Denbury Resources Inc. and Encore Acquisition Company have entered into a definitive merger agreement pursuant to which Denbury will acquire Encore in a transaction valued at approximately $4.5 billion, including the assumption of debt and the value of the minority interest in Encore Energy Partners LP. The combined company will continue to be known as Denbury Resources Inc. (the “Company”) and will be headquartered in Plano, Texas.

Under the definitive agreement, Encore stockholders will receive $50.00 per share for each share of Encore common stock, comprised of $15.00 in cash and $35.00 in Denbury common stock subject to both an election feature and a collar mechanism on the stock portion of the consideration.

The transaction positions the Company as one of the largest crude oil-focused, independent North American exploration and production companies. The acquisition will also create one of the largest CO2 enhanced oil recovery (”EOR”) platforms diversified across the Gulf Coast and Rocky Mountain regions, complemented by ownership and control of the Jackson Dome CO2 source in Mississippi and CO2 sequestration contracts secured with anthropogenic sources in the Gulf Coast, Midwest and Rockies. The combined companies will have over 500 MMBOE of additional potential barrels recoverable with CO2 tertiary operations. 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 oil shale in North Dakota and the Haynesville shale in North Louisiana. Encore has one of the larger acreage positions in the prolific Bakken oil shale with over 300,000 net acres.

“Encore is an excellent fit with Denbury’s CO2 EOR program,” said Phil Rykhoek, Chief Executive Officer of Denbury. “Encore has built an enviable asset portfolio in the Rockies, anchored by mature legacy crude oil assets, and our combined size and scale of operations will allow us to undertake significantly larger CO2 projects in the Gulf Coast and the Rockies. This combination will also further enhance Denbury’s position as the natural buyer and owner of mature oil properties in our core regions and the partner of choice for CO2 emitters looking to reduce their carbon footprint. With the addition of the Encore properties, we more than double our current inventory of oil reserves recoverable with CO2, and greatly expand our future growth potential with a second new core EOR area in the Rockies that has significant future expansion opportunities. The anticipated EOR production from the Encore properties will fit nicely into our overall EOR program, providing production growth in 2015 and beyond, about the time when we anticipate nearing the production peak of our existing EOR field inventory. In addition, the growth potential from Encore’s Bakken shale oil play further enhances its value and provides short-term production growth and cash flow as we develop the longer term EOR program. The transaction is expected to be meaningfully accretive to Denbury on a cash flow basis, between 8% and 18% depending on the ultimate number of Denbury shares issued, and the combined size, scale and access to capital will benefit both groups of stockholders.”

Jonny Brumley, Chief Executive Officer of Encore, stated, “The combined companies have a unique blend of large oil fields with huge upside potential. The large reserve and production base will increase the operational and financial flexibility allowing for more efficient development of the assets of both of our companies. We have been impressed by the amount of progress Denbury has made in building a world-class enhanced oil recovery business. Denbury has the experience and expertise to effectively capture the full value of Encore’s EOR inventory and the combined entities will provide the necessary size and scale to develop and fully recognize that potential. The transaction recognizes the value Encore has created for its stockholders and positions the combined company to deliver above average value creation for both sets of stockholders going forward. Encore has a dedicated group of employees that have worked hard and built a company to be proud of.”

Tags: Denbury Resources Inc.