UPDATE: MLV & Co. Downgrades Energy XXI Limited On Higher Cost Structure, Lack Of Production Growth

In a report published Tuesday, MLV & Co. analyst Chad Mabry downgraded the rating on

from Buy to Hold, and removed the $34.00 price target. In the report, MLV & Co noted, “With fiscal 2014 in the books, we're rolling our NAV forward to fiscal 2015. Unfortunately, the outlook is not as optimistic as we had been forecasting. Not only does the company's PV-10 imply a lower unit value for its reserves, but a lower production outlook and higher capital spending cause an increase in net debt. As a result, our NAV falls to $18 (from $34). We're downgrading shares of EXXI to Hold (from Buy) and removing our target price. While the stock has been an underperformer this year (-39% YTD vs. +8% for the EPX), the combination of a rising cost structure, lack of production growth, and above-average debt levels are likely to restrict outperformance in the near-term. Factors that could cause us to reassess our rating include improvements in its development drilling program, reductions in leverage, and/or success from its exploration initiatives.” Energy XXI Limited closed on Friday at $16.50.