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Oil and natural gas company Denbury Resources Inc. (DNR - Analyst Report) has closed the second and final phase of its previously announced divestiture program to the U.S. energy giant ExxonMobil Corporation (XOM - Analyst Report) and its wholly owned subsidiary, XTO Energy.

In the first phase, Denbury retained a 17.5% interest in its Bakken area assets to swap the remaining Bakken assets for about one-third of ExxonMobil's CO2 reserves in LaBarge Field in Wyoming, while ExxonMobil kept $350 million cash.

In the second phase, ExxonMobil swapped the proposed stake in the CO2 reserves and residual cash balances, after initial closing adjustments, with Denbury's retained interest in the Bakken area assets.

With the second closing, Denbury has completed the transfer of all of its Bakken area assets to ExxonMobil for about $1.3 billion of cash, including ExxonMobil's operating interests in Webster Field in Texas and Hartzog Draw Field in Wyoming and part of its CO2 reserves in Wyoming.

Denbury expects to obtain about 115 million cubic feet per day of CO2 from the plant, on the basis of the existing capacity of the LaBarge plant and its availability. ExxonMobil will receive a fee from Denbury for the delivery of CO2, which is initially intended to be utilized to flood its Bell Creek and Grieve fields together with the newly acquired Hartzog Draw Field. The incremental CO2 supply from the Rocky Mountain will help Denbury to speed up its planned CO2 flood of Hartzog Draw Field as well as postpone a part of the planned development of its Riley Ridge CO2 reserves.

A portion of the cash proceeds from the transaction is being used by Denbury to fund interests in additional oil fields in the Gulf Coast or Rocky Mountain region that are apt for CO2 enhanced oil recovery.

Denbury carries a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months. For the long term, we maintain our Neutral recommendation.

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