e10vq

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Cnic4JKICCYLAXTNR+7vIH3VPfJ4IalzbKxd3AEvJ/Qwll1ltgw8xlWyn1yWbShE EXmm75Y8cRSlvt0LP9LRJQ== 0000950134-04-007093.txt : 20040510 0000950134-04-007093.hdr.sgml : 20040510 20040510152811 ACCESSION NUMBER: 0000950134-04-007093 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENCORE ACQUISITION CO CENTRAL INDEX KEY: 0001125057 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 752759650 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-16295 FILM NUMBER: 04792804 BUSINESS ADDRESS: STREET 1: 777 MAIN STREET, SUITE 1400 CITY: FORT WORTH STATE: TX ZIP: 76102 BUSINESS PHONE: 8178779955 10-Q 1 d15219e10vq.htm FORM 10-Q e10vq

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q


(Mark One)
x		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2004
or


o		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _______ to ________

Commission file number 1-16295

ENCORE ACQUISITION COMPANY

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation)		001-16295 (Commission File Number)		75-2759650 (IRS Employer Identification No.)


777 Main Street, Suite 1400, Fort Worth, Texas (Address of principal executive offices)		76102 (Zip Code)

Registrant’s telephone number, including area code: (817) 877-9955

Not applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2)

Yes x No o

Number of shares of Common Stock, $0.01 par value, outstanding as of April 30, 2004 ....... 30,448,979

ENCORE ACQUISITION COMPANY
INDEX


	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2004 and December 31, 2003		1
Consolidated Statements of Operations for the three months ended March 31, 2004 and 2003		2
Consolidated Statement of Stockholders’ Equity for the three months ended March 31, 2004		3
Consolidated Statements of Cash Flows for the three months ended March 31, 2004 and 2003		4
Notes to Consolidated Financial Statements		5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		10
Item 3. Quantitative and Qualitative Disclosures About Market Risk		17
Item 4. Controls and Procedures		17
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K		18
Signatures		19
Third Amendment to Credit Agreement
Certification of Principal Executive Officer
Certification of Principal Financial Officer
Certification of Principal Executive Officer
Certification of Principal Financial Officer

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ENCORE ACQUISITION COMPANY

CONSOLIDATED BALANCE SHEETS
(in thousands except shares and per share amounts)


	March 31,			December 31,
	2004			2003
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	729		$	431
Hedge margin deposits		3,840			—
Accounts receivable		30,310			27,640
Inventory		5,092			6,019
Derivatives		3,579			5,588
Deferred taxes		6,668			3,592
Other current		1,534			1,673

Total current assets		51,752			44,943

Properties and equipment, at cost — successful efforts method:
Proved properties		768,539			739,288
Unproved properties		2,021			921
Accumulated depletion, depreciation, and amortization		(133,309	)		(124,646	)

		637,251			615,563

Other property and equipment		4,051			3,831
Accumulated depreciation		(2,786	)		(2,586	)

		1,265			1,245

Other assets		11,788			10,387

Total assets	$	702,056		$	672,138

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	11,435		$	10,668
Derivatives		14,133			8,026
Accrued and other current		26,961			26,301

Total current liabilities		52,529			44,995

Derivatives		8,855			3,514
Future abandonment costs		5,419			5,341
Deferred taxes		86,863			80,313
Long-term debt		179,000			179,000

Total liabilities		332,666			313,163

Commitments and contingencies		—			—
Stockholders’ equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized, none issued and outstanding		—			—
Common stock, $.01 par value, 60,000,000 authorized, 30,439,698 and 30,335,693 issued and outstanding		304			303
Additional paid-in capital		256,778			253,865
Deferred compensation		(4,114	)		(2,528	)
Retained earnings		134,267			117,365
Accumulated other comprehensive income		(17,845	)		(10,030	)

Total stockholders’ equity		369,390			358,975

Total liabilities and stockholders’ equity	$	702,056		$	672,138

The accompanying notes are an integral part of these consolidated financial statements.

ENCORE ACQUISITION COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)


	Three months ended
	March 31,
	2004			2003
Revenues:
Oil	$	46,764		$	46,432
Natural gas		12,527			9,355

Total revenues		59,291			55,787

Expenses:
Production —
Lease operations		10,242			8,953
Production, ad valorem, and severance taxes		5,839			6,169
General and administrative (excluding non-cash stock based compensation)		2,228			2,450
Non-cash stock based compensation		310			145
Depletion, depreciation, and amortization		9,263			7,783
Derivative fair value (gain) loss		158			(1,260	)
Other operating		1,002			170

Total expenses		29,042			24,410

Operating income		30,249			31,377

Other income (expenses):
Interest		(3,906	)		(4,171	)
Other		51			47

Total other income (expenses)		(3,855	)		(4,124	)

Income before income taxes and cumulative effect of accounting change		26,394			27,253
Current income tax provision		(1,085	)		(767	)
Deferred income tax provision		(8,407	)		(9,371	)

Income before cumulative effect of accounting change		16,902			17,115
Cumulative effect of accounting change, net of income taxes of $529		—			863

Net income	$	16,902		$	17,978

Income before cumulative effect of accounting change per common share:
Basic	$	0.56		$	0.57
Diluted		0.55			0.57
Net income per common share:
Basic	$	0.56		$	0.60
Diluted		0.55			0.59
Weighted average common shares outstanding:
Basic		30,179			30,037
Diluted		30,567			30,221

The accompanying notes are an integral part of these consolidated financial statements.

ENCORE ACQUISITION COMPANY

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
March 31, 2004
(in thousands)
(unaudited)


										Accumulated
			Additional							Other			Total
	Common		Paid-In		Deferred			Retained		Comprehensive			Stockholders’
	Stock		Capital		Compensation			Earnings		Income			Equity
Balance at December 31, 2003	$	303	$	253,865	$	(2,528	)	$	117,365	$	(10,030	)	$	358,975
Exercise of stock options		—		1,018		—			—		—			1,018
Deferred compensation:
Issuance of restricted common stock		1		1,738		(1,739	)		—		—			—
Amortization of expense		—		—		310			—		—			310
Other changes		—		157		(157	)		—		—			—
Components of comprehensive income:
Net income		—		—		—			16,902		—			16,902
Change in deferred hedge loss, net of income taxes of $4,790		—		—		—			—		(7,815	)		(7,815	)

Total comprehensive income														9,087

Balance at March 31, 2004	$	304	$	256,778	$	(4,114	)	$	134,267	$	(17,845	)	$	369,390

The accompanying notes are an integral part of these consolidated financial statements.

ENCORE ACQUISITION COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)


	Three months ended
	March 31,
	2004			2003
Operating activities
Net income	$	16,902		$	17,978
Adjustments to reconcile net income to net cash provided by operating activities:
Depletion, depreciation, and amortization		9,263			7,783
Deferred taxes		8,407			9,371
Non-cash stock based compensation		310			145
Cumulative effect of accounting change		—			(863	)
Non-cash derivative fair value (gain) loss		1,972			(613	)
Other non-cash		336			1,891
(Gain) loss on disposition of assets		(11	)		124
Changes in operating assets and liabilities:
Hedge margin deposit		(3,840	)		—
Accounts receivable		(2,670	)		(4,130	)
Other current assets		(1,127	)		(1,328	)
Other assets		(53	)		(112	)
Accounts payable and accrued liabilities		1,584			(4,538	)

Cash provided by operating activities		31,073			25,708

Investing activities
Proceeds from disposition of assets		119			395
Purchases of other property and equipment		(884	)		(36	)
Acquisition of oil and natural gas properties		(1,263	)		(60	)
Development of oil and natural gas properties		(28,984	)		(23,431	)

Cash used by investing activities		(31,012	)		(23,132	)

Financing activities
Proceeds from long-term debt		48,000			15,000
Payments on long-term debt		(48,000	)		(23,000	)
Other		237			733

Cash provided by (used in) financing activities		237			(7,267	)

Increase (decrease) in cash and cash equivalents		298			(4,691	)
Cash and cash equivalents, beginning of period		431			13,057

Cash and cash equivalents, end of period	$	729		$	8,366

The accompanying notes are an integral part of these consolidated financial statements.

ENCORE ACQUISITION COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
(unaudited)

1. Formation of Encore

Organized in 1998, Encore Acquisition Company (“Encore” or the “Company”), a Delaware corporation, is a growing independent energy company engaged in the acquisition, development and exploitation of North American oil and natural gas reserves. As of March 31, 2004 Encore’s oil and natural gas reserves were in four core areas: the Cedar Creek Anticline of Montana and North Dakota; the Permian Basin of West Texas and Southeastern New Mexico; the Mid Continent area, which included the Anadarko Basin of Oklahoma and the North Salt Basin of Louisiana; and the Rocky Mountains.

