at the Denbury special meeting will be counted by an independent inspector of elections appointed by the Denbury board. The votes at the Penn Virginia special meeting will be counted by an independent inspector of elections appointed by the Penn Virginia board.

 

Q:

What will Penn Virginia shareholders receive if the Merger is completed?

 

A:

As a result of the Merger, each share of Penn Virginia Common Stock issued and outstanding immediately prior to the effective time of the Merger (other than any excluded shares, as defined in the section entitled “The Merger Agreement—Effect of the Merger on Capital Stock; Merger Consideration” beginning on page 144, and any shares of Penn Virginia service-based restricted stock and Penn Virginia performance-based restricted stock (each, as defined and discussed in the Question and Answer directly below) not treated as shares of Penn Virginia Common Stock) will be converted into the right to receive, at the election of the holder of such share of Penn Virginia Common Stock, either (i) $25.86 in cash without interest and 12.4000 shares of Denbury Common Stock (the “Mixed Election Consideration” and such election, the “Mixed Election”), (ii) $79.80 in cash without interest (the “Cash Election Consideration” and such election, the “Cash Election”) or (iii) 18.3454 shares of Denbury Common Stock (the “Stock Election Consideration” and such election, the “Stock Election”) (which we refer to collectively as the “Merger Consideration”). We refer to such shares of Penn Virginia Common Stock eligible to receive the Merger Consideration as “eligible shares.” Each share for which a Cash Election, Stock Election or no election was made will be subject to proration to ensure that the total amount of cash paid to holders of Penn Virginia Common Stock is equal to $400 million.

Penn Virginia shareholders will not be entitled to receive any fractional shares of Denbury Common Stock in the Merger, and no Penn Virginia shareholder will be entitled to voting or other rights in respect of any

 

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fractional shares of Denbury Common Stock. Each holder of Penn Virginia Common Stock converted pursuant to the Merger who would otherwise have been entitled to receive a fraction of a share of Denbury Common Stock (after taking into account all shares of Penn Virginia Common Stock exchanged by such holder) will receive, in lieu thereof, cash in an amount equal to such fractional amount multiplied by the average of the volume weighted average price per share of Denbury Common Stock on the NYSE on each of the five consecutive trading days ending with the last complete trading day prior to the closing date of the Merger. For additional information regarding the Merger Consideration, see the sections entitled “The Merger—Consideration to Penn Virginia Shareholders” and “The Merger Agreement—Effect of the Merger on Capital Stock; Merger Consideration” beginning on pages 79 and 144, respectively.

 

Q:

What will holders of Penn Virginia equity awards receive in the Merger?

 

A:

As of the effective time of the Merger, (i) each restricted stock unit granted under Penn Virginia’s 2016 Management Incentive Plan (which we refer to as the “Penn Virginia stock plan”) that is (x) subject solely to service-based vesting and (y) payable in Penn Virginia Common Stock or the value of which is determined with reference to the value of Penn Virginia Common Stock (which we refer to as the “Penn Virginia service-based restricted stock”), and (ii) each restricted stock unit that is (x) subject in whole or in part to performance-based vesting and (y) payable in Penn Virginia Common Stock or the value of which is determined with reference to the value of Penn Virginia Common Stock (which we refer to as the “Penn Virginia performance-based restricted stock”) that is outstanding as of immediately prior to the effective time of the Merger, whether vested or unvested, will automatically and without any required action on the part of the holder thereof, be converted into the right to receive:

 

   

an amount in cash, without interest, equal to the product of (A) the number of shares of Penn Virginia Common Stock subject to such Penn Virginia service-based restricted stock unit award or earned under such Penn Virginia performance-based restricted stock unit award, as applicable and (B) $25.86; and

 

   

a number of shares of Denbury Common Stock equal to the product of (A) the number of shares of Penn Virginia Common Stock subject to such Penn Virginia service-based restricted stock unit award or earned under such Penn Virginia performance-based restricted stock unit award, as applicable, and (B) 12.4000, rounded up to the nearest whole share.

The number of shares of Penn Virginia Common Stock deemed earned under each Penn Virginia performance-based restricted stock unit award will be reasonably determined by the compensation committee of the Penn Virginia board after consultation with Denbury based on actual level of achievement. However, the number of shares of Penn Virginia Common Stock deemed earned under any Penn Virginia performance-based restricted stock unit award with respect to any performance period scheduled to commence on or after January 1, 2019 will vest based on maximum level of achievement. Such shares deemed earned as described in this paragraph are referred to herein as the “earned Penn Virginia performance-based restricted stock.”

For additional information regarding the treatment of Penn Virginia equity awards, see the section entitled “The Merger—Treatment of Penn Virginia Equity Awards” beginning on page 134.

 

Q:

What equity stake will Penn Virginia shareholders hold in Denbury immediately following the Merger?

 

A:

Based on the number of issued and outstanding shares of Denbury and Penn Virginia Common Stock (including shares of Penn Virginia service-based restricted stock and earned Penn Virginia performance-based restricted stock) as of February 19, 2019 and the Mixed Election exchange ratio of 12.4000 shares of Denbury Common Stock for each share of Penn Virginia Common Stock, holders of shares of Penn Virginia Common Stock as of immediately prior to the effective time of the Merger would hold, in the aggregate, approximately 29% of the issued and outstanding shares of Denbury Common Stock immediately following the effective time of the Merger. The exact equity stake of Penn Virginia shareholders in Denbury immediately following the effective time of the Merger will depend on the number of shares of Denbury

 

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  Common Stock and Penn Virginia Common Stock issued and outstanding (including shares of Penn Virginia service-based restricted stock and earned Penn Virginia performance-based restricted stock) immediately prior to the effective time of the Merger, as provided in the section entitled “The Merger Agreement—Effect of the Merger on Capital Stock; Merger Consideration” beginning on page 144.

 

Q:

How do the Denbury and Penn Virginia boards recommend that I vote?

 

A:

Denbury. The Denbury board unanimously recommends that Denbury stockholders vote “FOR” the approval of the Denbury Issuance Proposal and “FOR” the approval of the Denbury Charter Amendment Proposal. For additional information regarding how the Denbury board recommends that Denbury stockholders vote, see the section entitled “The Merger—Recommendation of the Denbury Board of Directors and Reasons for the Merger” beginning on page 93.

Penn Virginia. The Penn Virginia board unanimously recommends that Penn Virginia shareholders vote “FOR” the approval of the Penn Virginia Merger Proposal and “FOR” the approval of the Penn Virginia Non-Binding Compensation Advisory Proposal. For additional information regarding how the Penn Virginia board recommends that Penn Virginia shareholders vote, see the section entitled “The Merger—Recommendation of the Penn Virginia Board of Directors and Reasons for the Merger” beginning on page 112.

 

Q:

Who is entitled to vote at the special meeting?

 

A:

Denbury special meeting. The Denbury board has fixed February 19, 2019 as the record date for the Denbury special meeting. All holders of record of shares of Denbury Common Stock as of the close of business on the record date are entitled to receive notice of, and to vote at, the Denbury special meeting, provided that those shares remain outstanding on the date of the Denbury special meeting. As of the record date, there were 460,442,313 shares of Denbury Common Stock outstanding. Physical attendance at the Denbury special meeting is not required to vote. Instructions on how to vote your shares without attending the Denbury special meeting are provided in this section below.

Penn Virginia special meeting. The Penn Virginia board has fixed February 19, 2019 as the record date for the Penn Virginia special meeting. All holders of record of shares of Penn Virginia Common Stock as of the close of business on the record date are entitled to receive notice of, and to vote at, the Penn Virginia special meeting. As of the record date, there were 15,105,251 shares of Penn Virginia Common Stock outstanding. Physical attendance at the Penn Virginia special meeting is not required to vote. Instructions on how to vote your shares without attending the Penn Virginia special meeting are provided in this section below.

 

Q:

How many votes do I have?

 

A:

Denbury Stockholders. Each Denbury stockholder of record is entitled to one vote for each share of Denbury Common Stock held of record by him or her as of the close of business on the record date.

Penn Virginia Shareholders. Each Penn Virginia shareholder of record is entitled to one vote for each share of Penn Virginia Common Stock held of record by him or her as of the close of business on the record date.

 

Q:

What constitutes a quorum for the Denbury and Penn Virginia special meetings?

 

A:

A quorum is the minimum number of stockholders or shareholders necessary to hold a valid meeting.

Quorum for Denbury special meeting. The presence at the Denbury special meeting of the holders of not less than one-third of the shares of Denbury Common Stock issued and outstanding and entitled to vote at the Denbury special meeting, present in person or represented by proxy, will constitute a quorum. If you submit a properly executed Denbury proxy card, even if you do not vote for the proposal or vote to “abstain” in respect of the proposal, your shares of Denbury Common Stock will be counted for purposes of calculating whether a quorum is present for the transaction of business at the Denbury special meeting. Broker non-votes will not be treated as present for purposes of determining the presence of a quorum at the Denbury special meeting.

 

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Quorum for Penn Virginia special meeting. The presence at the Penn Virginia special meeting of the holders of a majority in voting power of the outstanding shares of Penn Virginia Common Stock entitled to vote at the Penn Virginia special meeting, present in person or represented by proxy, will constitute a quorum. If you submit a properly executed Penn Virginia WHITE proxy card, even if you do not vote for the proposals or vote to “abstain” in respect of the proposals, your shares of Penn Virginia Common Stock will be counted for purposes of calculating whether a quorum is present and entitled to vote for the transaction of business at the Penn Virginia special meeting. Broker non-votes will not be treated as present and entitled to vote for purposes of determining the presence of a quorum at the Penn Virginia special meeting, unless the broker, bank or other nominee has been instructed to vote on at least one of the proposals.

 

Q:

What will happen to Penn Virginia as a result of the Merger?

 

A:

If the Merger is completed, Merger Sub will merge with and into Penn Virginia, and Penn Virginia will continue as the surviving corporation as a direct wholly owned subsidiary of Denbury. Immediately following the effective time of the Merger, Penn Virginia will merge with and into LLC Sub and the separate corporate existence of Penn Virginia will cease, and LLC Sub will continue as the surviving limited liability company as a direct wholly owned subsidiary of Denbury. Shares of Penn Virginia Common Stock will no longer be publicly traded following the effective time of the Merger.

 

Q:

I own shares of Penn Virginia Common Stock. What will happen to those shares as a result of the Merger?

 

A:

If the Merger is completed, your shares of Penn Virginia Common Stock will be converted into the right to receive the Merger Consideration. Each holder of a share of Penn Virginia Common Stock that was outstanding immediately prior to the effective time of the Merger will cease to have any rights with respect to shares of Penn Virginia Common Stock except the right to receive the Merger Consideration, any dividends or distributions made with respect to shares of Denbury Common Stock with a record date after the effective time of the Merger, and any cash to be paid in lieu of any fractional shares of Denbury Common Stock, in each case to be issued or paid upon the exchange of any certificates or book-entry shares of Penn Virginia Common Stock for Merger Consideration. For additional information, see the sections entitled “The Merger—Consideration to Penn Virginia Shareholders” and “The Merger Agreement—Effect of the Merger on Capital Stock; Merger Consideration” beginning on pages 79 and 144, respectively.

 

Q:

Where will the Denbury Common Stock that Penn Virginia shareholders receive in the Merger be publicly traded?

 

A:

Assuming the Merger is completed, the shares of Denbury Common Stock that Penn Virginia shareholders receive in the Merger will be listed and traded on the NYSE.

 

Q:

What happens if the Merger is not completed?

 

A:

If the Penn Virginia Merger Proposal is not approved by Penn Virginia shareholders, if either the Denbury Issuance Proposal or the Denbury Charter Amendment Proposal is not approved by Denbury stockholders or if the Merger is not completed for any other reason, Penn Virginia shareholders will not receive any Merger Consideration in connection with the Merger, and their shares of Penn Virginia Common Stock will remain outstanding. Penn Virginia will remain an independent public company and Penn Virginia Common Stock will continue to be listed and traded on the Nasdaq. Additionally, if the Penn Virginia Merger Proposal is not approved by Penn Virginia shareholders or if the Merger is not completed for any other reason, Denbury will not issue shares of Denbury Common Stock to Penn Virginia shareholders, regardless of whether the Denbury Issuance Proposal or the Denbury Charter Amendment Proposal is approved. If the Merger Agreement is terminated under specified circumstances, either Penn Virginia or Denbury (depending on the circumstances) may be required to pay the other party a termination fee. For a more detailed discussion of the termination fees, see “The Merger Agreement—Termination” beginning on page 180.

 

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Q:

What is a proxy and how can I vote my shares in person at the special meetings?

 

A:

A proxy is a legal designation of another person to vote the stock you own.

Denbury. Shares of Denbury Common Stock held directly in your name as the stockholder of record as of the close of business on February 19, 2019, the record date, may be voted in person at the Denbury special meeting. If you choose to attend the Denbury special meeting, you will need to bring valid, government-issued photo identification. If you are a beneficial owner of Denbury Common Stock but not the stockholder of record of such shares of Denbury Common Stock, you will also need proof of stock ownership to be admitted to the Denbury special meeting. A recent brokerage statement or a letter from a broker, bank or other nominee are examples of proof of ownership. Please note that if your shares are held in “street name” by a broker, bank or other nominee and you wish to vote at the Denbury special meeting, you will not be permitted to vote in person unless you first obtain a legal proxy issued in your name from the record owner and present it to the inspector of election with your ballot at the Denbury special meeting. To request a legal proxy, contact your broker, bank or other nominee holder of record. It is suggested you do so in a timely manner to ensure receipt of your legal proxy prior to the Denbury special meeting.

Failure to bring the appropriate documentation may delay your entry into or prevent you from attending the Denbury special meeting. The doors to the meeting room will be closed promptly at the start of the meeting and stockholders will not be permitted to enter after that time.

Penn Virginia. Shares of Penn Virginia Common Stock held directly in your name as the shareholder of record as of the close of business on February 19, 2019, the record date, may be voted in person at the Penn Virginia special meeting. If you choose to attend the Penn Virginia special meeting, you will need to bring valid, government-issued photo identification. If you are a beneficial owner of Penn Virginia Common Stock, but not the shareholder of record of such shares of Penn Virginia Common Stock, you will also need proof of stock ownership to be admitted to the Penn Virginia special meeting. A recent brokerage statement or a letter from a broker, bank or other nominee are examples of proof of ownership. Please note that if your shares are held in “street name” by a broker, bank or other nominee and you wish to vote at the Penn Virginia special meeting, you will not be permitted to vote in person unless you first obtain a legal proxy issued in your name from the record owner and present it to the inspector of election with your ballot at the Penn Virginia special meeting. To request a legal proxy, contact your broker, bank or other nominee holder of record. It is suggested you do so in a timely manner to ensure receipt of your legal proxy prior to the Penn Virginia special meeting.

Failure to bring the appropriate documentation may delay your entry into or prevent you from attending the Penn Virginia special meeting. The doors to the meeting room will be closed promptly at the start of the meeting and shareholders will not be permitted to enter after that time.

 

Q:

How can I vote my shares without attending the special meetings?

 

A:

Denbury. If you are a stockholder of record of Denbury Common Stock as of the close of business on February 19, 2019, the record date, you can vote by proxy by phone, the Internet or mail by following the instructions provided in the enclosed Denbury proxy card. Please note that if you are a beneficial owner, you may vote by submitting voting instructions to your broker, bank or other nominee, or otherwise by following instructions provided by your broker, bank or other nominee. Phone and Internet voting may be available to beneficial owners. Please refer to the vote instruction form provided by your broker, bank or other nominee.

Penn Virginia. If you are a shareholder of record of Penn Virginia Common Stock as of the close of business on February 19, 2019, the record date, you can vote by proxy by phone, the Internet or mail by following the instructions provided in the enclosed Penn Virginia WHITE proxy card. Please note that if you are a beneficial owner, you may vote by submitting voting instructions to your broker, bank or other nominee, or otherwise by following instructions provided by your broker, bank or other nominee. Phone and Internet voting may be available to beneficial owners. Please refer to the vote instruction form provided by your broker, bank or other nominee.

 

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Q:

What is the difference between holding shares as a stockholder or shareholder of record and as a beneficial owner?

 

A:

Denbury. If your shares of Denbury Common Stock are registered directly in your name with Denbury’s transfer agent, Broadridge Corporate Issuer Solutions, Inc., you are considered the stockholder of record with respect to those shares, and the proxy materials are being provided directly to you. If your shares are held in a stock brokerage account or by a broker, bank or other nominee, then you are considered the beneficial owner of those shares, which are considered to be held in “street name.” The proxy materials are being provided to you by your broker, bank or other nominee who is considered the stockholder of record with respect to those shares.

Penn Virginia. If your shares of Penn Virginia Common Stock are registered directly in your name with Penn Virginia’s transfer agent, American Stock Transfer & Trust Company, LLC, you are considered the shareholder of record with respect to those shares, and the proxy materials are being provided directly to you. If your shares are held in a stock brokerage account or by a broker, bank or other nominee, then you are considered the beneficial owner of those shares, which are considered to be held in “street name.” The proxy materials are being provided to you by your broker, bank or other nominee who is considered the shareholder of record with respect to those shares.

 

Q:

What should I do if I receive more than one set of voting materials?

 

A:

You may receive more than one set of voting materials relating to the Denbury special meeting and/or the Penn Virginia special meeting if you hold shares of both Denbury and Penn Virginia Common Stock or if you hold shares of Denbury and/or Penn Virginia Common Stock in “street name” and also directly in your name as a stockholder or shareholder of record or otherwise or if you hold shares of Denbury and/or Penn Virginia Common Stock in more than one brokerage account.

Direct holders (stockholders or shareholders of record). For shares of Denbury and/or Penn Virginia Common Stock held directly, complete, sign, date and return each Denbury proxy card or Penn Virginia WHITE proxy card (or cast your vote by phone or the Internet as provided on each proxy card) or otherwise follow the voting instructions provided in this joint proxy statement/prospectus in order to ensure that all of your shares of Denbury and/or Penn Virginia Common Stock are voted.

Shares in “street name.” For shares of Denbury and/or Penn Virginia Common Stock held in “street name” through a broker, bank or other nominee, follow the instructions provided by your broker, bank or other nominee to vote your shares.

 

Q:

I hold shares of both Denbury and Penn Virginia Common Stock. Do I need to vote separately for each company?

 

A:

Yes. You will need to separately follow the applicable procedures described in this joint proxy statement/prospectus both with respect to the voting of shares of Denbury Common Stock and with respect to the voting of shares of Penn Virginia Common Stock in order to effectively vote the shares of common stock you hold in each company.

 

Q:

If a stockholder or shareholder gives a proxy, how will the shares of Denbury or Penn Virginia Common Stock, as applicable, covered by the proxy be voted?

 

A:

If you provide a proxy, regardless of whether you provide that proxy by phone, the Internet or completing and returning the applicable enclosed Denbury proxy card or Penn Virginia WHITE proxy card, the individuals named on the enclosed proxy card will vote your shares of Denbury or Penn Virginia Common Stock, as applicable, in the way that you indicate when providing your proxy in respect of the shares of common stock you hold in such company. When completing the phone or Internet processes or the Denbury proxy card or Penn Virginia WHITE proxy card, you may specify whether your shares of Denbury or Penn Virginia Common Stock, as applicable, should be voted for or against, or abstain from voting on, all, some or none of the specific items of business to come before the Denbury special meeting or the Penn Virginia special meeting, as applicable.

 

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Q:

How will my shares of common stock be voted if I return a blank proxy?

 

A:

Denbury. If you sign, date and return your proxy and do not indicate how you want your shares of Denbury Common Stock to be voted, then your shares of Denbury Common Stock will be voted “FOR” the approval of the Denbury Issuance Proposal and “FOR” the approval of the Denbury Charter Amendment Proposal.

Penn Virginia. If you sign, date and return your proxy and do not indicate how you want your shares of Penn Virginia Common Stock to be voted, then your shares of Penn Virginia Common Stock will be voted “FOR” the approval of the Penn Virginia Merger Proposal and “FOR” the approval of the Penn Virginia Non-Binding Compensation Advisory Proposal.

 

Q:

Can I change my vote after I have submitted my proxy?

 

A:

Denbury. Yes. If you are a stockholder of record of Denbury Common Stock as of the close of business on the record date, whether you vote by phone, the Internet or mail, you can change or revoke your proxy before it is voted at the Denbury special meeting in one of the following ways:

 

   

submit a new Denbury proxy card bearing a later date;

 

   

vote again by phone or the Internet at a later time;

 

   

give written notice of your revocation to Denbury’s Secretary at 5320 Legacy Drive, Plano, Texas 75024 stating that you are revoking your proxy; or

 

   

vote in person at the Denbury special meeting. Please note that your attendance at the Denbury special meeting will not alone serve to revoke your proxy.

If you are a beneficial owner of Denbury Common Stock as of the close of business on the record date, you must follow the instructions of your broker, bank or other nominee to revoke or change your voting instructions.

Penn Virginia. Yes. If you are a shareholder of record of Penn Virginia Common Stock as of the close of business on the record date, whether you vote by phone, the Internet or mail, you can change or revoke your proxy before it is voted at the Penn Virginia special meeting in one of the following ways:

 

   

submit a new proxy card bearing a later date;

 

   

vote again by phone or the Internet at a later time;

 

   

give written notice of your revocation to Penn Virginia’s Corporate Secretary at 16285 Park Ten Place, Suite 500, Houston, Texas 77084 stating that you are revoking your proxy; or

 

   

vote in person at the Penn Virginia special meeting. Please note that your attendance at the Penn Virginia special meeting will not alone serve to revoke your proxy.

If you are a beneficial owner of Penn Virginia Common Stock as of the close of business on the record date, you must follow the instructions of your broker, bank or other nominee to revoke or change your voting instructions.

 

Q:

Where can I find the voting results of the special meetings?

 

A:

Within four business days following certification of the final voting results, Denbury and Penn Virginia each intend to file the final voting results of its special meeting with the SEC in a Current Report on Form 8-K.

 

Q:

If I do not favor the approval of the Merger Agreement as a Denbury stockholder and/or Penn Virginia shareholder, what are my rights?

 

A:

Denbury Stockholders. Under Delaware law, Denbury stockholders are not entitled to dissenters’ or appraisal rights in connection with the Denbury Stock Issuance or the Denbury Charter Amendment. Denbury stockholders may vote against the Denbury Issuance Proposal or the Denbury Charter Amendment Proposal if they do not favor the Merger.

 

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Penn Virginia Shareholders. Penn Virginia shareholders are not entitled to exercise dissenters’ or appraisal rights under Virginia law in connection with the Merger. Penn Virginia shareholders may vote against the Penn Virginia Merger Proposal if they do not favor the Merger.

 

Q:

Are there any risks that I should consider as a Denbury stockholder and/or Penn Virginia shareholder in deciding how to vote?

 

A:

Yes. You should read and carefully consider the risk factors set forth in the section entitled “Risk Factors” beginning on page 51. You also should read and carefully consider the risk factors of Denbury and Penn Virginia contained in the documents that are incorporated by reference in this joint proxy statement/prospectus.

 

Q:

What happens if I sell my shares before the special meetings?

 

A:

Denbury Stockholders. The record date for Denbury stockholders entitled to vote at the Denbury special meeting is earlier than the date of the Denbury special meeting. If you transfer your shares of Denbury Common Stock after the record date but before the Denbury special meeting, you will, unless special arrangements are made, retain your right to vote at the Denbury special meeting.

Penn Virginia Shareholders. The record date for Penn Virginia shareholders entitled to vote at the Penn Virginia special meeting is earlier than the date of the Penn Virginia special meeting. If you transfer your shares of Penn Virginia Common Stock after the record date but before the Penn Virginia special meeting, you will, unless special arrangements are made, retain your right to vote at the Penn Virginia special meeting but will have transferred the right to receive the Merger Consideration to the person to whom you transferred your shares of Penn Virginia Common Stock.

 

Q:

What are the material U.S. federal income tax consequences of the Integrated Mergers to Penn Virginia shareholders?

 

A:

Denbury and Penn Virginia intend for the Merger and the LLC Sub Merger (together, the “Integrated Mergers”), taken together, to qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”). It is a condition to each of Denbury’s and Penn Virginia’s obligation to complete such mergers that it receive a written opinion from its counsel, Vinson & Elkins LLP (“Vinson & Elkins”) and Skadden, Arps, Slate, Meagher & Flom LLP (“Skadden”), respectively, to the effect that the Integrated Mergers, taken together, will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. The U.S. federal income tax consequences of the Integrated Mergers, taken together, to a U.S. holder (as defined under “Material U.S. Federal Income Tax Consequences of the Integrated Mergers”) generally will depend on whether such U.S. holder exchanges its Penn Virginia Common Stock for cash consideration, stock consideration or a combination of cash consideration and stock consideration. Assuming the receipt and accuracy of the opinions described above:

 

   

U.S. Holders Who Receive Solely Cash: A U.S. holder who receives solely cash consideration in exchange for Penn Virginia Common Stock in the Merger generally will recognize gain or loss in an amount equal to the difference, if any, between (1) the amount of cash received and (2) such U.S. holder’s adjusted tax basis in the shares of Penn Virginia Common Stock surrendered.

 

   

U.S. Holders Who Receive Solely Shares of Denbury Common Stock: A U.S. holder who receives solely shares of Denbury Common Stock in exchange for Penn Virginia Common Stock in the Merger generally will not recognize any gain or loss, except with respect to cash received in lieu of a fractional share of Denbury Common Stock.

 

   

U.S. Holders Who Receive a Combination of Shares of Denbury Common Stock and Cash: A U.S. holder who receives a combination of shares of Denbury Common Stock and cash in exchange for Penn Virginia Common Stock in the Merger generally will recognize gain (but not loss) in an amount equal to the lesser of (i) the amount by which the sum of the fair market value of the Denbury Common Stock and cash received by the U.S. holder exceeds such U.S. holder’s adjusted tax basis in its shares of Penn Virginia Common Stock surrendered and (ii) the amount of cash received by such U.S. holder.

 

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Holders of Penn Virginia Common Stock that are not U.S. holders and that receive cash pursuant to the Merger may be subject to U.S. withholding tax with respect to any cash received.

Penn Virginia shareholders should read the section entitled “Material U.S. Federal Income Tax Consequences of the Integrated Mergers” beginning on page 185 for a more complete discussion of the U.S. federal income tax consequences of the Integrated Mergers. Tax matters can be complicated, and the tax consequences to a particular holder will depend on such holder’s particular facts and circumstances. Penn Virginia shareholders should consult their tax advisors to determine the specific consequences to them of the Integrated Mergers.

 

Q:

When is the Merger expected to be completed?

 

A:

Denbury and Penn Virginia are working to complete the Merger as quickly as possible. Subject to the satisfaction or waiver of the conditions described in the section entitled “The Merger Agreement—Conditions to the Completion of the Merger” beginning on page 178, including the approval of the Penn Virginia Merger Proposal by Penn Virginia shareholders at the Penn Virginia special meeting and the approval of the Denbury Issuance Proposal and the Denbury Charter Amendment Proposal by Denbury stockholders at the Denbury special meeting, the Merger is expected to close in the second quarter of 2019. However, neither Denbury nor Penn Virginia can predict the actual date on which the Merger will be completed, nor can the parties assure that the Merger will be completed, because completion is subject to conditions beyond either company’s control.

 

Q:

If I am a Penn Virginia shareholder, how will I receive the Merger Consideration to which I am entitled?

 

A:

You will be paid the Merger Consideration to which you are entitled (i) in the case of shares of Penn Virginia Common Stock that are represented by certificates, upon surrender to the exchange agent of such certificates, by physical surrender of such certificates in accordance with the terms of the letter of transmittal and accompanying instructions, (ii) in the case of shares of Penn Virginia Common Stock that are book-entry shares not held through DTC, upon the transfer of such shares in accordance with the terms of the letter of transmittal and accompanying instructions, or (iii) in the case of shares of Penn Virginia Common Stock that are book-entry shares held through DTC, upon the transfer of such shares in accordance with DTC’s customary procedures and such other procedures as agreed by Denbury, Penn Virginia, the exchange agent and DTC.

No interest will be paid or accrued on any amount payable for shares of Penn Virginia Common Stock eligible to receive the Merger Consideration pursuant to the Merger Agreement.

For additional information on the exchange of Penn Virginia Common Stock for the Merger Consideration, see the section entitled “The Merger Agreement—Payment for Securities; Exchange” beginning on page 146.

 

Q:

How and when do I make my Mixed Election, Cash Election or Stock Election?

 

A:

If you are a record holder of shares of Penn Virginia Common Stock, not less than 30 days prior to the anticipated effective time of the Merger, you will receive a form of election in a separate mailing. You should carefully review and follow the instructions accompanying that form of election. The election form will contain instructions for making your Mixed Election, Cash Election or Stock Election and for surrendering your Penn Virginia Common Stock in exchange for the Merger Consideration. The exchange agent must receive your properly completed and signed election form and your stock certificates or book-entry shares, or an appropriate and customary guarantee of delivery thereof, and any additional documents specified in the election form, by no later than the election deadline in order for your choice as to the form of Merger Consideration to be considered with those timely made by the other Penn Virginia shareholders. The election deadline will be 5:00 p.m., New York time, on the second business day prior to the effective time of the Merger or such other time as mutually agreed by Denbury and Penn Virginia. Denbury will publicly announce the anticipated election deadline at least five business days prior to the election deadline in a press release.

 

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If you do not properly complete and return your election form and letter of transmittal (along with any Penn Virginia Common Stock certificates) prior to the election deadline, your shares of Penn Virginia Common Stock will be deemed “No Election Shares,” and the Merger Consideration to be received for such shares will depend on the number of other shares making a Mixed Election, Cash Election or Stock Election. See “The Merger—Non-Electing Holders” beginning on page 81. You will then receive a separate letter of transmittal following the effectiveness of the Merger with instructions on how to surrender your shares of Penn Virginia Common Stock and to receive the Merger Consideration.

If your shares of Penn Virginia Common Stock are held in “street name” by your broker, bank or other nominee, contact the nominee and request that the nominee make your Mixed Election, Cash Election or Stock Election for you. Penn Virginia shareholders who hold their shares in “street name” may be subject to an earlier deadline. Therefore, Penn Virginia shareholders should carefully read any materials received from their bank, broker, nominee, trust company or other fiduciary.

For more details on the election procedures, see “The Merger—Form of Election” beginning on page 80.

 

Q:

Can I change my election after the form of election has been submitted?

 

A:

Yes, as long as you do so before the election deadline. If you are a record holder, you may revoke your election prior to the election deadline by submitting a written notice of revocation to the exchange agent or by submitting new later-dated form of election. Revocations must specify the name in which your shares of Penn Virginia Common Stock are registered on the share transfer books of Penn Virginia and such other information as the exchange agent may request. If you wish to submit a new election, you must do so in accordance with the election procedures described in this joint proxy statement/prospectus and in the form of election that you will receive in a separate mailing. If you instructed a bank, broker, nominee, trust company or other fiduciary to submit an election for your shares of Penn Virginia Common Stock, you must follow the directions of your bank, broker, nominee, trust company or other fiduciary for changing those instructions. Whether you revoke your election by submitting a written notice of revocation or by submitting a new form of election, the notice of revocation or new form of election must be received by the exchange agent by the election deadline in order for the revocation or new form of election to be valid. See “The Merger—Election Revocation and Changes” beginning on page 80.

 

Q:

May I transfer my shares of Penn Virginia Common Stock after I make my election?

 

A:

Yes. Penn Virginia shareholders who have made elections will be able to sell or otherwise transfer their shares of Penn Virginia Common Stock after making the election. However, any election made with respect to a share of Penn Virginia Common Stock will be automatically revoked upon a sale of transfer of any such shares. See “The Merger—Impact of Selling Shares of Penn Virginia Common Stock as to which an Election Has Already Been Made” beginning on page 80.

 

Q:

What if I do not send a form of election or it is not received?

 

A:

If the exchange agent does not receive a properly completed form of election from you before the election deadline and any additional documents required by the procedures set forth in the form of election, then you will have no control over the type of Merger Consideration you receive. Shares of Penn Virginia Common Stock for which no election is made will be deemed “No Election Shares,” and the Merger Consideration to be received for such shares will depend on the number of other shares making a Mixed Election, Cash Election or Stock Election. See “The Merger—Non-Electing Holders” beginning on page 81. You bear the risk of delivery and should send any form of election by courier or by hand delivery to the appropriate address shown in the form of election.

If you do not make a valid election with respect to any shares of Penn Virginia Common Stock you own of record, you will receive written instructions from the exchange agent after completion of the Merger on how to exchange your shares of Penn Virginia Common Stock for the Merger Consideration.

 

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Q:

May I submit a form of election even if I do not vote for the approval of the Merger Agreement?

 

A:

Yes. You may submit a form of election even if you vote against the approval of the Merger Agreement or if you abstain from voting.

 

Q:

If I am a holder of Penn Virginia Common Stock certificates, do I need to send in my stock certificates at this time to receive the Merger Consideration?

 

A:

No. Please DO NOT send your Penn Virginia Common Stock certificates with your Penn Virginia WHITE proxy card. You should carefully review and follow the instructions set forth in the letter of transmittal, which will be mailed to you, regarding the surrender of your stock certificates.

 

Q:

If I am a Penn Virginia shareholder, will the shares of Denbury Common Stock issued in the Merger receive a dividend?

 

A:

After the completion of the Merger, the shares of Denbury Common Stock issued in connection with the Merger will carry with them the right to receive the same dividends on shares of Denbury Common Stock as all other holders of shares of Denbury Common Stock, for any dividend the record date for which occurs after the Merger is completed.

For the past three years, Denbury has not paid a dividend on the shares of Denbury Common Stock, as described in greater detail in the section entitled “Comparative Per Share Market Price and Dividend Information—Denbury and Penn Virginia Historical Market Price and Dividend Information” beginning on page 49. Any future Denbury dividends will remain subject to approval by the Denbury board.

 

Q:

Who will solicit and pay the cost of soliciting proxies?

 

A:

Denbury. Denbury has retained MacKenzie Partners, Inc. (which we refer to as “MacKenzie Partners”) to assist in the solicitation process. Denbury has paid MacKenzie Partners a retainer of $25,000 to be applied against a final fee to be mutually agreed between Denbury and MacKenzie Partners. Denbury also has agreed to indemnify MacKenzie Partners against various liabilities and expenses that relate to or arise out of its solicitation of proxies (subject to certain exceptions).

Penn Virginia. Penn Virginia has retained Okapi Partners LLC (which we refer to as “Okapi Partners”) to assist in the solicitation process. Penn Virginia has paid Okapi Partners an initial retainer fee of $15,000, and also agreed to pay Okapi Partners (a) fees for additional services that may be incurred, (b) a performance fee to be mutually agreed in light of effort expended and outcome achieved and (c) reasonable out-of-pocket expenses. Penn Virginia also has agreed to indemnify Okapi Partners against various liabilities and expenses that relate to or arise out of its solicitation of proxies (subject to certain exceptions).

 

Q:

What is “householding”?

 

A:

To reduce the expense of delivering duplicate proxy materials to Penn Virginia shareholders and Denbury stockholders who may have more than one account holding Penn Virginia Common Stock or Denbury Common Stock but who share the same address, Penn Virginia and Denbury have each adopted a procedure approved by the SEC called “householding.” Under this procedure, certain shareholders of record or stockholders of record who have the same address and last name will receive only one copy of this joint proxy statement/prospectus until such time as one or more of these shareholders or stockholders notifies Penn Virginia or Denbury, as applicable, that they want to receive separate copies. In addition, the broker, bank or other nominee for any shareholder or stockholder who is a beneficial owner of Penn Virginia Common Stock or Denbury Common Stock may deliver only one copy of this joint proxy statement/prospectus to multiple shareholders or stockholders who share the same address, unless that broker, bank or other nominee has received contrary instructions from one or more of the Penn Virginia shareholders or the Denbury stockholders, as applicable. This procedure reduces duplicate mailings and saves printing costs and postage fees, as well as natural resources. Penn Virginia shareholders and Denbury stockholders who participate in householding will utilize separate proxy voting instructions.

 

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Q:

What should I do now?

 

A:

You should read this joint proxy statement/prospectus carefully and in its entirety, including the annexes, and return your completed, signed and dated Denbury proxy card or Penn Virginia WHITE proxy card by mail in the enclosed postage-paid envelope or submit your voting instructions by phone or the Internet as soon as possible so that your shares of Denbury and/or Penn Virginia Common Stock will be voted in accordance with your instructions.

