- Oil volumes higher for third consecutive quarter
- Lomond well at Highlander prospect logs 150 net feet of pay
- Share repurchase program reaches 12 percent
HOUSTON, Feb. 6, 2014 (GLOBE NEWSWIRE) -- Energy XXI (Nasdaq:EXXI) (AIM:EXXI) today announced fiscal second-quarter results and provided an operations update on activities in the Gulf of Mexico.
For the 2014 fiscal second quarter, Energy XXI reported adjusted earnings before interest, income taxes, depreciation, depletion and amortization (adjusted EBITDA) of $162.1 million, compared with $196.5 million in the 2013 fiscal second quarter. Net income available for common stockholders for the 2014 fiscal second quarter was $7.6 million, or $0.10 per diluted share, on revenues of $296.8 million, compared with fiscal 2013 second-quarter net income available for common stockholders of $38.5 million, or $0.47 per diluted share, on revenue of $320.5 million.
Fiscal 2014 second-quarter results were reduced by a higher effective income tax rate, lower realized crude oil sales prices, and hedge ineffectiveness.
Production for the 2014 fiscal second quarter averaged 45,100 barrels of oil equivalent per day (BOE/d) net, compared with 44,600 BOE/d net in the 2013 fiscal second quarter. Oil volumes for the 2014 fiscal second quarter averaged 30,200 barrels per day (Bbl/d) net, up from to 29,400 Bbl/d in the 2013 fiscal second quarter.
"With success at West Delta and Main Pass, we continue to hit our oil production targets," Energy XXI Chairman and Chief Executive Officer John Schiller said. "Facilities are being upgraded to allow for a ramp up in drilling activity in the back half of this fiscal year. With six horizontal oil wells set to be drilled at West Delta 73 and 30, we expect a strong finish to our fiscal year in June."
OPERATIONS UPDATE
At West Delta 73 (100% WI/ 83% NRI), the El Diente well was drilled to 9,272 feet measured depth (MD)/ 8,074 feet total vertical depth (TVD), including a 1,000 foot lateral into the F-35 sand, and currently is being placed on production. El Diente is the tenth consecutive successful horizontal well at West Delta 73, where net oil production has grown to more than 6,000 Bbl/d. The rig will be mobilized to the B platform to continue the horizontal program, and a second drilling rig is mobilizing to the C platform, where the first well is expected to spud by the end of March.
At Grand Isle 16/18 (100% WI/ 86% NRI), the Pi well was recompleted to the B-4 oil sand and brought online this week at 950 Bbl/d and 450 Mcf/d gross, with a flowing tubing pressure of 850 psi. The Pi well was also set up for future through-tubing recompletions to the C-2 oil zone and the C-4 gas sand.
Significant progress is being made within the company's exploration joint venture with Freeport-McMoRan Oil & Gas (FM O&G), pursuing the Inboard Lower Tertiary/Cretaceous gas trend on the Gulf of Mexico Shelf and onshore in South Louisiana (previously referred to as the ultra-deep trend).
The Lomond North well (18% WI/ 13% NRI) in the Highlander area, located primarily in St. Martin Parish, Louisiana, discovered high-quality natural gas pay in several Wilcox and Cretaceous aged sands. The operator recently reported that wireline log and core data indicate favorable reservoir characteristics with approximately 150 feet of net pay between 24,000 feet and 29,000 feet.
The Lomond North discovery well currently is in completion operations to test the lower Wilcox and Cretaceous objectives found below the salt weld. FM O&G has identified multiple exploratory prospects in the Highlander area where it controls rights to approximately 56,000 gross acres.
Approximately 65 miles south of Lomond North, completion activities have commenced on the Davy Jones offset well (15.8% WI/12.5% NRI). Flow testing of the well is expected in the first half of calendar 2014.
The Lineham Creek exploration well (9% WI/ 6.75% NRI), located onshore in Cameron Parish, Louisiana, has been suspended while future plans are being developed.
SHARE REPURCHASE PROGRAM
As previously announced in May 2013, the company's Board of Directors approved the repurchase of the company's common shares up to a value of $250 million, plus an additional $76 million share repurchase associated with the issuance of preferred convertible notes in November 2013. To date, repurchased shares totaled 9,415,563 at a cost of $242.9 million, or an average price per share of $25.80, totaling approximately 12 percent of the company's stock outstanding at the beginning of the program. Following these purchases, the company has a total of 70,322,050 shares outstanding.
