-- Sequential Quarterly Volumes Grow 44% and Revenues Climb 53% to Record Levels -- Fiscal 2008 Capital Budget Set At $260 million
HOUSTON, Sept. 26, 2007 (PRIME NEWSWIRE) -- Energy XXI (Bermuda) Limited (Nasdaq:EXXI) (LSE:EXXS) (LSE:EXXI) today announced audited fiscal fourth-quarter and full-year financial and operating results for the period ended June 30, 2007.
"Our fiscal fourth-quarter production volumes averaged 44 percent higher than in the immediately preceding quarter, while revenues rose 53 percent, assisted by our hedging program," Energy XXI Chairman and CEO John Schiller said. "From our initial start-up of operations in April 2006, Energy XXI has grown rapidly through both acquisitions and our organic capital program. Our track record of growth is continuing, as our estimated fiscal first-quarter volumes to date have averaged 26,000 barrels of oil equivalent (BOE) per day, which is nearly 25 percent higher than our fourth-quarter average."
For the 2007 fiscal fourth quarter, Energy XXI reported net income of $2.2 million, or $.02 per diluted share, on revenues of $118.7 million. These results were affected by higher depletion costs. Net cash provided by operating activities totaled $116.6 million, as volumes averaged 20,900 BOE per day. In the 2006 fiscal fourth quarter, net income was $5.5 million or $.09 per diluted share, revenues were $47.1 million, net cash provided by operating activities was $12.4 million and volumes averaged 9,700 BOE per day.
The net realized price received for the company's production in the 2007 fiscal fourth quarter was $62.53 per BOE, including $5.03 per BOE contributed by hedging, consistent with the company's active risk-management program.
For the company's fiscal year ended June 30, Energy XXI reported net income of $24.1 million, or $.29 per diluted share, on revenues of $341.3 million. Net cash provided by operating activities totaled $275.4 million. Comparisons to the prior fiscal year are not meaningful, as the company's first producing properties were acquired on April 4, 2006.
Capital Expenditures
During the year ended June 30, 2007, capital expenditures, excluding acquisitions, totaled $431.8 million, which included $331.1 million for development activity, $67.1 million for exploration and a $31 million capital contribution to an exploration joint venture, with the remainder associated with administration and other. In addition, producing property acquisitions totaled $717.6 million.
The 2008 capital budget, excluding acquisitions, is expected to be approximately $260 million, or 40 percent lower than the prior year.
"Last year, we ran a very active and successful drilling program at our South Timbalier 21 field offshore Louisiana, which doubled production from that property in addition to growing its reserves 16 percent and present value 38 percent," Energy XXI President and Chief Operating Officer Steve Weyel said. "Our overall drilling program delivered good value with a rate of return exceeding 30 percent, yet our focus on development contributed to high reserve replacement costs, as did some disappointing results that required negative reserve revisions. Consequently, high depletion costs weighed upon our financial results. This year, the focus will shift more to exploration, with more opportunity to add new reserves rather than enhancing the value of reserves already on the books."
Of the $260 million 2008 budget, approximately $137 million is allocated to exploration and $120 million to development activity. The company also has agreed to acquire $40 million of producing properties, $36 million of which are related to the exercise of a preferential right for onshore Louisiana properties recently purchased by a joint venture partner.
Year-end Reserves
Proved reserves at June 30, 2007 totaled 55.6 million BOE, up 126 percent from the 24.6 million BOE booked at June 30, 2006. During fiscal year 2007, Energy XXI added 29.7 million BOE of proved reserves through acquisitions and 10.9 million BOE through the drilling program, while producing 5.9 million BOE. Revisions reduced proved reserves by 3.2 million BOE, while property sales cut 0.4 million BOE. Year-end proved reserves were weighted toward liquids (crude oil, condensate and natural gas liquids) at 54 percent, or 30.3 million barrels, with natural gas representing 46 percent, or 151.8 billion cubic feet. The company's reserves are fully determined by independent reservoir engineering firms.
4th Quarter Operational Highlights
During the fiscal fourth quarter, Energy XXI was successful in one of five exploration wells and two of four development wells. Further detail on the exploration and development program is provided in the Operations Report below.
