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Energy XXI Reports Fiscal Third-Quarter Results

  • Acquisition of EPL Oil & Gas nears completion
  • West Delta 73 program continues to deliver solid results with El Diente well
  • Black Widow well at West Delta 30 finds 100 feet of pay
  • Divestiture of non-operated assets nets nearly $100 million in cash

HOUSTON, April 30, 2014 (GLOBE NEWSWIRE) -- Energy XXI (Nasdaq:EXXI) (AIM:EXXI) today announced fiscal third-quarter results and provided an update on activities in the Gulf of Mexico.

Energy XXI Logo (EPR)


For the 2014 fiscal third quarter, Energy XXI reported adjusted earnings before interest and other, taxes, depreciation, depletion and amortization (adjusted EBITDA) of $178.8 million. Net income available for common stockholders for the quarter was $4.4 million, or $0.06 per diluted share, on revenues of $285.2 million. Excluding one-time charges associated with acquisitions and divestitures, net income available to common stockholders was $13.5 million, or $0.19 per diluted share.

Production for the 2014 fiscal third quarter averaged 42,300 barrels of oil equivalent per day (BOE/d) net, 28,400 barrels per day (Bbl/d) or 67 percent of which was oil. Current production approximates 41,000 BOE/d, which reflects the April 1, 2014 sale of non-operated properties that had been producing approximately 2,000 BOE/d.

"As expected, our fiscal third quarter was a transitional period with limited drilling activity and higher production shut-ins due to rig moves," Energy XXI Chairman and Chief Executive Officer John Schiller said. "The transition is almost complete, and we will be doubling our development drilling activity with the addition of two operated rigs, which should position the company for organic growth in our new fiscal year."

Operations Update

At West Delta 73 (100% WI/ 83% NRI), the El Diente well was completed and brought online in February. El Diente was drilled to 10,462 feet measured depth (MD)/ 8,080 feet total vertical depth (TVD), including a 1,190-foot lateral into the F-35 sand. El Diente came online at 500 Bbl/d of oil and 188 thousand cubic feet per day (Mcf/d) of natural gas, with flowing tubing pressure of 460 psi. Upon completion of El Diente, the rig was moved to the West Delta 73 "B" platform, where it is preparing to drill the Scully horizontal oil well to 10,500 feet MD/ 8,650 feet TVD, including a planned 1,000-foot lateral targeting the F-35 sand. A newly installed second rig at West Delta 73 is preparing to drill the Columbo horizontal oil well to 10,585 feet MD/ 8,065 feet TVD, including a 1,000-foot lateral into the F-35 sand.

At West Delta 30 (100% WI/ 87% NRI), the Black Widow well has been drilled, completed and currently is under test and producing 400 BOE/d. Black Widow was drilled to 3,440 feet MD/ 2,797 feet TVD and encountered 100 feet of pay. Black Widow is the first of a multi-well development program at West Delta 30, to be followed by Banshee, which is being drilled to 3,675 feet MD/ 2,785 feet TVD. The first horizontal well at West Delta 30, Crusader, is expected to be drilled after Banshee, to 5,975 feet MD/ 4,300 feet TVD, including a 700-foot lateral. 

"The West Delta 30 development program represents the first drilling in this giant oil field in nine years, targeting overlooked pay sands as shallow as 2,600 feet," Executive Vice President of Operations Ben Marchive said. "Our field study has yielded nearly 60 potential drilling locations, including 45 potential horizontal wells."

In the Main Pass 61 field (100% WI/ 78% NRI), the Don Carlos well was drilled to 10,450 feet MD/ 8,161 feet TVD, and was brought online in early January with oil production of 1,250 Bbl/d from dual completions into the BA-4B and BA-4AA sands. Punch, an oil development well spud in early April following rig maintenance, is being drilled to 9,900 feet MD/ 8,450 feet TVD, also targeting the BA-4AA oil sands.

Acquisitions and Divestitures

In mid-March, Energy XXI and EPL Oil & Gas, Inc. announced the signing of a definitive merger agreement pursuant to which Energy XXI will acquire all of EPL's outstanding shares for total consideration of $2.3 billion, including the assumption of debt. As a result of the merger, Energy XXI will become the largest public independent producer on the Gulf of Mexico shelf. 

