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 November 9, 2015 - 6:00 AM EST
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Energy XXI Reports Fiscal 2016 First quarter Results and Operations Update

HOUSTON, Nov. 09, 2015 (GLOBE NEWSWIRE) -- Energy XXI (NASDAQ:EXXI) today announced financial and operating results for the three months ended September 30, 2015 (fiscal 2016 first quarter), and provided an operations update. Highlights include:

  • Production continues to be stable
    • 1Q 2016 net oil production averaged 42,200 barrels per day
    • 1Q 2016 total net production averaged 58,900 barrels equivalent per day
  • Lease Operating Expenses (LOE) decreased 34% year over year
    • $94 million in 1Q 2016, decreased from $142 million in 1Q 2015
  • Over $890 million in face-value debt retired in 2015 to-date
  • Annualized interest savings of approximately $65 million, ~$3.00 per barrel of oil equivalent (BOE)
  • Total liquidity of $510 million

“We continue to execute successfully on multiple objectives,” Energy XXI President and Chief Executive Officer John Schiller said.  “Our operations team continues to deliver stable production, while reducing our LOE costs, and improving our efficiency in the Gulf of Mexico.   Production for the fiscal 2016 first quarter totaled 5.42 million barrels of oil equivalent (MMBOE), compared to 5.38 MMBOE in the same period last year.  LOE for fiscal 2016 first quarter were $94 million compared to $142 million in the fiscal 2015 first quarter.  The 34 percent year over year decrease was driven by a combination of synergies gained from the EPL acquisition, operational efficiencies, and lower service costs in the field as a result of the commodity price erosion,” Mr. Schiller continued.  “Our finance team continues to reduce debt while managing our liquidity.  We have retired over $890 million in face value of our bonds through open-market purchases and continue to look for opportunities to reduce our leverage and minimize annual interest payments.”

For the fiscal 2016 first quarter, adjusted EBITDA was $89.0 million (a non-GAAP measure reconciled below), on revenue of $257.8 million, as total net production volumes averaged 58,900 barrels of oil equivalent per day (BOE/d), 72 percent of which was oil.  These results compare with fiscal 2015 first quarter adjusted EBITDA of $231.5 million on revenue of $461.4 million and volumes of 58,600 BOE/d, 71 percent oil.  Net loss attributable to common shareholders in the 2016 fiscal first quarter totaled ($576.2) million, or ($6.08) per diluted share, compared with fiscal 2015 first quarter net income attributable to common shareholders of $24.3 million, or $0.24 per diluted share.  Net loss attributable to common shareholders in the 2016 fiscal first qurter includes a non-cash impairment charge on its oil and gas assets of $904.7 million, or ($9.54) per diluted share, due to sustained lower commodity prices and a gain on early extinguishment of debt of $458.3 million, or $4.83 per diluted share, resulting from our bond repurchases.  Excluding these two items and other non-cash items, the company’s fiscal 2016 first quarter adjusted net loss attributable to common shareholders was ($155.8) million, or ($1.64) per diluted share, compared with adjusted net loss attributable to common shareholders in fiscal 2015 first quarter of ($31.8) million, or ($0.34) per diluted share.

(Adjusted EBITDA and Adjusted Net Income (Loss) is a non-GAAP financial measure and is defined and reconciled to the most directly comparable GAAP measure under “Non-GAAP Financial Measures” in the tables below)

Operations Update

Production for the 2016 fiscal first quarter averaged 58,900 BOE/d, of which 42,200 was oil.  Current production for the fiscal second quarter to date is approximately 54,500 BOE/d, as a result of third-party pipeline downtime during the quarter.  With a majority of the downtime back online, production for the month of November has averaged 56,515 BOE/d. 

The West Delta 73 (100% WI/ 83% NRI) rig demobilization has been completed and the field has returned to full production, averaging over 5,900 BOE/d net.  Operations were shut-in temporarily to remove the rig in October, which had an impact on average production for the fiscal second quarter of 775 BOE/d. 

The company began the recompletion of the Landers well in South Louisiana (74% WI/ 55% NRI).  The Landers well has produced 48 billion cubic feet of gas since coming online in 2011.  This large gas unit has multiple stacked pay zones.  The company is currently recompleting to the MA7 sand, and expects it to come online this December at a rate of 20-24 Mmcf/d, approximately 15-17 Mmcf/d net to Energy XXI.

