- Merger will create the largest public independent
producer on the shelf
- Pro forma production approximates 65,000 BOE per day,
70 percent oil
- Transaction expected to be immediately accretive to
shareholders
Energy XXI (Nasdaq:EXXI) (LSE:EXXI) and EPL Oil & Gas, Inc.
(NYSE:EPL) today announced the signing of a definitive merger
agreement pursuant to which Energy XXI will acquire all of EPL's
outstanding shares for total consideration of $2.3 billion,
including the assumption of debt. As a result of the merger, Energy
XXI will become the largest public independent producer on the Gulf
of Mexico shelf, with production of approximately 65,000 barrels of
oil equivalent (BOE) per day, 70 percent oil, including a reduction
related to the pending divestiture of non-operated interests in the
Eugene Island 330 and South Marsh Island 128 fields. Upon
completion of the merger, Energy XXI expects to have an enterprise
value of approximately $6 billion.
"EPL's assets and operations closely resemble our own,
predominantly oil, with some of the highest margins in the industry
and extraordinary opportunities for reserves and production growth
through development and exploration activities," Energy XXI
Chairman and CEO John Schiller said. "Energy XXI will be the
only publicly traded pure play on the Gulf of Mexico shelf, with
the highest concentration of large, mature oil fields ever owned by
a single shelf operator. With a history of increasing acquired
reserves, we have proven the adage that big oil fields get bigger,
and we are excited at the prospect of continuing that trend with
the addition of EPL's properties."
"This merger of the two premier independent oil producers on the
shelf will create an unrivalled operator," EPL Chairman, President
and CEO Gary C. Hanna said. "As part of a larger organization, EPL
shareholders will benefit from synergies across the board, a
high-grading of the drilling portfolio and opportunities to expand
across the Gulf of Mexico."
EPL owns working interests in 37 producing fields, mainly
concentrated within nine core producing areas: an estimated 91
percent of proved reserves, 88 percent of production and 91 percent
of revenues are associated with the Ship Shoal, East Bay, South
Timbalier, South Pass 78 and 49, West Delta, Main Pass, Eugene
Island and South Marsh complexes. EPL operates 90 percent of
its properties, by reserves, similar to Energy XXI's 94
percent.
EPL's year-end reserves estimates were prepared as of Dec. 31,
2013 by Netherland, Sewell & Associates, Inc., independent oil
and gas consultants. Including estimates for the subsequently
acquired Eugene Island 258/259 field, and adjustments for lease-use
natural gas, the properties are estimated to contain net proved and
probable reserves of 106.3 million BOE, 71 percent of which is oil.
Proved reserves are estimated at 54.9 million barrels of oil and
139.2 billion cubic feet of natural gas, or a total of 78.1 million
BOE, 70 percent of which are proved developed. Offshore leases
total 273,713 net acres. At its Dec. 31, 2013 year end, EPL
reported total assets of $1.86 billion, with net income for the
year totaling $85.3 million. Further information is available at
www.eplweb.com.
"This acquisition adds meaningfully to our reserves, production,
infrastructure and acreage positions, complemented by seismic data
and field studies," Energy XXI Executive Vice President of
Exploration and Production Ben Marchive said. "Upon completion, the
combined company will own and operate 10 oil fields on the shelf
with cumulative production exceeding 80 million barrels of oil
each, with ample opportunity to grow organically by increasing
recovery from those known reservoirs as well as by exploring around
and below the producing horizons. The combined company's
larger presence on the central Gulf of Mexico shelf can drive
capital costs lower and operating efficiencies higher. In
addition, we will be able to apply horizontal drilling and other
exploitation expertise across the expanded portfolio, while
leveraging advanced seismic data to explore sub-salt and deeper
horizons across the region."
In addition to utilizing cash on hand to finance the purchase,
Energy XXI has obtained commitments to increase its corporate
revolver from $1.0875 billion currently to $1.675 billion in
conjunction with the acquisition, as well as a $400 million
unsecured bridge loan to augment the available revolver if EPL's
bonds are repurchased. Energy XXI would anticipate retiring
any bridge loan through the future issuance of high-yield notes.
