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Tickers in this Article: EAC, DNR, RRC, APA, CLR, ENP
Denbury Resources (NYSE: DNR) held an analyst meeting last week at which it expanded on the strategy behind its recent announcement to purchase Encore Acquisition Co. (NYSE: EAC). The combination will vault Denbury Resources into the upper ranks of independent exploration and production companies in the U.S. IN PICTURES: Digging Out Of Debt In 8 Steps

A $4.5 Billion Purchase
On November 1, Denbury Resources agreed to purchase Encore Acquisition in a deal valued at $4.5 billion. Denbury Resources will pay consideration of $50 per share consisting of $15 in cash and $35 in stock. Denbury will also assume the debt and Encore Acquisition's minority interest in Encore Energy Partners (NYSE: ENP).

Denbury Resources specializes in tertiary oil recovery, where the company injects carbon dioxide into older, mature oil wells to enhance recovery of hydrocarbons. The company is the leader in this activity east of the Mississippi, with tertiary oil production estimated at 24,000 barrels of oil equivalent (BOE) per day in 2009.

Encore Acquisition brings an entire new set of fields in the Rocky Mountain area that are suitable for carbon dioxide injection. Denbury Resources estimates 264 million barrels of probable and possible reserves there. Some of the major fields include Bell Creek, Cedar Creek and South Pine.

A Leader Among Independent E&P Companies
Once the deal closes, Denbury Resources will move up into the higher levels among the independent exploration and production companies. The combined enterprise value of the two companies will be $9.4 billion, putting it just under Range Resources (NYSE: RRC) at $9.8 billion.

The combined company will also have the highest percentage (75%) of production from oil among the large cap independent exploration and production companies.

Currently, the company with the highest percentage of its production from oil is Apache (NYSE: APA), with about 50%.

Bakken Shale
Another benefit of the merger for Denbury Resources is gaining entry into two new high-profile shale plays in North America. Encore Acquisition has 300,000 net acres under lease in the Bakken Shale and 19,000 in the Haynesville Shale. The combined company will be the fourth-largest leaseholder in the Bakken Shale.

The largest acreage holder in the Bakken Shale is Continental Resources (NYSE: CLR) with 605,000 acres. Denbury Resources plans to spend $142 million in capital in the Bakken Shale in 2010 to drill up to 65 operated and non-operated wells, and to start several refracturing operations on existing wells.

Two Good Reasons To Look At This Stock
Due to its purchase of Encore Acquisition, Denbury Resources will become the "oiliest" of the large cap independents and the undisputed leader of tertiary enhanced oil recovery methods. Both seem like good reasons to take a look at this exploration and production company. (For a primer on the oil industry, refer to our Oil And Gas Industry Primer.)

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