2010-01-07-2009-12-03-2009-12-22

Acquired 95% WI in TX Conroe Field, gaining 20 MMBOE proved, 2,500 BOE/d.

Dallas-based Denbury Resources Inc. (NYSE: DNR) has closed its acquisition of Conroe Field north of Houston from privately owned Wapiti Energy LLC, Houston, for approximately $430.7 million in cash and stock. Denbury paid $256.4 million in cash and 11.62 million shares of stock with a value of $174.3 million assuming a stock price of $15 per share. The assets include a 95% working interest (80.4% net revenue interest) in Conroe Field Unit and other assets in Conroe Field. Denbury will be operator. Denbury estimates the assets contain approximately 125 million barrels of oil potential from CO2 tertiary recovery, and that the acquired interests contain an estimated 20 million barrels of oil equivalent of proved conventional reserves as of Dec. 1, 2009, nearly all of which is proved developed. Current production is 2,500 barrels of oil equivalent per day net. The company reports it will need to build an estimated 80-mile pipeline to transport CO2 from the Green Pipeline to Conroe Field. It estimates it will spend an additional $750 million to $1 billion to develop Conroe Field as a tertiary flood, including the estimated cost of the CO2 pipeline. The company initially funded the cash portion of the purchase with bank debt, but expects to cover approximately $210 million of the cash portion of this purchase with the sale of its remaining Barnett shale assets. Phil Rykhoek, Denbury chief executive, says, "Conroe Field is the single largest potential tertiary flood on our list of desired Gulf Coast properties. This is a natural expansion of our Gulf Coast enhanced oil-recovery (EOR) operations, and allows us to more completely utilize the Green Pipeline currently under construction…These transactions, coupled with the pending Encore acquisition, provide us with many more years of potential production growth in our EOR program, well beyond the projected peak from our first eight phases in the Gulf Coast." Upon completion, he adds, Denbury will have more than 1 billion barrels of potential oil reserves, making the company one of the largest oil-focused independents in North America. Wapiti chairman and chief executive Dick Agee says, "It took Wapiti years to consolidate the ownership of Conroe Field. As the enormous tertiary potential of the field became clear to us, we understood that the field belonged in the hands of EOR experts. We are pleased that Denbury, one of the preeminent CO2 players in the industry, will be managing the development of Conroe. We are delighted to become shareholders of this exciting company." Private-equity provider Quantum Energy Partners holds a minor interest in Wapiti.