HOUSTON, Feb. 8, 2015 (GLOBE NEWSWIRE) -- Energy XXI (Nasdaq:EXXI) today announced fiscal second-quarter 2015 results and provided an operations update on activities in the Gulf of Mexico.
Highlights
- Oil production within guidance
- Average Q2 production was 57,900 BOE/d (41,800 barrels of oil per day)
- Average third quarter production to date has averaged 60,000 BOE/d (43,000 barrels of oil per day)
- Operating cost reductions better than guidance with more efficiencies expected
- LOE $119 million versus $142 million in previous quarter
- General and administrative costs, before severance charges, approximated $14 million
- Revenue impact of lower commodity prices mitigated by hedge position
- Adjusted EBITDA $217.0 million versus Bloomberg consensus estimate of $215.3 million
-
Continued progress on asset monetizations
- Non-cash goodwill write-down of $329 million taken primarily due to commodity prices
"We have made great progress in lowering our lease operating costs as well as our general and administrative costs, and expect further reductions in the future," Energy XXI Ltd Chairman, President and Chief Executive Officer John D. Schiller said. "Additionally, we are continuing to pursue and evaluate monetization of our Grand Isle gathering system, as well as evaluating bids on our non-core asset sale. These proceeds will enhance liquidity and reduce long term debt."
Fiscal 2015 Second-Quarter Results
For the 2015 fiscal second quarter, adjusted earnings before non-recurring charges and interest, taxes, depreciation, depletion and amortization (adjusted EBITDA) was $217.0 million (a non-GAAP measure reconciled below), compared with $169.8 million in the 2014 fiscal second quarter. The company reported a net loss available for common stockholders in the 2015 fiscal second quarter of $376.7 million, or $4.01 loss per diluted share (or loss per share of $0.35 before a non-cash goodwill impairment and severance costs), on revenues of $357.8 million, compared with fiscal 2014 second-quarter net income available for common stockholders of $7.6 million, or $0.10 income per diluted share, on revenues of $296.8 million. The company's reported loss on the quarter was primarily due to a non-cash write down on goodwill due to lower commodity prices, as well as executive severance and other severance costs associated with reducing general and administrative and field operating expenses.
Production for the 2015 fiscal second quarter averaged 57,900 net barrels of oil equivalent per day (BOE/d), with 41,800 barrels per day (Bbl/d) liquids, compared with 45,100 net BOE/d, 30,200 Bbl/d liquids in the 2014 fiscal second quarter. Current quarter production has averaged 60,000 BOE/d, of which 43,000 barrels are oil.
Hedging
During the fiscal second quarter, the company monetized certain calendar 2015 crude oil hedges for total cash proceeds of $26 million, and replaced some of those hedges with put spreads for calendar 2015. In late January and early February, the company monetized its three-way and put spread hedges for calendar 2015, receiving $73.1 million in cash proceeds. Following this monetization, the company entered into additional hedges for calendar 2015 and calendar 2016, bringing total crude oil hedges to approximately 72 percent and 39 percent of estimated volumes for those periods.
Operations Update
During the fiscal second quarter eight oil wells were brought online: two horizontal wells at West Delta 73, two oil wells at Main Pass 61, three wells at Ship Shoal 208, and one oil well at West Delta 30. Additionally, one recompletion was brought online at West Delta 30.
The production optimization work in the West Delta area, which includes water handling and compression equipment to alleviate line pressures and allow the company to optimize oil production in the field, should be completed by the end of February. At South Pass 49 the optimization project has been completed and brought online within the past week. Compression equipment was installed to allow for additional capacity, providing initial uplift from the field of approximately 1,000 BOE/d gross.
The company continues to focus on low risk recompletions to maximize capital efficiency. To date 23 recompletion targets have been identified across the core acreage, with another 20 that are being evaluated. The majority of recompletion opportunities are in the South Pass 78 field where the company deployed a workover rig in December 2014. The primary targets for these recompletions are proved developed non-producing reserves. Two wells have already been successfully recompleted with average initial production rate of approximately 450 Bbl/d each.
Divestiture Update
The Grand Isle gathering system was deregulated on February 1, 2015 and we continue to evaluate and pursue the monetization of the asset.
On our potential non-core asset divestiture, being marketed by The Oil & Gas Asset Clearinghouse, bids have been submitted and are being reviewed. The package includes approximately 6,000 BOE/d of production from Energy XXI from approximately 30 fields.
