Denbury plans to use asset sale proceeds to pay down credit facility

By Angela McDaniels

Tacoma, Wash., April 5 - Denbury Resources Inc. will pay down its $1.6 billion bank credit facility with the proceeds from the sale of some oil and natural gas properties for $900 million, according to a company news release.

As of March 31, $800 million was outstanding under the facility.

The company said its credit facility may be redetermined by its lenders as a result of the sale and could potentially be reduced. However, the company believes that any reduction would be minor relative to the sales proceeds.

The properties being sold were recently acquired in the company's merger with Encore Acquisition Co. They are being sold to Quantum Resources Management, LLC. The sale is expected to close in May.

"This transaction significantly reduces our debt, frees up our bank credit line, restores our balance sheet to leverage ratios more in line with pre-acquisition levels and allows us to focus our attention on our core assets," chief executive officer Phil Rykhoek said in the news release.

"We still plan to market the Haynesville assets that were not part of this sales package, but even if the bids are unacceptable, with this transaction, we will have met our 2010 delevering goals."

Denbury and Encore are oil and natural gas companies based in Plano, Texas, and Fort Worth, respectively.

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