S&P: sale favorable for Denbury

Standard & Poor's said that Denbury Resources Inc.'s (BB-/positive/--) announcement that it sold its Gulf of Mexico properties to Newfield Exploration Co. (BB+/stable/--) for about $185 million is favorable for Denbury's credit quality.

While proceeds will be used to retire outstanding bank borrowings in the short term, S&P said it believes Denbury will ultimately use the proceeds to acquire and develop additional fields in Denbury's tertiary recovery operations in Mississippi. In recent years, Denbury has achieved strong rates of return on investments and production increases in this area.

While Denbury's pro forma reserves and production will decline by roughly 12% and 25%, respectively, near-term credit measures should strengthen as a result of much lower debt levels and higher-than-average commodity prices.

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