Energy XXI Ltd (NASDAQ:EXXI) announced that it and certain of its subsidiaries have entered into a Restructuring Support Agreement (the “RSA”) with holders of more than 63% of the Company’s secured second lien 11.0% notes (the “Second Lien Notes”) on the material terms of a balance sheet restructuring plan that will strengthen the Company’s financial position by reducing long-term debt and enhancing financial flexibility. In order to implement the terms of the RSA, the Company commenced cases under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas, Houston Division.
Through the Chapter 11 restructuring, 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 RSA eliminates substantially all of the Company’s prepetition funded indebtedness other than its first lien reserve based loan facility, resulting in a significantly deleveraged balance sheet upon the Company’s emergence from the Chapter 11 bankruptcy process. The RSA also provides that John Schiller will continue as the reorganized company’s Chief Executive Officer and a member of its board of directors. The Company is also continuing ongoing negotiations with a steering committee of lenders under the Company’s first lien reserve based loan facility that is not party to the RSA at this time.
Energy XXI expects operations to continue as normal throughout the court-supervised financial restructuring process, including paying royalty and surety obligations in the ordinary course. In addition, the Company expects to maintain compliance with its existing long-term plan with the Bureau of Ocean Energy Management throughout the restructuring process.
Energy XXI’s President and Chief Executive Officer John Schiller said, “Today’s announcement reflects the next step in our efforts to respond proactively to the challenging market environment. Over the last several months, we have worked to actively manage our balance sheet, and after thoroughly evaluating our options with the help of our outside advisors, we determined that entering these agreements and implementing them through a court-supervised process is the best course of action for Energy XXI and all our stakeholders. We are confident that we are taking the right steps to provideEnergy XXI a solid foundation for a successful future.”
Mr. Schiller continued, “Our production is on track as we continue to focus our operations on low-risk, high-return projects. We thank our employees for their continued hard work and dedication, and we look forward to working with our vendors and partners as we move through this process and positionEnergy XXI to emerge as a stronger company.”
The Company believes it has sufficient liquidity, including approximately $180 million of cash on hand as of March 31, 2016 and funds generated from ongoing operations, to continue its operations and support the business in the ordinary course during the financial restructuring process.
The Company expects to file a Current Report on Form 8-K with the Securities and Exchange Commission that will include the full terms of the RSA.
Energy XXI has filed various motions with the Bankruptcy Court in support of its financial restructuring. The Company intends to continue to pay employee wages and provide benefits without interruption in the ordinary course of business. The Company also expects to pay suppliers and vendors in full under normal terms for goods and services provided on or after the Chapter 11 filing date, and anticipates making royalty payments and payments to working interest owners when due. The Company expects to receive Bankruptcy Court approval for the requests in its motions. (Original Source)
Shares of Energy are collapsing, down 75% to $0.16 in pre-market trading. EXXI has a 1-year high of $4.74 and a 1-year low of $0.29. The stock’s 50-day moving average is $0.66 and its 200-day moving average is $1.12.
On the ratings front, KeyBanc analyst David Deckelbaum downgraded EXXI to Hold, in a report issued on December 22. According to TipRanks.com, Deckelbaum has a yearly average return of -36.2%, a 14.3% success rate, and is ranked #3771 out of 3798 analysts.
Energy XXI (Bermuda) Ltd. operates as an independent oil and natural gas exploration and production company. It engages in the business of acquisition, exploration, development and operation of oil and natural gas properties. The company was founded by John D. Schiller Jr. and David W. Griffin in June 2005 and is headquartered in Hamilton, Bermuda.