HOUSTON, May 8, 2007 (PRIME NEWSWIRE) -- Energy XXI (Bermuda) Limited (LSE:EGY) today announced fiscal third-quarter 2007 financial and operating results for the period ended March 31, 2007.
"Our results for the recently completed quarter were affected by delays in bringing on new production and the shut-in of existing volumes due to weather and temporary operational issues, as we indicated previously," Energy XXI Chairman and CEO John Schiller said. "Those challenges were overcome in April as we executed the drilling and production-optimization programs and set new volume records. From our initial start-up of operations in April 2006, Energy XXI has grown rapidly through both acquisitions and the drill bit and today is producing more than 20,000 barrels of oil equivalent per day. We expect to continue advancing our growth strategy as we layer in the Pogo properties and carry out the organic capital program."
For the fiscal third quarter, Energy XXI reported net income of $9.6 million, or $.11 per diluted share, on revenues of $77.6 million. Cash flow from operating activities totaled $76.2 million.
The company's proactive risk-management strategy continued to pay dividends, resulting in a net realized price of $59.54 per barrel of oil equivalent (BOE) in the fiscal third quarter, including $7.95 per BOE contributed by hedging activity. Third-quarter production averaged 14,500 BOE per day. Prior-year fiscal third-quarter comparisons are not meaningful because the company had not yet established operations.
In January, the company finalized a global insurance settlement for all remaining claims related to hurricanes Katrina and Rita, resulting in the receipt of $38.8 million, virtually all of which was recorded during the fiscal third quarter as a reduction in accounts receivable.
OPERATIONAL HIGHLIGHTS
During the fiscal third quarter, Energy XXI was successful in five of eight exploration wells and four of five development wells, while performing 11 workovers. Further detail on the exploration and development program is provided in the Operations Report attachment below.
THIRD QUARTER CONFERENCE CALL TODAY AT 10 A.M. EDT, 3 P.M. LONDON TIME
Energy XXI will host its third-quarter conference call today, Tuesday, May 8, 2007 at 10 a.m. EDT (9 a.m. CDT; 3 p.m. London time). The dial-in number is (913) 312-6696 in the U.S. and 44 (0) 207-984-7566 in the U.K., and the confirmation code is 6504232. 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.
Forward-Looking Statements
All 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 that could cause actual results 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, Director 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 primarily located in the U.S. Gulf of Mexico waters and the Gulf Coast onshore. In April 2007, Energy XXI announced an agreement to purchase Gulf of Mexico shelf properties from Pogo Producing Company. Also in April, the company's registration statement on Form S-1 was declared effective by the U.S. Securities and Exchange Commission, helping facilitate the planned listing of Energy XXI common stock on the NASDAQ system under the symbol 'EXXI' later this quarter. Collins Stewart Europe Limited and Jefferies International are Energy XXI listing brokers in the United Kingdom. In the United States, Jefferies & Company, BMO Capital Markets, Collins Stewart and Natexis Bleichroeder are market makers.
