News Column

Energy XXI Announces Fiscal Year-End Results and Details Fiscal 2015 Budget

August 13, 2014

Proved reserves grew 38% to 246 MMBOE

Energy XXI Logo (EPR)




Reserve replacement rate exceeded 510%

Fourth-quarter production volumes ahead of company guidance

Fiscal 2014 oil production grew 6%

Fiscal 2015 capital program focused on oil development

Fiscal 2015 production expected to grow more than 30%, oil more than 40%

HOUSTON, Aug. 13, 2014 (GLOBE NEWSWIRE) -- Energy XXI (Nasdaq:EXXI) (AIM:EXXI) today announced fiscal fourth-quarter and full-year financial and operating results for the period ending June 30, 2014, and provided fiscal 2015 guidance.

Highlights

• Fourth-quarter adjusted EBITDA was $194.3 million as production tops guidance, including a higher percentage of oil volumes• Proved reserves reach 246 MMBOE, lifting PV-10 to $7.6 billion, while 3P reserves grow to 432 MMBOE, with a PV-10 of $14.6 billion• Fiscal 2014 production rose 4% year over year, with oil up 6%, while fiscal 2015 production is expected to grow more than 37% at the guidance mid-point, and 48% for oil• Acquisition of EPL adds locations to the drilling inventory and provides significant operational synergies, including cost savings exceeding initial targets• Fiscal 2015 capital budget target of $875 million focused on development drilling, with 30 wells expected to be placed on production in fiscal 2015, compared with 17 wells in fiscal 2014

Fiscal 2014 Fourth-Quarter and Full-year Results

For the 2014 fiscal fourth quarter, adjusted earnings before non-recurring charges and interest, taxes, depreciation, depletion and amortization (adjusted EBITDA) was $194.3 million (a non-GAAP measure reconciled below) on revenues of $324.1 million. Volumes averaged 46,100 barrels of oil equivalent per day (BOE/d), 69 percent of which was oil. Due to non-recurring items associated with acquisition and divestiture activities, the company reported a net loss in the 2014 fiscal fourth quarter of $1.8 million, or $0.06 per diluted share.

For the fiscal year ended June 30, 2014, adjusted EBITDA was $754.2 million, compared to $768.9 million in fiscal 2013. Fiscal 2014 net income available for common shareholders was $47.6 million, or $0.64 per diluted share, on revenues of $1.2 billion. Net income available for common shareholders for fiscal 2013 was $150.6 million, or $1.86 per diluted share, on revenues of $1.2 billion. Fiscal 2014 production averaged 45,000 BOE/d, up four percent from production of 43,100 BOE/d the prior year, while the oil portion rose six percent, representing 67 percent of volumes compared with 66 percent in fiscal 2013.

Fiscal 2014 Year-end Reserves

The company's June 30, 2014 fiscal year-end proved reserves are estimated at 246 million barrels of oil equivalent (MMBOE), 75 percent liquids, up 38 percent from the June 30, 2013 year-end reserves, primarily due to the June 2014 acquisition of EPL Oil & Gas. Approximately 61 percent of proved reserves are proved developed. The tables set forth below provide additional information regarding the company's reserves and associated values.

 Oil NGLGasEquivalentPV10%
 (MBBL)(MBBL)(MMCF)(MBOE)($000)1
Proved Developed Producing 87,609 3,368 132,106 112,994 3,362,983
Proved Developed Non-Producing 19,291 2,522 90,811 36,948 904,447
Proved Undeveloped  68,916 3,684 141,940 96,256 3,334,074
Proved Reserves175,8159,573364,856246,1987,601,504
Probable 70,123 3,556 134,390 96,077 3,628,742
Proved+Probable245,93813,129499,246342,27511,230,246
Possible 64,870 2,733 130,103 89,287 3,396,132
Proved+Probable+Possible310,80815,862629,349431,56214,626,378
           
1Before tax, as of June 30, 2014, using prices of $103.63/per barrel of oil and $4.15/MCF ($96.75/per barrel of oil and $4.10/MMBTU base before differentials & BTU adjustment), based on the SEC-prescribed first-of-the-month average prices for the preceding 12 months


"Our reserves base has continued to grow, particularly the liquids portion, which has resulted in even higher increases in the reserves' value," Energy XXI Chairman and CEO John Schiller said. "In addition to growth from the EPL acquisition, we grew oil reserves organically, replacing 124 percent of our liquids production. We believe we can continue adding reserves organically as our teams apply technology to identify untapped reservoirs and increase recoveries of the oil in place."