 

Q:

Who can answer my questions about the Denbury and/or Penn Virginia special meeting or the transactions contemplated by the Merger Agreement?

 

A:

Denbury Stockholders. If you have questions about the Denbury special meeting or the information contained in this joint proxy statement/prospectus, or desire additional copies of this joint proxy statement/prospectus or additional proxies, contact Denbury’s proxy solicitor:

 

LOGO

 

MacKenzie Partners, Inc.

1407 Broadway, 27th Floor

New York, New York 10018

Denbury@mackenziepartners.com

Call Collect: (212) 929-5500

Toll-Free: (800) 322-2885

Penn Virginia shareholders. If you have questions about the Penn Virginia special meeting or the information contained in this joint proxy statement/prospectus, or desire additional copies of this joint proxy statement/prospectus or additional proxies, contact Penn Virginia’s proxy solicitor:

 

LOGO

 

Okapi Partners LLC

1212 Avenue of the Americas, 24th Floor

New York, New York 10036

info@okapipartners.com

Call Collect: (212) 297-0720

Toll-Free: (855) 305-0856

 

Q:

Where can I find more information about Denbury, Penn Virginia and the Merger?

 

A:

You can find out more information about Denbury, Penn Virginia and the Merger by reading this joint proxy statement/prospectus and, with respect to Denbury and Penn Virginia, from various sources described in the section entitled “Where You Can Find More Information” beginning on page 221.

 

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SUMMARY

This summary highlights selected information included in this joint proxy statement/prospectus and does not contain all of the information that may be important to you. You should read this joint proxy statement/prospectus and its annexes carefully and in its entirety and the other documents to which Denbury and Penn Virginia refer before you decide how to vote with respect to the proposals to be considered and voted on at the special meeting for your company. In addition, Denbury and Penn Virginia incorporate by reference important business and financial information about Denbury and Penn Virginia into this joint proxy statement/prospectus, as further described in the section entitled “Where You Can Find More Information” beginning on page 221. You may obtain the information incorporated by reference into this joint proxy statement/prospectus without charge by following the instructions in the section entitled “Where You Can Find More Information” beginning on page 221. Each item in this summary includes a page reference directing you to a more complete description of that item in this joint proxy statement/prospectus.

Information About the Companies (page 63)

Denbury Resources Inc.

5320 Legacy Drive

Plano, Texas 75024

Phone: (972) 673-2000

Denbury, whose legal name is Denbury Resources Inc., was incorporated in Delaware in December 2003. Based in Plano, Texas, Denbury is an independent oil and natural gas company with operations focused in two key operating areas: the Gulf Coast and Rocky Mountain regions. Denbury’s goal is to increase the value of its properties through a combination of exploitation, drilling and proven engineering extraction practices, with the most significant emphasis relating to CO2 enhanced oil recovery operations.

Penn Virginia Corporation

16285 Park Ten Place, Suite 500

Houston, Texas 77084

Phone: (713) 722-6500

Penn Virginia, whose legal name is Penn Virginia Corporation, was incorporated in Virginia in January 1882. Based in Houston, Texas, Penn Virginia is an independent oil and gas company engaged in the exploration, development and production of oil, natural gas liquids (“NGLs”) and natural gas in the Eagle Ford Shale in Gonzales, Lavaca and DeWitt Counties in South Texas.

Dragon Merger Sub Inc.

c/o Denbury Resources Inc.

5320 Legacy Drive

Plano, Texas 75024

Phone: (972) 673-2000

Merger Sub, whose legal name is Dragon Merger Sub Inc., is a direct wholly owned subsidiary of Denbury. Upon the completion of the Merger, Merger Sub will cease to exist. Merger Sub was incorporated in Virginia on October 18, 2018, for the sole purpose of effecting the Merger.

DR LLC Sub

c/o Denbury Resources Inc.

5320 Legacy Drive

Plano, Texas 75024

Phone: (972) 673-2000



 

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LLC Sub, whose legal name is DR LLC Sub, is a direct wholly owned subsidiary of Denbury. Immediately after the consummation of the Merger, the surviving corporation will merge with and into LLC Sub, with LLC Sub surviving such merger. LLC Sub was formed in Virginia on October 18, 2018, for the sole purpose of effecting the transactions contemplated by the Merger Agreement.

The Merger and the Merger Agreement (page 142)

The terms and conditions of the Merger are contained in the Merger Agreement, which is attached to this joint proxy statement/prospectus as Annex A and is incorporated by reference herein in its entirety. Denbury and Penn Virginia encourage you to read the Merger Agreement carefully and in its entirety, as it is the legal document that governs the Merger.

The Denbury board and Penn Virginia board have each unanimously approved the Merger Agreement and the transactions contemplated by the Merger Agreement. Pursuant to the terms and subject to the conditions included in the Merger Agreement, Denbury has agreed to acquire Penn Virginia by means of a merger of Merger Sub with and into Penn Virginia, with Penn Virginia surviving the merger as a wholly owned subsidiary of Denbury.

Merger Consideration (page 79)

On the terms and subject to the conditions set forth in the Merger Agreement, upon the effective time of the Merger, each share of Penn Virginia Common Stock issued and outstanding immediately prior to the effective time of the Merger (other than as described in the Merger Agreement) will be converted into the right to receive, at the election of the holder of such share of Penn Virginia Common Stock, either, (i) the Mixed Election Consideration ($25.86 in cash without interest and 12.4000 shares of Denbury Common Stock), (ii) the Cash Election Consideration ($79.80 in cash without interest) or (iii) the Stock Election Consideration (18.3454 shares of Denbury Common Stock). The Cash and Stock Elections will be subject to proration to ensure that the total amount of cash paid to holders of Penn Virginia Common Stock is equal to $400 million. Shares of Penn Virginia Common Stock not making an election will be deemed “No Election Shares,” and the Merger Consideration to be received for such shares will depend on the number of other shares making a Mixed Election, Cash Election or Stock Election. See “The Merger—Non-Electing Holders” beginning on page 81.

Penn Virginia shareholders will not be entitled to receive any fractional shares of Denbury Common Stock in the Merger, and no Penn Virginia shareholder will be entitled to voting or other rights in respect of any fractional shares of Denbury Common Stock. Each holder of Penn Virginia Common Stock converted pursuant to the Merger who would otherwise have been entitled to receive a fraction of a share of Denbury Common Stock (after taking into account all shares of Penn Virginia Common Stock exchanged by such holder) will receive, in lieu thereof, cash in an amount equal to such fractional amount multiplied by the average of the volume weighted average price per share of Denbury Common Stock on the NYSE (as reported by Bloomberg, L.P. or, if not reported by Bloomberg, L.P., in another authoritative source mutually selected by Denbury and Penn Virginia) on each of the five consecutive trading days ending with the last complete trading day prior to the effective time of the Merger.

Risk Factors (page 51)

The Merger and an investment in Denbury Common Stock involve risks, some of which are related to the transactions contemplated by the Merger Agreement. You should carefully consider the information about these risks set forth under the section entitled “Risk Factors” beginning on page 51, together with the other information included or incorporated by reference in this joint proxy statement/prospectus, particularly the risk factors contained in Denbury’s and Penn Virginia’s Annual Reports on Form 10-K. Penn Virginia shareholders should carefully consider the risks set out in that section before deciding how to vote with respect to the Penn Virginia



 

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Merger Proposal and Penn Virginia Non-Binding Compensation Advisory Proposal to be considered and voted on at the Penn Virginia special meeting, and Denbury stockholders should carefully consider the risks set out in that section before deciding how to vote with respect to the Denbury Issuance Proposal and the Denbury Charter Amendment Proposal to be considered and voted on at the Denbury special meeting. For additional information, see the section entitled “Where You Can Find More Information” beginning on page 221.

Treatment of Penn Virginia Equity Awards (page 134)

As of the effective time of the Merger, (i) each restricted stock unit granted under the Penn Virginia stock plan that is (x) subject solely to service-based vesting and (y) payable in Penn Virginia Common Stock or the value of which is determined with reference to the value of the Penn Virginia Common Stock, and (ii) each restricted stock unit that is (x) subject in whole or in part to performance-based vesting and (y) payable in Penn Virginia Common Stock or the value of which is determined with reference to the value of the Penn Virginia Common Stock that is outstanding as of immediately prior to the effective time of the Merger, whether vested or unvested, will automatically and without any required action on the part of the holder thereof, be converted into the right to receive:

 

   

an amount in cash, without interest, equal to the product of (A) the number of shares of Penn Virginia Common Stock subject to such Penn Virginia service-based restricted stock unit award or earned under such Penn Virginia performance-based restricted stock unit award, as applicable and (B) $25.86; and

 

   

a number of shares of Denbury Common Stock equal to the product of (A) the number of shares of Penn Virginia Common Stock subject to such Penn Virginia service-based restricted stock unit award or earned under such Penn Virginia performance-based restricted stock unit award, as applicable, and (B) 12.4000, rounded up to the nearest whole share.

The number of shares of Penn Virginia Common Stock deemed earned under each Penn Virginia performance-based restricted stock unit award will be reasonably determined by the compensation committee of the Penn Virginia board after consultation with Denbury based on actual level of achievement. However, the number of shares of Penn Virginia Common Stock deemed earned under any Penn Virginia performance-based restricted stock unit award with respect to any performance period scheduled to commence on or after January 1, 2019 will vest based on maximum level of achievement. Such shares deemed earned as described in this paragraph are referred to herein as the “earned Penn Virginia performance-based restricted stock units.”

Recommendation of the Denbury Board of Directors and Reasons for the Merger (page 93)

The Denbury board unanimously recommends that Denbury stockholders vote “FOR” the approval of the Denbury Issuance Proposal and “FOR” the approval of the Denbury Charter Amendment Proposal. For the factors considered by the Denbury board in reaching this decision and additional information on the recommendation of the Denbury board, see the section entitled “The Merger—Recommendation of the Denbury Board of Directors and Reasons for the Merger” beginning on page 93.

Recommendation of the Penn Virginia Board of Directors and Reasons for the Merger (page 112)

The Penn Virginia board unanimously recommends that Penn Virginia shareholders vote “FOR” the approval of the Penn Virginia Merger Proposal and “FOR” the approval of the Penn Virginia Non-Binding Compensation Advisory Proposal. For the factors considered by the Penn Virginia board in reaching this decision and additional information on the recommendation of the Penn Virginia board, see the section entitled “The Merger—Recommendation of the Penn Virginia Board of Directors and Reasons for the Merger” beginning on page 112.



 

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Opinions of Financial Advisors (pages 97 and 115)

Opinion of Guggenheim, Denbury’s financial advisor

Denbury retained Guggenheim Securities, LLC (which we refer to as “Guggenheim”) as its financial advisor in connection with Denbury’s possible acquisition of or merger with Penn Virginia. Guggenheim delivered an opinion to the Denbury board to the effect that, as of October 28, 2018 and based on and subject to the matters considered, the procedures followed, the assumptions made and various limitations of and qualifications to the review undertaken, the Merger Consideration was fair, from a financial point of view, to Denbury. The full text of Guggenheim’s written opinion, which is attached as Annex B to this joint proxy statement/prospectus, and which you should read carefully and in its entirety, is subject to the assumptions, limitations, qualifications and other conditions contained in such opinion and is necessarily based on economic, capital markets and other conditions, and the information made available to Guggenheim, as of the date of such opinion.

Guggenheim’s opinion was provided to the Denbury board (in its capacity as such) for its information and assistance in connection with its evaluation of the Merger Consideration. Guggenheim’s opinion and any materials provided in connection therewith did not constitute a recommendation to the Denbury board with respect to the Merger, nor does Guggenheim’s opinion or the summary of its underlying financial analyses elsewhere in this joint proxy statement/prospectus constitute advice or a recommendation to any holder of Denbury Common Stock or Penn Virginia Common Stock as how to vote or act in connection with the Merger or otherwise or what form of Merger Consideration any holder of Penn Virginia Common Stock should elect to receive pursuant to the Merger Consideration election mechanisms described in the Merger Agreement. Guggenheim’s opinion addresses only the fairness, from a financial point of view and as of the date of such opinion, of the Merger Consideration to Denbury to the extent expressly specified in such opinion. Guggenheim’s opinion does not address (1) any other term, aspect or implication of (a) the Merger or the Merger Agreement (including, without limitation, the form or structure of the Merger or the Merger Consideration election procedures, adjustments, limitations or prorationing mechanisms contemplated by the Merger Agreement) or (b) the Voting Agreements or any other agreement, transaction document or instrument contemplated by the transaction documentation or to be entered into or amended in connection with the Merger.

For a description of the opinion that the Denbury board received from Guggenheim, see “The Merger—Opinion of Guggenheim, Denbury’s Financial Advisor” beginning on page 97. For the full text of Guggenheim’s written opinion, see Annex B.

Opinion of Jefferies, Penn Virginia’s financial advisor

In July 2018, Penn Virginia retained Jefferies LLC (which we refer to as “Jefferies”) to act as Penn Virginia’s financial advisor in connection with certain potential strategic transactions, including a possible sale, disposition or other business transaction or series of related transactions involving all or a majority of the voting securities or assets of Penn Virginia. At a meeting of the Penn Virginia board on October 28, 2018, a representative of Jefferies rendered Jefferies’ opinion to the Penn Virginia board to the effect that, as of that date and based upon and subject to the various assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken as set forth in its opinion, the Merger Consideration as set forth in the Merger Agreement was fair, from a financial point of view, to the holders of Penn Virginia Common Stock (other than Denbury and its affiliates), as more fully described in the section of this joint proxy statement/prospectus entitled “The Merger—Opinion of Jefferies, Penn Virginia’s Financial Advisor” beginning on page 115.

The full text of the written opinion of Jefferies, dated as of October 28, 2018, is attached hereto as Annex C. Jefferies’ opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken by Jefferies in rendering its opinion. Penn Virginia encourages you to read Jefferies’ opinion carefully and in its entirety. Jefferies’ opinion was directed to the Penn



 

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Virginia board (in its capacity as such) and addresses only the fairness, from a financial point of view, to holders of Penn Virginia Common Stock (other than Denbury and its affiliates) of the Merger Consideration as set forth in the Merger Agreement. It does not address the relative merits of the transactions contemplated by the Merger Agreement as compared to any alternative transaction or opportunity that might be available to Penn Virginia, nor does it address the underlying business decision by Penn Virginia to engage in the Merger or the terms of the Merger Agreement or the documents referred to therein. Jefferies’ opinion does not constitute a recommendation as to how any holder of Penn Virginia Common Stock or Denbury Common Stock should vote or act with respect to the Merger or any matter related thereto, including, without limitation, whether any shareholder should elect to receive the Mixed Election Consideration, the Cash Election Consideration or the Stock Election Consideration or make no election in connection with the Merger.

For additional information, see the section entitled “The Merger—Opinion of Jefferies, Penn Virginia’s Financial Advisor” beginning on page 115 and Annex C.

Special Meeting of Denbury Stockholders (page 64)

Date, Time, Place and Purpose of the Denbury Special Meeting

The Denbury special meeting will be held on April 17, 2019, at 10:00 a.m., Central Time, at 5320 Legacy Drive, Plano, Texas 75024. The purpose of the Denbury special meeting is to consider and vote on the Denbury Issuance Proposal and the Denbury Charter Amendment Proposal. Approval of the Denbury Issuance Proposal and the Denbury Charter Amendment Proposal is a condition to the obligation of Denbury and Penn Virginia to complete the Merger.

Record Date and Outstanding Shares of Denbury Common Stock

Only holders of record of issued and outstanding shares of Denbury Common Stock as of the close of business on February 19, 2019, the record date for the Denbury special meeting, are entitled to notice of, and to vote at, the Denbury special meeting or any adjournment or postponement of the Denbury special meeting.

As of the close of business on the record date, there were 460,442,313 shares of Denbury Common Stock issued and outstanding and entitled to vote at the Denbury special meeting. You may cast one vote for each share of Denbury Common Stock that you held as of the close of business on the record date.

A complete list of Denbury stockholders entitled to vote at the Denbury special meeting will be available for inspection at Denbury’s principal place of business during regular business hours for a period of no less than 10 days before the Denbury special meeting and during the Denbury special meeting at 5320 Legacy Drive, Plano, Texas 75024.

Quorum; Abstentions and Broker Non-Votes

A quorum of Denbury stockholders is necessary to hold a valid meeting. The presence at the Denbury special meeting of the holders of not less than one-third of the shares of Denbury Common Stock issued and outstanding and entitled to vote at the Denbury special meeting, present in person or represented by proxy, will constitute a quorum. If you submit a properly executed Denbury proxy card, even if you do not vote for the proposal or vote to “abstain” in respect of the proposal, your shares of Denbury Common Stock will be counted for purposes of calculating whether a quorum is present for the transaction of business at the Denbury special meeting. Broker non-votes will not be treated as present for purposes of determining the presence of a quorum at the Denbury special meeting.

Denbury Common Stock held in “street name” with respect to which the beneficial owner fails to give voting instructions to the broker, bank or other nominee, and Denbury Common Stock with respect to which the



 

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beneficial owner otherwise fails to vote, will not be considered present and entitled to vote at the Denbury special meeting for the purpose of determining the presence of a quorum.

A broker non-vote will result if your broker, bank or other nominee returns a proxy but does not provide instruction as to how shares should be voted on a particular matter. Under stock exchange rules, brokers, banks or other nominees do not have discretionary authority to vote on the Denbury Issuance Proposal or the Denbury Charter Amendment Proposal because they are “non-routine” proposals. If there are any broker non-votes, the shares will not be considered present and entitled to vote at the Denbury special meeting for the purpose of determining the presence of a quorum.

Executed but unvoted proxies will be voted in accordance with the recommendations of the Denbury board.

Required Vote to Approve the Denbury Issuance Proposal

Approval of the Denbury Issuance Proposal requires the affirmative vote of the holders of a majority of the shares of Denbury Common Stock represented in person or by proxy at the Denbury special meeting. Abstentions will have the same effect as a vote “AGAINST” the proposal, and broker non-votes will have no effect on the outcome of the vote.

The Denbury Issuance Proposal is described in the section entitled “Denbury Proposals” beginning on page 69.

Required Vote to Approve the Denbury Charter Amendment Proposal

Approval of the Denbury Charter Amendment Proposal requires the affirmative vote of holders of a majority of the outstanding shares of Denbury Common Stock entitled to vote on the proposal. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” the proposal. Failure to vote on the Denbury Charter Amendment Proposal will have the same effect as a vote “AGAINST” the Denbury Charter Amendment Proposal.

The Denbury Charter Amendment Proposal is described in the section entitled “Denbury Proposals” beginning on page 69.

Voting by Directors and Executive Officers

As of February 19, 2019, Denbury directors and executive officers, and their affiliates, as a group, owned and were entitled to vote 4,824,264 shares of Denbury Common Stock, or approximately 1.0% of the total outstanding shares of Denbury Common Stock as of February 19, 2019.

Denbury currently expects that all of its directors and executive officers will vote their shares “FOR” the Denbury Issuance Proposal and “FOR” the Denbury Charter Amendment Proposal.

Adjournment

In accordance with the Second Amended and Restated Bylaws of Denbury (which we refer to as the “Denbury bylaws”), whether or not a quorum is present, the chairman of the Denbury special meeting will have the power to adjourn the Denbury special meeting from time to time for the purpose of, among other things, soliciting additional proxies. If the Denbury special meeting is adjourned, Denbury stockholders who have already submitted their proxies will be able to revoke them at any time prior to their use. At any subsequent reconvening of the Denbury special meeting, all proxies will be voted in the same manner as the manner in which such proxies would have been voted at the original convening of the Denbury special meeting, except for any proxies that have been validly revoked or withdrawn prior to the subsequent meeting.



 

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In addition, the Merger Agreement provides that Denbury (1) will be required to adjourn or postpone the Denbury special meeting (A) to the extent necessary to ensure that any required supplement or amendment to this joint proxy statement/prospectus is provided to the Denbury stockholders or (B) if, as of the time the Denbury special meeting is scheduled, there are insufficient shares of Denbury Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct business at the Denbury special meeting, or (2) may, and at Penn Virginia’s request must, adjourn or postpone the Denbury special meeting if, as of the time for which the Denbury special meeting is scheduled, there are insufficient shares of Denbury Common Stock represented (either in person or by proxy) to obtain the approval of the Denbury Issuance Proposal or the Denbury Charter Amendment Proposal. However, the Denbury special meeting will not be adjourned or postponed to a date that is more than 30 days after the date for which the Denbury special meeting was previously scheduled (though the Denbury special meeting may be adjourned or postponed every time the circumstances described in (1)(A) and (1)(B) exist, and, upon Penn Virginia’s request, every time the circumstances described in (2) exist) or to a date on or after two business days prior to April 30, 2019.

Special Meeting of Penn Virginia Shareholders (page 71)

Date, Time, Place and Purpose of the Penn Virginia Special Meeting

The Penn Virginia special meeting will be held on April 17, 2019, at 10:00 a.m., Central Time, at Houston Marriott Energy Corridor, 16011 Katy Freeway, Houston, Texas 77094. The purpose of the Penn Virginia special meeting is to consider and vote on the Penn Virginia Merger Proposal and the Penn Virginia Non-Binding Compensation Advisory Proposal. Approval of the Penn Virginia Merger Proposal is a condition to the obligation of Penn Virginia and Denbury to complete the Merger. Approval of the Penn Virginia Non-Binding Compensation Advisory Proposal is not a condition to the obligation of either Penn Virginia or Denbury to complete the Merger.

Record Date and Outstanding Shares of Penn Virginia Common Stock

Only holders of record of issued and outstanding shares of Penn Virginia Common Stock as of the close of business on February 19, 2019, the record date for the Penn Virginia special meeting, are entitled to notice of, and to vote at, the Penn Virginia special meeting or any adjournment or postponement of the Penn Virginia special meeting.

As of the close of business on the record date, there were 15,105,251 shares of Penn Virginia Common Stock issued and outstanding and entitled to vote at the Penn Virginia special meeting. You may cast one vote for each share of Penn Virginia Common Stock that you held as of the close of business on the record date.

A complete list of Penn Virginia shareholders entitled to vote at the Penn Virginia special meeting will be available for inspection at Penn Virginia’s principal place of business during regular business hours for a period of no less than 10 days before the Penn Virginia special meeting and during the Penn Virginia special meeting at 16285 Park Ten Place, Suite 500, Houston, Texas 77084.

Quorum; Abstentions and Broker Non-Votes

A quorum of Penn Virginia shareholders is necessary to hold a valid meeting. The presence at the Penn Virginia special meeting, in person or by proxy, of the holders of a majority in voting power of the outstanding shares of capital stock of Penn Virginia entitled to vote at the Penn Virginia special meeting constitutes a quorum. If you submit a properly executed Penn Virginia WHITE proxy card, even if you do not vote for one or both of the proposals or vote to “abstain” in respect of one or both of the proposals, your shares of Penn Virginia Common Stock will be counted for purposes of calculating whether a quorum is present for the transaction of business at the Penn Virginia special meeting.



 

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Penn Virginia Common Stock held in “street name” with respect to which the beneficial owner fails to give voting instructions to the broker, bank or other nominee will not be considered present and entitled to vote at the Penn Virginia special meeting for the purpose of determining the presence of a quorum.

A broker non-vote will result if your broker, bank or other nominee returns a proxy but does not provide instruction as to how shares should be voted on a particular matter. Under stock exchange rules, brokers, banks or other nominees do not have discretionary authority to vote on any of the proposals at the Penn Virginia special meeting because they are “non-routine” proposals. Broker non-votes will not be considered present and entitled to vote at the Penn Virginia special meeting for the purpose of determining the presence of a quorum, unless the broker, bank or other nominee has been instructed to vote on at least one of the proposals.

Executed but unvoted proxies will be voted in accordance with the recommendations of the Penn Virginia board.

Required Vote to Approve the Penn Virginia Merger Proposal

Approval of the Penn Virginia Merger Proposal requires the affirmative vote of the holders of more than two-thirds of the outstanding shares of Penn Virginia Common Stock entitled to vote on the proposal. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” the proposal. Failure to vote on the Penn Virginia Merger Proposal will have the same effect as a vote “AGAINST” the Penn Virginia Merger Proposal.

The Penn Virginia Merger Proposal is described in the section entitled “Penn Virginia Proposals” beginning on page 77.

Required Vote to Approve the Penn Virginia Non-Binding Compensation Advisory Proposal

Approval of the Penn Virginia Non-Binding Compensation Advisory Proposal requires that the number of votes cast “FOR” the proposal exceed the number of votes cast “AGAINST” the proposal. Abstentions, broker non-votes and failure to vote will not count as votes cast and will have no effect on the outcome of the vote. As an advisory vote, this proposal is not binding upon Penn Virginia or the Penn Virginia board or Denbury or the Denbury board, and approval of this proposal is not a condition to completion of the Merger.

The Penn Virginia Non-Binding Compensation Advisory Proposal is described in the section entitled “Penn Virginia Proposals” beginning on page 77.

Voting by Directors and Executive Officers

As of February 19, 2019, Penn Virginia directors and executive officers, and their affiliates, as a group, owned and were entitled to vote 55,102 shares of Penn Virginia Common Stock, or approximately 0.3% of the total outstanding shares of Penn Virginia Common Stock as of February 19, 2019 (excluding Penn Virginia service-based restricted stock and Penn Virginia performance-based stock).

Penn Virginia currently expects that all of its directors and executive officers will vote their shares “FOR” the approval of the Penn Virginia Merger Proposal and “FOR” the approval of the Penn Virginia Non-Binding Compensation Advisory Proposal.

Agreements with Certain Penn Virginia Shareholders

Concurrently with the execution of the Merger Agreement, Denbury entered into voting and support agreements (each, a “Voting Agreement” and, collectively, the “Voting Agreements”) with (i) Strategic Value Partners, LLC (“SVP”) on behalf of certain investment funds directly and indirectly managed by SVP, (ii) KLS



 

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Diversified Asset Management LP (“KLS”) and (iii) each director and executive officer of Penn Virginia, pursuant to which each such shareholder has agreed, among other matters and upon the terms and subject to the conditions set forth in the Voting Agreements, to vote all of their shares of Penn Virginia Common Stock in favor of the Penn Virginia Merger Proposal and the other actions contemplated by the Merger Agreement and against any proposal that would reasonably be expected to impede, interfere with, delay, postpone, discourage or adversely affect the consummation of the Merger. As of February 19, 2019, such shareholders subject to the Voting Agreements held 2,294,699 shares of Penn Virginia Common Stock in the aggregate (excluding Penn Virginia service-based restricted stock and Penn Virginia performance-based restricted stock), or approximately 15.2% of the voting power of Penn Virginia (excluding Penn Virginia service-based restricted stock and Penn Virginia performance-based restricted stock). The Voting Agreements are attached to this joint proxy statement/prospectus as Annex E, Annex F and Annex G, respectively.

Adjournment

In accordance with the Third Amended and Restated Bylaws of Penn Virginia (which we refer to as the “Penn Virginia bylaws”), whether or not a quorum is present, the chairman of the Penn Virginia special meeting will have the power to adjourn the Penn Virginia special meeting from time to time for the purpose of, among other things, soliciting additional proxies. If the Penn Virginia special meeting is adjourned, Penn Virginia shareholders who have already submitted their proxies will be able to revoke them at any time prior to their use. At any subsequent reconvening of the Penn Virginia special meeting, all proxies will be voted in the same manner as the manner in which such proxies would have been voted at the original convening of the Penn Virginia special meeting, except for any proxies that have been validly revoked or withdrawn prior to the reconvened meeting.

In addition, the Merger Agreement provides that Penn Virginia (1) will be required to adjourn or postpone the Penn Virginia special meeting (A) to the extent necessary to ensure that any required supplement or amendment to this joint proxy statement/prospectus is provided to the Penn Virginia shareholders or (B) if, as of the time the Penn Virginia special meeting is scheduled, there are insufficient shares of Penn Virginia Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct business at the Penn Virginia special meeting, and (2) may, and at Denbury’s request must, adjourn or postpone the Penn Virginia special meeting if, as of the time for which the Penn Virginia special meeting is scheduled, there are insufficient shares of Penn Virginia Common Stock represented (either in person or by proxy) to obtain the approval of the Penn Virginia Merger Proposal. However, the Penn Virginia special meeting will not be adjourned or postponed to a date that is more than 30 business days after the date for which the Penn Virginia special meeting was previously scheduled (though the Penn Virginia special meeting may be adjourned or postponed every time the circumstances described in (1)(A) and 1(B) exist, and, with Denbury’s consent, every time the circumstances described in (2) exist) or to a date on or after two business days prior to April 30, 2019.

Board of Directors and Management of Denbury Following Completion of the Merger (page 134)

Under the terms of the Merger Agreement, Denbury has agreed to take all necessary corporate action so that upon and after the effective time of the Merger, the size of the Denbury board is increased by two members, and two members of the Penn Virginia board who are mutually agreed by Denbury and Penn Virginia and would qualify as independent directors under Section 303A.02 of the NYSE Listed Company Manual are appointed to the Denbury board to fill the vacancies on the Denbury board created by such increase. Denbury, through the Denbury board and subject to the Denbury board’s fiduciary duties to Denbury stockholders, has agreed to take all necessary action to recommend that the two applicable members of the Penn Virginia board be elected to the Denbury board in the proxy statement relating to the first annual meeting of Denbury stockholders following the completion of the Merger.



 

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Upon completion of the Merger, the current directors and executive officers of Denbury are expected to continue in their current positions, other than as may be publicly announced by Denbury in the normal course.

Interests of Penn Virginia Directors and Executive Officers in the Merger (page 134)

In considering the recommendation of the Penn Virginia board with respect to the Penn Virginia Merger Proposal and the Penn Virginia Non-Binding Compensation Advisory Proposal, Penn Virginia shareholders should be aware that the executive officers and directors of Penn Virginia have interests in the Merger that may be different from, or in addition to, the interests of Penn Virginia shareholders generally. These interests include, but are not limited to, the treatment in the Merger of awards of Penn Virginia service-based restricted stock and Penn Virginia performance-based restricted stock held by Penn Virginia directors and executive officers, potential benefits upon a qualifying termination of employment in connection with the Merger and rights to ongoing indemnification and insurance coverage.

These interests are described in more detail in the sections entitled “The Merger—Interests of Penn Virginia Directors and Executive Officers in the Merger,” “The Merger—Treatment of Penn Virginia Equity Awards,” “The Merger—Executive Officer Severance Arrangements” and “The Merger—Quantification of Potential Payments” beginning on pages 134, 134, 135 and 137, respectively.

The members of the Penn Virginia board were aware of and considered these interests, among other matters, in evaluating and negotiating the Merger Agreement, in approving the Merger Agreement and in determining to recommend that Penn Virginia shareholders approve the Penn Virginia Merger Proposal.

Conditions to the Completion of the Merger (page 178)

Each party’s obligation to complete the Merger is subject to the satisfaction or waiver of the following mutual conditions:

 

   

Denbury Stockholder Approval. The Denbury Issuance Proposal and the Denbury Charter Amendment Proposal must have been approved in accordance with applicable law and the Denbury organizational documents, as applicable.

 

   

Penn Virginia Shareholder Approval. The Penn Virginia Merger Proposal must have been approved in accordance with applicable law and the Penn Virginia organizational documents, as applicable.

 

   

Government Approval. Any waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (which we refer to as the “HSR Act”) applicable to the Merger and the other transactions contemplated by the Merger Agreement must have expired or been terminated.

 

   

No Legal Restraints. There must not be any applicable law and no judgment, preliminary, temporary or permanent, issued by any court or tribunal of competent jurisdiction in effect that prevents, makes illegal or prohibits the consummation of the Merger and the other transactions contemplated by the Merger Agreement.

 

   

Effectiveness of the Registration Statement. The registration statement, of which this joint proxy statement/prospectus forms a part, must have become effective under the Securities Act and must not be the subject of any stop order or proceedings seeking a stop order.

 

   

NYSE Listing. The shares of Denbury Common Stock issuable to Penn Virginia shareholders pursuant to the Merger Agreement must have been authorized for listing on the NYSE, upon official notice of issuance.



 

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The obligations of Denbury and Merger Sub to complete the Merger are subject to the satisfaction or waiver of further conditions, including:

 

   

the accuracy of the representations and warranties of Penn Virginia contained in the Merger Agreement as of October 28, 2018 and as of the closing date (other than representations that by their terms speak specifically as of another date or period of time), subject to the materiality standards provided in the Merger Agreement;

 

   

Penn Virginia having performed, or complied with, in all material respects all agreements, obligations and covenants required to be performed or complied with by it under the Merger Agreement at or prior to the effective time of the Merger;

 

   

Denbury having received a certificate of Penn Virginia signed by an executive officer of Penn Virginia, dated as of the closing date, confirming that the conditions described in the two bullets directly above have been satisfied; and

 

   

Denbury having received an opinion from Vinson & Elkins (or other counsel with a national reputation and experience in comparable corporate and tax law matters, selected by Denbury and reasonably acceptable to Penn Virginia), in form and substance reasonably satisfactory to Denbury, dated as of the closing date (and, if requested, dated as of the date on which the registration statement, of which this joint proxy statement/prospectus forms a part, is declared effective by the SEC), to the effect that, on the basis of the facts, representations and assumptions set forth or referred to in such opinion, the Integrated Mergers, taken together, will qualify as a “reorganization” within the meaning of Section 368(a) of the Code.

The obligation of Penn Virginia to complete the Merger is subject to the satisfaction or waiver of the following additional conditions:

 

   

the accuracy of the representations and warranties of Denbury contained in the Merger Agreement as of October 28, 2018 and as of the closing date (other than representations that by their terms speak specifically as of another date or period of time), subject to the materiality standards provided in the Merger Agreement;

 

   

Denbury and Merger Sub having performed, or complied with, in all material respects all agreements, obligations and covenants required to be performed or complied with by them under the Merger Agreement at or prior to the effective time of the Merger;

 

   

Penn Virginia having received a certificate of Denbury signed by an executive officer of Denbury, dated as of the closing date, confirming that the conditions described in the two bullets directly above have been satisfied; and

 

   

Penn Virginia having received an opinion from Skadden (or other counsel with a national reputation and experience in comparable corporate and tax law matters, selected by Penn Virginia and reasonably acceptable to Denbury), in form and substance reasonably satisfactory to Penn Virginia, dated as of the closing date (and, if requested, dated as of the date on which the registration statement, of which this joint proxy statement/prospectus forms a part, is declared effective by the SEC), to the effect that, on the basis of the facts, representations and assumptions set forth or referred to in such opinion, the Integrated Mergers, taken together, will qualify as a “reorganization” within the meaning of Section 368(a) of the Code.



 

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No Solicitation (page 157)

No Solicitation by Denbury

Denbury has agreed that, from October 28, 2018 until the earlier of the effective time of the Merger or the termination of the Merger Agreement, Denbury will, and will cause its subsidiaries and its and their respective directors, officers, and employees and use its reasonable best efforts to cause its and their respective representatives to:

 

   

immediately cease and cause to be terminated all discussions or negotiations with any person conducted prior to October 28, 2018 with respect to any Denbury Takeover Proposal (as such term is defined in the section entitled “The Merger Agreement—No Solicitation; Adverse Recommendation Changes—Definitions of Takeover Proposals” beginning on page 165) or any inquiry, proposal or offer that could reasonably be expected to lead to a Denbury Takeover Proposal;

 

   

promptly (and in any event within 24 hours) request the prompt return or destruction of all confidential information previously furnished to any such person or its representatives and use reasonable best efforts to obtain the return or the destruction of such confidential information; and

 

   

immediately terminate all physical and electronic data room access previously granted to any such person or its representatives.

In addition, Denbury has agreed that, from October 28, 2018 until the earlier of the effective time of the Merger or the termination of the Merger Agreement, Denbury will not, and it will cause its subsidiaries and its and their respective directors, officers, and employees and use its reasonable best efforts to cause its and their respective representatives not to, directly or indirectly:

 

   

solicit, initiate, or knowingly encourage or facilitate (including by way of furnishing or affording access to any non-public information) any Denbury Takeover Proposal or any inquiry, proposal or offer that could reasonably be expected to lead to a Denbury Takeover Proposal;

 

   

furnish any non-public information regarding Denbury or any of its subsidiaries or afford access to the business, properties, books or records of Denbury or any of its subsidiaries to any person (other than Penn Virginia or its directors, officers, employees, affiliates or representatives) in connection with or in response to any Denbury Takeover Proposal or any inquiries, proposals or offers that could reasonably be expected to lead to a Denbury Takeover Proposal; or

 

   

enter into or participate in any discussions or negotiations with any person (other than Penn Virginia or its directors, officers, employees, affiliates or representatives) with respect to any Denbury Takeover Proposal or any inquiry, proposal or offer that could reasonably be expected to lead to a Denbury Takeover Proposal.

