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Private Equity with a Public Ticker John D. Schiller, Jr. Chairman and CEO IPAA Private Capital Conference Houston, TX - January 18 th , 2007. Energy XXI is a new company…. Formed July 25, 2005 October 2005 - Successfully completed a $300 million IPO on the London AIM Market

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slide1

Private Equity with a Public Ticker

John D. Schiller, Jr.

Chairman and CEO

IPAA Private Capital Conference

Houston, TX - January 18th, 2007

energy xxi is a new company
Energy XXI is a new company…
  • Formed July 25, 2005
  • October 2005 - Successfully completed a $300 million IPO on the London AIM Market
  • February 2006 - Agreed to acquire Marlin Energy Offshore, LLC for $421 MM
  • March 31, 2006 - Shareholders approved the “reverse merger”; Closed Marlin acquisition April 4, 2006
  • June 2006 - Agreed to acquire South Louisiana properties for $308 million
  • July 2006 - Raised $85.6 million through exercise of warrants and closed South Louisiana acquisition July 28, 2006
  • December 2006- Form 10 filing with SEC effective December 29, 2006
delivering rapid growth
…delivering rapid growth

Enterprise Value / 2P PV10 (1)

  • PV10 value is based on current market prices and 2P reserves are as of 7/1/06
at attractive cost parameters
…at attractive cost parameters

Transaction Value / Proved Reserves(1)

Transaction Value / Daily Production(1)

  • Per John S. Herold
with experienced management
…with experienced management

John SchillerChairman and CEO

25 yearsexperience

  • Worldwide VP of E&P - Devon Energy & Ocean Energy
  • Management Positions - Burlington Resources
  • Started career with Superior Oil in Lafayette, Louisiana

Steve WeyelPresident & COO

30 yearsexperience

  • President & COO InterGen N.A., a Shell Bechtel JV
  • Executive VP Integrated Energy – NGC / Dynegy
  • 20 years in international oil service sector – RTC & Baker

West GriffinChief Financial Officer

22 yearsexperience

  • Chief Financial Officer - Alon USA
  • Chief Financial Officer of InterGen North America
  • Started career with Bankers Trust, UBS

Ben MarchiveSenior VP- Operations

28 yearsexperience

  • VP - Production North America - Ocean Energy
  • Manager - Kerr-McGee Corporation
  • Started career with Superior Oil in Lafayette, Louisiana

Steve NelsonVP Drilling & Operations

23 yearsexperience

  • Manager of Drilling & Operations - Devon Energy
  • Production Manager - Ocean Energy
  • Gulf of Mexico Operations - Kerr-McGee

Granger AndersonVP Land

25 yearsexperience

  • Chief Landman of GOM - Kerr-McGee
  • Manager - Westport Resources and Burlington Resources
  • Started career with Hunt Oil

Energy XXI Executive Team

150+ yearsexperience

  • Senior Management Experience
  • Highly Successful Growth Companies
  • Long Successful Track Records through Multiple Cycles
slide6

…exploiting high quality assets.

Lake Salvador JDA

Manila Village Field

Rabbit Island Field

Lake Boudreaux Field

South Timbalier 21 Field

Energy XXI Operations Profile

Production: 16,000 BOEPD

Reserves: 2P of 49.1 MMBOE

PV10: $1,351 MM

136 drilling opportunities and 125 recompletions identified

200,000 net acres

company information
Bermuda based corporation

Listed on the London AIM Market

Shares trade as EGY

Warrants trade as EGYW

Fiscal year ended June 30, 2006

Filed “Form 10” for U.S. registration

Filed October 30th, 2006

Effective December 29th, 2006

Dual listing in U.K. & U.S.

Company Information
timing required
Identified angel money July 2004

John/Steve put together business plan June 2004 - December 2004

West Griffin, CFO, joined January 2005

Decided on SPAC as preferred capital raise in April 2005

Completed $300 MM IPO October 2005

Timing Required
funding options considered
Funding Options Considered
  • Private Equity
  • Raise own Private Equity Fund
  • Public Market
special purpose acquisition corporation spac
Special Purpose Acquisition Corporation (SPAC)
  • Essentially a blind trust
  • Management team reputation is key
  • Typical structure
    • Sale a unit for $6
    • Unit consists of 1 Share and 2 Warrants exercisable at $5 for four years
    • 95% of money held in trust
  • Shares and Warrants trade separately
  • Management gets 20% IPO shares (7.7% fully diluted)
shareholder rights
Shareholder Rights
  • Shareholders vote to approve the initial acquisition
  • Shareholders have right to put stock back to company for $5.65/share if they don’t like deal
  • Ensure management does deal in the middle of the fairway
why a spac
Why a SPAC?
  • Pros
    • One time raise with additional equity from Warrants
    • Public money
    • Smaller shareholder base
  • Cons
    • Warrant Dilution
    • Must complete transaction in 12 to 18 months
    • Investor share restrictions (liquidity)
london alternative investment market aim
London Alternative Investment Market (AIM)
  • Less Regulations
    • NOMADS
    • Lawyers
  • Preferred European money (30% IPO)
  • Able to move proxy forward quickly
  • Closed initial transaction in 45 days
  • U.K. markets value true 2P reserves
raising the money
Raising the money

Toronto

Glasgow

Edinburgh

St Paul

Montreal

Portland

Chicago

London

Boston

Seattle

Denver

San Francisco

New York

Paris

Philadelphia

Houston

Dallas

  • Perseverance
    • 6 week road show
raising the money16
Raising the Money

$42.42

Blended Strip (50% oil/50% gas)

$8.18

Acquisition Cost of U.S. Reserves

Source: J.S. Herold, Bloomberg

Note: Forward strip is at year-end for annual data and end of July for year-to-date data; strip is two-year strip at that time

  • Acquisitions trade at a significant discount to strip price
  • Hedging markets provide opportunities to secure high operating margins
  • Favorable environment for asset acquisitions

The margin opportunity for acquisition of reserves has improved with increased oil and gas prices

  • Perseverance
  • Arbitrage
raising the money17
Raising the Money

Asset Acquirers have been substantially rewarded by the market

Source: Randall & Dewey with respect to selection of Acquirers vs. Other Large Caps

  • Perseverance
  • Arbitrage
  • What success will be
capitalization
Capitalization
  • 83.9 MM Shares outstanding
    • $420 MM market capitalization
  • 78.6 MM Warrants outstanding
    • $70.7 MM market value
    • $393 MM potential equity
  • $325 MM 2nd Lien
  • $127 MM Revolver (as of 1Q ’07)

Energy XXI intends to refinance 2nd Lien with high yield

balance sheet
Balance Sheet

($M)

June 30, 2006

Sept 30,2006

Cash 62 8

Net Working Capital (excluding cash) 74 73

Debt 209 450

Stockholder’s Equity 353 405

Total Capitalization (based upon net debt) 500 847

Net Debt/Total Capitalization 29% 52%

Net Debt/Proved Reserve ($/BOE) $5.98 $11.79

quarterly results
Quarterly Results

($M)

June 30, 2006

Sept 30, 2006

  • Operating Income 13,319 17,397
  • Net Income 5,534 1,933
  • Operating Cash Flow (EBITDA) 33,636 (1) 45,141 (1)
  • Net Debt/EBITDA (2) 1.09x 2.52x
  • EBITDA/Interest (3) 5.23x 4.61x
  • Operating Income plus Depreciation, Depletion and Amortization
  • Annualized quarterly EBITDA
  • Interest excludes one-time write-off of up-front fees
spac thoughts
Right vehicle at the right time

Eurospac preferred

Management team with wall street exposure essential

Fast & Furious Year

5 people with $278 MM cash

59 people, 16 mboed, 200 M acres, 5 operated rigs

Management & employees incentivized to increase shareholder value

Collectively own 15% of outstanding shares

SPAC Thoughts
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