Denbury Resources (DNR : NYSE : US$17.30)
subject to closing adjustments, and ExxonMobil’s operating interests in Webster Field in Texas and Hartzog Draw Field in Wyoming, both of which are ideal candidates for carbon dioxide flooding and close to Denbury’s existing or planned CO(2) pipelines. In addition, Denbury has agreed in principle to either purchase an interest in the CO(2) reserves in ExxonMobil’s LaBarge Field in southwestern Wyoming or purchase incremental CO(2) from that field, on terms and conditions to be mutually agreed upon by the parties.
The purchase of an interest in CO(2) reserves would reduce the amount of cash received by Denbury. Denbury intends to use the cash proceeds from the transaction to pursue the purchase of additional oil fields in the Gulf Coast or Rocky Mountain regions that are suited for CO(2) flooding, to fund capital expenditures, and/or to repay outstanding debt under its bank credit facility.
Additionally, Denbury plans to resume its stock repurchase program begun in October 2011 under which $195 million of the $500 million of authorized repurchases have been made. Assuming no additional assets are acquired with the cash proceeds in a manner that would qualify for like-kind exchange treatment for federal income tax purposes, Denbury estimates that its after-tax cash proceeds from the transaction will be approximately $1.1 billion.