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Energy XXI Reports Fiscal 2015 First-Quarter Results, Issues Operations Update

First-quarter production volumes average 58,600 BOE/d

FY15 capital program reduced to $670-$690 million range

On target to achieve full-year cost savings on acquisition

Energy XXI Logo


HOUSTON, Nov. 5, 2014 (GLOBE NEWSWIRE) -- Energy XXI (Nasdaq:EXXI) (AIM:EXXI) today announced fiscal first-quarter 2015 results and provided an operations update on activities in the Gulf of Mexico.

Highlights

  • Generated first-quarter adjusted EBITDA of $230.7 million
  • Current production averaging 60,000 BOE/d
  • Reaffirmed full-year guidance ranges
  • Currently completing the Toro well after logging 170 net feet of oil pay

"During the first quarter with a front-loaded capital budget, we completed nine wells, with nine additional wells to come online in the current quarter," Energy XXI Ltd Chairman, President and Chief Executive Officer John D. Schiller said. "As we enter the second half of our fiscal year we are focused on capital preservation, reducing downtime and lowering expenses while maintaining production and generating free cash flow. Asset rationalization and free cash flow will be used for debt reduction."

Fiscal 2015 First-Quarter Results

For the 2015 fiscal first quarter, adjusted earnings before non-recurring charges and interest, taxes, depreciation, depletion and amortization (adjusted EBITDA) was $230.7 million (a non-GAAP measure reconciled below), compared with $205.2 million in the 2014 fiscal first quarter. The company reported a net loss available for common stockholders in the 2015 fiscal first quarter of $9.3 million, or $0.10 loss per diluted share, on revenues of $403.2 million, compared with fiscal 2014 first-quarter net income available for common stockholders of $40.3 million, or $0.51 income per diluted share, on revenues of $324.6 million. 

Production for the 2015 fiscal first quarter averaged 58,600 net barrels of oil equivalent per day (BOE/d), with 41,600 barrels per day (Bbl/d) liquids, compared with 46,600 net BOE/d, 29,800 Bbl/d liquids in the 2014 fiscal first quarter. Current production approximates 60,000 BOE/d.   The company currently has 75 percent of oil hedged through calendar 2014, and has 60 percent of oil hedged in calendar 2015.

Operations Update

Our core acreage position has led to multiple wells coming online in the first quarter.   Three horizontal wells were brought online at West Delta 73 (100% WI/83% NRI), four at the West Delta 30 field (100% WI/ 87% NRI), one at Main Pass (100% WI/ 83% NRI), and one at Ship Shoal (100% WI/ 83% NRI). The nine wells provided uplift of approximately 1,250 net BOE/d to the first-quarter average. These wells are expected to add approximately 3,000 net BOE/d to the fiscal second-quarter average. In the second quarter, the company plans to bring nine additional wells online, providing approximate uplift of 2,100 net BOE/d to the second-quarter average production. 

At the Main Pass 61 field, the Toro well reached total depth of 8,070 feet TVD/ 10,835 MD; logging 170 net feet measured depth (MD) feet of oil pay in the J-6 sand, and is expected to be online within the next 30 days. The company expects to be operating two rigs by calendar year-end. In addition, the company will have a workover rig at South Pass 78 to execute a four to six well workover program. 

Multiple capital projects are underway designed to alleviate back pressure, water handling capacity, and compression upgrades in the West Delta, Main Pass and South Pass areas. These planned facilities upgrades are expected to cost approximately $15 million and be completed in the company's fiscal third quarter.  These programs are designed to help optimize oil and gas production from our core fields with total potential incremental production from existing wells expected to exceed 2,500 BOE/d.

Inboard Lower Tertiary Cretaceous Trend

In the non-operated joint venture with Freeport McMoRan Oil and Gas in the Inboard Lower Tertiary/Cretaceous trend, the Highlander discovery (Lomond) is currently being completed and testing is anticipated in the calendar fourth quarter of 2014. Energy XXI has a 20 percent working interest in the Lomond well.

Capital Expenditures

During the 2015 fiscal first quarter, capital expenditures totaled $280.0 million, with $25.4 million in exploration and $254.6 million in development and other costs. Currently, the company is estimating the total fiscal 2015 capital program to range from $670 million to $690 million ($450 million annualized run rate), down from a previously announced $815 million.