Year-End Conference Call Today at 10 a.m. EDT, 3 p.m. London Time
Energy XXI will host its year-end conference call today, Wednesday, Sept. 26, 2007, at 10 a.m. EDT (3 p.m. London time). The dial-in number is 1 (913) 981-5543 in the U.S. and 08000 289 262 in the U.K., and the confirmation code is 5476163. 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, 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 that could cause actual results 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.
Competent Person Disclosure
The technical information contained in this announcement relating to operations adheres to the standard set by the Society of Petroleum Engineers. Tom O'Donnell, Vice President of Corporate Development, a registered Petroleum Engineer, is the qualified person who has reviewed and approved the technical information contained in this announcement.
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 primarily located in the U.S. Gulf of Mexico waters and the Gulf Coast onshore. Collins Stewart Europe Limited and Jefferies International are Energy XXI listing brokers in the United Kingdom. In the United States, BMO Capital Markets, Collins Stewart, Dahlman Rose & Co., Jefferies & Company, Natexis Bleichroeder and Sterne Agee & Leach, Inc. are market makers. To learn more, visit the Energy XXI website at www.energyxxi.com.
The Energy XXI logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=3587
ENERGY XXI (BERMUDA) LIMITED CONSOLIDATED BALANCE SHEETS (In Thousands, except share information) June 30, -------- 2007 2006 ---- ---- ASSETS Current Assets Cash and cash equivalents $ 19,784 $ 62,389 Accounts receivable Oil and natural gas sales 55,763 19,325 Joint interest billings 14,377 11,173 Acquisition -- 14,070 Stock subscription -- 7,326 Insurance and other 958 39,801 Prepaid expenses and other current assets 21,870 9,200 Royalty deposit 2,175 2,175 Derivative financial instruments 17,131 7,752 ----------------------- Total Current Assets 132,058 173,211 ----------------------- Property and Equipment, net of accumulated depreciation, depletion, and amortization Oil and natural gas properties - full cost method of accounting 1,491,685 447,852 Other property and equipment 3,097 1,569 ----------------------- Total Property and Equipment 1,494,782 449,421 ----------------------- Other Assets Deposit and acquisition costs -- 10,025 Derivative financial instruments 616 5,856 Deferred income taxes -- 1,780 Debt issuance costs, net of accumulated amortization 20,986 3,678 ----------------------- Total Other Assets 21,602 21,339 ----------------------- Total Assets $1,648,442 $ 643,971 ======================= ENERGY XXI (BERMUDA) LIMITED CONSOLIDATED BALANCE SHEETS (Continued) (In Thousands, except share information) June 30, -------- 2007 2006 ---- ---- LIABILITIES Accounts payable $79,563 $23,281 Advances from joint interest partners 2,026 6,211 Accrued liabilities 33,411 11,463 Income and franchise taxes payable 48 913 Deferred income taxes 1,044 143 Derivative financial instruments 1,480 948 Current maturities of long-term debt 5,508 9,584 ------------------------- Total Current Liabilities 123,080 52,543 Long-term debt, less current maturities 1,045,511 200,064 Deferred income taxes 14,788 -- Asset retirement obligations 63,364 37,844 Derivative financial instruments 4,573 590 Other liabilities -- 221 ------------------------- Total Liabilities 1,251,316 291,262 ------------------------- STOCKHOLDERS' EQUITY Preferred stock, $0.01 par value, 2,500,000 shares authorized and no shares issued at June 30, 2007 and 2006 -- -- Common stock, $0.001 par value, 400,000,000 shares authorized and 84,203,444 and 80,645,129 issued and outstanding at June 30, 2007 and 2006, respectively 84 81 Additional paid-in capital 363,206 350,238 Retained earnings 31,072 6,942 Accumulated other comprehensive income (loss), net of tax expense 2,764 (4,552) ------------------------- Stockholders' Equity 397,126 352,709 ------------------------- Total