Private Equity with a Public TickerPrivate Equity with a Public Ticker

John D. Schiller, Jr.John D. Schiller, Jr.Chairman and CEOChairman and CEO

IPAA Private Capital ConferenceIPAA Private Capital ConferenceHouston, TX - January 18Houston, TX - January 18thth, 2007, 2007

22

Energy XXI is a new Energy XXI is a new company…company…

• Formed July 25, 2005Formed July 25, 2005

• October 2005 - Successfully completed a $300 million IPO October 2005 - Successfully completed a $300 million IPO on the London AIM Marketon the London AIM Market

• February 2006 - Agreed to acquire Marlin Energy Offshore, February 2006 - Agreed to acquire Marlin Energy Offshore, LLC for $421 MMLLC for $421 MM

• March 31, 2006 - Shareholders approved the “reverse March 31, 2006 - Shareholders approved the “reverse merger”; Closed Marlin acquisition April 4, 2006merger”; Closed Marlin acquisition April 4, 2006

• June 2006 - Agreed to acquire South Louisiana properties June 2006 - Agreed to acquire South Louisiana properties for $308 millionfor $308 million

• July 2006 - Raised $85.6 million through exercise of July 2006 - Raised $85.6 million through exercise of warrants and closed South Louisiana acquisition July 28, warrants and closed South Louisiana acquisition July 28, 20062006

• December 2006- Form 10 filing with SEC effective December 2006- Form 10 filing with SEC effective December 29, 2006December 29, 2006

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……delivering rapid growthdelivering rapid growth

0

250

500

750

1,000

1,250

1,500

2Q06 3Q06 4Q06 1Q07

$MM

Equity Debt PV10

Enterprise Value / 2P PV10 PV10 (1)(1)

1.1. PV10 value is based on current market prices and 2P reserves are as of 7/1/06PV10 value is based on current market prices and 2P reserves are as of 7/1/06

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……at attractive cost at attractive cost parametersparameters

$29.3 $30.4 $31.3 $32.1 $37.1 $38.7 $41.7 $42.0 $44.2 $44.9 $48.2$55.1 $55.3 $59.7

$80.5

$95.1

0

20

40

60

80

100($M/BOE/d)

Transaction Value / Proved ReservesTransaction Value / Proved Reserves(1)(1)

Transaction Value / DailyDaily Production(1)

1.1. Per John S. HeroldPer John S. Herold

$13.8$16.6

$18.9 $19.0 $19.7 $19.9 $19.9 $20.2 $21.0 $21.3 $22.2 $22.6 $22.9 $23.1$26.7

$36.2

0

10

20

30

40

($BOE)

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……with experienced with experienced managementmanagement

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

John SchillerChairman and CEO

Steve WeyelPresident & COO

President & COO InterGen N.A., a Shell Bechtel JVPresident & COO InterGen N.A., a Shell Bechtel JV Executive VP Integrated Energy – NGC / DynegyExecutive VP Integrated Energy – NGC / Dynegy 20 years in international oil service sector – RTC & Baker20 years in international oil service sector – RTC & Baker

West GriffinChief Financial Officer

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

Steve NelsonVP Drilling & Operations

Manager of Drilling & Operations - Devon EnergyManager of Drilling & Operations - Devon Energy Production Manager - Ocean EnergyProduction Manager - Ocean Energy Gulf of Mexico Operations - Kerr-McGeeGulf of Mexico Operations - Kerr-McGee

Ben MarchiveSenior VP- Operations

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

Granger AndersonVP Land

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

25 years25 yearsexperienceexperience

30 years30 yearsexperienceexperience

22 years22 yearsexperienceexperience

28 years28 yearsexperienceexperience

23 years23 yearsexperienceexperience

25 years25 yearsexperienceexperience

Energy XXI Energy XXI Executive TeamExecutive Team

150+ years150+ yearsexperienceexperience

Senior Management ExperienceSenior Management Experience Highly Successful Growth CompaniesHighly Successful Growth Companies Long Successful Track Records through Multiple CyclesLong Successful Track Records through Multiple Cycles

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South Timbalier 21 FieldEnergy XXI Operations Profile

Production: 16,000 BOEPDReserves: 2P of 49.1 MMBOEPV10: $1,351 MM136 drilling opportunities and 125 recompletions identified200,000 net acres

Rabbit Island Field

Manila Village Field

Lake Salvador JDA

Lake Boudreaux Field

……exploiting high quality exploiting high quality assets.assets.

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Company InformationCompany Information

• Bermuda based corporationBermuda based corporation

• Listed on the London AIM MarketListed on the London AIM Market– Shares trade as EGYShares trade as EGY– Warrants trade as EGYWWarrants trade as EGYW

• Fiscal year ended June 30, 2006Fiscal year ended June 30, 2006

• Filed “Form 10” for U.S. registrationFiled “Form 10” for U.S. registration– Filed October 30Filed October 30thth, 2006 , 2006 – Effective December 29Effective December 29th,th, 2006 2006

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

88

How did we get here?How did we get here?

99

Timing RequiredTiming Required

• Identified angel money July 2004Identified angel money July 2004

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

• West Griffin, CFO, joined January 2005West Griffin, CFO, joined January 2005

• Decided on SPAC as preferred capital Decided on SPAC as preferred capital raise in April 2005raise in April 2005

• Completed $300 MM IPO October 2005Completed $300 MM IPO October 2005

1010

Funding Options Funding Options ConsideredConsidered

• Private EquityPrivate Equity

• Raise own Private Equity Fund Raise own Private Equity Fund

• Public MarketPublic Market

1111

Special Purpose Special Purpose Acquisition Corporation Acquisition Corporation

(SPAC)(SPAC)• Essentially a blind trustEssentially a blind trust

• Management team reputation is keyManagement team reputation is key

• Typical structureTypical structure– Sale a unit for $6Sale a unit for $6– Unit consists of 1 Share and 2 Warrants Unit consists of 1 Share and 2 Warrants

exercisable at $5 for four yearsexercisable at $5 for four years– 95% of money held in trust95% of money held in trust

• Shares and Warrants trade separatelyShares and Warrants trade separately

• Management gets 20% IPO shares Management gets 20% IPO shares (7.7% fully diluted)(7.7% fully diluted)

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Shareholder RightsShareholder Rights

• Shareholders vote to approve the Shareholders vote to approve the initial acquisitioninitial acquisition

• Shareholders have right to put stock Shareholders have right to put stock back to company for $5.65/share if back to company for $5.65/share if they don’t like dealthey don’t like deal

• Ensure management does deal in the Ensure management does deal in the middle of the fairwaymiddle of the fairway

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Why a SPAC?Why a SPAC?

• ProsPros– One time raise with additional equity from One time raise with additional equity from

WarrantsWarrants– Public moneyPublic money– Smaller shareholder baseSmaller shareholder base

• ConsCons– Warrant DilutionWarrant Dilution– Must complete transaction in 12 to 18 Must complete transaction in 12 to 18

monthsmonths– Investor share restrictions (liquidity)Investor share restrictions (liquidity)

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London Alternative London Alternative Investment Market (AIM)Investment Market (AIM)

• Less RegulationsLess Regulations– NOMADSNOMADS– LawyersLawyers

• Preferred European money (30% IPO)Preferred European money (30% IPO)

• Able to move proxy forward quicklyAble to move proxy forward quickly

• Closed initial transaction in 45 daysClosed initial transaction in 45 days

• U.K. markets value true 2P reservesU.K. markets value true 2P reserves

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Raising the moneyRaising the money

• PerseverancePerseverance– 6 week road show6 week road show

Seattle

Toronto

Denver

Houston

ChicagoPortland

San Francisco

Edinburgh

Dallas

Philadelphia

New York

Boston

Montreal

St Paul

Paris

London

Glasgow

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Raising the MoneyRaising the Money

• PerseverancePerseverance• ArbitrageArbitrage Historical Acquisition Pricing vs. Blended Strip

-

10

20

30

40

50

60

1998 1999 2000 2001 2002 2003 2004 Jul-05

$/B

OE Blended Strip (50% oil/50% gas)

Acquisition Cost of U.S. Reserves

$8.18

$42.42

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

Source: J.S. Herold, BloombergNote: 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

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

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Raising the MoneyRaising the Money

• PerseverancePerseverance• Arbitrage Arbitrage • What success will beWhat success will be

Asset Acquirers have been substantially rewarded by the Asset Acquirers have been substantially rewarded by the marketmarketSource: Randall & Dewey with respect to selection of Acquirers vs. Other Large Caps

Performance: Acquirers vs. Other Large Caps

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Large Caps (APC,BR,DVN,EOG,KMG,UCL) Acquirers (CHK,APA,XTO,NFX)

1818

The ResultsThe Results

1919

Capitalization Capitalization

• 83.9 MM Shares outstanding83.9 MM Shares outstanding– $420 MM market capitalization$420 MM market capitalization

• 78.6 MM Warrants outstanding78.6 MM Warrants outstanding– $70.7 MM market value$70.7 MM market value– $393 MM potential equity$393 MM potential equity

• $325 MM 2nd Lien$325 MM 2nd Lien

• $127 MM Revolver (as of 1Q ’07)$127 MM Revolver (as of 1Q ’07)

Energy XXI intends to refinance 2nd Lien with high yield

2020

Balance SheetBalance Sheet

($M)($M) June 30, 2006June 30, 2006

CashCash 62 62 8 8

Net Working Capital Net Working Capital (excluding cash)(excluding cash) 74 74 73 73

DebtDebt 209 209 450450

Stockholder’s EquityStockholder’s Equity 353 353 405 405

Total Capitalization Total Capitalization (based upon net debt)(based upon net debt) 500 500 847 847

Net Debt/Total CapitalizationNet Debt/Total Capitalization 29% 29% 52%52%

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

Sept 30,2006

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Quarterly ResultsQuarterly Results

Operating IncomeOperating Income 13,319 13,319 17,397 17,397

Net IncomeNet Income 5,534 5,534 1,933 1,933

Operating Cash Flow (EBITDA) 33,636 Operating Cash Flow (EBITDA) 33,636 (1)(1) 45,141 45,141 (1)(1)

Net Debt/EBITDA Net Debt/EBITDA (2)(2) 1.09x 1.09x 2.52x 2.52x

EBITDA/Interest EBITDA/Interest (3)(3) 5.23x 5.23x 4.61x 4.61x

(1)(1) Operating Income plus Depreciation, Depletion and AmortizationOperating Income plus Depreciation, Depletion and Amortization

(2)(2) Annualized quarterly EBITDAAnnualized quarterly EBITDA

(3)(3) Interest excludes one-time write-off of up-front feesInterest excludes one-time write-off of up-front fees

June 30, 2006($M)($M) Sept 30, 2006

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SPAC ThoughtsSPAC Thoughts

• Right vehicle at the right timeRight vehicle at the right time

• Eurospac preferredEurospac preferred

• Management team with wall street Management team with wall street exposure essentialexposure essential

• Fast & Furious YearFast & Furious Year– 5 people with $278 MM cash5 people with $278 MM cash

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

• Management & employees incentivized Management & employees incentivized to increase shareholder value to increase shareholder value – Collectively own 15% of outstanding sharesCollectively own 15% of outstanding shares

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DisclaimerDisclaimer