Endeavour Announces 2013 Third Quarter Financial and Operational Results
HOUSTON, Nov. 6, 2013 -- Endeavour International Corporation
(NYSE: END) (LSE: ENDV) today reported third quarter 2013 net loss, as adjusted
of $34.7 million compared to a net loss, as adjusted of $13.6 million for the
same period in 2012. On a GAAP basis, net loss for the third quarter of 2013
was $40.3 million as compared to net loss of $34.2 million for the same quarter
in 2012.
Third quarter 2013 sales and production numbers were impacted by the annual
summer maintenance period in the U.K. North Sea and the timing of liftings at
the Alba field during the period. Sales volumes for the third quarter of 2013
were 4,725 barrels of oil equivalent per day ("boepd"), compared to 11,006
boepd for the same quarter in the prior year. Physical production for the third
quarter of 2013 averaged 7,980 boepd compared to 10,724 boepd for the same
quarter of 2012.
Recent Business Highlights:
* First production achieved at Rochelle
* Bacchus B1 well commenced production in July
* Completion of the summer maintenance at the Alba field
* Joint venture in the Pennsylvania Marcellus
* Conclusion of the Strategic Review
"First production at Rochelle is a major achievement for our Company. Rochelle
was part of a package of assets Endeavour purchased in 2006. The field's
evolution from stranded discovery to producing asset is a testament to the
perseverance and technical talent of all whom have been involved in the
project," said William L. Transier, chairman, chief executive officer and
president. "Now with three significant assets and all of our U.K. development
projects on-line, we will focus on exploiting the underlying value of our
assets and turn our attention in the near-term to reducing debt and being cost
efficient."
Operational Update
North Sea
Rochelle commenced production on October 23, 2013. Following first production,
Rochelle is in a 30-day proving period and the W1 well is being ramped up to
its full potential. Current production is 44 MMscf/d with 2,500 barrels of oil
a day ("bopd") of associated condensate, which is in line with operational
expectations for the new infrastructure on the Scott Platform. At East
Rochelle, the E2 well has been drilled to total depth, completed and a
production test is due to commence in the next few days. The E2 well is
expected on-line in the fourth quarter. When fully operational, the production
from the Rochelle field is expected to exceed the available production capacity
at Scott. Endeavour has a 44% working interest in the Rochelle development.
At the Bacchus field, the third planned production well (B1) was completed in
July. 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. The third well was completed ahead of schedule and below estimated
costs. Current production at the field is 13,000 bopd gross, in line with the
expected field performance. Endeavour has a 30% working interest in the field.
At Alba, the planned 28-day summer maintenance program was completed on time
and the field restarted in the middle of September. The previous water
handling, turbine and emulsion concerns have been addressed and the field is
currently ramping back up to full production levels. Production has achieved
rates of over 25,000 bopd and the operator is working to maintain consistent
production rates with on-going operational activities. Two infield wells,
drilled earlier in the year, were brought back on-line and another platform
well is scheduled to be on production in early 2014. Endeavour has a 25.68%
working interest in the Alba field.
As of the fourth quarter of 2013, all the Company's major U.K. oil and gas
assets are on production.
North America
In Rio Blanco County, Colorado, the Company successfully drilled, cored and
logged its Wiley Federal Unit well. The data indicates liquids-rich gas
potential in both the Niobrara and Frontier formations. The well is being
evaluated for a future horizontal re-entry sometime next year. In a separate
operation in Mesa County, Colorado, Endeavour obtained Niobrara cores in a
third party well where the Company has drill-to-earn options, that may be
exercised by horizontal drilling in 2014. In total, the Company has leasehold
and drilling options over approximately 40,000 gross acres in this liquids-rich
Cretaceous play.
During October in the Pennsylvania Marcellus area, the Company entered into a
purchase and sale agreement covering 50% of its upstream and midstream assets.
The transaction is expected to deliver the capital necessary for near term
joint development of these assets. Final closing of the agreement is
anticipated to occur in the fourth quarter of 2013.
Strategic Review
In October, the Board of Directors concluded the strategic review process that
started in February 2013. During the course of the strategic review, the Board
considered the sale of all or parts of the Company and possible joint venture
arrangements. As the year progressed, Endeavour achieved several objectives
that improved the long-term value of the business, including the completion of
Bacchus, start-up of production at Rochelle and continued process improvements
at the Alba field. As a result, the Board decided it was in the best interest
of shareholders to retain and exploit the asset base.
In conjunction with the conclusion of the strategic review, Endeavour decided
to close its London office and consolidate its technical teams in Aberdeen,
Scotland. Derek A. Neilson has been promoted to Managing Director of U.K.
Operations to head the consolidated team. Mr. Neilson has been with Endeavour
for over six years and has 28 years of experience in the oil and gas industry.
