SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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) September 12, 1997
DENBURY RESOURCES INC.
(Exact name of Registrant as specified in its charter)
Canada
(State or other
jurisdiction
of incorporation or
organization)
33-93722 Not applicable
(Commission File (I.R.S. Employer
Number) Identification
No.)
17304 Preston Road
Suite 200
Dallas, TX 75252
(Address of principal (Zip code)
executive offices)
Registrant's telephone number, including area code: (972)713-3000
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Item 5. Other Events
During the last week, Denbury Resources Inc. (the "Company") evaluated
three recently completed wells which have significantly increased the Company's
proved reserves. Two wells, the Stanley 1-11 #8 and the Stanley 1-14 #2, were
recently completed at its East Eucutta Field in Wayne County, Mississippi.
Analysis of electric logs and core samples indicate over 140 net feet of pay in
each of these two wells in seven Paluxy sands between 7,700 and 8,500 feet.
These wells are expected to add approximately 4.2 million barrels of additional
net proved oil reserves to the Company based on estimates from Netherland,
Sewell and Associates, Inc., the Company's independent consulting engineers. At
least six additional wells will be drilled to produce these reserves. The
Company has a 100% working interest and an 87.5% net revenue interest in these
two wells.
The Company also completed the Harry Bourg #1 well at Bayou Rambio Field in
Terrebonne Parish, Louisiana. Analysis of electric logs and core samples
indicate over 90 net feet of pay in this well in seven Miocene sands between
11,000 and 13,500 feet. This well is expected to add approximately 6.7 billion
cubic feet of additional net proved gas reserves and 40,000 barrels of
additional net proved oil reserves to the Company based on estimates from
Netherland & Sewell. At least one additional well will be drilled to produce
these reserves. The Company has a 70% working interest and an 52% net revenue
interest in this well.
The Company expects all three wells to commence production within the next
two to three weeks. As of December 31, 1996, the Company's net proved reserves
consisted of approximately 15 million barrels of oil and 74.1 billion cubic feet
of natural gas or approximately 27.4 million barrels of oil equivalent (on a 6:1
basis).
Item 7. Financial Statements and Exhibits
99. Reserve estimates dated September 11, 1997 regarding certain
reserve additions from Netherland, Sewell & Associates, Inc.,
independent petroleum engineers.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DENBURY RESOURCES INC.
Date: September 12, 1997 By: /s/ Phil Rykhoek
------------------------------
Phil Rykhoek
Chief Financial Officer
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<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
- ----------- -------
99. Reserve estimates dated September 11, 1997 regarding certain
reserve additions from Netherland, Sewell & Associates, Inc.,
independent petroleum engineers.
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<PAGE>
September 11, 1997
Mr. William E. Gross
Denbury Management, Inc.
Suite 200
17304 Preston Road
Dallas, Texas 75252
Dear Mr. Gross:
In accordance with your request, we have estimated the proved developed
non-producing and proved undeveloped reserves and future revenue, as of October
1, 1997, to the Denbury Management, Inc. (DMI) interest in certain oil and gas
properties located in Bayou Rambio Field, Terrebonne Parish, Louisiana, and in
East Eucutta Field, Wayne County, Mississippi, as listed in the accompanying
tabulations. As requested, our estimates are limited to reserves and future
revenue for those reservoirs discovered as a result of recent drilling activity.
This report has been prepared using constant prices and costs as set forth in
this letter.
As presented in the accompanying summary projections, Tables I through III,
we estimate the net reserves and future net revenue to the DMI interest, as of
October 1, 1997, to be:
Net Reserves Future Net Revenue
------------------------- ----------------------------
Oil Gas Present Worth
Category (Barrels) (MCF) Total at 10%
- ----------------- ---------- ----------- ------------ ------------
Proved Developed
Non-Producing 667,429 3,683,160 $16,660,000 $ 11,481,300
Proved 3,599,868 6,292,000 58,068,200 39,650,900
Undeveloped
---------- ----------- ------------ ------------
Total Proved 4,267,297 9,975,160 $74,728,200 $ 51,132,200
The oil reserves shown include crude oil and condensate. Oil volumes are
expressed in barrels which are equivalent to 42 United States gallons. Gas
volumes are expressed in thousands of standard cubic feet (MCF) at the contract
temperature and pressure bases.