Energy XXI and EPL have established a record date of April 21, 2014 and a meeting date of May 30, 2014 for the special meetings of their respective shareholders.  The merger is expected to be completed on or about June 3, 2014.

"We are excited to be nearing the completion of this transformative acquisition," Schiller said. "The teams are working together to high-grade oil development projects and looking at ways to capitalize on additional synergies beyond the approximate $50 million of potential annual savings already identified."

On April 1, 2014, Energy XXI sold its non-operated interests in Eugene Island 330 and South Marsh Island 128 to M21K, LLC, a joint venture in which the company owns a 20 percent interest, for $123 million in cash, approximately $100 million net to Energy XXI. The two assets included recent production of approximately 2,000 BOE/d and proved reserves of 4.7 million BOE.

"Divestiture of these non-operated assets is consistent with our focus on putting capital to work in fields where we operate and can drive growth in reserves, production and value," Schiller said. 

Capital Expenditures

During the 2014 fiscal third quarter, capital expenditures totaled $186.6 million, with $41.8 million in exploration and $144.8 million in development and other costs. Acquisitions added another $22.5 million of expenditures for the fiscal third quarter.

Conference Call Tomorrow, May 1, at 9 a.m. CDT, 3 p.m. London Time

Energy XXI will host its fiscal third-quarter conference call tomorrow, May 1, at 9 a.m. CDT (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 31378048. 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

ENERGY XXI (BERMUDA) LIMITED
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 Nine Months Ended
  March 31, March 31,
  2014 2013 2014 2013
         
Net Income as Reported $7,292 $40,436 $60,926 $100,028
         
 Interest expense-net 41,833 27,159 108,724 79,914
 Depreciation, depletion and amortization 99,899 88,727 303,628 279,378
 Income tax expense  14,565 29,688 50,559 65,418
         
EBITDA 163,589 186,010 523,837 524,738
         
Adjustments to EBITDA        
Accretion of asset retirement obligation  6,066  7,649  20,817  23,057
Acquisition and divestiture expenses 9,100  -- 9,100  --
         
Adjusted EBITDA $178,755 $193,659 $553,754 $547,795
         
         
Weighted Average Number of Common Shares Outstanding         
 Basic 70,437 79,365 73,415 79,280
 Diluted 70,502 87,516 73,493 87,471
 
ENERGY XXI (BERMUDA) LIMITED
CONSOLIDATED BALANCE SHEETS
(In Thousands, except share information)
  March 31, June 30,
  2014 2013
  (Unaudited)  
Current Assets    
Cash and cash equivalents $303,702  $—
Restricted cash 325
Accounts receivable    
 Oil and natural gas sales 129,604 132,521
 Joint interest billings 5,210 9,505
 Insurance and other 8,494 6,745
Prepaid expenses and other current assets 24,204 50,738
Derivative financial instruments 3,393 38,389
 Total Current Assets 474,932 237,898
Property and Equipment     
 Oil and natural gas properties - full cost method of accounting, including $263.2 million and $422.6 million of unevaluated properties not being amortized at March 31, 2014 and June 30, 2013, respectively 3,625,788 3,289,505
 Other property and equipment 16,888 17,003
 Total Property and Equipment, net of accumulated depreciation, depletion, amortization and impairment 3,642,676 3,306,508
Other Assets    
 Derivative financial instruments 966 21,926
 Equity investments 17,344 12,799
 Debt issuance costs, net of accumulated amortization and other assets 45,198 32,580
 Total Other Assets 63,508 67,305
 Total Assets $4,181,116 $3,611,711
LIABILITIES    
Current Liabilities    
 Accounts payable $207,111 $219,610
 Accrued liabilities 112,169 105,192
 Notes payable 3,037 22,524
 Deferred income taxes 20,517
 Asset retirement obligations 30,457 29,500
 Derivative financial instruments 2,593 40
 Current maturities of long-term debt 10,896 19,554
 Total Current Liabilities 366,263 416,937
Long-term debt, less current maturities 2,015,956 1,350,491
Deferred income taxes 191,640 140,804
Asset retirement obligations 264,029 258,318
Derivative financial instruments 2
Other liabilities 10,461 7,915
 Total Liabilities 2,848,351 2,174,465
Stockholders' Equity    
 Preferred stock, $0.001 par value, 7,500,000 shares authorized at March 31, 2014 and June 30, 2013, respectively    
  7.25% Convertible perpetual preferred stock, 8,000 shares issued and outstanding at March 31, 2014 and June 30, 2013, respectively
 5.625% Convertible perpetual preferred stock, 812,760 and 813,188 shares issued and outstanding at March 31, 2014 and June 30, 2013, respectively 1 1
Common stock, $0.005 par value, 200,000,000 shares authorized and 77,670,043 and 79,425,473 shares issued and 70,340,943 and 76,485,910 shares outstanding at March 31, 2014 and June 30, 2013, respectively 388 397
Additional paid-in capital 1,530,414 1,512,311
Accumulated deficit  (3,281) (29,352)
Accumulated other comprehensive income (loss), net of income taxes (4,794) 26,552
Treasury stock, at cost, 7,329,100 and 2,938,900 shares at March 31, 2014 and June 30, 2013, respectively (189,963) (72,663)
 Total Stockholders' Equity 1,332,765 1,437,246
 Total Liabilities and Stockholders' Equity $4,181,116 $3,611,711
 
