Note 16 – 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 March 31, 2014
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Cash and cash equivalents	$	-	$	28,753	$	26,737	$	-	$	55,490
Accounts receivable		-		2,273		45,944		-		48,217
Current receivables due from affiliates		850,227		6,704		49,036		(905,967)		-
Prepaid expenses and other		-		813		82,083		-		82,896
Current Assets		850,227		38,543		203,800		(905,967)		186,603

Property, plant and equipment, net		-		88,421		965,354		-		1,053,775
Goodwill		-		-		259,238		-		259,238
Long-term receivables due from affiliates		-		500,000		-		(500,000)		-
Investments in subsidiaries		57,662		219,058		-		(276,720)		-
Other assets		19,619		56		13,322		-		32,997
Total Assets	$	927,508	$	846,078	$	1,441,714	$	(1,682,687)	$	1,532,613

Accounts payable	$	-	$	10,094	$	46,105	$	-	$	56,199
Current maturities of debt		-		-		2,140		-		2,140
Deferred revenue		-		-		2,152		-		2,152
Monetary production payment, current portion		-		-		120,833		-		120,833
Current liabilities due to affiliates		648		899,237		6,082		(905,967)		-
Accrued expenses and other		10,655		6,345		62,219		-		79,219
Current Liabilities		11,303		915,676		239,531		(905,967)		260,543

Long-term debt		691,483		-		200,346		-		891,829
Long-term liabilities due to affiliates		-		-		500,000		(500,000)		-
Deferred taxes		-		-		173,847		-		173,847
Monetary production payment, long-term portion		-		-		40,833		-		40,833
Other liabilities		4,065		5,077		118,647		-		127,789
Total Liabilities		706,851		920,753		1,273,204		(1,405,967)		1,494,841

Series C convertible preferred stock		43,703		-		-		-		43,703
Stockholders' equity		176,954		(74,675)		168,510		(276,720)		(5,931)
Total Liabilities and Equity	$	927,508	$	846,078	$	1,441,714	$	(1,682,687)	$	1,532,613



As of December 31, 2013
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Cash and cash equivalents	$	-	$	2,417	$	32,325	$	-	$	34,742
Accounts receivable		-		1,832		63,339		-		65,171
Current receivables due from affiliates		853,900		20,783		45,982		(920,665)		-
Prepaid expenses and other		-		594		59,724		-		60,318
Current Assets		853,900		25,626		201,370		(920,665)		160,231

Property, plant and equipment, net		-		87,313		984,838		-		1,072,151
Goodwill		-		-		259,238		-		259,238
Long-term receivables due from affiliates		-		500,000		8		(500,008)		-
Investments in subsidiaries		57,662		219,066		-		(276,728)		-
Other assets		20,518		6,056		6,648		-		33,222
Total Assets	$	932,080	$	838,061	$	1,452,102	$	(1,697,401)	$	1,524,842

Accounts payable	$	-	$	1,214	$	36,819	$	-	$	38,033
Current maturities of debt		-		-		-		-		-
Deferred revenue		-		-		20,965		-		20,965
Monetary production payment deposit		-		-		74,167		-		74,167
Current liabilities due to affiliates		648		899,853		20,172		(920,673)		-
Accrued expenses and other		27,474		3,353		57,798		-		88,625
Current Liabilities		28,122		904,420		209,921		(920,673)		221,790

Long-term debt		678,850		-		192,028		-		870,878
Long-term liabilities due to affiliates		-		-		500,000		(500,000)		-
Deferred taxes		-		-		146,213		-		146,213
Monetary production payment, long-term portion		-		-		92,500		-		92,500
Other liabilities		3,535		601		127,234		-		131,370
Total Liabilities		710,507		905,021		1,267,896		(1,420,673)		1,462,751

