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Denbury Resources Inc. Message Board

  • jerrykrause jerrykrause Jul 30, 2014 8:19 PM Flag

    Under pressure: How will oil prices affect companies like Denbury Resources?

    Under pressure: How will oil prices affect companies like Denbury Resources?
    by Nicholas Sakelaris - Staff Writer - Dallas Business Journal

    Injecting carbon dioxide to bring older oil fields back to life is Denbury Resources’ bread and butter.

    Pressure goes down in an oil field after decades of drilling, making it harder to produce oil out of the reservoir by traditional means. Plano-based Denbury (DNR) pipes in carbon dioxide from manmade and natural sources that it shoots into the oilfield to restore the pressure and produce the oil again.

    The same carbon dioxide causes a can of pop to shoot like a geyser after shaking.

    But this so-called enhanced oil recovery is also more costly than traditional drilling, adding potentially $20 to $30 to the cost of every barrel produced for the carbon dioxide alone, according to the a new report by the Energy Information Administration.

    Special equipment is needed to separate the crude oil from the carbon dioxide. Pressurizing the oilfield also takes time, which also increases the cost, according to the EIA.

    “Oil prices thus play an important role in determining whether the additional production resulting from applying CO2 EOR to old oil fields is sufficient to make this process commercially viable and economically feasible,” the EIA wrote in its report.

    The EIA uses three different projections for the future price of oil by 2040.

    High price

    If oil reaches $202 a barrel by 2040:
    Oil production by EOR could be 960,000 barrels per day
    12 percent of U.S. oil production

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    • whats the point of this projection ? Oil will stay relatively high and in high global demand at least for the next couple of decades.

    • Part II

      Reference case:

      If oil is $90 per barrel by 2040
      Oil production by EOR could be 740,000 barrels per day
      10 percent of U.S. oil production
      Low price

      If oil falls to $73 per barrel by 2040:
      Oil production by EOR would drop to 480,000 barrels per day
      8 percent of U.S. oil production
      Denbury did not immediately respond to calls for comment. The company has 468.3 million barrels of oil equivalent per day in proven reserves, according to its website. Of that, 83 percent is oil.

      Denbury operates in Texas, Louisiana, Mississippi, Alabama, Wyoming, Montana and North Dakota. Denbury will release its second quarter earnings on Aug. 6.

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