Denbury Resources Completes Matrix Oil & Gas Acquisition.

Business Editors

DALLAS--(BUSINESS WIRE)--July 13, 2001

Denbury Resources Inc. (NYSE:DNR)(TSE:DNR) ("Denbury" or the "Company") today announced the completion of its acquisition of privately held Matrix Oil & Gas, Inc. ("Matrix"), in accordance with the agreement and plan of merger dated June 4, 2001.

The adjusted purchase price was approximately $158 million. The Matrix acquisition, accounted for as a purchase, increases Denbury's reserves by approximately 12% and production by approximately 22% based on the second half of 2001's forecasted production. The Company anticipates the transaction as being immediately accretive to reserves, production and cash flow on a per share basis.

The purchase price was comprised of: $90.0 million for Matrix's common stock, made up of $30.8 million of cash and 6,569,930 shares of Denbury common stock; redemption of Matrix's preferred stock at a cost of approximately $32.5 million; redemption of Matrix's outstanding stock options at a cost of approximately $7.3 million; retirement of Matrix's outstanding bank debt of $23.1 million; and other transaction costs of $5.1 million. The cash portions of the transaction were funded by bank debt, leaving the Company with $311.9 million of total debt currently outstanding and with $13.1 million available on its bank borrowing base before any adjustment for the Matrix transaction.

DeGolyer & MacNaughton, the Company's independent engineers, estimated Matrix's proved reserves as of June 30, 2001 to be 71.6 billion cubic feet equivalent ("Bcfe"), 92% of which is natural gas and 78% of which is proved developed. These reserves had a PV-10 value of $100.4 million using June 30, 2001 prices of $3.10 per Mcf and $26.25 per Bbl. This PV-10 value excludes any benefit that may be derived from the higher price floors that Denbury has purchased relating to this acquisition. An adjusted PV-10 value which includes the effect of these price floors, would be approximately $130 million. These floors cover nearly 95% of the forecasted proved natural gas production on the acquired properties through 2003 and have a minimum price of $4.25 per MMBtu from now through December 2002 and $3.75 per MMBtu during 2003. In the aggregate, these price floors cover approximately 50% of Matrix's total proved reserves on a volume basis. Denbury plans to record $30 million of the purchase price as unevaluated property costs to reflect the probable and possible reserves that the Company has identified, giving an adjusted purchase price of $1.79 per Mcfe.

In accordance with the terms of the merger agreement, Mr. David B. Miller joined Denbury's Board of Directors, increasing Denbury's board to nine members. Mr. Miller is a Managing Director and co-founder of EnCap Investments L.L.C., which is now a wholly owned subsidiary of El Paso Corporation (NYSE:EPG). As a result of the transaction, EnCap becomes Denbury's second largest shareholder, holding 3.9 million shares of Denbury common stock, or 7.5% of Denbury's post-closing 52.8 million shares outstanding. Prior to the formation of EnCap in 1988, Mr. Miller held executive positions with PMC Reserve Acquisition Company, MAZE Exploration Inc., and Republic National Bank of Dallas. Mr. Miller, age 51, also serves on the board of directors of 3TEC Energy Corporation and two other EnCap portfolio companies.

Update on 2001 Outlook

The transaction provides Denbury with significant drilling and exploitation opportunities. Although still under review, the Company's 2001 development and exploration budget is expected to be approximately $180 million, not including any acquisitions. Management has not altered its previously announced average daily production target for 2001 of 31,900 BOE/d, a 49% increase over 2000's output. Approximately 47% of 2001's average projected production should be natural gas, as compared to 29% of 2000's average production. Third quarter production is expected to average 36,000 BOE/d and fourth quarter production is expected to average 37,000 BOE/d. Although still preliminary, the Company's second quarter production is expected to be within approximately 1% (positive or negative) of the Company's original forecast of 28,000 BOE/d.

The acquisition is expected to lower the Company's average operating expenses by approximately $0.35 per BOE, lower production taxes by approximately $0.05 to $0.10 per BOE, and increase the Company's depreciation and amortization rate to approximately $6.85 per BOE during the third and fourth quarters of 2001. The Company's total income tax expense is expected to increase to approximately 41% following the merger, with an average rate for 2001 of approximately 39%.

Denbury Resources Inc. is a growing independent oil and gas company. The Company is the largest oil and natural gas operator in Mississippi, holds key operating acreage onshore Louisiana and has a growing presence in the offshore Gulf of Mexico areas. The Company increases the value of acquired properties in its core areas through a combination of exploitation drilling and proven engineering extraction practices.

This press release, other than historical financial information, contains forward-looking statements that involve risks and uncertainties including per BOE estimated expenses, expected reserve quantities, production levels, exploration and exploitation results, capital expenditure budgets, commodity prices, financial results and other risks and uncertainties detailed in the Company's filings with the Securities and Exchange Commission, including Denbury's reports on Form 10-K, and 10-Q. These reports are incorporated by this reference as though fully set forth herein. These statements are based on engineering, geological and operating assumptions that management believes are reasonable based on currently available information; however, management's assumptions and the Company's future performance are both subject to a wide range of business risks, and there is no assurance that these goals and projections can or will be met. Actual results may vary materially.