Details of financing terms will be disclosed upon completion of any
issuances.
"Based on current expectations and market conditions, the
acquisition is expected to be immediately accretive to existing
Energy XXI shareholders, while offering EPL shareholders a
significant premium to recent trading prices in addition to the
ability to participate in the future success of the combined
company," Schiller said.
TRANSACTION TERMS
The consideration to be received by EPL stockholders is valued
at $39.00 per EPL share based on Energy XXI's closing price as of
March 11, 2014, representing a 37 percent premium to the 30-day
average closing price of EPL shares and a 34 percent premium over
the closing price of EPL shares on March 11, 2014. The aggregate
consideration will be paid 65 percent in cash and 35 percent in
Energy XXI common shares, based on Energy XXI's closing price on
March 11, 2014. EPL stockholders will be able to elect, for
each EPL share held, either (i) $39.00 in cash, (ii) 1.669 common
shares of Energy XXI, or (iii) $25.35 in cash plus 0.584 common
shares of Energy XXI. All elections by shareholders will be
subject to proration. Upon closing, Energy XXI shareholders are
expected to own approximately 77 percent of the combined
company and EPL shareholders are expected to own the remaining 23
percent.
Aggregate consideration to EPL shareholders is expected to
consist of approximately $1 billion in cash and approximately
23.4 million common shares of Energy XXI. Once the transaction
is completed, Schiller will remain chairman and CEO of the combined
entity. The headquarters will remain in Houston. One member of
EPL's board of directors will join the Energy XXI board of
directors upon completion of the transaction, which is subject to
shareholder approval at both companies, receipt of regulatory
approvals and customary closing conditions. Both the boards of
directors of Energy XXI and EPL are unanimously recommending that
shareholders vote in favor of the transaction.
Members of the boards of directors and management teams of
Energy XXI and EPL all have entered into voting agreements in
support of the transaction.
Energy XXI expects that the completion of the transaction will
trigger change-of-control provisions in the indenture governing
EPL's existing senior notes. These change-of-control
provisions entitle holders of the notes to receive 101 percent of
par for the notes, plus accrued and unpaid interest from a
change-of-control offer related to the notes. Energy XXI
expects any of EPL's notes not tendered pursuant to the change of
control offer to remain outstanding following the transaction,
subject to any opportunistic refinancing of such notes it may
pursue in the future based on market conditions and in accordance
with the indenture for those notes.
ADVISORS AND COUNSEL
Citigroup Global Markets Inc. and Credit Suisse Securities (USA)
LLC acted as financial advisors to the Energy XXI board of
directors and each rendered a fairness opinion in connection with
the transaction. Vinson & Elkins L.L.P. acted as legal advisor
to the Energy XXI board of directors. Barclays acted as financial
advisors to the EPL board of directors and rendered a fairness
opinion in connection with the transaction. Sidley Austin LLP acted
as legal advisor to the EPL board of directors.
CONFERENCE CALLS SCHEDULED
Energy XXI has scheduled a conference call for today, March 12,
2014, at 8 a.m. CDT (1 p.m. London time) to discuss the
acquisition. To actively participate on the conference call,
please call 1 (631) 813-4724 about 5 minutes before the
scheduled start time and use Confirmation Code 12508402. U.K.
callers may dial (0) 800 0288 438. Those who wish to view the
presentation materials, or to participate in listen-only mode,
should access the event through the company's web site,
www.energyxxi.com. A replay of the call will be archived and
available on the web site following the live call.
