Energy XXI To Acquire Gulf Of Mexico Oil Properties From MitEnergy Upstream

Published: 23-Nov-2009

Energy XXI (Bermuda) has executed a conditional purchase/sale agreement to acquire certain Gulf of Mexico shelf oil and natural gas interests from MitEnergy Upstream for a headline cash consideration of $283m.

The transaction involves non-operated interests in the same group of properties Energy XXI acquired from Pogo Producing Company in June 2007. The properties include 30 fields currently producing 8,000 net barrels of oil equivalent (BOE) per day, about 77% of which is oil and 80% of which is already operated by Energy XXI.

John Schiller, chairman and CEO of Energy XXI, said: "The original Pogo property acquisition turned out to be an excellent transaction for Energy XXI, and the purchase announced today will double our interests in the same properties. The synergies are obvious, as no incremental personnel, systems or other overhead will be required. Administrative and operating cash costs are expected to be reduced by about $1 per BOE overall."

Energy XXI has purchased puts and put spreads that provide downside price protection averaging $73.46 per barrel on 6,500 barrels per day of oil production for 18 months, from January 2010 through June 2011.

The transaction is likely to be funded through a combination of new equity, cash on hand and bank debt. Energy XXI has placed a 5% cash deposit into escrow under the terms of the agreement.

The purchase is subject to customary closing conditions and adjustments, such as downward adjustments to the purchase price to reflect revenues generated between the effective date of July 1, 2009 and the closing, which is expected within 90 days. Assuming a year-end closing, actual funding requirements are estimated to be $263m.