Encore Acquisition Co., Fort Worth, (NYSE: EAC) plans to purchase privately held Plano, Texas-based Cortez Oil & Gas Inc. for $123 million. The deal may close during this quarter. Cortez owns oil and gas properties in three regions: the Cedar Creek Anticline of Montana, the Permian Basin of Texas and New Mexico, and the Midcontinent area, which includes the Arkoma and Anadarko basins of Oklahoma and the Barnett Shale in Texas. Encore estimates that Cortez has total proved reserves of 15 million BOE, of which 60% are proved developed producing, and 55% are gas. The properties have an additional 7.8 million BOE of identified drilling and waterflood upside opportunities. The proved reserve life is 14 years. Production is approximately 8.4 million cu. ft. and 1,550 bbl. per day-or 2,950 BOE per day. In comparison, Encore's 2003 production averaged 22,218 BOE per day. Cortez owns more than 25,000 net developed acres and more than 48,000 net undeveloped acres, of which 21,000 are mineral fee. Cortez's reserves will join Encore's portfolio in the Williston Basin of Montana and North Dakota, the Permian Basin, the Anadarko Basin, the Powder River Basin of Montana, the Paradox Basin of Utah, and the North Salt Basin of Louisiana. Cortez's Cedar Creek Anticline properties are directly adjacent to Encore's North Pine unit. Proved reserves are estimated to be 4 million BOE and current production is approximately 900 BOE per day. About 75% of the reserves are proved developed producing. Its Permian Basin properties are near Encore's current Permian Basin operations, and include proved reserves of 3.2 million BOE (72% proved developed producing) and current production of about 930 BOE per day. Its Midcontinent properties contain proved reserves of 47 billion cu. ft. equivalent (47% proved developed producing) or 7.8 million BOE. Production is 6.7 million cu. ft. equivalent per day or 1,120 BOE. Cortez was founded in 2000 by the founders, and sellers, of Lobo Resources. Cortez was funded by management and by private-equity firm Natural Gas Partners. Standard & Poor's Ratings Services affirmed its ratings of Encore's debt. The deal will be financed with bank borrowings or a future note offering. "The ratings affirmation reflects the fact that, even with the increased debt Encore will take on to fund this transaction, financial measures will remain appropriate for the current ratings," says S&P credit analyst Brian Janiak. "Furthermore, the acquisition is consistent with Encore's business growth strategy of acquiring relatively low-risk drilling, long-lived reserves (reserve/production ratio of 14 years), complementary to Encore's operations," he says.