Energy XXI (Bermuda) Limited (EXXI)
Q2 2013 Earnings Call
January 31, 2013 10:00 am ET
Executives
Stewart Lawrence - Vice President of Investor Relations and Communications
John Daniel Schiller - Chairman and Chief Executive Officer
David West Griffin - Chief Financial Officer
Analysts
David Deckelbaum - KeyBanc Capital Markets Inc., Research Division
Michael A. Glick - Johnson Rice & Company, L.L.C., Research Division
Michael Kelly - Global Hunter Securities, LLC, Research Division
Duane Grubert - Susquehanna Financial Group, LLLP, Research Division
Stephen F. Berman - Canaccord Genuity, Research Division
Richard M. Tullis - Capital One Southcoast, Inc., Research Division
Adam R. Michael - Miller Tabak + Co., LLC, Research Division
Andrew Coleman - Raymond James & Associates, Inc., Research Division
Biju Z. Perincheril - Jefferies & Company, Inc., Research Division
Patrick B. Rigamer - Iberia Capital Partners, Research Division
Presentation
Operator
Ladies and gentlemen, good afternoon. At this time, I'd like to welcome everyone to the Energy XXI Fiscal Second Quarter 2013 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded.
And I'd now I would like to turn the call over to Stewart Lawrence, Vice President of Investor Relations. Please go ahead, sir.
Stewart Lawrence
Thanks, John. Welcome to the call everybody. Presenting today, we have John Schiller, Chairman and CEO; and West Griffin, Chief financial Officer. We'll be available to answer your questions at the end of the call.
Before we get started, I need to remind everyone that our remarks today, including answers to your questions include statements that we believe to be forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those currently anticipated. Those risks include among others, matters described in our earnings release issued yesterday and in our public filings. We disclaim any obligation to update these forward-looking statements. While the company believes these forward-looking statements are reasonable, they are subject to factors such as commodity prices, competition, technology and environmental and regulatory compliance. Our drilling schedules, capital plans and other factors may cause our results to differ materially. I urge you to read our 10-K and the latest 10-Q to become better familiar with these risks and our company.
I'll turn it over now to John.
John Daniel Schiller
Thanks, Stewart. Welcome, everyone. We released our second quarter financials yesterday, including a lot of information about our ongoing operations, as well as an acquisition we just finalized in South Louisiana. Our oil production continues to deliver over 90% of our revenues and we continue to focus on all the opportunities highlighted by our ongoing horizontal program that is adding both production and new reserves.
The program is looking very promising. There will be some ups and down along the way and we will start our turf from time to time, but taken as a whole, the program remains extremely encouraging.
In addition to the Velman [ph] activity, our exploration prospect, Pendragon, is drilling ahead at Vermillion. In total, we have 5 operated rigs currently drilling with 2 more preparing to scrub with onshore barge wells. So we're excited about the remainder of our fiscal year.
And before I get into those details, let's have West go over some of the financial information. West?
David West Griffin
Thanks, John. Let's review the quarter starting with volumes. We averaged 44,600 barrels a day for the quarter. That compares to 42,700 barrels a day in the second quarter of fiscal 2012.
As we stated in today's release, current production is about 47,000 barrels a day with capacity of almost 52,000 barrels a day. That means we currently have over 9% of our production capacity offline for various reasons and actually, averaged more than 10% offline in the December quarter.
Since mid-2011, when we began operating the Exxon Mobil properties acquired in December 2010, it has become apparent that the older infrastructure has resulted in higher downtime. With our drilling success, we have been moving more fluids through an aging infrastructure, which led to a higher-than-expected downtime associated with compressors and pipelines in those fields. When they go down, they're more likely need to be replaced rather than repaired. But these are growing pains, not a long-term issue. Gradually, the infrastructure is being updated and we're confident that we can reduce downtimes to more normal level. Until then however, we are adjusting expectations to assume some higher downtime.
Using those adjusted expectations, oil production should average between 30,000 and 32,000 barrels a day this quarter and between 36,000 and 38,000 barrels a day in the fourth quarter. With today's margins, that would trigger the best EBITDA in the company's history. Pretty much regardless of the success, we have been increasing natural gas volumes.
The impact of our second half oil-focused drilling program shows up in the exit rates, which should approach 40,000 barrels a day of oil, 25% higher than the prior year exit rate. Going back to the December quarter's results, premium Gulf of Mexico pricing on our HLS group continued to generate solid revenues on a BOE basis. Our pre-hedged oil price averaged more than $107 per barrel last quarter. NGLs were 6% of reported oil volumes and combined with natural gas prices, our realized price per barrel equivalent averaged $78.15. While our pre-hedged oil price was $107 last quarter, we are off to a great March quarter with pre-hedged oil prices for the month of January averaging almost $115 per barrel.
Turning to our operating expenses, you will see that for the quarter, LOE was down over $3 a barrel to $20.95 driven by a reduction in direct LOE expense. Other expenses were generally in line, so EBITDA was a healthy $48.47 per barrel.
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