Enegy XXI: Updated Forecast

[dan_s]

Energy XXI (EXXI): The company reported fiscal 4th quarter earnings per share that topped my forecast. An updated Net Income & Cash Flow Forecast model has been posted under the Sweet 16 Tab. [Log on, click on the Sweet 16 Tab, click on EXXI logo]

> Q4 Production volumes were slightly higher than my forecast (46,800 boepd, up 7.6% quarter-over-quarter)
> Expenses were lower than my forecast, especially G&A
> Interest expense is falling since the company is now generating free cash flows

Big news is that Proved Reserves are up 50% year-over-year and 3P reserves are way up with a PV10 value over $10 Billion.

Since EXXI has a market cap of only $2.1 Billion and a very strong balance sheet, you can see why I keep it in the Sweet 16.

EXXI does have a lot of hurricane risk, as we found out last year. If they can make it through this hurricane season, I can see the stock moving toward my Fair Value Estimate of $49.50/share.

First Calls Target Price is just $37.27, but that should go higher with this very strong year-end reserve report.

[dan_s]

Energy XXI Ltd. (EXXI): An updated profile has been posted under the Sweet 16 Tab.

Note that the company has not given any production guidance, so my SWAG of 50,000 boepd for the next fiscal year is just a guess based on what they said about horizontal development wells on the CC.

The stock is trading at less than half NAV [(PV10 of Proved Reserves - Debt) / share count]

Wall Street may avoid the Hurricane Risk, but this stock should do well if fiscal Q1 shows a production gain and it makes it past hurricane season. Last year they took a big hit from Hurricane Isaac.

[setliff]

ya know, there are some stocks that are recognized for their fundamentals, ie accomplishments and potential. then there are others that for whatever reason are just dogs. i was hoping the mkt would turn on EXXI's report, but it just has not been the case.

[dan_s]

Everything was down yesterday, so don't judge EXXI by one day's trading activity. Actually, it held up quite well. - Dan

"I just added a deepwater E & P concern to my portfolio on Wednesday. The outfit is called Energy XXI Limited and it is rapidly growing production and reserves via some of the most productive sites in the Gulf of Mexico. The company just reported solid results, is cheap on an earnings basis, and is significantly undervalued based on its proven reserves. I could easily see the shares rising 50% to 100% over the next two to three years if it continues its impressive reserve & production growth and oil prices remain high." - Bret Jenson, author of article below.

http://seekingalpha.com/article/1651032 ... urce=yahoo

[dan_s]

By traditional measures the stock of Energy XXI Limited is cheap. EXXI sells for less than 8x forward earnings and less than 4x operating cash flow. In addition, it pays an almost two percent dividend yield. Revenues are expected to rise in the low to mid-teens annually in FY2014 & FY2015. The shares also have strong analyst support. Raymond James recently listed it as one of its top plays in the sector. Keybanc also reiterated its "Buy" rating and has a $40 price target on EXXI, more than 50% above its current price. The median price target of the 15 analysts that cover the stock is $37 a share.