OilVoice - Encore Acquisition Company Announces 2009 Capital Budget

Encore Acquisition Company Announces 2009 Capital Budget

Wednesday, October 29, 2008

Encore Acquisition Company announced today that its Board of Directors has approved a capital budget for 2009 of $460 million related to its drilling and development program. Encore's strategy for 2009 is to continue to focus on allocation of capital to projects expected to achieve the most efficient production and reserve growth, expand the Company's acreage position in the highly successful Bakken/Sanish play, repurchase $40 million of common stock, and pay down debt, all well within internally generated cash flows. This budget allows the Company to have an organic growth rate of three to five percent for 2009.

Jon S. Brumley, President and Chief Executive Officer of the Company, commented, "Encore is poised to improve in 2009. We plan to grow production three to five percent, repurchase up to three percent of our outstanding shares, and repay $55 million of debt." Mr. Brumley went on to state, "When times are tough, quality shines through, and 2009 looks bright for Encore. Our hedging program, shallow declining properties, and strong balance sheet will allow us to grow, repurchase stock, and pay down debt inside of cash flows at a time when the rest of the industry will struggle. Our budget for 2009 will be the best and most efficient budget in the history of the Company."

The Company believes it will be able to meet these goals because it has executed a hedge plan that protects over 95 percent of its estimated oil production for 2009. The hedges include floors at $110.00 per barrel ("Bbl") for 11,630 barrels of oil per day ("BOPD"), swaps at $86.21 per Bbl for 6,000 BOPD, and floors at $80.00 per Bbl for 8,000 BOPD. The counterparties to these hedges are a diverse group comprising eleven institutions, all of which are rated A- or better by Standard & Poor's and/or Fitch, with the majority rated AA- or better.

While Encore expects to allocate capital to projects throughout its portfolio, the Company is focusing a substantial portion of the budget on three areas with the highest expected rate of return: the Bakken/Sanish, Haynesville/Cotton Valley/Travis Peak, and the West Texas joint venture with ExxonMobil.

The regional breakdown of the capital budget is expected to be as follows:
Bakken/Sanish: $ 164 million
Haynesville/Cotton Valley/Travis Peak: $ 88 million
West Texas JV: $ 82 million
Mid-Continent: $ 63 million
Other Rockies: $ 48 million
Other West Texas: $ 15 million

The $460 million of capital is expected to be invested in the following categories:
Drilling: $ 356 million
Improved Oil Recovery, Workovers: $ 50 million
Land, Seismic and Other: $ 54 million

The Company's 2009 budget is designed to continue to leverage Encore's expertise in improved oil recovery, horizontal drilling, and tight sands gas development. The activity in the Company's different plays is expected to be as follows:

• In the Bakken/Sanish, Encore expects to operate three rigs during 2009 and increase its acreage position in the Bakken to 325,000 net acres by the end of 2009.
• In the other areas of the Rockies, the Company will focus on improved oil recovery projects at the Cedar Creek Anticline, the Bell Creek field, the Big Horn Basin, and the Williston Basin.
• In the fields covered by the ExxonMobil West Texas joint venture, Encore expects to operate two to three rigs in 2009. One deep rig will be targeting the Devonian zone in the Pegasus and Wilshire fields. Another deep rig will be targeting the Montoya formation in the Delaware Basin. The Company plans to have rigs targeting the Wilshire Wolfberry and shallow gas in the Delaware Basin.
• In the Haynesville shale play, Encore will be operating one rig during most of 2009 as the Company begins developing its expanding acreage position.
• The Company will have several non-operated rigs targeting the Elm Grove field in North Louisiana in 2009.
• In the Mid-Continent, Encore expects to operate one rig most of 2009 in its Cleveland sand play in the Anadarko Basin of Oklahoma. In addition, the Company will participate in a high level of non-operated activity in the Cleveland play.