FORT WORTH, Texas--(Business Wire)--
Encore Acquisition Company (NYSE:EAC) ("Encore" or the "Company")
announced today that its Board of Directors has approved a capital
budget for 2009 of $460 million related to its drilling and
development program. Encore's strategy for 2009 is to continue to
focus on allocation of capital to projects expected to achieve the
most efficient production and reserve growth, expand the Company's
acreage position in the highly successful Bakken/Sanish play,
repurchase $40 million of common stock, and pay down debt, all well
within internally generated cash flows. This budget allows the Company
to have an organic growth rate of three to five percent for 2009.
Jon S. Brumley, President and Chief Executive Officer of the
Company, commented, "Encore is poised to improve in 2009. We plan to
grow production three to five percent, repurchase up to three percent
of our outstanding shares, and repay $55 million of debt." Mr. Brumley
went on to state, "When times are tough, quality shines through, and
2009 looks bright for Encore. Our hedging program, shallow declining
properties, and strong balance sheet will allow us to grow, repurchase
stock, and pay down debt inside of cash flows at a time when the rest
of the industry will struggle. Our budget for 2009 will be the best
and most efficient budget in the history of the Company."
The Company believes it will be able to meet these goals because
it has executed a hedge plan that protects over 95 percent of its
estimated oil production for 2009. The hedges include floors at
$110.00 per barrel ("Bbl") for 11,630 barrels of oil per day ("BOPD"),
swaps at $86.21 per Bbl for 6,000 BOPD, and floors at $80.00 per Bbl
for 8,000 BOPD. The counterparties to these hedges are a diverse group
comprising eleven institutions, all of which are rated A- or better by
Standard & Poor's and/or Fitch, with the majority rated AA- or better.
Under the various NYMEX pricing assumptions, the Company's hedging
portfolio is expected to provide the following cash flows in 2009 (net
of deferred premiums, in thousands):
-0-
*T
Natural Gas Crude Oil ($/Bbl)
--------------------------------------------------------
($/Mcf) $50.00 $60.00 $70.00 $80.00
------------- ------------- ------------- ------------- -------------
$5.00 $362,668 $269,118 $176,299 $82,749
$6.00 $359,894 $266,344 $173,525 $79,975
$7.00 $357,120 $263,570 $170,751 $77,201
$8.00 $354,970 $261,420 $168,601 $75,051
*T
While Encore expects to allocate capital to projects throughout
its portfolio, the Company is focusing a substantial portion of the
budget on three areas with the highest expected rate of return: the
Bakken/Sanish, Haynesville/Cotton Valley/Travis Peak, and the West
Texas joint venture with ExxonMobil. The regional breakdown of the
capital budget is expected to be as follows:
-0-
*T
-- Bakken/Sanish $ 164 million
-- Haynesville/Cotton Valley/Travis Peak $ 88 million
-- West Texas JV $ 82 million
-- Mid-Continent $ 63 million
-- Other Rockies $ 48 million
-- Other West Texas $ 15 million
*T
The $460 million of capital is expected to be invested in the
following categories:
-0-
*T
-- Drilling $ 356 million
-- Improved Oil Recovery, Workovers $ 50 million
-- Land, Seismic and Other $ 54 million
*T
The Company's 2009 budget is designed to continue to leverage
Encore's expertise in improved oil recovery, horizontal drilling, and
tight sands gas development. The activity in the Company's different
plays is expected to be as follows:
-- In the Bakken/Sanish, Encore expects to operate three rigs
during 2009 and increase its acreage position in the Bakken to
325,000 net acres by the end of 2009.
-- In the other areas of the Rockies, the Company will focus on
improved oil recovery projects at the Cedar Creek Anticline,
the Bell Creek field, the Big Horn Basin, and the Williston
Basin.
-- In the fields covered by the ExxonMobil West Texas joint
venture, Encore expects to operate two to three rigs in 2009.
One deep rig will be targeting the Devonian zone in the
Pegasus and Wilshire fields. Another deep rig will be
targeting the Montoya formation in the Delaware Basin. The
Company plans to have rigs targeting the Wilshire Wolfberry
and shallow gas in the Delaware Basin.
-- In the Haynesville shale play, Encore will be operating one
rig during most of 2009 as the Company begins developing its
expanding acreage position.
-- The Company will have several non-operated rigs targeting the
Elm Grove field in North Louisiana in 2009.
-- In the Mid-Continent, Encore expects to operate one rig most
of 2009 in its Cleveland sand play in the Anadarko Basin of
Oklahoma. In addition, the Company will participate in a high
level of non-operated activity in the Cleveland play.
About the Company
Encore Acquisition Company is engaged in the acquisition and
development of oil and natural gas reserves from onshore fields in the
United States. Since 1998, Encore has acquired producing properties
with proven reserves and leasehold acreage and grown the production
and proven reserves by drilling, exploring, reengineering or expanding
existing waterflood projects, and applying tertiary recovery
techniques.
Cautionary Statement
This press release includes forward-looking statements, which give
Encore's current expectations or forecasts of future events based on
currently available information. Forward-looking statements in this
press release relate to, among other things, expected capital
expenditures (including, without limitation, the amount, location,
category, and timing of such expenditures), drilling plans, reserve
growth, production growth, acreage growth, discretionary cash flows,
the benefits of the hedging program, the conduct of the share
repurchase program (including, without limitation, the timing,
duration, form of transaction, the factors to be considered and
termination of the program), debt repayment, results in 2009 and any
other statements that are not historical facts. The assumptions of
management and the future performance of Encore are subject to a wide
range of business risks and uncertainties and there is no assurance
that these statements and projections will be met. Factors that could
affect Encore's business include, but are not limited to: the risks
associated with drilling of oil and natural gas wells; Encore's
ability to find, acquire, market, develop, and produce new properties;
the risk of drilling dry holes; oil and natural gas price volatility;
derivative transactions (including the costs associated therewith);
uncertainties in the estimation of proved, probable and potential
reserves and in the projection of future rates of production and
reserve growth; inaccuracies in Encore's assumptions regarding items
of income and expense and the level of capital expenditures;
uncertainties in the timing of exploitation expenditures; operating
hazards attendant to the oil and natural gas business; risks related
to Encore's high-pressure air program; drilling and completion losses
that are generally not recoverable from third parties or insurance;
potential mechanical failure or underperformance of significant wells;
climatic conditions; availability and cost of material and equipment;
the risks associated with operating in a limited number of geographic
areas; actions or inactions of third-party operators of Encore's
properties; Encore's ability to find and retain skilled personnel;
diversion of management's attention from existing operations while
pursuing acquisitions or joint ventures; availability of capital; the
strength and financial resources of Encore's competitors; regulatory
developments; environmental risks; uncertainties in the capital
markets; uncertainties with respect to asset sales; general economic
and business conditions; the ability of derivative counterparties to
satisfy their obligations to the Company; industry trends; and other
factors detailed in Encore's most recent Form 10-K and other filings
with the Securities and Exchange Commission. If one or more of these
risks or uncertainties materialize (or the consequences of such a
development changes), or should underlying assumptions prove
incorrect, actual outcomes may vary materially from those forecasted
or expected. Encore undertakes no obligation to publicly update or
revise any forward-looking statements.
Encore Acquisition Company, Fort Worth
Bob Reeves, 817-339-0918
Chief Financial Officer
rcreeves@encoreacq.com
or
Kim Weimer, 817-339-0886
Investor Relations
kweimer@encoreacq.com
Copyright Business Wire 2008
