Encore Energy Partners LP (ENP) Tuesday said that it has agreed to purchase from Encore Acquisition Co. (EAC), its parent company, oil and natural gas producing properties located in the Arkoma Basin and royalty interest properties mainly situated in Oklahoma for a net purchase price of approximately $46 million cash.
The acquisition will be effective from November 1, 2008 and is expected to close in early January 2009, with the deal becoming immediately accretive to its 2009 distributable cash flow per unit, the Partnership added.
The Fort Worth, Texas-based partnership noted that the total purchase price is $49 million and includes acquisition-related hedge premiums of roughly $3 million. The acquisition has been hedged at an average NYMEX equivalent price of $7.51 per thousand cubic feet for a four-year period ending December 31, 2012.
Encore said that the royalty interest properties include interests in over 1,700 wells in Arkansas, Texas, and Oklahoma, together with a 10,300 unleased mineral acres. The Arkoma Basin properties consist of non-operated working interests in over 100 producing wells in the Chismville field, having a total of proved reserves of about 2.8 million barrels of oil equivalent, or BOE. Of which, 73% are proved developed producing and 87% are natural gas.
Encore further stated that total current production at these properties amount to around 500 BOE per day, or 3 million cubic feet of natural gas equivalent per day, of which 91% is natural gas. The estimated average reserve-to-production ratio is 15.3 years.
Additionally, as a result of debt level increase stemming from the acquisition, the Partnership entered into an interest rate swap. Under this, the company swapped $50 million of floating rate LIBOR debt to a fixed rate of 2.42% and an expected margin of 1.5% through March 7, 2012, the maturity date of the Partnership's revolving credit facility. The Partnership stated that it will fund the acquisition by borrowing under this revolving credit facility.
The Partnership also entered into natural gas derivative contracts, which extends its natural gas hedging portfolio through 2012.
The Board Encore Energy Partners' general partner has approved the deal, based on a recommendation from its Conflicts Committee.
Encore Energy Partners was formed by the parent company to acquire, exploit, and develop oil and natural gas properties, as well as to acquire, own, and operate related assets. The Partnership's assets currently consist mainly of producing and non-producing oil and natural gas properties in the Big Horn Basin of Wyoming and Montana, the Williston Basin of North Dakota, and the Permian Basin of West Texas.
ENP closed Tuesday's regular trading on NYSE at $12.00, up $1.32, or 12.36%, with a volume of 72,718 shares.
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