Encore Acquisition Company says that its Board of Directors has approved a revised capital budget for 2009 of $310 million related to its drilling and development program, a reduction of $150 million from the Company's previously approved $460 million capital budget. While Encore has hedges in place protecting approximately 90 percent of its estimated oil production for 2009, the Company felt it prudent to scale back its capital program in light of the financial crisis, inflated service costs, and a further weakening of commodity prices. The Company believes that late 2009 or 2010 oil prices will increase, and the deferred projects will have a higher rate of return than today. Encore's strategy for 2009 continues to be focused on allocation of capital to the Company's most efficient and highest rate of return projects, expansion of the Company's acreage position in the highly successful Bakken and Haynesville plays, repurchase of common stock, and reduction of debt.

Jon S. Brumley, President and Chief Executive Officer of the Company, commented, "Encore was formed around long-life, shallow-declining properties and that has continued as core to our business philosophy and strategy. When you couple our long-life, high-margin oil properties with our hedging portfolio, the result is a company poised to weather storms and take advantage of uncertainty. As commodity prices rose, service costs rose right alongside them. Now commodity prices have dropped, but service costs remain inflated. So, to make us more opportunistic and improve our already strong liquidity position, we are reducing our 2009 budget by $150 million. However, even with a lower budget, the Company can keep production flat. I think it is important to note that we are not losing projects, but deferring them until service costs reflect the current commodity price environment. If you were to drill the projects under the current scenario, you would be wasting those projects."

Mr. Brumley went on to say, "Our properties are time-tested and decline at slow rates as they have been weathering cycles since the second half of the 20th century. A downturn in commodity prices is nothing new to the Cedar Creek Anticline or our Permian waterfloods. It is because of properties like these that we can maintain our production with only $215 million of drilling. We are excited about 2009 and look forward to our small but efficient budget, improving our liquidity position, and maintaining our production for about 50 percent of EBITDAX. We plan to continually assess and wisely invest in areas the markets are giving the best rate of return whether it be drilling, stock repurchases, debt reduction, or acquisitions. We feel this is the most efficient and prudent use of capital and will position the Company for 2010 and beyond, regardless of the commodity price environment. Our focus has always been on increasing long-term shareholder value, and with our new, efficient capital budget we will accomplish our goal."

Tags: Encore Acquisition Company