Note 15 – Guarantor Subsidiaries

Certain of our wholly-owned domestic subsidiaries have, jointly and severally, fully and unconditionally guaranteed the Senior Notes. Pursuant to Securities and Exchange Commission (“SEC”) regulations, we have presented in columnar format the condensed consolidating financial information for Endeavour International Corporation, the guarantor subsidiaries on a combined basis, and all non-guarantor subsidiaries on a combined basis.

The subsidiary guarantees are unsecured obligations of each subsidiary guarantor and rank equally in right of payment with all senior indebtedness of that subsidiary guarantor and senior in right of payment to all subordinated indebtedness of that subsidiary guarantor. The subsidiary guarantees are effectively subordinated to any secured indebtedness of the subsidiary guarantor with respect to the assets securing the indebtedness. In addition, the subsidiary guarantees may be released in certain customary circumstances, including (i) the sale of all or substantially all of the properties or assets or a guarantor, (ii) the sale of the capital stock of a guarantor, (iii) the designation of a guarantor as an “Unrestricted Subsidiary,” (iv) upon legal defeasance of the Senior Notes or satisfaction and discharge of the indentures governing the Senior Notes, (v) upon the liquidation or dissolution of the guarantor or (vi) if the guarantor ceases to guarantee other of our indebtedness and ceases to be a material subsidiary, each of which is subject to important limitations in the indentures governing the Senior Notes.

Condensed consolidating financial statements for our guarantor subsidiaries and non-guarantor subsidiaries are presented in the following tables:



As of June 30, 2013
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Cash and cash equivalents	$	-	$	2,622	$	128,168	$	-	$	130,790
Accounts receivable		-		2,305		26,307		-		28,612
Current receivables due from affiliates		913,633		22,459		37,414		(973,506)		-
Prepaid expenses and other		-		1,291		32,642		-		33,933
Current Assets		913,633		28,677		224,531		(973,506)		193,335

Property, plant and equipment, net		-		94,711		960,123		-		1,054,834
Goodwill		-		-		259,238		-		259,238
Long-term receivables due from affiliates		-		599,000		-		(599,000)		-
Investments in subsidiaries		57,662		120,058		-		(177,720)		-
Other assets		23,213		6,056		9,796		-		39,065
Total Assets	$	994,508	$	848,502	$	1,453,688	$	(1,750,226)	$	1,546,472

Accounts payable	$	-	$	3,760	$	68,452	$	-	$	72,212
Current maturities of debt		-		-		115,163		-		115,163
Monetary production payment, current portion		-		-		20,833		-		20,833
Current liabilities due to affiliates		22,712		928,335		22,459		(973,506)		-
Accrued expenses and other		28,219		2,654		65,281		-		96,154
Current Liabilities		50,931		934,749		292,188		(973,506)		304,362

Long-term debt		677,632		-		72,262		-		749,894
Long-term liabilities due to affiliates		-		-		599,000		(599,000)		-
Deferred taxes		-		-		125,146		-		125,146
Monetary production payment, long-term portion		-		-		104,167		-		104,167
Other liabilities		3,408		658		130,009		-		134,075
Total Liabilities		731,971		935,407		1,322,772		(1,572,506)		1,417,644

Series C convertible preferred stock		43,703		-		-		-		43,703
Stockholders' equity		218,834		(86,905)		130,916		(177,720)		85,125
Total Liabilities and Equity	$	994,508	$	848,502	$	1,453,688	$	(1,750,226)	$	1,546,472



As of December 31, 2012
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Cash and cash equivalents	$	-	$	27,800	$	31,385	$	-	$	59,185
Accounts receivable		-		2,695		43,486		-		46,181
Current receivables due from affiliates		950,210		36,725		71,964		(1,058,899)		-
Prepaid expenses and other		-		508		20,487		-		20,995
Current Assets		950,210		67,728		167,322		(1,058,899)		126,361

