Denbury Sells Off Utah Paradox Basin Assets To Resolute, Navajo Nation Oil

Exercised option to acquire 10% interest in Aneth Field in UT Parado Basin, retaining option to acquire an additional 10% working interest in 2017.

Resolute Energy Corp., Denver, (NYSE: REN) and St. Michaels, Ariz.-based Navajo Nation Oil and Gas Co. have purchased the remaining nonoperated assets in the Greater Aneth Field in the Paradox Basin of Utah from Denbury Resources Inc., Plano, Texas, (NYSE: DNR) for $75 million. The assets were acquired on a 50-50 basis and represent the last significant ownership interests in the Aneth and Ratherford units not yet owned by the partnership.

The acquired assets include a 13% working interest in the Aneth unit and an 11% working interest in the Ratherford unit. Acquired daily production is approximately 650 barrels of oil per day. Proved reserves as of year-end 2011 were approximately 6.4 million barrels of oil equivalent (98% oil, 58% proved developed producing). The effective date is Jan. 1, 2012.

Denbury president and chief executive Phil Rykhoek says, “This sale completes our planned 2012 noncore asset divestitures. Altogether, we sold assets for approximately $313.5 million, before taxes and closing adjustments, consisting of the sale of Vanguard Natural Resources units in January for $83.5 million, the sale of Gulf Coast assets at the end of February for $155 million, and now the sale of Paradox Basin assets for $75 million.”

In a separate deal, NNOG exercised an option to acquire a 10% interest in Aneth Field from Denbury for $100 million, to be paid for in two transfers in July 2012 and January 2013. The effective date is Jan. 1, 2012. NNOG retains an option to acquire an additional 10% working interest in 2017.

Resolute chairman and chief executive Nick Sutton says, "These transactions, taken together, have strong economics for Resolute while presenting NNOG and the Navajo Nation the opportunity to increase their ownership interest in Aneth Field and the tertiary recovery projects that we have undertaken there."

Raymond James analyst John Freeman places deal metrics on the Denbury assets at $115,000 per flowing BOE and $12 per BOE proved. On the NNOG acquisition, Freeman believes the transaction highlights the real value that exists within Resolute's core asset at its Aneth Field.

"The company's 10% sale of the field for $100 million implies a valuation of $1 billion, in line with the assets' PV-10 value but more than $200 million above Resolute's total enterprise value."