Denbury expects oil development activities to increase capex in Q4
Denbury Inc. expects capital expenditures in this year’s fourth quarter, about $135 million, to be higher than third-quarter 2022 due to oil development activities, particularly at the company’s Cedar Creek Anticline (CCA) enhanced oil recovery (EOR) project in Montana and North Dakota.
The CCA EOR project targeted initial tertiary production by late 2021 or early 2022, Denbury said upon project sanction in June 2018 (OGJ Online, June 19, 2018).
Fourth-quarter 2022 sales volumes of 47,500-49,000 boe/d are expected, with the midpoint up nearly 2.5% from third-quarter 2022. The predicted volumes are slightly lower than original expectations due to timing associated with equipment and materials delays, which should benefit production in early 2023, the company said in a release Nov. 3.
Third-quarter 2022
Total revenues and other income in third-quarter 2022 were $439 million, down from second-quarter 2022 levels due to lower oil prices, offset by a slight increase in quarterly sales volumes. Third quarter 2022 net cash flows provided by operating activities totaled $156 million, and adjusted cash flows from operations, excluding working capital changes, totaled $156 million.
Sales volumes averaged 47,109 boe/d during the quarter, slightly above expectations and 548 boe/d higher than second-quarter 2022 levels. Oil represented 97% of the company’s third-quarter 2022 volumes, and 28% of the company’s oil was attributable to the injection of industrial-sourced CO2 in its EOR operations.
Third quarter sales volumes in the Gulf Coast region were up almost 2% from second-quarter 2022 as multiple projects added incremental production, including the Rodessa development at Soso. In the Rocky Mountain region, sales volumes were up slightly compared with second-quarter 2022 driven primarily by continued positive CO2 flood response at Grieve and development at Beaver Creek, partially offset by workover activities and downtime at CCA.
Third-quarter 2022 capital expenditures, excluding capitalized interest, totaled $108 million (92% oil and gas development, 8% CCUS activities). The total was lower than expected due to supply chain disruptions that delayed some third quarter activities into the fourth quarter.
Capital expenditures at the CCA EOR project increased from second-quarter 2022 primarily due to procurement and installation of compression and dehydration equipment associated with CO2 recycle infrastructure for Phase 1 development. In addition, drilling and construction at the Pennel CO2 pilot, in advance of Phase 2 development of CCA, began in the quarter. Non-CCA oil and gas development capital reflected continued focus on expansion of existing EOR assets, including Beaver Creek, Cranfield, Heidelberg, and Soso field activities.