EX-99.1 2 ex99_1.htm EXHIBIT 99.1 ex99_1.htm
Exhibit 99.1
 

Energy XXI Reports Fiscal Second-Quarter Results
 
·  
Volumes and discretionary cash flow rise 66 percent from prior-year second quarter

HOUSTON – Feb. 4, 2008 – Energy XXI (Bermuda) Limited (NASDAQ: EXXI) (AIM: EXXI, EXXS) today announced fiscal second-quarter financial and operating results for the period ended Dec. 31, 2007.
“Higher realized prices for our oil and natural gas production, combined with continued strong operating results, helped the company achieve record-high revenues and EBITDA in this year’s fiscal second quarter,” Energy XXI Chairman and CEO John Schiller said.
For the 2008 fiscal second quarter, revenues were $153.7 million and earnings before interest, taxes, depreciation, depletion and amortization (EBITDA) totaled $111.9 million, compared with revenues of $79.1 million and EBITDA of $60.4 million in the 2007 fiscal second quarter.  Net income was $6.5 million, or $.07 per diluted share, compared with net income of $10.4 million, or $.12 per diluted share, in the 2007 fiscal second quarter.
Net cash provided by operating activities totaled $48.2 million for the 2008 fiscal second quarter, compared with $64.9 million in the 2007 fiscal second quarter.  Discretionary cash flow was $88.4 million in the 2008 fiscal second quarter, compared with $53.3 million in the 2007 fiscal second quarter.
For the 2008 fiscal second quarter, sales volumes averaged 26,000 barrels of oil equivalent per day (BOE/d), compared with 15,700 BOE/d in the 2007 fiscal second quarter.  The net realized price received for the company’s production in the 2008 fiscal second quarter averaged $64.24 per BOE, including a $3.56 per BOE reduction due to hedging, compared with a net realized price of $54.71 per BOE, including a $7.19 per BOE contribution from hedging, in the 2007 fiscal second quarter.

Capital Expenditures
During the 2008 fiscal second quarter, capital expenditures totaled $91.7 million.  The fiscal-year 2008 capital budget, excluding acquisitions, is unchanged at approximately $260 million.

2nd Quarter Operational Highlights
During the fiscal second quarter, Energy XXI continued to implement its exploration and development program, details of which are provided in the attached Operations Report.

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“Our capital program through the first half of our fiscal year was weighted toward development work, which has resulted in the completion and start-up of several important wells,” Energy XXI President and Chief Operating Officer Steve Weyel said.  “These achievements were masked during our fiscal second quarter primarily due to down-time associated with a major integrated oil company’s pipeline outage.  By January, however, our volumes reached record levels in excess of 29,000 BOE/d.  We are continuing to work to improve the on-line performance of our facilities in order to maximize daily volumes.”
Weyel said exploration is expected to have a more significant impact during the second half of fiscal-year 2008, which ends June 30.
“Several high-potential exploration wells are expected to be drilled before our June year-end,” Weyel said.  “In addition, development work has begun on recently acquired properties such as the Main Pass 61 fields.”

Conference Call Tomorrowat 10 a.m. CST, 4p.m. LondonTime
Energy XXI will host its second-quarter conference call tomorrow, Tuesday, Feb. 5, 2008,at 10 a.m. CST (4 p.m. Londontime). The dial-in number is 1 (913) 312-1393in the U.S.and 08081 011 402 in the U.K., and the confirmation code is 1490663. For complete instructions on how to actively participate in the conference call, or to listen to the live audio webcast or a replay, please refer to www.energyxxi.com.

Forward-Looking Statements
All statements included in this release relating to future plans, projects, events or conditions and all other statements other than statements of historical fact included in this release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based upon current expectations and are subject to a number of risks, uncertainties and assumptions, including changes in long-term oil and gas prices or other market conditions affecting the oil and gas industry, reservoir performance, the outcome of commercial negotiations and changes in technical or operating conditions, among others, that could cause actual results, including project plans and related expenditures and resource recoveries, to differ materially from those described in the forward-looking statements. Energy XXI assumes no obligation and expressly disclaims any duty to update the information contained herein except as required by law.

Competent Person Disclosure
The technical information contained in this announcement relating to operations (including information in the attached Operations Report) adheres to the standard set by the Society of Petroleum Engineers.  Tom O’Donnell, Vice President of Corporate Development, a registered Petroleum Engineer, is the qualified person who has reviewed and approved the technical information contained in this announcement.

