USA: Energy XXI to Acquire Gulf of Mexico Shelf Properties From ExxonMobil for $1.01 Billion
Energy XXI announced it has executed a purchase and sale agreement to acquire certain shallow-water Gulf of Mexico shelf oil and natural gas interests from affiliates of ExxonMobil for $1.01 billion.
The assets are currently producing approximately 20,000 net BOE per day (BOE/d), about 53 percent of which is oil. Offshore leases included in the purchase total 130,853 net acres.
Reserve estimates for the acquired properties were prepared on Nov. 16, 2010, by Netherland, Sewell & Associates, Inc., independent oil and gas consultants employed by Energy XXI. The properties are estimated to contain net proved and probable reserves of 66 million barrels of oil equivalent (BOE), 61 percent of which is oil. Proved reserves are estimated at 30.1 million barrels of oil and 116.1 billion cubic feet of natural gas, or a total of 49.5 million BOE, 68 percent of which are proved developed.
The properties include nine fields on the Gulf of Mexico shelf, generally located between Energy XXI’s existing core South Timbalier and Main Pass operations in water depths of 470 feet or less. The six largest fields account for 89 percent of the net production.
“The ExxonMobil properties are an extraordinary fit with our existing, oil-focused core assets, which generate some of the highest margins in the industry,” Energy XXI Chairman and CEO John Schiller said. “With this acquisition, we are gaining access to production, infrastructure and extensive acreage complemented by seismic data and field studies. As operator of 94 percent of the assets being acquired, we would have a portfolio of drilling and recompletion opportunities that we can pursue while analyzing the potential for higher-impact exploration prospects.”
Pro forma for the acquisition, Energy XXI would become the third-largest oil producer on the Gulf of Mexico shelf, with interests in seven of the top 11 oil fields on the shelf. Estimated proved plus probable reserves would increase 72 percent to 158.1 million BOE from 92.1 million BOE at the company’s June 20, 2010 fiscal year end. Production would increase to approximately 46,000 BOE per day, up more than 77 percent from the 25,900 BOE per day average in the most recent fiscal quarter ended Sept. 30, 2010, with oil representing 63 percent.
“In addition to growing our reserves, production volumes and drilling portfolio, we expect this consolidation of properties within our existing core area to achieve meaningful cost savings,” Executive Vice President of Exploration and Production Ben Marchive said. “Cash flow from these properties, combined with the excess cash already being generated by our existing asset base, should put us in a position to rapidly retire debt while funding accelerated development of the overall portfolio.”
In conjunction with the signing of the agreement, Energy XXI has added to its crude oil hedge position to provide downside price protection. Based on 46,000 BOE per day of pro forma production, 63 percent of which is oil, the company currently has hedged 70 percent, 61 percent and 12 percent of the crude oil production for calendar years 2011, 2012 and 2013, respectively.
In addition to utilizing cash on hand to finance the purchase, Energy XXI has obtained committed financing to increase its corporate revolver from $350 million currently to $700 million in conjunction with the acquisition, as well as a $450 million unsecured bridge loan that the company would anticipate retiring through the future issuance of high-yield notes. Energy XXI has placed a 10 percent cash deposit into an interest-bearing account under the terms of the agreement.
The purchase is subject to preferential rights-to-purchase held by other working interest owners in the properties, as well as customary closing conditions and adjustments. The effective date is Dec. 1, 2010, with closing expected by Dec. 20, 2010.
Source:ENERGY XII , November 22, 2010;