After falling 13% over the past three weeks and closing Tuesday at $23.23,

Encore Acquisition


may be worthy of another look.

The company owns a diverse portfolio of oil and natural gas reserves across several domestic sites and has proven reserves of about 200 million barrels of oil equivalent.

Despite oil and natural gas commodities prices that remain well ahead of historical averages, Encore posted fourth-quarter results that fell short of consensus analyst expectations.

The company earned 19 cents a share, compared with the 26-cent estimate. Revenue did grow 14% yearn over year to $157.7 million, $44 million ahead of analyst estimates, but management spent considerably more money than expected acquiring new production assets.

With that in mind, I'm here to answer readers' questions: Should I do it? Is Encore Acquisition worthy of another look, or should investors focus elsewhere in the energy patch?

On Jan. 25, the company paid $410 million in cash to buy 50 fields across Montana and North Dakota from

Anadarko Petroleum

(APC) - Get Anadarko Petroleum Corporation Report

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. Because of its increased acquisitions costs, Encore's 2007 earnings are expected to fall 12% annually to $1.54 a share. Even so, the company trades at just 14.9 times earnings, which is an 8.5% discount to its peers, according to Capital IQ.

Another thing that is attractive about Encore is the recent insider buying interest. Both Chief Operating Officer Ben Nivens and director Ted Collins Jr. bought shares on the open market in late February. The total purchase of 5,000 shares is just above $100,000 but still sends an important psychological message. By placing their own money behind a stock they arguably know more about than the average person, these execs' purchases can be interpreted as a sign the shares may soon end their recent slide.

So yes, I do believe that readers should consider Encore Acquisition at current levels. Insiders have been buying the stock at a discount to its peers. I expect that oil and natural gas commodity prices will remain among historical averages for the next several quarters and that the company's recent acquisitions will considerably pay off. With that in mind, I believe Encore Acquisition shares have 10% to 15% upside by the end of the year.

To view David Peltier's video take on this story, click here

David Peltier is a research associate at In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Peltier appreciates your feedback;

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