8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 8-K

CURRENT REPORT

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

Date of Report (Date of earliest event reported): October 26, 2004

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

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

     o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

     o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

     o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

     o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	Item 1.01      Entry into a Material Definitive Agreement
	Item 2.02      Results of Operations and Financial Condition
	Item 9.01      Financial Statements and Exhibits.
SIGNATURES
Press Release

Item 1.01      Entry into a Material Definitive Agreement

     On October 26, 2004, the Board of Directors of Encore Acquisition Company, a Delaware corporation (“Encore”), approved indemnity agreements between Encore and its officers and directors (each an “indemnitee”). The indemnity agreements provide for indemnification by Encore of each indemnitee to the fullest extent permitted by Delaware law for claims relating to the indemnitee’s service as an officer or director, excluding any claim in which a judgment determines that the indemnitee personally gained financial profit or other advantage to which he was not legally entitled and acted in bad faith or was deliberately dishonest in a manner that was material to the claim. The agreements also provide for advancement of expenses relating to the indemnification obligations and obligate Encore to purchase and maintain liability insurance for each indemnitee’s acts as an officer or director.

Item 2.02      Results of Operations and Financial Condition

     On October 26, 2004, Encore issued a press release announcing quarter ended September 30, 2004 results. A copy of the press release is attached as Exhibit 99.1 and is incorporated herein by reference.

     The information being furnished pursuant to Item 2.02 of this Form 8-K shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into a filing under the Securities Act of 1933, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01      Financial Statements and Exhibits.

     (c)      Exhibits

     The exhibit listed below is being furnished pursuant to Item 2.02 of this Form 8-K:

     99.1    Press Release Dated October 26, 2004

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: October 26, 2004	By:	/s/ Robert C. Reeves
		Robert C. Reeves
		Vice President, Controller and Principal Accounting Officer

EX-99.1

Exhibit 99.1

Encore Acquisition Company Reports Record Third Quarter 2004 Financial and Operating Results

FORT WORTH, Texas—(BUSINESS WIRE)—October 26, 2004

Encore Acquisition Company (NYSE:EAC) today reported record quarterly net income of $21.0 million ($0.64 per diluted share) for the third quarter of 2004. This represents an increase of 33% over third quarter 2003 net income of $15.8 million ($0.52 per diluted share). Encore’s production volumes achieved record levels, averaging 25,779 BOE per day during the third quarter of 2004 as compared to 22,663 BOE per day during the third quarter of 2003, an increase of 14%. Production volumes for the current quarter were comprised of 18,419 Bbls per day of oil and 44,160 Mcf per day of natural gas. The reported production volumes are net of the net profits interest burden on the Cedar Creek Anticline of 367 BOE per day during the third quarter of 2003 and 1,114 BOE per day in the current quarter. Encore’s record production volumes combined with higher commodity prices during the current quarter give rise to record quarterly oil and natural gas revenues of $79.3 million. This represents a 42% increase over third quarter 2003 oil and natural gas revenues of $55.7 million. Higher commodity prices were reflected in the average net combined price of $33.42 per BOE Encore reported for the third quarter of 2004 as compared to $26.73 per BOE reported for the third quarter of 2003.

“Encore is well positioned; our inventory of development opportunities holds us in good stead. Through future drilling and high-pressure air we should continue to grow production.” stated Jon Brumley, CEO and Chairman.

Lease operations expense increased from $4.70 per BOE reported in the third quarter of 2003 to $5.31 per BOE in the third quarter of 2004. General and administrative expense increased from $0.96 per BOE in the third quarter of 2003 to $1.21 per BOE in the third quarter of 2004. DD&A expense per BOE of $5.38 for the third quarter of 2004 increased from the $4.06 per BOE recorded for the third quarter of 2003. Encore recorded a non-cash derivative fair value expense of $2.3 million ($0.04 per diluted share after-tax) as a result of Statement of Financial Accounting Standards No. 133.

Development Activities:

Encore invested $52.8 million in development projects during the third quarter of 2004, $9.3 million of which was invested in the Company’s high-pressure air injection tertiary recovery projects in the Little Beaver Unit and the Pennel Unit of the Cedar Creek Anticline. The capital was invested in 32 (29.4 net) new operated vertical producing wells, 7 (6.5 net) operated horizontal wells, 8 (7.9 net) operated horizontal re-entry wells and 6 (5.6 net) operated service/injection wells. The Company also participated in the drilling of 19 (2.7 net) non-operated vertical producing wells and 1 (0.02 net) non-operated service well. The Company is currently investing capital on its operated properties with five rigs drilling in the Cedar Creek Anticline and seven in the Company’s other producing areas.

