Oklahoma City’s Devon Energy finished 2020 with a nearly $20 million sale of holdings in Wyoming to independent oil and gas company Denbury Inc. headquartered in Plano, Texas.
The sale involved Devon’s assets in the Big Sand Draw and Beaver Creek oilfields of Freemont County, Wyoming. The acquisition by Denbury involved associated surface facilities and a 46-mile CO2 transportation pipeline to the fields.
The net production from the two fields will add nearly 2,800 barrels of oil equivalent a day to Denbury’s production. The 2,800 BOE a day is based on the third quarter of 2020 of which 85% was oil production.
Denbury’s announcement of its acquisition indicated that based on Dec. 1, 2020 oil and natural gas futures strip prices, the net proved reserves from the two fields are 93% oil and estimated at 13,7 million BOE.
“Big Sand Draw and Beaver Creek are exciting additions to Denbury’s Rocky Mountain region footprint, and we believe they are an ideal operational fit for Denbury’s differentiated CO2 EOR-focused strategy,” said Chris Kendall, Denbury’s President and CEO.
He said by using 100% industrial sourced CO2, the fields will increase the company’s use of industrial sourced CO2 by nearly 400,000 tons a year, enhancing the company’s low carbon footprint from oil production.
The purchase agreement provides for two contingent cash payments of $4 million each, the first one payable if West Texas Intermediate oil prices average at least $50 per barrel in calendar year 2021 and the second one payable if NYMEX WTI oil prices average at least $50 per barrel in calendar year 2022. The acquisition is expected to close in the first quarter of 2021 and is subject to customary closing conditions.
The Big Sand Draw oil field was discovered in 1918 and the CO2 flood was initiated in 2014. The Beaver Creek oil field was discovered in 1938 and the CO2 flood was initiated in 2008.
The CO2 used to flood both fields is supplied from ExxonMobil’s Shute Creek gas processing plant in southwestern Wyoming, where Denbury owns a one-third overriding royalty interest in all captured CO2.
Source: Denbury release