Liabilities and Stockholders' Equity $1,648,442 $643,971 ========================= ENERGY XXI (BERMUDA) LIMITED CONSOLIDATED STATEMENTS OF INCOME (In Thousands, except per share information) Period from Inception July 25, Three Months Ended 2005 June 30, Year Ended Through -------- June 30, June 30, 2007 2006 2007 2006 ---- ---- ---- ---- REVENUES Crude oil sales $71,867 $29,056 $193,749 $29,056 Natural gas sales 46,849 18,056 147,535 18,056 ------------------------------------------- Total Revenues 118,716 47,112 341,284 47,112 ------------------------------------------- COSTS AND EXPENSES Lease operating expense 25,166 9,902 68,985 9,902 Production taxes 686 84 3,595 84 Depreciation, depletion and amortization 57,873 20,317 145,928 20,357 Accretion of asset retirement obligation 1,372 738 3,991 738 General and administrative expense 10,183 2,752 26,507 4,361 Loss (gain) on derivative financial instruments 173 -- (2,937) 68 ------------------------------------------- Total Costs and Expenses 95,453 33,793 246,069 35,510 ------------------------------------------- OPERATING INCOME 23,263 13,319 95,215 11,602 ------------------------------------------- OTHER INCOME (EXPENSE) Interest income 311 291 1,910 5,000 Interest expense (20,677) (6,426) (60,330) (7,933) -------------------------------------------- Total Other Income (Expense) (20,366) (6,135) (58,420) (2,933) -------------------------------------------- INCOME BEFORE INCOME TAXES 2,897 7,184 36,795 8,669 PROVISION FOR INCOME TAXES 689 1,650 12,665 1,727 -------------------------------------------- NET INCOME $2,208 $5,534 $24,130 $6,942 ============================================ EARNINGS PER SHARE Basic $0.03 $0.11 $0.29 $0.14 Diluted $0.02 $0.09 $0.29 $0.12 WEIGHTED AVERAGE NUMBER OF COMMON STOCK OUTSTANDING Basic 84,158 50,568 83,959 49,839 Diluted 88,621 59,330 83,959 58,475 ENERGY XXI (BERMUDA) LIMITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In Thousands) Accumulated Other Compre- Total Additional hensive Stock- Paid-in Retained Income holders' Shares Amount Capital Earnings (Loss) Equity ------ ------ ------- -------- ------ ------- Inception, July 25, 2005 -- $-- $-- $-- $-- $-- Common stock issued 62,500 63 277,676 277,739 Warrants exercised 18,145 18 72,562 72,580 Comprehensive income: Net income 6,942 6,942 Unrealized loss on derivative financial instruments, net of tax (4,552) (4,552) ----------- Total comprehensive income 2,390 ----------- ----------------------------------------------------- Balance, June 30, 2006 80,645 81 350,238 6,942 (4,552) 352,709 Common stock issued - warrant exercise 3,265 3 13,056 13,059 Common stock issued as compensation 293 981 981 Warrants repurchased (1,069) (1,069) Comprehensive income: Net income 24,130 24,130 Unrealized gain on derivative financial instruments, net of tax 7,316 7,316 ----------- Total comprehensive income 31,446 ----------- ----------------------------------------------------- Balance, June 30, 2007 84,203 $84 $363,206 $31,072 $2,764 $397,126 ===================================================== ENERGY XXI (BERMUDA) LIMITED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) Period from Inception July 25, Three Months Ended 2005 June 30, Year Ended Through -------- June 30, June 30, 2007 2006 2007 2006 ---- ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 2,208 $ 5,534 $ 24,130 $ 6,942 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Deferred income tax expense 1,554 814 13,530 814 Change in derivative financial instruments 1,254 1,153 11,759 1,153 Accretion of asset retirement obligations 1,372 738 3,991 738 Depletion, depreciation, and amortization 57,873 20,317 145,928 20,357 Write-off of debt issuance costs-net 1,047 (921) 7,045 494 Changes in operating assets and liabilities Accounts receivable (19,349) (26,912) 16,458 (26,912) Prepaid expenses and other current assets 26,831 (1,585) (12,670) (5,815) Accounts payable and other liabilities 43,841 13,299 65,226 14,297 ------------------------------------------------ Net Cash Provided by Operating Activities 116,631 12,437 275,397 12,068 ------------------------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions (415,137) (448,374) (717,618) (448,374) Capital expenditures (180,876) (19,319) (431,827) (19,703) Proceeds from property sales -- -- 1,400 -- Escrow deposit -- (10,025) -- (10,025) Other (778) 7,592 555 (2,568) ------------------------------------------------ Net Cash Used in Investing Activities (596,791) (470,126) (1,147,490) (480,670) ------------------------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from the issuance of common stock 873 84,846 14,040 384,872 Proceeds from long-term debt 835,444 192,500 1,199,444 206,650 Payments on long-term debt (325,155) (14,150) (349,780) (14,150) Payments on put financing (1,764) (330) (8,794) (330) Stock issuance costs -- (596) -- (22,308) Debt issuance costs (19,599) (4,172) (24,353) (4,172) Repurchase of common stock and other (32) (19,571) (1,069) (19,571) ------------------------------------------------ Net Cash Provided by Financing Activities 489,767 238,527 829,488 530,991 ------------------------------------------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 9,607 (219,162) (42,605) 62,389 CASH AND CASH EQUIVALENTS, beginning of period 10,177 281,551 62,389 -- ------------------------------------------------ CASH AND CASH EQUIVALENTS, end of period $ 19,784 $ 62,389 $ 19,784 $ 62,389 ================================================ ENERGY XXI (BERMUDA) LIMITED CONSOLIDATED OPERATING RESULTS (In Thousands, except per unit amounts) Year Quarter Ended Ended ------------- June 30, Sept. 30, Dec. 31, March 31, June 30, June 30, 2006 2006 2006 2007 2007 2007 ---- ---- ---- ---- ---- ---- Revenues $ 47,112 $ 65,817 $ 79,143 $ 77,608 $118,716 $341,284 Lease operating expense Insurance expense 144 2,662 2,653 4,866 2,489 12,670 Workover expense 166 1,322 (495) 1,910 5,532 8,269 Other production costs 9,592 10,697 10,629 9,575 17,145 48,046 ----------------------------------------------------- Total lease operating expense 9,902 14,681 12,787 16,351 25,166 68,985 ----------------------------------------------------- Production taxes 84 811 407 1,691 686 3,595 DD&A 20,317 27,744 31,711 28,600 57,873 145,928 General and adminis- trative 2,752 5,018 5,573 5,733 10,183 26,507 Sales volumes per day Gas (MMcf) 27.9 47.1 52.1 42.1 60.0 50.3 Oil (MBbls) 5.1 5.9 7.0 7.5 10.9 7.8 Total (MBOE) 9.7 13.8 15.7 14.5 20.9 16.2 Average sales price Gas per Mcf $ 6.48 $ 6.28 $ 6.67 $ 7.77 $ 7.78 $ 7.13 Oil per Bbl 66.64 67.16 56.77 56.24 67.46 62.33 Hedge gain per BOE 1.67 1.68 7.19 7.95 5.03 5.48 Total realized per BOE 55.02 52.03 54.71 59.54 62.53 57.71 Per BOE Lease operating expense Insurance expense $ 0.17 $ 2.10 $ 1.83 $ 3.73 $ 1.31 $ 2.14 Workover expense 0.19 1.04 (0.34) 1.47 2.91 1.40 Other production costs 11.20 8.46 7.35 7.34 9.03 8.12 ----------------------------------------------------- Total lease operating expense 11.56 11.60 8.84 12.54 13.25 11.66 ----------------------------------------------------- Production taxes 0.10 0.64 0.28 1.30 0.36 0.61 DD&A 23.73 21.93 21.92 21.94 30.48 24.68 General and adminis- trative 3.21 3.97 3.85 4.40 5.37 4.48 Other 0.87 0.14 0.02 (0.52) 0.82 0.18 Operating income 15.55 13.75 19.80 19.88 12.25 16.10 ENERGY XXI (BERMUDA) LIMITED COSTS INCURRED, CAPITAL EXPENDITURES AND OIL AND GAS RESERVES Period from Inception July 25, 2005 Year Ended Through Costs Incurred Capital Expenditures June 30, 2007 June 30, 2006 ------------- ------------- (In thousands) Oil and Gas Activities Property acquisition Proved $632,707 $393,087 Unproved 134,340 50,840 Exploration costs 67,140 -- Development costs 362,219 18,002 ------------------------------ Costs incurred for oil and gas activities 1,196,406 461,929 Administrative and Other 2,468 1,701 ------------------------------ Total Costs Incurred 1,198,874 463,630 Less acquisitions (717,618) (448,374) Less asset retirement obligations