Energy XXI Provides Fiscal Year-End Reserves Estimates and Operations Update
- Preliminary proved reserves estimated at 120 MMBOE, 71% oil
- Fiscal 2013 capital budget of $700 million approved
- Drilling program continues to add reserves, production
- Davy Jones flow test nearing
HOUSTON � July 31, 2012 � Energy XXI (NASDAQ: EXXI) (AIM: EXXI) today provided estimates of its fiscal 2012 year-end reserves and an operations update, including production and recent exploration and development results.
Fiscal 2012 Year-end Reserves
Preliminary estimates of the company�s June 30, 2012 fiscal year-end proved reserves total 120 million barrels of oil equivalent (MMBOE), up three percent from the June 30, 2011 year-end reserves, primarily due to successful drilling of the company�s core properties on the Gulf of Mexico shelf. Energy XXI estimates it added 19 MMBOE of proved reserves primarily through discoveries, extensions of existing fields and revisions, while producing 16 MMBOE in fiscal 2012. The all-sources reserves replacement rate was 119 percent. Netherland, Sewell & Associates, Inc. (NSAI), independent oil and gas reserve auditors, are currently finalizing the year-end reserves estimates. All of the company�s proved reserves are in the United States Gulf of Mexico or Gulf Coast, approximately 68 percent are proved developed, with approximately 71 percent being liquids, of which 94 percent is crude and condensate.
�Successful development drilling during fiscal 2012 drove organic growth in reserves without an acquisition,� Energy XXI Chairman and CEO John Schiller said. �We produced a record 16 million barrels and still added meaningfully to our reserve base, particularly considering oil represented virtually all of the net increase in reserves, which lifted the total oil mix to 71 percent from 66 percent the previous year.�
Core Operations Update
Currently, the company is operating four rigs on the Gulf of Mexico shelf. In the Main Pass complex, the company has successfully drilled the Carinos and Don Tomas wells (WI 100%/ NRI 78%) targeting the BA-4AA sand. Carinos was drilled to 8,346 feet true vertical depth (TVD) and encountered 88 net feet of pay. The well initially tested 575 barrels per day (Bbl/d) gross of oil from a low-resistivity section of the sand. The primary targeted upper section of the BA-4AA sand will be added to the completion following work at Don Tomas. The Don Tomas well was drilled to 8,292 feet TVD, encountering 195 net feet of pay within the targeted BA-4AA sand, thicker and cleaner than was seen at Carinos, which positively impacts reserves and anticipated production rates. The zone was penetrated after June 30, 2012 and is not included in the fiscal 2012 reserve numbers. Don Tomas is expected to be completed and placed on production in August at an estimated gross rate of 3,000 BOE/d. Additional development wells are scheduled at Main Pass, with as many as seven additional wells in the program this fiscal year.
At Grand Isle 16 (WI 100%/ NRI 87%), the Pi development well has been drilled to 9,537 feet TVD. Initial logs indicate nearly 400 feet of net pay, primarily oil, in seven different sands. While the primary target was the C-7 sand, pay was seen from the BF-2 to C-7 sands, far exceeding pre-drill net pay estimates. The well is being completed and is expected to come online within the next two to three weeks at 1,200 BOE/d gross. During fiscal 2012, the company plans to drill as many as seven more development wells and begin a multi-well re-completion program at Grand Isle.
The company�s first horizontal well, Big Sky, has spud at West Delta 73 field (WI 100%/ NRI 83%). A total of four to five horizontal wells will be drilled at West Delta this fiscal year. Based on historical results in this field, horizontal wells increase ultimate recovery more than three-fold with only an estimated 15 percent increase in cost relative to vertical wells. The company will provide updates on the multiple-well horizontal development at West Delta as the program progresses.
Production Update
During the company�s fiscal fourth quarter, production peaked at 56,300 BOE/d. Production for the quarter averaged a record 47,600 BOE/d, up 13 percent from the year before even as tropical storm Debby, rig moves and pipeline downtime negatively affected run rates. �Reaching more than 56,000 BOE/d in mid-June was an important milestone,� Schiller said. �Current production approximates 45,000 BOE/d, still affected by third party pipeline maintenance and rig moves. With production from key wells coming online within the next couple weeks could easily get back to record production levels. We remain on track to average 58,000 to 62,000 BOE/d for fiscal year 2013, which would represent about 35 percent year-over-year growth.�
Shallow-Water Ultra-Deep Exploration and Development
In June 2012, 165 feet of Wilcox sands in the Davy Jones No.1 discovery well were successfully perforated with electric wireline casing guns. Completion activities are continuing and a flow test is expected in August with commercial production expected shortly thereafter. Energy XXI holds a 15.8 percent working interest (12.6 percent net revenue interest) in the Davy Jones discovery well. Total net investment in Davy Jones #1 through June 30, 2012 was approximately $74 million.
At the Blackbeard West #2 exploration well on Ship Shoal Block 188, a liner was set after the well encountered a high-pressure gas flow immediately below the salt weld in May 2012. The well is currently drilling below 21,400 feet to evaluate objectives below the salt weld. The well is targeting Miocene sands seen below the salt weld approximately 13 miles east at Blackbeard East, with a proposed total depth of 24,500 feet. Energy XXI holds a 22.9 percent working interest (17.5 percent net revenue interest) in the prospect. Total net investment in Blackbeard West # 2 approximated $16 million at June 30, 2012.
The Lineham Creek exploration prospect, located onshore in Cameron Parish, Louisiana, is drilling below 20,100 feet towards a proposed total depth of 29,000 feet, targeting Eocene and Paleocene objectives below the salt weld. Chevron U.S.A Inc. is the operator of the well. Energy XXI holds a 9 percent working interest in the well with total net investment through June 30, 2012 of approximately $8 million.
Central Gulf of Mexico Lease Sale
The company participated in the Gulf of Mexico lease sale held June 20, 2012. Energy XXI was the sole bidder on a single lease, South Timbalier 22. The lease is adjacent to the company�s South Timbalier 21 field.
McMoRan, operator of the ultra-deep exploration partnership, was the apparent high bidder on 14 lease blocks on the Gulf of Mexico shelf, with six of the 14 bids being made solely by McMoRan and the remaining eight being submitted with Chevron U.S.A Inc. Energy XXI expects to participate with its full 18 percent working interest on the bids made solely by McMoRan and 9 percent working interest on the bids made jointly with Chevron U.S.A. Inc.
Capital Expenditures
The company has received approval from its Board of Directors to proceed with a capital expenditure budget of $700 million for fiscal year 2013, which began July 1, 2012. Drilling, completion and facilities account for $505 million of the total capital budget, with $322 million going toward exploration and development at the acquired ExxonMobil properties and $183 million allocated toward the exploration and development of the legacy assets. Approximately 85 percent of the overall capital budget will be allocated to development of the company�s assets.
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. Bobby Poirrier Jr., Vice President of Corporate Development, a 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.
.