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Encore, Vanguard Buying Permian Assets

Encore Energy Partners LP (ENP) and its general partner, Vanguard Natural Resources LLC, each are acquiring a 50% stake in producing oil and gas assets in the Permian Basin from a private seller for a total price of $85 million.

The interests to be acquired by ENP and Vanguard each have estimated total net proved reserves of 2.74 million boe, of which about 70% is oil and natural gas liquids (NGL). The properties being acquired are 100% proved developed. At closing net production to ENP attributable to the assets being acquired should be approximately 500 boe/d, it said. The effective date of the acquisition is May 1, 2011 with closing expected by Aug. 1.

"This acquisition is an excellent MLP- [master limited partnership] type asset and is a great addition to our Permian Basin portfolio," said ENP CEO Scott W. Smith. "These assets are expected to generate very stable cash flows and production for the next several years. Upon execution of the purchase and sale agreement for this transaction, we entered into hedges covering a substantial portion of the estimated production from this acquisition for the next several years."

ENP's assets consist mainly of producing and nonproducing oil and gas properties 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.

Vanguard assets are mainly producing and nonproducing gas and oil reserves in the southern portion of the Appalachian Basin, the Permian Basin, South Texas and in Mississippi.

Late last year Vanguard acquired all of Denbury Resources Inc.'s interest in ENP for $380 million (see Daily GPI, Nov. 18, 2010). Vanguard currently owns about 46% of the common units of ENP and has made an offer, valued at about $567 million, to acquire the remaining stake (see Daily GPI, March 28). The offer is currently pending, a spokesperson said Thursday.

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