Encore Acquisition Company: Long Life, Low Price

With a few more weeks before fourth quarter results are reported, buy-recommended Encore Acquisition (EAC) offers 44% appreciation potential to estimated net present value of $50 a share that presumes a long-term oil price of $50 a barrel. Futures investors price Light, Sweet Crude Oil at $67 a barrel for the next six years.

Among independent producer peers, EAC’s near lowest McDep Ratio suggests that investors may not be giving the stock as much credit for long life as might be justified. Adjusted reserve life at 14.3 years is the highest in our large cap and small cap independent group. The value of the company is more concentrated on oil, 75%, than on natural gas. Enhanced recovery underway on a large oil field in Montana and North Dakota has the potential to double company reserves. Chairman Jon Brumley is one of investors’ favorite long-term money makers in oil and gas.

EAC 1-yr Chart

Kurt Wulff's McDep Associates offers realtime, independent research services for investors in the energy and utilities sectors. For more information, go to www.mcdep.com or email Mr. Wulff at [e-mail].

« Any opinions expressed on the Seeking Alpha sites are those of the individual authors and do not necessarily represent the opinion of Seeking Alpha or its management. »