Encore Acquisition Company Announces 20 percent Annual Production Growth, Full Year and Fourth Quarter 2007 Results

Encore Acquisition Company (NYSE: EAC) ("Encore” or the "Company”) today reported unaudited fourth quarter and full year 2007 results. Highlights for the fourth quarter of 2007 include the following: Production of 37,530 BOE/D exceeded the mid-point of production guidance by over 1,000 net BOE/D; Oil and natural gas revenues increased 94 percent over the fourth quarter of 2006 to $225 million; Completed three Bakken wells and expect to bring on four additional wells in the first quarter of 2008. Currently hold 198,400 gross acres (134,000 net) in the Bakken; West Texas joint development agreement grew to 10.7 net MMcfe/D; Production in Bell Creek exceeded expectations of 900 net BOE/D by 58 net BOE/D and exiting 2007 at a rate of 1,150 net BOE/D; First Madison well is still producing approximately 350 BOE/D gross (193 net) and three offsetting wells are planned; Drilled three East Texas Travis Peak wells with an average 2.1 gross MMcf/D initial production rate; and Recompleted a Sand Hills well in Crane County, Texas with an initial production rate of over 300 BOE/D. The following table highlights certain reported amounts for 2007 as compared to 2006 ($ in millions, except average price amounts).   Qtr Ended December 31,   Year Ended December 31, 2007   2006 2007   2006 Oil and natural gas revenues $ 224.9 $ 116.2 $ 712.9 $ 493.3 Average daily production volumes (BOE/D) 37,530 30,704 37,094 30,807 Oil as percentage of total production volumes 73 % 65 % 71 % 65 % Average realized combined price ($/BOE) $ 65.12 $ 41.13 $ 52.66 $ 43.87 Oil and gas related costs incurred $ 112.5 $ 110.4 $ 403.6 $ 373.2 Unproved acreage costs incurred $ 11.7 $ 6.0 $ 52.3 $ 24.5 Adjusted EBITDAX $ 150.8 $ 73.0 $ 476.3 $ 334.0 Net income $ 19.4 $ 10.1 $ 17.2 $ 92.4 Net income excluding certain charges $ 37.9 $ 9.6 $ 78.4 $ 79.1 Weighted average diluted shares outstanding 54.4 53.8 54.1 52.7 Fourth Quarter 2007 Encore reported net income for the fourth quarter of 2007 of $19.4 million ($0.36 per diluted share) as compared to $10.1 million ($0.19 per diluted share) for the fourth quarter of 2006. Encore reported net income excluding certain charges for the fourth quarter of 2007 of $37.9 million ($0.70 per diluted share) as compared to net income excluding certain charges of $9.6 million ($0.19 per diluted share) for the fourth quarter of 2006. Net income excluding certain charges for the fourth quarter of 2007 excludes hedging gains and losses not related to the current period, a loss related to the divestiture of certain Mid-Continent assets, and non-cash compensation expense related to Encore Energy Partners LP ("ENP”). Net income excluding certain charges for the fourth quarter of 2006 excludes hedging gains and losses not related to the current period. Net income excluding certain charges is reconciled to its most directly comparable GAAP measure of net income in the attached financial schedules. Adjusted earnings before interest, income taxes, depletion, depreciation and amortization, non-cash equity-based compensation expense, non-cash derivative fair value loss (gain), and exploration expense ("Adjusted EBITDAX”) increased 107 percent to $150.8 million for the fourth quarter of 2007 as compared to $73.0 million for the fourth quarter of 2006. Adjusted EBITDAX is reconciled to its most directly comparable GAAP measures in the attached financial schedules. Encore’s oil and natural gas revenues increased 94% in the fourth quarter of 2007 to $224.9 million from $116.2 million in the fourth quarter of 2006 as the average NYMEX oil price rose 51 percent to $90.92 per barrel ("Bbl”) versus $60.21 per Bbl in the fourth quarter of 2006. The Company’s NYMEX oil differential widened to $13.06 per Bbl in the fourth quarter of 2007 from $10.06 per Bbl in the fourth quarter of 2006, an increase of 30 percent. The combined effect of these two factors was a 55 percent increase in the Company’s average wellhead oil price, which represents the net price the Company receives for its oil production, which rose to $77.86 per Bbl for the fourth quarter of 2007 from $50.15 per Bbl in the fourth quarter of 2006. Lease operations expenses were $38.2 million for the fourth quarter of 2007 ($11.08 per BOE) versus $27.9 million for the fourth quarter of 2006 ($9.86 per BOE). Lease operations expense per BOE of $11.08 in the fourth quarter of 2007 was $0.67 per BOE lower than the mid-point of the Company’s guidance, which resulted as the Company’s fixed operating costs were spread over higher than expected production volumes. General and administrative ("G&A”) expenses for the fourth quarter of 2007 were $12.9 million ($3.74 per BOE) versus $5.0 million ($1.77 per BOE) in the fourth quarter of 2006. Higher G&A expenses resulted from higher compensation in the fourth quarter of 2007 versus the fourth quarter of 2006 as the Company grew and the demand for qualified personnel increased across the industry due to historically high commodity prices. Additionally, the Company incurred public company expenses, related to ENP, not incurred in 2006, and expenses related to the sale of properties to ENP, which closed on February 7, 2008. Full Year 2007 Encore’s oil and natural gas revenues grew to $712.9 million in 2007. This represents the highest annual revenue in the Company’s history and a 45 percent increase over the $493.3 million in oil and natural gas revenues for 2006. The increased revenue was attributable to higher production volumes and higher average realized prices in 2007 as compared to 2006. Average daily production volumes grew 20 percent in 2007 to 37,094 BOE/D from 30,807 BOE/D in 2006. Oil production represented 71 percent of the Company’s total sales volumes in 2007 as compared to 65 percent in 2006. Net profits interests reduced reported average daily production volumes by approximately 1,466 BOE/D in 2007 versus 1,278 BOE/D in 2006. Encore’s higher average realized prices were primarily the result of an overall increase in the market price of crude oil and tightening of the Company’s differentials in 2007 as compared to 2006. The average NYMEX oil price rose nine percent to $72.39 per Bbl in 2007 versus $66.22 in 2006. The Company’s NYMEX oil differential tightened to $8.89 per Bbl in 2007 from $11.80 per Bbl in 2006, a decrease of 25 percent. The combined effect of these two factors was a 17 percent increase in the Company’s average wellhead oil price, which represents the net price the Company receives for its oil production, which rose to $63.50 per Bbl for 2007 from $54.42 per Bbl in 2006. The tightening of the NYMEX oil differential was most apparent in the Cedar Creek Anticline, where the Company saw its average NYMEX oil wellhead differential tighten to $9.67 per Bbl in 2007 from $14.70 per Bbl in 2006. Jon S. Brumley, Encore’s Chief Executive Officer and President, stated, "2007 was a great year for Encore. We refocused on long-life oil properties that increased our margins and capital efficiency while at the same time exposing Encore to a significant resource play in the Bakken. After making $810 million of primarily oil acquisitions in early 2007, we delevered by selling high-cost deep gas properties in Oklahoma and bringing to market a publicly sponsored oil and gas MLP. All of these decisions were timely and panned out. Our West Texas JV with ExxonMobil is getting bigger and less risky as we have moved through 75 percent of the commitment phase, and we see better and better results from bringing the wells on quicker and drilling bigger and better wells. We are pleased with our waterflood and HPAI projects that are reducing our overall production decline rate and throwing off large amounts of cash flow. Encore is positioned for a great 2008 by planning a low-risk development budget and by helping to ensure a high level of revenue through 2009 by entering into swaps, collars and put contracts. Our project