Netherland, Sewell & Associates, Inc., independent oil and gas reserves consultants, audited the year-end reserves estimates. All of the company's reserves are in the United States Gulf of Mexico or Gulf Coast.

Capital Expenditures

The company's capital budget for fiscal year 2015, which began July 1, 2014, is estimated between $850 million and $950 million, with $875 million as the expected case and the higher end of the range primarily reliant on a successful test of the Lomond North well in the Highlander area. Development drilling, completions and recompletions account for approximately $475 million of planned spending, up approximately 26 percent from $378 million in fiscal 2014. This includes $38 million for non-operated projects in fiscal 2015, compared to $48 million in the prior year. The company currently is operating eight drilling rigs, and expects to complete 30 development wells in fiscal 2015, a 76 percent increase over fiscal 2014. The targeted $875 million budget would allow the company to operate an average of six rigs in fiscal 2015, with a majority of the capital being allocated to the first half of the year. Exploration drilling is budgeted at $33 million, down from approximately $112 million in the prior year. This includes $24 million for non-operated projects in fiscal 2015, compared to $42 million in the prior year. The bulk of the remaining capital budget for fiscal 2015 is allocated to facilities, general and administrative, land and abandonment costs. Fiscal 2014 capital spending totaled $814.9 million, including abandonment costs.

Guidance

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

 
     
ResultsFY 2015 AnnualFY 2015 Q1
Estimated Production HighMid LowHighMid Low
Liquids, MBOD 47.0 44.5 42.0 43.0 41.5 40.0
Equivalent, MBOED 64.0 61.5 59.0 60.0 58.5 57.0
% Oil Liquids   73%   72%   71% 72% 71% 70%
             
Adjusted EBITDA @ Various Prices            
$110 Bbl/$4 Mcf 1,359 1,258 1,157 313 298 283
$100 Bbl/$4 Mcf 1,187 1,096 1,004 274 261 247
$95 Bbl/$4 Mcf 1,101 1,015    928  255  242  229


Production and Operations Update

At the mid-point of guidance, fiscal 2015 production is expected to increase 37 percent over the prior year, with oil volumes 48 percent ahead of the prior year. July 2014 production approximated 59,000 BOE/d with 42,000 barrels per day of oil.

The company currently operates eight rigs in the shallow waters on the Gulf of Mexico shelf. Drilling is ongoing at West Delta 29/30 and 73, Main Pass, Ship Shoal 208/209, and South Timbalier.

In the non-operated joint venture with Freeport McMoRan Oil & Gas in the Inboard Lower Tertiary/Cretaceous trend, completion activity is ongoing at Lomond North in the Highlander area, located primarily in St. Martin Parish, Louisiana. The operator expects a flow test to be conducted in the second half of calendar year 2014.

Energy XXI was awarded 29 shallow-water blocks in the Central Gulf of Mexico lease sale #231 by the U.S. Bureau of Ocean Energy Management. Two additional blocks jointly bid with Fieldwood and Apache also were awarded.

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.
         
 Quarter Ended June 30,Year Ended June 30,
 2014201320142013
         
Net Income (Loss) as Reported$(1,815)$62,053$59,111$162,081
         
Other expense 49,962 28,479 164,211 113,091
Depreciation, depletion and amortization 119,691 96,846 423,319 376,224
Income tax expense  6,530 21,215 57,089 86,633
         
EBITDA 174,368 208,593 703,730 738,029
         
Adjustments to EBITDA        
Accretion of asset retirement obligation 9,366 7,828 30,183 30,885
Acquisition and divestiture expenses 10,610 -- 20,268 --
         
Adjusted EBITDA$194,344$216,421$754,181$768,914
         
Adjusted EBITDA Per Common Share        
Basic$2.52$2.76$10.14$9.73
Diluted$2.51$2.76$10.13$9.71
         
Weighted Average Number of Common Shares Outstanding        
Basic 77,265 78,409 74,375 79,063
Diluted 77,326 78,477 74,445 79,166
 
ENERGY XXI (BERMUDA) LIMITED
CONSOLIDATED BALANCE SHEETS
(In Thousands, except share information)
     