Capital Expenditures
During the 2015 fiscal second quarter, capital expenditures totaled $202 million, with $12.1 million in exploration and $189.9 million in development and other costs. Currently, the company is estimating the total fiscal 2015 capital program to range from $670 million to $690 million. As of December 31, 2014 the company had $434 million of available liquidity including $101 million cash.
Guidance
Third-quarter and full-year guidance is provided below.
| Volume Projections | FY 2015 | 3Q FY15 |
| Net Production (per day) | ||
| Oil, including NGLs (Bbls) | 41,000 - 44,000 | 41,000-44,000 |
| BOE | 57,000 – 61,000 | 58,000-62,000 |
|
% Oil, including NGLs (using midpoint of guidance) |
71% | 71% |
| FY15 Cost Projections ($MM) |
2Q Actuals |
3Q proj. |
| LOE | 119 | 115-125 |
| G&A | 28* | 16-20 |
| Gathering & Transport | 4.8 | 4-7 |
| DD&A | 33.29/BOE | 32.00-34.50/BOE |
| *includes non-recurring charges | ||
| Quarter Ended | |||||
| December 31, | September 30, | June 30, | March 31, | December 31, | |
| Operating Highlights | 2014 | 2014 | 2014 | 2014 | 2013 |
| (In thousands, except per unit amounts) | |||||
| Operating revenues | |||||
| Crude oil sales | $ 279,163 | $ 370,155 | $ 294,974 | $ 254,641 | $ 263,626 |
| Natural gas sales | 32,345 | 34,561 | 34,508 | 37,562 | 31,138 |
| Hedge gain (loss) | 46,247 | (1,485) | (5,348) | (7,020) | 2,052 |
| Total revenues | 357,755 | 403,231 | 324,134 | 285,183 | 296,816 |
| Percentage of operating revenues from crude oil | |||||
| Prior to hedge gain (loss) | 90% | 91% | 90% | 87% | 89% |
| Including hedge gain (loss) | 91% | 91% | 89% | 88% | 88% |
| Operating expenses | |||||
| Lease operating expense | |||||
| Insurance expense | 11,233 | 11,022 | 8,357 | 6,410 | 7,920 |
| Workover and maintenance | 13,130 | 29,416 | 14,408 | 17,797 | 19,690 |
| Direct lease operating expense | 95,003 | 102,147 | 79,806 | 59,417 | 66,179 |
| Total lease operating expense | 119,366 | 142,585 | 102,571 | 83,624 | 93,789 |
| Production taxes | 2,263 | 3,093 | 1,750 | 1,090 | 1,189 |
| Gathering and transportation | 4,771 | 9,188 | 6,509 | 5,700 | 5,978 |
| DD&A | 177,333 | 161,266 | 119,691 | 99,899 | 103,513 |
| Goodwill impairment | 329,293 | -- | -- | -- | -- |
| General and administrative | 27,745 | 26,424 | 30,824 | 24,208 | 17,698 |
| Other - net | 11,912 | 9,536 | 8,112 | 5,861 | 13,147 |
| Total operating expenses | 672,683 | 352,092 | 269,457 | 220,382 | 235,314 |
| Operating income (loss) | $ (314,928) | $ 51,139 | $ 54,677 | $ 64,801 | $ 61,502 |
| Sales volumes per day | |||||
| Natural gas (MMcf) | 96.5 | 100.7 | 84.8 | 83.7 | 89.3 |
| Crude oil (MBbls) | 41.8 | 41.8 | 32.0 | 28.4 | 30.2 |
| Total (MBOE) | 57.9 | 58.6 | 46.1 | 42.3 | 45.1 |
| Percent of sales volumes from crude oil | 72% | 71% | 69% | 67% | 67% |
| Average sales price | |||||
| Natural gas per Mcf | 3.64 | 3.73 | 4.47 | 4.98 | 3.79 |
| Hedge gain (loss) per Mcf | 0.09 | 0.02 | (0.02) | (0.31) | 0.42 |
| Total natural gas per Mcf | $ 3.73 | $ 3.75 | $ 4.45 | $ 4.67 | $ 4.21 |
| Crude oil per Bbl | 72.56 | 96.28 | 101.45 | 99.71 | 94.85 |
| Hedge gain (loss) per Bbl | 11.82 | (0.43) | (1.78) | (1.83) | (0.50) |
| Total crude oil per Bbl | $ 84.38 | $ 95.85 | $ 99.67 | $ 97.88 | $ 94.35 |
| Total hedge gain (loss) per BOE | 8.68 | (0.28) | (1.28) | (1.83) | 0.49 |