ENERGY XXI (BERMUDA) LIMITED
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, except per share information)
(Unaudited)
         
  Three Months Nine Months
  Ended March 31, Ended March 31,
  2014 2013 2014 2013
Revenues        
 Crude oil sales $249,955 $274,364 $801,414 $807,518
 Natural gas sales 35,228 29,410 105,177 87,002
 Total Revenues 285,183 303,774 906,591 894,520
         
Costs and Expenses        
 Lease operating  83,624 86,305 263,176 254,708
 Production taxes  1,090 1,352 3,677 3,765
 Gathering and transportation 5,700 4,411 17,023 18,500
 Depreciation, depletion and amortization 99,899 88,727 303,628 279,378
 Accretion of asset retirement obligations 6,066 7,649 20,817 23,057
 General and administrative expense 24,208 16,092 65,578 59,299
 Loss (gain) on derivative financial instruments (205) (632) 6, 958 5,755
 Total Costs and Expenses  220,382 203,904 680,857 644,462
         
Operating Income  64,801 99,870 225,734 250,058
         
Other Income (Expense)        
 Loss from equity method investees (1,111) (2,587) (5,525) (4,698)
 Other income - net 867 523 2,302 1,425
 Interest expense  (42,700) (27,682) (111,026) (81,339)
 Total Other Expense  (42,944) (29,746) (114,249) (84,612)
         
Income Before Income Taxes  21,857 70,124 111,485 165,446
         
Income Tax Expense  14,565 29,688 50,559 65,418
Net Income  7,292 40,436 60,926 100,028
Preferred Stock Dividends 2,872 2,873 8,617 8,623
Net Income Available for Common Stockholders $4,420 $37,563 $52,309 $91,405
         
Earnings per Share        
 Basic $0.06 $0.47 $0.71 $1.15
 Diluted $0.06 $0.46 $0.71 $1.14
         
Weighted Average Number of Common Shares Outstanding        
 Basic 70,437 79,365 73,415 79,280
 Diluted 70,502 87,516 73,493 87,471
 
ENERGY XXI (BERMUDA) LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
         
  Three Months  Nine Months 
  Ended March 31, Ended March 31,
  2014 2013 2014 2013
         
Cash Flows From Operating Activities        
Net income  $7,292 $40,436 $60,926 $100,028
Adjustments to reconcile net income to net cash provided by (used in) operating activities:         
 Depreciation, depletion and amortization 99,899 88,727 303,628 279,378
 Deferred income tax expense 14,325 25,625 47,197 58,439
 Change in derivative financial instruments        
 Proceeds from derivative instruments 574 735
 Other – net (185) (5,318) (549) (19,336)
 Accretion of asset retirement obligations 6,066 7,649 20,817 23,057
 Loss from equity method investees 1,111 2,587 5,525 4,698
 Amortization of debt discount and issuance costs 5,160 1,910 9,715 5,708
 Stock-based compensation  1,321 483 5,292 2,139
 Changes in operating assets and liabilities        
 Accounts receivable 3,552 (1,858) 20,551 (9,254)
 Prepaid expenses and other current assets 21,911 19,541 28,130 40,263
 Settlement of asset retirement obligations (12,231) (4,761) (46,269) (29,570)
 Accounts payable and accrued liabilities 35,995 34,314 (9,047) (4,740)
 Net Cash Provided by Operating Activities 184,216 209,909 445,916 451,545
         
