Why Denbury Resources’ Delhi Field Plant Is So Significant

Denbury Resources (DNR) is constructing an NGL (natural gas liquids) plant at its Delhi Field on the Gulf Coast. This plant is a significant ongoing development project for DNR. On September 6, 2016, at the Barclays CEO Energy-Power Conference, Denbury Resources’ president and CEO, Phil Rykhoek, announced the progress of the NGL plant at Delhi Field.

This plant is on schedule and on budget with major equipment installation ongoing in the field now. The NGL plant at Delhi Field is expected to come online by year-end 2016. The estimated expenditure on the NGL plant in 2016 will be ~$20 million. Denbury Resources’ 2Q16 production from Delhi Field was ~3,996 boe (barrels of oil equivalent) per day.

This plant is important for DNR because it will serve three main purposes.

• First, it should strip NGLs from Denbury Resources’ gas stream so they can be sold separately. Currently, DNR has no revenues from NGL sales.
• Second, it should improve the effectiveness of DNR’s Delhi flood with a purer CO2 recycle stream.
• Third, the methane recovered from the plant will be used to generate power, part of which will be used to offset the field’s electricity purchases, reducing DNR’s overall power costs.

Other upstream players active in the Gulf Coast region are Devon Energy (DVN), Callon Petroleum (CPE), Chesapeake Energy (CHK), and Cabot Oil and Gas (COG). The SPDR S&P Oil and Gas Exploration & Production ETF (XOP) generally invests at least 80% of its total assets in oil and gas exploration companies.

Continue to the next part of this series for a rundown of the reaction from Wall Street.