Monday, March 28, 2011

Vanguard offers to acquire remaining 56% stake in Encore Energy for $567 million- a 27% increased offer price!!

Vanguard Natural Resources submitted a proposal to acquire the remaining 56% stake in Encore Energy Partners LP for $567 million. Under the terms of the current offer, Vanguard would offer 0.72 Vanguard common units for each outstanding publicly-held Encore Energy common unit. Based on Vanguard's closing unit price on March 24, 2011, the offer values each Encore Energy unit at $23.20. If accepted, the bid for Encore would be Vanguard’s largest acquisition. Here is the list of Vanguard's acquisitions...

Encore Energy has its assets located in the Big Horn Basin in Wyoming and Montana, the Williston Basin in North Dakota and Montana, the Permian Basin in West Texas and New Mexico, and the Arkoma Basin in Arkansas and Oklahoma. Encore Energy’s 2010 year end reserves are reported to be approximately 41.074 MMBOE (90%- PDP and 70%- Oil).

Why is the offer price high compared to November-2010 offer??
Earlier in November 2010, Vanguard acquired the initial 46% stake in Encore from Denbury Resources for $380 million. This current offer by Vanguard values the remaining 54% stake in Encore at $567 million, a 27% increase compared to the November offer. The increase in the offer price could be justified by the following facts:
  • 18% increase in Encore’s stock price
  • 31% increase in the oil price (WTI Spot)
  • Encore reported net income of $32.07 million in 2010 compared to a net loss of $40.3 million in 2009. These facts put Encore in a better financial status. Hence, the higher offer price from Vanguard.
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