The company will finance the acquisition with about $213m of cash and borrowings under its revolving credit facility.
The acquisition includes about 100% working interest and 84.7% net revenue interest in the 8,454 acre Thompson Field, located 18 miles west of Hastings Field that Denbury is now pumping with carbon dioxide to increase oil recovery.
Denbury president and CEO Phil Rykhoek said Thompson Field is in close proximity to the Green Pipeline which will allow it to be connected to this CO2 transportation system with a minimal level of pipeline infrastructure spending.
"Further, in light of their similarities, we expect to use the knowledge gained from our CO2 flood at Hastings Field to optimize the planned CO2 flood of the Thompson Field," added Rykhoek.
"While we are still in the process of incorporating the field into our development plan, we anticipate first tertiary oil production will not occur prior to 2017."
The oil production rate at the field has reached about 2,200 barrels of oil per day (Bbls/d) while the reserves are estimated at about 17 million barrels of oil.
As per the deal, the undisclosed seller will receive a 5% net revenue interest when oil production exceeds 3,000 Bbls/d and the field is under CO2 flood.
Denbury also intends to target the undeveloped reserves at Thompson Field over the coming years while it designs the field’s carbon-dioxide project, with annual development costs estimated at $12m until the CO2 flood commences.
The acquisition is expected to close in early June.
Denbury estimates Thompson Field could produce between 30 million and 60 million barrels of oil in a CO2 flood, with the field’s original oil in place is expected at 650 million barrels of oil, with the zones targeted for CO2 flood to hold 300 million barrels.
