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Denbury Resources Management Discusses Q2 2012 Results - Earnings Call Transcript

Turning to the second quarter, as you saw on this morning's press release, we continue to execute well in 2012. We have grown in reserves, grow production, lower in cost and most importantly, creating value for our shareholders. Our tertiary production increased by 6% sequentially as a result of growth from our fields at Hastings and Oyster Bayou and also Tinsley and Heidelberg. Craig will give you much more color on that here in a minute.

Based on the strong tertiary response today at Hastings, we're able to book initial proved tertiary reserves in this field a bit earlier than we originally had expected. We added about 43 million barrels of oil reserves at Hastings with a PV-10 Value of over $1 billion, and that's using SEC pricing of approximately $95 oil. By itself, that's an incremental value of between $2.50 and $3 per share.

If you recall, we added 14 million barrels of proved tertiary reserves last quarter at Oyster Bayou and that had a PV-10 Value of more than $500 million. So combined these 2 EOR gives fields gives us nearly 57 million barrels of incremental tertiary oil reserves in the first half of 2012 adding about $4 a share to our PV-10 Value.

At both of these fields, we would expect to add to these proved reserve numbers over time as the fields are further developed. Another point you might make here is that Hastings and Oyster Bayou's positive response to the CO2 injections is also very favorable for the recently acquired Thompson. If you recall, Thompson's about 18 miles from Hastings, and the important point is that all 3 fields produce from the same preo [ph] formation.

With reserve additions at Hastings, Oyster Bayou and the Bakken, we've increased our internally estimated proved reserves up 12% from year-end 2011 levels. So the bottom line, our tertiary program's doing well, and it's creating real value.

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