About the Company
Energy XXI is an independent oil and natural gas exploration and production company whose growth strategy emphasizes acquisitions, enhanced by its value-added organic drilling program. The company’s properties are primarily located in the U.S. Gulf of Mexico waters and the Gulf Coast onshore. Collins Stewart Europe Limited and Tristone Capital Limited are Energy XXI listing brokers in the United Kingdom.  In the United States, BMO Capital Markets, Collins Stewart, Dahlman Rose & Co., Jefferies & Company, Natixis Bleichroeder and Sterne Agee & Leach, Inc. are market makers. To learn more, visit the Energy XXI website at www.energyxxi.com.

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ENERGY XXI (BERMUDA) LIMITED
CONSOLIDATED BALANCE SHEETS
(In Thousands, except share information)

   
December 31,
    
June 30,
  
   
2007
    
2007
  
   
(Unaudited)
        
ASSETS
            
Current Assets
            
Cash and cash equivalents
   $ 11,500     $ 19,784  
Accounts receivable
                
Oil and natural gas sales
     68,565       55,763  
Joint interest billings
     26,676       14,377  
Insurance and other
     12,600       958  
Prepaid expenses and other current assets
     32,987       21,870  
Deferred income taxes
     12,629       —  
Royalty deposits
     9,928       2,175  
Derivative financial instruments
     1,951       17,131  
Total Current Assets
     176,836       132,058  
Property and Equipment, net of accumulated depreciation, depletion, and amortization
                
Oil and natural gas properties - full cost method of accounting
     1,541,694       1,491,685  
Other property and equipment
     5,410       3,097  
Total Property and Equipment
     1,547,104       1,494,782  
Other Assets
                
Debt issuance costs, net of accumulated amortization
     19,087       20,986  
Derivative financial instruments
     —       616  
Total Other Assets
     19,087       21,602  
Total Assets
   $ 1,743,027     $ 1,648,442  

LIABILITIES
            
Current Liabilities
            
Accounts payable
   $ 80,133     $ 79,563  
Advances from joint interest partners
     2,587       2,026  
Accrued liabilities
     34,268       33,459  
Deferred income taxes
     —       1,044  
Derivative financial instruments
     43,390       1,480  
Note payable
     8,256       —  
Current maturities of long-term debt
     5,754       5,508  
Total current liabilities
     174,388       123,080  
Long-term debt, less current maturities
     1,114,442       1,045,511  
Deferred income taxes
     176       14,788  
Asset retirement obligations
     66,446       63,364  
Derivative financial instruments
     42,866       4,573  
Total Liabilities
     1,398,318       1,251,316  
Commitments and Contingencies (Note 12)
                
Stockholders’ Equity
                
Preferred stock, $0.01 par value, 2,500,000 shares authorized and no shares issued at December 31, 2007 and June 30, 2007
     —       —  
Common stock, $0.001 par value, 400,000,000 shares authorized and 84,511,906 and 84,203,444 issued and outstanding at December 31, 2007 and June 30, 2007, respectively
     84       84  
Additional paid-in capital
     363,305       363,206  
Retained earnings
     39,434       31,072  
Accumulated other comprehensive income (loss), net of tax
     (58,114 )     2,764  
Total Stockholders’ Equity
     344,709       397,126  
Total Liabilities and Stockholders’ Equity
   $ 1,743,027     $ 1,648,442  



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ENERGY XXI (BERMUDA) LIMITED
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, except per share information)
(Unaudited)

   
Three Months Ended
    
Six Months Ended
  
   
December 31,
    
December 31,
  
   
2007
    
2006
    
2007
    
2006
  
                         
Revenues
                        
Oil sales
   $ 93,322     $ 43,954     $ 180,895     $ 79,106  
Natural gas sales
     60,403       35,189       116,438       65,854  
Total Revenues
     153,725       79,143       297,333       144,960  
                                 
Costs and Expenses
                                
Lease operating expense
     34,043       12,787       64,736       27,468  
Production taxes
     1,272       407       3,232       1,218  
Depreciation, depletion and amortization
     75,406       31,711       148,659       59,455  
Accretion of asset retirement obligation
     1,989       871       3,749       1,742  
General and administrative expense
     5,644       5,573       11,415       10,591  
Gain on derivative financial instruments
     (1,086 )     (853 )     (44 )     (1,558 )
Total Costs and Expenses
     117,268       50,496       231,747       98,916  
                                 