CAPITAL EXPENDITURES
During the 2014 fiscal second quarter, capital expenditures totaled $189.9 million, with $50.1 million in exploration and $139.8 million in development and other costs. In addition, acquisition expenditures for the quarter totaled $12.5 million. Capital expenditures for fiscal 2014 are estimated at $705 million, excluding acquisitions.
CONFERENCE CALL TOMORROW, FEB. 7, AT 9 A.M. CST, 3 P.M. LONDON TIME
Energy XXI will host its fiscal second-quarter conference call tomorrow, Feb. 7, at 9 a.m. CST (3 p.m. London time). The dial-in numbers are 1 (631) 813-4724 (U.S.) and (0) 800 028 8438 (U.K.), and the confirmation code is 34659187. 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.
ENERGY XXI (BERMUDA) LIMITED
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(In Thousands, except per share information)
(Unaudited)
As required under Regulation G of the Securities Exchange Act of 1934, provided below are reconciliations of net income to the following non-GAAP financial measure: Adjusted EBITDA. The company uses this non-GAAP measure as a key metric for the management of the company and to demonstrate the company's ability to internally fund capital expenditures and service debt.
| Three Months Ended | Six Months Ended | |||
| December 31, | December 31, | |||
| 2013 | 2012 | 2013 | 2012 | |
| Net Income as Reported | $10,495 | $41,332 | $53,634 | $59,592 |
| Preferred stock dividends | 2,872 | 2,874 | 5,745 | 5,749 |
| Net Income Available for Common Stockholders | 7,623 | 38,458 | 47,889 | 53,843 |
| Interest expense and other income-net | 37,728 | 26,569 | 66,891 | 52,755 |
| Depreciation, depletion and amortization | 103,513 | 105,856 | 203,729 | 190,651 |
| Income tax expense | 10,658 | 25,020 | 35,994 | 35,730 |
| EBITDA | $159,522 | $195,903 | $354,503 | $332,979 |
| Loss from equity method investments | 2,621 | 616 | 4,414 | 2,111 |
| Adjusted EBITDA | $162,143 | $196,519 | $358,917 | $335,090 |
| Adjusted EBITDA Per Share | ||||
| Basic | $2.19 | $2.48 | $4.79 | $4.23 |
| Diluted | $2.19 | $2.25 | $4.79 | $4.22 |
| Weighted Average Number of Common Shares Outstanding | ||||
| Basic | 73,964 | 79,314 | 74,873 | 79,238 |
| Diluted | 74,053 | 87,468 | 74,956 | 79,367 |
| ENERGY XXI (BERMUDA) LIMITED | ||
| CONSOLIDATED BALANCE SHEETS | ||
| (In Thousands, except share information) | ||
| December 31, | June 30, | |
| 2013 | 2013 | |
| (Unaudited) | ||
| Current Assets | ||
| Cash and cash equivalents | $357,828 | $— |
| Restricted cash | 746 | — |
| Accounts receivable | ||
| Oil and natural gas sales | 130,398 | 132,521 |
| Joint interest billings | 5,647 | 9,505 |
| Insurance and other | 7,424 | 6,745 |
| Prepaid expenses and other current assets | 45,603 | 50,738 |
| Derivative financial instruments | 7,731 | 38,389 |
| Total Current Assets | 555,377 | 237,898 |
| Property and Equipment | ||
| Oil and natural gas properties - full cost method of accounting, including $251.4 million and $422.6 million of unevaluated properties not being amortized at December 31, 2013 and June 30, 2013, respectively | 3,523,881 | 3,289,505 |
| Other property and equipment | 16,582 | 17,003 |
| Total Property and Equipment, net of accumulated depreciation, depletion, amortization and impairment | 3,540,463 | 3,306,508 |
| Other Assets | ||
| Derivative financial instruments | 501 | 21,926 |
| Equity investments | 18,440 | 12,799 |
| Debt issuance costs, net of accumulated amortization and other assets | 46,927 | 32,580 |
| Total Other Assets | 65,868 | 67,305 |
| Total Assets | $4,161,708 | $3,611,711 |
| LIABILITIES | ||
| Current Liabilities | ||
| Accounts payable | 196,652 | $219,610 |
| Accrued liabilities | 77,411 | 105,192 |
| Notes payable | 10,288 | 22,524 |
| Deferred income taxes | — | 20,517 |
| Asset retirement obligations | 29,911 | 29,500 |
| Derivative financial instruments | 1,820 | 40 |
| Current maturities of long-term debt | 12,843 | 19,554 |
| Total Current Liabilities | 328,925 | 416,937 |
| Long-term debt, less current maturities | 1,999,086 | 1,350,491 |
| Deferred income taxes | 177,497 | 140,804 |
| Asset retirement obligations | 277,173 | 258,318 |
| Derivative financial instruments | 932 | — |
| Other liabilities | 11,907 | 7,915 |
| Total Liabilities | 2,795,520 | 2,174,465 |
| Commitments and Contingencies | ||
| Stockholders' Equity | ||
| Preferred stock, $0.001 par value, 7,500,000 shares authorized at December 31, 2013 and June 30, 2013, respectively | ||
| 7.25% Convertible perpetual preferred stock, 8,000 shares issued and outstanding at December 31, 2013 and June 30, 2013, respectively | — | — |
| 5.625% Convertible perpetual preferred stock, 812,760 and 813,188 shares issued and outstanding at December 31, 2013 and June 30, 2013, respectively | 1 | 1 |
| Common stock, $0.005 par value, 200,000,000 shares authorized and 79,693,213 and 79,425,473 shares issued and 71,513,450 and 76,485,910 shares outstanding at December 31, 2013 and June 30, 2013, respectively | 398 | 397 |
| Additional paid-in capital | 1,581,664 | 1,512,311 |
| Retained earnings (deficit) | 739 | (29,352) |
| Accumulated other comprehensive income (loss), net of income taxes | (4,456) | 26,552 |
| Treasury stock, at cost, 8,179,100 and 2,938,900 shares at December 31, 2013 and June 30, 2013, respectively | (212,158) | (72,663) |
| Total Stockholders' Equity | 1,366,188 | 1,437,246 |
| Total Liabilities and Stockholders' Equity | $4,161,708 | $3,611,711 |
| ENERGY XXI (BERMUDA) LIMITED | ||||
| CONSOLIDATED STATEMENTS OF INCOME | ||||
| (In Thousands, except per share information) | ||||
| (Unaudited) | ||||
| Three Months | Six Months | |||
| Ended December 31, | Ended December 31, | |||
| 2013 | 2012 | 2013 | 2012 | |
| Revenues | ||||
| Crude oil sales | $262,230 | $285,824 | $551,459 | $533,154 |
| Natural gas sales | 34,586 | 34,695 | 69,949 | 57,592 |
| Total Revenues | 296,816 | 320,519 | 621,408 | 590,746 |
| Costs and Expenses | ||||
| Lease operating | 93,789 | 85,922 | 179,552 | 168,403 |
| Production taxes | 1,189 | 1,166 | 2,587 | 2,413 |
| Gathering and transportation | 5,978 | 6,098 | 11,323 | 14,089 |
| Depreciation, depletion and amortization | 103,513 | 105,856 | 203,729 | 190,651 |
| Accretion of asset retirement obligations | 7,425 | 7,756 | 14,751 | 15,408 |
| General and administrative expense | 17,698 | 19,319 | 41,370 | 43,207 |
| Loss on derivative financial instruments | 5,722 | 865 | 7,163 | 6,387 |
| Total Costs and Expenses | 235,314 | 226,982 | 460,475 | 440,558 |
| Operating Income | 61,502 | 93,537 | 160,933 | 150,188 |
| Other Income (Expense) | ||||
| Loss from equity method investees | (2,621) | (616) | (4,414) | (2,111) |
| Other income - net | 913 | 543 | 1,435 | 902 |
| Interest expense | (38,641) | (27,112) | (68,326) | (53,657) |
| Total Other Expense | (40,349) | (27,185) | (71,305) | (54,866) |
| Income Before Income Taxes | 21,153 | 66,352 | 89,628 | 95,322 |
| Income Tax Expense | 10,658 | 25,020 | 35,994 | 35,730 |
| Net Income | 10,495 | 41,332 | 53,634 | 59,592 |
| Preferred Stock Dividends | 2,872 | 2,874 | 5,745 | 5,749 |
| Net Income Available for Common Stockholders | $7,623 | $38,458 | $47,889 | $53,843 |
| Earnings per Share | ||||
| Basic | $0.10 | $0.48 | $0.64 | $0.68 |
| Diluted | $0.10 | $0.47 | $0.64 | $0.68 |
| Weighted Average Number of Common Shares Outstanding | ||||
