Denbury Acquires Devon's Interests in Wyoming EOR Fields
NYSE-listed Denbury Inc. has entered into an agreement with a subsidiary of Oklahoma-based Devon Energy Corp. to acquire its nearly 100% working interest in the Big Sand Draw and Beaver Creek oil fields in Wyoming, for a total upfront consideration of US$12 million plus certain contingent payments.
Under the terms of the agreement, the total purchase consideration will be payable in cash. The agreement also provides for two contingent payments of US$4 million each, payable if NYMEX WTI oil prices average at least US$50 per barrel in 2021 and 2022.
The Big Sand Draw and Beaver Creek oil fields are located in Freemont County, Wyoming, and were discovered in 1918 and 1938, respectively. The CO2 flood on the fields was initiated in the Big Sand Draw in 2014 and during 2008 in Beaver Creek. The CO2 used to flood both fields is supplied from oil major ExxonMobil Corp.’s Shute Creek gas processing plant in southwestern Wyoming, where Denbury owns a 1/3rd overriding royalty interest in all captured CO2.
Total net proved (1P) reserves for the acquired fields are estimated at approximately 13.7 million barrels of oil equivalent (MMboe), including 5.5 MMboe of proved undeveloped reserves, which the company estimates can be developed for less than US$5.00 per barrel. Net production from the fields during Q3-2020 was approximately 2,800 barrels of oil equivalent per day (boe/d), of which 85% was oil.
“Big Sand Draw and Beaver Creek are exciting additions to Denbury’s Rocky Mountain region footprint, and we believe they are an ideal operational fit for Denbury’s differentiated CO2 EOR-focused strategy. Importantly, by utilizing 100% industrial sourced CO2, these fields will increase Denbury’s use of industrial sourced CO2 by nearly 400,000 tons annually, further enhancing the low carbon footprint of Denbury’s oil production,” said Chris Kendall, Denbury’s President & CEO.
Plano, Texas-based Denbury is focused on operations in the Gulf Coast and Rocky Mountain regions of the United States, with a significant emphasis on CO2 enhanced oil recovery operations.
The completion of the transaction is subject to customary closing conditions, and is expected to occur in Q1-2021.