History
A Gulf of Mexico oil producer that borrowed to grow, failed in a 2009 bankruptcy, rebuilt through acquisitions, sold to Energy XXI in 2014, then defaulted on its bonds in 2016.
2005-2006: Borrowed money and a bid too big
Energy Partners, Ltd. was a New Orleans oil and gas producer working the shallow waters of the Gulf of Mexico and onshore south Louisiana. In January 2005 it closed its first large purchase, paying about $146 million cash for south Louisiana properties from the Castex group, partly by drawing $60 million on its bank revolver. In June 2006 it enlarged that bank facility from $200 million to $300 million, and days later it signed a deal to buy Stone Energy at $51.00 a share, after Stone's board judged the offer better than Stone's existing deal with Plains Exploration & Production. The price, about $2.1 billion including Stone's debt, would have roughly doubled the company.
It did not last. In late August 2006 ATS Inc., a Woodside Petroleum vehicle, sued in Delaware over the termination fees and launched a hostile $23.00 a share tender offer. The board adopted a rights plan, a poison pill, against it. On 11 October 2006 the board ended the Stone merger, paying Stone $8 million and writing off $44.5 million of costs, including the $43.5 million it had paid Plains to break Stone's earlier deal. About $52 million was spent and nothing acquired. The board then opened a search for strategic alternatives, including a possible sale. ATS dropped its lawsuit, and its offer expired on 17 November 2006 with no shares taken. The record does not say how ATS's attempt to replace the board ended, and names no buyer in the sale process.
2007-2008: The leveraged buyback
Having failed to buy, the company chose to shrink its equity instead. In March 2007 Bank of America committed to finance a recapitalisation, and in April the company issued $300 million of 9.75% notes due 2014 and $150 million of floating-rate notes, alongside a new secured credit agreement. It drew $70 million to pay for shares bought in a self-tender of up to $200 million. In June it sold substantially all its onshore south Louisiana assets back to Castex Energy 2007 for $71.7 million, a fraction of what it had paid two years earlier, and used the money to pay down the revolver. In April 2008 activist holder Carlson Capital, with about 9.4%, placed three directors on the board.
2009: Chapter 11
The debt proved too heavy. In March 2009 the offshore regulator issued a non-compliance notice over $16.7 million of unposted bonds for well plugging and platform removal. In April a cut to the borrowing base left a $38 million shortfall the company could not repay. Its banks granted extensions and agreed to hold off on defaults, but on 1 May 2009 Energy Partners filed for Chapter 11 in Houston with its noteholders' support agreement already signed.
The plan was confirmed on 3 August and took effect on 21 September 2009. Noteholders received 95% of the new equity (38 million shares) and existing shareholders 5% (2 million shares). The old notes and equity plans were cancelled. New money came from a GE Capital facility and $61.1 million of 20% pay-in-kind second-lien notes taken by Carlson Capital, Wexford and others. Founder Richard Bachmann was replaced as chief executive by Gary Hanna the same day.
2010-2012: Rebuilding by acquisition
The punitive notes were redeemed in full by mid-2010, after the GE facility was reset, and PricewaterhouseCoopers replaced KPMG as auditor. Then the company began buying again. In February 2011 it paid $200.7 million for Anglo-Suisse Gulf of Mexico assets, funded by $210 million of 8.25% notes due 2018. In November 2011 an $80 million agreement for Main Pass interests from Stone Energy Offshore closed at only $38.4 million after an Apache subsidiary exercised pre-emption rights. In May 2012 it paid $32.4 million for W&T Offshore's 40% of South Timbalier 41, taking full ownership.
Renamed EPL Oil & Gas in 2012, it agreed in September to buy Hilcorp's Gulf of Mexico shelf subsidiary for $550 million, about 10,000 barrels a day. A further $300 million of 8.25% notes and an enlarged secured facility of up to $750 million paid for it, and it closed in November. Share count stayed near 39 to 40 million throughout, as growth was funded by debt rather than new shares.
2013-2014: Sale to Energy XXI
The record for 2013 is quiet. In January 2014 EPL bought Nexen's Eugene Island 258/259 field for $70.4 million. In March it agreed to be bought by Energy XXI: holders could elect $39.00 cash, 1.669 Energy XXI shares, or a mix, prorated to about 65% cash and 35% shares. A joint proxy statement followed on 21 April 2014, with former EPL holders to own about 25% of Energy XXI. The merger completed on 3 June 2014, making EPL an indirect wholly owned subsidiary and replacing its board and officers.
2014-2016: Inside the parent's troubles
EPL kept filing as a subsidiary. It bought South Pass 49 interests from a sister company for about $230 million, repaid its $475 million facility and joined the parent's first-lien loan. The group breached its leverage covenant, at 3.6 times against a 3.5 limit. In March 2015 EPL signed a $325 million 10% second-lien note to its parent, funded by the parent's $1.45 billion of 11% secured notes. In September 2015 it said accounts from June 2014 to March 2015 needed restating because its hedging paperwork fell short of the required standard.
On 15 February 2016 EPL missed interest on its 8.25% 2018 notes. Bank lenders waived the default only in short steps, and by 15 March 2016 the waiver ran to 15 April and also covered missed interest on the parent's 6.875% 2024 and 11% 2020 notes. That was the last substantive disclosure in the record.
Written from the 62 story beats below (2005 to 15 Mar 2016), which come from the company's own announcements and filings.