ENERGY XXI (BERMUDA) LIMITED CONSOLIDATED BALANCE SHEETS (In Thousands, except share information) March 31, June 30, 2007 2006 ---- ---- (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 10,177 $ 62,389 Accounts receivable Oil and natural gas sales 40,818 19,325 Joint interest billings 14,961 11,173 Acquisition -- 14,070 Stock subscription -- 7,326 Insurance 109 39,801 Prepaid expenses and other current assets 48,701 9,200 Royalty deposit 2,175 2,175 Derivative financial instruments 15,543 7,752 ---------------------- TOTAL CURRENT ASSETS 132,484 173,211 ---------------------- PROPERTY AND EQUIPMENT, net of accumulated depreciation, depletion, and amortization ("DD&A") Oil and natural gas properties - full cost method of accounting, including $199,780 and $50,840 of unproved oil and natural gas properties as of March 31, 2007 and June 30, 2006, respectively, and net of accumulated DD&A of $107,594 and $20,225 as of March 31, 2007 and June 30, 2006, respectively 925,906 447,852 Other property and equipment, net of accumulated depreciation of $818 and $132 as of March 31, 2007 and June 30, 2006, respectively 3,036 1,569 ---------------------- TOTAL PROPERTY AND EQUIPMENT, NET 928,942 449,421 ---------------------- Deposit and acquisition costs -- 10,025 ---------------------- Derivative financial instruments 4,508 5,856 ---------------------- Deferred income taxes -- 1,780 ---------------------- Debt issuance costs, net of accumulated amortization of $1,223 and $306, as of March 31, 2007 and June 30, 2006, respectively 2,434 3,678 ---------------------- TOTAL ASSETS $1,068,368 $ 643,971 ====================== ENERGY XXI (BERMUDA) LIMITED CONSOLIDATED BALANCE SHEETS (Continued) (In Thousands, except share information) March 31, June 30, 2007 2006 ---- ---- (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 47,119 $ 23,281 Advances from joint interest partners 6,295 6,211 Accrued liabilities 8,327 11,463 Income and franchise taxes payable 1,512 913 Deferred income taxes 2,287 143 Derivative financial instruments 4,073 948 Current maturities of long-term debt 9,634 9,584 ---------------------- TOTAL CURRENT LIABILITIES 79,247 52,543 Long-term debt, less current maturities 532,712 200,064 Deferred income taxes 12,628 -- Asset retirement obligations 45,981 37,844 Derivative financial instruments -- 590 Other liabilities 1,530 221 ---------------------- TOTAL LIABILITIES 672,098 291,262 ---------------------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred stock, $0.01 par value, 2,500,000 shares authorized and no shares issued at March 31, 2007 and June 30, 2006 -- -- Common stock, $0.001 par value, 396,500,624 shares authorized and 84,049,115 and 80,645,129 issued and outstanding at March 31, 2007 and June 30, 2006, respectively 84 81 Additional paid-in capital 362,334 350,238 Retained earnings 28,864 6,942 Accumulated other comprehensive income (loss), net of tax expense of $2,725 as of March 31, 2007 and net of tax benefit of $2,541 as of June 30, 2006 4,988 (4,552) ---------------------- TOTAL STOCKHOLDERS' EQUITY 396,270 352,709 ---------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,068,368 $ 643,971 ====================== ENERGY XXI (BERMUDA) LIMITED CONSOLIDATED STATEMENTS OF INCOME (In Thousands, except per share information) (Unaudited) Period from Inception Nine July 25, Months 2005 Three Months Ended Ended Through March 31, March 31, March 31, 2007 2006 2007 2006 ---- ---- ---- ---- REVENUES Oil sales $42,776 $ -- $121,882 $ -- Natural gas sales 34,832 -- 100,686 -- -------- -------- -------- -------- TOTAL REVENUES 77,608 -- 222,568 -- -------- -------- -------- -------- COSTS AND EXPENSES Lease operating expense 11,485 -- 33,638 -- Production taxes and transportation 1,691 -- 2,909 -- Depreciation, depletion and amortization 28,600 21 88,055 40 Accretion of asset retirement obligation 877 -- 2,619 -- General and administrative expense 10,599 1,204 26,505 1,755 Gain on derivative