Houston-based Energy XXI has reached an agreement with the Bureau of Ocean Energy Management (BOEM) regarding supplemental bonding requirements for Energy XXI and its subsidiaries.
The company has provided $150 million of supplemental bonding, bringing Energy XXI’s total supplemental bonding to $319 million at an annual premium expense of $4.8 million, with approximately $10 million collateral posted, Energy XXI said in a June 22 press statement. The company also maintains $226 million in Letters of Credit to third parties on additional U.S. Gulf assets.
As part of the agreement, BOEM will withdraw its orders with regard to supplemental bonding upon dismissal of the appeals filed by Energy XXI with the Interior Board of Land Appeals. BOEM also has agreed to put off issuing until Nov. 15 of this year any further requirements for financial assurance with respect on existing properties of Energy XXI and its subsidiaries.
Energy XXI and its subsidiaries will continue to cooperate with and "engage in constructive discussions" with BOEM and the Bureau of Safety and Environmental Enforcement, with regard to decommissioning and financial assurance matters.
The company received an initial request for $1 billion in supplemental bonding, according to a June 2015 investors’ presentation. The financial figures in the agreement are to replace the need to bond $1 billion, a company spokesperson told Rigzone.
The new regulations regarding supplemental bonding are part of BOEM’s effort to modernize financial assurance regulations to match current industry standards, BOEM spokesperson John Filostrat told Rigzone. Late last summer, BOEM issued an advanced notice of proposed rulemaking to update the regulations to ensure that "the U.S. taxpayer never pays to decommission an Outer Continental Shelf (OCS) facility" and to ultimately protect the environment.
With OCS infrastructure aging, BOEM wanted to ensure that the leaseholder and all of its partners have enough bonding in place to support decommissioning and ensure companies have enough financial wherewithal to conduct business on the OCS.
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