HOUSTON, May 6, 2010 /PRNewswire/ -- Endeavour International Corporation (NYSE-Amex: END) today reported operational and financial results for the first quarter of 2010.
The quarter was highlighted by successful appraisal drilling in our North Sea Cygnus field that confirmed the discovery as one of the largest ever in the Southern Gas Basin and added reserves that more than replaced expected 2010 production. We also began drilling our first exploratory wells in U.S. gas shale plays as part of our U.S. initiative to balance the longer cycle time activities in the North Sea and increase current production, said William L. Transier, chairman, chief executive officer and president. Our excellent operational results were offset by lower production volumes related to unexpected downtime and timing of deliveries that caused weaker financial performance for the quarter.
Discretionary cash flow for the first quarter of 2010 was US$4.1 million compared to US$23.4 million in the first quarter of 2009. Net loss, as adjusted, was US$7.0 million for the first quarter of 2010 compared to US$3.9 million in the same period last year. On a GAAP basis, net loss was US$15.2 million for the first quarter of 2010 as compared to US$16.9 million in the same quarter in 2009. These GAAP basis amounts for the first quarter of 2010 and 2009 include non-cash charges resulting primarily from mark-to-market accounting for derivatives and asset impairments totaling US$8.8 million and US$15.6 million, respectively, as outlined on the attached reconciliation schedule.
Highlights for the first quarter are as follows:
Launched strategic alternative review of North Sea assets - Endeavour is in the process of evaluating a full range of options for unlocking the value of its North Sea assets that may include selling specific assets or the entire UK business, entering a joint venture to accelerate North Sea activities or continuing the current operations plan. The decision was announced in response to the continued dislocation between the company's stock price and the underlying asset value of its United Kingdom assets. The results will be announced once a course of action is selected.
Further extended size of Cygnus gas field in the North Sea with drilling of latest successful appraisal well - Results from the 44-11a appraisal well drilled during the quarter have led to preliminary estimates of reserves and resources that are significantly increased to make the Cygnus field one of the largest gas fields ever discovered in the Southern North Sea. The appraisal well was drilled to a depth of 12,207 feet, encountering a high quality, gas-saturated Leman sand reservoir with a sand thickness of 130 feet gross and 85 feet net. The well flow tested at a rate of 28 million cubic feet of gas per day. The rig then moved south to spud another Cygnus appraisal well, the 44/12a-5, at the end of April 2010.
Participating in six wells as part of a growing U.S. drilling initiative - In early 2010, the company acquired interests in 526,000 gross acres (165,000 net acres) in four resource plays in the Haynesville and Marcellus gas shale plays and frontier plays in Alabama and Montana where the company is one of the first participants. During the first quarter, Endeavour and its partner, Cohort Energy, participated in the drilling of two joint venture wells and four low-working interest third-party-operated horizontal wells in northern Louisiana and East Texas. Completion results for all six wells are expected in the second quarter of 2010.
Completed two financing transactions for US$45 million to accelerate U.S. shale initiative - In February, Endeavour successfully closed a US$25 million lending facility with the Bank of Scotland PLC and a US$20.5 million private placement of common stock sold primarily to existing investors. The proceeds from the transactions are being used primarily to accelerate the company's 2010 U.S. onshore gas shale drilling program.
Guidance for Year 2010
The table below sets forth estimates for operating statistics for the full year ending December 31, 2010.
(All amounts in US dollars unless otherwise specified.)
Estimated Average Production (A) Daily Production (BOE per day) 4,500 to 6,000 Differentials (B) Oil ($/Bbl) $(5.00) to $(6.00) Gas ($Mcf) $(0.50) to $(0.60) Gas percentage of Total 55% to 60% Lease Operating Expense ($ per barrel) $8.00 to $10.00 (A) Actual results may differ materially from these estimates. (B) For purposes of the estimates, assumptions of price differentials are based on location, quality and other factors, excluding the effects of derivative financial instruments. Gas price differentials are stated as premiums (discounts) from Henry Hub pricing, and oil price differentials are stated as premiums (discounts) from West Texas Intermediate pricing.
Earnings Conference Call, Thursday, May 6, 2010 at 9:00 a.m., Central Daylight Time, 3:00 p.m. British Summer Time
Endeavour will host a conference call and web cast to discuss its 2010 first quarter financial and operating results on Thursday, May 6, 2010 at 9 a.m. Central Daylight Time, 3 p.m. British Summer Time. To participate and ask questions during the conference call, dial the local country telephone number and the confirmation code 8642055. The toll-free numbers are +1-888-218-8088 in the United States and +44-0-808-101-1402 in the United Kingdom. Other international callers should dial +1-913-312-1438 (tolls apply). To listen only to the live audio web cast access Endeavour's home page at http://www.endeavourcorp.com. A replay will be available beginning at 12:00 p.m. Central Daylight Time on May 6 through 12:00 p.m. on May 13 by dialing toll free +1-888-203-1112 (U.S.) or +1-719-457-0820 (international), confirmation code 8642055.