Further, Denbury has agreed to notify Penn Virginia orally and in writing if (i) Denbury receives a Denbury Takeover Proposal in which the person making such Denbury Takeover Proposal requests that Denbury terminate the Merger Agreement or otherwise not consummate the transactions contemplated thereby, including the Merger, or (ii) Denbury determines to begin providing information or commence discussions or negotiations concerning a Denbury Takeover Proposal in the event the Denbury board determines in good faith that the failure to do so would be inconsistent with the fiduciary duties owed by the Denbury board to Denbury stockholders. Thereafter, Denbury has agreed to promptly (and in any event within 24 hours) after its receipt of any Disclosable Denbury Takeover Proposal (as such term is defined in the section entitled “The Merger Agreement—No Solicitation; Adverse Recommendation Changes—Denbury: No Solicitation Exceptions” beginning on page 160) or information relating to Denbury or any of its subsidiaries in connection with a Disclosable Denbury Takeover Proposal, notify Penn Virginia (orally and in writing) of such Disclosable Denbury Takeover Proposal, inquiry or request (including providing the identity of the person making or



 

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submitting such Disclosable Denbury Takeover Proposal, inquiry or request), and, (i) if it is in writing, a copy of such Disclosable Denbury Takeover Proposal, inquiry or request and any related draft agreements and (ii) if oral, a reasonably detailed written summary thereof, including the financial and other terms thereof, in each case including any modifications thereto. Denbury has agreed to keep Penn Virginia informed in all material respects on a prompt basis (and in any event within 24 hours) with respect to any material development regarding the status or terms of any such Disclosable Denbury Takeover Proposal (including any change to the terms of any such Disclosable Denbury Takeover Proposal) or inquiry or request. Denbury has agreed to provide to Penn Virginia as soon as practicable after receipt or delivery thereof (and in any event within 24 hours) copies of all correspondence and other written materials sent by or provided to Denbury or its representatives to or from any person making a Disclosable Denbury Takeover Proposal, as applicable, with respect to any material development regarding the status or terms of any such Disclosable Denbury Takeover Proposal.

Notwithstanding the agreements described above, prior to, but not after, Denbury stockholders have approved the Denbury Issuance Proposal and the Denbury Charter Amendment Proposal, in response to an unsolicited, bona fide, written, Denbury Takeover Proposal made after October 28, 2018, that did not result from or arise in connection with a material breach of Denbury’s non-solicitation obligations in the Merger Agreement and that the Denbury board determines in good faith (after consultation with outside counsel and its financial advisor) constitutes or is reasonably expected to lead to a Superior Denbury Proposal (as such term is defined in the section entitled “The Merger Agreement—No Solicitation; Adverse Recommendation Changes—Definition of Superior Denbury Proposal” beginning on page 166), and that the failure to do so would be inconsistent with the fiduciary duties owed by the Denbury board to Denbury stockholders under applicable law, Denbury may (and may authorize its directors, officers, employees and representatives to) (x) furnish information with respect to Denbury and its subsidiaries to the person making such Denbury Takeover Proposal and its representatives and financing sources (provided that all such information has previously been provided to Penn Virginia or is provided to Penn Virginia prior to or substantially concurrently with the time it is provided to such person) pursuant to a customary confidentiality agreement that is not less restrictive of such person than the confidentiality agreement in place between Denbury and Penn Virginia (provided that such confidentiality agreement will not prohibit such counterparty from making any private proposal to the Denbury board) and that does not prohibit Denbury from complying with Denbury’s non-solicitation obligations in the Merger Agreement, including the provision of any information to Penn Virginia in accordance with the Merger Agreement, and (y) participate in discussions regarding the terms of such Denbury Takeover Proposal and the negotiation of such terms with, and only with, the person making such Denbury Takeover Proposal (and such person’s representatives and financing sources).

No Solicitation by Penn Virginia

Penn Virginia has agreed that, from October 28, 2018 until the earlier of the effective time of the Merger or the termination of the Merger Agreement, Penn Virginia will, and will cause its subsidiaries and its and their respective directors, officers, and employees and use its reasonable best efforts to cause its and their respective representatives to:

 

   

immediately cease and cause to be terminated all discussions or negotiations with any person conducted heretofore with respect to any Penn Virginia Takeover Proposal (as such term is defined in the section entitled “The Merger Agreement—No Solicitation; Adverse Recommendation Changes—Definitions of Takeover Proposals” beginning on page 165) or any inquiry, proposal or offer that could reasonably be expected to lead to a Penn Virginia Takeover Proposal;

 

   

promptly (and in any event within 24 hours) request the prompt return or destruction of all confidential information previously furnished to any such person or its representatives and use reasonable best efforts to obtain the return or the destruction of such confidential information; and



 

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immediately terminate all physical and electronic data room access previously granted to any such person or its representatives.

In addition, Penn Virginia has agreed that, from October 28, 2018 until the earlier of the effective time of the Merger or the termination of the Merger Agreement, Penn Virginia will not, and it will cause its subsidiaries and its and their respective directors, officers, and employees and use its reasonable best efforts to cause its and their respective representatives not to, directly or indirectly:

 

   

solicit, initiate, or knowingly encourage or facilitate (including by way of furnishing or affording access to any non-public information) any Penn Virginia Takeover Proposal or any inquiry, proposal or offer that could reasonably be expected to lead to a Penn Virginia Takeover Proposal;

 

   

furnish any non-public information regarding Penn Virginia or any of its subsidiaries or afford access to the business, properties, books or records of Penn Virginia or any of its subsidiaries to any person (other than Denbury or its directors, officers, employees, affiliates or representatives) in connection with or in response to any Penn Virginia Takeover Proposal or any inquiries, proposals or offers that could reasonably be expected to lead to a Penn Virginia Takeover Proposal; or

 

   

enter into or participate in any discussions or negotiations with any person (other than Denbury or its representatives) with respect to any Penn Virginia Takeover Proposal or any inquiry, proposal or offer that could reasonably be expected to lead to a Penn Virginia Takeover Proposal.

Further, Penn Virginia has agreed to promptly (and in any event within 24 hours) after its receipt of any Penn Virginia Takeover Proposal or any inquiry or request for discussions or negotiations regarding a Penn Virginia Takeover Proposal or information relating to Penn Virginia or any of its subsidiaries in connection with a Penn Virginia Takeover Proposal, notify Denbury (orally and in writing) of such Penn Virginia Takeover Proposal, inquiry or request (including providing the identity of the person making or submitting such Penn Virginia Takeover Proposal, inquiry or request), and, (i) if it is in writing, a copy of such Penn Virginia Takeover Proposal, inquiry or request and any related draft agreements and (ii) if oral, a reasonably detailed written summary thereof, including the financial and other terms thereof, in each case including any modifications thereto.

Penn Virginia has also agreed to notify Denbury in writing if Penn Virginia determines to begin providing information or to commence discussions or negotiations concerning a Penn Virginia Takeover Proposal, prior to providing any such information or commencing any such discussions or negotiations. Penn Virginia must keep Denbury informed in all material respects on a prompt basis (and in any event within 24 hours) with respect to any material development regarding the status or terms of any such Penn Virginia Takeover Proposal (including any change to the terms of any such Penn Virginia Takeover Proposal) or inquiry or request. Penn Virginia must provide to Denbury as soon as practicable after receipt or delivery thereof (and in any event within 24 hours) copies of all correspondence and other written materials sent by or provided to Penn Virginia or its representatives to or from any person making a Penn Virginia Takeover Proposal, as applicable, with respect to any material development regarding the status or terms of any such Penn Virginia Takeover Proposal.

Notwithstanding the agreements described above, prior to, but not after, Penn Virginia shareholders approving the Penn Virginia Merger Proposal, in response to an unsolicited, bona fide, written, Penn Virginia Takeover Proposal made after October 28, 2018 that did not result from or arise in connection with a material breach of Penn Virginia’s non-solicitation obligations under the Merger Agreement and that the Penn Virginia board determines in good faith (after consultation with outside counsel and its financial advisor) constitutes or is reasonably expected to lead to a Superior Penn Virginia Proposal (as such term is defined in the section entitled “The Merger Agreement—No Solicitation; Adverse Recommendation Changes—Definition of Superior Penn Virginia Proposal” beginning on page 166), and that the failure to do so would be inconsistent with the fiduciary



 

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duties owed by the Penn Virginia board to Penn Virginia shareholders under applicable law, Penn Virginia may (and may authorize its directors, officers, employees and representatives to), subject to compliance with the terms of the Merger Agreement, (x) furnish information with respect to Penn Virginia and its subsidiaries to the person making such Penn Virginia Takeover Proposal and its representatives and financing sources (provided that all such information has previously been provided to Denbury or is provided to Denbury prior to or substantially concurrently with the time it is provided to such person) pursuant to a customary confidentiality agreement that is not less restrictive of such person than the confidentiality agreement between Penn Virginia and Denbury (provided that such confidentiality agreement will not be required to prohibit such counterparty from making any private proposal to the Penn Virginia board) and that does not prohibit Penn Virginia from complying with Penn Virginia’s non-solicitation obligations in the Merger Agreement, including the provision of any information to Denbury in accordance with the Merger Agreement, and (y) participate in discussions regarding the terms of such Penn Virginia Takeover Proposal and the negotiation of such terms with, and only with, the person making such Penn Virginia Takeover Proposal (and such person’s representatives and financing sources).

Adverse Recommendation Changes (page 157)

Denbury Restrictions on Adverse Recommendation Change

Subject to certain exceptions described below, the Denbury board may not effect a Denbury Adverse Recommendation Change (as defined in the section entitled “The Merger Agreement—No Solicitation; Adverse Recommendation Changes—Denbury: Restrictions on Adverse Recommendation Changes” beginning on page 161).

Penn Virginia Restrictions on Adverse Recommendation Change

Subject to certain exceptions described below, the Penn Virginia board may not effect a Penn Virginia Adverse Recommendation Change (as defined in the section entitled “The Merger Agreement—No-Solicitation; Adverse Recommendation Changes—Penn Virginia: Restrictions on Adverse Recommendation Changes” beginning on page 161).

Denbury: Permitted Adverse Recommendation Changes and Permitted Termination to Enter into a Superior Proposal

Prior to, but not after, Denbury stockholders have approved the Denbury Issuance Proposal and the Denbury Charter Amendment Proposal, in response to an unsolicited, bona fide, written, Denbury Takeover Proposal that did not result from or arise in connection with a breach of Denbury’s non-solicitation obligations in the Merger Agreement described above and in the section entitled “The Merger Agreement—No Solicitation; Adverse Recommendation Changes—No Solicitation by Denbury” beginning on page 157, the Denbury board may make a Denbury Adverse Recommendation Change and/or terminate the Merger Agreement if:

 

   

the Denbury board determines in good faith (after consultation with outside legal counsel and its financial advisor) that such Denbury Takeover Proposal is a Superior Denbury Proposal;

 

   

the Denbury board determines in good faith (after consultation with outside legal counsel) that the failure to take such action in response to such Superior Denbury Proposal would be inconsistent with the fiduciary duties owed by the Denbury board to Denbury stockholders under applicable law; and

 

   

Denbury provides Penn Virginia with written notice of such proposed action and the basis thereof five business days in advance and complies with certain obligations, each as described in the section entitled “The Merger Agreement—No Solicitation; Adverse Recommendation Changes—Denbury: Permitted Adverse Recommendation Changes and Permitted Termination to Enter into a Superior Proposal” beginning on page 162.



 

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Denbury: Permitted Adverse Recommendation Changes in Connection with Intervening Events

Prior to, but not after, Denbury stockholders have approved the Denbury Issuance Proposal and the Denbury Charter Amendment Proposal, in response to a Denbury Intervening Event (as defined in the section entitled “The Merger Agreement—No Solicitation; Adverse Recommendation Changes—Denbury: Permitted Adverse Recommendation Changes in Connection with Intervening Events” beginning on page 163) that did not arise from or in connection with a material breach of the Merger Agreement by Denbury, the Denbury board may make a Denbury Adverse Recommendation Change if:

 

   

the Denbury board determines in good faith (after consultation with outside legal counsel and its financial advisor) that the failure to effect a Denbury Adverse Recommendation Change in response to such Denbury Intervening Event would be inconsistent with the fiduciary duties owed by the Denbury board to Denbury stockholders under applicable law; and

 

   

Denbury provides Penn Virginia with written notice of such proposed action and the basis thereof five business days in advance and complies with certain obligations, each as described in the section entitled “The Merger Agreement—No Solicitation; Adverse Recommendation Changes—Denbury: Permitted Adverse Recommendation Changes in Connection with Intervening Events” beginning on page 163.

Penn Virginia: Permitted Adverse Recommendation Changes and Permitted Termination to Enter into a Superior Proposal

Prior to, but not after, Penn Virginia shareholders have approved the Penn Virginia Merger Proposal, in response to an unsolicited, bona fide, written, Penn Virginia Takeover Proposal that did not result from or arise in connection with a breach of Penn Virginia’s non-solicitation obligations under the Merger Agreement described above and in the section entitled “The Merger Agreement—No Solicitation; Adverse Recommendation Changes—No Solicitation by Penn Virginia” beginning on page 159, the Penn Virginia board may make a Penn Virginia Adverse Recommendation Change and/or terminate the Merger Agreement if:

 

   

the Penn Virginia board determines in good faith (after consultation with outside legal counsel and its financial advisor) that such Penn Virginia Takeover Proposal is a Superior Penn Virginia Proposal;

 

   

the Penn Virginia board determines in good faith (after consultation with outside legal counsel) that the failure to take such action in response to such Superior Penn Virginia Proposal would be inconsistent with the fiduciary duties owed by the Penn Virginia board to Penn Virginia shareholders under applicable law; and

 

   

Penn Virginia provides Denbury with written notice of such proposed action and the basis thereof five business days in advance and complies with certain obligations, each as described in the section entitled “The Merger Agreement—No Solicitation; Adverse Recommendation Changes—Penn Virginia: Permitted Adverse Recommendation Changes and Permitted Termination to Enter into a Superior Proposal” beginning on page 162.

Penn Virginia: Permitted Adverse Recommendation Change in Connection with Intervening Events

Prior to, but not after, Penn Virginia shareholders have approved the Penn Virginia Merger Proposal, in response to a Penn Virginia Intervening Event (as defined in the section entitled The Merger Agreement—No Solicitation; Adverse Recommendation Changes—Penn Virginia: Permitted Adverse Recommendation Changes in Connection with Intervening Events beginning on page 164) that did not arise from or in connection with a material breach of the Merger Agreement by Penn Virginia, the Penn Virginia board may make a Penn Virginia Adverse Recommendation Change if:

 

   

the Penn Virginia board determines in good faith (after consultation with outside legal counsel and its financial advisor) that the failure to effect a Penn Virginia Adverse Recommendation Change in



 

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response to such Penn Virginia Intervening Event would be inconsistent with the fiduciary duties owed by the Penn Virginia board to Penn Virginia shareholders under applicable law; and

 

   

Penn Virginia provides Denbury with written notice of such proposed action and the basis thereof five business days in advance and complies with certain obligations, each as described in the section entitled “The Merger Agreement—No Solicitation; Adverse Recommendation Changes—Penn Virginia: Permitted Adverse Recommendation Changes in Connection with Intervening Events” beginning on page 164.

Termination (page 180)

Denbury and Penn Virginia may terminate the Merger Agreement and abandon the Merger at any time prior to the effective time of the Merger by mutual written consent of Denbury and Penn Virginia.

The Merger Agreement may also be terminated by either Denbury or Penn Virginia at any time prior to the effective time of the Merger in any of the following situations:

 

   

upon an end date termination event (as defined in the section entitled “The Merger Agreement—Termination—Termination Rights” beginning on page 180);

 

   

if any applicable law is in effect or any court or tribunal of competent jurisdiction issues a final and non-appealable order that prevents, makes illegal or prohibits the consummation of the transactions contemplated by the Merger Agreement, including the Merger, so long as such law or order is not the result of a breach by the terminating party of its obligations under the Merger Agreement; or

 

   

upon a Penn Virginia shareholder approval termination event or a Denbury stockholder approval termination event (as each term is defined in the section entitled “The Merger Agreement—Termination—Termination Rights” beginning on page 180).

In addition, the Merger Agreement may be terminated by Denbury:

 

   

upon a Penn Virginia breach termination event (as defined in the section entitled “The Merger Agreement—Termination—Termination Rights” beginning on page 180);

 

   

if a Penn Virginia Adverse Recommendation Change has occurred (whether or not such Penn Virginia Adverse Recommendation Change is permitted by the Merger Agreement);

 

   

if Penn Virginia, any of its subsidiaries or any of its or their representatives has materially breached its non-solicitation obligations under the Merger Agreement (which are described in the section entitled “The Merger Agreement—No Solicitation; Adverse Recommendation Changes” beginning on page 157); or

 

   

prior to Denbury stockholders approving the Denbury Issuance Proposal and the Denbury Charter Amendment Proposal, if Denbury has complied in all material respects with its non-solicitation obligations (which are described in the section entitled “The Merger Agreement—No Solicitation; Adverse Recommendation Changes” beginning on page 157), in order to enter into a definitive agreement with respect to a Superior Denbury Proposal.

Further, the Merger Agreement may be terminated by Penn Virginia:

 

   

upon a Denbury breach termination event (as defined in the section entitled “The Merger Agreement—Termination—Termination Rights” beginning on page 180);

 

   

if a Denbury Adverse Recommendation Change has occurred (whether or not such Denbury Adverse Recommendation Change is permitted by the Merger Agreement);



 

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if Denbury, any of its subsidiaries or any of its or their representatives has materially breached its non-solicitation obligations under the Merger Agreement (which are described in the section entitled “The Merger Agreement—No Solicitation; Adverse Recommendation Changes” beginning on page 157); or

 

   

prior to Penn Virginia shareholders approving the Penn Virginia Merger Proposal, if Penn Virginia has complied in all material respects with its non-solicitation obligations (which are described in the section entitled “The Merger Agreement—No Solicitation; Adverse Recommendation Changes” beginning on page  157), in order to enter into a definitive agreement with respect to a Superior Penn Virginia Proposal.

Termination Fees (page 182)

Termination Fees Payable by Denbury

The Merger Agreement requires Denbury to pay Penn Virginia a termination fee of $45 million if:

 

   

Penn Virginia terminates the Merger Agreement due to a Denbury Adverse Recommendation Change or a breach of Denbury’s non-solicitation obligations under the Merger Agreement;

 

   

Denbury terminates the Merger Agreement due to Denbury stockholders not approving the Denbury Issuance Proposal or the Denbury Charter Amendment Proposal following a Denbury Adverse Recommendation Change;

 

   

Denbury terminates the Merger Agreement due to entry into a Superior Denbury Proposal; or

 

   

(A) prior to the Denbury special meeting, a Denbury Takeover Proposal is made to Denbury or is made directly to Denbury stockholders or otherwise becomes publicly known or any person has publicly announced an intention (whether or not conditional) to make a Denbury Takeover Proposal, and such Denbury Takeover Proposal or intended Denbury Takeover Proposal has not been publicly withdrawn without qualification at least five business days prior to (1) the Denbury special meeting or (2) if the Denbury special meeting has not been held at the time of termination, the date of such termination, (B) Denbury or Penn Virginia, as applicable, terminates the Merger Agreement due to (1) an end date termination event (if the Denbury special meeting has not been held), (2) a Denbury stockholder approval termination event or (3) a Denbury breach termination event, and (C) within 12 months of such termination Denbury enters into a definitive contract (other than a confidentiality agreement) with respect to a Denbury Takeover Proposal (or Denbury publicly approves or recommends to Denbury stockholders or otherwise does not oppose, in the case of a tender or exchange offer, a Denbury Takeover Proposal which is ultimately consummated regardless of whether outside such 12-month period) or consummates a Denbury Takeover Proposal. For purposes of this paragraph only, any reference in the definition of Denbury Takeover Proposal to “40%” and “60%” will be deemed to be “50%.”

In no event will Denbury be required to pay the termination fee on more than one occasion.

Termination Fees Payable by Penn Virginia

The Merger Agreement requires Penn Virginia to pay Denbury a termination fee of $45 million if:

 

   

Denbury terminates the Merger Agreement due to a Penn Virginia Adverse Recommendation Change or a breach of Penn Virginia’s non-solicitation obligations under the Merger Agreement;

 

   

Penn Virginia terminates the Merger Agreement due to Penn Virginia shareholders not approving the Penn Virginia Merger Proposal following a Penn Virginia Adverse Recommendation Change;



 

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Penn Virginia terminates the Merger Agreement due to entry into a Superior Penn Virginia Proposal; or

 

   

(A) prior to the Penn Virginia special meeting, a Penn Virginia Takeover Proposal is made to Penn Virginia or is made directly to Penn Virginia shareholders or otherwise becomes publicly known or any person has publicly announced an intention (whether or not conditional) to make a Penn Virginia Takeover Proposal, and such Penn Virginia Takeover Proposal or intended Penn Virginia Takeover Proposal has not been publicly withdrawn without qualification at least five business days prior to (1) the Penn Virginia special meeting or (2) if the Penn Virginia special meeting has not been held at the time of termination, the date of such termination, (B) Denbury or Penn Virginia, as applicable, terminates the Merger Agreement due to (1) an end date termination event (if the Penn Virginia special meeting has not been held), (2) a Penn Virginia shareholder approval termination event or (3) a Penn Virginia breach termination event, and (C) within 12 months of such termination Penn Virginia enters into a definitive contract (other than a confidentiality agreement) with respect to a Penn Virginia Takeover Proposal (or Penn Virginia publicly approves or recommends to Penn Virginia shareholders or otherwise does not oppose, in the case of a tender or exchange offer, a Penn Virginia Takeover Proposal which is ultimately consummated regardless of whether outside such 12-month period) or consummates a Penn Virginia Takeover Proposal. For purposes of this paragraph only, any reference in the definition of Penn Virginia Takeover Proposal to “15%” will be deemed to be “50%.”

In no event will Penn Virginia be required to pay the termination fee on more than one occasion.

Regulatory Approvals (page 133)

The completion of the Merger is subject to the receipt of antitrust clearance in the United States. Under the HSR Act, and the rules promulgated thereunder, the Merger may not be completed until notification and report forms have been filed with the Federal Trade Commission (which we refer to as the “FTC”) and the Department of Justice (which we refer to as the “DOJ”) and the applicable waiting period (or any extension of such waiting period) has expired or been terminated. On December 27, 2018, Denbury and Penn Virginia received notice of the early termination of the applicable waiting period under the HSR Act.

Neither Denbury nor Penn Virginia is aware of any material governmental approvals or actions that are required for completion of the Merger other than as described above. It is presently contemplated that if any such additional material governmental approvals or actions are required, those approvals or actions will be sought.

For additional information, see the section entitled “The Merger Agreement—Required Actions” beginning on page 170.

Specific Performance; Remedies (page 183)

Denbury, Penn Virginia and Merger Sub have agreed that each will be entitled to an injunction or injunctions, or any other appropriate form of specific performance or equitable relief, to prevent breaches of the Merger Agreement and to enforce specifically the terms and provisions of the Merger Agreement.

Except in the case of fraud or a knowing and intentional breach of the Merger Agreement, the monetary remedies and the specific performance remedies set forth in the Merger Agreement will be the receiving party’s sole and exclusive remedy against the paying party.

No Dissenters’ or Appraisal Rights (page 149)

No dissenters’ or appraisal rights will be available with respect to the transactions contemplated by the Merger Agreement.



 

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Material U.S. Federal Income Tax Consequences of the Integrated Mergers (page 185)

Denbury and Penn Virginia intend for the Integrated Mergers, taken together, to qualify as a “reorganization” within the meaning of Section 368(a) of the Code. It is a condition to each of Denbury’s and Penn Virginia’s obligation to complete such mergers that it receive a written opinion from its counsel, Vinson & Elkins and Skadden, respectively, to the effect that the Integrated Mergers, taken together, will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. The U.S. federal income tax consequences of the Integrated Mergers to a U.S. holder (as defined under “Material U.S. Federal Income Tax Consequences of the Integrated Mergers”) generally will depend on whether such U.S. holder exchanges its Penn Virginia Common Stock for cash consideration, stock consideration or a combination of cash consideration and stock consideration. Assuming the receipt and accuracy of the opinions described above:

 

   

U.S. Holders Who Receive Solely Cash: A U.S. holder who receives solely cash consideration in exchange for Penn Virginia Common Stock in the Merger generally will recognize gain or loss in an amount equal to the difference, if any, between (1) the amount of cash received and (2) such U.S. holder’s adjusted tax basis in the shares of Penn Virginia Common Stock surrendered.

 

   

U.S. Holders Who Receive Solely Shares of Denbury Common Stock: A U.S. holder who receives solely shares of Denbury Common Stock in exchange for Penn Virginia Common Stock in the Merger generally will not recognize any gain or loss, except with respect to cash received in lieu of a fractional share of Denbury Common Stock.

 

   

U.S. Holders Who Receive a Combination of Shares of Denbury Common Stock and Cash: A U.S. holder who receives a combination of shares of Denbury Common Stock and cash in exchange for Penn Virginia Common Stock in the Merger generally will recognize gain (but not loss) in an amount equal to the lesser of (i) the amount by which the sum of the fair market value of the Denbury Common Stock and cash received by the U.S. holder exceeds such U.S. holder’s adjusted tax basis in its shares of Penn Virginia Common Stock surrendered and (ii) the amount of cash received by such U.S. holder.

Holders of Penn Virginia Common Stock that are not U.S. holders and that receive cash pursuant to the

Merger may be subject to U.S. withholding tax with respect to any cash received.

Holders of Penn Virginia Common Stock should read the section entitled “Material U.S. Federal Income Tax Consequences of the Integrated Mergers” beginning on page 185 for a more complete discussion of the U.S. federal income tax consequences of the Integrated Mergers. Tax matters can be complicated, and the tax consequences to a particular holder will depend on such holder’s particular facts and circumstances. Penn Virginia shareholders should consult their tax advisors to determine the specific consequences to them of the Integrated Mergers.

Litigation Relating to the Merger (page 141)

As of February 28, 2019, one complaint has been filed by a purported Penn Virginia shareholder relating to the Merger. The complaint, which was filed in the United States District Court for the Southern District of Texas, Houston Division, is captioned Assad v. Penn Virginia Corp. et al., Docket No. 4:19-cv-00656 (filed February 25, 2019). The complaint names as defendants each member of Penn Virginia’s board of directors, Penn Virginia itself, Denbury, Merger Sub, and LLC Sub. The complaint alleges, among other things, that statements made in the joint proxy solicitation included in the registration statement filed by Denbury on January 16, 2019, omitted material information and was misleading. The complaint asserts claims under Sections 14(a) and 20(a) of the Exchange Act. Among other remedies, the complaint seeks to enjoin the defendants from completing the Merger or, if the Merger is completed, rescission of the Merger or rescissory damages, as well as recovery of litigation costs, attorneys’ fees, and experts’ fees. The defendants intend to defend this action vigorously.



 

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For additional information, see the section entitled “The Merger—Litigation Relating to the Merger” beginning on page 141.

Comparison of Stockholders’ Rights (page 201)

The rights of Penn Virginia shareholders who receive shares of Denbury Common Stock in the Merger will be governed by the Denbury certificate of incorporation, as amended by the Denbury Charter Amendment, the Denbury bylaws and the Delaware General Corporation Law (“DGCL”), rather than by the Second Amended and Restated Articles of Incorporation of Penn Virginia (which we refer to as the “Penn Virginia articles of incorporation”), the Penn Virginia bylaws and the VSCA. As a result, Penn Virginia shareholders will have different rights once they become Denbury stockholders due to the differences in the organizational documents of Penn Virginia and Denbury. The key differences are described in the section entitled “Comparison of Stockholders’ Rights” beginning on page 201.

Listing of Denbury Common Stock; Delisting and Deregistration of Penn Virginia Common Stock (page 140)

If the Merger is completed, the shares of Denbury Common Stock to be issued in the Merger will be listed for trading on the NYSE, shares of Penn Virginia Common Stock will be delisted from the Nasdaq and deregistered under the Exchange Act, and Penn Virginia will no longer be required to file periodic reports with the SEC pursuant to the Exchange Act.



 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF DENBURY

The following table presents selected historical consolidated financial data for Denbury (1) as of and for the years ended December 31, 2018, 2017, 2016, 2015 and 2014. The selected consolidated financial data for each of the years ended December 31, 2018, 2017 and 2016, and as of December 31, 2018 and 2017 have been derived from Denbury’s selected financial data and audited consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2018, which is incorporated by reference herein in its entirety. The selected historical consolidated financial data for each of the year ended December 31, 2015 and 2014, and as of December 31, 2016, 2015 and 2014 have been derived from Denbury’s selected financial data and audited consolidated financial statements for such years, which have not been incorporated by reference herein.

The information set forth below is only a summary and is not necessarily indicative of the results of future operations of Denbury, nor does it include the effects of the Merger. This summary should be read together with the other information contained in Denbury’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, including the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes therein. For additional information, see the section entitled “Where You Can Find More Information” beginning on page 221.

    Year Ended December 31,  
In thousands, except per share data   2018     2017     2016     2015     2014  

Consolidated statements of operations data

         

Revenues and other income

         

Oil, natural gas, and related product sales

  $ 1,422,589     $ 1,089,666     $ 935,751     $ 1,213,026     $ 2,372,473  

CO2 sales and transportation fees

    31,145       26,182       24,816       30,626       44,643  

Other income

    19,891       13,938       15,029       13,908       18,089  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues and other income

    1,473,625       1,129,786       975,596       1,257,560       2,435,205  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

         

Lease operating expenses

    489,720       447,799       414,937       515,043       647,559  

Marketing and plant operating expenses

    50,002       51,820       57,454       55,746       64,379  

CO2 discovery and operating expenses

    2,816       3,099       3,374       4,557       25,222  

Taxes other than income

    104,670       87,207       77,892       109,992       169,701  

General and administrative expenses

    71,495       101,806       109,926       144,564       158,343  

Interest, net of amounts capitalized (a)

    69,688       99,263       125,145       159,268       183,003  

Depletion, depreciation, and amortization

    216,449       207,713       846,043       531,660       592,972  

Commodity derivatives expense (income)

    (21,087     77,576       127,944       (147,999     (555,255

Loss (gain) on debt extinguishment

    —         —         (115,095     —         113,908  

Write-down of oil and natural gas properties

    —         —         810,921       4,939,600       —    

Impairment of goodwill

    —         —         —         1,261,512       —    

Other expenses

    79,941       7,003       37,402       9,599       12,816  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    1,063,694       1,083,286       2,495,943       7,583,542       1,412,648  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

    409,931       46,500       (1,520,347     (6,325,982     1,022,557  

Income tax provision (benefit)

    87,233       (116,652     (544,170     (1,940,534     387,066  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

  $ 322,698     $ 163,152     $ (976,177   $ (4,385,448   $ 635,491  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per common share

         

Basic

  $ 0.75     $ 0.42     $ (2.61   $ (12.57   $ 1.82  

Diluted

    0.71       0.41       (2.61     (12.57     1.81  

Dividends declared per common share

    —         —         —         0.1875       0.25  

Consolidated statements of cash flows data

         

Cash provided by (used in)

         

Operating activities

  $ 529,685     $ 267,143     $ 219,223     $ 864,304     $ 1,222,825  

Investing activities

    (333,276     (356,814     (204,663     (549,730     (1,076,179

Financing activities

    (157,452     88,613       (15,012     (334,460     (135,104

 

(a)

Denbury’s capitalized interest was $37.1 million, $30.8 million, $26.0 million, $32.1 million and $24.2 million for the years ended December 31, 2018, 2017, 2016, 2015 and 2014, respectively. Interest expense reflected in Denbury’s consolidated financial data is lower than the actual cash interest payments during certain periods, primarily due to the accounting for exchange transactions in accordance with Financial Accounting Standards Board Codification 470-60, Troubled Debt Restructuring by Debtors, whereby interest



 

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  of $86.1 million, $52.5 million and $32.1 million for the years ended December 31, 2018, 2017 and 2016, respectively, are not reflected as interest for financial reporting purposes.

 

     December 31,  
In thousands    2018      2017      2016      2015      2014  

Consolidated balance sheet data

              

Total assets

   $ 4,723,222      $ 4,471,299      $ 4,274,578      $ 5,885,533      $ 12,690,156  

Total long-term debt (c)

     2,664,211        2,979,086        2,909,732        3,245,114        3,498,255  

Stockholders’ equity

     1,141,777        648,165        468,448        1,248,912        5,703,856  

 

(c)

Total long-term debt reflected in Denbury’s consolidated financial data includes future interest payable of $164.9 million, $241.5 million and $178.5 million as of December 31, 2018, 2017 and 2016, respectively.

The following table sets forth certain historical information with respect to Denbury’s estimated oil and natural gas reserves and other data as of the dates indicated. The estimates of Denbury’s net proved oil and natural gas reserves presented below were prepared by DeGolyer and MacNaughton, an independent petroleum engineering firm located in Dallas, Texas. Estimates of reserves were prepared using an average price equal to the unweighted arithmetic average of hydrocarbon prices on the first day of each month within the applicable fiscal 12-month period in accordance with rules and regulations of the SEC. Our oil and natural gas reserve estimates do not include any value for probable or possible reserves that may exist. The reserve estimates represent our net revenue interest in our properties. The estimates of proved CO2 reserves presented below were also prepared by DeGolyer and MacNaughton.



 

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The following information should be read in conjunction with the information contained in Denbury’s 2018 consolidated financial statements and notes related thereto included in its Annual Report on Form 10-K for the year ended December 31, 2018, incorporated herein by reference.

 

     Unaudited
December 31,
 
     2018     2017     2016     2015     2014  

Summary oil and natural gas reserves data

          

Estimated proved reserves

          

Oil (MBbls)

     255,042       252,625       247,103       282,250       362,335  

Natural gas (MMcf)

     43,008       42,721       44,315       38,305       452,402  

Oil equivalent (MBOE)

     262,210       259,745       254,489       288,634       437,735  

Percentage of total MBOE

          

Proved developed producing

     79     75     69     68     57

Proved developed non-producing

     9     13     13     11     20

Proved undeveloped

     12     12     18     21     23

Representative oil and natural gas prices (a)

          

Oil—NYMEX

   $ 65.56     $ 51.34     $ 42.75     $ 50.28     $ 94.99  

Natural gas—Henry Hub

     3.10       2.98       2.55       2.63       4.30  

Present values (thousands) (b)

          

Discounted estimated future net cash flow before income taxes (“PV-10 Value”) (c)

   $ 4,025,139     $ 2,533,798     $ 1,541,684     $ 2,318,555     $ 8,748,069  

Standardized measure of discounted estimated future net cash flow after income taxes (“Standardized Measure”)

     3,351,385       2,232,429       1,399,217       1,890,124       5,908,128  

Summary non-hydrocarbon reserves data

          

Estimated proved carbon dioxide reserves

          

Gulf Coast region (MMcf) (d)

     4,982,440       5,164,741       5,332,576       5,501,175       5,697,642  

Rocky Mountain region (MMcf) (e)

     1,155,538       1,187,787       1,214,428       1,237,603       3,035,286  

 

(a)

The reference prices were based on the arithmetic average of the first-day-of-the-month NYMEX commodity prices for each month during the respective year. These prices do not reflect adjustments for market differentials by field that are utilized in the preparation of our reserve report to arrive at the appropriate net price we receive.

(b)

Determined based on the average first-day-of-the-month prices for each month, adjusted to prices received by field in accordance with standards set forth in the Financial Accounting Standards Board Codification (“FASC”).

