ExxonMobil Corp. agreed to buy Bakken formation assets in North Dakota and Montana covering 196,000 net acres from Denbury Resources Inc. for $1.6 billion.
Denbury also will receive ExxonMobil's operating interests in Webster field in Texas and Hartzog Draw field in Wyoming, both candidates for carbon dioxide flooding.
Webster and Hartzog fields are close to Denbury's existing or planned CO2 pipelines.
In addition, Denbury agreed in principle to either purchase an interest in the CO2 reserves in ExxonMobil's LaBarge field in southwestern Wyoming or purchase incremental CO2 from that field.
The purchase of an interest in CO2 reserves would reduce the amount of cash received by Denbury.
"This trade illustrates our CO2 EOR strategy,” said Phil Rykhoek, Denbury’s president and chief executive officer. “We start with a large anchor oil field, acquire or build the necessary CO2 supply and transportation infrastructure, and then acquire other oil fields in the expansion area that we can flood with CO2.”
The agreement increases ExxonMobil’s holdings in the Bakken by 50% to nearly 600,000 acres.
“This agreement provides a strategic addition to ExxonMobil’s North American unconventional resource base,” said Andrew P. Swiger, ExxonMobil senior vice-president. “ExxonMobil’s financial and technical strength will support continued development of America’s natural resources.”
The transactions are expected to close late in the fourth quarter with a July 1 effective date, subject to customary title, environmental due diligence, and other conditions.
Denbury said it intends to use sale proceeds to buy additional oil assets in the Gulf Coast or Rocky Mountain regions suited for CO2 flooding and also to repay debt.
Asset details outlined
Denbury estimated its Bakken proved reserves being sold were 96 million boe as of Dec. 31, 2011, of which 26% were developed and producing.
First-half 2012 average production was 15,400 boe/d, of which 88% was oil and natural gas liquids.
Denbury is acquiring nearly 100% working interest in Webster field and nearly 80% net after royalty interest in the field 8 miles northeast of Denbury's Hastings CO2 flood and the Green Pipeline which transports CO2 from Mississippi.
Net to Denbury's acquired interest, Webster field is producing 1,000 boe/d, of which 86% is oil.
Hartzog Draw field, in the Powder River basin of northeastern Wyoming, was discovered in 1975.
Denbury is receiving an 83% working interest and 71% net after royalty interest in the oil-producing Shannon sandstone zone and a 67% working interest and 53% net after royalty interest in the gas-producing Big George coal zone.
Hartzon Draw field is 12 miles from Denbury's Greencore Pipeline, which is under construction and scheduled for completion by yearend.
Net to Denbury's acquired interest, the field is producing 2,600 boe/d, with 52% being oil.
ExxonMobil agreed in principle to either sell Denbury roughly one third of the LaBarge field CO2 reserves or to expand the volume of CO2 that ExxonMobil will sell to Denbury under an existing sales contract.
Based on the current capacity of the LaBarge plant and availability, either option would allow for the delivery of up to 115 MMcfd of CO2.
Contact Paula Dittrick at [email protected].
Paula Dittrick | Senior Staff Writer
Paula Dittrick has covered oil and gas from Houston for more than 20 years. Starting in May 2007, she developed a health, safety, and environment beat for Oil & Gas Journal. Dittrick is familiar with the industry’s financial aspects. She also monitors issues associated with carbon sequestration and renewable energy.
Dittrick joined OGJ in February 2001. Previously, she worked for Dow Jones and United Press International. She began writing about oil and gas as UPI’s West Texas bureau chief during the 1980s. She earned a Bachelor’s of Science degree in journalism from the University of Nebraska in 1974.