Guidance

Second-quarter and full-year guidance is provided below.

Volume Projections FY 2015 2Q FY15
Net Production (per day)    
 Oil, including NGLs (Bbls) 42,000 – 46,000 41,000 – 45,000
 BOE 59,000 – 64,000 58,000 – 63,000
% Oil, including NGLs (using midpoint of guidance) 71% 71%
     
FY15 Cost Projections ($MM)  
1Q Actuals
 
2Q proj.
LOE 142.6 125-135
G&A 26.4 21-24
Gathering & Transport 9.2 8-10
DD&A 29.93/BOE 29.50-31.50/BOE
     
     
  Quarter Ended
 Operating Highlights Sept. 30,
2014
June 30,
2014
Mar. 31,
2014
Dec. 31,
2013
Sept. 30,
2013
  (In Thousands, Except per Unit Amounts)
Operating revenues          
Crude oil sales $370,155 $294,974 $254,641 $263,626 $290,965
Natural gas sales 34,561 34,508 37,562 31,138 32,584
Hedge gain (loss) (1,485) (5,348) (7,020) 2,052 1,043
Total revenues 403,231 324,134 285,183 296,816 324,592
Percent of operating revenues from crude oil          
Prior to hedge gain (loss) 91% 90% 87% 89% 90%
Including hedge gain (loss) 91% 89% 88% 88% 89%
Operating expenses          
Lease operating expense          
Insurance expense 11,022 8,357 6,410 7,920 8,496
Workover and maintenance 29,416 14,408 17,797 19,690 14,586
Direct lease operating expense 102,147 79,806 59,417 66,179 62,681
Total lease operating expense 142,585 102,571 83,624 93,789 85,763
Production taxes 3,093 1,750 1,090 1,189 1,398
Gathering and transportation 9,188 6,509 5,700 5,978 5,345
DD&A 161,266 119,691 99,899 103,513 100,216
General and administrative 26,424 30,824 24,208 17,698 23,672
Other – net 9,536 8,112 5,861 13,147 8,767
Total operating expenses 352,092 269,457 220,382 235,314 225,161
Operating income $51,139 $54,677 $64,801 $61,502 $99,431
Sales volumes per day          
Natural gas (MMcf) 100.7 84.8 83.7 89.3 100.8
Crude oil (MBbls) 41.8 32.0 28.4 30.2 29.7
Total (MBOE) 58.6 46.1 42.3 45.1 46.6
Percent of sales volumes from crude oil 71% 69% 67% 67% 64%
Average sales price          
Natural gas per Mcf $3.73 $4.47 $4.98 $3.79 $3.51
Hedge gain (loss) per Mcf 0.02 (0.02) (0.31) 0.42 0.30
Total natural gas per Mcf $3.75 $4.45 $4.67 $4.21 $3.81
Crude oil per Bbl $96.28 $101.45 $99.71 $94.85 $106.31
Hedge gain (loss) per Bbl (0.43) (1.78) (1.83) (0.50) (0.63)
Total crude oil per Bbl $95.85 $99.67 $97.88 $94.35 $105.68
Total hedge gain (loss) per BOE $(0.28) $(1.28) $(1.84) $0.49 $0.24
Operating revenues per BOE $74.84 $77.28 $74.85 $71.54 $75.78
Operating expenses per BOE          
Lease operating expense          
Insurance expense 2.05 1.99 1.68 1.91 1.98
Workover and maintenance 5.46 3.44 4.67 4.75 3.41
Direct lease operating expense 18.96 19.03 15.59 15.95 14.63
Total lease operating expense per BOE 26.47 24.46 21.94 22.61 20.02
Production taxes 0.57 0.42 0.29 0.29 0.33
Gathering and transportation 1.71 1.55 1.50 1.44 1.25
DD&A 29.93 28.54 26.22 24.95 23.40
General and administrative 4.90 7.35 6.35 4.27 5.53
Other – net 1.77 1.93 1.54 3.17 2.05
Total operating expenses per BOE 65.35 64.25 57.84 56.73 52.58
Operating income per BOE $9.49 $13.03 $17.01 $14.81 $23.20
 
