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8-K - FORM 8-K - ENDEAVOUR INTERNATIONAL CORP | h80226e8vk.htm |
Exhibit 99.1
Endeavour Announces Financial and
Operational Results For 2010
Operational Results For 2010
Houston, March 2, 2011 Endeavour International Corporation (NYSE Amex: END) (LSE: ENDV)
today reported full year 2010 net income, as adjusted of $57.4 million compared to $41.1 million
for 2009. Adjusted EBITDA for the full year was $124.8 million compared to $64.6 million last
year.
During 2010 and to date, we have successfully launched an onshore drilling program in the United
States, received field development approval at Bacchus and East
Rochelle in the United Kingdom and achieved a 419%
reserve replacement ratio, said William L. Transier, chairman, chief executive officer and
president. The purchase of the additional interest in Bacchus and the sale of Cygnus allowed us
to capture the value imbedded in our portfolio and effectively transfer capital resources from a
longer cycle capital intensive project to a near term oil project in the North Sea. The
Companys achievements in 2010 position us for strong growth in
the coming years as we ramp up production from our asset portfolio in the US and UK.
On a GAAP basis, net income was $82.8 million for the fourth quarter of 2010 as compared to ($29.5)
million in the same quarter in 2009. Net Income was $56.5 million for the year
ended December 31, 2010 as compared to a loss of ($41.0) million in the same period in 2009.
Highlights for 2010 and early 2011 are as follows:
Rochelle Development Endeavour has received approval from the Department of Energy and Climate
Change (DECC) for the Rochelle Field Development Plan (FDP), Block 15/27 in the Central North Sea.
The approval for Rochelle, now known as East Rochelle, represents phase one of the development of
the Greater Rochelle area. The Company is the operator of East Rochelle and holds a 55.6 percent
working interest in the project. The current FDP calls for the subsea development to be linked by a
30 kilometer pipeline to production facilities on the Scott Platform. First production is planned
for the second half of 2012. The Company is working on integrating West Rochelle, which was
discovered in October 2010, into the development plan as phase two with production estimated to
begin in 2012.
Sale of Cygnus Reserves in the Southern North Sea During the fourth quarter, Endeavour received
cash proceeds of $110.0 million and booked a gain of approximately $87.0 million from the sale of
Cygnus, a southern North Sea gas asset to Bayerngas UK Ltd., the U.K. oil and gas subsidiary of
Bayerngas Norge AS. The Company had previously held a 12.5 percent interest in the project.
Significantly, the Company avoided capital commitments approaching $200.0 million that would have
been required over the next few years to position Cygnus for production. The transaction closed on
October 19, 2010.
Purchase of additional 20 Percent Interest in the Bacchus Development In November 2010,
Endeavour announced that its wholly owned subsidiary Endeavour Energy U.K. Ltd. had signed a
definitive agreement to acquire Shell U.K. Limiteds 20 percent working interest in the Bacchus
development. The transaction closed in February 2011 and adds approximately 3.4 million barrels of
oil equivalent (mmboe) of reserves to Endeavours 2P reserves.
The Bacchus project is a three well subsea development with a tie back to the Forties Alpha
platform. The project has received Field Development Plan (FDP) approval and first oil is expected
in mid 2011. The project remains on schedule and is anticipated to produce approximately 4,000 -
5,000 barrels of oil per day net to Endeavour when fully on production. The recent purchase by
Endeavour brings the companys total working interest in Bacchus to 30 percent.
US Operations During its first full year operations, Endeavour established a portfolio of
onshore resource plays. Year-on-year proved reserves in the US increased nearly 300 percent
to 5.4 mmboe and annual production increased over 750 percent to 445 thousand barrels of oil
equivalent (mboe) led by a successful drilling effort in the Louisiana Haynesville play.
During 2010, the Company participated in 11 gross wells in northwest Louisiana and East Texas. The
primary focus was in the Louisiana Haynesville play in the Woodardville Field area in Red River and
Bienville Parishes where several wells were completed with initial production rates (IPs) in
excess of 20 million cubic feet of gas per day (mmcfd). Near the end of 2010, Endeavour opened a
new project area at the Bull Bayou Field in Red River and DeSoto Parishes where two wells were
completed with IP rates at or above 17 mmcfd. The Company currently has two rigs working in the
Haynesville area and expects to maintain a measured pace of development that can be adjusted in
conjunction with gas price expectations.