financial instruments (1,552) -- (3,110) -- -------- -------- -------- -------- TOTAL COSTS AND EXPENSES 51,700 1,225 150,616 1,795 -------- -------- -------- -------- OPERATING INCOME (LOSS) 25,908 (1,225) 71,952 (1,795) -------- -------- -------- -------- OTHER INCOME (EXPENSE) Interest income 307 2,798 1,599 4,709 Interest expense (12,646) (1,506) (39,653) (1,506) -------- -------- -------- -------- TOTAL OTHER INCOME (EXPENSE) (12,339) 1,292 (38,054) 3,203 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 13,569 67 33,898 1,408 PROVISION FOR INCOME TAXES 3,988 -- 11,976 -- -------- -------- -------- -------- NET INCOME $9,581 $67 $21,922 $1,408 ======== ======== ======== ======== EARNINGS PER SHARE Basic $0.11 $0.00 $0.26 $0.03 Diluted $0.11 $0.00 $0.26 $0.03 WEIGHTED AVERAGE NUMBER OF COMMON STOCK OUTSTANDING Basic 84,049 62,500 83,893 42,821 Diluted 84,049 62,500 83,893 42,821 ENERGY XXI (BERMUDA) LIMITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (In Thousands) (Unaudited) Accumulated Additional Other Total Paid-in Retained Comprehensive Stockholders' Shares Amount Capital Earnings Income (Loss) Equity ------ ------ ------- -------- ------------ ------ Balance, June 30, 2006 80,645 $81 $350,238 $6,942 $(4,552) $352,709 Common stock issued 3,404 3 13,164 -- -- 13,167 Warrants repurchased -- -- (1,068) -- -- (1,068) Comprehensive income: Net income -- -- -- 21,922 -- 21,922 Unrealized gain on derivative financial instruments, net of tax -- -- -- -- 9,540 9,540 -------- Total comprehensive income 31,462 -------- -------------------------------------------------------- Balance, March 31, 2007 84,049 $84 $362,334 $28,864 $4,988 $396,270 ======================================================== ENERGY XXI (BERMUDA) LIMITED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited) Period from Inception Three Nine July 25, Months Months 2005 Ended Ended Through March 31, March 31, March 31, 2007 2007 2006 ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net income $9,581 $21,922 $1,408 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Deferred income tax expense (3,043) 3,954 -- Unrealized loss on derivative financial instruments 11,145 18,527 -- Accretion of asset retirement obligations 877 2,619 -- Depletion, depreciation, and amortization 28,600 88,055 40 Write-off of debt issuance costs-net 325 5,998 1,415 Changes in operating assets and liabilities Accounts receivable 28,769 35,807 -- Prepaid expenses and other current assets (13,334) (39,501) (4,230) Accounts payable and other liabilities 13,326 21,385 998 -------------------------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 76,246 158,766 (369) -------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Acquisition -- (302,481) (10,160) Capital expenditures (130,587) (250,951) (384) Proceeds from the sale of oil and natural gas properties -- 1,400 -- Other 573 1,333 -- -------------------------------- NET CASH USED IN INVESTING ACTIVITIES (130,014) (550,699) (10,544) -------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from the issuance of common stock 108 13,167 300,026 Proceeds from long-term debt 65,000 364,000 14,150 Payments on long-term debt (10,000) (24,625) -- Payments on put financing (2,011) (7,030) -- Stock issuance costs -- -- (21,712) Debt issuance costs -- (4,754) -- Other (407) (1,037) -- -------------------------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 52,690 339,721 292,464 -------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,078) (52,212) 281,551 CASH AND CASH EQUIVALENTS, beginning of period 11,255 62,389 -- -------------------------------- CASH AND CASH EQUIVALENTS, end of period $10,177 $10,177 $281,551 ================================ The following table presents the Company's significant operational information for the periods indicated (in thousands except per unit amounts). Nine Three Months Ended Months ----------------- Ended June 30, Sept. 30, Dec. 31, March 31, March 31, 