Firm buying Encore reports $26.9 million third-quarter profit

Posted Thursday, Nov. 05, 2009 Comments   (0) Print Share Share Reprints
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By JACK Z. SMITH

jzsmith@star-telegram.com

Denbury Resources, which announced plans to buy Fort Worth-based Encore Acquisition Co., reported third-quarter net income Thursday of $26.9 million, or 11 cents per share, on revenue of $227.2 million.

That was down sharply from earnings of $157.5 million, or 63 cents a share, on revenue of $410.3 million during the third quarter of 2008, when Denbury, a Plano-based oil and natural gas producer, benefited from substantially higher energy prices. Denbury’s production revenue for the recent quarter that ended Sept. 30 was also reduced by its sale of 60 percent of its assets in the Barnett Shale of North Texas in July.

Denbury’s adjusted third-quarter earnings, taking into account special items, were $40.7 million, or 16 cents a share, compared with adjusted net income of $123 million, or 50 cents a share, for the third quarter of 2008.

Denbury announced Sunday that it had entered into a definitive agreement to acquire Encore, also an oil and gas company, for $2.64 billion. The deal is valued at $4.5 billion including the assumption of debt and the value of a minority interest in Encore Energy Partners L.P.

Under the deal, Encore shareholders would receive $50 per share, $15 in cash and $35 in Denbury common stock. That is about a 35 percent premium above Encore’s closing stock price of $37.07 on Oct. 30, the last day of trading before the deal was announced after a unanimous vote of approval by the boards of directors of both companies.

Encore stock (ticker: EAC) closed Thursday at $44.56, down 76 cents, but up $7.49 from the Oct. 30 close.

Denbury stock (DNR) closed Thursday at $12.94, down 46 cents. It has fallen $1.66, or 11.4 percent, from its Oct. 30 close of $14.60, which some observers might assess as an unenthusiastic market reception to the deal.

Denbury CEO Phil Rykhoek, in a conference call with investment analysts Thursday, said: "We’re very excited about this acquisition. We think that you will be too, once you understand it better."

JACK Z. SMITH, 817-390-7724

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