Endeavour Announces 2014 Second Quarter Financial and Operational Results
HOUSTON, Aug. 5, 2014 -- Endeavour International Corporation
(NYSE: END) (LSE: ENDV) today reported physical production for the quarter that
exceeded the Company's revised guidance range of 10,500 - 11,500 barrels of oil
equivalent per day ("boepd") previously announced on June 10, 2014. Physical
production for the second quarter of 2014 averaged 12,900 boepd compared to
9,500 boepd for the same quarter of 2013. Sales volumes for the second quarter
of 2014 were 7,400 boepd, compared to 14,500 boepd for the same quarter in the
prior year.
The Company did not have a lifting of production at the Alba field during the
quarter, so revenues were significantly lower than would have been if based on
physical production. Physical production for the quarter produced but not
lifted is recorded as deferred revenue on the balance sheet. Endeavour
estimates that there will be three to four liftings per year at the Alba field.
The most recent lifting occurred on July 4, 2014 and the associated revenues of
approximately $50 million will be reflected in the Company's third quarter
results. A similar situation occurred in the third quarter of 2013, when there
was no lifting at the Alba field.
The Company reported a second quarter 2014 net loss, as adjusted of $38.7
million compared to a net loss, as adjusted of $12.6 million for the same
period in 2013. On a GAAP basis, net loss for the second quarter was $36.7
million as compared to net loss of $13.9 million for the same quarter in 2013.
Recent Events:
* Rochelle field fully operational with both wells producing during the
quarter
* Settled and received $12.6 million in proceeds for the Rochelle E1Y well
insurance claim
* Executed a forward sale for $22.5 million
* Successfully finished the hydraulic fracture stimulation of a third
Pennsylvania Marcellus well
"During the quarter we were able to establish production from both wells at the
Rochelle field. We experienced periods during the quarter where production
rates exceeded 100 million cubic feet of gas per day ("mmcfd") and 4,000 boepd.
This confirms our confidence in the Rochelle field's potential," said William
L. Transier, chairman, chief executive officer and president. "However, we
continue to be challenged by unexpected downtime and lower production
efficiency rates which are directly attributable to the production facilities
we do not control. We are working with the operators at Alba and Rochelle to
improve ongoing performance."
Operational Update
North Sea
At Rochelle, the West Rochelle (W1) development well was returned to production
in mid-May. The E2 and W1 wells produced together during the quarter and
achieved production rates greater than 100 million cubic feet equivalent per
day ("mmcfed") for 32 days during the second quarter. The Scott Platform began
its planned shutdown period on July 27, 2014 and so the Rochelle Field is
expected to be shut-in for three weeks until the Scott Platform goes back into
service. The shutdown at the Scott Platform is being executed to coincide with
the previously announced maintenance work occurring on the Forties Pipeline
System. Endeavour has a 44% working interest in Rochelle.
At Alba, the A69 well is being completed and is expected to start production
this month. Progress was made in the southern part of the field with partial
water injection being reinstated. Installation of the replacement pipeline is
planned early in the first quarter of 2015, with start-up expected in the
second quarter. The partial reinstatement of water injection in the southern
part of the field has sustained production throughout the second quarter. Well
A69 is expected to increase overall production rates in the third quarter.
Endeavour has a 25.68% working interest in Alba.
Bacchus continues to perform at rates above the Company's expectations. The B3Y
well has not, as expected, been turned into a water injector because of certain
technical issues. Future options for the B3Y well continue to be evaluated.
Endeavour has a 30% working interest in the field.
North America
In the Pennsylvania Marcellus, Endeavour successfully completed hydraulic
fracture stimulation of the C-13 horizontal well, the third completion this
year in the Daniel Field. The Company's operated activity included more than
double the number of frac stages on the longest laterals to date relative to
previous wells. Following these successful well completions, operatorship of
the Marcellus assets was transferred to Samson Exploration, LLC. Later this
year, the wells will be tied into a new third-party pipeline being commissioned
by EQT Corporation that allows firm capacity of up to 10 mmcfd, with potential
for future expansion.
In the Piceance Basin Rim play in Northwest Colorado, Endeavour has two
projects targeting liquids-rich Niobrara and Frontier objectives. At present, a
rig has commenced drilling an initial horizontal Niobrara test at the Company's
Wiley prospect. Endeavour has leasehold and drilling options on 40,000 gross
acres and 27,000 net acres.
Finance
In May, Endeavour entered into a third 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. The forward sale is expected to be fulfilled in November 2014.
The first forward sale commitment was fulfilled in June 2013 and the second in
March 2014.
In January of this year, the Company refinanced its revolving credit facility
($115 million at 13%) and two reimbursement agreements ($120 million at 13%
and $33 million at 9% interest) into a new senior secured first lien term loan
with an interest rate of 8.25% (libor + 700 basis points). During the second
quarter, the first full quarter reflecting the refinancing impact, Endeavour
realized cash interest expense savings of $4 million ($16 million on annualized
basis). In addition, gross general and administrative expenses were reduced, as
a result of the previously announced consolidation of the Company's U.K.
offices, headcount reductions and other cost reduction initiatives.