In Pennsylvania, Endeavour focused on its acreage in the Daniel Field in Cameron County, where the
Company completed one horizontal well in 2010 and is currently drilling two additional horizontal
wells to delineate the block. In parallel, the Company is working to expand the local gas
gathering infrastructure, including options to connect with one of three major pipelines in Cameron
County and expects to ramp up production by the fourth quarter of 2011.
In its Alabama shale gas and Montana shale oil frontier plays, the Company plans to evaluate pilot
test wells this year to further define their future potential.
Strong Reserve Replacement Endeavour reported a 12 percent increase in proved and probable
reserves for the year, representing a 419 percent increase in 2P
reserve replacement. Proved and probable reserves at year-end 2010 increased to 43.7 mmboe
compared to 38.9 mmboe a year ago. Extensions, discoveries, sales, revisions and purchases less
production added 6.3 mmboe to 2P reserves during 2010. The upward revisions in 2P reserves are a
result of the appraisal well drilled in West Rochelle Block 15/26b, the addition of reserves from
the purchase of an additional 20 percent in the Bacchus development and strong results from the
Louisiana/Texas Haynesville program.
Projected 2011 Capital Spending of Approximately $150.0 million Endeavours projected 2011
capital spending is approximately $150.0 million which will be funded from cash on hand and cash
flow generated by operations. The company anticipates that approximately sixty percent of this
years budget will be directed toward its two key initiatives in the U.K. North Sea Bacchus and
Rochelle. The remainder of the capital spend will be in the U.S., focused on bringing forward
near-term production in the Haynesville and Marcellus areas. A majority of the estimated capital
spending is within the companys control and will be increased or curtailed depending on the
availability of capital, progress on developments and other opportunities during the year.
Earnings Conference Call, Wednesday, March 2, 2011 at 9:00 a.m., Central Daylight Time, 3:00
p.m. British Time
Endeavour International will host a conference call and web cast to discuss its 2010
fourth quarter financial and operating results on Wednesday, March 2, 2011 at 9 a.m. Central
Daylight Time, 3 p.m. British Time. To participate and ask questions during the conference call,
dial the local country
telephone number and the confirmation code 7902719. The toll-free numbers are 888-765-5579 in the
United States and 0-808-101-1402 in the United Kingdom. Other international callers should dial
913-312-1397 (tolls apply). To listen only to the live audio web cast access Endeavours home page
at http://www.endeavourcorp.com. A replay will be available beginning at 12:00 p.m. Central
Daylight Time on March 2 through 12:00 p.m. on March 9 by dialing toll free 888-203-1112 (U.S.) or
719-457-0820 (international), confirmation code 7902719.
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 http://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 may use certain terms in our news releases, such as reserve potential, that the
SECs 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.
For further information:
Endeavour Investor Relations | ||
Mike Kirksey
|
713.307.8788 | |
Darcey Matthews
|
713.307.8711 | |
Pelham Public Relations UK Media | ||
Philip Dennis
|
+44 (0)207 861 3919 | |
Henry Lerwill
|
+44 (0)207 861 3169 |
Endeavour International Corporation
Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
December 31, | December 31, | |||||||
2010 | 2009 | |||||||
Assets |
||||||||
Current Assets: |
||||||||
Cash and cash equivalents |
$ | 99,267 | $ | 27,287 | ||||
Restricted cash |
31,776 | 2,879 | ||||||
Accounts receivable |
8,068 | 14,800 | ||||||
Prepaid expenses and other current assets |
8,718 | 10,118 | ||||||
Total Current Assets |
147,829 | 55,084 | ||||||
Property and Equipment, Net |
364,677 | 266,587 | ||||||
Goodwill |
211,886 | 211,886 | ||||||
Other Assets |
25,895 | 5,322 | ||||||
Total Assets |
$ | 750,287 | $ | 538,879 | ||||