Operating Income
     36,457       28,647       65,586       46,044  
                                 
Other Income (Expense)
                                
Interest income
     403       866       901       1,292  
Interest expense
     (26,819 )     (12,148 )     (53,630 )     (27,007 )
Total Other Income (Expense)
     (26,416 )     (11,282 )     (52,729 )     (25,715 )
                                 
Income Before Income Taxes
     10,041       17,365       12,857       20,329  
                                 
Provision for Income Taxes
     3,566       6,957       4,495       7,988  
                                 
Net Income
   $ 6,475     $ 10,408     $ 8,362     $ 12,341  
                                 
Earnings Per Share
                                
Basic
   $ 0.08     $ 0.12     $ 0.10     $ 0.15  
Diluted
   $ 0.07     $ 0.12     $ 0.09     $ 0.15  
                                 
Weighted Average Number of Common Shares Outstanding
                                
Basic
     84,141       83,973       84,138       83,817  
Diluted
     86,506       83,973       90,262       83,817  



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ENERGY XXI (BERMUDA) LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)

   
Three Months Ended
    
Six Months Ended
  
   
December 31,
    
December 31,
  
   
2007
    
2006
    
2007
    
2006
  
                         
Cash Flows From Operating Activities
                        
Net income
   $ 6,475     $ 10,408     $ 8,362     $ 12,341  
Adjustments to reconcile net income to net cash  provided by (used in) operating activities:
                                
Deferred income tax expense
     3,566       6,957       4,495       7,988  
Change in derivative financial instruments
     (486 )     3,060       (508 )     6,391  
Accretion of asset retirement obligations
     1,989       871       3,749       1,742  
Depletion, depreciation, and amortization
     75,406       31,711       148,659       59,455  
Amortization and write-off of debt issuance costs
     1,454       306       2,574       5,673  
Common stock issued to Directors for services
     —       —       67       —  
Changes in operating assets and liabilities
                                
Accounts receivable
     (12,643 )     27,158       (33,895 )     7,038  
Prepaid expenses and other current assets
     875       (15,787 )     (18,870 )     (26,167 )
Accounts payable and other liabilities
     (28,454 )     175       10,221       8,059  
Net Cash Provided by Operating Activities
     48,182       64,859       124,854       82,520  
                                 
                                 
Cash Flows from Investing Activities
                                
Acquisitions
     (26,845 )     (1,304 )     (30,366 )     (302,481 )
Capital expenditures
     (91,729 )     (71,855 )     (171,218 )     (120,364 )
Proceeds from the sale of oil and natural gas properties
     —       —       —       1,400  
Insurance payments
     —       (4,581 )     —       —  
Other
     (35 )     (1,780 )     (33 )     760  
Net Cash Used in Investing Activities
     (118,609 )     (79,520 )     (201,617 )     (420,685 )
                                 
Cash Flows from Financing Activities
                                
Proceeds from the issuance of common stock
     —       (7,326 )     32       13,059  
Proceeds from long-term debt
     163,135       30,000       183,135       299,000  
Payments on long-term debt
     (91,135 )     —       (111,135 )     (14,625 )
Payments on put financing
     (1,385 )     (4,186 )     (2,875 )     (5,019 )
Debt issuance costs
     (675 )     (13 )     (675 )     (4,754 )
Other
     (13 )     (630 )     (3 )     (630 )
Net Cash Provided by Financing Activities
     69,927       17,845       68,479       287,031  
                                 
Net Increase (Decrease) in Cash and Cash Equivalents
     (500 )     3,184       (8,284 )     (51,134 )
                                 
Cash and Cash Equivalents, beginning of period
     12,000       8,071       19,784       62,389  
                                 
Cash and Cash Equivalents, end of period
   $ 11,500     $ 11,255     $ 11,500     $ 11,255  








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ENERGY XXI (BERMUDA) LIMITED
CONSOLIDATED OPERATING RESULTS
(In Thousands, except per unit amounts)(Unaudited)
             
