EXXI--5 reasons to buy

[setliff]

5 Reasons Energy XXI Remains A Strong Buy
Jan. 14, 2014 8:40 AM ET | by: Derek Chipman 1 comment | About: EXXI Disclosure: I am long EXXI, . I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)
Back in November of last year, I published an article providing coverage on Energy XXI (EXXI), a small independent oil and natural gas E&P company with a focus on deep water drilling in the Gulf of Mexico. Over the last several months, its shares have remained fairly stagnant, but a recent pull back now offers an excellent buying opportunity. EXXI continues to offer an excellent reward opportunity through the lucrative resources it has access to, and by maintaining a strong capital structure, its valuation is considerably attractive. With that being said, I am reiterating a strong buy for EXXI, and in this article, you will find the five key reasons why I feel its shares are cheap. For further background information on EXXI, please refer to my previous article and EXXI's website.

complete article here---

http://seekingalpha.com/article/1944041 ... e_readmore

[mdwitte]

How is EXXI different than ATPG? High debt, outspending cashflow, on a treadmill...I'm genuinely curious, as I got burned with ATPG...and am not accounting-savvy enough to determine the differences...

[dan_s]

EXXI is NOT a deepwater driller. Most of its production is on the GOM shelf.

EXXI is now generating enough cash flow from operations to cover its budget. CFPS is over $8.00.

PV10 of just their proven reserves is over $6 Billion, so debt level is actually very conservative. Net Asset Value per share is over $50.

They are actively buying back their own shares.

This is nothing like ATPG.

[GeraldR]

Seems to be no bottom. I'll own a hefty slug when options expire this weekend. Still the story makes sense and the people are reputable. Company buying back shares, production set to increase with additional rigs, etc. Who is selling and why? Maybe only the shadow knows>

[dan_s]

Gerald: If you sold Puts on EXXI and you do not want to "get put to" you can buy back the Put options and roll them forward. I do it all the time. Actually you can generate some nice cash flow by doing this.

For example, here is what I did today:
> Purchased 2 OAS Feb 14 $45 Puts at $2.75/share to close the position
> Sold 2 OAS Jan 15 $45 Puts at $7.90/share to open a position (rolled forward the same exposure)

Each Put contract = 100 shares

So, I netted over $5/share without increasing my exposure at all. I pocketed over $1,000 on this simple trade and I pushed the strike date out to mid-January 2015.

Remember: Only sell Puts on stocks your really want to own. The stock can be put to you at the strike price anytime (although it seldom happens prior to the expiration date). ALWAYS make sure you can handle the total exposure of your open Puts.

[GeraldR]

Thanks Dan. Good technique.