| Operating revenues per BOE | $ 67.15 | $ 74.84 | $ 77.28 | $ 74.85 | $ 71.54 |
| Operating expenses per BOE | |||||
| Lease operating expense | |||||
| Insurance expense | 2.11 | 2.05 | 1.99 | 1.68 | 1.91 |
| Workover and maintenance | 2.46 | 5.46 | 3.44 | 4.67 | 4.75 |
| Direct lease operating expense | 17.83 | 18.96 | 19.03 | 15.59 | 15.95 |
| Total lease operating expense per BOE | 22.40 | 26.47 | 24.46 | 21.94 | 22.61 |
| Production taxes | 0.42 | 0.57 | 0.42 | 0.29 | 0.29 |
| Gathering and transportation | 0.90 | 1.71 | 1.55 | 1.50 | 1.44 |
| DD&A | 33.29 | 29.93 | 28.54 | 26.22 | 24.95 |
| Goodwill impairment | 61.81 | -- | -- | -- | -- |
| General and administrative | 5.21 | 4.90 | 7.35 | 6.35 | 4.27 |
| Other - net | 2.23 | 1.77 | 1.93 | 1.54 | 3.17 |
| Total operating expenses per BOE | 126.26 | 65.35 | 64.25 | 57.84 | 56.73 |
| Operating income (loss) per BOE | $ (59.11) | $ 9.49 | $ 13.03 | $ 17.01 | $ 14.81 |
| ENERGY XXI LTD | ||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
| (In Thousands, except per share information) | ||||
| (Unaudited) | ||||
| Three Months Ended December 31, | Six Months Ended December 31, | |||
| 2014 | 2013 | 2014 | 2013 | |
| Revenues | ||||
| Crude oil sales | $ 324,655 | $ 262,230 | $ 693,156 | $ 551,459 |
| Natural gas sales | 33,100 | 34,586 | 67,830 | 69,949 |
| Total Revenues | 357,755 | 296,816 | 760,986 | 621,408 |
| Costs and Expenses | ||||
| Lease operating | 119,366 | 93,789 | 261,951 | 179,552 |
| Production taxes | 2,263 | 1,189 | 5,356 | 2,587 |
| Gathering and transportation | 4,771 | 5,978 | 13,959 | 11,323 |
| Depreciation, depletion and amortization | 177,333 | 103,513 | 338,599 | 203,729 |
| Accretion of asset retirement obligations | 12,798 | 7,425 | 25,617 | 14,751 |
| Goodwill impairment | 329,293 | -- | 329,293 | -- |
| General and administrative expense | 27,745 | 17,698 | 54,169 | 41,370 |
| (Gain) loss on derivative financial instruments | (886) | 5,722 | (4,169) | 7,163 |
| Total Costs and Expenses | 672,683 | 235,314 | 1,024,775 | 460,475 |
| Operating Income (Loss) | (314,928) | 61,502 | (263,789) | 160,933 |
| Other Income (Expense) | ||||
| Income (loss) from equity method investees | (1,619) | (2,621) | (738) | (4,414) |
| Other income - net | 991 | 913 | 1,942 | 1,435 |
| Interest expense | (66,901) | (38,641) | (133,164) | (68,326) |
| Total Other Expense | (67,529) | (40,349) | (131,960) | (71,305) |
| Income (Loss) Before Income Taxes | (382,457) | 21,153 | (395,749) | 89,628 |
| Income Tax Expense (Benefit) | (8,578) | 10,658 | (15,467) | 35,994 |
| Net Income (Loss) | (373,879) | 10,495 | (380,282) | 53,634 |
| Preferred Stock Dividends | 2,870 | 2,872 | 5,742 | 5,745 |
| Net Income (Loss) Available for Common Stockholders | $ (376,749) | $ 7,623 | $ (386,024) | $ 47,889 |
| Earnings (Loss) per Share | ||||
| Basic | $ (4.01) | $ 0.10 | $ (4.11) | $ 0.64 |
| Diluted | $ (4.01) | $ 0.10 | $ (4.11) | $ 0.64 |
| Weighted Average Number of Common Shares Outstanding | ||||
| Basic | 93,993 | 73,964 | 93,913 | 74,873 |
| Diluted | 93,993 | 74,053 | 93,913 | 74,956 |
ENERGY XXI LTD
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 measure: Adjusted EBITDA. The company uses this non-GAAP measure as a key metric for the management of the company and to demonstrate the company's ability to internally fund capital expenditures and service debt.
