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Denbury to buy Cedar Creek anticline assets for $1.05 billion

Denbury Resources Inc. agreed to acquire producing property interests in the Cedar Creek anticline of Montana and North Dakota from a wholly owned subsidiary of ConocoPhillips for $1.05 billion cash.

The assets to be purchased include additional interests in Denbury’s existing operated fields in Cedar Creek anticline along with operating interests in other fields within the structure.

Cedar Creek anticline is 110 miles north of Denbury's Bell Creek field, which Denbury plans to start flooding with carbon dioxide in the first half of 2013 using the recently completed Greencore pipeline to deliver CO2 from central Wyoming.

Denbury is designing a CO2 development plan for Cedar Creek that will include the properties being acquired from ConocoPhillips. The company estimates a CO2 flood of the to-be-acquired properties could recover 60-80 million bbl of oil.

All total, including the assets to be acquired, Denbury estimates a CO2 flood of its Cedar Creek assets could recover 260-280 million bbl of oil.

The acquisition, subject to completion of due diligence, is expected to close near the end of this year’s first quarter with a Jan. 1 effective date.

Denbury estimates that at yearend 2012 the proved conventional reserves to be acquired were 42 million boe, of which 95% was oil and 91% was proved developed producing.

Net to the acquired interest, Denbury estimates current average production from the to-be-acquired properties at 11,000 boe/d, of which 99% is oil and natural gas liquids. Assuming closing as scheduled, Denbury estimates full year 2013 average daily production would increase by 7,700 boe/d.

The Creek Creek anticline extends 126 miles in a northwest-southeast and ranges from 2-6 miles in width. The structure contains a collection of oil fields. Commercial quantities of oil were discovered in the early 1950s.

Original oil in place at all fields, including those not owned by Denbury, is estimated at over 3 billion bbl.

The anticline produces from numerous reservoirs with the primary reservoir being the Red River formation.

Reservoir characteristics of Cedar Creek anticline are similar in many respects to oil fields successfully flooded with CO2 in the Permian basin of West Texas and Weyburn field in the Canadian Williston basin.

Contact Paula Dittrick at paulad@ogjonline.com.


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