Denbury Resources Inc. (DNR: Quote) said Thursday that it has agreed to sell its Bakken shale assets in North Dakota and Montana to Exxon Mobil Corp. (XOM: Quote) and its subsidiary XTO Energy Inc.
The company noted that the sale will enable it to focus on CO2 enhanced oil recovery or EOR, which it believes offers one of the most compelling rates of return in the oil and gas industry.
In exchange for its Bakken shale assets, Denbury will receive $1.6 billion in cash and also acquire ExxonMobil's operating interests in Webster Field in Texas and Hartzog Draw Field in Wyoming. The company noted that both the fields are ideal candidates for carbon dioxide flooding and close to its existing or planned CO2 pipelines.
Separately, ExxonMobil noted that the deal will increase its holdings in the Bakken region by about 50 percent to nearly 600,000 acres, giving the company a significant presence in one of the major U.S. growth areas for onshore oil production.
Denbury has also agreed in principle to either buy an interest in the CO2 reserves in ExxonMobil's LaBarge Field in southwestern Wyoming or purchase incremental CO2 from that field under an existing contract, on mutually acceptable terms. However, the purchase of an interest in CO2 reserves would reduce the amount of cash the company will receive.
The transactions are expected to close late in the fourth quarter of 2012, with an effective date of July 1, 2012. Denbury estimates after-tax cash proceeds from the transaction, without giving effect to closing adjustments, to be about $1.1 billion.
Phil Rykhoek, President and CEO of Denbury said, "This trade allows us to realize that value and leverage our Bakken position to acquire two of the top oil fields in our core operating regions that are candidates for CO2 flooding, while also adding incremental CO2 resources in the Rocky Mountain region and increasing liquidity by over $1 billion."
Denbury intends to use cash proceeds from the transaction to buy additional oil fields in the Gulf Coast or Rocky Mountain regions that are suited for CO2 flooding, to fund capital expenditures and to repay outstanding debt under its bank credit facility.
Denbury also plans to resume its stock repurchase program that commenced in October 2011, under which $195 million of the $500 million of authorized repurchases have been made.
Denbury's Bakken shale assets being sold consist of about 196,000 net acres in North Dakota and Montana. Proved reserves attributed to these assets were about 96 million barrels of oil equivalent as of December 31, 2011.
Average production from the properties in the first half of 2012 was about 15,400 barrels of oil equivalent per day, of which 88 percent was oil and natural gas liquids.
In Thursday's pre-market, DNR is trading at $18.10, up $1.38 or 8.25 percent from Wednesday's close. XOM is trading at $90.07, down $0.50 or 0.55 percent from Wednesday's close.
| || |
| To receive FREE breaking news email alerts for Denbury Resources Inc. and others in your portfolio|
by RTT Staff Writer
For comments and feedback: email@example.com