Denbury to Acquire Encore for $4.5B Transaction; Creates One of the Largest Crude Oil Upstream North American Independents and One of the Largest CO2 EOR Platforms
02 November 2009
Denbury Resources Inc. and Encore Acquisition Company have entered into a definitive merger agreement pursuant to which Denbury will acquire Encore in a transaction valued at approximately $4.5 billion, including the assumption of debt and the value of the minority interest in Encore Energy Partners LP. The combined company will continue to be known as Denbury Resources Inc. (the “Company”) and will be headquartered in Plano, Texas. The transaction positions Denbury as one of the largest crude oil-focused, independent North American exploration and production companies.
The acquisition will also create one of the largest CO2 enhanced oil recovery (EOR) platforms diversified across the Gulf Coast and Rocky Mountain regions, complemented by ownership and control of the Jackson Dome CO2 source in Mississippi and CO2 sequestration contracts secured with anthropogenic sources in the Gulf Coast, Midwest and Rockies. The combined companies will have over 500 MMBOE of additional potential barrels recoverable with CO2 tertiary operations. The longer lead-time of CO2 project development in the Rockies is ideally matched with a strong growth profile from low-risk development of unconventional resource plays in the Bakken oil shale in North Dakota and the Haynesville shale in North Louisiana. Encore has one of the larger acreage positions in the prolific Bakken oil shale with over 300,000 net acres.
Encore is an excellent fit with Denbury’s CO2 EOR program. Encore has built an enviable asset portfolio in the Rockies, anchored by mature legacy crude oil assets, and our combined size and scale of operations will allow us to undertake significantly larger CO2 projects in the Gulf Coast and the Rockies. This combination will also further enhance Denbury’s position as the natural buyer and owner of mature oil properties in our core regions and the partner of choice for CO2 emitters looking to reduce their carbon footprint.
With the addition of the Encore properties, we more than double our current inventory of oil reserves recoverable with CO2, and greatly expand our future growth potential with a second new core EOR area in the Rockies that has significant future expansion opportunities. The anticipated EOR production from the Encore properties will fit nicely into our overall EOR program, providing production growth in 2015 and beyond, about the time when we anticipate nearing the production peak of our existing EOR field inventory.
In addition, the growth potential from Encore’s Bakken shale oil play further enhances its value and provides short-term production growth and cash flow as we develop the longer term EOR program.
—Phil Rykhoek, Chief Executive Officer of Denbury
Comments