updated 10/26/2010 7:15:53 AM ET 2010-10-26T11:15:53

  • Quarterly volumes rise 67 percent year-over-year
  • Fiscal 2011 first-quarter EBITDA tops $75 million
  • Exploration and development program advances

HOUSTON, Oct. 25, 2010 (GLOBE NEWSWIRE) -- Energy XXI (Nasdaq:EXXI) (LSE:EXXI) today announced fiscal first-quarter results for the period ended Sept. 30, 2010 and provided an operational update.

For the 2011 fiscal first quarter, Energy XXI reported earnings before interest, taxes, depreciation, depletion and amortization (EBITDA) of $75.7 million, compared with $51.3 million in the 2010 fiscal first quarter. Cash flows from operating activities totaled $78.0 million, which included $34 million received from the sale of derivative instruments. Additional derivative sales have been completed that will generate nearly $13 million of proceeds in the fiscal second quarter.

The company reported 2011 fiscal first-quarter net loss available to shareholders of $1.9 million, or $0.04 per share, on revenues of $144.0 million and production of 25,900 barrels of oil equivalent per day (BOE/d). The loss includes approximately $7 million of higher performance-based compensation expense primarily linked to the company's rising stock price. In the 2010 fiscal first quarter, the company had a net loss of $12.3 million, or $.42 per share, on revenues of $84.9 million and production of 15,500 BOE/d.

"Our new fiscal year has started well, with no hurricane-season production shut-ins or any other material operational issues, while our capital program has begun to deliver better-than-expected results at lower-than-planned costs, lifting the recent production rate to approximately 27,000 BOE/d," Energy XXI Chairman and CEO John Schiller said. "The core oil-weighted production portfolio continues to generate strong margins while our shallow-water, ultra-deep drilling program adds high-impact growth potential."


Energy XXI has remained active within its core producing properties and has received permits to perform workovers, recompletions and sidetracks for wells in its Main Pass 61, South Timbalier 21, East Cameron 334 and Eugene Island 275 and 330 fields. In addition, the shallow-water, ultra-deep program has continued to advance, with the Lafitte well receiving a drilling permit and beginning to drill in October. To date, none of the company's production, drilling activities or future plans has been materially affected by the deepwater Gulf of Mexico oil spill.

Within the shallow-water, ultra-deep shelf program, the McMoRan-operated partnership (in which Energy XXI has various interests) has identified 15 sub-salt prospects near existing infrastructure. The partnership's current drilling activity includes the Blackbeard East and Lafitte exploratory wells and the delineation well at Davy Jones.

In February 2010, the Davy Jones discovery well on South Marsh Island Block 230 was drilled to a total depth of 29,000 feet.  As reported in January 2010, McMoRan logged 200 net feet of pay in multiple Eocene/Paleocene (Wilcox) sands in the well.  In March 2010, a production liner was set and the well was temporarily abandoned until necessary equipment for the completion is available.  Flow testing will be required to confirm the ultimate hydrocarbon flow rates from the well.  Long-lead-time equipment needed to complete, test and produce the well has been ordered, with first flow expected in the third calendar quarter of 2011.

On April 7, 2010, the partnership commenced drilling the Davy Jones offset appraisal well (Davy Jones #2) on South Marsh Island Block 234, two and a half miles southwest of the discovery well.  Casing has been run to 20,000 feet and current operations are preparing to drill ahead to a proposed total depth of 29,950 feet. Davy Jones #2 is expected to test similar sections up-dip to the discovery well, as well as deeper objectives, including potential additional Wilcox and possibly Cretaceous (Tuscaloosa) sections.

Davy Jones involves a large structure encompassing four lease blocks (20,000 acres). Energy XXI has a 15.8 percent working interest and 12.6 percent net revenue interest in Davy Jones.  The company's investment in both wells at Davy Jones to date has totaled about $30 million.

The Blackbeard East exploration well commenced drilling on March 8, 2010.  Casing has been run to 25,990 feet and current operations are preparing to drill ahead towards a proposed total depth of 29,950 feet.  The well, which is located in 80 feet of water on South Timbalier Block 144, is targeting Middle and Deep Miocene objectives seen below 30,000 feet in Blackbeard West, nine miles away, as well as younger Miocene objectives. The operator has reported that data from wireline logs, side wall cores and formation tests indicate hydrocarbons in quality reservoir rocks with good porosity and permeability in the Upper and Middle Miocene below the salt weld. Pressure and temperature data below the salt weld between 19,500 feet and 24,600 feet indicate a completion could utilize conventional equipment and technologies.  Energy XXI has an 18 percent working interest and 14.35 percent net revenue interest in Blackbeard East. The company's investment in the well to date has totaled about $15 million.

The Lafitte exploration well commenced drilling on Oct. 3, 2010.  Casing has been run to 4,665 feet and current operations are preparing to drill ahead towards a proposed total depth of 29,950 feet, targeting Middle and Deep Miocene objectives below the salt weld.  Lafitte is located on Eugene Island Block 223 in 140 feet of water.  Energy XXI has an 18 percent working interest and a 14.6 percent net revenue interest.  The company's investment in the well to date has totaled about $.5 million.


During the 2011 fiscal first quarter, capital expenditures, including plug-and-abandonment costs, totaled $83.2 million, with $15.2 million in exploration and $68.0 million in development and other investments.


Energy XXI will host its quarterly conference call tomorrow, Oct. 26, at 8 a.m. CDT (2 p.m. London time). The dial-in numbers are 1 (631) 813-4724 (U.S.) and (0) 80 0051 3806 (U.K.), and the confirmation code is 20479228. For complete instructions on how to actively participate in the conference call, or to listen to the live audio webcast or a replay, please refer to www.EnergyXXI.com .

(In Thousands, except per share information)

As required under Regulation G of the Securities Exchange Act of 1934, provided below is a reconciliation of net income to EBITDA. We define EBITDA as earnings before interest, taxes, depreciation, depletion and amortization. EBITDA is not a measure of performance calculated in accordance with accounting principles generally accepted in the United States ("GAAP"). Although not proscribed under GAAP, the company believes EBITDA is relevant because it helps investors to understand the company's operating performance and makes it easier to compare its results with other oil and gas exploration and production companies that may have different financing and capital structures or tax rates. EBITDA should not be considered in isolation of, or as a substitute for, net income as an indicator of operating performance or cash flows from operating activities as a measure of liquidity. EBITDA, as the company calculates it, may not be comparable to EBITDA measures reported by other companies. In addition, EBITDA does not represent funds available for discretionary use.

The following table presents a reconciliation of our consolidated net loss available for common stockholders to our consolidated EBITDA for the periods presented.


Barrel – unit of measure for oil and petroleum products, equivalent to 42 U.S. gallons.

Bcfe – billion cubic feet equivalent, used to equate liquid barrels to natural gas volumes at a general conversion rate of 6,000 cubic feet of gas per barrel.

BOE – barrels of oil equivalent, used to equate natural gas volumes to liquid barrels at a general conversion rate of 6,000 cubic feet of gas per barrel.

BOE/d – barrels of oil equivalent per day.

Field – an area consisting of a single reservoir or multiple reservoirs all grouped on, or related to, the same individual geological structural feature or stratigraphic condition. The field name refers to the surface area, although it may refer to both the surface and the underground productive formations.

MBOE – thousand barrels of oil equivalent.

MMBOE – million barrels of oil equivalent.

Net Revenue Interest – the percentage of production revenue allocated to the working interest after first deducting proceeds allocated to royalty and overriding interest.

Spud – to begin drilling a well.

TD – target total depth of a well.

TVD – total vertical depth.

Working Interest – the interest held in lands by virtue of a lease, operating agreement, fee title or otherwise, under which the owner of the interest is vested with the right to explore for, develop, produce and own oil, gas or other minerals and bears the proportional cost of such operations.

Workover / Recompletion – operations on a producing well to restore or increase production. A workover or recompletion may be performed to stimulate the well, remove sand or wax from the wellbore, to mechanically repair the well, or for other reasons.

Forward-Looking Statements

All statements included in this release relating to future plans, projects, events or conditions and all other statements other than statements of historical fact included in this release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based upon current expectations and are subject to a number of risks, uncertainties and assumptions, including changes in long-term oil and gas prices or other market conditions affecting the oil and gas industry, reservoir performance, the outcome of commercial negotiations and changes in technical or operating conditions, among others, that could cause actual results, including project plans and related expenditures and resource recoveries, to differ materially from those described in the forward-looking statements. Energy XXI assumes no obligation and expressly disclaims any duty to update the information contained herein except as required by law.

Competent Person Disclosure

The technical information contained in this announcement relating to operations adheres to the standard set by the Society of Petroleum Engineers. Tom O'Donnell, Vice President of Corporate Development, a registered Petroleum Engineer, is the qualified person who has reviewed and approved the technical information contained in this announcement.

About the Company

Energy XXI is an independent oil and natural gas exploration and production company whose growth strategy emphasizes acquisitions, enhanced by its value-added organic drilling program. The company's properties are located in the U.S. Gulf of Mexico waters and the Gulf Coast onshore. Seymour Pierce is Energy XXI's listing broker in the United Kingdom.  To learn more, visit the Energy XXI website at www.EnergyXXI.com .

The Energy XXI logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=3587

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