   
Quarter Ended
        
   
Dec. 31,2006
    
March 31, 2007
    
June 30,2007
    
Sept. 30, 2007
    
Dec. 31, 2007
        
   
Twelve Months Ended
Dec. 31,2007
  
                                     
Operating Revenues
   $ 79,143     $ 77,608     $ 118,716     $ 143,608     $ 153,725     $ 493,657  
                                                 
Operating Expenses
                                                
Lease operating expense
                                                
Insurance expense
     2,653       4,866       2,489       4,832       4,812       16,999  
Workover expense
     (495 )     1,910       5,532       5,720       4,489       17,651  
 Other lease operating expense
     10,629       9,575       17,145       20,141       24,742       71,603  
  Total lease operating expense
     12,787       16,351       25,166       30,693       34,043       106,253  
Production taxes
     407       1,691       686       1,960       1,272       5,609  
DD&A
     31,711       28,600       57,873       73,253       75,406       235,132  
General and administrative
     5,573       5,733       10,183       5,771       5,644       27,331  
Other – net
     18       (675 )     1,545       2,802       903       4,575  
Total operating expenses
     50,496       51,700       95,453       114,479       117,268       378,900  
Operating Income
   $ 28,647     $ 25,908     $ 23,263     $ 29,129     $ 36,457     $ 114,757  
                                                 
Sales Volumes per Day
                                                
   Natural gas (MMcf)
     52.1       42.1       60.0       83.5       78.1       66.1  
   Crude oil (MBbls)
     7.0       7.5       10.9       12.3       13.0       10.9  
      Total (MBOE)
     15.7       14.5       20.9       26.2       26.0       21.9  
                                                 
Average Sales Price
                                                
    Natural gas per Mcf
   $ 6.67     $ 7.77     $ 7.78     $ 5.83     $ 7.48     $ 6.47  
    Hedge gainper Mcf
     0.67       1.43       0.80       1.46       0.93       1.05  
        Total natural gas per Mcf
   $ 7.34     $ 9.20     $ 8.58     $ 7.29     $ 8.41     $ 7.52  
                                                 
    Crude oil per Bbl
   $ 56.77     $ 56.24     $ 67.46     $ 79.19     $ 90.71     $ 73.31  
    Hedge gain (loss) per Bbl
     11.14       7.36       5.21       (1.52 )     (12.68 )     (1.64 )
        Total crude oil per Bbl
   $ 67.91     $ 63.60     $ 72.67     $ 77.67     $ 78.03     $ 71.67  
                                                 
    Hedge gain (loss) per BOE
   $ 7.19     $ 7.95     $ 5.03     $ 3.94     $ (3.56 )     2.45  
                                                 
 Operating Revenues per BOE
   $ 54.71     $ 59.54     $ 62.53     $ 59.63     $ 64.24     $ 61.68  
                                                 
Operating Expenses per BOE
                                                
Lease operating expense
                                                
Insurance expense
     1.83       3.73       1.31       2.00       2.01       2.12  
Workover expense
     (0.34 )     1.47       2.91       2.38       1.88       2.21  
 Other lease operating expense
     7.35       7.34       9.03       8.36       10.34       8.95  
  Total lease operating expense
     8.84       12.54       13.25       12.74       14.23       13.28  
Production taxes
     0.28       1.30       0.36       0.81       0.53       0.70  
DD&A
     21.92       21.94       30.48       30.42       31.51       29.38  
General and administrative
     3.85       4.40       5.37       2.40       2.36       3.41  
Other– net
     0.02       (0.52 )     0.82       1.16       0.38       0.57  
Total operating expenses
     34.91       39.66       50.28       47.53       49.01       47.34  
Operating Incomeper BOE
   $ 19.80     $ 19.88     $ 12.25       12.10     $ 15.23     $ 14.34  


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ENERGY XXI (BERMUDA) LIMITED
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(In Thousands, except per share information)
(Unaudited)


As required under Regulation G of the Securities Exchange Act of 1934, provided below are reconciliations of net income to the following non-GAAP financial measures: EBITDA and discretionary cash flow. The company uses these non-GAAP measures as key metrics for the management of the company and to demonstrate the company’s ability to internally fund capital expenditures and service debt.  The non-GAAP measures are useful in comparisons of oil and gas exploration and production companies as they exclude non-operating fluctuations in assets and liabilities.