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 http://endeavourcorp.com.
Additional information for investors:
Certain statements and information in this news release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words believe, expect, anticipate, plan, intend, foresee, should, would, could or other similar expressions are intended to identify forward-looking statements, which are generally not historical in nature. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenues and operating results are based on our forecasts for our existing operations and do not include the potential impact of any future acquisitions or divestitures. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections. Important factors that could cause actual results to differ materially from those in the forward-looking statements are included in our Annual Report on Form 10-K and updated quarterly in our Form 10-Qs.
Endeavour International Corporation Condensed Consolidated Balance Sheets (Unaudited) (Amounts in thousands) March 31, December 31, 2010 2009 ---- ---- Assets Current Assets: Cash and cash equivalents $31,923 $27,287 Restricted cash 19 2,879 Accounts receivable 10,744 14,800 Prepaid expenses and other current assets 11,863 10,118 ----------------------------------------- ------ ------ Total Current Assets 54,549 55,084 Property and Equipment, Net 305,913 266,587 Goodwill 211,886 211,886 Other Assets 5,725 5,322 ------------ ----- ----- Total Assets $578,073 $538,879 ------------ -------- -------- Liabilities and Stockholders' Equity Current Liabilities: Accounts payable $26,045 $12,401 Current maturities of debt 79,942 - Accrued expenses and other 18,180 17,798 Total Current Liabilities 124,167 30,199 Long-Term Debt 170,964 223,385 Deferred Taxes 83,033 80,692 Other Liabilities 75,295 85,412 ----------------- ------ ------ Total Liabilities 453,459 419,688 Commitments and Contingencies Series C Convertible Preferred Stock: Face value (liquidation preference) 46,625 50,000 Net non-cash premiums under fair value accounting on redemption 8,447 9,058 -------------------------------------- ----- ----- Total Series C Convertible Preferred Stock 55,072 59,058 Stockholders' Equity: 69,542 60,133 --------------------- ------ ------ Total Liabilities and Stockholders' Equity $578,073 $538,879 ------------------------------------------ -------- --------
Endeavour International Corporation Condensed Consolidated Statement of Operations (Unaudited) (Amounts in thousands, except per share data) Three Months Ended March 31, --------- 2010 2009 ---- ---- Revenues $13,721 $16,338 Cost of Operations: Operating expenses 2,821 6,182 Depreciation, depletion and amortization 5,681 11,324 Impairment of oil and gas properties 7,692 29,402 General and administrative 4,431 3,835 -------------------------- ----- ----- Total Expenses 20,625 50,743 -------------- ------ ------ Income (Loss) From Operations (6,904) (34,405) ----------------------------- ------ ------- Other Income (Expense): Derivatives: Realized gains 232 11,936 Unrealized losses (1,072) (1,373) Interest expense (5,636) (3,911) Interest income and other 3,024 (341) ------------------------- ----- ---- Total Other Income (Expense) (3,452) 6,311 ---------------------------- ------ ----- Loss Before Income Taxes (10,356) (28,094) Income Tax Expense (Benefit) 4,834 (10,952) ---------------------------- ----- ------- Loss from Continuing Operations (15,190) (17,142) Income from Discontinued Operations - 279 ----------------------------------- --- --- Net Loss (15,190) (16,863) Preferred Stock Dividends 589 2,669 ------------------------- --- ----- Net Loss to Common Stockholders $(15,779) $(19,532) ------------------------------- -------- -------- Basic and Diluted Net Loss per Common Share: Continuing operations $(0.11) $(0.15) Discontinued operations - - ----------------------- --- --- Total $(0.11) $(0.15) ----- ------ ------ Weighted Average Number of Common Shares Outstanding: Basic and Diluted 149,546 129,291 ----------------- ------- ------- Endeavour International Corporation Condensed Consolidated Statement of Cash Flows (Unaudited) (Amounts in thousands) Three Months Ended March 31, ------------------ 2010 2009 ---- ---- Cash Flows from Operating Activities: Net loss $(15,190) $(16,863) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation, depletion and amortization 5,681 16,059 Impairment of oil and gas properties 7,692 29,402 Deferred tax expense (benefit) 3,477 (8,423) Unrealized losses on derivatives 1,072 1,373 Amortization of non-cash compensation 1,153 657 Amortization of loan costs and discount 1,528 1,201 Non-cash interest expense 1,683 1,279 Other (3,023) (1,293) Changes in operating assets and liabilities 5,341 16,347 ------------------------------- ----- ------ Net Cash Provided by Operating Activities 9,414 39,739 Cash Flows From Investing Activities: Capital expenditures (21,768) (29,431) Acquisitions (29,407) (1,153) (Increase) decrease in restricted cash 2,859 (11,814) -------------------------------------- ----- ------- Net