With its strategy more trained on oil than natural gas, Denbury Resources Inc. has agreed to sell more than half of its Barnett Shale natural gas assets to privately held Talon Oil & Gas LLC for $270 million.

Denbury said it would sell 60% of its Barnett Shale leasehold. The assets to be sold contributed 16% of Denbury’s total output and 18% of its total proved reserves at the end of 2008. Production attributable to the interest in the properties being sold last year averaged 45.7 MMcfe/d, weighted 77% to natural gas.

Besides its Barnett Shale holdings, the Dallas-based explorer is the largest gas and oil operator in Mississippi, and it owns the largest reserves of carbon dioxide used for tertiary oil recovery east of the Mississippi River.

“This sale further enables us to concentrate our investment and management focus on our tertiary operations where we have lower risk, virtually no competition in our areas of operation and higher profitability,” said CEO Gareth Roberts. “We plan to use these funds to increase our 2010 tertiary-related spending beyond what we could accomplish using only cash flow.

“We believe we can make a good rate of return in our tertiary program at current oil prices, and we are more optimistic about near-term oil prices than natural gas prices, prompting us to direct our focus on our core tertiary oil assets.”

The asset sale will allow Denbury to accelerate the tertiary growth and “will give us both greater liquidity and flexibility in case of further decreases in commodity prices and an unused bank credit line if an attractive acquisition opportunity becomes available. We remain enthusiastic about our future.”

The sale is expected to close in late June. After the transaction is completed, Talon would operate the properties after a transition period. Proceeds from the sale initially will be used to repay Denbury’s outstanding bank debt. Denbury’s $1 billion bank borrowing base will be redetermined by its lenders as a result of the sale and “will likely decrease, but the bank commitment amount is expected to remain unchanged at $750 million,” the company said.

As part of the transaction, Talon is acquiring a portion of Denbury’s natural gas swaps. Denbury plans to transfer natural gas swaps for 2010 totaling 16 MMcf/d at an average price of $5.65/MMBtu, and natural gas swaps for 2011 totaling 13 MMcf/d at an average price of $6.16. At closing Talon agreed to pay the market value of the derivative contracts, or if the amount is negative, Talon would be reimbursed, Denbury said.

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