Production Volumes Recover On Strength of South Timbalier 21 Field
Cote de Mer Successfully Side-Tracked
Energy XXI High-Yield Bond Repurchases Reach $126 Million
Natural Gas Hedge Position Augmented
HOUSTON, Dec. 4, 2008 (GLOBE NEWSWIRE) -- Energy XXI (Bermuda) Limited (Nasdaq:EXXI) (AIM:EXXI) today provided an operational update related to storm impacts and drilling activity, in addition to updates on its bond repurchases and hedge position.
"Our post-hurricane restoration of oil and natural gas production is ahead of schedule, which, combined with hedge-protected prices, is delivering solid cash flow that is funding our strong capital program, including high-potential exploration that can be a company game-changer," Energy XXI Chairman and CEO John Schiller said. "Also, we have continued to strengthen and preserve our financial position through additional bond purchases and natural gas hedges."
POST-HURRICANE PRODUCTION UPDATE
The company's recent net production has reached approximately 21,000 barrels of oil equivalent per day (BOE/d), which remains partially constrained due to pipeline outages that are expected to be resolved within the next several months. Production averaged an estimated 15,500 BOE/d in October and 19,500 BOE/d in November. South Timbalier 21 field production has been restored to approximately 6,800 BOE/d. The current status of other key storm-affected Gulf of Mexico fields follows.
* South Pass 49 - All topside facilities are ready to flow;
pre-storm volumes of 830 BOE/d remain shut-in due to the loss of
third-party-operated sales lines. Production is expected to be
restored by March 2009.
* East Cameron 334/335 - Approximately 250 BOE/d of pre-storm net
production is expected to be restored in December following repairs
to the third-party pipeline servicing the area, as well as volumes
from three recent recompletions.
* Nine additional fields representing approximately 1,700 BOE/d of
pre-storm net production remain off-line due to third-party
pipelines that are expected to be repaired during the next several
months.
Drilling Activity
The E.A. McIlhenny #1 well on the Cote de Mer prospect, located in Vermillion Parish, Louisiana, has been successfully cleaned out to 19,700 feet and is being side-tracked to resume drilling to the proposed depth of 22,000 feet. Before being temporarily abandoned ahead of Hurricanes Gustav and Ike and subsequently encountering operating difficulties, this well was drilled to a depth of 21,504 feet. Energy XXI holds a 33 percent working interest (WI) and a 24 percent net revenue interest (NRI).
The Kaplan prospect (100 percent WI, 74 percent NRI), drilled with the Green & Broussard #1ST4 well in Vermillion Parish, Louisiana, has reached its target depth of 18,605 feet. The well encountered 34 feet of net oil pay in the Marg Howei sand from 15,980 feet to 16,040 feet, which is expected to be completed and placed on production in March. The primary Camerina B target sand was deemed non-commercial.
The Ammazzo prospect (16 percent WI, 13 percent NRI) has commenced drilling operations using the new Rowan-Mississippi 240C class jack-up rig. Located in 25 feet of water at South Marsh Island block 251, the prospect has a proposed total depth of 24,500 feet, targeting one of the largest undrilled deep structures below 15,000 feet on the shelf of the Gulf of Mexico. It is positioned on the southern portion of the structural ridge extending from the Flatrock and JB Mountain discoveries (approximately 16 and 11 miles north-northwest, respectively), where operator McMoRan has proved the existence of productive Rob-L, Operc and Gyro sands in the Middle Miocene. The Ammazzo prospect's multiple targets represent significant exploration potential (500 billion cubic feet of natural gas equivalents to greater than 1 trillion cubic feet), similar to Flatrock and potentially larger.
At the South Timbalier 21 field, the ST 21 #82 ST2 well (100 percent WI, 88 percent NRI) was drilled to its target depth of 12,684 feet, encountering 162 feet of net oil pay in the S-3, S-4A, S-4B, D-2, D-3, D-4, D-7 and D-10 sands between 10,110 and 12,684 feet. The well is being completed and is expected to be placed on production in January.
Adding to the company's recent success at East Cameron 334 (51 percent WI, 43 percent NRI) with the B-10 well recompletion, which tested at 9.1 million cubic feet per day of natural gas, the B-11 well has been worked over and the B-6 well was recompleted to the HA sand. These wells will be tested and placed online when the sales pipeline repairs are completed, expected in December.
In the Apache-operated Golden Meadow field (25 percent WI, 19 percent NRI), a southern extension of the Lake Salvador focus area in Lafourche Parish, Louisiana, the LL&E #233 well was spud Oct. 15 and drilled to target depth of 14,948 feet, logging 21 net feet of natural gas pay in the Pelican sand, 96 net feet of gas pay in the Duval sand and 39 net feet of gas pay in the Dulac sand, encountered between 13,318 and 14,780 feet. The well is expected to be completed and placed on production in February, following completion of the LL&E #236 well. As previously reported, the nearby LL&E #236 well logged 75 feet of net pay between 12,381 and 12,505 feet in the Tex W3 sand, which appears to be oil bearing. Further drilling to the target depth of 16,325 feet has encountered 126 feet of net natural gas pay between 15,696 and 16,153 feet in the Big Hum sand. The well, which was spud Sept. 5, is expected to be dual completed in both intervals and placed on production in January. Several additional prospects remain in inventory.
FINANCIAL MATTERS
As of Dec. 1, 2008, total debt, net of $112 million of cash on hand, was $803 million, reflecting in part the repurchase of $126 million of the company's $750 million high-yield issue maturing June 15, 2013, at a total cost of $95.3 million. Total undrawn capacity under the corporate revolver was $155 million as of Dec. 1, 2008, providing substantial liquidity.
Energy XXI has continued to execute its risk-management strategy, adding natural gas hedges to help protect cash flows during its 2010 fiscal year, which begins July 1, 2009. The revised hedge schedule is attached.