Endeavour Announces Third Quarter 2010 Financial and Operational Results
By Endeavour International Corporation, PRNETuesday, November 2, 2010
HOUSTON, November 3, 2010 - — UK West Rochelle well confirms reservoir
— Sale of UK Cygnus Asset
— Continued success in US Haynesville
Endeavour International Corporation (NYSE Amex: END) (LSE: ENDV) today
reported discretionary cash flow for the third quarter of 2010 was US$6.1
million compared to US$7.6 million in the third quarter of 2009 and US$11.2
million for the second quarter of 2010. Net loss, as adjusted, was US$(14.6)
million for the third quarter of 2010 compared to US$(6.4) million in the
same period last year. On a GAAP basis, the net loss was US$(11.7) million
for the third quarter of 2010 as compared to US$(4.5) million in the same
quarter in 2009.
"During the quarter, we achieved several important goals by executing
steps to enhance Endeavour's overall value from both an operational, as well
as a financial perspective," said William L. Transier, chairman, chief
executive officer and president. "The combination of the West Rochelle
discovery, our recent financing and the sale of our Cygnus asset positions
the company to execute our growth strategy."
Highlights for the third quarter are as follows:
West Rochelle Discovery Confirms Gas and Oil Reservoir - Located in the
Central North Sea, the West Rochelle well was spud on September 3rd and
reached a total depth of 10,787ft on October 7th encountering natural gas
with an oil rim in an excellent quality reservoir similar to that discovered
at Rochelle. The well has been sidetracked to the north and has encountered
hydrocarbons that extend the West Rochelle area. The well straddles Blocks
15/26c and 15/26b and lies west of the Rochelle gas field in Block 15/27. The
West Rochelle accumulation is expected to be developed as a tie-back to the
Rochelle field.
Completed the Sale of the UK Cygnus Asset - In October, Endeavour
successfully completed the sale of its UK Cygnus asset to Bayerngas UK Ltd.
for US$110 million in cash. The cash proceeds were not burdened by any
current taxes payable and are being used primarily to accelerate the
company's development projects.
Continued US Drilling Success and Momentum in the Haynesville - In the
third quarter, net sales from US production more than doubled from the
previous quarter. Production growth was driven by activity in the Louisiana
Haynesville shale play where the company had four successful completions
during the quarter. The Woodard 10-H well, where Endeavour holds a 40.8%
working interest, flowed gas at an initial production rate of 22.6 million
cubic feet of gas equivalent per day. The company currently has an interest
in four additional Haynesville wells waiting on completion, including two
wells operated by its joint venture partner Cohort Energy. Endeavour plans to
continue a conservative 1-2 rig drilling program for the remainder of the
year in Louisiana and East Texas maintaining flexibility to adjust drilling
activity in accordance with current and future gas prices. In the
Pennsylvania Marcellus shale play, the company will participate in two
horizontal wells to be drilled in the fourth quarter to further evaluate the
Daniel Field in Cameron County where an integrated development plan is being
formalized. In Alabama, the Hillwood-operated joint venture successfully
drilled two vertical pilot tests which will be evaluated for future
horizontal re-entries and/or completion tests.
Completed a Financing Transaction for US$160 million - In August,
Endeavour closed on a US$150 million senior secured credit facility. Of the
total proceeds, US$66 million was used to repay the company senior bank and
second lien facilities. This facility offered the company the flexibility to
sell assets and reinvest the proceeds in the business, make acquisitions and
incur additional debt. It bears cash interest of 12 percent plus three
percent payment in-kind payable in cash at the company's option. The facility
contains a covenant package customary for transactions of this type and is
callable after the first year. During October 2010, the company borrowed an
additional US$10 million as provided under this facility.
Awarded Blocks in the 26th Offshore Gas and Licensing Round - Endeavour
has been awarded licenses in four blocks or part blocks in the United Kingdom
North Sea. The blocks are located in the company's core focus areas.
Share Consolidation Effected in the Form of a Reverse Stock Split -
Earlier this week, the company announced a 1-for-7 share consolidation of its
common stock in the form of a reverse stock split that is expected to be
effective at the opening of trading on November 18, 2010. With this share
consolidation, the company expects to make the stock available to a broader
range of investors and position the company's trading metrics more in-line
with its peers. As a result of the share consolidation, every seven shares of
common stock outstanding will automatically be combined into one share of
common stock and holders who would otherwise receive fractional shares will
have their shares rounded up to the next whole share. The company has not
restated any share or per share amounts as a result of this share
consolidation within this release.
Guidance for Year 2010
The table below sets forth estimates for operating statistics for the
full year ending December 31, 2010.
