Energy XX1 to gamble on the Gulf of Mexico

JOHN Schiller, chief executive of Texas oil upstart Energy XXI, relishes his reputation for taking risks.

Unconcerned by President Obama’s drilling moratorium in the Gulf of Mexico and BP’s woes in the region – which slashed his company’s share price from $22 (£13.70) to $13 – he has ambitious expansion plans.

Schiller has announced a substantial expansion in Energy XXI’s holdings in the Gulf of Mexico shelf, with purchases of properties from ExxonMobil worth $1.01bn.

The sale by ExxonMobil places Energy XXI at the centre of the most audacious gamble in the Gulf of Mexico in years.

Schiller has been expanding Energy XXI fearlessly since it went public in 2005 and a $550m equity offering two weeks ago, which released common stock at $20.75, gives him plenty of cash to carry on doing so.

The gamble is to snatch up as many old shallow-water wells as possible, then to use new technology to drill deeper in the hunt for megafields of natural gas.

In a characteristically bold estimate, Schiller anticipates his company’s daring move producing 100 trillion cubic feet of natural gas – enough to keep the entire US going for four years. “What we’re seeing so far is not making anything look smaller,” Schiller said.

“The ExxonMobil properties are an extraordinary fit with our existing, oil-focused core assets, which generate some of the highest margins in the industry.”

Even relative to its own partner, McMoRan Exploration, Energy XXI is a pipsqueak. But while McMoRan’s legendary leader Jim Bob Moffett is well into his seventies, Schiller is a mere 51.

Reports from Houston suggest that Moffett’s succession plans include a possible merger of McMoRan and Energy XXI – with Schiller at the helm.

ADVISERS

SEYMOUR PIERCE

Described as a typical Texas dealmaker, Energy XXI's chief executive John Schiller likes to seal a deal personally with as little outside help as possible, sources close to today's ExxonMobil deal confirmed. However, Schiller's latest property grab in the Gulf of Mexico has been guided to completion by a number of high-flying advisers, both in the US and the City.

Foremost among the London advisers has been Richard Redmayne, head of corporate broking at Energy XXI's listing broker in the UK, Seymour Pierce. The stockbroker has been given the task of pushing the Texas company to the forefront of British investors' minds, a task that should become easier if Schiller hits megafields of natural gas as he predicts. Redmayne is a familiar face in big City deals. He was closely involved with both the privatisation of the British Airports Authority and raising the equity for Eurotunnel.

In Texas, Energy XXI was advised by up-and-coming energy boutique, Dahlman Rose & Co, under the leadership of their vice-president, Anthony Socci. The privately owned investment bank and natural resources specialist, founded in 2004, has its base in New York but maintains a strong presence in Houston.