UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 19, 2008
DENBURY RESOURCES INC.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction
of incorporation or organization)
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| 1-12935
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20-0467835 |
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(I.R.S. Employer |
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Identification No.) |
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| 5100 Tennyson Parkway |
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| Suite 1200 |
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| Plano, Texas
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75024 |
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(Zip code) |
Registrant’s telephone number, including area code: (972) 673-2000
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions (see General Instruction
A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c)) |
Item 1.01 Entry into a Material Definitive Agreement
On August 19, 2008, the principal wholly-owned operating subsidiary of Denbury Resources Inc.
(NYSE: DNR), Denbury Onshore, LLC, entered into an agreement with a privately-owned company, Wapiti
Energy, LLC and its wholly-owned subsidiaries, Wapiti Operating, LLC and Wapiti Gathering, LLC to
purchase a 91.4% working interest (approximate net revenue interest of 77.6%) in Conroe Field, an
oil field with oil reserves that have the potential to be extracted using Carbon Dioxide for
tertiary flooding. The Company will succeed the seller as operator of the field.
The primary assets are north of Houston, Texas. The transaction is expected to close in October
2008, subject to our due diligence and other conditions to closing customary for transactions of
this type. The acquisition price is $600 million and is subject to adjustment at the closing date
or during the subsequent 36 months if oil futures prices exceed $121 per barrel (the “Base Price”)
as follows:
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At the closing date the purchase price will be adjusted upward if the average settlement
price (using the last business day prior to closing) of the NYMEX crude oil futures strip
prices for the ensuing 16 months (i.e. November 2008 – February 2010) (the “Adjustment
Price”) is then in excess of the $121 per barrel Base Price. The purchase price will
increase by $7.2 million for each dollar (or fraction thereof) per barrel of oil price
increase in the Adjustment Price over the Base Price. If the Adjustment Price on the date
of closing is less than $121 per barrel, the Adjustment Price will be $121 per barrel. |
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For a period of 36 months after closing, the seller shall have a one-time election (to
be exercised on any business day of the seller’s choosing) to receive additional
consideration if the average settlement price of the 12 month NYMEX strip of crude oil
futures on the day of election (“Election Price”) is in excess of the Adjustment Price.
The additional consideration will be $7.2 million for each dollar (or fraction thereof)
that the Election Price exceeds the Adjustment Price. |
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The maximum additional consideration that the seller may receive pursuant to the two
opportunities for additional consideration will be $125 million. |
On August 20, 2008, we transferred to the seller $30 million as a performance deposit which will be
credited to the purchase price at closing. If the conditions to closing are satisfied and the
acquisition is not consummated by October 1, 2008 due to our failure to perform our material
obligations, then we will forfeit the performance deposit.
We plan to fund the acquisition initially with bank debt, which will require an anticipated
increase in our bank credit line. Currently our borrowing base under our credit agreement is $1.0
billion with the commitment amount set at $350 million. The borrowing base represents the amount
that can be borrowed from a credit standpoint based on our assets, as confirmed by the banks, while
the commitment amount is the amount the banks have committed to fund pursuant to the terms of the
credit agreement. The banks have the option to participate in any borrowing
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request by us in excess of the commitment amount, up to the borrowing base limit, although the
banks are not obligated to fund any amount in excess of the commitment amount. We intend to follow
up with other sources of funds including possibly other debt financing or the sale of our Barnett
Shale properties in North Texas.
We plan to build an eighty mile pipeline to transport to the Conroe Field the CO2 to be
used for tertiary flooding. For more details on our expected expenditures to extract oil from the
Conroe Field, see the attached press release.
Item 9.01 Financial Statements and Exhibits
(c) Exhibits
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Document Name |
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Exhibit 99.1
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Press release dated August 21, 2008 |
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