Denbury to Sell Haynesville, East Tx. Natural Gas Assets

Denbury has entered into an agreement to sell its Haynesville and East Texas natural gas assets for approximately $217.5 million to a private oil and gas company. The sale is expected to close in 30 to 45 days and is subject to satisfactory completion of customary due diligence and closing conditions. The agreement contemplates an effective date of September 1, 2010, and consequently operating net revenue after September 1, net of capital expenditures, along with other purchase price adjustments, will be accounted for as adjustments to the ultimate sales price.

Production attributable to the properties to be sold averaged approximately 34 MMcfe/d during the second quarter of 2010. The Company expects to utilize a Section 1031 like-kind-exchange with a portion of the proceeds expected from the sale of the Haynesville and East Texas assets and the previously announced Riley Ridge acquisition in order to reduce the estimated taxable gain on the sale. The Company plans to use the balance of proceeds from the sale to repay most of its currently outstanding bank debt. RBC Richardson Barr acted as advisor to Denbury on the asset sale.

Natural Gas Derivative Contracts

As a result of the proposed sale of the Company's Haynesville and East Texas assets, upon closing it expects to terminate a portion of its remaining 2010 and 2011 natural gas hedges. The Company expects to realize between $10 and $15 million from this termination based on current prices.

Jackson Dome Update

During 2010, the Company has drilled three additional wells in the Jackson Dome area in order to increase its deliverability and proved reserves of CO2. Two wells were drilled in the Gluckstadt field, the Waggoner 35-14 #1 and Anderson Estate 36-9 #1 wells, and the third well, Pearl River 29-16 #1, was drilled on the DRI Dock prospect. The Company also has completed its 3D seismic evaluation and production testing on the DRI Dock prospect, which confirms the Company's original proved reserve estimate of approximately 400 Bcf of CO2 reserves for the prospect. Additional drilling on the DRI Dock prospect may add additional reserves, but most likely significantly less than originally predicted in estimating the prospect's potential.

The Waggoner well was drilled to add additional deliverability from the Gluckstadt field and is expected to produce at approximately 50 MMcf/d based on initial testing. The Anderson well was drilled across a known fault and the initial logging results indicate the reservoir pressure in the well is virgin pressure and thus is not in communication with the existing wells in Gluckstadt. Based on the Anderson's net pay and the reservoir's expected areal extent estimated by 3D seismic, the Company estimates this fault block contains approximately 600 Bcf of proven CO2 reserves, increasing the total estimated CO2 reserves added during 2010 to 1.0 Tcf.

Phil Rykhoek, Chief Executive Officer, stated, "With this sale, we have nearly completed our planned divestiture program relating to the Encore assets acquired this March, all designed to reduce our leverage incurred from the Encore acquisition and to focus our capital investments and energy on our core tertiary operations and the acquired Bakken assets where we believe we have lower risk, greater predictability, and higher profitability. Given the continued strength in oil prices versus natural gas prices and our significant inventory of tertiary projects and Bakken drilling locations, we want to focus our time and money on these properties rather than in the Haynesville. Proceeds from this sale, combined with the anticipated proceeds from the ongoing process to sell our interests in ENP are expected to more than fund any shortfall between our anticipated 2010 and 2011 cash flow from operations and our anticipated 2010 and 2011 capital budgets based on current commodity prices.

"Although a considerable amount of effort has been focused on integrating the assets acquired from Encore, our technical teams have not lost focus on our legacy Denbury properties. The additional one Tcf of CO2 reserves that we have added during 2010 are very significant to our Gulf Coast operations as they are expected to provide us with nearly enough CO2 reserves to flood all of our existing phases in the Gulf Coast, Phases 1 through 9. Thus, 2010 is shaping up to be a very good year for Denbury."


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