Denbury Resources to Farm-Down 50% of Its Working Interest in Four Texas Conventional Oil Fields to Navitas Petroleum for $50...
December 23 2019 - 6:00AM
Denbury Resources Inc. (NYSE: DNR) (“Denbury” or the “Company”)
today announced that it has entered into a definitive agreement
with a subsidiary of Navitas Petroleum (TASE: NVPT.L, “Navitas”) to
sell half of its nearly 100% working interest position in four
southeast Texas oil fields (consisting of Webster, Thompson, Manvel
and East Hastings), for $50 million cash and a carried interest in
ten wells to be drilled by Navitas. The sale is expected to
close by early March 2020 and is subject to customary closing
conditions. The Company anticipates using the sale proceeds
to fund operations, enhance liquidity and/or reduce debt.
TRANSACTION HIGHLIGHTS
- Denbury will sell 50% of its working interest in Webster,
Thompson, Manvel and East Hastings oil fields for $50 million cash
and a carried interest in ten wells to be drilled by Navitas.
Denbury will remain operator of the fields but Navitas will drill
and complete each of the ten wells.
- Under the agreement, Navitas is committed to funding 100% of
the capital required to drill and complete an initial ten
horizontal wells across the fields, with the first of the ten wells
to be spudded within six months of closing and with all ten wells
to be completed within 18 months after closing. For these
initial ten wells, Denbury will receive only a 6.25% overriding
royalty interest prior to the combined payout of the wells drilled
in a specific field. Subsequent to payout, Denbury will hold
and bear the cost of its 50% working interest in each well.
Navitas is required to drill at least one well in each of the four
fields.
- After the initial ten well program is completed and if certain
performance hurdles are achieved, Navitas will have the opportunity
to continue the development of the fields for up to six separate
extension periods. During each extension period, Navitas can
propose and drill up to ten additional wells, totaling up to 60
additional wells on a pro-rata working interest basis.
- Denbury will retain 100% ownership of the future Webster Unit
CO2 enhanced oil recovery (“EOR”) project, wherein:
- Navitas may elect to participate in the future CO2 EOR project
through reimbursement to Denbury of Navitas’ working interest share
of project costs incurred to date; or
- If Navitas declines to participate in the CO2 EOR project,
Denbury has the right to repurchase Navitas’ working interest in
Webster under a contractually agreed valuation mechanism.
Production associated with the working interests
to be sold averaged approximately 1,050 barrels of oil equivalent
per day for the first nine months of 2019, and proved reserves for
the working interests to be sold were approximately 3.7 million
barrels of oil as of December 31, 2018. Estimated net cash to
Denbury from the sale is $42 million after adjusting for interim
cash flow from the properties between the January 1, 2019 effective
date and the estimated early March 2020 closing date. Denbury
retains the right to 100% of the proceeds from surface acreage
sales at Webster Field.
MANAGEMENT COMMENT
Chris Kendall, Denbury’s President and CEO,
said, “This transaction provides a significant opportunity to
expand the value of our portfolio and highlights the premium value
of our oil-rich conventional assets. Through partnering with the
experienced Navitas team, we expect to accelerate conventional
exploitation of unproven oil resources across these fields, while
providing Denbury additional flexibility for our 2020 capital plans
and debt reduction efforts.”
ABOUT DENBURY RESOURCES
Denbury is an independent oil and natural gas
company with operations focused in two key operating areas: the
Gulf Coast and Rocky Mountain regions. The Company’s goal is
to increase the value of its properties through a combination of
exploitation, drilling and proven engineering extraction practices,
with the most significant emphasis relating to carbon dioxide
enhanced oil recovery (CO2 EOR) operations. For more
information about Denbury, please visit www.denbury.com.
This press release, other than historical
financial information, contains forward-looking statements that
involve risks and uncertainties, including estimates of oil
reserves, 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.
DENBURY CONTACTS:
Mark C. Allen, Executive Vice President and Chief Financial Officer, 972.673.2000
John Mayer, Director of Investor Relations, 972.673.2383
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