Denbury Resources Inc. has mutually agreed with Penn Virginia Corporation to terminate their previously announced agreement under which Denbury was to acquire Penn Virginia. Both US-based companies focus on carbon dioxide-based enhanced oil recovery (EOR).
CO2-based EOR is concerned when an oilfield begins to decrease its oil production, multiple methods can be used to increase production, CO2 EOR is one of these.
The process involves the injection of compressed carbon dioxide into an oil reservoir. The CO2 acts like a solvent and causes the oil to expand and flow more easily to production wells. Both Denbury and Penn Virginia’s focus’ are aimed at developing American oil through CO2 EOR.
“While we firmly believed in the strategic merits of the combination with Penn Virginia, the difficult market conditions since announcement, combined with the opposition of certain Penn Virginia shareholders, led us to the conclusion that the transaction was unlikely to receive the necessary super majority approval from Penn Virginia shareholders,” said Chris Kendall, Denbury’s President and CEO.
“We remain optimistic about significant resource potential that CO2 EOR could delivery in the Eagle Ford, and the work we have completed to date has only increased that optimism.”
“We will continue to pursue practical opportunities to expand Denbury’s business, particularly in areas where EOR expertise, experience and extensive CO2 resources can create value for the benefit of all Denbury stakeholders.”
“Longer term, we believe that CO2 EOR will become an even more vital component of the world’s oil supply, with the smallest possible carbon footprint for an oil producer, and that Denbury is uniquely positioned in the industry to benefit from an increasing need to limit or reduce CO2 emissions.”
“As we move forward, we are highly confident in Denbury’s position and are committed to executing our strategic plan, including the significant ongoing EOR development at the Cedar Creek Anticline. Through leveraging our resilient, high margin, low decline asset base, we will continue to drive incremental, high value growth opportunities. At the same time, we will maintain our disciplined operating approach, which we expect will enable us to generate well over $100m of free cash flow in 2019 at current oil prices, providing us with significant flexibility going forward,” Kendall concluded.
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