(c)

PV-10 Value is a non-GAAP measure and is different from the Standardized Measure in that PV-10 Value is a pre-tax number and the Standardized Measure is an after-tax number. The information used to calculate PV-10 Value is derived directly from data determined in accordance with FASC Topic 932, Extractive Industries—Oil and Gas. The difference between these two amounts, the discounted estimated future income tax, was $673.8 million at December 31, 2018; $301.4 million at December 31, 2017; $142.5 million at December 31, 2016; $428.4 million at December 31, 2015; and $2.84 billion at



 

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  December 31, 2014. We believe that PV-10 Value is a useful supplemental disclosure to the Standardized Measure because the Standardized Measure can be impacted by a company’s unique tax situation, and it is not practical to calculate the Standardized Measure on a property-by-property basis. Because of this, PV-10 Value is a widely used measure within the industry and is commonly used by securities analysts, banks and credit rating agencies to evaluate the estimated future net cash flows from proved reserves on a comparative basis across companies or specific properties. PV-10 Value is commonly used by us and others in our industry to evaluate properties that are bought and sold, to assess the potential return on investment in our oil and natural gas properties, and to perform our impairment testing of oil and natural gas properties. PV-10 Value is not a measure of financial or operating performance under GAAP, nor should it be considered in isolation or as a substitute for the Standardized Measure. Our PV-10 Value and the Standardized Measure do not purport to represent the fair value of our oil and natural gas reserves.
(d)

Proved CO2 reserves in the Gulf Coast region consist of reserves from our reservoirs at Jackson Dome and are presented on a gross or 8/8ths working interest basis, of which our net revenue interest was approximately 4.0 Tcf, 4.1 Tcf, 4.2 Tcf, 4.4 Tcf and 4.5 Tcf at December 31, 2018, 2017, 2016, 2015 and 2014, respectively, and include reserves dedicated to volumetric production payments of 3.1 Bcf, 7.6 Bcf, 12.3 Bcf, 25.3 Bcf and 9.3 Bcf at December 31, 2018, 2017, 2016, 2015 and 2014, respectively.

(e)

Proved CO2 reserves in the Rocky Mountain region consist of our overriding royalty interest in LaBarge Field and our reserves at Riley Ridge (presented on a gross (8/8ths) basis), of which our net revenue interest was approximately 1.2 Tcf, 1.2 Tcf, 1.2 Tcf, 1.2 Tcf and 2.6 Tcf at December 31, 2018, 2017, 2016, 2015 and 2014, respectively. As of December 31, 2015, Riley Ridge CO2 reserves were reclassified and are no longer considered proved reserves primarily as a result of the decline in average first-day-of-the-month natural gas prices utilized in preparing our December 31, 2015 reserve report.

The following table sets forth certain historical information with respect to Denbury’s production and other data for the periods indicated, and should be read in conjunction with the information contained in Denbury’s consolidated financial statements and notes thereto in Denbury’s Annual Report on Form 10-K for the year ended December 31, 2018, which is incorporated by reference in this document.

 

    Unaudited
Year Ended December 31,
 
    2018     2017     2016     2015     2014  

Summary operating data

         

Average daily production volumes (a)

         

Oil (Bbls)

    58,532       58,410       61,440       69,165       70,606  

Natural gas (Mcf)

    10,854       11,329       15,378       22,172       22,955  

BOE (6:1)

    60,341       60,298       64,003       72,861       74,432  

Unit sales price—excluding impact of derivative settlements

         

Oil (per Bbl)

  $ 66.11     $ 50.64     $ 41.12     $ 47.30     $ 90.74  

Natural gas (per Mcf)

    2.58       2.41       1.98       2.35       4.07  

Unit sales price—including impact of derivative settlements

         

Oil (per Bbl)

  $ 57.91     $ 48.40     $ 44.86     $ 67.41     $ 90.82  

Natural gas (per Mcf)

    2.58       2.41       1.98       2.83       3.99  

Costs per BOE

         

Lease operating expenses

  $ 22.24     $ 20.35     $ 17.71     $ 19.37     $ 23.84  

Taxes other than income

    4.75       3.96       3.33       4.13       6.25  

General and administrative expenses

    3.25       4.63       4.69       5.44       5.83  

Depletion, depreciation, and amortization (b)

    9.83       9.44       36.12       19.99       21.83  


 

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Table of Contents
(a)

Includes production related to non-core assets in the Williston Basin of North Dakota and Montana sold during 2016, production from Lockhart Crossing Field sold in the third quarter of 2018, plus other minor asset sales, which production totaled 315 BOE/d, 549 BOE/d, 1,806 BOE/d, 3,033 BOE/d and 3,200 BOE/d for the years ended December 31, 2018, 2017, 2016, 2015 and 2014, respectively.

(b)

Depletion, depreciation, and amortization during the year ended December 31, 2016 includes an accelerated depreciation charge of $591.0 million, or $25.23 per BOE, associated with the Riley Ridge gas processing facility and related assets.



 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF PENN VIRGINIA

The following table sets forth Penn Virginia’s selected consolidated historical financial information that has been derived from Penn Virginia’s consolidated financial statements (1) as of and for the years ended December 31, 2018 and 2017, for the period from September 13, 2016 through December 31, 2016 and as of December 31, 2016 (Successor) and (2) as of and for the period from January 1, 2016 through September 12, 2016, as of September 12, 2016 and as of and for the years ended December 31, 2015 and 2014 (Predecessor). The information set forth below is only a summary and is not necessarily indicative of the results of future operations of Penn Virginia nor does it include the effects of the Merger. The selected consolidated financial data for the years ended December 31, 2018 and 2017, the period from September 13, 2016 through December 31, 2016 and the period from January 1, 2016 through September 12, 2016 and as of December 31, 2018 and 2017 have been derived from Penn Virginia’s selected financial data and audited consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2018, which is incorporated by reference herein in its entirety. The historical consolidated financial data for each of the years ended December 31, 2015 and 2014, and as of September 12, 2016, December 31, 2015 and 2014 have been derived from Penn Virginia’s selected financial data and audited consolidated financial statements for such years, which have not been incorporated by reference herein.

The consolidated historical financial information presented below reflect Penn Virginia’s emergence from bankruptcy proceedings and fresh start accounting following relief under Chapter 11 of Title 11 of the United States Bankruptcy Code. On August 11, 2016, the United States Bankruptcy Court for the Eastern District of Virginia confirmed Penn Virginia’s Second Amended Joint Chapter 11 Plan of Reorganization of Penn Virginia Corporation and its Debtor Affiliates, and subsequently emerged from bankruptcy on September 12, 2016, or the Effective Date. Upon the Effective Date, Penn Virginia adopted and applied the relevant guidance with respect to the accounting and financial reporting for entities that have emerged from bankruptcy proceedings, or Fresh Start Accounting. The adoption of Fresh Start Accounting resulted in a new reporting entity, the Successor, for financial reporting purposes. The reorganized company is referred to below as the “Successor” for periods subsequent to September 12, 2016, and the “Predecessor” for periods prior to September 13, 2016.



 

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The information set forth below is only a summary and is not necessarily indicative of the results of future operations of Penn Virginia, nor does it include the effects of the Merger. This summary should be read together with the other information contained in Penn Virginia’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, including the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes thereto. For additional information, see the section entitled “Where You Can Find More Information” beginning on page 221.

 

    Successor     Predecessor  
    Year Ended
December 31,
    September 13,
Through
December 31,
    January 1,
Through
September 12,
    Year Ended December 31,  
In thousands, except per share data   2018     2017     2016     2016     2015     2014  

Consolidated statements of operations data

           

Revenues

           

Crude oil

  $ 402,485     $ 140,886     $ 33,157     $ 81,377     $ 220,596     $ 420,286  

Natural gas liquids

    21,073       10,066       2,707       6,064       16,905       34,552  

Natural gas

    15,972       8,517       2,790       6,208       25,479       58,044  

Gain (loss) on sales of assets, net

    (177     (36     (49     1,261       41,335       120,769  

Other revenues, net

    1,479       621       398       (600     983       3,122  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    440,832       160,054       39,003       94,310       305,298       636,773  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

           

Lease operating

    35,879       21,784       5,331       15,626       42,428       48,298  

Gathering, processing and transportation

    18,626       10,734       3,043       13,235       23,815       18,294  

Production and ad valorem taxes

    23,547       8,814       2,498       3,490       16,282       27,990  

General and administrative

    26,064       18,201       5,066       38,956       43,263       48,940  

Exploration

    —         —         —         10,288       12,583       17,063  

Depreciation, depletion and amortization

    127,961       48,649       11,652       33,582       334,479       300,299  

Impairments

    —         —         —         —         1,397,424       791,809  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    232,077       108,182       27,590       115,177       1,870,274       1,252,693  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

    208,755       51,872       11,413       (20,867     (1,564,976     (615,920

Other income (expense)

           

Interest expense, net of amounts capitalized (a)

    (26,462     (6,392     (879     (58,018     (90,951     (88,831

Loss on extinguishment of debt

    —         —         —         —         —         —    

Derivatives

    37,427       (17,819     (16,622     (8,333     71,247       162,212  

Other, net

    2,266       58       792       (3,173     (3,652     1,269  

Reorganization items, net

    3,322       —         —         1,144,993       —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

    225,308       27,719       (5,296     1,054,602       (1,588,332     (541,270

Income tax benefit (expense)

    (523     4,943       —         —         5,371       131,678  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

    224,785       32,662       (5,296     1,054,602       (1,582,961     (409,592

Preferred stock dividends

    —         —         —         (5,972     (22,789     (17,148

Induced conversion of preferred stock

    —         —         —         —         —         (4,256
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to common shareholders

  $ 224,785     $ 32,662     $ (5,296   $ 1,048,630     $ (1,605,750   $ (430,996
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per common share

           

Basic

  $ 14.93     $ 2.18     $ (0.35   $ 11.91     $ (21.81   $ (6.26

Diluted

  $ 14.70       2.17       (0.35     8.50       (21.81     (6.26

Dividends declared per common share

    —         —         —         —         —         —    


 

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(a)

Penn Virginia’s capitalized interest was $9.1 million for the year ended December 31, 2018, $2.7 million for the year ended December 31, 2017, $0.03 million for the period from September 13, 2016 through December 31, 2016, $0.2 million for the period from January 1, 2016 through September 12, 2016, and $6.3 million and $7.2 million for the years ended December 31, 2015 and 2014, respectively.

 

    Successor     Predecessor  
    Year Ended
December 31,
    September 13,
Through
December 31,
    January 1,
Through
September 12,
    Year Ended
December 31,
 
In thousands   2018     2017     2016     2016     2015     2014  

Consolidated statements of cash flows data

             

Cash provided by (used in)

             

Operating activities

  $ 272,132     $ 81,710     $ 30,774     $ 30,247     $ 169,303     $ 282,724  

Investing activities

    (508,296     (315,667     (4,916     (13,949     (279,655     (426,494

Financing activities

    243,011       238,213       (50,511     3,161       116,055       126,548  

 

    Successor     Predecessor  
    December 31,     September 12,     December 31,  
In thousands   2018     2017     2016     2016     2015     2014  

Consolidated balance sheet data

             

Total assets

  $ 1,068,954     $ 629,597     $ 291,686     $ 333,974     $ 517,725     $ 2,201,810  

Total long-term debt

    511,375       265,267       25,000       75,350       1,224,383       1,085,429  

Stockholders’ equity

    447,355       221,639       185,548       190,895       (915,121     675,817  

The following table sets forth certain historical information with respect to Penn Virginia’s estimated oil and natural gas reserves and other data as of the dates indicated. The estimates of Penn Virginia’s net proved oil and natural gas reserves presented below were prepared by DeGolyer and MacNaughton, an independent petroleum engineering firm located in Dallas, Texas for the years ended December 31, 2018, 2017, 2016 and 2015 and were prepared by Wright & Company, Inc., an independent petroleum engineering firm located in Brentwood, Tennessee for the year ended December 31, 2014. Estimates of reserves were prepared using an average price equal to the unweighted arithmetic average of hydrocarbon prices on the first day of each month within the applicable fiscal 12-month period in accordance with rules and regulations of the SEC. Penn Virginia’s oil and natural gas reserve estimates do not include any value for probable or possible reserves that may exist. The reserve estimates represent Penn Virginia’s net revenue interest in its properties.



 

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The following information should be read in conjunction with the information contained in Penn Virginia’s consolidated financial statements and notes related thereto included in its Annual Report on Form 10-K for the year ended December 31, 2018, incorporated herein by reference.

 

    Successor (Unaudited)      Predecessor (Unaudited)  
    December 31,      December 31,  
    2018      2017      2016      2015      2014  

Summary oil and natural gas reserves data

             

Estimated proved reserves

             

Oil (MMBbls)

    89.7        55.8        36.6        29.5        69.0  

Natural gas liquids (MMBbls)

    18.0        8.9        6.8        7.2        19.2  

Natural gas (Bcf)

    91.5        47.3        36.7        42.2        159.2  

Oil equivalent (MMBOE)

    123.0        72.6        49.5        43.7        114.8  

Percentage of total MBOE

             

Proved developed producing

    38%        44%        52%        73%        37%  

Proved developed non-producing

    —  %        —  %        1%        2%        3%  

Proved undeveloped

    62%        56%        47%        25%        60%  

Representative oil and natural gas prices (a)

             

Oil—NYMEX

  $ 65.56      $ 51.34      $ 42.75      $ 50.28      $ 94.99  

Natural gas—Henry Hub

    3.10        2.98        2.48        2.59        4.35  

Present values (millions) (b)

             

Discounted estimated future net cash flow before income taxes (PV-10 Value) (c)

  $ 1,769.4      $ 609.0      $ 317.5      $ 323.3      $ 1,472.5  

Standardized measure of discounted estimated future net cash flow after income taxes (“Standardized Measure”)

    1,623.9        590.5        317.5        323.3        1,182.4  

 

(a)

The reference prices were based on the arithmetic average of the first-day-of-the-month NYMEX commodity prices for each month during the respective year. These prices do not reflect adjustments for market differentials by field that are utilized in the preparation of our reserve report to arrive at the appropriate net price we receive.

(b)

Determined based on the average first-day-of-the-month prices for each month, adjusted to prices received by field in accordance with standards set forth in the Financial Accounting Standards Board Codification (“FASC”).

(c)

PV-10 Value is a non-GAAP measure and is different from the Standardized Measure in that PV-10 Value is a pre-tax number and the Standardized Measure is an after-tax number. The information used to calculate PV-10 Value is derived directly from data determined in accordance with FASC Topic 932, Extractive Industries—Oil and Gas. The difference between these two amounts, the discounted estimated future income tax, was $145.5 million at December 31, 2018; $18.5 million at December 31, 2017; and $290.1 million at December 31, 2014. The Standardized Measures for 2016 and 2015 did not include any income tax effect; thus, PV-10 and Standardized Measure are equivalent as of those dates. We believe that PV-10 Value is a useful supplemental disclosure to the Standardized Measure because the Standardized Measure can be impacted by a company’s unique tax situation, and it is not practical to calculate the Standardized Measure on a property-by-property basis. Because of this, PV-10 Value is a widely used measure within the industry and is commonly used by securities analysts, banks and credit rating agencies to evaluate the estimated future net cash flows from proved reserves on a comparative basis across companies or specific properties. PV-10 Value is commonly used by us and others in our industry to evaluate properties that are bought and sold, to assess the potential return on investment in our oil and natural gas properties, and to perform our impairment testing of oil and natural gas properties. PV-10 Value is not a measure of financial or operating performance under GAAP, nor should it be considered in isolation or as a substitute



 

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  for the Standardized Measure. Our PV-10 Value and the Standardized Measure do not purport to represent the fair value of our oil and natural gas reserves.

The following table sets forth certain historical information with respect to Penn Virginia’s production and other data for the periods indicated, and should be read in conjunction with the information contained in Penn Virginia’s consolidated financial statements and notes thereto in Penn Virginia’s Annual Report on Form 10-K for the year ended December 31, 2018, which is incorporated by reference in this document.

 

    Successor (Unaudited)     Predecessor (Unaudited)  
    Years Ended
December 31,
    September 13,
Through
December 31,
    January 1,
Through
September 12,
    Year Ended
December 31,
 
    2018     2017     2016     2016     2015     2014  

Summary operating data

           

Average daily production volumes (a)

           

Oil (Bbls)

    16,650       7,573       6,457       9,028       13,523       12,723  

Natural gas liquids (Bbls)

    2,750       1,432       1,486       2,083       3,893       3,040  

Natural gas (MMcf)

    14       8       9       12       29       36  

BOE (6:1)

    21,765       10,353       9,449       13,071       22,323       21,738  

Unit sales price—excluding impact of derivative settlements

           

Oil (per Bbl)

  $ 66.23     $ 50.96     $ 46.68     $ 35.21     $ 44.81     $ 90.50  

Natural gas liquids (per Bbl)

    20.99       19.25       16.56       11.37       12.24       31.14  

Natural gas (per Mcf)

    3.08       2.89       2.81       2.06       2.62       4.44  

Unit sales price—including impact of derivative settlements

           

Oil (per Bbl)

  $ 58.28     $ 49.69     $ 47.22     $ 55.98     $ 72.74     $ 89.17  

Natural gas liquids (per Bbl)

    20.99       19.25       16.56       11.37       12.24       31.14  

Natural gas (per Mcf)

    3.08       2.89       2.81       2.06       2.69       4.34  

Costs per BOE

           

Lease operating

  $ 4.52     $ 5.76     $ 5.13     $ 4.67     $ 5.36     $ 6.09  

Gathering, processing and transportation

    2.34       2.84       2.93       3.96       3.01       2.31  

Production and ad valorem taxes

    2.96       2.33       2.40       1.04       2.06       3.53  

General and administrative

    3.28       4.82       4.88       11.64       5.47       6.18  

Depreciation, depletion and amortization

    16.11       12.87       11.21       10.04       42.22       37.85  


 

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SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

The following summary unaudited pro forma combined financial information is compressed for illustrative purposes and does not include the pro forma adjustment columns and corresponding notes contained in the full unaudited pro forma combined financial information beginning on page 189 of this joint proxy statement/prospectus.

The following tables set forth Denbury’s pro forma combined financial information to give effect to the Merger and related financing transactions. The unaudited pro forma combined statements of operations data assume the Merger and related financing transactions occurred on January 1, 2018 and the unaudited pro forma combined balance sheet data assumes the Merger and related financing transactions occurred on December 31, 2018.

This unaudited pro forma combined financial data is not necessarily indicative of the results of operations or the financial position that would have occurred had the Merger been consummated on the assumed dates nor is it necessarily indicative of future results of operations or financial position. The pro forma combined financial data should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the historical financial statements and related notes of Denbury and Penn Virginia incorporated by reference in this document and the pro forma combined financial information provided in the section “Unaudited Pro Forma Combined Financial Statements” beginning on page 189 of this joint proxy statement/prospectus.

 

In thousands, except per-share data    Year Ended
December 31, 2018
 

Unaudited Pro Forma Combined Statement of Operations Data:

  

Total revenues and other income

   $ 1,920,045  

Net income

     486,902  

Net income per common share

  

Basic

   $ 0.78  

Diluted

   $ 0.75  

 

In thousands    December 31,
2018
 

Unaudited Pro Forma Combined Balance Sheet Data:

  

Cash and cash equivalents

   $ —    

Total assets

     6,117,016  

Long-term debt

     3,564,164  

Stockholders’ equity

     1,532,897  


 

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SUMMARY PRO FORMA COMBINED OIL AND NATURAL GAS RESERVE DATA

The following tables set forth summary pro forma information with respect to Denbury’s and Penn Virginia’s pro forma combined estimated net proved and proved developed oil and natural gas reserves and the standardized measure of discounted future net cash flows as of December 31, 2018. This pro forma information gives effect to the Merger as if it occurred on January 1, 2018. The Denbury and Penn Virginia oil and natural gas reserve data presented below was derived from each company’s 2018 Annual Report on Form 10-K, which are incorporated by reference in this joint proxy statement/prospectus. Future exploration, exploitation and development expenditures, as well as future commodity prices and service costs, will affect the reserve volumes attributable to the acquired properties and the standardized measure of discounted future net cash flows.

Estimated Quantities of Oil and Natural Gas Reserves as of

December 31, 2018

 

     Denbury
Historical
     Penn Virginia
Historical
     Denbury Pro
Forma
Combined
 

Estimated Proved Reserves

        

Oil (MBbls)

     255,042        89,656        362,742  

NGLs (MBbls) (a)

        18,044     

Natural gas (MMcf)

     43,008        91,493        134,501  

Oil equivalent (MBOE)

     262,210        122,950        385,160  

Estimated Proved Developed Reserves

        

Oil (MBbls)

     222,736        35,190        264,205  

NGLs (MBbls)

        6,279     

Natural gas (MMcf)

     42,912        31,833        74,745  

Oil equivalent (MBOE)

     229,888        46,774        276,662  

 

(a)

For the purposes of the pro forma combined information, Penn Virginia’s NGLs have been combined with oil reserves to conform to Denbury’s two-stream presentation.

Standardized Measure of Discounted Future Net Cash Flows as of

December 31, 2018

 

In thousands

   Denbury
Historical
    Penn Virginia
Historical
    Denbury Pro
Forma
Combined
 

Future cash inflows

   $ 16,657,988     $ 6,719,145     $ 23,377,133  

Future production costs

     (8,000,884     (1,852,168     (9,853,052

Future development costs

     (1,524,476     (1,208,815     (2,733,291

Future income taxes

     (1,186,769     (413,137     (1,599,906
  

 

 

   

 

 

   

 

 

 

Future net cash flows

     5,945,859       3,245,025       9,190,884  

10% annual discount for estimated timing of cash flows

     (2,594,474     (1,621,135     (4,215,609
  

 

 

   

 

 

   

 

 

 

Standardized measure of discounted future net cash flows

   $ 3,351,385     $ 1,623,890     $ 4,975,275  
  

 

 

   

 

 

   

 

 

 


 

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COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

The following table presents Denbury’s and Penn Virginia’s historical and pro forma per share data for the year ended December 31, 2018. The pro forma per share data for the year ended December 31, 2018 is presented as if the Merger had been completed on January 1, 2018, assuming that for the equity portion of the Merger Consideration 12.4 shares of Denbury Common Stock will be issued for each share of Penn Virginia Common Stock. Except for the historical information for the year ended December 31, 2018, the information provided in the table below is unaudited. This information should be read together with the historical consolidated financial statements and related notes of Denbury and Penn Virginia, filed by each with the SEC, and incorporated by reference in this joint proxy statement/prospectus, and with the unaudited pro forma combined financial statements included in the section entitled “Unaudited Pro Forma Combined Financial Statements” beginning on page 189.

 

     Year Ended
December 31, 2018
 

Historical—Denbury

  

Net Income (Loss) Per Share:

  

Basic

   $ 0.75  

Diluted

     0.71  

Cash dividends (1)

     —    

Net Book Value Per Share

     2.47  

Historical—Penn Virginia

  

Net Income (Loss) Per Share:

  

Basic

   $ 14.93  

Diluted

     14.70  

Cash dividends (2)

     —    

Net Book Value Per Share

     29.66  

Pro Forma Combined (Unaudited)

  

Net Income (Loss) Per Share:

  

Basic

   $ 0.78  

Diluted

     0.75  

Net Book Value Per Share

     2.34  

Equivalent Pro Forma (3)

  

Net Income (Loss) Per Share

  

Basic

   $ 9.67  

Diluted

     9.32  

Net Book Value Per Share

     29.06  

 

(1)

Denbury is not currently paying dividends on its common stock and does not anticipate paying cash dividends on its common stock in the foreseeable future.

(2)

Penn Virginia is not currently paying dividends on its common stock and does not anticipate paying cash dividends on its common stock in the foreseeable future.

(3)

Equivalent pro forma amounts are calculated by multiplying pro forma amounts by the exchange ratio attributable to the equity portion of the Merger Consideration.



 

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COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

Denbury and Penn Virginia Historical Market Price and Dividend Information

Denbury’s common stock is listed on the New York Stock Exchange under the symbol “DNR.” Penn Virginia’s common stock is listed on the Nasdaq under the symbol “PVAC.” The following table sets forth the high and low closing prices per share of Denbury’s common stock on the New York Stock Exchange and Penn Virginia Common Stock on the Nasdaq for the periods indicated, in each case rounded to the nearest whole cent. The trading prices of Penn Virginia Common Stock do not reflect prices under Penn Virginia’s formerly traded symbol “PVA” prior to emergence from Chapter 11 proceedings in late 2016. On November 15, 2016, Penn Virginia was listed on the OTCQX Premier Market under the symbol “PVAC,” and on December 28, 2016, Penn Virginia began trading on the Nasdaq under the symbol “PVAC.” Prior to such time, there was no established trading market for Penn Virginia’s common stock. You are urged to obtain current market quotations before making any decision with respect to the Merger.

 

     Denbury
Common Stock
     Penn Virginia
Common Stock
 
     High      Low      Dividend      High      Low      Dividend  

2016

                 

First Quarter

   $ 3.66      $ 0.95        —          N/A        N/A        —    

Second Quarter

     4.68        2.01        —          N/A        N/A        —    

Third Quarter

     3.67        2.62        —          N/A        N/A        —    

Fourth Quarter (1)

     4.03        2.39        —        $ 49.00      $ 36.99        —    

2017

                 

First Quarter

   $ 3.88      $ 2.21        —        $ 57.90      $ 42.70        —    

Second Quarter

     2.53        1.30        —          48.83        32.61        —    

Third Quarter

     1.67        0.96        —          40.50        35.87        —    

Fourth Quarter

     2.21        1.07        —          42.16        33.39        —    

2018

                 

First Quarter

   $ 2.82      $ 1.84        —        $ 47.14      $ 34.53        —    

Second Quarter

     4.88        2.55        —          84.89        33.96        —    

Third Quarter

     6.21        4.19        —          93.62        73.44        —    

Fourth Quarter

     6.61        1.43        —          85.57        49.70        —    

2019

                 

First Quarter (through February 28, 2019)

   $ 2.29      $ 1.71        —        $ 57.62      $ 50.24        —    

 

(1)

Prices for Penn Virginia Common Stock represent the period from November 15, 2016, the date the entity began trading under the symbol “PVAC,” to December 31, 2016. Prior to such time, there was no established trading market for Penn Virginia’s common stock.



 

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Comparison of Denbury and Penn Virginia Market Prices and Implied Share Value of the Mixed Election Consideration

The following table sets forth the closing sale price per share of Denbury Common Stock and Penn Virginia Common Stock as reported on the NYSE and Nasdaq, respectively, on October 26, 2018, the last trading day prior to the public announcement of the Merger, and on March 1, 2019, the last practicable trading day prior to the mailing of this joint proxy statement/prospectus. The table also shows the estimated implied value of the Mixed Election Consideration proposed for each share of Penn Virginia Common Stock as of the same two dates. This implied value was calculated by multiplying the closing price of a share of Denbury Common Stock on the relevant date by the exchange ratio for the Mixed Election Consideration of 12.4 shares of Denbury Common Stock per share of Penn Virginia Common Stock, plus $25.86 in cash, for each issued and outstanding share of Penn Virginia Common Stock.

 

     Denbury
Closing Price
     Penn Virginia
Closing Price
     Implied Per Share
Value of Merger
Consideration
 

October 26, 2018

   $ 4.35      $ 67.39      $ 79.80  

March 1, 2019

     1.93        54.31        49.79  

Denbury stockholders and Penn Virginia shareholders are encouraged to obtain current market quotations for Denbury Common Stock and Penn Virginia Common Stock and to review carefully the other information contained in this joint proxy statement/prospectus or incorporated by reference herein. The market value of shares of Denbury Common Stock has declined since the last trading day prior to the public announcement of the Merger, and may decline or fluctuate before or after the effective date of the Merger as a result of a variety of factors, including general market and economic conditions, changes in commodity prices, changes in Denbury’s businesses, operations and prospects and regulatory considerations. You should read and carefully consider the risk factors set forth in the section entitled “Risk Factors” beginning on page 51, including the risk factor titled “Because the exchange ratio is fixed and because the market price of Denbury Common Stock may continue to fluctuate, Penn Virginia shareholders cannot be certain of the precise value of any Merger Consideration they may receive in the Merger.” No assurance can be given concerning the market price of Denbury Common Stock before or after the effective date of the Merger. For additional information, see the section entitled “Where You Can Find More Information” beginning on page 221.



 

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RISK FACTORS

In addition to the other information contained in or incorporated by reference herein, including the matters addressed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 61, Penn Virginia shareholders should carefully consider the following risks before deciding how to vote with respect to the Penn Virginia Merger Proposal and Penn Virginia Non-Binding Compensation Advisory Proposal to be considered and voted on at the Penn Virginia special meeting, and Denbury stockholders should carefully consider the following risks before deciding how to vote with respect to the Denbury Issuance Proposal and the Denbury Charter Amendment Proposal to be considered and voted on at the Denbury special meeting. Penn Virginia shareholders and Denbury stockholders should also consider the other information in this joint proxy statement/prospectus and the other documents incorporated by reference herein, particularly the risk factors contained in Denbury’s and Penn Virginia’s Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. For additional information, see the section entitled “Where You Can Find More Information” beginning on page 221.

Because the exchange ratio is fixed and because the market price of Denbury Common Stock may continue to decline or fluctuate, Penn Virginia shareholders cannot be certain of the precise value of any Merger Consideration they may receive in the Merger.

Penn Virginia shareholders who either make a Stock Election, Mixed Election or no election or who make a Cash Election that is prorated, as described in the section entitled “The Merger—Proration and Adjustment Procedures” beginning on page 81 will receive Denbury Common Stock as part of the Merger Consideration. The market value of the Denbury Common Stock that such Penn Virginia shareholders will receive in the Merger will depend on the trading price of the Denbury Common Stock as of the effective time of the Merger. The exchange ratio that determines the number of shares of Denbury Common Stock that Penn Virginia shareholders will receive in the Merger is fixed. This means that there is no mechanism contained in the Merger Agreement that would adjust the number of shares of Denbury Common Stock that Penn Virginia shareholders will receive based on any change in the trading price of the Denbury Common Stock or Penn Virginia Common Stock.

If the Merger is completed, there will be a time lapse between each of the date on which the Merger Agreement was entered into, the date of this joint proxy statement/prospectus, the dates on which Penn Virginia shareholders vote to approve the Penn Virginia Merger Proposal at the Penn Virginia special meeting and Denbury stockholders vote to approve the Denbury Issuance Proposal and the Denbury Charter Amendment Proposal at the Denbury special meeting, and the date on which Penn Virginia shareholders entitled to receive the Merger Consideration actually receive the Merger Consideration. The market value of shares of Denbury Common Stock has declined from $4.35 per share on the trade date immediately prior to the public announcement of the Merger to $1.92 per share on February 28, 2019. The market value may decline or fluctuate during and after these periods as a result of a variety of factors, including general market and economic conditions, prevailing and expected commodity prices, changes in Denbury’s businesses, operations and prospects and regulatory considerations. Such factors are difficult to predict and in many cases may be beyond the control of Denbury and Penn Virginia. For instance, the NYMEX-WTI oil price has declined from $67.04 per Bbl on October 29, 2018 to $57.22 per Bbl on February 28, 2019, and the NYMEX strip pricing with respect to future commodity prices for crude oil as of February 28, 2019 through 2022 is lower than the NYMEX strip pricing assumptions as of October 19, 2018 through 2022 reflected in the unaudited forecasted financial data used by Jefferies and Guggenheim in their respective financial analyses. Consequently, at the time Penn Virginia shareholders must decide whether to approve the Penn Virginia Merger Proposal, they will not know the actual market value of any Merger Consideration they will receive when the Merger is completed. The actual value of any Merger Consideration received by Penn Virginia shareholders at the completion of the Merger will depend on the market value of the shares of Denbury Common Stock at that time. This market value may be lower, possibly materially, than the market value of shares of Denbury Common Stock at the time the Merger Agreement was entered into or at any other time. Penn Virginia shareholders should obtain current stock quotations for shares of Denbury Common Stock before voting their shares of Penn Virginia Common Stock. For additional information about the Merger Consideration, see the sections

 

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entitled “The Merger—Consideration to Penn Virginia Shareholders,” “The Merger Agreement—Effect of the Merger on Capital Stock; Merger Consideration” and “The Merger—Proration and Adjustment Procedures” beginning on pages 79, 144 and 81, respectively.

Penn Virginia shareholders may not receive the amount of cash consideration or stock consideration they elected to receive due to proration and adjustment, and therefore such shareholders may receive consideration having an aggregate value that is less than the aggregate value of the consideration they elected to receive.

Penn Virginia shareholders who make either a Cash Election, Stock Election or no election will be subject to proration if Penn Virginia shareholders, in the aggregate, elect to receive more or less cash consideration than the aggregate amount of $400 million cash consideration to be paid in the Merger. Accordingly, some of the consideration Penn Virginia shareholders receive in the Merger may differ from the type of consideration they elected to receive. The relative proportion of Denbury Common Stock and cash that a Penn Virginia shareholder receives in the Merger also may have an aggregate value that is higher or lower than the relative proportion of stock and cash that the Penn Virginia shareholder elected to receive. A discussion of the proration mechanism can be found under the heading “The Merger—Proration and Adjustment Procedures” beginning on page 81.

The market price of Denbury Common Stock will continue to fluctuate after the Merger.

Upon completion of the Merger, Penn Virginia shareholders who either make a Stock Election or Mixed Election or who make a Cash Election that is prorated as described in the section entitled “The Merger—Proration and Adjustment Procedures” beginning on page 81 will, and Penn Virginia shareholders who make no election may, become holders of shares of Denbury Common Stock. The market price of Denbury Common Stock may decline or fluctuate significantly following completion of the Merger, and holders of Penn Virginia Common Stock could lose some or all of the value of their investment in Denbury Common Stock. In addition, the stock market has experienced significant price and volume fluctuations in recent times which, if they continue to occur, could have a material adverse effect on the market for, or liquidity of, the Denbury Common Stock, regardless of Denbury’s actual operating performance.

Penn Virginia shareholders will have a reduced ownership and voting interest in the combined company after the Merger compared to their ownership in Penn Virginia and will exercise less influence over management.

Currently, Penn Virginia shareholders have the right to vote in the election of the Penn Virginia board and the power to approve or reject any matters requiring shareholder approval under Virginia law and the Penn Virginia articles of incorporation and bylaws. Upon completion of the Merger, each Penn Virginia shareholder who receives shares of Denbury Common Stock in the Merger will become a stockholder of Denbury with a percentage ownership of Denbury that is smaller than the Penn Virginia shareholder’s current percentage ownership of Penn Virginia. Based on the number of issued and outstanding shares of Denbury Common Stock and shares of Penn Virginia Common Stock as of February 19, 2019 and the exchange ratio of 12.4000 shares of Denbury Common Stock and $25.86 of cash for each share of Penn Virginia Common Stock, after the Merger Penn Virginia shareholders are expected to collectively own approximately 29% of the outstanding shares of Denbury Common Stock, without giving effect to any shares of Denbury Common Stock held by Penn Virginia shareholders prior to the completion of the Merger. Even if all former Penn Virginia shareholders voted together on all matters presented to Denbury stockholders from time to time, the former Penn Virginia shareholders would exercise significantly less influence over Denbury after the completion of the Merger relative to their influence over Penn Virginia prior to the completion of the Merger, and thus would have a less significant impact on the election of the Denbury board and the approval or rejection of future Denbury proposals submitted to a stockholder vote.

The Merger may not be completed and the Merger Agreement may be terminated in accordance with its terms.

The Merger is subject to a number of conditions that must be satisfied or waived prior to the completion of the Merger, which are described in the section entitled “The Merger Agreement—Conditions to the Completion of the Merger” beginning on page 178. These conditions to the completion of the Merger may not be satisfied or waived in a timely manner or at all, and, accordingly, the Merger may be delayed or may not be completed.

 

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In addition, if the Merger is not completed by April 30, 2019 either Denbury or Penn Virginia may choose not to proceed with the Merger, and the parties can mutually decide to terminate the Merger Agreement at any time, before or after stockholder and/or shareholder approval. In addition, Denbury and Penn Virginia may elect to terminate the Merger Agreement in certain other circumstances as further detailed in the section entitled “The Merger Agreement—Termination” beginning on page 180.

The Merger is subject to receipt of approvals from the Penn Virginia shareholders and the Denbury stockholders.

