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 February 8, 2015 - 10:28 PM EST
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Energy XXI Reports Fiscal 2015 Second-Quarter Results, Issues Operations Update

HOUSTON, Feb. 8, 2015 (GLOBE NEWSWIRE) -- Energy XXI (Nasdaq:EXXI) today announced fiscal second-quarter 2015 results and provided an operations update on activities in the Gulf of Mexico.

Energy XXI Logo


Highlights

  • Oil production within guidance

- Average Q2 production was 57,900 BOE/d (41,800 barrels of oil per day)

- Average third quarter production to date has averaged 60,000 BOE/d (43,000 barrels of oil per day)

  • Operating cost reductions better than guidance with more efficiencies expected

- LOE $119 million versus $142 million in previous quarter

- General and administrative costs, before severance charges, approximated $14 million

  • Revenue impact of lower commodity prices mitigated by hedge position

- Adjusted EBITDA $217.0 million versus Bloomberg consensus estimate of $215.3 million

  • Continued progress on asset monetizations

  • Non-cash goodwill write-down of $329 million taken primarily due to commodity prices

"We have made great progress in lowering our lease operating costs as well as our general and administrative costs, and expect further reductions in the future," Energy XXI Ltd Chairman, President and Chief Executive Officer John D. Schiller said. "Additionally, we are continuing to pursue and evaluate monetization of our Grand Isle gathering system, as well as evaluating bids on our non-core asset sale. These proceeds will enhance liquidity and reduce long term debt."

Fiscal 2015 Second-Quarter Results

For the 2015 fiscal second quarter, adjusted earnings before non-recurring charges and interest, taxes, depreciation, depletion and amortization (adjusted EBITDA) was $217.0 million (a non-GAAP measure reconciled below), compared with $169.8 million in the 2014 fiscal second quarter. The company reported a net loss available for common stockholders in the 2015 fiscal second quarter of $376.7 million, or $4.01 loss per diluted share (or loss per share of $0.35 before a non-cash goodwill impairment and severance costs), on revenues of $357.8 million, compared with fiscal 2014 second-quarter net income available for common stockholders of $7.6 million, or $0.10 income per diluted share, on revenues of $296.8 million. The company's reported loss on the quarter was primarily due to a non-cash write down on goodwill due to lower commodity prices, as well as executive severance and other severance costs associated with reducing general and administrative and field operating expenses.

Production for the 2015 fiscal second quarter averaged 57,900 net barrels of oil equivalent per day (BOE/d), with 41,800 barrels per day (Bbl/d) liquids, compared with 45,100 net BOE/d, 30,200 Bbl/d liquids in the 2014 fiscal second quarter. Current quarter production has averaged 60,000 BOE/d, of which 43,000 barrels are oil.

Hedging

During the fiscal second quarter, the company monetized certain calendar 2015 crude oil hedges for total cash proceeds of $26 million, and replaced some of those hedges with put spreads for calendar 2015. In late January and early February, the company monetized its three-way and put spread hedges for calendar 2015, receiving $73.1 million in cash proceeds. Following this monetization, the company entered into additional hedges for calendar 2015 and calendar 2016, bringing total crude oil hedges to approximately 72 percent and 39 percent of estimated volumes for those periods.

Operations Update

During the fiscal second quarter eight oil wells were brought online: two horizontal wells at West Delta 73, two oil wells at Main Pass 61, three wells at Ship Shoal 208, and one oil well at West Delta 30. Additionally, one recompletion was brought online at West Delta 30.

The production optimization work in the West Delta area, which includes water handling and compression equipment to alleviate line pressures and allow the company to optimize oil production in the field, should be completed by the end of February. At South Pass 49 the optimization project has been completed and brought online within the past week. Compression equipment was installed to allow for additional capacity, providing initial uplift from the field of approximately 1,000 BOE/d gross.

The company continues to focus on low risk recompletions to maximize capital efficiency. To date 23 recompletion targets have been identified across the core acreage, with another 20 that are being evaluated. The majority of recompletion opportunities are in the South Pass 78 field where the company deployed a workover rig in December 2014. The primary targets for these recompletions are proved developed non-producing reserves. Two wells have already been successfully recompleted with average initial production rate of approximately 450 Bbl/d each.

Divestiture Update

The Grand Isle gathering system was deregulated on February 1, 2015 and we continue to evaluate and pursue the monetization of the asset. 

On our potential non-core asset divestiture, being marketed by The Oil & Gas Asset Clearinghouse, bids have been submitted and are being reviewed. The package includes approximately 6,000 BOE/d of production from Energy XXI from approximately 30 fields.  

Capital Expenditures

During the 2015 fiscal second quarter, capital expenditures totaled $202 million, with $12.1 million in exploration and $189.9 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. As of December 31, 2014 the company had $434 million of available liquidity including $101 million cash. 

