Jon Brumley, CEO, said "this type of acquisition is a fit. With our high-pressure air opportunity expected to show significant growth in 2006 or 2007, we identified the North Louisiana Salt Basin as having the production profile that will fill in the gap prior to the anticipated high-pressure air uplift. We expect significant production growth from Elm Grove between now and December 2005. Our intention is to make North Louisiana a core area for Encore."
Encore's internal reservoir engineers estimate proved reserves to be approximately 37 billion cubic feet of gas equivalent (bcfe) with 14 bcfe of the reserves in the proved developed category. Also, the new properties are estimated to have over 20 bcfe of probable reserves. These probable volumes represent additional Hosston and Cotton Valley opportunities within the field. The production from these properties is 99% natural gas and the reserve to production ratio is 14 years. Net production from these properties is approximately 7,000 mcfe per day. Non-operated working interests range from 2% to 38% across 1,800 (net) acres in 15 sections. The properties produce primarily from multiple tight sandstone reservoirs at depths ranging between 7,200 and 10,000 feet. In addition, Encore is purchasing 1,500 (net) acres of rights that can allow for possible exploration of the Bossier and Smackover Formations, which produce in the area.
Encore has identified over 150 development and re-completion opportunities in the Hosston and Cotton Valley Formations, and expects to exploit these opportunities during the remainder of 2003, 2004, and 2005.
Encore anticipates closing the transaction, which is subject to due diligence and other customary closing conditions, in July of 2003, effective June 1, 2003, and expects to fund the transaction with bank financing under its existing credit line.
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