This report includes summary projections of reserves and revenue for each
reserve category; one-line summaries of reserves, economics, and basic data by
lease; and summaries of supplemental data. For the purposes of this report, the
term "lease" refers to a single economic projection.
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<PAGE>
The estimated reserves and future revenue shown in this report are for
proved developed non-producing and proved undeveloped reserves. No study was
made to determine whether probable or possible reserves might be established for
these properties. This report does not include any value which could be
attributed to interests in undeveloped acreage beyond those tracts for which
undeveloped reserves have been estimated.
Future gross revenue to the DMI interest is prior to deducting state
production taxes. Future net revenue is after deducting these taxes, future
capital costs, and operating expenses, but before consideration of federal
income taxes. The future net revenue has been discounted at an annual rate of 10
percent to determine its "present worth." The present worth is shown to indicate
the effect of time on the value of money and should not be construed as being
the fair market value of the properties.
For the purposes of this report, a field inspection of the properties has
not been performed nor has the mechanical operation or condition of the wells
and their related facilities been examined. We have not investigated possible
environmental liability related to the properties; therefore, our estimates do
not include any costs which may be incurred due to such possible liability.
Also, our estimates do not include any salvage value for the lease and well
equipment nor the cost of abandoning the properties.
As requested, oil prices used in this report are based on a June 30, 1997
Koch Oil Company West Texas Intermediate posted price of $17.18 per barrel,
adjusted by lease for gravity, transportation fees, and regional posted price
differentials. Gas prices used in this report are based on a June 30, 1997 NYMEX
Henry Hub posted price of $2.35 per MMBTU, adjusted by lease for transportation
fees, BTU content, and regional price differentials. Oil and gas prices are held
constant throughout the life of the properties.
Lease and well operating costs are based on operating expense records of
DMI for similar wells in the fields. As requested, lease and well operating
costs include only direct lease and field level costs. Headquarters general and
administrative overhead expenses of DMI are not included. Lease and well
operating costs are held constant throughout the life of the properties. Capital
costs are included as required for workovers, new development wells, and
production equipment.
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The reserves included in this report are estimates only and should not be
construed as exact quantities. They may or may not be recovered; if recovered,
the revenues therefrom and the costs related thereto could be more or less than
the estimated amounts. These reserves are for behind-pipe zones and undeveloped
locations which lack data upon which performance-related estimates of reserves
can be based. Therefore, these reserves are based on estimates of reservoir
volumes and recovery efficiencies along with analogies to similar production. As
such reserve estimates are usually subject to greater revision than those based
on substantial production and pressure data, it may be necessary to revise these
estimates up or down in the future as additional performance data become
available. The sales rates, prices received for the reserves, and costs incurred
in recovering such reserves may vary from assumptions included in this report
due to governmental policies and uncertainties of supply and demand. Also,
estimates of reserves may increase or decrease as a result of future operations.
In evaluating the information at our disposal concerning this report, we
have excluded from our consideration all matters as to which legal or
accounting, rather than engineering and geological, interpretation may be
controlling. As in all aspects of oil and gas evaluation, there are
uncertainties inherent in the interpretation of engineering and geological data;
therefore, our conclusions necessarily represent only informed professional
judgments.
The titles to the properties have not been examined by Netherland, Sewell &
Associates, Inc., nor has the actual degree or type of interest owned been
independently confirmed. The data used in our estimates were obtained from
Denbury Management, Inc. and the nonconfidential files of Netherland, Sewell &
Associates, Inc. and were accepted as accurate. We are independent petroleum
engineers, geologists, and geophysicists; we do not own an interest in these
properties and are not employed on a contingent basis. Basic geologic and field
performance data together with our engineering work sheets are maintained on
file in our office.
Very truly yours,
/s/ Clarence Netherland
DMA:EIB
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