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Energy XXI (Bermuda) Limited's CEO Discusses Q3 2012 Results - Earnings Call Transcript

We realized natural gas prices of $2.52 this quarter versus $3.23 in the December quarter. Even though natural gas prices fell 34% quarter on quarter, our average realized price per barrel equivalent fell less than 3%. Gas prices have a minimal impact on our financial performance.

Our LOE remains essentially flat against the December quarter at $19.61 per barrel. And our EBITDA was healthy $52.16 per barrel, our second consecutive quarter above $50 per barrel, even with natural gas prices declining by over 1/3 during that period.

G&A was higher quarter on quarter, primarily due to noncash mark-to-market adjustment and stock-based compensation and profit sharing paid during the quarter. Our EBITDA for the past 2 quarters combined is $440 million. On an annualized basis, that's almost $900 million. As we continue to ramp crude oil production, we should see a significant increase in EBITDA and free cash flow.

During the fiscal third quarter, the drilling program was at its peak and we spent approximately $155 million in CapEx. And even at that rate, we were cash flow positive. As we bring production tied to this CapEx online in the June and September quarters, you will see accelerated cash flow and increased liquidity. And to help assure that we remain cash flow positive, although we believe that the fundamental for crude oil remains very constructive, we continue to look for prudent ways to enhance our existing hedge portfolio. We recently bought 15,000 barrels per day of the 75-85 WTI foot [ph] spread, paying approximately $0.70 per barrel for this through May through the December period. We are also looking at incremental hedges for calendar 2013 and 2014 periods, which give us additional downside protection while allowing us to participate in the upside.

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