Energy XXI cautious in current price environment, ends Q2 with liquidity of $434 million

By Lisa Kerner

Charlotte, N.C., Feb. 9 – Energy XXI is “focused on strengthening the balance sheet, rightsizing the company’s spending on all fronts and making Energy XXI a stronger company, even in a lower-commodity-price environment,” said chairman, president and chief executive officer John Schiller.

The company has its “eye on the ball” and is being proactive in the current climate by monetizing assets, reducing costs and focusing on low-risk development drilling, said Schiller during a conference call on Monday to discuss Energy XXI’s second-quarter results.

According to Schiller, Energy XXI has lowered its lease operating and general and administrative costs. The company is pursuing and evaluating the monetization of its Grand Isle gathering system as well as evaluating bids on a non-core asset sale. Proceeds from these sales will enhance liquidity and reduce long-term debt, Schiller said.

“Last week we monetized a large portion of our in-the-money put spreads and collected $73.1 million, which will hit the balance sheet this quarter,” said chief financial officer Bruce Busmire on the call.

At Dec. 31, the company had total liquidity of $434 million, including $101 million of cash. Currently, Energy XXI’s liquidity totals about $500 million, including the $73.1 million mentioned above.

When asked about possible future financings and redetermination of the revolver borrowing base, Busmire said the company is looking to address all options related to liquidity. Management expressed confidence that multiple options exist.

Busmire said the company wants to make sure the balance sheet is structured for the long term.

Financial highlights

Energy XXI’s adjusted EBITDA for the fiscal second quarter was $217 million, compared to about $170 million for the prior-year period.

Net loss for the quarter was $376.7 million, or $4.01 loss per diluted share, on revenues of $357.8 million.

This compares to a 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.

During the fiscal second quarter, the company monetized certain calendar 2015 crude oil hedges for total cash proceeds of $26 million, according to the earnings news release. Energy XXI replaced some of those hedges with put spreads for calendar year 2015.

Capital expenditures totaled $202 million for the quarter. For the full fiscal year 2015, the company expects its total capital program to be between $670 million and $690 million.

Energy XXI is a Houston-based independent oil and natural gas exploration and production company.

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