New York based JPMorgan Chase & Co. was Denbury’s banker in the negotiations, while Barclays Plc based in London advised Encore on the deal. The deal is expected to close in the first quarter of next year.
Financing modalities
As a part of the deal, Texas-based Encore shareholders will be paid $50 per share, which represents a premium of 35 percent for Encore shareholders based on its Friday close. The amount will be paid by way of $15 in cash and $35 in Denbury common stock.
Encore's Chief Financial Officer Bob Reeves said that the total transaction was valued at about $2.64 billion based on Encore's 52.8 million common shares outstanding at July 31.
Denbury intends to issue between 115 million and 146 million shares of common stock to fund the equity portion of the deal.
Moreover, Plano, Texas-based Denbury, a specialist in extracting crude from mature fields, will sell off the companies' non-core oil and gas properties.
The sale is expected to garner an estimated $500 million, which will be used to pay down its own debt.
Larger CO2 projects for the combined entity
Denbury is the largest oil and gas operator in Mississippi and has Barnett shale natural-gas assets in Texas. On the other hand, Encore primarily manages oil and natural gas projects in the Rockies, Mid-Continent and Permian basins.
"The combined companies have a unique blend of large oil fields with huge upside potential," said Encore Chief Executive Jonny Brumley.
The combined entity, to be headquartered in Plano, Texas, would have over 500 million additional potential BOEs (barrels of oil equivalent) recoverable with CO2 tertiary operations.
"Encore has built an enviable asset portfolio in the Rockies, anchored by mature legacy crude oil assets, and our combined size and scale of operations will allow us to undertake significantly larger CO2 projects in the Gulf Coast and the Rockies," said Denbury’s Chief Executive Officer Phil Rykhoek.
“With the addition of the Encore properties, we more than double our current inventory of oil reserves recoverable with carbon dioxide, and greatly expand our future growth potential,” added Rykhoek.
Post acquisition, Denbury stockholders will own between 63 percent and 68 percent of the combined company, while Encore stockholders will own between 32 percent and 37 percent. Denbury's board and senior management will not change though.
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