inventory is strong, and our exposure to resource plays is increasing, while we are shrinking our outstanding share base through a stock repurchase program. We are ready for 2008 and well positioned for a long-term profitable production growth rate through 2011.” Net income for 2007 was $17.2 million ($0.32 per diluted share) as compared to $92.4 million ($1.75 per diluted share) for 2006. Net income excluding certain charges for 2007 was $78.4 million ($1.46 per diluted share) as compared to $79.1 million ($1.50 per diluted share) for 2006. Net income excluding certain charges for 2007 excludes hedging gains and losses not related to the current period, a loss related to the divestiture of certain Mid-Continent assets, and non-cash compensation expense related to ENP. Net income excluding certain charges for 2006 excludes hedging gains and losses not related to the current period. Net income excluding certain charges is reconciled to its most directly comparable GAAP measure of net income in the attached financial schedules. Adjusted EBITDAX increased 43 percent to $476.3 million for 2007 as compared to $334.0 million for 2006. Adjusted EBITDAX is reconciled to its most directly comparable GAAP measures in the attached financial schedules. Lease operations expenses were $143.4 million for 2007 ($10.59 per BOE) versus $98.2 million for 2006 ($8.73 per BOE). The increase in the per BOE rate resulted as higher commodity prices in 2007 drove up prices for experienced workers. Additionally, properties acquired in 2007 have higher lease operations expense per BOE than the Company’s historical average and the Company’s divested properties. G&A expenses for 2007 included a charge of $6.8 million for compensation expense related to ENP. Additionally, G&A expenses include approximately $1.0 million in expenses related to the sale of properties to ENP that closed on February 7, 2008. Encore’s effective tax rate for the quarter was 40 percent. This is higher than the Company’s historical effective tax rate due to the non-deductibility for federal income tax purposes of compensation expense related to ENP. The Company made two large proved property acquisitions and completed 228 gross wells (82.6 net) during 2007. The following table summarizes costs incurred related to oil and natural gas properties for the periods indicated: Year Ended December 31, 2007   2006 (in thousands) Acquisitions: Proved properties $ 785,761 $ 4,486 Unproved properties 52,306 24,462 Asset retirement obligations 10,478 785 Total acquisitions 848,545 29,733   Development: Drilling and exploitation 270,016 253,484 Asset retirement obligations 145 147 Total development 270,161 253,631   Exploration: Drilling and exploitation 95,221 92,839 Geological and seismic 1,456 1,720 Delay rentals 776 646 Total exploration 97,453 95,205   Total costs incurred $ 1,216,159 $ 378,569 Operations Update Drilling continued on the Bakken horizontal play in North Dakota. Encore completed three wells in the fourth quarter of 2007 at an average cost of $3.9 million. These three wells had an average gross production rate of 440 BOE/D per well for the first seven days and 250 BOE/D per well for the first thirty days. The Company expects to bring on four additional wells in the first quarter of 2008. Due to the success the Company has seen in the area, Encore has expanded its acreage position and currently holds 198,400 gross acres (134,000 net) in this area. The Company’s Bell Creek Field in southeast Montana exceeded fourth quarter expectations of 900 net BOE/D by averaging 958 net BOE/D and exiting 2007 at a rate of 1,150 net BOE/D from waterflood reactivation and polymer injections. The Company has a 100 percent working interest in the properties and plans to reactivate additional sections of the field as well as continue additional polymer injections during 2008. The Company’s first Madison well is still producing approximately 350 BOE/D gross (193 net) after initially producing at a rate of approximately 700 