Denbury Resources Exec Insights: Acquisition, Heidelberg
Thompson Field Acquisition
Scott Hanold – RBC Capital Markets: Bob you sort of addressed some of this, but I’m going to ask the question in different ways. When you look at the acquisition of the Thompson Field, you mean in general where you all think the CO2 — incremental CO2 need is, is it around half a Tcf and then further when you step back and look at Jackson Dome, can you talk about as you’re going to look forward potentially acquire more fields and what not, how much potential do you think incrementally could be there?
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Robert Cornelius – Senior Vice President, CO2 Operations: Well, we have identified between the Norfolk formation and (indiscernible) formation we’ve identified potential of possible reserves of 7 Tcf of CO2 and remember Phil said, it’s going to be 2017. So, we feel like we have some time to develop those reserves. We’re taking capital investments now into infrastructure to be able to move that type of reserves through or type of volume through our pipeline system and again, we have five years to do that. So, we’re implementing those plans. Phil has, as you heard – drilled another well at Jackson Dome and so we’re going to have to modify our drilling program to do the acquisition, but we feel like we can deliver those volumes.
Scott Hanold – RBC Capital Markets: What kind of incremental deliverability would be just facilitated with this and is that sort of half a Tcf of future requirement for development roughly?
Phil Rykhoek – President and CEO: I think you’re correct between half to Tcf for that field and if you look at the rate, it’s at we’re at 150 to 200 million cubic feet a day for Oyster Bayou and Hastings.
Scott Hanold – RBC Capital Markets: Then, when you look at the field (indiscernible) or you opt to get out there and do a little bit of work to kind of see what needs to be done. But to your comparing contrast in terms of whether it’s been water-flooded, the pressure in the reservoir is this going to be something that ramps up quickly or is it going to be longer in – can you just give us a little bit color with the understanding, I recognize that you got to kind of get out there and do some work?
Robert Cornelius – Senior Vice President, CO2 Operations: Well it’s a free reservoir so it’s the same as Hastings. So we would expect the response to be similar to what we see at Hastings. It’s has been water flooded, similar to Hastings. It currently has more – it has higher percentage of oil left in the ground. So we think that’s an attractive aspect of the reservoir as well. But in general, we will see it to perform quite similar to Hastings, Oyster Bayou and frankly somewhat similar to our (indiscernible).
Phil Rykhoek – President and CEO: This is not quite as large as Hastings. Hastings is probably 800 million to 900 million barrels well in place. This is 650 in total and at this point we’ve just identified really the half of what we think is at least initial floodable area. So, from a technical standpoint, the characteristics are very, very similar.
Scott Hanold – RBC Capital Markets: So, I think you said there’s more relative oil in place. Why is it, is it just not been as – produces much from a conventional perspective?
Phil Rykhoek – President and CEO: That’s correct.
Scott Hanold – RBC Capital Markets: Then moving into the Bakken, can you talk about the type of returns you think you’re seeing right now, the current well cost and where do you think that’s going to go and when you look at your capital decision how that impacts that?
Phil Rykhoek – President and CEO: Well, as you know we publish that comparison, although on our slideshow I think we used $90 and of course oils closer to $100. So, we’re probably in the upper 20s, low 30s, probably at the base price. Our cost are little higher than what we used in that analysis, but we still think we can with pad drilling, and so forth we think going forward we’ll still get down in the below 10 or upper 9s on well cost. I think that the one we used for the public is 9.6. So, oil is little higher, cost little higher right this moment, we are still pretty optimistic about getting that down.
Scott Hanold – RBC Capital Markets: Approximately, how many stages you’re using in the average completion on that right now?
Robert Cornelius – Senior Vice President, CO2 Operations: We are first of all, optimizing that in the 20s – upper to mid 20s.
Mike Sciala – Stifel Nicolaus: You mentioned that Thomson Field the only part of it is floodable at this point. Can you elaborate on what you need to see to determine if more of that is going to be floodable with CO2?
