Energy XXI Partially Monetizes Hedges

Energy XXI (Bermuda) Limited announced the early settlement of certain oil and natural gas hedges. Net proceeds of $66.5 million are expected to be used to reduce borrowings under the company's secured revolving credit facility. Concurrent with the early settlements, Energy XXI re-hedged all of the related volumes.

"Monetizing a portion of our hedges and re-hedging allows Energy XXI to capture value today while still protecting our future cash flows," Energy XXI Chairman and CEO John Schiller said.

At March 11, 2009, the company had approximately $63 million of cash on hand and bank borrowings under its $400 million borrowing base totaled $300.6 million, before application of the $66.5 million of hedge-settlement proceeds. Following the hedge repositioning, the mark-to-market value of the company's hedge portfolio is currently $102 million.

In total, the company monetized crude oil swaps and collars covering 4,174 barrels per day (Bbl/d) for the remainder of 2009, and 1,516 Bbl/d for 2010, as well as natural gas swaps and collars covering 10,507 million British thermal units per day (MMBTU/d) for the remainder of 2009, and 16,055 MMBTU/d for 2010. These hedges were replaced with new crude oil swaps on the same volumes at prices averaging $50.32 for the remainder of 2009 and $54.70 for 2010, as well as natural gas swaps on the same volumes at prices averaging $4.22 for the remainder of 2009 and $5.75 for 2010. The full revised hedge schedule is included as an attachment to this news release.

"Even after re-setting a large portion of our hedge portfolio, we expect to generate sufficient cash flow from operations to pay down additional debt during our 2010 fiscal year, which begins July 1, 2009," Schiller said. "Energy XXI is positioned to ride out the current industry down-cycle and to capture opportunities as oil and gas prices recover."
Energy XXI currently is pursuing a bank borrowing redetermination that is expected to be completed by the end of March. The company remains in compliance with the revolving credit facility's covenants and expects to have continued liquidity under the facility following the redetermination.
 

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