Under the terms of the agreement, Encore will have the opportunity to earn 30% of ExxonMobil's working interest in each well drilled. Encore will operate each well during the drilling and completion phase, after which ExxonMobil will assume operational control of the well.

After Encore has fulfilled its obligations under the 24-well commitment phase, Encore will be entitled to a 30% working interest in future drilling locations. Encore will have the right to propose and drill wells for as long as Encore is engaged in continuous drilling operations.

"We are excited that ExxonMobil has selected Encore as a development partner to enhance such significant, high potential natural gas fields in West Texas," stated Jon S. Brumley, President and Chief Executive Officer of Encore. "We see great potential in the fields and are looking forward to working with ExxonMobil to bring these development ideas online."

In 2006, Encore intends to drill 22 wells and invest $17 million of net capital in the joint venture. Encore anticipates operating 4 rigs in West Texas by the end of 2006. "To have the opportunity to invest in an opportunity of this size is a significant step for Encore," Brumley stated. "We have enjoyed working with the ExxonMobil team in evaluating and negotiating this opportunity."