Phil Rykhoek – President and CEO: We, of course, haven’t had a chance to really look at it very hard. We know that the field is a bit more (indiscernible) and perhaps Hastings through some of our other fields, and so the question is how many of those (indiscernible) practical to flood. Before we bought we had the guys doing little bit of a tertiary review of it and they feel very comfortable with what we presented but that’s why I kind of said in my opening remarks, I think, that number will grow as we dig into it.
Mike Sciala – Stifel Nicolaus: Can you even gave us a ballpark of what say maximum could be or some kind of upside to the 650 number?
Robert Cornelius – Senior Vice President, CO2 Operations: Well, as mentioned in the press release, we think oil in place in 650 barrels we have assumed 300 million barrels as initial EOR target. All of the 650 million barrels oil in place is a potential EOR target. As it has oil in it, and therefore, it can be with CO2 contact, we get more out. So, that’s the range of outcomes. We think we’ve taken a conservative approach in the initial estimate and the additional scrubbing of development plans I think will improve that more.
Mike Sciala – Stifel Nicolaus: You talked about the additional reserves you booked at Oyster Bayou. How about at Heidelberg? I think you had said, Craig, that your forecast there is unchanged, but in terms of reserve potential, do you see that 31 million of proved and 11 million of 2P and 3P, is that still the right number or is that changed?
Craig McPherson – Senior Vice President, Production Operations: I’m not looking at those numbers, and I think which are spent, but in general, our outlook for Heidelberg reserve is unchanged. We’re pleased with the performance that we’ll access the reserves that are proved, and so, we believe we are on track with what we previously forecasted.
Phil Rykhoek – President and CEO: We didn’t make any adjustments to the Heidelberg reserves, nor have we today.
Mike Sciala – Stifel Nicolaus: So maybe the way to think of it when I’m modeling it is, you still feel like that potential is still there but maybe spread out over longer time, since you’re going to be flooding fewer zones at a given time?
Phil Rykhoek – President and CEO: Yeah, it probably is a little bit more of a modest growth. That would be accurate, yes.
Mike Sciala – Stifel Nicolaus: Bob, you had mentioned the delay at Riley Ridge. Does that affect the timing of Bell Creek at all?
Robert Cornelius – Senior Vice President, CO2 Operations: No, because Bell Creek’s initial CO2 is actually coming from the Conoco-Phillips operating at Lost Cabin, and that’s on schedule. We are actually making connections from their plant to our compression station during this month and the pipeline is on schedule and it should be – we should be commissioning it December and injection December, January.
Phil Rykhoek – President and CEO: Just as a refresher, (indiscernible) design this plant and they were going to reinject the CO2 which is what we plan to do initially. So with the initial methane, helium sales we’ll be reinjecting CO2 but we’ll do by the time pipeline gets there in about five years as we’ll have, I guess, what we call is a sweetner plant but a add-on to the plant that would hold the CO2 out that stream and will use it for EOR.
Mike Sciala – Stifel Nicolaus: Given where gas prices are would there be any reason to, I mean, how long is that delay going to be in place and should we expect some more charges going forward for the take or pay contract?
Phil Rykhoek – President and CEO: Well, we’re anticipating fourth quarter now and so if we’re on track than the charges probably pretty close, while gas only sells for a couple of bucks, helium still has pretty good price about $70.
Mike Sciala – Stifel Nicolaus: Last one for me you mentioned a good three forks well do you have recently completed have you tested the lower benches you had in three forks I think you had mentioned you had some points to do that?
Robert Cornelius – Senior Vice President, CO2 Operations: No sir we have not. There have been no tests. We’ve only drilled three I think significant test. So, we’ve not had time to go in and go after the lower (benches).
Mike Sciala – Stifel Nicolaus: Any of the near term wells plan to test that zone or you’re going to let other people do that?
Robert Cornelius – Senior Vice President, CO2 Operations: I think initially we’re going to let some other people do that, we may cut a core in it, but.