Attached files
| file | filename |
|---|---|
| 8-K - Energy XXI Ltd | v205940_8k.htm |
| EX-99.1 - Energy XXI Ltd | v205940_ex99-1.htm |
| EX-23.1 - Energy XXI Ltd | v205940_ex23-1.htm |
Exhibit 99.2
Energy
XXI (Bermuda) Limited
Introduction
Pro Forma
Consolidated Financial Statements
(Unaudited)
The
Company executed a Purchase and Sale Agreement (PSA) with Exxon Mobil
Corporation, Mobil Oil Exploration & Producing Southeast Inc., ExxonMobil
Pipeline Company and Mobil Eugene Island Pipeline Company (collectively,
ExxonMobil”) on November 19, 2010 to acquire (the ‘ExxonMobil Acquisition”)
certain crude oil and natural gas properties located in the Gulf of Mexico (the
“ExxonMobil Properties”). The transaction closed on December 17, 2010 and was
financed through common and preferred equity offerings, an increase in the
borrowing base available under our revolving credit facility, and borrowings
under a $750 million seven year 9.25% bond private placement (Private
Placement).
In
addition, on December 9, 2010, the Company closed on the call of 35% of its
currently outstanding 16% Second Lien Notes at a price of 110% of face value.
On
December 17, 2010, the Company redeemed $219.8 million face amount of 16% Second
Lien Notes at a total cost of $250.9 million. The remaining $4.7 million face
value of 16% Second Lien Notes will be redeemed through the tender offer which
expires on December 30, 2010 or the call of the notes which is expected to close
on January 18, 2011.
The
Company has called $47.6 million face value of its $276.5 million outstanding
10% Senior Notes at a price of 105% of par value (the “10% Senior Notes Call”)
which is expected to close on January 18, 2011.
Lastly,
through a private transactions and a public tender, the Company redeemed
1,000,900 shares of its 7.25% perpetual convertible preferred stock in exchange
for common stock and cash.
The pro
forma consolidated balance sheet at September 30, 2010 has been prepared to
reflect the preferred stock redemption, the equity offerings, the Private
Placement, the increase in the borrowing base under its revolving credit
facility, the 16% Notes Redemption, the ExxonMobil Acquisition and the 10%
Senior Notes Call as if such transactions occurred on September 30,
2010.
The pro
forma consolidated statements of operations for the three months ended September
30, 2010 and the twelve months ended June 30, 2010 have been prepared to
reflect the Private Placement, the increase in the borrowing base under its
revolving credit facility, the 16% Notes Redemption, the ExxonMobil Acquisition
and the 10% Senior Notes Call as if such transaction occurred on July 1,
2009.
These
unaudited pro forma consolidated financial statements have been prepared for
comparative purposes only and may not be indicative of the results that would
have occurred if the Company had completed these transactions at an earlier date
or the results that will be obtained in the future. These pro forma consolidated
financial statements should be read in conjunction with the audited June 30,
2010 and unaudited September 30, 2010 consolidated financial statements of the
Company.
Energy
XXI (Bermuda) Limited
Pro Forma
Consolidated Statement of Operations
Year
Ended June 30, 2010
(Unaudited)
Basis of
Presentation
The pro
forma consolidated statements of operations has been prepared to reflect the
Private Placement, the increase in the borrowing base under its revolving credit
facility, the 16% Notes Redemption, the ExxonMobil Acquisition and the 10%
Senior Notes Call as if such transaction occurred on July 1, 2009. Non-recurring
expenses have been omitted (in thousands).
