Denbury Resources Inc. was the winning bidder for the COHO Energy Inc. Gulf Coast properties auctioned yesterday in the U.S. Bankruptcy Court in Dallas, Texas.
Consummation of the purchase, currently scheduled by the Court for August, is subject to the completion of title review, field and environmental inspections, completion of an asset purchase agreement and final authorization and approval by the U.S. Bankruptcy Court.
Denbury's winning bid was $50.3 million for the Gulf Coast properties of COHO, which consists of ten fields, eight of which are located in Mississippi and two in Texas. Seven of the eight Mississippi fields and one Texas field are operated by COHO. Initial estimates by the Company indicate the acquisition includes net proven reserves of approximately 14.4 million barrels of oil with current production of between 4,000 and 4,500 barrels of oil per day. The purchase is to have an effective date of June 1, 2002. The Company plans to initially finance the purchase with a draw on its $84 million of availability under its bank facility, although it may consider more permanent financing subsequent to closing and may also consider selling a portion of the acquired properties. The Mississippi fields to be purchased include interests in the Brookhaven, Laurel, Martinville, Soso and Summerland fields, with such interests representing operational control with working interests in excess of 90%, plus interests in the smaller Bentonia, Cranfield and Glazier fields.
Included in the acquisition is Brookhaven Field, a possible tertiary carbon dioxide injection candidate located close to the Company's 183 mile CO2 pipeline. The acquisition of Brookhaven field is part of Denbury's strategy to expand its CO2 recovery operations throughout the Lower Tuscaloosa oil fields of Southwest Mississippi. These fields have produced over 245 million barrels of light sweet crude oil to date from the Lower Tuscaloosa sands, the majority of which are currently marginal producers or abandoned. Denbury is strategically positioned to develop the potential tertiary reserves in these fields because of its ownership of CO2 reserves and pipeline. Denbury operates the only active CO2 operations in the basin at Little Creek, Lazy Creek and Mallalieu Fields and has expertise in installing and managing such an operation.