Denbury Resources to Acquire Additional Potential Tertiary Oil Property
Denbury Resources has entered into an agreement with Natural Gas Systems to acquire the Delhi Holt-Bryant Unit ("Delhi") in northern Louisiana for $50 million, plus a 25% reversionary interest to the seller after the Company has achieved $200 million in net operating revenue, as defined. The acquisition is expected to close by the end of May and is subject to satisfactory completion of normal and customary due diligence and closing conditions.
Transaction Highlights $ The acquisition includes the purchase of substantially all the interest in the Delhi Holt-Bryant Unit, located in northern Louisiana about 65 miles southwest of the recently acquired Tinsley Field. $ Delhi is a potential carbon dioxide ("CO2") tertiary flood candidate. The Company initially has estimated that this field has an estimated net reserve potential from CO2 tertiary floods of up to 30 to 40 million barrels of oil equivalent ("MMBOE"), net of the projected reversionary interest based on a $60 oil price. $ The Company will need to build a pipeline to transport CO2 to this field from Jackson Dome (the Company's CO2 source field near Jackson, Mississippi). The Company is initiating studies and plans to construct this line, with a goal of having it installed and operational within the next two to three years. $ Based on preliminary Company estimates, it will cost between $125 million and $150 million to develop this field, excluding the cost of the CO2 pipeline which, based on very preliminary estimates, is expected to be between $75 million and $100 million. $ Delhi currently is producing less than 100 Bbls/d and has nominal conventional proven reserves. $ Delhi produces light sweet oil which is expected to sell for near NYMEX prices. $ The Company will use its currently unused bank credit line to fund the acquisition.
Gareth Roberts, CEO of Denbury, commented on the transaction,
saying: "This acquisition is the continuation of our strategy, a
natural extension beyond the recently acquired Tinsley Field, and will
constitute the fifth phase of our ongoing program. In order to flood
Delhi, we will use our remaining unallocated proven CO2 reserves (500
Bcf) at Jackson Dome, although it is our goal to add 3 to 4 more Tcf
of CO2 within the next few years through further drilling. We
currently plan to commence CO2 injections at Delhi in three years,
although if things go well, we hope to start before then. With this
acquisition, our long-term CO2 program should give us access to, as
much as, 300 MMBbls of tertiary oil reserves, including our currently
proven tertiary oil reserves and historical tertiary oil production.
Our tertiary operations continue to provide Denbury an unique
opportunity for growth for years into the future."
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