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UNITED STATES
 SECURITIES AND EXCHANGE
    COMMISSION
 Washington, D.C.
    20549
  Form 10-K
 (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2007oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from           to   Commission File
    Number: 001-16295
  ENCORE ACQUISITION
    COMPANY
 (Exact name of registrant as
    specified in its charter)
  Delaware

75-2759650State or other jurisdiction
    of incorporation or organization

(I.R.S. Employer
    Identification No.)777 Main Street, Suite 1400, Fort Worth, Texas

76102(Address of principal executive
    offices)

(Zip Code)   Registrants telephone number, including area code:
    (817) 877-9955
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of each class

Name of each exchange on which registeredCommon Stock

New York Stock Exchange   Securities registered pursuant to Section 12(g) of the
    Act: None
   þ o
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large accelerated
    filer þ

Accelerated
    filer o

Non-accelerated
    filer o
    (Do not check if a smaller reporting company)

Smaller reporting
    company o   Rule 12b-2).  Yes o þ
  Aggregate market value of the voting and non-voting common
    equity held by non-affiliates computed by reference to the price
    at which the common equity of the registrant was last sold as of
    June 30, 2007 (the last business day of the
    registrants most recently completed second fiscal quarter)

$1,371,310,811Number of shares of Common Stock, $0.01 par value,
    outstanding as of February 20, 2008

53,400,959   DOCUMENTS INCORPORATED BY REFERENCE
  Form 10-K.




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##### 





ENCORE
    ACQUISITION COMPANY
   INDEX
   
 PagePART IItems 1 and 2.

Business and Properties


1Item 1A.

Risk Factors


22Item 1B.

Unresolved Staff Comments


32Item 3.

Legal Proceedings


32Item 4.

Submission of Matters to a Vote of Security
    Holders


32PART IIItem 5.

Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


33Item 6.

Selected Financial Data


35Item 7.

Managements Discussion and Analysis of
    Financial Condition and Results of Operations


37Item 7A.

Quantitative and Qualitative Disclosures About
    Market Risk


68Item 8.

Financial Statements and Supplementary Data


71Item 9.

Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosure


126Item 9A.

Controls and Procedures


126Item 9B.

Other Information


128PART IIIItem 10.

Directors, Executive Officers and Corporate
    Governance


128Item 11.

Executive Compensation


128Item 12.

Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


129Item 13.

Certain Relationships and Related Transactions,
    and Director Independence


129Item 14.

Principal Accounting Fees and Services


129PART IVItem 15.

Exhibits, Financial Statement Schedules


130Signatures


134First Supplemental IndentureFirst Supplemental IndentureSecond Supplemental IndentureStatement Showing Computation of Ratios of Earnings to Fixed ChargesSubsidiaries of EAC as of February 20, 2008Consent of Ernst & Young LLPConsent of Miller and Lents, Ltd.Rule 13a-14(a)/15d-14(a) Certification (Principal Executive Officer)Rule 13a-14(a)/15d-14(a) Certification (Principal Financial Officer)Section 1350 Certification (Principal Executive Officer)Section 1350 Certification (Principal Financial Officer)   i




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ENCORE
    ACQUISITION COMPANY
  GLOSSARY
  Form 10-K Rule 4-10(a)(2-4) Regulation S-X.
  
    Bbl.  One stock tank barrel, or 42
    U.S. gallons liquid volume, used in reference to oil or
    other liquid hydrocarbons.
    Bbl/D.  One Bbl per day.
    Bcf.  One billion cubic feet, used in reference
    to natural gas.
    BOE.  One barrel of oil equivalent, calculated
    by converting natural gas to oil equivalent barrels at a ratio
    of six Mcf of natural gas to one Bbl of oil.
    BOE/D.  One BOE per day.
    Completion.  The installation of permanent
    equipment for the production of oil or natural gas.
    Council of Petroleum Accountants Societies
    (COPAS).  A professional organization
    of oil and gas accountants that maintains consistency in
    accounting procedures and interpretations, including the
    procedures that are part of most joint operating agreements.
    These procedures establish a drilling rate and an overhead rate
    to reimburse the operator of a well for overhead costs, such as
    accounting and engineering.
    Delay Rentals.  Fees paid to the lessor of an
    oil and natural gas lease during the primary term of the lease
    prior to the commencement of production from a well.
    Developed Acreage.  The number of acres
    allocated or assignable to producing wells or wells capable of
    production.
    Development Well.  A well drilled within the
    proved area of an oil or natural gas reservoir to the depth of a
    stratigraphic horizon known to be productive.
    Drill-to-Earn.  The acquisition of an ownership
    interest in the reserves and production found and developed on
    properties in which no ownership interest exists prior to the
    onset of drilling.
    Dry Hole.  A well found to be incapable of
    producing hydrocarbons in sufficient quantities such that
    proceeds from the sale of such production would exceed lease
    operations expense and production taxes.
    EAC.  Encore Acquisition Company, a Delaware
    corporation, together with its subsidiaries.
    ENP.  Encore Energy Partners LP, a publicly
    traded Delaware limited partnership, together with its
    subsidiaries.
    Exploratory Well.  A well drilled to find and
    produce oil or natural gas in an unproved area, to find a new
    reservoir in a field previously producing oil or natural gas in
    another reservoir, or to extend a known reservoir.
    Farm-out.  Transfer of all or part of the
    operating rights from the working interest holder to an
    assignee, who assumes all or some of the burden of development,
    in return for an interest in the property.
    Field.  An area consisting of a single
    reservoir or multiple reservoirs, all grouped on or related to
    the same individual geological structural feature
    and/or
    stratigraphic condition.
    Gross Acres or Gross Wells.  The total acres or
    wells, as the case may be, in which we own a working interest.
    High-Pressure Air Injection
    (HPAI).  Utilizing compressors to
    force air under high pressure into previously produced oil and
    natural gas formations in order to displace remaining resident
    hydrocarbons and force them under pressure to a common lifting
    point for production. ii




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ENCORE
    ACQUISITION COMPANY
   
    Horizontal Drilling.  A drilling operation in
    which a portion of a well is drilled horizontally within a
    productive or potentially productive formation. This operation
    usually yields a well which has the ability to produce higher
    volumes than a vertical well drilled in the same formation.
    Lease Operations Expense
    (LOE).  All direct and allocated
    indirect costs of producing oil and natural gas after completion
    of drilling. Such costs include labor, superintendence,
    supplies, repairs, maintenance, and direct overhead charges.
    LIBOR.  London Interbank Offered Rate.
    MBbls.  One thousand Bbls.
    MBOE.  One thousand BOE.
    MBOE/D.  One thousand BOE per day.
    Mcf.  One thousand cubic feet, used in
    reference to natural gas.
    Mcf/D.  One Mcf per day.
    Mcfe.  One Mcf equivalent, calculated by
    converting oil to natural gas equivalent at a ratio of one Bbl
    of oil to six Mcf of natural gas.
    Mcfe/D.  One Mcfe per day.
    MMBbls.  One million Bbls.
    MMBOE.  One million BOE.
    MMBtu.  One million British thermal units. One
    British thermal unit is the quantity of heat required to raise
    the temperature of a one-pound mass of water by one degree
    Fahrenheit.
    MMcf.  One million cubic feet, used in
    reference to natural gas.
    MMcf/D.  One MMcf per day.
    Net Acres or Net Wells.  Gross acres or wells,
    as the case may be, multiplied by the working interest
    percentage owned by us.
    Net Production.  Production that is owned by us
    less royalties, net profits interest, and production due others.
    Net Profits Interest (NPI).  An
    interest that entitles the owner to a specified share of net
    profits from production of hydrocarbons.
    Natural Gas Liquids (NGLs).  The
    combination of ethane, propane, butane, and natural gasolines
    that when removed from natural gas become liquid under various
    levels of higher pressure and lower temperature.
    NYMEX.  New York Mercantile Exchange.
    Oil.  Crude oil, condensate, and NGLs.
    Operator.  The entity responsible for the
    exploration, exploitation, and production of an oil or natural
    gas well or lease.
    Present Value of Future Net Revenues
    (PV-10).  The
    pretax present value of estimated future revenues to be
    generated from the production of proved reserves, net of
    estimated future LOE and development costs, using prices and
    costs as of the date of estimation without future escalation,
    without giving effect to hedging activities, non-property
    related expenses such as general and administrative expenses,
    debt service, depletion, depreciation, and amortization, and
    income taxes and discounted using an annual discount rate of
    10 percent.
    Production Margin.  Oil and natural gas
    revenues less LOE and production, ad valorem, and severance
    taxes. iii




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ENCORE
    ACQUISITION COMPANY
   
    Productive Wells.  Producing wells and wells
    capable of production, including natural gas wells awaiting
    pipeline connections to commence deliveries and oil wells
    awaiting connection to production facilities.
    Proved Developed Reserves.  Proved reserves
    that can be expected to be recovered from existing wells with
    existing equipment and operating methods.
    Proved Reserves.  The estimated quantities of
    crude oil, natural gas, and NGLs that geological and engineering
    data demonstrate with reasonable certainty are recoverable in
    future years from known reservoirs under existing economic and
    operating conditions.
    Proved Undeveloped Reserves.  Proved reserves
    that are expected to be recovered from new wells drilled to
    known reservoirs on acreage yet to be drilled for which the
    existence and recoverability of such reserves can be estimated
    with reasonable certainty, or from existing wells where a
    relatively major expenditure is required to establish
    production. Proved undeveloped reserves include unrealized
    production response from fluid injection and other improved
    recovery techniques, such as HPAI, where such techniques have
    been proved effective by actual tests in the area and in the
    same reservoir.
    Royalty.  An interest in an oil and natural gas
    lease that gives the owner the right to receive a portion of the
    production from the leased acreage (or of the proceeds from the
    sale thereof), but does not require the owner to pay any portion
    of the LOE or development costs on the leased acreage. Royalties
    may be either landowners royalties, which are reserved by
    the owner of the leased acreage at the time the lease is
    granted, or overriding royalties, which are usually reserved by
    an owner of the leasehold in connection with a transfer to a
    subsequent owner.
    SEC.  The United States Securities and Exchange
    Commission.
    Standardized Measure.  Future cash inflows from
    proved oil and natural gas reserves, less future LOE,
    development costs, and income taxes, discounted at
    10 percent per annum to reflect the timing of future net
    cash flows. Standardized Measure differs from
    PV-10
    because Standardized Measure includes the effect of estimated
    future income taxes.
    Successful Well.  A well capable of producing
    oil and/or
    natural gas in commercial quantities.
    Tertiary Recovery.  An enhanced recovery
    operation, such as HPAI, that normally occurs after
    waterflooding in which chemicals or natural gasses are used as
    the injectant.
    Undeveloped Acreage.  Lease acreage on which
    wells have not been drilled or completed to a point that would
    permit the production of commercial quantities of oil or natural
    gas regardless of whether such acreage contains proved reserves.
    Unit.  A specifically defined area within which
    acreage is treated as a single consolidated lease for operations
    and for allocations of costs and benefits without regard to
    ownership of the acreage. Units are established for the purpose
    of recovering oil and natural gas from specified zones or
    formations.
    Unsuccessful Well.  A well incapable of
    producing oil
    and/or
    natural gas in commercial quantities.
    Waterflood.  A secondary recovery operation in
    which water is injected into the producing formation in order to
    maintain reservoir pressure and force oil toward and into the
    producing wells.
    Working Interest.  An interest in an oil or
    natural gas lease that gives the owner the right to drill for
    and produce oil and natural gas on the leased acreage and
    requires the owner to pay a share of the LOE and development
    costs.
    Workover.  Operations on a producing well to
    restore or increase production. iv




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ENCORE
    ACQUISITION COMPANY
   PART I ITEMS 1
    and 2.  BUSINESS AND PROPERTIES  General
  Our Business.
  
    the Cedar Creek Anticline (CCA) in the Williston
    Basin of Montana and North Dakota;
    the Permian Basin of West Texas and southeastern New Mexico;
    the Rockies, which includes non-CCA assets in the Williston, Big
    Horn, and Powder River Basins of Montana, North Dakota, and
    Wyoming, and the Paradox Basin of southeastern Utah; and
    the Mid-Continent area, which includes the Arkoma and Anadarko
    Basins of Oklahoma, the North Louisiana Salt Basin, and the East
    Texas Basin.       1




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ENCORE
    ACQUISITION COMPANY
        Financial Information About Segments.
  Proved Reserves.
  Most Valuable Asset.
  Drilling.
 2




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ENCORE
    ACQUISITION COMPANY
  Oil and Natural Gas Reserve
    Replacement.
  Year Ended December 31,


Three-Year2007


2006


2005


Average(In MBOE, except percentages)Acquisition Reserve Replacement:Changes in Proved Reserves:Acquisitions of
    minerals-in-place


43,146



64



14,796



19,335Divided by:Production


13,539



11,244



10,381



11,721Acquisition Reserve Replacement


318
%


1
%


142
%


165
%Development Reserve Replacement:Changes in Proved Reserves:Extensions, discoveries, and improved recovery


15,983



27,504



19,158



20,882Revisions of estimates


896



(7,461
)


(928
)


(2,498
)Total development program


16,879



20,043



18,230



18,384Divided by:Production


13,539



11,244



10,381



11,721Development Reserve Replacement


125
%


178
%


176
%


157
%Total Reserve Replacement:Changes in Proved Reserves:Acquisitions of
    minerals-in-place


43,146



64



14,796



19,335Extensions, discoveries, and improved recovery


15,983



27,504



19,158



20,882Revisions of estimates


896



(7,461
)


(928
)


(2,498
)Total reserve additions


60,025



20,107



33,026



37,719Divided by:Production


13,539



11,244



10,381



11,721Total Reserve Replacement


443
%


179
%


318
%


322
%      3




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ENCORE
    ACQUISITION COMPANY
  Business
    Strategy
    
    Maintain an active development program to maximize existing
    reserves and production.  Our technological
    expertise, combined with our proficient field operations and
    reservoir engineering, has allowed us to increase production and
    reserves on our properties through infill, offset, and re-entry
    drilling, workovers, and recompletions. Our plan is to maintain
    an inventory of exploitation and development projects that
    provide a good source of future production.
    Utilize enhanced oil recovery techniques to maximize existing
    reserves and production.  We budget a portion of
    internally generated cash flows for secondary and tertiary
    recovery projects, including HPAI, that are longer-term in
    nature to increase production and proved reserves on our
    properties. In the CCA, we have successfully used HPAI
    techniques to increase our production. Throughout our Williston
    and Permian Basin properties, we have successfully used
    waterfloods to increase production. On certain of our
    non-operated properties in the Rockies, a tertiary recovery
    technique that uses carbon dioxide instead of water is being
    used successfully. Throughout our Bell Creek properties, we have
    initiated a polymer injection program. We believe that these
    enhanced oil recovery projects will continue to be a source of
    reserve and production growth.
    Expand our reserves, production, and development inventory
    through a disciplined acquisition program.  Using
    our experience, we have developed and refined an acquisition
    program designed to increase our reserves and complement our
    core properties. We have a staff of engineering and geoscience
    professionals who manage our core properties and use their
    experience and expertise to target and evaluate attractive
    acquisition opportunities. Following an acquisition, our
    technical professionals seek to enhance the value of the new
    assets through a proven development and exploitation program. We
    will continue to evaluate acquisition opportunities with the
    same disciplined commitment to acquire assets that fit our
    existing portfolio of properties and create value for our
    shareholders.
    Explore for reserves.  With the current
    commodity price environment, we believe exploration programs can
    provide a rate of return comparable to property acquisitions in
    certain areas. We seek to acquire undeveloped acreage
    and/or enter
    into development arrangements to explore in areas that
    complement our existing portfolio of properties. Successful
    exploration projects would expand our existing fields and could
    set up multi-well exploitation projects in the future.
    Operate in a cost effective, efficient, and safe manner.  As of December 31, 2007, we operated
    properties representing approximately 86 percent of our
    proved reserves, which allows us to control capital allocation,
    operate in a safe manner, and control timing of investments.  Challenges to Implementing Our Strategy.
  Operations
   4




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ENCORE
    ACQUISITION COMPANY
    Production
    and Price History
    Year Ended December 31,2007


2006


2005Total Production Volumes:Oil (MBbls)


9,545



7,335



6,871Natural gas (MMcf)


23,963



23,456



21,059Combined (MBOE)


13,539



11,244



10,381Average Daily Production Volumes:Oil (Bbls/D)


26,152



20,096



18,826Natural gas (Mcf/D)


65,651



64,262



57,696Combined (BOE/D)


37,094



30,807



28,442Average Realized Prices:Oil (per Bbl)

$
58.96


$
47.30


$
44.82Natural gas (per Mcf)


6.26



6.24



7.09Combined (per BOE)


52.66



43.87



44.05Average Costs per BOE:Lease operations expense

$
10.59


$
8.73


$
6.72Production, ad valorem, and severance taxes


5.51



4.43



4.39Depletion, depreciation, and amortization


13.59



10.09



8.25Exploration


2.05



2.71



1.39Derivative fair value loss (gain)


8.31



(2.17
)


