Denbury Resources recently added an additional $40 million to its existing $110 million revolving credit facility to fund the acquisition of C02 Assets. "We're seeing it as a strategic play that can give us control of the price and availability of CO2 at Little Creek Field," saidPhil Rykhoek, cfo of Denbury, a Texas-based oil company which focuses on Mississippi, Louisiana, and the U.S. Gulf Coast.
Rykhoek explained that Denbury Resources, which had purchased C02 from Air Gas Inc., wanted to be its own supplier. "There was the potential for the prices to change," he said of Air Gas' rates. Rykhoek says the company is willing to listen to other banks. "We're open to other banks, but we're certainly not dissatisfied with the banks we have," he said.
Rykhoek says the add-on was the simplest and quickest way for the company to get additional money. He says the lead, Bank of America, and the other seven banks in the syndicate, were agreeable to the additional financing. There are no new covenants or terms. "We looked at several options for funding, including an off-balance sheet and project financing," he said. "We chose this because it was cheapest method of financing and offered us the most flexibility and control over our assets." The facility, which was signed in 1997, expires in 2003. Rykhoek says the original $110 million was taken out for acquisitions.