Property, plant and equipment, net		-		92,692		910,749		-		1,003,441
Goodwill		-		-		262,764		-		262,764
Long-term receivables due from affiliates		-		599,000		-		(599,000)		-
Investments in subsidiaries		57,662		120,058		-		(177,720)		-
Other assets		25,200		6,085		18,621		-		49,906
Total Assets	$	1,033,072	$	885,563	$	1,359,456	$	(1,835,619)	$	1,442,472

Accounts payable	$	-	$	2,622	$	57,531	$	-	$	60,153
Current maturities of debt		-		-		15,713		-		15,713
Deferred revenue		-		-		-		-		-
Monetary production payment deposit		-		-		-		-		-
Current liabilities due to affiliates		34,509		987,664		36,726		(1,058,899)		-
Accrued expenses and other		27,548		1,517		61,035		-		90,100
Current Liabilities		62,057		991,803		171,005		(1,058,899)		165,966

Long-term debt		676,413		-		167,380		-		843,793
Long-term liabilities due to affiliates		-		-		599,000		(599,000)		-
Deferred taxes		-		-		141,887		-		141,887
Monetary production payment, long-term portion		-		-		-		-		-
Other liabilities		3,033		561		144,098		-		147,692
Total Liabilities		741,503		992,364		1,223,370		(1,657,899)		1,299,338

Series C convertible preferred stock		43,703		-		-		-		43,703
Stockholders' equity		247,866		(106,801)		136,086		(177,720)		99,431
Total Liabilities and Equity	$	1,033,072	$	885,563	$	1,359,456	$	(1,835,619)	$	1,442,472



For the Three Months Ended June 30, 2013
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Revenue	$	-	$	2,315	$	123,850	$	-	$	126,165
Operating expenses		-		1,844		36,259		-		38,103
DD&A expense		-		1,007		50,916		-		51,923
Impairment of oil and gas properties		-		-		-		-		-
G&A expenses		577		1,701		2,604		-		4,882
Income (loss) from Operations		(577)		(2,237)		34,071		-		31,257

Derivatives:
Unrealized gains (losses)		323		-		(1,600)		-		(1,277)
Interest expense		(20,814)		898		(19,531)		15,000		(24,447)
Letter of credit fees		-		-		(7,128)		-		(7,128)
Other income (expense)		-		14,520		(529)		(15,000)		(1,009)
Income (loss) before taxes		(21,068)		13,181		5,283		-		(2,604)
Income tax expense		-		-		11,281		-		11,281
Net income (loss)		(21,068)		13,181		(5,998)		-		(13,885)
Preferred stock dividends		456		-		-		-		456
Net income (loss) to common shareholders	$	(21,524)	$	13,181	$	(5,998)	$	-	$	(14,341)



For the Six Months Ended June 30, 2013
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Revenue	$	-	$	4,851	$	178,986	$	-	$	183,837
Operating expenses		-		5,459		50,134		-		55,593
DD&A expense		-		2,146		72,724		-		74,870
Impairment of oil and gas properties		-		3,534		-		-		3,534
G&A expenses		1,308		4,313		4,743		-		10,364
Income (loss) from Operations		(1,308)		(10,601)		51,385		-		39,476

Derivatives:
Unrealized gains (losses)		(377)		-		680		-		303
Interest expense		(40,973)		1,500		(36,411)		29,999		(45,885)
Letter of credit fees		-		-		(18,508)		-		(18,508)
Other income (expense)		(1)		28,998		9,873		(29,999)		8,871
Income (loss) before taxes		(42,659)		19,897		7,019		-		(15,743)
Income tax expense		-		-		12,189		-		12,189
Net income (loss)		(42,659)		19,897		(5,170)		-		(27,932)
Preferred stock dividends		911		-		-		-		911
Net income (loss) to common shareholders	$	(43,570)	$	19,897	$	(5,170)	$	-	$	(28,843)



For the Three Months Ended June 30, 2012
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Revenue	$	-	$	2,863	$	20,140	$	-	$	23,003
Operating expenses		-		1,603		4,139		-		5,742
DD&A expense		-		2,474		8,153		-		10,627
Impairment of oil and gas properties		-		19,960		-		-		19,960
G&A expenses		643		2,450		1,937		-		5,030
Income (loss) from Operations		(643)		(23,624)		5,911		-		(18,356)

Derivatives:
Unrealized gains (losses)		(1,448)		-		5,253		-		3,805
Interest expense		(10,281)		(789)		(20,788)		6,602		(25,256)
Letter of credit fees		-		-		(3,064)		-		(3,064)
Loss on early extinguishment of debt		-		-		(21,661)		-		(21,661)
Other income (expense)		-		5,004		987		(6,602)		(611)
Loss before taxes		(12,372)		(19,409)		(33,362)		-		(65,143)
Income tax benefit		-		-		(14,335)		-		(14,335)
Net loss		(12,372)		(19,409)		(19,027)		-		(50,808)
Preferred stock dividends		456		-		-		-		456
Net loss to common shareholders	$	(12,828)	$	(19,409)	$	(19,027)	$	-	$	(51,264)



For the Six Months Ended June 30, 2012
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Revenue	$	-	$	6,620	$	31,549	$	-	$	38,169
Operating expenses		-		3,237		7,403		-		10,640
DD&A expense		-		5,888		12,645		-		18,533
Impairment of oil and gas properties		-		35,700		-		-		35,700
G&A expenses		1,234		5,808		3,311		-		10,353
Income (loss) from Operations		(1,234)		(44,013)		8,190		-		(37,057)

Derivatives:
Unrealized losses		(379)		-		(594)		-		(973)
Interest expense		(13,494)		(2,115)		(38,097)		8,743		(44,963)
Letter of credit fees		-		-		(3,064)		-		(3,064)
Loss on early extinguishment of debt		-		-		(21,661)		-		(21,661)
Other income (expense)		(1)		4,774		688		(8,743)		(3,282)
Loss before taxes		(15,108)		(41,354)		(54,538)		-		(111,000)
Income tax benefit		-		-		(24,929)		-		(24,929)
Net loss		(15,108)		(41,354)		(29,609)		-		(86,071)
Preferred stock dividends		911		-		-		-		911
Net loss to common shareholders	$	(16,019)	$	(41,354)	$	(29,609)	$	-	$	(86,982)



For the Six Months Ended June 30, 2013
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations⁽¹⁾		Consolidated
Cash Flows from Operating Activities:
Net loss	$	(42,659)	$	19,897	$	(5,170)	$		$	(27,932)
Adjustments to reconcile net loss to
net cash provided by (used in) operations
DD&A expense		-		2,146		72,724		-		74,870
Impairment of oil and gas properties		-		3,534		-		-		3,534
Deferred tax benefit		-		-		(2,457)		-		(2,457)
Unrealized (gains) losses on derivatives		377		-		(680)		-		(303)
Amortization of non-cash compensation		318		-		-		1,314		1,632
Amortization of loan costs and discount		3,913		-		4,782		-		8,695
Non-cash interest expense		-		(582)		4,036		-		3,454
Loss on early extinguishment of debt		-		-		-		-		-
Other		44		(8)		(2,480)		-		(2,444)
Changes in operating assets and liabilities:
(Increase) decrease in receivables		-		(19,895)		37,463		-		17,568
(Increase) decrease in other current assets		(8)		16,294		(13,931)		-		2,355
Increase (decrease) in liabilities		39,131		(33,720)		(9,883)		(2,889)		(7,361)
Net Cash Provided by (Used in)
Operating Activities		1,116		(12,334)		84,404		(1,575)		71,611

Cash Flows From Investing Activities:
Capital expenditures		-		(6,694)		(102,195)		1,575		(107,314)
Acquisitions, net of cash acquired		-		(390)		(1,082)		-		(1,472)
Proceeds from sales, net of cash		-		-		-		-		-
Issuance of note receivable to affiliate		-		-		-		-		-
Increase in restricted cash		-		-		-		-		-
Net Cash Used in Investing Activities		-		(7,084)		(103,277)		1,575		(108,786)