and other-net (49,429) 4,447 ------------------------------ Capital expenditures $431,827 $19,703 ============================== Oil Natural Gas Total (MBbls) (MMcf) (MBOE) ------- ------ ------ Proved reserves at inception July 25, 2005 -- -- -- Production (446) (2,459) (856) Revisions of previous estimates 106 436 179 Purchases of minerals in place 14,160 66,674 25,272 --------------------------- Proved reserves at June 30, 2006 13,820 64,651 24,595 Production (2,852) (18,369) (5,914) Extensions and discoveries 4,726 37,235 10,932 Revisions of previous estimates (523) (16,233) (3,229) Sales of reserves (224) (991) (389) Purchases of minerals in place 15,393 85,539 29,650 --------------------------- Proved reserves at June 30, 2007 30,340 151,832 55,645 =========================== Proved developed reserves June 30, 2006 8,922 42,246 15,963 June 30, 2007 20,978 96,751 37,103 ENERGY XXI (BERMUDA) LIMITED SUMMARY OF HEDGE POSITIONS AS OF SEPTEMBER 25, 2007 Natural Gas (000 MMBTU) ------------------------------------------------------------ Average --------------------- Qtr Instrument Volume Sub Floor Cap --- ---------- ------ --- ----- --- Q208 Swaps 1,328 8.71 8.71 3-Way Collars 540 5.71 7.48 10.09 Collars 600 8.26 10.75 Puts 150 8.00 Put Spreads 1,670 6.00 8.00 Q308 Swaps 2,170 8.84 8.84 3-Way Collars 1,500 5.70 7.45 10.10 Collars 570 8.26 10.74 Puts 140 8.00 Put Spreads 1,540 6.00 8.00 Q408 Swaps 2,010 8.83 8.83 3-Way Collars 1,420 5.68 7.42 10.10 Collars 460 8.24 10.78 Puts 120 8.00 Put Spreads 1,390 6.00 8.00 Q109 Swaps 1,360 8.82 8.82 3-Way Collars 1,340 5.66 7.38 10.11 Collars 390 8.22 10.81 Puts 120 8.00 Put Spreads 1,280 6.00 8.00 Q209 Swaps 1,740 8.81 8.81 3-Way Collars 1,250 5.63 7.34 10.12 Collars 360 8.21 10.82 Puts 110 8.00 Put Spreads 1,170 6.00 8.00 Q309 Swaps 1,140 8.59 8.59 3-Way Collars 1,040 6.00 8.09 9.97 Q409 Swaps 1,060 8.58 8.58 3-Way Collars 930 6.00 8.10 9.96 Q110 Swaps 1,010 8.57 8.57 3-Way Collars 820 6.00 8.11 9.96 Q210 Swaps 950 8.56 8.56 3-Way Collars 740 6.00 8.12 9.95 Q310 3-Way Collars 180 6.00 8.50 9.80 Q410 3-Way Collars 180 6.00 8.50 9.80 Q111 3-Way Collars 180 6.00 8.50 9.80 Q211 3-Way Collars 180 6.00 8.50 9.80 Crude Oil (000 BBL) ------------------------------------------------------------ Average ---------------------- Qtr Instrument Volume Sub Floor Cap --- ---------- ------ --- ----- --- Q208 Swaps 161 71.65 71.65 3-Way Collars 260 46.31 56.31 63.08 Collars 287 64.43 76.99 Puts 37 60.00 Q308 Swaps 460 70.21 70.21 3-Way Collars 240 54.25 67.30 78.49 Collars 162 64.79 76.56 Puts 33 60.00 Q408 Swaps 398 70.14 70.14 3-Way Collars 208 54.13 67.19 78.50 Collars 189 65.46 76.36 Puts 30 60.00 Q109 Swaps 364 70.38 70.38 3-Way Collars 205 54.12 67.44 78.99 Collars 55 60.00 78.00 Puts 27 60.00 Q209 Swaps 320 70.37 70.37 3-Way Collars 184 54.02 67.40 79.09 Collars 51 60.00 78.00 Puts 26 60.00 Q309 Swaps 325 70.85 70.85 3-Way Collars 170 53.94 67.24 78.94 Q409 Swaps 303 70.86 70.86 3-Way Collars 137 53.69 67.37 79.66 Q110 Swaps 277 70.97 70.97 3-Way Collars 111 53.38 67.52 80.49 Q210 Swaps 257 71.01 71.01 3-Way Collars 87 52.93 67.70 81.64 Q310 Swaps 238 70.86 70.86 3-Way Collars 68 52.35 67.35 82.05 Q410 Swaps 215 70.89 70.89 3-Way Collars 60 52.00 67.00 82.04 Q111 Swaps 193 70.93 70.93 3-Way Collars 52 51.54 66.54 82.03 Q211 Swaps 171 70.96 70.96 3-Way Collars 44 50.95 65.95 82.02 Includes production for October 2007 and later All prices are weight-averaged by contract volume Operations Report --------------------------------------------------------------------- EXXI Fiscal 4th Quarter Drilling Results --------------------------------------------------------------------- Exploration Development Total --------------------------------------------------------------------- Gross Net Gross Net Gross Net --------------------------------------------------------------------- Operated --------------------------------------------------------------------- Oil 0 0 1 1 1 1 --------------------------------------------------------------------- Gas 