Also during the quarter, the Company settled an insurance claim for the
Rochelle E1Y well, which was damaged in early 2013, for £7.5 million
(approximately $12.6 million). The proceeds from the settlement were received
in June.
Third Quarter Production Guidance and Maintenance Downtime
In the U.K. North Sea, the third quarter is typically the time to perform
maintenance and other tasks on infrastructure. During 2014, Endeavour
anticipates that all of its producing fields will be modestly impacted. These
shutdowns will be less invasive than those experienced in 2013, but will still
have an impact on third quarter physical production.
At present, there is a 16 day shutdown on the Forties Pipeline System planned
in August that will affect oil production from Bacchus and Rochelle. Currently
underway is a three week Rochelle shutdown which coincides with the work being
done at Forties. At Alba during August, a short shutdown of three days is
planned to test the emergency systems. Average daily physical production
volumes are expected to be in the range of 9,500 - 10,500 boepd for the third
quarter of 2014.
Earnings Conference Call, Tuesday, August 5, 2014 at 9:00 a.m., Central Time,
3:00 p.m. British Summer Time
Endeavour International will host a conference call and web cast to discuss its
2014 second quarter financial and operating results on Tuesday, August 5, 2014
at 9:00 a.m. Central 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 3569591. The toll-free numbers are 888-221-3886 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 August 5, 2014
through 12:00 p.m. on August 11, 2014 by dialing toll free 888-203-1112 (U.S.)
or 719-457-0820 (international), confirmation code 3569591.
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
(Amounts in thousands)
June 30, December 31,
2014 2013
(unaudited)
Assets
Current Assets:
Cash and cash equivalents $ 83,209 $ 34,742
Accounts receivable 46,992 65,171
Prepaid expenses and other current assets 103,550 60,318
Total Current Assets 233,751 160,231
Property and Equipment, Net 1,032,281 1,072,151
Goodwill 259,238 259,238
Other Assets 30,455 33,222
Total Assets $ 1,555,725 $ 1,524,842
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 32,907 $ 38,033
Current maturities of debt 2,131 -
Deferred revenue 57,811 20,965
Monetary production payment, current 125,833 74,167
Accrued expenses and other 94,748 88,625
Total Current Liabilities 313,430 221,790
Long-Term Debt 894,122 870,878
Deferred Taxes 183,501 146,213
Other Liabilities 162,457 223,870
Total Liabilities 1,553,510 1,462,751
Commitments and Contingencies
Series C Convertible Preferred Stock 43,703 43,703
Stockholders' Equity (41,488) 18,388
Total Liabilities and Stockholders' Equity $ 1,555,725 $ 1,524,842
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,
2014 2013 2014 2013
Revenues $ 44,857 $ 126,165 $ 139,021 $ 183,837
Cost of Operations:
Operating expenses 6,847 38,103 34,017 55,593
Depreciation, depletion and 32,251 51,923 77,220 74,870
amortization
Impairment of oil and gas - - - 3,534
properties
General and administrative 5,240 4,882 10,089 10,364
Total Expenses 44,338 94,908 121,326 144,361
Income From Operations 519 31,257 17,695 39,476
Other Income (Expense):
Unrealized gains (losses) on 2,010 (1,277) 4,669 303
derivatives
Interest expense (31,431) (24,447) (62,908) (45,885)
Letter of credit fees (2,270) (7,128) (6,059) (18,508)
Loss on early extinguishment of - - (3,543) -
financing agreements
Litigation settlement expense - - (19,034) -
Unrealized gain (loss) on (4,511) 1,072 (5,784) 10,831
foreign currency exchange
Other expense (1,402) (2,081) (3,423) (1,960)
Total Other Expense (37,604) (33,861) (96,082) (55,219)
Loss Before Income Taxes (37,085) (2,604) (78,387) (15,743)
Petroleum Revenue Tax ("PRT") 2,243 7,012 3,968 7,208
Expense
Corporate Tax Expense (Benefit) (2,655) 4,269 (811) 4,981
Total Tax Expense (412) 11,281 3,157 12,189
Net Loss (36,673) (13,885) (81,544) (27,932)
Preferred Stock Dividends 456 456 911 911
Net Loss to Common Stockholders $ (37,129) $ (14,341) $ (82,455) $ (28,843)
Net Loss per Common Share:
Basic and Diluted $ (0.72) $ (0.30) $ (1.63) $ (0.61)
Weighted Average Number of Common Shares
Outstanding:
Basic and Diluted 51,580 47,092 50,591 47,076
Endeavour International Corporation
Condensed Consolidated Statement of Cash Flows
(Unaudited)
(Amounts in thousands)
Six Months Ended
June 30,
2014 2013
Cash Flows from Operating Activities:
Net loss $ (81,544) $ (27,932)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation, depletion and amortization 77,220 74,870