Outlook for Fourth Quarter:

Production in the fourth quarter is expected to be in line with third quarter levels. The Company expects lease operations expense to be approximately $5.35 per BOE, general and administrative expense to be approximately $1.30 per BOE and DD&A expense to be approximately $5.40 per BOE. The Company anticipates an effective tax rate of approximately 36%, with 90% deferred. The Company has budgeted $53.0 million for development projects in the fourth quarter, including $5.0 million relating to the existing HPAI tertiary recovery projects currently underway in the CCA.

Conference Call:

Encore will host a conference call and simultaneous webcast on Wednesday, October 27, 2004 at 9:30 AM CDT. The conference call can be accessed by dialing 877-356-9552 and supplying the title “Encore Acquisition Company Conference Call” and the webcast can be accessed via www.encoreacq.com. A replay of the conference call will be archived and available via Encore’s website at the address above or by dialing 800-642-1687 and entering

conference ID 1504008. The replay will be available through November 3, 2004. International or local callers can dial 706-679-0419 for the live broadcast or 706-645-9291 for the replay.

About the Company:

Organized in 1998, Encore is a growing independent energy company engaged in the acquisition, development and exploitation of North American oil and natural gas reserves. Encore’s oil and natural gas reserves are 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 includes the Arkoma and Anadarko Basins of Oklahoma, the North Louisiana Salt Basin, the East Texas Basin and the Barnett Shale near Fort Worth, Texas; and the Rocky Mountains. Encore’s latest investor presentation is available on the Company’s website at www.encoreacq.com.

Cautionary Statements:

This press release includes forward-looking statements, which give Encore’s current expectations or forecasts of future events based on currently available information. Forward-looking statements in this press release relate to, among other things, the following: expected production levels and growth; the effect of the Cortez and Overton acquisitions on future earnings, cash flows and production; changes in the Company’s capital budget; future growth; projected lease operations, general and administrative, and DD&A expense; expected capital expenditures and the focus of the Company’s capital program; projected borrowings under the Company’s revolving credit facility; the Company’s expected effective tax rate; and the percentage of tax deferred. However, the assumptions of management and the future performance of Encore are subject to a wide range of business risks and uncertainties and there is no assurance that these statements and projections will be met. Factors that could affect Encore’s business include, but are not limited to: diversion of management’s attention from existing operations while pursuing acquisitions; difficulties completing and integrating acquisitions; complications resulting from increasing the scope and geographic diversity of Encore’s operations; inaccuracies in the assessment of reserves or daily or annual production with respect to acquisitions; inaccuracies in Encore’s assumptions regarding the expected revenues, lease operations expense, production taxes and other items of income and expense related to acquisitions; the amount, nature, and timing of capital expenditures and the drilling of wells; the timing and amount of future production of oil and natural gas; operating hazards; operating costs and other expenses; marketing of oil and natural gas; and other factors detailed in Encore’s most recent Form 10-K and other filings with the Securities and Exchange Commission. If one or more of these risks or uncertainties materialize (or the consequences of such a development changes), or should underlying assumptions prove incorrect, actual outcomes may vary materially from those forecasted or expected. Encore undertakes no obligation to publicly update or revise any forward-looking statements.

Contact:

Encore Acquisition Company, Fort Worth
Roy W. Jageman, 817-339-0861
or
William J. Van Wyk, 817-339-0812