| Basic | 73,964 | 79,314 | 74,873 | 79,238 |
| Diluted | 74,053 | 87,468 | 74,956 | 79,367 |
| ENERGY XXI (BERMUDA) LIMITED | ||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
| (In Thousands) | ||||
| (Unaudited) | ||||
| Three Months | Six Months | |||
| Ended December 31, | Ended December 31, | |||
| 2013 | 2012 | 2013 | 2012 | |
| Cash Flows From Operating Activities | ||||
| Net income | $10,495 | $41,332 | $53,634 | $59,592 |
| Adjustments to reconcile net income to net cash provided by | ||||
| (used in) operating activities: | ||||
| Depreciation, depletion and amortization | 103,513 | 105,856 | 203,729 | 190,651 |
| Deferred income tax expense | 10,392 | 22,025 | 32,872 | 32,814 |
| Change in derivative financial instruments | ||||
| Proceeds from derivative instruments | — | 100 | — | 161 |
| Other – net | 1,993 | (8,671) | (364) | (14,018) |
| Accretion of asset retirement obligations | 7,425 | 7,756 | 14,751 | 15,408 |
| Loss from equity method investees | 2,621 | 616 | 4,414 | 2,111 |
| Amortization of debt discount and issuance costs | 3,100 | 1,907 | 4,555 | 3,798 |
| Stock-based compensation | 439 | 1,200 | 3,971 | 1,656 |
| Changes in operating assets and liabilities | ||||
| Accounts receivable | 19,130 | (18,153) | 16,999 | (7,397) |
| Prepaid expenses and other current assets | 12,489 | 4,685 | 6,219 | 20,722 |
| Settlement of asset retirement obligations | (15,975) | (14,673) | (34,038) | (24,809) |
| Accounts payable and accrued liabilities | (1,821) | (4,509) | (45,042) | (39,053) |
| Net Cash Provided by Operating Activities | 153,801 | 139,471 | 261,700 | 241,636 |
| Cash Flows from Investing Activities | ||||
| Acquisitions | (12,549) | (41,156) | (12,564) | (41,156) |
| Capital expenditures | (189,869) | (192,352) | (388,227) | (379,050) |
| Net distributions (contributions) from/to equity investees | 5,000 | — | (11,694) | (15,524) |
| Transfer to restricted cash | (746) | — | (746) | — |
| Return of property deposit | — | 3,500 | — | — |
| Proceeds from the sale of properties | — | — | 1,748 | — |
| Other | (21) | (17) | (72) | 355 |
| Net Cash Used in Investing Activities | (198,185) | (230,025) | (411,555) | (435,375) |
| Cash Flows from Financing Activities | ||||
| Proceeds from the issuance of common and preferred stock, net of offering costs | 138 | 69 | 3,405 | 6,388 |
| Discount on convertible debt allocated to additional paid-in capital | 63,432 | — | 63,432 | — |
| Repurchase of company common stock | (118,281) | — | (153,491) | — |
| Dividends to shareholders – common | (8,702) | (5,553) | (17,798) | (11,103) |
| Dividends to shareholders – preferred | (2,872) | (2,874) | (5,745) | (5,750) |
| Proceeds from long-term debt | 723,988 | 385,637 | 1,764,685 | 609,449 |
| Payments on long-term debt | (262,648) | (294,446) | (1,127,879) | (481,259) |
| Debt issuance costs | (10,203) | — | (18,923) | — |
| Other | (2) | (149) | (3) | (178) |
| Net Cash Provided by Financing Activities | 384,850 | 82,684 | 507,683 | 117,547 |
| Net Increase (Decrease) in Cash and Cash Equivalents | 340,466 | (7,870) | 357,828 | (76,192) |
| Cash and Cash Equivalents, beginning of period | 17,362 | 48,765 | — | 117,087 |
| Cash and Cash Equivalents, end of period | $357,828 | $40,895 | $357,828 | $40,895 |
| ENERGY XXI (BERMUDA) LIMITED | |||||||
| CONSOLIDATED OPERATIONAL INFORMATION (Unaudited) | |||||||
| Quarter Ended | |||||||
| Operating Highlights | Dec. 31, 2013 | Sep. 30, 2013 | June 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | ||
| Operating revenues | (In Thousands, Except per Unit Amounts) | ||||||
| Crude oil sales | $263,626 | $290,965 | $270,623 | $273,280 | $280,953 | ||
