October 2010 and August 2011 Acquisitions of Reserves in Rocky Mountain Region at Riley Ridge

In October 2010, we acquired a 42.5% non-operated working interest in the Riley Ridge Federal Unit (“Riley Ridge”), located in the LaBarge Field of southwestern Wyoming, for $132.3 million after closing adjustments. Riley Ridge contains natural gas resources, as well as helium and CO2 resources. The purchase included a 42.5% interest in a gas plant, currently under construction, which will separate the helium and natural gas from the commingled gas stream. The acquisition also included approximately 33% of the CO2 mineral rights in an additional 28,000 acres adjoining the Riley Ridge Unit. The fair values assigned to assets acquired and liabilities assumed in the October 2010 acquisition have been finalized and no adjustments have been made to amounts previously disclosed in our Form 10-K for the period ended December 31, 2010.

On August 1, 2011, we acquired the remaining 57.5% working interest in Riley Ridge not already owned, the remaining 57.5% interest in the gas plant and a working interest of approximately 33% in the 28,000 acres adjacent to Riley Ridge. As a result of the transaction, we became the operator of both projects. The purchase price was approximately $214.6 million after preliminary closing adjustments, including a $15 million deferred payment to be made at the time the property's gas plant is operational and meets specific performance conditions. We expect the gas plant to be operational during the latter part of the first quarter of 2012.

Because the Riley Ridge plant is currently under construction, current production at the field is negligible. As a result, pro forma information has not been disclosed due to the immateriality of revenues and expenses during 2011 and 2010.

The August 1, 2011 acquisition of Riley Ridge meets the definition of a business under the FASC Business Combinations topic. The following table presents a summary of the fair value of the Riley Ridge assets acquired and liabilities assumed on August 1, 2011:

In thousands
Consideration:
	Cash payment		$	199,554
	Deferred payment⁽¹⁾			15,000
		Total consideration		214,554

Less: Fair value of assets and liabilities acquired:⁽²⁾
	Oil and natural gas properties
		Proved		48,731
		Unevaluated		12,542
	CO2 and other non-hydrocarbon gases properties			9,741
	Pipelines and plants			91,594
	Other assets⁽³⁾			48,660
	Asset retirement obligations			(389)
				210,879

Goodwill			$	3,675

(1)		The deferred payment is included in "Accounts payable and accrued liabilities" on the accompanying balance sheet and will be paid at the time the property’s gas plant is operational and meets specific performance conditions as described above.
(2)		Fair value of the assets acquired and liabilities assumed is preliminary, pending final closing adjustments.
(3)		Other assets includes helium extraction rights of $36.7 million. Helium reserves at Riley Ridge are owned primarily by the Federal government. The fair value assigned to helium extraction rights was calculated using the income approach and represents the future net revenues associated with the Company’s right to extract and sell the helium on behalf of the helium resource owners. Upon commencement of helium production, helium extraction rights will be amortized on a units-of-production basis.

On March 9, 2010, we acquired Encore Acquisition Company (“Encore”) pursuant to the Encore Merger Agreement entered into with Encore on October 31, 2009. The Encore Merger Agreement provided for a stock and cash transaction valued at approximately $4.8 billion at the acquisition date, including the assumption of debt and the value of the noncontrolling interest in ENP (the “Encore Merger”). Under the Encore Merger Agreement, Encore was merged with and into Denbury, with Denbury surviving the Encore Merger.

For the three months ended September 30, 2010 and for the period from March 9, 2010 to September 30, 2010, we recognized $174.3 million and $435.2 million, respectively, of oil, natural gas sales and related product sales from properties acquired as part of the Encore Merger. For the three months ended September 30, 2010 and for the period from March 9, 2010 to September 30, 2010, we recognized $114.1 million and $294.8 million, respectively, of net field operating income (oil, natural gas and related product sales less lease operating expenses, production taxes and marketing expenses) from properties acquired as part of the Encore Merger. We recognized a total of $11.5 million of transaction and other costs related to the Encore Merger (primarily advisory, legal, accounting, due diligence, integration and severance costs) for the three months ended September 30, 2010, and $4.4 million and $79.3 million of such costs for the nine months ended September 30, 2011 and 2010, respectively.

Had the Encore Merger occurred on January 1, 2010, our combined pro forma revenues and net income for the three and nine months ended September 30, 2010, would have been as follows:

		Pro Forma Results
In thousands, except per share amounts		Three Months Ended September 30, 2010		Nine Months Ended September 30, 2010
Pro forma total revenues		$	466,703	$	1,579,184
Pro forma net income attributable to Denbury stockholders			29,104		276,527
Pro forma net income per common share:
	Basic	$	0.07	$	0.70
	Diluted		0.07		0.69

In February 2010, we sold our interest in Genesis Energy, LLC, the general partner of Genesis Energy, L.P. (“Genesis”), for net proceeds of approximately $84 million. In March 2010, we sold all of our Genesis common units in a secondary public offering for net proceeds of approximately $79 million. We recognized a pre-tax gain of approximately $101.5 million ($63.0 million after tax) on these dispositions.

In May 2010, we sold certain non-strategic legacy Encore properties, primarily located in the Permian Basin, the Mid-continent area and the East Texas Basin (the “Southern Assets”), to Quantum Resources Management, LLC for consideration of $892.1 million after closing adjustments. In August 2010, we sold additional legacy Encore properties, primarily located in the Cleveland Sand Play of western Oklahoma, for consideration of $32.1 million after closing adjustments. We did not record a gain or loss on the sales in accordance with the full cost method of accounting.