Oil Firms to Merge

Denbury Resources will buy Encore Acquisition Corp. for $3.25 billion in a deal combining two independent North American oil exploration and production companies.

The $50 Denbury will pay for each Encore share amounts to a 35 percent premium over Encore's Friday close of $37.07 a share. Denbury will pay $15 in cash and $35 in common stock. The companies valued the entire transaction at $4.5 billion, including assumption of Encore's $1.24 billion debt.

Denbury will unload some of its non-core oil and gas assets to pay down debt as part of the deal.

The acquisition expands Denbury's oil and gas exploration footprint. The Plano, Texas-based company currently concentrates on the Gulf Coast, developing fields in Texas, Louisiana, Alabama and Mississippi. Encore, based in Fort Worth, has been developing fields in the Rocky Mountains, Texas and Oklahoma.

"All of our operations are in the Gulf Coast. It is good to expand to another area, to get a footprint in another location like the Rockies," Denbury CEO Phil Rykhoek told the Wall Street Journal. The combined company, with about 426 milllion barrels in crude oil reserves, will have one of the largest reserves of any independent driller, Rykhoek said.

The announcement marks further evidence of a strengthening merger market in the U.S., as multi-billion dollar merger announcements--all but absent for most of the year--have once again become a feature of Monday mornings.

That development began at the end of August, with the announcement of $8.9 billion worth of deals on one day. The market showed continued strength through September.

In addition to its merger deal, Denbury is pioneering the construction of infrastructure to move carbon dioxide from industrial emitters to older oilfields, where it can be pumped underground to help extract more oil. The company is building one of the first pipelines for carbon dioxide, a 320-mile-long line along the Gulf Coast to an old field south of Houston.