Endeavour Announces 2013 Fourth Quarter and Year-End Financial and Operational
Results
HOUSTON, March 5, 2014 -- Endeavour International Corporation
(NYSE: END) (LSE: ENDV) today reported fourth quarter 2013 net loss, as
adjusted of $24.7 million compared to a net loss, as adjusted of $7.7 million
for the same period in 2012. On a GAAP basis, net loss for the fourth quarter
was $27.7 million as compared to net loss of $6.5 million for the same quarter
in 2012.
Sales volumes for the fourth quarter of 2013 were 13,648 barrels of oil
equivalent per day ("boepd"), compared to 11,541 boepd for the same quarter in
the prior year. Physical production for the fourth quarter of 2013 averaged
12,422 boepd compared to 10,300 boepd for the same quarter of 2012.
Year-over-year average daily physical production increased 121%.
Fourth Quarter highlights include:
* Achieved first production at the Rochelle field
* Closed on the sale of a 50% interest in the Pennsylvania Marcellus
* Completed an additional $25 million of Monetary Production Payment
Recent Events:
* Refinanced the Revolving Credit Facility and replaced two LC reimbursement
agreements
* Resolved the stuck valve issue at Rochelle, resuming production at the
field
* Completed a private placement for $25 million
* Amended the Decommissioning Securities Agreement for the Alba field,
reducing security requirements
* Consolidated the U.K. offices in Aberdeen, Scotland
* Announced a capital expenditure budget for 2014 of $60 million - $80
million
* Completed the year-end 2013 reserves evaluation
"With the Rochelle situation resolved, we will continue our focus on reducing
cost of capital and deleveraging our balance sheet. The reorganization and
consolidation of our UK offices completed last year, combined with the reduced
cost of capital from our refinancing effort in January, result in over $30
million in annual cash savings," said William L. Transier, chairman, chief
executive officer and president. "Now with our core assets online in the North
Sea, we should expect improved production and cash flow on a comparative basis
so we can move forward prudently in the exploitation of our portfolio for the
benefit of our stakeholders."
Operational Update
North Sea
At Rochelle, the East (E2) and West (W1) development wells at Rochelle, a
gas-condensate field, were fully completed and tied-in to the production
manifolds in January. During the restart of production, a valve was discovered
stuck in the 'shut' position on the outlet side of the Rochelle production
manifold. An attempt to open the valve manually was unsuccessful and the
operator secured an intervention vessel to open the valve. The valve was
reopened on February 26th and the E2 well commenced first production on
February 28th. The E2 production is ramping up and the W1 well is expected to
be online in the next few days. When both wells are fully operational, the
production from the Rochelle field is expected to exceed the available
production capacity at the Scott Platform. Endeavour has a 44% working interest
in the Rochelle development.
The Bacchus field continues to perform in line with expectations. The 2013
production exit rate at the field was over 10,000 barrels of oil per day
("bopd") gross. Consistent with the original development plans, the first well
drilled (B3Y) is expected to be turned into a water injector during the second
quarter of 2014. This will provide pressure support to help sustain the field's
production rate and increase its overall recovery. A new 3D seismic survey was
shot in 2013 and the results are being processed to define additional field
development opportunities. Endeavour has a 30% working interest in the field.
Water handling and other operational issues at the Alba production facilities
were addressed during the period up to and including the extended shutdown
period last year. Subsequently, a problem occurred in the subsea water
injection pipeline supplying pressure to the Southern area of the field. This
has resulted in a portion of the Southern area being shut-in. The Alba 2013
exit rate was 18,500 bopd gross, below the levels expected from the field.
Remedial action is currently being taken to reinstate partial water injection
to offset some of this reduction and the permanent replacement of the pipeline
is targeted for late 2014. Production will be improved by the first 2014
development well, which was recently brought online. An additional two
development wells are scheduled to be drilled during the year. Endeavour has a
25.68% working interest in the field.
North America
During the fourth quarter in the Pennsylvania Marcellus area, the Company
closed on a purchase and sale agreement covering 50% of its upstream and
midstream assets to Samson Exploration LLC. The transaction provides for the
joint development of the Marcellus assets, including the capital necessary for
the next phase of development in the core Daniel Field area in Cameron County,
Pennsylvania. Initially, the partnership plans to complete three previously
drilled and cased horizontal Marcellus wells. These wells will be tied into a
new third-party pipeline being constructed by EQT Corporation that allows firm
capacity of up to 10 MMCF/D, with potential for future expansion. Endeavour
will operate this initial phase of activity, which is expected to be completed
by mid-year 2014.
