Denbury Resources Inc. has entered into an agreement to sell its ownership interests in Encore Energy Partners LP (NYSE:ENP - News) (“ENP”) to Vanguard Natural Resources, LLC (NYSE:VNR - News) (“Vanguard”) for $380 million. Denbury is selling its interest in the entity which owns 100% of ENP’s general partner’s interest and approximately 20.9 million ENP common units, or approximately 46% of ENP’s outstanding common units. Up to $80 million of the total consideration to be paid by Vanguard in the sale may be paid in Vanguard common units, at the option of Vanguard.
By virtue of Denbury’s ownership of 100% of ENP’s general partnership interest, Denbury consolidates 100% of ENP’s financial results with Denbury’s financial results, even though Denbury’s aggregate ownership represents only approximately 46% of ENP’s common ownership. Production attributable to ENP averaged 8,630 barrels of oil equivalent per day during the third quarter of 2010, and its proved reserves at December 31, 2009 were approximately 43.0 million barrels of oil equivalent (67% oil).
The transaction is expected to close on or before December 31, 2010. The Company plans to use the proceeds from the sale to repay outstanding bank debt and to fund any shortfall between its anticipated cash flows from operations and planned capital expenditures during 2011. Wells Fargo Securities, LLC acted as advisor to Denbury on the sale.
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