BOE/D gross (385 net). The well has already paid out and has produced approximately 100 MBOE gross (55 net) in the first 174 days of production. Based on the results, the Company has contracted a second North Dakota rig to drill a series of three additional wells in the same field. The first well in this program was spud on February 10, 2008. In West Texas, the joint development agreement with ExxonMobil continues to show excellent results, achieving a peak rate of approximately 10.7 net MMcfe/D in December 2007 versus 3.7 net MMcfe/D in December 2006. Twelve wells were brought online in the fourth quarter of 2007. In the Wilshire field, Encore completed the commitment phase of the joint development agreement in mid-year 2007. With the commitment phase behind the Company, Encore is able to drill simpler, repeatable wells in the heart of the field. The time between the spud to sales of wells has greatly improved in 2007. At the beginning of the program, a well typically took 230 days from spud to sales and at the end of 2007; the typical time was reduced to 85 days. Encore ended 2007 having satisfied 75 percent of the commitment phase of the joint development agreement. The Company has planned a five rig drilling program in the related fields in 2008, and by mid-year plans to have completed the commitment phase in all areas. As a result, all wells drilled in the second half of 2008 should be lower risk, repeatable, development wells and not the complicated, high-risk wells drilled during the commitment phase in each respective field. Additionally in West Texas, the Company recompleted a Sand Hills well in Crane County with an initial production rate of over 300 BOE/D. Due to this successful effort, the Company has budgeted for and plans to drill three additional offset wells in Crane County in 2008. In East Texas, Encore completed another three successful Travis Peak wells during the fourth quarter of 2007 with an average initial production rate of 2.1 gross MMcfe/D per well. The Company has a rig drilling in East Texas to follow up on the success of these wells. Liquidity Update At December 31, 2007, the Company’s long-term debt, net of discount, was $1.1 billion, including $150 million of 6.25% senior subordinated notes due April 15, 2014, $300 million of 6.0% senior subordinated notes due July 15, 2015, $150 million of 7.25% senior subordinated notes due December 1, 2017, and $526 million of outstanding borrowings under the Company’s revolving credit facilities. On December 31, 2007, Encore owned 14.5 million units of ENP, including 0.5 million general partner units, and will receive approximately $5.6 million on February 14, 2008 as a result of ENP’s declared cash distribution on those shares. Additionally, on February 7, 2008 as part of the consideration for the sale of properties to ENP, Encore received an additional 6.9 million common units of ENP. Stock Repurchase From December 31, 2007 through February 13, 2008, Encore repurchased approximately 781,000 shares of its outstanding common stock for approximately $25.0 million, including brokerage commissions, or an average price of $32.01 per share. First Quarter 2008 Outlook The Company expects the following in the first quarter of 2008: Average daily wellhead production volumes   39,000 to 39,800 BOE/D Average daily net profits production volumes 1,800 to 2,000 BOE/D Average daily reported production volumes 37,000 to 38,000 BOE/D Oil and natural gas related capital $93 to $98 million Lease operations expense $11.50 to $12.00 per BOE General and administrative expenses $2.50 to $2.65 per BOE Depletion, depreciation, and amortization $14.50 to $15.00 per BOE Production, ad valorem, and severance taxes 9.7% of wellhead revenues Oil differential (% of NYMEX) 14% of NYMEX oil price Natural gas differential (% of NYMEX) 10% of NYMEX natural gas price Income tax expense 38% effective rate Income tax expense deferred 46% deferred The sale of $250.4 million of properties to ENP closed on February 7, 