Oil Price Hiccup Is Wreaking Havoc With Energy XXI Ltd (EXXI), Has It Finally Hit Bottom?

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In its financial results for the fiscal third quarter, Energy XXI Ltd (NASDAQ:EXXI) reported a net loss per share of $1.08, which fell short of the estimates by $0.05, while revenues of $260.19 million represented a decline of 8.8% on a year-over-year basis and a shortfall of $10.66 million from the expectations, despite record production of 60,000 barrels per day. The company’s total debt-to-equity ratio stood at an astounding level of 504.32 compared to the industry’s average of 58.59. In order to provide itself with more liquidity, Energy XXI Ltd (NASDAQ:EXXI) carried out an issuance of second lien notes with $1.36 billion worth of proceeds. On a positive note the company has been able to further bring down its Lease Operating Expenses (LOE), which now stand at $20.02. LOE-related expenses declined to $108 million at the end of the fiscal third quarter compared to $142 million at the end of the previous quarter. As part of cutting its expenditures, the company planned to limit its expenses to $500 million in the first half of the year and $180 million in the second half. Most of these finances will be focused on low risk development drilling and recompletion-type activities.

While shares have declines by over 40% since the end of the first quarter, given the continued unappealing fundamentals of the company, it’s hard to recommend a buy even at these levels. We recommend investors look elsewhere for better bounce-back candidates in the energy sector.

Disclosure: None

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