2015 Corporate Responsibility Report

Our Strategic Vision for CO₂ EOR

What We Do

GRI:
G4-OG1 Reserves Denbury is focused on revitalizing America’s mature oil fields with carbon dioxide enhanced oil recovery (“CO₂ EOR”), bringing new life and energy from these fields to provide oil for our nation for decades to come. CO₂ EOR provides an economic and technically feasible method of utilizing CO₂ provided by industrial facilities, that also results in associated underground storage, reducing our nation’s dependence on foreign oil and making our nation more energy secure.

Our CO2 story
The stages of oil recovery
Our CO2 EOR process*
Use of CO2 From Industrial Sources*

Our CO₂ story

Denbury is unique among domestic oil and gas companies because our primary corporate strategy and focus is on developing significant and otherwise stranded reserves of American oil from depleted reservoirs through carbon dioxide enhanced oil recovery (“CO₂ EOR”).

In many U.S. oil fields, it is estimated that only about 30% to 40% of the original oil in place (“OOIP”) is recoverable through primary and secondary methods. Our experience has shown that CO₂ EOR can recover another 10% to 20% of the OOIP. While the technology used in CO₂ EOR may not be considered new, we apply several concepts learned over time to improve and increase CO₂ utilization efficiency within the reservoirs. For example, we are focused on using CO₂ more efficiently in our operations which allows us to decrease the amount of naturally-occurring CO₂ injected in our operations, thereby increasing the proportion of industrial-sourced CO₂ utilized in EOR. Implementing this strategy improves the economics of the process and makes CO₂ EOR operations economically viable on a wider scale, even in a lower oil price environment.

We began our CO₂ EOR operations in 1999 when we acquired Little Creek Field in Mississippi, followed by our acquisition of Jackson Dome CO₂ reserves and the Northeast Jackson Dome (“NEJD”) Pipeline in 2001. Based upon our success at Little Creek and the ownership of significant CO₂ reserves at Jackson Dome, we began to transition our capital spending and acquisition efforts to focus predominantly on CO₂ EOR. Today, our asset base primarily consists of current CO₂ EOR projects, future CO₂ EOR projects and assets that produce, process and transport much of the CO₂ that we use.

Our oil and natural gas properties are concentrated in the Gulf Coast and Rocky Mountain regions of the United States.

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About Forward Looking Statements

The stages of oil recovery

For many years, oil has been produced from the earth using a variety of different production techniques, typically occurring in three phases: primary, secondary and tertiary oil recovery, also known as enhanced oil recovery (“EOR”). Primary oil recovery is limited to hydrocarbons that naturally rise to the surface, or those that use artificial lift devices, such as pump jacks. In secondary production, water is typically injected to re-pressure the target formation, providing energy and mobility to sweep the remaining recoverable liquids to the wellbore for recovery. Utilizing only primary and secondary recovery methods can leave up to 70% of the original oil in place (“OOIP”).

Tertiary production occurs after both primary and secondary recovery production is complete. This phase of production requires a catalyst that will interact with the stranded oil so that it will flow through the rock reservoir to the wellbore. Pressurized CO₂ injection is a proven EOR technique and can recover, on average, an additional 10% to 20% of the OOIP.

CO₂ EOR currently accounts for approximately 3.5% of average U.S. daily production, or approximately 300,000 barrels of oil per day (“BOPD”) or over 100 million barrels per year. CO₂ transportation pipelines currently cover over 5,000 miles and are a small fraction of the U.S. natural gas pipeline network. CO₂ EOR projects have been in commercial operation since the 1970's and enjoy an impressive record of safely and securely injecting more than an estimated 1 billion metric tons (one gigatonne) of CO₂ since 1984. On average it is estimated that the industry injects 63-68 million metric tons of CO₂ per year for EOR production operations.

EOR Can Deliver Almost as Much Oil as Primary and Secondary Recovery⁽¹⁾

⁽¹⁾ Recovery of original oil in place based on history at Little Creek Field.

Our CO₂ EOR process^*

STEP 1: CO₂ Sources and Capture

The first step in implementing a carbon dioxide enhanced oil recovery (“CO₂ EOR”) project is to secure access to substantial volumes of CO₂. Denbury sources CO₂ both from naturally-occurring underground reservoirs and from industrial sources which capture, process and then compress the CO₂ for delivery into a pipeline network. The CO₂ captured from industrial sources (which is sometimes referred to as anthropogenic or man-made CO₂) could otherwise be released into the atmosphere. For our Gulf Coast assets, Denbury sources naturally-occurring CO₂ from Jackson Dome in Mississippi and industrial CO₂ from two facilities: one in Port Arthur, Texas and one in Geismar, Louisiana. For our Rocky Mountain region, Denbury sources CO₂ from the Lost Cabin gas plant and the Shute Creek plant in Wyoming.