2. Basis of Presentation

In the opinion of management, the accompanying unaudited consolidated financial statements of Encore include all adjustments necessary to present fairly our financial position as of March 31, 2004 and results of operations and cash flows for the three months ended March 31, 2004 and 2003. All adjustments are of a recurring nature. These interim results are not necessarily indicative of results for an entire year.

Certain amounts and disclosures have been condensed or omitted from these consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. Therefore, these consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in the Company’s 2003 Annual Report filed on Form 10-K.

Employee stock options and restricted stock awards are accounted for at intrinsic value in accordance with the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”). Accordingly, no compensation expense is recorded for stock options that are granted to employees or non-employee directors with an exercise price equal to or above the Company’s stock price on the date of grant. However, compensation expense is recorded for the fair value of the restricted stock granted to employees. If employee stock options and restricted stock awards were accounted for at fair value in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” the Company’s reported net income and net income per share amounts would have been adjusted to the pro forma amounts indicated below (in thousands, except per share amounts):


	Three months ended
	March 31,
	2004		2003
As Reported:
Non-cash stock based compensation (net of taxes)	$	192	$	90
Net income		16,902		17,978
Basic net income per common share		0.56		0.60
Diluted net income per common share		0.55		0.59
Pro Forma:
Non-cash stock based compensation (net of taxes)	$	406	$	422
Net income		16,688		17,646
Basic net income per common share		0.55		0.59
Diluted net income per common share		0.55		0.58

3. Asset Retirement Obligations

In August 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS 143, “Accounting for Asset Retirement Obligations,” which the Company adopted as of January 1, 2003. This statement requires the Company to record a liability in the period in which an asset retirement obligation is incurred, in an amount equal to the discounted estimated fair value of the obligation. Also, upon initial recognition of the liability, the Company must capitalize an equal amount of asset cost. Thereafter, each quarter, this liability is accreted and, if needed, adjusted up to the final cost. Accretion expense is included in ‘Other operating’ expense in the Company’s Consolidated Statements of Operations.

The adoption of SFAS 143 on January 1, 2003 resulted in a cumulative effect of accounting change adjustment to record (i) a $4.0 million increase in the carrying values of proved properties, (ii) a $2.1 million decrease in accumulated depletion, depreciation, and amortization, (iii) a $5.2 million increase in non-current liabilities, and (iv) a gain of $0.9 million, net of tax.

The following table shows net income and basic and diluted net income per common share as reported, as well as pro forma amounts as if the Company had adopted SFAS 143 prior to January 1, 2003 (in thousands, except per common share amounts):


	Three months ended
	March 31,
	2004		2003
As Reported:
Net income	$	16,902	$	17,978
Basic net income per common share		0.56		0.60
Diluted net income per common share		0.55		0.59
Pro Forma:
Net income	$	16,902	$	17,115
Basic net income per common share		0.56		0.57
Diluted net income per common share		0.55		0.57

The Company’s primary asset retirement obligations relate to future plugging and abandonment expenses on our oil and natural gas properties and related facilities disposal. As of March 31, 2004, the Company had $2.8 million held in an escrow account from which funds are released only for reimbursement of plugging and abandonment expenses on our Bell Creek property. This amount is included in ‘Other assets’ in the accompanying Consolidated Balance Sheet. The following table summarizes the changes in the Company’s future abandonment liability from January 1, 2004 through March 31, 2004 (in thousands):


	Three months
	ended
	March 31,
	2004
Future abandonment liability at January 1, 2004	$	5,341
Wells drilled		43
Accretion expense		72
Plugging and abandonment costs incurred		(37	)

Future abandonment liability at March 31, 2004	$	5,419

4. Income Taxes

Reconciliation of income tax expense with tax at the Federal statutory rate is as follows (in thousands):


	Three months ended
	March 31,
	2004			2003
Income before income taxes and the cumulative change in accounting	$	26,394		$	27,253

Tax at statutory rate		9,238			9,539
State income taxes, net of federal benefit		792			818
Section 43 credits generated		(740	)		(26	)
Other		202			(193	)

Total	$	9,492		$	10,138

5. Earnings Per Share (EPS)

The following table sets forth basic and diluted EPS computations for the three months ended March 31, 2004 and 2003 (in thousands, except per share data):


	Three months ended
	March 31,
	2004		2003
Numerator:
Income before cumulative effect of accounting change	$	16,902	$	17,115
Cumulative effect of accounting change		—		863

Net income	$	16,902	$	17,978

Denominator:
Denominator for basic earnings per share – weighted average shares outstanding		30,179		30,037
Effect of dilutive options and dilutive restricted stock (a)		388		184

Denominator for diluted earnings per share		30,567		30,221

Basic earnings per common share:
Income before cumulative effect of accounting change	$	0.56	$	0.57
Cumulative effect of accounting change, net of income taxes		—		0.03

Net income	$	0.56	$	0.60

Diluted earnings per common share:
Income before cumulative effect of accounting change	$	0.55	$	0.57
Cumulative effect of accounting change, net of income taxes		—		0.02

Net income	$	0.55	$	0.59

(a) There were no antidilutive options or any shares of antidilutive restricted stock outstanding for the three months ended March 31, 2004. For the quarter ended March 31, 2003 outstanding employee stock options of 240,000 were excluded from the calculation of diluted earnings per share because their effect would have been antidilutive. During the three months ended March 31, 2004, 234,856 shares of stock were issued upon exercise of employee stock options granted under the Company’s 2000 Incentive Stock Plan at a weighted average strike price of $25.76 per share. Additionally, 67,496 shares of restricted stock were granted under the Company’s 2000 Incentive Stock Plan during the three months ended March 31, 2004. For the quarter ended March 31, 2004, 6,176 shares of employee stock options and 7,366 shares of restricted stock, which were issued and outstanding at December 31, 2003, were forfeited.

6. Derivative Financial Instruments

The following tables summarize our open commodity derivative instruments designated as hedges as of March 31, 2004:

Oil Derivative Instruments at March 31, 2004


	Daily		Floor		Daily		Cap		Daily		Swap		Fair
	Floor Volume		Price		Cap Volume		Price		Swap Volume		Price		Value
Period	(Bbls)		(per Bbl)		(Bbls)		(per Bbl)		(Bbls)		(per Bbl)		(000s)
April – June 2004		15,500	$	22.98		7,000	$	29.06		500	$	26.48	$	(4,072	)
July – Dec 2004		15,500		24.23		6,000		29.37		500		26.48		(5,007	)
Jan – June 2005		6,500		25.69		3,500		31.89		1,000		25.12		(1,699	)
July – Dec 2005		5,500		25.82		2,500		31.07		1,000		25.12		(780	)
Jan – Dec 2006		1,000		27.50		1,000		29.88		2,000		25.03		(3,180	)
Jan – Dec 2007		—		—		—		—		2,000		25.11		(2,363	)

Natural Gas Derivative Instruments at March 31, 2004


	Daily		Floor		Daily		Cap		Daily		Swap		Fair
	Floor Volume		Price		Cap Volume		Price		Swap Volume		Price		Value
Period	(Mcf)		(per Mcf)		(Mcf)		(per Mcf)		(Mcf)		(per Mcf)		(000s)
April – June 2004		15,000	$	4.02		7,500	$	6.03		5,000	$	5.01	$	(435	)
July – Dec 2004		15,000		4.02		7,500		6.03		10,000		5.29		(1,798	)
Jan – Dec 2005		5,000		5.05		5,000		5.97		5,000		4.63		(1,645	)
Jan – Dec 2006		5,000		4.85		5,000		5.68		—		—		21

Encore recognizes in the consolidated statement of operations derivative fair value gains and losses related to changes in the mark-to-market value of our basis swaps and certain other commodity derivatives that are not designated for hedge accounting; ineffectiveness of our commodity futures contracts designated as hedges; and for changes in the mark-to-market value of our interest rate swap.

In order to more effectively hedge the cash flows received on our oil production, the Company enters into financial instruments whereby the Company swaps certain per Bbl or per Mcf floating market indices for a fixed amount. These market indices are a component of the price the Company is paid on its actual production. By fixing this component of our marketing price, the Company is able to realize a net price with a more consistent differential to NYMEX. Since NYMEX is the basis of all our derivative oil hedging contracts and some of our natural gas contracts, a more consistent differential results in more effective hedges. However, management has elected not to use hedge accounting for certain of these contracts. Instead, the Company marks these contracts to market each quarter through ‘Derivative fair value (gain) loss’ in the Consolidated Statements of Operations. Thus, as these contracts do not change the Company’s overall hedged volumes, average prices presented in the tables above are exclusive of any effect of these non-hedge instruments. As of March 31, 2004, the mark-to-market value of these contracts is $0.1 million.

