Exploration & Production | Operational Updates | Quarterly / Earnings Reports | Second Quarter (2Q) Update | Deals - Acquisition, Mergers, Divestitures | Hedging | Capital Markets | Capital Expenditure
Energy XXI Talks Fiscal 2Q; Updates GoM Ops
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Energy XXI 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
Energy XXI Ltd Chairman, President and Chief Executive Officer John D. Schiller said: "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. 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.