Dallas-based E&P Denbury Resources Inc., (NYSE: DNR) has closed its acquisition of Fort Worth, Texas-based Encore Acquisition Co. (NYSE: EAC) for approximately $4.5 billion in cash, stock and debt assumption, including the value of the minority interest in the MLP Encore Energy Partners LP (NYSE: ENP). The deal makes Denbury one of the largest oil-focused independent E&Ps in the U.S.
The company issued approximately 134.4 million shares of its common stock and paid approximately $829.4 million in cash to Encore stockholders, or about $50 per Encore share comprised of $15 in cash and $35 in stock. The acquisition also involves some $1 billion in Encore Acquisition debt. Encore stockholders hold approximately 34% of the combined company.

Encore Acquisition has total proved reserves of 186 million BOE (72% oil; 80% proved developed). Production for first-half 2009 averaged 41,652 bbl. of oil per day. The reserve-to-production ratio is 13 years.

Encore’s assets involve more than 300,000 net acres in the North Dakota Bakken shale, a 30% working interest (22.5% net revenue interest) in 100,000 gross acres in West Texas in a joint venture with ExxonMobil Corp., Irving, Texas, (NYSE: XOM) more than 19,000 net acres in the Haynesville shale play in Caddo and DeSoto parishes, Louisiana, and some 99 million BOE net proved reserves in the Powder River and Williston basins in Montana and Wyoming.

The combined company has more than 500 million BOE of additional potential barrels recoverable with CO2 tertiary operations. According to Denbury, the longer lead-time of CO2 project development in the Rockies is ideally matched with a strong growth profile from low-risk development of unconventional resource plays in the Bakken and Haynesville shales.

Denbury entered a new credit agreement led by JPMorgan Chase Bank NA and 23 other lenders for $1.6 billion and a $1.25-billion bridge financing, with approximately $600 million to $700 million remaining available.

During 2010, Denbury intends to sell noncore properties to reduce debt, with targeted sales of at least $500 million to $1 billion.
Denbury’s board and senior management remain unchanged.

J.P. Morgan Securities Inc. was financial advisor to Denbury and Baker & Hostetler LLP was legal counsel. Barclay’s Capital Inc. was financial advisor to Encore and Baker Botts LLP was legal counsel.