0 0 1 .5 1 .5 --------------------------------------------------------------------- Dry 1 .7 2 2 3 2.7 --------------------------------------------------------------------- Non- Operated --------------------------------------------------------------------- Oil 0 0 0 0 0 0 --------------------------------------------------------------------- Gas 1 .8 0 0 1 .8 --------------------------------------------------------------------- Dry 3 1.375 0 0 3 1.375 ====== ====== ====== ====== ====== ====== --------------------------------------------------------------------- Total 5 2.875 4 3.5 9 6.375 --------------------------------------------------------------------- Exploration Development Total --------------------------------------------------------------------- Success Rate (Net) 28% 43% 36% --------------------------------------------------------------------- Exploration Development Total --------------------------------------------------------------------- Onshore 5 3 8 --------------------------------------------------------------------- Offshore 0 1 1 == == == --------------------------------------------------------------------- Total 5 4 9 --------------------------------------------------------------------- --------------------------------------------------------------------- EXXI Fiscal Year 2007 Drilling Results --------------------------------------------------------------------- Exploration Development Total --------------------------------------------------------------------- Gross Net Gross Net Gross Net --------------------------------------------------------------------- Operated --------------------------------------------------------------------- Oil 0 0 8 8 8 8 --------------------------------------------------------------------- Gas 0 0 6 5 6 5 --------------------------------------------------------------------- Dry 2 1.37 8 8 10 9.366 --------------------------------------------------------------------- Non- Operated --------------------------------------------------------------------- Oil 0 0 0 0 0 0 --------------------------------------------------------------------- Gas 5 2.8 5 1.59 10 4.385 --------------------------------------------------------------------- Dry 6 2.23 0 0 6 2.23 ====== ====== ====== ====== ====== ====== --------------------------------------------------------------------- Total 13 6.4 27 22.58 40 29 --------------------------------------------------------------------- --------------------------------------------------------------------- Exploration Development Total --------------------------------------------------------------------- Success Rate (Net) 44% 65% 60% --------------------------------------------------------------------- --------------------------------------------------------------------- Exploration Development Total --------------------------------------------------------------------- Onshore 13 15 28 --------------------------------------------------------------------- Offshore 0 12 12 == == == --------------------------------------------------------------------- Total 13 27 40 ---------------------------------------------------------------------
South Louisiana Onshore Highlights
Rabbit Island
-- State Lease 19022 #1 (25% WI), Iberia Parish - Drilled last quarter; on production 05/11/07 at 2.6 MMcf/d in the 10,700' Stray sand through a 10/64" choke and a FTP of 2,675 psig. -- State Lease 340 #231 (100% WI), Iberia Parish - Spud 06/16/07; drilled to 8,992' MD with proposed 9,845' TD; casing was run but stuck at 6,837'; due to an expiring rig contract, the rig was released and will return at a later date to finish the well.
Bayou Carlin
-- C. M. Peterson Jr. #1 (31.25% WI) (Laphroaig Discovery), St. Mary Parish - Discovered in the third quarter; commenced production Aug. 15; ramped up in September to 34.3 MMcf/d and 650 BOPD through a 26/64" choke and 12,500 psig FTP; performing as anticipated and scheduled to be brought up to 40 MMcf/d in October.