| Natural gas sales | 31,138 | 32,584 | 38,630 | 27,070 | 29,657 | ||
| Hedge gain | 2,052 | 1,043 | 5,072 | 3,424 | 9,909 | ||
| Total revenues | 296,816 | 324,592 | 314,325 | 303,774 | 320,519 | ||
| Percent of operating revenues from crude oil | |||||||
| Prior to hedge gain | 89% | 90% | 88% | 91% | 90% | ||
| Including hedge gain | 88% | 89% | 87% | 90% | 89% | ||
| Operating expenses | |||||||
| Lease operating expense | |||||||
| Insurance expense | 7,920 | 8,496 | 7,462 | 7,473 | 8,810 | ||
| Workover and maintenance | 19,690 | 14,586 | 15,622 | 19,166 | 20,217 | ||
| Direct lease operating expense | 66,179 | 62,681 | 59,371 | 59,666 | 56,895 | ||
| Total lease operating expense | 93,789 | 85,763 | 82,455 | 86,305 | 85,922 | ||
| Production taxes | 1,189 | 1,398 | 1,481 | 1,352 | 1,166 | ||
| Gathering and transportation | 5,978 | 5,345 | 5,668 | 4,411 | 6,098 | ||
| DD&A | 103,513 | 100,216 | 96,846 | 88,727 | 105,856 | ||
| General and administrative | 17,698 | 23,672 | 12,299 | 16,092 | 19,319 | ||
| Other – net | 13,147 | 8,767 | 3,829 | 7,017 | 8,621 | ||
| Total operating expenses | 235,314 | 225,161 | 202,578 | 203,904 | 226,982 | ||
| Operating income | $61,502 | $99,431 | $111,747 | $99,870 | $93,537 | ||
| Sales volumes per day | |||||||
| Natural gas (MMcf) | 89.3 | 100.8 | 107.4 | 89.4 | 90.9 | ||
| Crude oil (MBbls) | 30.2 | 29.7 | 28.9 | 28.6 | 29.4 | ||
| Total (MBOE) | 45.1 | 46.6 | 46.8 | 43.5 | 44.6 | ||
| Percent of sales volumes from crude oil | 67% | 64% | 62% | 66% | 66% | ||
| Average sales price | |||||||
| Natural gas per Mcf | $3.79 | $3.51 | $3.95 | $3.37 | $3.55 | ||
| Hedge gain per Mcf | 0.42 | 0.30 | 0.23 | 0.29 | 0.60 | ||
| Total natural gas per Mcf | $4.21 | $3.81 | $4.18 | $3.66 | $4.15 | ||
| Crude oil per Bbl | $94.85 | $106.31 | $102.82 | $106.11 | $103.79 | ||
| Hedge gain (loss) per Bbl | (0.50) | (0.63) | 1.08 | 0.42 | 1.80 | ||
| Total crude oil per Bbl | $94.35 | $105.68 | $103.90 | $106.53 | $105.59 | ||
| Total hedge gain per BOE | $0.49 | $0.24 | $1.19 | $0.87 | $2.42 | ||
| Operating revenues per BOE | $71.54 | $75.78 | $73.78 | $77.58 | $78.15 | ||
| Operating expenses per BOE | |||||||
| Lease operating expense | |||||||
| Insurance expense | 1.91 | 1.98 | 1.75 | 1.91 | 2.15 | ||
| Workover and maintenance | 4.75 | 3.41 | 3.67 | 4.89 | 4.93 | ||
| Direct lease operating expense | 15.95 | 14.63 | 13.94 | 15.24 | 13.87 | ||
| Total lease operating expense per BOE | 22.61 | 20.02 | 19.36 | 22.04 | 20.95 | ||
| Production taxes | 0.29 | 0.33 | 0.35 | 0.35 | 0.28 | ||
| Gathering and transportation | 1.44 | 1.25 | 1.33 | 1.13 | 1.49 | ||
| DD&A | 24.95 | 23.40 | 22.73 | 22.66 | 25.81 | ||
| General and administrative | 4.27 | 5.53 | 2.89 | 4.11 | 4.71 | ||
| Other – net | 3.17 | 2.05 | 0.90 | 1.79 | 2.10 | ||
| Total operating expenses per BOE | 56.73 | 52.58 | 47.56 | 52.08 | 55.34 | ||
| Operating income per BOE | $14.81 | $23.20 | $26.22 | $25.50 | $22.81 | ||
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. Phil Kerig, Director of Corporate Development, 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. Cantor Fitzgerald Europe is Energy XXI's listing broker in the United Kingdom. To learn more, visit the Energy XXI website at www.EnergyXXI.com.
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.
Bopd – barrels of oil per day
MMcf/d – million cubic feet of gas per day.
MD – total measured depth of a well.
Net Pay – cumulative hydrocarbon-bearing formations.
NRI, 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.
TVD –true vertical depth of a well.
WI, 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.