What: Shares of Energy XXI Ltd (OTC:EXXIQ) dropped as much as 11% today after announcing an asset sales and an operational update.

So what: The company sold the East Bay Field for $21 million to private buyers but will retain 5% overriding royalty interest and 50% of the deep rights in the field. East Bay Field produced 2,050 barrels of oil per day in fiscal 2015 and net reserves are estimated at 9.4 million barrels of oil equivalent. It also closed on the $245 million sale of Grand Isla Gathering System, although the company will continue to operate the system. 

 Energy XXI Ltd's operational update said that production averaged 59,000 barrels of oil equivalent per day in the fiscal fourth quarter, which was down from 60,000 barrels of oil equivalent per day in the fiscal third quarter.  

Now what: The decline in production, asset sales, and a drilling program that only includes two rigs brings into question how Energy XXI Ltd will ever return to profitability. The company has $4.6 billion in long-term debt and is losing money now that oil prices are near $60 per barrel. This is a stock I wouldn't take a risk on now and the decline in production is the red flag to look at today.