Since its inception in 1998, Fort Worth, Texas-based Encore Acquisition Co. has made acquisitions totaling more than $1.8 billion, primarily in its core areas of the Midcontinent, Permian Basin and Rockies, and applied focused reservoir management and creative deal structures to enhance inventory. Its specialty of enhanced oil recovery through waterflood and tertiary techniques has been a hit in the U.S., where many basins are old and in decline.

Most recently, Encore has made headlines as a bold, repeat buyer in the divestiture program of Houston-based Anadarko Petroleum Corp. and as one of a slew of companies to announce plans to spin off some assets into a master limited partnership (MLP). The Rockies-focused Anadarko acquisitions, totaling more than $800 million or more than 40% of the company's total spent in its nine-year history, expand Encore's position in the Bakken shale of the Williston Basin and in the Big Horn Basin.

The MLP will be of some of these properties and some that Encore previously held.(For more on this, see "Company Briefs" in this issue.) Additionally, Encore plans to sell some holdings in the Anadarko and Arkoma basins and in the Barnett shale.

President and chief executive Jonny Brumley is at the helm of this markets-take-notice energy company, taking a page from his father, chairman Jon Brumley, who developed Encore's strategy of focusing on redeveloping mature, long-life properties. He was chairman of Mesa Petroleum that merged with Parker & Parsley in 1997 to form Pioneer Natural Resources Co., which he chaired until forming Encore.

Jonny Brumley honed his leadership skills at Encore initially as vice president of business development, and was previously with Pioneer, Mesa and Parker & Parsley. He became CEO in 2006.

Brumley was forbidden by SEC rules to talk about the MLP plans just yet, outside of what the company has already publicly disclosed. Here, he talks to Oil and Gas Investor about Encore's greatest opportunities, what investors don't fully understand about the company and the best piece of advice his father gave him.

Investor Was Encore interested in the Anadarko properties before the divestiture program?

Brumley Yes, we had always liked the Elk Basin Field and have desired it, so we were really excited when we saw those properties come on the market. There are more than 1 billion barrels of original oil in place in the Elk Basin Field, and when we have targets that big, we get really excited. The second acquisition, which was of properties in the Williston Basin in North Dakota, was where we started the company when we bought Shell Oil out of the Cedar Creek Anticline, so that acquisition is kind of coming back to our roots. It is a big property package, primarily of waterfloods, and Williston Basin waterfloods are one of the things we do best.

Waterflooding and tertiary projects are our forte. Our main expertise is improved oil-recovery projects; that is a big focus of the company.

Investor Will you focus on the Big Horn and Williston basins more in the future?

Brumley We will focus very closely on Rocky Mountain oil in general. This is a core competency for Encore, and time and time again we have added value with waterflood properties. Because of our great technical staff, we've been able to buy waterfloods, increase the production on them significantly and increase the reserves on them by 90% after we put them through our reservoir-development program.

Investor You are currently selling Oklahoma gas and Barnett shale property packages. Why are you looking to exit those areas?

Brumley Our position in the Barnett shale is a good, high-quality position, but it's not the large acreage position the gas-resource-play companies have that are focused exclusively in the Barnett shale. We purchased that position through the acquisition of Cortez Oil & Gas Inc. in 2004. The largest property included in the Cortez acquisition was on the Cedar Creek Anticline, which is in our core area.

The Oklahoma and Barnett shale properties were just part of the purchase. We've had good success in the Barnett shale and there is a lot to do on those properties, but we need to reduce debt, so this is one of the assets we feel the market will desire that is not a focus for Encore.

The other part of the divestiture is Oklahoma gas. People are really excited about both parts of the package. We are in some great areas in Oklahoma and that part of the package is getting a lot of interest as well as the Barnett shale.

Investor How will the Anadarko acquisitions change Encore's overall profile?

Brumley They will bring us back to our roots of reengineering and enhancing vintage oil fields. Accompanied with our divestitures in Oklahoma and the Barnett shale, the acquisitions will make us oilier; we will go from about 65% oil to about 70% oil. They will make us much more waterflood- and tertiary-focused and will rejuvenate our inventory.

Investor What made you want to focus on these types of properties?

Brumley Companies that are comprised of fields that are long-life and have a shallow decline rate are much easier to manage because you don't have the re-investment risk that's created from very flush, steep-decline assets. The re-investment risk is much lower.

They are also easier to budget for because they're predictable and you're less likely to make a mistake when valuating them because of their long production history. Many of the fields we've purchased were producing in the 1920s or 1930s. It's fairly easy to predict how they're going to produce in the future.

Investor What do you think prepared you to run a company like Encore?

Brumley Having a good strategy has made it much easier to step in and run this company. My father, Jon Brumley, established this strategy when he founded Encore, and I'm just continuing it. His strategy was to concentrate on and redevelop long-life properties.

Investor What piece of advice from your dad has stuck with you?

Brumley There are two. The first is that you need to surround yourself with first-class people in all facets of the business. You need a great land group, accounting group and technical staff. I feel fortunate that we had a great staff when I became CEO, and I also feel we have improved it recently.

The second is from when we were setting up this company back in the venture-capital days. He has always said the deal has got to be a really good deal for the investor; you've got to take care of the investor. He has always put the investors first. The integrity he has is one of the traits that really sticks with me. The first characteristic he considers is how good of a deal it is for the investors, and he worries about himself later.

Investor What should Wall Street understand better about Encore?

Brumley This company has a considerable amount of upside potential. Because the upside potential is in waterfloods and tertiary recovery, it's more difficult to project the increase from an improved oil-recovery project than a resource play. Our business is to go into an old field, redevelop the waterflood or tertiary patterns and begin putting an injectant into the ground. We have to convert some producing wells to injectors, which lowers production for a while, and wait anywhere from six to 24 months to see production begin to increase.

With a resource company, you have a certain amount of locations, you're going to run a certain amount of rigs and it takes a certain amount of days per well. You can build a financial model around that much easier than you can for our type of projects.

From a production-growth standpoint, that type of production is easier to predict. But if you look at our growth rate, it has been phenomenal. We produced 8,000 barrels of oil per day in 1998, and we will produce almost 40,000 per day in this quarter.

Some people try to evaluate us like a resource company and it doesn't really work. Our business is quite a bit different.

Investor What is Encore's greatest opportunity right now?

Brumley Encore is very opportunity-rich. We have a huge tertiary-recovery project at Cedar Creek Anticline right now. We're implementing a big waterflood there, and we'll have considerable upside in the Bakken and in the waterfloods we bought to redevelop.

We also have a big opportunity in West Texas, where we were selected by ExxonMobil to redevelop some of its gas fields. These fields are very opportunity-rich; they're some of the biggest fields in West Texas-fields like Pegasus, Parks, Wilshire and Brown Bassett. Some really first-class fields.

It's a joint-venture structure. We operate the drilling and completion phase, and then turn it over to ExxonMobil to operate the production phase. We implement most of the capital work.

Investor Is that the type of opportunity Encore will be looking for in the future?

Brumley Yes. It's been a great deal for both of us. When prices were so high in 2006, it allowed us to add to our inventory without having to make an acquisition. We didn't have to buy the PDP (proved developed producing) part of the field; we just came in and became partners with ExxonMobil in the upside.

That's how we got around the problem of what to acquire when prices were so high. The wells are coming in better than either of us thought, so that's pretty exciting too.