Energy XXI Ltd. (NASDAQ:EXXI)

CAPS Rating: 4 out of 5

Recs

3
Player Avatar TSIF (99.96) Submitted: 1/12/2010 2:17:04 PM : Underperform Start Price: $16.49 EXXI Score: -24.05

Energy XX1 surged yesterday (1/11/2010) on McMoRan's announcement of a large deposit of natural gas in shallow water. As one of three partners (Exploration & Production (NYSE: PXP) and McMoran (MRR) then this is certainly good news. By the time the day was over, the announcement/speculation had grown that this was one of the largest deposits of natural gas in the world. Again, good news, if only partially true. My issue with the share price spike is that natural gas in the ground is "potential", it's not profit. That it exists and the reserves are available is a reason for some shareholder appreciation as the rights to the reserve have increased in value. The "reserves", however are from one of the deepest wells drilled in water. Cheap on the drill rig, but a dangerous investment through 2,000 feet plus of rock. This is why multiple companies go together, because the risk is so high. Currently the US is finding that natural gas is a rich resource. Exploration continues in places easier and with less risk. There is glut of natural gas on the market. Eventually the US will learn to use it in more applications, (CLNE) and demand will rise. In the short run, most natural gas producers are lucky to fund CAPEX and debt off their current supply. I doubt the market's enthusiam will be maintained as a few quarters go buy with little to show on Energy XXI's balance sheet, but I might be wrong on this one. If shareholders can hold for future value and another one or two more drill holes become successful, then they might see appreciation, but any bad news on the next drill could be very detrimental.

Report this Post 5 Replies
Member Avatar TSIF (99.96) Submitted: 2/1/2010 3:57:09 PM
Recs: 0

Scared me with the 1:5 that occured last week and is just now showing on CAPs.

Should get ajusted out soon! :)

-476 points goes to show what a downthumb can do to damage you if the equity does soar for some legitimate reason!!! :)

Member Avatar neskolf (29.66) Submitted: 2/1/2010 7:45:34 PM
Recs: 0

Thank goodness that's the case. My jaw dopped when I initially saw the change in score. =)

Member Avatar stockjock12 (< 20) Submitted: 2/1/2010 8:12:45 PM
Recs: 0

Bet that you're miffed that you're down 483 CAPS points!

Member Avatar TSIF (99.96) Submitted: 2/1/2010 8:51:06 PM
Recs: 0

Caps will catch things up and make the adjustments. Happens all the time. Not as bad as when Stake and Shake did a 1 for 20 when I had an active downthumb. Negative 2,000 points gave me back a propeller head. The jagged red knife is still in my graph.

It would be better if they had a live feed that corrected without so many manual operations. They are prompt when notified.

Good luck.

Member Avatar neskolf (29.66) Submitted: 2/2/2010 11:40:56 AM
Recs: 0

Well, at least I got to be the 1-day hottest member on the site for a while once the correction kicked in. :)

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