0.51General and administrative


2.89



2.06



1.67Provision for doubtful accounts


0.43



0.18



0.02Other operating expense


1.26



0.71



0.89Marketing loss (gain)


(0.11
)


0.09



  5




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ENCORE
    ACQUISITION COMPANY
  Productive
    Wells
    Oil Wells


Natural Gas WellsAverage








AverageGross


Net


Working


Gross


Net


WorkingWells(a)


Wells


Interest


Wells(a)


Wells


InterestCCA


759



674



89
%


17



4



26
%Permian Basin


1,985



774



39
%


568



272



48
%Rockies


1,379



817



59
%


61



44



72
%Mid-Continent


230



138



60
%


546



145



27
%Total


4,353



2,403



55
%


1,192



465



39
%     (a)
    
    Our total wells include 3,056 operated wells and 2,489
    non-operated wells. At December 31, 2007, 58 of our wells
    had multiple completions. 6




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ENCORE
    ACQUISITION COMPANY
   Acreage
    Gross


NetAcreage


AcreageCCA:Developed


129,853



117,763Undeveloped


143,706



112,944273,559



230,707Permian Basin:Developed


63,814



39,025Undeveloped


15,634



14,65579,448



53,680Rockies:Developed


225,290



141,213Undeveloped


650,054



452,875875,344



594,088Mid-Continent:Developed


63,214



39,189Undeveloped


273,815



179,163337,029



218,352Total:Developed


482,171



337,190Undeveloped


1,083,209



759,6371,565,380



1,096,827  7




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ENCORE
    ACQUISITION COMPANY
  Drilling
    Results
    Year Ended December 31,2007


2006


2005Gross


Net


Gross


Net


Gross


NetDevelopment Wells:Productive


165



62



182



72



242



145Dry holes


5



3



4



3



4



2170



65



186



75



246



147Exploratory Wells:Productive


63



21



71



19



34



22Dry holes


5



3



14



8



47



4268



24



85



27



81



64Total:Productive


228



83



253



91



276



167Dry holes


10



6



18



11



51



44238



89



271



102



327



211   Present
    Activities
    Delivery
    Commitments and Marketing
       8




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ENCORE
    ACQUISITION COMPANY
      Competition
        Environmental
    Matters and Regulation
  General.
  
    require the acquisition of various permits before development
    commences;
    require the installation of expensive pollution control
    equipment;
    enjoin some or all of the operations of facilities deemed in
    non-compliance with permits;
    restrict the types, quantities, and concentration of various
    substances that can be released into the environment in
    connection with oil and natural gas development, production, and
    transportation activities;
    restrict the way in which wastes are handled and disposed;
    limit or prohibit development activities on certain lands lying
    within wilderness, wetlands, areas inhabited by threatened or
    endangered species, and other protected areas; 9




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ENCORE
    ACQUISITION COMPANY
   
    require remedial measures to mitigate pollution from former and
    ongoing operations, such as requirements to close pits and plug
    abandoned wells;
    impose substantial liabilities for pollution resulting from
    operations; and
    require preparation of a Resource Management Plan, Environmental
    Assessment
    and/or an
    Environmental Impact Statement for operations affecting federal
    lands or leases.      Waste Handling.
  Site Remediation.
   10




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ENCORE
    ACQUISITION COMPANY
        Water Discharges.
   11




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ENCORE
    ACQUISITION COMPANY
    Air Emissions.
    Massachusetts,
    et al. v. EPA,
  Activities on Federal Lands.
  Occupational Safety and Health Act (OSH Act) and
    Other Laws and Regulation.
 12




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ENCORE
    ACQUISITION COMPANY
  and/or
    Other
    Regulation of the Oil and Natural Gas Industry
      Development and Production.
  
    the location of wells;
    the method of developing and casing wells;
    the surface use and restoration of properties upon which wells
    are drilled;
    the plugging and abandoning of wells; and
    notice to surface owners and other third parties.   13




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ENCORE
    ACQUISITION COMPANY
    Interstate Crude Oil
    Transportation.
  Natural Gas Gathering.
    Sales of Natural Gas.
 14




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ENCORE
    ACQUISITION COMPANY
    State Regulation.
    Federal, State, or Native American Leases. on-site
  Operating
    Hazards and Insurance
      Employees
    Principal
    Executive Office
  (817) 877-9955.
 15




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ENCORE
    ACQUISITION COMPANY
  Available
    Information
  www.encoreacq.com Form 10-K, Form 10-Q, Form 8-K, 1-800-SEC-0330. www.sec.gov
          Properties
  Nature
    of Our Ownership Interests
  PV-10
  Proved Reserve Quantities


PV-102007 Net Production


at December 31, 2007


at December 31, 2007Natural











NaturalOil


Gas


Total


Percent


Oil


Gas


Total


Percent


Amount (a)


Percent(MBbls)


(MMcf)


(MBOE)





(MBbls)


(MMcf)


(MBOE)





(In thousands)CCA


4,426



1,122



4,614



34%



113,519



14,763



115,979



50%


$
2,074,429



46%Permian Basin


1,214



8,937



2,703



20%



24,678



133,427



46,916



20%



828,921



19%Rockies


3,434



1,368



3,662



27%



47,842



18,499



50,925



22%



1,305,723



29%Mid-Continent


471



12,536



2,560



19%



2,548



89,758



17,508



8%



259,446



6%Total


9,545



23,963



13,539



100%



188,587



256,447



231,328



100%


$
4,468,519



100%     (a)
    
    Giving effect to commodity derivative contracts, our
    PV-10 would
    have been decreased by $13.4 million at December 31,
    2007. Standardized Measure at December 31, 2007 was
    $3.3 billion. Standardized Measure differs from
    PV-10 by
    $1.2 billion because Standardized Measure includes the
    effects of future income taxes. Since we are taxed at the
    corporate level, future income taxes are determined on a
    combined property basis and cannot be accurately subdivided
    among our core areas. Therefore, we feel
    PV-10
    provides the best method for assessing the relative value of
    each of our areas. 16




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ENCORE
    ACQUISITION COMPANY
   PV-10
  Form EIA-23. Form EIA-23,
  
  CCA
    Properties  Montana and North Dakota
    six-mile-wide
 17




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ENCORE
    ACQUISITION COMPANY
      
    acquisition of additional interests;
    effective management of the existing wellbores;
    the addition of strategically positioned new horizontal and
    vertical wellbores;
    re-entry horizontal drilling using existing wellbores;
    waterflood enhancements; and
    implementation of our HPAI program.          HPAI.
     18




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ENCORE
    ACQUISITION COMPANY
  NPI.
  Permian
    Basin Properties  West Texas and New
    Mexico
  West
    Texas
           19




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
      New
    Mexico
    
    joint development agreements;
    agreements with major oil and natural gas companies;
    drill-to-earn agreements;
    farm-outs of close-in exploitation opportunities; and
    establishing built-in partnerships with other independent
    exploration companies.        Mid-Continent
    Properties  Oklahoma, Arkansas, East Texas, Kansas,
    and North Louisiana
  Oklahoma,
    Arkansas, and Kansas
      North
    Louisiana Salt Basin and East Texas Basin
   20




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
      Rockies
    Properties  Montana, North Dakota, Wyoming, and
    Utah
  Big Horn
    Basin  Montana and Wyoming
        Williston
    Basin  Montana and North Dakota
        Bell
    Creek  Montana
   21




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
      Paradox
    Basin  Utah
      Title to
    Properties
      
    royalties, overriding royalties, NPIs, and other burdens under
    oil and natural gas leases;
    contractual obligations, including, in some cases, development
    obligations arising under joint operating agreements, farmout
    agreements, production sales contracts, and other agreements
    that may affect the properties or their titles;
    liens that arise in the normal course of operations, such as
    those for unpaid taxes, statutory liens securing unpaid
    suppliers and contractors, and contractual liens under joint
    operating agreements;
    pooling, unitization and communitization agreements,
    declarations, and orders; and
    easements, restrictions, rights-of-way, and other matters that
    commonly affect property.     ITEM 1A.  RISK
    FACTORS  Please carefully consider the following factors together with
    all of the other information included in this Report. If any of
    the following risks and uncertainties were actually to occur,
    our business, financial condition, or results of operations
    could be materially adversely affected. In that case, the
    trading price of our common stock could decline and an investor
    could lose all or part of
    his/her
    investment.
 22




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  Oil
    and natural gas prices are very volatile. A decline in commodity
    prices could materially and adversely affect our financial
    condition, results of operations, and cash flows.
    
    domestic and foreign supply of and demand for oil and natural
    gas;
    weather conditions;
    overall domestic and global economic conditions;
    political and economic conditions in oil and natural gas
    producing countries, including those in the Middle East and
    South America;
    actions of the Organization of Petroleum Exporting Countries and
    other state-controlled oil companies relating to oil price and
    production controls;
    impact of the U.S. dollar exchange rates on oil and natural
    gas prices;
    technological advances affecting energy consumption and energy
    supply;
    armed conflicts in oil and natural gas producing regions;
    domestic and foreign governmental regulations and taxation;
    the impact of energy conservation efforts;
    the proximity, capacity, cost, and availability of oil and
    natural gas pipelines and other transportation facilities;
    the availability of refining capacity; and
    the price and availability of alternative fuels.    
    negatively impact the value of our reserves, because declines in
    oil and natural gas prices would reduce the amount of oil and
    natural gas that we can produce economically;
    reduce the amount of cash flow available for capital
    expenditures and repayment of indebtedness; and
    limit our ability to borrow money or raise additional capital.  An
    increase in the differential between the NYMEX or other
    benchmark prices of oil and natural gas and the wellhead price
    we receive could significantly affect our financial condition,
    results of operations, and cash flows.
   23




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ENCORE
    ACQUISITION COMPANY
    Our
    estimated proved reserves are based on many assumptions that may
    prove to be inaccurate. Any material inaccuracies in these
    reserve estimates or underlying assumptions will materially
    affect the quantities and present value of our
    reserves.
          Disclosures about Oil
    and Gas Producing Activities
  Our
    oil and natural gas reserves naturally decline and the failure
    to replace our reserves could adversely affect our financial
    condition.
     24




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
    The
    results of HPAI techniques are uncertain.
    Future
    price declines may result in a write-down of our asset carrying
    values, which could have a material adverse effect on our
    results of operations and limit our ability to borrow funds
    under our revolving credit facility.
    If we
    do not make acquisitions on economically acceptable terms, our
    future growth will be limited.
    
    unable to identify attractive acquisition candidates or
    negotiate acceptable purchase contracts with them;
    unable to obtain financing for these acquisitions on
    economically acceptable terms; or
    outbid by competitors.    The
    failure to properly manage growth through acquisitions could
    adversely affect our results of operations.
    
    diversion of management attention from existing operations;
    unexpected losses of key employees, customers, and suppliers of
    the acquired business;
    conforming the financial, technological, and management
    standards, processes, procedures, and controls of the acquired
    business with those of our existing operations; and
    increasing the scope, geographic diversity, and complexity of
    our operations. 25




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
     Any
    acquisitions we complete are subject to substantial risks that
    would adversely affect our financial condition and results of
    operations.
    
    the validity of our assumptions about reserves, future
    production, revenues, capital expenditures, and operating
    expenses and costs, including synergies;
    an inability to integrate the businesses we acquire successfully;
    a decrease in our liquidity by using a significant portion of
    our available cash or borrowing capacity to finance acquisitions;
    a significant increase in our interest expense or financial
    leverage if we incur additional debt to finance acquisitions;
    the assumption of unknown liabilities, losses or costs for which
    we are not indemnified or for which our indemnity is inadequate;
    the diversion of managements attention from other business
    concerns;
    an inability to hire, train, or retain qualified personnel to
    manage and operate our growing business and assets;
    natural disasters;
    the incurrence of other significant charges, such as impairment
    of goodwill or other intangible assets, asset devaluation, or
    restructuring charges;
    unforeseen difficulties encountered in operating in new
    geographic areas; and
    customer or key employee losses at the acquired businesses.      A
    substantial portion of our producing properties is located in
    one geographic area and adverse developments in any of our
    operating areas would negatively affect our financial condition
    and results of operations.
   26




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  Our
    commodity derivative contract activities could result in
    financial losses or could reduce our income.
      
    a counterparty may not perform its obligation under the
    applicable derivative instrument; and
    there may be a change in the expected differential between the
    underlying commodity price in the derivative instrument and the
    actual price received, which may result in payments to our
    derivative counterparty that are not accompanied by our receipt
    of higher prices from our production in the field.    We
    have limited control over the activities on properties we do not
    operate.
    Our
    development and exploratory drilling efforts may not be
    profitable or achieve our targeted returns.
     27




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
      Developing
    and producing oil and natural gas are costly and high-risk
    activities with many uncertainties that could adversely affect
    our financial condition or results of operations.
    
    high costs, shortages or delivery delays of rigs, equipment,
    labor, or other services;
    unexpected operational events
    and/or
    conditions;
    reductions in oil and natural gas prices;
    increases in severance taxes;
    limitations in the market for oil and natural gas;
    adverse weather conditions and natural disasters;
    facility or equipment malfunctions, and equipment failures or
    accidents;
    title problems;
    pipe or cement failures and casing collapses;
    compliance with environmental and other governmental
    requirements;
    environmental hazards, such as natural gas leaks, oil spills,
    pipeline ruptures, and discharges of toxic gases;
    lost or damaged oilfield development and service tools;
    unusual or unexpected geological formations, and pressure or
    irregularities in formations;
    loss of drilling fluid circulation;
    fires, blowouts, surface craterings, and explosions;
    uncontrollable flows of oil, natural gas, or well
    fluids; and
    loss of leases due to incorrect payment of royalties.    Secondary
    and tertiary recovery techniques may not be successful, which
    could adversely affect our financial condition or results of
    operations.
   28




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ENCORE
    ACQUISITION COMPANY
    
    lower-than-expected production;
    longer response times;
    higher capital costs;
    shortages of equipment; and
    lack of technical expertise.    Our
    operations are subject to operational hazards and unforeseen
    interruptions for which we may not be adequately
    insured.
      Terrorist
    activities and the potential for military and other actions
    could adversely affect our business.
   29




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  Our
    development, exploitation, and exploration operations require
    substantial capital, and we may be unable to obtain needed
    financing on satisfactory terms.
    Shortages
    of rigs, equipment and crews could delay our operations and
    reduce our cash available for distribution.
    The
    loss of key personnel could adversely affect our
    business.
      Our
    business depends in part on gathering and transportation
    facilities owned by others. Any limitation in the availability
    of those facilities could interfere with our ability to market
    our oil and natural gas production and could harm our
    business.
   30




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ENCORE
    ACQUISITION COMPANY
  Competition
    in the oil and natural gas industry is intense, and many of our
    competitors have greater financial, technological, and other
    resources than we do. As a result, we may be unable to
    effectively compete with larger competitors.
    We are
    subject to complex federal, state, local, and other laws and
    regulations that could adversely affect the cost, manner or
    feasibility of conducting our operations.
      We
    have significant indebtedness and may incur significant
    additional indebtedness, which could negatively impact our
    financial condition, results of operations, and business
    prospects.
      
    our ability to obtain additional financing, if necessary, for
    working capital, capital expenditures, acquisitions, or other
    purposes may be impaired or such financing may not be available
    on favorable terms; 31




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
   
    covenants contained in our existing and future debt arrangements
    will require us to meet financial tests that may affect our
    flexibility in planning for and reacting to changes in our
    business, including possible acquisition opportunities;
    we will need a substantial portion of our cash flow to make
    principal and interest payments on our indebtedness, reducing
    the funds that would otherwise be available for operations and
    future business opportunities; and
    our debt level will make us more vulnerable to competitive
    pressures, a downturn in our business, or the economy generally,
    than our competitors with less debt.  and/or
  ITEM 1B.UNRESOLVED
    STAFF COMMENTS
    ITEM 3.
    LEGAL
    PROCEEDINGS    ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   32




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES    High


Low2007Quarter ended December 31

$
38.55


$
30.59Quarter ended September 30

$
33.00


$
25.79Quarter ended June 30

$
29.96


$
24.21Quarter ended March 31

$
26.50


$
21.742006Quarter ended December 31

$
27.62


$
22.45Quarter ended September 30

$
30.97


$
22.63Quarter ended June 30

$
32.59


$
22.75Quarter ended March 31

$
36.84


$
28.16     Purchases
    of Equity Securities by the Issuer and Affiliated
    Purchasers
    Total Number of


Approximate DollarShares Purchased


Value of SharesTotal Number





as Part of Publicly


That May Yet Beof Shares


Average Price


Announced Plans


Purchased Under theMonth

Purchased


Paid per Share


or Programs


Plans or ProgramsOctober





$




November(a)


17,690


$
33.34



December





$




Total


17,690


$
33.34






$
50,000,000    (a)
    
    During the fourth quarter of 2007, certain employees surrendered
    shares of common stock to pay income tax withholding obligations
    in conjunction with vesting of restricted shares.    Dividends
   33




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
    Stock
    Performance Graph
    Comparison
    of Total Return Since January 1, 2003 Among Encore
    Acquisition Company, the Standard & Poors 500
    Index, and the
    Independent Oil and Gas Index
  
