Energy XXI joins midstream sale bandwagon

OREANDA-NEWS. June 25, 2015. Independent producer Energy XXI sold its Grand Isle midstream assets for \\$245mn in cash, joining a growing group of companies shedding non-core assets to reinforce their balance sheets and fund drilling.

Following the sale, Energy XXI will enter into a lease agreement with the buyer, CorEnergy Infrastructure, to operate the assets, which include gathering and transportation pipelines in the shallow waters of the Gulf of Mexico (GoM) and a terminal adjacent to Energy XXI's operations onshore.

Companies are selling assets, picking areas that offer the best returns and developing more efficient procedures and technology as cash inflows get squeezed with oil prices still nearly 50pc below 2014 highs. The Bakken region in North Dakota looks set to take the lead in midstream asset sales over other key oil producing areas in the country, going by the divestitures so far.

Hess sold a 50pc stake in its Bakken midstream assets to Global Infrastructure Partners for \\$2.675bn. The price Hess got was above expectations, according to most investors, possibly prompting Whiting Petroleum, which acquired Kodiak last year to become the biggest Bakken producer, to go ahead with its proposed divestiture. Oasis Petroleum said it is "looking at a different options" to monetize its water disposal unit in the Bakken called Oasis Midstream Services (OMS).

Mega midstream deals for the year were kicked off by Kinder Morgan buying Bakken pipeline company Hiland Partners from founder and Continental Resources chief executive Harold Hamm, for \\$3bn.

Energy XXI, founded in 2005, acquired ExxonMobil's GoM Shelf properties in 2010 for \\$1.01bn, making it the third-largest producer in the GoM Shelf. It acquired EPL Oil & Gas for \\$2.3bn in 2014. For the three months ended 31 March, which is the third quarter for the company's fiscal year, the producer posted a net loss of \\$587.2mn versus an income of \\$4.4mn a year earlier.