Encore Energy Partners Acquires Producing Assets in Rockies, Permian Basin
Encore Energy Partners has entered into an agreement with Encore Acquisition Company ("EAC") to acquire oil and natural gas producing properties in the Rockies and the Permian Basin for $190 million in cash, subject to customary purchase price adjustments. The acquisition will be effective as of April 1, 2009 and is expected to close in August 2009. The transaction is expected to be immediately accretive to ENP's distributable cash flow per unit. Due to this accretion, the Partnership expects that its annualized distribution rate will increase from an estimated $2.05 per unit for the second quarter of 2009 to $2.15 per unit beginning with the distribution for the third quarter of 2009.
The acquired properties are comprised of shallow-declining mature assets located in the Big Horn Basin in Wyoming, the Permian Basin in West Texas and New Mexico, and the Williston Basin in Montana and North Dakota. The properties have estimated total proved reserves of approximately 12.4 million barrels of oil equivalent ("BOE"), 93 percent of which are proved developed producing and 84 percent of which are oil. The properties currently produce approximately 2,129 BOE per day, and such properties are estimated to have a total reserve-to-production ratio of approximately 16.0 years. These properties will be 96 percent operated by the Partnership.
Jon S. Brumley, Chief Executive Officer and President of Encore Energy Partners GP LLC, stated, "While other upstream MLPs are struggling to find their footing in this marketplace, Encore Energy Partners has been able to make two significant acquisitions in 2009. These Rocky Mountain and Permian Basin oil properties are a perfect fit for ENP. They are high margin and predictable. We expect this drop down to be 8 to 11 percent accretive to 2010 distributable cash flow and to enhance an already healthy partnership. We are excited about increasing our oil exposure to the upside, but with our savvy hedging program we were able to protect the downside risk while retaining half of the upside exposure."
As a result of the Partnership's expanded property base and increased cash flow, the Partnership expects to increase its 2009 annualized distribution rate to $2.15 per unit (or $0.5375 per quarter) beginning with the third quarter of 2009. The acquisition is expected to be approximately 8 to 11 percent accretive to the distribution per unit at a 1.1 times coverage ratio for 2010.
In connection with the acquisition, the Partnership has entered into derivative contracts on over 90 percent of the acquisition's proved developed producing volumes for 2010 through 2012. The Partnership purchased oil puts for 760 barrels per day ("Bbls/D") at a strike price of $67 per barrel ("Bbl") for 2010 and $65 per Bbl for 2011 and 2012. Additionally, the Partnership entered into oil swap contracts for 760 Bbls/D at an average price of $75.43 per Bbl for 2010, $78.46 per Bbl for 2011, and $80.30 per Bbl for 2012. With respect to natural gas, the Partnership entered into swap contracts with an average NYMEX equivalent price of $7.99 per thousand cubic feet ("Mcf") for 2,100 Mcf per day for 2010 through 2012.
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Company: Encore Energy Partners more info
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