 34




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ENCORE
    ACQUISITION COMPANY
  ITEM 6.
    SELECTED
    FINANCIAL DATA    Year Ended December 31,(h)2007


2006


2005


2004


2003(In thousands, except per share and per unit data)Consolidated Statements of Operations Data:Revenues(a):Oil

$
562,817


$
346,974


$
307,959


$
220,649


$
176,351Natural gas


150,107



146,325



149,365



77,884



43,745Marketing(e)


42,021



147,563











Total revenues

$
754,945


$
640,862


$
457,324


$
298,533


$
220,096Net income

$
17,155


$
92,398


$
103,425
(b)

$
82,147


$
63,641
(c)Net income per common share(d):Basic

$
0.32


$
1.78


$
2.12


$
1.74


$
1.41Diluted

$
0.32


$
1.75


$
2.09


$
1.72


$
1.40Weighted average common shares outstanding(d):Basic


53,170



51,865



48,682



47,090



45,153Diluted


54,144



52,736



49,522



47,738



45,500Consolidated Statements of Cash Flows Data:Cash provided by (used in):Operating activities

$
319,707


$
297,333


$
292,269


$
171,821


$
123,818Investing activities


(929,556
)


(397,430
)


(573,560
)


(433,470
)


(153,747
)Financing activities


610,790



99,206



281,842



262,321



17,303Total Production Volumes:Oil (Bbls)


9,545



7,335



6,871



6,679



6,601Natural gas (Mcf)


23,963



23,456



21,059



14,089



9,051Combined (BOE)


13,539



11,244



10,381



9,027



8,110Average Realized Prices:Oil ($/Bbl)

$
58.96


$
47.30


$
44.82


$
33.04


$
26.72Natural gas ($/Mcf)


6.26



6.24



7.09



5.53



4.83Combined ($/BOE)


52.66



43.87



44.05



33.07



27.14Average Costs per BOE:Lease operations(f)

$
10.59


$
8.73


$
6.72


$
5.30


$
4.70Production, ad valorem, and severance taxes


5.51



4.43



4.39



3.36



2.71Depletion, depreciation, and amortization


13.59



10.09



8.25



5.38



4.13Exploration(f)


2.05



2.71



1.39



0.44



General and administrative(f)


2.89



2.06



1.67



1.33



1.12Derivative fair value loss (gain)(g)


8.31



(2.17
)


0.51



0.56



(0.11
)Provision for doubtful accounts


0.43



0.18



0.02







Other operating expense


1.26



0.71



0.89



0.56



0.43Marketing loss (gain)(e)


(0.11
)


0.09











   35




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  As of December 31,2007


2006


2005


2004


2003(In thousands)Proved Reserves:Oil (Bbls)


188,587



153,434



148,387



134,048



117,732Natural gas (Mcf)


256,447



306,764



283,865



234,030



138,950Combined (BOE)


231,328



204,561



195,698



173,053



140,890Consolidated Balance Sheets Data:Working capital

$
(16,220
)

$
(40,745
)

$
(56,838
)

$
(15,566
)

$
(52
)Total assets


2,784,561



2,006,900



1,705,705



1,123,400



672,138Total long-term debt


1,120,236



661,696



673,189



379,000



179,000Stockholders equity


948,155



816,865



546,781



473,575



358,975     (a)
    
    For 2007, 2006, 2005, 2004, and 2003 we reduced oil and natural
    gas revenues for NPI payments by $32.5 million,
    $23.4 million, $21.2 million, $12.6 million, and
    $5.8 million, respectively.(b)
    
    Net income for 2005 includes an after-tax loss on early
    redemption of debt of $12.2 million.(c)
    
    Net income for 2003 includes $0.9 million income from the
    cumulative effect of accounting change, net of tax, related to
    the adoption of SFAS No. 143, Accounting for Asset
    Retirement Obligations.(d)
    
    Net income per common share and weighted average common shares
    outstanding for 2004 and 2003 have been adjusted for the effects
    of the
    3-for-2
    stock split in July 2005.(e)
    
    In 2006, we began purchasing third-party oil Bbls from a
    counterparty other than to whom the Bbls were sold for
    aggregation and sale with our own equity production in various
    markets. These purchases assisted us in marketing our production
    by decreasing our dependence on individual markets. These
    activities allowed us to aggregate larger volumes, facilitated
    our efforts to maximize the prices we received for production,
    provided for a greater allocation of future pipeline capacity in
    the event of curtailments, and enabled us to reach other
    markets. In 2007, we discontinued purchasing oil from third
    party companies as market conditions changed and historical
    pipeline space was realized. Implementing this change in
    direction allowed us to focus on the marketing of our own equity
    production, leveraging newly gained pipeline space, and on
    delivering oil to various newly developed markets in an effort
    to maximize netback value to the wellhead. In March 2007, ENP
    acquired a natural gas pipeline from Anadarko as part of the Big
    Horn Basin acquisition. Natural gas volumes are purchased from
    numerous gas producers at the inlet to the pipeline and resold
    downstream to various local and off-system markets.(f)
    
    On January 1, 2006, we adopted the provisions of
    SFAS No. 123R, Share-Based Payment
    (SFAS 123R). Due to the adoption of
    SFAS 123R, non-cash equity-based compensation expense for
    2005, 2004, and 2003 has been reclassified to allocate the
    amount to the same respective income statement lines as the
    respective employees cash compensation. This resulted in
    increases in LOE of $1.3 million, $0.7 million, and
    $0.2 million during 2005, 2004, and 2003, respectively,
    increases in general and administrative (G&A)
    expense of $2.6 million, $1.1 million, and
    $0.4 million during 2005, 2004, and 2003, respectively, and
    increases in exploration expense of $41 thousand and $29
    thousand during 2005 and 2004, respectively.(g)
    
    During July 2006, we elected to discontinue hedge accounting
    prospectively for all of our remaining commodity derivative
    contracts which were previously accounted for as hedges. From
    that point forward, all mark-to-market gains or losses on all
    commodity derivative contracts are recorded in Derivative
    fair value loss (gain) while in periods prior to that
    point, only the ineffective portions of commodity derivative
    contracts which were designated as hedges were recorded in
    Derivative fair value loss (gain).(h)
    
    We acquired certain oil and natural gas properties and related
    assets in the Big Horn Basin and Williston Basins from Anadarko
    in March 2007 and April 2007, respectively. We disposed of
    certain oil and natural gas properties and related assets in the
    Mid-Continent in June 2007. We also acquired Crusader Energy
    Corporation (Crusader) in October 2005 and Cortez
    Oil & Gas, Inc. (Cortez) in April 2004. 36




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  The following discussion and analysis of our consolidated
    financial position and results of operations should be read in
    conjunction with our consolidated financial statements, the
    accompanying notes, and the supplemental oil and natural gas
    disclosures included in Item 8. Financial Statements
    and Supplementary Data. The following discussion and
    analysis contains forward-looking statements including, without
    limitation, statements relating to our plans, strategies,
    objectives, expectations, intentions, and resources. Actual
    results could differ materially from those stated in the
    forward-looking statements. We do not undertake to update,
    revise, or correct any of the forward-looking information unless
    required to do so under federal securities laws. Readers are
    cautioned that such forward-looking statements should be read in
    conjunction with our disclosures under the headings:
    Information Concerning Forward-Looking Statements
    below and Item 1A. Risk Factors.
  Introduction
    
    Overview of Business
    2007 Highlights
    2008 Outlook
    Results of Operations      
    Capital Commitments, Capital Resources, and Liquidity
    Changes in Prices
    Critical Accounting Policies and Estimates
    New Accounting Pronouncements
    Information Concerning Forward-Looking Statements  Overview
    of Business
    
    Maintaining an active development program to maximize existing
    reserves and production;
    Utilizing enhanced oil recovery techniques to maximize existing
    reserves and production;
    Expanding our reserves, production, and development inventory
    through a disciplined acquisition program;
    Exploring for reserves; and
    Operating in a cost effective, efficient, and safe manner.   37




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ENCORE
    ACQUISITION COMPANY
               38




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
      2007
    Highlights
    
    Oil and natural gas reserves as of December 31, 2007
    increased 13 percent to 231 MMBOE from 205 MMBOE
    as of December 31, 2006. We added 60.0 MMBOE of
    reserves, replacing 443 percent of the 13.5 MMBOE we
    produced. At December 31, 2007, oil reserves accounted for
    82 percent of total proved reserves and 68 percent of
    proved reserves were developed. The estimated
    PV-10 of our
    reserves as of December 31, 2007 increased by
    128 percent to $4.5 billion (using a 10 percent
    discount rate and constant prices of $96.01 per Bbl of oil and
    $7.47 per Mcf of natural gas) from $2.0 billion as of
    December 31, 2006 (using a 10 percent discount rate
    and constant prices of $61.06 per Bbl of oil and $5.48 per Mcf
    of natural gas). Our Standardized Measure at December 31,
    2007 was $3.3 billion, as compared to $1.5 billion at
    December 31, 2006. Standardized Measure differs from
    PV-10
    because Standardized Measure includes the effect of future
    income taxes.
    Our oil and natural gas revenues increased 45 percent to
    $712.9 million as compared to $493.3 million in 2006
    as a result of increased production volumes and higher average
    realized prices.
    Our average realized oil price, including the effects of
    commodity derivative contracts, increased $11.66 per Bbl to
    $58.96 per Bbl as compared to $47.30 per Bbl in 2006. Our
    average realized natural gas price, including the effects of
    commodity derivative contracts, remained virtually unchanged at
    $6.26 per Mcf as compared to $6.24 per Mcf in 2006.
    Production volumes increased 20 percent to 37,094 BOE/D as
    compared to 30,807 BOE/D in 2006, primarily as a result of our
    Big Horn Basin and Williston Basin acquisitions and our
    development program. Oil represented 71 percent and
    65 percent of our total production volumes in 2007 and
    2006, respectively.
    We invested $1.2 billion in oil and natural gas activities
    (excluding related asset retirement obligations of
    $8.4 million). Of this amount, we invested
    $367.5 million in development, exploitation, HPAI
    expansion, and exploration activities, which yielded
    228 gross (82.5 net) productive wells, and
    $840.3 million on acquisitions, primarily related to our
    Big Horn Basin and Williston Basin acquisitions. We operated
    between 7 and 12 drilling rigs during 2007, including 4 to 6
    rigs related to our West Texas joint development agreement with
    ExxonMobil.
    On March 7, 2007, we completed the Big Horn Basin
    acquisition.
    On April 11, 2007, we completed the Williston Basin
    acquisition.
    On June 29, 2007, we completed the Mid-Continent
    disposition.
    On September 17, 2007, ENP completed its IPO of 9,000,000
    common units and on October 11, 2007, the underwriters
    exercised their over-allotment option to purchase 1,148,400
    additional ENP common units. 39




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ENCORE
    ACQUISITION COMPANY
   2008
    Outlook
    Development and exploitation

$
260,000Exploration


166,000Acquisitions of leasehold acreage


19,000Total

$
445,000    40




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ENCORE
    ACQUISITION COMPANY
  Results
    of Operations
  Comparison
    of 2007 to 2006
  Oil and natural gas revenues and
    production.
  Year Ended December 31,2007


2006


Increase/ (Decrease)Revenues (in thousands):Oil wellhead

$
606,112


$
399,180


$
206,932Oil hedges


(43,295
)


(52,206
)


8,911Total oil revenues

$
562,817


$
346,974


$
215,843



62
%Natural gas wellhead

$
160,399


$
154,458


$
5,941Natural gas hedges


(10,292
)


(8,133
)


(2,159
)Total natural gas revenues

$
150,107


$
146,325


$
3,782



3
%Combined wellhead

$
766,511


$
553,638


$
212,873Combined hedges


(53,587
)


(60,339
)


6,752Total combined oil and natural gas revenues

$
712,924


$
493,299


$
219,625



45
%Average realized prices:Oil wellhead ($/Bbl)

$
63.50


$
54.42


$
9.08Oil hedges ($/Bbl)


(4.54
)


(7.12
)


2.58Total oil revenues ($/Bbl)

$
58.96


$
47.30


$
11.66



25
%Natural gas wellhead ($/Mcf)

$
6.69


$
6.59


$
0.10Natural gas hedges ($/Mcf)


(0.43
)


(0.35
)


(0.08
)Total natural gas revenues ($/Mcf)

$
6.26


$
6.24


$
0.02



0
%Combined wellhead ($/BOE)

$
56.62


$
49.24


$
7.38Combined hedges ($/BOE)


(3.96
)


(5.37
)


1.41Total combined oil and natural gas revenues ($/BOE)

$
52.66


$
43.87


$
8.79



20
%Total production volumes:Oil (MBbls)


9,545



7,335



2,210



30
%Natural gas (MMcf)


23,963



23,456



507



2
%Combined (MBOE)


13,539



11,244



2,295



20
%Average daily production volumes:Oil (Bbl/D)


26,152



20,096



6,056



30
%Natural gas (Mcf/D)


65,651



64,262



1,389



2
%Combined (BOE/D)


37,094



30,807



6,287



20
%Average NYMEX prices:Oil (per Bbl)

$
72.39


$
66.22


$
6.17



9
%Natural gas (per Mcf)

$
6.86


$
7.18


$
(0.32
)


(4
)%  41




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
        Mid-Continent
      Year Ended December 31,2007


2006Oil wellhead ($/Bbl)

$
63.50


$
54.42Average NYMEX ($/Bbl)

$
72.39


$
66.22Differential to NYMEX

$
(8.89
)

$
(11.80
)Oil wellhead to NYMEX percentage


88
%


82
%Natural gas wellhead ($/Mcf)

$
6.69


$
6.59Average NYMEX ($/Mcf)

$
6.86


$
7.18Differential to NYMEX

$
(0.17
)

$
(0.59
)Natural gas wellhead to NYMEX percentage


98
%


92
%    42




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
    Marketing revenues and expenses.
      Year Ended December 31,2007


2006(In thousands, except per BOE amounts)Marketing revenues

$
42,021


$
147,563Marketing expenses


(40,549
)


(148,571
)Marketing gain (loss)

$
1,472


$
(1,008
)Marketing revenues per BOE

$
3.10


$
13.12Marketing expenses per BOE


(2.99
)


(13.21
)Marketing gain (loss), per BOE

$
0.11


$
(0.09
)  43




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  Expenses.
  Year Ended December 31,2007


2006


Increase/ (Decrease)Expenses (in thousands):Production:Lease operations

$
143,426


$
98,194


$
45,232Production, ad valorem, and severance taxes


74,585



49,780



24,805Total production expenses


218,011



147,974



70,037



47
%Other:Depletion, depreciation, and amortization


183,980



113,463



70,517Exploration


27,726



30,519



(2,793
)General and administrative


39,124



23,194



15,930Derivative fair value loss (gain)


112,483



(24,388
)


136,871Provision for doubtful accounts


5,816



1,970



3,846Other operating


17,066



8,053



9,013Total operating


604,206



300,785



303,421



101
%Interest


88,704



45,131



43,573Income tax provision


14,476



55,406



(40,930
)Total expenses

$
707,386


$
401,322


$
306,064



76
%Expenses (per BOE):Production:Lease operations

$
10.59


$
8.73


$
1.86Production, ad valorem, and severance taxes


5.51



4.43



1.08Total production expenses


16.10



13.16



2.94



22
%Other:Depletion, depreciation, and amortization


13.59



10.09



3.50Exploration


2.05



2.71



(0.66
)General and administrative


2.89



2.06



0.83Derivative fair value loss (gain)


8.31



(2.17
)


10.48Provision for doubtful accounts


0.43



0.18



0.25Other operating


1.26



0.71



0.55Total operating


44.63



26.74



17.89



67
%Interest


6.55



4.01



2.54Income tax provision


1.07



4.93



(3.86
)Total expenses

$
52.25


$
35.68


$
16.57



46
%   Production expenses.
 44




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
      
    increases in prices paid to oilfield service companies and
    suppliers;
    increased operational activity to maximize production;
    HPAI expenses at the CCA; and
    higher salary levels for engineers and other technical
    professionals.    Depletion, depreciation, and amortization
    (DD&A) expense.
  Exploration expense.
  Year EndedDecember 31,


Increase/2007


2006


(Decrease)(In thousands)Dry holes

$
14,673


$
17,257


$
(2,584
)Geological and seismic


1,455



1,720



(265
)Delay rentals


784



670



114Impairment of unproved acreage


10,814



10,872



(58
)Total

$
27,726


$
30,519


$
(2,793
)   and/or
 45




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
    G&A expense.
  Derivative fair value loss (gain).
    Year EndedDecember 31,


Increase/2007


2006


(Decrease)(In thousands)Ineffectiveness on designated cash flow hedges

$



$
1,748


$
(1,748
)Mark-to-market loss (gain) on commodity derivative contracts


85,372



(31,205
)


116,577Premium amortization


41,051



13,926



27,125Settlements on commodity derivative contracts


(13,940
)


(8,857
)


(5,083
)Total derivative fair value loss (gain)

$
112,483


$
(24,388
)

$
136,871   Provision for doubtful accounts.
  Other operating expense.
  Interest expense.
    Year EndedDecember 31,


