Energy XXI Granted Operatorship on West Delta Fields

Energy XXI provided an operational update, including results of the first recompletion at the South Pass 89 field and drilling of the Onyx prospect at the Main Pass 73 field.

In addition, the company announced it has been granted operatorship of the West Delta 30 and West Delta 73 fields obtained in the ExxonMobil asset acquisition in December 2010. "Gaining control of these fields allows us to move forward with our production optimization and capital programs," Chairman and Chief Executive Officer John Schiller said. "We expect to have the last field, South Timbalier 54, under our control by the end of the month."

Exploration and Development Activity

Within the company's core producing properties, located offshore Louisiana, the first of a six-well recompletion program at the South Pass 89 field has been successful. The A-15 well is currently flowing 18 million cubic feet per day and 300 barrels of condensate per day, with 3,100 pounds of flowing tubing pressure. The well, forecast to deliver 800 barrels of oil equivalent per day (BOE/d) net, is producing 2,500 BOE/d net. These production levels equal the company's pre-work estimate for the entire six-well program.

At the Grand Isle 16 field, the company perforated a prospective natural gas zone in the J 21 well, which instead tested mostly oil at approximately 1,200 BOE/d. That well has been shut in until a platform rig is mobilized to complete work. In addition, the Rowan EXL 3 rig, previously working for McMoRan, will be mobilized to Grand Isle 16 to perform three recompletions that have been identified to optimize production.

Quarter-to-date, production has averaged approximately 42,500 BOE/d, benefitting from the success at South Pass 89 and other previously announced recompletions. Current production exceeds 46,500 BOE/d. This production level has been achieved despite the fact Energy XXI did not have operational control over the West Delta 73 and South Timbalier 54 fields, which are the largest fields added in the December 2010 acquisition.

Near-term production also should be augmented by two successful wells at the Main Pass 73 field. The Onyx well was drilled to 5,635 feet and encountered two pay zones that were previously modeled as salt. The well was completed and initial testing is beginning today. The rig currently is being moved to begin completion operations on the Ashton well which, as previously announced, encountered seven pay zones. Combined initial production from Ashton and Onyx is expected to approximate 1,500 BOE/d within the next 30 days.

Within the shallow-water, ultra-deep Gulf of Mexico shelf program, the McMoRan-operated partnership (in which Energy XXI has various interests) has continued activity at the Blackbeard East and Lafitte exploratory wells and the offset appraisal well at Davy Jones.

The Davy Jones offset well, located on South Marsh Island Block 234 in 20 feet of water, has been drilled and cased to 30,450 feet. Logging operations have been completed and the logs are being evaluated. As previously announced, wireline logs indicated over 200 feet of gross sand and approximately 100 net feet of sand, based on porosity data available, in multiple Wilcox zones that appear to be hydrocarbon bearing. Below the identified Wilcox section the well encountered Upper Cretaceous, Tuscaloosa and Lower Cretaceous sections. The well is being readied for production once equipment has been procured, with expected first production to occur during the second quarter of calendar 2012. Energy XXI has a 15.8 percent working interest and 12.6 percent net revenue interest in Davy Jones.

The Blackbeard East exploration well, located in 80 feet of water on South Timbalier Block 144, was drilled to 32,559 feet before encountering mechanical issues. McMoRan is continuing to make progress recovering drill pipe and tools stuck in the hole. After recovering 1,866 feet of stuck pipe, the remaining 1,374 feet of pipe and tools appear to have slipped further down the wellbore. The operator has washed and reamed the wellbore to a depth of 29,227 feet and has yet to reencounter the top of the stuck pipe. Progress to date provides encouragement that the wellbore may be preserved to the previous depth and deepened to the permitted depth of 34,000 feet. Energy XXI has an 18 percent working interest and 14.35 percent net revenue interest in Blackbeard East.

The Lafitte exploration well commenced drilling on Oct. 3, 2010 towards a proposed total depth of 29,950 feet, targeting Miocene objectives below the salt weld. A liner has been run below the salt to 22,982 feet and the well is currently drilling at 23,645 feet.. Lafitte is located on Eugene Island Block 223 in 140 feet of water. Energy XXI has an 18 percent working interest and a 14.6 percent net revenue interest.