Cash Flows from Investing Activities        
 Acquisitions (22,518) (112,566) (35,082) (153,722)
 Capital expenditures (186,597) (184,504) (574,824) (563,554)
 Contributions to equity investees   (503) (11,694) (16,027)
 Return of (transfer to) restricted cash 421 (325)
 Proceeds from the sale of properties   1,748
 Other 696 (409) 624 (54)
 Net Cash Used in Investing Activities (207,998) (297,982) (619,553) (733,357)
         
Cash Flows from Financing Activities        
 Proceeds from the issuance of common and preferred stock, net of offering costs 439 499 3,844 5,259
 Discount on convertible debt allocated to additional paid-in capital   63,432
 Repurchase of company common stock (30,772) (184,263)
 Dividends to shareholders – common (8,440) (5,556) (26,238) (16,659)
 Dividends to shareholders – preferred (2,872) (2,873) (8,617) (8,623)
 Proceeds from long-term debt 275,074 532,990 2,039,759 1,142,439
 Payments on long-term debt (263,500) (447,653) (1,391,379) (928,914)
 Debt issuance costs (276) (19,199)
 Other 3 1,452
 Net Cash Provided by (Used in) Financing Activities (30,344) 77,407 477,339 194,954
         
Net Increase (Decrease) in Cash and Cash Equivalents (54,126) (10,666) 303,702 (86,858)
Cash and Cash Equivalents, beginning of period  357,828 40,895 117,087
Cash and Cash Equivalents, end of period $303,702 $30,229 $303,702 $30,229
 
ENERGY XXI (BERMUDA) LIMITED
CONSOLIDATED OPERATIONAL INFORMATION (Unaudited)
  Quarter Ended
Operating Highlights Mar. 31, 2014 Dec. 31, 2013 Sep. 30, 2013 June 30, 2013 Mar. 31, 2013
  (In Thousands, Except per Unit Amounts)
Operating revenues          
Crude oil sales $254,641 $263,626 $290,965 $270,623 $273,280
Natural gas sales 37,562 31,138 32,584 38,630 27,070
Hedge gain (loss) (7,020) 2,052 1,043 5,072 3,424
Total revenues 285,183 296,816 324,592 314,325 303,774
Percent of operating revenues from crude oil          
 Prior to hedge gain  87% 89% 90% 88% 91%
 Including hedge gain  88% 88% 89% 87% 90%
Operating expenses          
 Lease operating expense          
Insurance expense 6,410 7,920 8,496 7,462 7,473
Workover and maintenance 17,797 19,690 14,586 15,622 19,166
Direct lease operating expense 59,417 66,179 62,681 59,371 59,666
 Total lease operating expense 83,624 93,789 85,763 82,455 86,305
 Production taxes 1,090 1,189 1,398 1,481 1,352
Gathering and transportation 5,700 5,978 5,345 5,668 4,411
DD&A 99,899 103,513 100,216 96,846 88,727
 General and administrative  24,208 17,698 23,672 12,299 16,092
 Other – net 5,861 13,147 8,767 3,829 7,017
 Total operating expenses 220,382 235,314 225,161 202,578 203,904
Operating income  $64,801 $61,502 $99,431 $111,747 $99,870
Sales volumes per day          
Natural gas (MMcf) 83.7 89.3 100.8 107.4 89.4
Crude oil (MBbls) 28.4 30.2 29.7 28.9 28.6
Total (MBOE) 42.3 45.1 46.6 46.8 43.5
Percent of sales volumes from crude oil 67% 67% 64% 62% 66%
Average sales price          
Natural gas per Mcf $4.98 $3.79 $3.51 $3.95 $3.37
Hedge gain (loss) per Mcf   (0.31) 0.42 0.30 0.23 0.29
Total natural gas per Mcf $4.67 $4.21 $3.81 $4.18 $3.66
Crude oil per Bbl $99.71 $94.85 $106.31 $102.82 $106.11
Hedge gain (loss) per Bbl  (1.83)  (0.50)  (0.63) 1.08 0.42
Total crude oil per Bbl $97.88 $94.35 $105.68 $103.90 $106.53
Total hedge gain (loss) per BOE  $ (1.84) $0.49 $0.24 $1.19 $0.87
Operating revenues per BOE $74.85 $71.54 $75.78 $73.78 $77.58
Operating expenses per BOE          
 Lease operating expense          
Insurance expense 1.68 1.91 1.98 1.75 1.91
Workover and maintenance 4.67 4.75 3.41 3.67 4.89
Direct lease operating expense 15.59 15.95 14.63 13.94 15.24
 Total lease operating expense per BOE 21.94 22.61 20.02 19.36 22.04
 Production taxes 0.29 0.29 0.33 0.35 0.35
Gathering and transportation 1.50 1.44 1.25 1.33 1.13
DD&A 26.22 24.95 23.40 22.73 22.66
General and administrative  6.35 4.27 5.53 2.89 4.11
Other – net 1.54 3.17 2.05 0.90 1.79
Total operating expenses per BOE 57.84 56.73 52.58 47.56 52.08
Operating income per BOE $17.01 $14.81 $23.20 $26.22 $25.50

