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Denbury Resources’ Must-Know Operational Strategies

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Sep. 28 2016, Updated 6:04 p.m. ET

Denbury Resources’ Grieve Field revised joint venture

For 2016, Denbury Resources’ (DNR) core goals are to reduce costs, optimize its business, reduce debt, and maintain liquidity. In order to execute its core goals of reducing costs and maintaining liquidity, Denbury Resources has revised its joint venture agreement with its partner in Grieve Field, Wyoming (in the Rocky Mountain region).

Under the revised agreement, DNR’s joint venture partner will provide the estimated capital of $55 million to complete development of the facility and fieldwork in exchange for a 14% higher working interest and a disproportionate sharing of revenue during the first 2 million barrels of production. This plan will reduce DNR’s working interest in Grieve Field from 65% to 51%. This arrangement would accelerate the remaining development of the Grieve Field facility so as to complete it by mid-2018.

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Denbury Resources’ divestiture

On June 20, 2016, Denbury Resources entered into a purchase and sale agreement to sell its remaining non-core assets in the Williston Basin, located in North Dakota and Montana, for ~$58 million (before final closing adjustments). DNR expects to close this transaction in 3Q16. Production from the Williston assets averaged ~1,267 boe (barrels of oil equivalent) per day and 1,315 boe per day during 2Q16 and 1H16, respectively.

Other upstream players

In order to deal with lower energy prices and raise cash, other upstream players from the S&P 500 (SPY) including Murphy Oil (MUR), Consol Energy (CNX), Devon Energy (DVN), Chesapeake Energy (CHK), and Anadarko Petroleum (APC) have also recently completed divestitures. The Energy Select Sector SPDR ETF (XLE) generally invests at least 95% of its total assets in oil and gas companies.

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