Energy XXI Hits Paydirt at Cote de Mer Prospect in Louisiana

Energy XXI has identified significant incremental natural gas pay sands at its Cote de Mer prospect in Vermilion Parish, Louisiana, lifting the discovery's resource potential to between 89 billion and 108 billion cubic feet equivalent (Bcfe), compared with the previous estimate of between 20 and 40 Bcfe.

The E.A. McIlhenny #1 well on the Cote de Mer prospect was drilled to its target depth of 22,300 feet. Logs indicate that the well encountered at least 80 net feet of natural gas pay in two zones, and possibly another 70 net feet of pay in two additional sands, all within the targeted Cris-A section. Energy XXI holds a 33 percent working interest (WI) and a 24 percent net revenue interest (NRI) in the discovery.

"We are pleased to have successfully drilled the Cote de Mer prospect to target depth, resulting in a sizable natural gas discovery," Energy XXI Chairman and CEO John Schiller said. "We have set casing on the well and expect to test the potential pay zones and bring the well on production within six months."

A third-party independent reservoir engineering firm employed by Energy XXI has estimated the discovery holds gross proved reserves of 88.8 Bcfe, as well as probable and possible resources of 8.9 Bcfe and 10.3 Bcfe, respectively, implying total recoverable resource potential of 108 Bcfe.

In other exploration activity, the Ammazzo deep gas prospect (16 percent WI, 13 percent NRI) is drilling ahead below 16,500 feet towards a proposed total depth of 24,500 feet. The Ammazzo prospect is located in 25 feet of water offshore Louisiana, approximately 15 miles south of the Flatrock and JB Mountain discoveries where operator McMoRan has successfully drilled to the targeted Rob-L, Operc and Gyro sands in the Middle Miocene.

Production Update

Energy XXI volumes have averaged approximately 21,000 barrels of oil equivalent per day (BOE/d) thus far in the fiscal third quarter, on target to achieve a solid increase from the 19,200 BOE/d of production reported for the fiscal second quarter ended Dec. 31, 2008. Volumes continue to be curtailed by approximately 2,000 BOE/d due to third-party pipeline damage inflicted by Hurricanes Gustav and Ike. In addition, nearly 700 BOE/d of net production from the company's Rabbit Island field in Louisiana is offline due to a ruptured third-party pipeline. Most of the pipeline constraints are expected to be resolved and production volumes restored during the company's fiscal fourth quarter.