 June 30,
ASSETS20142013
Current Assets    
Cash and cash equivalents$145,806  $—
Accounts receivable    
Oil and natural gas sales 167,075 132,521
Joint interest billings 12,898 9,505
Insurance and other 5,438 6,745
Prepaid expenses and other current assets 72,530 50,738
Deferred income taxes 52,587  
Derivative financial instruments 1,425 38,389
Total Current Assets 457,759 237,898
Property and Equipment     
Oil and natural gas properties - full cost method of accounting, including $1,165.7 million and $422.6 million of unevaluated properties not being amortized at June 30, 2014 and 2013, respectively  6,524,602 3,289,505
Other property and equipment 19,760 17,003
Total Property and Equipment, net of accumulated depreciation, depletion, amortization and impairment 6,544,362 3,306,508
Other Assets    
Goodwill 327,235
Derivative financial instruments 3,035 21,926
Equity investments 40,643 12,799
Restricted cash 6,350
Other assets and debt issuance costs, net of accumulated amortization  57,394 32,580
Total Other Assets 434,657 67,305
Total Assets$7,436,778$3,611,711
LIABILITIES    
Current Liabilities    
Accounts payable$415,718$219,610
Accrued liabilities 133,526 105,192
Notes payable 21,967 22,524
Deferred income taxes  — 20,517
Asset retirement obligations 79,649 29,500
Derivative financial instruments 31,957 40
Current maturities of long-term debt 15,020 19,554
Total Current Liabilities 697,837 416,937
Long-term debt, less current maturities 3,744,624 1,350,491
Deferred income taxes 701,038 140,804
Asset retirement obligations 480,185 258,318
Derivative financial instruments 4,306
Other liabilities 10,958 7,915
Total Liabilities 5,638,948 2,174,465
Stockholders' Equity    
Preferred stock, $0.001 par value, 7,500,000 shares authorized at June 30, 2014 and 2013, respectively    
7.25% Convertible perpetual preferred stock, 8,000 shares issued and outstanding at June 30, 2014 and 2013, respectively
5.625% Convertible perpetual preferred stock, 812,760 and 813,188 shares issued and outstanding at June 30, 2014 and 2013, respectively 1 1
Common stock, $0.005 par value, 200,000,000 shares authorized and 93,719,570 and 79,425,473 shares issued and 93,719,570 and 76,485,910 shares outstanding at June 30, 2014 and 2013, respectively 468 397
Additional paid-in capital 1,837,462 1,512,311
Accumulated deficit  (19,626) (29,352)
Accumulated other comprehensive (loss) income, net of income taxes (20,475) 26,552
Treasury stock, at cost, 2,938,900 shares at June 30, 2013 (72,663)
Total Stockholders' Equity 1,797,830 1,437,246
Total Liabilities and Stockholders' Equity$7,436,778$3,611,711
     
See accompanying Notes to Consolidated Financial Statements
 
ENERGY XXI (BERMUDA) LIMITED
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, except per share information)
       
 Year Ended June 30,
 201420132012
       
Revenues      
Crude oil sales$1,091,223$1,080,982$1,186,631
Natural gas sales 139,502 127,863 116,772
Total Revenues 1,230,725 1,208,845 1,303,403
       
Costs and Expenses      
Lease operating  365,747 337,163 310,815
Production taxes  5,427 5,246 7,261
Gathering and transportation 23,532 24,168 16,371
Depreciation, depletion and amortization 423,319 376,224 367,463
Accretion of asset retirement obligations 30,183 30,885 39,161
General and administrative expense 96,402 71,598 86,276
Loss (gain) on derivative financial instruments 5,704 1,756 (7,228)
Total Costs and Expenses  950,314 847,040 820,119
       
Operating Income  280,411 361,805 483,284
       
Other Income (Expense)      
Loss from equity method investees (4,781) (6,397)
Other income - net 3,298 1,965 71
Interest expense  (162,728) (108,659) (108,882)
Total Other Expense  (164,211) (113,091) (108,811)
       
Income Before Income Taxes  116,200 248,714 374,473
       
Income Tax Expense  57,089 86,633 38,646
       
Net Income  59,111 162,081 335,827
Induced Conversion of Preferred Stock 6,068
Preferred Stock Dividends 11,489 11,496 13,028
Net Income Available for Common Stockholders$47,622$150,585$316,731
       
Earnings per Share      
Basic$0.64$1.90$4.10
Diluted$0.64$1.86$3.85
       
Weighted Average Number of Common Shares Outstanding      
Basic 74,375 79,063 77,310
Diluted 74,445 87,263 87,208
 