East Lake Boudreaux
-- Verda Ragen #1 (50% WI), Terrebonne Parish - Completed in the second quarter; on production 07/14/07 and ramped up to 10.3 MMcf/d in the Rob L sands on a 13/64" choke and a FTP of 9,450 psig.
Golden Meadow
-- LaTerre Co. Inc. #1 (50% WI) (W. Lake Verret Discovery), Lafourche Parish - Spud 04/24/07; reached TD of 15,800' on 06/17/07; encountered 46' net pay and will be completed in the Cibcarste E sand, with the 10,000' sand behind pipe. -- LL&E #231 (25% WI), Lafourche Parish - Spud 06/06/07; drilled to 13,253' MD, encountering nearly 150' of net gas pay in the Pelican and Duval sands; completed 07/25/07 with production of 11.0 MMcf/d and 375 BOPD with 5,600 psig FTP.
Manila Village
-- State Lease 18727 #1 (50 %WI), Jefferson Parish - Spud 5/7/07; TD'd at 13,787' MD on 6/14/07; logged pay in the established TP-1 field pay sand and brought on production 7/22/07 at 5 MMcf/d and 61 BOPD with 5,450 psig FTP.
Cote de Mer
-- McIlhenny #1 well (35% WI) (Cote de Mer Prospect), Vermilion Parish - Spud 02/07/07; experienced uncontrolled release of gas on 06/11/07 at about 20,400' MD; washed out drill string to 13,056' with an additional 6000' remaining; wellbore being evaluated for continued drilling operations while control operations are completed; management is encouraged by drilling results seen to date on this high-potential prospect.
Gulf of Mexico Shelf Highlights
South Timbalier 21 (100% WI)
During the fiscal fourth quarter, South Timbalier 21 net production averaged 10,700 BOE/d, up 27 percent from the previous quarter's 8,400 BOE/d net rate. The field's net production peaked at more than 12,000 BOE/d in May, but has since declined as the number of rigs employed dropped to one from as many as four previously. The company plans to operate a one-rig program designed to essentially offset natural field declines. Activity in the field during the quarter included:
-- Shiraz, which TD'd at 12,112' MD and found 32' of net pay in the D10 sand and 14' of net pay in the D-8 sand, achieved first production of 370 BOE/d on 05/22/07. -- Malbec, which TD'd at 12,240' and found 11' of net pay in the D-9 sand and 29' of net pay in the D-10 sand, achieved first production of 1,120 BOE/d on 05/12/07. -- Cabernet, spud 05/04/07, was TD'd at 12,350' MD on 05/25/07 and found 20' of net pay in the D-2 sand, 15' net pay in the D-2A and 50' net pay in the D-7 sand, and achieved first production of 320 BOE/d on 07/15/07. -- Beaujolais, spud 07/17/07, TD'd at 14,066' MD and encountered approximately 40' of net pay in the primary D-15 through D-18 sand objectives, in addition to 20' of net pay in the S-4 interval and 16' of net pay in the D-7 and D-9 sands, which were secondary objectives.
Acquired Pogo Properties
-- In June, Energy XXI completed the acquisition of Gulf of Mexico shelf properties from Pogo Producing Company. Production from these properties has fluctuated as extensive repair and maintenance work has been undertaken. During June, the properties produced 236,500 BOE net, or 7,900 BOE/d, and currently have the capacity to produce about 10,000 BOE/d. The company expects volumes from these properties to remain uneven in the near-term as work continues, but is optimistic about the opportunity to add value through future capital projects.
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.
Field -- an area consisting of a single reservoir or multiple reservoirs all grouped on, or related to, the same individual geological structural feature or stratigraphic condition. The field name refers to the surface area, although it may refer to both the surface and the underground productive formations.
FTP -- flowing tubing pressure.
MBOE -- thousand barrels of oil equivalent.
MMBOE -- million barrels of oil equivalent.
MD -- measured depth.
Net Pay -- cumulative hydrocarbon-bearing formations.
Spud -- to begin drilling a well.
TD -- target total depth of a well.
TD'd -- to finish drilling a well.
TVD -- total vertical depth.
Workover -- operations on a producing well to restore or increase production. A workover may be performed to stimulate the well, remove sand or wax from the wellbore, to mechanically repair the well, or for other reasons.