Denbury Resources Inc. has entered into an agreement to acquire Thompson Field in Fort Bend County, Texas for USD$360million in cash and a production payment from a private seller. Expected to close at the beginning of June, the acquisition is subject to customary closing conditions and the satisfactory completion of due diligence reviews. Between the June 1st, 2012 effective date and the transaction closing date, the purchase price is subject to standard purchase price adjustments for revenues and costs.
The purchase will be funded with an estimated USD$213million of the cash that Denbury received from its 2012 non-core property sales and borrowings under its revolving credit facility. Proceeds from the property sales will fund a significant portion of the purchase and is anticipated to qualify as a like-kind exchange. The qualification will allow Denbury to defer paying an estimated USD$30million of cash taxes this year on the taxable gains from property sales.
The acquisition includes a working interest of almost 100% and 84.7% net revenue interest in the field.
Located about 18miles west of the Hastings Field that Denbury is currently flooding with CO2, the 8,454acre Thompson Field was jointly owned by Chevron and Exxonmobil from 1932 until they sold their interests in separate transactions in 1999 and 2003, respectively. The field oil production peaked in 1974 at about 41,000 barrels of oil per day. The field is currently producing about 2,200bpd of oil with potential conventional reserves estimated at 17 million barrels of oil. Based on its other Gulf Coast CO2 floods, the company estimates the field could recover between 30million and 60million barrels of oil. The seller will receive a production payment the equivalent of 5% net revenue when production of oil exceeds 3,000bpd when the field is under CO2 flood.