ENERGY XXI (BERMUDA) LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
       
 Year Ended June 30,
 201420132012
Cash Flows From Operating Activities      
Net income $59,111$162,081$335,827
Adjustments to reconcile net income to net cash provided by (used in) operating activities:      
Depreciation, depletion and amortization 423,319 376,224 367,463
Deferred income tax expense 53,448 73,761 38,796
Change in derivative financial instruments      
Proceeds from sale of derivative instruments 760 66,522
Other – net (1,793) (27,516) (52,155)
Accretion of asset retirement obligations 30,183 30,885 39,161
Loss from equity method investees 4,781 6,397
Amortization and write-off of debt issuance costs and other 13,774 6,898 7,559
Stock-based compensation  6,711 3,505 11,760
Changes in operating assets and liabilities      
Accounts receivable 63,283 1,690 (4,995)
Prepaid expenses and other current assets 6,019 12,499 (15,890)
Settlement of asset retirement obligations (57,391) (41,939) (14,990)
Accounts payable and accrued liabilities (55,985) 32,903 6,456
Net Cash Provided by Operating Activities 545,460 638,148 785,514
       
Cash Flows from Investing Activities      
Acquisitions, net of cash acquired (849,641) (161,164) (6,401)
Capital expenditures (788,676) (816,105) (570,670)
Insurance payments received 1,983 6,472
Change in equity method investments (34,294) (16,693) (2,201)
Proceeds from the sale of properties 126,265 2,750
Transfer to restricted cash (325)
Other 113 (41) 457
Net Cash Used in Investing Activities (1,544,575) (994,003) (569,593)
       
Cash Flows from Financing Activities      
Proceeds from the issuance of common and preferred stock, net of offering costs 3,994 7,021 9,839
Discount on convertible debt allocated to additional paid-in capital 63,432
Conversion of preferred stock to common stock (6,040)
Repurchase of company common stock (184,263) (58,666)
Dividends to shareholders - common (34,680) (25,992)
Dividends to shareholders - preferred (11,489) (11,496) (18,682)
Proceeds from long-term debt 3,420,873 1,576,551 896,717
Payments on long-term debt (2,079,485) (1,243,848) (1,008,300)
Debt issuance costs (33,461) (4,805)
Other 3 (775)
Net Cash Provided by (Used in) Financing Activities 1,144,921 238,768 (127,241)
       
Net Increase (Decrease) in Cash and Cash Equivalents 145,806 (117,087) 88,680
       
Cash and Cash Equivalents, beginning of year  117,087 28,407
       
Cash and Cash Equivalents, end of year$145,806  $—$117,087
   
   
 Quarter Ended
 Operating HighlightsJune 30,

2014
Mar. 31,

2014
Dec. 31,

2013
Sept. 30,

2013
June 30,

2013
  (In Thousands, Except per Unit Amounts)
Operating revenues          
Crude oil sales$294,974$254,641$263,626$290,965$270,623
Natural gas sales 34,508 37,562 31,138 32,584 38,630
Hedge gain (loss) (5,348) (7,020) 2,052 1,043 5,072
Total revenues 324,134 285,183 296,816 324,592 314,325
Percent of operating revenues from crude oil          
Prior to hedge gain (loss) 90% 87% 89% 90% 88%
Including hedge gain (loss) 89% 88% 88% 89% 87%
Operating expenses          
Lease operating expense          
Insurance expense 8,357 6,410 7,920 8,496 7,462
Workover and maintenance 14,408 17,797 19,690 14,586 15,622
Direct lease operating expense 79,806 59,417 66,179 62,681 59,371
Total lease operating expense 102,571 83,624 93,789 85,763 82,455
Production taxes 1,750 1,090 1,189 1,398 1,481
Gathering and transportation 6,509 5,700 5,978 5,345 5,668
DD&A 119,691 99,899 103,513 100,216 96,846
General and administrative 30,824 24,208 17,698 23,672 12,299
Other – net 8,112 5,861 13,147 8,767 3,829
Total operating expenses 269,457 220,382 235,314 225,161 202,578
Operating income$54,677$64,801$61,502$99,431$111,747
Sales volumes per day          
Natural gas (MMcf) 84.8 83.7 89.3 100.8 107.4
Crude oil (MBbls) 32.0 28.4 30.2 29.7 28.9
Total (MBOE) 46.1 42.3 45.1 46.6 46.8
Percent of sales volumes from crude oil 69% 67% 67% 64% 62%
           