In order for the Merger to be completed, (i) the Penn Virginia Merger Proposal must be approved by the holders of more than two-thirds of the outstanding shares of Penn Virginia Common Stock entitled to vote on the proposal, (ii) the Denbury Issuance Proposal must be approved by the affirmative vote of the holders of a majority of the outstanding shares of Denbury Common Stock represented in person or by proxy at the Denbury special meeting and (iii) the Denbury Charter Amendment Proposal must be approved by the affirmative vote of the holders of a majority of the outstanding shares of Denbury Common Stock entitled to vote on the proposal. There can be no assurance that any such approvals will be obtained. In that regard, one shareholder of Penn Virginia (Mangrove Partners Master Fund, Ltd.) has engaged in a public campaign to prevent Penn Virginia shareholder approval of the Penn Virginia Merger Proposal, which campaign includes a preliminary proxy statement filed on January 17, 2019, as amended on February 6, 2019 and February 14, 2019, that solicits votes in opposition to the Penn Virginia Merger Proposal. Other Penn Virginia shareholders or Denbury stockholders could oppose the proposals for approval of the Merger. Any such campaign could result in substantial costs and divert each company’s respective management’s and directors’ attention and resources from each company’s respective business.

The Merger Agreement limits Denbury’s ability and Penn Virginia’s ability to pursue alternatives to the Merger.

The Merger Agreement contains provisions that may discourage a third party from submitting a Denbury Takeover Proposal or a Penn Virginia Takeover Proposal that might result in greater value to Denbury’s stockholders or Penn Virginia’s shareholders than the Merger, or may result in a potential acquirer of Denbury, or a potential competing acquirer of Penn Virginia, proposing to pay a lower per share price to acquire Denbury or Penn Virginia, respectively, than it might otherwise have proposed to pay. These provisions include a general prohibition on Denbury and Penn Virginia from soliciting or, subject to certain exceptions relating to the exercise of fiduciary duties by the Denbury board or Penn Virginia board, entering into discussions with any third party regarding any Denbury Takeover Proposal or Penn Virginia Takeover Proposal or offer for a competing transaction. Denbury has an unqualified obligation to submit the Denbury Issuance Proposal and the Denbury Charter Amendment Proposal to a vote by its stockholders, unless the Merger Agreement is terminated in accordance with its terms prior to such time. Penn Virginia also has an unqualified obligation to submit a Penn Virginia Merger Proposal to a vote, unless the Merger Agreement is terminated in accordance with its terms prior to such time. For additional information, see the section entitled “The Merger Agreement—Termination” beginning on page 180.

Failure to complete the Merger could negatively impact the price of shares of Denbury Common Stock and the price of shares of Penn Virginia Common Stock, as well as Denbury’s and Penn Virginia’s respective future businesses and financial results.

The Merger Agreement contains a number of conditions that must be satisfied or waived prior to the completion of the Merger. There can be no assurance that all of the conditions to the completion of the Merger will be so satisfied or waived. If any of these conditions is not satisfied or waived, Denbury and Penn Virginia will be unable to complete the Merger.

If the Merger is not completed for any reason, including the failure to receive the required approvals of Denbury stockholders and Penn Virginia shareholders, Denbury’s and Penn Virginia’s respective businesses and financial results may be adversely affected, including as follows:

 

   

Denbury and Penn Virginia may experience negative reactions from the financial markets, including negative impacts on the market price of Denbury Common Stock and Penn Virginia Common Stock;

 

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the manner in which customers, vendors, business partners and other third parties perceive Denbury and Penn Virginia may be negatively impacted, which in turn could affect Denbury’s and Penn Virginia’s marketing operations or their ability to compete for new business or obtain renewals in the marketplace more broadly;

 

   

Denbury and Penn Virginia may experience negative reactions from employees or other stakeholders; and

 

   

Denbury and Penn Virginia will have expended time and resources that could otherwise have been spent on Denbury’s and Penn Virginia’s existing businesses and the pursuit of other opportunities that could have been beneficial to each company, and Denbury’s and Penn Virginia’s ongoing business and financial results may be adversely affected.

In addition to the above risks, if the Merger Agreement is terminated and either party’s board seeks an alternative transaction, such party’s stockholders or shareholders cannot be certain that such party will be able to find a party willing to engage in a transaction on more attractive terms than the Merger.

Required regulatory approvals may not be received, may take longer than expected to be received or may impose conditions that are not presently anticipated or cannot be met.

Completion of the Merger is conditioned upon the approval by the NYSE of the listing of the shares of Denbury Common Stock to be issued in the Merger upon official notice of issuance and the expiration or termination of the waiting period applicable to the Merger under the HSR Act. On December 27, 2018, Denbury and Penn Virginia received notice of the early termination of the applicable waiting period under the HSR Act. Although Denbury has agreed to use its reasonable best efforts to obtain NYSE approval to list the shares issued in connection with the Denbury Stock Issuance, there can be no assurance that such approval will be obtained and that the other conditions to completing the Merger will be satisfied.

Denbury and Penn Virginia will be subject to business uncertainties while the Merger is pending, which could adversely affect their respective businesses.

Uncertainty about the effect of the Merger on employees, vendors and customers may have an adverse effect on Denbury and Penn Virginia. These uncertainties may impair Denbury’s and Penn Virginia’s ability to attract, retain and motivate key personnel until the Merger is completed and for a period of time thereafter and could cause vendors, customers and others that deal with Denbury and Penn Virginia to seek to change their existing business relationships with Denbury and Penn Virginia, respectively. Employee retention at Penn Virginia may be particularly challenging during the pendency of the Merger, as employees may experience uncertainty about their roles with Denbury following the Merger. In addition, the Merger Agreement restricts Denbury and Penn Virginia from entering into certain corporate transactions and taking other specified actions without the consent of the other party, and generally requires each party to continue its operations in the ordinary course, until completion of the Merger. These restrictions may prevent Denbury and Penn Virginia from pursuing attractive business opportunities that may arise prior to the completion of the Merger. For a description of the restrictive covenants to which Denbury and Penn Virginia are subject, see the section entitled “The Merger Agreement—Interim Operations of Penn Virginia and Denbury Pending the Merger” beginning on page 152.

Directors and executive officers of Penn Virginia may have interests in the Merger that are different from, or in addition to, the interests of Penn Virginia shareholders.

Directors and executive officers of Penn Virginia have interests in the Merger that may be different from, or in addition to, the interests of Penn Virginia shareholders generally. These interests include, but are not limited to, the treatment in the Merger of awards of Penn Virginia service-based restricted stock units and Penn Virginia performance-based restricted stock units held by Penn Virginia directors and executive officers, potential payments and benefits upon a qualifying termination of employment in connection with the Merger, Denbury’s agreement to appoint two mutually agreed upon directors of Penn Virginia as directors of Denbury, and rights to ongoing

 

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indemnification and insurance coverage. These interests are described in more detail in the section entitled “The Merger—Interests of Penn Virginia Directors and Executive Officers in the Merger” beginning on page 134.

The Merger may not be accretive, and may be dilutive, to Denbury’s earnings per share, which may negatively affect the market price of Denbury Common Stock.

Because shares of Denbury Common Stock will be issued in the Merger, it is possible that, although Denbury currently expects the Merger to be accretive to earnings per share, the Merger may be dilutive to Denbury’s earnings per share, which could negatively affect the market price of Denbury Common Stock.

In connection with the completion of the Merger, based on the number of issued and outstanding shares of Penn Virginia Common Stock as of February 19, 2019 and the number of outstanding Penn Virginia equity awards currently estimated to be payable in Denbury Common Stock following the Merger, Denbury will issue up to approximately 191.6 million shares of Denbury Common Stock. The issuance of these new shares of Denbury Common Stock could have the effect of depressing the market price of Denbury Common Stock, through dilution of earnings per share or otherwise. Any dilution of, or delay of any accretion to, Denbury’s earnings per share could cause the price of shares of Denbury Common Stock to decline or increase at a reduced rate.

Denbury and Penn Virginia will incur significant transaction and merger-related costs in connection with the Merger, which may be in excess of those anticipated by Denbury or Penn Virginia.

Each of Denbury and Penn Virginia have incurred and expect to continue to incur a number of significant non-recurring costs associated with negotiating and completing the Merger, combining the operations of the two companies and achieving desired synergies. These fees and costs have been, and will continue to be, substantial. The substantial majority of non-recurring expenses will consist of transaction costs related to the Merger and include, among others, employee retention costs, fees paid to financial, legal and accounting advisors, costs of soliciting shareholder approval, severance and benefit costs and filing fees.

Denbury and Penn Virginia will also incur transaction fees and costs related to formulating and implementing integration plans, including facilities and systems consolidation costs and employment-related costs. Denbury and Penn Virginia will continue to assess the magnitude of these costs, and additional unanticipated costs may be incurred in the Merger and the integration of the two companies’ businesses. Although Denbury and Penn Virginia each expect that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, should allow Denbury and Penn Virginia to offset integration-related costs over time, this net benefit may not be achieved in the near term, or at all. For additional information, see the risk factor entitled “The integration of Penn Virginia into Denbury may not be as successful as anticipated” below.

The costs described above, as well as other unanticipated costs and expenses, could have a material adverse effect on the financial condition and operating results of Denbury following the completion of the Merger.

Many of these costs will be borne by Denbury or Penn Virginia even if the Merger is not completed.

The opinions of Denbury’s and Penn Virginia’s respective financial advisors will not reflect changes in circumstances between the signing of the Merger Agreement and the completion of the Merger.

Denbury and Penn Virginia have received opinions from their respective financial advisors in connection with the signing of the Merger Agreement, but have not obtained updated opinions from their respective financial advisors as of the date of this joint proxy statement/prospectus. Changes in the operations and prospects of Denbury or Penn Virginia, general market and economic conditions, changes in commodity prices, and other factors that may be beyond the control of Denbury or Penn Virginia, and on which Denbury’s and Penn Virginia’s financial advisors’ opinions were based, may significantly alter the value of Denbury or Penn Virginia or the prices of the shares of Denbury Common Stock or of the shares of Penn Virginia Common Stock by the

 

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time the Merger is completed. The opinions do not speak as of the time the Merger will be completed or as of any date other than the date of such opinions. Because Denbury and Penn Virginia do not currently anticipate asking their respective financial advisors to update their opinions, the opinions will not address the fairness of the Merger Consideration from a financial point of view at the time the Merger is completed. The Denbury board’s recommendation that Denbury stockholders vote “FOR” approval of the Denbury Issuance Proposal and the Denbury Charter Amendment Proposal and the Penn Virginia board’s recommendation that Penn Virginia shareholders vote “FOR” approval of the Penn Virginia Merger Proposal and the Penn Virginia Non-Binding Compensation Advisory Proposal, however, is made as of the date of this joint proxy statement/prospectus.

For a description of the opinions that Denbury and Penn Virginia received from their respective financial advisors, see the sections entitled “The Merger—Opinion of Guggenheim, Denbury’s Financial Advisor” and “The Merger—Opinion of Jefferies, Penn Virginia’s Financial Advisor” beginning on pages 97 and 115, respectively. A copy of the opinion of Guggenheim, Denbury’s financial advisor, is attached as Annex B to this joint proxy statement/prospectus, and a copy of the opinion of Jefferies, Penn Virginia’s financial advisor, is attached as Annex C to this joint proxy statement/prospectus, and each is incorporated by reference herein in its entirety.

Completion of the Merger may trigger change in control or other provisions in certain agreements to which Penn Virginia is a party.

The completion of the Merger may trigger change in control or other provisions in certain agreements to which Penn Virginia is a party. If Denbury and Penn Virginia are unable to negotiate waivers of those provisions, the counterparties may exercise their rights and remedies under the agreements, potentially terminating the agreements or seeking monetary damages. Even if Denbury and Penn Virginia are able to negotiate waivers, the counterparties may require a fee for such waivers or seek to renegotiate the agreements on terms less favorable to Penn Virginia.

The combined company’s debt may limit its financial flexibility.

As of December 31, 2018, Denbury had approximately $2.5 billion of outstanding indebtedness, consisting of $1,521 million of second lien notes, $180 million of pipeline capital lease obligations, $5 million of other capital lease obligations, and $826 million of senior subordinated indebtedness. As of December 31, 2018, Penn Virginia had approximately $521 million of outstanding indebtedness, consisting of $321 million outstanding under its bank credit facility and $200 million on its second lien term loan. Denbury continues to review the treatment of its and Penn Virginia’s existing indebtedness and Denbury may seek to repay, refinance, repurchase, redeem, exchange or otherwise terminate its or Penn Virginia’s existing indebtedness prior to, in connection with or following the completion of the Merger. If Denbury does seek to refinance its or Penn Virginia’s existing indebtedness, there can be no guarantee that Denbury would be able to execute the refinancing on favorable terms or at all. Denbury has received a financing commitment letter (the “commitment letter”) from JPMorgan Chase Bank, N.A. for a new $1.2 billion senior secured bank credit facility, replacing its current credit facility and a $400 million senior secured second lien bridge financing. The new debt financings will be used to fully or partially fund the $400 million cash portion of the consideration, potentially retire and replace Penn Virginia’s $200 million second lien term loan, and replace Penn Virginia’s existing bank credit facility, which had $321 million drawn and outstanding as of December 31, 2018, and pay fees and expenses. Upon consummation of the new debt financings and the repayment or replacement of Penn Virginia’s indebtedness as described above, the combined company is expected to have outstanding indebtedness of approximately $3.44 billion following the closing of the Merger, based on Denbury’s and Penn Virginia’s outstanding indebtedness as of December 31, 2018.

Any increase in Denbury’s indebtedness could have adverse effects on its financial condition and results of operations, including:

 

   

imposing additional cash requirements on Denbury in order to support interest payments, which reduces the amount Denbury has available to fund its operations and other business activities;

 

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increasing the risk that Denbury may default on its debt obligations;

 

   

increasing Denbury’s vulnerability to adverse changes in general economic and industry conditions, economic downturns and adverse developments in its business;

 

   

limiting Denbury’s ability to sell assets, engage in strategic transactions or obtain additional financing for working capital, capital expenditures, general corporate and other purposes;

 

   

limiting Denbury’s flexibility in planning for or reacting to changes in its business and the industry in which it operates; and

 

   

increasing Denbury’s exposure to a rise in interest rates, which will generate greater interest expense to the extent Denbury does not have applicable interest rate fluctuation hedges.

The unaudited pro forma combined financial information and unaudited forecasted financial information included in this joint proxy statement/prospectus is presented for illustrative purposes only and does not represent the actual financial position or results of operations of the combined company following the completion of the Merger. Future results of Denbury or Penn Virginia may differ, possibly materially, from the unaudited pro forma combined financial information and unaudited forecasted financial information presented in this joint proxy statement/prospectus.

The unaudited pro forma combined financial statements and unaudited forecasted financial information contained in this joint proxy statement/prospectus is presented for illustrative purposes only, contains a variety of adjustments, assumptions and preliminary estimates and does not represent the actual financial position or results of operations of Denbury and Penn Virginia prior to the Merger or that of the combined company following the Merger for several reasons. Specifically, the unaudited pro forma combined financial statements do not reflect the effect of any potential divestitures that may occur prior to or subsequent to the completion of the Merger, integration costs or Denbury’s projected reduction of its debt to capitalization ratio following the completion of the Merger. For additional information, see the section entitled “Unaudited Pro Forma Combined Financial Statements” beginning on page 189. In addition, the Merger and post-merger integration process may give rise to unexpected liabilities and costs, including costs associated with the defense and resolution of transaction-related litigation or other claims. Unexpected delays in completing the Merger or in connection with the post-merger integration process may significantly increase the related costs and expenses incurred by Denbury. The actual financial positions and results of operations of Denbury and Penn Virginia prior to the Merger and that of the combined company following the Merger may be different, possibly materially, from the unaudited pro forma combined financial statements or forecasted financial information included in this joint proxy statement/prospectus. In addition, the assumptions used in preparing the unaudited pro forma combined financial statements and forecasted financial information included in this joint proxy statement/prospectus may not prove to be accurate and may be affected by other factors. Any significant changes in the market price of Denbury Common Stock may cause a significant change in the purchase price used for Denbury’s accounting purposes and the unaudited pro forma financial statements contained in this joint proxy statement/prospectus.

Denbury and Penn Virginia are subject to litigation related to the merger, and it is possible that additional claims may be brought by the current plaintiff or others.

Denbury and Penn Virginia are subject to litigation related to the Merger. See “The Merger – Litigation Relating to the Merger.” It is possible that additional claims beyond those that have already been filed will be brought by the current plaintiff or by others in an effort to enjoin the merger or seek monetary relief from Denbury or Penn Virginia. Denbury and Penn Virginia cannot predict the outcome of these lawsuits, or others, nor can they predict the amount of time and expense that will be required to resolve any such lawsuits. An unfavorable resolution of any such litigation surrounding the merger could delay or prevent its consummation. In addition, the costs of defending any such litigation, even if resolved in Denbury’s or Penn Virginia’s favor, could be substantial and such litigation could distract Denbury and Penn Virginia from pursuing the consummations of the merger and other potentially beneficial business opportunities.

 

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The integration of Penn Virginia into Denbury may not be as successful as anticipated.

The Merger involves numerous operational, strategic, financial, accounting, legal, tax and other risks, potential liabilities associated with the acquired businesses, and uncertainties related to design, operation and integration of Penn Virginia’s internal control over financial reporting. Difficulties in integrating Penn Virginia into Denbury may result in the combined company performing differently than expected, in operational challenges or in the failure to realize anticipated expense-related efficiencies. Denbury’s and Penn Virginia’s existing businesses could also be negatively impacted by the Merger. Potential difficulties that may be encountered in the integration process include, among other factors:

 

   

the inability to successfully integrate the businesses of Penn Virginia into Denbury in a manner that permits Denbury to achieve the full financial benefits anticipated from the Merger;

 

   

complexities associated with managing the larger, more complex, integrated business;

 

   

not realizing anticipated synergies;

 

   

integrating personnel from the two companies and the loss of key employees;

 

   

potential unknown liabilities and unforeseen expenses, delays or regulatory conditions associated with the Merger;

 

   

integrating relationships with customers, vendors and business partners;

 

   

performance shortfalls at one or both of the companies as a result of the diversion of management’s attention caused by completing the Merger and integrating Penn Virginia’s operations into Denbury; and

 

   

the disruption of, or the loss of momentum in, each company’s ongoing business or inconsistencies in standards, controls, procedures and policies.

Denbury’s results may suffer if it does not effectively manage its expanded operations following the Merger.

Following completion of the Merger, Denbury’s success will depend, in part, on its ability to manage its expansion, which poses numerous risks and uncertainties, including the need to integrate the operations and business of Penn Virginia into its existing business in an efficient and timely manner, to combine systems and management controls and to integrate relationships with customers, vendors and business partners.

Even if Denbury and Penn Virginia complete the Merger, Denbury may fail to realize all of the anticipated benefits of the Merger.

The success of the Merger will depend, in part, on Denbury’s ability to realize the anticipated financial benefits from combining Denbury’s and Penn Virginia’s businesses, including synergies. The anticipated financial benefits of the Merger may not be realized fully or at all, may take longer to realize than expected or could have other adverse effects that Denbury does not currently foresee. Some of the assumptions that Denbury has made, such as the achievement of synergies, may not be realized. The integration process may, for each of Denbury and Penn Virginia, result in the loss of key employees, the disruption of ongoing businesses or inconsistencies in standards, controls, procedures and policies. There could be potential unknown liabilities and unforeseen expenses associated with the Merger that were not discovered in the course of performing due diligence.

Uncertainties associated with the Merger may cause a loss of management personnel and other key employees, which could adversely affect the future business and operations of the combined company.

Denbury and Penn Virginia are dependent on the experience and industry knowledge of their officers and other key employees to execute their business plans. Each company’s success until the Merger and the combined company’s success after the Merger will depend in part upon the ability of Denbury and Penn Virginia to retain key management personnel and other key employees. Current and prospective employees of Denbury and Penn Virginia may experience uncertainty about their roles within the combined company following the Merger, which may have an adverse effect on the ability of each of Denbury and Penn Virginia to attract or retain key management and other key personnel. Accordingly, no assurance can be given that the combined company will be able to attract or retain

 

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key management personnel and other key employees of Denbury and Penn Virginia to the same extent that Denbury and Penn Virginia have previously been able to attract or retain their own employees.

The market price of Denbury Common Stock may decline in the future as a result of the sale of shares of Denbury Common Stock held by former Penn Virginia shareholders or current Denbury stockholders.

Based on the number of shares of Penn Virginia Common Stock outstanding as of February 19, 2019 and the number of outstanding Penn Virginia equity awards currently estimated to be payable in Denbury Common Stock following the Merger, Denbury expects to issue approximately 191.6 million shares of Denbury Common Stock to Penn Virginia shareholders in the Merger. Following their receipt of shares of Denbury Common Stock as Merger Consideration in the Merger, former Penn Virginia shareholders may seek to sell the shares of Denbury Common Stock delivered to them, and the Merger Agreement contains no restriction on the ability of former Penn Virginia shareholders to sell such shares of Denbury Common Stock following completion of the Merger. Other Denbury stockholders may also seek to sell shares of Denbury Common Stock held by them following, or in anticipation of, completion of the Merger. These sales (or the perception that these sales may occur), coupled with the increase in the outstanding number of shares of Denbury Common Stock, may affect the market for, and the market price of, Denbury Common Stock in an adverse manner.

The combined company may record goodwill and other intangible assets that could become impaired and may result in material non-cash charges to the results of operations of the combined company in the future.

The Merger will be accounted for as an acquisition by Denbury in accordance with accounting principles generally accepted in the United States (which we refer to as “GAAP”). Under the acquisition method of accounting, the assets and liabilities of Penn Virginia and its subsidiaries will be recorded, as of completion, at their respective fair values and added to those of Denbury. The reported financial condition and results of operations of Denbury for periods after completion of the Merger will reflect Penn Virginia balances and results after completion of the Merger but will not be restated retroactively to reflect the historical financial position or results of operations of Penn Virginia and its subsidiaries for periods prior to the Merger. For additional information, see the section entitled “Unaudited Pro Forma Combined Financial Statements” beginning on page 189.

Under the acquisition method of accounting, the total purchase price will be allocated to Penn Virginia’s tangible assets and liabilities and identifiable intangible assets based on their fair values as of the date of completion of the Merger. The excess, if any, of the purchase price over those fair values will be recorded as goodwill. Denbury and Penn Virginia expect that the Merger may result in the creation of goodwill based upon the application of the acquisition method of accounting. To the extent the value of goodwill or intangibles becomes impaired, the combined company may be required to incur material non-cash charges relating to such impairment. The combined company’s operating results may be significantly impacted from both the impairment and the underlying trends in the business that triggered the impairment.

Shares of Denbury Common Stock received by Penn Virginia shareholders as a result of the Merger will have different rights from shares of Penn Virginia Common Stock.

Upon completion of the Merger, Penn Virginia shareholders will no longer be shareholders of Penn Virginia, and Penn Virginia shareholders who receive Merger Consideration will become Denbury stockholders. There will be important differences between the current rights of Penn Virginia shareholders and the rights to which such shareholders will be entitled as Denbury stockholders. For a discussion of the different rights associated with shares of Denbury Common Stock, see the section entitled “Comparison of Stockholders’ Rights” beginning on page 201.

The market price of Denbury Common Stock may be affected by factors different from those that historically have affected Penn Virginia Common Stock.

Upon completion of the Merger, holders of Penn Virginia Common Stock who receive Merger Consideration (other than any holder that receives solely cash) will become holders of Denbury Common Stock.

 

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The businesses of Denbury differ from those of Penn Virginia in certain respects, and, accordingly, the financial position or results of operations and/or cash flows of Denbury after the Merger, as well as the market price of Denbury Common Stock, may be affected by factors different from those currently affecting the financial position or results of operations and/or cash flows of Penn Virginia. Following the completion of the Merger, Penn Virginia will be part of a larger company, so decisions affecting Penn Virginia may be made in respect of the larger combined business as a whole rather than the Penn Virginia business individually. For a discussion of the businesses of Denbury and Penn Virginia and of some important factors to consider in connection with those businesses, see the section entitled “Information About the Companies” and the documents incorporated by reference in the section entitled “Where You Can Find More Information” beginning on pages 63 and 221, respectively, including, in particular, in the sections entitled “Risk Factors” in each of Denbury’s and Penn Virginia’s Annual Report on Form 10-K for the year ended December 31, 2018.

Following the completion of the Merger, Denbury may incorporate Penn Virginia’s hedging activities into Denbury’s business, and Denbury may be exposed to additional commodity price risks arising from such hedges.

To mitigate its exposure to changes in commodity prices, Penn Virginia hedges oil, natural gas and NGL prices from time to time, primarily through the use of certain derivative instruments. If Denbury assumes existing Penn Virginia hedges, then Denbury will bear the economic impact of all of Penn Virginia’s current hedges following the completion of the Merger. Actual crude oil, natural gas and NGL prices may differ from the combined company’s expectations and, as a result, such hedges may or may not have a negative impact on Denbury’s business.

Denbury and Penn Virginia may be targets of securities class action and derivative lawsuits which could result in substantial costs and may delay or prevent the Merger from being completed.

Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into merger agreements. Even if the lawsuits are without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on Denbury’s and Penn Virginia’s respective liquidity and financial condition. Additionally, if a plaintiff is successful in obtaining an injunction prohibiting completion of the Merger, then that injunction may delay or prevent the Merger from being completed, which may adversely affect Denbury’s and Penn Virginia’s respective business, financial position and results of operation.

Risks Relating to Denbury’s Business.

You should read and consider risk factors specific to Denbury’s businesses that will also affect the combined company after the completion of the Merger. These risks are described in Part I, Item 1A of Denbury’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, and in other documents that are incorporated by reference herein. For the location of information incorporated by reference in this joint proxy statement/prospectus, see the section entitled “Where You Can Find More Information” beginning on page 221.

Risks Relating to Penn Virginia’s Business.

You should read and consider risk factors specific to Penn Virginia’s businesses that will also affect the combined company after the completion of the Merger. These risks are described in Part I, Item 1A of Penn Virginia’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, and in other documents that are incorporated by reference herein. For the location of information incorporated by reference in this joint proxy statement/prospectus, see the section entitled “Where You Can Find More Information” beginning on page 221.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This joint proxy statement/prospectus, and the documents to which Penn Virginia and Denbury refer you in this joint proxy statement/prospectus, as well as oral statements made or to be made by Penn Virginia and Denbury, include certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, included in this joint proxy statement/prospectus that address activities, events or developments that Denbury or Penn Virginia expects, believes or anticipates will or may occur in the future are forward-looking statements. Words such as “estimate,” “project,” “predict,” “believe,” “expect,” “anticipate,” “potential,” “create,” “intend,” “could,” “may,” “foresee,” “plan,” “will,” “guidance,” “look,” “outlook,” “goal,” “future,” “assume,” “forecast,” “build,” “focus,” “work,” “continue” or the negative of such terms or other variations thereof and words and terms of similar substance used in connection with any discussion of future plans, actions, or events identify forward-looking statements. However, the absence of these words does not mean that the statements are not forward-looking. These forward-looking statements include, but are not limited to, statements regarding the Merger, pro forma descriptions of the combined company and its operations, integration and transition plans, synergies, opportunities and anticipated future performance. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements included in this joint proxy statement/prospectus. These include:

 

   

the expected timing and likelihood of completion of the Merger, including the timing, receipt and terms and conditions of any required governmental and regulatory approvals of the Merger that could reduce anticipated benefits or cause the parties to abandon the Merger;

 

   

the ability to successfully integrate the businesses;

 

   

the occurrence of any event, change or other circumstances that could give rise to the termination of or amendment to the Merger Agreement;

 

   

the possibility that Denbury stockholders may not approve the Denbury Issuance Proposal or the Denbury Charter Amendment Proposal or that Penn Virginia shareholders may not approve the Penn Virginia Merger Proposal;

 

   

the risk that the parties may not be able to satisfy the conditions to the Merger in a timely manner or at all;

 

   

the risk that any announcements relating to the Merger by Denbury, Penn Virginia or others could have adverse effects on the market price of Denbury Common Stock or Penn Virginia Common Stock;

 

   

the risk that the Merger and its announcement could have an adverse effect on the ability of Denbury and Penn Virginia to retain customers and retain and hire key personnel and maintain relationships with their suppliers and customers and on their operating results and businesses generally;

 

   

the risk the pending Merger could distract management of both entities from ongoing business operations or cause them to incur substantial costs;

 

   

the risk that problems may arise in successfully integrating the businesses of the companies, which may result in the combined company not operating as effectively and efficiently as expected; and

 

   

the risk that the combined company may be unable to achieve the anticipated financial benefits of the Merger or it may take longer than expected to achieve the anticipated financial benefits of the Merger and other important factors that could cause actual results to differ materially from those projected.

All such factors are difficult to predict and are beyond Denbury or Penn Virginia’s control, including those detailed in Denbury’s annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K that are available on its website at www.denbury.com and on the SEC’s website at www.sec.gov, and those detailed in Penn Virginia’s annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K that are available on Penn Virginia’s website at www.pennvirginia.com and on the SEC’s

 

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website at www.sec.gov. All forward-looking statements are based on assumptions that Denbury or Penn Virginia believe to be reasonable but that may not prove to be accurate. Any forward-looking statement speaks only as of the date on which such statement is made, and Denbury and Penn Virginia undertake no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.

 

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INFORMATION ABOUT THE COMPANIES

Denbury Resources Inc.

5320 Legacy Drive

Plano, Texas 75024

Phone: (972) 673-2000

Denbury, whose legal name is Denbury Resources Inc., was incorporated in Delaware in December 2003. Based in Plano, Texas, Denbury is an independent oil and natural gas company with operations focused in two key operating areas: the Gulf Coast and Rocky Mountain regions. Denbury’s goal is to increase the value of its properties through a combination of exploitation, drilling and proven engineering extraction practices, with the most significant emphasis relating to CO2 enhanced oil recovery operations.

Penn Virginia Corporation

16285 Park Ten Place, Suite 500

Houston, Texas 77084

Phone: (713) 722-6500

Penn Virginia, whose legal name is Penn Virginia Corporation, was incorporated in Virginia in January 1882. Based in Houston, Texas, Penn Virginia is an independent oil and gas company engaged in the exploration, development and production of oil, NGLs and natural gas in the Eagle Ford Shale in Gonzales, Lavaca and DeWitt Counties in South Texas.

Dragon Merger Sub Inc.

c/o Denbury Resources Inc.

5320 Legacy Drive

Plano, Texas 75024

Phone: (972) 673-2000

Merger Sub, whose legal name is Dragon Merger Sub Inc., is a direct wholly owned subsidiary of Denbury. Upon the completion of the Merger, Merger Sub will cease to exist. Merger Sub was incorporated in Virginia on October 18, 2018, for the sole purpose of effecting the Merger.

DR LLC Sub

c/o Denbury Resources Inc.

5320 Legacy Drive

Plano, Texas 75024

Phone: (972) 673-2000

LLC Sub, whose legal name is DR LLC Sub, is a direct wholly owned subsidiary of Denbury. Immediately after the consummation of the Merger, the surviving corporation will merge with and into LLC Sub, with LLC Sub surviving such merger. LLC Sub was formed in Virginia on October 18, 2018, for the sole purpose of effecting the transactions contemplated by the Merger Agreement.

 

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SPECIAL MEETING OF DENBURY STOCKHOLDERS

Date, Time and Place

The Denbury special meeting will be held on April 17, 2019, at 10:00 a.m., Central Time, at 5320 Legacy Drive, Plano, Texas 75024.

Purpose of the Denbury Special Meeting

The purpose of the Denbury special meeting is to consider and vote on:

 

   

the Denbury Issuance Proposal; and

 

   

the Denbury Charter Amendment Proposal.

Denbury will transact no other business at the Denbury special meeting.

Recommendation of the Denbury Board of Directors

The Denbury board unanimously recommends that Denbury stockholders vote:

 

   

FOR” the approval of the Denbury Issuance Proposal; and

 

   

FOR” the approval of the Denbury Charter Amendment Proposal.

For additional information on the recommendation of the Denbury board, see the section entitled “The Merger—Recommendation of the Denbury Board of Directors and Reasons for the Merger” beginning on page 93.

Record Date and Outstanding Shares of Denbury Common Stock

Only holders of record of issued and outstanding shares of Denbury Common Stock as of the close of business on February 19, 2019, the record date for the Denbury special meeting, are entitled to notice of, and to vote at, the Denbury special meeting or any adjournment or postponement of the Denbury special meeting.

As of the close of business on the record date, there were 460,442,313 shares of Denbury Common Stock issued and outstanding and entitled to vote at the Denbury special meeting. You may cast one vote for each share of Denbury Common Stock that you held as of the close of business on the record date.

A complete list of Denbury stockholders entitled to vote at the Denbury special meeting will be available for inspection at Denbury’s principal place of business during regular business hours for a period of no less than 10 days before the Denbury special meeting and during the Denbury special meeting at 5320 Legacy Drive, Plano, Texas 75024.

Quorum; Abstentions and Broker Non-Votes

A quorum of Denbury stockholders is necessary to hold a valid meeting. The presence at the Denbury special meeting of the holders of not less than one-third of the shares of Denbury Common Stock issued and outstanding and entitled to vote at the Denbury special meeting, present in person or represented by proxy, will constitute a quorum. If you submit a properly executed Denbury proxy card, even if you do not vote for the proposal or vote to “abstain” in respect of the proposal, your shares of Denbury Common Stock will be counted for purposes of calculating whether a quorum is present for the transaction of business at the Denbury special meeting. Broker non-votes will not be treated as present for purposes of determining the presence of a quorum at the Denbury special meeting.

 

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Denbury Common Stock held in “street name” with respect to which the beneficial owner fails to give voting instructions to the broker, bank or other nominee, and Denbury Common Stock with respect to which the beneficial owner otherwise fails to vote, will not be considered present and entitled to vote at the Denbury special meeting for the purpose of determining the presence of a quorum.

A broker non-vote will result if your broker, bank or other nominee returns a proxy but does not provide instruction as to how shares should be voted on a particular matter. Under stock exchange rules, brokers, banks or other nominees do not have discretionary authority to vote on the Denbury Issuance Proposal or the Denbury Charter Amendment Proposal because they are “non-routine” proposals. If there are any broker non-votes, the shares will not be considered present and entitled to vote at the Denbury special meeting for the purpose of determining the presence of a quorum.

Executed but unvoted proxies will be voted in accordance with the recommendations of the Denbury board.

Required Vote

Approval of the Denbury Issuance Proposal requires the affirmative vote of the holders of a majority of the shares of Denbury Common Stock represented in person or by proxy at the Denbury special meeting. Abstentions will have the same effect as a vote “AGAINST” the proposal, and broker non-votes will have no effect on the outcome of the vote.

Approval of the Denbury Charter Amendment Proposal requires the affirmative vote of holders of a majority of the outstanding shares of Denbury Common Stock entitled to vote on the proposal. Abstentions and broker-non votes will have the same effect as a vote “AGAINST” the proposal. Failure to vote on the Denbury Charter Amendment Proposal will have the same effect as a vote “AGAINST” the Denbury Charter Amendment Proposal.

The Denbury Charter Amendment Proposal and the Denbury Issuance Proposal are described in the section entitled “Denbury Proposals” beginning on page 69.

Methods of Voting

Denbury stockholders, whether holding shares directly as stockholders of record or beneficially in “street name,” may vote on the Internet by going to the web address provided on the enclosed Denbury proxy card and following the instructions for Internet voting, by phone using the toll-free phone number listed on the enclosed proxy card, or by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided.

Denbury stockholders of record may vote their shares in person by ballot at the Denbury special meeting or by submitting their proxies:

 

   

by phone until 11:59 p.m. Eastern Time on April 16, 2019;

 

   

by the Internet until 11:59 p.m. Eastern Time on April 16, 2019; or

 

   

by completing, signing and returning your proxy or voting instruction card via mail. If you vote by mail, your Denbury proxy card must be received by 11:59 p.m. Eastern Time on April 16, 2019.

Denbury stockholders who hold their shares in “street name” by a broker, bank or other nominee should refer to the Denbury proxy card, voting instruction form or other information forwarded by their broker, bank or other nominee for instructions on how to vote their shares.

Voting in Person

Shares held directly in your name as stockholder of record may be voted in person at the Denbury special meeting. If you choose to vote your shares in person at the Denbury special meeting, bring your enclosed

 

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Denbury proxy card and proof of identification. Even if you plan to attend the Denbury special meeting, the Denbury board recommends that you vote your shares in advance as described herein so that your vote will be counted if you later decide not to attend the Denbury special meeting.

