Energy XXI (EXXI) CEO/Chairman John Schiller says his company's deal to acquire offshore producer EPL Oil & Gas (EPL) is a chance to capitalize on synergies that oil producers don’t typically get when offshore leases simply trade hands.
EXXI is more focused on optimizing oil production rates in the Gulf - "getting more oil out of old oilfields" - while EPL is stronger in geosciences activities such as using seismic equipment, he says.
EXXI investors weren't happy with the 34% premium paid for EPL, sending shares -7.8% today, but Schiller believes the merged company will be able to wring out costs that should make up for the premium.
Schiller's strong belief in shallow-water production will be put to the test; even with the risks of hurricanes disrupting production or the threat of sub-$100 oil prices, EXXI forecasts shallow-water Gulf of Mexico projects will remain among the most profitable.
Combining the two companies’ offshore fields will make EXXI the third-largest producer in the Gulf of Mexico shelf, behind PE-backed Fieldwood Energy and Chevron.