Energy XXI Reports Record Fiscal Second-Quarter Results and Provides Operations Update
- Development drilling program delivers early successes
- Oil represents 72% of production
- Beat of estimates driven by increased oil production and prices
- EBITDA of $226 million sets 4th consecutive quarterly record
- Free cash flow cuts net debt, builds cash balance
HOUSTON � Feb., 1, 2012 � Energy XXI (NASDAQ: EXXI) (AIM: EXXI) today announced results for the fiscal second-quarter ended Dec. 31, 2011, and provided an operational update.
For the 2012 fiscal second quarter, Energy XXI reported earnings before interest, taxes, depreciation, depletion and amortization (EBITDA) of $225.6 million, more than double the prior-year�s fiscal second-quarter EBITDA of $97.8 million. Net income attributable to common shareholders for the 2012 fiscal second quarter was $93.4 million, or $1.11 per diluted share, on revenues of $340.6 million and production of 42,700 barrels of oil equivalent per day (BOE/d).
�Success in developing our asset base delivered record results for the fourth straight quarter and positioned us to continue achieving strong results in today�s environment,� Energy XXI Chairman and CEO John Schiller said. �Production from the properties acquired in December 2010 increased more than 20 percent during the first year, primarily from oil-focused activities. Oil represented 72 percent of our production in the fiscal second quarter, up from 70 percent in the prior-year period, while realized oil prices rose 41 percent to $110 per barrel. As a result, 93 percent of our revenues for the quarter were derived from oil. This combination generated significant free cash flow that helped us reduce our net debt-to-capitalization ratio to 44 percent from 58 percent a year earlier.�
Exploration and Development Activity
At Main Pass 72 (100% WI/83.3% NRI), the Onyx well continues to deliver in excess of 2,200 barrels of oil per day gross as it has since coming online in June 2011. At Grand Isle 16/18 (100% WI/ 87% NRI), multiple recompletions and one development well are delivering gross production rates totaling 5,300 BOE/d. The Sunny development well was drilled to 8,579 feet total vertical depth (TVD) targeting updip C-2 sands. The well encountered 225 feet of net pay in the B and C sands and was dual-completed. Gross production from the B-4 and C-4 sands is currently averaging 1,400 BOE/d, while the primary target, the C?2 sand was gravel packed and is available to produce through a future wireline zone change. The Winters development well was drilled to 16,500 feet TVD, encountering 166 feet gross and 83 feet net of natural gas pay in the K-2 sand. The well is expected to be on production within three weeks at a rate in excess of 20 million cubic feet per day. The company plans to drill two additional development wells, Costello and Pi, later this fiscal year.
In the West Delta 73 field (100% WI/ 87% NRI), Magnum, the first of a four-well development drilling program, was drilled to 8,500 feet TVD, encountering 60 feet of net oil pay in three Pliocene F sands and first production is expected in March. Following Magnum is the Miller development well, a proved undeveloped location targeting F sands in a sparsely drilled area on the west side of the field with a planned total depth of 8,500 feet TVD.
At South Timbalier 54 (100% WI/ 87% NRI), drilling has commenced on Camshaft, the first of two planned development wells, targeting four separate G sands with a planned total depth of 12,000 feet TVD. Plans are to dual complete this well to optimize oil production.
Within the shallow-water, ultra-deep Gulf of Mexico shelf program, the McMoRan-operated partnership is approaching several important milestones.
Completion activities at the Davy Jones No. 1 discovery well at South Marsh Island Block 230 are in an advanced stage. The wellbore has been cleaned out to total depth and drilling mud has been displaced with completion fluid. Current expectations are to perforate and flow the well during the March quarter. Installation of the central processing facility, production platform and sales pipelines has been completed. First production from the well could be established shortly after a successful flow test. The company�s investment in the Davy Jones discovery well (15.8% WI/12.3% NRI) as of Dec. 31, 2011, totaled about $45 million. McMoRan holds a 63.4 percent working interest in Davy Jones.
The Blackbeard East ultra-deep exploration by-pass well has been drilled to 33,318 feet TVD and the section below 30,800 feet TVD was recently logged, identifying potential hydrocarbons in the Sparta carbonate section. The Sparta interval measures 300 feet thick and appears to be a hydrocarbon-bearing fractured carbonate. A production liner will be set to total depth and the well will be temporarily abandoned while development options are evaluated. Blackbeard East is located in 80 feet of water on South Timbalier Block 144. The company�s investment in Blackbeard East (18% WI/14.35% NRI) as of Dec. 31, 2011 was about $42 million. McMoRan holds a 72.0 percent working interest in the well.
The Lafitte exploration well (18% WI/14.6% NRI), located on Eugene Island Block 223 in 140 feet of water, is drilling below 33,000 feet TVD towards a proposed total depth of 34,000 feet TVD, targeting Lower Miocene, Oligocene and potentially Wilcox sections below the salt weld. In January 2012, wireline logs indicated 40 feet of possible hydrocarbon-bearing Frio sands between 31,300 feet and 31,700 feet TVD. In November 2011, wireline logs indicated 56 net feet of hydrocarbon-bearing sand over a 58 foot gross interval in the Cris-R section of the Lower Miocene. Recent pressure data and rotary sidewall cores obtained in the Cris-R sand are being evaluated. The new Frio and Cris-R sand intervals, combined with the 115 feet of potential net Miocene pay previously announced, brings the total possible productive net sands to 211 feet in the Lafitte well. Current plans are to drill ahead to 34,000 feet TVD targeting the Sparta section seen about 80 miles away at Blackbeard East. The company�s investment at Lafitte as of Dec. 31, 2011 was about $31 million. McMoRan holds a 72.0 percent working interest in Lafitte.
The Blackbeard West #2 ultra-deep exploration well (22.9% WI/17.5% NRI) commenced drilling on Nov. 25, 2011 and is currently drilling below 15,450 feet TVD towards a proposed total depth of 26,000 feet TVD. The well, located on Ship Shoal Block 188 within the Blackbeard West unit, is targeting Miocene aged sands seen below the salt weld approximately 13 miles east at Blackbeard East. The company�s investment at Blackbeard West #2 totaled $3.3 million at Dec., 31, 2011. McMoRan holds a 69.4 percent working interest in Ship Shoal Block 188.
In the partnership�s first project to take the ultra-deep concept onshore, operations commenced Dec. 31, 2011 at the Lineham Creek exploration prospect. Lineham Creek is located in Cameron Parish, Louisiana and is targeting Eocene and Paleocene objectives below the salt weld, with a proposed total depth of 29,000 feet TVD. Chevron U.S.A Inc., as operator of the well, holds a 50 percent working interest, Energy XXI has a 9 percent working interest, and McMoRan has a 36.0 percent working interest.
Capital Expenditures
During the 2012 fiscal second quarter, capital expenditures, including plug-and-abandonment costs, totaled $134.5 million, with $46.6 million in exploration and $87.9 million in development and other investments. Total capital expenditures for fiscal 2012 ending June 30, 2012 are expected to be between $450 million and $500 million.