U.S. Gulf of Mexico oil company Cox Oil is set to buy all the outstanding shares of Energy XXI Gulf Coast (EGC), also a Gulf of Mexico oil firm, for $322 million. According to EGC, the agreed price is $9.10 per fully diluted share in cash, representing a 21% premium to EGC’s closing share price on June 15, 2018.
EGC’s Board of Directors unanimously approved the proposed transaction with Cox after evaluating multiple transactions, including a proposal from Orinoco Natural Resources, LLC (“ONR”) and its affiliates to assume EGC’s non-core asset portfolio and related asset retirement obligations, EGC said.
EGC, has ceased all negotiations with ONR and its affiliates regarding the non-binding term sheet announced on May 10, 2018.
Douglas E. Brooks, EGC’s Chief Executive Officer and President, said: “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. We have determined that the best available course of action is a transaction that provides stockholders with a certain cash premium and less execution risk.”
Brooks added: “We have been a proponent of consolidation in the Gulf of Mexico for some time. Cox currently operates approximately 35,000 barrels of oil equivalent per day and the combined entities will have production exceeding 61,000 barrels of oil equivalent per day.”
Brad E. Cox, Chairman of Cox, said, “We are pleased to have reached this agreement with EGC, which expands our presence in the Gulf of Mexico. The combined entities represent the continuation of our past practices to generate economies of scale through the consolidation of assets without wavering on our commitment to safe and responsible production in the Gulf of Mexico. In addition, Cox strives to preserve and protect the natural resources of the United States while balancing the need to reduce the abandonment liabilities. We look forward to working with EGC’s assets and team during the transition and into the future.”
In the first quarter of the year, Energy XXI produced an average of approximately 26,600 barrels of oil equivalent (“BOE”) per day, of which 79% was oil, above the midpoint of guidance. The company incurred a net loss of $33.1 million, or $0.99 per share, which included a $12.8 million loss on derivative financial instruments.
The closing of the transaction is subject to customary conditions, including obtaining necessary approvals from EGC’s stockholders and regulatory authorities. There is no financing contingency to complete the transaction. The transaction is anticipated to close in the third quarter of 2018.