Monday, March 8, 2010

Denbury Resources (NYSE: DNR): Used Oil Fields

Denbury Resources Making Money from Abandoned Oil Fields

Denbury Resources (NYSE: DNR) is an interesting oil play because they make money from oil in a very different way than most of their energy counterparts.

What Denbury does is buy up abandoned or used oil fields which no longer profitably produced for their original owners, and tap into the oil left for a profit.

The reason this works is they take carbon dioxide and inject into the wells which increases the output.

The competitive advantage Denbury has is it has a source of inexpensive carbon dioxide which allows them to produce the oil at a far less expensive price than most, if not all, of their competitors. They also have significant carbon dioxide reserves to work with.

Costs to extract the oil is estimated to be about $5 to $10 a barrel, making it a great operational and cost-efficient process for them. That means their profits will be higher over the long haul.

Denbury should be considered a long-term play, and it should pay off for those investors in oil with that type of outlook.

Denbury Resources Making Money from Abandoned Oil Fields

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