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Energy XXI Provides Fiscal Year-End Reserves Estimates and Operations Update

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  • Proved reserves estimated at 179 MMBOE, up 50%, with a present value of $6.1 billion; proved plus probable reserves estimated at 232 MMBOE with a present value of $8.4 billion
  • Reserve replacement rate approximated 390% organically, or 469% including acquisitions
  • Horizontal drilling program records 82% success rate on first 11 wells
  • Subsalt exploration program logs first discovery with 76 feet of net oil pay
  • Fiscal 2014 capital program, at $660 million, expected to be within cash flow

HOUSTON, July 16, 2013 (GLOBE NEWSWIRE) -- Energy XXI (Nasdaq:EXXI) (LSE:EXXI) today provided estimates of its fiscal 2013 year-end reserves and fiscal 2014 capital program, as well as an operations update, including production and recent exploration and development results.



Fiscal 2013 Year-end Reserves and Present Value

The company's June 30, 2013 fiscal year-end proved reserves are estimated at 179 million barrels of oil equivalent (MMBOE), up almost 50 percent from the June 30, 2012 year-end reserves. Energy XXI estimates it added 62 MMBOE of proved reserves through discoveries, extensions of existing fields and revisions, in addition to 13 MMBOE through acquisitions, while producing 16 MMBOE in fiscal 2013. The all-sources proved reserves replacement rate was 469 percent. Excluding acquisitions, the nearly 390 percent organic reserves replacement rate was a record for Energy XXI. Pre-tax proved-only present value, using a 10 percent discount rate (PV10), totaled $6.1 billion as of June 30, 2013, using prices of $91.60 per barrel of oil and $3.44 per MMBTU of gas, before differentials, based on the SEC-prescribed first-of-the-month average prices for the preceding 12 months. Proved plus probable reserves as of June 30, 2013 are estimated at 232 MMBOE, with a PV10 of $8.4 billion.

Netherland, Sewell & Associates, Inc., independent oil and gas reserves auditors, completed the year-end proved and probable reserves audits and currently are finalizing the possible reserves audit. All of the company's reserves are in the United States Gulf of Mexico or Gulf Coast, with approximately 75 percent being liquids, of which 95 percent is crude oil and condensate. Approximately 61 percent of proved reserves are proved developed.

"The horizontal drilling campaign was a key driver to our reserves growth in fiscal 2013," Energy XXI Chairman and CEO John Schiller said. "Since initiating the horizontal program a year ago, we have been successful in nine of our first 11 attempts. On average, the successful horizontal wells added about 1 MMBOE of incremental proved reserves per location due to higher recoveries of oil-in-place. We have addressed the early challenges associated with the program and the value generated by the overall horizontal program has been outstanding."

Production Update

During the company's fiscal fourth quarter, production reached 50,200 BOE/d, averaging approximately 47,000 BOE/d for the quarter, with oil production averaging nearly 29,000 barrels per day (Bbl/d).

"The drilling program leading into our new fiscal year is delivering excellent results, and we have gained confidence in what to expect moving forward," Schiller said. "Our goal is to increase shareholder value, primarily through reserves and volume growth while spending within operating cash flow."

Operations Update

At West Delta 73 (100% WI/ 83% NRI), the Glacier well was drilled to 10,215 feet measured depth (MD)/ 8,074 feet true vertical depth (TVD), including a 977-foot lateral section into the F-35 sand. Glacier was brought online in June at 1,450 Bbl/d of oil and 500 thousand cubic feet per day (Mcf/d) of natural gas, gross, with flowing tubing pressure of 550 psi. The next horizontal well at West Delta, Big Sky 3, is drilling below 10,110 feet MD/ 8,000 feet TVD, targeting the F-30 sand with a proposed depth of 11,225 feet MD/ 8,000 feet TVD, including a 1,000-foot lateral section.

"We continue to see very positive results from the West Delta field, with more than 40 additional horizontal development locations already mapped," Schiller said. "We are going to move a second rig to the field this winter to expedite development, and will add a new production platform to accommodate drilling of the identified horizontal locations."

In the Main Pass 61 field (100% WI/ 78% NRI), the Quintero well was drilled to 11,500 feet MD/ 6,560 feet TVD into the J-6 sand. The high-angle well was completed and brought online at a gross rate of 1,260 Bbl/d and 600 Mcf/d with flowing tubing pressure of 600 psi. The Java well has been drilled to 9,676 feet MD/ 7,148 feet TVD, and encountered oil pay in an updip position in the J-6 sand. The Java well completion is finished and the well will come online within the week.

