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.

TUTORIAL: Top Stock-Picking Strategies

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.)

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

Related Articles
  1. Stock Analysis

    The Biggest Risks of Investing in Netflix Stock

    Examine the current state of Netflix Inc., and learn about three of the major fundamental risks that the company is currently facing.
  2. Mutual Funds & ETFs

    Top 3 Commodities Mutual Funds

    Get information about some of the most popular and best-performing mutual funds that are focused on commodity-related investments.
  3. Stock Analysis

    What Seagate Gains by Acquiring Dot Hill Systems

    Examine the Seagate acquisition of Dot Hill Systems, and learn what Seagate is looking to gain by acquiring Dot Hill's software technology.
  4. Chart Advisor

    Agriculture Commodities Are In The Bear's Sights

    Agriculture stocks have experienced strong moves higher over recent weeks, but chart patterns on sugar, corn and wheat are suggesting the moves could be short lived.
  5. Stock Analysis

    The Biggest Oil Producers in Asia

    Learn which Asian countries deliver the most crude oil to market, and discover what companies are the biggest producers in each country.
  6. Stock Analysis

    The 5 Biggest Russian Oil Companies

    Discover the top Russian oil companies by production volume and find out more about their domestic and international business operations.
  7. Mutual Funds & ETFs

    What Exactly Are Arbitrage Mutual Funds?

    Learn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
  8. Investing News

    Ferrari’s IPO: Ready to Roll or Poor Timing?

    Will Ferrari's shares move fast off the line only to sputter later?
  9. Stock Analysis

    3 Solar Stocks to Add to Your Portfolio

    Understand the growth and challenges of the renewable energy market and its success in 2015. Learn about the top three energy stocks to add to a portfolio.
  10. Investing News

    Glencore Shares Surge in Hong Kong

    Shares of Glencore International, a leading multinational commodities and mining company, jumped by around 15% on London Stock Exchange, after the shares had gained about 71% earlier on the Hong ...
  1. Can working capital be too high?

    A company's working capital ratio can be too high in the sense that an excessively high ratio is generally considered an ... Read Full Answer >>
  2. How do I use discounted cash flow (DCF) to value stock?

    Discounted cash flow (DCF) analysis can be a very helpful tool for analysts and investors in equity valuation. It provides ... Read Full Answer >>
  3. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  4. What is the formula for calculating compound annual growth rate (CAGR) in Excel?

    The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... Read Full Answer >>
  5. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  6. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!