Enhanced oil recovery (EOR) specialist Denbury Resources Inc. has agreed to sell half of its stakes in four Texas oilfields to Navitas Petroleum LP for $50 million.

The Plano, TX-based independent said it would remain operator of the Webster, Thompson, Manvel and East Hastings fields in Southeast Texas. The agreement also includes a carrying interest in 10 wells to be drilled and completed by Navitas, which is based in Israel.

Production associated with the working interests to be sold averaged around 1,050 boe/d from January through September, according to Denbury. Proved reserves for the working interests to be sold were around 3.7 million bbl at the end of 2018.

“This transaction provides a significant opportunity to expand the value of our portfolio and highlights the premium value of our oil-rich conventional assets,” Denbury CEO Chris Kendall said. “Through partnering with the experienced Navitas team, we expect to accelerate conventional exploitation of unproven oil resources across these fields, while providing Denbury additional flexibility for our 2020 capital plans and debt reduction efforts.”

Proceeds from the sale, expected to close by early March, would be used by Denbury to fund operations, enhance liquidity and/or reduce debt.

Under the agreement, Navitas is committed to funding 100% of the capital required to drill and complete an initial 10 horizontal wells across the fields, with the first of the wells to be spudded within six months of closing and all 10 wells to be completed within 18 months after closing. 

For the initial 10 wells, Denbury would receive a 6.25% overriding royalty interest before the combined payout of the wells drilled in a specific field. After the payout, Denbury would hold and bear the cost of its 50% working interest in each well. 

Navitas is required to drill at least one well in each of the four fields.

After the initial drilling program is completed and if “performance hurdles” are achieved, Navitas would have the opportunity to continue to develop the fields for up to six separate extension periods. During each extension period, Navitas may propose and drill up to 10 additional wells, totaling up to 60 additional wells on a pro-rata working interest basis.

Denbury would retain 100% ownership of the planned Webster Unit carbon dioxide (CO2) EOR project. Navitas may elect to participate in the future CO2 EOR project by reimbursing Denbury its working interest share of project costs incurred to date. If it does not participate in the project, Denbury may repurchase the stakes in Webster.

Navitas Petroleum is a North America-focused exploration and production partnership. Its portfolio includes onshore production from the Neches field and offshore output from the LLOG Exploration Co. LLC-operated Buckskin project in the Gulf of Mexico (GOM) in which it holds 7%. Navitas also has “development stage assets” in the Shenandoah project in the GOM and offshore Canada.

After a merger with Penn Virginia Corp. was scuttled earlier this year, Kendall said Denbury instead would pursue “practical opportunities” to expand its business, “particularly in areas where our EOR expertise, experience and extensive CO2 resources can create value for the benefit of all Denbury stakeholders.”

In the longer term, Denbury expects CO2 EOR to “become an even more vital component of the world’s oil supply, with the smallest possible carbon footprint for an oil producer, and that Denbury is uniquely positioned in the industry to benefit from an increasing need to limit or reduce CO2 emissions.”