The oil put contracts in place at March 31, 2004 that the Company did not designate as cash flow hedges represented 1,500 Bbls per day in the first half of 2004 and 2,500 Bbls in the second half of 2004. The Company also had natural gas put contracts not designated as hedges representing 5,000 Mcf per day for 2004. The fair value of these contracts at March 31, 2004 was $0.1 million.

Interest Rate Derivatives

The following table summarizes the Company’s only interest rate swap contract at March 31, 2004:


				Encore			Fair Value
Contract Expiration	Notional Amount		Encore Pays	Receives			(000s)
June 2005	$	80,000,000	LIBOR + 3.89%		8.375	%	$	3,130

This contract does not qualify for hedge accounting and thus, the changes in its fair market value are recorded in ‘Derivative fair value (gain) loss’ on the Consolidated Statements of Operations. During the quarter ended March 31, 2004, a gain of $0.7 million related to the interest rate swap was recorded in the Consolidated Statement of Operations.

The actual gains or losses the Company realizes from derivative transactions may vary significantly from the deferred loss amount recorded in stockholders’ equity at March 31, 2004 due to fluctuation of prices in the commodities markets.

7. Financial Statements of Subsidiary Guarantors

As of March 31, 2004, all of the Company’s subsidiaries were subsidiary guarantors of the Company’s outstanding 8⅜% notes. Since (i) each subsidiary guarantor is 100% owned by the Company, (ii) the Company has no assets or operations that are independent of its subsidiaries, (iii) the subsidiary guarantees are full and unconditional and joint and several and (iv) all of the Company’s subsidiaries are subsidiary guarantors, the Company has not included the financial statements of each subsidiary in this report. The subsidiary guarantors may without restriction transfer funds to the Company in the form of cash dividends, loans, and advances.

8. Subsequent Events

Cortez Acquisition

On March 2, 2004, the Company entered into an agreement to purchase all of the outstanding capital stock of Cortez Oil & Gas, Inc., a privately held, independent oil and natural gas company. On April 14, 2004, Encore completed the acquisition of Cortez for a cash purchase price of $122.6 million, which includes the repayment of $39.4 million of Cortez’s debt. Encore has also agreed to pay Cortez’s former securityholders up to $2.9 million in aggregate additional cash consideration if specified leases associated with Cortez’s properties are obtained by June 30, 2004 (subject to 30 day extension) and other conditions are met.

Encore funded the acquisition with a portion of the net proceeds from the issuance of the 6¼% Notes described above. The net proceeds from the notes were placed in escrow upon the closing of the offering and were released to fund the Cortez acquisition in accordance with the terms of the escrow agreement with the initial purchasers of the 6¼% Notes.

The acquired oil and natural gas properties are located primarily in the Cedar Creek Anticline of Montana, the Permian Basin of West Texas and Southeastern New Mexico and in the Mid Continent area, including the Anadarko and Arkoma Basins of Oklahoma and the Barnett Shale north of Fort Worth, Texas.

Issuance of 6¼% Senior Subordinated Notes

On April 2, 2004, the Company issued $150.0 million of 6¼% Senior Subordinated Notes maturing April 15, 2014 (the “6¼% Notes”). The offering was made through a private placement pursuant to Rule 144A and Regulation S. The Company estimates net proceeds of approximately $146.2 million after paying all costs associated with the offering. The net proceeds were used to fund the acquisition of Cortez Oil & Gas (see above) and repay amounts outstanding under our revolving credit facility. Concurrently with the issuance of the 6¼% Notes, the Company entered into a registration rights agreement whereby Encore agreed to file a registration statement within 90 days after the issue date of April 2, 2004 offering to exchange the 6¼% Notes for publicly registered notes with substantially identical terms. The Company also agreed to use our reasonable best efforts to cause the registration statement to become effective within 180 days after the issue date of April 2, 2004.

Overton Acquisition

On April 26, 2004, the Company entered into an agreement to purchase natural gas properties in the Overton Field located in Smith County Texas for $82.0 million from a group of private sellers. The Company expects to finance this acquisition with existing capacity under the Company’s revolving credit facility.

Additional Derivative Financial Instruments

Since the end of March 2004, the Company entered into the following natural gas derivative instruments:


	Daily		Swap
	Swap Volume		Price
Period	(Mcf)		(per Mcf)
July – Dec 2004		5,000	$	5.83
Jan – Dec 2005		5,000		5.29
Jan – Dec 2006		12,500		5.07
Jan – Dec 2007		7,500		4.94

Since the end of March 2004, the Company also entered into the following oil derivative instruments:


	Daily		Floor
	Floor Volume		Price
Period	(Bbls)		(per Bbl)
Jan – June 2005		8,000	$	28.75
July – Dec 2005		6,000	$	29.33

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This document contains forward-looking statements that involve risks and uncertainties that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those anticipated in our forward-looking statements due to many factors, including, but not limited to, those set forth under “SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS” contained in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in Encore’s 2003 Annual Report filed on Form 10-K. The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in this document and Encore’s 2003 Form 10-K.

First Quarter 2004 Highlights

Our financial and operating results for the quarter ended March 31, 2004 included the following highlights:

• During the first quarter of 2004, we had oil and natural gas revenues of $59.3 million, a record for Encore. This represents a 6% increase over the $55.8 million of oil and natural gas revenues reported for the first quarter of 2003. Strong commodity prices coupled with more favorable oil and natural gas hedging positions resulted in higher average realized prices of $29.03 per Bbl and $4.96 per Mcf during the quarter ended March 31, 2004 when compared to the average prices of $27.87 per Bbl and $4.84 per Mcf realized in the first quarter of 2003. Our current oil hedging positions allowed the realization of 90% of the $1.29 increase in the average NYMEX oil price from the first quarter of 2003 to the first quarter of 2004. Additionally, our current natural gas hedging positions allowed the realization of a higher natural gas price in the first quarter of 2004 as compared to the first quarter of 2003, despite a $0.19 per Mcf drop in the average NYMEX natural gas price over the same period.

• We reported net income of $16.9 million or $0.55 per diluted share in the first three months of 2004. This represents a slight decrease from the $18.0 million of net income or $0.59 per diluted share from the first quarter of 2003. Although 2004 revenues increased $3.5 million ($2.2 million net of tax) from the first quarter of 2003 to the first quarter of 2004, net income decreased as the first quarter of 2003 included a one-time $0.9 million gain related to a cumulative effect of accounting change and a $0.8 million net of tax derivative fair value gain.

• We increased first quarter 2004 daily production volumes to 22,322 BOE as compared to 22,088 BOE per day reported in the first quarter of 2003. During the first quarter of 2004, oil production averaged 17,699 Bbls per day and natural gas production averaged 27,741 Mcf per day. Natural gas production volumes in the first quarter of 2004 reflect an increase of 29% over the level reported in the first quarter of 2003 attributable to our Elm Grove acquisition that closed in the second half of 2003.

• Lease operations expense increased from the $4.50 per BOE reported in the first quarter of 2003 to $5.04 per BOE in the first quarter of 2004. The increase reflects increased costs associated with the high-pressure air injection project in the CCA; the effect of production declines on our Lodgepole properties, which have low per BOE operating costs as compared to the average per BOE costs of our other properties; and an increase in prices paid for outside services. G&A expense decreased 11% on a per BOE basis in the first quarter of 2004 as compared to the same period in 2003 reflecting the non-recurring consulting expenses incurred in the first quarter of 2003. DD&A expense per BOE of $4.56 for the first three months of 2004 increased, as expected, from the $3.92 per BOE recorded in the first three months of 2003 resulting from higher than historical finding, development, and acquisition costs in 2003.

• Encore invested $29.1 million in development projects during the first quarter of 2004, $7.7 million of which was invested in our high-pressure air injection tertiary recovery projects in the Little Beaver and Pennel units of the Cedar Creek Anticline. Our $29.1 million investment in development projects yielded 16 (15.4 net) new operated vertical producing wells, as well as 18 (17.2 net) operated horizontal re-entry wells and 3 (2.9 net) operated service/injection wells. Additionally, we participated in the drilling of 9 (1.2 net) non-operated vertical producing wells. We are currently investing capital in a six-rig conventional drilling program on our operated properties with five rigs drilling in the Cedar Creek Anticline and one in the Permian Basin. Also, we are currently participating in a two-rig conventional drilling program on our non-operated Elm Grove properties.

• We were able to fund the entire $30.2 million of acquisition and development capital investments made in the first quarter of 2004 using the $31.1 million of operating cash flows generated during the quarter. Long-term debt at March 31, 2004 remained at $179.0 million, the same level as at December 31, 2003.