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements concerning the proposed transaction, its financial and business impact, management's beliefs and objectives with respect thereto, and management's current expectations for future operating and financial performance, based on assumptions currently believed to be valid. Forward-looking statements are all statements other than statements of historical facts. The words "anticipates," "may," "can," "plans," "believes," "estimates," "expects," "projects," "intends," "likely," "will," "should," "to be," and any similar expressions or other words of similar meaning are intended to identify those assertions as forward-looking statements. It is uncertain whether the events anticipated will transpire, or if they do occur, what impact they will have on the results of operations and financial condition of Energy XXI, EPL or of the combined company. These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those anticipated, including but not limited to the ability of the parties to satisfy the conditions precedent and consummate the proposed transaction, the timing of consummation of the proposed transaction, the ability of the parties to secure regulatory approvals in a timely manner or on the terms desired or anticipated, the ability of Energy XXI to integrate the acquired operations, the ability to implement the anticipated business plans following closing and achieve anticipated benefits and savings, and the ability to realize opportunities for growth. Other important economic, political, regulatory, legal, technological, competitive and other uncertainties are identified in the documents filed with the SEC by Energy XXI and EPL from time to time, including their respective Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K. The forward-looking statements included in this press release are made only as of the date hereof. Neither Energy XXI nor EPL undertakes any obligation to update the forward-looking statements included in this press release to reflect subsequent events or circumstances.

About Energy XXI

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.

About EPL

Founded in 1998, EPL is an independent oil and natural gas exploration and production company headquartered in Houston, Texas with an office in New Orleans, Louisiana. The Company's operations are concentrated in the U.S. Gulf of Mexico shelf, focusing on the state and federal waters offshore Louisiana. For more information, please visit www.eplweb.com.

IMPORTANT ADDITIONAL INFORMATION FILED WITH THE SEC

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. The proposed merger and related transactions will be submitted to the stockholders of both Energy XXI and EPL for their consideration. Energy XXI filed with the SEC a registration statement on Form S-4 that constitutes a preliminary prospectus of Energy XXI that also includes a joint proxy statement for each of Energy XXI and EPL. The registration statement was declared effective by the SEC on April 17, 2014 andEnergy XXI and EPL have mailed the final joint proxy statement/prospectus to their respective equity holders. INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTIONS. You may obtain a free copy of the final joint proxy statement/prospectus and other relevant documents filed by Energy XXI and EPL with the SEC at the SEC's website at www.sec.gov. You may also obtain these documents by contacting Energy XXI's Investor Relations department at (713) 351-3175 or via e-mail at IR@energyxxi.com or by contacting EPL's Investor Relations department at (713) 228-0711 or via email at tthom@eplweb.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, 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 of oil per day

MMcf/d – million 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.

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.

CONTACT: ENQUIRIES OF THE COMPANY
         
         Energy XXI
         Stewart Lawrence
         Vice President, Investor Relations and Communications
         713-351-3006
         slawrence@energyxxi.com
         
         Greg Smith
         Director, Investor Relations
         713-351-3149
         gsmith@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 (April 30, 2014 - 4:15 PM EDT)

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