Liabilities and Stockholders Equity |
||||||||
Current Liabilities: |
||||||||
Accounts payable |
$ | 32,442 | $ | 12,401 | ||||
Current maturities of debt |
21,600 | | ||||||
Accrued expenses and other |
22,642 | 17,798 | ||||||
Total Current Liabilities |
76,684 | 30,199 | ||||||
Long-Term Debt |
323,706 | 223,385 | ||||||
Deferred Taxes |
77,200 | 80,692 | ||||||
Other Liabilities |
64,927 | 85,412 | ||||||
Total Liabilities |
542,517 | 419,688 | ||||||
Commitments and Contingencies |
||||||||
Series C Convertible Preferred Stock |
53,152 | 59,058 | ||||||
Stockholders Equity |
154,618 | 60,133 | ||||||
Total Liabilities and Stockholders Equity |
$ | 750,287 | $ | 538,879 | ||||
Endeavour International Corporation
Condensed Consolidated Statement of Operations
(Unaudited)
(Amounts in thousands, except per share data)
Condensed Consolidated Statement of Operations
(Unaudited)
(Amounts in thousands, except per share data)
Fourth Quarter | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Revenues |
$ | 16,573 | $ | 20,113 | $ | 71,675 | $ | 62,293 | ||||||||
Cost of Operations: |
||||||||||||||||
Operating expenses |
4,467 | 3,321 | 15,347 | 17,776 | ||||||||||||
Depreciation, depletion and amortization |
7,604 | 9,192 | 28,894 | 34,020 | ||||||||||||
Impairment of oil and gas properties |
| 13,284 | 7,692 | 43,929 | ||||||||||||
General and administrative |
5,542 | 4,925 | 18,415 | 16,966 | ||||||||||||
Total Expenses |
17,613 | 30,722 | 70,348 | 112,691 | ||||||||||||
Income (Loss) From Operations |
(1,040 | ) | (10,609 | ) | 1,327 | (50,398 | ) | |||||||||
Other Income (Expense): |
||||||||||||||||
Derivatives: |
||||||||||||||||
Realized gains (losses) |
| 6,842 | (11,753 | ) | 35,422 | |||||||||||
Unrealized gains (losses) |
814 | (17,143 | ) | 12,291 | (55,598 | ) | ||||||||||
Interest expense |
(12,859 | ) | (4,575 | ) | (34,592 | ) | (16,630 | ) | ||||||||
Gain on sale of reserves in place |
87,171 | | 87,171 | | ||||||||||||
Interest income and other |
19 | (552 | ) | 1,299 | (7,483 | ) | ||||||||||
Total Other Income (Expense) |
75,145 | (15,428 | ) | 54,416 | (44,289 | ) | ||||||||||
Income (Loss) Before Income Taxes |
74,105 | (26,037 | ) | 55,743 | (94,687 | ) | ||||||||||
Income Tax Expense (Benefit) |
(8,704 | ) | 3,319 | (788 | ) | (7,158 | ) | |||||||||
Income (Loss) from Continuing Operations |
82,809 | (29,356 | ) | 56,531 | (87,529 | ) | ||||||||||
Income (Loss) from Discontinued Operations |
| (112 | ) | | 46,534 | |||||||||||
Net Income (Loss) |
82,809 | (29,468 | ) | 56,531 | (40,995 | ) | ||||||||||
Preferred Stock Dividends |
546 | 13,150 | 2,227 | 21,211 | ||||||||||||
Net Income (Loss) to Common Stockholders |
$ | 82,263 | $ | (42,618 | ) | $ | 54,304 | $ | (62,206 | ) | ||||||
Basic Net Income (Loss) per Common Share: |
||||||||||||||||
Continuing operations |
$ | 3.34 | $ | (2.27 | ) | $ | 2.34 | $ | (5.84 | ) | ||||||
Discontinued operations |
| (0.01 | ) | | 2.50 | |||||||||||
Total |
$ | 3.34 | $ | (2.28 | ) | $ | 2.34 | $ | (3.34 | ) | ||||||
Diluted Net Income (Loss) per Common Share: |
||||||||||||||||
Continuing operations |
$ | 2.37 | $ | (2.27 | ) | $ | 1.95 | $ | (4.70 | ) | ||||||
Discontinued operations |
| (0.01 | ) | | 2.50 | |||||||||||
Total |
$ | 2.37 | $ | (2.28 | ) | $ | 1.95 | $ | (2.20 | ) | ||||||
Weighted Average Number of Common Shares Outstanding: |
||||||||||||||||
Basic |
24,647 | 18,674 | 23,252 | 18,613 | ||||||||||||
Diluted |
35,956 | 18,674 | 28,886 | 18,613 | ||||||||||||
Endeavour International Corporation
Condensed Consolidated Statement of Cash Flows
(Unaudited)
(Amounts in thousands)
Condensed Consolidated Statement of Cash Flows
(Unaudited)
(Amounts in thousands)
Year Ended December 31, | ||||||||
2010 | 2009 | |||||||
Cash Flows from Operating Activities: |
||||||||
Net income (loss) |
$ | 56,531 | $ | (40,995 | ) | |||
Adjustments to reconcile net income (loss) to net cash |
||||||||
provided by operating activities: |
||||||||
Depreciation, depletion and amortization |
28,894 | 38,701 | ||||||
Impairment of oil and gas properties |
7,692 | 43,929 | ||||||
