Encore Acquisition Company Announces Third Quarter 2008 Results

Encore Acquisition Company (NYSE: EAC) ("Encore” or the "Company”) today reported unaudited third quarter 2008 results.

The following table highlights certain reported amounts for the third quarter of 2008 as compared to the third quarter of 2007 (in millions, except average price amounts):

Adjusted EBITDAX increased 69 percent to $204.7 million for the third quarter of 2008 as compared to $121.4 million for the third quarter of 2007. Adjusted EBITDAX is defined as adjusted earnings before interest, income taxes, depletion, depreciation, and amortization, impairment of long-lived assets, non-cash equity-based compensation expense, non-cash derivative fair value gains and losses, minority interest, and exploration expense. Adjusted EBITDAX is reconciled to its most directly comparable GAAP measures in the attached financial schedules.

Encore recorded record net income in the third quarter of 2008 of $206.3 million ($3.80 per diluted share) as compared to $12.0 million ($0.22 per diluted share) in the third quarter of 2007. Net income for the third quarter of 2008 included a pre-tax net derivatives gain of $239.4 million comprising settlement payments of $22.7 million, premium amortization of $14.8 million, and a mark-to-market gain of $276.9 million. Net income for the third quarter of 2007 included a pre-tax net derivatives loss of $15.8 million comprising settlement payments of $7.1 million, premium amortization of $11.7 million, and a mark-to-market gain of $3.0 million.

Encore reported net income excluding certain items for the third quarter of 2008 of $64.9 million ($1.15 per diluted share), a 160 percent increase over net income excluding certain items for the third quarter of 2007 of $24.9 million ($0.46 per diluted share). Net income excluding certain items for the third quarter of 2008 excludes derivative gains and losses not related to the current period, non-cash compensation expense related to Encore Energy Partners LP ("ENP”), and impairment of long-lived assets. Net income excluding certain items for the third quarter of 2007 excludes derivative gains and losses not related to the current period, non-cash compensation expense related to ENP, and loss on divestiture of oil and natural gas properties. Net income excluding certain items is reconciled to its most directly comparable GAAP measure of net income in the attached financial schedules.

Jon S. Brumley, Encore's Chief Executive Officer and President, stated, "The third quarter was a terrific quarter for Encore. We were pleased with our production growth, but more importantly we are very excited about our plans for 2009. Since Encore’s inception, we have been espousing the importance of shallow declining properties, a strong hedging position, and high rate of return projects. In no other time in Encore’s history have these three factors been more important. Because of our long-life portfolio, our savvy hedging program, and our high return budget, we will be able to exit 2009 in an even stronger position than today. In 2009, Encore will be able to grow three to five percent, repurchase $40 million of stock, and repay $55 million of debt. Our properties and hedging position place us in a unique position relative to our peers. We are ready for 2009 whether commodity prices are high or low.”

Oil and natural gas revenues increased 75 percent in the third quarter of 2008 to $335.3 million as compared to the $191.7 million in the third quarter of 2007, as the Company continued to reap the benefits of the high commodity price environment, as well as enjoy strong operating results.

The Company’s NYMEX oil differential in the third quarter of 2008 was $10.46 per Bbl as compared to $7.37 per Bbl in the third quarter of 2007. The average NYMEX oil price rose to $118.67 per barrel ("Bbl”) in the third quarter of 2008 versus $75.17 per Bbl in the third quarter of 2007. As a percentage of NYMEX, the Company’s NYMEX oil differential decreased slightly from 10 percent in the third quarter of 2007 to nine percent in the third quarter of 2008. The combined effect of rising commodity prices and a lower relative differential was a 60 percent increase in the Company’s average wellhead oil price, which represents the net price the Company receives for its oil production. It rose to $108.21 per Bbl for the third quarter of 2008 from $67.80 per Bbl in the third quarter of 2007. The Company’s average wellhead prices and related differentials exclude the effects of hedging activities, as these are recorded outside of revenue as derivative fair value gains or losses.

Production volumes averaged 39,617 BOE/D in the third quarter of 2008, comprising 26,975 barrels of oil per day and 75,847 Mcf of natural gas per day. This represents an increase of seven percent over third quarter of 2007 production of 36,917 BOE/D, and it exceeded the high end of the Company’s previously announced production guidance.

Lease operations expenses ("LOE”) were $49.0 million for the third quarter of 2008 ($13.43 per BOE) versus $37.1 million for the third quarter of 2007 ($10.93 per BOE). Encore’s reported LOE per BOE in the third quarter of 2008 remained in line with previously released guidance.

Exploration expenses for the third quarter of 2008 increased to $13.4 million ($3.67 per BOE) from $8.9 million ($2.63 per BOE) in the third quarter of 2007. The Company also recorded an impairment charge of $26.3 million on the Richland Plantation A 1 and the Joe Jackson 4-13H, the first two wells the Company has drilled in the Tuscaloosa Marine Shale ("TMS”). These appraisal wells, while experiencing some mechanical problems, demonstrated the ability to drill a horizontal lateral in a stable shale and establish sustained oil production from the TMS. Therefore, the Company will invest more in the first wells because drilling and completion techniques are expected to be optimized for future development wells. The Company has drilled its third appraisal well, which is currently waiting on completion, and is currently drilling its fourth well.

General and administrative ("G&A”) expenses for the third quarter of 2008 were $15.3 million ($4.20 per BOE) versus $12.7 million ($3.73 per BOE) in the third quarter of 2007. Encore’s reported G&A per BOE in the third quarter of 2008 remained in line with previously released guidance.

