Preliminary Proved Reserves Estimated at 246 MMBOE, up 38%
- Estimated proved reserves of 246 MMBOE as of June 30, 2014, exceeding 515% all-sources reserves replacement rate
- Acquisition of EPL adds locations to the drilling inventory and provides significant operational synergies, including cost savings exceeding initial targets
- Fourth-quarter production tops guidance, including a higher percentage of oil volumes
- 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
"The acquisition of EPL, coupled with the successful horizontal campaign, drove our year-end reserve estimates," Energy XXI Chairman and CEO John Schiller said. "With nearly two years of horizontal drilling success, we are now seeing the fruits of the program with increased recoveries of oil-in-place. We continue to analyze the assets just purchased and have identified a multi-year development drilling campaign, with substantial additional upside from exploration."Production Update During the company's fiscal fourth quarter, production averaged approximately 46,100 barrels of oil equivalent per day (BOE/d), with oil production averaging nearly 32,000 barrels per day (Bbl/d), both of which are higher than the guidance provided at the time of the EPL acquisition. The quarter's volumes included a one-month contribution from the acquired assets, less approximately 2,000 BOE/d from the sale of the Eugene Island and South Marsh Island properties on April 1, 2014. The company expects to issue first-quarter and full-year production guidance mid-August with the year-end earnings release. Operations Update During the company's fiscal fourth quarter, eight wells were drilled, providing initial production uplift of approximately 4,150 BOE/d. The bulk of the uplift came online in June following the completion of rig moves and facility upgrades, contributing approximately 1,200 BOE/d to the quarter average. Four wells were drilled in the West Delta 30 field, three were drilled in Ship Shoal 208 and one was completed in Main Pass 61. For the full fiscal year ended June 30, 2014, 17 development wells were drilled and completed, including five wells completed on EPL properties in the quarter. 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.
"With eight operated rigs working today, the capital program is front-end loaded to accelerate production growth," Schiller said. "We expect to adjust our capital budget as the year progresses, factoring in drilling and completion results, realized prices and other variables, with the goal of maximizing oil production while generating free cash flow for net debt reduction. Assisting with our free cash flow goal is the fact our cost synergies have proved to be more than twice the expected rate, now estimated to be around $60 million in the first year. The acquisition integration is progressing well."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 XXI Stewart Lawrence Senior Vice President, Investor Relations and Communications 713-351-3006 firstname.lastname@example.org Greg Smith Vice President, Investor Relations 713-351-3149 email@example.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 firstname.lastname@example.org Mark Antelme email@example.com +44 (0) 20 7861 3232