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. Savings

    Do Natural Gas Prices Always Follow Oil Trends?

    Prices for oil and natural gas are highly correlated. But investors should be aware of different factors affecting the prices of these commodities.
  2. Charts & Patterns

    Understand How Square Works before the IPO

    Square is reported to have filed for an IPO. For interested investors wondering how the company makes money, Investopedia takes a look at its business.
  3. Technical Indicators

    4 Ways to Find a Penny Stock Worth Millions

    Thinking of trading in risky penny stocks? Use this checklist to find bargains, not scams.
  4. Professionals

    Chinese Slowdown Affects Iron Ore Market

    The Chinese economy's ongoing slowdown is having a major impact on iron ore demand.
  5. Investing Basics

    Why do Debt to Equity Ratios Vary From Industry to Industry?

    Obtain a better understanding of the debt/equity ratio, and learn why this fundamental financial metric varies significantly between industries.
  6. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  7. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  8. Mutual Funds & ETFs

    ETF Analysis: iShares Morningstar Small-Cap Value

    Find out about the Shares Morningstar Small-Cap Value ETF, and learn detailed information about this exchange-traded fund that focuses on small-cap equities.
  9. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  10. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Profit Margin

    A category of ratios measuring profitability calculated as net ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis ...
  4. Debt Ratio

    A financial ratio that measures the extent of a company’s or ...
  5. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing ...
  6. Net Present Value - NPV

    The difference between the present values of cash inflows and ...
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  5. What is the difference between the return on total assets and an interest rate?

    Return on total assets (ROTA) represents one of the profitability metrics. It is calculated by taking a company's earnings ... Read Full Answer >>
  6. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
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!