Energy XXI Updates on Fourth Quarter Operations, Progress Pending in GOM
Energy XXI (Bermuda) Ltd. has issued an operational update for the fourth quarter ended June 30, 2008.
The Cote de Mer prospect, which commenced drilling in Vermillion Parish, Louisiana in February 2007, has been drilled to a true vertical depth (TVD) of 20,548 feet on its way to the proposed TVD of 21,000 feet. Energy XXI holds a 33 percent working interest (WI) and a 24 percent net revenue interest (NRI). Nexen Inc. operates the well with a 35 percent WI and 25 percent NRI. Private partners have the remaining interests.
"Preliminary indications at Cote de Mer are very encouraging," Energy XXI President and Chief Operating Officer Steve Weyel said. "We believe we are in the primary gas objective. Logging operations, which were delayed by Hurricane Gustav and the approaching Hurricane Ike, will give us an idea of what we've encountered and then we plan to drill ahead. Once we have obtained a log over the objective interval we will update the market with a full drilling update."
Other high-potential wells in progress include the Kaplan and Blackbeard West prospects. The Kaplan prospect, being drilled with the Green & Broussard #1ST well in Vermillion Parish, Louisiana, (100 percent WI, 65 percent NRI), began drilling on March 28, 2008 and is currently preparing to sidetrack at 14,774 feet TVD as a result of problems encountered with the liner top, drilling toward a proposed 18,500 feet TVD.
The Blackbeard West prospect (20 percent WI, 16 percent NRI), being drilled with the South Timbalier Block 168 No. 1 exploratory well in 70 feet of water offshore Louisiana, was reentered on March 18, 2008, and has been drilled below 32,550 feet to evaluate potentially significant targets. The well is permitted to 35,000 feet. Previous logs indicated that the well has encountered potential hydrocarbon bearing zones.
Details regarding any sands, zones and hydrocarbons encountered, generally required to be reported under the London Stock Exchange’s AIM regulations, are withheld due to certain contractual restrictions. Energy XXI’s investment in the South Timbalier Block 168 No. 1 well totaled approximately $19 million at Sept. 9, 2008.
During the 2008 fiscal fourth quarter ended June 30, capital expenditures totaled $96.1 million, bringing full-year capital expenditures to $330.1 million (excluding acquisitions), which included $114.6 million for exploration, $205.7 million for development activity and $9.8 million for other spending. Additionally, the company spent approximately $40 million on producing property acquisitions. The company drilled 18 exploration wells and 10 development wells for a success rate of 33 percent and 80 percent, respectively. Energy XXI has budgeted capital expenditures for fiscal year 2009 at $380 million excluding acquisitions, with about $184 million for exploration, $194 million for development activity, and $2 million for other spending.
Proved reserves at June 30, 2008 totaled 51.5 million BOE, compared with 55.6 million BOE booked at June 30, 2007. During fiscal year 2008, Energy XXI added 3.8 million BOE of proved reserves through discoveries and extensions of existing fields and 1.7 million BOE through acquisitions, while producing 9.6 million BOE.
"From our foundation three years ago, Energy XXI has relied upon acquisitions to add reserves, augmented by a strong development program," Schiller said. "Without a significant acquisition in our 2008 fiscal year, our proved reserves declined modestly. Looking ahead, with the exploration program just now beginning to mature, the high-potential wells in our current drilling program could make this a watershed year for Energy XXI, offering organic reserve growth in addition to the core acquisition strategy."
FISCAL 2008 SUMMARY
"Energy XXI entered the new fiscal year in the best position in our three-year history, based on the many accomplishments of fiscal 2008," Schiller said. "The development program delivered strong production volumes and cash flows, the exploration program is looking very encouraging, and our capital structure is greatly improved following the warrant tender in June, which added nearly $240 million of cash to the balance sheet while essentially eliminating the warrant overhang. We are optimistic about the opportunities we are pursuing in fiscal 2009, tempered only by the impact of hurricanes on our operating results."
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