Endeavour Announces 2013 Second Quarter Financial and Operational Results
HOUSTON, Aug. 6, 2013 -- Endeavour International Corporation
(NYSE: END) (LSE: ENDV) today reported second quarter 2013 net loss, as
adjusted of $12.6 million compared to a net loss, as adjusted of $17.4 million
for the same period in 2012. On a GAAP basis, net loss for the second quarter
of 2013 was $14.3 million as compared to net loss of $51.3 million for the same
quarter in 2012.
Sales volumes for the second quarter of 2013 were 14,497 barrels of oil
equivalent per day ("boepd"), compared to 4,677 boepd for the same quarter in
the prior year. Second quarter 2013 sales numbers were impacted by two liftings
at the Alba field during the period. Physical production for the second quarter
of 2013 averaged 9,498 boepd compared to 6,437 boepd for the same quarter of
2012.
Recent Business Highlights:
* North Sea:
+ Drilling of the West Rochelle (W-1) well has been completed. First
production is expected in September 2013
+ At East Rochelle, the E-2 well commenced drilling on July 25th
+ At Bacchus, the third production well was completed and flowed at a
rate of 9,600 barrels of oil per day ("bopd")
* North America:
+ First vertical pilot well in the Piceance Basin was successfully
drilled, cored and logged
* Finance:
+ In March, the Company received a payment of $22.5 million under a
Forward Sale agreement. The Forward Sale commitment has now been
fulfilled
+ In May, the Company completed the sale of an additional $17.5 million
expansion to the Monetary Production Payment, bringing the total to
$125 million outstanding
* Guidance Update:
+ Direct capital expenditures for the year are expected to be $170
million - $180 million in the U.K. and $10 million - $30 million in the
U.S.
+ Physical production for the third quarter is expected to be in the
range of 8,000 - 9,000 boepd due to planned shutdown work on certain
U.K. assets during the period
"We remain focused and are making progress on operational matters related to
the commencement of first production at Rochelle and improved performance at
Alba," said William L. Transier, chairman, chief executive officer and
president. "The start-up of production from the Bacchus B-1 development is
another achievement for the Company. The performance of this field continues to
be very positive."
Operational Update
North Sea
At the Rochelle development, the West Rochelle well was completed and flow
tested at the end of June. During a 56-hour flow test, the well flowed up to 60
million standard cubic feet per day, which was the limit of the well test
equipment on the drilling rig. Final installation of the subsea pipeline
infrastructure has been completed and the well is connected back to the Scott
Platform. First production from the West Rochelle well (W-1) is expected in
September 2013 following the completion of the annual maintenance period at the
Scott Platform. In addition, the Transocean Prospect rig returned to the
Rochelle field and commenced drilling the E-2 well at East Rochelle on July
25th. The second well of the development, E-2, is expected to be on-line during
the fourth quarter. Endeavour has a 44% working interest in the Rochelle
development.
At the Bacchus field, the third planned production well (B-1) has been
completed and flowed at 9,600 bopd. The well logged 2,057 feet net oil pay
along a horizontal completion segment in high quality Jurassic-aged Fulmar
sandstone in the field's western fault block. Production performance from the
three wells was over 17,600 bopd gross. The third well was completed ahead of
schedule and below estimated costs. Endeavour has a 30% working interest in the
field.
At Alba, the first of three planned development wells at the field was
completed in June and a second subsea well was drilled and completed over the
past few days. During the planned 28-day summer maintenance program, both the
produced water and well-related issues will be addressed and production for the
field is expected to improve by year-end. Endeavour has a 25.68% working
interest in the Alba field.
North America
In the Piceance Basin in Northwest Colorado, Endeavour successfully drilled,
cored and logged its first Wiley federal unit vertical pilot well, targeting
the liquids-rich Niobrara and Frontier formations. The Company is evaluating
the results and will likely drill a horizontal re-entry later in the year. In
this play, Endeavour has accumulated leasehold and drill-to-earn options
totaling about 40,000 gross acres.
Finance
In March, Endeavour entered into a Forward Sale agreement receiving a payment
of $22.5 million and effectively hedged a portion of production by locking in
pricing for in excess of 200,000 barrels of oil over a six month delivery
period. During the second quarter, the Company fulfilled the delivery
requirements for the Forward Sale agreement. This had a positive effect on the
Company's realized oil prices year-to-date.
In May, the Company completed the sale of an additional $17.5 million expansion
to the Monetary Production Payment (MPP), bringing the total to $125 million
outstanding. The MPP has a two-year term and will be satisfied out of the
production from the Alba and Bacchus fields. Repayment of the MPP began in July
2013 under its terms.
Current liabilities were impacted during the quarter due to the
reclassification of the $115 million Credit Revolver from long-term into
short-term liabilities. Endeavour intends to refinance the Credit Revolver, due
in June of 2014, with a new revolving credit facility. Discussions are in
process with a syndicate of financial institutions.
