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8-K - FORM 8-K - ENDEAVOUR INTERNATIONAL CORPd432214d8k.htm
EX-99.2 - EXHIBIT 99.2 - ENDEAVOUR INTERNATIONAL CORPd432214dex992.htm

Exhibit 99.1

 

LOGO

For immediate release

Endeavour Announces 2012 Third Quarter

Financial and Operational Results

Houston, November 1, 2012—Endeavour International Corporation (NYSE: END) (LSE: ENDV) today reported third quarter 2012 Adjusted EBITDA of $51.6 million compared to $2.4 million for the same quarter of 2011. On a GAAP basis, for the third quarter of 2012 net loss was $33.7 million as compared to net loss of $63.3 million for the same quarter in 2011.

Production for the quarter ending September 30, 2012 was up 370% from the comparable quarter in 2011, with U.K. crude oil accounting for 100% of the increase. For the first nine months of 2012 compared to the same period in 2011, sales volumes increased 215% from U.K. crude production. For the third quarter 2012, entitlement production averaged approximately 10,700 barrels of oil equivalent per day (“boepd”) compared to actual sales volumes for the period of approximately 11,000 boepd.

Business highlights include:

 

   

North Sea:

 

   

At Rochelle, the installation of subsea pipelines and umbilicals has been completed ahead of schedule

 

   

The first of the two planned production wells was drilled to a final casing point

 

   

Awarded seven licenses covering ten exploration blocks in the U.K.’s 27th Licensing Round around existing core areas

 

   

U.S. Onshore:

   

Closed an exchange with co-owner J-W Operating to obtain operator status, control of upstream and midstream assets and an additional 15,500 net acres in the Pennsylvania Marcellus

 

   

U.S. net production averaged 12.9 million cubic feet of gas equivalent per day (MMCFe/D) for the third quarter

 

   

Finance:

 

   

Completed an offering of an additional $54 million of 12% Senior Notes due 2018 for net proceeds of $58 million

 

   

Fully redeemed the $25.1 million 12% Senior Subordinated Notes due 2014


“The Company enjoyed significant progress in the third quarter with strong increases in Brent priced crude oil production in the U.K. North Sea. We are focused on and making great progress to deliver first production at our Rochelle development,” said William L. Transier, chairman, chief executive officer and president. “For health and safety reason, drilling and infrastructure implementation cannot occur in the same area simultaneously. By making the difficult decision to suspend drilling before final completion, we were able to keep our service contractor on schedule to complete the necessary subsea infrastructure. This decision preserves the option to achieve first production at Rochelle in early 2013.”

Operational Update

United Kingdom

The contracted rig at Rochelle, the Diamond Ocean Nomad, completed the drilling on the first of two planned development wells to the final casing point before moving the rig off location to allow for the hook-up of the pipelines and flow-lines to the subsea manifolds. Final drilling and completion of this first development well will be done by the Transocean Prospect which is scheduled to arrive in field in December. Due to the change in the timing of completion of the first well, first production at the field is now expected in January 2013 assuming the rig arrives as scheduled. The Rochelle subsea infrastructure installation has been substantially completed. Endeavour is the operator of the Rochelle development project and holds a 44% ownership interest in the Rochelle development which is comprised of Blocks 15/26b, 15/26c and 15/27.

During the 27th Licensing Round, the U.K. government awarded the Company seven new licenses, covering ten exploration blocks located around existing core areas. All the licenses, which have a traditional four year term, will be operated by the Company and offer additional growth opportunities in the future. There are no firm well obligations on any of the licenses and minimal upfront capital commitments.

United States Onshore

Effective October 1, 2012 Endeavour completed an exchange of assets with co-owner J-W Operating to trade the Company’s Bull Bayou Haynesville and Willow Springs Cotton Valley projects for all of J-W’s upstream and midstream Marcellus assets in Pennsylvania. The transaction adds 15,500 net acres to Endeavour’s position in the Marcellus bringing the total to 31,000 net acres and decreases the Company’s position in the Haynesville/Cotton Valley by 2,100 net acres and approximately 3.2 MMCFe/d (530 boepd) of net production. Also in the Marcellus, Endeavour has secured an off-take solution in the key Daniel area of Cameron County for up to an additional 10 mmcf/d of production with a local gatherer by year-end 2013. In conjunction with the transaction, the Company currently has three wells drilled and cased in the area waiting on completion with no additional drilling requirements until 2014.

In the Heath Shale tight oil play, the Company has deferred horizontal re-entries of its vertical pilot wells until 2013 while it evaluates results from offset operators and operational efficiencies. In Colorado, the Company continues to acquire acreage for Upper Cretaceous targets and has formed a 23,000 acre Federal unit, where it expects to drill an initial test in 2013.

There is currently no drilling activity underway in the Company’s U.S. gas fields in the Louisiana, Haynesville or the Pennsylvania Marcellus. Net daily production averaged 12.9 MMCFe/D for the third quarter and 15.5 MMCFe/D for the first nine months of 2012.


Finance

Operating expenses during the quarter included a non-recurring expense of approximately $9.7 million related to the initial purchase price value allocation of inventory at Alba at the date of acquisition.

In October, Endeavour completed a $54 million addition to its 12% Senior Notes due 2018 at 109% of principal amount, resulting in a yield of 9.4%. Proceeds of $58 million were used to fully redeem $25.1 million of the Company’s 12% Senior Subordinated Notes due 2014. The remaining proceeds will be used to finance a portion of the construction, improvement and other capital costs related to its U.S. and U.K oil and natural gas properties. The redemption of the 12% Senior Subordinated Notes was an important step in preparing for the syndicated bank revolver Endeavour expects to put in place in 2013.

In addition, the Company increased the amount available to be borrowed under the Revolving Credit Facility an additional $25 million and drew down an additional $15 million bringing the outstanding balance to approximately $115 million.

Earnings Conference Call, Thursday, November 1, 2012 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 2012 third quarter financial and operating results on Thursday, November 1, 2012 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 2204201. The toll-free numbers are 888-677-8751 in the United States and 0-808-101-1402 in the United Kingdom. Other international callers should dial 913-312-0682(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 1, 2012 through 12:00 p.m. on November 8, 2012 by dialing toll free 888-203-1112 (U.S.) or 719-457-0820 (international), confirmation code 2204201.

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 www.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 as of the date made. Such statements are subject to assumptions, risk and uncertainty. Actual results or events may vary materially.

The Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose not only proved reserves, but also probable reserves and possible reserves that meet the SEC's definitions for such terms, and price and cost sensitivities for such reserves, and prohibits disclosure of resources that do not constitute such 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. These estimates are by their nature more speculative than estimates of proved, probable and possible reserves and accordingly are subject to substantially greater risk of being actually realized. 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

 

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)

 

     September 30,
2012
     December 31,
2011
 

Assets

  

Current Assets:

     

Cash and cash equivalents

   $ 75,722      $ 106,036  

Restricted cash

     178        —     

Accounts receivable

     16,131        8,649  

Prepaid expenses and other current assets

     28,047        18,840  
  

 

 

    

 

 

 

Total Current Assets

     120,078        133,525  

Property and Equipment, Net

     836,369        549,196  

Goodwill

     258,973        211,886  

Other Assets

     51,417        30,384  
  

 

 

    

 

 

 

Total Assets

   $ 1,266,837      $ 924,991  
  

 

 

    

 

 

 

Liabilities and Stockholders’ Equity

  

Current Liabilities:

     

Accounts payable

   $ 84,744      $ 62,275  

Current maturities of debt

     12,500        12,350  

Accrued expenses and other

     23,680        20,549  
  

 

 

    

 

 

 

Total Current Liabilities

     120,924        95,174  

Long-Term Debt

     812,926        455,028  

Deferred Taxes

     111,806        115,759  

Other Liabilities

     72,338        61,248  
  

 

 

    

 

 

 

Total Liabilities

     1,117,994        727,209  

Commitments and Contingencies

     

Series C Convertible Preferred Stock

     43,703        43,703  

Stockholders’ Equity

     105,140        154,079  
  

 

 

    

 

 

 

Total Liabilities and Stockholders’ Equity

   $ 1,266,837      $ 924,991  
  

 

 

    

 

 

 


Endeavour International Corporation

Condensed Consolidated Statement of Operations

(Unaudited)

(Amounts in thousands, except per share data)

 

     Third Quarter
September 30,
    Nine Months Ended
September 30,
 
     2012     2011     2012     2011  

Revenues

   $ 83,275     $ 10,302     $ 121,444     $ 43,459  

Cost of Operations:

        

Operating expenses

     23,973       3,496       34,613       14,888  

Depreciation, depletion and amortization

     23,759       5,372       42,292       18,698  

Impairment of U.S. oil and gas properties

     11,416       28,793       47,116       28,793  

General and administrative

     5,026       4,863       15,379       14,525  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Expenses

     64,174       42,524       139,400       76,904  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (Loss) From Operations

     19,101       (32,222     (17,956     (33,445
  

 

 

   

 

 

   

 

 

   

 

 

 

Other Income (Expense):

        

Derivatives:

        

Unrealized gains (losses)

     (1,204     13,081       (2,178     11,098  

Interest expense

     (18,053     (12,253     (63,016     (32,607

Loss on early extinguishment of debt

     —          —          (21,661     (402

Letter of credit fees

     (9,378     —          (12,442     —     

Other income (expense)

     (2,663     611       (5,944     826  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Other Income (Expense)

     (31,298     1,439       (105,241     (21,085
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss Before Income Taxes

     (12,197     (30,783     (123,197     (54,530

Income Tax Expense (Benefit)

     21,505       32,507       (3,424     31,820  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Loss

     (33,702     (63,290     (119,773     (86,350

Preferred Stock Dividends

     456       466       1,367       1,518  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Loss to Common Stockholders

   $ (34,158   $ (63,756   $ (121,140   $ (87,868
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Loss per Common Share:

        

Basic and Diluted

   $ (0.73   $ (1.63   $ (2.94   $ (2.52
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted Average Number of Common Shares Outstanding:

        

Basic and Diluted

     46,555       39,064       41,163       34,854  
  

 

 

   

 

 

   

 

 

   

 

 

 


Endeavour International Corporation

Condensed Consolidated Statement of Cash Flows

(Unaudited)

(Amounts in thousands)

 

     Nine Months Ended September 30,  
     2012     2011  

Cash Flows from Operating Activities:

    

Net loss

   $ (119,773   $ (86,350

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

    

Depreciation, depletion and amortization

     42,292       18,698  

Impairment of U.S. oil and gas properties

     47,116       28,793  

Deferred tax expense (benefit)

     (15,849     23,052  

Unrealized (gains) losses on derivatives

     2,178       (11,098

Amortization of non-cash compensation

     3,605       2,733  

Amortization of loan costs and discount

     10,536       9,151  

Non-cash interest expense

     7,077       9,306  

Loss on early extinguishment of debt

     21,661       402  

Other

     9,692       1,839  

Changes in operating assets and liabilities

     (7,191     (25,145
  

 

 

   

 

 

 

Net Cash Provided by (Used in) Operating Activities

     1,344       (28,619

Cash Flows From Investing Activities:

    

Capital expenditures

     (175,597     (113,137

Acquisitions

     (228,437     (22,898

(Increase) decrease in restricted cash

     (178     31,726  
  

 

 

   

 

 

 

Net Cash Used in Investing Activities

     (404,212     (104,309

Cash Flows From Financing Activities:

    

Repayments of borrowings

     (247,065     (97,638

Borrowings under debt agreements, net of debt discount

     595,000       210,000  

Proceeds from issuance of common stock

     60,805       118,444  

Dividends paid

     (833     (1,400

Payments for early extinguishment of debt

     (7,248     —     

Financing costs paid

     (28,109     (11,226

Other financing

     4       511  
  

 

 

   

 

 

 

Net Cash Provided by Financing Activities

     372,554       218,691  

Net Increase (Decrease) in Cash and Cash Equivalents

     (30,314     85,763  

Cash and Cash Equivalents, Beginning of Period

     106,036       99,267  
  

 

 

   

 

 

 

Cash and Cash Equivalents, End of Period

   $ 75,722     $ 185,030  
  

 

 

   

 

 

 


Endeavour International Corporation

Operating Statistics

(Unaudited)

 

     Third Quarter
September 30,
     Nine Months Ended
September 30,
 
     2012      2011      2012      2011  

Sales volume (1)

           

Oil and condensate sales (Mbbls):

           

United Kingdom

     812        49        1,099        274  

United States

     1        3        2        5  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     813        52        1,101        279  
  

 

 

    

 

 

    

 

 

    

 

 

 

Gas sales (MMcf):

           

United Kingdom

     19        —           69        78  

United States

     1,182        1,329        4,234        3,305  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,201        1,329        4,303        3,383  
  

 

 

    

 

 

    

 

 

    

 

 

 

Oil equivalent sales (MBOE)

           

United Kingdom

     815        49        1,110        287  

United States

     198        225        708        556  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,013        274        1,818        843  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total BOE per day

     11,006        2,972        6,635        3,089  
  

 

 

    

 

 

    

 

 

    

 

 

 

Physical production volume (BOE per day) (1)

           

United Kingdom

     8,573        838        4,474        1,152  

United States

     2,151        2,436        2,585        2,036  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     10,724        3,274        7,059        3,188  
  

 

 

    

 

 

    

 

 

    

 

 

 

Realized Price, before and after derivatives

           

Oil and condensate price ($ per Bbl)

   $ 99.31      $ 106.57      $ 101.76      $ 108.57  
  

 

 

    

 

 

    

 

 

    

 

 

 

Gas price ($ per Mcf)

   $ 2.16      $ 3.59      $ 2.19      $ 3.88  
  

 

 

    

 

 

    

 

 

    

 

 

 

Equivalent oil price ($ per BOE)

   $ 82.24      $ 37.68      $ 66.80      $ 51.53  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) 

We record oil revenues using the sales method, i.e. when delivery has occurred. Actual production may differ based on the timing of tanker liftings. Physical production may differ from sales volumes based on the timing of tanker liftings for our international sales. We use the entitlements method to account for sales of gas production.


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 and Adjusted EBITDA. 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.

 

(amounts in thousands)    Third Quarter
September 30,
    Nine Months Ended
September 30,
 
     2012     2011     2012     2011  

Net loss

   $ (33,702   $ (63,290   $ (119,773   $ (86,350

Impairment of U.S. oil and gas properties (net of tax) (1)

     11,416       28,793       47,116       28,793  

Unrealized (gain) loss (net of tax) (2)

     265       (13,034     58       (12,245

Loss on early extinguishment of debt (net of tax)(3)

     —          —          17,762       402  

Deferred tax expense related to U.K. tax rate change

     8,393       25,387       8,393       25,387  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Loss as Adjusted

   $ (13,628   $ (22,144   $ (46,444   $ (44,013
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (33,702   $ (63,290   $ (119,773   $ (86,350

Unrealized loss on derivatives

     1,204       (13,081     2,178       (11,098

Net interest expense

     18,005       12,084       62,789       31,832  

Letter of credit fees

     9,378        —          12,442        —     

Loss on early extinguishment of debt

     —          —          21,661        402  

Depreciation, depletion and amortization

     23,759       5,372       42,292       18,698  

Impairment of U.S. oil and gas properties

     11,416       28,793       47,116       28,793  

Income tax expense (benefit)

     21,505       32,507       (3,424     31,820  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA (4)

   $ 51.565     $ 2,385     $ 65,281      $ 14,097  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) 

Since the impairments related to U.S. oil and gas properties, we recognized no tax benefits as there was no assurance that we could generate any U.S. taxable earnings.

(2) 

Net of tax (benefit) expense of $939 and $(47) and $2,120 and $1,147, respectively.

(3) 

Net of tax benefit of $3,899 for the nine months ended September 30, 2012.

(4) 

Includes operating expenses of approximately $9.7 million for the third quarter of 2012 and nine months ended September 30, 2012 related to the initial purchase price value allocation of inventory at Alba at acquisition date.