Energy XXI Says 7% of its Pre-Storm Production Off-line Indefinitely

Energy XXI (Bermuda) Limited provided an operational update related to storm impacts.

Energy XXI safely evacuated all operating personnel and shut in a majority of its production ahead of Hurricane Ike. Following the storm, inspections have revealed limited damage to company-operated facilities from Hurricane Ike, although two non-operated fields accounting for approximately 1,750 barrels of oil equivalent per day (BOE/d), or about 7 percent of the company's pre-storm net production, will be off-line indefinitely due to toppled production platforms.

The Eugene Island 330 field, in which Energy XXI holds a 17.5 percent working interest, has lost its two primary producing platforms, which accounted for approximately 1,200 BOE/d of the company's net production prior to the recent storms. In addition, a single well at Ewing Bank 948 that had been producing about 550 BOE/d net is off-line due to the loss of the third-party platform through which it produced via sub-sea tie-back.  These outages are incremental to the 300 BOE/d of net volumes knocked offline by Hurricane Gustav due to the loss of a small producing platform at South Timbalier 21.  Assessments will be conducted to determine potential redevelopment options at all three locations.

The company's total clean-up and repair costs related to Hurricane Ike are expected to be capped at its $7.5 million insurance deductible. Energy XXI does not purchase business interruption insurance. There have been no reported injuries to personnel or environmental impacts related to the company's properties.

Restoration efforts following Hurricane Gustav were delayed further by Hurricane Ike, but have since resumed. 

As of today, Sept. 18, the company's production has reached about 10,000 BOE/d, or approximately 38 percent of pre-storm levels. Due to the effects of Hurricanes Gustav and Ike, Energy XXI estimates that production for the quarter ending Sept. 30 will average approximately 18,000 BOE/d.  In addition to the indefinite delay of volumes from the Eugene Island 330 and Ewing Banks 948 fields, production constraints could continue beyond September, depending on the return to service of third-party pipelines and related facilities. Energy XXI expects quarterly production to exceed its hedged volumes.  Lehman Brothers is a minor participant in the company's outstanding hedges and revolving credit facility. Their bankruptcy filing is expected to have no material impact on the company. 

Key Field and Rig Status

With the exception of Eugene Island 330, all of the company's key fields are expected to be restored to production once third-party take-away pipelines are placed back in service, although some may flow at constrained levels while portions of the pipeline systems remain under repair. The current status of key fields follows.


Eastern Gulf Fields

  • Main Pass 61 - Production was fully restored as of Sept. 16;

  • Main Pass 72/73 - Production was fully restored as of Sept. 16; 

  • South Pass 49 - All top side facilities are ready to flow; volumes remain shut-in due to a leak in the third-party-operated oil sales line and water damage at a related third-party facility at South Pass 24.

Central Gulf Fields

  • South Timbalier 21:

    • The ST-21 D&H platform's 6-inch departing gas sales line and 14-inch low-pressure gas loop line are damaged; repairs are underway;

    • The Gulf South take-away pipeline that handles most of the natural gas production from South Timbalier 21 sustained damage at Timbalier Island during Hurricane Gustav and is expected to be off-line for up to a month.

  • East Cameron 334/335 - These fields had been returned to partial production Sept. 8 and were shut in again for Hurricane Ike. The third-party take-away pipeline servicing the area has reportedly sustained additional damage that will likely require several weeks to repair.

Onshore/Gulf Coast Fields

  • Rabbit Island - The field facilities incurred no significant damage; awaiting third-party pipeline availability, expected in the near term;

  • Lake Salvador - No significant damage was incurred; the Joe McHugh field flowed throughout Hurricane Ike; awaiting flood waters to recede in some other areas;

  • Laphroaig - No significant damage was incurred; production is curtailed approximately 20 percent awaiting third-party pipeline availability, expected in the near term.

Other Activity

The company's operational headquarters in downtown Houston also were safely evacuated ahead of Hurricane Ike's landfall. While most Houston-area residents have experienced electrical power outages and varying degrees of home damage due to the storm, there have been no reported injuries to personnel, and the company's offices have re-opened and daily corporate functions have resumed.

Of the eight rigs drilling wells in which Energy XXI has an interest, the three land rigs continued operations throughout the storm. The remainder, which include three barge rigs and two offshore rigs, were safely evacuated ahead of the storm and have since returned to operations.


Read more on the aftermath of Hurricane Ike in Rigzone's Special Coverage After the Storm.