Plains Exploration & Production Co. (PXP) said Friday it will sell a one-fifth interest in its offshore unit, which holds all of its promising Gulf of Mexico (GOM) prospects, to EIG Global Energy Partners for $450 million in cash.

Washington, DC-based EIG would receive a 20% equity stake in Plains Offshore Operations Inc. PXP plans to use the proceeds to fund its share of capital investments in its deepwater portfolio, which include the Lucius development and prospect exploratory drilling in the Phobos field, which is planned in 2012.

The transaction with EIG is a “major accomplishment,” said PXP CEO James C. Flores. He said the company’s growing onshore business, combined with the GOM prospects, would increase total company oil and liquids sales volumes at an average compounded growth rate of more than 15% through 2016.

Plains Offshore’s GOM portfolio includes 100 blocks covering close to 570,000 gross acres and several derisked near-term exploration prospects targeting the Pliocene trend with additional Miocene potential. PXP actually began to market its entire GOM deepwater portfolio last September (see Daily GPI, Sept. 21, 2010).

“While this transaction values our Gulf of Mexico business at $2.25 billion (including cash), the financing provides the capital for the development of Lucius, drilling of Phobos and other high potential prospects going forward,” Flores said.

First production from the promising Lucius field in the deepwater GOM is expected in 2014. Anadarko Petroleum Corp. discovered Lucius in Keathley Canyon Block 875 in 2009 (see Daily GPI, Dec. 11, 2009). Anadarko holds a half-stake in Lucius, while PXP and Apache Corp. also are stakeholders. The partners and ExxonMobil Corp., which anchors other discoveries in Keathley Canyon, finalized a unitization agreement in July to jointly develop portions of the field (see Daily GPI, July 19).

In the latest transaction, Plains Offshore agreed to issue to EIG 8% of its convertible preferred stock and nondetachable warrants. The 8% convertible preferred stock would pay quarterly cash dividends of 6% a year and an additional 2% a year dividend. Plains Offshore also intends to enter into a $300 million revolving credit facility with a bank group.

The transaction is scheduled to close by the end of the year. Plains Offshore also agreed to reimburse PXP for any costs attributable to the GOM assets incurred since July 1.

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