Denbury Resources said it has reduced its projected 2002 development and exploration budget by $25 million (20%) to $95 million to adjust for the loss in potential revenue and cash flow during 2002 from its natural gas hedges with Enron Corp. and for the general decline in commodity prices.

The spending cut is expected to reduce its 2002 production only 2%, from its previously announced target of 36,000 boe/d to 35,250 boe/d. The company said it currently is pursuing legal remedies to protect itself as a creditor in the Enron bankruptcy proceedings and is reviewing other options available.

The spending cut partly reflects cost savings because of lower oil field costs, but also the postponement of various projects from 2002 to 2003. About one-third of the reductions relate to natural gas projects offshore, 20% relate to CO2 projects and the balance to the company’s other core areas of eastern Mississippi and southern Louisiana, together with overall anticipated cost savings.

The company also repositioned its gas hedges by securing collars for 2002 with a floor price of $2.50/MMBtu and an average ceiling price of $4.15/MMBtu covering 90 MMcf/d, which represents 75% of the company’s anticipated gas production for 2002. The cost of this hedge was $5.2 million and has been secured from four separate counterparties.

“We are committed to maintaining a strong balance sheet, which also allows us to preserve our bank credit line ($89 million) for potential acquisitions, which should be attractive in a weak commodity price environment,” said CEO Gareth Roberts. “Meanwhile our employee teams have been doing a great job of reducing costs, allowing us to reduce the budget without significant effects on production.”

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