Denbury Resources Inc.
) has closed its previously announced divestiture program with
U.S. energy giant
) and its subsidiary, XTO Energy.
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Per the deal, Denbury received $1.3 billion in cash from the U.S.
behemoth in the first of the two closings and ExxonMobil
transferred its operating interests in Webster Field in Texas and
Hartzog Draw Field in Wyoming to Denbury.
Plano, Texas-based Denbury has kept aside its 17.5% pre-closing
interest in the Bakken area assets for the second phase of the
agreement, which is scheduled to get sealed by the end of the
year. In exchange, ExxonMobil withheld $350 million of cash for
the concerned properties.
Again, in the second set of deal, Denbury will get a portion in
the carbon dioxide (CO2) reserves in ExxonMobil's LaBarge Field
in Wyoming. In return, ExxonMobil will get its hold over the
Denbury's retained Bakken interests. This deal will involve
necessary cash adjustments.
However, upon failure of the second phase, Denbury aims to
offload its retained 17.5% Bakken area interest to ExxonMobil for
the withheld $350 million.
ExxonMobil will get its hold over 196,000 net acres in North
Dakota and Montana. It is expected that the combined acreage will
produce 15,000 barrels of oil and other hydrocarbons per day in
the second half of 2012. The deal will boost ExxonMobil's stake
by 50% in the Bakken shale region to 600,000 acres.
Despite the collapse in natural gas prices, ExxonMobil -- the
largest natural gas producer in the U.S., ahead of
Chesapeake Energy Corporation
) -- expects unconventional gas to play a dominant role in future
supplies owing to the rapid decline in conventional production.
Denbury plans to utilize portions of the cash proceeds from the
first phase of the sale to acquire certain interests in other oil
fields on the Gulf Coast or Rocky Mountain regions. These assets
are appropriate for CO2-enhanced oil recovery, which involves
injection of CO2 into geological formations holding crude.
For the long term, we maintain our Neutral recommendation. The
company carries a Zacks #3 Rank (short-term Hold rating).