Fort Worth, TX-based Encore Acquisition Co. announced Monday that it has entered into two separate agreements to purchase oil and gas interests and an unnamed oil and gas company from private sellers for approximately $123 million.
The properties are located primarily in the western Anadarko Basin and the Golden Trend area of Oklahoma, and the Williston Basin in Montana and North Dakota. The properties also include substantial exploration acreage in western Oklahoma and eastern Montana.
Encore's internal engineers estimate that total proved reserves attributable to the properties are 48 Bcfe, of which 65% are natural gas and 68% are proved developed producing. Current net production is estimated at approximately 10.5 MMcfe/d. Lease operating costs are estimated to be $1.14/MMcfe. Encore said the reserves are long-lived, with an estimated ratio of total proved reserves to production of 12.5 years. The company added that it expects the properties to generate approximately $29 million of cash flow in 2006.
The properties include 37,352 net acres of undeveloped leasehold and have many development opportunities. Encore has identified over 90 proved locations, and approximately 90 probable and possible locations.
Encore said it expects the transactions to close in September and October and will finance the acquisitions by drawing on its $450 million credit facility. The company has increased its hedge position in 2006 by purchasing put options that protect against downward movements in the price of oil and gas. Based on current production rates, Encore has downside protection for 2006 on approximately 70% of combined production, while only approximately 20% of upside is limited.
Organized in 1998, Encore is a growing independent energy company engaged in the acquisition, development and exploitation of North American oil and natural gas reserves. Encore's oil and natural gas reserves are in four core areas: the Cedar Creek Anticline of Montana and North Dakota; the Permian Basin of West Texas and southeastern New Mexico; the Midcontinent area, which includes the Arkoma and Anadarko Basins of Oklahoma, the North Louisiana Salt Basin, the East Texas Basin and the Barnett Shale; and the Rocky Mountains.
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