Guidance

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

Volume Projections FY 2015 3Q FY15
Net Production (per day)    
Oil, including NGLs (Bbls) 41,000 - 44,000 41,000-44,000
BOE 57,000 – 61,000 58,000-62,000
% Oil, including NGLs
(using midpoint of guidance)
71% 71%
     
FY15 Cost Projections ($MM)  
2Q Actuals
 
3Q proj.
LOE 119 115-125
G&A 28* 16-20
Gathering & Transport 4.8 4-7
DD&A 33.29/BOE 32.00-34.50/BOE
 
*includes non-recurring charges
   
   
  Quarter Ended
  December 31, September 30, June 30, March 31, December 31,
Operating Highlights 2014 2014 2014 2014 2013
  (In thousands, except per unit amounts)
Operating revenues          
Crude oil sales  $ 279,163   $ 370,155   $ 294,974   $ 254,641   $ 263,626 
Natural gas sales  32,345   34,561   34,508   37,562   31,138 
Hedge gain (loss)  46,247   (1,485)  (5,348)  (7,020)  2,052 
Total revenues  357,755   403,231   324,134   285,183   296,816 
Percentage of operating revenues from crude oil          
Prior to hedge gain (loss) 90% 91% 90% 87% 89%
Including hedge gain (loss) 91% 91% 89% 88% 88%
Operating expenses          
Lease operating expense          
Insurance expense  11,233   11,022   8,357   6,410   7,920 
Workover and maintenance  13,130   29,416   14,408   17,797   19,690 
Direct lease operating expense  95,003   102,147   79,806   59,417   66,179 
Total lease operating expense  119,366   142,585   102,571   83,624   93,789 
Production taxes  2,263   3,093   1,750   1,090   1,189 
Gathering and transportation  4,771   9,188   6,509   5,700   5,978 
DD&A  177,333   161,266   119,691   99,899   103,513 
Goodwill impairment  329,293   --  --  --  --
General and administrative  27,745   26,424   30,824   24,208   17,698 
Other - net  11,912   9,536   8,112   5,861   13,147 
Total operating expenses  672,683   352,092   269,457   220,382   235,314 
Operating income (loss)  $ (314,928)  $ 51,139   $ 54,677   $ 64,801   $ 61,502 
Sales volumes per day          
Natural gas (MMcf) 96.5 100.7 84.8 83.7 89.3
Crude oil (MBbls) 41.8 41.8 32.0 28.4 30.2
Total (MBOE) 57.9 58.6 46.1 42.3 45.1
Percent of sales volumes from crude oil 72% 71% 69% 67% 67%
Average sales price          
Natural gas per Mcf  3.64   3.73   4.47   4.98   3.79 
Hedge gain (loss) per Mcf  0.09   0.02   (0.02)  (0.31)  0.42 
Total natural gas per Mcf  $ 3.73   $ 3.75   $ 4.45   $ 4.67   $ 4.21 
Crude oil per Bbl  72.56   96.28   101.45   99.71   94.85 
Hedge gain (loss) per Bbl  11.82   (0.43)  (1.78)  (1.83)  (0.50)
Total crude oil per Bbl  $ 84.38   $ 95.85   $ 99.67   $ 97.88   $ 94.35 
Total hedge gain (loss) per BOE  8.68   (0.28)  (1.28)  (1.83)  0.49 
Operating revenues per BOE  $ 67.15   $ 74.84   $ 77.28   $ 74.85   $ 71.54 
Operating expenses per BOE          
Lease operating expense          
Insurance expense  2.11   2.05   1.99   1.68   1.91 
Workover and maintenance  2.46   5.46   3.44   4.67   4.75 
Direct lease operating expense  17.83   18.96   19.03   15.59   15.95 
Total lease operating expense per BOE  22.40   26.47   24.46   21.94   22.61 
Production taxes  0.42   0.57   0.42   0.29   0.29 
Gathering and transportation  0.90   1.71   1.55   1.50   1.44 
DD&A  33.29   29.93   28.54   26.22   24.95 
Goodwill impairment  61.81   --  --  --  --
General and administrative  5.21   4.90   7.35   6.35   4.27 
Other - net  2.23   1.77   1.93   1.54   3.17 
Total operating expenses per BOE  126.26   65.35   64.25   57.84   56.73 
Operating income (loss) per BOE  $ (59.11)  $ 9.49   $ 13.03   $ 17.01   $ 14.81 
 
 
ENERGY XXI LTD
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, except per share information)
(Unaudited)
 
  Three Months Ended December 31, Six Months Ended December 31,
  2014 2013 2014 2013
         
