Cox Oil to Buy Energy XXI Gulf Coast for $322 Million
A privately-held Cox Oil affiliate that owns and operates assets in the Gulf of Mexico is buying Houston-based Energy XXI Gulf Coast (EGC) for a total of $322 million. This is a 21 percent premium to EGC’s closing share price on June 15, according to a press release.
Shareholders responded favorably to the news. At press time, EGC shares were trading up 19 percent from the previous closing price on June 15.
“We have sought to protect and maximize shareholder value and have searched for the best way to address EGC’s asset retirement obligations, liquidity challenges and need for financing to invest for future growth,” Douglas E. Brooks, EGC’s chief executive officer and president, said in a release.
The press release also said Energy XXI’s board unanimously approved the transaction after evaluating several options, including a previous proposal from Virginia-based Orinoco Natural Resources LLC in May. Energy XXI has since ceased all negotiations with Orinoco regarding the non-binding term sheet.
Brooks added that the company has been a proponent of consolidation in the Gulf of Mexico for some time. EGC focuses on oil and gas properties in conventional assets in the US Gulf Coast region, both offshore in the Gulf of Mexico and onshore in Louisiana and Texas.
During the first quarter of 2018 EGC produced an average of approximately 26,600 barrels of oil equivalent per day, of which 79 percent was oil. During the same period the company reported a net loss of $33.1 million, which included a $12.8 million loss on derivative financial instruments.
In referencing the first-quarter results, Brooks said they were in line with prior guidance but operationally the company continued “to battle downtime and weather issues, in particular pipeline downtime, which reduced volumes in the first quarter and into mid-May."
Dallas-based Cox operates more than 200 producing wells over 25 fields producing a combined 35,000 barrels of oil equivalent per day. The two companies together will have production of more than 61,000 barrels of oil equivalent per day.
This latest transaction comes after several major changes for Energy XXI in recent years, including it’s acquisition of EPL Oil & Gas for $2.3 billion in 2014 and a Chapter 11 bankruptcy filing in December 2016.
Intrepid Partners LLC is financial advisor to EGC and Sidley Austin LLP is its legal advisor; Houlihan Lokey Inc. is financial advisor to Cox and Locke Lord LLP is its legal advisor.
The transaction is expected to close in the third quarter of 2018.
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