Energy XXI Provides Operations Update
- Fiscal second quarter oil production tops 30,000 Bbl/d
- Stricker exploration well at West Delta 30 encounters 79 feet of oil pay
- West Delta Block 32 acquired
- Share repurchase program approaches 11 percent
HOUSTON � Jan. 7, 2014 � Energy XXI (NASDAQ: EXXI) (AIM: EXXI) today provided an operations update, including production and recent exploration, development and acquisition activity.
Production Update
During the company�s fiscal second quarter ended Dec. 31, 2013, production is estimated to have averaged 45,000 barrels of oil equivalent per day (BOE/d), with oil production exceeding 30,000 barrels per day (Bbl/d), up from 29,700 Bbl/d in the preceding quarter.
�We have continued to grow our oil production through the last three quarters with minimal development drilling,� Energy XXI Chairman and Chief Executive Officer John Schiller said. �We increased activity in December by adding a rig at West Delta 30, where the successful Stricker exploration well will lead to a multiple-well development program. Additionally, we are currently moving a second rig into West Delta 73 to accelerate oil development in our highly successful horizontal drilling program.�
Operations Update
The Stricker well at West Delta 30 (100% WI/ 87% NRI) was drilled to 5,897 feet measured depth (MD)/ 5,168 feet total vertical depth (TVD) and logged 79 net feet of oil pay in six different reservoirs, five of which were previously untested and are new discoveries. Stricker is being sidetracked down dip to delineate the size of the new discoveries, with the expectation of encountering incremental net pay. Because of the number of pay sands discovered in the Stricker well, additional development wells likely will be needed to accelerate recovery of reserves. Stricker is the first well Energy XXI has drilled in the West Delta 30 field since its acquisition in December 2010, and also is the first well in a long-term drilling program resulting from an ongoing field study.
At West Delta 73 (100% WI/ 83% NRI), the Gunn well was brought online in mid-December at 300 Bbl/d of oil, 125 thousand cubic feet per day (Mcf/d) of natural gas and 2,225 Bbl/d of water, gross, with a flowing tubing pressure of 490 psi. The Gunn well was drilled to 11,483 feet MD/ 8,292 feet TVD with a 1,500-foot lateral into the F-40 sand. The company also drilled a water injector well for pressure maintenance to allow for enhanced oil recovery from the field. The next well at West Delta 73, El Diente, is preparing to spud with a proposed target depth of 10,100 feet MD/ 8,075 feet TVD, including a 1,000-foot lateral, to the F-35 sand. Upon completion of the El Diente well, the rig will be mobilized to the B platform to continue the horizontal development.
�Once the rig moves, we intend to run production logs on all of our producing horizontal completions on the D platform,� Schiller said. �We believe the knowledge acquired from this logging program will give us additional data to further enhance the superior results we are seeing from our horizontal campaign.�
In the Main Pass 61 field (100% WI/ 78% NRI), the Don Carlos well has been drilled to 10,450 feet MD/ 8,161 feet TVD, and was brought online last week. The well currently is unloading, with oil production exceeding 1,250 Bbl/d gross from the dual-completion into the BA-4B and BA-4AA sands. Production is expected to increase as completion fluid is unloaded.
The Merlin well (100% WI/ 41% NRI), located on Vermilion Block 179, was drilled to the proposed depth of 19,915 feet MD/ 15,700 feet TVD. Merlin did not encounter commercial hydrocarbons and will be plugged and abandoned. Energy XXI currently is analyzing the well data to determine future drilling activities at Vermilion. The Ensco 99 rig will move to Grand Isle to conduct two recompletions before being mobilized to the West Delta 30 field late this fiscal year to begin a multi-well horizontal program.
Within the ultra-deep exploration program with Freeport-McMoRan, the Davy Jones offset well (15.8% WI/12.5% NRI) is being completed. Completion, with a production test to follow, is expected in the first half of calendar 2014. The Lomond North prospect (18% WI/ 13% NRI) in the Highlander area, located primarily in St. Martin Parish, Louisiana, is currently drilling at 29,000 feet toward a total depth of 30,000 feet.
Acquisition of West Delta Block 32
Energy XXI has acquired assets in West Delta Block 32 (100% WI/ 85% NRI) from Black Elk Energy for $10.4 million in cash. Proved, probable and possible reserves are estimated at 1 MMBOE, of which 89 percent is oil. The assets consist of 1,625 net acres and four platforms. Total production from the field was 250 BOE/d before being shut-in after an accident in November 2012. Energy XXI has filed to obtain operatorship and anticipates bringing the field back online later this quarter. The acquisition closed Dec. 20, 2013 with an effective date of Oct. 1, 2013.
�We are excited about the upside potential in this block,� Schiller said. �For reference, Block 32 has produced more oil than any other block in the West Delta 30 field. Our internal estimate for potential resources exceeds 10 MMBOE, based on a minimal increase in reservoir recovery factors.�
Share Repurchase Program
As previously announced, the company's Board of Directors in May 2013 approved the repurchase of the company's common shares up to a value of $250 million, plus an additional $76 million associated with the issuance of preferred convertible notes in November 2013. Through Jan. 6, 2014, repurchased shares totaled 8,597,700 at a cost of $222.8 million, or an average price per share of $25.91, totaling nearly 11 percent of the company�s stock in issuance at the beginning of the program. Following these purchases, the company has a total of 71,139,601 shares in issue.
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.
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.
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, a registered Petroleum Engineer, is the qualified person who has reviewed and approved the technical information contained in this announcement.
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.
Bbl/d � barrels per day of oil or condensate.
MMBTU � million British thermal units.
Mcf/d � thousand 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.
Proved, Probable, Possible reserves � are as defined in the SPE/World Petroleum Congress Standard.
psi � pounds per square inch.
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.
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