OilVoice - Encore Acquisition Announces Fourth Quarter and Full Year 2009 Results

Encore Acquisition Announces Fourth Quarter and Full Year 2009 Results

Monday, February 22, 2010

Encore Acquisition Company has reported unaudited fourth quarter and full year 2009 results.

Fourth Quarter 2009
Encore's fourth quarter 2009 production averaged 45,143 barrels of oil equivalent ("BOE") per day. Daily production volumes consisted of 27,913 Bbls of oil per day and 103,382 Mcf of natural gas per day. For the fourth quarter of 2008, production volumes averaged 41,824 BOE per day. Net profits interests reduced reported average daily production volumes by approximately 1,756 BOE per day in the fourth quarter of 2009 versus 829 BOE per day in the fourth quarter of 2008.

Encore reported net income excluding certain items for the fourth quarter of 2009 of $16.4 million ($0.29 per diluted share) as compared to $36.3 million ($0.64 per diluted share) for the fourth quarter of 2008. Encore reported a net loss for the fourth quarter of 2009 of $21.6 million ($0.40 per diluted share) as compared to net income of $229.0 million ($4.32 per diluted share) for the fourth quarter of 2008. Net income excluding certain items is defined and reconciled to its most directly comparable GAAP measure in the attached financial schedules.

Adjusted EBITDAX was $156.1 million for the fourth quarter of 2009 as compared to $176.6 million for the fourth quarter of 2008. Adjusted EBITDAX is defined and reconciled to its most directly comparable GAAP measures in the attached financial schedules.

Encore's oil and natural gas revenues were $218.8 million in the fourth quarter of 2009 as compared to $165.9 million in the fourth quarter of 2008. The average NYMEX oil price increased to $75.98 per Bbl in the fourth quarter of 2009 from $58.52 per Bbl in the fourth quarter of 2008. The Company's NYMEX oil differential was $8.04 per Bbl in the fourth quarter of 2009 as compared to $11.89 per Bbl in the fourth quarter of 2008. As a result, the Company's average wellhead oil price, which represents the net price the Company receives for its oil production, was $67.94 per Bbl for the fourth quarter of 2009 versus $46.63 per Bbl in the fourth quarter of 2008.

Lease operating expense was $10.17 per BOE in the fourth quarter of 2009 as compared to $11.72 per BOE reported for the fourth quarter of 2008.

Exploration expense was $8.7 million in the fourth quarter of 2009, which was comprised of $7.2 million in amortization of unproved acreage, $1.1 million related to dry holes, and $0.4 million in delay rentals, geological, and seismic costs. For the fourth quarter of 2008, exploration expense was also $8.7 million.

During the fourth quarter of 2009, the Company recorded an impairment charge on unproved property for its Tuscaloosa Marine Shale acreage of $10.0 million as compared to an impairment charge on proved properties of $33.2 million in the fourth quarter of 2008.

Full Year 2009
Average daily production volumes in 2009 were 42,929 BOE per day as compared to 39,470 BOE per day in 2008. Oil production represented 64 percent of the Company's total sales volumes in 2009 as compared to 70 percent in 2008. Net profits interests reduced reported average daily production volumes by approximately 1,721 BOE per day in 2009 versus 1,530 BOE per day in 2008.

The average NYMEX oil price for the year was $61.95 per Bbl in 2009 versus $99.75 per Bbl in 2008 and the average NYMEX natural gas price was $3.99 per Mcf in 2009 as compared to $9.04 per Mcf in 2008. The Company's NYMEX oil differential was $7.10 per Bbl in 2009 and $10.17 per Bbl in 2008, and as a percentage of NYMEX the differential was 11 percent in 2009 as compared to 10 percent in 2008. Combining the movement in the NYMEX oil price and the Company's differential, the Company's average wellhead oil price, which represents the net price the Company receives for its oil production, was $54.85 per Bbl in 2009 as compared to $89.58 per Bbl in 2008. The Company's average wellhead natural gas price decreased to $3.87 per Mcf in 2009 from $8.63 per Mcf in 2008.

Net income excluding certain items for 2009 was $125.6 million ($2.32 per diluted share) as compared to $246.0 million ($4.55 per diluted share) in 2008. The Company reported a net loss for 2009 of $81.1 million ($1.54 per diluted share) as compared to net income of $430.8 million ($8.01 per diluted share) in 2008. Net income excluding certain items is defined and reconciled to its most directly comparable GAAP measure in the attached financial schedules.

Adjusted EBITDAX for 2009 was $703.0 million as compared to $798.0 million for 2008.

Lease operating expense decreased to $165.1 million ($10.53 per BOE) for 2009 from $175.1 million ($12.12 per BOE) for 2008.

G&A expenses for 2009 were $54.0 million ($3.45 per BOE) as compared to $48.4 million ($3.35 per BOE) in 2008.
The Company completed 112 gross wells (42.4 net) during 2009.

Liquidity Update
At December 31, 2009, the Company's long-term debt, net of discount, was $1.2 billion, including $150 million of 6.25% senior subordinated notes due April 15, 2014, $300 million of 6.0% senior subordinated notes due July 15, 2015, $225 million of 9.5% senior subordinated notes due May 1, 2016, $150 million of 7.25% senior subordinated notes due December 1, 2017, and $155 million and $255 million of outstanding borrowings under Encore's and Encore Energy Partners LP's ("ENP") revolving credit facilities, respectively. As of December 31, 2009, the borrowing base of Encore's revolving credit facility was $925 million, of which $769.7 million was available liquidity. ENP's available borrowing capacity under its $375 million revolving credit facility was $120 million at December 31, 2009.

On December 31, 2009, Encore owned 21.4 million units of ENP, including all 0.5 million general partner units, and received approximately $11.5 million on February 12, 2010 as a result of ENP's declared cash distribution of $0.5375 per unit for the fourth quarter of 2009.