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EX-99.2 - EX-99.2 - ENDEAVOUR INTERNATIONAL CORPd496871dex992.htm

Exhibit 99.1

 

LOGO

For immediate release

Endeavour Announces 2012 Fourth Quarter

and Year-End Financial and Operational Results

Houston, March 6, 2013 – Endeavour International Corporation (NYSE: END) (LSE: ENDV) today reported fourth quarter 2012 net loss, as adjusted of $7.7 million compared to a net loss, as adjusted of $5.8 million for 2011. On a GAAP basis, net loss for the fourth quarter of 2012 was $6.5 million as compared to net loss of $44.6 million for the same quarter in 2011.

Sales volumes for the 2012 fourth quarter period were 11,541 boepd, compared to 4,253 boepd for the same quarter in the prior year. Physical production for the fourth quarter of 2012 averaged 10,300 barrels of oil equivalent per day (“boepd”) compared to approximately 4,100 boepd for the same quarter of 2011, representing a 151% increase.

Fourth Quarter highlights include:

 

   

Finance:

 

   

Completed an offering for an additional $54 million of the 12% First Priority Notes due 2018

 

   

Fully redeemed the $25 million 12% Senior Subordinated Notes

 

   

Operational:

 

   

Proved reserves in the U.K. increased 186% year-over-year

 

   

Drilling commenced and infrastructure substantially completed on the Rochelle development

 

   

Completed an exchange of Haynesville assets for Pennsylvania Marcellus assets

Recent Events:

 

   

Strategic Review Process:

 

   

The Board of Directors initiated a process to explore a broad range of strategic alternatives to further enhance shareholder value

 

   

Current business focus remains on executing the operational plan

 

   

Management and Board Developments:

 

   

Catherine L. Stubbs named Chief Financial Officer

 

   

Ashok Nayyor resigns from the Board of Directors

 

   

Finance:


   

Received $22.5 million through the forward sale of U.K. oil production

 

   

Obtained an extension on the Revolving Credit Facility to midyear 2014

 

   

Replaced or extended the Reimbursement Agreements to midyear 2014

 

   

Entered into a Monetary Production Payment for $107.5 million to be satisfied out of proceeds of production from Endeavour’s U.K. North Sea assets

 

   

Established 2013 Capex budget in the U.K. of $140 million - $150 million

 

   

North Sea:

 

   

Drilling commenced at West Rochelle after suspension of the East Rochelle production well

 

   

Bacchus third production well expected to commence drilling in March

 

   

U.S. Onshore:

 

   

Established a 23,000 acre Federal unit in Northwestern Colorado

“In 2012, the Company undertook two major development projects and a sizable acquisition resulting in increased oil production and reserves in the U.K. North Sea. Although the path to growth was challenging, we were able to manage through a series of complex business transactions to close on the additional working interest at Alba and bring the Bacchus development on-line. We remain confident that Rochelle production will be on-line soon demonstrating the quality of this important asset,” said William L. Transier, chairman, chief executive officer and president. “Our ability to increase our liquidity quickly shows the perseverance of our management team to handle unexpected events for the benefit of all stakeholders.”

Strategic Review Process

On February 14, 2013 Endeavour announced the Board of Directors intent to review a broad range of strategic alternatives. The primary motivation of the strategic review is to accelerate the delevering of the balance sheet and unlock the underlying value of the assets. The options under consideration include:

 

   

a sale, joint venture or partnership in respect of the Company’s activities in the North Sea;

 

   

a sale of specific assets;

 

   

a sale or merger of the Company; or

 

   

continuing to execute on the Company’s operational plan.

Tudor, Pickering, Holt & Co. and Lambert Energy Advisory Ltd. have been engaged as the Company’s financial advisors in this process. There is no assurance that the strategic alternatives review will result in Endeavour changing its current business plan or completing any such transaction.

Management Developments

Catherine “Cathy” Stubbs was named Chief Financial Officer for the Company on February 14, 2013. She has over 20 years of experience in financial management in the energy industry and eight years with Endeavour. Cathy has served in various roles of increasing responsibility in corporate development, accounting and financial controls, and treasury roles since the inception of Endeavour and most recently served as the senior vice president, finance.


