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Energy XXI Provides Operations Update, Announces Exploration Joint Venture

In the Main Pass complex, the company successfully drilled the Don Tomas well (WI 100%/ NRI 78%) targeting the BA-4AA sand. Don Tomas was drilled to 8,292 feet TVD/ 8,550 feet MD, encountering 195 net feet of pay within the targeted BA-4AA sand, and placed on production in mid-August at 4,500 (BOE/d) gross. Additional development wells are scheduled at Main Pass, with as many as five additional wells in the program this fiscal year.

At Grand Isle 16 (WI 100%/ NRI 87%), the Pi development well was drilled to 9,572 feet TVD/ 11,482 feet MD and is currently producing 1,200 BOE/d. Pay was seen in the primary targets, C1 through C-7 sands, and additional pay was seen in the BF-1 through B-4 sands. The company currently is drilling Cake, a horizontal development well targeting the BF-2 sand updip of a past producer. The well is drilling at 6,898 feet TVD/7,808 feet MD.

Purchase and Exploration Joint Venture

The company has executed a purchase and sale agreement to acquire certain shallow-water Gulf of Mexico interests from Exxon Mobil Corporation. The agreement covers 5,000 gross acres on Vermilion Block 164, currently producing approximately 1,100 BOE/d net. The asset has produced approximately 44 million BOE since its discovery in 1957.

Energy XXI and ExxonMobil also have entered into a joint venture agreement to explore for oil and gas on nine contiguous blocks adjacent to Vermilion Block 164 in shallow waters on the Gulf of Mexico shelf. Energy XXI will operate the joint venture, and drilling of the initial prospect, called Pendragon, is expected to commence by the end of the year. The company's total capital commitment is estimated at $75 million, assuming successful completions of two earning wells. Energy XXI plans to adjust its drilling schedule, postponing two large natural gas exploration prospects, Golden Bear and Wombat, to drill the two oil-focused joint venture wells.

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