2008-09-24-2007-12-28-2008-02-07

Purchased Permian & Williston basin assets, gaining 10.8 MMBOE proved, production of 1,800 BOE/d.

The MLP Encore Energy Partners LP, Fort Worth, Texas, (NYSE: ENP) plans to acquire producing properties in the Permian and Williston basins from parent Encore Acquisition Co. (NYSE: EAC) for total consideration of $250 million. The assets include production of approximately 1,800 barrels of oil equivalent per day (83% operated, 63% oil). Approximately 80% of current production is in Crockett, Nolley McFarland, Dune, North Cowden, Champmon and Yates fields in the Permian Basin. Other production is in Horse Creek, Charlson Madison Unit and Elk fields in the Williston Basin. Proven reserves are 10.8 million barrels of oil equivalent (88% proved developed producing, 65% oil). The average reserve-to-production ratio is 16 years. Encore Energy will pay $125 million in cash and approximately 6.88 million common units at $18.156 per unit. It will fund the purchase using an existing $300-million revolving credit facility. Encore Acquisitions will own approximately 68% of Encore Energy following the transaction. In connection with the acquisition, Encore Energy purchased oil puts at a strike price of $80 per barrel for 440 barrels per day for approximately $2.2 million for 2008 through 2010. Additionally, it entered costless collars for 440 barrels per day with a floor of $80 per barrel and an average ceiling price of $99.72 per barrel over the same period. Additionally, it purchased gas puts at a strike price of $8.20 per thousand cubic feet for 1.8 million cubic feet per day for $2.6 million for 2008 through 2010 and entered collars for 1.8 million cubic feet per day for $400,000 with a floor of $7.20 per thousand cubic feet and an average ceiling price of $9.80 per thousand cubic feet over the same period. Encore Energy and Encore Acquisition president and chief executive Jon S. Brumley says, "The MLP is adding another first-class set of properties to its portfolio that are long-life, shallow-declining, and have low maintenance capital requirements which are just as accretive three years from now as they are in 2008. EAC is excited about increasing its equity position in ENP and at the same time delivering with the cash proceeds." The companies' chief financial officer Bob Reeves says, "We have locked in the high-margin cash flows from this transaction through our proven hedging strategy of protecting two-thirds of the downside risk while maintaining two-thirds of the upside exposure to rising commodity prices." Simmons & Company International and Griffis & Associates LLC are financial advisors to Encore Energy. Lehman Brothers Inc. is financial advisor to Encore Acquisition. Encore Energy's assets are primarily in the Elk Basin of Wyoming and Montana, Williston Basin in North Dakota and Permian Basin of West Texas.