Denbury acquiring carbon dioxide reserves in Wyoming

By OGJ editors
HOUSTON, Sept. 23 -- Denbury Resources Inc. agreed to acquire a 42.5% nonoperated working interest in the Riley Ridge federal exploratory unit in southwestern Wyoming for $115 million.

The transaction includes 33% of the carbon dioxide rights in 28,000 acres adjoining the Riley Ridge unit. The Riley Ridge unit and the adjoining acreage are in LaBarge field.

Closing, subject to due diligence, is expected by Oct. 31.

Denbury estimates the Riley Ridge acquisition contains proved reserves of 185 bcf of natural gas, 6.6 bcf of helium, and 1 tcf of CO₂, net to the interest being acquired.

The additional adjoining acreage is estimated to contain an additional 1 tcf of probable CO₂ reserves, net to the same interest.

Denbury expects net development costs associated with the Riley Ridge unit to be $24 million during 2010 and $32 million in 2011.

The estimate includes the costs of drilling an additional producing well and constructing processing facilities to separate the natural gas and helium. The full well stream is expected to consist of 65% CO₂, 19% natural gas, 10% hydrogen sulfide, 0.6% helium and other gases.

Initially the operator plans to re-inject the CO₂ and hydrogen sulfide, but Denbury will have the right to separate and take the CO₂ and reinject the H₂S.

Denbury said no decision has been made whether or when to construct processing facilities to separate CO₂ from the H₂S.