Workover Program Completed at Energy XXI's South Pass 89
Energy XXI announced fiscal first-quarter results and provided an operational update on activities in the Gulf of Mexico.
For the 2012 fiscal first quarter, Energy XXI reported adjusted earnings before interest, taxes, depreciation, depletion and amortization (EBITDA) of $186.9 million, compared with $75.7 million in the 2011 fiscal first quarter. Net income attributable to common shareholders for the 2012 fiscal first quarter was $62.6 million, $0.76 per diluted share, on revenues of $284.9 million and production of 40,800 barrels of oil equivalent per day (BOE/d).
"Our oil-focused asset base delivered record quarterly EBITDA," Energy XXI Chairman and CEO John Schiller said. "Oil represented 69 percent of our production and 90 percent of our pre-hedge revenue in the quarter, generating strong free cash flow that allowed us to continue paying down debt. In addition, we collected nearly $50 million during the quarter by monetizing crude oil swaps. We re-hedged the same volumes using collars based on Brent crude prices, better correlating with the premium on our HLS crude. The combination of free cash flow and hedge monetizations drove our net debt-to-total-capitalization ratio down to 47 percent from 53 percent."
Exploration and Development Activity
The multi-well recompletion program at South Pass 89 (100% WI/ 82% NRI) has been completed. Gross production in the field was increased from 700 BOE/d to more than 6,000 BOE/d by working over seven wells. Total cost of the program approximated $18.5 million.
At Grand Isle 16/18 (100% WI/ 87% NRI), five wells have been recompleted, delivering initial gross production rates totaling 4,200 BOE/d, with a program cost of $19 million and a projected payout of approximately 7 months. Currently at Grand Isle, the Ensco 99 rig is drilling Sunny (GI 16 R22 ST3), a development well targeting the C-2 sand with secondary B-2 and B-4 sand targets. The rig is slated to drill two additional development wells and perform one workover at Grand Isle. In addition, the Sundowner 1 platform rig has moved from South Pass 89 to Grand Isle 16 and has begun the workover to gravel pack the J-21 well, which previously was recompleted and tested at approximately 1,200 barrels per day of oil.
Within the shallow-water, ultra-deep Gulf of Mexico shelf program, the McMoRan-operated partnership has continued drilling the Blackbeard East and Lafitte exploratory wells and is working to place the Davy Jones discovery on production.
The Davy Jones discovery well (15.8% WI/12.3% NRI) is set to begin flow testing in December. All equipment is on schedule and installation of the production facilities has commenced. The Rowan EXL III rig is currently moving on location to begin completion operations. As of Sept. 30, 2011, the company's investment in both Davy Jones wells and facilities totaled about $67 million.
The Blackbeard East exploration well (18% WI/14.4% NRI), located in 80 feet of water on South Timbalier Block 144, is drilling below 32,200 feet towards a target depth of 34,000 feet. The company's investment in Blackbeard East as of Sept. 30, 2011 was about $37 million.
The Lafitte exploration well (18% WI/14.6% NRI), located on Eugene Island Block 223 in 140 feet of water, is drilling below 28,400 feet towards a proposed total depth of 29,950 feet, targeting Lower Miocene and possibly Oligocene sections below the salt weld. Wireline logs from interim logging operations in September and October 2011 indicate several Lower Miocene sands that appear to be hydrocarbon bearing. The sands have various thicknesses that aggregate approximately 250 gross feet (115 feet net), some of which are contained within a thin-bedded, sand-shale formation. The company's investment at Lafitte as of Sept. 30, 2011 was about $26 million.
"Our deep drilling program is approaching several potential catalysts, and our core drilling, recompletion and workover activities have delivered results at or above target levels, providing increased confidence in our goal of averaging 46,000 to 50,000 BOE/d of net production for our 2012 fiscal year," Schiller said.
During the 2012 fiscal first quarter, capital expenditures, including plug-and-abandonment costs, totaled $117.4 million, with $42.1 million in exploration and $75.3 million in development and other investments.
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