|
Historical
|
Pro Forma
|
|||||||||||||||||||||||||||
|
Year Ended
|
Private
|
Upsize
|
Call of 16%
|
Purchase of
|
Call of $47.6MM of
|
Year Ended
|
||||||||||||||||||||||
|
June 30, 2010
|
Placement
|
Revolver
|
Second Lien Notes
|
ExxonMobil
|
10% Senior Notes
|
June 30, 2010
|
||||||||||||||||||||||
|
Oil
sales
|
$ | 387,935 | $ | - | $ | - | $ | - | $ | 321,262 | (4) | $ | - | $ | 709,197 | |||||||||||||
|
Natural
gas sales
|
110,996 | - | - | - | 84,037 | (4) | - | 195,033 | ||||||||||||||||||||
|
Total
Revenues
|
$ | 498,931 | $ | - | $ | - | $ | - | $ | 405,299 | $ | - | $ | 904,230 | ||||||||||||||
| $ | 100,938 | (4) | ||||||||||||||||||||||||||
|
Lease
operating expenses
|
$ | 142,612 | $ | - | $ | - | $ | - | 10,000 | (5) | $ | - | $ | 253,550 | ||||||||||||||
|
Production
taxes
|
4,217 | - | - | - | 1,173 | (4) | - | 5,390 | ||||||||||||||||||||
|
Depreciation,
depletion and amortization
|
181,640 | - | - | - | 188,248 | (6) | - | 369,888 | ||||||||||||||||||||
|
Accretion
of asset retirement obligations
|
23,487 | - | - | - | 20,000 | (7) | - | 43,487 | ||||||||||||||||||||
|
General
and administrative expenses
|
49,667 | - | - | - | 3,972 | (8) | - | 54,739 | ||||||||||||||||||||
| 1,100 | (9) | |||||||||||||||||||||||||||
|
Gain
on derivative financial instruments
|
(4,739 | ) | - | - | - | - | - | (4,739 | ) | |||||||||||||||||||
|
Total
Costs and Expenses
|
$ | 396,884 | $ | - | $ | - | $ | - | $ | 325,431 | $ | - | $ | 722,315 | ||||||||||||||
|
Operating
Income
|
102,047 | - | - | - | 79,868 | - | 181,915 | |||||||||||||||||||||
|
Other
income
|
29,756 | - | - | - | - | - | 29,756 | |||||||||||||||||||||
| (70,339 | )(1) | 34,330 | (3) | 6,962 | (11) | |||||||||||||||||||||||
|
Interest
expense
|
(88,239 | ) | (2,184 | )(1) | (3,778 | )(2) | (6,800 | )(3) | (8,342 | )(10) | 434 | (11) | (137,956 | ) | ||||||||||||||
|
Total
Other Expense
|
(58,483 | ) | (72,523 | ) | (3,778 | ) | 27,530 | (8,342 | ) | 7,396 | (108,200 | ) | ||||||||||||||||
|
Income
Before Income Taxes
|
43,564 | (72,523 | ) | (3,778 | ) | 27,530 | 71,526 | 7,396 | 73,715 | |||||||||||||||||||
|
Income
taxes
|
16,244 | - | - | - | - | - | (12) | 16,244 | ||||||||||||||||||||
|
Net
Income
|
$ | 27,320 | $ | (72,523 | ) | $ | (3,778 | ) | $ | 27,530 | $ | 71,526 | $ | 7,396 | $ | 57,471 | ||||||||||||
|
(1)
|
To
reflect additional interest expense due under the $750 million 9.25%
Private Placement and to amortize $15.3 million in debt issue cost related
to the Private Placement over a seven year period. Excluded from expenses
is $4.8 million in costs related to obtaining a bridge loan commitment (1%
of $450 million plus $300,000 in expenses) as this amount is
non-recurring.
|
|
(2)
|
To
amortize $8.5 million in fees related to the increase in the revolving
credit facility borrowing base to $700 million amortized over 27
months.
|
|
(3)
|
To
reflect a reduction of interest expense ($34.33 million) and to adjust
interest expense for the reduction of debt issue cost amortization
($72,000), premium amortization ($9.477 million) and discount amortization
($2.605 million) related to the redeemed 16% Second Lien Notes. This
adjustment excludes a non-recurring gain related to the difference between
the book value and call price of the 16% Second Lien
Notes.
|
|
(4)
|
To
reflect the revenues and direct operating expenses related to the
ExxonMobil Properties.
|
|
(5)
|
To
reflect incremental windstorm and related insurance expense associated
with the ExxonMobil Properties.