At Grand Isle 16/18 (100% WI/ 86% NRI), the Vanguard horizontal well was drilled to 10,635 feet MD/ 8,210 feet TVD with a 940-foot lateral into the C-1 sand, and brought on production in June at a gross rate of 1,600 Bbl/d and 600 Mcf/d with a flowing tubing pressure of 750 psi. The Vanguard pilot hole logged pay in four separate reservoirs, including the targeted C-1 sand.

In the South Timbalier 54 field (100% WI/ 87% NRI), two high-angle wells were completed in the fiscal fourth quarter. The Slider well was drilled to 6,291 feet MD/ 5,036 TVD and brought on production in mid-May at 350 Bbl/d and 300 Mcf/d, gross. The Charlie well was drilled to 7,200 feet MD/ 5,063 feet TVD targeting two separate pay sands. Charlie was dual-completed and brought online in June at a combined rate of 350 Bbl/d and 6,000 Mcf/d with flowing tubing pressure of 260 psi in the A-1 oil sand and 1,400 psi in the PL-10 gas sand.

In the company's shallow-water sub-salt exploration play, the Heron well (25% WI/ 17.8% NRI), located on Main Pass Block 295 and operated by Apache, currently is preparing to drill out from casing run to 10,510 feet MD/ 10,500 feet TVD, targeting multiple sands trapped against a salt dome. The well has initially encountered 76 feet of net oil pay in two sands, as identified with wireline logging equipment. Drilling continues toward deeper primary targets with a proposed depth of 20,000 feet TVD.

The Merlin well (50% WI/ 41% NRI), located on Vermilion Block 178, was spud in mid-June and currently is drilling below 8,536 feet MD/ 8,166 feet TVD. Energy XXI is the operator at Merlin, which is targeting multiple oil and gas sands trapped against a salt dome, with a proposed depth of 15,700 feet TVD.

Onshore Louisiana at the Bayou Carlin field in St. Mary's Parish, the Duplantis well (94%WI/ 69% NRI) was drilled to a total depth of 19,718 feet TVD. The targeted sands were penetrated down-dip of existing production and therefore were not productive. The well was temporarily abandoned pending the acquisition of additional seismic that can help identify up-dip sections of the targeted sands. Farther east, in St. Martin Parish, the Pintail exploration well (48.4% WI/ 25.4% NRI) was drilled to a depth of 18,612 feet MD/ 16,767 feet TVD. The Pintail well logged a shallow hydrocarbon-bearing sand and was temporarily abandoned pending further evaluation. The lower target Marg A sand was found to be non-productive.

Within the ultra-deep exploration program with Freeport-McMoRan, the Lomond North prospect (18% WI/ 13% NRI) in the Highlander area, located primarily in St. Martin Parish, Louisiana, is drilling below 23,000 feet toward a proposed total depth of 30,000 feet. The well is targeting Eocene, Paleocene and Cretaceous objectives below the salt weld. Lomond North is approximately 65 miles north of the partnership's Davy Jones discovery. The Lineham Creek exploration prospect (9% WI/ 6.75 NRI), located onshore in Cameron Parish, Louisiana, approximately 55 miles northwest of Davy Jones, is drilling in the sidetrack wellbore below 22,100 feet, toward a target depth of 30,500 feet.

Capital Expenditures

The company's capital program for fiscal year 2014, which began July 1, 2013, is estimated at $660 million. Development drilling and recompletions account for $360 million of planned spending, with exploration drilling targeting approximately $100 million and facilities totaling about $80 million. Facilities spending includes $51 million for construction of a new platform at West Delta 73. The remainder of the capital budget for fiscal 2014 is allocated to general and administrative, land and abandonment costs. Capital expenditures in the just completed fiscal year 2013 approximated $860 million, including $44 million of abandonment costs and excluding $161 million spent on acquisitions.

Share Repurchase Program

As previously announced, the company's Board of Directors in May approved the repurchase of the company's common shares up to a value of $250 million. Through July 16, 2013, repurchased shares totaled 3,852,900 at an average price per share of $24.35. Following these purchases, the company has a total of 75,571,910 shares in issue.

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, 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"). Tom O'Donnell, Vice President of Exploitation, a 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 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.

Proved, Probable, Possible reserves – are as defined in the SPE/World Petroleum Congress Standard.

psi – pounds per square inch.

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

Source:Energy XXI