   
Three Months Ended
    
Six Months Ended
  
   
December 31,
    
December 31,
  
   
2007
    
2006
    
2007
    
2006
  
                         
Net Income as Reported
   $ 6,475     $ 10,408     $ 8,362     $ 12,341  
                                 
   Total other (income) expense
     26,416       11,282       52,729       25,715  
   Depreciation, depletion and amortization
     75,406       31,711       148,659       59,455  
   Provision for income taxes
     3,566       6,957       4,495       7,988  
                                 
EBITDA
   $ 111,863     $ 60,358     $ 214,245     $ 105,499  
                                 
EBITDA Per Share
                                
Basic
   $ 1.33     $ 0.72     $ 2.55     $ 1.26  
Diluted
   $ 1.29     $ 0.72     $ 2.37     $ 1.26  
                                 
Weighted Average Number of Common Shares Outstanding
                                
Basic
     84,141       83,973       84,138       83,817  
Diluted
     86,506       83,973       90,262       83,817  
                                 
                                 
                                 
                                 
Net Income as Reported
   $ 6,475     $ 10,408     $ 8,362     $ 12,341  
                                 
   Deferred income tax expense
     3,566       6,957       4,495       7,988  
   Change in derivative financial instruments
     (486 )     3,060       (508 )     6,391  
   Accretion of asset retirement obligations
     1,989       871       3,749       1,742  
   Depletion, depreciation, and amortization
     75,406       31,711       148,659       59,455  
   Amortization and write-off of debt issuance costs
     1,454       306       2,574       5,673  
   Common stock issued to Directors for services
     —       —       67       —  
                                 
Discretionary Cash Flow
   $ 88,404     $ 53,313     $ 167,398     $ 93,590  


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ENERGY XXI (BERMUDA) LIMITED
SUMMARY OF HEDGE POSITIONS AS OF FEBRUARY 4, 2008
Natural Gas(000 MMBTU)
  
Crude Oil(000 BBL)
                         