Estimated Average Production (A)
Daily Production (BOE per day) 4,500 to 6,000
Differentials (B)
Oil ($/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, Wednesday, November 3, 2010 at 9:00 a.m.,
Central Daylight Time, 2:00 p.m. British Time
Endeavour International will host a conference call and web cast to
discuss its 2010 third quarter financial and operating results on Wednesday,
November 3, 2010 at 9 a.m. Central Daylight Time, 2 p.m. British Time. To
participate and ask questions during the conference call, dial the local
country telephone number and the confirmation code 9961634. The toll-free
numbers are +1-888-812-8569 in the United States and +0-808-101-1402 in the
United Kingdom. Other international callers should dial +1-913-312-0970
(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 November 3 through
12:00 p.m. on November 10 by dialing toll free +1-888-203-1112 (U.S.) or
+1-719-457-0820 (international), confirmation code 9961634.
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.
(All amounts are in US$ unless otherwise noted)
Endeavour International Corporation
Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
September December
30, 31,
2010 2009
---- ----
Assets
Current Assets:
Cash and cash equivalents $16,527 $27,287
Restricted cash 32,524 2,879
Accounts receivable 9,812 14,800
Prepaid expenses and other current
assets 9,558 10,118
---------------------------------- ----- ------
Total Current Assets 68,421 55,084
Property and Equipment, Net 334,749 266,587
Assets Held for Sale 21,145 -
Goodwill 211,886 211,886
Other Assets 26,423 5,322
------------ ------ -----
Total Assets $662,624 $538,879
------------ -------- --------
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $30,476 $12,401
Current maturities of debt 16,500 -
Accrued expenses and other 16,850 17,798
-------------------------- ------ ------
Total Current Liabilities 63,826 30,199
Long-Term Debt 314,708 223,385
Deferred Taxes 86,887 80,692
Other Liabilities 72,722 85,412
----------------- ------ ------
Total Liabilities 538,143 419,688
Commitments and Contingencies
Series C Convertible Preferred
Stock 53,152 59,058
Stockholders' Equity 71,329 60,133
-------------------- ------ ------
Total Liabilities and
Stockholders' Equity $662,624 $538,879
--------------------- -------- --------
Endeavour International Corporation
Condensed Consolidated Statement of Operations
(Unaudited)
(Amounts in thousands, except per share data)
Three Months Ended
September 30,
-------------
2010 2009
---- ----
Revenues $19,849 $7,759
Cost of Operations:
Operating expenses 4,595 3,876
Depreciation, depletion and
amortization 7,697 5,646
Impairment of oil and gas
properties - -
General and administrative 4,237 4,091
-------------------------- ----- -----
Total Expenses 16,529 13,613
-------------- ------ ------
Income (Loss) From Operations 3,320 (5,854)
----------------------------- ----- ------
Other Income (Expense):
Derivatives:
Realized gains (losses) (452) 7,530
Realized loss on early
termination (10,201) -
Unrealized gains (losses) 6,441 (4,360)
Interest expense (10,474) (3,919)
Interest income and other (2,327) 1,402
------------------------- ------ -----
Total Other Income (Expense) (17,013) 653
---------------------------- ------- ---
Loss Before Income Taxes (13,693) (5,201)
Income Tax Expense (Benefit) (2,001) (441)
---------------------------- ------ ----
Loss from Continuing Operations (11,692) (4,760)
Income from Discontinued
Operations - 277
------------------------ --- ---
Net Loss (11,692) (4,483)
Preferred Stock Dividends 546 2,696
------------------------- --- -----
Net Loss to Common Stockholders $(12,238) $(7,179)
------------------------------- -------- -------
Basic and Diluted Net Loss
per Common Share:
Continuing operations $(0.07) $(0.06)
Discontinued operations - -
----------------------- --- ---
Total $(0.07) $(0.06)
----- ------ ------
Weighted Average Number of
Common Shares Outstanding:
Basic and Diluted 167,641 130,109
----------------- ------- -------
Nine Months Ended
September 30,
-------------
2010 2009
---- ----
Revenues $55,102 $42,179
Cost of Operations:
Operating expenses 10,881 14,455
Depreciation, depletion and
amortization 21,290 24,828
Impairment of oil and gas
properties 7,692 30,645
General and administrative 12,873 12,041
-------------------------- ------ ------
Total Expenses 52,736 81,969
-------------- ------ ------
Income (Loss) From Operations 2,366 (39,790)
----------------------------- ----- -------
Other Income (Expense):
Derivatives:
Realized gains (losses) (1,552) 28,581
Realized loss on early
