Denbury Resources has entered into an agreement to sell its ownership interests in Encore Energy Partners LP to Vanguard Natural Resources, LLC for $380 million.
Encore Energy Partners LP is a growth-oriented master limited partnership formed on February 13, 2007 by Encore Acquisition Company which was subsequently acquired by Denbury on March 9, 2010. As an upstream partnership, Encore is focused on acquiring, exploiting and developing oil and natural gas properties currently located in the Big Horn Basin in Wyoming and Montana, the Williston Basin in North Dakota and Montana, the Permian Basin in West Texas and New Mexico, and the Arkoma Basin in Arkansas and Oklahoma.
Denbury is selling its interest in the entity which owns 100% of Encore's general partner's interest and approximately 20.9 million ENP common units, or approximately 46% of ENP's outstanding common units. Up to $80 million of the total consideration to be paid by Vanguard in the sale may be paid in Vanguard common units, at the option of Vanguard.
By virtue of Denbury's ownership of 100% of Encore's general partnership interest, Denbury consolidates 100% of ENP's financial results with Denbury's financial results, even though Denbury's aggregate ownership represents only approximately 46% of ENP's common ownership. Production attributable to Encore averaged 8,630 barrels of oil equivalent per day during the third quarter of 2010, and its proved reserves at December 31, 2009 were approximately 43.0 million barrels of oil equivalent (67% oil).
The transaction is expected to close on or before December 31, 2010. Denbury plans to use the proceeds from the sale to repay outstanding bank debt and to fund any shortfall between its anticipated cash flows from operations and planned capital expenditures during 2011. Wells Fargo Securities, LLC acted as advisor to Denbury on the sale.
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