Denbury strikes $900-million partial asset sale deal with Quantum Resources

US oil and gas explorer Denbury Resources Inc today said that it has agreed to sell certain of its oil and gas assets to Houston-based Quantum Resources Management LLC for $900 million.

Plano-Texas-based Denbury is selling its assets from its recent acquisition of Encore Acquisition Company.

In November 2009, Denbury agreed to buy Texas-based Encore, an acquirer and developer of oil and gas reserves for $4.5 billion, aiming to position the company as one of the largest crude oil-focused, North American exploration and production companies. (See: Denbury Resources to acquire Encore for $4.5 billion)

The assets are primarily located in the Permian Basin in West Texas and southeastern New Mexico; the Mid-continent area, which includes the Anadarko Basin in Oklahoma, Texas and Kansas and the East Texas Basin.

These assets have an estimated production of about 13,000 barrels of oil equivalent per day with proved reserves of 54 million barrels of oil equivalent as of 31 December 2009.

Denbury said that the proceeds from the sale will primarily be used to pay down the company's $1.6 billion bank credit facility, which had $800 million outstanding at 31 March 2010.

Denbury is a growing oil and gas company and the largest operator in Mississippi. The company owns the largest reserves of carbon dioxide (CO2) used for tertiary oil recovery east of Mississippi river and holds interests in the Barnett Shale play in Texas and other properties.

Phil Rykhoek, CEO of Denbury said, "We are pleased that we were able to reach an agreement to sell these former Encore properties at an equitable price so quickly. This transaction significantly reduces our debt, frees up our bank credit line, restores our balance sheet to leverage ratios more in line with pre-acquisition levels, and allows us to focus our attention on our core assets.''