Results of Operations

The following table sets forth selected operating information for the periods presented:



	Three months ended					Increase /
	2004		2003		(Decrease)
Operating results (in thousands):
Oil and natural gas revenues	$	59,291	$	55,787	$	3,504
Lease operations expense		10,242		8,953		1,289
Production, ad valorem, and severance taxes		5,839		6,169		(330	)
Daily production volumes:
Oil (Bbls)		17,699		18,509		(810	)
Natural gas (Mcf)		27,741		21,475		6,266
Combined (BOE)		22,322		22,088		234
Average prices:
Oil (per Bbl)	$	29.03	$	27.87	$	1.16
Natural gas (per Mcf)		4.96		4.84		0.12
Combined (per BOE)		29.19		28.06		1.13
Selected operating expenses per BOE:
Lease operations	$	5.04	$	4.50	$	0.54
Production, ad valorem, and severance taxes		2.87		3.10		(0.23	)
G&A (excluding non-cash stock based compensation)		1.10		1.23		(0.13	)
DD&A		4.56		3.92		0.64

Comparison of Quarter Ended March 31, 2004 to Quarter Ended March 31, 2003

Set forth below is our comparison of operations during the first quarter of 2004 with the first quarter of 2003.

Revenues and Production Volumes. The following table illustrates the primary components of oil and natural gas revenue for the three months ended March 31, 2004 and 2003, as well as each quarter’s respective oil and natural gas volumes (in thousands, except per unit amounts):


	Three months ended March 31,												Increase /
	2004						2003						(Decrease)
	Revenue			$/Unit			Revenue			$/Unit			Revenue		$/Unit
Revenues:
Oil wellhead	$	52,378		$	32.51		$	52,214		$	31.34		$	164	$	1.17
Oil hedges		(5,614	)		(3.48	)		(5,782	)		(3.47	)		168		(0.01	)

Total Oil Revenues	$	46,764		$	29.03		$	46,432		$	27.87		$	332	$	1.16

Natural gas wellhead	$	12,922		$	5.12		$	10,312		$	5.34		$	2,610	$	(0.22	)
Natural gas hedges		(395	)		(0.16	)		(957	)		(0.50	)		562		0.34

Total Natural Gas Revenues	$	12,527		$	4.96		$	9,355		$	4.84		$	3,172	$	0.12

Combined wellhead	$	65,300		$	32.15		$	62,526		$	31.45		$	2,774	$	0.70
Combined hedges		(6,009	)		(2.96	)		(6,739	)		(3.39	)		730		0.43

Total Combined Revenues	$	59,291		$	29.19		$	55,787		$	28.06		$	3,504	$	1.13


			Average				Average					Average
			NYMEX				NYMEX					NYMEX
	Production		$/Unit		Production		$/Unit		Production			$/Unit
Other data:
Oil (Bbls)		1,611	$	35.15		1,666	$	33.86	$	(55	)	$	1.29
Natural Gas (Mcf)		2,524		5.72		1,933		5.91		591			(0.19	)
Combined (BOE)		2,031				1,988				43

Oil revenues increased from first quarter 2003 to first quarter 2004 by $0.3 million, due to a higher realized average oil price which was partially offset by a slight decrease in volumes. Our realized average oil price increased $1.16 per Bbl in the first quarter of 2004 over the same period in 2003 primarily as a result of an increase in our average wellhead price. This increase in our average wellhead price is in line with the increase in the overall market price for oil as reflected in the $1.29 per Bbl increase in the average NYMEX price over the same period.

Natural gas revenues increased by $3.2 million, or $0.12 per Mcf, in the first quarter of 2004 from the first quarter of 2003 due to an increase in volumes and an increase in our realized average natural gas price. Production volumes increased 591 MMcf in the first quarter of 2004 as compared to the first quarter of 2003 due to the Elm Grove acquisition, which was completed during the third quarter of 2003. The $0.12 increase in our realized average natural gas price was primarily due to a decrease in hedging payments partially offset by a decrease of $0.22 per Mcf in the average wellhead price received. The decrease in our average wellhead price received is consistent with the decrease in the overall market price for natural gas, as reflected in the decrease in the average NYMEX price of $0.19 per Mcf over the same period.

Lease operations. Lease operations expense for the first quarter of 2004 increased as compared to the first quarter of 2003 by $1.3 million. The increase is primarily attributable to the production from the Elm Grove acquisition, which closed in the third quarter of 2003 and a $0.54 increase in the average per BOE rate. The increase in our average per BOE rate was attributable to increased costs associated with the high-pressure air injection project in the CCA; production declines in our Lodgepole fields that have relatively low lease operations expense compared to our other properties; and an increase in prices paid for outside services.

Production, ad valorem, and severance taxes. Production, ad valorem, and severance taxes for the first quarter of 2004 decreased as compared to the same period in 2003 by approximately $0.3 million. As a percentage of oil and natural gas revenues (excluding the effects of hedges), production, ad valorem, and severance taxes for the first quarter of 2004 decreased when compared to the first quarter of 2003, down to 8.9% from 9.9%. The decrease is attributable to the addition of the Elm Grove properties added in the third quarter of 2003, which have a lower rate as a percentage of oil and natural gas revenues than our historical average. The effect of hedges is excluded from oil and natural gas revenues in the calculation of these percentages because this method more closely reflects the method used to calculate actual production, ad valorem, and severance taxes paid to taxing authorities.

General and administrative (“G&A”) expense. G&A expense (excluding non-cash stock based compensation) decreased $0.2 million for the first quarter of 2004 as compared to the first quarter of 2003. The overall decrease, as well as the $0.13 decrease in the per BOE rate, is a result of first quarter 2003 non-recurring consulting services.

Non-cash stock based compensation expense. Non-cash stock based compensation expense increased $0.2 million from the three months ended March 31, 2003 to March 31, 2004. This expense represents the amortization of deferred compensation which is being amortized to expense over the vesting period of restricted stock granted under the 2000 Incentive Stock Plan. The increase is the result of the increase in total deferred compensation to be recorded, which is due to an increase in the number of shares granted and an increase in our stock price.

Depletion, depreciation, and amortization (“DD&A”) expense. DD&A expense for the first quarter of 2004 increased by $1.5 million as compared to the first quarter of 2003, due to a $0.64 increase in the per BOE rate and an increase in production. The per BOE rate increased, as expected, from the $3.92 per BOE recorded in the first three months of 2003 to $4.56 in the first three months of 2004 as a result of higher than historical finding, development, and acquisition costs in 2003.

Derivative fair value (gain) loss. During the first quarter of 2004 we recorded a $0.2 million derivative fair value loss as compared to the $1.3 million gain recorded in the first quarter of 2003. The components of the derivative fair value (gain) loss reported in the quarterly periods are as follows (in thousands):


	Three months ended March 31,						Increase /
	2004			2003			(Decrease)
Designated cash flow hedges:
Ineffectiveness – Commodity contracts	$	274		$	93		$	181
Undesignated derivative contracts:
Mark-to-market (gain) loss – Interest rate swaps		(710	)		(1,353	)		643
Mark-to-market (gain) loss – Commodity contracts		594			—			594

Derivative fair value (gain) loss	$	158		$	(1,260	)	$	1,418

Other operating expense. Other operating expense for the first quarter of 2004 increased by $0.8 million as compared to the first quarter of 2003. This increase is attributable to higher third party transportation expenses in 2004 and inclusion of $0.5 million gain related to the sale of an Enron receivable in the first quarter of 2003.

Interest expense. Interest expense decreased $0.3 million in the quarter ended March 31, 2004 from the quarter ended March 31, 2003. The decrease in interest expense is due to a decrease in non-cash amortization of the deferred loss on interest rate swaps offset by a slight increase in interest under our revolving credit facility. The weighted average interest rate, net of hedges, for the first quarter of 2004 was 8.7% compared to 10.2% for the first quarter of 2003. The following table illustrates the components of interest expense for the three months ended March 31, 2004 and 2003 (in thousands):


	Three months ended March 31,						Increase /
	2004			2003			(Decrease)
8⅜% notes due 2012	$	3,141		$	3,141		$	—
Revolving credit facility		211			102			109
Interest rate hedges		212	(1)		654	(1)		(442	)
Banking fees and other		342			274			68

Total	$	3,906		$	4,171		$	(265	)

(1) Amount represents non-cash amortization of the deferred loss on interest rate swaps from other comprehensive income to interest expense. This unrealized loss relates to previously outstanding interest rate swaps which no longer qualified for hedge accounting. We have since cash settled these interest rate swaps and the swaps are no longer outstanding.

