Denbury Resources Sanctions Cedar Creek Anticline CO2 EOR Development
June 18 2018 - 4:30PM
Denbury Resources Inc. (NYSE:DNR) (“Denbury” or the “Company”)
today announced that the Company has sanctioned a CO2 enhanced oil
recovery (“EOR”) project at Cedar Creek Anticline (“CCA”).
CCA is a massive geological feature stretching approximately 125
miles in length across parts of Montana, North Dakota and South
Dakota. Denbury’s portion of CCA covers approximately 175,000 acres
and is estimated to hold up to five billion barrels of original oil
in place.
KEY PROJECT HIGHLIGHTS:
- Targets EOR potential greater than 400 million barrels,
with initial tertiary production expected by late 2021 or early
2022
- Modest capital to first tertiary production of
approximately $250 million (including CO2 pipeline) can be funded
with cash flow
- First two project phases are estimated to generate $3
billion of cumulative net free cash flow at $60 oil
Chris Kendall, Denbury’s President and CEO,
commented, “The decision to sanction this significant project marks
a major milestone for the Company and highlights our confidence in
the significant long-term oil production and cash flow potential of
this key asset. Over the last few years, the Denbury team has
worked diligently to prepare this project for execution,
capitalizing on our vast EOR experience, and I am proud of all the
efforts that made the sanctioning of this project possible.
“We expect this project could ultimately produce
more than 400 million barrels of oil through CO2 enhanced oil
recovery, much greater than Denbury’s entire current proved
reserves base and is attractive at $50 oil. I believe CCA
will deliver significant value to Denbury and our stakeholders for
many years.”
PLANNED DEVELOPMENT SUMMARY
- Phase 1 of the project targets 30 million
barrels of estimated recoverable oil in the Red River formation at
East Lookout Butte and Cedar Hills South fields.
- Includes a 110-mile, $150 million extension of the Greencore
CO2 Pipeline from the Company’s Bell Creek Field, which will
benefit all future CCA EOR development, and equates to less than
$0.50 per barrel across the total potential CCA EOR resource.
- Estimated field development capital (in addition to the CO2
pipeline) of $100 million before first tertiary production, and an
estimated $400 million of total capital over a 15-year period. Peak
capital investment is expected in 2019 at $125 – $150 million,
mainly for the CO2 pipeline, and is generally expected to be less
than $50 million per year thereafter.
- First tertiary production projected in late 2021/early 2022,
with incremental production expected to reach between 7,500 and
12,500 barrels of oil per day within three years of first
production.
- Phase 1 payout is expected within two years of first
production.
- Capital for both field development and the CO2 pipeline is
expected to be sourced from available cash flow, but external
capital sources will also be evaluated for the CO2 pipeline.
- Phase 2 of the project is estimated to begin
in 2022 and will target approximately 100 million barrels of
recoverable oil in the Interlake, Stony Mountain and Red River
formations at Cabin Creek field.
- Estimated development capital of between $500 – $600 million
over multiple decades, anticipated to be fully funded from Phases 1
and 2 cash flow.
- Future Phases of the project, targeting over
300 million barrels of estimated recoverable oil in the Interlake,
Stony Mountain and Red River formations in Denbury’s other CCA
fields will be developed based on CO2 availability and other
factors.
CONFERENCE AND SLIDE
PRESENTATION
Chris Kendall, Denbury’s President and CEO,
presented at the 2018 J.P. Morgan Energy Conference earlier today,
which presentation included information contained in this press
release. An updated corporate slide presentation and a link
to a replay of the live webcast of today’s presentation is
available in the Investor Relations section of the Company’s
website at www.denbury.com.
Denbury is an independent oil and natural gas
company with operations focused in two key operating areas: the
Gulf Coast and Rocky Mountain regions. The Company’s goal is
to increase the value of its properties through a combination of
exploitation, drilling and proven engineering extraction practices,
with the most significant emphasis relating to CO2 enhanced oil
recovery operations. For more information about Denbury,
please visit www.denbury.com.
This press release, contains forward-looking
statements including currently estimated capital costs, estimated
production and expected time of first tertiary response, along with
potential recoverable reserves of CCA and estimated future cash
flows, which are subject to numerous risks and uncertainties
involved in large field development, along with other risks and
uncertainties detailed in the Company’s filings with the Securities
and Exchange Commission (“SEC”), including Denbury’s most recent
report on Form 10-K. These risks and uncertainties are
incorporated by this reference as though fully set forth herein.
These statements are based on engineering, geological, financial
and operating assumptions that management believes are reasonable
based on currently available information; however, management’s
assumptions and the Company’s future performance are both subject
to a wide range of business risks, and there is no assurance that
these goals and projections can or will be met. Actual
results may vary materially. In addition, any forward-looking
statements represent the Company’s estimates only as of today and
should not be relied upon as representing its estimates as of any
future date. Denbury assumes no obligation to update its
forward-looking statements.
Current SEC rules regarding oil and gas reserves
information allow oil and gas companies to disclose in filings with
the SEC not only proved reserves, but also probable and possible
reserves that meet the SEC’s definitions of such terms. The
Company discloses only proved reserves in its filings with the
SEC. In this press release, the Company refers to estimates
of original oil in place, resource or reserves “potential,” barrels
recoverable or other descriptions of volumes potentially
recoverable, which in addition to reserves generally classifiable
as probable and possible (2P and 3P reserves), include estimates of
resources that do not rise to the standards for possible reserves,
and which SEC guidelines strictly prohibit the Company from
including in filings with the SEC. Portions of these amounts are
based upon estimates by the Company’s independent engineers or by
Denbury’s internal staff of engineers, and are by their nature more
speculative than estimates of proved reserves and are subject to
greater uncertainties, and accordingly the likelihood of recovering
those reserves is subject to substantially greater risk.
DENBURY CONTACTS:
Mark C. Allen, Executive Vice President and Chief Financial Officer, 972.673.2000
John Mayer, Director of Investor Relations, 972.673.2383
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