The Highlander well (18% WI/ 13% NRI) in South Louisiana, operated by Freeport McMoRan, has been remediated and returned to production as of September 29, 2015, at 25 Mmcf/d.  The well was taken offline in July 2015 to begin remediation and to expand an amine unit to allow for higher production rates.  The operator expects that the new amine unit will be commissioned and operational this December and is expected to allow the well to produce over 45 Mmcf/d, 8 Mmcf/d net to Energy XXI.

The company reaffirms 2016 full year production ranges as detailed below.

Volume ProjectionsFY 2016
Net Production (per day) 
  Oil, including NGLs (Bbls)35,000 – 40,000
  BOE54,000 – 59,000
Oil, including NGLs
(using midpoint of guidance)
~66%

Capital Expenditures and Liquidity

For fiscal 2016 full year, the company is targeting a range of $130 - $150 million in capital expenditures.  Fiscal 2016 first quarter ended September 30, 2015, capital expenditures totaled approximately $55 million excluding acquisitions, of which approximately $33 million was spent on development of our core properties, and $22 million on other assets, mostly attributable to plugging and abandonment costs. 

As of October 31, 2015, the company had total liquidity of $510 million. The company has been opportunistic in repurchasing bonds, and to date has retired over $890 million in face value of bonds with annualized cash interest expense savings of more than $65 million.  We continue to analyze a variety of transactions designed to reduce our leverage.

Conference Call Today, Nov. 9, at 9 a.m. CST

Energy XXI will host its fiscal 2016 first quarter conference call Monday, Nov. 9, at 9:00 a.m. CST. The dial-in number is 1 (877) 794-3620 (U.S.) and the confirmation code is 72125657.  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.

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of the Company's consolidated financial statements, such as industry analysts and investors. The Company defines Adjusted EBITDA as earnings before interest expense, income taxes, depreciation, depletion, amortization, exploration expenses, gains/losses on derivatives less net cash received or paid in settlement of commodity derivatives, non-cash impairments, non-cash gain or (loss) on extinguishment of debt and other similar non-cash or non-recurring charges. Adjusted EBITDA is not a measure of net income or cash flows as determined by the United States generally accepted accounting principles, or GAAP. 

Adjusted net income (loss) is a supplemental non-GAAP financial measure that is used by management and external users of our consolidated financial statements, such as industry analysts and investors. We define adjusted net income (loss) as net income (loss) before derivative fair value (gain) loss, excluding net cash receipts on settled derivative instruments incentive unit expense, non-cash impairments, non-cash gain (loss) on extinguishment of debt and other similar non-cash or non-recurring items. Adjusted net income (loss) is not a measure of net income as determined by the United States generally accepted accounting principles, or GAAP.

The following tables presents a reconciliation of the GAAP financial measure net income to the non-GAAP financial measures of Adjusted EBITDA and Adjusted Net Income (Loss) for the periods presented:

    
ENERGY XXI LTD   
RECONCILIATION OF GAAP TO NON-GAAP MEASURES   
(In thousands, except per share information)   
(Unaudited)   
    
 Three Months Ended
 September 30,
  2015   2014 
    
Net Income (Loss) attributable to common shareholders$  (576,246) $  24,318 
    
  Total gain on commodity derivative contracts - net (55,430)  (55,095)
  Cash settlements, net of purchased put premium amortization 18,742   1630 
  Impairment of oil and natural gas properties 904,669   - 
  Gain on early extinguishment of debt (458,278)  - 
  Income (Loss) from equity method investees 10,746   (959)
    
Adjusted net (Loss) attributable to common shareholders (155,797)  (31,736)
    
Weighted average fully diluted shares outstanding 94,778   93,833 
    
Adjusted loss per share assuming dilution$  (1.64) $  (0.34)


    
ENERGY XXI LTD   
RECONCILIATION OF GAAP TO NON-GAAP MEASURES   
(In thousands, except per share information)   
(Unaudited)   
     
