Denbury to Sell Encore Stake, Opts Against Asset Deal

Sept. 2 (Bloomberg) -- Denbury Resources Inc. said it will sell control of Encore Energy Partners LP, part of last year’s second-biggest U.S. oil and gas acquisition, after deciding against an asset deal with the partnership.

Denbury plans to sell the general partner that controls Encore, as well as some or all of its common units of the partnership, according to a statement today by the Plano, Texas-based oil and natural-gas producer. The company owns a 46 percent stake in Fort Worth, Texas-based Encore, acquired when Denbury bought Encore Acquisition for more than $4 billion in a deal announced in November.

The decision to shed the partnership comes after Denbury and Encore Energy Partners decided against a transaction involving Denbury’s Elk Basin field at the Wyoming-Montana border. Denbury and Encore, which announced a strategic review of the partnership’s alternatives in April, couldn’t reach agreement on the value of oil reserves at Elk Basin, according to today’s statement.

The review was initiated in light of “substantial” costs to inject carbon dioxide into the Elk Basin field to stimulate production, Denbury said.

Encore Energy Partners owns oil and gas assets in seven central and western U.S. states, according to a public filing. As a so-called master limited partnership, or MLP, it’s exempt from federal income taxes and pays out most of its cash flow to unit holders.

Among U.S. oil and gas acquisitions announced last year, only Exxon Mobil Corp.’s takeover of XTO Energy Inc. was larger than Denbury’s purchase of Encore Acquisition.

Denbury rose 38 cents, or 2.5 percent, to $15.48 as of the 4 p.m. close of New York Stock Exchange composite trading. Encore, this year’s worst performer in the Alerian MLP Index, fell 67 cents, or 3.6 percent, to $18.18.

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