Ashok Nayyor resigned from the Board of Directors effective March 5, 2013. Mr. Nayyor joined the Board in August of 2012 and he made a significant contribution during his tenure as a board member.

Finance

Since year-end 2012, Endeavour has completed several transactions to improve the Company’s liquidity position and has extended the maturities of its Revolving Credit Facility, as well as the two Reimbursement Agreements to midyear 2014.

In January, the Company entered into a new reimbursement arrangement to provide for a replacement Letter of Credit with an unaffiliated third party for $33 million and terminated its previous Reimbursement Agreement in the same amount. The new agreement, which secures the Company’s decommissioning obligations in connection with the specific assets in the U.K. North Sea, matures in July of 2014.

In February, Endeavour entered into a forward sale agreement with one of its established purchasers and received a payment of approximately $22.5 million for a specified volume of crude oil in excess of 200,000 barrels to be delivered over a six month period from its U.K. North Sea production.

In early March, the Company and its existing lenders agreed to extensions on the Revolving Credit Facility and the $120 million Reimbursement Agreement. $100 million of the $115 million outstanding on the Revolving Credit Facility was extended from October 31, 2013 to June 30, 2014. The full amount of the $120 million Reimbursement Agreement was extended from December 31, 2013 to June 30, 2014.

Endeavour also entered into a Monetary Production Payment with a group of investors for the purchase price amount of $107.5 million. Closing is subject to the satisfaction of standard conditions, including regulatory approval in the United Kingdom. The Monetary Production Payment will be satisfied out of the production from certain U.K. North Sea assets and is expected to be satisfied over a two year period.

For 2013, the Company anticipates a direct oil and gas capital expenditures budget in the U.K. of $140 million to $150 million. Approximately sixty percent of the U.K. capital budget is being allocated to final drilling and completion of the Rochelle development, as well as the third development well at Bacchus. Endeavour has also allocated $30 million to $40 million of its capital budget for its U.S. acreage with plans to spend approximately half of that capital in the Pennsylvania Marcellus area for infrastructure expansion and well completions. The U.S. spend is primarily discretionary and will be evaluated once Rochelle production is on-line and after the completion of the strategic review process.

The completion of these recent financing activities are designed to provide sufficient liquidity to bring the Rochelle development on line, drill the third well at Bacchus and allow sufficient time for a thoughtful and disciplined strategic review process.

Operational Update

United Kingdom

In mid-February, the Transocean Prospect rig moved to the West Rochelle area and commenced drilling of the production well. Estimated time to drill and complete the well is approximately 120


days. At East Rochelle, analysis and testing of the cause of the non-uniform hole around the conductor pipe is on-going. Once the analysis is concluded, the Company will be able to determine the optimal path forward for the completion of the East Rochelle well. Endeavour anticipates drilling operations will re-commence at East Rochelle following first production at West Rochelle. A majority of the Rochelle subsea infrastructure has been installed at the field and the modification work to the Scott platform is nearing completion.

At the Bacchus development, the operator announced plans to commence drilling the third production well in March. In 2012, the partnership drilled two of three planned production wells. Due to the additional positive data gained from the second production well, the Bacchus partners decided to observe field results before proceeding forward with the third well. Endeavour has a 30% working interest in the field.

At Alba production volumes continue to be impacted by water handling issues. The matter is being dealt with by the operator and it is anticipated that the asset will return to normal production levels during the year.

United States Onshore

During 2012, Endeavour maintained a disciplined capital approach in the U.S. For the year, two gross wells were drilled and completed in the Louisiana Haynesville acreage, with all critical acreage currently held by production. Net daily production averaged 10.6 MMCFe/D for the fourth quarter and 14.3 MMCFe/D for the full year 2012.

In the fourth quarter of 2012, the Company closed an exchange of Haynesville assets for Pennsylvania Marcellus assets and obtained operatorship, while increasing the ownership to 100% working interest in 31,000 total net acres and all upstream and midstream assets. In conjunction with the exchange, Endeavour secured an off-take solution in Cameron County for up to an additional 10 mmcf/d of production by year-end 2013. The Company has three wells drilled and cased in the area waiting on completion.

