Interactive 2009 Annual Report (PDF 7.56 MB) - Denbury Resources ...

Denbury Resources Inc. 2009 Annual Report 19Drilling ActivityThe following table sets forth the results of our drilling activities over the last three years:Year Ended December 31,2009 2008 2007Gross Net Gross Net Gross NetExploratory Wells: (1)Productive (2) 1 1.0 — — 9 6.2Non-productive (3) — — 1 1.0 4 3.4Development Wells: (1)Productive (2) 23 16.6 102 98.3 101 96.8Non-productive (3)(4) — — 1 0.7 — —Total 24 17.6 104 100.0 114 106.4(1) An exploratory well is a well drilled either in search of a new, as yet undiscovered, oil and natural gas reservoir or to greatly extend the known limits of a previouslydiscovered reservoir. A development well is a well drilled within the presently proved productive area of an oil or natural gas reservoir, as indicated by reasonableinterpretation of available data, with the objective of completing in that reservoir.(2) A productive well is an exploratory or development well found to be capable of producing either oil or natural gas in sufficient quantities to justify completion as anoil or natural gas well.(3) A nonproductive well is an exploratory or development well that is not a producing well.(4) During 2009, 2008 and 2007 an additional 20, 33 and 23, wells, respectively, were drilled for water or CO 2 injection purposes.Production and Unit PricesInformation regarding average production rates, unit sale prices and unit costs per BOE are set forth under“Management’s Discussion and Analysis of Financial Condition and Results of Operations – Operating Results”included herein.Title to PropertiesCustomarily in the oil and natural gas industry, only a perfunctory title examination is conducted at the time propertiesbelieved to be suitable for drilling operations are first acquired. Prior to commencement of drilling operations, athorough drill site title examination is normally conducted, and curative work is performed with respect to significantdefects. During acquisitions, title reviews are performed on all properties; however, formal title opinions are obtainedon only the higher value properties. We believe that we have good title to our oil and natural gas properties, some ofwhich are subject to minor encumbrances, easements and restrictions.Geographic SegmentsAll of our operations are in the United States.Significant Oil and Gas Purchasers and Product MarketingOil and gas sales are made on a day-to-day basis under short-term contracts at the current area market price. Theloss of any single purchaser would not be expected to have a material adverse effect upon our operations; however, theloss of a large single purchaser could potentially reduce the competition for our oil and natural gas production, which inturn could negatively impact the prices we receive. For the year ended December 31, 2009, two purchasers accountedfor 10% or more of our oil and natural gas revenues: Marathon Petroleum Company LLC (52%) and Hunt Crude OilSupply Co. (21%). For the year ended December 31, 2008, we had three significant purchasers that each accounted for10% or more of our oil and natural gas revenues: Marathon Petroleum Company LLC (49%), Hunt Crude Oil Supply Co.(20%) and Crosstex Energy Field Services Inc. (14%). For the year ended December 31, 2007, three purchasers eachaccounted for 10% or more of our oil and natural gas revenues: Marathon Petroleum Company LLC (43%), Hunt CrudeOil Supply Co. (19%) and Crosstex Energy Field Services Inc. (16%).Our ability to market oil and natural gas depends on many factors beyond our control, including the extent ofdomestic production and imports of oil and gas, the proximity of our gas production to pipelines, the available capacityin such pipelines, the demand for oil and natural gas, the effects of weather, and the effects of state and federalForm 10-K Part I