In the Piceance Basin Rim play in Northwest Colorado, Endeavour has two
projects targeting liquids-rich Niobrara and Frontier objectives. The Company
has formed two federal units and has plans to drill initial horizontal tests in
the Niobrara target zone by mid-year 2014. Endeavour has leasehold and drilling
options on 40,000 gross acres and 27,000 net acres.
Finance
In December, the Company completed an additional $25 million expansion to the
Monetary Production Payment (MPP), bringing the total to $175 million
outstanding. The MPP has a two-year term and will be satisfied out of the
production from the Alba, Bacchus and Rochelle fields. Repayment of the MPP
began in July 2013 under its terms and the current outstanding balance is
approximately $162 million.
In January 2014, Endeavour closed on a $255 million senior secured first lien
term loan with an interest rate of 8.25% (Libor + 700 basis points). The first
lien note is a strip facility consisting of a $125 million Secured Term Loan
and a $130 million LC Procurement Facility. The Company has used the net
proceeds from the offering to refinance its 13% $115 million Revolving Credit
Facility and replace its two reimbursement agreements ($120 million at 13% and
$33 million at 9%, interest rates, respectively). The facility is due in
November 2017.
Due to a change in the U.K. tax treatment for decommissioning, Endeavour has
amended its Decommissioning Securities Agreement for the Alba field. The new
tax law, which allows companies to treat decommissioning on an after-tax basis
(including Petroleum Revenue Tax (PRT)), enables Endeavour to reduce its
current Letter of Credit (LC) amount on the Alba field from $120 million to
approximately $55 million. The reduced LC requirements as a result of the new
U.K. decommissioning tax treatment, combined with the refinancing activities
done in January, is expected to generate an annual cash savings of
approximately $17 million to the Company.
On March 3rd, the Company completed a private placement for $25 million. The
transaction was comprised of the issuance of 2.9 million shares at $4.28/share
with the issuance of 729,000 warrants with a strike price of $5.29. In
addition, the transaction involved the issuance of 6.5% convertible notes, with
a conversion price of $4.66. The notes have a four year maturity. The
transaction also includes an option for an additional $30 million and normal
registration rights.
In the fourth quarter, Endeavour completed the consolidation of its U.K.
offices in Aberdeen, Scotland. Annual cash savings are anticipated to be in the
range of $15 million - $20 million.
First Quarter Production Guidance
With the unanticipated downtime at the Rochelle field and continued restricted
rates at Alba, average daily production volumes are expected to be in the range
of 9,000 - 10,000 boepd for the first quarter of 2014.
2014 Capital Expenditure Program
Endeavour's direct capital expenditure program in 2014 is expected to be in the
range of $60 million - $80 million. Having completed the work on the Company's
large North Sea development projects, Endeavour expects to spend approximately
$45 million in the U.K., the majority on the Alba field for infill drilling, 4D
seismic and the replacement of the subsea water injection line. The capital
spend for the U.S. drilling program is expected to be in the range of $20
million - $25 million.
Decommissioning costs during the year are expected to be approximately $50
million for the IVRR, Renee and Rubie fields.
2013 Reserves
Year-over-year, the Company added 1.5MMboe of proved reserves, which represents
a reserves replacement ratio of 41%. Oil represented 52% of total proved
reserves at December 31, 2013 down slightly from 54% at the end of the prior
year. Net proved and probable reserves (2P) were 40.1 million in 2013 compared
to 47.2 million in the previous year, with oil representing 61% of the total.
The reduction in 2P reserves was due to the 2013 production, a slightly shorter
Alba field life due to lower SEC pricing, minor revisions in Rochelle reserves
following development drilling and lack of new drilling activities in the U.S.
Earnings Conference Call, Wednesday, March 5, 2014 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 fourth quarter and year-end financial and operating results on Wednesday,
March 5, 2014 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 5131878. The toll-free numbers are 888-684-1281 in
the United States and 0-808-101-7548 in the United Kingdom. Other international
callers should dial 913-312-1453 (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 March 5, 2014 through
12:00 p.m. on March 11, 2014 by dialing toll free 888-203-1112 (U.S.) or
719-457-0820 (international), confirmation code 5131878.