2006 2006 2006 2007 2007 --------- --------- --------- --------- --------- Revenues $ 47,112 $ 65,817 $ 79,143 $ 77,608 $ 222,568 Production costs 9,991 12,830 10,541 13,176 36,547 Depreciation, depletion & amortization ("DD&A") 20,225 27,744 31,711 28,600 88,055 General and administrative (a) 2,680 7,680 8,226 10,599 26,505 Sales volumes per day Gas (MMcf) 27.9 47.1 52.1 42.1 47.1 Oil (MBbls) 5.1 5.9 7.0 7.5 6.8 Total (MBOE) 9.7 13.8 15.7 14.5 14.7 Average sales price Gas per Mcf $ 6.48 $ 6.28 $ 6.67 $ 7.77 $ 6.86 Oil per Bbl 66.64 67.16 56.77 56.24 59.61 Hedge gain per equivalent Bbl 1.67 1.68 7.19 7.95 5.70 Total per BOE 55.02 52.03 54.71 59.54 55.43 Per BOE Production costs $ 11.67 $ 10.14 $ 7.29 $ 10.11 $ 9.10 DD&A 23.62 21.93 21.92 21.94 21.93 General and administrative (a) 3.13 6.07 5.69 8.13 6.60 Other 1.05 0.14 0.01 (0.52) (0.12) Operating income 15.55 13.75 19.80 19.88 17.92 Note: (a) General and administrative expense includes windstorm and excess windstorm insurance of $2.7 million, $2.7 million, $4.8 million and $10.2 million for the three months ended September 30, 2006, December 31, 2006, March 31, 2007 and for the nine months ended March 31, 2007, respectively. Excluding windstorm and excess windstorm insurance, General and administrative costs per BOE were $3.97, $3.80, $4.41 and $4.07 for the three months ended September 30, 2006, December 31, 2006, March 31, 2007 and for the nine months ended March 31, 2007, respectively. Fiscal 3rd Quarter Operations Report EXXI Fiscal 3rd Quarter Drilling Results Exploration Development Total ----------- ----------- ---------- Gross Net Gross Net Gross Net ----- ---- ----- ----- ------ ----- Operated Oil 1 1 1 1 2 2 Gas -- -- 2 2 2 2 Dry 1 .67 1 1 2 1.67 Non-Operated Oil -- -- -- -- -- -- Gas 4 2 1 .13 5 2.13 Dry 2 .65 -- -- 2 .65 ------ ----- ------- ----- ------ ----- Total 8 4.32 5 4.13 13 8.45 ------------ ------------- ------------ Exploration Development Total ------------ ------------- ------------ Success Rates 62.5% 80% 69% ------------ ------------- ------------ Onshore 7 3 10 ------------ ------------- ------------ Offshore 1 2 3 ------------ ------------- ------------ Total 8 5 13 ------------ ------------- ------------ EXXI Fiscal 3rd Quarter Rigs Rig Days Rigs Used -------------------- ------------------- Drilling Workover Drilling Workover -------- -------- -------- -------- Operated Jack-ups 180 150 2 2 Barges 120 78 2 1 ------ ------ ---- --- 300 228 4 3 Non-Operated Barges 431 12 7 1 Land Rigs 90 19 1 1 ------ ------ ---- --- 521 31 8 2 ------ ------ ---- --- Total 821 259 12 5 SOUTH LOUISIANA ONSHORE HIGHLIGHTS Rabbit Island -- Rabbit Island State Lease 340 #15 (100% WI), Iberia Parish - Spud 02/08/07; TD'd at 10,329' MD on 04/19/07; found 32' of net gas pay in the 9,700' Sand, with about 30' of additional, shallower net gas pay behind pipe; being completed in the main objective and should be on production in the fiscal fourth quarter. -- Rabbit Island State Lease 19022 #1 (25% WI), Iberia Parish - Spud 01/21/07; TD'd at 11,780' MD on 02/07/07; found 66' of net gas pay in the 10,700' Stray Sand; tested at 2.9 MMcf/d through a 14/64" choke and a FTP of 2,682 psig; should be on production in the fiscal fourth quarter. -- Rabbit Island State Lease 340 #223 (100% WI), Iberia Parish - Drilled last quarter; on production 03/03/07 at 1.5 MMcf/d from the Big A 15 Sand through a 15/64" choke and a FTP of 1,050 psig. -- Rabbit Island State Lease 340 #224 (100% WI), St. Mary Parish - Drilled last quarter; on production 02/05/07 at 1.5 MMcf/d from the 9,700' Sand through a 14/64" choke and a FTP of 1,500 psig. South Houma -- South Houma Agness Toups Investment Corp. #1 (20.9375% WI), Terrebonne Parish - Spud 01/21/07; TD'd at 15,006' on 03/05/07; found 34' of net gas pay in the Hollywood Bourg Sand; tested at 4.4 MMcf/d through a 10/64" choke and FTP of 9,168 psig; should be on production in the fiscal fourth quarter. West Lake Boudreaux -- Oaks