Sale ends an oil saga
Private company has deal to buy struggling Houston producer Energy XXI
The offshore oil and gas company Energy XXI Gulf Coast agreed Monday to be bought by a privately held Dallas company for more than $300 million, a deal that will bring an end to what was once largest publicly traded independent producer in the shallow Gulf of Mexico.
For years, Energy XXI of Houston rode an acquisition wave, buying up acreage and rivals for billions of dollars — and accumulating debt — before collapsing during the recent oil bust and filing for bankruptcy two years ago. A lesser Energy XXI emerged from bankruptcy but continued to struggle financially until Monday’s announcement that it would be acquired by Cox Oil for $322 million.
The new deal would cancel an agreement reached just a month ago with Virginia-based Orinoco Natural Resources to buy a 35 percent stake in Energy XXI.
Energy XXI continued to cut jobs last year and then looked for a financial partner before opting to sell the company outright. Energy XXI employed close to 500 at its peak before its bankruptcy, but fewer than 170 workers at the year’s start. CEO Douglas Brooks said the company was running out of cash and couldn’t grow without more financing.
“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 said. “We have been a proponent of consolidation in the Gulf of Mexico for some time.”
Brooks took over Energy XXI last year after the ouster of its founder and CEO, John Schiller, following the company’s exit from bankruptcy.
Schiller was investigated internally for taking personal loans from Energy XXI vendors and a board member. He was first stripped of his chairman’s title and later forced out of the CEO post and off the board.
Energy XXI was formed in 2005 by Schiller and, in less than
a decade, went on a buying spree of more than $5 billion to build up its shallow Gulf acreage, including acquiring $1 billion in assets from Exxon Mobil.
The company’s expansion peaked in June 2014 when it closed a deal to buy rival EPL Oil & Gas for $2.3 billion, including the assumption of about $800 million in debt. In hindsight, the timing couldn’t have been worse.
That same month U.S. oil prices peaked above $107 a barrel. Soon after oil prices began their slide, accelerating into free fall that hit bottom in February 2016 at just above $26 a barrel. Two months later, Energy XXI filed for bankruptcy with about $2.8 billion in debt.
Energy XXI certainly wasn’t alone. More than 300 U.S. energy companies, including about 160 based out of Texas, filed for bankruptcy following the 2014 collapse in oil prices. While the country’s onshore shale business is again booming, the offshore sector has proven much slower to recover, only now showing signs of life through new projects and consolidation. Energy XXI’s chief rival, Fieldwood Energy of Houston, recently bought the Gulf of Mexico assets of Houston’s Noble Energy for about $700 million.
With the Energy XXI acquisition, Cox Oil will emerge as a larger player in the Gulf. The deal is expected to close in the third quarter. Cox is a 14-yearold company headed by fourthgeneration oilman, Brad Cox, and the company focuses exclusively on the Gulf.