In the Montana Heath tight oil play, Endeavour deferred horizontal re-entries of its vertical pilot wells to evaluate drilling and production results from offset operators. In Northwest Colorado, the Company formed a 23,000 acre Federal unit with stacked Upper Cretaceous targets and liquids-rich potential. An initial test well is planned for later this year.

2012 Reserves

Year- over-year U.K. proved reserves increased 186%, with the Company’s total proved reserves increasing 13%. Oil represented 54% of total proved reserves at December 31, 2012 up from 18% at the end of the prior year due to the increased working interest in Alba and additional reserves at the Bacchus field. Net proved and probable reserves increased 4.7% from the prior year, with oil representing 62% of the total up from 32% the year prior. There was a decline in the U.S. gas reserves as a result of decreasing natural gas prices.


     Endeavour Historical  
     As of December 31,  
     2010 (3)     2011     2012  

Net 1P reserves:

      

United Kingdom:

      

Oil (MBbls)(1)

     3,967        4,060        13,733   

Gas (MMcf)

     56,267        50,723        56,901   

Oil equivalents (MBOE)(2)

     13,345        12,514        23,217   

United States:

      

Oil (MBbls)(1)

     59        41        6   

Gas (MMcf)

     31,777        60,978        14,690   

Oil equivalents (MBOE)(2)

     5,355        10,204        2,454   

Total:

      

Oil (MBbls)(1)

     4,026        4,101        13,739   

Gas (MMcf)

     88,044        111,701        71,591   

Oil equivalents (MBOE)(2)

     18,700        22,718        25,671   

Percentage oil

     22     18     54

Percentage proved developed

     19     23     32

Net 2P reserves:

      

Total:

      

Oil (MBbls)(1)

     14,897        14,556        29,208   

Gas (MMcf)

     172,820        182,989        107,715   

Oil equivalents (MBOE)(2)

     43,700        45,054        47,161   

Percentage oil

     34     32     62

 

(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) Reserve information includes the purchase of the additional 20% (approximately 3.4 mmboe of 2P reserves) of the Bacchus field in the North Sea, which closed in February 2011.


Earnings Conference Call, Wednesday, March 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 2012 fourth quarter and year-end financial and operating results on Wednesday, March 6, 2013 at 9 a.m. Central Time, 3 p.m. British Time. A supporting slide deck for the conference call is available on Endeavour’s website at www.endeavourcorp.com. To participate and ask questions during the conference call, dial the local country telephone number and the confirmation code 8741109. The toll-free numbers are 888-708-5695 in the United States and 0-808-101-7548 in the United Kingdom. Other international callers should dial 913-312-1520 (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 6, 2013 through 12:00 p.m. on March 12, 2013 by dialing toll free 888-203-1112 (U.S.) or 719-457-0820 (international), confirmation code 8741109.

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.

For further information:

Endeavour – Investor Relations

Darcey Matthews    713.307.8711
Pelham Public Relations – UK Media
Philip Dennis    +44 (0) 207 861 3919
Henry Lerwill    +44 (0) 207 861 3169


Endeavour International Corporation

Condensed Consolidated Balance Sheets

(Unaudited)

(Amounts in thousands)

 

     December 31,
2012
     December 31,
2011
 
     
Assets      

Current Assets:

     

Cash and cash equivalents

   $ 59,185      $ 106,036  

Restricted cash

     178        —    

Accounts receivable

     46,003        8,649  

Prepaid expenses and other current assets

     12,906        18,840  
  

 

 

    

 

 

 

Total Current Assets

     118,272        133,525  

Property and Equipment, Net

     1,003,441        549,196  

Goodwill

     262,764        211,886  

Other Assets

     49,906        30,384  
  

 

 

    

 

 

 

Total Assets

   $ 1,434,383      $ 924,991  
  

 

 

    

 

 

 
Liabilities and Stockholders’ Equity   

Current Liabilities:

     