Once the consolidation and organizational changes are fully implemented, the
Company expects to achieve annual cash savings of approximately $15 million to
$20 million.
Finance
In August, the Company completed the sale of an additional $25 million
expansion to the Monetary Production Payment (MPP), bringing the total to $150
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.
In September, Endeavour entered into a second Forward Sale agreement receiving
a payment of $22.5 million. This 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. This has had a positive effect on the Company's realized oil
prices year-to-date. The first Forward Sale commitment was fulfilled in June
2013.
Fourth Quarter Production Guidance
With Rochelle and Alba ramping up over the course of the fourth quarter,
average daily production volumes are expected to be in the range of 12,000 -
13,000 boepd for the period. Sales volumes recorded as revenue will be affected
by the number of actual liftings from the Alba field. Currently, one lifting is
expected during the fourth quarter.
Earnings Conference Call, Wednesday, November 6, 2013 at 9:00 a.m., Central
Time, 3:00 p.m. British Time
Endeavour International will host a conference call and web cast to discuss its
2013 third quarter financial and operating results on Wednesday, November 6,
2013 at 9:00 a.m. Central Time, 3:00 p.m. British 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 4806271. The toll-free numbers are 888-812-8595 in the United
States and 0-808-101-1152 in the United Kingdom. Other international callers
should dial 913-312-0672 (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 Time on November 6, 2013 through 12:
00 p.m. on November 12, 2013 by dialing toll free 888-203-1112 (U.S.) or
719-457-0820 (international), confirmation code 4806271.
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,
2013 2012
Assets
Current Assets:
Cash and cash equivalents $ 60,357 $ 59,185
Accounts receivable 24,496 46,181
Prepaid expenses and other current assets 48,696 20,995
Total Current Assets 133,549 126,361
Property and Equipment, Net 1,078,906 1,003,441
Goodwill 259,238 262,764
Other Assets 36,396 49,906
Total Assets $ 1,508,089 $ 1,442,472
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 44,802 $ 60,153
Current maturities of debt 115,163 15,713
Deferred revenue 40,691 -
Monetary production payment, current 19,167 -
Accrued expenses and other 54,422 90,100
Total Current Liabilities 274,245 165,966
Long-Term Debt 752,769 843,793
Deferred Taxes 127,658 141,887
Other Liabilities 263,465 147,692
Total Liabilities 1,418,137 1,299,338
Commitments and Contingencies
Series C Convertible Preferred Stock 43,703 43,703
Stockholders' Equity 46,249 99,431
Total Liabilities and Stockholders' Equity $ 1,508,089 $ 1,442,472
Endeavour International Corporation
Condensed Consolidated Statement of Operations
(Unaudited)
(Amounts in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2013 2012 2013 2012
Revenues $ 36,901 $ 83,275 $ 220,738 $ 121,444
Cost of Operations:
Operating expenses 16,358 23,973 71,951 34,613
Depreciation, depletion and 18,596 23,759 93,466 42,292
amortization
Impairment of oil and gas 6,032 11,416 9,566 47,116
properties
General and administrative 3,913 5,026 14,276 15,379
Total Expenses 44,899 64,174 189,259 139,400
Income (Loss) From Operations (7,998) 19,101 31,479 (17,956)
Other Income (Expense):
Unrealized gains (losses) on 855 (1,204) 1,158 (2,178)
derivatives
Interest expense (26,461) (18,053) (72,346) (63,016)
Loss on early extinguishment - - - (21,661)
of debt
Letter of credit fees (7,274) (9,378) (25,782) (12,442)
Unrealized foreign currency (10,793) (1,448) 38 (4,186)
gains (losses)
Other expense (2,544) (1,215) (4,505) (1,758)
Total Other Expense (46,217) (31,298) (101,437) (105,241)
Loss Before Income Taxes (54,215) (12,197) (69,958) (123,197)
Income Tax Expense (Benefit) (14,330) 21,505 (2,141) (3,424)
Net Loss (39,885) (33,702) (67,817) (119,773)
Preferred Stock Dividends 456 456 1,367 1,367
Net Loss to Common $ (40,341) $ (34,158) $ (69,184) $ (121,140)
Stockholders
Net Loss per Common Share:
Basic and Diluted $ (0.86) $ (0.73) $ (1.47) $ (2.94)
Weighted Average Number of Common Shares
Outstanding:
Basic and Diluted 47,092 46,555 47,082 41,163
Endeavour International Corporation
Condensed Consolidated Statement of Cash Flows
(Unaudited)
(Amounts in thousands)
