NEW YORK (AP) -- Shares of Energy XXI jumped Wednesday after the independent oil and natural gas exploration and production company announced a strong increase in proved oil reserves.
THE SPARK: Late Tuesday, Energy XXI (Bermuda) Ltd. said that fiscal 2013 year-end proved oil reserves surged nearly 50 percent to an estimated 179 million barrels of oil equivalent. The company said that the current value of the reserves is $6.1 billion.
Accounting for probable reserves, the total climbs to an estimated 232 million barrels of oil equivalent with a present value of $8.4 billion.
THE ANALYSIS: Duan Grubert of Susquehanna Financial Group raised Energy XXI's price target to $35 from $30 on the proved reserve increase and lower share count that resulted from buybacks.
Grubert said in a client note that he anticipated a 10 percent to 15 percent rise in proved reserves, based on indications from management. The analyst said that Energy XXI still has something to prove to investors after its loss of operational momentum over the past several quarters, but Grubert believes the proved oil reserves increase will push the stock higher.
The analyst kept a "Positive" rating.
Stewart Lawrence, vice president of investor relations at Energy XXI, said that the company's investments in its drilling program over the last year "delivered excellent growth in oil reserves, primarily through enhanced recovery of known oil in our existing fields and better delineation of the size of those fields."
Lawrence added that Energy XXI is on pace for solid reserves and production growth — along with paying a sizeable dividend and continued free cash flow generation — in its new fiscal year that started on July 1.
SHARE ACTION: Up $3.70, or 15.2 percent, to $28.09 in morning trading. The stock has traded in a 52-week range of $21.49 to $37.90. Year to date, the shares are down 24 percent.
- Oil, Gas, & Consumable Fuels
- Basic Materials Industry
- oil reserves
- barrels of oil equivalent