  Three Months Ended
  September 30,
   2015   2014 
     
Net Income (Loss)$  (573,392) $  27,190 
 Interest expense, net   102,724     65,312 
 Depreciation, depletion and amortization   124,024     159,140 
 Income tax expense   -      16,649 
     
EBITDA    (346,644)    268,291 
 Total Gains on commodity derivative contracts – net   (55,430)    (56,725)
         
 Cash settlements, net of purchased put premium amortization 18,742   1,630 
 Impairment of oil and natural gas properties   904,669     -  
 Gain on early extinguishment of debt   (458,278)    -  
 Accretion of asset retirement obligations   14,784     12,819 
 Acquisition and integration costs and disposition costs   -      120 
 Severance payments   -      3,015 
 One time bank fee related to covenant waiver   -      1,500 
 Loss from equity method investees   10,746     (959)
 Stock-based compensation   383     1,779 
     
Adjusted EBITDA$  88,972  $  231,470 
     
Adjusted EBITDA per share   
 Basic$  0.94  $  2.47 
 Diluted$  0.86  $  2.26 
     
Weighted average number of common shares outstanding   
 Basic   94,778     93,833 
 Diluted   103,296     102,300 
     


 
ENERGY XXI LTD
OPERATING HIGHLIGHTS
(Unaudited)
 
  Quarter Ended
  September 30, June 30, March 31, December 31, September 30,
Operating Highlights 2015 2015 2015 2014 2014
  (In thousands, except per unit amounts)
Operating revenues               
Oil sales $ 178,908  $ 225,263  $ 177,605  $ 279,708  $ 370,155 
Natural gas sales   23,485    23,908    27,012    31,801    34,561 
Gain (loss) on derivative financial instruments   55,430    (29,711)   16,963    191,462    56,725 
Total revenues   257,823    219,460    221,580    502,971    461,441 
Percentage of operating revenues from oil prior to gain (loss) on derivative financial instruments   88%   90%   87%   90%   91%
Operating expenses               
Lease operating expense               
Insurance expense   11,335    8,963    8,828    11,233    11,022 
Workover and maintenance   22,028    12,243    10,773    13,130    29,416 
Direct lease operating expense   61,259    72,268    88,509    95,003    102,147 
Total lease operating expense   94,622    93,474    108,110    119,366    142,585 
Production taxes   757    1,492    1,537    2,263    3,093 
Gathering and transportation   14,978    3,459    3,726    4,771    9,188 
Depreciation, depletion and amortization   124,024    183,279    187,947    175,155    159,140 
Accretion of asset retirement obligations   14,784    12,358    12,106    12,798    12,819 
Impairment of oil and natural gas properties   904,669    1,852,268    569,616    -    - 
Goodwill impairment   -    -    -    329,293    - 
General and administrative   22,189    25,210    37,121    27,745    26,424 
Total operating expenses   1,176,023    2,171,540    920,163    671,391    353,249 
Operating income (loss) $ (918,200) $ (1,952,080) $ (698,583) $ (168,420) $ 108,192 
                
Sales volumes per day               
Natural gas (MMcf)   100.4    103.2    110.4    96.5    100.7 
Oil (MBbls)   42.2    42.0    41.6    41.8    41.8 
Total (MBOE)   58.9    59.3    60.0    57.9    58.6 
Percent of sales volumes from oil   72%   71%   69%   72%   71%
                
Average sales price               
Oil per Bbl $ 46.11  $ 58.87  $ 47.49  $ 72.70  $ 96.28 
Natural gas per Mcf   2.54    2.55    2.72    3.58    3.73 
Gain (loss) on derivative financial instruments per BOE   10.23    (5.51)   3.14    35.94    10.53 
Total revenues per BOE   47.57    40.70    41.06    94.40    85.64 
                
Operating expenses per BOE               
Lease operating expense               
Insurance expense   2.09    1.66    1.64    2.11    2.05 
Workover and maintenance   4.06    2.27    2.00    2.46    5.46 
Direct lease operating expense   11.30    13.40    16.40    17.83    18.96 
Total lease operating expense per BOE   17.45    17.33    20.04    22.40    26.47 
Production taxes   0.14    0.28    0.28    0.42    0.57 
Gathering and transportation   2.76    0.64    0.69    0.90    1.71 
Depreciation, depletion and amortization   22.88    33.99    34.83    32.87    29.54 
Accretion of asset retirement obligations   2.73    2.29    2.24    2.40    2.38 
Impairment of oil and natural gas properties   166.91    343.52    105.56    -    - 
Goodwill impairment   -    -    -    61.80    - 
General and administrative   4.09    4.68    6.88    5.21    4.90 
Total operating expenses per BOE   216.96    402.73    170.52    126.00    65.57 
Operating income (loss) per BOE $ (169.39) $ (362.03) $ (129.46) $ (31.60) $ 20.07 


 
ENERGY XXI LTD
CONSOLIDATED BALANCE SHEETS
(In Thousands, except share information)
 
      
 September 30, June 30,
ASSETS2015 2015
Current Assets (Unaudited)   
Cash and cash equivalents$ 491,461  $ 756,848 
Accounts receivable     
Oil and natural gas sales  75,902    100,243 
Joint interest billings  19,979    12,433 
Other  35,105    43,513 
Prepaid expenses and other current assets  49,053    24,298 
Restricted cash  9,708    9,359 
Derivative financial instruments  50,904    22,229 
Total Current Assets  732,112    968,923 
Property and Equipment     
Oil and natural gas properties, net - full cost method of accounting, including $437.8 million and $436.4 million of unevaluated properties not being amortized at September 30, 2015 and June 30, 2015, respectively  2,691,510    3,570,759 
Other property and equipment, net  22,599    21,820 
Total Property and Equipment, net of accumulated depreciation, depletion, amortization and impairment  2,714,109    3,592,579 
Other Assets     
Derivative financial instruments  8,658    3,898 
Equity investments  -    10,835 
Restricted cash  32,682    32,667 
Other assets and debt issuance costs, net of accumulated amortization  71,068    81,927 
Total Other Assets  112,408    129,327 
Total Assets$ 3,558,629  $ 4,690,829 
LIABILITIES     
Current Liabilities     
Accounts payable$ 175,994  $ 156,339 
Accrued liabilities  135,425    155,306 
Asset retirement obligations  27,366    33,286 
Derivative financial instruments     2,661 
Current maturities of long-term debt  6,230    11,395 
Total Current Liabilities  345,015    358,987 
Long-term debt, less current maturities  4,007,081    4,597,037 
Asset retirement obligations  505,806    453,799 
Derivative financial instruments  -    1,358 
Other liabilities  5,000    8,370 
Total Liabilities  4,862,902    5,419,551 
Commitments and Contingencies     
Stockholders’ Deficit     
Preferred stock, $0.001 par value, 7,500,000 shares authorized at Sept. 30, 2015 and June 30, 2015     
7.25% Convertible perpetual preferred stock, 3,000 shares issued and outstanding at September 30, 2015 and June 30, 2015  -    - 
5.625% Convertible perpetual preferred stock, 797,759 and 812,759 shares issued and outstanding at September 30, 2015 and June 30, 2015, respectively  1    1 
Common stock, $0.005 par value, 200,000,000 shares authorized and  94,966,655 and  94,643,498 shares issued and outstanding at September 30, 2015 and June 30, 2015, respectively  474    472 
Additional paid-in capital  1,844,611    1,843,918 
Accumulated deficit  (3,149,359)   (2,573,113)
Total Stockholders’ Deficit  (1,304,273)   (728,722)
Total Liabilities and Stockholders’ Deficit$ 3,558,629  $ 4,690,829 


 
ENERGY XXI LTD
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, except per share information)
(Unaudited)
      
 Three Months Ended September 30,
 2015 2014
      
Revenues     
Oil sales$ 178,908  $ 370,155 
Natural gas sales  23,485    34,561 
Gain on derivative financial instruments  55,430    56,725 
Total Revenues  257,823    461,441 
      
Costs and Expenses     
Lease operating  94,622    142,585 
Production taxes  757    3,093 
Gathering and transportation  14,978    9,188 
Depreciation, depletion and amortization  124,024    159,140 
Accretion of asset retirement obligations  14,784    12,819 
Impairment of oil and natural gas properties  904,669    - 
General and administrative expense  22,189    26,424 
Total Costs and Expenses  1,176,023    353,249 
      
