Endeavour Announces Second Quarter 2010 Financial and Operational Results
By Endeavour International Corporation, PRNEWednesday, August 4, 2010
HOUSTON, August 5, 2010 - — Agreement to drill UK West Rochelle area
— Expansion of UK Cygnus field
— Success in US gas shale portfolio
Endeavour International Corporation (NYSE-Amex: END) (LSE: ENDV) today
reported discretionary cash flow for the second quarter of 2010 was US$11.2
million compared to US$19.0 million in the second quarter of 2009 and US$4.1
million for the first quarter of 2010. Net income (loss), as adjusted, was
US$(3.9) million for the second quarter of 2010 compared to US$38.5 million
in the same period last year. On a GAAP basis, net income was US$0.6 million
for the second quarter of 2010 as compared to US$9.8 million in the same
quarter in 2009.
"We continued to make excellent progress on many fronts during the second
quarter as we advanced all of our key goals," said William L. Transier,
chairman, chief executive officer and president. "The success in expanding
our Cygnus field and the positive results from our first wells in the United
States demonstrates the value of our strategy and combination of assets."
Highlights for the second quarter are as follows:
Preparing to drill UK West Rochelle prospect - Endeavour has reached
agreement to test the West Rochelle prospect that straddles Blocks 15/26c and
15/26b in the Central North Sea and lies west of the Rochelle gas field in
Block 15/27. Subject to final board approvals, the Rochelle 15/26b-M well is
scheduled to begin drilling in late August. The well will be drilled near the
lease line boundary between the two blocks and will satisfy the Department of
Energy and Climate Change (DECC) license commitment for Block 15/26c.
Drilling results are expected in early fourth quarter. Nexen Petroleum U.K.
Limited will operate the well. The 15/26b participants will carry Endeavour's
share of the well cost. Endeavour is the operator of 15/26c and retains 50
percent interest. With success, the West Rochelle accumulation would be
developed as a tie-back to the Rochelle field. Endeavour is operator and
holds 55.6 percent interest in the Rochelle field and Nexen holds the
remaining interest.
Successful appraisal drilling expanded UK Cygnus field and 25th Licensing
Round awards increased leasehold position in area - During the quarter, the
44/12a-5 appraisal well successfully tested a fifth fault block in the Cygnus
field. The well flowed at an initial rate of 29 million cubic feet of natural
gas per day (mmcfd) from the Leman sandstone and was the fourth successive
appraisal well to flow at this enhanced rate. The estimated ultimate recovery
of Cygnus could reach two trillion cubic feet. Earlier this year, the DECC
awarded Endeavour two blocks, 44/11b and 44/12b, adjacent to the company's
other Cygnus acreage as part of the 25th Licensing Round. Endeavour holds
17.24 percent interest in the two new blocks. The Cygnus participants applied
for additional Cygnus area acreage in the 26th Licensing Round that closed in
June. Results are expected either late 2010 or early 2011. A 3D seismic
survey covering the expanded Cygnus area will be acquired for interpretation
to optimize placement of development well locations. Endeavour and
co-participants are pursuing an enhanced field development concept to
accommodate improved field production rates and lower capital expenditures.
Successfully drilled and completed three wells in U.S. gas shale
portfolio - In the Louisiana Haynesville play, the Batchelor 3-1H horizontal
well in the Woodardville field flowed gas at an initial rate of 21.5 mmcfd.
Endeavour holds a 50 percent working interest in the Batchelor well and in
the adjacent Indigo Minerals well which has produced more than three billion
cubic feet of gas in the past year. The Endeavour/Cohort Energy joint venture
holds approximately 13,500 gross acres in the highly prospective Louisiana
portion of the Haynesville play where it continues to operate an active
drilling rig. In East Texas, the Longview North Gas Unit 1H horizontal well
was completed after testing at an initial rate of 6.1 mmcfd in the East
Willow Springs Field in Gregg County. Endeavour holds a 50 percent working
interest in the well where there are up to six potential offset locations. In
the Pennsylvanian Marcellus play at the Daniel Prospect in Cameron County,
the Pardee & Curtin Lumber Co. C-9H horizontal well tested gas at an initial
rate of 2.7 mmcfd. Endeavour holds a 50 percent in the well and in the
prospect area covering approximately 22,900 gross acres. The joint venture is
currently formulating an integrated development plan at the Daniel Prospect
and overall holds approximately 40,000 gross acres in the Pennsylvania
Marcellus play.
