Energy XXI To Buy EPL Oil & Gas For $2.3 Bln, Incl. Debt

(RTTNews) - Oil and natural gas exploration and production company Energy XXI (Bermuda) Limited (EXXI, EXXI.L) Wednesday said it has signed a definitive merger agreement to acquire EPL Oil & Gas, Inc. (EPL), a Texas-based peer, for total consideration of $2.3 billion, including the assumption of debt. Upon completion of the merger, Energy XXI expects to have an enterprise value of about $6 billion.

The company expects the transaction to be immediately accretive to its shareholders, based on current expectations and market conditions.

Energy XXI said the consideration to be received by EPL stockholders is valued at $39 per EPL share, 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.

The aggregate consideration will be paid 65 percent in cash and 35 percent in Energy XXI shares. EPL stockholders will be able to elect, for each EPL share held, either $39 in cash, 1.669 common shares of Energy XXI, or $25.35 in cash plus 0.584 common shares of Energy XXI.

According to the firm, the aggregate consideration to EPL shareholders would consist of about $1 billion in cash and approximately 23.4 million Energy XXI shares.

Upon the deal closure, Energy XXI shareholders would own approximately 77 percent of the combined company, while EPL shareholders would own the remaining 23 percent.

Following the closure, Energy XXI Chairman and CEO John Schiller will remain chairman and CEO of the combined entity, with headquarters in Houston. One member of EPL's board would join the Energy XXI board.

The company said the completion of the deal is subject to shareholder approval at both companies, receipt of regulatory approvals and customary closing conditions. The boards of directors of both companies have unanimously recommended that shareholders vote in favor of the deal.

Energy XXI's properties are located in the U.S. Gulf of Mexico waters and the Gulf Coast onshore, while EPL's operations are concentrated in the U.S. Gulf of Mexico shelf, focusing on the state and federal waters offshore Louisiana. At its December 31, 2013 year end, EPL reported total assets of $1.86 billion, with net income for the year totaling $85.3 million.

The company noted that EPL owns working interests in 37 producing fields, mainly concentrated within nine core producing areas. EPL operates 90 percent of its properties, by reserves, similar to Energy XXI's 94 percent.

Energy XXI expects the merger to result in the largest public independent producer on the Gulf of Mexico shelf, with production of approximately 65,000 barrels of oil equivalent or BOE per day, 70 percent oil. This includes a reduction related to the pending divestiture of non-operated interests in the Eugene Island 330 and South Marsh Island 128 fields.

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.

In the transaction, Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC acted as financial advisors to Energy XXI. Barclays acted as financial advisors to EPL.

In London, Energy XXI shares are currently trading at $25, down $3 or 10.71 percent.

EPL shares closed Tuesday's trading at $29.11, down $0.81 or 2.71 percent.