| Three Months Ended | Six Months Ended | |||
| December 31, | December 31, | |||
| 2014 | 2013 | 2014 | 2013 | |
| (In Thousands, Except per Unit Amounts) | ||||
| Net Income (Loss) as Reported | $ (373,879) | $ 10,495 | $ (380,282) | $ 53,634 |
| Interest expense - net | 65,910 | 37,728 | 131,222 | 66,891 |
| Depreciation, depletion and amortization | 177,333 | 103,513 | 338,599 | 203,729 |
| Goodwill impairment | 329,293 | -- | 329,293 | -- |
| Income tax expense (benefit) | (8,578) | 10,658 | (15,467) | 35,994 |
| EBITDA | 190,079 | 162,394 | 403,365 | 360,248 |
| Adjustments to EBITDA | ||||
| Accretion of asset retirement obligation | 12,798 | 7,425 | 25,617 | 14,751 |
| Non-recurring charges (severance costs) | 14,122 | -- | 18,757 | -- |
| Adjusted EBITDA | $ 216,999 | $ 169,819 | $ 447,739 | $ 374,999 |
| Adjusted EBITDA Per Share | ||||
| Basic | $ 2.31 | $ 2.30 | $ 4.77 | $ 5.01 |
| Diluted | $ 2.31 | $ 2.29 | $ 4.77 | $ 5.00 |
| Weighted Average Number of Common Shares Outstanding | ||||
| Basic | 93,993 | 73,964 | 93,913 | 74,873 |
| Diluted | 93,993 | 74,053 | 93913 | 74,956 |
| ENERGY XXI LTD | ||
| CONSOLIDATED BALANCE SHEETS | ||
| (In Thousands, except share information) | ||
| December 31, | June 30, | |
| 2014 | 2014 | |
| Current Assets | (Unaudited) | |
| Cash and cash equivalents | $ 101,284 | $ 145,806 |
| Accounts receivable | ||
| Oil and natural gas sales | 102,882 | 167,075 |
| Joint interest billings | 19,098 | 12,898 |
| Other | 30,728 | 5,438 |
| Prepaid expenses and other current assets | 50,178 | 72,530 |
| Deferred income taxes | 11,235 | 52,587 |
| Derivative financial instruments | 150,026 | 1,425 |
| Total Current Assets | 465,431 | 457,759 |
| Property and Equipment | ||
| Oil and natural gas properties, net - full cost method of accounting, including $807.8 million and $1,165.7 million of unevaluated properties not being amortized at December 31, 2014 and June 30, 2014, respectively | 6,642,565 | 6,524,602 |
| Other property and equipment, net | 23,833 | 19,760 |
| Total Property and Equipment, net of accumulated depreciation, depletion, amortization and impairment | 6,666,398 | 6,544,362 |
| Other Assets | ||
| Goodwill | -- | 329,293 |
| Derivative financial instruments | 8,377 | 3,035 |
| Equity investments | 27,685 | 40,643 |
| Restricted Cash | 6,024 | 6,350 |
| Other assets and debt issuance costs, net of accumulated amortization | 50,128 | 57,394 |
| Total Other Assets | 92,214 | 436,715 |
| Total Assets | $ 7,224,043 | $ 7,438,836 |
| LIABILITIES | ||
| Current Liabilities | ||
| Accounts payable | $ 312,568 | $ 417,776 |
| Accrued liabilities | 91,665 | 133,526 |
| Notes payable | 12,175 | 21,967 |
| Asset retirement obligations | 79,573 | 79,649 |
| Derivative financial instruments | -- | 31,957 |
| Current maturities of long-term debt | 21,702 | 15,020 |
| Total Current Liabilities | 517,683 | 699,895 |
| Long-term debt, less current maturities | 3,989,922 | 3,744,624 |
| Deferred income taxes | 713,736 | 701,038 |
| Asset retirement obligations | 470,523 | 480,185 |
| Derivative financial instruments | -- | 4,306 |
| Other liabilities | 8,629 | 10,958 |
| Total Liabilities | 5,700,493 | 5,641,006 |
| Commitments and Contingencies | ||
| Stockholders' Equity | ||
| Preferred stock, $0.001 par value, 7,500,000 shares authorized at December 31, 2014 and June 30, 2014 | ||
|
7.25% Convertible perpetual preferred stock, 3,000 and 8,000 shares issued and outstanding at December 31, 2014 and June 30, 2014, respectively |
-- | -- |
| 5.625% Convertible perpetual preferred stock, 812,759 and 812,760 shares issued and outstanding at December 31, 2014 and June 30, 2014, respectively | 1 | 1 |
| Common stock, $0.005 par value, 200,000,000 shares authorized and 94,395,593 and 93,719,570 shares issued and outstanding at December 31, 2014 and June 30, 2014, respectively | 471 | 468 |
| Additional paid-in capital | 1,842,152 | 1,837,462 |
| Accumulated deficit | (428,200) | (19,626) |
