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.

IN PICTURES: 7 Forehead-Slapping Stock Blunders

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?)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Investing

    How to Ballast a Portfolio with Bonds

    If January and early February performance is any guide, there’s a new normal in financial markets today: Heightened volatility.
  2. Stock Analysis

    Performance Review: Emerging Markets Equities in 2015

    Find out why emerging markets struggled in 2015 and why a half-decade long trend of poor returns is proving optimistic growth investors wrong.
  3. Investing

    Don't Freak Out Over Black Swans; Be Prepared

    Could 2016 be a big year for black swans? Who knows? Here's what black swans are, how they can devastate the unprepared, and how the prepared can emerge unscathed.
  4. Investing News

    Today's Sell-off: Are We in a Margin Liquidation?

    If we're in market liquidation, is it good news or bad news? That party depends on your timeframe.
  5. Economics

    4 Countries Pleading for Higher Commodity Prices

    Discover what countries are struggling the most from the price collapse in commodities and what these countries require to return to economic growth.
  6. Investing News

    Bank Stocks: Time to Buy or Avoid? (WFC, JPM, C)

    Bank stocks have been pounded. Is this the right time to buy or should they be avoided?
  7. Stock Analysis

    Why the Bullish Are Turning Bearish

    Banks are reducing their targets for the S&P 500 for 2016. Here's why.
  8. Stock Analysis

    How to Find Quality Stocks Amid the Wreckage

    Finding companies with good earnings and hitting on all cylinders in this environment, although possible, is not easy.
  9. Stock Analysis

    Analyzing Sirius XM's Return on Equity (ROE) (SIRI)

    Learn more about the Sirius XM's overall 2015 performance, return on equity performance and future predictions for the company's ROE in 2016 and beyond.
  10. Stock Analysis

    Glencore Vs. Noble Group

    Read about the differences between Glencore and Noble Group, two companies in the commodities business. Learn about accounting accusations facing Noble Group.
  1. When does a growth stock turn into a value opportunity?

    A growth stock turns into a value opportunity when it trades at a reasonable multiple of the company's earnings per share ... Read Full Answer >>
  2. What is the formula for calculating EBITDA?

    When analyzing financial fitness, corporate accountants and investors alike closely examine a company's financial statements ... Read Full Answer >>
  3. How do I calculate the P/E ratio of a company?

    The price-earnings ratio (P/E ratio) is a valuation measure that compares the level of stock prices to the level of corporate ... Read Full Answer >>
  4. How do you calculate return on equity (ROE)?

    Return on equity (ROE) is a ratio that provides investors insight into how efficiently a company (or more specifically, its ... Read Full Answer >>
  5. How do you calculate working capital?

    Working capital represents the difference between a firm’s current assets and current liabilities. The challenge can be determining ... Read Full Answer >>
  6. What is the formula for calculating the current ratio?

    The current ratio is a financial ratio that investors and analysts use to examine the liquidity of a company and its ability ... Read Full Answer >>
Trading Center