Cash Used in Investing Activities (48,316) (42,398) Cash Flows From Financing Activities: Borrowings (repayments) of borrowings 25,000 (10,678) Proceeds from issuance of common stock 20,011 - Dividends paid (550) (2,656) Other financing (923) (50) --------------- ---- --- Net Cash Provided by (Used in) Financing Activities 43,538 (13,384) Net Increase (Decrease) in Cash and Cash Equivalents 4,636 (16,043) Cash and Cash Equivalents, Beginning of Period 27,287 38,156 --------------------------------------- ------ ------ Cash and Cash Equivalents, End of Period $31,923 $22,113 ---------------------------------------- ------- ------- Cash and Cash Equivalents, End of Period: Continuing operations $31,923 $12,599 Discontinued operations - 9,514 ----------------------- --- ----- Total $31,923 $22,113 ----- ------- -------
Endeavour International Corporation Operating Statistics (Unaudited) Three Months Ended March 31, --------- 2010 2009 ---- ---- Sales volume (1) Oil and condensate sales (Mbbls): United Kingdom 113 178 United States 1 1 ------------- --- --- Continuing operations 114 179 Discontinued operations - Norway - 224 -------------------------------- --- --- Total 114 403 ----- --- --- Gas sales (MMcf): United Kingdom 766 1,078 United States 280 51 ------------- --- --- Continuing operations 1,046 1,129 Discontinued operations - Norway - 533 -------------------------------- --- --- Total 1,046 1,662 ----- ----- ----- Oil equivalent sales (MBOE) United Kingdom 241 358 United States 48 9 ------------- --- --- Continuing operations 289 367 Discontinued operations - Norway - 313 -------------------------------- --- --- Total 289 680 ----- --- --- Total BOE per day 3,209 7,551 ----------------- ----- ----- Physical production volume (BOE per day): United Kingdom 3,118 4,315 United States 578 90 ------------- --- --- Continuing operations 3,696 4,405 Discontinued operations - Norway - 3,365 -------------------------------- --- ----- Total 3,696 7,770 ----- ----- ----- Realized Prices (2) Oil and condensate price ($ per Bbl): Before commodity derivatives $70.24 $41.68 Effect of commodity derivatives (7.50) 24.50 ------------------------------- ----- ----- Realized prices including commodity derivatives $62.74 $66.18 ----------------------------------------------- ------ ------ Gas price ($ per Mcf): Before commodity derivatives $5.43 $7.78 Effect of commodity derivatives 1.25 1.25 ------------------------------- ---- ---- Realized prices including commodity derivatives $6.68 $9.03 ----------------------------------------------- ----- ----- Equivalent oil price ($ per BOE): Before commodity derivatives $47.51 $43.71 Effect of commodity derivatives 1.55 17.56 ------------------------------- ---- ----- Realized prices including commodity derivatives $49.06 $61.27 ----------------------------------------------- ------ ------ (1) We record oil revenues on 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. (2) The average sales prices reflect both our continuing and discontinued operations and include realized 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, Adjusted EBITDA and discretionary cash flow. 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. Three Months Ended March 31, --------- 2010 2009 ---- ---- Net loss $(15,190) $(16,863) Depreciation, depletion and amortization 5,681 16,059 Impairment of oil and gas properties 7,692 29,402 Deferred tax expense (benefit) 3,477 (8,423) Unrealized loss on derivatives 1,072 1,373 Other 1,341 1,844 ----- ---- ---- Discretionary Cash Flow (1) $4,073 $23,392 =========================== ====== ======= Net loss to common shareholders $(15,779) $(19,532) Impairment of oil and gas properties (net of tax) (2) 7,692 14,745 Unrealized loss on derivatives (net of tax) (3) 1,174 1,571 Currency impact on deferred taxes (59) (705) --------------------------------- --- ---- Net Income (Loss) as Adjusted $(6,972) $(3,921) ============================= ======= ======= Net loss to common shareholders $(15,779) $(19,532) Unrealized loss on derivatives 1,072 1,373 Net interest expense 5,633 3,820 Depreciation, depletion and amortization 5,681 16,059 Impairment of oil and gas properties 7,692 29,402 Income tax expense (benefit) 4,834 (8,385) Preferred stock dividends 589 2,669 ------------------------- -- ---- Adjusted EBITDA $9,722 $25,406 =============== ====== ======= (1) Discretionary cash flow is equal to cash flow from operating activities before the changes in operating assets and liabilities. (2) Net of tax benefits of none and $14,657, respectively. (3) Net of tax expense of $102 and $198, respectively.
SOURCE: Endeavour International Corporation
CONTACT: Investor Relations, Mike Kirksey of Endeavour,+44(0)207-451-2381, +1-713-307-8788; or Jeffrey Auld, UK Broker, ofCanaccord Adams, + 44(0)207-050-6500, or UK Media, Philip Dennis,+44(0)207-743-6363, Henry Lerwill, +44(0)203-178-6242, both of PelhamPublic Relations for Endeavour International Corporation
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