Denbury Resources Inc. Press Release

Denbury Resources Announces Agreement to Acquire
the General Partner of Genesis Energy, L.P.

 

News Release

Released at 7:30 AM CDT

 

DALLAS - May 6, 2002 - Denbury Resources Inc. (NYSE symbol:  DNR) ("Denbury" or the "Company") today announced the signing of an agreement to acquire Genesis Energy, L.L.C., the general partner of Genesis Energy, L.P. (AMEX symbol:  GEL) for total consideration, including expenses and commissions, of approximately $2.0 million.  The general partner interest to be acquired owns 2% of the limited partnership.  The transaction is expected to close on May 15, 2002.

 

Overview of Genesis

 

Genesis is a publicly traded master limited partnership engaged in two primary lines of business: crude oil gathering and marketing and pipeline transportation.  Currently, Genesis is purchasing approximately 67,000 barrels per day (Bbls/d) of crude.  They also utilize their trucking fleet of 75 leased tractor-trailers to transport crude purchased at the wellhead to pipeline injection points, terminals or refineries.  Their operations are concentrated in Alabama, Florida, Mississippi, Louisiana, and Texas.

 

Genesis also owns and operates three common carrier crude oil pipeline systems.  They include the 703 mile Texas system, the 114 mile Jay System extending between Florida and Alabama and the 261 mile Mississippi system extending between Mississippi and Louisiana.  Complementing the pipelines is 1.5 million barrels of crude oil storage capacity.

 

Strategic Fit and Joint Opportunities

 

Genesis owns and operates a 261mile crude oil pipeline system in Mississippi adjacent to several of Denbury's existing and prospective oil fields.  Denbury is the largest oil and natural gas operator in the state of Mississippi.  There may be mutual benefits to Denbury and Genesis due to this common production and transportation area.  Because of the new relationship, Genesis may obtain certain commitments for increased crude volumes, while Denbury may obtain the certainty of transportation for its oil production at competitive market rates.  With Denbury's anticipated expansion in the area related to its continued acquisition and development of old oil fields using carbon dioxide (CO₂), there may be future additional benefits for both entities.  If development continues as planned, Denbury would expect to add additional crude oil gathering and CO₂ supply infrastructure to these fields as it commences its tertiary recovery operations.  Genesis may be able to provide or acquire this infrastructure and provide support to Denbury's development of these fields.  Furthermore, with Denbury's anticipated production increases from these fields, over time it will require more transportation of its crude oil.

 

Gareth Roberts, Chief Executive Officer, said: "With the uncertainty surrounding midstream assets since the Enron collapse, Denbury felt it was necessary to ensure long term survival of an important segment of its transportation infrastructure.  We feel that we have improved out economics in this key operating area, with greater control over the transportation and price of, and potentially greater value for, our Mississippi production.  We expect there will be significant benefits to both parties from this transaction and we look forward to working with our new business partner.  Even though we have an agreement to acquire the general partner of Genesis, we expect Genesis to continue to operate as a separate entity with its own management and personnel."

 

 

Conference Call

 

Genesis is planning to host a conference call regarding their first quarter earnings on May 14, 2002 at 11:00 AM CDT.  Members of Denbury's management, who are among those from Denbury that are expected to join the board of directors of the general partner, will also be available on that call to discuss this transaction.  The call will be broadcast live over the Internet at Genesis' web site at www.genesiscrudeoil.com.  The public is invited to join.  If you are unable to participate during the live broadcast, the call will be archived on Genesis' web site.

PetroGrowth Advisors of Dallas, Texas acted as Denbury's financial advisor in the transaction.

Denbury Resources Inc. (www.denbury.com) is a growing independent oil and gas company. The Company is the largest oil and natural gas operator in Mississippi, holds key operating acreage onshore Louisiana and has a growing presence in the offshore Gulf of Mexico areas.  The Company increases the value of acquired properties in its core areas through a combination of exploitation drilling and proven engineering extraction practices.

This press release, other than historical financial information, contains forward looking statements that involve risks such as those involved in drilling activity and those sue to price volatility, and uncertainties as to drilling results, production levels, commodity prices, and financial results as detailed in Denbury's filings with the Securities and Exchange Commission, including its reports on Form 10-K and 10-Q.  These reports are incorporated by reference as though fully set forth herein. These statements are based on assumptions concerning commodity prices, existing market conditions, scheduling, drilling and completion results and costs and engineering assumption that management believes are reasonable based on currently available information; however, management's assumptions and Denbury's future performance are both subject to a wide range of business risks, and there is no assurance that these goals and projections can or will be met.  Actual results may vary materially.