Production attributable to the properties being sold averaged approximately 28.8 MMcfe/d (85% natural gas) during the second quarter of 2007, representing approximately 11% of Denbury’s total second quarter production, and approximately 4% of the total proved reserves as of December 31, 2006. The Company plans to reduce its bank debt with the proceeds from the sale, which is anticipated to repay the majority of the outstanding amounts. The Company’s bank borrowing base will not be affected by the sale and will remain unchanged at $500 million.
Gareth Roberts, President and Chief Executive Officer, stated, "This sale further enables us to concentrate our investment and management focus on our tertiary operations where we have lower risk, greater predictability, virtually no competition in our areas of operation and higher profitability. These funds, combined with the anticipated capital from planned 'dropdowns' of CO2 pipeline assets over the next twelve months to Genesis Energy, L.P. are expected to fund the shortfall between our anticipated cash flow from operations and our capital budgets in 2007 and 2008. We will adjust our production guidance for 2007 upon completion of the sale and we also plan to announce 2008 guidance within the next few weeks. We continue to forecast strong organic growth in both 2007 and 2008, even after reducing our production volumes related to this sale. Our CO2 program is working and we remain enthusiastic about our future."
2008 Natural Gas Derivative Contracts
The Company also announced that it has swapped 60 MMcf/d of its 2008 natural gas production at a weighted average price of $7.91 per MMBtu. Based on preliminary forecasts after the Louisiana sale, these derivative contracts are expected to be between 70% and 80% of the Company’s natural gas production.
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