Oil and natural gas company
Denbury Resources Inc.
) plans to use most of the proceeds raised from its asset sale to
) in 2012, to work out a purchase deal with
CONOCOPHILLIPS (COP): Free Stock Analysis
DENBURY RES INC (DNR): Free Stock Analysis
EXXON MOBIL CRP (XOM): Free Stock Analysis
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Denbury inked an agreement with a wholly owned subsidiary of
ConocoPhillips to purchase the producing property interests in
Cedar Creek Anticline (CCA). Spread across 86,000 acres between
eastern Montana and southwestern North Dakota, the interests in
CAA will be sold for $1.05 billion in cash.
The purchase will comprise interests in some properties already
being operated by Denbury along with operating interests in some
new CCA acreage. With an effective date of January 1, 2013, the
deal is scheduled to close by the end of the first quarter.
The purchase price will be taken from the $1.3 billion Bakken
asset sale to ExxonMobil in December 2012.
At year-end 2012, the assets to be purchased had estimated proved
conventional reserves of about 42 million barrels of oil
equivalent, of which 95% was oil and 4% gas liquids.
Both the companies will benefit from this deal. The CAA acreage
matches Denbury's existing portfolio. Also, recovery from these
fields requires supply of carbon dioxide - a process in which
Denbury excels in the Gulf of Mexico. For ConocoPhillips, the
deal will be part of its already announced asset divestiture
The deal is also tax efficient for Denbury as it exempts over
$400 million of the $500 million of cash taxes initially
estimated on the Bakken transaction. This was prior to the
purchase of CO2 reserves and approval of the acquisition of the
Denbury holds a Zacks Rank #3 (short-term Hold rating). Longer
term, we maintain our Neutral recommendation.