By Tiffany Kary and Joe Carroll
(Bloomberg) — Energy XXI Ltd. filed for bankruptcy protection after spending $5 billion on acquisitions in the years leading up to the crude slump.
The oil and gas explorer sought Chapter 11 protection in Houston Thursday, listing $1.8 billion in assets and $3.6 billion in debt and saying it has reached a restructuring agreement with noteholders.
“Energy XXI will eliminate more than $2.8 billion in debt from its balance sheet, substantially deleverage its capital structure and position the company for long-term success,” the company said in a statement.
Energy XXI bills itself as the largest publicly traded independent producer on the Gulf of Mexico shelf. Since its initial public offering more than 10 years ago, the Houston-based company bought MitEnergy, picked up $1.01 billion of properties from Exxon Mobil Corp. and spent $2.3 billion on EPL Oil & Gas, according to its website.
As recently as three years ago, Chief Executive Officer John Schiller was planning to expand as far afield as Southeast Asia, where he said the geology is similar to the Gulf’s.
With oil hovering around $30 a barrel, Energy XXI wound up buying back more than $1.7 billion in debt over seven months to trim its interest expense. In a February regulatory filing, the company said it doubted it could meet financial commitments over the coming year and continue operating. Crude’s recovery to about $40 since then hasn’t been enough.
Schiller, a protege of wildcatter James “Jim Bob” Moffett, had also steered the company into costly exploration projects with Moffett’s Freeport-McMoRan Inc. several miles beneath the Gulf of Mexico. Energy XXI said Thursday that Schiller will continue as CEO.
The company, which plans to operate as normal during the restructuring, has about $180 million in cash and said it expects to pay suppliers and vendors in full. It asked the court for a freeze on stock transfers in order to preserve tax benefits. Energy XXI has $1 billion in “net operating losses” which help it save on federal and state taxes, according to court papers.
Oil began its slide in mid-2014 when crude was at about $100 a barrel. A glut has driven dozens of energy explorers into Chapter 11, including Magnum Hunter Resources Corp., Samson Resources Corp. and Sabine Oil & Gas Corp. Rig operators such as Paragon Offshore Plc and Hercules Offshore Inc. also declared bankruptcy as demand for their services dropped.
About 35 percent of exploration and production companies worldwide — some 175 firms — are at risk of bankruptcy this year, according to a Deloitte LLP study published in February. Together, these companies have around $150 billion in debt on their balance sheets, according to the report.
Money manager Franklin Resources Inc. was the biggest owner of the company’s second-lien bonds as of Feb. 29, with a 32.4 percent holding.
An Energy XXI subsidiary that leases subsea pipelines off the Louisiana coast remained outside Chapter 11 case and those leases remain intact, according to CorEnergy Infrastructure Trust Inc., which owns the pipe network.
The case is In re Energy XXI Ltd., 16-31928, U.S. Bankruptcy Court, Southern District of Texas (Houston).
© 2016 Bloomberg L.P