EPL Oil & Gas, Inc. today announced it has executed a purchase and sale agreement to acquire oil and natural gas assets in the shallow-water central Gulf of Mexico (GOM) from Nexen Petroleum Offshore U.S.A. Inc. for $70.4 million.
The Eugene Island 258/259 field consists of five leases, namely 254, 255, 257, 258, and 259, all at 100% working interest. The assets are currently producing approximately 900 net barrels of oil equivalent (Boe) per day, about 95% of which is oil. EPL estimates the proved reserves as of the September 1, 2013 effective date consist of approximately 2.6 million Boe of proved developed producing reserves, about 91% of which is oil. The field areas exhibit shallow decline and EPL has identified upside potential beyond the current proved reserves. The Company also estimates the asset retirement obligation to be assumed in the acquisition is expected to total approximately $27 million.
Gary Hanna, EPL’s President and CEO commented, “This purchase adds another layer of long-lived oil production to our current asset base and additional upside. The assets are within our shallow water Central GOM focus area, which allows for excellent operational synergies and efficient integration. As our successful strategy has demonstrated with prior acquisitions, we will apply our proven regional knowledge and technical skills to exploit the upside potential of these assets. This purchase dovetails nicely into our commitment to acquire new 3D datasets. A new Full Azimuth Nodal dataset is currently being shot covering these field areas, and we expect to have the data in house during the second half of 2014. Additionally, post transaction, we will maintain substantial liquidity through our expanded revolving credit facility.”
EPL has worked with its lenders to expand the borrowing base under its senior secured credit facility from $425 million to $475 million, which maintains substantial liquidity for the Company. Currently EPL has $130 million outstanding under its revolving credit facility. EPL has begun implementing additional oil hedges to provide further downside protection in conjunction with this acquisition and its anticipated oil growth in 2014.
The closing of the transaction is subject to customary closing conditions and adjustments. The economic effective date is September 1, 2013, with closing expected late January.
Press Release, January 02, 2014