Lease operating expenses decreased 1% on a per BOE basis sequentially, but increased 32% on a per BOE basis between the respective second quarters. The sequential decrease was primarily due to lower workover costs in the Company’s tertiary operations in the second quarter, as the first quarter included above-normal workover costs, primarily at Brookhaven Field. The overall increase on a per BOE basis between the respective second quarters was primarily due to the sale of non-strategic legacy Encore and ENP properties during 2010, which generally had a lower operating cost per BOE than Denbury’s tertiary operations and other legacy properties. Denbury’s tertiary operating expense decreased 8% on a per Bbl basis sequentially, averaging $23.35 per Bbl in the second quarter of 2011, as compared to $25.40 per Bbl in the first quarter of 2011, the savings primarily due to the aforementioned decrease in workover expenses. Tertiary operating expenses were higher than the $21.37 per Bbl in the prior-year second quarter, primarily due to higher workover costs and CO 2 costs, with the cost of CO 2 increasing due to higher oil prices and increased injection volumes. Production taxes and marketing expenses increased during the second quarter of 2011 as compared to second quarter 2010 levels, primarily as a result of higher oil prices.
General and administrative (“G&A”) expenses decreased 30% sequentially, totaling $30.9 million in the second quarter of 2011, as compared to $43.8 million in the first quarter of 2011, due primarily to lower compensation and employee-related costs and lower professional fees in the current quarter. The first quarter of 2011 included higher payroll tax burdens and 401(k) match associated with bonus payouts, the true-up of long-term incentive compensation estimates, incremental costs associated with relocating the Company’s headquarters and higher professional fees associated with year-end work. Current quarter G&A expenses totaling $30.9 million were approximately the same as the $31.2 million of these expenses in the prior-year second quarter. On a BOE basis, G&A expense was $5.23 per BOE in the second quarter of 2011, as compared to $4.07 in the prior year quarter. Lower production attributable to the 2010 sale of properties was the primary factor relating to the higher cost per BOE, as any cost savings as a result of the property sales were offset by other expenses, including compensation increases effective at the beginning of 2011 and incremental expense attributable to the legacy Encore office leases and the new Denbury headquarters.
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