Operations Update

Bakken/Sanish

Encore is continuing its highly successful Sanish program in the Charlson area and expanded the Sanish drilling to the Cherry prospect area by adding a third rig in September of 2008. Encore drilled four 640 acre Bakken and Sanish wells in the third quarter. These four wells averaged approximately 650 BOE/D over the first seven days and approximately 515 BOE/D over the first 30 days.

Encore has re-fracture stimulated three more Murphy Creek Middle Bakken wells with encouraging results. Production was increased by 95 BOE/D per well on average for the first two months after re-stimulation. The re-fracture stimulation program is adding reserves and improving the economics of the Company’s Bakken drilling program.

Ben Nivens, the Company’s Chief Operating Officer, stated, "We plan on releasing the most inefficient of our three contracted rigs drilling in the Bakken during the fourth quarter of 2008 and subsequently picking up a more efficient replacement rig at the beginning of the first quarter of 2009. Similar to the stock buyback, Encore will use the lull in the activity to improve the Company.”

West Texas

It was a record quarter in the West Texas Joint Venture with ExxonMobil as the Company turned seven deep wells over to production. The wells had an average IP of 4.1 MMcfe/D. Four of the wells were in the Midland Basin, two in the Delaware Basin, and one was in the Val Verde Basin. To date a total of 29 deep gas wells have been brought online in the joint venture.

Ark-LA-Tex

The Stockman Field in East Texas continues to outperform the Company’s expectations. Four new Travis Peak wells were brought online in the quarter with an average IP of 3.6 MMcfe/D. The most recent well, the Wheeler 3, completed the second stage fracture stimulation in the Travis Peak at a gross peak rate of 6.2 MMcf/D and 90 Bbls/D.

The Company plans to spud its first Haynesville shale well in November 2008 at the Greenwood Waskom field. This well is expected to be online in the first quarter of 2009.

Tuscaloosa Marine Shale

Encore plans to complete the 4,100 feet of lateral in the Weyerhaeuser #1H in St. Helena Parish, Louisiana in November 2008. This completion has been delayed approximately five weeks due to the short supply of high-strength proppant.

Hedging Update

The Company has executed a hedge plan that protects over 95 percent of its estimated oil production for 2009. The hedges include floors at $110.00 per barrel ("Bbl”) for 11,630 barrels of oil per day ("BOPD”), swaps at $86.21 per Bbl for 6,000 BOPD, and floors at $80.00 per Bbl for 8,000 BOPD. The counterparties to these hedges are a diverse group comprising eleven institutions, all of which are rated A- or better by Standard & Poor’s and/or Fitch, with the majority rated AA- or better.

Under the various NYMEX pricing assumptions, the Company’s hedging portfolio is expected to generate the following cash flows in 2009 (net of deferred premiums, in thousands):

Liquidity Update

At September 30, 2008, the Company's long-term debt was $1.2 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 $622.9 million of outstanding borrowings under revolving credit facilities due March 7, 2012.

The amount outstanding on revolving credit facilities increased $75.9 million during the third quarter of 2008, primarily as a result of exercising a preferential right for proved production and Haynesville acreage, tax payments to the Internal Revenue Service, and hedge premiums for 2009. The borrowing base is $1.1 billion for Encore Acquisition Company and $240 million for ENP. At September 30, 2008, Encore Acquisition Company had availability under its revolving credit facility of $617.1 million and ENP had $99.9 million of availability under its revolving credit facility.

The syndicate of lenders underwriting Encore Acquisition Company’s facility comprises 30 banking and other financial institutions, and the syndicate of lenders underwriting ENP’s facility comprises 13 banking and other financial institutions, both after taking into consideration recently announced mergers and acquisitions within the financial services industry. None of the lenders are underwriting more than eight percent of the respective total commitments. The Company feels the large number of lenders, the relatively small percentage participation of each, and the relatively high level of availability under each facility provides adequate diversity and flexibility should further consolidation occur within the financial services industry.

Fourth Quarter 2008 Outlook

The Company expects the following in the fourth quarter of 2008:

Conference Call Details

Title: Encore Acquisition Company and Encore Energy Partners LP Conference Call

Date and Time: Wednesday, October 29, 2008 at 9:00 A.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 69593655.

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 69593655. The replay will be available through November 12, 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 likelihood and benefits of acquisitions and dispositions, drilling plans and expectations, expected production volumes, the expected benefits of existing hedging programs, 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, potential hedging programs, opportunities for acreage expansion, 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 injection 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; the ability of derivative counterparties and lenders to fulfill their obligations to the Company; industry trends; and other factors detailed in Encore's 2007 Annual Report on 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.

(b) Oil prices represent NYMEX WTI monthly average prices, while natural 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 $0.30 per Mcf.

(c) From time to time, Encore sells floors with a strike price below the strike price of the purchased floors in order to partially finance the premiums paid on the purchased floors, thereby entering into a floor spread. In the above table, the purchased floor component of these floor spreads are shown net and included with Encore's other floor contracts. In addition to the floor contracts shown above for 2009, Encore has a floor contract for 1,000 Bbls/D at $63.00 per Bbl and a short floor contract for 1,000 Bbls/D at $65.00 per Bbl.

"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 Encore'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 (loss), 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 items," which is a non-GAAP financial measure. The following tables provide a reconciliation of net income excluding certain items to net income (loss), Encore's most directly comparable financial measure calculated and presented in accordance with GAAP.

Encore believes that the exclusion of these items enables it to evaluate operations more effectively period-over-period and to identify operating trends that could otherwise be masked by the excluded items.

"Net income excluding certain items" should not be considered an alternative to net income (loss), operating income, net cash provided by operating activities, or any other measure of financial performance presented in accordance with GAAP. Encore’s definition of "net income excluding certain items" may not be comparable to similarly titled measures of another entity because all entities may not calculate "net income excluding certain items" in the same manner.