Series C convertible preferred stock		43,703		-		-		-		43,703
Stockholders' equity		177,870		(66,960)		184,206		(276,728)		18,388
Total Liabilities and Equity	$	932,080	$	838,061	$	1,452,102	$	(1,697,401)	$	1,524,842



For the Three Months Ended March 31, 2014
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Revenue	$	-	$	1,947	$	92,216	$	-	$	94,163
Operating expenses		-		1,181		25,989		-		27,170
DD&A expense		-		721		44,247		-		44,968
Impairment of oil and gas properties		-		-		-		-		-
General and administrative		995		3,709		145		-		4,849
Income (loss) from Operations		(995)		(3,664)		21,835		-		17,176

Other Income (Expense):
Unrealized gains on derivatives		469		-		2,190		-		2,659
Interest expense		(20,620)		578		(26,435)		15,000		(31,477)
Letter of credit fees		-		-		(3,789)		-		(3,789)
Loss on early extinguishment of debt		-		-		(3,543)		-		(3,543)
Litigation settlement expense		-		(19,034)		-		-		(19,034)
Unrealized foreign currency gains (losses)		-		-		(1,273)		-		(1,273)
Other income (expense)		(322)		14,406		(1,104)		(15,000)		(2,020)
Loss Before Income Taxes		(21,468)		(7,714)		(12,119)		-		(41,301)
Petroleum Revenue Tax ("PRT") Expense		-		-		1,725		-		1,725
Corporate Tax Expense		-		-		1,844		-		1,844
Total tax expense		-		-		3,569		-		3,569
Net loss		(21,468)		(7,714)		(15,688)		-		(44,870)
Preferred stock dividends		456		-		-		-		456
Net loss to common shareholders	$	(21,924)	$	(7,714)	$	(15,688)	$	-	$	(45,326)


For the Three Months Ended March 31, 2013
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Revenue	$	-	$	2,536	$	55,136	$	-	$	57,672
Operating expenses		-		3,615		13,875		-		17,490
DD&A expense		-		1,139		21,808		-		22,947
Impairment of oil and gas properties		-		3,534		-		-		3,534
General and administrative		732		2,611		2,139		-		5,482
Income (loss) from Operations		(732)		(8,363)		17,314		-		8,219

Other Income (Expense):
Unrealized gains (losses) on derivatives		(700)		-		2,280		-		1,580
Interest expense		(20,160)		603		(16,881)		15,000		(21,438)
Letter of credit fees		-		-		(11,380)		-		(11,380)
Loss on early extinguishment of debt		-		-		-		-		-
Litigation settlement expense		-		-		-		-		-
Unrealized foreign currency gains (losses)		-		(1)	-	9,761	-	-	-	9,760
Other income (expense)		1		14,478		643		(15,000)		122
Income (Loss) Before Income Taxes		(21,591)		6,717		1,737		-		(13,137)
Petroleum Revenue Tax ("PRT") Expense		-		-		628		-		628
Corporate Tax Expense		-		-		281		-		281
Total tax expense		-		-		909		-		909
Net income (loss)		(21,591)		6,717		828		-		(14,046)
Preferred stock dividends		456		-		-		-		456
Net income (loss) to common shareholders	$	(22,047)	$	6,717	$	828	$	-	$	(14,502)



For the Three Months Ended March 31, 2014
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Cash Flows from Operating Activities:
Net loss	$	(21,468)	$	(7,714)	$	(15,688)	$	-	$	(44,870)
Adjustments to reconcile net loss to
net cash provided by (used in) operations
Depreciation, depletion and amortization		-		721		44,247		-		44,968
Deferred tax expense (benefit)		-		-		1,969		-		1,969
Unrealized (gains) losses on derivatives		(469)		-		(2,190)		-		(2,659)
Amortization of non-cash compensation		162		-		-		809		971
Amortization of loan costs and discount		2,049		-		4,656		-		6,705
Non-cash interest expense		-		-		1,883		-		1,883
Loss on early extinguishment of debt		-		-		6,856		-		6,856
Litigation settlement expense				19,034		-		-		19,034
Other		-		(4)		1,851		-		1,847
Changes in operating assets and liabilities:
(Increase) decrease in receivables		-		(852)		19,853		-		19,001
(Increase) decrease in other current assets		-		(238)		(4,818)		-		(5,056)
Increase (decrease) in liabilities		(17,438)		20,381		(23,658)		(2,385)		(23,100)
Net Cash Provided by (Used in)
Operating Activities		(37,164)		31,328		34,961		(1,576)		27,549

