Energy XXI is an independent oil and gas firm that is focused on mature oilfield exploitation. The company’s core properties are located in the Louisiana Gulf Coast.

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For Chairman and CEO John D. Schiller Jr., the operation of Energy XXI is not just work, but a passion. Through its work, the company captures value for shareholders while doing the world a service by “providing [fuel] at as low a cost as possible,” he says.

Based in Hamilton, Bermuda, with its primary operating subsidiary and most employees located in Houston, Energy XXI is an independent oil and gas company that is focused on mature oilfield exploitation. The company’s core properties are located in the Louisiana Gulf Coast.

While the company’s offshore properties primarily include legacy oilfields where activity is centered on exploitation, Energy XXI’s onshore properties concentrate on natural gas. “Proved reserves and production are weighted toward oil at about 55 percent,” the company states.

‘A Neat Idea’
A longtime veteran of the oil industry, Schiller formed Energy XXI in 2005. Prior to Energy XXI, he served as the executive vice president of exploration and production for Ocean Energy Inc., the vice president of exploration and production for Devon Energy, and the interim CEO of Particle Drilling.

After leaving Devon, Schiller got the inspiration for Energy XXI during a meeting with a top associate at Halliburton. “He showed me their vision of a 21st century oil company that you could run with five or six guys and outsource the rest to their organization,” he recalls. “I thought it was a neat idea.”

Schiller later formed Energy XXI with President and COO Steve Weyel and CFO David West Griffin. Schiller knew both men previously, and they also held extensive industry experience.

Griffin was previously the CFO of Alon USA, a refining and marketing company. Weyel most recently was a principal, president and COO at EnerVen LLC, a developer of energy ventures, but his roots were on the oil service side, at a Baker Hughes subsidiary and at his own high-end reservoir engineering firm, where he first met Schiller.
 
A ‘Team’ Effort
Energy XXI obtained funding in October 2005 through a $300 million private placement equity offering in the United States and the United Kingdom and an initial listing on the London Stock Exchange’s Alternative Investment Market. “It was $300 million to go buy something,” Schiller recalls.

“We had people betting [on] our past history and reputation, and I think we couldn’t have done it without the whole team together,” he states.

The company’s core members also include Ben Marchive, senior vice president of operations, who started his career 29 years ago at Superior Oil Co., where he was one of Schiller’s first bosses. “He came out of retirement to do this with us,” Schiller notes.

Energy XXI’s management team also includes Vice President of Drilling Steve Nelson, who is a veteran of Devon Energy, and Vice President of Land J. Granger Anderson III, who brings almost 30 years’ experience as a petroleum landman. “It’s been a nice little deal for us,” Schiller says.

Growing Strong
Energy XXI has grown and assembled properties primarily through acquisitions. After acquiring Marlin Energy for $407 million in 2006, the company then acquired Louisiana Gulf Coast producing properties from Castex Energy, a privately owned oil and gas company based in Houston, for $312 million.

In addition, Energy XXI says it has formed exploration and development joint ventures with Castex for large parts of south Louisiana, which includes the Lake Salvador project, comprising 1,680 square miles.

In June, the company purchased Gulf of Mexico shelf properties from Pogo Producing Co. for $417 million. “These properties will be a key focus of the company’s capital program in fiscal 2008, which began July 1, 2007,” Schiller says.

‘Strong Results’
So far, the bet placed on Energy XXI has paid off. In the company’s first full year of operation, which ended June 30, 2007, “[We] averaged 16,200 barrels of oil equivalent a day (BOE/d),” Schiller reports.

In addition, in Energy XXI’s fiscal 2008 first-quarter results, the company reported that volumes averaged 26,200 BOE/d and its cash flow had grown to $76.7 million, compared to $17.7 in the fiscal 2007 first quarter. Energy XXI notes that it also was successful in four of its five exploration wells and one of its development wells.

According to Weyel, Energy XXI has made substantial progress with its Pogo properties, which have achieved volume growth beyond the company’s expectations, despite the fact that no wells have been drilled or worked over. The gains have come simply from taking care of daily operations, he said.

“We plan to ramp up the offshore drilling program later in the year, but for now, we are concentrating on operating enhancements, getting higher rates from the existing producing wells, while improving the on-line performance of the acquired facilities,” he says.

‘For the Long Term’
Even after all these years, Schiller says he still enjoys the oil industry. “I can’t imagine doing anything else,” he says, noting that he enjoys the challenges and locations of its properties. “We operate in areas that I think are a lot of fun.”

As it has grown, Energy XXI has stayed true to its original plan of operating with a lean technical staff by employing outside expertise where it makes sense, Schiller says.

While the company oversees many critical operations itself, it has outsourced its field studies work to such companies as Schlumberger Ltd. and Halliburton. “We try to keep our people focused on the day-to-day operations and the more long-term, geological [matters],” he says.

The company also has stayed focused on managing its costs. “What kills you in the Gulf of Mexico are mistakes,” he says, adding that the company has worked to have a top technical staff and has excelled in the aspects of exploitation.

For the future, he says Energy XXI began as and continues to be an acquisition company. “We are always looking at asset deals,” he says. “I think you’re going to see consolidation [in] our space, and we’re going to be very active in [our] market over the next few years.”

Future Aspirations
Schiller says Energy XXI expects to go international at some point, and has a strong board of directors and management team with extensive overseas experience. “Currently, the best margins in the world for a company like ours are right here in the Gulf Coast region, but eventually we likely will go where we can acquire larger properties,” he said.

Schiller notes that he is also confident that the company’s owners – including management, which holds 15 percent of the company – is on board with the strategy. “We’ve got a great group of shareholders who came on with us since day one,” he adds. “They know the type of company we’re trying to build, and they’re here with us for the long term.  

“From a standing start about two years ago to a high-margin operating company with nearly 30,000 BOE/d of production, a capitalization approaching $2 billion and dual-listings on NASDAQ and the London AIM (ticker symbol EXXI), it’s been a great ride already and we are excited about what lies farther down the track,” he adds.