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 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)
December 31,
2013 2012
Assets
Current Assets:
Cash and cash equivalents $ 34,742 $ 59,185
Accounts receivable 65,171 46,181
Prepaid expenses and other current assets 35,920 20,995
Total Current Assets 135,833 126,361
Property and Equipment, Net 1,072,151 1,003,441
Goodwill 259,238 262,764
Other Assets 33,223 49,906
Total Assets $ 1,500,445 $ 1,442,472
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 38,033 $ 60,153
Current maturities of debt - 15,713
Deferred revenue 20,965 -
Monetary production payment, current 74,167 -
Accrued expenses and other 88,625 90,100
Total Current Liabilities 221,790 165,966
Long-Term Debt 870,878 843,793
Deferred Taxes 121,816 141,887
Other Liabilities 223,870 147,692
Total Liabilities 1,438,354 1,299,338
Commitments and Contingencies
Series C Convertible Preferred Stock 43,703 43,703
Stockholders' Equity 18,388 99,431
Total Liabilities and Stockholders' Equity $ 1,500,445 $ 1,442,472
Endeavour International Corporation
Condensed Consolidated Statement of Operations
(Unaudited)
(Amounts in thousands, except per share data)
Fourth Quarter Year Ended
December 31, December 31,
2013 2012 2013 2012
Revenues $ 116,926 $ 97,615 $ 337,664 $ 219,058
Cost of Operations:
Operating expenses 33,493 23,924 105,444 58,536
Depreciation, depletion and 49,582 24,272 143,048 66,564
amortization
Impairment of oil and gas - 5,956 9,566 53,072
properties
General and administrative 4,847 5,705 19,124 21,085
Total Expenses 87,922 59,857 277,182 199,257
Income From Operations 29,004 37,758 60,482 19,801
Other Income (Expense):
Unrealized gains (losses) on (3,001) 7,319 (1,843) 5,141
derivatives
Interest expense (32,171) (21,105) (104,516) (84,122)
Loss on early extinguishment - - - (21,661)
of debt
Letter of credit fees (7,643) (9,461) (33,425) (21,903)
Unrealized foreign currency (3,154) 12,266 (3,116) 8,080
gains (losses)
Other expense (2,114) (15,579) (6,619) (17,334)
Total Other Expense (48,083) (26,560) (149,519) (131,799)
Income (Loss) Before Income (19,079) 11,198 (89,037) (111,998)
Taxes
Income Tax Expense 8,583 17,652 6,442 14,228
Net Loss (27,662) (6,454) (95,479) (126,226)
Preferred Stock Dividends 456 456 1,823 1,823
Net Loss to Common $ (28,118) $ (6,910) $ (97,302) $ (128,049)
Stockholders
Net Loss per Common Share
Basic and Diluted $ (0.60) $ (0.15) $ (2.07) $ (3.01)
Weighted Average Number of Common Shares
Outstanding:
Basic and Diluted 47,111 46,613 47,089 42,533
Endeavour International Corporation
Condensed Consolidated Statement of Cash Flows
(Unaudited)
(Amounts in thousands)
Year Ended December 31,
2013 2012
Cash Flows from Operating Activities:
Net loss $ (95,479) $ (126,226)
Adjustments to reconcile net loss to net
provided by (used in) operating activities:
Depreciation, depletion and amortization 143,048 66,564
Impairment of oil and gas properties 9,566 53,072
Deferred tax benefit (14,255) (17,594)
Unrealized (gains) losses on derivatives 1,843 (5,141)
Amortization of non-cash compensation 3,294 4,401
Amortization of loan costs and discount 22,359 14,179
Non-cash interest expense 7,082 8,684
Loss on early extinguishment of debt - 21,661
Other 16,329 15,365
Changes in operating assets and liabilities (42,450) 3,648
Net Cash Provided by Operating Activities 51,337 38,613
Cash Flows From Investing Activities:
Capital expenditures (223,656) (246,925)
Acquisitions, net of cash acquired (2,787) (238,854)
Proceeds from sales, net of cash 6,774 1,407
Increase in restricted cash - (178)
Net Cash Used in Investing Activities (219,669) (484,550)
Cash Flows From Financing Activities:
Repayments of borrowings - (274,629)
Borrowings under debt agreements, net of debt - 654,023
discount
Proceeds from issuance of common stock - 60,805
Proceeds from issuance of monetary production 175,000 -
payments
Repayment of monetary production payments (8,333) -
Payments for early extinguishment of debt - (7,248)
Financing costs paid (21,198) (32,204)
Other financing (1,580) (1,661)
Net Cash Provided by Financing Activities 143,889 399,086