termination (10,201) -
Unrealized gains (losses) 11,477 (38,455)
Interest expense (21,733) (12,054)
Interest income and other 1,281 (6,932)
------------------------- ----- ------
Total Other Income (Expense) (20,728) (28,860)
---------------------------- ------- -------
Loss Before Income Taxes (18,362) (68,650)
Income Tax Expense (Benefit) 7,916 (10,477)
---------------------------- ----- -------
Loss from Continuing Operations (26,278) (58,173)
Income from Discontinued
Operations - 46,646
------------------------ --- ------
Net Loss (26,278) (11,527)
Preferred Stock Dividends 1,682 8,061
------------------------- ----- -----
Net Loss to Common Stockholders $(27,960) $(19,588)
------------------------------- -------- --------
Basic and Diluted Net Loss
per Common Share:
Continuing operations $(0.17) $(0.51)
Discontinued operations - 0.36
----------------------- --- ----
Total $(0.17) $(0.15)
----- ------ ------
Weighted Average Number of
Common Shares Outstanding:
Basic and Diluted 159,801 129,719
----------------- ------- -------
Endeavour International Corporation
Condensed Consolidated Statement of Cash Flows
(Unaudited)
(Amounts in thousands)
Nine Months Ended September 30,
-------------------------------
2010 2009
---- ----
Cash Flows from Operating Activities:
Net loss $(26,278) $(11,527)
Adjustments to reconcile net loss to
net cash
provided by operating activities:
Depreciation, depletion and
amortization 21,290 29,509
Impairment of oil and gas properties 7,692 30,645
Deferred tax expense (benefit) 6,195 (3,269)
Unrealized (gains) losses on
derivatives (11,477) 38,455
Gain on sale of Norwegian operations - (47,420)
Other 13,767 13,577
Changes in operating assets and
liabilities 20,113 (10,286)
------------------------------- ------ -------
Net Cash Provided by Operating
Activities 31,302 39,684
Cash Flows From Investing Activities:
Capital expenditures (75,677) (88,639)
Acquisitions (39,279) (4,127)
Proceeds from sales, net of cash - 144,765
(Increase) decrease in restricted cash (29,645) 20,366
-------------------------------------- ------- ------
Net Cash Provided by (Used in)
Investing Activities (144,601) 72,365
Cash Flows From Financing Activities:
Borrowings (repayments) of borrowings 100,058 (64,458)
Proceeds from issuance of common stock 30,181 -
Dividends paid (1,563) (7,969)
Other financing (26,137) 27
--------------- ------- ---
Net Cash Provided by (Used in)
Financing Activities 102,539 (72,400)
Net Increase (Decrease) in Cash and
Cash Equivalents (10,760) 39,649
Cash and Cash Equivalents, Beginning of
Period 27,287 38,156
--------------------------------------- ------ ------
Cash and Cash Equivalents, End of
Period $16,527 $77,805
--------------------------------- ------- -------
Endeavour International Corporation
Operating Statistics
(Unaudited)
Three Months
Ended
September 30,
-------------
2010 2009
---- ----
Sales volume (1)
Oil and condensate sales (Mbbls):
United Kingdom 127 82
United States 2 1
------------- --- ---
Continuing operations 129 83
Discontinued operations - Norway - -
-------------------------------- --- ---
Total 129 83
----- --- ---
Gas sales (MMcf):
United Kingdom 869 629
United States 978 19
------------- --- ---
Continuing operations 1,847 648
Discontinued operations - Norway - -
-------------------------------- --- ---
Total 1,847 648
----- ----- ---
Oil equivalent sales (MBOE)
United Kingdom 272 187
United States 165 4
------------- --- ---
Continuing operations 437 191
Discontinued operations - Norway - -
-------------------------------- --- ---
Total 437 191
----- --- ---
Total BOE per day 4,755 2,072
----------------- ----- -----
Physical production volume (BOE per day)
(2):
United Kingdom 2,993 2,777
United States 1,995 32
------------- ----- ---
Continuing operations 4,988 2,809
Discontinued operations - Norway - -
-------------------------------- --- ---
Total 4,988 2,809
----- ----- -----
Realized Prices (3)
Oil and condensate price ($ per Bbl):
Before commodity derivatives $75.64 $61.73
Effect of commodity derivatives (3.11) 46.05
------------------------------- ----- -----
Realized prices including commodity
derivatives $72.53 $107.78
----------------------------------- ------ -------
Gas price ($ per Mcf):
Before commodity derivatives $5.44 $4.10
Effect of commodity derivatives (0.03) 5.75
------------------------------- ----- ----
Realized prices including commodity
derivatives $5.41 $9.85
----------------------------------- ----- -----
Equivalent oil price ($ per BOE):
Before commodity derivatives $45.37 $40.70
Effect of commodity derivatives (1.03) 39.50
------------------------------- ----- -----
