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 an enterprise value of approximately $6 billion.
Energy XXI said the acquisition will give them production of approximately 65,000 barrels of oil equivalent (BOE) per day.
EPL owns working interests in 37 producing fields, mainly concentrated within nine core producing areas: an estimated 91percent 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. 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.
"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.
EPL's year-end reserves are estimated to contain proved and probable reserves of 106.3 million BOE, 71 percent of which is oil, according to independent oil and gas consultants. 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.
The consideration to be received by EPL stockholders is valued at $39.00 per EPL share, 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. 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.