     
Average
        
Average
Qtr
Instrument
Volume
Sub
Floor
Cap
  
Qtr
Instrument
Volume
Sub
Floor
Cap
                         
Q308
Swaps
4,370
  
8.44
8.44
  
Q308
Swaps
670
  
76.41
76.41
 
3-Way Collars
1,500
5.70
7.45
10.10
    
3-Way Collars
240
54.25
67.30
78.49
 
Collars
1,002
  
8.00
10.52
    
Collars
162
  
64.79
76.56
 
Puts
140
  
8.00
      
Puts
33
  
60.00
  
 
Put Spreads
1,540
6.00
8.00
                
                         
Q408
Swaps
2,730
  
8.64
8.64
  
Q408
Swaps
564
  
75.96
75.96
 
3-Way Collars
1,420
5.68
7.42
10.10
    
3-Way Collars
208
54.13
67.19
78.50
 
Collars
848
  
7.98
10.49
    
Collars
189
  
65.46
76.36
 
Puts
120
  
8.00
      
Puts
30
  
60.00
  
 
Put Spreads
1,390
6.00
8.00
                
                         
Q109
Swaps
1,480
  
8.78
8.78
  
Q109
Swaps
364
  
70.38
70.38
 
3-Way Collars
1,340
5.66
7.38
10.11
    
3-Way Collars
205
54.12
67.44
78.99
 
Collars
744
  
7.97
10.46
    
Collars
55
  
60.00
78.00
 
Puts
120
  
8.00
      
Puts
27
  
60.00
  
 
Put Spreads
1,280
6.00
8.00
                
                         
Q209
Swaps
1,820
  
8.77
8.77
  
Q209
Swaps
320
  
70.37
70.37
 
3-Way Collars
1,250
5.63
7.34
10.12
    
3-Way Collars
184
54.02
67.40
79.09
 
Collars
685
  
7.97
10.43
    
Collars
51
  
60.00
78.00
 
Puts
110
  
8.00
      
Puts
26
  
60.00
  
 
Put Spreads
1,170
6.00
8.00
                
                         
Q309
Swaps
1,920
  
8.62
8.62
  
Q309
Swaps
325
  
70.85
70.85
 
3-Way Collars
1,040
6.00
8.09
9.97
    
3-Way Collars
170
53.94
67.24
78.94
 
Collars
302
  
7.72
9.96
              
                         
Q409
Swaps
1,720
  
8.46
8.46
  
Q409
Swaps
303
  
70.86
70.86
 
3-Way Collars
930
6.00
8.10
9.96
    
3-Way Collars
137
53.69
67.37
79.66
 
Collars
289
  
7.73
9.91
              
                         
Q110
Swaps
1,530
  
8.46
8.46
  
Q110
Swaps
277
  
70.97
70.97
 
3-Way Collars
820
6.00
8.11
9.96
    
3-Way Collars
111
53.38
67.52
80.49
 
Collars
137
  
8.00
8.85
              
                         
Q210
Swaps
1,390
  
8.46
8.46
  
Q210
Swaps
257
  
71.01
71.01
 
3-Way Collars
740
6.00
8.12
9.95
    
3-Way Collars
87
52.93
67.70
81.64
 
Collars
137
  
8.00
8.85
              
                         
Q310
Swaps
1,700
  
8.12
8.12
  
Q310
Swaps
238
  
70.86
70.86
 
3-Way Collars
180
6.00
8.50
9.80
    
3-Way Collars
68
52.35
67.35
82.05
               
Collars
132
  
75.00
102.00
                         
Q410
Swaps
1,500
  
8.12
8.12
  
Q410
Swaps
215
  
70.89
70.89
 
3-Way Collars
180
6.00
8.50
9.80
    
3-Way Collars
60
52.00
67.00
82.04
               
Collars
122
  
75.00
102.00
                         
Q111
Swaps
1,380
  
8.12
8.12
  
Q111
Swaps
193
  
70.93
70.93
 
3-Way Collars
180
6.00
8.50
9.80
    
3-Way Collars
52
51.54
66.54
82.03
               
Collars
110
  
75.00
102.00
                         
Q211
Swaps
1,280
  
8.12
8.12
  
Q211
Swaps
171
  
70.96
70.96
 
3-Way Collars
180
6.00
8.50
9.80
    
3-Way Collars
45
50.95
65.95
82.02
               
Collars
102
  
75.00
102.00
Includes production for January 2008 and later; Quarters based on June 30 fiscal year-end
All prices are weight-averaged by contract volume

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FY 2008 2nd Quarter Operations Report

EXXI Fiscal 2nd Quarter 2008 Drilling Results
Exploration
Development
Total
Gross
Net
Gross
Net
Gross
Net
Operated
Oil
0
0
1
1
1
1
Gas
0
0
0
0
0
0
Dry
0
0
0
0
0
0
Non-Operated
Oil
0
0
0
0
0
0
Gas
1
0.25
1
0.1625
2
0.4125
Dry
5
1.625
0
0
5
1.625
Total
6
1.875
2
1.1625
8
3.0375
         
Exploration
Development
Total
Success Rates
17%
13%
100%
100%
38%
47%
         
Exploration
Development
Total
Onshore
6
1
7
Offshore
0
1
1
Total
6
2
8

Gulf Of Mexico Shelf Highlights

South Timbalier 21 (100% WI)
South Timbalier 21 net production averaged 7,109 BOE/d during the fiscal second quarter.  One drilling rig remained active throughout the quarter, while a second rig was added in October to accelerate the completion of the Beaujolais discovery well and two well workovers in response to higher oil prices.  This rig activity, while successfully increasing deliverability from the field to more than 9,000 BOE/d (net), resulted in production interruptions during the quarter as facilities were temporarily shut-in.
The Beaujolais well, which finished drilling on 9/16/07, was dual completed in the D-15 and D-18 sands and placed on production in late December.  The well recently tested at 1,250 BOE/d (net).
The Pinot development well reached TD of 12,036’ on 11/10/07.  The well encountered 40’ of net oil pay in the D-10, D-5, D-4 and S-4 sands.  It was dual completed in late December in the D-5 and D-10 sands and recently tested at 775 BOE/d (net).
The Sangria development well reached TD of 14,112’ and encountered 8’ of pay in the D-7 sand.  Completion activities are in progress, with production expected to begin in late February at an initial anticipated rate of about 700 BOE/d (net).

