Encore Acquisition CEO: “It’s Nice To Be Oily”

Buy-recommended Encore Acquisition (EAC) offers unlevered appreciation potential of 49% to estimated net present value [NPV] of $54 a share, revised up from $48 a share on May 29 when we raised long-term oil price to $66 a barrel from $60.

Second quarter results reported on August 1 included higher than expected unlevered cash flow (Ebitda) driven by advancing production volume and a narrowing of the discount to benchmark oil price. The acquisition of oil properties and the divestiture of natural gas properties increases the concentration of NPV on oil production to 83% from 77%.

That will change again with the transfer of oil properties to a newly created Master Limited Partnership, expected to be brought to market in the next few months. Nonetheless while presenting latest results, Chief Executive Jonny Brumley said, “It’s Nice to be Oily.”

Pointing to more good quarters, we hope, long-term oil price appears to be in an uptrend despite volatility of short-term quotes. Up 7% on the day, EAC stock bounced to maintain positive momentum at 7% above its 200-day average.

Originally published on August 1, 2007.

EAC 1-yr chart: