ENDEAVOUR INTERNATIONAL CORP - FORM 8-K - EX-99.5 - UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

Attached files

file	filename
8-K - FORM 8-K - ENDEAVOUR INTERNATIONAL CORP	d292789d8k.htm
EX-99.4 - AUDITED STATEMENT OF COMBINED REVENUES AND DIRECT OPERATING EXPENSES - ENDEAVOUR INTERNATIONAL CORP	d292789dex994.htm
EX-99.2 - ENDEAVOUR INTERNATIONAL CORPORATION RESERVE REPORT - ENDEAVOUR INTERNATIONAL CORP	d292789dex992.htm
EX-99.3 - COP ASSETS RESERVE REPORT FOR THE YEAR ENDED DECEMBER 31, 2011 - ENDEAVOUR INTERNATIONAL CORP	d292789dex993.htm
EX-99.1 - CERTAIN INFORMATION CONTAINED IN THE OFFERING MEMORANDUM AND INVESTOR - ENDEAVOUR INTERNATIONAL CORP	d292789dex991.htm

UNAUDITED PRO FORMA CONDENSED COMBINED

FINANCIAL STATEMENTS OF

ENDEAVOUR INTERNATIONAL CORPORATION

TO REFLECT THE ACQUISITION OF OIL AND GAS PROPERTIES

PURCHASED FROM CONOCOPHILLIPS (U.K.) LIMITED,

CONOCOPHILLIPS PETROLEUM LIMITED AND

CONOCOPHILLIPS (U.K.) LAMBDA LIMITED

F-2

Unaudited Pro Forma Condensed Combined

Financial Statements of Endeavour International Corporation

Introduction

The accompanying pro forma financial statements are presented in accordance with Article 11 of Regulation S-X. The following unaudited pro forma condensed combined financial information reflects adjustments to give effect to the purchase of certain oil and natural gas interests in the North Sea (the “COP Acquisition”) from ConocoPhillips (U.K.) Limited, ConocoPhillips Petroleum Limited and ConocoPhillips (U.K.) Lambda Limited (collectively, “COP”) and the offering of senior notes in sufficient amount to fund the COP Acquisition.

The income statement data assume that the Offering and COP Acquisition were completed on January 1, 2010. The balance sheet data assume that the Offering and COP Acquisition were completed on September 30, 2011.

During the periods presented, the assets to be acquired in the COP Acquisition were not accounted or operated as a separate division by COP. Certain costs, such as depreciation, depletion and amortization, interest, accretion, general and administrative expenses, and corporate income taxes were not allocated to all the individual properties. Accordingly, full separate financial statements prepared in accordance with generally accepted accounting principles do not exist and are not practicable to obtain in these circumstances. Revenues and direct operating expenses included in the accompanying unaudited pro forma condensed combined financial information represent Endeavour’s net working interest in the properties acquired for the periods prior to the respective closing dates and are presented on the accrual basis of accounting.

The unaudited pro forma condensed combined financial data are not necessarily indicative of the results of operations or the financial position which would have occurred had the transactions been consummated at January 1, 2010, nor are they necessarily indicative of future results of operations or financial position. The unaudited pro forma combined financial data should be read in conjunction with the historical consolidated financial statements and related notes thereto of Endeavour and the Statements of Combined Revenue and Direct Operating Expenses of the assets to be acquired by Endeavour in the COP Acquisition.

F-3

Endeavour International Corporation

Unaudited Pro Forma Condensed Combined Balance Sheet

As of September 30, 2011

(Amounts in thousands)


	Endeavour		COP Acquisition			Pro Forma Adjustments			Pro Forma Combined
				(A)
Current Assets:
Cash and cash equivalents	$	185,030	$	(277,537	)	$	277,000	(B)	$	184,493
Receivables		6,502		—						6,502
Other Current Assets		12,210		—						12,210

Total Current Assets		203,742		(277,537	)		277,000			203,205
Property and Equipment, net		527,149		993,296						1,520,445
Goodwill		211,886		—						211,886
Other Assets		27,326		—			13,000	(C)		40,326

Total Assets	$	970,103	$	715,759		$	290,000		$	1,975,862

Current Liabilities:
Accounts Payable	$	71,408	$	—		$			$	71,408
Current Maturities of Long-Term Debt		14,850		—						14,850
Accrued Expenses and Other Current Liabilities		26,617		—						26,617

Total Current Liabilities		112,875		—						112,875
Long-term Debt		454,286		—			290,000	(B)		744,286
Deferred Taxes		117,839		704,138						821,977
Other Liabilities		43,278		11,621						54,899

Total Liabilities		728,278		715,759			290,000			1,734,037
Series C Convertible Preferred Stock		43,703		—						43,703
Stockholders’ Equity		198,122								198,122

Total Liabilities and Stockholders’ Equity	$	970,103	$	715,759		$	290,000		$	1,975,862

F-4

Endeavour International Corporation

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Nine Months Ended September 30, 2011

(Amounts in thousands, except per share data)


	Endeavour			COP Acquisition		Pro Forma Adjustments			Pro Forma Combined
					(A)
Revenues	$	43,459		$	289,086				$	332,545

Expenses:
Operating expenses		14,888			50,981					65,869
Depreciation, depletion and amortization		18,698			—		71,012	(D)		89,710
Impairment of oil and gas properties		28,793			—					28,793
General and administrative		14,525			—					14,525

Total expenses		76,904			50,981		71,012			198,897

Income (Loss) from Operations		(33,445	)		238,105		(71,012	)		133,648

Other Income (Expense):
Unrealized gain on derivatives		11,098			—					11,098
Interest expense		(32,607	)		—		(22,968	)(B),(C)		(55,575	)
Other income		424			—					424

Total other income (expense)		(21,085	)		—		(22,968	)		(44,053	)

Income (Loss) Before Income Taxes		(54,530	)		238,105		(93,980	)		89,595
Income Tax Expense		31,820			—		110,941	(E)		142,761

Net Income (Loss)		(86,350	)		238,105		(204,921	)		(53,166	)
Preferred Stock Dividends		(1,518	)		—					(1,518	)

Net Income (Loss) to Common Stockholders	$	(87,868	)		238,105	$	(204,921	)	$	(54,684	)

Net Loss Per Share:
Basic	$	(2.52	)						$	(1.57	)

Diluted	$	(2.52	)						$	(1.57	)

Weighted Average Number of Common Shares Outstanding:
Basic		34,854								34,854

Diluted		34,854								34,854

F-5

Endeavour International Corporation

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Year Ended December 31, 2010

(Amounts in thousands, except per share data)


	Endeavour			COP Acquisition		Pro Forma Adjustments			Pro Forma Combined
					(A)
Revenues	$	71,675		$	300,061				$	371,736
Expenses:
Operating expenses		15,347			56,479					71,826
Depreciation, depletion and amortization		28,894			—		111,983	(D)		140,877
Impairment of oil and gas properties		7,692			—					7,692
General and administrative and other		18,415			—					18,415

Total expenses		70,348			56,479		111,983			238,810

Income (Loss) from Operations		1,327			243,582		(111,983	)		132,926

Other Income (Expense):
Gains (losses) on derivatives		538			—					538
Interest expense		(34,592	)		—		(30,625	)(B),(C)		(65,217	)
Gain on sale of reserves in place		87,171			—					87,171
Interest income and other		1,299			—					1,299

Total other income (expense)		54,416			—		(30,625	)		23,791

Income (Loss) Before Income Taxes		55,743			243,582		(142,608	)		156,717
Income Tax Expense (Benefit)		(788	)		—		73,308	(E)		72,520

Net Income (Loss)		56,531			243,582		(215,916	)		84,197
Preferred Stock Dividends		(2,227	)		—					(2,227	)

Net Income (Loss) to Common Stockholders	$	54,304		$	243,582	$	(215,916	)	$	81,970

Net Income Per Share:
Basic	$	2.34							$	3.53

Diluted	$	1.95							$	2.91

Weighted Average Number of Common Shares Outstanding:
Basic		23,252								23,252

Diluted		28,886								28,886

F-6

Endeavour International Corporation

Notes to Unaudited Pro Forma Condensed

Combined Statements

(Amounts in thousands, except per share data)

(A)

To record the acquisition of certain oil and natural gas interests in the North Sea from COP for a contract price of approximately $330 million in cash. The preliminary purchase price allocation is determined as follows:


Contract price	$	330,000
Purchase price adjustment for estimated cash flows from the COP Acquisition assets from economic date of January 1, 2011 to September 30, 2011(F)		(54,463	)
Estimated expenses		2,000

Preliminary purchase price	$	277,537

Allocation of purchase price:
Property, plant & equipment	$	993,296
Deferred taxes		704,138
Asset retirement obligations (included in other long-term liabilities)		(11,621	)

U.S. generally accepted accounting principles require the establishment of deferred tax liabilities (credits) for the excess of book basis over the tax basis of assets acquired at the applicable statutory rate (the “deferred tax step-up”). The deferred tax step-up results in offsetting increases in property, plant and equipment and deferred tax liability. As the increased book basis in the acquired assets is depreciated over the life of the assets, the resulting depreciation, depletion and amortization (“DD&A”) expense is offset by the corresponding deferred tax benefit in the income statement. The deferred tax step-up, and the subsequent additional DD&A expense and deferred tax benefit, are non-cash adjustments. The deferred tax step-up does not:

•

reflect the amount of future taxes payable;

•

reflect the cash paid to acquire the assets; and

•

impact the future EBITDA or cash flow from operations of the assets we expect to acquire.

The purchase price allocation set forth above and reflected in the pro forma financials is preliminary and subject to change in the fair value of the COP Acquisition assets’ cash flows from the economic date, working capital and other liabilities on the effective date and the actual transaction expenses incurred.

(B)

To record the Offering of $290 million in Senior Notes due 2020, less expenses. The Senior Notes are assumed to bear interest at 10% and to be issued at par.

(C)

To record $13.0 million of deferred financing fees capitalized in connection with the Offering and amortization over the life of the debt, eight years.

(D)

To record DD&A expense after giving effect to the purchase price allocation including the non-cash effect of the deferred tax step-up of $704.1 million. The deferred tax step-up increased the DD&A expense by $62.3 million and $37.3 million for the year ended December 31, 2010 and the nine months ended September 30, 2011, respectively.

(E)

To record the income tax effect of the COP Acquisition on a combined basis with Endeavour’s UK operations. The income tax effect was partially offset by deferred tax benefits of $45.2 million and $27.3 million for the year ended December 31, 2010 and the nine months ended September 30, 2011, respectively, related to the increased DD&A expense resulting from the deferred tax step-up.

(F)

The COP Acquisition is expected to close on March 31, 2012, at which time the purchase price adjustment would be approximately $95 million.

See accompanying notes to condensed consolidated financial statements.

F-7

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ENDEAVOUR INTERNATIONAL CORP Reports

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