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Encore Acquisition Co., a successful oil and natural gas firm based in downtown Fort Worth, is being acquired by Plano-based Denbury Resources in a deal that would create one of the largest independent exploration and production companies in North America that focuses primary on oil.
Denbury, which has substantial oil properties in Mississippi, said in an announcement Sunday that it will pay $2.64 billion in cash and stock for Encore.The Denbury and Encore boards have approved the deal, which is expected to close in early 2010, subject to shareholders’ approval. After the acquisition is complete, Denbury stockholders will own 63 to 68 percent of the new company, and Encore stockholders will own 32 to 37 percent.Encore shareholders will receive $50 for each share held: $15 in cash and $35 in stock. The purchase price represents a 35 percent premium on the stock’s closing price Friday.Based on Encore’s 52.8 million common shares outstanding on July 31, the acquisition is valued at about $2.64 billion. Denbury also plans to assume more than $1 billion in Encore debt and will take over Encore’s minority stake in Fort Worth-based Encore Energy Partners, valued at nearly a half-billion dollars. In total, the companies estimate that the deal is worth $4.5 billion.Encore Chairman Jon Brumley, in a telephone interview Sunday night, said he expects that "nearly all" Encore employees will have the opportunity to go with Denbury.Denbury, which has some interests in the natural gas-rich Barnett Shale in North Texas, "will keep an office here [in Fort Worth] for a while, but I don’t know for how long," Brumley said.Encore has more than 400 employees, including about 300 in Fort Worth, where it has offices at Carter & Burgess Plaza, 777 Main St.Brumley said the merger, in addition to offering Encore shareholders an attractive price for their stock, should become an "extremely successful" union of two companies that have focused heavily on oil, in contrast with most independent U.S. exploration and production companies, which have focused primarily on natural gas in recent years.Brumley’s son, Jonny Brumley, is Encore’s CEO.The father son-team made the cover of Forbes magazine several years ago when they were honored as entrepreneurs of the year for their launch of Encore, which has substantial operations in the Rocky Mountains, Wyoming, North Dakota, Texas and elsewhere.Denbury holds properties in Mississippi, Louisiana, Alabama and Southeast Texas. It owns large reserves of carbon dioxide, which it injects into older oil wells to boost oil production, a method known as tertiary production.The combined company will continue to be known as Denbury Resources and will remain based in Plano."Encore has built an enviable asset portfolio in the Rockies . . . and our combined size and scale of operations will allow us to undertake significantly larger CO{-2} projects in the Gulf Coast and the Rockies," Denbury CEO Phil Rykhoek said.Denbury said it will finance the deal with a combination of equity and debt. It said J.P. Morgan has committed to providing a new $1.6 billion bank revolving loan and $1.25 billion in debt financing. Denbury expects to issue 115 million to 146 million shares of common stock to fund the equity portion of the deal.Denbury said it will sell off the companies’ noncore oil and gas properties next year and use the estimated $500 million in proceeds to pay down its debt. The combined company may sell some of the properties to Encore Energy Partners.Denbury’s board and senior management will remain unchanged.Jonny Brumley, the Encore CEO, said, "The combined companies have a unique blend of large oilfields with huge upside potential."In August, Denbury reported sliding to a second-quarter loss of $87.2 million from its year-earlier profit, hurt by lower oil and gas prices and a write-down on the fair value of commodity contracts. Revenue dropped 48 percent to $217.4 million as the company’s realized price of oil and gas tumbled 42 percent.This report includes material from The Associated Press.JACK Z. SMITH, 817-390-7724
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