Increase/2007


2006


(Decrease)(In thousands)6.25% Notes

$
9,705


$
9,684


$
216.0% Notes


18,517



18,418



997.25% Notes


10,988



10,984



4Revolving credit facilities


46,085



3,609



42,476Other


3,409



2,436



973Total

$
88,704


$
45,131


$
43,573  46




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  Minority interest.
  Income taxes.
  Comparison
    of 2006 to 2005
  Oil and natural gas revenues and
    production.
  Year EndedDecember 31,


Increase/2006


2005


(Decrease)Revenues (in thousands):Oil wellhead

$
399,180


$
350,837


$
48,343Oil hedges


(52,206
)


(42,878
)


(9,328
)Total oil revenues

$
346,974


$
307,959


$
39,015



13
%Natural gas wellhead

$
154,458


$
165,794


$
(11,336
)Natural gas hedges


(8,133
)


(16,429
)


8,296Total natural gas revenues

$
146,325


$
149,365


$
(3,040
)


(2
)%Combined wellhead

$
553,638


$
516,631


$
37,007Combined hedges


(60,339
)


(59,307
)


(1,032
)Total combined oil and natural gas revenues

$
493,299


$
457,324


$
35,975



8
%Average realized prices:Oil wellhead ($/Bbl)

$
54.42


$
51.06


$
3.36Oil hedges ($/Bbl)


(7.12
)


(6.24
)


(0.88
)Total oil revenues ($/Bbl)

$
47.30


$
44.82


$
2.48



6
%Natural gas wellhead ($/Mcf)

$
6.59


$
7.87


$
(1.28
)Natural gas hedges ($/Mcf)


(0.35
)


(0.78
)


0.43Total natural gas revenues ($/Mcf)

$
6.24


$
7.09


$
(0.85
)


(12
)%Combined wellhead ($/BOE)

$
49.24


$
49.76


$
(0.52
)Combined hedges ($/BOE)


(5.37
)


(5.71
)


0.34Total combined oil and natural gas revenues ($/BOE)

$
43.87


$
44.05


$
(0.18
)


0
%Total production volumes:Oil (MBbls)


7,335



6,871



464



7
%Natural gas (MMcf)


23,456



21,059



2,397



11
%Combined (MBOE)


11,244



10,381



863



8
% 47




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  Year EndedDecember 31,


Increase/2006


2005


(Decrease)Average daily production volumes:Oil (Bbl/D)


20,096



18,826



1,270



7
%Natural gas (Mcf/D)


64,262



57,696



6,566



11
%Combined (BOE/D)


30,807



28,442



2,365



8
%Average NYMEX prices:Oil (per Bbl)

$
66.22


$
56.56


$
9.66



17
%Natural gas (per Mcf)

$
7.18


$
8.96


$
(1.78
)


(20
)%           48




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  Year Ended December 31,2006


2005Oil wellhead ($/Bbl)

$
54.42


$
51.06Average NYMEX ($/Bbl)

$
66.22


$
56.56Differential to NYMEX

$
(11.80
)

$
(5.50
)Oil wellhead to NYMEX percentage


82
%


90
%Natural gas wellhead ($/Mcf)

$
6.59


$
7.87Average NYMEX ($/Mcf)

$
7.18


$
8.96Differential to NYMEX

$
(0.59
)

$
(1.09
)Natural gas wellhead to NYMEX percentage


92
%


88
%       Marketing revenues and expenses.
  Marketing revenues

$
147,563Marketing expenses


(148,571
)Marketing loss

$
(1,008
)Marketing revenues per BOE

$
13.12Marketing expenses per BOE


(13.21
)Marketing loss per BOE

$
(0.09
)   Expenses.
 49




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
      Year EndedDecember 31,


Increase/2006


2005


(Decrease)Expenses (in thousands):Production:Lease operations

$
98,194


$
69,744


$
28,450Production, ad valorem, and severance taxes


49,780



45,601



4,179Total production expenses


147,974



115,345



32,629



28
%Other:Depletion, depreciation, and amortization


113,463



85,627



27,836Exploration


30,519



14,443



16,076General and administrative


23,194



17,268



5,926Derivative fair value loss (gain)


(24,388
)


5,290



(29,678
)Loss on early redemption of debt






19,477



(19,477
)Provision for doubtful accounts


1,970



231



1,739Other operating


8,053



9,254



(1,201
)Total operating


300,785



266,935



33,850



13
%Interest


45,131



34,055



11,076Income tax provision


55,406



53,948



1,458Total expenses

$
401,322


$
354,938


$
46,384



13
%Expenses (per BOE):Production:Lease operations

$
8.73


$
6.72


$
2.01Production, ad valorem, and severance taxes


4.43



4.39



0.04Total production expenses


13.16



11.11



2.05



18
%Other:Depletion, depreciation, and amortization


10.09



8.25



1.84Exploration


2.71



1.39



1.32General and administrative


2.06



1.67



0.39Derivative fair value loss (gain)


(2.17
)


0.51



(2.68
)Loss on early redemption of debt






1.88



(1.88
)Provision for doubtful accounts


0.18



0.02



0.16Other operating


0.71



0.89



(0.18
)Total operating


26.74



25.72



1.02



4
%Interest


4.01



3.28



0.73Income tax provision


4.93



5.20



(0.27
)Total expenses

$
35.68


$
34.20


$
1.48



4
%   Production expenses.
 50




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
      
    increases in prices paid to oilfield service companies and
    suppliers due to the higher price environment;
    increased operational activity to maximize production;
    the operation of wells with higher operating costs (which
    offered acceptable rates of return due to increases in oil and
    natural gas prices);
    higher than expected operating costs in the Anadarko Basin and
    Arkoma Basin of Oklahoma and the North Louisiana Salt Basin;
    higher salary levels for engineers and other technical
    professionals;
    expensing HPAI costs associated with the Little Beaver Phase 2
    program; and
    increased equity-based compensation expense attributable to
    equity instruments granted to employees.      DD&A expense.
  Exploration expense.
 51




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
    Year Ended December 31,


Increase/2006


2005


(Decrease)(In thousands)Dry holes

$
17,257


$
8,632


$
8,625Geological and seismic


1,720



3,137



(1,417
)Delay rentals


670



635



35Impairment of unproved acreage


10,872



2,039



8,833Total

$
30,519


$
14,443


$
16,076   G&A expense.
    Derivative fair value loss (gain).
  Year EndedDecember 31,


Increase/2006


2005


(Decrease)(In thousands)Ineffectiveness on designated cash flow hedges

$
1,748


$
8,371


$
(6,623
)Mark-to-market loss (gain):Interest rate swap






462



(462
)Commodity derivative contracts


(31,205
)


(10,539
)


(20,666
)Premium amortization


13,926



8,489



5,437Settlements:Interest rate swap






(312
)


312Commodity derivative contracts


(8,857
)


(1,181
)


(7,676
)Total derivative fair value loss (gain)

$
(24,388
)

$
5,290


$
(29,678
)   Loss on early redemption of debt. 3 8 3 8 3 8
  Interest expense. 3 8
 52




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
    Year Ended December 31,


Increase/2006


2005


(Decrease)(In thousands)83/8% Notes

$



$
8,079


$
(8,079
)6.25% Notes


9,684



9,657



276.0% Notes


18,418



8,675



9,7437.25% Notes


10,984



1,153



9,831Revolving credit facility


3,609



5,834



(2,225
)Other


2,436



657



1,779Total

$
45,131


$
34,055


$
11,076   Income taxes.
  Capital
    Commitments, Capital Resources, and Liquidity
  Capital commitments.
  
    Development, exploitation, and exploration of our oil and
    natural gas properties;
    Acquisitions of oil and natural gas properties and leasehold
    acreage;
    Funding of necessary working capital; and
    Contractual obligations.  Development, exploitation, and exploration of oil and natural
    gas properties.
  Year Ended December 31,2007


2006


2005(In thousands)Development and exploitation

$
265,744


$
228,014


$
236,467Exploration


97,453



95,205



57,046HPAI


4,272



25,470



32,053Total

$
367,469


$
348,689


$
325,566    53




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
      Acquisitions of oil and natural gas properties and leasehold
    acreage.
  Year Ended December 31,2007


2006


2005(In thousands)Acquisitions of proved property

$
787,988


$
4,486


$
224,469Acquisitions of leasehold acreage


52,306



24,462



21,205Total

$
840,294


$
28,948


$
245,674         Funding of necessary working capital.
   54




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
      Off-balance sheet arrangements.
  Contractual obligations.
  Payments Due by PeriodContractual Obligations and Commitments

Total


2008


2009-2010


2011-2012


Thereafter(In thousands)6.25% Notes(a)

$
210,938


$
9,375


$
18,750


$
18,750


$
164,0636.0% Notes(a)


444,000



18,000



36,000



36,000



354,0007.25% Notes(a)


258,750



10,875



21,750



21,750



204,375Revolving credit facilities(a)


696,052



32,913



65,827



65,827



531,485Derivative obligations(b)


67,781



32,075



35,706







Development commitments(c)


102,640



93,291



9,349







Operating leases and commitments(d)


18,583



3,712



6,507



5,757



2,607Asset retirement obligations(e)


156,008



2,379



2,275



2,275



149,079Total

$
1,954,752


$
202,620


$
196,164


$
150,359


$
1,405,609     (a)
    
    Amounts include both principal and projected interest payments.
    Please read Note 8 of Notes to Consolidated Financial
    Statements included in Item 8. Financial Statements
    and Supplementary Data for additional information
    regarding our long-term debt.(b)
    
    Derivative obligations represent net liabilities for commodity
    derivative contracts that were valued as of December 31,
    2007. With the exception of $51.9 million of deferred
    premiums on commodity derivative contracts, the ultimate
    settlement of our remaining derivative obligations are unknown
    because they are subject to continuing market risk. Please read
    Item 7A. Quantitative and Qualitative Disclosures
    about Market Risk and Note 13 of Notes to
    Consolidated Financial Statements included in Item 8.
    Financial Statements and Supplementary Data for additional
    information regarding our derivative obligations.(c)
    
    Development commitments include: authorized purchases for work
    in process of $50.9 million; future minimum payments for
    drilling rig operations of $45.7 million; and
    $6.0 million for minimum capital obligations associated
    with the remaining 6 commitment wells to be drilled under the
    ExxonMobil joint development agreement. Also at
    December 31, 2007, we had $203.9 million of authorized
    purchases not 55




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  placed to vendors (authorized AFEs), which were not accrued and
    are excluded from the above table but are budgeted for and are
    expected to be made unless circumstances change.(d)
    
    Operating leases and commitments include office space and
    equipment obligations that have non-cancelable lease terms in
    excess of one year of $17.2 million and future minimum
    payments for other operating commitments of $1.4 million.
    Please read Note 4 of Notes to Consolidated Financial
    Statements included in Item 8. Financial Statements
    and Supplementary Data for additional information
    regarding our operating leases.(e)
    
    Asset retirement obligations represent the undiscounted future
    plugging and abandonment expenses on oil and natural gas
    properties and related facilities disposal at the completion of
    field life. Please read Note 5 of Notes to Consolidated
    Financial Statements included in Item 8. Financial
    Statements and Supplementary Data for additional
    information regarding our asset retirement obligations.  Other contingencies and commitments.
      Capital resources.
  
    Cash flows from operating activities;
    Cash flows from financing activities; and
    Proceeds from sales of non-strategic assets.  Cash flows from operating activities.
 56




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
      Cash flows from investing activities.
    Cash flows from financing activities.
        3 8
 57




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  Liquidity.
  Internally generated cash flows.
  Revolving credit facilities.
  Encore Acquisition Company Senior Secured Credit Agreement
        Applicable Margin for


Applicable Margin forRatio of Total Outstanding Borrowings to Borrowing Base

Eurodollar Loans


Base Rate LoansLess than .50 to 1


1.000
%


0.000
%Greater than or equal to .50 to 1 but less than .75 to 1


1.250
%


0.000
%Greater than or equal to .75 to 1 but less than .90 to 1


1.500
%


0.250
%Greater than or equal to .90 to 1


1.750
%


0.500
%    58




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
      
    a prohibition against incurring debt, subject to permitted
    exceptions;
    a prohibition against paying dividends or making distributions,
    purchasing or redeeming capital stock, or prepaying
    indebtedness, subject to permitted exceptions;
    a restriction on creating liens on our and our restricted
    subsidiaries assets, subject to permitted exceptions;
    restrictions on merging and selling assets outside the ordinary
    course of business;
    restrictions on use of proceeds, investments, transactions with
    affiliates, or change of principal business;
    a provision limiting oil and natural gas hedging transactions
    (other than puts) to a volume not exceeding 75 percent of
    anticipated production from proved producing reserves;
    a requirement that we maintain a ratio of consolidated current
    assets to consolidated current liabilities of not less than 1.0
    to 1.0; and
    a requirement that we maintain a ratio of consolidated EBITDA
    (as defined in the EAC Credit Agreement) to the sum of
    consolidated net interest expense plus letter of credit fees of
    not less than 2.5 to 1.0.      CommitmentRatio of Total Outstanding Borrowings to Borrowing Base

Fee PercentageLess than .50 to 1


0.250
%Greater than or equal to .50 to 1 but less than .75 to 1


0.300
%Greater than or equal to .75 to 1 but less than .90 to 1


0.375
%Greater than or equal to .90 to 1


0.375
%     Encore Energy Partners Operating LLC Credit Agreement
     59




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
            
    a prohibition against incurring debt, subject to permitted
    exceptions;
    a prohibition against purchasing or redeeming capital stock, or
    prepaying indebtedness, subject to permitted exceptions;
    a restriction on creating liens on the assets of ENP, OLLC and
    its restricted subsidiaries, subject to permitted exceptions;
    restrictions on merging and selling assets outside the ordinary
    course of business;
    restrictions on use of proceeds, investments, transactions with
    affiliates, or change of principal business;
    a provision limiting oil and natural gas hedging transactions
    (other than puts) to a volume not exceeding 75 percent of
    anticipated production from proved producing reserves;
    a requirement that OLLC maintain a ratio of consolidated current
    assets to consolidated current liabilities of not less than 1.0
    to 1.0;
    a requirement that OLLC maintain a ratio of consolidated EBITDA
    (as defined in the OLLC Credit Agreement) to the sum of
    consolidated net interest expense plus letter of credit fees of
    not less than 1.5 to 1.0;
    a requirement that OLLC maintain a ratio of consolidated EBITDA
    (as defined in the OLLC Credit Agreement) to consolidated senior
    interest expense of not less than 2.5 to 1.0; and
    a requirement that OLLC maintain a ratio of consolidated funded
    debt (excluding certain related party debt) to consolidated
    adjusted EBITDA (as defined in the OLLC Credit Agreement) of not
    more than 3.5 to 1.0.       60




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
        Indentures governing our senior subordinated
    notes.
  
    incur additional indebtedness;
    pay dividends on our capital stock or redeem, repurchase, or
    retire our capital stock or subordinated indebtedness;
    make investments;
    incur liens;
    create any consensual limitation on the ability of our
    restricted subsidiaries to pay dividends, make loans, or
    transfer property to us;
    engage in transactions with our affiliates;
    sell assets, including capital stock of our
    subsidiaries; and
    consolidate, merge, or transfer assets.    Debt covenants.
  Current capitalization.
  Changes
    in Prices
   61




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
    Year Ended December 31,2007


2006


2005Average Realized Prices:Oil ($/Bbl)

$
58.96


$
47.30


$
44.82Natural gas ($/Mcf)


6.26



6.24



7.09Combined ($/BOE)


52.66



43.87



44.05Average Wellhead Prices:Oil ($/Bbl)

$
63.50


$
54.42


$
51.06Natural gas ($/Mcf)


6.69



6.59



7.87Combined ($/BOE)


56.62



49.24



49.76     Critical
    Accounting Policies and Estimates
    Oil and
    Natural Gas Properties
  Successful efforts method. Financial
    Accounting and Reporting by Oil and Gas Producing
    Companies
   62




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
          Accounting
    for the Impairment or Disposal of Long-Lived Assets and/or
  property-by-property
 63




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
    Oil and natural gas reserves. well-by-well
  
    the quality and quantity of available data;
    the interpretation of that data;
    the accuracy of various mandated economic assumptions; and
    the judgment of the independent reserve engineer.    Asset retirement obligations. Accounting for Asset
    Retirement
    Goodwill
   64




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
      Net
    Profits Interests
    Revenue
    Recognition
    Income
    Taxes
  Effective tax rate. and/or
 65




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  Commodity
    Derivative Contracts and Related Activities
    New
    Accounting Pronouncements
  FASB
    Interpretation No. 48, Accounting for Uncertainty in
    Income Taxes  an Interpretation of FASB Statement
    No. 109 (FIN 48)
  Accounting
    for Income Taxes
  SFAS No. 157,
    Fair Value Measurement
    (SFAS 157)
  157-2 (FSP 157-2) FSP 157-2
  SFAS No. 159,
    The Fair Value Option for Financial Assets and Financial
    Liabilities  including an amendment of FASB Statement
    No. 115 (SFAS 159)
  instrument-by-instrument
 66




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  FSP
    FIN 39-1,
    Amendment of FASB Interpretation No. 39
    (FSP
    FIN 39-1)
  FIN 39-1. FIN 39-1 Offsetting of Amounts
    Related to Certain Contracts FIN 39-1 FIN 39-1
  SFAS No. 141
    (revised 2007), Business Combinations
    (SFAS 141R)
  Business
    Combinations
  SFAS No. 160,
    Noncontrolling Interests in Consolidated Financial
    Statements  an amendment to ARB No. 51
    (SFAS 160)
  Consolidated Financial Statements
  Information
    Concerning Forward-Looking Statements
    
    expected capital expenditures and the focus of our capital
    program;
    areas of future growth;
    our development program;
    future horizontal development, secondary development, and
    tertiary recovery potential;
    the implementation of our HPAI programs, the ability to expand
    the program to other parts of the CCA and the effects thereof;
    the completion of current HPAI projects and the effects thereof;
    anticipated prices for oil and natural gas and expectations
    regarding differentials between wellhead prices and benchmark
    prices (including, without limitation, the effects of increased
    Canadian oil production and refinery turnarounds); 67




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
   
    projected results of operations;
    timing and amount of future production of oil and natural gas;
    availability of pipeline capacity;
    expected commodity derivative positions and payments related
    thereto;
    expectations regarding working capital, cash flow, and liquidity;
    projected borrowings under our revolving credit
    facility; and
    the marketing of our oil and natural gas production.    ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  Derivative policy.
  Counterparties.
  Percentage of


Percentage ofOil Derivative


Natural Gas DerivativeCounterparty

Contracts Committed


Contracts CommittedBank of America, N.A.