| Accumulated other comprehensive income (loss), net of income taxes | 109,126 | (20,475) |
| Total Stockholders' Equity | 1,523,550 | 1,797,830 |
| Total Liabilities and Stockholders' Equity | $ 7,224,043 | $ 7,438,836 |
| ENERGY XXI LTD | ||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (In Thousands) | ||
| (Unaudited) | ||
| Six Months Ended December 31, | ||
| 2014 | 2013 | |
| Cash Flows From Operating Activities | ||
| Net income (loss) | $ (380,282) | $ 53,634 |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
| Depreciation, depletion and amortization | 338,599 | 203,729 |
| Goodwill impairment | 329,293 | |
| Deferred income tax expense (benefit) | (16,027) | 32,872 |
| Change in derivative financial instruments | ||
| Proceeds from sale of derivative instruments | 29,236 | -- |
| Other – net | (5,449) | (364) |
| Accretion of asset retirement obligations | 25,617 | 14,751 |
| Loss (income) from equity method investees | 738 | 4,414 |
| Amortization and write-off of debt issuance costs and other | 5,615 | 4,555 |
| Stock-based compensation | 2,632 | 3,971 |
| Changes in operating assets and liabilities | ||
| Accounts receivable | 33,819 | 16,999 |
| Prepaid expenses and other current assets | 22,483 | 6,219 |
| Settlement of asset retirement obligations | (53,960) | (34,038) |
| Accounts payable and accrued liabilities | (171,006) | (45,042) |
| Net Cash Provided by Operating Activities | 161,308 | 261,700 |
| Cash Flows from Investing Activities | ||
| Acquisitions | (287) | (12,564) |
| Capital expenditures | (449,114) | (388,227) |
| Change in equity method investments | 12,642 | (11,694) |
| Transfer from (to) restricted cash | 325 | (746) |
| Proceeds from the sale of properties | 6,947 | 1,748 |
| Other | 95 | (72) |
| Net Cash Used in Investing Activities | (429,392) | (411,555) |
| Cash Flows from Financing Activities | ||
| Proceeds from the issuance of common and preferred stock, net of offering costs | 2,059 | 3,405 |
| Discount on convertible debt allocated to additional paid-in capital | -- | 63,432 |
| Repurchase of company common stock | -- | (153,491) |
| Dividends to shareholders – common | (22,548) | (17,798) |
| Dividends to shareholders – preferred | (5,744) | (5,745) |
| Proceeds from long-term debt | 1,011,948 | 1,764,685 |
| Payments on long-term debt | (759,851) | (1,127,879) |
| Debt issuance costs | (2,302) | (18,923) |
| Other | -- | (3) |
| Net Cash Provided by Financing Activities | 223,562 | 507,683 |
| Net Increase (Decrease) in Cash and Cash Equivalents | (44,522) | 357,828 |
| Cash and Cash Equivalents, beginning of period | 145,806 | -- |
| Cash and Cash Equivalents, end of period | $ 101,284 | $ 357,828 |
Fiscal 2015 Second Quarter Conference Call
Energy XXI will host its fiscal second-quarter conference call Monday, Feb. 9, at 10 a.m. CST. The dial-in numbers are 1 (888) 771-4371 (U.S.) and (0) 80 8238 9578 (U.K.) and the confirmation code is 38758743. 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.
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.
Bbl/d – barrels per day of oil or condensate
Mcf/d – thousand cubic feet of gas per day.
NRI, Net Revenue Interest – the percentage of production revenue allocated to the working interest after first deducting proceeds allocated to royalty and overriding interest.
WI, Working Interest – the interest held in lands by virtue of a lease, operating agreement, fee title or otherwise, under which the owner of the interest is vested with the right to explore for, develop, produce and own oil, gas or other minerals and bears the proportional cost of such operations.
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, our ability to integrate acquisitions, 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.
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 located in the U.S. Gulf of Mexico waters and the Gulf Coast onshore. To learn more, visit the Energy XXI website at www.EnergyXXI.com.