2008. As a result of this transaction the Company expects to have a taxable gain of approximately $64.3 million and a related current tax payable of $11.5 million in the first quarter of 2008. Conference Call Details Title: Encore Acquisition Company and Encore Energy Partners LP Conference Call Date and Time: Friday, February 15, 2008 at 12:00 p.m. Central Time Webcast: Listen to the live broadcast via http://www.encoreacq.com Telephone: Dial 877-356-9552 ten minutes prior to the scheduled time and request the conference call by supplying the title specified above or ID 33226345. A replay of the conference call will be archived and available via Encore’s website at the above web address or by dialing 800-642-1687 and entering conference ID 33226345. The replay will be available through February 29, 2008. International callers can dial 706-679-0419 for the live broadcast or 706-645-9291 for the replay. About the Company Encore Acquisition Company is engaged in the acquisition and development of oil and natural gas reserves from onshore fields in the United States. Since 1998, Encore has acquired producing properties with proven reserves and leasehold acreage and grown the production and proven reserves by drilling, exploring, reengineering or expanding existing waterflood projects, and applying tertiary recovery techniques. Cautionary Statement 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 benefits of acquisitions and joint venture arrangements, drilling plans, expected net profits interests, the likelihood of acquisitions and dispositions, inventory growth, expected production volumes and decline rates, expected revenues, expected expenses, expected taxes (including the amount of any gain or deferral), expected capital expenditures (including, without limitation, as to amount and property), expected differentials, growth rates, future purchases under the stock repurchase program, and any other statements that are not historical facts. 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: the risks associated with drilling of oil and natural gas wells; Encore’s ability to find, acquire, market, develop, and produce new properties; the risk of drilling dry holes; oil and natural gas price volatility; derivative transactions (including the costs associated therewith); uncertainties in the estimation of proved, probable and potential reserves and in the projection of future rates of production and reserve growth; inaccuracies in Encore’s assumptions regarding items of income and expense and the level of capital expenditures; uncertainties in the timing of exploitation expenditures; operating hazards attendant to the oil and natural gas business; risks related to Encore’s high-pressure air program; drilling and completion losses that are generally not recoverable from third parties or insurance; potential mechanical failure or underperformance of significant wells; climatic conditions; availability and cost of material and equipment; the risks associated with operating in a limited number of geographic areas; actions or inactions of third-party operators of Encore’s properties; Encore’s ability to find and retain skilled personnel; diversion of management’s attention from existing operations while pursuing acquisitions or joint ventures; availability of capital; the strength and financial resources of Encore’s competitors; regulatory developments; environmental risks; uncertainties in the capital markets; uncertainties with respect to asset sales; general economic and business conditions; industry trends; 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. Encore Acquisition Company Condensed Consolidated Statements of Operations (in thousands, except per share amounts)           Three Months Ended Year Ended December 31, December 31, 2007 2006 2007 2006 (unaudited) (unaudited) Revenues: Oil $ 185,303 $ 78,908 $ 562,817 $ 346,974 Natural gas 39,559 37,275 150,107 146,325 Marketing 14,882   41,527   42,021   147,563   Total revenues 239,744   