Net Decrease in Cash and Cash Equivalents (24,443) (46,851)
Cash and Cash Equivalents, Beginning of Period 59,185 106,036
Cash and Cash Equivalents, End of Period $ 34,742 $ 59,185
Endeavour International Corporation
Operating Statistics
(Unaudited)
Fourth Quarter Year Ended
December 31, December 31,
2013 2012 2013 2012
Sales volume:
Oil and condensate sales (Mbbls):
United Kingdom 977 896 3,017 1,994
United States - - 1 3
Total 977 896 3,018 1,997
Gas sales (MMcf):
United Kingdom 1,159 22 1,194 91
United States 509 972 2,636 5,207
Total 1,668 994 3,830 5,298
Oil equivalent sales (MBOE):
United Kingdom 1,171 899 3,216 2,009
United States 85 163 441 871
Total 1,256 1,062 3,657 2,880
Total BOE per day 13,648 11,541 10,017 7,868
Physical production volume (BOE per day):
United Kingdom 11,441 8,533 8,665 5,494
United States 981 1,767 1,257 2,379
Total 12,422 10,300 9,922 7,873
Realized Price, before and after
derivatives :
United Kingdom:
Oil and condensate price ($ per Bbl) $ 103.70 $ 105.73 $ 104.40 $ 103.56
Gas price ($ per Mcf) $ 12.12 $ 7.95 $ 12.00 $ 7.41
Equivalent oil price ($ per BOE) $ 98.51 $ 105.57 $ 102.39 $ 103.13
United States:
Oil and condensate price ($ per Bbl) - $ 44.00 120.00 94.67
Gas price ($ per Mcf) $ 3.04 $ 2.74 $ 3.13 $ 2.23
Equivalent oil price ($ per BOE) $ 18.41 $ 16.63 $ 18.98 $ 13.64
Total:
Oil and condensate price ($ per Bbl) $ 103.71 $ 105.76 $ 104.40 $ 103.56
Gas price ($ per Mcf) $ 9.35 $ 2.86 $ 5.89 $ 2.32
Equivalent oil price ($ per BOE) $ 93.09 $ 91.94 $ 92.36 $ 76.07
• 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. 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) Fourth Quarter Year Ended
December 31, December 31,
2013 2012 2013 2012
Net loss $ (27,662) $ (6,454) $ (95,479) $ (126,226)
Impairment of oil and gas - 5,956 9,566 53,072
properties (net of tax) (1)
Unrealized gains (losses) on 3,001 (7,383) 1,843 (7,326)
derivatives (net of tax) (2)
Loss on early extinguishment of - - - 17,662
debt (net of tax) (3)
Deferred tax expense related to - 194 - 8,587
U.K. tax rate change
Net Loss as Adjusted $ (24,661) $ (7,687) $ (84,070) $ (54,231)
Net loss $ (27,662) $ (6,454) $ (95,479) $ (126,226)
Unrealized gains (losses) on 3,001 (7,319) 1,843 (5,141)
derivatives
Net interest expense 32,163 21,083 104,452 83,872
Letter of credit fees 7,643 9,461 33,425 21,903
Loss on early extinguishment of - - - 21,661
debt
Depreciation, depletion and 49,582 24,272 143,048 66,564
amortization
Impairment of oil and gas - 5,956 9,566 53,072
properties
Income tax expense 8,583 17,652 6,442 14,228
Adjusted EBITDA $ 73,310 $ 64,651 $ 203,297 $ 129,933
(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, $64, none, $2,185 for the three months ended
December 31, 2013 and 2012, year ended December 31, 2013 and 2012,
respectively.
(3) Net of tax benefit of $3,899 for the year ended December 31, 2012.
Endeavour International Corporation
2013 Reserve Information
Endeavour Historical
As of December 31,
2011 2012 2013
Net 1P reserves:
United Kingdom:
Oil (MBbls)(1) 4,060 13,733 12,340
Gas (MMcf)(3) 50,723 56,901 55,398
Oil equivalents (MBOE)(2) 12,514 23,217 21,573
United States:
Oil (MBbls)(1) 41 6 3
Gas (MMcf) 60,978 14,690 11,775
Oil equivalents (MBOE)(2) 10,204 2,454 1,965
Total:
Oil (MBbls)(1) 4,101 13,739 12,343
Gas (MMcf) 111,701 71,591 67,173
Oil equivalents (MBOE)(2) 22,718 25,671 23,538
Percentage oil 18% 54% 52%
Percentage proved developed 23% 32% 49%
Net 2P reserves:
Total:
Oil (MBbls)(1) 14,556 29,208 24,552
Gas (MMcf)(3) 182,989 107,715 93,370
Oil equivalents (MBOE)(2) 45,054 47,161 40,114
Percentage oil 32% 62% 61%
(1) Includes natural gas liquids.
(2) One Bbl of oil is equal to six Mcfe based on an approximate energy
equivalency. This is a physical correlation and does not reflect a value or
price relationship between the commodities.
(3) Gas prices in the U.K. have been in the range of $9.50 - $11.00 an Mcf
during 2013.
SOURCE Endeavour International Corporation
CONTACT: For further information: Endeavour - Investor Relations, Darcey
Matthews, 713.307.8711; or Pelham Public Relations - UK Media, Philip Dennis,
+44 (0)207 861 3919, Henry Lerwill, +44(0)207 861 3169