Energy XXI has closed on the sale of the East Bay Field in the U.S. Gulf of Mexico for $21 million to a private buyer, the company said in a news release.

In addition, Energy XXI will retain a 5% overriding royalty interest on these assets for a period not to exceed five years from the closing date. Energy XXI will also retain 50% of the deep rights associated with the East Bay Field.

The East Bay Field produced about 2,050 barrels of oil per day (bbl/d) net on average for fiscal 2015, with net reserves associated with the East Bay Field estimated at about 9.4 million barrels of oil equivalent (boe), 94% liquids, as of June 30, the release said. The buyer will assume plugging and abandonment liability.

“The sale of East Bay allows the company to focus on activities in fields with higher profitability, while significantly reducing our plugging and abandonment liability in the Gulf of Mexico," Energy XXI CEO John Schiller said. "We continue to evaluate additional opportunities to sell non-core assets in the Gulf of Mexico.”

Additionally, the company closed on the divestiture of the Grand Isle Gathering System. Total cash proceeds received were $245 million, the release said. As previously announced, the company will continue to operate the system on behalf of the buyer, CorEnergy Infrastructure Trust, Inc.

Operations Update

During the company’s fiscal fourth-quarter, production averaged about 59,000 boe/d net, with oil production averaging 41,600 bbl/d net, the release said.

During fiscal 2015, the company reduced downtime in the field to about 7%, down from over 9% at the beginning of the fiscal year. Energy XXI said the reduced downtime and a recompletion program allowed the company to arrest base declines and maintain production relatively flat since Jan. 1, 2015 despite lower capital spending. The company said it is currently finalizing the capital budget for fiscal 2016, and will continue to focus capital expenditures on low-risk development drilling.

In addition, Energy XXI is operating two rigs: one workover rig at South Pass and one rig drilling development wells at West Delta 73. To date, eight wells have been completed in the South Pass 78 field workover program, bringing production in the field to over 5,100 boe/d net as compared to 2,500 boe/d net when the program began earlier this calendar year, according to the release.

Energy XXI said it expects to drill up to 14 development wells in fiscal 2016, which begins July 1, with seven of the 14 wells being drilled at West Delta 73.

Offshore