157,710   754,945   640,862   Expenses: Production: Lease operations 38,240 27,862 143,426 98,194 Production, ad valorem, and severance taxes 22,835 11,398 74,585 49,780 Depletion, depreciation, and amortization 47,608 30,984 183,980 113,463 Exploration 3,870 12,172 27,726 30,519 General and administrative 12,908 4,995 39,124 23,194 Marketing 12,942 42,910 40,549 148,571 Derivative fair value loss (gain) 44,317 (4,125 ) 112,483 (24,388 ) Loss on divestiture of oil and natural gas properties 1,904 - 7,361 - Provision for doubtful accounts 1,810 1,970 5,816 1,970 Other operating 5,501   4,480   9,705   8,053   Total operating expenses 191,935   132,646   644,755   449,356   Operating income 47,809   25,064   110,190   191,506   Other income (expense): Interest (20,664 ) (11,365 ) (88,704 ) (45,131 ) Other 778   417   2,667   1,429   Total other income (expense) (19,886 ) (10,948 ) (86,037 ) (43,702 ) Income before income taxes 27,923 14,116 24,153 147,804 Income tax provision (12,986 ) (4,024 ) (14,476 ) (55,406 ) Minority interest in loss of consolidated partnership 4,490   -   7,478   -   Net income $ 19,427   $ 10,092   $ 17,155   $ 92,398     Net income per common share: Basic $ 0.36 $ 0.19 $ 0.32 $ 1.78 Diluted $ 0.36 $ 0.19 $ 0.32 $ 1.75   Weighted average common shares outstanding: Basic 53,261 53,004 53,170 51,865 Diluted 54,392 53,806 54,144 52,736 Encore Acquisition Company Condensed Statements of Operations (in thousands) (unaudited)           Three Months Ended Year Ended December 31, 2007 December 31, 2007 EAC w/o ENP   ENP EAC w/o ENP   ENP Revenues: Oil $ 165,046 $ 20,257 $ 503,981 $ 58,836 Natural gas 36,110 3,449 137,838 12,269 Marketing 13,286 1,596   33,439 8,582   Total revenues 214,442 25,302   675,258 79,687   Expenses: Production: Lease operations 33,663 4,577 129,506 13,920 Production, ad valorem, and severance taxes 20,121 2,714 66,014 8,571 Depletion, depreciation, and amortization 40,380 7,228 157,982 25,998 Exploration 3,870 - 27,726 - General and administrative 9,869 3,039 28,417 10,707 Marketing 11,924 1,018 33,876 6,673 Derivative fair value loss 27,502 16,815 86,182 26,301 Loss on divestiture of oil and natural gas properties 1,904 - 7,361 - Provision for doubtful accounts 1,810 - 5,816 - Other operating 5,273 228   8,943 762   Total operating expenses 156,316 35,619   551,823 92,932   Operating income (loss) $ 58,126 $ (10,317 ) $ 123,435 $ (13,245 ) Encore Acquisition Company Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited)     Year Ended December 31, 2007 2006 Net income $ 17,155 $ 92,398 Adjustments to reconcile net income to net cash provided by operating activities:   Non-cash and other items 384,871 198,637 Changes in operating assets and liabilities (82,319 ) 6,298   Net cash provided by operating activities 319,707   297,333       Net cash used in investing activities (929,556 ) (397,430 )   Financing activities: Net proceeds from (payments on) long-term debt 444,831 (12,000 ) Net proceeds from issuance of equity securities 193,461 127,101 Other (27,502 ) (15,895 ) Net cash provided by financing activities 610,790   99,206     Increase (decrease) in cash and cash equivalents 941 (891 ) Cash and cash equivalents, beginning of period 763   1,654   Cash and cash equivalents, end of period $ 1,704   $ 763   Encore Acquisition Company Condensed Consolidated Balance Sheets (in thousands)     December 31, December 31, 2007 2006 (unaudited) Total assets $ 2,784,561   $ 2,006,900     Liabilities (excluding long-term debt) $ 593,636 $ 528,339 Long-term debt 1,120,236 661,696 Minority interest in consolidated partnership 200,160 - Stockholders' equity 870,529   816,865   Total liabilities and stockholders' equity $ 2,784,561   $ 2,006,900     Working capital(a) $ (16,220 ) $ (40,745 )   (a) Working capital is defined as current assets minus current liabilities. Encore Acquisition Company Selected Operating Results (unaudited)           Three Months Ended Year Ended December 31, December 31, 2007 2006 2007 2006 Production