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Energy XXI scraps remaining 2017 drilling plans

Written by  OE Staff Friday, 11 August 2017 08:31

Energy XXI reported mixed results for its current development drilling plans in the West Delta area of the Gulf of Mexico, and has cancelled plans to spud any additional wells in 2017.

Source: Energy XXI.

Energy XXI encountered 102ft of net pay across three prospective horizons in the 30 L-14 ST2 High Tide well.

The well, spud on 7 June and drilled to 8500ft total vertical depth, is on the West Delta 30 field, and will be completed and placed on production before the end of Q3 2017.  The well is the first the company has successfully spud in nearly two years, and was drilled from an existing platform at a lower than estimated cost.

The company’s second development well, the West Delta 31 L-19 ST1 Kingstream, encountered an unanticipated fluid loss zone, or thief zone.  Energy XXI is finalizing plans to temporarily abandon the well and potentially re-drill it from a different location to avoid the thief zone and reach the targeted reserves.

Douglas E. Brooks, chief executive officer and president of Energy XXI, said the firm remains confident in its inventory of approximately 40 development drilling locations.

"For the remainder of 2017, we intend to focus on operating safely, efficiently and effectively to deliver predictable and repeatable results," he said.

The company's decision to scrap its plans to spud additional wells for the rest of the year is in order to preserve balance sheet strength and liquidity amid continued uncertainty over commodity prices.

The company confirmed it will continue implementing its previously announced well workover and completion program in its 2Q 2017 results.

Energy XXI has revised its capital expenditure program for 2017 downward from US$140 to $170 million to $125 to $155 million, including $50 to $70 million for abandonment activities. EGC expects to fund its 2017 capital program with cash on hand and cash generated from ongoing operations. 

For the three months ending 30 June, 2017, the company incurred capital costs, excluding acquisitions but including abandonment activities, totaling $31.8 million.  The company spent approximately $14.4 million on development of its core properties and $17.4 million related to abandonment activities.

“We will accomplish this through enhancing our base production and undertaking low-cost, low-risk projects,” Brooks said. “We will continue to drive down costs in areas we can control and right size our organization to better align with our future needs."

"The company also will use hedges to minimize downside risk exposure and maximize cash flow generation from its production, as demonstrated with its expanded hedging program for a portion of our 2018 volumes," he said. "We continue to work on our long-term strategic plan, and are evaluating a variety of alternatives with our financial advisors."

Late last year, the company emerged from Chapter 11 bankruptcy.  As part of its restructuring, a new board of directors was appointed, which also includes Brooks, who was named as the company’s president and CEO in April this year. The company earlier this year named Morgan Stanley as its financial advisor to aid Energy XXI in evaluating, developing and implementing a strategic plan, including a stand-alone financial plan and select strategic alternatives.

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