EPL has scheduled a conference call for Wednesday, March 12,
2014, at 9 a.m. CDT to discuss the acquisition. To actively
participate on the conference call, please call the Toll-Free
Dial-In Number (866) 845-8624, or International Dial-In (706)
634-0487, approximately five minutes before the scheduled start
time and use Conference ID Code: 12862334. Those who wish
to participate in listen-only mode can access the event through the
company's web site, www.eplweb.com. A replay of the call will be
archived and available on the web site following the live call.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements
concerning the proposed transaction, its financial and business
impact, management's beliefs and objectives with respect thereto,
and management's current expectations for future operating and
financial performance, based on assumptions currently believed to
be valid. Forward-looking statements are all statements other than
statements of historical facts. The words "anticipates," "may,"
"can," "plans," "believes," "estimates," "expects," "projects,"
"intends," "likely," "will," "should," "to be," and any similar
expressions or other words of similar meaning are intended to
identify those assertions as forward-looking statements. It is
uncertain whether the events anticipated will transpire, or if they
do occur, what impact they will have on the results of operations
and financial condition of Energy XXI, EPL or of the combined
company. These forward-looking statements involve significant risks
and uncertainties that could cause actual results to differ
materially from those anticipated, including but not limited to the
ability of the parties to satisfy the conditions precedent and
consummate the proposed transaction, the timing of consummation of
the proposed transaction, the ability of the parties to secure
regulatory approvals in a timely manner or on the terms desired or
anticipated, the ability of Energy XXI to integrate the acquired
operations, the ability to implement the anticipated business plans
following closing and achieve anticipated benefits and savings, and
the ability to realize opportunities for growth. Other important
economic, political, regulatory, legal, technological, competitive
and other uncertainties are identified in the documents filed with
the SEC by Energy XXI and EPL from time to time, including their
respective Annual Reports on Form 10-K, Quarterly Reports on Form
10-Q, and Current Reports on Form 8-K. The forward-looking
statements included in this press release are made only as of the
date hereof. Neither Energy XXI nor EPL undertakes any obligation
to update the forward-looking statements included in this press
release to reflect subsequent events or circumstances.
Competent Person Disclosure
The technical information contained in this announcement
relating to resources and operations adheres to the standard set by
the Society of Petroleum Engineers ("SPE"). Phil Kerig, Director of
Corporate Development, is the qualified person who has reviewed and
approved the technical information contained in this
announcement.
About Energy XXI
Energy XXI is an independent oil and natural gas exploration and
production company whose growth strategy emphasizes acquisitions,
enhanced by its value-added organic drilling program. The company's
properties are located in the U.S. Gulf of Mexico waters and the
Gulf Coast onshore. Cantor Fitzgerald Europe is Energy XXI's
listing broker in the United Kingdom. To learn more, visit
the Energy XXI website at www.EnergyXXI.com.
ABOUT EPL
Founded in 1998, EPL is an independent oil and natural gas
exploration and production company headquartered in Houston, Texas
with an office in New Orleans, Louisiana. The Company's operations
are concentrated in the U.S. Gulf of Mexico shelf, focusing on the
state and federal waters offshore Louisiana. For more information,
please visit www.eplweb.com.
IMPORTANT ADDITIONAL INFORMATION WILL BE FILED WITH THE
SEC
In connection with the proposed transactions, Energy XXI intends
to file with the SEC a registration statement on Form S-4 that will
include a joint proxy statement of Energy XXI and EPL that also
constitutes a prospectus of Energy XXI. Each of Energy XXI and EPL
also plan to file other relevant documents with the SEC regarding
the proposed transactions. INVESTORS ARE URGED TO READ THE JOINT
PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED WITH
THE SEC IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION. You may obtain a free copy of the joint
proxy statement/prospectus (if and when it becomes available) and
other relevant documents filed by Energy XXI and EPL with the SEC
at the SEC's website at www.sec.gov. You may also obtain these
documents by contacting Energy XXI's Investor Relations department
at (713) 351-3175 or via e-mail at IR@energyxxi.com or by
contacting EPL's Investor Relations department at (713) 228-0711 or
via email at mjensen@eplweb.com.
PARTICIPANTS IN THE SOLICITATION
Energy XXI and EPL and their respective directors and executive
officers and other members of management and employees may be
deemed to be participants in the solicitation of proxies in respect
of the proposed transactions. Information about Energy XXI's
directors and executive officers is available in Energy XXI's proxy
statement dated October 7, 2013, for its 2013 Annual Meeting of
Shareholders. Information about EPL's directors and executive
officers is available in EPL's proxy statement dated March 21,
2013, for its 2013 Annual Meeting of Stockholders. Other
information regarding the participants in the proxy solicitations
and a description of their direct and indirect interests, by
security holdings or otherwise, will be contained in the joint
proxy statement, Energy XXI proxy statement/prospectus and other
relevant materials to be filed with the SEC regarding the proposed
transactions when they become available. Investors should read the
joint proxy statement/prospectus carefully when it becomes
available before making any voting or investment decisions. You may
obtain free copies of these documents from Energy XXI or EPL using
the sources indicated above.