volumes: Oil (MBbls) 2,519 1,841 9,545 7,335 Natural gas (MMcf) 5,604 5,901 23,963 23,456 Combined (MBOE) 3,453 2,825 13,539 11,244   Daily production: Oil (Bbls/D) 27,379 20,014 26,152 20,096 Natural gas (Mcf/D) 60,910 64,140 65,651 64,262 Combined (BOE/D) 37,530 30,704 37,094 30,807   Average realized prices: Oil (per Bbl) $ 73.57 $ 42.85 $ 58.96 $ 47.30 Natural gas (per Mcf) 7.06 6.32 6.26 6.24 Combined (per BOE) 65.12 41.13 52.66 43.87   Average costs per BOE: Lease operations expense $ 11.08 $ 9.86 $ 10.59 $ 8.73 Production, ad valorem, and severance taxes 6.61 4.03 5.51 4.43 Depletion, depreciation, and amortization 13.79 10.97 13.59 10.09 Exploration 1.12 4.31 2.05 2.71 General and administrative 3.74 1.77 2.89 2.06 Derivative fair value loss (gain) 12.83 (1.46 ) 8.31 (2.17 ) Provision for doubtful accounts 0.52 0.70 0.43 0.18 Other operating 1.59 1.58 0.72 0.71 Marketing loss (gain) (0.56 ) 0.49 (0.11 ) 0.09     Three Months Ended Year Ended December 31, 2007 December 31, 2007 EAC w/o ENP   ENP EAC w/o ENP   ENP Production volumes: Oil (MBbls) 2,211 308 8,492 1,053 Natural gas (MMcf) 5,125 479 22,094 1,869 Combined (MBOE) 3,065 388 12,174 1,365   Daily production: Oil (Bbls/D) 24,026 3,353 23,266 3,440 Natural gas (Mcf/D) 55,699 5,211 60,532 5,272 Combined (BOE/D) 33,308 4,222 33,354 4,318   Average realized prices: Oil (per Bbl) $ 74.64 $ 65.66 $ 59.35 $ 55.85 Natural gas (per Mcf) 7.05 7.19 6.24 6.56 Combined (per BOE) 65.63 61.04 52.72 52.09   Average costs per BOE: Lease operations expense $ 10.98 $ 11.79 $ 10.64 $ 10.20 Production, ad valorem, and severance taxes 6.57 6.99 5.42 6.28 Depletion, depreciation, and amortization 13.18 18.61 12.98 19.05 Exploration 1.26 - 2.28 - General and administrative 3.22 7.83 2.33 7.84 Derivative fair value loss 8.97 43.29 7.08 19.27 Provision for doubtful accounts 0.59 - 0.48 - Other operating 1.72 0.58 0.73 0.56 Marketing loss (gain) (0.44 ) (1.49 ) 0.04 (1.40 ) Encore Acquisition Company Derivative Summary as of February 13, 2008 (unaudited)           Oil Derivative Contracts(b)(c)   Average Average Downside Downside Upside Upside Price Volume Price Volume (per Bbl) (Bbls) (per Bbl) (Bbls)   2008 - First Half $ - - $ 101.99 2,440 - - 96.65 2,000 83.77 19,880 - - 71.67 6,000 - - 61.32 9,500 - - 57.15 4,000 58.59 1,000   2008 - Second Half $ - - $ 101.99 2,440 92.48 3,500 94.00 5,500 83.92 16,380 89.42 1,500 71.67 6,000 - - 62.27 5,500 - - 56.67 3,000 - -   2009 90.46 2,000 91.77 2,440 81.69 16,380 89.22 3,000 75.00 2,250 - - 65.49 1,000 68.70 1,000   2010 - - 93.80 440 80.00 880 - - 75.00 2,000 - - - - 77.23 1,000   2011 - - 95.41 1,440 80.00 1,880 - - 70.00 1,000 - -     Natural Gas Derivative Contracts(c)   Average Average Downside Downside Upside Upside Price Volume Price Volume (per Mcf) (Mcf) (per Mcf) (Mcf)   2008 $ - - $ 9.52 6,300 8.16 11,300 8.27 12,500 7.41 16,300 7.47 5,000 6.35 20,000 - -   2009 - - 9.83 3,800 8.20 3,800 - - 7.20 3,800 - -   2010 - - 9.58 3,800 8.20 3,800 - - 7.20 3,800 - -   (b) In addition to above contracts, Encore has sold put contracts for 3,000 Bbls/D at $50.00 in 2008 and 5,000 Bbls/D at $50.00 in 2009.   (c) Oil prices represent NYMEX WTI monthly average prices, while gas prices represent various price points in 2008, and IF Houston Ship Channel prices for 2009 and 2010.  The differential between IF HSC and NYMEX Henry Hub is approximately $0.20 per Mcf. Encore Acquisition Company Non-GAAP Financial Measures (in thousands, except per share amounts) (unaudited)   This press release includes a discussion of Adjusted EBITDAX, which is a non-GAAP financial measure.  The following table provides reconciliations of Adjusted EBITDAX to net income and net cash provided by operating activities, Encore's most directly comparable financial performance and liquidity measures calculated and presented in accordance with GAAP.     