Denbury Resources (NYSE:DNR) remains one of the leaders in tertiary enhanced oil recovery (EOR) among the independent exploration and production companies. The company will continue to focus much of its resources in this area despite additional onshore oil and gas opportunities acquired in a recent merger.

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Enhanced Oil Recovery
Tertiary EOR is used on mature oil fields by operators after primary and secondary recovery methods can no longer maintain adequate production for wells to operate commercially. Tertiary recovery involves the injection of carbon dioxide into these older wells to boost production. The general rule used by the industry is that primary recovery operations will produce approximately 20% of the original oil in place (OOIP), while secondary, or water flooding, will yield another 18% of the OOIP. Tertiary EOR will get an additional 17% of the resources out of the ground.

Denbury Resources EOR Summary
Denbury Resources reported average production of 30,825 barrels of oil equivalent per day (BOE) from the company's tertiary operations in the first quarter of 2011. This represented a 14% year-over-year increase from the same quarter in 2010.

Denbury Resources has been on a growth tear since starting EOR operations in the 1990s, and grew production at a 33% compound annual growth rate (CAGR) from 1999 to 2010. The company estimates that, over the next decade, EOR production growth will continue at a CAGR between 13% and 15%, resulting in production ranging from 100,000 to 120,000 BOE per day in 2020. Denbury Resources gets most of its carbon dioxide supply from the Jackson Dome field in Mississippi, where the company has 7.1 TCF of proved reserves at the end of 2010.

Gulf Coast EOR
Denbury Resources started its EOR focus on various mature fields in Mississippi, and estimates that it has 3P reserves of 498 million BOE here. The company has nine project areas across the entire Gulf Coast area, and expects to spend $435 million in 2011 to advance eight of these projects.

Rocky Mountain EOR
In the Rocky Mountains region, Denbury Resources is at an earlier stage of development and estimates that the company has 233 million BOE of 3P reserves across several different project areas. Denbury Resources has allocated $57 million in 2011 to develop its tertiary EOR projects at the Bell Creek and Cedar Creek Anticline fields.

Other EOR Players
Another active player in EOR operations is Occidental Petroleum (NYSE:OXY), which employs this method in the Permian Basin. The company estimates that 60% of its production in this area is from EOR employing carbon dioxide injection.

Resolute Energy Corporation (NYSE:REN) is active in the Rocky Mountain region, and is operating a carbon dioxide EOR operation at the Aneth Field in Utah. Hess Corporation (NYSE:HES) has been involved with EOR operations for several decades, and has projects in Texas and Algeria.

The Bottom Line
Denbury Resources will continue to put capital into tertiary EOR projects in the United States, while also exploiting the other domestic oil and gas opportunities available to the company as a result of a recent merger. (For related reading, also take a look at 6 Industries Hoping That Oil Prices Go Higher.)

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