Denbury Resources (NYSE:DNR) more than doubled the amount of proved reserves from the Bakken formation in 2011, as the company's development in this popular domestic play continues at a rapid pace. (To know more about oil and gas, read Oil And Gas Industry Primer.)

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Proved Reserves Growth
Denbury Resources reported total proved reserves of 462 million barrels of oil equivalent (BOE) as of Dec. 31, 2011. This represented a 16% increase over the end of 2010. The company said that approximately 77% of these proved reserves were composed of crude oil, condensate and natural gas liquids.

Bakken
Denbury Resources added 48.2 million of proved reserves from its development of the Bakken formation during 2011, bringing the company's total proved reserves here to 93.9 million BOE. The company reported 45.7 million BOE of proved reserves in the Bakken at the end of 2010.

Denbury Resources estimates that the average Bakken well generate an internal rate of return of 29%. This estimate incorporates a drilling and completion cost of $9 million, an estimated ultimate recovery of 575,000 BOE per well and a NYMEX oil price of $90 per barrel. Denbury Resources spent approximately $440 million in capital in 2011 to develop the company's Bakken properties.

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Another operator active in the Bakken is Whiting Petroleum (NYSE:WLL), which has approximately 682,000 net acres prospective for the Bakken and other formations in the Williston Basin. The company spent $825 million in capital in these areas during 2011.

Tertiary Oil Start Ups
Denbury Resources is one of the leaders in tertiary oil recovery, a process in which carbon dioxide is injected into old oil wells in an effort to stimulate additional production.

Denbury Resources recently announced the start of production from the Hastings Field, a tertiary oil operation located in Texas. The company estimates that this field holds between 70 million and 100 million barrels of proved and probable reserves. Denbury Resources expects production from the Hastings Field to peak in the first half of the next decade at between 15,000 and 20,000 BOE per day.

The start of production at the Hastings Field comes about a month after production began at the Oyster Bayou Field in Texas. Denbury Resources estimates that this field has anywhere from 20 million to 30 million barrels of proved and probable oil reserves and will achieve peak production at under 5,000 BOE per day over the next two years.


Tertiary Oil Operators
Other operators that are active in tertiary oil development include Occidental Petroleum (NYSE:OXY), which estimates that 60% of its production from properties in the Permian Basin are from wells that employ carbon dioxide injection.

Resolute Energy (NYSE:REN) also has tertiary operations and is active in the Aneth Field in Utah. The company began carbon dioxide flooding here in 2007 and reported average production of 5,923 BOE per day in the third quarter of 2011.

The Bottom Line
Denbury Resources is developing an emerging position in the Bakken formation in North Dakota, while also continuing to advance the company's tertiary oil operations. The company will no doubt continue this in 2012, as long as oil prices cooperate and stay high. (For additional reading, check out A Guide To Investing In Oil Markets.)

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