Acquired Pogo Properties
The Gulf of Mexico shelf properties acquired in June 2007 from Pogo Producing Company averaged 9,723 BOE/d (net) during the fiscal second quarter, a 25% increase relative to the preceding quarter.  Almost $10 million of reimbursable spending on Minerals Management Service (MMS) compliance work in just five months helped volumes hit a two-year high, with no drilling or workovers. The properties were also formally released from MMS probation.
Following facility upgrades, including replacement of separation and compression units, gas lift optimization and acid stimulations on four D-69/D-70 sand wells are planned for South Pass 49.
The Ensco 82 rig will arrive at Main Pass 61-B early February to begin a recompletion on B-1 and a new-drill on B-6.  A second rig is expected to be added in June for Main Pass 61-A&C.

- 9 -
South Louisiana Onshore Highlights

Golden Meadow
·  
LL&E #232 (25% WI), Lafourche Parish – spud 9/22/07 and reached a TD of 14,000’ on 10/12/07; encountered more than 100’ gross pay in the main objective; completed and tested in January at 82 BOPD and 2.2 MMcf/d (gross).

South Lake Verret
·  
Jeanerett Lumber & Shingle 34-1 (100% WI), St. Martin Parish – previously encountered zones of interest were completed and evaluated; deemed non-economic for production.

Eugene Island
·  
SL 17695 #1 (35% WI) (Comus Prospect), Iberia Parish – spud 12/22/07 with a proposed TD of 13,800’; currently drilling at 12,920’.

Cote de Mer
·  
McIlhenny #1 (35% WI) (Cote de Mer Prospect), Vermillion Parish – control operations completed in January; Coastal rig 21 expected onsite mid-February to sidetrack at approximately 14,000’ and resume drilling toward proposed TD of 21,932’.

Rabbit Island
·  
‘J’ Prospect, SL 340 #7 (39% WI), Iberia / St. Mary Parish – spud 11/30/07 with a proposed TD of 16,600’; currently drilling at 11,425’.

Bourg, South Field
·  
Logan Babin #1 ST-1 (16.25% WI), Terrebonne Parish – spud 10/01/07, TD’d at 13,500’ on 10/18/07; on production in December; recently tested at 510 BOE/d (gross).

West Cote Blanche Bay
·  
SL 340 #1 (25% WI), St. Mary Parish – spud 1/15/08 with a proposed TD of 15,000’; currently drilling at 13,545’.
·  
SL 340 #2, #3 & #4 (25% WI); St. Mary Parish – all three wells spud and were drilled to TD of 2,100’ in late December, testing three oil amplitudes in the same stratigraphic section; two sands were wet and the third was a non-commercial accumulation.  Drilling these low-cost shallow wells ($695,000 net total) preserved the lease (12,000 acres) and earned Energy XXI an interest in the deep oil play targeted by the SL 340 #1 well.



- 10 -


 
GLOSSARY
 
Barrel– unit of measure for oil and petroleum products, equivalent to 42 U.S. gallons.
 
BOE– barrels of oil equivalent, used to equate natural gas volumes to liquid barrels at a general conversion rate of 6,000 cubic feet of gas per barrel.
 
BOE/d– barrels of oil equivalent per day.
 
Field– an area consisting of a single reservoir or multiple reservoirs all grouped on, or related to, the same individual geological structural feature or stratigraphic condition. The field name refers to the surface area, although it may refer to both the surface and the underground productive formations.
 
FTP– flowing tubing pressure.
 
MBOE– thousand barrels of oil equivalent.
 
MMBOE– million barrels of oil equivalent.
 
MD– measured depth.
 
Net Pay– cumulative hydrocarbon-bearing formations.
 
Spud– to begin drilling a well.
 
TD– target total depth of a well.
 
TD’d– to finish drilling a well.
 
TVD– total vertical depth.
 
Workover– operations on a producing well to restore or increase production. A workover may be performed to stimulate the well, remove sand or wax from the wellbore, to mechanically repair the well, or for other reasons.

 



Enquiries of the Company

Energy XXI (Bermuda) Limited
Stewart Lawrence
Vice President, Investor Relations and Communications
+1 713-351-3006
slawrence@energyxxi.com

Collins Stewart Europe Limited
Nominated Adviser and Joint UK Broker
Seema Paterson
+44 207 523 8321
spaterson@collins-stewart.com

Pelham PR
James Henderson
+44 207 743 6673
james.henderson@pelhampr.com
 
Alisdair Haythornthwaite
+44 207 743 6676
alisdair.haythornthwaite@pelhampr.com

 


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