A&D Intelligence

Yesterday, Denbury Resources announced it is buying the old and aging Conroe Unit north of Houston for $600MM with plans to pump it full of CO2 and squeeze out a lot more production, the very thing the EOR-focused company does best. To fund the deal, it wants to sell out of all of its assets in the Barnett shale in North Texas—and flip the proceeds through an IRS 1031 like-kind exchange to maximize its buying power.

Denbury has set up the structure as a reverse exchange. They just need a buyer, and the sooner the better, says CFO Phil Rykhoek. “Sharpen your pencils and bring your checkbook.”

Denbury holds some 20,000 acres in Parker County currently producing 80.6 MMcfe/d. Proved reserves year-end 2007 were 369 Bcfe with another 170 probable. The company has been drilling 50 wells per year since 2006 and that is ongoing at present. The land is developed on 500-foot spacing, Rykhoek says, but downspacing is possible.

Rykhoek says a data room is going to open within a couple of weeks, but inquirers are welcome now. Contact Tracy Evans at 972-673-2028, or Brad Cox at 972-673-2129.

Steve Toon, Editor, A&D Watch; Contributing Editor, Oil and Gas Investor; www.OilandGasInvestor.com; stoon@hartenergy.com

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