Income taxes. Income tax expense for the first quarter of 2004 related to income before income taxes and the cumulative effect of accounting change decreased as compared to the first quarter of 2003 by $0.6 million. This decrease is due in part to the $0.9 million decrease in income before income taxes and the cumulative effect of accounting change and in part to a decrease in our effective tax rate from 37.2% in the first quarter of 2003 to 36% in the first quarter of 2004. The decrease in our effective tax rate is due to an increase in Section 43 credits generated from investments in high-pressure air injection on our Cedar Creek Anticline properties during the first quarter of 2004 as compared to the first quarter of 2003. Section 43 credits increased from $0.04 million generated during the first quarter of 2003 to $1.2 million generated in the first quarter of 2004.

Capital Commitments, Capital Resources and Liquidity

The following discussion below regarding our future capital commitments, capital resources and liquidity reflects the Cortez acquisition, which closed on April 14, 2004; the Overton acquisition, which we expect to close in the third quarter of 2004; the issuance of $150.0 million of 6¼% notes on April 2, 2004; and assumed base prices of $27.00 per Bbl and $4.50 per Mcf.

Capital Commitments

Our primary needs for cash are as follows:

• Development and exploitation of our existing oil and natural gas properties

• High-pressure air injection programs on our CCA properties

• Acquisitions of oil and natural gas properties

• Leasehold and acreage costs

• Other general property and equipment

• Funding of necessary working capital

• Payment of contractual obligations

Development and Exploitation. Our capital expenditures for conventional development and exploitation during the three months ended March 31, 2004 and 2003 totaled $21.4 million and $23.4 million, respectively.

For the remainder of 2004, we expect to invest $106.8 million in development and exploitation. We have based our revised 2004 forecasts on the assumptions of $27.00 per Bbl and $4.50 per Mcf NYMEX prices. If NYMEX prices trend downward below our base prices, we may reevaluate capital projects and may adjust the capital budgeted for development and exploitation investments accordingly.

High-Pressure Air Injection. Our capital expenditures for high-pressure air injection during the quarter ended March 31, 2004 and 2003 totaled $7.7 million and $0.3 million, respectively. In December 2003, we began implementing our second HPAI program in the Little Beaver unit of the CCA and began injecting air in the reservoir. We have fully implemented the Little Beaver unit project, and we are currently injecting air. We expect to see uplift sometime in the next 10 to 18 months. In 2002, we began a pilot program to begin injecting air into the Red River U4 reservoir in a portion of the Pennel Unit of the CCA. Because of positive results, we are currently expanding the project in the Pennel unit of the CCA which we expect to complete by early 2005.

For the remainder of 2004, we expect to invest $26.7 million in high-pressure air injection.

Acquisitions. Our capital expenditures for proved oil and natural gas properties during the three months ended March 31, 2004 totaled $0.2 million while there were no capital expenditures for acquisitions in the first quarter of 2003. As discussed in Note 8, “Subsequent Events,” on April 14, 2004, we completed the acquisition of Cortez for a cash purchase price of $122.6 million, which includes the repayment of $39.4 million of Cortez’s debt. Additionally, as discussed in Note 8, “Subsequent Events,” on April 26, 2004, the Company entered into an agreement to purchase natural gas properties in the Overton Field located in Smith County Texas for $82.0 million from a group of private sellers. The Company expects to finance this acquisition with existing capacity under the Company’s revolving credit facility.

Leasehold and Acreage Costs. Our capital expenditures for unproved property during the first quarter of 2004 and 2003 totaled $1.1 million and $0.1 million, respectively.

For the remainder of 2004, we expect to invest an additional $10.9 million for leasehold and acreage costs. These anticipated investments represent a significant increase from historical capital expenditures for leasehold and acreage costs. We plan to actively pursue leases and acreage in our core areas in which we are currently operating oil and natural gas properties. These investments are not expected to result in oil and natural gas production in 2004.

Other General Property and Equipment. Our capital expenditures for other general property and equipment during the quarters ended March 31, 2004 and 2003 totaled $0.9 million and $0.04 million, respectively. Capital expenditures for other general property and equipment includes corporate leasehold improvements, computers, software, telecommunications equipment, field trucks, and field rental equipment.

For the remainder of 2004, we expect to invest $0.7 million in other general property and equipment.

Working Capital. At March 31, 2004, our working capital was $(0.8) million while at December 31, 2003 working capital was $(0.1) million, a decrease of $0.7 million. The decrease is primarily attributable to changes in the fair value of outstanding derivative contracts, our hedge margin deposit, and the deferred tax asset related to the deferred hedge loss in other comprehensive income. As of May 7, 2004, we have $11.6 million posted related to our derivatives margin account.

For 2004, we expect working capital to remain relatively flat compared to 2003. We anticipate cash reserves to be close to zero as we use any excess cash to fund capital obligations and any additional excess cash would be used to pay down our existing revolving credit facility. The overall 2004 commodity prices for oil and natural gas will be the largest variable driving the different components of working capital. Our operating cash flow is determined in a large part by commodity prices. Assuming moderate to high commodity prices, our operating cash flow should remain positive for the remainder of 2004. We have revised our budgeted capital expenditures to approximately $175.5 million for 2004 which excludes capital required for acquisitions. The level of these and other future expenditures is largely discretionary, and the amount of funds devoted to any particular activity may increase or decrease significantly, depending on available opportunities and market conditions. We plan to finance our ongoing expenditures using internally generated cash flow, available cash, and our existing revolving credit facility.

Contractual Obligations. The following table illustrates our contractual obligations and commercial commitments outstanding at March 31, 2004 (in thousands):


Contractual Obligations	Payments Due by Period
and Commitments	Total		2004		2005 – 2006		2007 – 2008		Thereafter
8⅜% Notes	$	256,781	$	12,562	$	25,125	$	25,125	$	193,969
6¼% Notes (a)		244,115		5,052		18,750		18,750		201,563
Revolving credit facility		30,679		560		30,119		—		—
Derivative obligations		19,694		10,407		6,924		2,363		—
Development commitments		44,920		43,050		1,270		600		—
Operating leases		2,610		719		1,507		341		43

Totals	$	598,799	$	72,350	$	83,695	$	47,179	$	395,575

(a) Prior to March 31, 2004, we entered into an underwriting agreement whereby Encore agreed issue $150.0 million of 6¼% notes due 2014. These notes were issued on April 2, 2004, subsequent to end of the quarter, and thus, are not included in the accompanying March 31, 2004 consolidated balance sheet.

Capital Resources

Our primary capital resource is net cash provided by operating activities and proceeds from financing activities, which are used to fund our capital commitments. Our primary needs for cash include development and exploitation of our existing oil and natural gas properties, including our high-pressure air injection program in the CCA; acquisitions of oil and natural gas properties; acquisition of leasehold and acreage interest; funding of necessary working capital; and payment of contractual obligations.

Operating Activities. For the first quarter of 2004, cash provided by operating activities increased by $5.4 million as compared to the same period in 2003. This increase resulted mainly from increase in revenues which resulted from increased volumes and increased commodity prices.

Financing Activities. For the first quarter of 2004 we maintained the level of debt outstanding under our revolving credit facility at the beginning of the period, while in the first quarter of 2003, we paid down our revolving credit facility by $8.0 million. This change reflects the change in the use of cash flows generated though operations between the two periods. In the first quarter of 2003, we had excess cash from operations after funding our development program, which we used to pay down amounts outstanding under revolving credit facility. However, although we increased investments in the development of oil and natural gas properties by $6.8 million in the first quarter of 2004 as compared to the first quarter of 2003, maintaining the $29.0 million revolving credit facility balance outstanding at the beginning of the quarter. There were no substantial acquisitions in either period which would require any new financing.

Additionally, subsequent to March 31, 2004 (April 2, 2004), we issued $150.0 million of 6¼% Senior Subordinated Notes maturing April 15, 2014 (the “6¼% Notes”). The offering was made through a private placement pursuant to Rule 144A and Regulation S. We estimate net proceeds of approximately $146.2 million after paying all costs associated with the offering. The net proceeds were used

to fund the acquisition of Cortez Oil & Gas, Inc. and repay amounts outstanding under our revolving credit facility. Concurrently with the issuance of the 6¼% Notes, we entered into a registration rights agreement whereby Encore agreed to file a registration statement within 90 days after the issue date of April 2, 2004 offering to exchange the 6¼% Notes for publicly registered notes with substantially identical terms. We also agreed to use our reasonable best efforts to cause the registration statement to become effective within 180 days after the issue date of April 2, 2004.

Additionally, as discussed in Note 8, “Subsequent Events,” on April 26, 2004, the Company entered into an agreement to purchase natural gas properties in the Overton Field located in Smith County Texas for $82.0 million from a group of private sellers. The Company expects to finance this acquisition with existing capacity under the Company’s revolving credit facility.