Received approval of first of four field development plans under review
by UK government - The DECC sanctioned the development plans for the Bacchus
oil field in Block 22/6a in the Central North Sea. Endeavour holds a 10
percent interest in the 2005 discovery. The plan calls for a subsea
development with three wells to be drilled and linked to production
facilities at the nearby Forties Field. Apache operates and holds a 70
percent working interest in the Bacchus development. First production is
planned for the first half of 2011.
Entered into engineering agreement for Columbus field - The Columbus
field under development in the Central North Sea in Blocks 12/16f and Block
23/16f will feature a bridge-linked platform that will connect production to
the Lomond field and provide gas and condensate reception facilities. Project
sanction is scheduled for the end of 2010. The Columbus field was discovered
in 2006 and subsequently appraised in 2007 through the drilling of two
additional wells. Endeavour holds a 25 percent interest in the field that is
expected to begin producing in the second half of 2012.
Gained ISO 14001 accreditation for UK exploration and production
activities - The International Organization for Standardization (ISO) has
accredited the environmental processes of Endeavour's offshore and associated
onshore operations in the United Kingdom Continental Shelf. The ISO 14001:204
certification is independent verification that the company operates in an
environmentally responsible manner in compliance with the law and relevant
industry standards, identifies and assesses the environmental impacts and
risks of its operations and has a system in place to mitigate any issues.
Guidance for Year 2010
The table below sets forth estimates for operating statistics for the
full year ending December 31, 2010.
(All amounts in US dollars unless otherwise noted.)
Estimated Average Production (A)
Daily Production (BOE per day) 4,500 to 6,000
Differentials (B)
Oil ($/Bbl) $(5.00) to $(6.00)
Gas ($Mcf) $(0.50) to $(0.60)
Gas percentage of Total 55% to 60%
Lease Operating Expense ($ per barrel) $8.00 to $10.00
(A) Actual results may differ materially from these estimates.
(B) For purposes of the estimates, assumptions of price differentials
are based on location, quality and other factors, excluding the
effects of derivative financial instruments. Gas price
differentials are stated as premiums (discounts) from Henry Hub
pricing, and oil price differentials are stated as premiums
(discounts) from West Texas Intermediate pricing.
Earnings Conference Call, Thursday, August 5, 2010 at 9:00 a.m., Central
Daylight Time, 3:00 p.m. British Summer Time
Endeavour International will host a conference call and web cast to
discuss its 2010 second quarter financial and operating results on Thursday,
August 5, 2010 at 9 a.m. Central Daylight Time, 3 p.m. British Summer Time.
To participate and ask questions during the conference call, dial the local
country telephone number and the confirmation code 9904628. The toll-free
numbers are 888-663-2241 in the United States and 0-808-101-1402 in the
United Kingdom. Other international callers should dial +1-913-312-0416
(tolls apply). To listen only to the live audio web cast access Endeavour's
home page at www.endeavourcorp.com. A replay will be available
beginning at 12:00 p.m. Central Daylight Time on August 5 through 12:00 p.m.
on August 12 by dialing toll free 888-203-1112 (U.S.) or +1-719-457-0820
(international), confirmation code 9904628.
Endeavour International Corporation is an oil and gas exploration and
production company focused on the acquisition, exploration and development of
energy reserves in the North Sea and the United States. For more information,
visit endeavourcorp.com.
Additional information for investors:
Certain statements in this news release should be regarded as
"forward-looking" statements within the meaning of the securities laws. These
statements speak only of as of the date made. Such statements are subject to
assumptions, risk and uncertainty. Actual results or events may vary
materially.
As of January 1, 2010, the Securities and Exchange Commission (SEC)
changed its rules to permit oil and gas companies, in their filings with the
SEC, to disclose not only proved reserves, but also probable reserves and
possible reserves. Proved oil and gas reserves are those quantities of oil
and gas, which, by analysis of geosciences and engineering data, can be
estimated with reasonable certainty to be economically producible - from a
given date forward, from known reservoirs, and under existing economic
conditions, operating methods, and government regulations - prior to the time
at which contracts providing the right to operate expire. Probable reserves
include those additional reserves that a company believes are as likely as
not to be recovered and possible reserves include those additional reserves
that are less certain to be recovered than probable reserves. We use may use
certain terms in our news releases, such as "reserve potential," that the
SEC's guidelines strictly prohibit us from including in filings with the SEC.
