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Energy XXI Q4 Earnings Decline on Higher Costs, Shares Slide - Analyst Blog

On Aug 13, 2014, upstream energy firm, Energy XXI Limited ( EXXI ) reported earnings per share − excluding non-recurring items related with acquisition and divestiture activities − of 23.5 cents in the fourth quarter of fiscal 2014 (three months ended Jun 30, 2014), significantly lower than the year-ago adjusted profit of 89 cents. Considerably higher lease operating expenses hampered the results. Following the earnings release, shares of Energy XXI declined over 19% on the NYSE.

However, the bottom line surpassed the Zacks Consensus Estimate of 20 cents, owing to higher oil production.

Quarterly revenues of $324.1 million were up 3.1% from the fourth quarter of fiscal 2013. However, the top line failed to beat the Zacks Consensus Estimate of $325 million.

Production & Prices

During the quarter, the company produced 46,100 barrels of oil equivalent per day (BOE/d) - oil alone comprises 69% − slightly lower than 46,800 BOE/d in the previous-year quarter.

Energy XXI produced roughly 32,000 barrels per day (Bbl/d) of oil, highlighting an increase of 10.7% from 28,900 (Bbl/d) in the fourth quarter of fiscal 2013. The company, however, sold oil at $99.67 per barrel (including hedging activities), implying a 4.1% decline from $103.90 per barrel in the year-ago quarter.

Total natural gas production declined 21% year over year to 84.8 million cubic feet per day. On the flip side, the company's realized natural gas prices (including hedging) was $4.45 per thousand cubic feet (Mcf), 6.5% higher than the year-earlier quarter figure of $4.18 Mcf.

Operating Expenses

Total lease operating expenses was recorded at $102.6 million, implying a significant 24.4% rise from $82.5 million in the fourth quarter of fiscal 2013.

Capital Spending and Balance Sheet

Energy XXI's capital investments during the quarter totaled $213.9 million. As of Jun 30, 2014, cash on hand was $145.8 million while long-term debt (including current maturities) stood at $3,759.6 million, representing a debt-to-capitalization ratio of 67.7%.

Proved Reserves

As of Jun 30, 2014, Energy XXI's total proved reserves stood at $246.2 million barrels of oil equivalents (MMBOE) − which comprised over 75% oil - reflecting roughly 38% annual increase in the company's total reserves. The improvement can be mainly attributed to the company's acquisition of an oil and natural gas exploration and production firm, EPL Oil & Gas, on Jun 3, 2014.

Guidance

Energy XXI expects total production to lie in the band of 59,000−64,000 BOE/d in fiscal-year 2015. The midpoint of the above guidance stands at 61,500 BOE/d, representing roughly 37% improvement from 45,000 BOE/d output recorded in fiscal 2014.

For the first quarter of fiscal year 2015, the company projects output between 57,000 and 60,000 BOE/d.

Energy XXI intends to invest $850-$950 million in fiscal 2015 in order to operate six more rigs to ramp up oil and gas production. Also, the company will likely spend the maximum in the first half of fiscal 2015.

Zacks Rank

Energy XXI currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at better-ranked players in the energy sector like Cameron International Corporation ( CAM ), Patterson-UTI Energy Inc. ( PTEN ) and Pioneer Energy Services Corp. ( PES ). All the stocks sport a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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