18
%


BNP Paribas


25
%


40
%Calyon


10
%


28
%Deutsche Bank


20
%


Wachovia


10
%


32
%      68




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  Commodity price sensitivity.
    Oil
    Derivative Contracts
  Daily


Average



Daily


Average



Daily


Average



Daily


Average



Asset (Liability)Floor


Floor



Short Floor


Short Floor



Cap


Cap



Swap


Swap



Fair MarketPeriod

Volume


Price



Volume


Price



Volume


Price



Volume


Price



Value(Bbl)


(per Bbl)



(Bbl)


(per Bbl)



(Bbl)


(per Bbl)



(Bbl)


(per Bbl)



(in thousands)Jan. 2008


4,000


$
80.00







$





2,000


$
100.75







$




$
(1,313
)6,000



71.67













2,000



96.65








11,500



61.96




(2,000
)


65.00

















3,000



56.67




(4,000
)


50.00













1,000



58.59Feb.  June 2008


4,880



80.00













2,440



101.99













(6,714
)6,000



71.67













2,000



96.65








11,500



61.96




(2,000
)


65.00

















3,000



56.67




(4,000
)


50.00













1,000



58.59Second Half 2008


4,880



80.00













2,440



101.99




3,000



90.26




(341
)6,000



71.67













2,000



96.65








7,500



63.00




(2,000
)


65.00

















3,000



56.67




(4,000
)


50.00

















2009


880



80.00













440



97.75













9,22212,250



72.96




(1,250
)


65.00

















3,750



64.47




(5,000
)


50.00













1,000



68.702010


880



80.00













440



93.80













522,000



75.00













1,000



77.23








2,000



65.00




(2,000
)


65.00

















2011


1,000



80.00













1,000



94.65













1,8111,000



70.00


























$
2,717  69




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  Natural
    Gas Derivative Contracts
  Daily


Average



Daily


Average



Daily


Average



Daily


Average



AssetFloor


Floor



Short Floor


Short Floor



Cap


Cap



Swap


Swap



Fair MarketPeriod

Volume


Price



Volume


Price



Volume


Price



Volume


Price



Value(Mcf)


(per Mcf)



(Mcf)


(per Mcf)



(Mcf)


(per Mcf)



(Mcf)


(per Mcf)



(In thousands)Jan. 2008


2,000


$
8.20







$





2,000


$
9.85







$




$
1592,000



7.20


























20,000



6.35


























Feb. - Dec. 2008


3,800



8.20













3,800



9.83













4,3063,800



7.20


























20,000



6.35


























2009


3,800



8.20













3,800



9.83













1,3763,800



7.20


























2010


3,800



8.20













3,800



9.58













1,2403,800



7.20


























$
7,081   Interest rate sensitivity.
     70




---



##### 



ENCORE
    ACQUISITION COMPANY
  ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  Index to
    Consolidated Financial Statements
   
 PageReport of Independent Registered Public
    Accounting Firm


72Consolidated Balance Sheets as of
    December 31, 2007 and 2006


73Consolidated Statements of Operations for the
    Years Ended December 31, 2007, 2006, and 2005


74Consolidated Statements of Stockholders
    Equity and Comprehensive Income for the Years Ended
    December 31, 2007, 2006, and 2005


75Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2007, 2006, and 2005


76Notes to Consolidated Financial Statements


77Supplementary Information


121   71




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  
        Accounting for
    Uncertainty in Income Taxes  an Interpretation of
    FASB No. 109 Share-Based Payment
  Internal Control  Integrated Framework
  Ernst &
    Young LLP
   
 72




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  CONSOLIDATED
    BALANCE SHEETS
  December 31,2007


2006(In thousands, exceptshare and per shareamounts)ASSETSCurrent assets:Cash and cash equivalents

$
1,704


$
763Accounts receivable, net of allowance for doubtful accounts of
    $6,045 and $2,329, respectively


134,880



81,470Inventory


16,257



18,170Derivatives


9,722



17,349Deferred taxes


20,420



24,978Other


5,527



2,988Total current assets


188,510



145,718Properties and equipment, at cost  successful efforts
    method:Proved properties, including wells and related equipment


2,845,776



2,033,914Unproved properties


63,352



47,548Accumulated depletion, depreciation, and amortization


(489,004
)


(364,780
)2,420,124



1,716,682Other property and equipment


21,750



18,231Accumulated depreciation


(10,733
)


(7,791
)11,017



10,440Goodwill


60,606



60,606Derivatives


34,579



40,715Long-term receivables


40,945



19,642Other


28,780



13,097Total assets

$
2,784,561


$
2,006,900LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
21,548


$
18,204Accrued liabilities:Lease operations expense


15,057



8,582Development capital


48,359



44,492Interest


12,795



11,273Production, ad valorem, and severance taxes


24,694



10,915Oil purchases


8,721



11,191Derivatives


39,337



60,448Oil and natural gas revenues payable


13,076



8,612Other


21,143



12,746Total current liabilities


204,730



186,463Derivatives


47,091



38,688Future abandonment cost


27,371



19,205Deferred taxes


312,914



282,825Long-term debt


1,120,236



661,696Other


1,530



1,158Total liabilities


1,713,872



1,190,035Commitments and contingencies (see Note 4)Minority interest in consolidated partnership


122,534



Stockholders equity:Preferred stock, $.01 par value, 5,000,000 shares
    authorized, none issued and outstanding






Common stock, $.01 par value, 144,000,000 shares
    authorized, 53,303,464 and 53,028,866 issued and outstanding,
    respectively


534



531Additional paid-in capital


538,620



457,201Treasury stock, at cost, of 17,690 and 17,809 shares,
    respectively


(590
)


(457
)Retained earnings


411,377



394,917Accumulated other comprehensive loss


(1,786
)


(35,327
)Total stockholders equity


948,155



816,865Total liabilities and stockholders equity

$
2,784,561


$
2,006,900     73




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY



CONSOLIDATED
    STATEMENTS OF OPERATIONS  Year Ended December 31,2007


2006


2005(In thousands, except per share amounts)Revenues:Oil

$
562,817


$
346,974


$
307,959Natural gas


150,107



146,325



149,365Marketing


42,021



147,563



Total revenues


754,945



640,862



457,324Expenses:Production:Lease operations


143,426



98,194



69,744Production, ad valorem, and severance taxes


74,585



49,780



45,601Depletion, depreciation, and amortization


183,980



113,463



85,627Exploration


27,726



30,519



14,443General and administrative


39,124



23,194



17,268Marketing


40,549



148,571



Derivative fair value loss (gain)


112,483



(24,388
)


5,290Loss on early redemption of debt










19,477Provision for doubtful accounts


5,816



1,970



231Other operating


17,066



8,053



9,254Total expenses


644,755



449,356



266,935Operating income


110,190



191,506



190,389Other income (expenses):Interest


(88,704
)


(45,131
)


(34,055
)Other


2,667



1,429



1,039Total other income (expenses)


(86,037
)


(43,702
)


(33,016
)Income before income taxes and minority interest


24,153



147,804



157,373Income tax provision


(14,476
)


(55,406
)


(53,948
)Minority interest in loss of consolidated partnership


7,478







Net income

$
17,155


$
92,398


$
103,425Net income per common share:Basic

$
0.32


$
1.78


$
2.12Diluted

$
0.32


$
1.75


$
2.09Weighted average common shares outstanding:Basic


53,170



51,865



48,682Diluted


54,144



52,736



49,522     74




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
 CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY
    AND COMPREHENSIVE INCOME  Issued

















AccumulatedShares of





Additional


Shares of








Other


TotalCommon


Common


Paid-in


Treasury


Treasury


Retained


Comprehensive


StockholdersStock


Stock


Capital


Stock


Stock


Earnings


Loss


Equity(In thousands)Balance at December 31, 2004


48,654


$
487


$
309,973






$



$
199,512


$
(36,397
)

$
473,575Exercise of stock options and vesting of restricted stock


138



1



2,817



















2,818Purchase of treasury stock














(18
)


(570
)










(570
)Cancellation of treasury stock


(7
)






(133
)


7



195



(62
)






Non-cash stock-based compensation










3,962



















3,962Components of comprehensive income:Net income






















103,425







103,425Change in deferred hedge gain/loss, net of tax of $21,701


























(36,429
)


(36,429
)Total comprehensive income






























66,996Balance at December 31, 2005


48,785



488



316,619



(11
)


(375
)


302,875



(72,826
)


546,781Exercise of stock options and vesting of restricted stock


280



3



3,641



















3,644Purchase of treasury stock














(25
)


(633
)










(633
)Cancellation of treasury stock


(18
)






(195
)


18



551



(356
)






Issuance of common stock


4,000



40



127,061



















127,101Non-cash stock-based compensation










10,075



















10,075Components of comprehensive income:Net income






















92,398







92,398Change in deferred hedge gain/loss, net of tax of $22,365


























37,499



37,499Total comprehensive income






























129,897Balance at December 31, 2006


53,047



531



457,201



(18
)


(457
)


394,917



(35,327
)


816,865Exercise of stock options and vesting of restricted stock


313



3



1,587



















1,590Purchase of treasury stock














(39
)


(1,136
)










(1,136
)Cancellation of treasury stock


(39
)






(338
)


39



1,003



(665
)






Non-cash equity-based compensation










14,632



















14,632EACs share of ENPs offering costs










(12,088
)


















(12,088
)ENP distributions






















(30
)






(30
)Adjustment to reflect gain on sale of ENP common units










77,626



















77,626Components of comprehensive income:Net income






















17,155







17,155Amortization of deferred hedge losses, net of tax of $20,047


























33,541



33,541Total comprehensive income






























50,696Balance at December 31, 2007


53,321


$
534


$
538,620



(18
)

$
(590
)

$
411,377


$
(1,786
)

$
948,155     75




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
 CONSOLIDATED
    STATEMENTS OF CASH FLOWS  Year Ended December 31,2007


2006


2005(In thousands)Cash flows from operating activities:Net income

$
17,155


$
92,398


$
103,425Adjustments to reconcile net income to net cash provided by
    operating activities:Depletion, depreciation, and amortization


183,980



113,463



85,627Non-cash exploration expense


25,487



28,128



10,706Deferred taxes


12,588



51,220



56,032Non-cash equity-based compensation expense


15,997



8,980



3,962Non-cash derivative loss (gain)


130,910



(10,434
)


12,637Loss (gain) on disposition of assets


7,409



(297
)


352Loss on early redemption of debt










19,477Minority interest in loss of consolidated partnership


(7,478
)






Provision for doubtful accounts


5,816



1,970



231Other


10,182



7,577



1,912Changes in operating assets and liabilities, net of effects from
    acquisitions:Accounts receivable


(48,647
)


(2,275
)


(30,423
)Current derivatives


(17,430
)






(2,029
)Other current assets


3,108



(4,945
)


(4,067
)Long-term derivatives


(35,750
)






(3,517
)Other assets


(1,214
)


(365
)


(1,281
)Accounts payable


4,461



1,833



(444
)Other current liabilities


14,788



10,080



39,839Other noncurrent liabilities


(1,655
)






(170
)Net cash provided by operating activities


319,707



297,333



292,269Cash flows from investing activities:Proceeds from disposition of assets


287,928



1,522



753Purchases of other property and equipment


(3,519
)


(4,290
)


(6,767
)Acquisition of oil and natural gas properties


(848,545
)


(30,119
)


(154,615
)Acquisition of Crusader Energy Corporation, net of cash acquired










(91,095
)Development of oil and natural gas properties


(335,897
)


(340,582
)


(321,836
)Net advances to working interest partners


(29,523
)


(22,425
)


Other






(1,536
)


Net cash used in investing activities


(929,556
)


(397,430
)


(573,560
)Cash flows from financing activities:Proceeds from issuance of common stock, net of issuance costs






127,101



Proceeds from issuance of ENP common units, net of issuance costs


193,461







Exercise of stock options and vesting of restricted stock, net
    of treasury stock purchases


454



3,011



898Proceeds from long-term debt, net of issuance costs


1,479,259



281,853



997,446Payments on long-term debt


(1,034,428
)


(294,000
)


(719,852
)Payment of commodity derivative contract premiums


(26,195
)


(7,848
)


ENP distributions


(568
)






Change in cash overdrafts


(1,193
)


(10,911
)


3,350Net cash provided by financing activities


610,790



99,206



281,842Increase (decrease) in cash and cash equivalents


941



(891
)


551Cash and cash equivalents, beginning of period


763



1,654



1,103Cash and cash equivalents, end of period

$
1,704


$
763


$
1,654     76




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
 NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  Note 1.  About
    EAC and Basis of Presentation
    
    the Cedar Creek Anticline (CCA) in the Williston
    Basin of Montana and North Dakota;
    the Permian Basin of West Texas and southeastern New Mexico;
    the Rockies, which includes non-CCA assets in the Williston, Big
    Horn, and Powder River Basins of Wyoming, Montana, and North
    Dakota, and the Paradox Basin of southeastern Utah; and
    the Mid-Continent area, which includes the Arkoma and Anadarko
    Basins of Oklahoma, the North Louisiana Salt Basin, and the East
    Texas Basin.  No. 04-5, Determining Whether a General Partner, or the General
    Partners as a Group, Controls a Limited Partnership or Similar
    Entity When the Limited Partners Have Certain Rights Accounting for Sales of Stock
    by a Subsidiary
  Variable
    Interest Entity
    2000-37.
 77




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Consolidation of Variable Interest Entities
  Minority
    Interest
      Reclassifications
    Note 2.
    Summary
    of Significant Accounting Policies  Principles
    of Consolidation
    Cash
    and Cash Equivalents
  bank-by-bank
  Accounts
    Receivable
   78




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year EndedDecember 31,2007


2006(In thousands)Allowance for doubtful accounts at January 1

$
2,329


$
347Bad debt expense


5,816



1,970Write off


(2,100
)


(20
)Other






32Allowance for doubtful accounts at December 31

$
6,045


$
2,329   Inventory
    December 31,2007


2006(In thousands)Materials and supplies

$
11,567


$
11,784Oil in pipelines


4,690



6,386Total inventory

$
16,257


$
18,170   Properties
    and Equipment
  Oil and Natural Gas Properties. Financial Accounting and Reporting by Oil
    and Gas Producing Companies
   79




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Accounting
    for the Impairment or Disposal of Long-Lived Assets
  property-by-property
 80




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,2007


2006(In thousands)Proved leasehold costs

$
1,346,516


$
796,932Wells and related equipment  Completed


1,408,512



1,193,939Wells and related equipment  In process


90,748



43,043Total proved properties

$
2,845,776


$
2,033,914   Other Property and Equipment.
  Goodwill
    Asset
    Retirement Obligations
  Accounting for Asset Retirement
    Obligations
  Stock-Based
    Compensation
  Share-Based
    Payment Accounting for
    Stock-Based Compensation Accounting for Stock Issued to
    Employees
 81




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          As Reported:Non-cash stock-based compensation, net of tax

$
2,483Net income

$
103,425Basic net income per share

$
2.12Diluted net income per share

$
2.09Pro Forma:Non-cash stock-based compensation, net of tax

$
3,091Net income

$
102,817Basic net income per share

$
2.11Diluted net income per share

$
2.08   Major
    Customers
   82




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Income
    Taxes
    Revenue
    Recognition
    Marketing
    Revenues and Expenses and Buy/Sell Transactions
    No. 04-13, Accounting for Purchases and Sales of Inventory with
    the Same Counterparty (EITF 04-13).
  EITF 04-13 Accounting for Nonmonetary
    Transactions
 83




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Shipping
    Costs
    Commodity
    Derivatives and Related Activities
        Comprehensive
    Income
    Use of
    Estimates
   84