If you are a beneficial holder, you will receive separate voting instructions from your broker, bank or other nominee explaining how to vote your shares. Please note that if your shares are held in “street name” by a broker, bank or other nominee and you wish to vote at the Denbury special meeting, you will not be permitted to vote in person unless you first obtain a legal proxy issued in your name from the record owner. You are encouraged to request a legal proxy from your broker, bank or other nominee promptly as the process can be lengthy.

Voting by Proxy

Whether you hold your shares of Denbury Common Stock directly as the stockholder of record or beneficially in “street name,” you may direct your vote by proxy without attending the Denbury special meeting. You can vote by proxy by phone, the Internet or mail by following the instructions provided in the enclosed Denbury proxy card.

Questions About Voting

If you have any questions about how to vote or direct a vote in respect of your shares of Denbury Common Stock, you may contact MacKenzie Partners, the proxy solicitor for Denbury, toll-free at (800) 322-2885 or, for brokers and banks, collect at (212) 929-5500.

Adjournment

In accordance with the Denbury bylaws, whether or not a quorum is present, the chairman of the Denbury special meeting will have the power to adjourn the Denbury special meeting from time to time for the purpose of, among other things, soliciting additional proxies. If the Denbury special meeting is adjourned, Denbury stockholders who have already submitted their proxies will be able to revoke them at any time prior to their use. At any subsequent reconvening of the Denbury special meeting, all proxies will be voted in the same manner as the manner in which such proxies would have been voted at the original convening of the Denbury special meeting, except for any proxies that have been validly revoked or withdrawn prior to the subsequent meeting.

In addition, the Merger Agreement provides that Denbury (1) will be required to adjourn or postpone the Denbury special meeting (A) to the extent necessary to ensure that any required supplement or amendment to this joint proxy statement/prospectus is provided to the Denbury stockholders or (B) if, as of the time the Denbury special meeting is scheduled, there are insufficient shares of Denbury Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct business at the Denbury special meeting, or (2) may, and at Penn Virginia’s request must, adjourn or postpone the Denbury special meeting if, as of the time for which the Denbury special meeting is scheduled, there are insufficient shares of Denbury Common Stock represented (either in person or by proxy) to obtain the approval of the Denbury Issuance Proposal or the Denbury Charter Amendment Proposal. However, the Denbury special meeting will not be adjourned or postponed to a date that is more than 30 days after the date for which the Denbury special meeting was previously scheduled (though the Denbury special meeting may be adjourned or postponed every time the circumstances described in (1)(A) and (1)(B) exist, and, upon Penn Virginia’s request, every time the circumstances described in (2) exist) or to a date on or after two business days prior to April 30, 2019.

Revocability of Proxies

If you are a stockholder of record of Denbury, whether you vote by phone, the Internet or mail, you can change or revoke your proxy before it is voted at the meeting in one of the following ways:

 

   

submit a new Denbury proxy card bearing a later date;

 

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vote again by phone or the Internet at a later time;

 

   

give written notice before the meeting to Denbury’s Secretary at 5320 Legacy Drive, Plano, Texas 75024 stating that you are revoking your proxy; or

 

   

attend the Denbury special meeting and vote your shares in person. Please note that your attendance at the meeting will not alone serve to revoke your proxy.

Proxy Solicitation Costs

The enclosed Denbury proxy card is being solicited by Denbury and the Denbury board. In addition to solicitation by mail, Denbury’s directors, officers and employees may solicit proxies in person, by phone or by electronic means. These persons will not be specifically compensated for conducting such solicitation.

Denbury has retained MacKenzie Partners to assist in the solicitation process. Denbury has paid MacKenzie Partners a retainer of $25,000 to be applied against a final fee to be mutually agreed between Denbury and MacKenzie Partners. Denbury also has agreed to indemnify MacKenzie Partners against various liabilities and expenses that relate to or arise out of its solicitation of proxies (subject to certain exceptions).

Denbury will ask brokers, banks and other nominees to forward the proxy solicitation materials to the beneficial owners of shares of Denbury Common Stock held of record by such nominee holders. Denbury will reimburse these nominee holders for their customary clerical and mailing expenses incurred in forwarding the proxy solicitation materials to the beneficial owners.

No Dissenters’ or Appraisal Rights

Under Delaware law, Denbury stockholders are not entitled to dissenters’ or appraisal rights in connection with the Merger Agreement.

Other Information

The matters to be considered at the Denbury special meeting are of great importance to the Denbury stockholders. Accordingly, you are urged to read and carefully consider the information contained in or incorporated by reference into this joint proxy statement/prospectus and submit your proxy by phone or the Internet or complete, date, sign and promptly return the enclosed Denbury proxy card in the enclosed postage-paid envelope. If you submit your proxy by phone or the Internet, you do not need to return the enclosed proxy card.

Assistance

If you need assistance in completing your Denbury proxy card or have questions regarding the Denbury special meeting, contact:

 

LOGO

MacKenzie Partners, Inc.

1407 Broadway, 27th Floor

New York, New York 10018

Denbury@mackenziepartners.com

Call Collect: (212) 929-5500

Toll-Free: (800) 322-2885

 

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Vote of Denbury’s Directors and Executive Officers

As of February 19, 2019, Denbury directors and executive officers, and their affiliates, as a group, owned and were entitled to vote 4,824,264 shares of Denbury Common Stock, or approximately 1.0% of the total outstanding shares of Denbury Common Stock as of February 19, 2019.

Denbury currently expects that all of its directors and executive officers will vote their shares “FOR” the approval of the Denbury Issuance Proposal and “FOR” the approval of the Denbury Charter Amendment Proposal.

Attending the Denbury Special Meeting

You are entitled to attend the Denbury special meeting only if you were a stockholder of record of Denbury at the close of business on the record date or you held your shares of Denbury beneficially in the name of a broker, bank or other nominee as of the record date, or you hold a valid proxy for the Denbury special meeting.

If you were a stockholder of record of Denbury at the close of business on the record date and wish to attend the Denbury special meeting, so indicate on your Denbury proxy card or as prompted by the phone or Internet voting system. Your name will be verified against the list of stockholders of record prior to your being admitted to the Denbury special meeting.

If a broker, bank or other nominee is the record owner of your shares of Denbury Common Stock, you will need to have proof that you are the beneficial owner as of the record date to be admitted to the Denbury special meeting. A recent statement or letter from your broker, bank or other nominee confirming your ownership as of the record date, or presentation of a valid proxy from a broker, bank or other nominee that is the record owner of your shares, would be acceptable proof of your beneficial ownership.

You should be prepared to present government-issued photo identification for admittance. If you do not provide photo identification or comply with the other procedures outlined above upon request, you might not be admitted to the Denbury special meeting.

Results of the Denbury Special Meeting

Within four business days following the Denbury special meeting, Denbury intends to file the final voting results with the SEC on a Current Report on Form 8-K. If the final voting results have not been certified within that four business day period, Denbury will report the preliminary voting results on a Current Report on Form 8-K at that time and will file an amendment to the Current Report on Form 8-K to report the final voting results within four days of the date that the final results are certified.

DENBURY STOCKHOLDERS SHOULD CAREFULLY READ THIS JOINT PROXY STATEMENT/PROSPECTUS IN ITS ENTIRETY FOR MORE DETAILED INFORMATION CONCERNING THE DENBURY ISSUANCE PROPOSAL AND THE DENBURY CHARTER AMENDMENT PROPOSAL.

 

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DENBURY PROPOSALS

Denbury Issuance Proposal

It is a condition to the completion of the Merger that Denbury stockholders approve the issuance of shares of Denbury Common Stock in the Merger. In the Merger, each Penn Virginia shareholder will receive, at its election and subject to proration, either, (i) $25.86 in cash without interest and 12.4000 shares of Denbury Common Stock, (ii) $79.80 in cash without interest or (iii) 18.3454 shares of Denbury Common Stock, as further described in the sections entitled “The Merger—Consideration to Penn Virginia Shareholders” and “The Merger Agreement—Effect of the Merger on Capital Stock; Merger Consideration” beginning on pages 79 and 144, respectively.

Under NYSE rules, a company is required to obtain stockholder approval prior to the issuance of shares of common stock if the number of shares of common stock to be issued is, or will be upon issuance, equal to or in excess of 20% of the number of shares of common stock outstanding before the issuance of the shares of common stock. If the Merger is completed pursuant to the Merger Agreement, Denbury expects to issue up to approximately 191.6 million shares of Denbury Common Stock in connection with the Merger based on the number of shares of Penn Virginia Common Stock outstanding as of February 19, 2019. Accordingly, the aggregate number of shares of Denbury Common Stock that Denbury will issue in the Merger will exceed 20% of the shares of Denbury Common Stock outstanding before such issuance, and for this reason, Denbury is seeking the approval of Denbury stockholders for the issuance of shares of Denbury Common Stock pursuant to the Merger Agreement. In the event the Denbury Issuance Proposal is not approved by Denbury stockholders, the Merger will not be completed.

In the event the Denbury Issuance Proposal is approved by Denbury stockholders, but the Merger Agreement is terminated, Denbury will not issue any shares of Denbury Common Stock pursuant to the Merger Agreement as a result of the approval of the Denbury Issuance Proposal.

Approval of the Denbury Issuance Proposal requires the affirmative vote of holders of a majority of the shares of Denbury Common Stock represented in person or by proxy at the Denbury special meeting. Abstentions will have the same effect as a vote “AGAINST” the proposal, and broker non-votes will have no effect on the outcome of the vote.

The Denbury board unanimously recommends a vote “FOR” the Denbury Issuance Proposal.

Denbury Charter Amendment Proposal

It is a condition to the completion of the Merger that Denbury stockholders approve the Denbury Charter Amendment Proposal to increase the total number of authorized shares of Denbury Common Stock from 600,000,000 shares to 984,000,000 shares in order to enable Denbury to have sufficient shares of authorized but unissued Denbury Common Stock for the issuance of shares of Denbury Common Stock in the Merger, as further described in the sections entitled “The Merger—Consideration to Penn Virginia Shareholders” and “The Merger Agreement—Effect of the Merger on Capital Stock; Merger Consideration” beginning on pages 79 and 144, respectively. The proposed Denbury Charter Amendment is attached to this joint proxy statement/prospectus as Annex D.

As of the close of business on the record date, February 19, 2019, Denbury had no shares of Denbury preferred stock and 460,442,313 shares of Denbury Common Stock issued and outstanding. As of the close of business on the record date, February 19, 2019, there were approximately 9,513,475 shares of Denbury Common Stock reserved for issuance under Denbury’s Amended and Restated 2004 Omnibus Stock and Incentive Plan. Based on the number of shares of Penn Virginia Common Stock, service-based restricted stock and performance-based restricted stock outstanding as of such date, if the Merger is completed, Denbury would be required to

 

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issue approximately 191.6 million additional shares of Denbury Common Stock to the holders of Penn Virginia Common Stock, service-based restricted stock and performance-based restricted stock. Denbury has determined that the 600 million shares of Denbury Common Stock currently authorized under the Denbury certificate of incorporation will be insufficient to complete the Merger. It is estimated that following completion of the Merger, approximately 654.0 million shares of Denbury Common Stock will be outstanding. The Denbury board believes that it is advisable to have additional authorized shares of Denbury Common Stock available for important corporate purposes, such as to provide the ability to react quickly to strategic opportunities and to attract and retain talented employees through the use of equity incentive compensation. Although there are no present plans or commitments for the issuance of any of the additional shares of Denbury Common Stock that would be authorized upon approval of the Denbury Charter Amendment Proposal, other than the issuance of shares in connection with the Merger, such additional shares would be available for equity incentive plans, possible future stock splits and dividends, public or private offerings of Denbury Common Stock or securities convertible into Denbury Common Stock, equity-based acquisitions and other corporate purposes that might be proposed. The additional shares of Denbury Common Stock will not be entitled to preemptive rights nor will existing Denbury stockholders have any preemptive right to acquire any of those shares when issued.

In the event the Denbury Charter Amendment Proposal is approved by Denbury stockholders, but the Merger Agreement is terminated, Denbury will not issue any shares of Denbury Common Stock pursuant to the Merger Agreement as a result of the approval of the Denbury Charter Amendment Proposal. However, the newly authorized shares pursuant to the Denbury Charter Amendment will be available for future issuance.

Approval of the Denbury Charter Amendment Proposal requires the affirmative vote of holders of a majority of the outstanding shares of Denbury Common Stock entitled to vote on the proposal. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” the proposal. Failure to vote on the Denbury Charter Amendment Proposal will have the same effect as a vote “AGAINST” the Denbury Charter Amendment Proposal.

The Denbury board unanimously recommends a vote “FOR” the approval of the Denbury Charter Amendment Proposal.

 

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SPECIAL MEETING OF PENN VIRGINIA SHAREHOLDERS

Date, Time and Place

The Penn Virginia special meeting will be held on April 17, 2019, at 10:00 a.m., Central Time, at Houston Marriott Energy Corridor, 16011 Katy Freeway, Houston, Texas 77094.

Purpose of the Penn Virginia Special Meeting

The purpose of the Penn Virginia special meeting is to consider and vote on the Penn Virginia Merger Proposal and the Penn Virginia Non-Binding Compensation Advisory Proposal.

Penn Virginia will transact no other business at the Penn Virginia special meeting.

Recommendation of the Penn Virginia Board of Directors

The Penn Virginia board unanimously recommends that Penn Virginia shareholders vote “FOR” the approval of the Penn Virginia Merger Proposal and “FOR” the approval of the Penn Virginia Non-Binding Compensation Advisory Proposal.

For additional information on the recommendation of the Penn Virginia board, see the section entitled “The Merger—Recommendation of the Penn Virginia Board of Directors and Reasons for the Merger” beginning on page 93.

Record Date and Outstanding Shares of Penn Virginia Common Stock

Only holders of record of issued and outstanding shares of Penn Virginia Common Stock as of the close of business on February 19, 2019, the record date for the Penn Virginia special meeting, are entitled to notice of, and to vote at, the Penn Virginia special meeting or any adjournment or postponement of the Penn Virginia special meeting.

As of the close of business on the record date, there were 15,105,251 shares of Penn Virginia Common Stock issued and outstanding and entitled to vote at the Penn Virginia special meeting. You may cast one vote for each share of Penn Virginia Common Stock that you held as of the close of business on the record date.

A complete list of Penn Virginia shareholders entitled to vote at the Penn Virginia special meeting will be available for inspection at Penn Virginia’s principal place of business during regular business hours for a period of no less than 10 days before the Penn Virginia special meeting and during the Penn Virginia special meeting at 16285 Park Ten Place, Suite 500, Houston, Texas 77084.

Quorum; Abstentions and Broker Non-Votes

A quorum of Penn Virginia shareholders is necessary to hold a valid meeting. The presence at the Penn Virginia special meeting, in person or by proxy, of the holders of a majority in voting power of the outstanding shares of capital stock of Penn Virginia entitled to vote at the Penn Virginia special meeting constitutes a quorum. If you submit a properly executed Penn Virginia WHITE proxy card, even if you do not vote for one or both of the proposals or vote to “abstain” in respect of one or both of the proposals, your shares of Penn Virginia Common Stock will be counted for purposes of calculating whether a quorum is present for the transaction of business at the Penn Virginia special meeting.

Penn Virginia Common Stock held in “street name” with respect to which the beneficial owner fails to give voting instructions to the broker, bank or other nominee will not be considered present and entitled to vote at the Penn Virginia special meeting for the purpose of determining the presence of a quorum.

 

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A broker non-vote will result if your broker, bank or other nominee returns a proxy but does not provide instruction as to how shares should be voted on a particular matter. Under stock exchange rules, brokers, banks or other nominees do not have discretionary authority to vote on any of the proposals at the Penn Virginia special meeting because they are “non-routine” proposals. Broker non-votes will not be considered present and entitled to vote at the Penn Virginia special meeting for the purpose of determining the presence of a quorum, unless the broker, bank or other nominee has been instructed to vote on at least one of the proposals.

Executed but unvoted proxies will be voted in accordance with the recommendations of the Penn Virginia board.

Required Vote

Approval of the Penn Virginia Merger Proposal requires the affirmative vote of the holders of more than two-thirds of the outstanding shares of Penn Virginia Common Stock entitled to vote on the proposal. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” the proposal. Failure to vote on the Penn Virginia Merger Proposal will have the same effect as a vote “AGAINST” the Penn Virginia Merger Proposal.

The Penn Virginia Merger Proposal is described in the section entitled “Penn Virginia Proposals” beginning on page 77.

Approval of the Penn Virginia Non-Binding Compensation Advisory Proposal requires that the number of votes cast “FOR” the proposal exceed the number of votes cast “AGAINST” the proposal. Abstentions, broker non-votes and failure to vote will not count as votes cast and will have no effect on the outcome of the vote. As an advisory vote, this proposal is not binding upon Penn Virginia or the Penn Virginia, Denbury or their respective boards, and approval of this proposal is not a condition to completion of the Merger.

The Penn Virginia Non-Binding Compensation Advisory Proposal is described in the section entitled “Penn Virginia Proposals” beginning on page 77.

Methods of Voting

Penn Virginia shareholders, whether holding shares directly as shareholders of record or beneficially in “street name,” may vote on the Internet by going to the web address provided on the enclosed Penn Virginia WHITE proxy card and following the instructions for Internet voting, by phone using the toll-free phone number listed on the enclosed Penn Virginia WHITE proxy card, or by completing, signing, dating and returning the enclosed Penn Virginia WHITE proxy card in the postage-paid envelope provided.

Penn Virginia shareholders of record may vote their shares in person by ballot at the Penn Virginia special meeting or by submitting their proxies:

 

   

by phone until 11:59 p.m. Eastern Time on April 16, 2019;

 

   

by the Internet until 11:59 p.m. Eastern Time on April 16, 2019; or

 

   

by completing, signing and returning your proxy or voting instruction card via mail. If you vote by mail, your Penn Virginia WHITE proxy card must be received by 11:59 p.m. Eastern Time on April 16, 2019.

Penn Virginia shareholders who hold their shares in “street name” by a broker, bank or other nominee should refer to the Penn Virginia WHITE proxy card, voting instruction form or other information forwarded by their broker, bank or other nominee for instructions on how to vote their shares.

Voting in Person

Shares held directly in your name as shareholder of record may be voted in person at the Penn Virginia special meeting. If you choose to vote your shares in person at the Penn Virginia special meeting, bring your

 

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enclosed Penn Virginia WHITE proxy card and proof of identification. Even if you plan to attend the Penn Virginia special meeting, the Penn Virginia board recommends that you vote your shares in advance as described herein so that your vote will be counted if you later decide not to attend the Penn Virginia special meeting.

If you are a beneficial holder, you will receive separate voting instructions from your broker, bank or other nominee explaining how to vote your shares. Please note that if your shares are held in “street name” by a broker, bank or other nominee and you wish to vote at the Penn Virginia special meeting, you will not be permitted to vote in person unless you first obtain a legal proxy issued in your name from the record owner. You are encouraged to request a legal proxy from your broker, bank or other nominee promptly as the process can be lengthy.

Voting by Proxy

Whether you hold your shares of Penn Virginia Common Stock directly as the shareholder of record or beneficially in “street name,” you may direct your vote by proxy without attending the Penn Virginia special meeting. You can vote by proxy by phone, the Internet or mail by following the instructions provided in the enclosed Penn Virginia WHITE proxy card.

Questions About Voting

If you have any questions about how to vote or direct a vote in respect of your shares of Penn Virginia Common Stock, you may contact Okapi Partners, Penn Virginia’s proxy solicitor, toll-free at (855) 305-0856 or collect at (212) 297-0720.

Agreements with Certain Penn Virginia Shareholders

Concurrently with the execution of the Merger Agreement, Denbury entered into voting and support agreements (each, a “Voting Agreement” and, collectively, the “Voting Agreements”) with (i) Strategic Value Partners, LLC on behalf of certain investment funds directly and indirectly managed by SVP, (ii) KLS Diversified Asset Management LP and (iii) each director and executive officer of Penn Virginia, pursuant to which each such shareholder has agreed, among other matters and upon the terms and subject to the conditions set forth in the Voting Agreements, to vote all of their shares of Penn Virginia Common Stock in favor of the Penn Virginia Merger Proposal and the other actions contemplated by the Merger Agreement and against any proposal that would reasonably be expected to impede, interfere with, delay, postpone, discourage or adversely affect the consummation of the Merger. As of February 19, 2019, such shareholders subject to the Voting Agreements held 2,294,699 shares of Penn Virginia Common Stock in the aggregate (excluding Penn Virginia service-based restricted stock and Penn Virginia performance-based restricted stock), or approximately 15.2% of the voting power of Penn Virginia (excluding Penn Virginia service-based restricted stock and Penn Virginia performance-based restricted stock). The Voting Agreements are attached to this joint proxy statement/prospectus as Annex E, Annex F and Annex G, respectively.

Adjournment

In accordance with the Penn Virginia bylaws, whether or not a quorum is present, the chairman of the Penn Virginia special meeting will have the power to adjourn the Penn Virginia special meeting from time to time for the purpose of, among other things, soliciting additional proxies. If the Penn Virginia special meeting is adjourned, Penn Virginia shareholders who have already submitted their proxies will be able to revoke them at any time prior to their use. At any subsequent reconvening of the Penn Virginia special meeting, all proxies will be voted in the same manner as the manner in which such proxies would have been voted at the original convening of the Penn Virginia special meeting, except for any proxies that have been validly revoked or withdrawn prior to the reconvened meeting.

 

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In addition, the Merger Agreement provides that Penn Virginia (1) will be required to adjourn or postpone the Penn Virginia special meeting (A) to the extent necessary to ensure that any required supplement or amendment to this joint proxy statement/prospectus is provided to the Penn Virginia shareholders or (B) if, as of the time the Penn Virginia special meeting is scheduled, there are insufficient shares of Penn Virginia Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct business at the Penn Virginia special meeting, and (2) may, and at Denbury’s request must, adjourn or postpone the Penn Virginia special meeting if, as of the time for which the Penn Virginia special meeting is scheduled, there are insufficient shares of Penn Virginia Common Stock represented (either in person or by proxy) to obtain the approval of the Penn Virginia Merger Proposal. However, the Penn Virginia special meeting will not be adjourned or postponed to a date that is more than 30 business days after the date for which the Penn Virginia special meeting was previously scheduled (though the Penn Virginia special meeting may be adjourned or postponed every time the circumstances described in (1)(A) and 1(B) exist, and, with Denbury’s consent, every time the circumstances described in (2) exist) or to a date on or after two business days prior to April 30, 2019.

Revocability of Proxies

If you are a shareholder of record of Penn Virginia, whether you vote by phone, the Internet or mail, you can change or revoke your proxy before it is voted at the meeting in one of the following ways:

 

   

submit a new Penn Virginia WHITE proxy card bearing a later date;

 

   

vote again by phone or the Internet at a later time;

 

   

give written notice before the meeting to Penn Virginia’s Corporate Secretary at 16285 Park Ten Place, Suite 500, Houston, Texas 77084 stating that you are revoking your proxy; or

 

   

attend the Penn Virginia special meeting and vote your shares in person. Please note that your attendance at the meeting will not alone serve to revoke your proxy.

Proxy Solicitation Costs

The enclosed Penn Virginia WHITE proxy card is being solicited on behalf of the Penn Virginia board. In addition to solicitation by mail, Penn Virginia’s directors, officers and employees may solicit proxies in person, by phone or by electronic means. These persons will not be specifically compensated for conducting such solicitation.

Penn Virginia has retained Okapi Partners to assist in the solicitation process. Penn Virginia has paid Okapi Partners an initial retainer fee of $15,000, and also agreed to pay Okapi Partners (a) fees for additional services that may be incurred, (b) a performance fee to be mutually agreed in light of effort expended and outcome achieved and (c) reasonable out-of-pocket expenses. Penn Virginia also has agreed to indemnify Okapi Partners against various liabilities and expenses that relate to or arise out of its solicitation of proxies (subject to certain exceptions).

Penn Virginia will ask brokers, banks and other nominees to forward the proxy solicitation materials to the beneficial owners of shares of Penn Virginia Common Stock held of record by such nominee holders. Penn Virginia will reimburse these nominee holders for their customary clerical and mailing expenses incurred in forwarding the proxy solicitation materials to the beneficial owners.

No Dissenters’ or Appraisal Rights

Holders of shares of Penn Virginia Common Stock are not entitled to exercise dissenters’ or appraisal rights under Virginia law in connection with the Merger.

Other Information

The matter to be considered at the Penn Virginia special meeting is of great importance to the Penn Virginia shareholders. Accordingly, you are urged to read and carefully consider the information contained in or

 

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incorporated by reference into this joint proxy statement/prospectus and submit your proxy by phone or the Internet or complete, date, sign and promptly return the enclosed Penn Virginia WHITE proxy card in the enclosed postage-paid envelope. If you submit your proxy by phone or the Internet, you do not need to return the enclosed Penn Virginia WHITE proxy card.

Assistance

If you need assistance in completing your Penn Virginia WHITE proxy card or have questions regarding the Penn Virginia special meeting, contact:

 

 

LOGO

Okapi Partners LLC

1212 Avenue of the Americas, 24th Floor

New York, New York 10036

info@okapipartners.com

Call Collect: (212) 297-0720

Toll-Free: (855) 305-0856

Vote of Penn Virginia’s Directors and Executive Officers

As of February 19, 2019, Penn Virginia directors and executive officers, and their affiliates, as a group, owned and were entitled to vote 55,102 shares of Penn Virginia Common Stock (excluding Penn Virginia service-based restricted stock and Penn Virginia performance-based stock), or approximately 0.3% of the total outstanding shares of Penn Virginia Common Stock as of February 19, 2019. Each director and executive officer has entered into a Voting Agreement pursuant to which each director and executive officer has agreed, among other matters and upon the terms and subject to the conditions set forth in the Voting Agreements, to vote all of his or her shares of Penn Virginia Common Stock in favor of the Penn Virginia Merger Proposal.

Penn Virginia currently expects that all of its directors and executive officers will vote their shares “FOR” the approval of the Penn Virginia Merger Proposal.

Attending the Penn Virginia Special Meeting

You are entitled to attend the Penn Virginia special meeting only if you were a shareholder of record of Penn Virginia at the close of business on the record date or you held your shares of Penn Virginia beneficially in the name of a broker, bank or other nominee as of the record date, or you hold a valid proxy for the Penn Virginia special meeting.

If you were a shareholder of record of Penn Virginia at the close of business on the record date and wish to attend the Penn Virginia special meeting, so indicate on the Penn Virginia WHITE proxy card or as prompted by the phone or Internet voting system. Your name will be verified against the list of Penn Virginia shareholders of record prior to your being admitted to the Penn Virginia special meeting.

If a broker, bank or other nominee is the record owner of your shares of Penn Virginia Common Stock, you will need to have proof that you are the beneficial owner as of the record date to be admitted to the Penn Virginia special meeting. A recent statement or letter from your broker, bank or other nominee confirming your ownership as of the record date, or presentation of a valid proxy from a broker, bank or other nominee that is the record owner of your shares, would be acceptable proof of your beneficial ownership.

 

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You should be prepared to present government-issued photo identification for admittance. If you do not provide photo identification or comply with the other procedures outlined above upon request, you might not be admitted to the Penn Virginia special meeting.

Results of the Penn Virginia Special Meeting

Within four business days following the Penn Virginia special meeting, Penn Virginia intends to file the final voting results with the SEC on a Current Report on Form 8-K. If the final voting results have not been certified within that four business day period, Penn Virginia will report the preliminary voting results on a Current Report on Form 8-K at that time and will file an amendment to the Current Report on Form 8-K to report the final voting results within four days of the date that the final results are certified.

PENN VIRGINIA SHAREHOLDERS SHOULD CAREFULLY READ THIS JOINT PROXY STATEMENT/PROSPECTUS IN ITS ENTIRETY FOR MORE DETAILED INFORMATION CONCERNING THE PENN VIRGINIA MERGER PROPOSAL.

 

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PENN VIRGINIA PROPOSALS

Penn Virginia Merger Proposal

It is a condition to completion of the Merger that Penn Virginia shareholders approve the Merger Agreement, which is attached to this joint proxy statement/prospectus as Annex A. In the Merger, each Penn Virginia shareholder will receive, at its election and subject to proration, either (i) $25.86 in cash without interest and 12.4000 shares of Denbury Common Stock, (ii) $79.80 in cash without interest or (iii) 18.3454 shares of Denbury Common Stock, as further described in the sections entitled “The Merger—Consideration to Penn Virginia Shareholders” and “The Merger Agreement—Effect of the Merger on Capital Stock; Merger Consideration” beginning on pages 79 and 144, respectively.

The approval by such shareholders of this proposal is required by Virginia law and is a condition to the completion of the Merger.

Approval of the Penn Virginia Merger Proposal requires the affirmative vote of the holders of more than two-thirds of the outstanding shares of Penn Virginia Common Stock entitled to vote on the proposal. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” the approval of the Penn Virginia Merger Proposal. Failure to vote on the Penn Virginia Merger Proposal will have the same effect as a vote “AGAINST” the approval of the Penn Virginia Merger Proposal.

The Penn Virginia board unanimously recommends a vote “FOR” the approval of the Penn Virginia Merger Proposal.

Penn Virginia Non-Binding Compensation Advisory Proposal

As required by Section 14A of the Exchange Act and the applicable SEC rules issued thereunder, which were enacted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, Penn Virginia is required to provide its shareholders the opportunity to vote to approve, on a non-binding, advisory basis, certain compensation that may be paid or become payable to Penn Virginia’s named executive officers in connection with the Merger, as described in the section entitled “The Merger—Quantification of Potential Payments” beginning on page 137 . Accordingly, Penn Virginia shareholders are being provided the opportunity to cast an advisory vote on such payments.

As an advisory vote, this proposal is not binding upon Penn Virginia, Denbury or their respective boards, and approval of this proposal is not a condition to completion of the Merger and is a vote separate and apart from the Penn Virginia Merger Proposal. Accordingly, you may vote to approve the Penn Virginia Merger Proposal and vote not to approve the Penn Virginia Non-Binding Compensation Advisory Proposal, and vice versa. Because the merger-related executive compensation to be paid in connection with the Merger is based on the terms of the Merger Agreement as well as the contractual arrangements with Penn Virginia’s named executive officers, such compensation will be payable, regardless of the outcome of this advisory vote, if the Penn Virginia Merger Proposal is approved (subject only to the contractual conditions applicable thereto) and the Merger is completed. However, Penn Virginia seeks the support of its shareholders and believes that shareholders support is appropriate because Penn Virginia has a comprehensive executive compensation program designed to link the compensation of its executives with Penn Virginia’s performance and the interests of Penn Virginia shareholders. Accordingly, holders of shares of Penn Virginia Common Stock are being asked to vote on the following resolution:

RESOLVED, that the shareholders of Penn Virginia Corporation approve, on an advisory, non-binding basis, certain compensation that may be paid or become payable to the named executive officers of Penn Virginia Corporation in connection with the Merger, as disclosed pursuant to Item 402(t) of Regulation S-K under the heading “The Merger—Quantification of Potential Payments.”

 

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Approval of the Penn Virginia Non-Binding Compensation Advisory Proposal requires that the number of votes cast “FOR” the proposal exceed the number of votes cast “AGAINST” the proposal. Abstentions, broker non-votes and failure to vote will not count as votes cast and will have no effect on the outcome of the vote.

The Penn Virginia board unanimously recommends a vote “FOR” the Penn Virginia Non-Binding Compensation Advisory Proposal.

 

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THE MERGER

This discussion of the Merger is qualified in its entirety by reference to the Merger Agreement, which is attached to this joint proxy statement/prospectus as Annex A and incorporated by reference herein in its entirety. You should read the entire Merger Agreement carefully as it is the legal document that governs the Merger.

Transaction Structure

At the effective time of the Merger, Merger Sub will be merged with and into Penn Virginia and the separate corporate existence of Merger Sub will cease, and Penn Virginia will continue as the surviving entity in the Merger as a direct wholly owned subsidiary of Denbury. Immediately following the effectiveness of the Merger, Penn Virginia will be merged with and into LLC Sub and the separate corporate existence of Penn Virginia will cease, and LLC Sub will continue as the surviving entity as a direct wholly owned subsidiary of Denbury.

Consideration to Penn Virginia Shareholders

On the terms and subject to the conditions set forth in the Merger Agreement, upon the effective time of the Merger, each share of Penn Virginia Common Stock issued and outstanding immediately prior to the effective time of the Merger (except for shares owned by Penn Virginia, which will be cancelled with no consideration being delivered therefor) will be converted into the right to receive, at the election of the holder of such share of Penn Virginia Common Stock, either (i) the Mixed Election Consideration ($25.86 in cash without interest and 12.4000 shares of Denbury Common Stock), (ii) the Cash Election Consideration ($79.80 in cash without interest) or (iii) the Stock Election Consideration (18.3454 shares of Denbury Common Stock). The Cash and Stock Elections will be subject to proration to ensure that the total amount of cash paid to holders of Penn Virginia Common Stock is equal to $400 million.

Penn Virginia shareholders will not be entitled to receive any fractional shares of Denbury Common Stock in the Merger, and no Penn Virginia shareholder will be entitled to voting or other rights in respect of any fractional shares of Denbury Common Stock. Each holder of Penn Virginia Common Stock converted pursuant to the Merger who would otherwise have been entitled to receive a fraction of a share of Denbury Common Stock (after taking into account all shares of Penn Virginia Common Stock exchanged by such holder) will receive, in lieu thereof, cash in an amount equal to such fractional amount multiplied by the average of the volume weighted average price per share of Denbury Common Stock traded on the NYSE (as reported by Bloomberg, L.P. or, if not reported by Bloomberg, L.P., in another authoritative source mutually selected by Denbury and Penn Virginia) on each of the five consecutive trading days ending with the last complete trading day prior to the closing date.

Election Deadline

The election deadline will be 5:00 p.m., New York time, on the second business day prior to the effective time of the Merger or such other time as mutually agreed by Denbury and Penn Virginia. Denbury will publicly announce the anticipated election deadline at least five business days prior to the election deadline. If the effective time of the Merger is delayed to a subsequent date, the election deadline will be similarly delayed to a subsequent date (which will be the second business day prior to the new effective time of the Merger or such other time as mutually agreed by Denbury and Penn Virginia), and Denbury will promptly announce any such delay and, when determined, the rescheduled election deadline.

Penn Virginia shareholders who hold their shares in “street name” may be subject to an earlier deadline. Therefore, Penn Virginia shareholders should carefully read any materials received from their bank, broker, nominee, trust company or other fiduciary.

 

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Form of Election

The applicable form of election must be properly completed, signed and accompanied by:

 

   

duly endorsed original certificates representing all of the shares of Penn Virginia Common Stock to which such form of election relates, duly endorsed in blank or otherwise in a form acceptable for transfer on Penn Virginia’s books (or appropriate evidence as to loss, theft or destruction, appropriate evidence as to the ownership of that certificate by the claimant, and appropriate and customary indemnification, as described in the form of election);

 

   

a properly completed and signed notice of guaranteed delivery, as described in the instructions accompanying the form of election, from a firm which is a member of a registered national securities exchange or commercial bank or trust company having an office or correspondent in the U.S., provided that the actual stock certificates are in fact delivered to the exchange agent by the time set forth in the notice of guaranteed delivery; or

 

   

if the shares of Penn Virginia Common Stock are held in book-entry form, the documents specified in the instructions accompanying the form of election.

In order to make a Mixed Election, Cash Election or Stock Election and/or no election, the properly completed and signed form of election, together with one of the items described above, must be actually received by the exchange agent at or prior to the election deadline in accordance with the instructions accompanying the form of election. Any shares with respect to which an election has not been properly made by the election deadline will be deemed No Election Shares.

Impact of Selling Shares of Penn Virginia Common Stock as to which an Election Has Already Been Made

Any subsequent transfer of shares of Penn Virginia Common Stock after an election has properly been made with respect to such shares will automatically revoke such election. Thus, any transferee of such shares of Penn Virginia Common Stock must properly make an election with respect to such shares of Penn Virginia Common Stock. If a transfer occurs after the election deadline, the election will automatically be revoked and the transferee will be deemed to have made no election with respect to such shares. See “—Election Revocation and Changes” below.

