?Dallas-based, privately held Talon Oil & Gas LLC, an EnCap Investments LP-backed company formed in 2007 and led by Grant Henderson, plans to acquire a 60% interest in Barnett shale assets of Denbury Resources Inc., Dallas, (NYSE: DNR) for $270 million.
Denbury holds approximately 20,441 gross acres (19,457 net) in the Barnett shale in north-central Texas in Parker, Wise, Tarrant and Johnson counties. At year-end 2008, proved reserves were approximately 458 billion cu. ft. equivalent, including 77 proved undeveloped locations, plus an additional 64 probable undeveloped locations based on 500-foot spacing.
Production net to Talon’s interest averaged approximately 45.7 million cu. ft. equivalent per day (77% gas) during 2008, representing approximately 16% of Denbury’s 2008 production and approximately 18% of its total proved reserves as of year-end.
Additionally, Talon is acquiring a portion of Denbury’s gas swaps. Swaps for 2010 total 16 million cu. ft. per day at an average price of approximately $5.65 per million Btu. Swaps for 2011 total 13 million per day at an average price of approximately $6.16 per million Btu.
“We’re excited about the transaction and think this will be a great relationship with Denbury going forward,” says Talon president Henderson. “They’ve got an excellent position in an excellent resource play.”
Denbury president and chief executive Gareth Roberts says, “This sale further enables us to concentrate our investment and management focus on our tertiary operations where we have lower risk, virtually no competition in our areas of operation and higher profitability. We plan to use these funds to increase our 2010 tertiary-related spending beyond what we could accomplish using only cash flow.
Denbury will use proceeds to pay debt. The deal is expected to close in late June. The effective date is June 1.
In addition to the Barnett, Denbury also owns CO2 reserves for tertiary oil recovery in Mississippi, with additional interests onshore Louisiana and Alabama, and in southeastern Texas.
Talon has interests in East Texas in Nacogdoches County targeting the Travis Peak formation, and in the Texas Panhandle in Hemphill and Wheeler counties targeting the Granite Wash. Including this deal, the company has made $345 million in acquisitions.
KeyBanc Capital Markets Inc. vice president Mitchell Wurschmidt values the deal at approximately $0.98 per proved million cu. ft. equivalent based on year-end 2008 proved reserves for the interest in the properties and $7,450 per flowing million cu. ft. equivalent per day based on first-quarter production.
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