(All data in thousands, except per share data)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2004			2003			2004			2003
Consolidated Statements of Operations Data:	(unaudited)						(unaudited)
Revenues:
Oil	$	58,243		$	44,538		$	157,892		$	131,674
Natural gas		21,009			11,186			50,773			31,080
Total revenues		79,252			55,724			208,665			162,754
Expenses:
Production —
Lease operations		12,589			9,795			33,752			27,888
Production, ad valorem, and severance taxes		8,117			5,449			21,117			16,713
Depletion, depreciation, and amortization		12,750			8,471			33,262			23,957
Exploration		462			—			2,159			—
G&A (excluding non-cash stock based compensation)		2,858			2,006			7,616			6,796
Non-cash stock based compensation		796			165			1,413			460
Derivative fair value (gain) loss		2,301			18			3,424			(1,818	)
Other operating		1,369			1,031			3,462			1,913
Total operating expenses		41,242			26,935			106,205			75,909
Operating income		38,010			28,789			102,460			86,845
Interest and other		(6,469	)		(3,934	)		(16,526	)		(12,058	)
Income before income taxes and cumulative effect of accounting change		31,541			24,855			85,934			74,787
Current income tax provision		(1,042	)		(289	)		(3,046	)		(1,647	)
Deferred income tax provision		(9,485	)		(8,798	)		(26,981	)		(26,024	)
Income before cumulative effect of accounting change		21,014			15,768			55,907			47,116
Cumulative effect of accounting change, net of taxes		—			—			—			863
Net income	$	21,014		$	15,768		$	55,907		$	47,979
Income before cumulative effect of accounting change per common share:
Basic	$	0.65		$	0.52		$	1.80		$	1.57
Diluted		0.64			0.52			1.78			1.56
Net income per common share:
Basic	$	0.65		$	0.52		$	1.80		$	1.60
Diluted		0.64			0.52			1.78			1.58
Weighted average common shares outstanding:
Basic		32,297			30,103			31,074			30,071
Diluted		32,735			30,332			31,481			30,274
Condensed Consolidated Statements of Cash Flows:
Operating activities
Net income							$	55,907		$	47,979
Adjustments to reconcile net income to net cash provided by operating activities:
Non-cash and other items								74,669			54,208
Changes in operating assets and liabilities								(3,476	)		(7,381	)
Net cash provided by operating activities								127,100			94,806
Net cash used by investing activities								(365,814	)		(123,862	)
Financing activities
Net proceeds from issuance of common stock								53,223			—
Net proceeds from long-term debt								181,208			15,000
Other								4,944			1,652
Net cash provided by financing activities								239,375			16,652
Increase (decrease) in cash and cash equivalents								661			(12,404	)
Cash and cash equivalents, beginning of period								431			13,057
Cash and cash equivalents, end of period							$	1,092		$	653
	September 30, 2004			December 31, 2003
Condensed Consolidated Balance Sheets:	(unaudited)
Total assets	$	1,076,027		$	672,138
Liabilities	$	278,151		$	134,163
Long-term debt		365,000			179,000
Stockholders’ equity		432,876			358,975
Total liabilities and stockholders’ equity	$	1,076,027		$	672,138
Working capital (a)	$	(28,591	)	$	(52	)

(a) Working capital is defined as current assets minus current liabilities.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2004		2003		2004		2003
Selected Financial Data:
Production volumes:
Oil (MBbls)		1,695		1,679		4,994		4,961
Natural gas (MMcf)		4,063		2,433		9,796		6,355
Combined (MBOE)		2,372		2,085		6,626		6,020
Daily production:
Oil (Bbls/d)		18,419		18,255		18,226		18,172
Gas (Mcf/d)		44,160		26,447		35,751		23,278
Combined (BOE/d)		25,779		22,663		24,184		22,052
Average prices:
Oil (per Bbl)	$	34.37	$	26.52	$	31.62	$	26.54
Gas (per Mcf)		5.17		4.60		5.18		4.89
Combined (per BOE)		33.42		26.73		31.49		27.04
Average costs per BOE:
Lease operations expense	$	5.31	$	4.70	$	5.09	$	4.63
Production, ad valorem and severance taxes		3.42		2.61		3.19		2.78
DD&A		5.38		4.06		5.02		3.98
G&A (excluding non-cash stock based comp)		1.21		0.96		1.15		1.13

Derivative Summary as of September 30, 2004

Oil Derivative Contracts

			Average				Average				Average
	Daily		Floor		Daily		Cap		Daily		Swap
	Floor Volume		Price		Cap Volume		Price		Swap Volume		Price
Period	(Bbls)		(per Bbl)		(Bbls)		(per Bbl)		(Bbls)		(per Bbl)
Oct — Dec 2004		18,000	$	24.33		6,000	$	29.37		500	$	26.48
Jan — June 2005		15,500		27.55		3,500		31.89		1,000		25.12
July — Dec 2005		12,500		27.84		2,500		31.07		1,000		25.12
Jan — Dec 2006		1,000		27.50		1,000		29.88		2,000		25.03
Jan — Dec 2007		—		—		—		—		2,000		25.11

Natural Gas Derivative Contracts

			Average				Average				Average
	Daily		Floor		Daily		Cap		Daily		Swap
	Floor Volume		Price		Cap Volume		Price		Swap Volume		Price
Period	(Mcf)		(per Mcf)		(Mcf)		(per Mcf)		(Mcf)		(per Mcf)
Oct — Dec 2004		20,000	$	4.07		7,500	$	6.02		15,000	$	5.47
Jan — Dec 2005		10,000		4.84		5,000		5.97		12,500		4.96
Jan — Dec 2006		5,000		4.85		5,000		5.68		12,500		5.02
Jan — Dec 2007		—		—		—		—		10,000		4.99

Interest Rate Swap

Expiration	Notional		Encore Pays	Encore Receives
June 15, 2005	$	80,000,000	LIBOR + 3.89%		8.375	%