Average sales price          
Natural gas per Mcf$4.47$4.98$3.79$3.51$3.95
Hedge gain (loss) per Mcf (0.02) (0.31) 0.42 0.30 0.23
Total natural gas per Mcf$4.45$4.67$4.21$3.81$4.18
Crude oil per Bbl$101.45$99.71$94.85$106.31$102.82
Hedge gain (loss) per Bbl (1.78) (1.83) (0.50) (0.63) 1.08
Total crude oil per Bbl$99.67$97.88$94.35$105.68$103.90
Total hedge gain (loss) per BOE$(1.28)$(1.84)$0.49$0.24$1.19
           
Operating revenues per BOE$77.28$74.85$71.54$75.78$73.78
Operating expenses per BOE          
Lease operating expense          
Insurance expense 1.99 1.68 1.91 1.98 1.75
Workover and maintenance 3.44 4.67 4.75 3.41 3.67
Direct lease operating expense 19.03 15.59 15.95 14.63 13.94
Total lease operating expense per BOE 24.46 21.94 22.61 20.02 19.36
Production taxes 0.42 0.29 0.29 0.33 0.35
Gathering and transportation 1.55 1.50 1.44 1.25 1.33
DD&A 28.54 26.22 24.95 23.40 22.73
General and administrative 7.35 6.35 4.27 5.53 2.89
Other – net 1.93 1.54 3.17 2.05 0.90
Total operating expenses per BOE 64.25 57.84 56.73 52.58 47.56
Operating income per BOE$13.03$17.01$14.81$23.20$26.22
   
 Year Ended June 30,
Operating Highlights20142013201220112010
  (In Thousands, Except per Unit Amounts)
Operating revenues          
Crude oil sales$1,104,206$1,067,686$1,186,193$777,869$383,928
Natural gas sales 135,792 112,753 88,608 101,815 69,399
Hedge gain (loss) (9,273) 28,406 28,602 (20,314) 45,604
Total revenues 1,230,725 1,208,845 1,303,403 859,370 498,931
Percent of operating revenues from crude oil          
Prior to hedge gain (loss)  89% 90% 93% 88% 85%
Including hedge gain (loss) 89% 89% 91% 84% 78%
Operating expenses          
Lease operating expense          
Insurance expense 31,183 32,737 28,521 27,876 27,603
Workover and maintenance 66,481 65,118 56,413 33,095 19,630
Direct lease operating expense 268,083 239,308 225,881 178,507 95,379
Total lease operating expense 365,747 337,163 310,815 239,478 142,612
Production taxes 5,427 5,246 7,261 3,336 4,217
Gathering and transportation 23,532 24,168 16,371 12,499  —
Depreciation, depletion and amortization 423,319 376,224 367,463 293,479 181,640
General and administrative 96,402 71,598 86,276 75,091 49,667
Other – net 35,887 32,641 31,933 26,564 18,748
Total operating expenses 950,314 847,040 820,119 650,447 396,884
Operating income$280,411$361,805$483,284$208,923$102,047
Sales volumes per day          
Natural gas (MMcf) 89.7 88.6 81.5 67.2 42.6
Crude oil (MBbls) 30.1 28.3 30.5 23.4 14.7
Total (MBOE) 45.0 43.1 44.1 34.6 21.8
Percent of sales volumes from crude oil 67% 66% 69% 68% 67%
Average sales price          
Natural gas per Mcf$4.15$3.48$2.97$4.15$4.47
Hedge gain per Mcf 0.11 0.47 0.94 1.54 2.68
Total natural gas per Mcf$4.26$3.95$3.91$5.69$7.15
           
Crude oil per Bbl$100.59$103.48$106.17$90.95$71.73
Hedge gain (loss) per Bbl (1.18) 1.29 0.04 (6.80) 0.75
Total crude oil per Bbl$99.41$104.77$106.21$84.15$72.48
           
Total hedge gain (loss) per BOE$(0.56)$1.81$1.77$(1.61)$5.74
           
Operating revenues per BOE$74.88$76.95$80.74$67.98$62.83
Operating expenses per BOE          
Lease operating expense          
Insurance expense 1.90 2.08 1.77 2.21 3.48
Workover and maintenance 4.04 4.15 3.49 2.62 2.47
Direct lease operating expense 16.31 15.23 13.99 14.12 12.01
Total lease operating expense per BOE 22.25 21.46 19.25 18.95 17.96
Production taxes 0.33 0.33 0.45 0.26 0.53
Gathering and transportation 1.43 1.54 1.01 0.98  —
Depreciation, depletion and amortization 25.75 23.95 22.76 23.22 22.87
General and administrative 5.87 4.56 5.34 5.94 6.25
Other – net 2.19 2.08 1.98 2.10 2.36
Total operating expenses per BOE 57.82 53.92 50.79 51.45 49.97
Operating income per BOE$17.06$23.03$29.95$16.53$12.86
 