|
|
(6)
|
To
adjust depreciation, depletion and amortization (DD&A) expense for the
ExxonMobil Properties. Of the $1.012 billion acquisition costs of the
ExxonMobil Properties, $289.7 million was allocated to unevaluated
properties. Included in the ExxonMobil Properties costs subject to
DD&A expense are $313.3 million of future development costs related to
the proved oil and natural gas reserves and $200 million in asset
retirement obligations. Combined production is 15.6
MMBOE.
|
|
(7)
|
To
record the accretion of the asset retirement obligation associated with
the ExxonMobil Properties.
|
|
(8)
|
To
adjust general and administration expense for $6.1 million of additional
expenses associated with the ExxonMobil Acquisition net of amounts
expected to be capitalized as directly attributable to oil and natural gas
property acquisition, exploration and development
(35%).
|
|
(9)
|
To
record the annual expenses associated with the letter-of-credit issued to
ExxonMobil to secure the properties plugging and abandonment obligations
($225 million in letters-of-credit costing .5% per
year).
|
|
(10)
|
To
reflect additional interest on incremental borrowings under the revolving
credit facility ($208.5 million at an annual rate of
4%).
|
|
(11)
|
To
reflect a reduction of interest expense ($6.962 million) and to adjust
interest expense for the reduction of debt issue cost amortization
($434,000) related to the $47.6 million redeemed 10% Senior
Notes.
|
|
(12)
|
To
adjust income tax expense for the impact of the adjustments outlined
above. The utilization of existing net operating loss carry-forwards at
June 30, 2010 will offset the income generated by the purchase of the
ExxonMobil Properties.
|
Energy
XXI (Bermuda) Limited
Pro Forma
Consolidated Statement of Operations
Three
Months Ended September 30, 2010
(Unaudited)
Basis of
Presentation
The pro
forma consolidated statements of operations has been prepared to reflect the
Private Placement, the increase in the borrowing base under its revolving credit
facility, the 16% Notes Redemption, the ExxonMobil Acquisition and the 10%
Senior Notes Call as if such transaction occurred on July 1, 2009. Non-recurring
expenses have been omitted (in thousands).
|
Historical
|
Pro
Forma
|
|||||||||||||||||||||||||||
|
Three
Months Ended
|
Private
|
Upsize
|
Call
of 16%
|
Purchase
of
|
Call
of $47.6MM of
|
Three
Months Ended
|
||||||||||||||||||||||
|
September
30, 2010
|
Placement
|
Revolver
|
Second
Lien Notes
|
ExxonMobil
|
10%
Senior Notes
|
September
30, 2010
|
||||||||||||||||||||||
|
Oil
sales
|
$ | 115,830 | $ | - | $ | - | $ | - | $ | 73,316 | (4) | $ | - | $ | 189,146 | |||||||||||||
|
Natural
gas sales
|
28,170 | - | - | - | 21,179 | (4) | - | 49,349 | ||||||||||||||||||||
|
Total
Revenues
|
$ | 144,000 | $ | - | $ | - | $ | - | $ | 94,495 | $ | - | $ | 238,495 | ||||||||||||||
| $ | 23,346 | (4) | ||||||||||||||||||||||||||
|
Lease
operating expenses
|
$ | 44,174 | $ | - | $ | - | $ | - | 2,500 | (5) | $ | - | $ | 70,020 | ||||||||||||||
|
Production
taxes
|
694 | - | - | - | 250 | (4) | - | 944 | ||||||||||||||||||||
|
Depreciation,
depletion and amortization
|
54,077 | - | - | - | 42,471 | (6) | - | 96,548 | ||||||||||||||||||||
|
Accretion
of asset retirement obligations
|
5,974 | - | - | - | 5,000 | (7) | - | 10,974 | ||||||||||||||||||||
|
General
and administrative expenses
|
18,597 | - | - | - | 993 | (8) | - | 19,865 | ||||||||||||||||||||
| 275 | (9) | |||||||||||||||||||||||||||
|
Gain
on derivative financial instruments
|
