Energy XXI Enters Reverse Takeover for Marlin Energy

Energy XXI (AIM: EGY) says its subsidiary, Energy XXI Gulf Coast, Inc., has entered into a definitive agreement with Marlin Energy, L.L.C. to acquire 100% of the membership interests in Marlin Energy Offshore, L.L.C. and Marlin Texas GP, L.L.C. and the limited partner interest in Marlin Texas, L.P. (collectively, the "Marlin Entities") for a total consideration of $421.1 million, subject to adjustment for post effective date production and expenses and certain other matters. The transaction is effective as of January 1, 2006 and is expected to close early in the second quarter of 2006. Completion of the acquisition, which constitutes a reverse takeover under the AIM Rules, is contingent upon shareholders' approval, financing and re-admission of the Energy XXI ordinary shares and warrants to trading on AIM.

The Marlin Entities to be acquired have interests in various oil and gas properties located on the Outer Continental Shelf in shallow waters of the U.S. Gulf of Mexico ("GOM") and onshore the U.S. Gulf Coast. The properties comprise interests in approximately 34 fields with 104 wells currently producing, the majority of which are located in the operated South Timbalier 21 field. Upon completion of the transaction, Energy XXI, through its subsidiaries, will hold approximately 102,000 net acres; 97% of which will be in the GOM. At closing of the acquisition, Energy XXI Gulf Coast, Inc. will enter into a transition agreement whereby Marlin Energy, L.L.C. will provide services and support for a period of three to six months. The Marlin Entities operate approximately 70% of the net proved reserves and January, 2006 production averaged approximately 10,800 barrels of oil equivalent ("BOE") per day.

Netherland, Sewell & Associates, Inc. ("NSAI"), worldwide petroleum engineering consultants, have estimated the proved reserves and future revenue, as of January 1, 2006. These projections by NSAI were "rolled forward" from previous estimates as of October 1, 2005. NSAI estimates "net proved reserves" of approximately 25.2 million BOE as of the January 1, 2006 effective date. Approximately 60% of the proved reserves are oil. NSAI have also estimated future net revenue, before US income taxes, discounted at an annual rate of 10 percent to determine the properties "present worth" as of January 1, 2006 at approximately $696 million dollars. NSAI has been retained by Energy XXI to provide a "competent persons report" specific to estimating the reserves and future revenues including the determination of probable and possible reserves associated with these properties. This report will be included in the admission document which the Company is preparing in connection with the re-admission of its ordinary shares and warrants to trading on AIM. NSAI's competent person's report will update the proven reserves as of January 1, 2006 based on operational data for the fourth quarter of 2005. This data will include revised estimates incorporating new drill wells and associated reserves, return of pre-hurricane production and enhanced well performance. Energy XXI expects a positive adjustment to the proven reserves estimate. In addition, based on review of the probable and possible reserves by Energy XXI, the Company expects appreciable additional value to be identified by NSAI in their report.

The revenue associated with these assets for the eleven months ended November 2005, which was materially impacted by hurricanes, was approximately $155 million and earnings before interest, depreciation, corporate overhead and tax was approximately $107 million based upon a total production for the eleven months to November 2005 of 2.9 million BOE.

John D. Schiller, Jr, Energy XXI Chairman and Chief Executive Officer, stated, "We committed to the market when we went public on AIM that we intended to effect a GOM transaction within four to six months, and today we have successfully demonstrated our ability to execute our strategy. We are excited about this transaction and the growth opportunity it represents on behalf of our shareholders."

The acquisition will be funded with a portion of the cash proceeds from the placing conducted in October 2005 at the time of Energy XXI's admission and trading on AIM. The net placing proceeds, approximating $278 million, are held in a Bermuda Trust and release of such funds is conditioned on majority shareholder approval of the acquisition. The Company has received a financing commitment from The Royal Bank of Scotland and is currently finalizing a similar commitment from BNP Paribas providing in the aggregate $375 million of financing facilities of which approximately $210 million will be available at closing. The financing will be subject to customary conditions including finalizing commitments and subsequently entering into definitive agreements. The Company may implement hedges in connection with the financing or its overall risk management objectives.

Upon closing of the acquisition, the Company will no longer be an Investing Company for the purposes of the AIM Rules. Accordingly, certain provisions of the Company's bye-laws including shareholders' rights to approve any proposed acquisition made by the Company will cease to apply. The Company will continue after completion of the acquisition as a normal operating company. A reverse takeover document will be sent to shareholders in due course. Until such time the Company's ordinary shares (AIM: EGY) and warrants (AIM: EGYW) will be suspended from trading.

There are no new proposed directors being considered by Energy XXI at this time.