Denbury Resources (NYSE: DNR) hopes to grow its production by a 13-15% compound annual growth rate(CAGR) over the next decade as the company exploits its enhanced oil recovery (EOR) projects in the Gulf Coast and Rocky Mountain area. The company also has more production upside from its operations in the Williston Basin, where it has acreage prospective for the Bakken and other formations.

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Enhanced Oil Recovery

Denbury Resources is focused on EOR techniques to stimulate production from older wells. These techniques can take many forms, but Denbury Resources uses the method of injecting carbon dioxide into mature fields to stimulate production.

The company believes that the use of EOR or tertiary recovery can recover as much as 17% of the original oil in place (OOIP) at a typical field in its portfolio. This compares to a 20% recovery rate during primary operations, and a further 18% recovery during secondary water flooding operations.

Denbury Resources sees this business as a huge growth market going forward, as tens of billions of barrels of OOIP remain unproduced at various fields in the United States.

Gulf Coast

Denbury Resources' main EOR operations are in the Gulf Coast area, and these have been the company's growth engine over the last decade. The company has grown its production from tertiary operations here at a 34% CAGR since 1999, reaching an average of 28,750 barrels of oil per day in 2010.

Carbon Dioxide Reserves

The company has its own carbon dioxide reserves to supply its EOR operations in the Gulf Coast area. These are stored in the Jackson Dome, an underground area in Mississippi. Denbury Resources reported proved reserves of 7 Tcf carbon dioxide as of November 1.

Denbury Resources estimates that it can recover between 3.4 billion and 7.5 billion barrels of oil from its various Gulf Coast properties by using tertiary recovery methods.

Rocky Mountains

In the Rocky Mountains, Denbury Resources also has fields at Bell Creek and Cedar Creek where tertiary recovery can be employed to boost production. The company has secured local carbon dioxide supplies to accomplish this.

Denbury Resources estimates that it can recover between 1.3 billion and 3.2 billion barrels of oil from its properties in the Rocky Mountain area using carbon dioxide.

Production Growth

Denbury Resources estimates that the company can grow production from its tertiary recovery operations in the Gulf Coast and Rocky Mountain area by a 13-15% CAGR, reaching 120,000 barrels per day by 2020.

Other companies active in EOR include Rex Energy (NYSE: REX), which is developing a project in Illinois, and Apache (NYSE: APA), which is involved in several projects in Canada.

Bakken Shale

Denbury Resources also has 275,000 net acres in the Williston Basin that is prospective for the Bakken and other formations. The company reported average daily production of 4,657 barrels of oil equivalent (BOE) per day during the third quarter of 2010, and it plans an active development program here in 2011. Other companies active in the Bakken include Northern Oil and Gas (NYSE: NOG), which just raised capital through an equity offering.

Denbury Resources is the king of tertiary oil recovery and plans to ride this to grow production by a 13-15% CAGR over the next decade. (For related reading, see How Does Crude Oil Affect Gas Prices?)

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