Transaction Type
Announce Date
Post Date
Close Date
Estimated Price

Acquired 50% WI in 30 fields in GOM shelf, gaining 10,000 BOE/d, 22.9 MMBOE proved.

Energy XXI (Bermuda) Ltd. (Nasdaq, London AIM: EXXI) has closed its acquisition of the remaining 50% interest in its core Gulf of Mexico shelf oil and gas properties from MitEnergy Upstream LLC, a subsidiary of Tokyo-based Mitsui & Co., Ltd. (Nasdaq: MITSY; Tokyo: 8031) for $283 million in cash. The transaction involves a 50% nonoperated interest in the same group of properties that Energy XXI purchased from Pogo Producing Co. in June 2007, including Main Pass 61, Viosca Knoll 10003, South Pass 49 and Main Pass 73. The assets include 30 fields currently producing 8,000 net barrels of oil equivalent per day (77% oil, 80% currently operated by Energy XXI). Proved reserves are 22.9 million barrels of oil equivalent (77% oil, 80% operated). Possible reserves are 4.2 million barrels equivalent with another 4.5 million barrels equivalent possible. Offshore leases included in the purchase total nearly 33,000 net acres. Upon restoration of volumes pending repair of third-party pipelines damaged by hurricanes in 2008, net production is expected to reach 10,000 barrels of oil equivalent per day. "This is a transformational transaction for Energy XXI," says Energy XXI chairman and CEO John Schiller. "Not only are we doubling up on some our most profitable and lowest-risk barrels, but we will use the transaction to strengthen the balance sheet, which increases our ability to fund future growth by furthering our acquire-and-exploit strategy and capitalizing on an enhanced portfolio of projects." "This acquisition is a watershed event for Energy XXI, doubling our interests in the most oil-weighted and highest-margin properties in our portfolio," says Energy XXI chairman and CEO John Schiller. "Beyond the obvious synergies gained by consolidating interests in properties we already operate, this transaction puts the company back on solid financial footing. Our strong balance sheet and greatly enhanced cash flows from the expanded asset base increase our ability to continue growing through our acquire-and-exploit strategy." The company values the deal at $12.30 per barrel proved. The acquisition will grow the company's proved reserves by 43%. Additionally, Energy XXI has purchased puts and put spreads 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 was funded through common and preferred equity that raised $268.7 million. Standard & Poor's Ratings Services reports its ratings and outlook of "SD" on Energy XXI remain unaffected by the announcement. The "SD" rating reflects the recent completion of an exchange offer for the company's $750 million senior notes due 2013, at a significant discount to the face value of the notes. S&P analyst Paul B. Harvey says, "We consider this to be a distressed exchange and, as such, tantamount to a default under our criteria. We expect to assign a new corporate credit rating to Energy XXI (Bermuda) within the next two weeks. We will base the new rating on our assessment of the company's new capital structure and liquidity profile, the MitEnergy acquisition, and our outlook on the North American exploration and production industry. Our preliminary expectation is that the corporate credit rating we assign will likely not be higher than the previous 'B-' rating prior to the exchange offer, and it could be lower. Energy XXI will remain highly leveraged at a time of continued commodity price uncertainty, which will continue to weigh negatively on ratings."