(1,138 | ) | - | - | - | - | - | (1,138 | ) | |||||||||||||||||||
|
Total
Costs and Expenses
|
$ | 122,378 | $ | - | $ | - | $ | - | $ | 74,835 | $ | - | $ | 197,213 | ||||||||||||||
|
Operating
Income
|
21,622 | - | - | - | 19,660 | - | 41,282 | |||||||||||||||||||||
|
Other
income
|
10 | - | - | - | - | - | 10 | |||||||||||||||||||||
| (17,729 | )(1) | 13,680 | (3) | 1,190 | (11) | |||||||||||||||||||||||
|
Interest
expense
|
(21,480 | ) | (546 | )(1) | (944 | )(2) | (2,720 | )(3) | (2,085 | )(10) | 101 | (11) | (30,533 | ) | ||||||||||||||
|
Total
Other Expense
|
(21,470 | ) | (18,275 | ) | (944 | ) | 10,960 | (2,085 | ) | 1,291 | (30,523 | ) | ||||||||||||||||
|
Income
Before Income Taxes
|
152 | (18,275 | ) | (944 | ) | 10,960 | 17,575 | 1,291 | 10,759 | |||||||||||||||||||
|
Income
taxes
|
19 | - | - | - | - | 1,326 | (12) | 1,345 | ||||||||||||||||||||
|
Net
Income
|
$ | 133 | $ | (18,275 | ) | $ | (944 | ) | $ | 10,960 | $ | 17,575 | $ | (35 | ) | $ | 9,414 | |||||||||||
|
(1)
|
To
reflect additional interest expense due under the $750 million 9.25%
Private Placement and to amortize $15.3 million in debt issue cost related
to the Private Placement over a seven year
period.
|
|
(2)
|
To
amortize $8.5 million in fees related to the increase in the revolving
credit facility borrowing base to $700 million amortized over 27
months.
|
|
(3)
|
To
reflect a reduction of interest expense ($13.68 million) and to adjust
interest expense for the reduction of debt issue cost amortization
($29,000), premium amortization ($3.791 million) and discount amortization
($1.042 million) related to the redeemed 16% Second Lien Notes. This
adjustment excludes a non-recurring gain related to the difference between
the book value and call price of the 16% Second Lien
Notes.
|
|
(4)
|
To
reflect the revenues and direct operating expenses related to the
ExxonMobil Properties.
|
|
(5)
|
To
reflect incremental windstorm and related insurance expense associated
with the ExxonMobil Properties.
|
|
(6)
|
To
adjust depreciation, depletion and amortization (DD&A) expense for the
ExxonMobil Properties. Of the $1.012 billion acquisition costs of the
ExxonMobil Properties, $289.7 million was allocated to unevaluated
properties. Included in the ExxonMobil Properties costs subject to
DD&A expense are $313.3 million of future development costs related to
the proved oil and natural gas reserves and $200 million in asset
retirement obligations. Combined production is 4.1
MMBOE.
|
|
(7)
|
To
record the accretion of the asset retirement obligation associated with
the ExxonMobil Properties.
|
|
(8)
|
To
adjust general and administration expense for $1.528 million of additional
expenses associated with the ExxonMobil Acquisition net of amounts
expected to be capitalized as directly attributable to oil and natural gas
property acquisition, exploration and development
(35%).
|
|
(9)
|
To
record the annual expenses associated with the letter-of-credit issued to
ExxonMobil to secure the properties plugging and abandonment obligations
($225 million in letters-of-credit costing .5% per
year).
|
|
(10)
|
To
reflect additional interest on incremental borrowings under the revolving
credit facility ($208.5 million at an annual rate of
4%).
|
|
(11)
|
To
reflect a reduction of interest expense ($1.19 million) and to adjust
interest expense for the reduction of debt issue cost amortization
($101,000) related to the $47.6 million redeemed 10% Senior
Notes.
|
|
(12)
|
To
adjust income tax expense for the impact of the adjustments outlined above
using an effective tax rate of
12.5%.