Election Revocation and Changes

An election may be revoked or changed with respect to all or a portion of the shares of Penn Virginia Common Stock covered by the election by the holder who submitted the applicable form of election, but only by written notice received by the exchange agent prior to the election deadline. If an election is revoked, or the Merger Agreement is terminated, and any share certificates have been transmitted to the exchange agent, the exchange agent will return those certificates to the Penn Virginia shareholder who submitted such certificates. Penn Virginia shareholders will not be entitled to revoke or change their elections following the election deadline, unless the Merger Agreement is thereafter terminated or the election deadline is thereafter delayed. As a result, Penn Virginia shareholders who have made elections will be unable to revoke their elections during the period between the election deadline and the date of completion of the Merger or termination of the Merger Agreement. Further, if a Penn Virginia shareholder transfers shares for which an election has been made following the election deadline, the election will automatically be revoked and, unless the election deadline is thereafter delayed, the transferee of such shares will not be permitted to make an election and such shares will be deemed No Election Shares.

Penn Virginia shareholders not making a valid election in respect of their shares of Penn Virginia Common Stock prior to the election deadline, including as a result of revocation, will be deemed non-electing holders. If it is determined that any purported Mixed Election, Cash Election or Stock Election was not properly made, the purported election will be deemed to be of no force or effect and the applicable shares will be deemed No

 

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Election Shares, unless a proper election is subsequently made on a timely basis. The exchange agent has reasonable discretion to determine whether any election, revocation or change has been properly or timely made.

Non-Electing Holders

Penn Virginia shareholders who do not make the Mixed Election, Cash Election or Stock Election, whose election form and letter of transmittals are not received by the exchange agent by the election deadline, or whose forms of election are revoked and not resubmitted, improperly completed or not signed will be deemed No Election Shares. Penn Virginia shareholders not making an election in respect of some or all of their shares of Penn Virginia Common Stock will receive consideration based on the number of Penn Virginia shareholders who make the Mixed Election, Cash Election and Stock Election. See “—Proration and Adjustment Procedures” below.

Penn Virginia shareholders who do not make a valid election with respect to any shares of Penn Virginia Common Stock will receive written instructions from the exchange agent after completion of the Merger on how to exchange their shares of Penn Virginia Common Stock for the Merger Consideration.

Proration and Adjustment Procedures

Penn Virginia shareholders should be aware that any Cash Election or Stock Election they make, and any No Election Shares, may be subject to the proration and adjustment procedures provided in the Merger Agreement to ensure that the total amount of cash paid to holders of Penn Virginia Common Stock is equal to $400 million.

Therefore, if the aggregate amount of cash to be paid by Denbury in the Merger taking into account all Cash Elections and Mixed Elections would be more than $400 million, then the amount of cash per share of Penn Virginia Common Stock to be received by holders making a Cash Election will be reduced (pro rata across all outstanding shares of Penn Virginia Common Stock subject to a Cash Election, which are referred to as the “Cash Election Shares”), so that the aggregate cash paid to all Penn Virginia shareholders is equal to $400 million, and the remainder of the consideration in respect of those shares of Penn Virginia Common Stock subject to a Cash Election will be payable in shares of Denbury Common Stock and cash in lieu of fractional shares as described below.

Alternatively, if the aggregate amount of cash to be paid by Denbury in the Merger taking into account all Cash Elections and Mixed Elections and the number of No Election Shares would be less than $400 million, then each share of Penn Virginia Common Stock subject to a Stock Election, which shares are referred to collectively as the “Stock Election Shares,” would receive such amount of cash as is necessary to make the aggregate amount of cash to be paid by Denbury in the Merger equal $400 million, and the number of shares of Denbury Common Stock per Stock Election Share would be reduced as described below.

The proration and adjustment procedures work as follows:

If (A) the product of the number of the Cash Election Shares and $79.80 (the Cash Election Consideration) (such product being referred to as the “Cash Election Amount”) exceeds (B) (1) $400,000,000 minus (2) the product of the number of shares of Penn Virginia Common Stock that have made the Mixed Election and $25.86 (such difference being referred to as the “Available Cash Election Amount”), then each Cash Election Share will be converted into the right to receive (y) an amount of cash without interest equal to the product of the Cash Election Consideration and a fraction, the numerator of which will be the Available Cash Election Amount and the denominator of which will be the Cash Election Amount (such fraction, the “Cash Fraction”) and (z) a number of shares of Denbury Common Stock equal to the product of (1) the Exchange Ratio of 18.3454 shares of Denbury Common Stock per share of Penn Virginia Common Stock and (2) one minus the Cash Fraction.

 

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If the Available Cash Election Amount exceeds the Cash Election Amount and the number of No Election Shares is less than the Cash Election Shortfall Number (as defined below), then each Stock Election Share will be converted into the right to receive (A) an amount of cash (without interest) equal to (1) the Cash Election Shortfall Amount (as defined below) minus the product of the number of No Election Shares and the Cash Election Consideration, divided by (2) the number of Stock Election Shares and (B) a number of shares of Denbury Common Stock equal to the product of (1) the Exchange Ratio of 18.3454 shares of Denbury Common Stock per share of Penn Virginia Common Stock and (2) a fraction, the numerator of which will be the Cash Election Consideration minus the amount calculated in clause (A) and the denominator of which will be the Cash Election Consideration.

If the Cash Election Amount equals or exceeds the Available Cash Election Amount, then each No Election Share will be converted into the right to receive 18.3454 shares of Denbury Common Stock. If the Available Cash Election Amount exceeds the Cash Election Amount (the amount by which the Available Cash Election Amount exceeds the Cash Election Amount referred to as the “Cash Election Shortfall Amount”), then (A) if the number of No Election Shares is less than or equal to an amount equal to the Cash Election Shortfall Amount divided by the Cash Election Consideration (such quotient referred to as the “Cash Election Shortfall Number”), then each No Election Share will be converted into the right to receive the Cash Election Consideration, and (B) if the number of No Election Shares is greater than the Cash Election Shortfall Number, then each No Election Share will be converted into the right to receive (A) an amount of cash (without interest) equal to the Cash Election Shortfall Amount divided by the number of No Election Shares and (B) a number of shares of Denbury Common Stock equal to the product of (1) the Exchange Ratio of 18.3454 shares of Denbury Common Stock per share of Penn Virginia Common Stock and (2) a fraction, the numerator of which will be the Cash Election Consideration minus the amount calculated in clause (A) and the denominator of which will be the Cash Election Consideration.

Neither Denbury nor Penn Virginia is making any recommendation as to whether Penn Virginia shareholders should make a Cash Election, Stock Election, Mixed Election or no election in the Merger. You must make your own decision with respect to such election. No guarantee can be made that you will receive the amount of cash consideration or stock consideration you elect. As a result of the proration procedures and other limitations described in this joint proxy statement/prospectus and in the Merger Agreement, you may receive stock consideration or cash consideration in amounts that are different from the amounts you elect to receive. Because the value of the stock consideration and cash consideration may differ, you may receive consideration having an aggregate value that is less than the aggregate value of the consideration you elected to receive.

Background of the Merger

On May 12, 2016, Penn Virginia and eight of its subsidiaries filed voluntary petitions (In re Penn Virginia Corporation, et al., Case No. 16-32395) seeking relief under Chapter 11 of Title 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of Virginia. On August 11, 2016, the bankruptcy court confirmed the Second Amended Joint Chapter 11 Plan of Reorganization of Penn Virginia Corporation and its debtor affiliates, and Penn Virginia subsequently emerged from bankruptcy on September 12, 2016. Upon emergence, the Penn Virginia board consisted of three directors: Messrs. Harry Quarls, Darin Holderness and Marc McCarthy, with Mr. Quarls serving as chairman of the Penn Virginia board. In October 2016, the size of the Penn Virginia board was expanded by one director, and Mr. Jerry Schuyler was appointed to the Penn Virginia board. On December 28, 2016, shares of Penn Virginia Common Stock began trading on the Nasdaq Global Select Stock Market.

In December 2016, the Penn Virginia board and senior management began an informal review and assessment of Penn Virginia’s strategic alternatives and authorized the engagement of Jefferies to act as Penn Virginia’s exclusive financial advisor in connection with the review and assessment. The Penn Virginia board considered other financial advisors and selected Jefferies based upon, among other things, Jefferies’ reputation, experience in mergers and acquisitions and familiarity with Penn Virginia.

 

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During the first quarter of 2017, Penn Virginia’s senior management and the Penn Virginia board, in consultation with Jefferies, began to identify candidates for a potential transaction with Penn Virginia based on, among other criteria, financial strength, quality of assets and management and relative performance of publicly traded equity securities, if applicable. In its earnings release in March 2017, Penn Virginia publicly disclosed that Penn Virginia was evaluating strategic alternatives available to the company to maximize shareholder value.

During the second quarter of 2017, at the direction of the Penn Virginia board, Jefferies contacted 37 potential buyers or merger partners, 23 of whom entered into nondisclosure agreements with Penn Virginia. At the direction of the Penn Virginia board, Jefferies provided these parties with financial, operational and reserves data, as well as other data to help in their evaluation of a potential combination with Penn Virginia. At various times, representatives of Jefferies provided updates to the Penn Virginia board regarding the process. Three companies submitted indications of interest on June 1, 2017. One bid involved an acquisition of Penn Virginia by another public company and two bids involved a combination of Penn Virginia with private companies. At meetings of the Penn Virginia board in early June 2017, representatives of Jefferies and Gibson Dunn & Crutcher LLP (“Gibson Dunn”), counsel to Penn Virginia, reviewed with the Penn Virginia board the proposals. The Penn Virginia board discussed each submission and instructed Jefferies to clarify certain information with one bidder. Following further discussion, the Penn Virginia board ultimately determined it was in the best interests of Penn Virginia and its shareholders to not pursue such indications of interest further.

On June 5, 2017, another potential buyer entered into a nondisclosure agreement with Penn Virginia and was provided with data room access on June 13, 2017. Following joint management presentations in mid-June, the potential buyer submitted a merger proposal to Penn Virginia on June 30, 2017. Additionally, on June 12, 2017, another potential buyer submitted an indication of interest to Penn Virginia management. Following discussion with Jefferies, the Penn Virginia board decided that it was in the best interests of Penn Virginia shareholders to not move forward with either party.

In July 2017, Penn Virginia announced the acquisition from Devon Energy Corporation of approximately 19,600 net acres in the Eagle Ford, expanding its core leasehold position and increasing its working interest in certain Penn Virginia owned properties.

In August 2017, Mr. John Brooks, interim principal executive officer and chief operating officer since Penn Virginia’s emergence from bankruptcy, was named chief executive officer of Penn Virginia and appointed to the expanded Penn Virginia board, and Mr. Quarls was named executive chairman of the Penn Virginia board.

At various times in 2017 and 2018, Penn Virginia engaged in discussions with certain of its largest shareholders, who were party to confidentiality agreements, regarding strategic alternatives for Penn Virginia. Penn Virginia also engaged in discussions with certain private equity firms regarding potential alternatives for financing acquisitions by Penn Virginia.

In January 2018, Penn Virginia announced the acquisition from Hunt Oil Company of approximately 9,700 net acres in the Eagle Ford, increasing its working interest in, and operatorship of, existing Penn Virginia owned properties.

Additionally, in January 2018, Mr. Quarls retired from the Penn Virginia board effective February 28, 2018, and agreed to provide consulting services as requested by the Penn Virginia board through the end of 2018.

In addition, in January 2018, the size of the Penn Virginia board was increased by one, such that there were two vacancies. Pursuant to a support agreement between Penn Virginia and Penn Virginia shareholder, SVP, and funds affiliated with SVP, Mr. David Geenberg was appointed to fill one of the vacancies. Mr. Michael Hanna, affiliated with Penn Virginia shareholder, KLS, was appointed to fill the other vacancy. Each of Messrs. Holderness and Geenberg was elected non-executive co-chairman of the Penn Virginia board, and the Penn Virginia bylaws were amended to provide for the co-chairman structure.

 

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In March 2018, Mr. McCarthy resigned from the Penn Virginia board and the size of the Penn Virginia board was reduced by one director.

From time to time, Denbury has evaluated the potential for enhanced oil recovery in basins in which it does not currently have operations, including the Eagle Ford.

On March 1, 2018, Guggenheim met with Denbury’s senior management to review and discuss the market generally, including a summary of recent acquisitions and divestitures activity. In that meeting, Guggenheim also presented ideas around potential expansion opportunities for Denbury in new basins where Denbury could utilize its enhanced oil recovery expertise, with particular emphasis on the Eagle Ford. During such discussion, Guggenheim also noted Penn Virginia’s position in the Eagle Ford as a potentially attractive area for enhanced oil recovery development. Following the March 1 meeting, Denbury’s senior management met with Guggenheim again on March 21, 2018 to review in further detail enhanced oil recovery activity in the Eagle Ford and a potential strategic business combination with Penn Virginia.

Following the March 21 meeting with Guggenheim, Denbury formed a technical team to collaborate with Guggenheim on assessing the merits of enhanced oil recovery operations in the Eagle Ford. The results of the evaluation were encouraging, particularly the results from recent multi-well enhanced oil recovery pilot programs conducted by other operators. The team continued to progress its technical evaluation throughout the process.

On March 29, 2018, Denbury management met with the Denbury board at a regularly scheduled board meeting. Among other topics discussed in that meeting, Denbury management provided a preliminary review of enhanced oil recovery operations in the Eagle Ford and raised the prospect of a combination of Denbury with Penn Virginia. After the board meeting, the Denbury board authorized Guggenheim to approach Penn Virginia to discuss the possibility of a combination with Denbury.

On April 2, 2018, representatives of Jefferies reviewed with the Penn Virginia board the M&A market and the trading history of Penn Virginia Common Stock.

On April 4, 2018, Guggenheim contacted Mr. Holderness to discuss the possibility of a strategic combination between Denbury and Penn Virginia and convey Denbury’s interest in scheduling a meeting with the management of Penn Virginia to further explore these topics. Mr. Holderness indicated that he would like to discuss the proposal with members of the Penn Virginia board to assess their interest in further exploring a combination with Denbury.

On April 10, 2018, there was a follow-up conversation between Mr. Holderness and a representative of Guggenheim in which Mr. Holderness conveyed that the Penn Virginia board was interested in learning more about Denbury’s business and was potentially open to subsequent discussions.

On April 23, 2018, a representative of Guggenheim contacted Mr. Holderness again on behalf of Denbury to raise the prospect of a combination of Penn Virginia and Denbury and to attempt to arrange a meeting between principals of Penn Virginia and Denbury to discuss Denbury’s business and the potential of a combination of the companies. Mr. Holderness later informed the Penn Virginia board of the conversation with Guggenheim. Also on April 23, 2018, Guggenheim sent Mr. Holderness a short presentation that was based on publicly available information that described Denbury’s business, the potential for enhanced oil recovery in the Eagle Ford, and the rationale supporting a potential combination with Penn Virginia.

On April 26, 2018, Mr. Holderness and Guggenheim agreed to schedule a meeting between the management teams of Denbury and Penn Virginia and their respective advisors. The purpose of the meeting would be for Denbury management to make a short presentation about Denbury’s business and to highlight the benefits of a combination with Penn Virginia.

 

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On May 2, 2018, a representative from the financial advisor to a publicly traded E&P company (“Party A”), contacted Mr. Brooks to raise the prospect of a combination of Penn Virginia and Party A and to attempt to arrange a meeting between principals of Penn Virginia and Party A to discuss Party A’s business and the potential of a combination of the companies. Mr. Brooks later informed the Penn Virginia board of the conversation with Party A’s financial advisor. Also in May of 2018, Party A’s financial advisor provided a presentation to Jefferies regarding Party A’s business.

On May 15, 2018, members of Penn Virginia’s management met with a member of senior management of Party A to discuss a potential combination of Penn Virginia and Party A.

On May 21, 2018, members of Penn Virginia’s management met with members of Denbury’s management and were accompanied by representatives of Guggenheim and Jefferies. In the meeting, Mr. Kendall provided an overview of Denbury’s business and also discussed the merits of a combination with Penn Virginia. At the conclusion of the meeting, Mr. Holderness suggested that Penn Virginia’s board would give further consideration to the proposed transaction.

On May 22, 2018, Guggenheim gave a presentation to the Denbury board that summarized Guggenheim’s perspectives on enhanced oil recovery operations in the Eagle Ford and the potential strategic rationale and financial benefits of a combination with Penn Virginia.

In June 2018, representatives of Guggenheim and Jefferies had several conversations about the possibility of advancing discussions regarding a potential combination between Denbury and Penn Virginia.

At a special meeting of the Penn Virginia board held on June 15, 2018 attended by representatives of Jefferies and Gibson Dunn, at the request of the Penn Virginia board, representatives of Jefferies reviewed with the Penn Virginia board the M&A market and a potential strategic alternatives process for Penn Virginia. The Penn Virginia board determined to commence a formal evaluation of Penn Virginia’s strategic alternatives to maximize shareholder value and authorized the engagement of Jefferies in connection with such strategic review.

On June 20, 2018, Jefferies contacted Guggenheim and indicated that Penn Virginia would likely conduct a review of strategic alternatives and that Denbury would be invited to participate in the process.

During the remainder of June and July 2018, Jefferies and Penn Virginia senior management identified 30 potential candidates who could have an interest in a potential transaction with Penn Virginia based on, among other criteria, financial strength, strategy, quality of management and quality of assets and proximity of assets to Penn Virginia’s leasehold interests, and performance of publicly traded equity securities where applicable. These companies consisted of public independent E&P companies, selected private companies and private equity firms.

On July 16, 2018, Guggenheim met with the Denbury board to provide an update on recent discussions with Jefferies and to continue reviewing a potential combination with Penn Virginia.

On July 23, 2018, Penn Virginia issued a press release announcing the intent of the Penn Virginia board to evaluate a range of strategic alternatives to enhance shareholder value, including without limitation, a corporate sale, merger or other business combination, one or more strategic acquisitions or other transactions. Following issuance of the press release, Party A’s financial advisor contacted Jefferies and indicated that Party A would not be interested in pursuing a transaction at that time given other strategic commitments.

On July 27, 2018, Denbury executed a confidentiality agreement with Penn Virginia, and in August and September 2018, Penn Virginia entered into confidentiality agreements with 11 other companies. The confidentiality agreements were entered into in order to share confidential information in connection with potential interest in a transaction with Penn Virginia. The form confidentiality agreement provided to each of

 

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these companies contained a two-year standstill with customary “don’t ask, don’t waive” provisions prohibiting a party from requesting amendment, modification or waiver of any provision of the standstill. Each of the 12 parties conducted varying levels of preliminary due diligence. Based on expressed interest, data room presentations were made on behalf of Penn Virginia to nine of those parties, including a presentation by Jefferies on August 15, 2018 to Denbury management and Guggenheim regarding Penn Virginia’s business.

On a regular basis between August 17 and September 26, 2018, representatives of Jefferies provided the Penn Virginia board with updates on the process. Representatives of Jefferies reviewed for the Penn Virginia board the status of each participant’s due diligence review, as well as any feedback from the participants regarding Penn Virginia or their interest in pursuing a transaction.

On August 17, 2018, Penn Virginia engaged Skadden to serve as special counsel to Penn Virginia, along with Gibson Dunn, in connection with its strategic review process.

On September 4, 2018, the Penn Virginia board held a telephonic meeting with representatives of Jefferies and Skadden to receive an update on the status of the strategic alternatives process. Jefferies reported that 10 of the prospective bidders were actively conducting diligence of Penn Virginia and making inquiries of management. The remaining prospective bidders were not actively participating in the diligence process.

On September 6, 2018, Penn Virginia posted to the virtual data room a form of merger agreement for a transaction with Penn Virginia. Prospective counterparties were instructed to submit a mark-up of the form merger agreement with their non-binding proposals by September 25, 2018.

On September 10, 2018, the size of the Penn Virginia board was increased by one director and Mr. Frank Pottow was appointed to the Penn Virginia board.

On September 18, 2018, the Denbury board held a regularly scheduled in-person meeting attended by Denbury management and, for a portion thereof, representatives of Vinson & Elkins, Denbury’s outside legal counsel, and Guggenheim. Guggenheim detailed a preliminary financial analysis of the proposed transaction with Penn Virginia. Guggenheim also reviewed the bid instructions provided by Penn Virginia to the prospective bidders, as well as reverse due diligence requests. Vinson & Elkins then reviewed with the Denbury board a presentation detailing the duties and responsibilities of the Denbury board relative to the potential transaction. Following discussion, Vinson & Elkins reviewed the structure and financial terms of the potential transaction, the key approvals required, the conditions to closing, and various other terms and covenants set forth in the draft merger agreement that Penn Virginia had made available in the virtual data room. After Guggenheim and Vinson & Elkins left the meeting, Denbury management and the Denbury board continued to discuss the potential transaction, including long-term strategy and rationale, as well as matters related to proposed merger consideration (including amount, potential premium, and the mix between Denbury stock and cash). Following such discussion, the Denbury board provided its unanimous approval for Denbury management to continue moving the process forward towards the submission of a non-binding bid.

Between September 18 and September 23, 2018, Denbury management, Vinson & Elkins and Guggenheim worked on a non-binding proposal, including the economic terms and a high-level summary of the issues presented in Penn Virginia’s bid-form merger agreement.

On September 23, 2018, the Denbury board held a telephonic meeting attended by Denbury management and representatives of Vinson & Elkins and Guggenheim. Denbury management and Guggenheim reviewed a draft bid letter. The draft bid letter provided for the acquisition of 100% of the equity interests in Penn Virginia at a 20% premium to Penn Virginia’s five-day volume weighted average price (“VWAP”), via a cash election merger, with the consideration comprised of 75% stock and 25% cash as of the date of signing a definitive merger agreement. Based on the respective closing prices of Denbury and Penn Virginia shares on September 21,

 

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2018, Penn Virginia shareholders would have the right to elect to receive 16.53 shares of Denbury common stock or $92.40 in cash, both fixed at the time of signing a definitive agreement, for each share of Penn Virginia common stock they own, with Penn Virginia shareholders owning approximately 30% of the combined company on a net fully diluted basis upon completion of the transaction. The Denbury board, Denbury management and the Denbury advisors also discussed other matters included in the draft bid proposal, such as the requested list of reverse due diligence items, the potential acquisition timeline, and governance matters, including the potential expansion of the Denbury board to include one or more Penn Virginia directors. Vinson & Elkins reviewed the merger agreement issues list to be attached to the bid letter and noted the high-level contract issues based on a review of the draft merger agreement. Guggenheim also provided the Denbury board with a preliminary financial analysis of the proposed transaction and potential exchange ratios. After dismissing Guggenheim and Vinson & Elkins from the meeting, the Denbury board and Denbury management continued a discussion of the potential bid, following which the Denbury board unanimously approved moving forward with the non-binding bid pursuant to the terms set forth in the bid letter, as well as conditioning the proposal on Penn Virginia agreeing to negotiate exclusively with Denbury through November 1, 2018.

On September 25, 2018, Denbury submitted its non-binding proposal to Penn Virginia. Based on the five-day VWAP of $77.6124 on September 24, 2018, the date of Denbury’s non-binding proposal, Denbury’s non-binding proposal on the terms as indicated above represented an implied value of $93.13 per share of Penn Virginia Common Stock. In lieu of a mark-up of the form merger agreement, Denbury submitted a detailed issues list with its non-binding proposal.

On September 26, 2018, the Penn Virginia board held a telephonic meeting with representatives of Jefferies, Skadden and Gibson Dunn to discuss initial reactions to three non-binding written proposals submitted by each of Denbury, a publicly-traded E&P company (“Party B”), and a privately held E&P portfolio company of a private equity firm (“Party C”), and one non-binding verbal proposal submitted by a publicly-traded E&P company (“Party D”).

Party B’s non-binding proposal contemplated a merger transaction where each share of Penn Virginia Common Stock would receive between $76.61 and $80.51 in cash and common stock of Party B. Party B’s proposal did not specify the percentage of cash or stock consideration or the method for valuing the stock component and did not provide the means by which Party B would finance all consideration necessary to fund the transaction, but did indicate that the transaction would be contingent upon Party B’s divestiture of certain assets prior to a transaction with Penn Virginia. Party B did not submit a mark-up of the form merger agreement or a list of issues with respect to the form merger agreement.

Party C’s non-binding proposal contemplated a transaction in which Party C would merge with a subsidiary of Penn Virginia in an “up-c” transaction structure, where the existing Penn Virginia shareholders would continue to own their shares of Penn Virginia Common Stock, and the equityholders of Party C would be entitled to approximately 50% of the outstanding shares of Penn Virginia Common Stock on a pro forma basis. Party C’s proposal did not provide detail supporting the pro forma ownership of Penn Virginia shareholders following the consummation of the proposed merger or the implied value to Penn Virginia shareholders. Party C did not submit a mark-up of the form merger agreement or a list of issues with respect to the form merger agreement.

Party D’s non-binding proposal contemplated a merger transaction at an enterprise value of $1.3 billion, implying that each share of Penn Virginia common stock would receive an estimated value of approximately $56.36, with the consideration comprising 30% cash and 70% Party D common stock. Party D’s proposal did not specify the method for valuing the stock component. Party D did not submit a mark-up of the form merger agreement or a list of issues with respect to the form merger agreement.

During the September 26 meeting of the Penn Virginia board, representatives of Jefferies reviewed with the Penn Virginia board the details of the four proposals, including the amount and form of consideration proposed,

 

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further due diligence requests, conditions and necessary approvals included in, and the implied value to Penn Virginia shareholders represented by, each proposal. The Penn Virginia board then discussed each proposal in detail but focused primarily on the Denbury proposal because the Denbury proposal represented the highest implied value and was the most fully developed proposal received. Following discussion, the Penn Virginia board decided to seek further information regarding Denbury and its proposal, given that Denbury’s proposal included a significant amount of Denbury Common Stock as a form of consideration.

On September 28, 2018, the Penn Virginia board held a telephonic meeting with representatives of Jefferies, Skadden and Gibson Dunn to again review the non-binding proposals Penn Virginia had received from Denbury, Party B, Party C and Party D, which had further submitted its written non-binding proposal on September 27, 2018. The Penn Virginia board directed Jefferies to contact Party B and Party C with respect to their proposals and following discussions with Jefferies, concluded that Party D’s offer was too low, and the likelihood of raising it meaningfully too remote, to warrant further discussion with Party D. At this meeting, representatives of Jefferies reviewed with the Penn Virginia board information relating to Denbury. The Penn Virginia board also discussed whether Denbury had the ability to increase the cash component of the consideration or otherwise reduce the exposure of Penn Virginia shareholders to declines in the Denbury share price between signing and closing. The Penn Virginia board decided to meet again on October 1, 2018 to provide each director with additional time to evaluate the proposals.

On October 1, 2018, the Penn Virginia board held a telephonic meeting with representatives of Jefferies, Skadden and Gibson Dunn to further discuss the non-binding proposals. Representatives of Jefferies updated the Penn Virginia board on its recent discussions with Guggenheim regarding the terms of Denbury’s proposal. Jefferies informed the Penn Virginia board that, based on such discussions, it was unlikely that Denbury would be willing to substantially increase the cash component of the consideration or to include in its proposal a mechanism to reduce the exposure of Penn Virginia shareholders to declines in the Denbury share price between signing and closing. Representatives of Jefferies also discussed with Penn Virginia management and the Penn Virginia board Jefferies’ ongoing review of Denbury’s valuation.

On October 5, 2018, the Penn Virginia board held a telephonic meeting with representatives of Jefferies, Skadden and Gibson Dunn to discuss ongoing diligence of Denbury and the status of Jefferies’ discussions with Denbury, Party B, Party C and Party D. During this meeting, representatives of Jefferies advised that, based on discussions with Party B and Party C, it was unlikely Party B and Party C would be able to significantly improve their respective proposals. After discussion, the Penn Virginia board instructed Jefferies to obtain further financial information with respect to Denbury and to make a counterproposal of $105 per share of Penn Virginia Common Stock with at least 30% of the consideration consisting of cash. Following the Penn Virginia board meeting, representatives of Jefferies contacted Guggenheim and summarized the Penn Virginia counterproposal.

On October 7, 2018, the Denbury board held a telephonic meeting attended by Denbury management and representatives of Vinson & Elkins and Guggenheim. Mark Allen, Denbury’s Chief Financial Officer, provided a status update on negotiations with Penn Virginia and Guggenheim and then summarized Penn Virginia’s verbal counterproposal. Guggenheim also reviewed certain preliminary financial information related to the Penn Virginia counterproposal. After discussion, the Denbury board authorized Guggenheim to communicate to Jefferies a revised, non-binding proposal from Denbury to include a 25% premium to Penn Virginia’s five-day VWAP as of October 5, 2018, and a cash component fixed at $400 million, with the remaining consideration to be in the form of Denbury Common Stock. As in the prior non-binding proposal, the offer would be conditioned upon Penn Virginia agreeing to negotiate exclusively with Denbury through November 1, 2018. Following the meeting, Guggenheim contacted Jefferies and detailed the Denbury counterproposal.

On October 8, 2018, the Penn Virginia board held a telephonic meeting with representatives of Jefferies, Skadden and Gibson Dunn. Representatives of Jefferies relayed to the Penn Virginia board the terms of a revised proposal from Denbury. The revised proposal contemplated a 25% premium to Penn Virginia’s five-day VWAP

 

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as of Friday, October 5, 2018. Representatives of Jefferies also reported that Denbury had again rejected a request to include in the proposal a collar to reduce the exposure of Penn Virginia shareholders to declines in the Denbury share price between signing and closing. The Penn Virginia board discussed the revised proposal, as well as the proposals that had been received from Party B and Party C, and following discussion, concluded to continue discussions with Denbury. The Penn Virginia board then instructed Jefferies to make a counterproposal to Denbury of a 25% premium to Penn Virginia’s five-day VWAP as of Monday, October 8, 2018, with the cash component fixed at $400 million. The counterproposal represented an implied value of $103.77 per share of Penn Virginia Common Stock.

On October 10, 2018, the Penn Virginia board held a meeting with Penn Virginia senior management and representatives of Jefferies, Skadden and Gibson Dunn in attendance. Representatives of Jefferies provided an update on discussions with Denbury and Denbury’s latest proposal, which reflected a 25% premium based on a 15-day VWAP immediately prior to signing a definitive agreement, with the aggregate cash component fixed at $400 million. Representatives of Skadden provided the Penn Virginia board with an overview of the fiduciary duties governing transactions of this nature. Representatives of Skadden also discussed the issues that Denbury had raised with respect to the draft merger agreement. After further discussion and consultation with Penn Virginia senior management and Penn Virginia’s financial and legal advisors, the Penn Virginia board instructed Jefferies to make a counterproposal to Denbury based on an implied fixed exchange ratio of 16.2 shares of Denbury Common Stock per share of Penn Virginia Common Stock, instead of an exchange ratio based on a VWAP prior to execution of a merger agreement. The counterproposal retained the cash component of the consideration at an aggregate of $400 million. Subsequently, members of Denbury’s senior management team made a presentation to the Penn Virginia board regarding Denbury’s business.

On October 11, 2018, representatives of Vinson & Elkins and Skadden discussed Denbury’s merger agreement issues list.

Also on October 11, 2018, the Denbury board held a telephonic meeting attended by Denbury management and representatives of Vinson & Elkins and Guggenheim. Chris Kendall, Denbury’s President and Chief Executive Officer, provided the Denbury board with a status update on the negotiations with Penn Virginia, as well as a review of the management team’s presentation to the Penn Virginia board the previous day. Mr. Kendall also provided a summary review of a revised bid proposal received from Jefferies, including a fixed exchange ratio of 12.094 shares of Denbury Common Stock per share of Penn Virginia Common Stock and a fixed cash component of $400 million, implying an aggregate fixed exchange ratio of 16.2 shares of Denbury Common Stock per share of Penn Virginia Common Stock. Guggenheim then reviewed with the Denbury board preliminary financial analyses of the offer and potential counterproposals. Discussion and inquiry ensued, following which the Denbury board discussed a proposed counteroffer and revised draft bid letter providing for the acquisition of 100% of the equity interests in Penn Virginia via a cash election merger in which Denbury would issue in the aggregate 186.397 million shares and $400 million in cash to Penn Virginia’s shareholders, or 12.094 Denbury shares and $25.88 in cash per Penn Virginia share. The Denbury board further discussed other aspects of the potential transaction, the proposed financing, the requested list of reverse due diligence items, the potential acquisition timeline, and governance matters, including the potential expansion of the Denbury board to include a certain number of current Penn Virginia directors. After such discussion, the Denbury board unanimously approved moving forward with the revised bid pursuant to the terms set forth in the bid letter presented to the Denbury board, including a condition that Penn Virginia agree to negotiate exclusively with Denbury through November 5, 2018, and authorized Guggenheim to communicate the terms of the revised bid to Penn Virginia’s financial advisor. Later on October 11, Denbury delivered to Jefferies a revised proposal.

During the evening on October 11, 2018, the Penn Virginia board held a telephonic meeting attended by Penn Virginia senior management and representatives of Jefferies, Skadden and Gibson Dunn. The Penn Virginia board discussed Denbury’s revised proposal and the request for exclusivity and authorized Penn Virginia to enter into an exclusivity agreement with Denbury.

 

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During the period from October 11 through October 28, 2018, the parties and their representatives conducted due diligence on each other.

On October 12, 2018, Vinson & Elkins sent a revised draft of the merger agreement to Skadden. Among other things, the revised draft contained (i) an election mechanism whereby Penn Virginia shareholders would be given the option to elect to receive either all Denbury Common Stock, all cash or a mix of Denbury Common Stock and cash in exchange for their shares of Penn Virginia Common Stock, in each case subject to proration and adjustment based on the actual elections of Penn Virginia shareholders; (ii) a reciprocal termination fee of 3.75% of Penn Virginia’s equity value payable under specified circumstances, including if the merger agreement was terminated in response to a party’s breach of the “no shop” provision; and (iii) a separate, reciprocal expense reimbursement fee of 1% of Penn Virginia’s equity value payable by either party if such party’s shareholders voted against the proposed merger without an alternative, competing proposal. The revised draft merger agreement prepared by Vinson & Elkins also provided that Penn Virginia would enforce its existing confidentiality agreements, with an exception that permitted the Penn Virginia board to waive the standstill to allow for confidential offers if the Penn Virginia board determined, in consultation with its outside counsel, that failing to do so would be inconsistent with its fiduciary duties.

On October 16, 2018, Penn Virginia senior management and representatives of Skadden and Gibson Dunn discussed the key outstanding issues based on the latest revised draft of the merger agreement.

On October 17, 2018, Skadden sent a revised draft of the merger agreement to Vinson & Elkins. The draft included a revised election consideration mechanism with a proration component, such that the amount of cash to be paid in the transaction would be $400 million. The revised draft contained a lower reciprocal termination fee of 3.40% of Penn Virginia’s equity value payable under specified circumstances, not including termination for breach of the “no-shop” provision. It did not contain an expense reimbursement fee in the event of a stockholder “no” vote.

On October 19, 2018, the Penn Virginia board held a meeting with Penn Virginia senior management and representatives of Jefferies, Skadden and Gibson Dunn in attendance. Representatives of Jefferies reviewed with the Penn Virginia board Jefferies’ preliminary financial analysis regarding the merger consideration proposed to be paid by Denbury. The Penn Virginia board discussed the recent decline in the trading price of Denbury’s Common Stock and its effect on the implied value of the proposed merger consideration. Representatives of Skadden reviewed for the Penn Virginia board the open issues on the merger agreement.

On October 20, 2018, representatives of Vinson & Elkins and Skadden discussed open issues on the merger agreement.    

On October 21, 2018, the Denbury board held a telephonic meeting attended by Denbury management and representatives of Guggenheim to discuss the status of the negotiations with Penn Virginia. Jim Matthews, Denbury’s General Counsel, reviewed with the Denbury board the status of negotiations on the draft merger agreement and noted certain of the high-level issues, as well as the status of due diligence and potential voting agreements from certain of Penn Virginia’s significant shareholders. Guggenheim summarized the discussions it had held with Jefferies relating to an acquisition timeline and proposed signing date. Mr. Allen then provided the Denbury board with an overview of the proposed financing for the potential transaction.