Realized prices including commodity
derivatives $44.34 $80.20
----------------------------------- ------ ------
Nine Months Ended
September 30,
-------------
2010 2009
---- ----
Sales volume (1)
Oil and condensate sales (Mbbls):
United Kingdom 429 494
United States 5 2
------------- --- ---
Continuing operations 434 496
Discontinued operations - Norway - 310
-------------------------------- --- ---
Total 434 806
----- --- ---
Gas sales (MMcf):
United Kingdom 2,614 2,777
United States 1,699 130
------------- ----- ---
Continuing operations 4,313 2,907
Discontinued operations - Norway - 686
-------------------------------- --- ---
Total 4,313 3,593
----- ----- -----
Oil equivalent sales (MBOE)
United Kingdom 864 957
United States 288 23
------------- --- ---
Continuing operations 1,152 980
Discontinued operations - Norway - 425
-------------------------------- --- ---
Total 1,152 1,405
----- ----- -----
Total BOE per day 4,222 5,147
----------------- ----- -----
Physical production volume (BOE per day)
(2):
United Kingdom 3,130 3,675
United States 1,117 54
------------- ----- ---
Continuing operations 4,247 3,729
Discontinued operations - Norway - 1,545
-------------------------------- --- -----
Total 4,247 5,274
----- ----- -----
Realized Prices (3)
Oil and condensate price ($ per Bbl):
Before commodity derivatives $74.72 $47.38
Effect of commodity derivatives (7.12) 24.47
------------------------------- ----- -----
Realized prices including commodity
derivatives $67.60 $71.85
----------------------------------- ------ ------
Gas price ($ per Mcf):
Before commodity derivatives $5.26 $5.99
Effect of commodity derivatives 0.36 2.46
------------------------------- ---- ----
Realized prices including commodity
derivatives $5.62 $8.45
----------------------------------- ----- -----
Equivalent oil price ($ per BOE):
Before commodity derivatives $47.81 $42.51
Effect of commodity derivatives (1.35) 20.34
------------------------------- ----- -----
Realized prices including commodity
derivatives $46.46 $62.85
----------------------------------- ------ ------
(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 Nine Months Ended
September 30, September 30,
------------- -------------
2010 2009 2010 2009
---- ---- ---- ----
Net loss $(11,692) $(4,483) $(26,278) $(11,527)
Depreciation, depletion
and amortization 7,697 5,646 21,290 29,509
Impairment of oil and
gas properties - - 7,692 30,645
Deferred tax expense
(benefit) (2,249) 327 6,195 (3,269)
Gain on asset sales - (277) - (47,420)
Unrealized (gain) loss
on derivatives (6,441) 4,360 (11,477) 38,455
Realized loss on early
termination of
derivatives 10,201 - 10,201 -
Other 8,613 2,043 3,566 13,577
----- ----- ----- ----- ------
Discretionary Cash Flow
(1) $6,129 $7,615 $11,189 $49,970
----------------------- ------ ------ ------- -------
Net loss to common
shareholders $(12,238) $(7,179) $(27,960) $(19,588)
Impairment of oil and
gas properties (net of
tax) (2) - - 7,692 15,988
Unrealized (gain) loss
on derivatives (net of
tax) (3) (2,413) 2,885 (5,070) 23,632
Currency impact on
deferred taxes 95 (2,106) (51) 8,143
------------------ --- ------ --- -----
Net Income (Loss) as
Adjusted $(14,556) $(6,400) $(25,389) $28,175
-------------------- -------- ------- -------- -------
Net loss $(11,692) $(4,483) $(26,278) $(11,527)
Unrealized (gain) loss
on derivatives (6,441) 4,360 (11,477) 38,455
Realized loss on early
termination of
derivatives 10,201 - 10,201 -
Net interest expense 10,467 3,877 21,704 11,860
Depreciation, depletion
and amortization 7,697 5,646 21,290 29,509
Impairment of oil and
gas properties - - 7,692 30,645
Income tax expense
(benefit) (2,001) (441) 7,916 (5,047)
Gain on asset sales - (277) - (47,420)
------------------- --- ---- --- -------
Adjusted EBITDA $8,231 $8,681 $31,048 $46,475
--------------- ------ ------ ------- -------
(1) Discretionary cash flow is equal to cash flow from operating
activities before the changes in operating assets and liabilities,
excluding the early termination of commodity derivatives.
(2) Net of tax benefits of $(14,657) for the nine months ended
September 30, 2009.
(3) Net of tax (benefits) expense of $(4,029), $1,475, $(6,408) and
$14,823, respectively.
Investor Relations, Mike Kirksey, +1-713-307-8788, or Darcey Matthews, +1-713-307-8711, both of Endeavour International Corporation; or Public Relations - UK Media, Philip Dennis, +44-(0)207-861-3919, or Henry Lerwill, +44-(0)207-861-3169, both of Pelham for Endeavour International Corporation
Tags: Endeavour International Corporation, Houston, November 3, texas, United Kingdom
