2007 was certainly one of the best years in our corporate history and one in which we set new records for profitability, cash flow, production and reserves, just to name a few. More importantly, despite ongoing operational challenges and volatile oil prices, we saw our increasing focus on tertiary operations bear fruit in 2007 with a 47% increase in our tertiary oil production year over year, averaging 14,767 Bbls/d for 2007, representing 53% of our total corporate oil production. And to make our year even better, our tertiary oil 2007 production results were right on forecast.

Let me review with you where Denbury is today and then reflect upon the goals we have set for the future. As of the end of 2007:

• Our average production during the fourth quarter of 2007 was 45,274 BOE/d, adjusted for the Louisiana properties sold in December 2007 and February 2008. On an annual basis, our average production was 39,170 BOE/d, adjusted in the same manner. The production from our tertiary floods contributed 17,428 Bbls/d to the fourth quarter and 14,767 Bbls/d to the annual average.

• We own (or have an option to acquire) oil fields that have an estimated 314 MMBbls (using range mid-points) of additional oil reserves that can be obtained from tertiary flooding. These potential reserves have a projected PV-10 Value using year-end prices of $7.3 billion.

• Our year-end proven CO2 reserves at Jackson Dome totaled 5.6 Tcf, just marginally less than the 6.3 Tcf needed to extract the proven and potential CO2 tertiary oil reserves from our eight-phase development plan and service our industrial customers, a total of over 380 MMBbls. We estimate that we have an additional 2–3 Tcf of potential CO2 reserves at Jackson Dome, which should more than cover the shortfall needed to extract our estimated proven and potential reserves and service our industrial customers.

• In addition to our natural source of CO2 described above, we have contracts with three proposed gasification plants that could supply us with approximately 800 MMcf/d of additional CO2. While we are uncertain when and if these three plants will be built, we are in discussions with several others in the same general region, so we expect to have significant incremental man-made sources of CO2 commencing around 2011 with further incremental supplies likely thereafter.

• We currently have three pipelines in operation distributing CO2 from Jackson Dome to our oil fields with a combined length of around 300 miles. We are currently transporting over 550 MMcf/d through these lines, primarily for use in our CO2 tertiary floods.

• We have a significant position in the Barnett Shale, near Fort Worth, Texas, from which we produced an average of 76.4 MMcfe/d during the fourth quarter of 2007. Our proven reserves in the Barnett totaled approximately 369 Bcfe with an estimated PV-10 Value using yearend pricing of $717 million. In addition to our proven reserves, we have almost 90 more probable locations with estimated probable reserves of 170 Bcfe and a PV-10 Value using the same pricing of $200 million. To date, this acreage has been developed based on 500' spacing. We have recently begun to test well spacings of 250', but the results are still too inconclusive at this time.

• We are the general partner of the public master limited partnership, Genesis Energy, LP (trading symbol “GEL”). We also own 7.4% of the outstanding common partnership units. During 2007, Genesis was very active, acquiring over $630 million of assets, funding the acquisitions with a new bank credit line and the public issuance of $185 million of equity. In late March 2008, we expect to complete the “drop-down” to Genesis of our Northeast Jackson Dome (NEJD) and Free State CO2 pipelines for $250 million, receiving $225 million of cash and $25 million in Genesis common units, and expect to receive in exchange a long-term transportation service arrangement on the Free State line and a 20-year direct financing lease for the NEJD line. This last transaction will benefit both entities by giving us long-term financing for our pipeline infrastructure and providing Genesis with predictable incremental cash flow. As of year-end 2007, Genesis’ market capitalization was approximately $917 million and their most recent cash distributions were $0.285 per unit paid for the fourth quarter of 2007, which triggered an incentive cash distribution to us of $75 thousand as a result of our general partner interest.

• Assuming the closing of the drop-downs in March 2008 to Genesis described above, we anticipate $525 million of subordinated debt, no bank debt and over $100 million of cash. Our current untapped bank borrowing base is $500 million; although we anticipate that we can approximately double this borrowing base with our banks at our next redetermination on April 1, 2008.

• Our market capitalization as of year-end 2007 was $7.3 billion, with approximately 245.4 million shares outstanding. In both 2005 and 2007, we completed two-for-one stock splits of our stock as our market capitalization increased approximately five fold since year-end 2004. This increase in liquidity has been beneficial for our stockholders.

• We have approximately 700 experienced, incentivized, and enthusiastic employees. We have a broad-based equity and long-term award program which allows all of our employees to share in the success of our Company. This has allowed us to attract qualified personnel in a competitive and difficult industry environment and maintain an industry-leading retention rate.

• We continue to develop and improve on our already strong corporate governance which starts at the top with our Board of Directors and extends down throughout the Company. During 2007, we placed a renewed emphasis on our health, safety and environmental policies and procedures in order to benefit our employees and the communities where we operate.

2008 and Beyond

During 2008 and 2009, we plan to invest almost $2 billion, expanding our CO2 pipeline network from Louisiana to Texas and implementing and expanding additional tertiary floods, all as part of our strategic plan. If oil prices remain at their current levels, most of this can be funded with internally generated cash flow, but if we need to, we can tap into our unused bank credit facility, the public debt markets, additional potential long-term funding of our infrastructure through Genesis, or even possibly from asset sales of our remaining non-core assets.

Our biggest single project during this period will be the construction of the $700 million Green Pipeline, a CO2 pipeline which we hope to have completed around year-end 2009. We believe this project will be strategic for us as it will create the backbone for a CO2 gathering and distribution system in the southern Gulf Coast region.

As discussed above, there are numerous potential gasification plants being considered for construction in this area and there are also numerous additional depleted oil fields that could be acquired, making this region of the United States attractive for our continued expansion and growth. Our strategy will be to acquire additional man-made volumes of CO2 in this area, purchase additional oil fields and expand our development program beyond its current eight phases. Assuming we are successful, this should allow us to continue to increase our tertiary oil production and reserves beyond those amounts currently projected from our existing eight phases.

We look forward to 2008 as we expect to significantly increase our tertiary proven oil reserves and expect another strong year of production growth. We currently expect our 2008 production to average approximately 49,000 BOE/d, a growth rate of approximately 25% over average 2007 production levels, after adjusting for the Louisiana property sale.

The current economic environment continues to favor our strategy, with oil prices to date in 2008 above $100/Bbl on occasion. We believe this is primarily due to the inability of worldwide oil production to keep up with the world’s growth in demand. We believe that conventional oil production worldwide has peaked and has begun to decline, a view commonly referred to as “peak oil.” It also appears that other petroleum volumes that make up total worldwide liquid production (such as NGL’s, etc.) could also peak soon. If these assumptions are true, then we are looking at a defining point in the 21st century.

Our reference to this potential peak is contrasted in this year’s annual report with another peak, the Jackson Dome volcano, whose presence is indisputable. This volcano and the CO2 it created millions of years ago is the foundation of our success. We have taken this natural bounty and created a strategic plan to amplify its influence through the expected use of man-made sources of CO2. This ability to modify our strategy has allowed us to exploit new opportunities, and we must be ready to adjust again should conditions change. Our ability to adapt will be what defines Denbury in the future. We have included pictures in this annual report of some of the creatures, mostly dinosaurs, which existed at the time of the volcanic eruption at Jackson Dome. Conventional wisdom suggests that dinosaurs died out eons ago, but like Denbury they continue to adapt and survive — today we call them birds.

Gareth Roberts
President and Chief Executive Officer
March 7, 2008