Endeavour Announces 2012 Third Quarter Financial and Operational
Results
HOUSTON, Nov. 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 +1-913-312-0682(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
+1-719-457-0820 (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.
Endeavour International Corporation
Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
September 30, December 31,
2012 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,
2012 2011
Revenues $83,275 $10,302
Cost of Operations:
Operating expenses 23,973 3,496
Depreciation, depletion and
amortization 23,759 5,372
Impairment of U.S. oil and
gas properties 11,416 28,793
General and administrative 5,026 4,863
-------------------------- ----- -----
Total Expenses 64,174 42,524
-------------- ------ ------
Income (Loss) From
Operations 19,101 (32,222)
------------------ ------ -------
Other Income (Expense):
Derivatives:
Unrealized gains (losses) (1,204) 13,081
Interest expense (18,053) (12,253)
Loss on early
extinguishment of debt - -
Letter of credit fees (9,378) -
Other income (expense) (2,663) 611
---------------------- ------ ---
Total Other Income
(Expense) (31,298) 1,439
------------------ ------- -----
Loss Before Income Taxes (12,197) (30,783)
Income Tax Expense
(Benefit) 21,505 32,507
------------------ ------ ------
Net Loss (33,702) (63,290)
Preferred Stock Dividends 456 466
------------------------- --- ---
Net Loss to Common
Stockholders $(34,158) $(63,756)
------------------ -------- --------
Net Loss per Common Share:
Basic and Diluted $(0.73) $(1.63)
----------------- ------ ------
Weighted Average Number of
Common
Shares Outstanding:
Basic and Diluted 46,555 39,064
----------------- ------ ------
Nine Months Ended
September 30,
2012 2011
Revenues $121,444 $43,459
Cost of Operations:
Operating expenses 34,613 14,888
Depreciation, depletion and
amortization 42,292 18,698
Impairment of U.S. oil and
gas properties 47,116 28,793
General and administrative 15,379 14,525
-------------------------- ------ ------
Total Expenses 139,400 76,904
-------------- ------- ------
Income (Loss) From
Operations (17,956) (33,445)
------------------ ------- -------
Other Income (Expense):
Derivatives:
Unrealized gains (losses) (2,178) 11,098
Interest expense (63,016) (32,607)
Loss on early
extinguishment of debt (21,661) (402)
Letter of credit fees (12,442) -
Other income (expense) (5,944) 826
---------------------- ------ ---
Total Other Income
(Expense) (105,241) (21,085)
------------------ -------- -------
Loss Before Income Taxes (123,197) (54,530)
Income Tax Expense
(Benefit) (3,424) 31,820
------------------ ------ ------
Net Loss (119,773) (86,350)
Preferred Stock Dividends 1,367 1,518
------------------------- ----- -----
Net Loss to Common
Stockholders $(121,140) $(87,868)
------------------ --------- --------
Net Loss per Common Share:
Basic and Diluted $(2.94) $(2.52)
----------------- ------ ------
Weighted Average Number of
Common
Shares Outstanding:
Basic and Diluted 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 $185,030
Endeavour International Corporation
Operating Statistics
(Unaudited)
Third Quarter
September 30,
2012 2011
---- ----
Sales volume (1)
Oil and condensate
sales (Mbbls):
United Kingdom 812 49
United States 1 3
------------- --- ---
Total 813 52
----- --- ---
Gas sales (MMcf):
United Kingdom 19 -
United States 1,182 1,329
------------- ----- -----
Total 1,201 1,329
----- ----- -----
Oil equivalent sales
(MBOE)
United Kingdom 815 49
United States 198 225
------------- --- ---
Total 1,013 274
----- ----- ---
Total BOE per day 11,006 2,972
----------------- ------ -----
Physical production
volume (BOE per day)
(1)
United Kingdom 8,573 838
United States 2,151 2,436
------------- ----- -----
Total 10,724 3,274
----- ------ -----
Realized Price,
before and after
derivatives
Oil and condensate
price ($ per Bbl) $99.31 $106.57
------------------ ------ -------
Gas price ($ per Mcf) $2.16 $3.59
--------------------- ----- -----
Equivalent oil price
($ per BOE) $82.24 $37.68
-------------------- ------ ------
Nine Months Ended
September 30,
2012 2011
---- ----
Sales volume (1)
Oil and condensate
sales (Mbbls):
United Kingdom 1,099 274
United States 2 5
------------- --- ---
Total 1,101 279
----- ----- ---
Gas sales (MMcf):
United Kingdom 69 78
United States 4,234 3,305
------------- ----- -----
Total 4,303 3,383
----- ----- -----
Oil equivalent sales
(MBOE)
United Kingdom 1,110 287
United States 708 556
------------- --- ---
Total 1,818 843
----- ----- ---
Total BOE per day 6,635 3,089
----------------- ----- -----
Physical production
volume (BOE per day)
(1)
United Kingdom 4,474 1,152
United States 2,585 2,036
------------- ----- -----
Total 7,059 3,188
----- ----- -----
Realized Price,
before and after
derivatives
Oil and condensate
price ($ per Bbl) $101.76 $108.57
------------------ ------- -------
Gas price ($ per Mcf) $2.19 $3.88
--------------------- ----- -----
Equivalent oil price
($ per BOE) $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,
-------------
2012 2011
---- ----
Net loss $(33,702) $(63,290)
Impairment of U.S. oil
and gas properties
(net of tax) (1) 11,416 28,793
Unrealized (gain) loss
(net of tax) (2) 265 (13,034)
Loss on early
extinguishment of debt
(net of tax)(3) - -
Deferred tax expense
related to U.K. tax
rate change 8,393 25,387
-------------------- ----- ------
Net Loss as Adjusted $(13,628) $(22,144)
-------------------- -------- --------
Net loss $(33,702) $(63,290)
Unrealized loss on
derivatives 1,204 (13,081)
Net interest expense 18,005 12,084
Letter of credit fees 9,378 -
Loss on early
extinguishment of debt - -
Depreciation, depletion
and amortization 23,759 5,372
Impairment of U.S. oil
and gas properties 11,416 28,793
Income tax expense
(benefit) 21,505 32,507
------ ------
Adjusted EBITDA (4) $51.565 $2,385
------------------- ------- ------
(amounts in thousands) Nine Months Ended
September 30,
-------------
2012 2011
---- ----
Net loss $(119,773) $(86,350)
Impairment of U.S. oil
and gas properties
(net of tax) (1) 47,116 28,793
Unrealized (gain) loss
(net of tax) (2) 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
-------------------- ----- ------
Net Loss as Adjusted $(46,444) $(44,013)
-------------------- -------- --------
Net loss $(119,773) $(86,350)
Unrealized loss on
derivatives 2,178 (11,098)
Net interest expense 62,789 31,832
Letter of credit fees 12,442 -
Loss on early
extinguishment of debt 21,661 402
Depreciation, depletion
and amortization 42,292 18,698
Impairment of U.S. oil
and gas properties 47,116 28,793
Income tax expense
(benefit) (3,424) 31,820
------ ------
Adjusted EBITDA (4) $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.
SOURCE Endeavour International Corporation
CONTACT: Endeavour - Investor Relations, Darcey Matthews, +1-713-307-8711; or Pelham
Public Relations - UK Media, Philip
Dennis, +44(0)207-861-3919, or Henry
Lerwill, +44(0)207-861-3169