DNR sells the Bakken

[dan_s]

This should be fantastic news for DNR shareholders. This will really shore up the balance sheet. It should also draw attention to all of our Bakken companies. - Dan

(Reuters) - Exxon Mobil Corp (XOM) will buy Denbury Resources Inc's (DNR) properties in the Bakken shale for $1.6 billion and the exchange of some assets as the world's largest publicly traded energy company seeks to boost its crude oil output.

Exxon shares rose 22 cents to $90.79 in early trading Thursday on the New York Stock Exchange. Denbury shares climbed 3.3 percent to $17.27.

Exxon and other global oil companies like Royal Dutch Shell (RDSA.L) are buying more oil and gas assets in North America as they struggle to boost production in a sector where a vast amount of energy resources is located and tightly controlled by countries like Brazil and Russia.

The use of technologies like hydraulic fracturing and horizontal drilling have unlocked vast supplies of oil and gas. Output in the Bakken - which spans North Dakota, Montana and Canada - is expected to double to about 1.2 million barrels per day by 2015.

The properties being bought consist of about 196,000 net acres, with expected production of more than 15,000 oil equivalent barrels per day in the second half of this year, Exxon said.

The acquisition will increase Exxon's holdings in the Bakken region to nearly 600,000 acres, and similar purchases are expected in the future by other big oil companies.

"We expect more of these deals from the majors in the future, given the majors' collective struggles to grow production and replace reserves, their significant financial resources, and given the fact that they have come to believe that the United States' unconventional oil growth story is a durable one," analysts at Houston-based energy investment bank Simmons & Co, told clients.

As average drilling and completion costs - at about $8.5 million per well - are among the highest in Bakken, companies need deep pockets to wait until new pipelines and infrastructure come up in the next few years.

Denbury said it plans to use part of the proceeds to buy oil fields in the Gulf Coast or Rocky Mountain regions.

The company, which will receive Exxon's operating interests in the Webster field in Texas and the Hartzog Draw field in Wyoming, said the assets were close to its existing or planned projects for recovering oil using carbon dioxide.

"We can now focus on what Denbury does best, carbon-dioxide enhanced oil recovery, which we believe offers one of the most compelling rates of return in the oil and gas industry today," Denbury Chief Executive Phil Rykhoek said in a statement.

The deal is expected to close late in the fourth quarter.

[mdwitte]

When DNR bought EAC I was worried that they (DNR) were deviating from their specialty, EOR via CO2...I'm glad I continued to hold my DNR shares...maybe mgt DOES know what they are doing! lol

[dan_s]

Phil Rykhoek is a great guy and he has a great team at DNR. You can meet Phil at our luncheon in Houston on October 23.

[dan_s]

The video at the link below explains why the deal is a Win-Win for both companies.

http://www.fool.com/investing/general/2 ... urces.aspx

Assuming oil prices hold up next week, I can see a lot of analysts taking a hard look at DNR for their portfolios. It is still trading way below its break-up value.