Yesterday, Energy XXI Ltd. became the latest domestic oil and gas company to pursue a more deleveraged balance sheet via Chapter 11 restructuring. This does not come as a surprise to those following the company – for much of the last three months Energy XXI’s stock has been trading at less than $1.00 per share. According to the press release issued by the company, the filing comes after the company reached agreement with more than 63% of second lien note holders on the material terms of the restructuring.

The restructuring is intended to eliminate more than $2.8 billion in debt from the company’s balance sheet. According to the company’s filings and press release, Energy XXI has $1.8 billion in assets and $3.6 billion debt but sufficient liquidity ($180 million of cash as of the end of 1Q2016) to continue operations during the pendency of the bankruptcy proceedings.

Since its founding and initial public offering more than 10 years ago, the company has become one of the largest shallow-water Gulf of Mexico producers through a half dozen major acquisitions totaling approximately $5 billion. Those acquisitions were largely financed by debt and resulted in a company that found the attributable interest payments and related burdens increasingly unwieldy in the current low-price environment.

The Company's President and Chief Executive Officer, John Schiller, said, "Today's announcement reflects the next step in our efforts to respond proactively to the challenging market environment. Over the last several months, we have worked to actively manage our balance sheet, and after thoroughly evaluating our options with the help of our outside advisors, we determined that entering these agreements and implementing them through a court-supervised process is the best course of action for Energy XXI and all our stakeholders. We are confident that we are taking the right steps to provide Energy XXI a solid foundation for a successful future."

The bankruptcy proceedings were commenced in the United States Bankruptcy Court for the Southern District of Texas, Houston Division.