Capitalization. At March 31, 2004, Encore had total assets of $702.1 million. Total capitalization was $548.4 million, of which 67.4% was represented by stockholders’ equity and 32.6% by long-term debt. This compares to December 31, 2003 total assets of $672.1 million and total capitalization of $538.0 million. Total capitalization at December 31, 2003 was represented by stockholders’ equity of 66.7% and senior debt of 33.3%.

Liquidity

Our principal source of short-term liquidity is our revolving credit facility. We entered into the current revolving credit facility on June 25, 2002. Borrowings under the facility are secured by a first priority lien on our proved oil and natural gas reserves. Availability under the facility is determined through semi-annual borrowing base determinations and may be increased or decreased. The amount available under our credit facility is $270.0 million, with $29.0 million outstanding as of March 31, 2004. The maturity date of the facility is June 25, 2006.

Inflation and Changes in Prices

While the general level of inflation affects certain of our costs, factors unique to the petroleum industry result in independent price fluctuations. Historically, significant fluctuations have occurred in oil and natural gas prices. In addition, changing prices often cause costs of equipment and supplies to vary as industry activity levels increase and decrease to reflect perceptions of future price levels. Although it is difficult to estimate future prices of oil and natural gas, price fluctuations have had, and will continue to have, a material effect on us.

The following table indicates the average oil and natural gas prices realized for the three months ended March 31, 2004 and 2003. Average equivalent prices for the first three months of 2004 and 2003 decreased by $2.96 and $3.39 per BOE, respectively, as a result of our hedging activities. Average prices per equivalent barrel indicate the composite impact of changes in oil and natural gas prices. Natural gas production volumes are converted to oil equivalents at the conversion rate of six Mcf per Bbl.


	Oil		Natural Gas		Equiv. Oil
	(per Bbl)		(per Mcf)		(per BOE)
Net Price Realization with Hedges
Quarter ended March 31, 2004	$	29.03	$	4.96	$	29.19
Quarter ended March 31, 2003		27.87		4.84		28.06
Average Wellhead Price
Quarter ended March 31, 2004	$	32.51	$	5.12	$	32.15
Quarter ended March 31, 2003		31.34		5.34		31.45

Description of Critical Accounting Estimates

The information included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Description of Critical Accounting Estimates” in Encore’s 2003 Annual Report filed on Form 10-K is incorporated herein by reference. There have been no material changes to our critical accounting estimates since December 31, 2003.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The information included in “Quantitative and Qualitative Disclosures about Market Risk” in Encore’s 2003 Annual Report filed on Form 10-K is incorporated herein by reference. Such information includes a description of Encore’s potential exposure to market risks, including commodity price risk and interest rate risk. The Company’s outstanding derivative contracts as of March 31, 2004 are discussed in Note 6 to the accompanying consolidated financial statements. As of March 31, 2004, the fair value of our open commodity and interest rate derivative contracts is $(17.9) million. Derivative contracts entered into subsequent to March 31, 2004 are discussed in Note 8 to the accompanying consolidated financial statements.

Hedging policy. We have adopted a formal hedging policy. The purpose of our hedging program is to mitigate the negative effects of declining commodity prices on our business. The hedging policy is set by the President with input from the Chief Executive Officer and the Chief Financial Officer. We plan to continue in the normal course of business to hedge our exposure to fluctuating commodity prices. The volumes we have capped or swapped will not exceed 75% of our anticipated production from proved producing reserves. Under our hedging policy, we do not enter into derivatives for speculative purposes. However, not all of our derivatives qualify for hedge accounting and in some instances management has determined it is more cost effective not to designate certain derivatives as hedges.

Hedging Margin Deposits. This amount represents the current mark-to-market liability of our commodity derivative contracts which exceeds the margin maintenance thresholds we have negotiated with our counterparties. Once a margin threshold is reached, we are required to maintain cash reserves in an account with the counterparty to ensure future settlement is made pursuant to our contracts. These funds are released back to us as our mark-to-market liability decreases due to either a drop in the futures price of oil and natural gas or due to the passage of time as settlements are made. As of May 7, 2004, our margin deposit requirements were $11.6 million.

Item 4. Controls and Procedures

In accordance with Exchange Act Rules 13a-15 and 15d-15, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2004 to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

There has been no change in our internal controls over financial reporting that occurred during the three months ended March 31, 2004 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K


Exhibits
3.1		Second Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2001, filed with the SEC on November 7, 2001).

3.2		Second Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2001, filed with the SEC on November 7, 2001).

10.1		Third Amendment to Credit Agreement dated March 19, 2004 among the Company, Encore Operating, L.P., Fleet National Bank, a national banking association, as Administrative Agent, Wachovia Bank, N.A., as Syndication Agent, Fortis Capital Corp., as Documentary Agent and the financial institutions listed therein.

10.2		Stock Purchase Agreement dated March 2, 2004 by and among Cortez Oil & Gas, Inc., HRM Resources, Inc., the Security Holders of Cortez Oil & Gas, Inc., and Encore Acquisition Company (incorporated by reference to Exhibit 10.9 of the Company’s 2003 Annual Report filed on Form 10-K).

31.1		Rule 13a-14(a)/15d-14(a) Certification (Principal Executive Officer)

31.2		Rule 13a-14(a)/15d-14(a) Certification (Principal Financial Officer)

32.1		Section 1350 Certification (Principal Executive Officer)

32.2		Section 1350 Certification (Principal Financial Officer)

Reports on Form 8-K

The Company filed with the SEC the following reports on Form 8-K during the quarter ended March 31, 2004:

On February 3, 2004, the Company filed a current report on Form 8-K under Items 7 and 9 to furnish information regarding Encore’s 2003 production and estimated proved oil and natural gas reserves as of December 31, 2003.

On February 11, 2004, the Company filed a current report on Form 8-K under Items 7 and 12 to furnish year ended and quarter ended December 31, 2003 results.

On March 2, 2004, the Company filed a current report on Form 8-K under Items 7 and 9 to furnish information regarding an agreement to acquire Cortez Oil & Gas, Inc.

On March 30, 2004, the Company filed a current report on Form 8-K under Items 5 and 7 announcing its intention to offer, subject to market and other conditions, $150 million of senior subordinated notes due 2014 in a private offering.

On March 31, 2004, the Company filed a current report on Form 8-K under Items 5 and 7 announcing that it had priced its private offering of $150 million of senior subordinated notes due 2014.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	ENCORE ACQUISITION COMPANY

Date: May 10, 2004	By:	/s/ Roy W. Jageman
	Roy W. Jageman
	Chief Financial Officer, Treasurer, Executive Vice President,
	Corporate Secretary, and Principal Financial Officer

Date: May 10, 2004	By:	/s/ Robert C. Reeves
	Robert C. Reeves
	Vice President, Controller and Principal Accounting Officer