In addition, we do not represent that the probable or possible reserves
described herein meet the recoverability thresholds established by the SEC in
its new definitions. Investors are urged to also consider closely the
disclosure in our filings with the SEC, available from our website at
www.endeavourcorp.com. Endeavour is also subject to the requirements
of the London Stock Exchange and considers the disclosures in this release
to be appropriate and/or required under the guidelines of that exchange.
Endeavour International Corporation
Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
June 30, December 31,
2010 2009
---- ----
Assets
Current Assets:
Cash and cash equivalents $13,593 $27,287
Restricted cash - 2,879
Accounts receivable 8,773 14,800
Prepaid expenses and other current assets 11,617 10,118
----------------------------------------- ------ ------
Total Current Assets 33,983 55,084
Property and Equipment, Net 332,102 266,587
Goodwill 211,886 211,886
Other Assets 4,354 5,322
------------ ----- -----
Total Assets $582,325 $538,879
------------ -------- --------
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $30,147 $12,401
Current maturities of debt 75,625 -
Accrued expenses and other 20,205 17,798
-------------------------- ------ ------
Total Current Liabilities 125,977 30,199
Long-Term Debt 168,552 223,385
Deferred Taxes 91,401 80,692
Other Liabilities 70,832 85,412
----------------- ------ ------
Total Liabilities 456,762 419,688
Commitments and Contingencies
Series C Convertible Preferred Stock 53,152 59,058
Stockholders' Equity 72,411 60,133
-------------------- ------ ------
Total Liabilities and Stockholders' Equity $582,325 $538,879
------------------------------------------ -------- --------
Endeavour International Corporation
Condensed Consolidated Statement of Operations
(Unaudited)
(Amounts in thousands, except per share data)
Three Months Ended
June 30,
--------
2010 2009
---- ----
Revenues $21,532 $18,082
Cost of Operations:
Operating expenses 3,465 4,397
Depreciation, depletion and
amortization 7,912 7,858
Impairment of oil and gas
properties - 1,244
General and administrative 4,205 4,115
-------------------------- ----- -----
Total Expenses 15,582 17,614
-------------- ------ ------
Income (Loss) From Operations 5,950 468
----------------------------- ----- ---
Other Income (Expense):
Derivatives:
Realized gains (losses) (1,332) 9,114
Unrealized gains (losses) 6,108 (32,722)
Interest expense (5,623) (4,224)
Interest income and other 586 (7,992)
------------------------- --- ------
Total Other Expense (261) (35,824)
------------------- ---- -------
Income (Loss) Before Income
Taxes 5,689 (35,356)
Income Tax Expense (Benefit) 5,084 916
---------------------------- ----- ---
Income (Loss) from Continuing
Operations 605 (36,272)
Income from Discontinued
Operations - 46,092
------------------------ --- ------
Net Income (Loss) 605 9,820
Preferred Stock Dividends 547 2,696
------------------------- --- -----
Net Income (Loss) to Common
Stockholders $58 $7,124
--------------------------- --- ------
Basic and Diluted Net
Income (Loss) per Common
Share:
Continuing operations $ - $(0.31)
Discontinued operations - 0.36
----------------------- --- ----
Total $ - $0.05
----- --- --- -----
Weighted Average Number of
Common Shares Outstanding:
Basic and Diluted 162,014 129,741
----------------- ------- -------
Six Months Ended
June 30,
--------
2010 2009
---- ----
Revenues $35,253 $34,420
Cost of Operations:
Operating expenses 6,286 10,580
Depreciation, depletion and
amortization 13,593 19,182
Impairment of oil and gas
properties 7,692 30,645
General and administrative 8,636 7,950
-------------------------- ----- -----
Total Expenses 36,207 68,357
-------------- ------ ------
Income (Loss) From Operations (954) (33,937)
----------------------------- ---- -------
Other Income (Expense):
Derivatives:
Realized gains (losses) (1,100) 21,050
Unrealized gains (losses) 5,036 (34,095)
Interest expense (11,259) (8,135)
Interest income and other 3,609 (8,333)
------------------------- ----- ------
Total Other Expense (3,714) (29,513)
------------------- ------ -------
Income (Loss) Before Income
Taxes (4,668) (63,450)
Income Tax Expense (Benefit) 9,917 (10,036)
---------------------------- ----- -------
Income (Loss) from Continuing
Operations (14,585) (53,414)
Income from Discontinued
Operations - 46,370
------------------------ --- ------
Net Income (Loss) (14,585) (7,044)
Preferred Stock Dividends 1,136 5,365
------------------------- ----- -----
Net Income (Loss) to Common
Stockholders $(15,721) $(12,409)
