2011-05-31-2011-05-13

To buy 20 fields with 70 producing wells onshore LA, gaining 9.7 Mmcf/d.

Houston-based Energy XXI (Bermuda) Ltd. (Nasdaq: EXXI; London: EXXI) plans to sell a number of noncore, mostly nonoperated, onshore natural gas assets in Louisiana to an undisclosed private buyer for $41 million in cash.

The assets include about 70 producing wells in 20 fields, with recent average net production of 8 million cubic feet of gas and 285 barrels of oil per day, or a total equivalent of 9.7 MMcf per day.

The sale does not include the Laphroaig and Cote de Mer discoveries or certain deep rights within the divested properties, which the company believes has significant unbooked upside.

"Divestiture of these noncore assets is consistent with our oil-focused acquire-and-exploit strategy," Energy XXI chairman and chief executive John Schiller says.

"Less than a quarter of the proved reserves associated with the properties are currently on production, so the divestiture significantly reduces future development costs in addition to asset retirement obligations," Schiller notes.

The property divestiture was factored into Energy XXI's recently amended revolving bank credit facility, which increased the company's borrowing base to $750 million from the prior $700-million facility and reduced the interest rate margins by 50 basis points.

The transaction is scheduled to close by June 30. The effective date is June 1.