Cash Flows From Financing Activities:
Repayments of borrowings		-		-		-		-		-
Borrowings under debt agreements, net
of debt discount		-		-		-		-		-
Borrowings from affiliates		-		-		-		-		-
Proceeds from issuance of MPP		-		-		125,000		-		125,000
Proceeds from issuance of common stock		-		-		-		-		-
Dividends paid		(416)		-		-		-		(416)
Payments for early extinguishment of debt		-		-		-		-		-
Financing costs paid		(700)		(5,760)		(9,344)		-		(15,804)
Other financing		2,232		-		-		(2,232)		-
Net Cash Provided by (Used in)
Financing Activities		1,116		(5,760)		115,656		(2,232)		108,780

Net Change in Cash and Cash Equivalents		-		(25,178)		96,783		-		71,605
Cash and Cash Equivalents, Beginning
of Period		-		27,800		31,385		-		59,185
Cash and Cash Equivalents, End of Period	$	-	$	2,622	$	128,168	$	-	$	130,790



For the Six Months Ended June 30, 2012
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations⁽¹⁾		Consolidated
Cash Flows from Operating Activities:
Net loss	$	(15,108)	$	(41,354)	$	(29,609)	$		$	(86,071)
Adjustments to reconcile net loss to
net cash provided by (used in) operations
DD&A expense		-		5,888		12,645		-		18,533
Impairment of oil and gas properties		-		35,700		-		-		35,700
Deferred tax benefit		-		-		(24,008)		-		(24,008)
Unrealized (gains) losses on derivatives		379		-		594		-		973
Amortization of non-cash compensation		337		-		-		2,777		3,114
Amortization of loan costs and discount		2,899		3,893		519		-		7,311
Non-cash interest expense		160		1,971		3,022		-		5,153
Loss on early extinguishment of debt		-		-		21,661		-		21,661
Other		149		3,351		1,187		-		4,687
Changes in operating assets and liabilities:
(Increase) decrease in receivables		-		74,690		(90,360)		-		(15,670)
(Increase) decrease in other current assets		-		(19,958)		(4,012)		-		(23,970)
Increase (decrease) in liabilities		(508,978)		470,470		65,785		(2,777)		24,500
Net Cash Provided by (Used in)
Operating Activities		(520,162)		534,651		(42,576)		-		(28,087)

Cash Flows From Investing Activities:
Capital expenditures		-		(13,455)		(103,003)		-		(116,458)
Acquisitions, net of cash acquired		-		(26,925)		(201,180)		-		(228,105)
Proceeds from sales, net of cash		-		178		(178)		-		-
Issuance of note receivable to affiliate		-		(500,000)		-		500,000		-
Increase in restricted cash		-		(178)		-		-		(178)
Net Cash Used in Investing Activities		-		(540,380)		(304,361)		500,000		(344,741)

Cash Flows From Financing Activities:
Repayments of borrowings		-		(4,323)		(240,242)		-		(244,565)
Borrowings under debt agreements, net
of debt discount		480,000		-		100,000		-		580,000
Borrowings from affiliates		-		-		500,000		(500,000)		-
Proceeds from issuance of MPP		-		-		-		-		-
Proceeds from issuance of common stock		61,088		-		-		-		61,088
Dividends paid		(416)		-		-		-		(416)
Payments for early extinguishment of debt		-		-		(7,248)		-		(7,248)
Financing costs paid		(20,514)		20,514		(27,500)		-		(27,500)
Other financing		3		(1)		-		1		3
Net Cash Provided by (Used in)
Financing Activities		520,161		16,190		325,010		(499,999)		361,362

Net Change in Cash and Cash Equivalents		-		10,461		(21,927)		-		(11,466)
Cash and Cash Equivalents, Beginning
of Period		-		2,951		103,085		-		106,036
Cash and Cash Equivalents, End of Period	$	-	$	13,412	$	81,158	$	-	$	94,570