|
Energy
XXI (Bermuda) Limited
Pro Forma
Consolidated Balance Sheet
September
30, 2010
(Unaudited)
Basis of
Presentation
The pro
forma consolidated balance sheet at September 30, 2010 has been prepared to
reflect the preferred stock conversion, the equity offerings, the Private
Placement, the increase in the borrowing base under its revolving credit
facility, the 16% Notes Redemption, the ExxonMobil Acquisition and the 10%
Senior Notes Call as if such transactions occurred on September 30,
2010 (in thousands).
|
Historical
|
Preferred Stock
|
Equity
|
Private
|
Upsize
|
Call of 16%
|
Purchase of
|
Call of $47.6MM of
|
Pro Forma
|
||||||||||||||||||||||||||||
|
September 30, 2010
|
Conversion
|
Offerings
|
Placement
|
Revolver
|
Second Lien Notes
|
ExxonMobil
|
10% Senior Notes
|
September 30, 2010
|
||||||||||||||||||||||||||||
|
Cash
and cash equivalents
|
$ | 12,883 | $ | (11,801 | ) (1) | $ | 554,945 | (2) | $ | 750,000 | (3) | $ | (8,500 | ) (4) | $ | (385,502 | ) (5) | $ | 208,543 | (6) | $ | (50,000 | ) (7) | $ | 37,368 | |||||||||||
| (15,300 | )(3) | (1,012,000 | )(6) | |||||||||||||||||||||||||||||||||
| (4,800 | )(3) | (1,100 | )(6) | |||||||||||||||||||||||||||||||||
|
Receivables
|
71,725 | - | - | - | - | - | - | - | 71,725 | |||||||||||||||||||||||||||
|
Derivative
financial instruments
|
908 | - | - | - | - | - | - | - | 908 | |||||||||||||||||||||||||||
|
Other
current assets
|
46,640 | - | - | - | 3,778 | (4) | 1,100 | (6) | - | 51,518 | ||||||||||||||||||||||||||
|
Total
Current Assets
|
$ | 132,156 | $ | (11,801 | ) | $ | 554,945 | $ | 729,900 | $ | (4,722 | ) | $ | (385,502 | ) | $ | (803,457 | ) | $ | (50,000 | ) | $ | 161,519 | |||||||||||||
|
Oil
and natural gas properties, net
|
$ | 1,388,863 | $ | - | $ | - | $ | - | $ | - | $ | - | 1,012,000 | (6) | $ | - | $ | 2,600,863 | ||||||||||||||||||
| 200,000 | (6) | |||||||||||||||||||||||||||||||||||
|
Other
non-current assets
|
25,613 | - | 15,300 | (3) | 4,722 | (4) | (434 | ) (5) | - | (1,200 | ) (7) | 44,001 | ||||||||||||||||||||||||
|
Total
Assets
|
$ | 1,546,632 | $ | (11,801 | ) | $ | 554,945 | $ | 745,200 | $ | - | $ | (385,936 | ) | $ | 408,543 | $ | (51,200 | ) | $ | 2,806,383 | |||||||||||||||
|
Accounts
payable
|
$ | 78,786 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 78,786 | ||||||||||||||||||
|
Accrued
liabilities
|
64,383 | - | - | - | - | - | - | - | 64,383 | |||||||||||||||||||||||||||
|
Note
payable
|
13,107 | - | - | - | - | - | - | - | 13,107 | |||||||||||||||||||||||||||
|
Asset
retirement obligations - current
|
50,755 | - | - | - | - | - | - | - | 50,755 | |||||||||||||||||||||||||||
|
Derivative
financial instruments
|
5,657 | - | - | - | - | - | - | - | 5,657 | |||||||||||||||||||||||||||
|
Current
maturties of long-term debt
|
1,580 | - | - | - | - | - | - | - | 1,580 | |||||||||||||||||||||||||||
|
Total
Current Liabilities
|
$ | 214,268 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 214,268 | ||||||||||||||||||
|
Long-term
debt:
|
||||||||||||||||||||||||||||||||||||
|
Revolving
credit facility
|
91,457 | - | - | - | - | 208,543 | (6) | - | 300,000 | |||||||||||||||||||||||||||
|
10%
Senior notes
|
276,500 | - | - | - | - | - | - | (47,600 | ) (7) | 228,900 | ||||||||||||||||||||||||||
|
16%
Second lien notes
|
382,781 | - | - | - | (382,781 | ) (5) | - | - | - | |||||||||||||||||||||||||||
|
Other
long-term debt
|
501 | 501 | ||||||||||||||||||||||||||||||||||
|
Private
Placement financing
|
- | - | - | 750,000 | (3) | - | - | - | - | 750,000 | ||||||||||||||||||||||||||
|
Total
long-term debt
|
751,239 | - | - | 750,000 | - | (382,781 | ) | 208,543 | (47,600 | ) | 1,279,401 | |||||||||||||||||||||||||
|
Asset
retirement obligations - long-term
|
110,239 | - | - | - | - | - | 200,000 | (6) | - | 310,239 | ||||||||||||||||||||||||||
|
Deferred
income taxes and other
|
32,728 | 32,728 | ||||||||||||||||||||||||||||||||||
|
Derivative
financial instruments
|
7,109 | - | - | - | - | - | - | - | 7,109 | |||||||||||||||||||||||||||
|
Total
Liabilities
|
$ | 1,115,583 | $ | - | $ | - | $ | 750,000 | $ | - | $ | (382,781 | ) | $ | 408,543 | $ | (47,600 | ) | $ | 1,843,745 | ||||||||||||||||
|
Common
stock
|
256 | 46 | (1) | 69 | (2) | - | - | - | - | - | 371 | |||||||||||||||||||||||||
|
Preferred
Stock 7.25%
|
11 | (10 | ) (1) | 1 | ||||||||||||||||||||||||||||||||
|
Preferred
Stock 5.625%
|
- | 1 | (2) | 1 | ||||||||||||||||||||||||||||||||
|
Additional
paid-in capital
|
908,047 | 7,697 | (1) | 554,875 | (2) | - | - | - | - | 1,470,619 | ||||||||||||||||||||||||||
| (1,200 | ) (7) | |||||||||||||||||||||||||||||||||||
|
Accumulated
deficit
|
(494,728 | ) | (19,534 | ) (1) | (4,800 | ) (3) | - | (434 | ) (5) | - | (2,400 | ) (7) | (525,817 | ) | ||||||||||||||||||||||
| (2,721 | ) (5) | |||||||||||||||||||||||||||||||||||
|
Accumulated
other comprehensive income, net of income taxes
|
17,463 | - | - | - | - | - | - | 17,463 | ||||||||||||||||||||||||||||
|
Total
stockholders equity
|
431,049 | (11,801 | ) | 554,945 | (4,800 | ) | - | (3,155 | ) | - | (3,600 | ) | 962,638 | |||||||||||||||||||||||
|
Total
Liabilities and Equity
|
$ | 1,546,632 | $ | (11,801 | ) | $ | 554,945 | $ | 745,200 | $ | - | $ | (385,936 | ) | $ | 408,543 | $ | (51,200 | ) | $ | 2,806,383 | |||||||||||||||
|
(1)
|
To
reflect the conversion of 1,000,900 shares of the Company’s 7.25%
perpetual convertible preferred stock. In addition to the 8.77192 common
shares per preferred share (8,779,806 common shares in total), the Company
paid an inducement premium which consisted of cash consideration of $11.8
million and 332,884 shares of common stock valued at $7.7
million.
|
|
(2)
|
To
reflect the sale of 13.8 million shares of common stock at $20.75 per
share less underwriting spread of $.985 per share ($272.76 million, net
proceeds), the sale of 1.15 million shares of $250 stated value 5.625%
perpetual convertible preferred stock less underwriting spread of 1.5% of
the proceeds ($283.18 million, net proceeds), less $1 million in other
offering costs.
|
|
(3)
|
Represents
proceeds from the $750 million Private Placement and the recording of the
fees associated with the facility (underwriting fees of 2% of $700 million
plus $1.3 million of transaction costs). In addition, the Company paid
$4.8 million (1% of $450 million plus $300,000 in transaction costs)
related to the issuance of a bridge loan commitment which has been charged
to accumulated deficit.