Three Months Ended December 31,   Year Ended December 31, 2007   2006 2007   2006 Net income $ 19,427 $ 10,092 $ 17,155 $ 92,398 Depletion, depreciation, and amortization 47,608 30,984 183,980 113,463 Non-cash equity-based compensation 3,207 2,183 15,997 8,980 Exploration 3,870 12,172 27,726 30,519 Interest expense and other 19,886 10,948 86,037 43,702 Income taxes 12,986 4,024 14,476 55,406 Non-cash derivative fair value loss (gain) 43,802   2,579   130,910   (10,434 ) Adjusted EBITDAX 150,786 72,982 476,281 334,034 Change in operating assets and liabilities (13,519 ) 4,092 (29,139 ) 12,651 Minority interest in loss of consolidated partnership (4,490 ) - (7,478 ) - Loss on divestiture of oil and natural gas properties 1,904 - 7,361 - Provision for doubtful accounts 1,810 1,970 5,816 1,970 Other non-cash expenses 7,700 4,509 10,210 5,310 Interest expense and other (19,886 ) (10,948 ) (86,037 ) (43,702 ) Current income taxes (1,772 ) 18 (1,888 ) (2,691 ) Cash exploration expense (894 ) (1,824 ) (2,239 ) (2,391 ) Purchased options (15,576 ) (7,848 ) (53,180 ) (7,848 ) Net cash provided by operating activities $ 106,063   $ 62,951   $ 319,707   $ 297,333     Adjusted EBITDAX is used as a supplemental financial measure by Encore’s management and by external users of Encore’s financial statements, such as investors, commercial banks, research analysts, and others, to assess: (1) the financial performance of EAC’s assets without regard to financing methods, capital structure, or historical cost basis, (2) the ability of Encore’s assets to generate cash sufficient to pay interest costs and support its indebtedness, (3) Encore’s operating performance and return on capital as compared to those of other entities in our industry, without regard to financing or capital structure, and (4) the viability of acquisitions and capital expenditure projects and the overall rates of return on alternative investment opportunities.   Adjusted EBITDAX should not be considered an alternative to net income, operating income, net cash provided by operating activities, or any other measure of financial performance presented in accordance with GAAP.  Encore’s definition of Adjusted EBITDAX may not be comparable to similarly titled measures of another entity because all entities may not calculate Adjusted EBITDAX in the same manner.   This press release also includes a discussion of "net income excluding certain charges," which is a non-GAAP financial measure.  The following table provides a reconciliation of net income excluding certain charges to net income, Encore's most directly comparable financial measure calculated and presented in accordance with GAAP.     Three Months Ended December 31, 2007 2006 Total Per Diluted Share Total Per Diluted Share Net income $ 19,427 $ 0.36 $ 10,092 $ 0.19 Add: OCI amortization and change in fair value in excess of premiums 26,541 0.48 (790 ) (0.01 ) Less: tax provision (benefit) on non-cash derivative fair value (9,892 ) (0.18 ) 294 0.01 Add: loss on divestiture of oil and natural gas properties 1,904 0.04 - - Less: tax benefit on divestiture of oil and natural gas properties (710 ) (0.01 ) - - Add: non-cash unit-based compensation related to ENP's management incentive units 1,058 0.02 - - Less: change in minority interest related to ENP's management incentive units (394 ) (0.01 ) -   -   Net income excluding certain charges $ 37,934   $ 0.70   $ 9,596   $ 0.19       Year Ended December 31, 2007 2006 Total Per Diluted Share Total Per Diluted Share Net income $ 17,155 $ 0.32 $ 92,398 $ 1.75 Add: OCI amortization and change in fair value in excess of premiums 83,417 1.54 (21,248 ) (0.40 ) Less: tax provision (benefit) on non-cash derivative fair value (31,090 ) (0.57 ) 7,906 0.15 Add: loss on divestiture of oil and gas properties 7,361 0.14 - - Less: tax benefit on divestiture of oil and gas properties (2,743 ) (0.05 ) - - Add: non-cash unit-based compensation related to ENP's management incentive units 6,804 0.13 - - Less: change in minority interest related to ENP's management incentive units (2,536 ) (0.05 ) -   -   Net income excluding certain charges $ 78,368   $ 1.46   $ 79,056   $ 1.50