This document shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be
any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the U.S.
Securities Act of 1933, as amended. GLOSSARY
Reserves:
Proved Oil and Gas Reserves -- Those quantities of crude oil and
gas, which, by analysis of geoscience and engineering data, can be
estimated with reasonable certainty to be economically producible
-- from a given date forward, from known reservoirs, and under
existing economic conditions, operating methods and government
regulations -- prior to the time at which contracts providing the
right to operate expire, unless evidence indicates that renewal is
reasonably certain, regardless of whether deterministic or
probabilistic methods are used for the estimation. The project to
extract the hydrocarbons must have commenced or the operator must
be reasonably certain that it will commence the project within a
reasonable time. This definition has been abbreviated from the
definition of "Proved oil and gas reserves" contained in Rule
4-10(a)(22) of SEC Regulation S-X.
Proved Developed Reserves -- Reserves are categorized as proved
developed if they are expected to be recovered from existing
wells.
Probable Reserves -- Those additional reserves that are less
certain to be recovered than proved reserves but more certain to be
recovered than possible reserves. This definition has been
abbreviated from the applicable definition contained in Rule
4-10(a)(18) of SEC Regulation S-X.
Possible Reserves -- Those additional reserves that are less
certain to be recovered than probable reserves. This definition has
been abbreviated from the applicable definition contained in Rule
4-10(a)(17) of Regulation S-X.
Other terms:
Barrel – unit of measure for oil and petroleum
products, equivalent to 42 U.S. gallons.
BOE – barrels of oil equivalent, used to equate
natural gas volumes to liquid barrels at a general conversion rate
of 6,000 cubic feet of gas per barrel.
BOE/d – barrels of oil equivalent per day.
Bbl/d – barrels per day of oil or
condensate.
MMBTU – million British thermal units.
Mcf/d – thousand cubic feet of gas per day.
MD – total measured depth of a well.
Net Pay – cumulative hydrocarbon-bearing
formations.
NRI, Net Revenue Interest – the percentage of
production revenue allocated to the working interest after first
deducting proceeds allocated to royalty and overriding
interest.
Proved, Probable, Possible reserves – are as
defined in the SPE/World Petroleum Congress Standard.
psi – pounds per square inch.
TD – target total depth of a well.
TVD –true vertical depth of a well.
WI, Working Interest – the interest held in
lands by virtue of a lease, operating agreement, fee title or
otherwise, under which the owner of the interest is vested with the
right to explore for, develop, produce and own oil, gas or other
minerals and bears the proportional cost of such operations.
Workover / Recompletion –
operations on a producing well to restore or increase production. A
workover or recompletion may be performed to stimulate the well,
remove sand or wax from the wellbore, to mechanically repair the
well, or for other reasons.
CONTACT: ENQUIRIES OF ENERGY XXI
Energy XXI
Stewart Lawrence
Vice President, Investor Relations and Communications
713-351-3006
slawrence@energyxxi.com
Greg Smith
Director, Investor Relations
713-351-3149
gsmith@energyxxi.com
Cantor Fitzgerald Europe
Nominated Adviser: David Porter, Rick Thompson
Corporate Broking: Richard Redmayne
Tel: +44 (0) 20 7894 7000
Pelham Bell Pottinger
James Henderson
jhenderson@pelhambellpottinger.co.uk
Mark Antelme
mantelme@pelhambellpottinger.co.uk
+44 (0) 20 7861 3232
ENQUIRIES OF EPL
EPL
Mac Jensen
Senior Vice President, Business Development
(713) 228 0711
mjensen@eplweb.com
Brunswick Group
Mark Palmer
(214) 254 3790
mpalmer@brunswickgroup.com
Ward
Deborah Buks
dbuks@wardcc.com
(713) 869 0707
Molly LeCronier
mlecronier@wardcc.com
(713) 869 0707
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