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Energy XXI CEO Discusses F4Q2010 Results - Earnings Call Transcript

Energy XXI CEO Discusses F4Q2010 Results - Earnings Call Transcript

Energy XXI (Bermuda) Limited (EXXI)

F4Q2010 Earnings Call Transcript

September 8, 2010 10:00 am ET


Stewart Lawrence – VP, IR and Communications

John Schiller – Chairman and CEO

David Griffin – CFO


Steve Berman – Pritchard Capital

Duane Grubert – Susquehanna

Nicholas Pope – Dahlman Rose

Neal Dingmann – Wunderlich Securities

Richard Tullis – Capital One South

Joan Lappin – Gramercy Capital

Jeff Hayden – Rodman & Renshaw

Phil Dodge – Tuohy Brothers

Don Chris [ph] – Johnson Rice

Alan Sinclair – Seymour Pierce



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Previous Statements by EXXI
» Energy XXI (Bermuda) Limited F3Q10 (Qtr End 03/31/10) Earnings Call Transcript
» Energy XXI F2Q10 (Qtr End 12/31/09) Earnings Call Transcript
» Energy XXI (Bermuda) Limited F1Q10 (Qtr End 09/30/09) Earnings Call Transcript

Good day, ladies and gentlemen and welcome to the Energy XXI Year-End Conference Call. At this time all participants are in a listen-only mode. Later we will conduct the question-and-answer session and instructions will follow at that time. As a reminder, this conference call is being recorded.

I would now like to introduce your host for today’s conference, Stewart Lawrence, Vice President of Investor Relations and Communications.

Stewart Lawrence

Thanks, Gerome. Welcome to the call today everybody. Presenting today is John Schiller, our Chairman and Chief Executive Officer. Also in the room, we have West Griffin; Ben Marchive, Todd Reid, Hugh Menown, making at the management committee. We would get some additional executives in the room, to help answer questions at the end of the call.

Before we get started, I need to remind everyone that our remarks today, including answers to your questions, include statements that we believe to be forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those currently anticipated.

Those risks included among others, matters that we’ve described in our earnings release and in our public filings. We disclaim any obligation to update these forward-looking statements. While the company believes these forward-looking statements are reasonable, they are subject to factors such as commodity prices, competition, technology, environmental and regulatory compliance.

Our drilling schedules, capital plans and other factors may cause our results to differ materially. I urge you to read our 10-K, which will be filed later today and our latest 10-Q to become better familiar with these risks and our company.

Now, I’ll turn the call over to John.

John Schiller

Thanks, Stewart. Good morning, everyone. Our audited financials released yesterday afternoon, there should be no surprises since we’ve preannounced all the key data a few weeks back. So we’ll skip the formal discussion of the quarter’s results this morning, although we’ll certainly be available to discuss them in the Q&A session.

To start let us look back at the year we wrapped up on June 30th and look ahead for the current year’s plans. Felt like the roller coaster ride, at times versus what the stock price chart looks like. But it ended up being quite a thrill.

Early in the new fiscal year, we announced the debt exchange, which put us in a better financial position a couple of months later to pursue the MitEnergy acquisition. Not only was that one of the most compelling acquisitions we’ve ever done but it also allowed us to significantly strengthen our balance sheet with equity due just accretive economics.

Once the deal was funded and closed, we were off for the races, just couple of weeks later in January we announced Davy Jones as a major discovery. Meanwhile our core operations have continued to deliver good results in a market warmed up to the story including the excellent reception we received at our first ever Investor Day in March in New York City.

And then BP rocked our world in April. We certainly had better summers than the one we’ve just went through with all the regulatory attention in the Macondo deepwater incident rocks our industry. But the bottom line is that the market greatly overreacted to the incident in relation to its impact on Energy XXI and other shallow water players.

Our production was not affected, our drilling program was not materially affected, our cost structure was not materially affected and we see no reason why any other will change going forward, from the shape that are stock were at until the market’s beginning to agree.

And now we believe once again we’re close to potential breakout to the upside. As you probably heard over the past couple of weeks, things are looking good at Blackbeard East, where we are drilling at 22,300 feet and are below the salt well. We have the potential to drill over 8,000 foot of interval within this trough and things continue to look very good there as we drill ahead, we’ve made basically 1,300 feet there over the last two and a half days.

So our drill rates continue to be outstanding at this depth and we’ll keep you posted as we drill. Not far behind Blackbeard East, we hope for the Davy Jones offset. I’ll talk about, that guys more in a couple of minutes.

Let’s switch gears now and look at the details around our year end reserve report and expectations for our capital program going forward. We ended the year at 75.6 million barrels, up 42% from the prior year. We produced nearly 8 million barrels last year and added about three times that amount with acquisitions.

Notably, despite a severely amended development budget as I’ll show you in a minute, our performance revisions, extensions and discoveries by themselves managed to offset about 60% of the produced barrels.

Looking at the reserve base in more detail, you can see even more impressive value equation. Our proved developed producing reserves rose dramatically year-over-year because of the Mit acquisition as well as the restoration of hurricane volumes. This had a big value impact.

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