 
ENERGY XXI LTD
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, except per share information)
(Unaudited)
 
  Three Months Ended
September 30,
  2014 2013
Revenues    
Crude oil sales $368,501 $289,229
Natural gas sales 34,730 35,363
Total Revenues 403,231 324,592
     
Costs and Expenses    
Lease operating 142,585 85,763
Production taxes 3,093 1,398
Gathering and transportation 9,188 5,345
Depreciation, depletion and amortization 161,266 100,216
Accretion of asset retirement obligations 12,819 7,326
General and administrative expense 26,424 23,672
(Gain) loss on derivative financial instruments (3,283) 1,441
Total Costs and Expenses 352,092 225,161
     
Operating Income 51,139 99,431
     
Other Income (Expense)    
Income (loss) from equity method investees 881 (1,793)
Other income - net 951 522
Interest expense (66,263) (29,685)
Total Other Expense (64,431) (30,956)
     
Income (Loss) Before Income Taxes (13,292) 68,475
     
Income Tax Expense (Benefit) (6,889) 25,336
     
Net Income (Loss) (6,403) 43,139
Preferred Stock Dividends 2,872 2,873
Net Income (Loss) Available for Common Stockholders $(9,275) $40,266
     
Earnings (Loss) per Share    
Basic $(0.10) $0.53
Diluted $(0.10) $0.51
     
Weighted Average Number of Common Shares Outstanding    
Basic 93,833 75,782
Diluted 93,833 84,073

ENERGY XXI LTD
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
September 30,
  2014 2013
     
Net Income (Loss) as Reported $(6,403) $43,139
     
Interest expense - net 65,312 29,163
Depreciation, depletion and amortization 161,266 100,216
Income tax expense (benefit) (6,889) 25,336
     
EBITDA 213,286 197,854
     
Adjustments to EBITDA    
Accretion of asset retirement obligation  12,819  7,326
Non-recurring charges  4,635 --
     
Adjusted EBITDA $230,740 $205,180
     
Adjusted EBITDA Per Share    
Basic $2.46 $2.71
Diluted $2.46 $2.70
     
Weighted Average Number of Common Shares Outstanding    
Basic 93,833 75,782
Diluted 93,833 75,858
 
 
ENERGY XXI LTD
CONSOLIDATED BALANCE SHEETS
(In Thousands, except share information)
 
  September 30, June 30,
  2014 2014
  (Unaudited)  
Current Assets    
Cash and cash equivalents  $119,500  $145,806
Accounts receivable    
Oil and natural gas sales 145,821 167,075
Joint interest billings 14,426 12,898
Insurance and other 5,615 5,438
Prepaid expenses and other current assets 64,631 72,530
Deferred income taxes 24,587 52,587
Derivative financial instruments 23,815 1,425
Total Current Assets 398,395 457,759
Property and Equipment    
Oil and natural gas properties - full cost method of accounting, including $1,167.6 million and $1,165.7 million of unevaluated properties not being amortized at September 30, 2014 and June 30, 2014, respectively 6,637,292 6,524,602
Other property and equipment 23,400 19,760
Total Property and Equipment, net of accumulated depreciation, depletion, amortization and impairment 6,660,692 6,544,362
Other Assets    
Goodwill 329,293 329,293
Derivative financial instruments 6,713 3,035
Equity investments 40,320 40,643
Restricted Cash 325 6,350
Other assets and debt issuance costs, net of accumulated amortization 60,845 57,394
Total Other Assets 437,496 436,715
Total Assets $7,496,583 $7,438,836
LIABILITIES    
Current Liabilities    
Accounts payable $472,108 $417,776
Accrued liabilities 115,509 133,526
Notes payable 19,368 21,967
Asset retirement obligations 79,614 79,649
Derivative financial instruments 1,446 31,957
Current maturities of long-term debt 15,612 15,020
Total Current Liabilities 703,657 699,895
Long-term debt, less current maturities 3,800,417 3,744,624
Deferred income taxes 685,121 701,038
Asset retirement obligations 482,339 480,185
Derivative financial instruments  — 4,306
Other liabilities 8,009 10,958
Total Liabilities 5,679,543 5,641,006
Stockholders' Equity    
Preferred stock, $0.001 par value, 7,500,000 shares authorized at September 30, 2014 and June 30, 2014,
7.25% Convertible perpetual preferred stock, 8.000 shares issued and outstanding at September 30, 2014 and June 30, 2014
5.625% Convertible perpetual preferred stock, 812,760 shares issued and outstanding at September 30, 2014 and June 30, 2014
Common stock, $0.005 par value, 200,000,000 shares authorized and 93,867,405 and 93,719,570 shares issued and outstanding at September 30, 2014 and June 30, 2014, respectively  469 468 
Additional paid-in capital 1,841,457 1,837,462
Accumulated deficit (40,165) (19,626)
Accumulated other comprehensive income (loss), net of income taxes 15,278 (20,475)
Total Stockholders' Equity 1,817,040 1,797,830
Total Liabilities and Stockholders' Equity $7,496,583 $7,438,836
 