Impairment of oil and gas properties - 3,534
Deferred tax benefit (7,951) (2,457)
Unrealized gains on derivatives (4,669) (303)
Amortization of non-cash compensation 2,123 1,632
Amortization of loan costs and discount 13,376 8,695
Non-cash interest expense 3,812 3,454
Loss on early extinguishment of financing agreements 6,856 -
Litigation settlement expense 14,034 -
Other 6,605 (2,444)
Changes in operating assets and liabilities 30,068 12,562
Net Cash Provided by Operating Activities 59,930 71,611
Cash Flows From Investing Activities:
Capital expenditures (39,302) (108,786)
Acquisitions, net of cash acquired - -
Proceeds from sales, net of cash 1,352 -
Proceeds from insurance settlement 12,606
Increase in restricted cash (2,521) -
Net Cash Used in Investing Activities (27,865) (108,786)
Cash Flows From Financing Activities:
Repayments of borrowings (115,699) -
Borrowings under debt agreements, net of debt discount 140,625 -
Proceeds from issuance of common stock 12,336 -
Proceeds from issuance of monetary production payment - 125,000
Repayments of monetary production payment (10,833) -
Financing costs paid (9,193) (15,804)
Other financing (834) (416)
Net Cash Provided by Financing Activities 16,402 108,780
Net Increase in Cash and Cash Equivalents 48,467 71,605
Cash and Cash Equivalents, Beginning of Period 34,742 59,185
Cash and Cash Equivalents, End of Period $ 83,209 $ 130,790
Endeavour International Corporation
Operating Statistics
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2014 2013 2014 2013
Sales volume: (1)
Oil and condensate sales (mbbls):
United Kingdom 255 1,205 1,087 1,713
United States - 1 - 1
Total 255 1,206 1,087 1,714
Gas sales (mmcf):
United Kingdom 2,109 15 2,694 26
United States 415 667 846 1,489
Total 2,524 682 3,540 1,515
Oil equivalent sales (mboe):
United Kingdom 606 1,207 1,536 1,717
United States 70 112 141 249
Total 676 1,319 1,677 1,966
Total boed 7,424 14,497 9,269 10,862
Physical production volume (boed): (1)
United Kingdom 12,079 8,083 10,351 7,973
United States 800 1,415 818 1,454
Total 12,879 9,498 11,169 9,427
Realized Price, before and after
derivatives :
United Kingdom:
Oil and condensate price ($ per bbl) $ 106.34 $ 102.68 $ 104.19 $ 104.37
Gas price ($ per mcf) $ 7.62 $ 8.19 $ 8.19 $ 8.06
Equivalent oil price ($ per boe) $ 71.17 $ 102.57 $ 88.10 $ 104.23
United States:
Oil and condensate price ($ per bbl) $ 97.33 $ 85.46 98.67 88.19
Gas price ($ per mcf) $ 4.07 $ 3.40 $ 4.30 $ 3.22
Equivalent oil price ($ per boe) $ 24.85 $ 20.72 $ 26.01 $ 19.49
Total:
Oil and condensate price ($ per bbl) $ 106.32 $ 102.67 $ 104.19 $ 104.37
Gas price ($ per mcf) $ 7.03 $ 3.50 $ 7.26 $ 3.30
Equivalent oil price ($ per boe) $ 66.40 $ 95.64 $ 82.87 $ 93.51
(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 loss to the following non-GAAP financial
measures: net income (loss), 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,
2014 2013 2014 2013
Net loss $ (36,673) $ (13,885) $ (81,544) $ (27,932)
Impairment of oil and gas - - - 3,534
properties (net of tax) (1)
Unrealized gains (losses) on (2,010) 1,277 (4,669) (303)
derivatives (net of tax) (2)
Loss on early extinguishment of
financing agreements (net of - - 1,220 -
tax) (3)
Litigation settlement expense - - 19,034 -
(net of tax) (1)
Net Loss as Adjusted $ (38,683) $ (12,608) $ (65,959) $ (24,701)
Net loss $ (36,673) $ (13,885) $ (81,544) $ (27,932)
Unrealized gains on derivatives (2,010) 1,277 (4,669) (303)
Net interest expense 31,425 24,427 62,892 45,849
Letter of credit fees 2,270 7,128 6,059 18,508
Depreciation, depletion and 32,251 51,923 77,220 74,870
amortization
Impairment of oil and gas - - - 3,534
properties
Loss on early extinguishment of - - 3,543 -
financing agreements
Litigation settlement expense - - 19,034 -
Income tax expense (benefit) (412) 11,281 3,157 12,189
Adjusted EBITDA $ 26,851 $ 82,151 $ 85,692 $ 126,715
(1) We recognized no tax benefits as there was no assurance that we could
generate any U.S. taxable earnings.
(2) Since the unrealized gains on derivatives were related to liabilities other
than the U.K., we recognized no tax benefits as there was no assurance that
we could generate any taxable earnings.
(3) Net of tax benefit of none, none, $2,323 and none, respectively.
CONTACT: Endeavour - Investor Relations, Darcey Matthews, 713.307.8711; or
Pelham Public Relations - UK Media, Philip Dennis, +44 (0)207 861 3919, or
Henry Lerwill, +44 (0)207 861 3169
SOURCE Endeavour International Corporation