Accounts payable

   $ 60,153      $ 62,275  

Current maturities of debt

     15,713        12,350  

Accrued expenses and other

     90,100        20,549  
  

 

 

    

 

 

 

Total Current Liabilities

     165,966        95,174  

Long-Term Debt

     843,793        455,028  

Deferred Taxes

     133,798        115,759  

Other Liabilities

     147,692        61,248  
  

 

 

    

 

 

 

Total Liabilities

     1,291,249        727,209  

Commitments and Contingencies

     

Series C Convertible Preferred Stock

     43,703        43,703  

Stockholders’ Equity

     99,431        154,079  
  

 

 

    

 

 

 

Total Liabilities and Stockholders’ Equity

   $ 1,434,383      $ 924,991  
  

 

 

    

 

 

 


Endeavour International Corporation

Condensed Consolidated Statement of Operations

(Unaudited)

(Amounts in thousands, except per share data)

 

     Fourth Quarter
December 31,
    Year Ended
December 31,
 
     2012     2011     2012     2011  

Revenues

   $ 97,615     $ 16,632     $ 219,058     $ 60,091  

Cost of Operations:

        

Operating expenses

     23,924       2,779       58,536       17,668  

Depreciation, depletion and amortization

     24,272       7,780       66,564       26,478  

Impairment of U.S. oil and gas properties

     5,956       36,913       53,072       65,706  

General and administrative

     5,705       3,328       21,085       17,853  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Expenses

     59,857       50,800       199,257       127,705  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (Loss) From Operations

     37,758       (34,168     19,801       (67,614
  

 

 

   

 

 

   

 

 

   

 

 

 

Other Income (Expense):

        

Derivatives:

        

Unrealized gains (losses)

     7,319       (2,719     5,141       8,378  

Interest expense

     (21,105     (12,688     (84,122     (44,893

Loss on early extinguishment of debt

     —         —         (21,661     (402

Letter of credit fees

     (9,461     —         (21,903     —    

Interest income and other

     (3,313     172       (9,254     597  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Other Expense

     (26,560     (15,235     (131,799     (36,320
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (Loss) Before Income Taxes

     11,198       (49,403     (111,998     (103,934

Income Tax Expense (Benefit)

     17,652       (4,758     14,228       27,061  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Loss

     (6,454     (44,645     (126,226     (130,995

Preferred Stock Dividends

     456       455       1,823       1,974  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Loss to Common Stockholders

   $ (6,910   $ (45,100   $ (128,049   $ (132,969
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Loss per Common Share:

        

Basic and diluted

   $ (0.15   $ (1.15   $ (3.01   $ (3.70
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted Average Number of Common Shares Outstanding:

        

Basic and diluted

     46,613       39,231       42,533       35,957  
  

 

 

   

 

 

   

 

 

   

 

 

 


Endeavour International Corporation

Condensed Consolidated Statement of Cash Flows

(Unaudited)

(Amounts in thousands)

 

     Year Ended December 31,  
     2012     2011  

Cash Flows from Operating Activities:

    

Net loss

   $ (126,226   $ (130,995

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

    

Depreciation, depletion and amortization

     66,564       26,478  

Impairment of oil and gas properties

     53,072       65,706  

Deferred tax expense (benefit)

     (17,594     21,116  

Unrealized gains on derivatives

     (5,141     (8,378

Amortization of non-cash compensation

     4,401       3,697  

Amortization of loan costs and discount

     14,179       12,234  

Non-cash interest expense

     8,684       12,811  

Loss on early extinguishment of debt

     21,661       402  

Other

     15,365       1,518  

Changes in operating assets and liabilities

     3,648       (43,932
  

 

 

   

 

 

 

Net Cash Provided by (Used in) Operating Activities

     38,613       (39,343

Cash Flows From Investing Activities:

    

Capital expenditures

     (246,925     (165,062

Acquisitions

     (238,854     (33,075

Proceeds from sales, net of cash

     1,407       —    

(Increase) decrease in restricted cash

     (178     31,726  
  

 

 

   

 

 

 

Net Cash Used in Investing Activities

     (484,550     (166,411

Cash Flows From Financing Activities:

    

(Repayments) borrowings under debt agreements

     379,394       106,775  

Proceeds from issuance of common stock

     60,805       118,444  

Dividends paid

     (1,665     (1,816

Payments for early extinguishment of debt

     (7,248     —    

Financing costs paid

     (32,204     (11,401

Other financing

     4       521  
  

 

 

   

 

 

 

Net Cash Provided by Financing Activities

     399,086       212,523  

Net Increase (Decrease) in Cash and Cash Equivalents

     (46,851     6,769  

Cash and Cash Equivalents, Beginning of Period

     106,036       99,267  
  

 

 

   

 

 

 

Cash and Cash Equivalents, End of Period

   $ 59,185     $ 106,036  
  

 

 

   

 

 

 


Endeavour International Corporation

Operating Statistics

(Unaudited)

 

     Fourth Quarter      Year Ended  
     December 31,      December 31,  
     2012      2011      2012      2011  

Sales volume:

           

Oil and condensate sales (Mbbls):

           

United Kingdom

     896        98        1,994        373  

United States

     —          3        3        7  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     896        101        1,997        380  
  

 

 

    

 

 

    

 

 

    

 

 

 

Gas sales (MMcf):

           

United Kingdom

     22        16        91        94  

United States

     972        1,728        5,206        5,033  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     994        1,744        5,298        5,127  
  

 

 

    

 

 

    

 

 

    

 

 

 

Oil equivalent sales (MBOE)

           

United Kingdom

     899        101        2,009        388  

United States

     163        290        871        846  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,062        391        2,880        1,234  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total BOE per day

     11,541        4,253        7,868        3,382  
  

 

 

    

 

 

    

 

 

    

 

 

 

Physical production volume (BOE per day):

           

United Kingdom

     8,533        925        5,494        1,095  

United States

     1,767        3,158        2,379        2,319  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     10,300        4,083        7,873        3,414  
  

 

 

    

 

 

    

 

 

    

 

 

 

Realized Prices:

           

Oil and condensate price ($ per Bbl)

   $ 105.76      $ 110.93      $ 103.56      $ 109.20  
  

 

 

    

 

 

    

 

 

    

 

 

 

Gas price ($ per Mcf)

   $ 2.86      $ 3.14      $ 2.32      $ 3.63  
  

 

 

    

 

 

    

 

 

    

 

 

 

Equivalent oil price ($ per BOE)

   $ 91.94      $ 42.51      $ 76.07      $ 48.67  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

   

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.

 

   

The average sales prices include gains and losses for derivative contracts we utilize to manage price risk related to our future cash flows.


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.

 

     Fourth Quarter
December 31,
    Year Ended
December 31,
 
     2012     2011     2012     2011  

Net loss

   $ (6,454   $ (44,645   $ (126,226   $ (130,995

Impairment of U.S. oil and gas properties (net of tax) (1)

     5,956       36,913       53,072       65,706  

Unrealized (gain) loss on derivatives (net of tax) (2)

     (7,383     1,976       (7,326     (10,269

Loss on early extinguishment of debt (net of tax) (3)

     —         —         17,762       402  

Deferred tax expense due to U.K. tax law change

     194       —         8,587       25,484  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Loss as Adjusted

   $ (7,687   $ (5,756   $ (54,131   $ (49,672
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (6,454   $ (44,645   $ (126,226   $ (130,995

Unrealized (gain) loss on derivatives

     (7,319     2,719       (5,141     (8,378

Net interest expense

     21,083       12,547       83,872       44,781  

Letter of credit fees

     9,461        —          21,903        —     

Loss on early extinguishment of debt

     —         —         21,661       402  

Depreciation, depletion and amortization

     24,272       7,780       66,564       26,478  

Impairment of U.S. oil and gas properties

     5,956       36,913       53,072       65,706  

Income tax expense (benefit)

     17,652       (4,758     14,228       27,061  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 64,651     $ 10,556     $ 129,933     $ 25,055  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(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 $64 and $743 and $2,185 and $1,891, respectively.

(3) 

Net of tax benefit of $3,899 for the year ended December 31, 2012.