Revenues        
Crude oil sales  $ 324,655   $ 262,230   $ 693,156   $ 551,459 
Natural gas sales  33,100   34,586   67,830   69,949 
Total Revenues  357,755   296,816   760,986   621,408 
         
Costs and Expenses        
Lease operating  119,366   93,789   261,951   179,552 
Production taxes  2,263   1,189   5,356   2,587 
Gathering and transportation  4,771   5,978   13,959   11,323 
Depreciation, depletion and amortization  177,333   103,513   338,599   203,729 
Accretion of asset retirement obligations  12,798   7,425   25,617   14,751 
Goodwill impairment  329,293   --  329,293   --
General and administrative expense  27,745   17,698   54,169   41,370 
(Gain) loss on derivative financial instruments  (886)  5,722   (4,169)  7,163 
Total Costs and Expenses  672,683   235,314   1,024,775   460,475 
         
Operating Income (Loss)  (314,928)  61,502   (263,789)  160,933 
         
Other Income (Expense)        
Income (loss) from equity method investees  (1,619)  (2,621)  (738)  (4,414)
Other income - net  991   913   1,942   1,435 
Interest expense  (66,901)  (38,641)  (133,164)  (68,326)
Total Other Expense  (67,529)  (40,349)  (131,960)  (71,305)
         
Income (Loss) Before Income Taxes  (382,457)  21,153   (395,749)  89,628 
         
Income Tax Expense (Benefit)  (8,578)  10,658   (15,467)  35,994 
         
Net Income (Loss)  (373,879)  10,495   (380,282)  53,634 
Preferred Stock Dividends  2,870   2,872   5,742   5,745 
Net Income (Loss) Available for Common Stockholders  $ (376,749)  $ 7,623   $ (386,024)  $ 47,889 
         
Earnings (Loss) per Share        
Basic  $ (4.01)  $ 0.10   $ (4.11)  $ 0.64 
Diluted  $ (4.01)  $ 0.10   $ (4.11)  $ 0.64 
         
Weighted Average Number of Common Shares Outstanding        
Basic  93,993   73,964   93,913   74,873 
Diluted  93,993   74,053   93,913   74,956 


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 Six Months Ended
  December 31, December 31,
  2014 2013 2014 2013
   (In Thousands, Except per Unit Amounts)
   
Net Income (Loss) as Reported  $ (373,879)  $ 10,495  $ (380,282)  $ 53,634
         
Interest expense - net  65,910  37,728  131,222  66,891
Depreciation, depletion and amortization  177,333  103,513  338,599  203,729
Goodwill impairment  329,293  --   329,293  -- 
Income tax expense (benefit)  (8,578)  10,658  (15,467)   35,994
         
EBITDA  190,079  162,394  403,365  360,248
         
Adjustments to EBITDA        
Accretion of asset retirement obligation  12,798  7,425  25,617  14,751
Non-recurring charges (severance costs)  14,122  --   18,757  -- 
         
Adjusted EBITDA  $ 216,999  $ 169,819  $ 447,739  $ 374,999
         
Adjusted EBITDA Per Share        
Basic  $ 2.31  $ 2.30  $ 4.77  $ 5.01
Diluted  $ 2.31  $ 2.29  $ 4.77  $ 5.00
         
Weighted Average Number of Common Shares Outstanding        
Basic  93,993  73,964  93,913  74,873
Diluted  93,993  74,053  93913  74,956
 
 
ENERGY XXI LTD
CONSOLIDATED BALANCE SHEETS
(In Thousands, except share information)
 