Cash Flows From Investing Activities:
Capital expenditures		-		(15,328)		(15,093)		1,576		(28,845)
Proceeds from sales, net of cash		-		1,352		-		-		1,352
Increase in restricted cash		-		-		(2,457)		-		(2,457)
Net Cash Used in Investing Activities		-		(13,976)		(17,550)		1,576		(29,950)

Cash Flows From Financing Activities:
Repayments of borrowings		-		-		(115,163)		-		(115,163)
Borrowings under debt agreements, net
of debt discount		17,500		-		123,125		-		140,625
Proceeds from issuance of common stock		12,376		-		-		-		12,376
Repayments of MPP		-		-		(5,000)				(5,000)
Financing costs paid		(456)		-		(8,817)		-		(9,273)
Intercompany cash management		8,160		8,984		(17,144)		-		-
Other financing		(416)		-		-		-		(416)
Net Cash Provided by (Used in)
Financing Activities		37,164		8,984		(22,999)		-		23,149

Net Change in Cash and Cash Equivalents		-		26,336		(5,588)		-		20,748
Cash and Cash Equivalents, Beginning
of Period		-		2,417		32,325		-		34,742
Cash and Cash Equivalents, End of Period	$	-	$	28,753	$	26,737	$	-	$	55,490



For the Three Months Ended March 31, 2013
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Cash Flows from Operating Activities:
Net loss	$	(21,591)	$	6,717	$	828	$		$	(14,046)
Adjustments to reconcile net loss to
net cash provided by (used in) operations
Depreciation, depletion and amortization		-		1,139		21,808		-		22,947
Impairment of oil and gas properties		-		3,534		-		-		3,534
Deferred tax expense (benefit)		-		-		128		-		128
Unrealized (gains) losses on derivatives		700		-		(2,280)		-		(1,580)
Amortization of non-cash compensation		163		-		-		669		832
Amortization of loan costs and discount		1,951		-		1,488		-		3,439
Non-cash interest expense		-		-		2,274		-		2,274
Other		43		(4)		(4,762)		-		(4,723)
Changes in operating assets and liabilities:
(Increase) decrease in receivables		-		275		15,554		-		15,829
(Increase) decrease in other current assets		3,643		(15,057)		55		-		(11,359)
Increase (decrease) in liabilities		(17,112)		52		48,059		(669)		30,330
Net Cash Provided by (Used in)
Operating Activities		(32,203)		(3,344)		83,152		-		47,605

Cash Flows From Investing Activities:
Capital expenditures		-		(2,532)		(56,542)		-		(59,074)
Net Cash Used in Investing Activities		-		(2,532)		(56,542)		-		(59,074)

Cash Flows From Financing Activities:
Proceeds from issuance of MPP		-		-		43,000		-		43,000
Intercompany cash management		32,794		(19,399)		(13,395)		-		-
Financing costs paid		(591)		-		(9,344)		-		(9,935)
Net Cash Provided by (Used in)
Financing Activities		32,203		(19,399)		20,261		-		33,065

Net Change in Cash and Cash Equivalents		-		(25,275)		46,871		-		21,596
Cash and Cash Equivalents, Beginning
of Period		-		27,800		31,385		-		59,185
Cash and Cash Equivalents, End of Period	$	-	$	2,525	$	78,256	$	-	$	80,781