Energy XXI has announced fiscal third-quarter results for the period ended March 31, 2009. Net cash provided by operating activities was $86.2 million and impairment-adjusted earnings before interest, taxes, depreciation, depletion and amortization (EBITDA) was $65.8 million, compared with $112.5 million and $117.5 million, respectively, in the 2008 fiscal third quarter.
"Energy XXI grew production 8 percent over the December quarter without the anticipated resumption of hurricane-affected volumes," Energy XXI Chairman and CEO John Schiller said. "While industry conditions weakened further since year-end, leading to a non-cash write-down of the carrying value of our reserves, operating results have been solid. Development activity added cost-effective volumes, while our exploration program delivered a discovery at the Cote de Mer prospect and continues to offer large reserve growth potential. Meanwhile, we have retained financial liquidity, with more than $90 million of cash and hedge-protected cash flow that supports our goal of further reducing bank debt during our 2010 fiscal year, which begins July 1, 2009."
Inclusive of a $117.9 million ceiling test impairment ($.82 per share), the company reported a 2009 fiscal third-quarter net loss of $120.6 million, or $.84 per share, on revenues of $106.1 million and production of 20,700 barrels of oil equivalent (BOE) per day. In the 2008 fiscal third quarter, the company had net income of $10.3 million, or $.12 per diluted share, on revenues of $167.1 million and production of 26,100 BOE per day. The net realized price received for the company's production in the 2009 fiscal third quarter averaged $57.04 per BOE, compared with $70.33 per BOE in the 2008 fiscal third quarter.
During the 2009 fiscal third quarter, capital expenditures totaled $60.5 million, with $27.3 million in exploration and $33.1 million in development. Excluding abandonment costs and hurricane-related spending, the company expects capital expenditures to remain within the previously announced range, at about $260 million for fiscal 2009.
Energy XXI production volumes continue to be curtailed by damage inflicted by Hurricanes Gustav and Ike. In addition to a 2,000 BOE per day long-term reduction due to the loss of facilities serving two non-operated fields, approximately 2,000 BOE per day remains off-line awaiting repair or replacement of third-party-operated pipelines, which currently is projected to be complete in September. The company's current net production is approximately 18,000 BOE per day.
EXPLORATION AND DEVELOPMENT ACTIVITY
As previously announced, the E.A. McIlhenny #1 well on the Cote de Mer prospect in Vermilion Parish, Louisiana, was drilled to 22,300 feet, discovering gross proved natural gas reserves of 88.8 billion cubic feet equivalent. The well has since been completed in the Cris-A 4C sand and flowed at a stabilized, constrained rate of 15.0 million cubic feet per day of natural gas through a 12/64ths inch choke with a flowing tubing pressure of 14,500 psi. Depending on the pace of permitting for a take-away pipeline lateral, the well is expected to be placed on production within four to six months. Energy XXI holds a 33 percent working interest (WI) and a 24 percent net revenue interest (NRI) in the discovery.
The Ammazzo deep gas exploratory prospect (16 percent WI, 13 percent NRI) is drilling ahead below 23,000 feet towards a proposed total depth of 24,500 feet. The Ammazzo prospect is located in 25 feet of water offshore Louisiana, approximately 15 miles south of the Flatrock and JB Mountain discoveries.
At the South Timbalier Block 168 No. 1 exploratory well, targeting the Blackbeard West prospect (20 percent WI, 16 percent NRI) in 70 feet of water offshore Louisiana, Energy XXI and its partners are proceeding with plans to conduct a production test of four potential hydrocarbon-bearing zones. Additional drilling opportunities on the flanks of the structure and on other acreage in the ultra-deep trend are being reviewed.
At the company's 100 percent owned South Timbalier 21 field, the Gouda well was sidetracked to 12,730 feet, logging 90 net feet of oil and gas pay sands updip of the original wellbore. Completion operations are underway, and the well is expected to be on production during the current quarter.
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