Deferred tax expense (benefit) |
(3,367 | ) | 4,599 | |||||
Unrealized (gains) losses on derivatives |
(12,291 | ) | 55,598 | |||||
Gain on sales |
(87,171 | ) | (47,308 | ) | ||||
Other |
20,632 | 16,835 | ||||||
Changes in operating assets and liabilities |
6,099 | (15,648 | ) | |||||
Net Cash Provided by Operating Activities |
17,019 | 55,711 | ||||||
Cash Flows From Investing Activities: |
||||||||
Capital expenditures |
(92,007 | ) | (99,241 | ) | ||||
Acquisitions |
(43,726 | ) | (32,152 | ) | ||||
Proceeds from sales, net of cash |
108,316 | 144,653 | ||||||
(Increase) decrease in restricted cash |
(28,897 | ) | 17,860 | |||||
Net Cash Provided by (Used in) Investing Activities |
(56,314 | ) | 31,120 | |||||
Cash Flows From Financing Activities: |
||||||||
Borrowings (repayments) of borrowings |
109,658 | (63,058 | ) | |||||
Proceeds from issuance of common stock |
30,181 | | ||||||
Redemption of preferred stock |
| (25,000 | ) | |||||
Dividends paid |
(2,070 | ) | (9,625 | ) | ||||
Financing costs paid |
(26,590 | ) | | |||||
Other financing |
96 | (17 | ) | |||||
Net Cash Provided by (Used in) Financing Activities |
111,275 | (97,700 | ) | |||||
Net Increase (Decrease) in Cash and Cash Equivalents |
71,980 | (10,869 | ) | |||||
Cash and Cash Equivalents, Beginning of Period |
27,287 | 38,156 | ||||||
Cash and Cash Equivalents, End of Period |
$ | 99,267 | $ | 27,287 | ||||
Endeavour International Corporation
Operating Statistics
(Unaudited)
Operating Statistics
(Unaudited)
Fourth Quarter | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Sales volume (1) |
||||||||||||||||
Oil and condensate sales (Mbbls): |
||||||||||||||||
United Kingdom |
116 | 196 | 545 | 690 | ||||||||||||
United States |
1 | 3 | 6 | 4 | ||||||||||||
Continuing operations |
117 | 199 | 551 | 694 | ||||||||||||
Discontinued operations Norway |
| | | 310 | ||||||||||||
Total |
117 | 199 | 551 | 1,004 | ||||||||||||
Gas sales (MMcf): |
||||||||||||||||
United Kingdom |
456 | 966 | 3,071 | 3,743 | ||||||||||||
United States |
937 | 190 | 2,636 | 320 | ||||||||||||
Continuing operations |
1,393 | 1,156 | 5,707 | 4,063 | ||||||||||||
Discontinued operations Norway |
| | | 686 | ||||||||||||
Total |
1,393 | 1,156 | 5,707 | 4,749 | ||||||||||||
Oil equivalent sales (MBOE) |
||||||||||||||||
United Kingdom |
192 | 357 | 1,057 | 1,314 | ||||||||||||
United States |
157 | 34 | 445 | 58 | ||||||||||||
Continuing operations |
349 | 391 | 1,502 | 1,372 | ||||||||||||
Discontinued operations Norway |
| | | 425 | ||||||||||||
Total |
349 | 391 | 1,502 | 1,797 | ||||||||||||
Total BOE per day |
3,800 | 4,258 | 4,115 | 4,923 | ||||||||||||
Physical production volume (BOE per day): |
||||||||||||||||
United Kingdom |
2,390 | 3,651 | 2,904 | 3,669 | ||||||||||||
United States |
1,708 | 483 | 1,221 | 162 | ||||||||||||
Continuing operations |
4,098 | 4,134 | 4,125 | 3,831 | ||||||||||||
Discontinued operations Norway |
| | | 1,156 | ||||||||||||
Total |
4,098 | 4,134 | 4,125 | 4,987 | ||||||||||||
Realized Prices (2) |
||||||||||||||||
Oil and condensate price ($ per Bbl): |
||||||||||||||||
Before commodity derivatives |
$ | 82.56 | $ | 71.47 | $ | 76.39 | $ | 52.15 | ||||||||
Effect of commodity derivatives |
| 14.55 | (5.61 | ) | 22.51 | |||||||||||
Realized prices including commodity derivatives |
$ | 82.56 | $ | 86.02 | $ | 70.78 | $ | 74.66 | ||||||||
Gas price ($ per Mcf): |
||||||||||||||||
Before commodity derivatives |
$ | 4.94 | $ | 5.09 | $ | 5.18 | $ | 5.77 | ||||||||
Effect of commodity derivatives |
| 3.41 | 0.27 | 2.69 | ||||||||||||
Realized prices including commodity derivatives |
$ | 4.94 | $ | 8.50 | $ | 5.45 | $ | 8.46 | ||||||||
Equivalent oil price ($ per BOE): |
||||||||||||||||
Before commodity derivatives |
$ | 47.41 | $ | 51.35 | $ | 47.72 | $ | 44.44 | ||||||||
Effect of commodity derivatives |
| 17.47 | (1.03 | ) | 19.71 | |||||||||||
Realized prices including commodity derivatives |
$ | 47.41 | $ | 68.82 | $ | 46.69 | $ | 64.15 | ||||||||
(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)
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.