Our CO₂ EOR operations provide an environmentally responsible method of utilizing CO₂ for the primary purpose of oil recovery that also results in the incidental underground storage of CO₂ while also making our nation more energy secure.

STEP 2: CO₂ Transportation

The second step is transporting the CO₂ from the source to the oil field. We operate or control over 1,100 miles of CO₂ pipelines and are continually expanding this network to transport naturally-occurring CO₂ and CO₂ from industrial sources to our tertiary fields. We currently utilize, on average, over 150 million cubic feet of CO₂ from industrial sources per day and anticipate additional CO₂ from industrial sources from currently planned or future construction of facilities in our Gulf Coast region.

STEP 3: CO₂ Injection

The third step is to inject the CO₂ into the oil-bearing reservoir through a wellbore. The injected CO₂ moves through the reservoir, mixing with the crude oil trapped there. The CO₂ acts to separate the oil from the reservoir rock and increase the oil’s mobility within the reservoir. The mixture is driven through the formation into a producing wellbore, where it then comes to the surface, increasing the field’s oil production. To date, our CO₂ EOR operations have resulted in the gross production of over 135 million barrels of oil that may not have otherwise been recovered.

STEP 4: CO₂ EOR Benefits & Storage

CO₂ EOR operations provide considerable economic and environmental benefits. The economic benefits of CO₂ EOR include the creation of jobs due to large cash investments required to implement and operate a CO₂ EOR project, along with tax payments to local governments. Our CO₂ EOR operations provide an environmentally responsible method of utilizing CO₂ for the primary purpose of oil recovery that also results in the incidental underground storage of CO₂ while also making our nation more energy secure.

* In this section any references to “Denbury,” “our” or “we” refers to Denbury Onshore, LLC, or in case of references to CO2 pipeline infrastructure, an affiliate of Denbury Onshore, LLC.

Use of CO₂ From Industrial Sources^*

Starting in late 2012, we began purchasing and utilizing CO₂ from industrial sources in our tertiary operations in the Gulf Coast region. These projects illustrate our unique ability to use captured CO₂ that would otherwise be released into the atmosphere.

Denbury is currently party to several contracts to purchase carbon dioxide (“CO₂”) from industrial sources (CO₂ from these sources is also known as anthropogenic or man-made CO₂) to use in our enhanced oil recovery (“EOR”) operations. We currently purchase CO₂ from an industrial facility in Port Arthur, Texas, an ammonia plant in Geismar, Louisiana and the Lost Cabin gas plant in Wyoming. These three sources currently supply, on average, over 100 MMcf/d of CO₂ for our EOR operations. Denbury also owns an interest in the CO₂ at LaBarge Field in Wyoming, which is captured from the Shute Creek Plant. The CO₂ captured from these industrial sources could otherwise be released into the atmosphere. Additionally, we are working to take deliveries from a coal-fired power plant in Mississippi and are in ongoing discussions with other parties who have plans to construct plants near the Green Pipeline.

We continue to have ongoing discussions with owners of existing plants of various types that emit CO₂ that we may be able to purchase and/or transport. In order to capture such volumes, we (or the plant owner) would need to install additional equipment, which includes, at a minimum, compression and dehydration facilities. Most of these existing plants emit relatively small volumes of CO₂, generally less than our contracted sources, but such volumes may be attractive if the source is located near CO₂ pipelines. The capture of CO₂ could also be influenced by potential federal legislation, which could impose economic penalties for atmospheric CO₂ emissions. We believe that we are a likely purchaser of CO₂ captured in our areas of operation because of the scale of our tertiary operations and our CO₂ pipeline infrastructure.

^*In this section any references to “Denbury,” “our” or “we” refers to Denbury Onshore, LLC, or in case of references to CO₂ pipeline infrastructure, an affiliate of Denbury Onshore, LLC.

Message From Our CEO

Phil Rykhoek President and Chief Executive Officer

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What We Do

Our CO2 story

The stages of oil recovery

EOR Can Deliver Almost as Much Oil as Primary and Secondary Recovery(1)

Our CO2 EOR process*

STEP 1: CO2 Sources and Capture

STEP 2: CO2 Transportation

STEP 3: CO2 Injection

STEP 4: CO2 EOR Benefits & Storage

Use of CO2 From Industrial Sources*