Attached files
| file | filename |
|---|---|
| 8-K - Energy XXI Ltd | v204198_8-k.htm |
| EX-99.8 - Energy XXI Ltd | v204198_ex99-8.htm |
| EX-99.1 - Energy XXI Ltd | v204198_ex99-1.htm |
| EX-99.4 - Energy XXI Ltd | v204198_ex99-4.htm |
| EX-99.2 - Energy XXI Ltd | v204198_ex99-2.htm |
| EX-99.5 - Energy XXI Ltd | v204198_ex99-5.htm |
| EX-99.6 - Energy XXI Ltd | v204198_ex99-6.htm |
| EX-99.9 - Energy XXI Ltd | v204198_ex99-9.htm |
| EX-99.7 - Energy XXI Ltd | v204198_ex99-7.htm |
Exhibit
99.3
Exxon
Acquisition
On
November 19, 2010, our wholly-owned subsidiary, Energy XXI GOM, LLC, entered
into a purchase and sale agreement (the “PSA”) with Exxon and several of Exxon’s
subsidiaries to purchase certain shallow-water Gulf of Mexico shelf oil and
natural gas interests for $1.01 billion in cash, subject to adjustment. The
Exxon properties:
|
•
|
had
estimated proved reserves as of November 30, 2010 of 49.5 MMBOE, of which
61% were oil and 68% were proved
developed;
|
|
•
|
are
located in water depths of 470 feet or
less;
|
|
•
|
include
160 producing wells in 9 fields;
|
|
•
|
had
average daily production of approximately 18.8 MBOED for the three months
ended September 30, 2010; and
|
|
•
|
include
approximately 180 miles of gathering lines as well as seismic data and
field studies related to the
properties.
|
The Exxon
acquisition provides an opportunity to significantly increase our reserves,
production volumes and drilling portfolio, while maintaining our focus on
oil-weighted assets in our core area of expertise, the shallow waters of the
Gulf of Mexico. The Exxon acquisition also provides us access to infrastructure
and extensive acreage, complemented by seismic data and field studies. We intend
to pursue our strategy of acquiring, exploiting and exploring the Exxon
properties, which provide a portfolio of drilling and recompletion opportunities
that we can pursue while we analyze the potential for higher-impact exploration
prospects. We expect to operate approximately 94% of the Exxon properties. Upon
the completion of the Exxon acquisition, we will become the third largest oil
producer on the Gulf of Mexico shelf, with interests in seven of the top 11
fields on the shelf.
Pursuant
to the PSA, Exxon reserved a 5% overriding royalty interest in the Exxon
properties for production from depths below approximately 16,000 feet. In
addition, the PSA requires us to post a $225 million letter of credit, which we
intend to post under our revolving credit facility, in favor of Exxon to
guarantee our obligation to plug and abandon the Exxon properties in the
future.
In
conjunction with the signing of the PSA, we have put in place hedges covering
approximately 47% of the average daily oil production from the Exxon properties,
assuming a daily average production rate of 47 MMBOE per day, of which 63% is
oil for calendar years 2011 through 2013. These hedges include (i) swaps
covering 2,900 barrels of oil production per day in 2011 at $89.48 per barrel,
3,400 barrels of oil production per day in 2012 at $89.06 per barrel, and 2,500
barrels of oil production per day in 2013 at $89.53 per barrel and (ii) put
spreads covering 6,600 barrels per day of oil production with a floor of $75.00
per barrel of oil production and a sub-floor at $60.00 per barrel of oil
production from January 2011 through December 2012.
The Exxon
acquisition is subject to customary closing conditions and adjustments, such as
adjustments to the purchase price to reflect revenues generated between the
effective date of December 1, 2010 and the closing, which is expected by
December 20, 2010. The closing of the Exxon acquisition is not conditioned upon
the closing of this offering. There is no assurance that the Exxon acquisition
will be completed, or that the anticipated benefits listed above will be
realized.
The
following table sets forth certain reserve and operating information with
respect to our existing properties and the Exxon properties.
|
Properties
|
Proved
Reserves
(MBOE)(1)
|
%
Oil
|
%
Proved
Developed
|
PV-10(2)
(in
thousands)
|
Average
Daily
Production
for
the
Three
Months
Ended
September
30,
2010
(BOED)
|
Producing
Wells
|
|||||||||||||||||||
|
Existing
properties
|
75,614
|
63
|
%
|
70
|
%
|
$
|
1,848,916
|
25,900
|
287
|
||||||||||||||||
|
Exxon
properties
|
49,467
|
61
|
%
|
68
|
%
|
$
|
802,929
|
18,800
|
160
|
||||||||||||||||
|
(1)
|
Estimated
proved reserve volumes and values for our existing properties were
calculated using the unweighted twelve-month average of the
first-day-of-the-month reference prices for the period ended June 30,
2010, which were $75.76 per Bbl for oil and $4.10 per Mcfe for natural
gas. Estimated proved reserve volumes and values for the Exxon properties
were calculated as of November 30, 2010 using the unweighted twelve-month
average of the first-day-of-the-month reference prices for the period
ended November 30, 2010, which were $75.25 per Bbl for oil and $4.396 per
MMBtu for natural gas.
|
|
(2)
|
PV-10
is a non-GAAP financial measure. For a reconciliation of PV-10 to the
standardized measure for our existing properties, please see “— Our
Summary Reserve and Historical Operating Data.” A reconciliation of PV-10
to the standardized measure is not available for the Exxon properties.
Please see “— Exxon Properties Summary Reserve and Historical Operating
Data.”
|
We intend
to finance the Exxon acquisition with a combination of the net proceeds from
this offering, borrowings under our revolving credit facility, and cash on hand,
the source of which is our Parent’s recently completed equity offerings. See “—
Recent Developments” and “Use of Proceeds.”