Encore Acquisition: Oilfield Recovery Efforts Bring Stock Back In Favor

First quarter 2007 results covered in a conference call on May 7 support estimated net present value [NPV] of $48 a share for buy-rated Encore Acquisition (EAC) and point to new opportunity in the northern Rockies.

Declaring, ‘what we do best is give old fields their encore,’ Chief Executive Jonny Brumley described enhanced recovery progress in the Bell Creek field in Montana. A new water injection effort is starting to show results and there may be 30 million barrels to be recovered with the help of future carbon dioxide injection.

The company has “hit the ground running” in the Bakken shale of North Dakota with drilling underway to add a few thousand barrels daily production in a few years in a property just acquired on April 11, 2007. Our projections include volumes for more than $800 million of acquisitions, but do not adjust yet for expected property sales including some $200 million in master limited partnership [MLP] units.

The new properties throw off predictable cash which we consider in our valuation, while higher depreciation charges and interest payments reduce reported earnings. Back in favor with stock price above the 200-day average, Encore has a full unlevered weight in the illustrative McDep Energy Portfolio concentrated on real assets promising a high return providing clean fuel for global growth.

EAC 1-yr chart:

Originally published on May 7, 2007.

Comments

[guntherd20:]

Re:EAC. If its worth today's $29 then HOGC (coalbed methane) should go for 3 times its current $10. One of them is over priced or under priced!

2007 Jun 15 02:26 PM