Editor's Note:  An original version of this report was posted at 6:440 a.m. on Dec. 22, 2019.

Denbury Resources Inc. said it has entered into a definitive agreement with a subsidiary of Navitas Petroleum 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.

Denbury will remain operator of the fields but Navitas will drill and complete each of the 10 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 10 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 10 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 10-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 project. 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 Dec. 31, 2018.  Estimated net cash to Denbury from the sale is $42 million after adjusting for interim cash flow from the properties between the Jan. 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.

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.”