2010-10-14-2010-10-12
To buy Haynesville and E TX asssts, gaining 34 MMcfe/d.
Denbury Resources Inc., Dallas, (NYSE: DNR) plans to sell its Haynesville and East Texas natural gas assets to a private oil and gas company for approximately $217.5 million.
The assets averaged production of 34 million cubic feet of gas equivalent per day during the second quarter.
Denbury plans to utilize a 1031 like-kind exchange with a portion of the remaining proceeds paying most of its currently outstanding bank debt and to fund any shortfall between our anticipated 2010 and 2011 cash flow. These proceeds will be directed toward its recently announced acquisition of CO2 assets in the Riley Ridge unit in Wyoming.
Denbury chief executive Phil Rykhoek says, "With this sale, we have nearly completed our planned divestiture program relating to the Encore (Acquisition Co.) assets acquired this March, all designed to reduce our leverage incurred from the Encore acquisition and to focus our capital investments and energy on our core tertiary operations and the acquired Bakken assets where we believe we have lower risk, greater predictability, and higher profitability."
Denbury acquired Encore in March for approximately $4.5 billion, gaining more than 300,000 net acres in the North Dakota Bakken shale, a 30% working interest in 100,000 gross acres in West Texas in a joint venture with ExxonMobil Corp., Irving, Texas, (NYSE: XOM) more than 19,000 net acres in the Haynesville shale play in Caddo and Desoto parishes, Louisiana, and proved reserves in the Powder River and Williston basins in Montana and Wyoming.
Rykhoek adds that due to strength in oil prices versus gas prices and Denbury's significant inventory of tertiary projects and Bakken drilling locations, the company will focus its time and money on these properties rather than in the Haynesville.
RBC Richardson Barr is advisor to Denbury. The deal is expected to close by late November.
KeyBanc Capital Markets Inc. vice president Mitchell Wurschmidt says despite week gas prices, the company received a decent deal value of approximately $6,300/ per thousand cubic feet equivalent per day and roughly $9,600 per acre.
Wurschmidt says, "We believe the Haynesville sale largely comes as a surprise, given low natural gas prices and most are more focused on the expected sale of ENP."