Denbury Resources Inc. (DNR) agreed to acquire from Cimarex Energy Co. (XEC) the 57.5% interest it doesn't already own in the Riley Ridge project in Wyoming and a 33% working interest in nearby land for about $191 million.
The acquisition of the 9,700-acre natural gas and carbon dioxide project comes as natural gas prices remain low on a historical basis and demand for alternative energy sources is robust.
Denbury estimates the Riley Ridge area contains proved reserves of 250 billion cubic feet of natural gas, 8.9 Bcf of helium and about 1.4 trillion cubic feet of carbon dioxide.
The purchase price consists of a $176 million payment at closing and a $15 million contingent payment to be paid at the time the gas processing facility is operational and meeting specific performance conditions.
First production of natural gas and helium is expected to occur in the fourth quarter, while development costs are seen adding about $50 million in 2011 capital spending.
The deal also includes operations and working interests in an adjoining 28,000 acres of which Denbury previously only had CO2 rights.
Meanwhile, Cimarex said the sale doesn't affect its expected 2011 production estimates as the plant wasn't expected to come online until late this year. Proceeds from the divestiture are expected to be reinvested in its capital program.
Shares of Denbury were up 0.9% at $18.92 in recent trading, while Cimarex edged up 0.7% at $85.40.
-By Lauren Pollock, Dow Jones Newswires; 212-416-2356; email@example.com
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