|
|
(4)
|
Represents
estimated fees associated with the upsizing of the Company’s revolving
credit facility (current and non current
portions).
|
|
(5)
|
To
reflect the redemption of the Company’s 16% Second Lien Notes. On December
9, 2010, the Company redeemed $119.7 million face value of 16% Second Lien
Notes redeemed at 110% of face value ($131.7 million in cash costs plus
$200,000 in transaction costs). On December 17, 2010, the Company redeemed
$219.8 million face amount of 16% Second Lien Notes at a total cost of
$250.9 million. The remaining $4.7 million face value of 16% Second Lien
Notes will be redeemed through the tender offer which expires on December
30, 2010 or the call of the notes which will close on January 18, 2011.
Transaction costs are estimated at $200,000. The difference between
the book value of the notes ($382.8 million) and the cash cost of the
redemption ($385.5 million) has been recorded as an adjustment to the
retained deficit. In addition, the debt issue costs of $434,000 associated
with 16% Second Lien Notes has been written
off.
|
|
(6)
|
To
reflect the ExxonMobil Acquisition contract price of $1.012 billion, $200
million is asset retirement obligations, annual fees on the
letters-of-credit securing the abandonment liabilities associated with the
properties and additional borrowings under the revolving credit
facility.
|
|
(7)
|
To
reflect the call of $47.6 million of 10% Senior Notes at a price of 105%
of par plus $20,000 in estimated expenses. The difference between the cash
cost of the call ($50 million) and the carrying value of the notes is
charged to retained earnings. In addition, $1.2 million of debt issue
costs associated with the redeemed 10% Senior Notes has been
written-off.
|
Energy
XXI (Bermuda) Limited
Pro
Forma Reserve Disclosures
Periods
Ended June 30, 2010, 2009 and 2008
(Unaudited)
Pro
Forma Estimated Net Quantities of Oil and Natural Gas Reserves
The
following estimates of the net proved oil and natural gas reserves of our oil
and gas properties located entirely within the United States of America are
based on evaluations prepared by third-party reservoir engineers and internal
estimates (87% of the Energy EXXI June 30, 2010 proved reserves on a valuation
basis were evaluated by third-party reservoir engineers) and, the remainder,
internally by EXXI reservoir engineers. Reserve volumes and values were
determined under the method prescribed by the SEC. Future net cash
flows calculated at June 30, 2010 are based on the 12-month unweighted
arithmetic average of the first-day-of-the-month price for each month within the
12-month prior period. Future net cash flows calculated at June 30,
2009 were computed using year-end commodity prices that relate to the
properties’ existing proved crude oil and natural gas reserves.
Reserve estimates are inherently imprecise and estimates of
new discoveries are more imprecise that those of producing oil and gas
properties. Accordingly, reserve estimates are expected to change as additional
performance data becomes available.
Estimated quantities of proved domestic
oil and gas reserves and changes in quantities of proved developed and
undeveloped reserves in thousands of barrels (“MBbls”), million cubic feet
(“MMcf”) and thousand barrels of oil equivalent (“MBOE”) were as
follows:
|
Energy EXXI
|
ExxonMobil
Acquisition
|
Energy XXI
Pro Forma
|
||||||||||
|
Proved
crude oil reserves at June 30, 2009
|
30,873 | 35,721 | 66,594 | |||||||||
|
Production
|
(5,352 | ) | (4,468 | ) | (9,820 | ) | ||||||
|