Nine Months Ended
September 30,
2013 2012
Cash Flows from Operating Activities:
Net loss $ (67,817) $ (119,773)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation, depletion and amortization 93,466 42,292
Impairment of oil and gas properties 9,566 47,116
Deferred tax benefit (17,262) (15,849)
Unrealized (gains) losses on derivatives (1,158) 2,178
Amortization of non-cash compensation 2,352 3,605
Amortization of loan costs and discount 15,330 10,536
Non-cash interest expense 5,246 7,077
Loss on early extinguishment of debt - 21,661
Other 10,192 9,692
Changes in operating assets and liabilities 4,872 (7,191)
Net Cash Provided by Operating Activities 54,787 1,344
Cash Flows From Investing Activities:
Capital expenditures (176,171) (175,597)
Acquisitions, net of cash acquired (2,602) (228,437)
Increase in restricted cash - (178)
Net Cash Used in Investing Activities (178,773) (404,212)
Cash Flows From Financing Activities:
Repayments of borrowings - (247,065)
Borrowings under debt agreements, net of debt discount - 595,000
Proceeds from issuance of common stock - 60,805
Proceeds from issuance of monetary production payment 150,000 -
Repayments of monetary production payment (4,167) -
Dividends paid (1,249) (833)
Payments for early extinguishment of debt - (7,248)
Financing costs paid (19,427) (28,109)
Other financing 1 4
Net Cash Provided by Financing Activities 125,158 372,554
Net Increase (Decrease) in Cash and Cash Equivalents 1,172 (30,314)
Cash and Cash Equivalents, Beginning of Period 59,185 106,036
Cash and Cash Equivalents, End of Period $ 60,357 $ 75,722
Endeavour International Corporation
Operating Statistics
(Unaudited)
Three Months Nine Months
Ended Ended
September 30, September 30,
2013 2012 2013 2012
Sales volume: (1)
Oil and condensate sales (Mbbls):
United Kingdom 327 812 2,039 1,099
United States - 1 1 2
Total 327 813 2,040 1,101
Gas sales (MMcf):
United Kingdom 9 19 35 69
United States (2) 638 1,182 2,127 4,234
Total 647 1,201 2,162 4,303
Oil equivalent sales (MBOE):
United Kingdom 328 815 2,045 1,110
United States (2) 107 198 356 708
Total 435 1,013 2,401 1,818
Total BOE per day 4,725 11,006 8,794 6,635
Physical production volume (BOE per
day): (1)
United Kingdom 6,824 8,573 7,586 4,474
United States 1,156 2,151 1,354 2,585
Total 7,980 10,724 8,940 7,059
Realized Price, before and after
derivatives :
United Kingdom:
Oil and condensate price ($ per Bbl) $ 106.82 $ 99.32 $ 104.77 $ 101.78
Gas price ($ per Mcf) $ 7.92 $ 6.80 $ 8.03 $ 7.18
Equivalent oil price ($ per BOE) $ 106.55 $ 99.09 $ 104.60 $ 101.16
United States:
Oil and condensate price ($ per Bbl) 106.78 $ 92.93 94.84 96.19
Gas price ($ per Mcf) $ 2.99 $ 2.09 $ 3.15 $ 2.11
Equivalent oil price ($ per BOE) $ 18.29 $ 12.88 $ 19.13 $ 12.95
Realized Price, before and after
derivatives:
Oil and condensate price ($ per Bbl) $ 106.82 $ 99.31 $ 104.76 $ 101.76
Gas price ($ per Mcf) $ 3.06 $ 2.16 $ 3.23 $ 2.19
Equivalent oil price ($ per BOE) $ 84.89 $ 82.24 $ 91.95 $ 66.80
(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.
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 Nine Months Ended
September 30, September 30,
2013 2012 2013 2012
Net loss $ (39,885) $ (33,702) $ (67,817) $ (119,773)
Impairment of oil and gas 6,032 11,416 9,566 47,116
properties (net of tax) (1)
Unrealized gains (losses) on (855) 265 (1,158) 58
derivatives (net of tax) (2)
Loss on early extinguishment of - - - 17,762
debt (net of tax) (3)
Deferred tax expense related to 8,393 8,393
U.K. tax rate change
Net Loss as Adjusted $ (34,708) $ (13,628) $ (59,409) $ (46,444)
Net loss $ (39,885) $ (33,702) $ (67,817) $ (119,773)
Unrealized loss on derivatives (855) 1,204 (1,158) 2,178
Net interest expense 26,441 18,005 72,290 62,789
Letter of credit fees 7,274 9,378 25,782 12,442
Loss on early extinguishment of - - - 21,661
debt
Depreciation, depletion and 18,596 23,759 93,466 42,292
amortization
Impairment of oil and gas 6,032 11,416 9,566 47,116
properties
Income tax expense (benefit) (14,330) 21,505 (2,141) (3,424)
Adjusted EBITDA $ 3,273 $ 51,565 $ 129,988 $ 65,281
(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, $939, none and $2,120 for the three months
ended September 30, 2013 and 2012, nine months ended September 30, 2013 and
2012, respectively.
(3) Net of tax benefit of $3,899 for the nine months ended September 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