Bolt-on Acquisition in Key Operating Area Supports CO2 EOR-Focused Strategy
PLANO, Texas, Dec. 29, 2020 (GLOBE NEWSWIRE) — Denbury Inc. (NYSE: DEN) (“Denbury” or the “Company”) today announced that it has entered into an agreement with a subsidiary of Devon Energy Corporation to acquire a nearly 100% working interest (approximately 83% net revenue interest) in the Big Sand Draw and Beaver Creek oil fields located in Freemont County, Wyoming for a cash purchase price of $12 million. The purchase price includes associated surface facilities and the 46-mile CO2 transportation pipeline to the acquired fields.
Net production from the acquired fields was approximately 2,800 barrels of oil equivalent (“BOE”) per day for the third quarter of 2020, of which approximately 85% was oil production. Based on December 1, 2020 oil and natural gas futures strip prices, net proved reserves for the acquired fields, which are 93% oil, are estimated at approximately 13.7 million BOE (“MMBOE”), including 5.5 MMBOE of proved undeveloped reserves which the Company estimates can be developed for less than $5 per BOE.
Chris Kendall, Denbury’s President and CEO, commented, “Big Sand Draw and Beaver Creek are exciting additions to Denbury’s Rocky Mountain region footprint, and we believe they are an ideal operational fit for Denbury’s differentiated CO2 EOR-focused strategy. Importantly, by utilizing 100% industrial sourced CO2, these fields will increase Denbury’s use of industrial sourced CO2 by nearly 400,000 tons annually, further enhancing the low carbon footprint of Denbury’s oil production. We look forward to applying Denbury’s industry-leading EOR expertise to these fields, which hold meaningful potential for optimization and future development.”
The purchase agreement provides for two contingent cash payments of $4 million each, the first one payable if West Texas Intermediate (“NYMEX WTI”) oil prices average at least $50 per barrel in calendar year 2021 and the second one payable if NYMEX WTI oil prices average at least $50 per barrel in calendar year 2022. The purchase price is subject to standard purchase price adjustments for revenues and costs between the December 1, 2020 effective date and the closing date of the transaction. The acquisition is expected to close in the first quarter of 2021 and is subject to customary closing conditions.
ABOUT THE BIG SAND DRAW AND BEAVER CREEK OIL FIELDS
The Big Sand Draw oil field was discovered in 1918 and the CO2 flood was initiated in 2014. The Beaver Creek oil field was discovered in 1938 and the CO2 flood was initiated in 2008. The CO2 used to flood both fields is supplied from ExxonMobil’s Shute Creek gas processing plant in southwestern Wyoming, where Denbury owns a one-third overriding royalty interest in all captured CO2.
Denbury is an independent oil and natural gas company with operations focused in two key operating areas: the Gulf Coast and Rocky Mountain regions. The Company’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. For more information about Denbury, please visit www.denbury.com.
This press release, other than historical financial information, contains forward-looking statements that involve risks and uncertainties including estimates of oil and natural gas reserves of the acquired assets and estimated costs to develop proved undeveloped reserves, and other risks and uncertainties detailed in the Company’s filings with the Securities and Exchange Commission, including Denbury’s most recent reports on Form 10-K and Form 10-Q. These risks and uncertainties are incorporated by this reference as though fully set forth herein. These statements are based on engineering, geological, financial and operating assumptions that management believes are reasonable based on currently available information; however, management’s assumptions and the Company’s future performance are both subject to a wide range of business risks, and there is no assurance that these goals and projections can or will be met. Actual results may vary materially. In addition, any forward-looking statements represent the Company’s estimates only as of today and should not be relied upon as representing its estimates as of any future date. Denbury assumes no obligation to update its forward-looking statements.