 
ENERGY XXI LTD
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
 
  Three Months Ended
September 30,
  2014 2013
     
Cash Flows From Operating Activities    
Net income (loss) $(6,403) $43,139
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:    
Depreciation, depletion and amortization 161,266 100,216
Deferred income tax expense (benefit) (7,169) 22,480
Change in derivative financial instruments    
Proceeds from derivative instruments 3,364
Other – net (5,938) (2,357)
Accretion of asset retirement obligations 12,819 7,326
Loss (income) from equity method investees (881) 1,793
Amortization and write-off of debt issuance costs and other 5,277 1,455
Stock-based compensation 1,779 3,532
Changes in operating assets and liabilities    
Accounts receivable 23,313 (2,131)
Prepaid expenses and other current assets 7,661 (6,270)
Settlement of asset retirement obligations (14,907) (18,063)
Accounts payable and accrued liabilities 23,769 (43,221)
Net Cash Provided by Operating Activities 203,950 107,899
     
Cash Flows from Investing Activities    
Acquisitions (287) (15)
Capital expenditures (280,010) (198,358)
Change in equity method investments 1,282 (16,694)
Proceeds from the sale of properties 6,947 1,748
Other (80) (51)
Net Cash Used in Investing Activities (272,148) (213,370)
     
Cash Flows from Financing Activities    
Proceeds from the issuance of common and preferred stock, net of offering costs 2,217 3,267
Repurchase of company common stock (35,210)
Dividends to shareholders – common (11,264) (9,096)
Dividends to shareholders – preferred (2,872) (2,873)
Proceeds from long-term debt 510,120 1,040,697
Payments on long-term debt (454,042) (865,231)
Debt issuance costs (2,250) (8,720)
Other (17) (1)
Net Cash Provided by Financing Activities 41,892 122,833
     
Net Increase (Decrease) in Cash and Cash Equivalents (26,306) 17,362
Cash and Cash Equivalents, beginning of period 145,806
Cash and Cash Equivalents, end of period $119,500 $17,362

Fiscal 2015 First Quarter Conference Call

Energy XXI will host its fiscal first-quarter conference call tomorrow, Nov. 6, 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 21254329. 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

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, our ability to integrate acquisitions, 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.

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

Mcf/d – thousand cubic feet of gas per day.

NRI, Net Revenue Interest – the percentage of production revenue allocated to the working interest after first deducting proceeds allocated to royalty and overriding interest.

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.

CONTACT: INQUIRIES OF THE COMPANY
         Energy XXI
         Greg Smith
         Vice President, Investor Relations
         713-351-3149
         gsmith@energyxxi.com
         
         Kim Pinyopusarerk
         Investor Relations Associate
         713-351-3028
         kpinto@energyxxi.com
         
         Cantor Fitzgerald Europe
         Nominated Adviser: David Porter, Rick Thompson
         Corporate Broking: Richard Redmayne
         Tel: +44 (0) 20 7894 7000
         
         Pelham Bell Pottinger
         James Henderson
         jhenderson@pelhambellpottinger.co.uk
         Mark Antelme
         mantelme@pelhambellpottinger.co.uk
         +44 (0) 20 7861 3232

Energy XXI Logo 2


Source: GlobeNewswire (November 5, 2014 - 6:49 PM EST)

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