Denbury Resources Inc. (DNR) has entered into a definitive agreement with Encore Acquisition Company (EAC) to acquire the company for $4.5 billion. This includes an assumption of debt and the value of the minority interest in Encore Energy Partners L.P. (ENP). Denbury intends to finance this transaction with a combination of equity and debt.

The combined company will operate under the Denbury name and trade under the DNR ticker symbol. Post-merger, it is expected that Denbury stockholders will own between 63% and 68% of the combined company and the Encore stockholders will own between 32% and 37% of the combined company. The completion of the merger is subject to regulatory approvals and is expected to take place in the first quarter of 2010.

We view the transaction as a win-win for shareholders of both companies. The transaction will position the combined company as one of the largest crude oil-focused independent North American exploration and production companies. In addition, it will also create one of the largest CO2-enhanced oil recovery platforms diversified across the Gulf Coast and Rocky Mountain regions.

The merger will allow the combined company to undertake significantly larger CO2 projects on the Gulf Coast and the Rockies, given Encore’s significant asset portfolio in these areas. On a cash-flow basis, the transaction is expected to benefit Denbury by 8% to 18%, depending on the ultimate number of Denbury shares issued.

Under the terms of the agreement, Encore stockholders will receive $50.00 for each share of Encore common stock, comprising $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.

To fund this transaction, Denbury may issue 115 million to 146 million of common stock, and intends to sell some of its non-core properties in 2010. The company also stated that it may decide to sell some of its Encore properties to reduce its debt level.

We think that Encore is a good fit for Denbury as both the companies have exposure in tertiary recovery techniques to increase the value of acquired properties. As Denbury had sold its 60% interest in Barnett Shale assets in June to focus on its core tertiary oil operations, the Encore acquisition is another prudent step in this direction.

Zacks Investment Research
View original at: Zacks.com News Feed

1. (BDX) Becton-Dickinson and Company Set for Acquisition of HandyLabBecton-Dickinson and Company (BDX) is set to acquire HandyLab Inc., an Ann Arbor, Michigan-based company...
2. (CLF) Cliffs Natural Resources to Acquire Wabush Mines StakeInternational mining and natural resources company, Cliffs Natural Resources Inc. (CLF) announced on Oct 12...
3. (EMR) Emerson Electric Company to Acquire Avocent CorporationEarlier today, Emerson Electric Co. (EMR) announced that it has reached an agreement to acquire...
4. (WIRE) Encore Wire Corporation – Value – Zacks Rank BuyEncore Wire Corporation (WIRE) continues to outperform even while it customers operate in one of...
5. (WIRE) Encore Wire Corporation – Beat Wall Street Third Quarter Estimates by 25.93%Encore Wire Corporation (WIRE) beat third quarter estimates by 25.93% even as it navigates the...
6. (EAC) – Encore Acquisition – surprised on estimates 4 consecutive quarters by an average of 16.44%Encore Acquisition saw revenues soar 96% in the second quarter on the back of record...

Search Posts by Tag: Denbury Resources Inc | DNR | EAC | Encore Acquisition Company | Encore Energy Partners LP | ENP | Basic Materials | Independent Oil & Gas

RSS Feeds by Tag: Denbury Resources Inc | DNR | EAC | Encore Acquisition Company | Encore Energy Partners LP | ENP | Basic Materials | Independent Oil & Gas |

Other Posts by: vitalstocks | RSS Feed for this author