Energy XXI to Acquire Louisiana Acreage

Energy XXI (Bermuda) Limited' subsidiary Energy XXI Gulf Coast, Inc. has entered into a definitive agreement with a number of affiliated sellers to acquire certain oil and gas properties for U.S. $330 million cash and certain other potential consideration. The transaction is effective as of June 1, 2006 and is expected to close in July 2006. Energy XXI paid a U.S. $10 million deposit to the Sellers to bind the transaction and has put in place certain hedges in anticipation of closing. The deposit will be forfeited if Energy XXI fails to complete the acquisition except in limited circumstances.

The Properties to be acquired represent various interests located in the U.S. Louisiana Gulf Coast both onshore and in state waters. These Properties comprise interests in approximately 21 fields with 35 wells currently producing. Upon completion of the transaction, Energy XXI will acquire approximately 108,000 net acres and access to over 2,200 square miles of 3-D seismic coverage. At closing of the acquisition, Energy XXI will enter a transition agreement whereby the Seller will provide services and support through October 2006. Management believes the acquisition will be accretive in terms of earnings and cash flow based upon a range of financing alternatives.

If hydrocarbon production from one of the Properties to be acquired exceeds 34 billion cubic feet equivalent (BCFE), a production payment of up to 3 BCFE of future production will also be payable to the Sellers beginning in January 2009.

Miller and Lents, Ltd., international oil and gas consultants, is currently conducting an independent third-party review of existing reserve estimates of the Properties which is due to be completed prior to the completion and financing of the acquisition. Energy XXI estimates proved and probable reserves at over 25 million barrels of oil equivalent (BOE) and proved reserves of 16 million BOE as of June 1, 2006. Approximately 90% of the proved reserves are estimated to be natural gas. Based upon current market pricing, the present value of the proved and probable reserves before taxes is U.S. $899 million at a discount rate of 10%. Current production is approximately 33 million cubic feet equivalent (MMCFE) per day. There are two drilling rigs under contract to develop the Properties.

In addition to the acquisition of the Properties, at closing, Energy XXI will enter into an exclusive 50/50 Exploration Agreement with the Seller for twenty-four months covering an area of mutual interest in South Louisiana. Also, a Joint Development Agreement (JDA) for the Lake Salvador Project covering 1,680 square miles with approximately 1,250 square miles of 3-D seismic data will be effective at closing. Currently the JDA has options on 80,000 acres within the Lake Salvador Project. This project is believed to be one of the largest contiguous ongoing oil and gas development in South Louisiana. The combined agreements encompass approximately 2 million acres in South Louisiana. The Seller has achieved a ten year average finding cost of $6.74/BOE on an investment of U.S. $554 million in the area.

John D. Schiller, Jr., Energy XXI Chairman and Chief Executive Officer, stated, "We are thrilled with the significant potential of these properties and the value these drilling opportunities create for the Shareholders."

The Company intends to finance the proposed acquisition through its existing cash resources, additional debt financing, and the subscription proceeds received from the exercise of existing issued Warrants to subscribe for shares of common stock of the Company. To encourage Warrantholders to exercise their Warrants at this time, and as permitted by the warrant instrument constituting the Company's Warrants, the Company will today notify the Warrant agent that it will lower the exercise price for the Warrants from $5 per share to $4.00 per share in respect of any exercise notices for the Warrants validly received on or prior to 5 p.m. (UK time) on June 26, 2006. A circular will also be sent to Warrantholders shortly providing further details of this opportunity. The exercise price for any Warrants not exercised prior to June 26, 2006 will remain at $5 per share. Energy XXI estimates that it will require at least U.S. $100 million of Warrants to be exercised to be in a position to complete the Acquisition. Completion of the acquisition will not occur unless the Company has obtained satisfactory financing.

Once completed, Energy XXI will have total proved and probable reserves in excess of 55 million BOE. Energy XXI is an independent oil and natural gas exploration and production company who emphasizes acquisitions as a significant part of our global growth strategy. The Company's properties are primarily located in the U.S. Gulf of Mexico waters and the Gulf Coast onshore.