The supplementary data presented reflects information for all of our oil and gas producing activities. Costs incurred for oil and gas property acquisition, exploration and development activities are as follows:
       
 Year Ended June 30,
 201420132012
  (In Thousands)
Property acquisitions      
Proved$2,046,879$108,825$6,401
Unevaluated 924,882 52,339
Exploration costs 153,136 168,512 183,397
Development costs 632,262 633,868 327,360
       
Estimated quantities of proved domestic oil and gas reserves and changes in quantities of proved developed and undeveloped reserves in thousands of barrels ("MBbls") and millions of cubic feet ("MMcf") for each of the periods indicated were as follows:
       
 Crude OilNatural GasTotal
 (MBbls)(MMcf)(MBOE)
Proved reserves at June 30, 2011 77,206 236,316 116,592
Production  (11,172) (29,824) (16,143)
Extensions and discoveries  11,444 27,821 16,081
Revisions of previous estimates  9,098 (23,281) 5,217
Reclassification of proved undeveloped  (1,783) (2,042) (2,123)
Proved reserves at June 30, 2012 84,793 208,990 119,624
Production  (10,318) (32,354) (15,710)
Extensions and discoveries  40,690 40,714 47,476
Revisions of previous estimates  14,380 7,903 15,697
Reclassification of proved undeveloped  (1,123) (1,755) (1,416)
Purchases of reserves 5,225 45,623 12,829
Proved reserves at June 30, 2013 133,647 269,121 178,500
Production  (10,978) (32,754) (16,437)
Extensions and discoveries  17,141 19,703 20,424
Revisions of previous estimates  (3,567) (29,822) (8,537)
Sales of reserves  (4,159) (3,378) (4,722)
Purchases of reserves 53,305 141,986 76,970
Proved reserves at June 30, 2014 185,389 364,856 246,198
       
Proved developed reserves       
June 30, 2011  59,234 134,024 81,572
June 30, 2012  63,308 110,310 81,693
June 30, 2013  80,223 175,623 109,493
June 30, 2014  112,789 222,916 149,942
       
Proved undeveloped reserves       
June 30, 2011  17,972 102,292 35,020
June 30, 2012  21,485 98,680 37,931
June 30, 2013 53,424 93,498 69,007
June 30, 2014 72,600 141,940 96,256


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.

Competent Person Disclosure

The technical information contained in this announcement relating to resources and operations adheres to the standard set by the Society of Petroleum Engineers ("SPE").  Phil Kerig, Vice President of Corporate Development 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 located in the U.S. Gulf of Mexico waters and the Gulf Coast onshore. Cantor Fitzgerald Europe is Energy XXI's listing broker in the United Kingdom. To learn more, visit the Energy XXI website at www.EnergyXXI.com.

GLOSSARY

Reserves:

Proved Oil and Gas Reserves -- Those quantities of crude oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible -- from a given date forward, from known reservoirs, and under existing economic conditions, operating methods and government regulations -- prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time. This definition has been abbreviated from the definition of "Proved oil and gas reserves" contained in Rule 4-10(a)(22) of SEC Regulation S-X.

Proved Developed Reserves -- Reserves are categorized as proved developed if they are expected to be recovered from existing wells.

Probable Reserves -- Those additional reserves that are less certain to be recovered than proved reserves but more certain to be recovered than possible reserves. This definition has been abbreviated from the applicable definition contained in Rule 4-10(a)(18) of SEC Regulation S-X.

Possible Reserves -- Those additional reserves that are less certain to be recovered than probable reserves. This definition has been abbreviated from the applicable definition contained in Rule 4-10(a)(17) of Regulation S-X.

Other terms:

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.

MMBTU – million British thermal units.

Mcf/d – thousand 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 XXIStewart Lawrence Senior Vice President, Investor Relations and Communications 713-351-3006 slawrence@energyxxi.comGreg Smith Vice President, 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 PottingerJames Hendersonjhenderson@pelhambellpottinger.co.uk Mark Antelme mantelme@pelhambellpottinger.co.uk +44 (0) 20 7861 3232



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Source: Energy XXI


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