SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) December 8, 1997
DENBURY RESOURCES INC.
(Exact name of Registrant as specified in its charter)
Canada
(State or other
jurisdiction
of incorporation or
organization)
33-93722 Not applicable
(Commission File (I.R.S. Employer
Number) Identification No.)
17304 Preston Road
Suite 200
Dallas, TX 75252
(Address of principal (Zip code)
executive offices)
Registrant's telephone number, (972)713-3000
including area code:
Item 2. Acquisition or Disposition of Assets
On November 25, 1997, Denbury Management Inc. ("Denbury"), a indirect
wholly-owned subsidiary of Denbury Resources Inc., announced that it had entered
into an asset sale agreement to purchase producing oil properties in the
Heidelberg Field, Jasper County, Mississippi, for approximately $202 million
from Chevron U.S.A. Inc. (the "Chevron Acquisition"). This field is in the same
area as the Company's other core Mississippi properties and includes operated,
non-operating and royalty interests with approximately 122 producing wells, of
which 96 wells will be Company operated. The Company will have an average
working interest of 94% and an average net revenue interest of 81% in these
operated wells which account for approximately 99% of the net average daily
production in this field. The average daily production from these properties
during the nine months ended September 30, 1997 was approximately 2,900 Bbls/d
and 600 Mcf/d, net to the acquired interest.
The Company has also acquired minor interests in Heidelberg Field from
three other entities at an aggregate cost of approximately $5.9 million. These
four acquisitions are expected to add net proved reserves of approximately 29.9
million barrels of oil and 1.8 billion cubic feet of gas, or approximately 30.2
million barrels on a BOE basis, as of January 1, 1998, to the Company based on
preliminary estimates by Netherland, Sewell and Associates, Inc., the Company's
independent petroleum engineers. For comparison, as of December 31, 1996, the
Company's net proved reserves consisted of approximately 15 million barrels of
oil and 74.1 billion cubic feet of natural gas or approximately 27.4 million
barrels on a BOE basis. As a result of the significant amount of future work to
be performed and its expected effect on future reserves and production, the
Company has attributed approximately $75 million of the purchase price to
unevaluated properties.
Heidelberg Field was discovered in 1944 and has produced an estimated 191
MMBbls and 36 Bcf since its discovery. The Field is a large salt cored anticline
which is divided by faulting into a western and eastern half. Production is from
a series of normally pressured Cretaceous and Jurassic sandstone horizons
situated between 4,500 feet and 11,500 feet. There are 11 producing formations
in Heidelberg Field containing 44 individual reservoir intervals, with the
majority of the current production coming from the Eutaw and Christmas sands at
depths of approximately 5,000 feet.
The West Heidelberg Eutaw sands have been unitized and water injection
began late in 1996 in order to increase the bottom hole pressure and improve
recoveries from the formation. A production response to the injection is
expected during 1998. The Eutaw East One Fault Block Oil Pool Unit (Eutaw
formation in East Heidelberg) was unitized in October 1997 and injection is
projected to commence in March 1998. These waterflood projects, particularly the
East Unit, comprise a significant portion of the potential reserves at
Heidelberg. The Company has a 78% working interest in the East Unit, 59% of
which was acquired in the Chevron Acquisition and the remaining 19% recently
acquired in the other acquisitions. The Company operates a similar type Eutaw
unit at its East Eucutta Field, located approximately nine miles to the
southeast, with production from sands with similar porosity, permeability,
thickness, and drive mechanisms.
The Company has identified several potential development projects during
its initial evaluation of the field. This includes initiating the East
Heidelberg waterflood project, upgrading lift capacity in over 15 wells and
recompleting 30 wells in new zones. In addition, the Company has identified over
40 potential drilling locations plus other potential secondary and tertiary
recovery projects. The Company has experienced success in its horizontal
drilling program at nearby Davis, Quitman and Eucutta Fields and based on this
information, the Company anticipates that 25 of the proposed future wells will
be horizontal wells. The total development budget during 1998 for this field is
expected to be approximately $28 million.
Denbury anticipates funding this acquisition initially with an expanded
bank financing and is currently exploring its alternatives to fund this
acquisition with other more permanent forms of capital. The transaction is
effective January 1, 1998 and is expected to close in late December, 1997. It is
subject to the possible effect of preferential purchase rights held by third
parties and typical purchase price adjustments and closing conditions.
This Form 8-K contains forward-looking statements that involve risks and
uncertainties including expected reserves, planned development and drilling
activity, expected production efforts, volumes and budgeted capital expenditures
and other risks and uncertainties detailed in the Company's SEC reports. Actual
results may vary materially.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Audited statements of revenues and direct operating expenses
attributable to the Chevron Acquisition for the years ending December
31, 1995 and December 31, 1996 and the nine months ended September 30,
1997 are not presently available. They will be filed by amendment as
soon as practicable, but not later than 60 days after the due date for
the filing of this report on Form 8-K.
(b) Pro forma results of operations of Denbury Resources Inc. for the year
ended December 31, 1996 and nine months ended September 30, 1997 as if
the acquisition had occurred at the beginning of each respective
period and a pro forma balance sheet as of September 30, 1997 are not
presently available. They will be filed by amendment as soon as
practicable, but not later than 60 days after the due date for the
filing of this report on Form 8-K.
(c) Exhibits:
Exhibit No. Exhibit
(2) Purchase and sale agreement between the
Company and Chevron U.S.A. Inc. dated
November 24, 1997.
(99) Reserve estimates as of January 1, 1998
regarding certain reserve additions from
Netherland, Sewell & Associates, Inc.,
independent petroleum engineers.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Denbury Resources Inc.
(Registrant)
DATE: December 8, 1997 By: /s/ Phil Rykhoek
-------------------------
Phil Rykhoek
Chief Financial Officer