Denbury to Get $155M on Asset Sale - Analyst Blog
January 13 2012 - 11:40AM
Zacks
Texas-based Denbury Resources Inc (DNR) has
inked a definitive agreement with oil-focused exploration and
production company Petro Harvester Oil and Gas to sell some of its
non-core assets -- located mainly in Mississippi and Louisiana --
for $155 million.
The buyer, Petro Harvester Oil and Gas, is privately held and
backed by private equity firm TPG Capital. It was formed to buy
mature producing assets in North America.
Denbury intends to use the sale proceeds to partly reduce its
debt under the credit facility. The transaction is expected to be
completed by the end of February 2012 and is subject to customary
closing conditions.
The assets to be shed had proved reserves of approximately 6.2
million barrels of oil equivalent (93% oil), as of December 31,
2010. The reserves consist of 54% proved developed producing and
46% proved developed non-producing.
The assets being sold include 138 operated wells in 29 producing
oil and gas fields. Denbury expects output of about 1400 barrels of
oil equivalent per day from properties, per the 2012 production
guidance issued earlier.
Denbury has a relatively low-risk business model – it produces
oil by applying tertiary recovery techniques to mature fields.
Tertiary operations remain the company’s principal focus area.
Denbury is continuously expanding its tertiary floods in the
Tinsley, Heidelberg and Delhi Fields.
In an attempt to fund its planned $1.35 billion investment
program and stock buybacks without putting pressure on the balance
sheet, Denbury is making a conscious effort to sell its non
operated interest in Utah’s Greater Aneth oil field by the end of
2012.
Moreover, the early start of production at its Oyster Bayou will
help fund its program partly. We are also optimistic about the
expected increase in output for 2012, given the accelerated
drilling in the Bakken area.
Denbury holds a Zacks #2 Rank, which is equivalent to Buy rating
for a period of one to three months. For the long term, we maintain
a Neutral recommendation on the stock. The company faces
considerable threat from Newfield Exploration
Company (NFX).
DENBURY RES INC (DNR): Free Stock Analysis Report
NEWFIELD EXPL (NFX): Free Stock Analysis Report
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