DALLAS--(BUSINESS WIRE)--May 9, 2006--Denbury Resources Inc.
(NYSE: DNR) ("Denbury" or the "Company") today announced that it has
entered into an agreement with Natural Gas Systems Inc. (OTC: NGSY) to
acquire the Delhi Holt-Bryant Unit ("Delhi") in northern Louisiana for
$50 million, plus a 25% reversionary interest to the seller after the
Company has achieved $200 million in net operating revenue, as
defined. The acquisition is expected to close by the end of May and is
subject to satisfactory completion of normal and customary due
diligence and closing conditions.
Transaction Highlights
$ The acquisition includes the purchase of substantially all the
interest in the Delhi Holt-Bryant Unit, located in northern
Louisiana about 65 miles southwest of the recently acquired
Tinsley Field.
$ Delhi is a potential carbon dioxide ("CO2") tertiary flood
candidate. The Company initially has estimated that this field
has an estimated net reserve potential from CO2 tertiary
floods of up to 30 to 40 million barrels of oil equivalent
("MMBOE"), net of the projected reversionary interest based on
a $60 oil price.
$ The Company will need to build a pipeline to transport CO2 to
this field from Jackson Dome (the Company's CO2 source field
near Jackson, Mississippi). The Company is initiating studies
and plans to construct this line, with a goal of having it
installed and operational within the next two to three years.
$ Based on preliminary Company estimates, it will cost between
$125 million and $150 million to develop this field, excluding
the cost of the CO2 pipeline which, based on very preliminary
estimates, is expected to be between $75 million and $100
million.
$ Delhi currently is producing less than 100 Bbls/d and has
nominal conventional proven reserves.
$ Delhi produces light sweet oil which is expected to sell for
near NYMEX prices.
$ The Company will use its currently unused bank credit line to
fund the acquisition.
Gareth Roberts, CEO of Denbury, commented on the transaction,
saying: "This acquisition is the continuation of our strategy, a
natural extension beyond the recently acquired Tinsley Field, and will
constitute the fifth phase of our ongoing program. In order to flood
Delhi, we will use our remaining unallocated proven CO2 reserves (500
Bcf) at Jackson Dome, although it is our goal to add 3 to 4 more Tcf
of CO2 within the next few years through further drilling. We
currently plan to commence CO2 injections at Delhi in three years,
although if things go well, we hope to start before then. With this
acquisition, our long-term CO2 program should give us access to, as
much as, 300 MMBbls of tertiary oil reserves, including our currently
proven tertiary oil reserves and historical tertiary oil production.
Our tertiary operations continue to provide Denbury an unique
opportunity for growth for years into the future."
The Company's typical presentation of financial and operational
highlights at its annual meeting of shareholders, being held this
Wednesday, May 10th, at 3:00 p.m. (CDT) at the Company's headquarters,
will include updated long-term assumptions for its CO2 business model
modified to include Delhi Field, the last of the Company's currently
projected tertiary oil recovery phases. Slides from this presentation
will be archived on the Company's website, www.denbury.com, for
approximately 30 days thereafter.
Denbury Resources Inc. (www.denbury.com) is a growing independent
oil and gas company. The Company is the largest oil and natural gas
operator in Mississippi, owns the largest reserves of CO2 used for
tertiary oil recovery east of the Mississippi River, and holds key
operating acreage in the onshore Louisiana and Texas Barnett Shale
areas. The Company increases the value of acquired properties in its
core areas through a combination of exploitation drilling and proven
engineering extraction practices.
This press release, other than historical financial information,
contains forward looking statements that involve risks and
uncertainties including expected reserve quantities and values
relating to the Company's proved reserves, the Company's potential
reserves from its tertiary operations, particular fields or potential
CO2 reserves, estimated capital expenditures for 2006, pricing
assumptions based on current and projected oil and natural gas prices,
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.
Cautionary Note to U.S. Investors - The United States Securities
and Exchange Commission permits oil and gas companies, in their
filings with the SEC, to disclose only proved reserves that a company
has demonstrated by actual production or conclusive formation tests to
be economically and legally producible under existing economic and
operating conditions. We use certain terms in this press release, such
as potential reserves, that the SEC's guidelines strictly prohibit us
from including in filings with the SEC.
CONTACT: Denbury Resources Inc.
Gareth Roberts, 972-673-2000
or
Phil Rykhoek, 972-673-2000
www.denbury.com
SOURCE: Denbury Resources Inc.
