J?ohn Schiller, chairman and chief executive of Houston-based Energy XXI, is known for championing an acquire-and-exploit strategy. His company acquires mature oil properties that hold potential for additional reserves and production.

Since its inception in 2005, Energy XXI has purchased three packages of properties in South Louisiana and the Gulf of Mexico. Today, its assets are nearly 60% oil, a favorable split, and its mature oil fields continue to offer opportunities.

“In this economic environment, we can find production to bring online, from recompletions, to workovers with coiled tubing, to something as simple as sliding a sleeve,” says Schiller.

Results have been heartening: At South Timbalier 21, a 1957 discovery that has already produced some 300 million barrels of oil equivalent (BOE), Energy XXI recently reworked four wells that added flush production of 2,400 BOE per day. This year, it plans two development wells and eight workovers in the old gem, which averaged volumes of nearly 8,000 BOE per day during 2008. Additionally, at Main Pass 61 and 72, two fields that have produced a combined 130 million BOE since 1979, it will drill two development wells and build two facilities.

“We are focused on keeping our volumes flat and taking advantage of where commodities are,” he says. “Some 40% of our probable reserves are associated with existing wellbores.”

Yet, balancing this steady-as-she-goes, predictable strategy is a plate of tempting deep and ultradeep wildcat prospects. One has just been announced as a discovery: the infamous Cote de Mer. The 22,300-foot #1ST1 E.A. McIlhenny, in Vermilion Parish, could be the most expensive well ever drilled in South Louisiana. Its drilling issues were legion.

Nonetheless, Energy XXI took over operations after hurricanes Ike and Gustav interrupted work last year, saved the wellbore and reached total depth. “We should have a well test shortly, and it should be on production by fall,” says Schiller. The discovery encountered 89 billion cubic feet of proved reserves; its 3P reserves total 108 billion cubic feet equivalent.

“We’ll watch the well and get comfortable that we have a good, solid reservoir. A year from now or so, we’ll look at drilling an updip well to test some additional sands.”

Another high-potential test is drilling on the Ammazzo venture. This 24,500-foot prospect lines up with the “Big Blue” regional fault that traps the deep-shelf Flat­rock, Hurricane Deep and JB Mountain accumulations. Ammazzo is a 5,000-acre closure in 20 feet of water; the prospect is so large that it covers an entire offshore block in South Marsh 251.

“We’re at 17,800 feet and we have one more pipe point before we get to the Operc and Gyro sands that pay at Flatrock,” says Schiller. Potential is as high as 1 trillion cubic feet in the immense feature. “If we get some thick sands, we can put a lot of gas into this structure,” he says. “We should know something in two to three months.”

Finally, Energy XXI is participating in the ultradeep Blackbeard West test on South Timbalier 168. The 32,997-foot well, in 70 feet of water, has been announced as a major discovery and completion and testing plans are in the works. Logs showed four potential pay zones below 30,067 feet. The well hit the top of a hulking structure and seismic data show that significantly thicker sands are likely present on its flanks.

“We have half a dozen potential drill targets we’re looking at to decide where to move the rig to next,” he says. “We’ll start firming up those decisions in the next month or so.”

Energy XXI holds a 33% working interest in Cote de Mer, 20.6% in Ammazzo and 20% in Blackbeard West. The interests provide it with meaningful positions in some of the most intriguing exploration plays in North America.

At the same time, the company is conservative at its core. This year, it will spend about $100 million, allowing it to continue to pay down debt.

“We’re focused on cleaning up our balance sheet. We’re very comfortable with our liquidity and the cash we have in the bank,” says Schiller.

“We think we’re in good shape to get through the current storm.”