Exporation

 

Fiscal 2012 marks a very important turning point in Energy XXI's exploration program. In January 2010, our exploration partnership, operated by McMoRan, announced the successful discovery of hydrocarbonbearing sands at our Davy Jones prospect. In April 2012, the discovery well is expected to be online.

 

Our partnership has spent the last two years testing and recalibrating our geologic models by exploring below 25,000 feet on the shallow-water Gulf of Mexico shelf in search of Miocene and Wilcox/Lower Tertiary sands. Previous discoveries show these sands are prolific both onshore and in deep water. We confirmed the first portion of our theory in 2008 when we discovered good-quality, hydrocarbon-bearing Miocene sands below 30,000 feet at Blackbeard West. The Davy Jones well now has discovered Wilcox pay sands below 27,000 feet and confirmed the vast potential of natural gas deposits in structures below the salt weld that cuts through the Gulf Coast. At Davy Jones, seismic images show a 20,000-acre structure that encompasses four lease blocks within a classic four-way trap. Including Davy Jones and our previous discovery at Blackbeard West, the partnership has identified 15 ultra-deep prospects that we believe may contain upwards of 100 Tcfe of recoverable reserves in this frontier exploration play. These potential resources are all located in shallow water on the Gulf of Mexico shelf where there is ample infrastructure to put production online quickly and inexpensively.

 

The Davy Jones discovery well on South Marsh Island Block 230 was drilled to a total depth of 29,122 feet and logged 200 net feet of pay in multiple Eocene/Paleocene (Wilcox) sands. This is the first-ever Wilcox discovery on the Gulf of Mexico shelf. Specially designed completion equipment has been ordered and expect we to have this well tied into production and online in April 2012. Netherland, Sewell & Associates, Inc. (NSAI), our independent oil and gas consultants, estimated the Davy Jones discovery holds as much as 841 million BOE (104 million BOE net to the company) of contingent and prospective resources based on data obtained to date. Additional data or a flow test of the well may be required before the contingent resources can be moved to the proved, probable or possible reserves categories.

 

The Davy Jones offset appraisal well on South Marsh Island Block 234, approximately two and a half miles southwest of the discovery well was drill to a total depth of 29,950 feet. This well is of particular significance as we hope to confirm the continuity of the originally discovered sands as well as test additional Wilcox sands and potentially the Tuscaloosa section. Energy XXI has a 15.8% working interest and 12.6% net revenue interest in Davy Jones.

 

At the Blackbeard East exploration well on South Timbalier Block 144, we drilled to a total depth of 29,950 feet. The well is another ultra-deep prospect that is syncline-separated from our first discovery at Blackbeard West and is targeting Middle and Lower Miocene objectives. Energy XXI is funding 16% of the exploratory costs to earn an 18% working interest and 14.35% net revenue interest in Blackbeard East.

 

Located in the Eugene Island Block 223 is our Lafitte prospect. This well is located in the third strategic area of our ultra-deep exploration program. This well was drilled to a total depth of 34,184 feet and encountered 211' net pay in the Lower Miocene including the Cris-R and Oligocene (Frio) sands. There was an additional 65' of net pay found in the Upper Eocene as well as 300' of fractured limestone in the Sparta section. Energy XXI has an 18% working interest and a 14.6% net revenue interest.