EPL Oil & Gas Inc. (NYSE:EPL) has executed a purchase and sale agreement to acquire oil and natural gas assets in the shallow-water central Gulf of Mexico from Nexen Petroleum Offshore USA Inc. for $70.4 million.
The Eugene Island 258/259 field consists of five leases (254, 255, 257, 258, and 259), all at 100% working interest. The assets are producing 900 net boe per day, about 95% of which is oil. EPL estimates 2.6 Mboe of proved developed producing reserves, about 91% of which is oil.
The field areas exhibit shallow decline, and EPL has identified upside potential beyond the current proved reserves. The company also estimates that the asset retirement obligation to be assumed in the acquisition will total $27 million.
EPL has worked with its lenders to expand the borrowing base under its senior secured credit facility from $425 million to $475 million, which maintains substantial liquidity for the company. EPL has $130 million outstanding under its revolving credit facility, and the company has begun implementing additional oil hedges to provide further downside protection in conjunction with this acquisition and its anticipated oil growth in 2014.
The transaction’s closing is expected in late January.