Energy Prospectus

High oil prices have been good for business for the energy explorers. Energy XXI (Bermuda) Limited (NasdaqGS:EXXI - News) reported a record fiscal first quarter in October. This Zacks #1 Rank (strong buy) is still a value, with a price-to-book of just 1.9.

Energy XXI is an oil and natural gas exploration company with its core properties in coastal and offshore Louisiana.

The company has grown through acquisitions and now has more than 116 million barrels of oil equivalent (NYSE:BOE - News) of proved reserves and about 42,000 BOE per day of production. 67% of that production is oil.

Full Article: http://finance.yahoo.com/news/Energy-XX ... 7.html?x=0

Dan, The forecast for EXXI mentions production from Davy Jones. When you talk about locked in production growth - do you consider production from Davy Jones in your forecast (ie locked in)?

Bob

My forecast model (dated 11/2/2011) assumes that Davy Jones will be on-line early in January. My forecast is based on the company's guidance provided 10/28/2011 of 46,000 to 50,000 boepd for fiscal year ending 6/30/2012. Production for the quarter ended 9/30/2011 was 40,833 boepd (68.5% liquids).

Energy XXI is expected to report 8% to 10% production growth for the quarter ending December 31 (without Davy Jones).

Year-over-year production growth should be 35% to 40%.

We should know a lot more about Davy Jones in a couple weeks when McMoRan reports early production results from the Davy Jones No. 1 well.
http://www.fool.com/investing/general/2 ... ation.aspx

S&P Rves Energy XXI (Bermuda) Otlk To Pos Frm Stbl; Afrms Rtgs 12/22 11:29 AM

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A Yahoo MMR post (EXXI):

Re: MMR Homework! Fun Read; merry christmas to all (remember the reason for the season!) 22-Dec-11 01:02 pm
DJ # 1 flow test will change the world! You don't spend 300 MM on production facilities, for a play that hasn't been deamed commericial (see SEC rules on reserve booking, to go from resource to reserve you have to PROVE you can produce the well i.e. "flow test", correct me if i'm wrong which i easily can be I am an aggie afterall)



MMR's market cap is 2 billion right now. They have spent around 1 billion dollars proving up the DJ structure. Everything from Jim Bob discovering that Exxon (worlds largest company by market cap) had misread the pressure equation in their high profile well know known as "blackbeard" below the Luann salt weld to the floating production facility already built, to diluting investors shares in the company to have access to more capital to explore the UD shelf. You don't risk 50% of your company on one investment unless you have accessed the risk and believe its worth the investment (right Kaleb?) Either Jim Bob is a genius, or he is crazy, or both! But look at Free Port McMoran (Jim Bob has a track record for success where nobody else has believed it could happen)



As of last Thursday, Dec 15, MMR was "reaming" the cased hole on DJ 1. Schiller (an Aggie, whoop) said "we are well underway on our completion process at DJ # 1". So since some of us are PETE's we would assume that if you are "reaming" the hole, the only thing left before you "poke" holes in the production casing is a LOOONG trip out of the hole; rig up of the perforating guns and take a looong trip back and let the "fireworks" begin. This has never been done before, so there is aboslutely NO guarantee for success. But is the risk / reward worth it for you? Thats a question only you can answer. I know my answer, and I sure as heck know Kaleb's answer (we should thank Schiller for giving you that scholarhip way back in thath old burnt down cripple creek apt, shouldnt we... maybe a christmas card with our scottrade account values?)...



THE FPSO MMR procured is able to handle 300 MMSCFPD. I think it is designed to support DJ # 1 and DJ # 2. DJ # 1 is estimated to come online at 75 MMSCF per day (DJ # 1 has a small Rw, and for those PETE's we know that the well deliverability equation is a fuction of wellbore radius, and in DJ # 2 they have a larger Rw, larger flowrate possible? I say yes, but how much, 100 MMSCF? 150 MMSCF? Those numbers are mind boggling to me at least, and I imagine to you as well if you really think about it.



Currently MMR produces (off the top of my head) 180 MMSCFPD throughout the entire company. That means that IF DJ #1 does indeed flow (big IF) you would assume DJ # 2 has the ability to flow and they combined could produce 300 MMSCF (net to MMR, i have no clue of their NRI, but I imagine its around 45 %) that means .45 * 300 MMSCFPD = 135 MMSCFPD net to MMR. E & P companies are evaluted based on the their reserves (for the most part) and with the DJ structure they can double current production. (They have already identified 14 other structures comparable to DJ below the "dancing dragon"



Now I know there are a lot of rumors about JV's and I'm not going to pretend that I understand any of that, but I do know that ifi Jim BoB "de-risked" this play, he is gonna make the big boys pay for that (and pay dearly i imagine)...



So without considering JV's or other structures, and just focusing on the DJ structure alone I believe by Jan 31, 2012 MMR should be trading north of 30 $ / share (unpreffered stock, dunno bout preffered shares)



But what do I know, i'm just an Aggie engineer who has lost money on almost every investment I have ever made in the stock market (Thanks Fannie and Freddie)



I did my homework, did you?



Merrry Christmas from all of us at MMR!

EPG Premium Members can find our profile on MMR under the Watch List tab.

My take is that you get most of the Davy Jones upside with a lot less risk by investing in EXXI.

First, Merry Christmas to all and thanks to Dan and his team for all of their hard work.

1. I am beginning to see EXXI as being in the situation where GPOR was before the big price move. The CF/PSS is awesome.

2. IBD today had EXXI in its section of stock charts - not the top 50 - but the feature that appears daily. Perhaps the word is getting out.

Anyway - time to wrap presents so I can keep my happy home.

Best to all.

Bob

If the Davy Jones No. 1 test results are good and EXXI hits the production targets in my forecast model, I can easily see a double for the share price in 2012. Keep in mind that EXXI is a relatively new company, so it will take awhile for the Wall Street gang to warm up to it. Plus, investors are still very risk adverse these days and they preceive offshore E&P companies as having a lot more risk than the shale companies.

EXXI's base production comes from very old fields. In fact, South Pass 89 was one of our top producting fields when I went to work for Hess Corp. back in 1983.

Merry Christmas to all of you guys. I'm at my son's home in Hollywood, CA today enjoying my new granddaughter, Stella. She is one cute kid.