  December 31, June 30,
  2014 2014
Current Assets (Unaudited)  
Cash and cash equivalents  $ 101,284   $ 145,806 
Accounts receivable    
Oil and natural gas sales  102,882   167,075 
Joint interest billings  19,098   12,898 
Other  30,728   5,438 
Prepaid expenses and other current assets  50,178   72,530 
Deferred income taxes  11,235   52,587 
Derivative financial instruments  150,026   1,425 
Total Current Assets  465,431   457,759 
Property and Equipment    
Oil and natural gas properties, net - full cost method of accounting, including $807.8 million and $1,165.7 million of unevaluated properties not being amortized at December 31, 2014 and June 30, 2014, respectively  6,642,565   6,524,602 
Other property and equipment, net  23,833   19,760 
Total Property and Equipment, net of accumulated depreciation, depletion, amortization and impairment  6,666,398   6,544,362 
Other Assets    
Goodwill  --  329,293 
Derivative financial instruments  8,377   3,035 
Equity investments  27,685   40,643 
Restricted Cash  6,024   6,350 
Other assets and debt issuance costs, net of accumulated amortization  50,128   57,394 
Total Other Assets  92,214   436,715 
Total Assets $ 7,224,043   $ 7,438,836 
LIABILITIES    
Current Liabilities    
Accounts payable $ 312,568  $ 417,776 
Accrued liabilities  91,665   133,526 
Notes payable  12,175   21,967 
Asset retirement obligations  79,573   79,649 
Derivative financial instruments  --  31,957 
Current maturities of long-term debt  21,702   15,020 
Total Current Liabilities  517,683   699,895 
Long-term debt, less current maturities  3,989,922   3,744,624 
Deferred income taxes 713,736   701,038 
Asset retirement obligations  470,523   480,185 
Derivative financial instruments  --  4,306 
Other liabilities  8,629   10,958 
Total Liabilities  5,700,493   5,641,006 
Commitments and Contingencies    
Stockholders' Equity    
Preferred stock, $0.001 par value, 7,500,000 shares authorized at December 31, 2014 and June 30, 2014    
7.25% Convertible perpetual preferred stock, 3,000 and 8,000 shares issued and outstanding at December 31, 2014
and June 30, 2014, respectively
 --  --
5.625% Convertible perpetual preferred stock, 812,759 and 812,760 shares issued and outstanding at December 31, 2014 and June 30, 2014, respectively  1   1 
Common stock, $0.005 par value, 200,000,000 shares authorized and 94,395,593 and 93,719,570 shares issued and outstanding at December 31, 2014 and June 30, 2014, respectively  471   468 
Additional paid-in capital  1,842,152   1,837,462 
Accumulated deficit  (428,200)  (19,626)
Accumulated other comprehensive income (loss), net of income taxes  109,126   (20,475)
Total Stockholders' Equity  1,523,550    1,797,830 
Total Liabilities and Stockholders' Equity $ 7,224,043   $ 7,438,836 
 
 
ENERGY XXI LTD
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
 
  Six Months Ended December 31,
  2014 2013
Cash Flows From Operating Activities    
Net income (loss)  $ (380,282)  $ 53,634 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:    
Depreciation, depletion and amortization  338,599   203,729 
Goodwill impairment  329,293   
Deferred income tax expense (benefit)  (16,027)  32,872 
Change in derivative financial instruments    
Proceeds from sale of derivative instruments  29,236   --
Other – net  (5,449)  (364)
Accretion of asset retirement obligations  25,617   14,751 
Loss (income) from equity method investees  738   4,414 
Amortization and write-off of debt issuance costs and other  5,615   4,555 
Stock-based compensation  2,632   3,971 
Changes in operating assets and liabilities    
Accounts receivable  33,819   16,999 
Prepaid expenses and other current assets  22,483   6,219 
Settlement of asset retirement obligations  (53,960)  (34,038)
Accounts payable and accrued liabilities  (171,006)  (45,042)
Net Cash Provided by Operating Activities  161,308   261,700 
     
Cash Flows from Investing Activities    
Acquisitions  (287)  (12,564)
Capital expenditures  (449,114)  (388,227)
Change in equity method investments  12,642   (11,694)
Transfer from (to) restricted cash  325   (746)
Proceeds from the sale of properties  6,947   1,748 
Other  95   (72)
Net Cash Used in Investing Activities  (429,392)  (411,555)
     
Cash Flows from Financing Activities    
Proceeds from the issuance of common and preferred stock, net of offering costs  2,059   3,405 
Discount on convertible debt allocated to additional paid-in capital --  63,432 
Repurchase of company common stock  --  (153,491)
Dividends to shareholders – common  (22,548)  (17,798)
Dividends to shareholders – preferred  (5,744)  (5,745)
Proceeds from long-term debt  1,011,948   1,764,685 
Payments on long-term debt  (759,851)  (1,127,879)
Debt issuance costs  (2,302)  (18,923)
Other  --  (3)
Net Cash Provided by Financing Activities  223,562   507,683 
     
Net Increase (Decrease) in Cash and Cash Equivalents  (44,522)  357,828 
Cash and Cash Equivalents, beginning of period  145,806   --
Cash and Cash Equivalents, end of period  $ 101,284   $ 357,828 

Fiscal 2015 Second Quarter Conference Call

Energy XXI will host its fiscal second-quarter conference call Monday, Feb. 9, at 10 a.m. CST. The dial-in numbers are 1 (888) 771-4371 (U.S.) and (0) 80 8238 9578 (U.K.) and the confirmation code is 38758743. 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

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.

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. To learn more, visit the Energy XXI website at www.EnergyXXI.com.

CONTACT: INQUIRIES OF THE COMPANY
         Greg Smith
         Vice President, Investor Relations
         713-351-3149
         gsmith@energyxxi.com
         
         Kim Pinyopusarerk
         Manager, Investor Relations
         713-351-3028
         kpinyo@energyxxi.com

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Source: GlobeNewswire (February 8, 2015 - 10:28 PM EST)

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