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      New
    Accounting Pronouncements
  SFAS No. 157,
    Fair Value Measurement
    (SFAS 157)
  157-2 (FSP 157-2) FSP 157-2
  SFAS No. 159,
    The Fair Value Option for Financial Assets and Financial
    Liabilities  including an amendment of FASB Statement
    No. 115 (SFAS 159)
  instrument-by-instrument
  FSP
    FIN 39-1,
    Amendment of FASB Interpretation No. 39
    (FSP
    FIN 39-1)
  FIN 39-1. FIN 39-1 Offsetting of Amounts
    Related to Certain Contracts
 85




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  FIN 39-1 FIN 39-1
  SFAS No. 141
    (revised 2007), Business Combinations
    (SFAS 141R)
  Business
    Combinations
  SFAS No. 160,
    Noncontrolling Interests in Consolidated Financial
    Statements   an amendment to ARB No. 51
    (SFAS 160)
  Consolidated Financial Statements
  Note 3.
    Acquisitions
    and Dispositions  2007
    Acquisitions
     86




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Calculation of total purchase price:Cash paid to Anadarko

$
390,728Transaction costs


1,333Total purchase price

$
392,061Allocation of purchase price to the fair value of net assets
    acquired:Proved properties, including wells and related equipment

$
383,909Unproved properties


16,134Accounts receivable


3,008Inventory


805Total assets acquired


403,856Current liabilities


8,289Future abandonment cost and assumed liabilities


3,506Total liabilities assumed


11,795Fair value of net assets acquired

$
392,061      87




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Calculation of total purchase price:Cash paid to Anadarko

$
392,289Transaction costs


1,288Total purchase price

$
393,577Allocation of purchase price to the fair value of net assets
    acquired:Proved properties, including wells and related equipment

$
395,606Intangibles


4,225Accounts receivable


1,673Other property and equipment


346Total assets acquired


401,850Current liabilities


1,300Future abandonment cost and assumed liabilities


6,973Total liabilities assumed


8,273Fair value of net assets acquired

$
393,577       2007
    Dispositions
     88




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Pro
    Forma
    Year Ended December 31,2007


2006


2005(In thousands, except per share amounts)Pro forma total revenues

$
749,659


$
785,281


$
621,858Pro forma net income

$
20,685


$
100,702


$
110,789Pro forma net income per common share:Basic

$
0.39


$
1.94


$
2.28Diluted

$
0.38


$
1.91


$
2.24   2005
    Acquisitions
  Williston Basin Acquisition.
  Crusader Acquisition.
   89




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Calculation of total purchase price:Cash paid to Crusaders former owners

$
79,142Crusader debt repaid


29,732Transaction costs


707Total purchase price

$
109,581Allocation of purchase price to the fair value of assets
    acquired:Cash

$
18,592Other current assets


3,362Deferred taxes


1,997Proved properties, including wells and related equipment


85,388Unproved properties


6,863Goodwill


22,698Total assets acquired


138,900Current liabilities


10,267Other noncurrent liabilities


1,190Deferred taxes


17,862Total liabilities assumed


29,319Fair value of net assets acquired

$
109,581     Kerr-McGee Acquisition. Nolley-McFarland,
  Note 4.
    Commitments
    and Contingencies  Litigation
   90




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Leases
    2008

$
3,0642009


2,9002010


2,9112011


2,9002012


2,835Thereafter


2,607$
17,217     ExxonMobil
        Note 5.
    Asset
    Retirement Obligations   91




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended December 31,2007


2006(In thousands)Future abandonment liability at January 1

$
19,841


$
14,430Acquisition of properties


8,251



785Disposition of properties


(959
)


Wells drilled


145



147Accretion of discount


1,145



743Plugging and abandonment costs incurred


(1,655
)


(1,466
)Revision of estimates


1,311



5,202Future abandonment liability at December 31

$
28,079


$
19,841   Note 6.
    Capitalization
    of Exploratory Well Costs  No. 19-1 Accounting for Suspended Well Costs (FSP 19-1),
  Year Ended December 31,2007


2006


2005(In thousands)Beginning balance at January 1

$
13,048


$
6,560


$
3,242Additions to capitalized exploratory well costs pending the
    determination of proved reserves


19,479



13,048



6,560Reclassification to proved property and equipment based on the
    determination of proved reserves


(9,390
)


(1,457
)


(996
)Capitalized exploratory well costs charged to expense


(3,658
)


(5,103
)


(2,246
)Total

$
19,479


$
13,048


$
6,560    92




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 7.
    Other
    Current Liabilities    December 31,2007


2006(In thousands)Net profits payable

$
3,996


$
1,178Natural gas imbalances


408



3,173Income taxes payable


2,789



1,247Accrued employee bonuses


8,431



5,665Current portion of future abandonment liability


708



636Liabilities assumed at acquisition


2,228



Other


2,583



847Total

$
21,143


$
12,746   Note 8.
    Long-Term
    Debt    December 31,2007


2006(In thousands)Revolving credit facilities

$
526,000


$
68,0006.25% Notes


150,000



150,0006.0% Notes, net of unamortized discount of $4,440 and
    $4,892, respectively


295,560



295,1087.25% Notes, net of unamortized discount of $1,323 and
    $1,412, respectively


148,676



148,588Total

$
1,120,236


$
661,696   Senior
    Subordinated Notes
  6.25% Notes.
  6.0% Notes.
  7.25% Notes.
   93




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    
    limitations on incurrence of additional debt, restrictions on
    asset dispositions, and restricted payments;
    a requirement that EAC maintain a current ratio (as defined in
    the indentures) of not less than 1.0 to 1.0; and
    a requirement that EAC maintain a ratio of consolidated EBITDA
    (as defined in the indentures) to consolidated interest expense
    of not less than 2.5 to 1.0.      Revolving
    Credit Facilities
  Encore
    Acquisition Company Senior Secured Credit Agreement
        Applicable Margin for


Applicable Margin forRatio of Total Outstanding Borrowings to Borrowing Base

Eurodollar Loans


Base Rate LoansLess than .50 to 1


1.000
%


0.000
%Greater than or equal to .50 to 1 but less than .75 to 1


1.250
%


0.000
%Greater than or equal to .75 to 1 but less than .90 to 1


1.500
%


0.250
%Greater than or equal to .90 to 1


1.750
%


0.500
%      94




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      
    a prohibition against incurring debt, subject to permitted
    exceptions;
    a prohibition against paying dividends or making distributions,
    purchasing or redeeming capital stock, or prepaying
    indebtedness, subject to permitted exceptions;
    a restriction on creating liens on EACs and its restricted
    subsidiaries assets, subject to permitted exceptions;
    restrictions on merging and selling assets outside the ordinary
    course of business;
    restrictions on use of proceeds, investments, transactions with
    affiliates, or change of principal business;
    a provision limiting oil and natural gas hedging transactions
    (other than puts) to a volume not exceeding 75 percent of
    anticipated production from proved producing reserves;
    a requirement that EAC maintain a ratio of consolidated current
    assets to consolidated current liabilities of not less than 1.0
    to 1.0; and
    a requirement that EAC maintain a ratio of consolidated EBITDA
    (as defined in the EAC Credit Agreement) to the sum of
    consolidated net interest expense plus letter of credit fees of
    not less than 2.5 to 1.0.      CommitmentRatio of Total Outstanding Borrowings to Borrowing Base

Fee PercentageLess than .50 to 1


0.250
%Greater than or equal to .50 to 1 but less than .75 to 1


0.300
%Greater than or equal to .75 to 1 but less than .90 to 1


0.375
%Greater than or equal to .90 to 1


0.375
%   Encore
    Energy Partners Operating LLC Credit Agreement
     95




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            
    a prohibition against incurring debt, subject to permitted
    exceptions;
    a prohibition against purchasing or redeeming capital stock, or
    prepaying indebtedness, subject to permitted exceptions;
    a restriction on creating liens on the assets of ENP, OLLC and
    its restricted subsidiaries, subject to permitted exceptions;
    restrictions on merging and selling assets outside the ordinary
    course of business;
    restrictions on use of proceeds, investments, transactions with
    affiliates, or change of principal business;
    a provision limiting oil and natural gas hedging transactions
    (other than puts) to a volume not exceeding 75 percent of
    anticipated production from proved producing reserves;
    a requirement that OLLC maintain a ratio of consolidated current
    assets to consolidated current liabilities of not less than 1.0
    to 1.0;
    a requirement that OLLC maintain a ratio of consolidated EBITDA
    (as defined in the OLLC Credit Agreement) to the sum of
    consolidated net interest expense plus letter of credit fees of
    not less than 1.5 to 1.0;
    a requirement that OLLC maintain a ratio of consolidated EBITDA
    (as defined in the OLLC Credit Agreement) to consolidated senior
    interest expense of not less than 2.5 to 1.0; and
    a requirement that OLLC maintain a ratio of consolidated funded
    debt (excluding certain related party debt) to consolidated
    adjusted EBITDA (as defined in the OLLC Credit Agreement) of not
    more than 3.5 to 1.0.     96




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Long-Term
    Debt Maturities
    Payments Due by PeriodTotal


2008


2009-2010


2011-2012


Thereafter(In thousands)6.25% Notes

$
150,000


$



$



$



$
150,0006.0% Notes


300,000















300,0007.25% Notes


150,000















150,000Revolving credit facilities


526,000











526,000



Total

$
1,126,000


$



$



$
526,000


$
600,000       Note 9.  Taxes
  Income
    Taxes
    Year Ended December 31,2007


2006


2005(In thousands)Federal:Current

$
(1,888
)

$
(3,785
)

$
2,084Deferred


(11,229
)


(48,327
)


(53,147
)Total federal


(13,117
)


(52,112
)


(51,063
)State, net of federal benefit/expense:Current






(401
)


Deferred


(1,359
)


(2,893
)


(2,885
)Total state


(1,359
)


(3,294
)


(2,885
)Income tax provision(a)

$
(14,476
)

$
(55,406
)

$
(53,948
)     (a)
    
    These amounts do not include EACs excess tax benefit
    related to stock option exercises and vesting of restricted
    stock, which was recorded directly to additional paid-in
    capital, of $1.3 million and $1.4 million during 2006
    and 2005, respectively. 97




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Year Ended December 31,2007


2006


2005(In thousands)Income before income taxes

$
31,631


$
147,804


$
157,373Tax at statutory rate

$
(11,071
)

$
(51,731
)

$
(55,081
)State income taxes, net of federal benefit/expense


(716
)


(3,440
)


(2,885
)Enactment of the Texas margin tax






(1,062
)


Change in estimated future state tax rate


(495
)


1,208



363Nondeductible deferred compensation


(1,963
)






Section 43 credits










3,227Permanent and other


(231
)


(381
)


428Income tax provision

$
(14,476
)

$
(55,406
)

$
(53,948
)      98




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,2007


2006(In thousands)Current:Assets:Unrealized hedge loss in AOCL

$
1,071


$
20,049Derivative fair value loss


15,442



4,062Other


3,907



867Total current deferred tax assets

$
20,420


$
24,978Long-term:Assets:Alternative minimum tax carryforward

$
2,676


$
2,394Unrealized hedge loss in AOCL






1,069Derivative fair value loss


10,775



2,606Section 43 credits


13,227



13,227Net operating loss carryforward


23,806



1,013Other


6,789



4,602Total long-term deferred tax assets


57,273



24,911Liabilities:Book basis of oil and natural gas properties in excess of tax
    basis


370,187



307,736Net long-term deferred tax liability

$
312,914


$
282,825     Federal


StateExpiration Date

NOL


AMT NOL


Sec. 43 Cr.


NOL(In thousands)2012

$



$



$



$
532014














8172022


21,913











822023










1,082



2024










6,125



22025










6,020



4822026














1522027














305Indefinite






2,676







$
21,913


$
2,676


$
13,227


$
1,893  99




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Accounting for Uncertainty in
    Income Taxes  an Interpretation of FASB Statement
    No. 109 Accounting for
    Income Taxes
    
    a review of documentation of tax positions taken on previous
    returns including an assessment of whether EAC followed industry
    practice or the applicable requirements under the tax code;
    a review of open tax returns (on a jurisdiction by jurisdiction
    basis) as well as supporting documentation used to support those
    tax returns;
    a review of the results of past tax examinations;
    a review of whether tax returns have been filed in all
    appropriate jurisdictions;
    a review of existing permanent and temporary
    differences; and
    consideration of any tax planning strategies that may have been
    used to support realization of deferred tax assets.      Taxes
    Other than Income Taxes
    Year Ended December 31,2007


2006


2005(In thousands)Production and severance taxes

$
65,145


$
43,458


$
41,195Ad valorem taxes


9,440



6,322



4,406Franchise, payroll, and other taxes


2,263



1,745



1,246Total

$
76,848


$
51,525


$
46,847  100




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 10.
    Stockholders
    Equity  Public
    Offering of Common Stock
    Shelf
    Registration Statement on
    Form S-3
  Form S-3 and/or
  Stock
    Split
    Stock
    Option Exercises and Restricted Stock Vestings
    Preferred
    Stock
    Stock
    Repurchase Program
    Gain
    on Sale of ENP Common Units
   101




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 11.
    Earnings
    Per Share (EPS)  Earnings Per
    Share
  Year Ended December 31,2007(b)


2006


2005(In thousands, except per share data)Numerator:Net income

$
17,155


$
92,398


$
103,425Denominator:Denominator for basic EPS:Weighted average shares outstanding


53,170



51,865



48,682Effect of dilutive options and diluted restricted stock(a)


974



871



840Denominator for diluted EPS


54,144



52,736



49,522Net income per common share:Basic

$
0.32


$
1.78


$
2.12Diluted

$
0.32


$
1.75


$
2.09     (a)
    
    For 2007 and 2006, options to purchase 121,651 and
    103,856 shares of common stock, respectively, were
    outstanding but not included in the above calculation of diluted
    EPS because their effect would be antidilutive. There were no
    antidilutive options for 2005. For 2007, there were
    59,865 shares of restricted stock that were not included in
    the above calculation of diluted EPS because their effect would
    have been antidilutive. There were no antidilutive shares of
    restricted stock for 2006 or 2005.(b)
    
    For 2007 diluted EPS, EAC considered the impact of the
    conversion of vested management incentive units held by certain
    executive officers of ENP. The conversion of the management
    incentive units into limited partner units of ENP would result
    in reducing EACs share of ENPs earnings. Since ENP
    incurred a net loss for 2007, the impact of this conversion
    would be antidilutive and was thus excluded from the above
    calculation.  Note 12.
    Employee
    Benefit Plans  401(k)
    Plan
    Incentive
    Stock Plans
   102




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      
    an employee may not be granted awards covering or relating to
    more than 225,000 shares of common stock in any calendar
    year;
    a non-employee director may not be granted awards covering or
    relating to more than 15,000 shares of common stock in any
    calendar year; and
    an employee may not receive awards consisting of cash (including
    cash awards that are granted as performance awards) in respect
    of any calendar year having a value determined on the grant date
    in excess of $1.0 million.        Stock Options.
 103




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended December 31,2007


2006


2005Expected volatility


35.7
%


42.8
%


46.0
%Expected dividend yield


0.0
%


0.0
%


0.0
%Expected term (in years)


6.0



6.0



6.0Risk-free interest rate


4.8
%


4.6
%


3.7
%     Year Ended December 31,2007


2006


2005WeightedAverageWeighted


Remaining


Aggregate





Weighted





WeightedNumber of


Average


Contractual


Intrinsic


Number of


Average


Number of


AverageOptions


Strike Price


Term


Value


Options


Strike Price


Options


Strike Price(In thousands)Outstanding at beginning of year


1,337,118


$
14.44











1,440,812


$
13.20



1,520,586


$
12.00Granted


200,059



25.73











122,890



31.10



115,255



26.55Forfeited or expired


(26,686
)


27.15











(48,410
)


24.65



(57,616
)


17.94Exercised


(128,709
)


12.34











(178,174
)


13.14



(137,413
)


9.07Outstanding at end of year


1,381,782



16.03



5.6


$
23,965



1,337,118



14.44



1,440,812



13.20Exercisable at end of year


1,103,018



13.25



4.8



22,189



1,076,815



11.90



1,089,677



11.04    104




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Weighted





WeightedNumber of


Average


Average


Number ofRange of Strike

Options


Life


Strike


OptionsYear of Grant

Prices Per Share

Outstanding


(Years)


Price


Exercisable2001

$8.33 to $9.33


438,782



3.5


$
8.88



438,7822002

$8.50 to $12.40


284,435



4.8



11.94



284,4352003

$11.49 to $13.61


36,594



5.6



12.31



36,5942004

$17.17 to $19.77


264,054



6.1



17.54



264,0542005

$26.55


72,594



7.1



26.55



48,1832006

$31.10


93,207



8.1



31.10



30,9702007

$25.73


192,116



9.1



25.73



1,381,782











1,103,018     Restricted Stock.
  WeightedAverageNumber of


Grant DateShares


Fair ValueOutstanding at January 1, 2007


828,619


$
26.17Granted


344,633



25.95Vested


(184,867
)


21.35Forfeited


(70,047
)