Estate Sub. et al. LLC #2 (50% WI), Terrebonne Parish - Spud 12/17/06; TD'd at 14,454' MD on 12/31/06; drilled as a twin to the LLC #1 (50% WI) to accelerate production; LLC #1 and #2 brought on production 3/31/07 and ramped up to a combined rate of 19 MMcf/d; each contains multiple behind-pipe pay zones, with a total 12 productive sands from the Upper Miocene Text L to Dularge sections. Bayou Carlin -- C. M. Peterson Jr. #1 (31.25% WI) (Laphroaig Discovery), St. Mary Parish - Spud in April 2006; Energy XXI became a partner effective 01/27/07 with the well at 19,515' MD; TD'd at 20,253' MD on 02/25/07; encountered 55' of net gas pay in the MA-12 Sand; tested 03/20/07 at rates up to 40.6 MMcf/d through a 31/64" choke and a FTP of 13,177 psig; should be on production in the fiscal first quarter of 2008; Energy XXI has purchased 12 square miles of 3D seismic around this well. East Lake Verret -- Kafoury #2 (60% WI), Assumption Parish - Spud 12/29/06; TD'd at 14,210' MD on 03/25/07; found about 10' of net gas pay in the Operc D-5 Sand; tested at 3.2 MMcf/d through a 16/64" choke and a FTP of 2,544 psig; should be on production in the fiscal fourth quarter. In addition, 55' of net gas pay was logged in the shallower Operc D-1 sand. Cote de Mer -- McIlhenny #1 well (35% WI) (Cote de Mer Prospect), Vermilion Parish - Spud 02/07/07; currently drilling at about 19,000' MD toward a planned total depth of 21,932' MD. Lake Sand North -- SL 19138 #1 (50% WI), Iberia Parish - Spud 04/05/07; currently drilling at about 12,000' MD toward a planned total depth of 14,170' MD. Golden Meadow -- LaTerre Co. Inc. #1 (50% WI), Lafourche Parish - Spud 04/24/07; currently drilling at about 11,000' MD toward a planned total depth of 16,125' MD. Gridiron Project -- Batture Park #1 (50% WI) (Zamason Prospect), St. Bernard Parish - Spud 04/20/07; currently drilling at about 11,000' MD toward a planned total depth of 13,067' MD.
GULF OF MEXICO SHELF HIGHLIGHTS
South Timbalier 21
During the fiscal third quarter, South Timbalier 21 reached net production of 12,500 BOE/d, essentially double the 6,284 BOE/d net production rate recorded at the onset of the fiscal year. Three development wells were drilled and completed in the quarter:
-- Riesling TD'd at 12,072' MD; found 20' of net pay in the D-10 Sand and 26' of net pay in the D-12 Sand; completed as a dual producer at 4 MMcf/d and 161 Bbl/d. -- Shiraz TD'd at 12,112' MD; found 32' of net pay in the D10 Sand and 14' of net pay in the D-8 Sand; test equipment currently being installed; completed as a dual producer, with first production expected in the fiscal fourth quarter. -- Malbec TD'd at 12,240'; found 11' of net pay in the D-9 Sand and 29' of net pay in the D-10 Sand; completed as a gravel packed alternate, with first production expected in the fiscal fourth quarter.
Other activity in the field included installation of gas lift in three wells, which increased uplift by 1,289 BOE/d gross, and three well recompletions, which contributed a combined uplift of 1,780 BOE/d gross. Field production was negatively affected during the quarter by weather delays, rig movements and an accident involving a work boat contracted to another operator, which struck one of Energy XXI's key South Timbalier production structures. These issues have since been resolved.
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.
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.
FTP - flowing tubing pressure.
MBOE - thousand barrels of oil equivalent.
MMBOE - million barrels of oil equivalent.
MD - measured depth.
Net Pay - cumulative hydrocarbon-bearing formations.
Spud - to begin drilling a well.
TD - target total depth of a well.
TD'd - to finish drilling a well.
TVD - total vertical depth.
Workover - operations on a producing well to restore or increase production. A workover may be performed to stimulate the well, remove sand or wax from the wellbore, to mechanically repair the well, or for other reasons.