Denbury Resources Inc. has entered into an agreement to acquire for $115 million a 42.5% non-operated working interest in the Riley Ridge Federal Unit located in southwestern Wyoming, together with approximately 33% of the CO2 rights in an additional +/-28,000 acres adjoining the Riley Ridge Unit. The acquisition is expected to close in late October and is subject to satisfactory completion of customary due diligence.

Transaction Highlights The acquisition includes a 42.5% working interest in the 9,700+ acre Riley Ridge Federal Unit and approximately a 33% interest in the CO2 rights under an additional approximately 28,000 acres adjoining the Riley Ridge Unit. The Company estimates that the Riley Ridge Federal Unit contains proved reserves of 185 Bcf of natural gas, 6.6 Bcf of helium and approximately one Tcf of CO2, net to the interest to be acquired. The additional adjoining acreage is estimated to contain an additional one Tcf of probable CO2 reserves, net to the same interest.

The Riley Ridge Unit and the adjoining acreage are located in the reservoir known as LaBarge Field, from which other owners and operators are currently producing and selling natural gas, helium and CO2.

First production of natural gas and helium from Riley Ridge is expected to occur in late 2011.

The net development costs associated with the Riley Ridge Unit are expected to be approximately $24 million during 2010 and $32 million in 2011. The future estimated development expenditures include the costs of drilling an additional producing well and constructing processing facilities that will separate the natural gas and helium.

The full well stream is expected to consist of 65% CO2, 19% natural gas, 10% H2S and 0.6% helium and other gases. Initially the operator plans to re-inject the CO2 and H2S, but Denbury will have the right to separate and take the CO2 and re-inject the H2S.

Given that Denbury is continuing to evaluate other potential CO2 sources in the Rocky Mountain Region, no determination has been made whether or when to construct the facilities to separate CO2 from the H2S. The initial phase of development could provide up to 65 MMcf/d of CO2 to the Company, and when fully developed, the Riley Ridge Unit could provide as much as 130 MMcf/d of CO2. If the additional approximate 28,000 acres are developed, the potential CO2 volumes could exceed 400 MMcf/d.

The Company will fund the acquisition with its existing bank credit facility.

Phil Rykhoek, CEO of Denbury, commented on the transaction, saying, "This acquisition provides us with our second source of CO2 in the Rockies, a source with significant expansion potential. We plan to continue our evaluation of other potential sources of CO2 in this region before we commence construction of CO2 separation facilities at Riley Ridge, thus today, we do not have a definitive development timetable for these CO2 reserves. The beauty of this acquisition is that the anticipated natural gas and helium sales from this field are expected to cover the purchase price, giving us a low-cost option on the CO2 resources. If we build the separation facilities, we estimate that our cost of Riley Ridge CO2 will be competitive with other sources of man-made or anthropogenic CO2 in the area. If the CO2 reserves associated with the Riley Ridge Unit and the adjoining acreage are all fully developed, this single source could potentially supply most, and perhaps all, of the volumes of CO2 we need for our existing oil properties in this region acquired in the Encore acquisition."

Tags: Denbury Resources Inc.