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Denbury to Take Sole Possession of Riley Ridge

Denbury Resources Inc. has agreed to pay Cimarex Energy Co. $191 million for the 57.5% working interest it does not already own in the 9,700-acre Riley Ridge Federal Unit in southwestern Wyoming and a 33% working interest in an additional 28,000 acres of mineral leases adjoining the unit, the company said Tuesday. The deal, which is expected to close in late July with an effective date of April 1, 2011, would make Denbury the operator of both projects.

Plano, TX-based Denbury estimates that Riley Ridge contains proved reserves of 250 Bcf of natural gas, with another 250-300 Bcf of probable reserves in the additional acreage. The deal would also bring Denbury a combined estimated 18.4-20.4 Bcf of helium and 2.4-2.6 Tcf of carbon dioxide (CO2).

First production of gas and helium is expected to occur during the fourth quarter of this year, according to Denbury. Development costs associated with the incremental interest in Riley Ridge are expected to add approximately $50 million to Denbury's 2011 capital spending.

Riley Ridge and the adjoining acreage are in the prolific LaBarge Field, from which gas, helium and CO2 are currently being produced and sold. Current operations include the completion of producing wells and construction of natural gas and helium processing facilities. Initial plans call for the re-injection of the CO2 into the producing formation until a planned CO2 pipeline can be built to the field.

In late 2009 Denbury sold its Barnett Shale stake to focus on CO2 tertiary recovery projects (see Daily GPI, Dec. 4, 2009). Since then the company has been actively securing new sources of CO2 volumes and, with the Riley Ridge acquisition, believes it has more CO2 than it needs to develop its existing CO2 enhanced oil recovery assets in the Rocky Mountains.

ExxonMobil Corp. in December completed an expansion of what it said was the world's largest CO2 capture plant near LaBarge, WY (see Daily GPI, Dec. 13, 2010). The plant has capacity to capture 365 MMcf/d of CO2 from natural gas streams produced from fields in Wyoming.

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