--------------------------- -------- --------
Basic and Diluted Net Income
(Loss) per Common Share:
Continuing operations $(0.10) $(0.46)
Discontinued operations - 0.36
----------------------- --- ----
Total $(0.10) $(0.10)
----- ------ ------
Weighted Average Number of
Common Shares Outstanding:
Basic and Diluted 155,815 129,521
----------------- ------- -------
Endeavour International Corporation
Condensed Consolidated Statement of Cash Flows
(Unaudited)
(Amounts in thousands)
Six Months Ended June 30,
-------------------------
2010 2009
---- ----
Cash Flows from Operating Activities:
Net loss $(14,585) $(7,044)
Adjustments to reconcile net loss to
net cash
provided by operating activities:
Depreciation, depletion and
amortization 13,593 23,863
Impairment of oil and gas properties 7,692 30,645
Deferred tax expense (benefit) 8,445 (3,596)
Unrealized (gains) losses on
derivatives (5,036) 34,095
Gain on sale of Norwegian operations - (47,144)
Other 5,155 11,536
Changes in operating assets and
liabilities 9,189 (156)
------------------------------- ----- ----
Net Cash Provided by Operating
Activities 24,453 42,199
Cash Flows From Investing Activities:
Capital expenditures (41,392) (65,068)
Acquisitions (33,047) (2,269)
Proceeds from sales, net of cash - 139,797
Decrease in restricted cash 2,878 18,592
--------------------------- ----- ------
Net Cash Provided by (Used in)
Investing Activities (71,561) 91,052
Cash Flows From Financing Activities:
Borrowings (repayments) of borrowings 15,683 (64,458)
Proceeds from issuance of common stock 20,011 -
Dividends paid (1,057) (5,313)
Other financing (1,223) (34)
--------------- ------ ---
Net Cash Provided by (Used in)
Financing Activities 33,414 (69,805)
Net Increase (Decrease) in Cash and
Cash Equivalents (13,694) 63,446
Cash and Cash Equivalents, Beginning of
Period 27,287 38,156
--------------------------------------- ------ ------
Cash and Cash Equivalents, End of
Period $13,593 $101,602
--------------------------------- ------- --------
Endeavour International Corporation
Operating Statistics
(Unaudited)
Three Months
Ended Six Months Ended
June 30, June 30,
-------- --------
2010 2009 2010 2009
---- ---- ---- ----
Sales volume (1)
Oil and condensate
sales (Mbbls):
United Kingdom 188 234 301 412
United States 1 - 3 1
------------- --- --- --- ---
Continuing operations 189 234 304 413
Discontinued
operations -Norway - 87 - 310
------------------- --- --- --- ---
Total 189 321 304 723
----- --- --- --- ---
Gas sales (MMcf):
United Kingdom 979 1,071 1,745 2,148
United States 441 60 721 111
------------- --- --- --- ---
Continuing operations 1,420 1,131 2,466 2,259
Discontinued
operations -Norway - 153 - 686
------------------- --- --- --- ---
Total 1,420 1,284 2,466 2,945
----- ----- ----- ----- -----
Oil equivalent sales
(MBOE)
United Kingdom 351 413 592 770
United States 75 10 123 20
------------- --- --- --- ---
Continuing operations 426 423 715 790
Discontinued
operations -Norway - 112 - 424
------------------- --- --- --- ---
Total 426 535 715 1,214
----- --- --- --- -----
Total BOE per day 4,684 5,877 3,951 6,710
----------------- ----- ----- ----- -----
Physical production
volume (BOE per day)
(2):
United Kingdom 3,279 3,995 3,199 4,132
United States 824 109 680 106
------------- --- --- --- ---
Continuing operations 4,103 4,104 3,879 4,238
Discontinued
operations -Norway - 1,324 - 2,332
------------------- --- ----- --- -----
Total 4,103 5,428 3,879 6,570
----- ----- ----- ----- -----
Realized Prices (3)
Oil and condensate
price ($ per Bbl):
Before commodity
derivatives $76.80 50.83 $74.33 $45.74
Effect of commodity
derivatives (8.50) 18.88 (8.83) 22.00
------------------- ----- ----- ----- -----
Realized prices
including commodity
derivatives $68.30 69.71 $65.50 $67.74
-------------------- ------ ----- ------ ------
Gas price ($ per Mcf):
Before commodity
derivatives $4.91 $4.64 $5.13 $6.41
Effect of commodity
derivatives 0.20 2.38 0.64 1.74
------------------- ---- ---- ---- ----
Realized prices
including commodity
derivatives $5.11 $7.02 $5.77 $8.15
-------------------- ----- ----- ----- -----
Equivalent oil price
($ per BOE):
Before commodity
derivatives $50.51 $41.62 $49.30 $42.79
Effect of commodity
derivatives (3.12) 17.04 (1.54) 17.34
------------------- ----- ----- ----- -----
Realized prices
including commodity
derivatives $47.39 $58.66 $47.76 $60.13
(1) We record oil revenues on the sales method, i.e. when delivery
has occurred. Actual production may differ based on the timing of tanker
liftings. We use the entitlements method to account for sales of gas
production.