Operating Income (Loss)  (918,200)   108,192 
      
Other Income (Expense)     
(Loss) income from equity method investees  (10,746)   959 
Other income, net  494    951 
Gain on early extinguishment of debt  458,278    - 
Interest expense  (103,218)   (66,263)
Total Other Income (Expense), net  344,808    (64,353)
      
Income (Loss) Before Income Taxes  (573,392)   43,839 
      
Income Tax Expense (Benefit)  -    16,649 
      
Net Income (Loss)  (573,392)   27,190 
Preferred Stock Dividends  2,854    2,872 
Net Income (Loss) Attributable to Common Stockholders$ (576,246) $ 24,318 
      
Earnings (Loss) per Share     
Basic$ (6.08) $ 0.26 
Diluted$ (6.08) $ 0.24 
      
Weighted Average Number of Common Shares Outstanding     
Basic  94,778    93,833 
Diluted  94,778    102,300 


 
ENERGY XXI LTD
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
      
 Three Months Ended September 30,
 2015 2014
      
Cash Flows From Operating Activities     
Net income (loss)$ (573,392) $ 27,190 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:     
Depreciation, depletion and amortization  124,024    159,140 
Impairment of oil and natural gas properties  904,669    - 
Deferred income tax expense  -    16,369 
Gain on early extinguishment of debt  (458,278)   - 
Change in fair value of derivative financial instruments  (36,688)   (55,095)
Accretion of asset retirement obligations  14,784    12,819 
Loss (income) from equity method investees  10,746    (959)
Amortization and write-off of debt issuance costs and other  5,581    2,744 
Deferred rent  2,288    - 
Stock-based compensation  383    1,779 
Changes in operating assets and liabilities     
Accounts receivable  39,606    23,313 
Prepaid expenses and other assets  (14,122)   7,661 
Settlement of asset retirement obligations  (40,631)   (14,907)
Accounts payable and accrued liabilities  (48,203)   23,896 
Net Cash Provided by (Used in) Operating Activities  (69,233)   203,950 
      
Cash Flows from Investing Activities     
Acquisitions, net of cash  (2,227)   (287)
Capital expenditures  (68,656)   (280,010)
Insurance payments received  976    - 
Change in equity method investments  -    1,282 
Transfer to restricted cash  (12)   - 
Proceeds from the sale of properties  3,787    6,947 
Other  112    (80)
Net Cash Used in Investing Activities  (66,020)   (272,148)
      
Cash Flows from Financing Activities     
Proceeds from the issuance of common and preferred stock, net of offering costs  311    2,217 
Dividends to shareholders – common  -    (11,264)
Dividends to shareholders – preferred  (2,863)   (2,872)
Proceeds from long-term debt  -    510,120 
Payments on long-term debt  (99,792)   (454,042)
Payment of debt assumed in acquisition, net of cash acquired  (25,187)   - 
Fees related to debt extinguishment  (1,580)   - 
Debt issuance costs  (4)   (2,250)
Other  (1,019)   (17)
Net Cash Provided by (Used in) Financing Activities  (130,134)   41,892 
      
Net Decrease in Cash and Cash Equivalents  (265,387)   (26,306)
Cash and Cash Equivalents, beginning of period  756,848    145,806 
Cash and Cash Equivalents, end of period$ 491,461  $ 119,500 


 
Other Information - Gain on Derivative Financial Instruments
(Unaudited)
 
 Three Months Ended
September 30,
Gain (loss) on derivative financial instruments 2015   2014 
      
Cash Settlements, net of purchased put premium amortization$ 18,742 $  (1,734)
Proceeds from monetizations  -    3,364 
Change in fair value  36,688    55,095 
Total gain on derivative financial instruments$ 55,430 $  56,725 

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, access to capital and ability to fund drilling costs and otherwise meet Energy XXI’s obligations, 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 development 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.

 

Enquiries of the Company

Greg Smith
Vice President, Investor Relations 
713-351-3149
gsmith@energyxxi.com

David Griffith
Associate, Investor Relations
713-351-3176
dgriffith@energyxxi.com

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Source: GlobeNewswire (November 9, 2015 - 6:00 AM EST)

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