Also on October 21, 2018, Vinson & Elkins sent a revised draft of the merger agreement to Skadden. The revised draft included the higher termination fee percentage of 3.75% of Penn Virginia’s equity value, payable for breach of the “no-shop” provision. It also contained an expense reimbursement fee of 1% of Penn Virginia’s equity value, or approximately $12.6 million, in the event of a shareholder “no” vote. The draft also rejected an acknowledgment that, in the event of a breach by Denbury, Penn Virginia’s damages would include, to the extent proven, the loss by Penn Virginia’s shareholders of the premium in the transaction and further provided that two Penn Virginia directors would be appointed to the Denbury board at closing.

 

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On October 22, 2018, Penn Virginia senior management and representatives of Skadden and Gibson Dunn discussed the key outstanding issues based on the latest revised draft of the merger agreement.

Also on October 22, 2018, the Denbury board held a telephonic meeting attended by Denbury management, representatives of Vinson & Elkins and representatives of JPMorgan Chase Bank, N.A. (“JP Morgan”) to discuss the proposed commitment of JP Morgan related to the financing of the transaction.

On October 23, 2018, Skadden sent a revised draft of the merger agreement to Vinson & Elkins. The revised draft (i) rejected the previously proposed termination fee of 3.75% of Penn Virginia’s equity value (without including a specific counter-proposal), (ii) rejected the proposal that the termination fee be payable for a breach of the “no-shop” provisions, (iii) rejected the requirement of an expense reimbursement fee of 1% of Penn Virginia’s equity value payable by a party whose shareholders fail to approve the transaction, (iv) included an acknowledgment that, in the event of a breach by Denbury, Penn Virginia’s damages would include, to the extent proven, the loss by its shareholders of the premium in the transaction and (v) rejected Denbury’s proposal that two members of the Penn Virginia board be appointed to the Denbury board at closing (without including a specific counter-proposal).

That evening, the Denbury board held a telephonic meeting attended by Denbury management and representatives of Vinson & Elkins and Guggenheim. Guggenheim advised the Denbury board that based on discussions with Jefferies, Guggenheim anticipated that Penn Virginia would make a counterproposal due to the volatility in Denbury’s stock price. Mr. Matthews and Vinson & Elkins provided the Denbury board with a summary of the major legal issues in the negotiation of the merger agreement, including the amount of the termination fee and under what circumstances it would be due, the reimbursement of expenses, the calculation of damages and governance issues with respect to board seats.

On October 24, 2018, the Penn Virginia board held a meeting with Penn Virginia senior management and representatives of Jefferies, Skadden and Gibson Dunn in attendance. Representatives of Jefferies reviewed with the Penn Virginia board Jefferies’ updated preliminary financial analysis regarding the merger consideration proposed to be paid by Denbury. The Penn Virginia board also discussed the greater decline in Denbury’s stock price relative to the decline in price of Penn Virginia’s stock, the effect of such declines on the implied price and premium represented by the Denbury proposal and the potential effect on Penn Virginia’s ability to obtain the approval of its shareholders for a transaction with Denbury. Representatives of Skadden then reviewed for the Penn Virginia board the open issues on the merger agreement and provided a summary of the proposed voting agreements that Denbury was requiring from certain large shareholders of Penn Virginia, as well as the directors and officers of Penn Virginia (beneficially owning, in the aggregate, approximately 15% of the outstanding Penn Virginia Common Stock). Following discussion, the Penn Virginia board instructed Jefferies to make a counterproposal to Denbury that reflected a 25% premium to Penn Virginia’s five-day VWAP as of the close of business on October 26, 2018, and a cash component fixed at $400 million, with the remaining consideration to be in the form of Denbury Common Stock.

Following the Penn Virginia board meeting, Jefferies contacted Guggenheim and detailed the terms of Penn Virginia’s counterproposal.

Later that evening, the Denbury board held a telephonic meeting attended by Denbury management and representatives of Vinson & Elkins and Guggenheim. Mr. Kendall provided an overview for the Denbury board of Penn Virginia’s counterproposal. Guggenheim informed the Denbury board that Jefferies had noted that the counterproposal was made following a Penn Virginia board meeting and due to the decline in stock prices since the initial bid proposal. Following discussion and feedback from each Denbury board member and Denbury management, as well as counsel and guidance from Denbury’s financial and legal advisors, the Denbury board determined to monitor the market through its closing on Friday, October 26, 2018, following which a response to Penn Virginia’s counterproposal would be formulated.

 

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On October 26, 2018, the Denbury board held a telephonic meeting attended by Denbury management and representatives of Vinson & Elkins and Guggenheim. Mr. Kendall, together with Guggenheim, provided the Denbury board with an update on the negotiations with Penn Virginia and its advisors. Vinson & Elkins reviewed for the Denbury board the outstanding legal points in the merger agreement negotiations, and Mr. Matthews provided an update on ongoing due diligence. The Denbury board then authorized Guggenheim to provide Penn Virginia with Denbury’s counterproposal in the form of a “best and final offer” and in line with the parameters discussed at the meeting, including an exchange ratio of 12.400 shares of Denbury Common Stock and $25.86 in cash per Penn Virginia share, together with, and conditioned upon, Penn Virginia’s agreement and accommodation on the material outstanding legal issues in the draft merger agreement.

On October 26, 2018, after the market closed, Guggenheim provided Jefferies with the revised proposal from Denbury, which Guggenheim characterized as Denbury’s “best and final offer.” Vinson & Elkins also distributed a revised draft of the merger agreement as part of Denbury’s proposal. The draft merger agreement proposed (i) a termination fee of $45 million (3.575% of the equity value of Penn Virginia under the terms of the transaction), (ii) the payment of the termination fee by either party if it materially breaches the “no-shop” provisions and the other party terminates, (iii) a payment of a $9 million expense reimbursement by a party if such party’s shareholders failed to approve the merger, (iv) a rejection of an acknowledgment that, in the event of a breach by Denbury, Penn Virginia’s damages would be based on the loss by its shareholders of the premium in the transaction, and (v) that two members of the Penn Virginia board be appointed to the Denbury board at closing.

Later that day, the Penn Virginia board held a telephonic meeting with senior management of Penn Virginia and representatives of Jefferies, Skadden and Gibson Dunn. Representatives of Jefferies provided the Penn Virginia board with a summary of the revised proposal, which reflected an implied value of $83.77 per share of Penn Virginia Common Stock, representing a 21.2% premium, based on the five-day VWAPs of Denbury and Penn Virginia as of the close of business on October 26, 2018. After the Penn Virginia board’s discussion of the revised proposal, representatives of Skadden reviewed for the Penn Virginia board the remaining open issues on the merger agreement. The Penn Virginia board then decided to adjourn until the following day to provide time for SVP and KLS to consider the revised proposal in light of Denbury’s requirement that each sign a voting and support agreement in favor of the transaction and to provide the Penn Virginia board additional time to evaluate the revised proposal and the remaining open issues in the merger agreement.

At noon Houston time on October 27, 2018, the Penn Virginia board held a telephonic meeting with senior management of Penn Virginia and representatives of Jefferies, Skadden and Gibson Dunn. Mr. Geenberg reported to the Penn Virginia board that SVP would agree to execute a voting agreement with Denbury at a 23% premium using a five-day VWAP calculated as of the close of business on Friday, October 26, 2018. Following discussion, the Penn Virginia board instructed Jefferies to make a counterproposal to Denbury that reflected a 23% premium using a five-day VWAP calculated as of the close of business on Friday, October 26, 2018. Jefferies communicated the counterproposal to Denbury.

On October 27, 2018, the Denbury board held a telephonic meeting attended by Denbury management and representatives of Vinson & Elkins and Guggenheim. Guggenheim updated the Denbury board on the discussions with Penn Virginia and its advisors, noting the Penn Virginia proposal of a 23% premium and a continued rejection of a mutual expense reimbursement of $9 million in the event either party’s shareholders failed to approve the merger. After discussion, the Denbury board instructed Denbury management and Guggenheim to reject the Penn Virginia counterproposal of a 23% premium but to concede the expense reimbursement point. After Guggenheim left the meeting, Vinson & Elkins then reviewed the terms of the merger agreement and the voting agreements with the Denbury board and refreshed the Denbury board on its fiduciary obligations under Delaware law in considering the proposed transaction.

Later that day, the Penn Virginia board held another telephonic meeting with senior management of Penn Virginia and representatives of Jefferies, Skadden and Gibson Dunn. Representatives of Jefferies reported

 

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Denbury’s rejection of the counterproposal of a 23% premium and concession of the removal of the expense reimbursement provision from the merger agreement. Mr. Geenberg reported to the Penn Virginia board that he had relayed Denbury’s position to SVP and that SVP had determined to support the transaction under the financial terms of Denbury’s proposal. Following further discussion of the financial terms of Denbury’s revised proposal, the Penn Virginia board instructed Jefferies to inform Denbury that it would support the general framework of the transaction under the proposed financial terms.

Thereafter, representatives of Skadden, Gibson Dunn and Vinson & Elkins finalized the terms of the proposed merger agreement, the voting and support agreements and related documents. The final draft of the merger agreement included a termination fee of $45 million.

On October 28, 2018, the Penn Virginia board held a special meeting, together with members of Penn Virginia senior management and representatives of Jefferies, Skadden and Gibson Dunn, to consider the proposed transaction. Representatives of Skadden provided an updated draft of the merger agreement and reviewed the terms thereof and the terms of the voting and support agreements related thereto with the Penn Virginia board. Jefferies reviewed with the Penn Virginia board Jefferies’ financial analyses of the Merger Consideration set forth in the draft merger agreement and, following discussion thereof, rendered Jefferies’ opinion to the Penn Virginia board (in its capacity as such) to the effect that, as of October 28, 2018 and based upon and subject to the various assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken as set forth in its opinion, the Merger Consideration was fair, from a financial point of view, to the holders of Penn Virginia Common Stock (other than Denbury and its affiliates). Following additional discussion, the Penn Virginia board unanimously determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, were advisable and in the best interests of Penn Virginia and its shareholders, adopted the Merger Agreement and determined to recommend that Penn Virginia’s shareholders approve the Merger Agreement. The final agreed upon merger consideration contemplated an exchange ratio of 12.400 shares of Denbury Common Stock and $25.86 in cash per share of Penn Virginia Common Stock, which reflected an implied value of $83.77 per share of Penn Virginia Common Stock, representing a 21.2% premium, based on the five-day VWAPs of Denbury Common Stock and Penn Virginia Common Stock as of the close of business on October 26, 2018.

Also on October 28, 2018, the Denbury board held a telephonic meeting attended by Denbury management and representatives of Vinson & Elkins and Guggenheim. Mr. Kendall provided an overview of key terms for the proposed transaction and noted that all of the open issues had been resolved. Guggenheim then rendered its oral opinion, which was subsequently confirmed in writing, that, as of such date and based upon and subject to the factors and assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Guggenheim as set forth therein, the merger consideration to be paid by Denbury for the outstanding shares of Penn Virginia Common Stock pursuant to the merger agreement was fair from a financial point of view to Denbury. Vinson & Elkins then reviewed material provisions in the merger agreement and the voting agreements and reviewed the fiduciary obligations of the Denbury board under Delaware law. Denbury management then recommended that the Denbury board approve the merger transactions and the Denbury board unanimously approved the merger transactions.

In the evening of October 28, 2018, the respective parties to the Merger Agreement and the Voting Agreements executed such agreements. Following such execution, Denbury and Penn Virginia issued a joint press release announcing the proposed merger. The following morning, Denbury, with participation of Penn Virginia management, hosted a conference call for the investment community to discuss the proposed merger.

Recommendation of the Denbury Board of Directors and Reasons for the Merger

The Denbury board unanimously determined the Merger Agreement and the transactions contemplated thereby, including the Denbury Issuance Proposal and Denbury Charter Amendment Proposal, to be in the best

 

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interests of, and advisable to, Denbury and its stockholders and approved the Merger Agreement and the transactions contemplated thereby, including the Denbury Issuance Proposal and Denbury Charter Amendment Proposal. The Denbury board unanimously recommends that Denbury stockholders vote “FOR” the Denbury Issuance Proposal and “FOR” the Denbury Charter Amendment Proposal.

In evaluating the Merger, the Denbury board consulted with Denbury management, as well as Denbury’s legal and financial advisors, and considered a number of factors, weighing both perceived benefits of the Merger as well as potential risks of the Merger.

In the course of its deliberations, the Denbury board considered a variety of factors and information that it believes support its determinations and recommendations, including the following (which are not necessarily presented in order of relative importance):

 

   

Denbury’s expectation that the increased size, scale, and resources of Denbury following the Merger will create additional stockholder value and allow Denbury to be even more competitive in leveraging its operating capabilities and capturing strategic opportunities.

 

   

Denbury’s expectation that the combined company would have core acreage positions in the Gulf Coast region, Rocky Mountain region and the Eagle Ford shale—three prolific, high-quality oil-weighted plays in North America—providing Denbury with regional diversity.

 

   

Denbury’s expectation that its expertise in enhanced oil recovery techniques combined with Penn Virginia’s knowledge of the Eagle Ford will create the opportunity to expand the combined company’s asset potential.

 

   

Denbury’s expectation that the Merger will be accretive in the first year to Denbury’s key per-share metrics (before synergies), including net asset value and cash flow.

 

   

Denbury’s expectation that the Merger will increase Denbury’s operating margin.

 

   

Denbury’s expectation that the cash flow of the combined company would provide additional capital investment flexibility, deleveraging capability, and potential future capacity to return capital to its stockholders.

 

   

Denbury’s expectation that the Merger will be credit enhancing to Denbury, including in respect of reduced debt leverage, strengthened balance sheet and enhanced liquidity, which together with the combined company’s increased size and scale, is expected to improve the combined company’s access to capital and reduce its overall cost of capital.

 

   

The attractiveness of the Merger to Denbury in comparison to other acquisition opportunities reasonably available to Denbury, including the belief that Denbury and Penn Virginia have similar execution-focused cultures, values, businesses and operational models and exceptional technical teams with complementary skill sets, which will facilitate the integration of Penn Virginia into Denbury.

 

   

The Denbury board’s knowledge of, and discussions with Denbury management and its advisors regarding, each of Denbury’s and Penn Virginia’s business operations, financial condition, earnings and prospects, taking into account Penn Virginia’s publicly filed information and the results of Denbury’s due diligence investigation of Penn Virginia.

 

   

The recommendation of the Merger by Denbury’s senior management team.

 

   

The oral opinion of Guggenheim rendered on October 28, 2018 and the written opinion of Guggenheim, dated October 28, 2018, to the Denbury board to the effect that as of the date of such opinion, and subject to the various assumptions made, procedures followed, matters considered, and qualifications and limitations on the scope of the review undertaken by Guggenheim as set forth therein, the Merger Consideration pursuant to the Merger Agreement was fair from a financial point of

 

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view to Denbury. For additional information regarding the opinion of Guggenheim, see the section entitled “The Merger—Opinion of Guggenheim, Denbury’s Financial Advisor” beginning on page 97. The full text of the written opinion of Guggenheim is attached as Annex B to this joint proxy statement/prospectus.

 

   

That the Denbury board believes the restrictions imposed on Denbury’s business and operations during the pendency of the Merger are reasonable and not unduly burdensome.

 

   

That the exchange ratio for the stock component of the Merger Consideration and the aggregate cash to be paid as part of the Merger Consideration is fixed and will not fluctuate in the event that the market price of Penn Virginia Common Stock or the market price of Denbury Common Stock changes between the date of the Merger Agreement and the completion of the Merger.

 

   

That Denbury will continue to be led by the current strong, experienced Denbury management team and that the addition of two current Penn Virginia directors to the Denbury board post-Merger will add further valuable expertise and experience and in-depth familiarity with Penn Virginia to the Denbury board, which will enhance the likelihood of realizing the strategic benefits that Denbury expects to derive from the Merger.

 

   

That the Denbury stockholders will have the opportunity to vote on the Denbury Issuance Proposal and the Denbury Charter Amendment Proposal, which is a condition precedent to the Merger.

 

   

That certain Penn Virginia shareholders holding, in the aggregate, approximately 15.1% of the issued and outstanding shares of Penn Virginia Common Stock entitled to vote at the Penn Virginia special meeting had entered into voting and support agreements with Denbury obligating such shareholders to vote all of the shares of Penn Virginia Common Stock held by them in favor of the Penn Virginia Merger Proposal, as more fully described in “—Voting and Support Agreements” beginning on page 136.

 

   

The representations, warranties, covenants and conditions contained in the Merger Agreement, including the following (which are not necessarily presented in order of relative importance):

 

   

That Denbury has the ability, in specified circumstances, to provide information to and to engage in discussions or negotiations with a third party that makes an unsolicited takeover proposal, as further described in the section entitled “The Merger Agreement—No Solicitation; Adverse Recommendation Changes” beginning on page 157.

 

   

That the Denbury board has the ability, in specified circumstances, to change its recommendation to Denbury stockholders in favor of the Denbury Issuance Proposal and the Denbury Charter Amendment Proposal, as further described in the section entitled “The Merger Agreement—No Solicitation; Adverse Recommendation Changes—Denbury: Permitted Adverse Recommendation Changes in Connection with Intervening Events” beginning on page 163.

 

   

That there are limited circumstances in which the Penn Virginia board may terminate the Merger Agreement or change its recommendation that Penn Virginia shareholders approve the Penn Virginia Merger Proposal, and if the Merger Agreement is terminated by Denbury as a result of a change in recommendation of the Penn Virginia board or because of a breach by Penn Virginia of its non-solicitation obligations or by Penn Virginia in order to enter into a definitive agreement with a third party providing for the consummation of a Penn Virginia superior proposal, then in each case Penn Virginia has agreed to pay Denbury a termination fee of $45 million. For additional information, see the section entitled “The Merger Agreement—Termination” beginning on page 180.

 

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In the course of its deliberations, the Denbury board also considered a variety of risks, uncertainties and other potentially negative factors, including the following (which are not necessarily presented in order of relative importance):

 

   

That the Merger may not be completed in a timely manner or at all and the potential consequences of non-completion or delays in completion.

 

   

The effect that the length of time from announcement of the Merger until completion of the Merger could have on the market price of Denbury Common Stock, Denbury’s operating results and the relationship with Denbury’s employees, stockholders, customers, suppliers, regulators and others who do business with Denbury.

 

   

That the anticipated benefits of the Merger may not be realized in full or in part or that the anticipated benefits may not be realized in the expected time frame.

 

   

That the attention of Denbury’s senior management may be diverted from other strategic priorities to implement the Merger and make arrangements for the integration of Penn Virginia’s and Denbury’s operations, assets and employees following the Merger.

 

   

That Penn Virginia shareholders may not approve the Penn Virginia Merger Proposal or that Denbury stockholders may not approve the Denbury Issuance Proposal or the Denbury Charter Amendment Proposal.

 

   

That the exchange ratio for the stock component of the Merger Consideration is fixed and will not fluctuate in the event that the market price of Denbury Common Stock or the market price of Penn Virginia Common Stock changes between the date of the Merger Agreement and the completion of the Merger.

 

   

The possibility that changes in global economic conditions or oil and gas industry and fluctuations in exchange and interest rates could make Denbury’s financing difficult to obtain on favorable terms.

 

   

That the Merger Agreement imposes restrictions on Denbury’s ability to solicit alternative transactions and make certain acquisitions, which are described in the sections entitled “The Merger Agreement—Interim Operations of Penn Virginia and Denbury Pending the Merger” and “The Merger Agreement—No Solicitation; Adverse Recommendation Changes” beginning on page 152 and 157, respectively.

 

   

That there are limited circumstances in which the Denbury board may terminate the Merger Agreement or change its recommendation that Denbury stockholders approve the Denbury Issuance Proposal and the Denbury Charter Amendment Proposal, and if the Merger Agreement is terminated by Penn Virginia as a result of a change in recommendation of the Denbury board, then Denbury has agreed to pay Penn Virginia a termination fee of $45 million. For additional information, see the section entitled “The Merger Agreement—Termination” beginning on page 180.

 

   

The transaction costs to be incurred by Denbury in connection with the Merger.

 

   

The risks associated with the occurrence of events that may materially and adversely affect the financial condition, properties, assets, liabilities, business or results of operations of Penn Virginia and its subsidiaries but that will not entitle Denbury to terminate the Merger Agreement.

 

   

The potential impact on the market price of Denbury Common Stock as a result of the issuance of the stock component of the Merger Consideration to Penn Virginia shareholders.

 

   

That forecasts of future financial results of the combined company are necessarily estimates based on assumptions and may vary significantly from future performance.

 

   

Various other risks described in the section entitled “Risk Factors” beginning on page 51.

The Denbury board considered all of these factors as a whole and unanimously concluded that they supported a determination to approve the Merger Agreement and the transactions contemplated thereby,

 

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including the Denbury Stock Issuance and Denbury Charter Amendment. The foregoing discussion of the information and factors considered by the Denbury board is not exhaustive. In view of the wide variety of factors considered by the Denbury board in connection with its evaluation of the Merger and the complexity of these matters, the Denbury board did not consider it practical to, nor did it attempt to, quantify, rank or otherwise assign relative weights to the specific factors that it considered in reaching its decision. In considering the factors described above and any other factors, individual members of the Denbury board may have viewed factors differently or given different weight or merit to different factors.

The foregoing discussion of the information and factors considered by the Denbury board is forward-looking in nature and should be read in light of the factors described in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 61.

Opinion of Guggenheim, Denbury’s Financial Advisor

Overview

Denbury retained Guggenheim as its financial advisor in connection with Denbury’s possible acquisition of or merger with Penn Virginia. In selecting Guggenheim as its financial advisor, Denbury considered that, among other things, Guggenheim is an internationally recognized investment banking, financial advisory and securities firm whose senior professionals have substantial experience advising companies in, among other industries, the oil and gas industry. Guggenheim, as part of its investment banking, financial advisory and capital markets businesses, is regularly engaged in the valuation and financial assessment of businesses and securities in connection with mergers and acquisitions, recapitalizations, spin-offs/split-offs, restructurings, securities offerings in both the private and public capital markets and valuations for corporate and other purposes.

At the October 28, 2018 meeting of the Denbury board, Guggenheim rendered an oral opinion, which was confirmed by delivery of a written opinion, to the Denbury board to the effect that, as of October 28, 2018 and based on and subject to the matters considered, the procedures followed, the assumptions made and various limitations of and qualifications to the review undertaken, the Merger Consideration was fair, from a financial point of view, to Denbury.

This description of Guggenheim’s opinion is qualified in its entirety by the full text of the written opinion, which is attached as Annex B to this joint proxy statement/prospectus and which you should read carefully and in its entirety. Guggenheim’s written opinion sets forth the matters considered, the procedures followed, the assumptions made and various limitations of and qualifications to the review undertaken by Guggenheim. Guggenheim’s written opinion, which was authorized for issuance by the Fairness Opinion and Valuation Committee of Guggenheim, is necessarily based on economic, capital markets and other conditions, and the information made available to Guggenheim, as of the date of such opinion. Guggenheim has no responsibility for updating or revising its opinion based on facts, circumstances or events occurring after the date of the rendering of the opinion.

In reading the discussion of Guggenheim’s opinion set forth below, you should be aware that such opinion (and, as applicable, any materials provided in connection therewith or the summary of Guggenheim’s underlying financial analyses elsewhere in this joint proxy statement/prospectus):

 

   

was provided to the Denbury board (in its capacity as such) for its information and assistance in connection with its evaluation of the Merger Consideration;

 

   

did not constitute a recommendation to the Denbury board with respect to the Merger;

 

   

does not constitute advice or a recommendation to any holder of Denbury Common Stock or Penn Virginia Common Stock as to how to vote or act in connection with the Merger or otherwise or what form of Merger Consideration any holder of Penn Virginia Common Stock should elect to receive pursuant to the cash/stock election mechanism described in the Merger Agreement;

 

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did not address Denbury’s underlying business or financial decision to pursue the Merger, the relative merits of the Merger as compared to any alternative business or financial strategies that might exist for Denbury, the financing or funding of the cash component of the Merger Consideration by Denbury or the effects of any other transaction in which Denbury might engage;

 

   

addressed only the fairness, from a financial point of view and as of the date of such opinion, of the Merger Consideration to Denbury;

 

   

expressed no view or opinion as to (1) any other term, aspect or implication of (a) the Merger or the Merger Agreement (including, without limitation, the form or structure of the Merger or the cash/stock election procedures, adjustments, limitations or prorationing mechanisms contemplated by the Merger Agreement) or (b) the Voting Agreements or any other agreement, transaction document or instrument contemplated by the Merger Agreement or the Voting Agreements or to be entered into or amended in connection with the Merger, or (2) the fairness, financial or otherwise, of the Merger to, or of any consideration to be paid to or received by, the holders of any class of securities (other than as expressly specified in Guggenheim’s opinion), creditors or other constituencies of Denbury or Penn Virginia; and

 

   

expressed no view or opinion as to the fairness, financial or otherwise, of the amount or nature of any compensation payable to or to be received by any of Denbury’s or Penn Virginia’s directors, officers or employees, or any class of such persons, in connection with the Merger relative to the Merger Consideration or otherwise.

In the course of performing its reviews and analyses for rendering its opinion, Guggenheim:

 

   

reviewed drafts of the Merger Agreement and the Voting Agreements dated as of October 27, 2018;

 

   

reviewed certain publicly available business and financial information regarding each of Denbury and Penn Virginia, including information regarding the oil and gas reserves included or reflected in certain filings of each of Denbury and Penn Virginia with the SEC and other publicly available reports and filings and information regarding the oil and gas reserves of each of Denbury and Penn Virginia;

 

   

reviewed certain non-public information relating to Penn Virginia, including certain:

 

   

information with respect to the oil and gas resource potential of Penn Virginia prepared by Penn Virginia’s senior management (the “Penn Virginia Oil and Gas Information”);

 

   

alternative risking scenarios for the oil and gas resource potential of Penn Virginia prepared and approved for Guggenheim’s use by Denbury’s senior management (the “Penn Virginia Riskings”); and

 

   

financial forecasts relating to the future financial performance of Penn Virginia (which reflect prospective commodity price curve assumptions) prepared and approved for Guggenheim’s use by Denbury’s senior management (the “Penn Virginia Projections”);

 

   

reviewed certain non-public information relating to Denbury, including certain:

 

   

information with respect to the oil and gas resource potential and other non-oil and gas assets of Denbury prepared and approved for Guggenheim’s use by Denbury’s senior management (the “Denbury Oil and Gas Information” and, together with the Penn Virginia Oil and Gas Information, the “Oil and Gas Information”);

 

   

alternative risking scenarios for the oil and gas resource potential of Denbury prepared and approved for Guggenheim’s use by Denbury’s senior management (the “Denbury Riskings” and, together with the Penn Virginia Riskings, the “Riskings”); and

 

   

financial forecasts relating to the future financial performance of Denbury (which reflect prospective commodity price curve assumptions) prepared and approved for Guggenheim’s use by Denbury’s senior management (the “Denbury Projections” and, together with the Penn Virginia Projections, the “Projections”);

 

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reviewed certain estimated revenue enhancements and other combination benefits and estimated costs to achieve the same (collectively, the “combination benefits”) expected to result from the Merger, all as prepared and approved for Guggenheim’s use by Denbury’s senior management;

 

   

discussed with Denbury’s senior management their strategic and financial rationale for the Merger as well as their views of Denbury’s and Penn Virginia’s respective businesses, operations, oil and gas potential, historical and projected financial results and future prospects and the commercial, competitive and regulatory dynamics in the oil and gas sector;

 

   

discussed with Penn Virginia’s senior management their views of Penn Virginia’s business, operations, oil and gas potential, historical and projected financial results and future prospects and the commercial, competitive and regulatory dynamics in the oil and gas sector;

 

   

reviewed certain historical prices, trading multiples and trading activity of the shares of Denbury Common Stock and Penn Virginia Common Stock;

 

   

compared certain information with respect to the financial performance of Denbury and Penn Virginia and the trading multiples and trading activity of the shares of Denbury Common Stock and Penn Virginia Common Stock with corresponding data with respect to certain other publicly traded companies that Guggenheim deemed relevant in evaluating Denbury and Penn Virginia;

 

   

reviewed the valuation and financial metrics of certain mergers and acquisitions that Guggenheim deemed relevant in evaluating the Merger;

 

   

estimated the net asset value (“NAV”) of each of Denbury and Penn Virginia based on the Projections, the Riskings and the combination benefits;

 

   

reviewed the estimated pro forma financial results, NAV, financial condition and capitalization of Denbury giving effect to Merger; and

 

   

conducted such other studies, analyses, inquiries and investigations and considered such other information and financial, economic and market criteria as Guggenheim deemed appropriate for purposes of its opinion.

With respect to the information used in arriving at its opinion, Guggenheim noted that:

 

   

Guggenheim relied upon and assumed, without independent verification, the accuracy, completeness and reasonableness of all industry, business, financial, legal, regulatory, tax, accounting, actuarial and other information (including, without limitation, the Oil and Gas Information, the Projections, the Riskings, the combination benefits, any other estimates and any other forward-looking information) provided by or discussed with Denbury or Penn Virginia or obtained from public sources, data suppliers and other third parties.

 

   

Guggenheim (1) did not assume any responsibility, obligation or liability for the accuracy, completeness, reasonableness, achievability or independent verification of, and Guggenheim did not independently verify, any such information (including, without limitation, any of the Oil and Gas Information, the Projections, the Riskings, the combination benefits, any other estimates and any other forward-looking information), (2) expressed no view, opinion, representation, guaranty or warranty (in each case, express or implied) regarding the reasonableness or achievability of the Oil and Gas Information, the Projections, the Riskings, the combination benefits, such other estimates or such other forward-looking information or the assumptions upon which they are based and (3) relied upon the assurances of Denbury’s senior management and Penn Virginia’s senior management (as the case may be) that they are unaware of any facts or circumstances that would make such information (including, without limitation, the Oil and Gas Information, the Projections, the Riskings, the combination benefits, such other estimates and such other forward-looking information) incomplete, inaccurate or misleading.

 

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Specifically, with respect to (1) the Oil and Gas Information, the Projections, the Riskings and the combination benefits provided by or discussed with Denbury or Penn Virginia, (a) Guggenheim was advised by Denbury’s senior management and Penn Virginia’s senior management (as the case may be), and Guggenheim assumed, that the Oil and Gas Information, the Projections, the Riskings, the combination benefits, such other estimates and such other forward-looking information utilized in its analyses had been reasonably prepared on bases reflecting the best then-currently available estimates and judgments of Denbury’s senior management and Penn Virginia’s senior management (as the case may be) as to the expected future performance of Denbury and Penn Virginia (as the case may be) and the expected amounts and realization of such combination benefits (and Guggenheim assumed that such combination benefits would be realized in the amounts and at the times projected) and (b) Guggenheim assumed that the Oil and Gas Information, the Projections, the Riskings, the combination benefits, such other estimates and such other forward-looking information had been reviewed by the Denbury board with the understanding that such information would be used and relied upon by Guggenheim in connection with rendering its opinion, and (2) any financial projections, oil and gas reserve reports, other estimates and/or other forward-looking information obtained by us from public sources, data suppliers and other third parties, Guggenheim assumed that such information is reasonable and reliable.

Guggenheim also noted certain other considerations with respect to its engagement and the rendering of its opinion:

 

   

Guggenheim did not perform or obtain any independent appraisal of the assets or liabilities (including any contingent, derivative or off-balance sheet assets and liabilities) of Denbury or Penn Virginia or any other entity or the solvency or fair value of Denbury, Penn Virginia or any other entity, nor was Guggenheim furnished with any such appraisals.

 

   

Guggenheim’s professionals are not legal, regulatory, tax, consulting, accounting, appraisal, actuarial or petroleum engineering experts and Guggenheim’s opinion should not be construed as constituting advice with respect to such matters; accordingly, Guggenheim relied on the assessments of Denbury’s senior management, Penn Virginia’s senior management and Denbury’s other professional advisors with respect to such matters. Guggenheim assumed that the Integrated Mergers, taken together, will qualify, for U.S. federal income tax purposes, as a “reorganization” within the meaning of Section 368(a) of the Code, as amended. Guggenheim did not express any view or render any opinion regarding the tax consequences of the Merger to Denbury, Penn Virginia or their respective securityholders.

 

   

Guggenheim further assumed that:

 

   

in all respects meaningful to its analyses, (1) the final executed forms of the Merger Agreement and the Voting Agreements would not differ from the drafts that Guggenheim reviewed, (2) each of the parties to the Merger Agreement and the Voting Agreements will comply with all terms and provisions of those agreements and (3) the representations and warranties of each party to the Merger Agreement and the Voting Agreements contained in the those agreements are true and correct and all conditions to the obligations of each party to consummate the Merger will be satisfied without any waiver, amendment or modification thereof; and

 

   

the Merger will be consummated in a timely manner in accordance with the terms of the Merger Agreement and in compliance with all applicable laws, documents and other requirements, without any delays, limitations, restrictions, conditions, divestiture or other requirements, waivers, amendments or modifications (regulatory, tax-related or otherwise) that would have an effect on Denbury, Penn Virginia or the Merger (including its contemplated benefits) in any way meaningful to Guggenheim’s analyses or opinion.

 

   

Guggenheim did not express any view or opinion as to the price or range of prices at which the shares of Denbury Common Stock or Penn Virginia Common Stock or other securities or financial

 

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instruments of or relating to Denbury or Penn Virginia may trade or otherwise be transferable at any time, including subsequent to the announcement or consummation of the Merger.

Summary of Financial Analyses

Overview

This “Summary of Financial Analyses” presents a summary of the principal financial analyses performed by Guggenheim and presented to the Denbury board in connection with the rendering of Guggenheim’s opinion. Such presentation to the Denbury board was supplemented by Guggenheim’s oral discussion, the nature and substance of which may not be fully described herein.

Some of the financial analyses summarized below include summary data and information presented in tabular format. In order to understand fully such financial analyses, the summary data and tables must be read together with the full text of the summary. Considering the summary data and tables alone could create a misleading or incomplete view of Guggenheim’s financial analyses.

The preparation of a fairness opinion is a complex process and involves various judgments and determinations as to the most appropriate and relevant financial analyses and the application of those methods to the particular circumstances involved. A fairness opinion therefore is not readily susceptible to partial analysis or summary description, and taking portions of the financial analyses set forth below, without considering such analyses as a whole, would in Guggenheim’s view create an incomplete and misleading picture of the processes underlying the financial analyses considered in rendering Guggenheim’s opinion.

In arriving at its opinion, Guggenheim:

 

   

based its financial analyses on various assumptions, including assumptions concerning general business, economic and capital markets conditions and industry-specific and company-specific factors, all of which are beyond the control of Denbury, Penn Virginia and Guggenheim;

 

   

did not form a view or opinion as to whether any individual analysis or factor, whether positive or negative, considered in isolation, supported or failed to support its opinion;

 

   

considered the results of all of its financial analyses and did not attribute any particular weight to any one analysis or factor; and

 

   

ultimately arrived at its opinion based on the results of all of its financial analyses assessed as a whole and believes that the totality of the factors considered and the various financial analyses performed by Guggenheim in connection with its opinion operated collectively to support its determination as to the fairness, from a financial point of view and as of the date of such opinion, of the Merger Consideration to Denbury.

With respect to the financial analyses performed by Guggenheim in connection with rendering its opinion:

 

   

Such financial analyses, particularly those based on estimates and projections, are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than suggested by these analyses.

 

   

None of the companies used in the selected publicly traded companies analysis described below is identical or directly comparable to Denbury or Penn Virginia, as the case may be, and none of the transactions used in the selected precedent merger and acquisition transactions analysis described below is identical or directly comparable to the Merger. However, such companies and transactions were selected by Guggenheim, among other reasons, because they involved publicly traded companies or represented target companies which may be considered broadly similar, for purposes of Guggenheim’s financial analyses, to Penn Virginia and Denbury based on Guggenheim’s familiarity with the oil and gas sector in the United States.

 

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In any event, selected publicly traded companies analysis and selected precedent merger and acquisition transactions analysis and are not mathematical. Rather, such analyses involve complex considerations and judgments concerning the differences in business, operating, financial and capital markets-related characteristics and other factors regarding the selected publicly traded companies to which Denbury and Penn Virginia were compared and the selected precedent merger and acquisition transactions to which the merger was compared.

 

   

Such financial analyses do not purport to be appraisals or to reflect the prices at which any securities may trade at the present time or at any time in the future.

Certain Definitions

Throughout this “Summary of Financial Analyses,” the following financial terms are used in connection with Guggenheim’s various financial analyses:

 

   

CAGR: means compound annual growth rate over the indicated period of time.