Fourth Quarter | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Net income (loss) |
$ | 82,809 | $ | (29,468 | ) | $ | 56,531 | $ | (40,995 | ) | ||||||
Depreciation, depletion and amortization |
7,604 | 9,192 | 28,894 | 38,701 | ||||||||||||
Impairment of oil and gas properties |
| 13,284 | 7,692 | 43,929 | ||||||||||||
Deferred tax expense (benefit) |
(9,563 | ) | 7,868 | (3,367 | ) | 4,599 | ||||||||||
Gain on sales |
(87,171 | ) | 112 | (87,171 | ) | (47,308 | ) | |||||||||
Unrealized (gain) loss on derivatives |
(814 | ) | 17,143 | (12,291 | ) | 55,598 | ||||||||||
Early termination of commodity derivatives |
| | 10,201 | | ||||||||||||
Other |
6,866 | 3,257 | 20,632 | 16,835 | ||||||||||||
Discretionary Cash Flow (1) |
$ | (269 | ) | $ | 21,388 | $ | 21,121 | $ | 71,359 | |||||||
Net income (loss) |
$ | 82,809 | $ | (29,468 | ) | $ | 56,531 | $ | (40,995 | ) | ||||||
Impairment of oil and gas properties (net of tax)
(2) |
| 12,275 | 7,692 | 28,263 | ||||||||||||
Unrealized (gain) loss on derivatives (net of tax)
(3) |
(1,750 | ) | 10,071 | (6,820 | ) | 33,702 | ||||||||||
Currency impact on deferred taxes |
| 11,979 | (51 | ) | 20,123 | |||||||||||
Net Income as Adjusted |
$ | 81,059 | $ | 4,857 | $ | 57,352 | $ | 41,093 | ||||||||
Net income (loss) to common shareholders |
$ | 82,263 | $ | (42,618 | ) | $ | 54,304 | $ | (62,206 | ) | ||||||
Unrealized (gain) loss on derivatives |
(814 | ) | 17,143 | (12,291 | ) | 55,598 | ||||||||||
Net interest expense |
12,813 | 4,560 | 34,517 | 16,420 | ||||||||||||
Depreciation, depletion and amortization |
7,604 | 9,192 | 28,894 | 38,701 | ||||||||||||
Impairment of oil and gas properties |
| 13,284 | 7,692 | 43,929 | ||||||||||||
Income tax expense (benefit) |
(8,704 | ) | 3,319 | (788 | ) | (1,729 | ) | |||||||||
Early termination of commodity derivatives |
| | 10,201 | | ||||||||||||
Gain on sale of discontinued operations |
| 112 | | (47,308 | ) | |||||||||||
Preferred stock dividends |
546 | 13,150 | 2,227 | 21,211 | ||||||||||||
Adjusted EBITDA |
$ | 93,708 | $ | 18,142 | $ | 124,756 | $ | 64,616 | ||||||||
(1) | Discretionary cash flow is equal to cash flow provided by operating activities before the changes in operating assets and liabilities, excluding the early termination of commodity derivatives. | |
(2) | Net of tax benefits of $(1,009) and $(15,666) for the quarter and year ended December 31, 2009, respectively. | |
(3) | Net of tax expense (benefit) of $(936), $(7,073), $5,472 and $(21,896), respectively. |