EX-10.1 2 d15219exv10w1.txt THIRD AMENDMENT TO CREDIT AGREEMENT EXHIBIT 10.1 THIRD AMENDMENT TO CREDIT AGREEMENT This Third Amendment to Credit Agreement (this "THIRD AMENDMENT") is executed as of March 19, 2004 (the "EFFECTIVE DATE"), by and among Encore Acquisition Company, a Delaware corporation ("BORROWER"), Encore Operating, L.P., a Texas limited partnership ("OPERATING"), Fleet National Bank, a national banking association, as Administrative Agent ("ADMINISTRATIVE AGENT"), and the financial institutions a party hereto as Banks ("EXECUTING BANKS"). WITNESSETH: WHEREAS, Borrower, Operating, Administrative Agent, the other Agents party thereto and Banks are parties to that certain Credit Agreement dated as of June 25, 2002 (as amended by (a) that certain First Amendment to Credit Agreement dated as of October 31, 2002, and (b) that certain Second Amendment to Credit Agreement dated as of October 21, 2003, the "CREDIT AGREEMENT") (unless otherwise defined herein, all terms used herein with their initial letter capitalized shall have the meaning given such terms in the Credit Agreement); and WHEREAS, pursuant to the Credit Agreement, Banks have made a revolving credit loan to Borrower; and WHEREAS, Borrower and Operating have requested that Banks amend and waive certain terms of the Credit Agreement in certain respects; and WHEREAS, subject to the terms and conditions set forth herein, Executing Banks have agreed to Borrower's and Operating's requests. NOW THEREFORE, for and in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, Borrower, Operating, Administrative Agent and each Executing Bank hereby agree as follows: SECTION 1. AMENDMENTS. In reliance on the representations, warranties, covenants and agreements contained in this Third Amendment, and subject to the satisfaction of the conditions precedent set forth in Section 3 hereof, the Credit Agreement is hereby amended effective as of the Effective Date in the manner provided in this Section 1. 1.1. AMENDMENT TO DEFINITIONS. The definitions of "LOAN PAPERS" and "PERMITTED SUBORDINATE DEBT" contained in Section 1.1 of the Credit Agreement shall be amended to read in full as follows: "LOAN PAPERS" means this Agreement, the First Amendment, the Second Amendment, the Third Amendment, the Notes, the Mortgages, each Borrower Pledge Agreement, each Subsidiary Pledge Agreement, each Facility Guaranty, and all other certificates, documents or instruments delivered in connection with this Agreement, as the foregoing may be amended from time to time. 1 "PERMITTED SUBORDINATE DEBT" means, collectively, (a) Debt of Borrower resulting from the issue of Borrower's 8.375% Senior Subordinated Notes Due 2012 in an aggregate outstanding principal balance of $150,000,000 (the "Original Issuance"), and which (1) is fully subordinated to the Obligations pursuant to subordination provisions which have been previously approved by Required Banks, and (2) is not subject to negative covenants or events of default (or other provisions which have the same effect as negative covenants or events of default) which have not been previously approved by Required Banks, and (b) Debt of Borrower resulting from the issue of Borrower's senior subordinated unsecured notes in an aggregate outstanding principal balance of not greater than $150,000,000 (the "New Issuance"), and which (1) is fully subordinated to the Obligations to the same extent set forth in the Original Issuance, unless otherwise approved by Required Banks, (2) is not subject to negative covenants or events of default (or other provisions which have the same effect as negative covenants or events of default) which are more restrictive on Borrower than those set forth in the Original Issuance, unless otherwise approved by Required Banks, and (3) does not have a coupon rate in excess of, or maturity date prior to, the coupon rate and maturity date, respectively, relative to the Original Issuance. SECTION 2. AGREEMENT AND WAIVER. In reliance on the representations, warranties, covenants and agreements contained in this Third Amendment, and subject to the satisfaction of the conditions precedent set forth in Section 3 hereof, Executing Banks hereby agree that a Special Mandatory Redemption (as defined in the New Issuance Documents) will not be a Default or Event of Default under Section 10.2 or Section 12.1(f) of the Credit Agreement. The waiver herein granted is a one-time waiver limited in all respects to a Special Mandatory Redemption pursuant to the terms of the New Issuance Documents. Nothing contained herein shall obligate any Bank to grant any waiver of, or consent to the deviation from, any other provision of the Credit Agreement or any other Loan Paper. SECTION 3. CONDITIONS PRECEDENT. The effectiveness of the amendments contained in Section 1 hereof, and the agreement and waiver contained in Section 2 hereof, is subject to the satisfaction of each of the following conditions precedent: 3.1. NO DEFAULT. No Default or Event of Default shall have occurred which is continuing. 3.2. ISSUANCE OF PERMITTED SUBORDINATE DEBT. Administrative Agent shall have received, reviewed and approved (in its reasonable discretion) a true and correct copy of each material document, instrument and agreement (the "New Issuance Documents") relating to the New Issuance, together with a certificate from an Authorized Officer of Borrower certifying that (1) such copies are accurate and complete and represent the complete understanding and agreement of the parties thereto, (2) no material right or obligation of any party to any of the New Issuance Documents has been modified, amended or waived, and (3) the New Issuance has been consummated in accordance with the terms set forth in the New Issuance Documents and the proceeds thereof have been received into escrow into accordance with the terms of the New Issuance Documents. 3.3. OTHER FEES. Borrower shall have paid to Administrative Agent any fees payable to Administrative Agent or any Affiliate of Administrative Agent pursuant to this Third 2 Amendment and any separate agreement among Borrower, Operating, Administrative Agent or any Affiliate of Administrative Agent in consideration for providing services in connection with the credit facilities provided by the Credit Agreement. 3.4. OTHER DOCUMENTS. Administrative Agent shall have been provided with such other documents, instruments and agreements, and Borrower and Operating shall have taken such actions, as Administrative Agent may reasonably require in connection with this Third Amendment and the transactions contemplated hereby. SECTION 4. REPRESENTATIONS AND WARRANTIES OF BORROWER AND OPERATING. To induce Executing Banks and Administrative Agent to enter into this Third Amendment, Borrower and Operating hereby jointly and severally represent and warrant to Banks and Administrative Agent as follows: 4.1. REAFFIRM EXISTING REPRESENTATIONS AND WARRANTIES. Each representation and warranty of each Credit Party contained in the Credit Agreement and the other Loan Papers is true and correct on the date hereof and will be true and correct immediately after giving effect to the amendments set forth in Section 1 hereof and the agreement and waiver set forth in Section 2 hereof, or, if such representations and warranties are expressly limited to particular dates, as of such particular dates. 4.2. DUE AUTHORIZATION: NO CONFLICT. The execution, delivery and performance by Borrower and Operating of this Third Amendment are within Borrower's and Operating's corporate and partnership powers (as applicable), have been duly authorized by all necessary action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not violate or constitute a default under any provision of applicable law or any Material Agreement binding upon Borrower, Operating or any other Credit Party or result in the creation or imposition of any Lien upon any of the assets of any Credit Party except Permitted Encumbrances. 4.3. VALIDITY AND ENFORCEABILITY: EXTENSION OF LIENS. This Third Amendment constitutes the valid and binding obligation of Borrower and Operating enforceable in accordance with its terms, except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditor's rights generally, and (ii) the availability of equitable remedies may be limited by equitable principles of general application. 4.4. NO DEFAULT OR EVENT OF DEFAULT. No Default or Event of Default has occurred which is continuing. SECTION 5. MISCELLANEOUS. 5.1. REAFFIRMATION OF LOAN PAPERS. Any and all of the terms and provisions of the Credit Agreement and the Loan Papers shall, except as amended and modified hereby, remain in full force and effect. The amendments contemplated hereby shall not limit or impair any Liens securing the Obligations, each of which are hereby ratified, affirmed and extended to secure the Obligations as they may be modified pursuant hereto. 3 5.2. PARTIES IN INTEREST. All of the terms and provisions of this Third Amendment shall bind and inure to the benefit of the parties hereto and their respective successors and assigns. 5.3. LEGAL EXPENSES. Borrower hereby agrees to pay on demand all reasonable fees and expenses of counsel to Administrative Agent incurred by Administrative Agent in connection with the preparation, negotiation and execution of this Third Amendment and all related documents. 5.4. COUNTERPARTS. This Third Amendment may be executed in counterparts, and all parties need not execute the same counterpart; however, no party shall be bound by this Third Amendment until Borrower, Operating and Required Banks have executed a counterpart. Facsimiles shall be effective as originals. 5.5. COMPLETE AGREEMENT. THIS THIRD AMENDMENT, THE CREDIT AGREEMENT AND THE OTHER LOAN PAPERS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN OR AMONG THE PARTIES. 5.6. HEADINGS. The headings, captions and arrangements used in this Third Amendment are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify or modify the terms of this Third Amendment, nor affect the meaning thereof. 5.7. EFFECTIVENESS. This Third Amendment shall be effective automatically and without necessity of any further action by Borrower, Operating, Administrative Agent or Banks when counterparts hereof have been executed by Borrower, Operating and Required Banks, and all conditions to the effectiveness hereof set forth herein have been satisfied. IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to be duly executed by their respective Authorized Officers on the date and year first above written. [Signature pages to follow] 4 SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT BY AND AMONG ENCORE ACQUISITION COMPANY, ENCORE OPERATING, L.P., FLEET NATIONAL BANK, AS ADMINISTRATIVE AGENT, AND THE BANKS A PARTY THERETO BORROWER: ENCORE ACQUISITION COMPANY, a Delaware corporation By: /s/ RANI M. WAINWRIGHT ----------------------- Name: Rani M. Wainwright ----------------------- Title: Assistant Treasurer ----------------------- OPERATING: ENCORE OPERATING, L.P., a Texas limited partnership By: EAP Operating, Inc., a Delaware corporation, its sole general partner By: /s/ RANI M. WAINWRIGHT ----------------------- Name: Rani M. Wainwright ----------------------- Title: Assistant Treasurer ----------------------- [Signature Page] SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT BY AND AMONG ENCORE ACQUISITION COMPANY, ENCORE OPERATING, L.P., FLEET NATIONAL BANK, AS ADMINISTRATIVE AGENT, AND THE BANKS A PARTY THERETO ADMINISTRATIVE AGENT: FLEET NATIONAL BANK, a Administrative Agent: By: /s/ JEFFERY H. RATHKAMP ------------------------ Jeffery H. Rathkamp, Director BANK: FLEET NATIONAL BANK, as a Bank By: /s/ JEFFERY H. RATHKAMP ------------------------- Jeffery H. Rathkamp, Director [Signature Page] SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT BY AND AMONG ENCORE ACQUISITION COMPANY, ENCORE OPERATING, L.P., FLEET NATIONAL BANK, AS ADMINISTRATIVE AGENT, AND THE BANKS A PARTY THERETO BANK: WACHOVIA BANK, N.A. By: /s/ DAVID HUMPHREYS ------------------------- Name: David Humphreys ------------------------- Title: Director ------------------------- [Signature Page] SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT BY AND AMONG ENCORE ACQUISITION COMPANY, ENCORE OPERATING, L.P., FLEET NATIONAL BANK, AS ADMINISTRATIVE AGENT, AND THE BANKS A PARTY THERETO BANK: FORTIS CAPITAL CORP. By: /s/ ILLEGIBLE ------------------------ Name: ILLEGIBLE ------------------------ Title: ILLEGIBLE ----------------------- By: /s/ ILLEGIBLE ------------------------ Name: ILLEGIBLE ------------------------ Title: Senior Vice President ----------------------- [Signature Page] SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT BY AND AMONG ENCORE ACQUISITION COMPANY, ENCORE OPERATING, L.P., FLEET NATIONAL BANK, AS ADMINISTRATIVE AGENT, AND THE BANKS A PARTY THERETO BANK: BNP PARIBAS By: /s/ DAVID DODD ------------------------ Name: David Dodd ------------------------ Title: Director ----------------------- By: /s/ POLLY SCHOTT ------------------------ Name: Polly Schott ------------------------ Title: Vice President ----------------------- [Signature Page] SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT BY AND AMONG ENCORE ACQUISITION COMPANY, ENCORE OPERATING, L.P., FLEET NATIONAL BANK, AS ADMINISTRATIVE AGENT, AND THE BANKS A PARTY THERETO BANK: THE FROST NATIONAL BANK By: /s/ JOHN S. WARREN ------------------------ Name: John S. Warren ------------------------ Title: Senior Vice President ----------------------- [Signature Page] SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT BY AND AMONG ENCORE ACQUISITION COMPANY, ENCORE OPERATING, L.P., FLEET NATIONAL BANK, AS ADMINISTRATIVE AGENT, AND THE BANKS A PARTY THERETO BANK: CREDIT SUISSE FIRST BOSTON, CAYMAN ISLANDS BRANCH By: ------------------------ Name: ------------------------ Title: ----------------------- By: ------------------------ Name: ------------------------ Title: ----------------------- [Signature Page] SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT BY AND AMONG ENCORE ACQUISITION COMPANY, ENCORE OPERATING, L.P., FLEET NATIONAL BANK, AS ADMINISTRATIVE AGENT, AND THE BANKS A PARTY THERETO BANK: COMERICA BANK By: /s/ V. MARK FUQUA ------------------------------------ Name: V. Mark Fuqua ------------------------------------ Title: Senior Vice President-Texas Division ------------------------------------ [Signature Page] SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT BY AND AMONG ENCORE ACQUISITION COMPANY, ENCORE OPERATING, L.P., FLEET NATIONAL BANK, AS ADMINISTRATIVE AGENT, AND THE BANKS A PARTY THERETO BANK: UNION BANK OF CALIFORNIA, N.A. By: ------------------------------- Name: ----------------------------- Title: ---------------------------- By: ------------------------------- Name: ----------------------------- Title: ---------------------------- [Signature Page] SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT BY AND AMONG ENCORE ACQUISITION COMPANY, ENCORE OPERATING, L.P., FLEET NATIONAL BANK, AS ADMINISTRATIVE AGENT, AND THE BANKS A PARTY THERETO BANK: CREDIT LYONNAIS NEW YORK BRANCH By: /s/ OLIVIER AUDEMARD ------------------------------- Name: Olivier Audemard ----------------------------- Title: Senior Vice President ---------------------------- [Signature Page] SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT BY AND AMONG ENCORE ACQUISITION COMPANY, ENCORE OPERATING, L.P., FLEET NATIONAL BANK, AS ADMINISTRATIVE AGENT, AND THE BANKS A PARTY THERETO BANK: COMPASS BANK By: ------------------------------- Name: ----------------------------- Title: ---------------------------- [Signature Page] SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT BY AND AMONG ENCORE ACQUISITION COMPANY, ENCORE OPERATING, L.P., FLEET NATIONAL BANK, AS ADMINISTRATIVE AGENT, AND THE BANKS A PARTY THERETO BANK: SUNTRUST BANK By: /s/ JAMES M. WARREN ------------------------------- Name: JAMES M. WARREN ----------------------------- Title: DIRECTOR ---------------------------- [Signature Page] SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT BY AND AMONG ENCORE ACQUISITION COMPANY, ENCORE OPERATING, L.P., FLEET NATIONAL BANK, AS ADMINISTRATIVE AGENT, AND THE BANKS A PARTY THERETO BANK: RZB FINANCE LLC By: /s/ ASTRID WILKE ------------------------------- Name: ASTRID WILKE ----------------------------- Title: VICE PRESIDENT ---------------------------- By: /s/ JUAN M. CSILLAGI ------------------------------- Name: JUAN M. CSILLAGI ----------------------------- Title: GROUP VICE PRESIDENT ---------------------------- [Signature Page] SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT BY AND AMONG ENCORE ACQUISITION COMPANY, ENCORE OPERATING, L.P., FLEET NATIONAL BANK, AS ADMINISTRATIVE AGENT, AND THE BANKS A PARTY THERETO BANK: BANK OF SCOTLAND By: /s/ JOSEPH FRATUS ------------------------------- Name: JOSEPH FRATUS ----------------------------- Title: FIRST VICE PRESIDENT ---------------------------- [Signature Page] EX-31.1 3 d15219exv31w1.htm CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER exv31w1