(2) The average sales prices reflect both our continuing and discontinued
operations and include realized gains and losses for derivative contracts we
utilize to manage price risk related to our future cash flows.
Endeavour International Corporation
Reconciliation of GAAP to Non-GAAP Measures
(Unaudited)
(Amounts in thousands)
As required under Regulation G of the Securities Exchange Act of
1934, provided below are reconciliations of net income (loss) to
the following non-GAAP financial measures: net income, as adjusted,
Adjusted EBITDA and discretionary cash flow. We use these
non-GAAP measures as key metrics for our management and to
demonstrate our ability to internally fund capital expenditures and
service debt. The non-GAAP measures are useful in comparisons of
oil and gas exploration and production companies as they
exclude non-operating fluctuations in assets and liabilities.
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2010 2009 2010 2009
---- ---- ---- ----
Net income (loss) $605 $9,820 $(14,585) $(7,044)
Depreciation, depletion
and amortization 7,912 7,804 13,593 23,863
Impairment of oil and gas
properties - 1,244 7,692 30,645
Deferred tax expense
(benefit) 4,967 4,827 8,445 (3,596)
Gain on asset sales - (47,144) - (47,144)
Unrealized (gain) loss on
derivatives (6,108) 32,722 (5,036) 34,095
Other 3,815 9,690 5,155 11,536
----- ----- ----- ----- ------
Discretionary Cash Flow
(1) $11,191 $18,963 $15,264 $42,355
----------------------- ------- ------- ------- -------
Net income (loss) to
common shareholders $58 $7,124 $(15,721) $(12,409)
Impairment of oil and gas
properties (net of tax)
(2) - 1,244 7,692 15,988
Unrealized (gain) loss on
derivatives (net of tax)
(3) (3,832) 19,176 (2,657) 20,748
Currency impact on
deferred taxes (87) 10,955 (146) 10,250
------------------ --- ------ ---- ------
Net Income (Loss) as
Adjusted $(3,861) $38,499 $(10,832) $34,577
-------------------- ------- ------- -------- -------
Net income (loss) $605 $9,820 $(14,585) $(7,044)
Unrealized (gain) loss on
derivatives (6,108) 32,722 (5,036) 34,095
Net interest expense 5,605 4,163 11,237 7,983
Depreciation, depletion
and amortization 7,912 7,804 13,593 23,863
Impairment of oil and gas
properties - 1,244 7,692 30,645
Income tax expense
(benefit) 5,084 3,779 9,917 (4,606)
Gain on asset sales - (47,144) - (47,144)
------------------- --- ------- --- -------
Adjusted EBITDA $13,098 $12,388 $22,818 $37,792
(1) Discretionary cash flow is equal to cash flow from operating
activities before the changes in operating assets and liabilities.
(2) Net of tax benefits of $(14,657) for the six months ended June 30,
2009.
(3) Net of tax (benefits) expense of $(2,277), $13,546, $(2,379) and
$13,348, respectively.
Mike Kirksey, Endeavour - Investor Relations, +44 (0) 207-451-2381, +1-713-307-8788; or Philip Dennis, +44 (0) 207 743 6363, Henry Lerwill, +44 (0) 203 178 6242, both of Pelham Public Relations - UK Media, for Endeavour International Corporation
Tags: August 5, Endeavour International Corporation, Houston, texas, United Kingdom
