UPDATE 3-Vanguard Natural offers $567 mln for rest of Encore Energy

Fri Mar 25, 2011 10:35am EDT

* Offer values Encore Energy at $23.20/unit,or $1.05 bln

* Each Encore Energy unit entitled to 0.72 Vanguard unit

* Encore Energy units up 1 pct; Vanguard down 1 pct (Adds details on reserves, analyst comment in paragraph 8; updates shares)

By Krishna N Das

BANGALORE, March 25 (Reuters) - Oil and natural gas firm Vanguard Natural Resources LLC offered to buy the rest of Encore Energy Partners LP it does not already own for about $567 million, to get full access to Encore's oil-heavy reserves amid surging crude prices.

Encouraged by crude oil prices that are consistently trading above $100 a barrel, global exploration and production companies are hunting for deals that would shore up their liquid reserves.

Earlier this week, Korea National Oil said it intends to buy one-third of Anadarko Petroleum's interest in the Eagle Ford shale for $1.55 billion, while Newfield Exploration will buy oil assets from Harvest Natural Resources and a private firm for $308 million.

Oil, condensate, and natural gas liquids reserves accounted for 70 percent of Encore Energy's total proved reserves of 41.1 million barrels of oil equivalent as of last year. Vanguard's total proved reserve mix is 47 percent natural gas, 38 percent oil and 15 percent natural gas liquids.

Under the offer, each Encore Energy unit will be entitled to 0.72 Vanguard unit, or $23.20 each. That is just above the price of $23.15 the Encore Energy stock closed on Thursday.

The offer by Houston-based Vanguard, which owns a 46 percent stake in Encore Energy , values the Fort Worth, Texas-based company at about $1.05 billion.

This is much higher than the $544-$635 million that analysts were pegging Encore Energy at early in 2010.

The Encore Energy deal will be Vanguard's biggest, according to Thomson Reuters data.

"The proposal does not come as a surprise," Jefferies & Co analyst Subash Chandra said. "People were wondering how you can own half the company but both managements can do two different things, how do you prevent them from competing for assets."

Vanguard, valued at under a billion dollars, has its main assets in the Appalachian Basin, the Permian Basin, South Texas and Mississippi.

Encore Energy owns acreages 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.

Encore Energy units, which rose 17 percent since Vanguard's stake buy was announced in November, were up a percent at $23.34 in early trade on Friday. Vanguard units were down 1.2 percent at $31.83. (Reporting by Krishna N Das; Editing by Maju Samuel)

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