HOUSTON, April 19, 2011 (GLOBE NEWSWIRE) -- Energy XXI (Nasdaq:EXXI) (LSE:EXXI) today provided key preliminary fiscal 2011 third-quarter data and an operations update.
Unaudited Preliminary Fiscal 2011 Third-Quarter Data
Energy XXI expects to announce after the market close on April 27, 2011, its results for the fiscal third quarter ended March 31, 2011, and today provided unaudited preliminary estimates for certain key data. Earnings before interest, taxes, depreciation, depletion and amortization (EBITDA) for the 2011 fiscal third quarter are estimated at $155 million on revenues of $259 million. Production is estimated to have averaged 41,400 barrels of oil equivalent (BOE) per day for the 2011 fiscal third quarter, compared with 25,400 BOE per day for the 2010 fiscal third quarter.
"Our expanded, oil-focused asset base is delivering strong cash flows, allowing us to fund the capital program in addition to reducing debt by an estimated $80 million in the recent quarter," Energy XXI Chairman and CEO John Schiller said. "The core production portfolio continues to offer extensive development opportunities while our exploration efforts, including the shallow-water, ultra-deep drilling program, add high-impact growth potential with near-term catalysts."
Production volumes for the fiscal third quarter were positively affected by the December acquisition of Gulf of Mexico properties, partially offset by temporary shut-ins caused by a number of factors, including freezing production equipment and pipeline and processing facility outages. In addition, government delays in transferring operatorship of certain of the acquired Gulf of Mexico properties have hampered the company's efforts to maintain production levels at those facilities.
"The fiscal third-quarter volumes rose more than 60 percent, and would have been even higher without temporary issues that were out of our control," Schiller said. "In fact, early progress at the acquired properties where we have assumed operatorship is encouraging. Those opportunities, coupled with current exploration and development activities, lead us to be very optimistic regarding the future of Energy XXI."
Exploration and Development Activity
Onshore Louisiana, Energy XXI is participating in the McMoRan-operated Valentine Pontiff well, an offset to the 2007 Laphroaig discovery in St. Mary Parish, Louisiana. The well commenced drilling Sept. 24, 2010 and was drilled to 19,984 feet. Wireline logs confirmed more than 140 net feet of pay in three zones, with porosity in excess of 30 percent in portions of each of the zones. McMoRan completed the well within the MA-10 sand and production tested the well. The production test indicated a gross rate of 54 million cubic feet of natural gas per day (MMcf/d) (approximately 8 MMcf/d net to Energy XXI) and zero barrels of water on a 30/64th choke with flowing tubing pressure of 9,989 pounds per square inch. These results will be used to determine the optimal flow rate for the well, with production expected to commence in the current quarter using facilities in the immediate area. Energy XXI has an 18.75 percent working interest and a 15 percent net revenue interest in the well, where the company's investment to date has totaled approximately $8 million.
Within Energy XXI's core producing fields offshore Louisiana, recompletion and development activity has continued. At two of the newly acquired fields where Energy XXI has assumed operatorship, non-rig work has resulted in low-cost production and reserves additions. On March 11, 2011, the Mississippi Canyon 397 A-1 ST01 well was returned to production, with the D-10 sand yielding an initial gross test rate of 873 barrels of oil per day and 0.53 MMcf/d (961 BOE/d net). As a result, Energy XXI successfully re-established production from a non-producing lease. On March 24, 2011, the Grand Isle 16 M-13 ST01 well (87.5 percent NRI) was recompleted to the Q-40 sand, yielding an initial gross test rate of 589 barrels of oil per day and 0.38 MMcf/d (570 net BOE/d).
At the Apache-operated Eugene Island 330 field, the first four wells in a field-wide redevelopment program have been brought online, the most recent being the EI 330 #B6 ST3, which was completed in the KE-1 sand at 7,920 feet. A fifth well, the #B12 ST, was completed in the KE-1 sand at 9,936 feet, with a future uphole selective completion made in the IC-1 sand at 7,936 feet. That well is currently testing. Initial production from the first four wells has totaled approximately 1,300 BOE/d net, with 80 percent being oil. Energy XXI has a 35 percent working interest and a 29 percent net revenue interest in the field.
At Main Pass 72, the company's first test of its reinterpreted salt-related seismic data appears to be achieving good results, as the Ashton well has penetrated the first four amplitudes and logged larger-than-expected pay sands, the last of which was encountered beyond the previously assumed salt interface. Drilling is continuing below 5,640 feet toward the well's proposed target depth of 10,126 feet.
Within the shallow-water, ultra-deep Gulf of Mexico 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 offset appraisal well at Davy Jones.
