Energy XXI reaches agreement with BOEM on supplemental bonding

Energy XXI (Nasdaq: EXXI) has reached an agreement with the Bureau of Ocean Energy Management (BOEM) with regard to supplemental bonding requirements for the company and its subsidiaries.

Energy XXI has provided $150 million of supplemental bonding, bringing the company's total supplemental bonding to $319 million at an annual premium expense of $4.8 million, with approximately $10 million collateral posted. In addition, the company maintains $226 million in letters of credit to third parties on additional assets in the Gulf of Mexico.

The BOEM has agreed to withdraw its orders with regard to supplemental bonding upon dismissal of the appeals filed by Energy XXI with the Interior Board of Land Appeals, and postponed until Nov. 15 the issuance of any further requirements for financial assurance with respect to activities on existing properties of Energy XXI and its subsidiaries.

In addition to the consideration provided under the agreement, during the interim period, Energy XXI and its subsidiaries continue to cooperate with and engage in constructive discussions with the BOEM and its sister agency, the Bureau of Safety and Environmental Enforcement, with regard to decommissioning and financial assurance matters.

Analysts from Global Hunter Securities commented, “Subsequent to the disclosure filed in its FQ3 10-Q pertaining to $1.0 billion in bonding requirements mandated by the BOEM, EXXI has reached an agreement on supplemental requirements. Takeaway: Positive. The terms in this agreement fall well below the worst-case scenario we had previously outlined (i.e., $500 million in incremental bonding, requiring $50 million in collateral and a $10 million annual fee); this leaves EXXI with ~$140 million available on the revolver, and $602 million in cash on hand at FQ3-end.”

Energy XXI is an independent oil and natural gas company whose properties are located in the US Gulf of Mexico waters and the Gulf Coast onshore.

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