26.07Outstanding at December 31, 2007


918,338



27.07     Year of VestingYear of Grant

2008


2009


2010


2011


2012


Total2003


17,195



















17,1952004


25,119



25,119















50,2382005


76,016



71,512



71,512











219,0402006


63,604



172,591



63,604











299,7992007


34,290



34,334



41,834



41,832



7,500



159,790Total


216,224



303,556



176,950



41,832



7,500



746,062  105




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year of VestingYear of Grant

2008


2009


2010


2011


Total2007


43,069



43,069



43,069



43,069



172,276         Note 13.
    Financial
    Instruments    December 31,2007


2006Book


Fair


Book


FairValue


Value


Value


Value(In thousands)Cash and cash equivalents

$
1,704


$
1,704


$
763


$
763Accounts receivable, net


134,880



134,880



81,470



81,470Plugging bond


777



921



732



838Bell Creek escrow


6,701



6,728



4,887



4,902Accounts payable


(21,548
)


(21,548
)


(18,204
)


(18,204
)6.25 Notes


(150,000
)


(138,375
)


(150,000
)


(140,625
)6.0% Notes


(295,560
)


(264,750
)


(295,108
)


(275,250
)7.25% Notes


(148,676
)


(143,813
)


(148,588
)


(145,500
)Revolving credit facilities


(526,000
)


(526,000
)


(68,000
)


(68,000
)Commodity derivative contracts


9,798



9,798



13,599



13,599Deferred premiums on commodity derivative contracts


(51,926
)


(51,926
)


(54,671
)


(54,671
)  106




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Derivative
    Financial Instruments
      Commodity Derivative Contracts  Mark-to-Market
    Accounting.
   107




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Oil
    Derivative Contracts
  Daily


Average



Daily


Average



Daily


Average



Daily


Average



Asset (Liability)Floor


Floor



Short Floor


Short Floor



Cap


Cap



Swap


Swap



Fair MarketPeriod

Volume


Price



Volume


Price



Volume


Price



Volume


Price



Value(Bbl)


(per Bbl)



(Bbl)


(per Bbl)



(Bbl)


(per Bbl)



(Bbl)


(per Bbl)



(in thousands)Jan. 2008


4,000


$
80.00







$





2,000


$
100.75







$




$
(1,313
)6,000



71.67













2,000



96.65








11,500



61.96




(2,000
)


65.00

















3,000



56.67




(4,000
)


50.00













1,000



58.59Feb.  June 2008


4,880



80.00













2,440



101.99













(6,714
)6,000



71.67













2,000



96.65








11,500



61.96




(2,000
)


65.00

















3,000



56.67




(4,000
)


50.00













1,000



58.59Second Half 2008


4,880



80.00













2,440



101.99




3,000



90.26




(341
)6,000



71.67













2,000



96.65








7,500



63.00




(2,000
)


65.00

















3,000



56.67




(4,000
)


50.00

















2009


880



80.00













440



97.75













9,22212,250



72.96




(1,250
)


65.00

















3,750



64.47




(5,000
)


50.00













1,000



68.702010


880



80.00













440



93.80













522,000



75.00













1,000



77.23








2,000



65.00




(2,000
)


65.00

















2011


1,000



80.00













1,000



94.65













1,8111,000



70.00


























$
2,717  108




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Natural
    Gas Derivative Contracts
  Daily


Average



Daily


Average



Daily


Average



Daily


Average



AssetFloor


Floor



Short Floor


Short Floor



Cap


Cap



Swap


Swap



Fair MarketPeriod

Volume


Price



Volume


Price



Volume


Price



Volume


Price



Value(Mcf)


(per Mcf)



(Mcf)


(per Mcf)



(Mcf)


(per Mcf)



(Mcf)


(per Mcf)



(In thousands)Jan. 2008


2,000


$
8.20







$





2,000


$
9.85







$




$
1592,000



7.20


























20,000



6.35


























Feb. - Dec. 2008


3,800



8.20













3,800



9.83













4,3063,800



7.20


























20,000



6.35


























2009


3,800



8.20













3,800



9.83













1,3763,800



7.20


























2010


3,800



8.20













3,800



9.58













1,2403,800



7.20


























$
7,081   Commodity Derivative Contracts  Current Period
    Impact.
  Year Ended December 31,2007


2006


2005(In thousands)Ineffectiveness on designated commodity derivative contracts

$



$
1,748


$
8,371Mark-to-market loss (gain):Interest rate swap










462Commodity derivative contracts


85,372



(31,205
)


(10,539
)Premium amortization


41,051



13,926



8,489Settlements:Interest rate swap










(312
)Commodity derivative contracts


(13,940
)


(8,857
)


(1,181
)Total derivative fair value loss (gain)

$
112,483


$
(24,388
)

$
5,290   Commodity Derivative Contracts  Future Period
    Impact.
   109




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Counterparty Risk.
  Percentage of


Percentage ofOil Derivative


Natural Gas DerivativeCounterparty

Contracts Committed


Contracts CommittedBank of America, N.A.


18
%


BNP Paribas


25
%


40
%Calyon


10
%


28
%Deutsche Bank


20
%


Wachovia


10
%


32
%       Note 14.
    Related
    Party Transactions      Note 15.
    Financial
    Statements of Subsidiary Guarantors   110




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    
    EAP Properties, Inc.;
    EAP Operating, LLC;
    Encore Operating; and
    Encore Operating Louisiana, LLC.    
    ENP;
    OLLC;
    Encore Partners GP Holdings LLC;
    Encore Partners LP Holdings LLC;
    GP LLC; and
    Encore Clear Fork Pipeline LLC.     111




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  CONDENSED
    CONSOLIDATING BALANCE SHEET
  December 31,
    2007
  Guarantor


Non-Guarantor





ConsolidatedParent


Subsidiaries


Subsidiaries


Eliminations


Total(In thousands)ASSETSCurrent assets:Cash and cash equivalents

$
1


$
1,700


$
3


$



$
1,704Other current assets


535,221



437,852



21,053



(807,320
)


186,806Total current assets


535,222



439,552



21,056



(807,320
)


188,510Properties and equipment, at cost  successful efforts
    method:Proved properties, including wells and related equipment






2,467,606



378,170







2,845,776Unproved properties






63,352











63,352Accumulated depletion, depreciation, and amortization






(451,343
)


(37,661
)






(489,004
)



2,079,615



340,509







2,420,124Other property and equipment, net






10,610



407







11,017Other assets, net


14,899



121,904



28,107







164,910Investment in subsidiaries


2,090,471



20,611







(2,111,082
)


Total assets

$
2,640,592


$
2,672,292


$
390,079


$
(2,918,402
)

$
2,784,561LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities

$
306,787


$
687,351


$
17,885


$
(807,293
)

$
204,730Deferred taxes


312,914















312,914Long-term debt


1,072,736







47,500







1,120,236Other liabilities






49,461



26,531







75,992Total liabilities


1,692,437



736,812



91,916



(807,293
)


1,713,872Commitments and contingencies (see Note 4)Minority interest in consolidated partnership










122,534







122,534Total stockholders equity


948,155



1,935,480



175,629



(2,111,109
)


948,155Total liabilities and stockholders equity

$
2,640,592


$
2,672,292


$
390,079


$
(2,918,402
)

$
2,784,561  112




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  CONDENSED
    CONSOLIDATING STATEMENT OF OPERATIONS AND 
    COMPREHENSIVE INCOME (LOSS)
    For the Year Ended December 31, 2007
  Guarantor


Non-Guarantor





ConsolidatedParent


Subsidiaries


Subsidiaries


Eliminations


Total(In thousands)Revenues:Oil

$



$
503,981


$
58,836


$



$
562,817Natural gas






137,838



12,269







150,107Marketing






33,439



8,582







42,021Total revenues






675,258



79,687







754,945Expenses:Production:Lease operations






129,506



13,920







143,426Production, ad valorem, and severance taxes






66,014



8,571







74,585Depletion, depreciation, and amortization






157,982



25,998







183,980Exploration






27,726











27,726General and administrative


15,107



15,354



10,707



(2,044
)


39,124Marketing






33,876



6,673







40,549Derivative fair value loss






86,182



26,301







112,483Provision for doubtful accounts






5,816











5,816Other operating


221



16,083



762







17,066Total expenses


15,328



538,539



92,932



(2,044
)


644,755Operating income (loss)


(15,328
)


136,719



(13,245
)


2,044



110,190Other income (expenses):Interest


(82,825
)


(6,415
)


(12,294
)


12,830



(88,704
)Equity income (loss) from subsidiaries


123,381



(3,205
)






(120,176
)


Other


6,405



10,940



196



(14,874
)


2,667Total other income (expenses)


46,961



1,320



(12,098
)


(122,220
)


(86,037
)Income (loss) before income taxes and minority interest


31,633



138,039



(25,343
)


(120,176
)


24,153Income tax provision


(14,478
)






2







(14,476
)Minority interest in loss of consolidated partnership










7,478







7,478Net income (loss)


17,155



138,039



(17,863
)


(120,176
)


17,155Amortization of deferred hedge losses (gains), net of tax


(20,047
)


53,588











33,541Comprehensive income (loss)

$
(2,892
)

$
191,627


$
(17,863
)

$
(120,176
)

$
50,696  113




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  CONDENSED
    CONSOLIDATING STATEMENT OF CASH FLOWS
 For the Year Ended December 31, 2007
  Guarantor


Non-Guarantor





ConsolidatedParent


Subsidiaries


Subsidiaries


Eliminations


Total(In thousands)Cash flows from operating activities:Net cash provided by (used in) operating activities

$
(305,868
)

$
615,484


$
10,091


$



$
319,707Cash flows from investing activities:Proceeds from disposition of assets






287,928











287,928Acquisition of oil and natural gas properties






(518,251
)


(330,294
)






(848,545
)Development of oil and natural gas properties






(329,252
)


(6,645
)






(335,897
)Investments in subsidiaries


(93,658
)










93,658



Other






(32,585
)


(457
)






(33,042
)Net cash provided by (used in) investing activities


(93,658
)


(592,160
)


(337,396
)


93,658



(929,556
)Cash flows from financing activities:Proceeds from issuance of ENP common units, net of issuance costs










193,461







193,461Exercise of stock options and vesting of restricted stock, net
    of treasury stock purchases


454















454Proceeds from long-term debt, net of issuance costs


1,208,501







270,758







1,479,259Payments on long-term debt


(809,428
)






(225,000
)






(1,034,428
)Net equity contributions










93,658



(93,658
)


Other






(22,387
)


(5,569
)






(27,956
)Net cash provided by (used in) financing activities


399,527



(22,387
)


327,308



(93,658
)


610,790Increase in cash and cash equivalents


1



937



3







941Cash and cash equivalents, beginning of period






763











763Cash and cash equivalents, end of period

$
1


$
1,700


$
3


$



$
1,704   Note 16.
    ENP   114




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Contribution,
    Conveyance and Assumption Agreement
    
    Encore Operating transferred certain assets in the Permian Basin
    to ENP in exchange for 4,043,478 common units; and
    EAC agreed to indemnify ENP for certain environmental
    liabilities, tax liabilities, and title defects, as well as
    defects relating to retained assets and liabilities, occurring
    or existing before the closing.      Administrative
    Services Agreement
         115




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Long-Term
    Incentive Plan
          Management
    Incentive Units (MIUs)
    
    the holders of MIUs are not entitled to receive, in the
    aggregate, common units upon conversion of the MIUs that exceed
    a maximum limit of 5.1 percent of ENPs
    then-outstanding common units; and
    the holders of MIUs are not entitled to receive, in the
    aggregate, distributions of ENPs available cash in an
    amount that exceeds a maximum limit of 5.1 percent of all
    such distributions to all unitholders at the time of any such
    distribution.   116




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Distributions
    Note 17.
    Segment
    Information   117




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Disclosure about Segments of an Enterprise and Related
    Information Disclosures about Oil and Gas
    Producing Activities
  For the Year Ended December 31, 2007EAC








ConsolidatedStandalone


ENP


Eliminations


Total(In thousands)Revenues:Oil

$
503,981


$
58,836


$



$
562,817Natural gas


137,838



12,269







150,107Marketing


33,439



8,582







42,021Total revenues


675,258



79,687







754,945Expenses:Production:Lease operations


129,506



13,920







143,426Production, ad valorem, and severance taxes


66,014



8,571







74,585Depletion, depreciation, and amortization


157,982



25,998







183,980Exploration


27,726











27,726General and administrative


30,461



10,707



(2,044
)


39,124Marketing


33,876



6,673







40,549Derivative fair value loss


86,182



26,301







112,483Provision for doubtful accounts


5,816











5,816Other operating


16,304



762







17,066Total expenses


553,867



92,932



(2,044
)


644,755Operating income (loss)


121,391



(13,245
)


2,044



110,190Other income (expenses):Interest


(82,825
)


(12,294
)


6,415



(88,704
)Other


10,930



196



(8,459
)


2,667Total other income (expenses)


(71,895
)


(12,098
)


(2,044
)


(86,037
)Income (loss) before income taxes and minority interest


49,496



(25,343
)






24,153Income tax provision


(14,478
)


2







(14,476
)Minority interest in loss of consolidated partnership


7,478











7,478Net income (loss)


42,496



(25,341
)






17,155Amortization of deferred hedge losses (gains) , net of tax


33,541











33,541Comprehensive income (loss)

$
76,037


$
(25,341
)

$



$
50,696Costs incurred related to oil and natural gas properties

$
874,811


$
341,348


$



$
1,216,159Segment assets (as of December 31, 2007)

$
2,395,135


$
390,079


$
(653
)

$
2,784,561  118




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 18.
    Subsequent
    Events  Unaudited  Commodity
    Derivative Contracts
    Oil
    Derivative Contracts
  Daily


Average



Daily


Average



Daily


Average



Daily


AverageFloor


Floor



Short Floor


Short Floor



Cap


Cap



Swap


SwapPeriod

Volume


Price



Volume


Price



Volume


Price



Volume


Price(Bbl)


(Per Bbl)



(Bbl)


(Per Bbl)



(Bbl)


(Per Bbl)



(Bbl)


(Per Bbl)First Half 2008


19,880


$
83.77







$





2,440


$
101.99







$
6,000



71.67













2,000



96.65








11,500



61.96




(2,000
)


65.00

















3,000



56.67




(4,000
)


50.00













1,000



58.59Second Half 2008


14,880



83.36













2,440



101.99




5,000



91.566,000



71.67













2,000



96.65








7,500



63.00




(2,000
)


65.00

















3,000



56.67




(4,000
)


50.00

















2009


13,380



80.00




(10,000
)


72.50




440



97.75




2,000



90.4612,250



72.96




(3,750
)


65.00













3,000



89.223,750



64.47




(5,000
)


50.00













1,000



68.702010


880



80.00













440



93.80








2,000



75.00













1,000



77.23








2,000



65.00




(2,000
)


65.00

















2011


1,880



80.00













1,440



95.41








1,000



70.00


























   Natural
    Gas Derivative Contracts
  Daily


Average



Daily


Average



Daily


Average



Daily


AverageFloor


Floor



Short Floor


Short Floor



Cap


Cap



Swap


SwapPeriod

Volume


Price



Volume


Price



Volume


Price



Volume


Price(Mcf)


(Per Mcf)



(Mcf)


(Per Mcf)



(Mcf)


(Per Mcf)



(Mcf)


(Per Mcf)2008


6,300


$
8.18







$





6,300


$
9.52




5,000


$
8.1411,300



7.38













7,500



8.35




5,000



7.4720,000



6.35


























2009


3,800



8.20













3,800



9.83








3,800



7.20


























2010


3,800



8.20













3,800



9.58








3,800



7.20


























     Purchase
    and Investment Agreement
   119




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Other
    Events
       120




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
 SUPPLEMENTARY
    INFORMATION  Capitalized
    Costs and Costs Incurred Relating to Oil and Natural Gas
    Producing Activities
    December 31,2007


2006(In thousands)Properties and equipment, at cost  successful efforts
    method:Proved properties, including wells and related equipment

$
2,845,776


$
2,033,914Unproved properties


63,352



47,548Accumulated depletion, depreciation, and amortization


(489,004
)


(364,780
)$
2,420,124


$
1,716,682     Year Ended December 31,2007


2006


2005(In thousands)Acquisitions:Proved properties

$
787,988


$
4,486


$
224,469Unproved properties


52,306



24,462



21,205Asset retirement obligations


8,251



785



2,221Total acquisitions


848,545



29,733



247,895Development:Drilling and exploitation


270,016



253,484



268,520Asset retirement obligations


145



147



954Total development


270,161



253,631



269,474Exploration:Drilling and exploitation


95,221



92,839



53,316Geological and seismic


1,456



1,720



3,095Delay rentals


776



646



635Total exploration


97,453



95,205



57,046Total costs incurred

$
1,216,159


$
378,569


$
574,415   Oil &
    Natural Gas Producing Activities  Unaudited
     121




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  SUPPLEMENTARY
    INFORMATION  (Continued)
    December 31,2007


2006


2005Oil (per Bbl)

$
96.01


$
61.06


$
61.04Natural gas (per Mcf)

$
7.47


$
5.48


$
9.44         December 31,2007


2006


2005Proved reserves:Oil (MBbl)