Guidance Update
Direct capital expenditures for the U.K. North Sea are expected to be in the
$170 million - $180 million range. As disclosed, the increase from previous
capital expenditure estimates are related to cost overruns on Rochelle,
primarily from an extended drilling duration of the West well(W-1) and the
drilling of the E-2 well at East Rochelle. Direct capital expenditures for the
U.S. remain in the range of $10 million - $30 million and are largely
discretionary.
Each year during the third quarter, routine maintenance work is performed on
platforms and infrastructure in the U.K. North Sea. Due to this planned
downtime, physical production levels for the third quarter are expected to be
in the range of 8,000 - 9,000 boepd. With the summer maintenance work at the
Alba field, there are no scheduled liftings during the third quarter. While the
lack of liftings will impact the estimated sales volumes for the third quarter,
the Company continues to receive payments monthly for its physical production
volumes under its existing marketing agreement.
Earnings Conference Call, Tuesday, August 6, 2013 at 9:00 a.m., Central
Daylight Time, 3:00 p.m. British Summer Time
Endeavour International will host a conference call and web cast to discuss its
2013 second quarter financial and operating results on Tuesday, August 6, 2013
at 9:00 a.m. Central Daylight Time, 3:00 p.m. British Summer Time. A supporting
slide deck for the conference call is available on the home page of Endeavour's
website at www.endeavourcorp.com and under the Investor Relations section in
conjunction with the details for the conference call. To participate and ask
questions during the conference call, dial the local country telephone number
and the confirmation code 8946017. The toll-free numbers are 800-753-0420 in
the United States and 0-808-101-1152 in the United Kingdom. Other international
callers should dial 913-312-0968 (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 August 6,
2013 through 12:00 p.m. on August 13, 2013 by dialing toll free 888-203-1112
(U.S.) or 719-457-0820 (international), confirmation code 8946017.
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)
June 30, December 31,
2013 2012
Assets
Current Assets:
Cash and cash equivalents $ 130,790 $ 59,185
Restricted cash 178 178
Accounts receivable 28,434 46,003
Prepaid expenses and other current assets 33,933 20,995
Total Current Assets 193,335 126,361
Property and Equipment, Net 1,054,834 1,003,441
Goodwill 259,238 262,764
Other Assets 39,065 49,906
Total Assets $ 1,546,472 $ 1,442,472
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 72,212 $ 60,153
Current maturities of debt 115,163 15,713
Monetary production payment, current 20,833 -
Accrued expenses and other 96,154 90,100
Total Current Liabilities 304,362 165,966
Long-Term Debt 749,894 843,793
Deferred Taxes 125,146 141,887
Other Liabilities 238,242 147,692
Total Liabilities 1,417,644 1,299,338
Commitments and Contingencies
Series C Convertible Preferred Stock 43,703 43,703
Stockholders' Equity 85,125 99,431
Total Liabilities and Stockholders' Equity $ 1,546,472 $ 1,442,472
Endeavour International Corporation
Condensed Consolidated Statement of Operations
(Unaudited)
(Amounts in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2013 2012 2013 2012
Revenues $ 126,165 $ 23,003 $ 183,837 $ 38,169
Cost of Operations:
Operating expenses 38,103 5,742 55,593 10,640
Depreciation, depletion and 51,923 10,627 74,870 18,533
amortization
Impairment of oil and gas - 19,960 3,534 35,700
properties
General and administrative 4,882 5,030 10,364 10,353
Total Expenses 94,908 41,359 144,361 75,226
Income (Loss) From Operations 31,257 (18,356) 39,476 (37,057)
Other Income (Expense):
Unrealized gains (losses) on (1,277) 3,805 303 (973)
derivatives
Interest expense (24,447) (25,256) (45,885) (44,963)
Loss on early extinguishment of - (21,661) - (21,661)
debt
Letter of credit fees (7,128) (3,064) (18,508) (3,064)
Other income (expense) (1,009) (611) 8,871 (3,282)
Total Other Expense (33,861) (46,787) (55,219) (73,943)
Loss Before Income Taxes (2,604) (65,143) (15,743) (111,000)
Income Tax Expense (Benefit) 11,281 (14,335) 12,189 (24,929)
Net Loss (13,885) (50,808) (27,932) (86,071)
Preferred Stock Dividends 456 456 911 911
Net Loss to Common Stockholders $ (14,341) $ (51,264) $ (28,843) $ (86,982)
Net Loss per Common Share:
Basic and Diluted $ (0.30) $ (1.31) $ (0.61) $ (2.26)
Weighted Average Number of Common Shares
Outstanding:
Basic and Diluted 47,092 39,020 47,076 38,438
Endeavour International Corporation
Condensed Consolidated Statement of Cash Flows
(Unaudited)
(Amounts in thousands)
Six Months Ended
June 30,
2013 2012
Cash Flows from Operating Activities:
Net loss $ (27,932) $ (86,071)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation, depletion and amortization 74,870 18,533
Impairment of oil and gas properties 3,534 35,700
Deferred tax benefit (2,457) (24,008)
Unrealized (gains) losses on derivatives (303) 973
Amortization of non-cash compensation 1,632 3,114
Amortization of loan costs and discount 8,695 7,311
Non-cash interest expense 3,454 5,153
Loss on early extinguishment of debt - 21,661
Other (2,444) 4,687
Changes in operating assets and liabilities 12,562 (15,140)
Net Cash Provided by (Used in) Operating Activities 71,611 (28,087)
Cash Flows From Investing Activities:
Capital expenditures (107,314) (116,458)
Acquisitions, net of cash acquired (1,472) (228,105)
Increase in restricted cash - (178)
Net Cash Used in Investing Activities (108,786) (344,741)
Cash Flows From Financing Activities:
Repayments of borrowings - (244,565)
Borrowings under debt agreements, net of debt discount - 580,000
Proceeds from issuance of common stock - 61,088
Proceeds from issuance of monetary production payment 125,000 -
Dividends paid (416) (416)
Payments for early extinguishment of debt - (7,248)
Financing costs paid (15,804) (27,500)
Other financing - 3
Net Cash Provided by Financing Activities 108,780 361,362
Net Increase (Decrease) in Cash and Cash Equivalents 71,605 (11,466)
Cash and Cash Equivalents, Beginning of Period 59,185 106,036
Cash and Cash Equivalents, End of Period $ 130,790 $ 94,570
Endeavour International Corporation
Operating Statistics
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2013 2012 2013 2012
Sales volume (1)
Oil and condensate sales (Mbbls):
United Kingdom 1,205 191 1,713 287
United States 1 1 1 2
Total 1,206 192 1,714 289
Gas sales (MMcf):
United Kingdom 15 30 26 51
United States (2) 667 1,375 1,489 3,052
Total 682 1,405 1,515 3,103
Oil equivalent sales (MBOE)
United Kingdom 1,207 196 1,717 295
United States (2) 112 230 249 510
Total 1,319 426 1,966 805
Total BOE per day 14,497 4,677 10,862 4,426
Physical production volume (BOE per day)(1)
United Kingdom 8,083 3,910 7,973 2,401
United States (2) 1,415 2,527 1,454 2,804
Total 9,498 6,437 9,427 5,205
Realized Price, before and after
derivatives
Oil and condensate price ($ per Bbl) 102.67 $ 104.46 $ 104.37 108.67
Gas price ($ per Mcf) 3.50 $ 2.14 $ 3.30 2.20
Equivalent oil price ($ per BOE) 95.64 $ 54.05 $ 93.51 47.39
(1) We record oil revenues when deliveries have occurred and legal ownership of
the oil transfers to the customer. Physical production may differ from
sales volumes based on the timing of tanker liftings for our international
sales.
In October 2012, we completed an exchange with domestic co-venturer, J-W
Operating Company ("J-W"), whereby we exchanged our Bull Bayou Haynesville
and Willow Springs Cotton Valley properties for all of J-W's upstream and
(2) midstream interests in the Pennsylvania Marcellus area. The transaction
added 15,500 net acres to our position in the Marcellus area, bringing the
total to 31,000 net acres, and decreased our position in the Haynesville
area by 2,100 net acres and approximately 3.2 MMcf equivalent per day (530
BOE per day) of declining net 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) Three Months Ended Six Months Ended
June 30, June 30,
2013 2012 2013 2012
Net Loss $ (13,885) $ (50,808) $ (27,932) $ (86,071)
Impairment of oil and gas - 19,960 3,534 35,700
properties (net of tax) (1)
Unrealized gains (losses) on 1,277 (4,355) (303) (207)
derivatives (net of tax) (2)
Loss on early extinguishment of - 17,762 - 17,762
debt (net of tax) (3)
Net Loss as Adjusted $ (12,608) $ (17,441) $ (24,701) $ (32,816)
Net Loss $ (13,885) $ (50,808) $ (27,932) $ (86,071)
Unrealized loss on derivatives 1,277 (3,805) (303) 973
Net interest expense 24,427 25,134 45,849 44,784
Letter of credit fees 7,128 3,064 18,508 3,064
Loss on early extinguishment of - 21,661 - 21,661
debt
Depreciation, depletion and 51,923 10,627 74,870 18,533
amortization
Impairment of oil and gas - 19,960 3,534 35,700
properties
Income Tax Expense (Benefit) 11,281 (14,335) 12,189 (24,929)
Adjusted EBITDA $ 82,151 $ 11,498 $ 126,715 $ 13,715
(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 of none, $550, none and $1,180 for the three months
ended June 30, 2013 and 2012, six months ended June 30, 2013 and 2012,
respectively.
(3) Net of tax benefit of $3,899 for both the three and six months ended
June 30, 2012.
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