Extensions
and discoveries
|
698 | 42 | 740 | |||||||||
|
Revisions
of previous estimates
|
3,643 | 272 | 3,915 | |||||||||
|
Purchases
of reserves in place
|
17,621 | — | 17,621 | |||||||||
|
Proved
crude oil reserves at June 30, 2010
|
47,483 | 31,567 | 79,050 | |||||||||
|
Proved
natural gas reserves at June 30, 2009
|
133,415 | 144,021 | 277,436 | |||||||||
|
Production
|
(15,534 | ) | (19,021 | ) | (34,555 | ) | ||||||
|
Extensions
and discoveries
|
5,637 | 778 | 6,415 | |||||||||
|
Revisions
of previous estimates
|
7,403 | (3,068 | ) | 4,335 | ||||||||
|
Purchases
of reserves in place
|
37,862 | — | 37,862 | |||||||||
|
Proved
natural gas reserves at June 30, 2010
|
168,783 | 122,710 | 291,493 | |||||||||
|
Proved
MBOE reserves at June 30, 2009
|
53,109 | 59,725 | 112,834 | |||||||||
|
Production
|
(7,941 | ) | (7,638 | ) | (15,579 | ) | ||||||
|
Extensions
and discoveries
|
1,638 | 172 | 1,810 | |||||||||
|
Revisions
of previous estimates
|
4,877 | (240 | ) | 4,637 | ||||||||
|
Purchases
of reserves in place
|
23,931 | — | 23,931 | |||||||||
|
Proved
MBOE reserves at June 30, 2010
|
75,614 | 52,019 | 127,633 | |||||||||
|
Proved
MBOE developed reserves
|
||||||||||||
|
June
30, 2009
|
33,922 | 43,731 | 77,653 | |||||||||
|
June
30, 2010
|
52,572 | 36,015 | 88,587 | |||||||||
|
Proved
MBOE undeveloped reserves
|
||||||||||||
|
June
30, 2009
|
19,187 | 15,994 | 35,181 | |||||||||
|
June
30, 2010
|
23,042 | 16,004 | 39,046 | |||||||||
Discounted
Future Net Cash Flows
The
discounted future net cash flows related to proved oil and gas reserves as of
June 30, 2010 are as follows (in thousands):
|
Energy EXXI
|
ExxonMobil
Acquisition
|
Energy XXI
Pro Forma
|
||||||||||
|
Future
cash inflows
|
$ | 4,121,293 | $ | 2,840,681 | $ | 6,961,974 | ||||||
|
Less
related future
|
||||||||||||
|
Production
costs
|
1,024,492 | 1,211,342 | 2,235,834 | |||||||||
|
Development
and abandonment costs
|
639,524 | 714,574 | 1,354,098 | |||||||||
|
Income
taxes
|
398,399 | 329,315 | 727,714 | |||||||||
|
Future
net cash flows
|
2,058,878 | 585,450 | 2,644,328 | |||||||||
|
Ten
percent annual discount for estimated timing of cash flows
|
509,727 | 72,168 | 581,895 | |||||||||
|
Standardized
measure of discounted future net cash flows
|
$ | 1,549,151 | $ | 513,282 | $ | 2,062,433 | ||||||
Changes
in Discounted Future Net Cash Flows
A summary of the changes in the
discounted future net cash flows applicable to proved crude oil and natural gas
reserves for the year ended June 30, 2010 follows (in thousands):
|
Energy EXXI
|
ExxonMobil
Acquisition
|
Energy XXI
Pro Forma
|
||||||||||
|
Beginning
of period
|
$ | 1,005,276 | $ | 581,589 | $ | 1,586,865 | ||||||
|
Revisions
of previous estimates
|
||||||||||||
|
Changes
in prices and costs
|
300,591 | 87,992 | 388,583 | |||||||||
|
Changes
in quantities
|
27,735 | (46,275 | ) | (18,540 | ) | |||||||
|
Additions
to proved reserves resulting from extensions,
|
||||||||||||
|
discoveries
and improved recovery, less related costs
|
27,651 | 4,723 | 32,374 | |||||||||
|
Purchases
of reserves in place
|
703,456 | — | 703,456 | |||||||||
|
Accretion
of discount
|
105,977 | 90,873 | 196,850 | |||||||||
|
Sales,
net of production costs
|
(352,102 | ) | (303,188 | ) | (655,290 | ) | ||||||
|
Net
change in income taxes
|
(245,269 | ) | 38,424 | (206,845 | ) | |||||||
|
Changes
in rate of production and other
|
(24,164 | ) | 59,144 | 34,980 | ||||||||
|
Net
change
|
543,875 | (68,307 | ) | 475,568 | ||||||||
|
End
of period
|
$ | 1,549,151 | $ | 513,282 | $ | 2,062,433 | ||||||