188,587



153,434



148,387Natural gas (MMcf)


256,447



306,764



283,865Combined (MBOE)


231,328



204,561



195,698Proved developed reserves:Oil (MBbl)


125,213



94,246



101,505Natural gas (MMcf)


191,072



235,049



229,950Combined (MBOE)


157,058



133,421



139,830    122




---



##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  SUPPLEMENTARY
    INFORMATION  (Continued)
    Natural


OilOil


Gas


Equivalent(MBbl)


(MMcf)


(MBOE)Balance, December 31, 2004


134,048



234,030



173,053Purchases of
    minerals-in-place


8,333



38,781



14,796Extensions and discoveries


2,780



28,073



7,459Improved recovery


11,510



1,132



11,699Revisions of previous estimates


(1,413
)


2,908



(928
)Production


(6,871
)


(21,059
)


(10,381
)Balance, December 31, 2005


148,387



283,865



195,698Purchases of
    minerals-in-place


25



235



64Extensions and discoveries


3,269



78,861



16,412Improved recovery


10,935



941



11,092Revisions of previous estimates


(1,847
)


(33,682
)


(7,461
)Production


(7,335
)


(23,456
)


(11,244
)Balance, December 31, 2006


153,434



306,764



204,561Purchases of
    minerals-in-place


40,534



15,667



43,146Sales of
    minerals-in-place


(1,845
)


(107,249
)


(19,719
)Extensions and discoveries


4,362



65,639



15,302Improved recovery


666



90



681Revisions of previous estimates


981



(501
)


896Production


(9,545
)


(23,963
)


(13,539
)Balance, December 31, 2007(a)


188,587



256,447



231,328     (a)
    
    Includes reserves of 20,940 MBOE comprised of
    14,417 MBbls of oil and 39,141 MMcf of natural gas
    attributable to ENP in which there is a 40.2 percent
    minority interest as of December 31, 2007.    December 31,2007


2006


2005(In thousands)Future cash inflows

$
17,394,468


$
9,291,007


$
10,414,091Future production costs


(5,721,804
)


(3,668,897
)


(3,690,974
)Future development costs


(469,034
)


(371,396
)


(250,554
)Future abandonment costs, net of salvage


(75,172
)


(134,103
)


(121,553
)Future income tax expense


(3,236,356
)


(1,499,290
)


(1,934,504
)Future net cash flows


7,892,102



3,617,321



4,416,50610% annual discount


(4,600,393
)


(2,155,514
)


(2,498,035
)Standardized measure of discounted estimated future net cash
    flows(a)

$
3,291,709


$
1,461,807


$
1,918,471  123




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  SUPPLEMENTARY
    INFORMATION  (Continued)
    (a)
    
    Includes $438.4 million attributable to ENP in which there
    is a 40.2 percent minority interest as of December 31,
    2007.    Year Ended December 31,2007


2006


2005(In thousands)Net change in prices and production costs

$
1,718,818


$
(634,033
)

$
531,793Purchases of
    minerals-in-place


1,249,008



539



256,257Sales of
    minerals-in-place


(300,727
)






Extensions, discoveries, and improved recovery


282,163



141,211



229,929Revisions of previous quantity estimates


21,887



(62,615
)


(15,455
)Production, net of production costs


(710,134
)


(340,036
)


(357,028
)Development costs incurred during the period


270,016



253,484



268,520Accretion of discount


146,181



191,847



116,562Change in estimated future development costs


(235,005
)


(185,212
)


(199,158
)Net change in income taxes


(672,807
)


248,491



(247,937
)Change in timing and other


60,502



(70,340
)


169,369Net change in standardized measure


1,829,902



(456,664
)


752,852Standardized measure, beginning of year


1,461,807



1,918,471



1,165,619Standardized measure, end of year

$
3,291,709


$
1,461,807


$
1,918,471  124




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  SUPPLEMENTARY
    INFORMATION  (Continued)
  Selected
    Quarterly Financial Data  Unaudited
    QuarterFirst


Second


Third


Fourth(In thousands, except per share data)2007Revenues

$
130,542


$
189,643


$
195,016


$
239,744Operating income (loss)

$
(29,592
)

$
50,914


$
41,059


$
47,809Net income (loss)

$
(29,429
)

$
15,171


$
11,985


$
19,428Net income (loss) per share:Basic

$
(0.55
)

$
0.29


$
0.23


$
0.36Diluted

$
(0.55
)

$
0.28


$
0.22


$
0.362006Revenues, as reported

$
116,216


$
133,471


$
177,697


$
157,710Plus: change in marketing presentation


31,746



24,022







Revenues, as restated

$
147,962


$
157,493


$
177,697


$
157,710Operating income

$
40,846


$
47,594


$
78,002


$
25,064Net income

$
17,936


$
22,235


$
42,135


$
10,092Net income per share:Basic

$
0.37


$
0.42


$
0.80


$
0.19Diluted

$
0.36


$
0.42


$
0.78


$
0.19    125




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES  Evaluation
    of Disclosure Controls and Procedures
  Rule 13a-15(e)
  Managements
    Report on Internal Control Over Financial Reporting
      Form 10-K,
 126




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  Report of
    Independent Registered Public Accounting Firm on Internal
    Control Over Financial Reporting
  
              Ernst &
    Young LLP
  
 127




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  Changes
    in Internal Control over Financial Reporting
    ITEM 9B.
    OTHER
    INFORMATION  change-in-control
   PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE      ITEM 11.
    EXECUTIVE
    COMPENSATION   128




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS    ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE    ITEM 14.
    PRINCIPAL
    ACCOUNTING FEES AND SERVICES   129




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  PART IV  ITEM 15.
    EXHIBITS,
    FINANCIAL STATEMENT SCHEDULES  (a)
    The following documents are filed as a part of this Report:    PageReport of Independent Registered Public Accounting Firm


72Consolidated Balance Sheets as of December 31, 2007 and 2006


73Consolidated Statements of Operations for the Years Ended
    December 31, 2007, 2006, and 2005


74Consolidated Statements of Stockholders Equity and
    Comprehensive Income for the Years Ended December 31, 2007,
    2006, and 2005


75Consolidated Statements of Cash Flows for the Years Ended
    December 31, 2007, 2006, and 2005


76Notes to Consolidated Financial Statements


77          130




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  INDEX TO
    EXHIBITS
  ExhibitNo.

Description2
.1

Purchase and Sale Agreement dated January 16, 2007 among
    Clear Fork Pipeline Company, Howell Petroleum Corporation,
    Kerr-McGee Oil & Gas Onshore LP, and EAC (incorporated
    by reference to Exhibit 2.1 of EACs Current Report on
    Form 8-K,
    filed with the SEC on January 17, 2007).2
.2

Purchase and Sale Agreement dated January 23, 2007 among
    Howell Petroleum Corporation and
    Kerr-McGee
    Oil & Gas Onshore LP, as Sellers, and EAC, as
    Purchaser (incorporated by reference to Exhibit 2.1 of
    EACs Current Report on
    Form 8-K,
    filed with the SEC on January 26, 2007).2
.3

Purchase and Sale Agreement dated May 16, 2007 between Crow
    Creek and Encore Operating, L.P. (incorporated by reference from
    EACs Current Report on
    Form 8-K,
    filed with the SEC on July 6, 2007).3
.1

Second Amended and Restated Certificate of Incorporation of EAC
    (incorporated by reference to EACs Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended September 30, 2001, filed with
    the SEC on November 7, 2001).3
.1.2

Certificate of Amendment to Second Amended and Restated
    Certificate of Incorporation of EAC (incorporated by reference
    to EACs Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended March 31, 2005, filed with the
    SEC on May 5, 2005).3
.2

Second Amended and Restated Bylaws of EAC (incorporated by
    reference to EACs Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended September 30, 2001, filed with
    the SEC on November 7, 2001).4
.1

Specimen certificate of EAC (incorporated by referenced to
    Exhibit 4.1 to Registration Statement on
    Form S-1,
    Registration
    No. 333-47540,
    filed with the SEC on December 15, 2000).4
.2.1

Indenture, dated as of April 2, 2004, among EAC, the
    subsidiary guarantors party thereto and Wells Fargo Bank,
    National Association, with respect to the 6.25% Senior
    Subordinated Notes due 2014 (incorporated by reference to
    Exhibit 4.1 of EACs Registration Statement on
    Form S-4
    (Registration
    No. 333-117025)
    filed with the SEC on June 30, 2004).4
.2.2

Form of 6.25% Senior Subordinated Note to Cede &
    Co. or its registered assigns (included as Exhibit A to
    Exhibit 4.2.1 above).4
.2.3*

First Supplemental Indenture, dated as of January 2, 2008,
    among EAC, the subsidiary guarantors party thereto and Wells
    Fargo Bank, National Association, with respect to the
    6.25% Senior Subordinated Notes due 2014.4
.3.1

Indenture, dated as of July 13, 2005, among EAC, the
    subsidiary guarantors party thereto and Wells Fargo Bank,
    National Association, with respect to the 6.0% Senior
    Subordinated Notes due 2015 (incorporated by reference to
    Exhibit 4.1 to EACs Current Report on
    Form 8-K,
    filed with the SEC on July 14, 2005).4
.3.2

Form of 6.0% Senior Subordinated Note due 2015 (included as
    Exhibit A to Exhibit 4.3.1 above).4
.3.3*

First Supplemental Indenture, dated as of January 2, 2008,
    among EAC, the subsidiary guarantors party thereto and Wells
    Fargo Bank, National Association, with respect to the
    6.0% Senior Subordinated Notes due 2015.4
.4.1

Indenture, dated as of November 16, 2005, among EAC, the
    subsidiary guarantors party thereto and Wells Fargo Bank,
    National Association with respect to Subordinated Debt
    Securities (incorporated by reference to Exhibit 4.1 to
    EACs Current Report on
    Form 8-K,
    filed with the SEC on November 23, 2005).4
.4.2

First Supplemental Indenture, dated as of November 16,
    2005, among EAC, the subsidiary guarantors party thereto and
    Wells Fargo Bank, National Association, with respect to the
    7.25% Senior Subordinated Notes due 2017 (incorporated by
    reference to Exhibit 4.2 to EACs Current Report on
    Form 8-K,
    filed with the SEC on November 23, 2005).4
.4.3

Form of 7.25% Senior Subordinated Note due 2017 (included
    as Exhibit A to Exhibit 4.4.2 above).4
.4.4*

Second Supplemental Indenture, dated as of January 2, 2008,
    among EAC, the subsidiary guarantors party thereto and Wells
    Fargo Bank, National Association, with respect to the
    7.25% Senior Subordinated Notes due 2017.10
.1+

2000 Incentive Stock Plan (incorporated by reference to
    Exhibit 4.1 to EACs Registration Statement on
    Form S-8
    (File
    No. 333-120422),
    filed with the SEC on November 12, 2004). 131




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  ExhibitNo.

Description10
.2+

Employee Severance Protection Plan (incorporated by reference to
    Exhibit 10.1 to EACs Quarterly Report on
    Form 10-Q
    for the quarterly period ended March 31, 2003, filed with
    the SEC on May 8, 2003).10
.3+

Form of Restricted Stock Award  Executive
    (incorporated by reference to Exhibit 10.3 to EACs
    Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2007, filed with the SEC on
    May 10, 2007).10
.4+

Form of Stock Option Agreement  Nonqualified
    (incorporated by reference to Exhibit 10.4 to EACs
    Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2007, filed with the SEC on
    May 10, 2007).10
.5+

Form of Stock Option Agreement  Incentive
    (incorporated by reference to Exhibit 10.5 to EACs
    Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2007, filed with the SEC on
    March 1, 2007).10
.6+

Form of Indemnification Agreement for directors and executive
    officers (incorporated by reference to Exhibit 10.6 of
    EACs Annual Report on
    Form 10-K
    for the year ended December 31, 2004, filed with the SEC on
    March 10, 2005).10
.7

Description of Compensation Payable to Non-Management Directors
    (incorporated by reference to Exhibit 10.1 of EACs
    Current Report on
    Form 8-K,
    filed with the SEC on February 22, 2006).10
.8

Amended and Restated Credit Agreement dated as of March 7, 2007
    by and among Encore Acquisition Company, Encore Operating, L.P.,
    Bank of America, N.A., as administrative agent and L/C Issuer,
    Fortis Capital Corp. and Wachovia Bank, N.A., as co-syndication
    agents, BNP Paribas and Calyon New York Branch, as
    co-documentation agents, Banc of America Securities LLC, as sole
    lead arranger and sole book manager, and other lenders party
    thereto (incorporated by reference from Exhibit 10.1 to
    EACs Current Report on Form 8-K, filed with the SEC on
    March 13, 2007).10
.9

First Amendment to Amended and Restated Credit Agreement, dated
    as of January 31, 2008, by and among Encore Acquisition Company,
    Encore Operating, L.P., Bank of America, N.A., as administrative
    agent and L/C Issuer, and the lenders party thereto
    (incorporated by reference from Exhibit 10.1 to EACs
    Current Report on Form 8-K, filed with the SEC on February 8,
    2008).10
.10

Credit Agreement dated as of March 7, 2007 by and among
    Encore Energy Partners Operating LLC, Encore Energy Partners LP,
    Bank of America, N.A., as administrative agent and L/C Issuer,
    Banc of America Securities LLC, as sole lead arranger and sole
    book manager, and other lenders (incorporated by reference to
    Exhibit 10.2 to EACs Current Report on
    Form 8-K,
    filed with the SEC on March 13, 2007).10
.11

First Amendment to Credit Agreement, dated August 22, 2007,
    by and among Encore Energy Partners Operating LLC, Encore Energy
    Partners LP, Bank of America, N.A., as administrative agent and
    L/C Issuer, Banc of America Securities LLC, as sole lead
    arranger and sole book manager and other lenders (incorporated
    by reference from Exhibit 10.1 to EACs Current Report
    on
    Form 8-K,
    filed with the SEC on August 28, 2007).10
.12

Contribution, Conveyance and Assumption Agreement, dated as of
    September 17, 2007, by and among Encore Energy Partners LP,
    Encore Energy Partners GP LLC, Encore Acquisition Company,
    Encore Operating, L.P., Encore Partners GP Holdings LLC, Encore
    Partners LP Holdings LLC and Encore Energy Partners Operating
    LLC (incorporated by reference from Exhibit 10.1 to
    EACs Current Report on
    Form 8-K,
    filed with the SEC on September 21, 2007).10
.13

Amended and Restated Administrative Services Agreement, dated as
    of September 17, 2007, by and among Encore Energy Partners
    GP LLC, Encore Energy Partners LP, Encore Energy Partners
    Operating LLC, Encore Acquisition Company and Encore Operating,
    L.P. (incorporated by reference from Exhibit 10.2 to
    EACs Current Report on
    Form 8-K,
    filed with the SEC on September 21, 2007).10
.14

Registration Rights Agreement, dated August 18, 1998, by
    and among EAC and the other parties thereto (incorporated by
    reference to Exhibit 4.2 to EACs Registration
    Statement on
    Form S-1
    (File
    No. 333-47540),
    filed with the SEC on October 6, 2000).10
.15

Second Amended and Restated Agreement of Limited Partnership of
    Encore Energy Partners LP (incorporated by reference to
    Exhibit 10.3 to EACs Current Report on
    Form 8-K,
    filed with the SEC on September 21, 2007).12
.1*

Statement showing computation of ratios of earnings to fixed
    charges.21
.1*

Subsidiaries of EAC as of February 20, 2008. 132




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  ExhibitNo.

Description23
.1*

Consent of Ernst & Young LLP.23
.2*

Consent of Miller and Lents, Ltd.24
.1*

Power of Attorney (included on the signature page of this
    report).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).     *
    
    Filed herewith.+
    
    Management contract or compensatory plan, contract, or
    arrangement. 133




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  SIGNATURES        By:
    /s/  Jon
    S. Brumley          Signature

Title or Capacity

Date/s/  I.
    Jon BrumleyI.
    Jon Brumley

Chairman of the Board and Director

February 26, 2008/s/  Jon
    S. BrumleyJon
    S. Brumley

Chief Executive Officer, President, and Director 
    (Principal Executive Officer)

February 26, 2008/s/  Robert
    C. ReevesRobert
    C. Reeves

Senior Vice President, Chief Financial Officer, and Treasurer
    
    (Principal Financial Officer)

February 26, 2008/s/  Andrea
    HunterAndrea
    Hunter

Vice President, Controller and Principal Accounting Officer

February 26, 2008/s/  John
    A. BaileyJohn
    A. Bailey

Director

February 26, 2008/s/  Martin
    C. BowenMartin
    C. Bowen

Director

February 26, 2008/s/  Ted
    Collins, Jr.Ted
    Collins, Jr.

Director

February 26, 2008/s/  Ted
    A. GardnerTed
    A. Gardner

Director

February 26, 2008 134




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##### Table of Contents



ENCORE
    ACQUISITION COMPANY
  Signature

Title or Capacity

Date/s/  John
    V. GenovaJohn
    V. Genova

Director

February 26, 2008/s/  James
    A. Winne IIIJames
    A. Winne III

Director

February 26, 2008  135