Exhibit 31.1

Rule 13a-14(a)/15d-14(a) Certification

I, I. Jon Brumley, certify that:

1. I have reviewed this report on Form 10-Q of Encore Acquisition Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: May 10, 2004	By:	/s/ I. Jon Brumley
		I. Jon Brumley Chairman and Chief Executive Officer

EX-31.2 4 d15219exv31w2.htm CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER exv31w2

Exhibit 31.2

13a-14(a)/15d-14(a) Certification

I, Roy W. Jageman, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Encore Acquisition Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:


Date: May 10, 2004		By:		/s/ Roy W. Jageman Roy W. Jageman Chief Financial Officer, Treasurer, Executive Vice President, Corporate Secretary, and Principal Financial Officer

EX-32.1 5 d15219exv32w1.htm CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER exv32w1

Exhibit 32.1

Section 1350 Certification

In connection with the Quarterly Report of Encore Acquisition Company (the “Company”) on Form 10-Q for the period ending March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, I. Jon Brumley, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: May 10, 2004


		/s/ I. Jon Brumley I. Jon Brumley Chairman and Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Note: The certification of the registrant furnished in this exhibit is not deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. Registration Statements or other documents filed with the Securities and Exchange Commission shall not incorporate this exhibit by reference, except as otherwise expressly stated in such filing.

EX-32.2 6 d15219exv32w2.htm CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER exv32w2

Exhibit 32.2

Section 1350 Certification

In connection with the Quarterly Report of Encore Acquisition Company (the “Company”) on Form 10-Q for the period ending March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Roy W. Jageman, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.


Date: May 10, 2004		/s/ Roy W. Jageman Roy W. Jageman Chief Financial Officer, Treasurer, Executive Vice President, Corporate Secretary, and Principal Financial Officer

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		The Company filed with the SEC the following reports on Form 8-K during the quarter ended March 31, 2004:

		On February 3, 2004, the Company filed a current report on Form 8-K under Items 7 and 9 to furnish information regarding Encore’s 2003 production and estimated proved oil and natural gas reserves as of December 31, 2003.

		On February 11, 2004, the Company filed a current report on Form 8-K under Items 7 and 12 to furnish year ended and quarter ended December 31, 2003 results.

		On March 2, 2004, the Company filed a current report on Form 8-K under Items 7 and 9 to furnish information regarding an agreement to acquire Cortez Oil & Gas, Inc.

		On March 30, 2004, the Company filed a current report on Form 8-K under Items 5 and 7 announcing its intention to offer, subject to market and other conditions, $150 million of senior subordinated notes due 2014 in a private offering.

		On March 31, 2004, the Company filed a current report on Form 8-K under Items 5 and 7 announcing that it had priced its private offering of $150 million of senior subordinated notes due 2014.

1.		I have reviewed this report on Form 10-Q of Encore Acquisition Company;

2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

1.		I have reviewed this quarterly report on Form 10-Q of Encore Acquisition Company;

2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: