Energy XXI Down Big On Bankruptcy Warning

Shares of Energy XXI Ltd EXXI plunged as much as 36 percent after the company said it may file for chapter 11 bankruptcy protection if the oil prices continues to remain low and it fails to refinance its debt.

"Absent a material improvement in oil and gas prices or a refinancing or some restructuring of our debt obligations or other improvement in liquidity, we may seek bankruptcy protection to continue our efforts to restructure our business and capital structure and may have to liquidate our assets and may receive less than the value at which those assets are carried on our consolidated financial statements," the company said in a regulatory filing with SEC.

Houston-based Energy XXI defaulted on an $8.8 million interest payment on senior notes on February 16 and has been in talks with debt holders to restructure its balance sheet before a 30-day grace period ends on March 17.

As of December 15, 2015, the company had debt of about $3.26 billion and taking into account the bond repurchases completed subsequent to December 31, it had total debt of $2.508 billion as of February 15, 2016. The company expects to have substantial interest payments totaling $235.8 million due on its outstanding bonds in the next 12 months.

Though a recent rally saw Brent crude breaching the $40 a barrel mark, the company needs at least $60 per barrel to break even.

Late February, Energy XXI received a letter from the NASDAQ notifying that the company's common stock failed to meet the minimum bid price of $1.00 per share required by the listing rules. Energy XXI has grace period until August 22, 2016, to achieve compliance with the minimum bid price requirement.

Energy XXI have also suspended the quarterly dividends on its 5.625 percent convertible perpetual preferred stock and its 7.25 percent convertible perpetual preferred stock for the quarter ending March 31, 2016. As a result, no dividends for the fiscal third quarter will be paid to holders of these preferred stocks.

Shares were recently down 30.5 percent at $0.75. They have been trading between $0.29 and $4.74 during the past 52 weeks.