The Davy Jones offset well (Davy Jones No. 2) has been drilled to a total depth of 30,546 feet and McMoRan is preparing to evaluate the exploration objectives in the Cretaceous section below the identified Wilcox pay sands. Based on interpretations of drilling data, the well is believed to have encountered the Cretaceous section. If confirmed, the combination of productive Wilcox and Cretaceous sections on the same structure could enhance the prospectivity of Davy Jones and the value of the partnership's other ultra-deep prospects on its acreage position within the Davy Jones trend.
In February 2011, McMoRan announced preliminary data from wireline logs over the interval from 25,400 feet to 27,300 feet in the Davy Jones No. 2 well. The logs, which continue to be evaluated, indicated more than 200 gross feet of sand and approximately 100 net feet of sand, based on intermittent porosity data available, in multiple Wilcox zones that appear to be hydrocarbon bearing. Additional data will be required to complete the evaluation. Paleo and log data indicate the offset well to be approximately 1,300 feet structurally high (up dip) to the Davy Jones discovery well and confirm the major structural features of the Davy Jones prospect. All but one of the sands in the discovery well appear to be present in the offset well, which would confirm sand continuity on the Davy Jones feature. The Davy Jones No. 2 well is located two and a half miles southwest of the discovery well. Based on analogs with a number of other large sub-surface structures in the Gulf of Mexico, there is potential for thicker sands on the northern part of the structure, which is thought to be closer to the depositional source.
As previously reported, in January 2010 McMoRan logged 200 net feet of pay in multiple Wilcox sands in the Davy Jones discovery well on South Marsh Island Block 230. In March 2010, a production liner was set and the well was temporarily abandoned to prepare for completion. Long-lead-time equipment has been ordered and completion and flow testing of Davy Jones No. 1 is expected by year-end 2011.
Davy Jones, in approximately 20 feet of water, involves a large ultra-deep structure encompassing four OCS 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 $44 million, including the cost of completion and production equipment.
The Blackbeard East ultra-deep exploration well, in about 80 feet of water, commenced drilling on March 8, 2010 and has been drilled to 32,559 feet. McMoRan is continuing to address a mechanical issue that was encountered in drilling the well. Pending resolution of the mechanical issue, McMoRan plans to deepen the well to a proposed total depth of 34,000 feet. Based on interpretations of drilling data, the well is believed to have encountered Sparta sands in the Eocene. Sparta sands are younger than Wilcox sands and have been found to be productive in certain onshore fields in South Louisiana. Wireline logs will be required to evaluate this interval.
As reported in January 2011, wireline logs have indicated that Blackbeard East has encountered hydrocarbon bearing Frio sands in the Oligocene with good porosity below 30,000 feet. McMoRan is considering down dip drilling opportunities on the flanks of the structure to evaluate this section further. This is the first hydrocarbon-bearing Frio sand encountered either on the shelf or in the deepwater offshore Louisiana. The Frio sand section encountered below 30,000 feet is in addition to the 178 net feet of hydrocarbon-bearing Miocene sands announced in December 2010 above 25,000 feet at Blackbeard East. Pressure and temperature data below the salt weld between 19,500 feet and 24,600 feet at Blackbeard East indicate that a completion could utilize conventional equipment and technologies. In 2011, McMoRan plans to drill a 25,000 foot offset appraisal well to further evaluate and delineate these Miocene zones.
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 $28 million.
The Lafitte ultra-deep exploration well commenced drilling on Oct. 3, 2010 and currently is drilling below 21,120 feet towards a proposed total depth of 29,950 feet. Lafitte is located on Eugene Island Block 223 in 140 feet of water. The well is targeting Miocene objectives and possibly Oligocene (Frio) sections below the salt weld. Energy XXI has an 18 percent working interest and a 14.6 percent net revenue interest in Lafitte. The company's investment in the well to date has totaled about $12 million.
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 .
The Energy XXI logo is available at
GLOSSARY
Barrel – unit of measure for oil and petroleum products, equivalent to 42 U.S. gallons.
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.
MMcf/d – million cubic feet of gas per day.
Net Pay – cumulative hydrocarbon-bearing formations.
Net Revenue Interest – the percentage of production revenue allocated to the working interest after first deducting proceeds allocated to royalty and overriding interest.
TD – target total depth of a well.
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.
CONTACT: Enquiries of the Company Energy XXI Stewart Lawrence Vice President, Investor Relations and Communications 713-351-3006 slawrence@energyxxi.com Greg Smith Director, Investor Relations 713-351-3149 gsmith@energyxxi.com Seymour Pierce Nominated Adviser: Jonathan Wright, Jeremy Porter Corporate Broking: Richard Redmayne Tel: +44 (0) 20 7107 8000 Pelham Bell Pottinger James Henderson jhenderson@pelhambellpottinger.co.uk Mark Antelme mantelme@pelhambellpottinger.co.uk +44 (0) 20 7861 3232
