Denbury Resources Inc. has entered into oil derivative contracts (collars) for the second quarter of 2010 covering 25,000 Bbls/d with a floor price of $50.00 per Bbl and a ceiling price ranging from $73.15 to $76.40 per Bbl, with a weighted average ceiling price of $74.60 per Bbl. These derivative contracts were acquired at no upfront cost to the Company and were made with multiple counterparties, all banks that are part of the Company’s bank credit agreement.
Gareth Roberts, President and CEO, stated, “In light of our desire to prevent our capital budget from being further reduced and our desire to maintain our strong liquidity position, we and our board of directors have decided to hedge a significant portion of our oil approximately twelve months in advance. These new derivative contracts, coupled with the first quarter 2010 fixed price swaps we obtained earlier this month, gives us a minimum price of approximately $50 on 25,000 Bbls/d for the first half of 2010. Because we remain bullish on oil prices, we have concluded that we don’t want to hedge oil too far into the future and when appropriate, we will likely attempt to hedge with price collars, as we have with these new contracts for the second quarter of 2010, in order to give us as much potential upside exposure as possible. This hedging program will allow us to maintain our aggressive expansion plans at a modest rate but retain the potential to accelerate it if higher oil prices materialize in 2010.”