CorEnergy Infrastructure Trust Inc. has agreed to acquire 100% of the Grand Isle gathering system (GIGS) from Energy XXI USA Inc. for $245 million in cash, plus the assumption of abandonment liabilities estimated at $12.5 million, for total consideration of $257.5 million. The deal is expected to close before June 30.
The system includes 153 miles of subsea pipeline that transports oil and water from six Energy XXI fields and one field operated by ExxonMobil Corp. in the shallow-water Gulf of Mexico.
The 16-acre terminal includes four storage tanks, a saltwater disposal facility with three injection wells, and associated pipelines, land, buildings, and facilities.
The system currently transports 60,000 b/d, of which 18,000 b/d is oil and 42,000 b/d is water, with total capacity of 120,000 b/d. GIGS volumes represented 42% of Energy XXI’s oil production for the fiscal year ended June 30, 2014. Initially FERC regulated, the system was deregulated on Feb. 1.
Energy XXI will continue to operate GIGS under a long-term, triple-net lease with CorEnergy. The primary term of the lease will be 11 years from closing, with an initial renewal term of 9 years, subject to certain conditions. Energy XXI will retain any revenues generated from transporting third-party volumes.
“Continuing to maintain operatorship of the GIGS is important to us, ensuring transportation of a significant portion of our production,” commented John Schiller, Energy XXI chairman, president, and chief executive officer.