Note 27 – Guarantor Subsidiaries

Certain of our wholly-owned domestic subsidiaries have, jointly and severally, fully and unconditionally guaranteed the 2018 Notes. Pursuant to 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 of 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 2018 Notes or satisfaction and discharge of the indentures governing the 2018 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 2018 Notes.

During 2014, we executed an intercompany loan agreement, effective May 2012, between Endeavour International Corporation and one of its wholly-owned subsidiaries that is a guarantor of the Senior Notes. As the intercompany loan is effective for prior periods, the revisions for this loan and related interest to the applicable prior periods are reflected in the financial information herein. The intercompany loan has no effect on our consolidated results of operations or financial statement position.

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



As of December 31, 2014
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Cash and cash equivalents	$	-	$	32,055	$	49,795	$	-	$	81,850
Accounts receivable		-		2,427		33,080		-		35,507
Current receivables due from affiliates		477,351		53,174		104,085		(634,610)		-
Prepaid expenses and other		-		7,350		40,047		-		47,397
Current Assets		477,351		95,006		227,007		(634,610)		164,754

Property, plant and equipment, net		-		35,529		433,980		-		469,509
Restricted cash, long-term portion		-		-		100,241		-		100,241
Long-term receivables due from affiliates		554,000		500,000		-		(1,054,000)		-
Investments in subsidiaries		57,662		219,058		-		(276,720)		-
Other assets		-		10		62		-		72
Total Assets	$	1,089,013	$	849,603	$	761,290	$	(1,965,330)	$	734,576

Accounts payable	$	-	$	2,065	$	25,299	$	-	$	27,364
Current maturities of debt		-		-		432,181		-		432,181
Deferred revenue		-		-		14,157		-		14,157
Current liabilities due to affiliates		648		581,402		52,560		(634,610)		-
Asset retirement obligations, current portion		-		42		40,505		-		40,547
Accrued expenses and other		385		5,663		9,148		-		15,196
Current Liabilities		1,033		589,172		573,850		(634,610)		529,445

Long-term liabilities due to affiliates		-		554,000		500,000		(1,054,000)		-
Deferred taxes		-		-		56,670		-		56,670
Other liabilities		1		436		65,640				66,077
Total Liabilities Not Subject to Compromise		1,034		1,143,608		1,196,160		(1,688,610)		652,192
Liabilities Subject to Compromise		751,219		6,079		83,746		-		841,044

Series C convertible preferred stock		17,481		-		-		-		17,481
Stockholders' equity (deficit)		319,279		(300,084)		(518,616)		(276,720)		(776,141)
Total Liabilities and Equity	$	1,089,013	$	849,603	$	761,290	$	(1,965,330)	$	734,576



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		20,782		45,982		(920,664)		-
Prepaid expenses and other		-		594		59,724		-		60,318
Current Assets		853,900		25,625		201,370		(920,664)		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	$	838,060	$	1,452,102	$	(1,697,400)	$	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		20,171		(920,672)		-
Accrued expenses and other		27,474		3,352		57,799		-		88,625
Current Liabilities		28,122		904,419		209,921		(920,672)		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		905,020		1,267,896		(1,420,672)		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	$	838,060	$	1,452,102	$	(1,697,400)	$	1,524,842



For the Year Ended December 31, 2014
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Revenue	$	-	$	6,729	$	309,303	$	-	$	316,032
Operating expenses		-		4,486		82,504		-		86,990
DD&A expense		-		2,523		173,221		-		175,744
Impairment of oil and gas properties		-		71,562		405,159		-		476,721
Goodwill impairment loss		-		-		259,238		-		259,238
Insurance proceeds		-		-		(10,786)		-		(10,786)
G&A expenses		166		248		14,413		-		14,827
Loss from Operations		(166)		(72,090)		(614,446)		-		(686,702)

Derivatives:
Realized losses		-		-		(175)		-		(175)
Unrealized gains		5,115		-		5,703		-		10,818
Interest expense		(65,251)		(64,240)		(105,923)		126,480		(108,934)
Letter of credit fees		-		-		(8,492)		-		(8,492)
Financing and transaction costs		(516)		(9,204)		(1,234)		-		(10,954)
Loss on early extinguishment of financing agreements		-		-		(34,297)		-		(34,297)
Litigation settlement expense		-		(19,034)		-		-		(19,034)
Reorganization items		(29,619)		(9,318)		(4,285)		-		(43,222)
Unrealized foreign currency gains (losses)		-		(2)		5,712				5,710
Other income (expense)		66,480		60,405		(67)		(126,480)		338
Loss before taxes		(23,957)		(113,483)		(757,504)		-		(894,944)
Income tax benefit		-		-		(54,689)		-		(54,689)
Net loss		(23,957)		(113,483)		(702,815)		-		(840,255)
Preferred stock dividends		1,329		-		-		-		1,329
Net loss to common shareholders	$	(25,286)	$	(113,483)	$	(702,815)	$	-	$	(841,584)



For the Year Ended December 31, 2013
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Revenue	$	-	$	8,368	$	329,296	$	-	$	337,664
Operating expenses		-		7,399		98,045		-		105,444
DD&A expense		-		4,249		138,799		-		143,048
Impairment of oil and gas properties		-		9,566		-		-		9,566
G&A expenses		2,502		7,764		8,858		-		19,124
Income (loss) from Operations		(2,502)		(20,610)		83,594		-		60,482

Derivatives:
Unrealized losses		(503)		-		(1,340)		-		(1,843)
Interest expense		(81,400)		2,988		(86,105)		60,001		(104,516)
Letter of credit fees		-		-		(33,425)		-		(33,425)
Financing and transaction costs		(27)		(2,542)		(4,405)		-		(6,974)
Loss on early extinguishment of financing agreements		-		-		-		-		-
Unrealized foreign currency losses		-		-		(3,116)		-		(3,116)
Other income (expense)		-		60,005		351		(60,001)		355
Income (loss) before taxes		(84,432)		39,841		(44,446)		-		(89,037)
Income tax expense		-		-		6,442		-		6,442
Net income (loss)		(84,432)		39,841		(50,888)		-		(95,479)
Preferred stock dividends		1,823		-		-		-		1,823
Net income (loss) to common shareholders	$	(86,255)	$	39,841	$	(50,888)	$	-	$	(97,302)



For the Year Ended December 31, 2012
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Revenue	$	-	$	11,877	$	207,181	$	-	$	219,058
Operating expenses		-		6,968		51,568		-		58,536
DD&A expense		-		8,603		57,961		-		66,564
Impairment of oil and gas properties		-		53,072		-		-		53,072
G&A expenses		2,629		9,887		8,569		-		21,085
Income (loss) from Operations		(2,629)		(66,653)		89,083		-		19,801

Derivatives:
Unrealized gains (losses)		(705)		-		5,846		-		5,141
Interest expense		(54,163)		(66,645)		(67,673)		104,359		(84,122)
Letter of credit fees		-		-		(21,903)		-		(21,903)
Financing and transaction costs		-		(1,410)		(4,606)		-		(6,016)
Loss on early extinguishment of financing agreements		-		-		(21,661)		-		(21,661)
Unrealized foreign currency gains		-		-		8,080	-	-	-	8,080
Other income (expense)		53,082		47,740		(7,781)		(104,359)		(11,318)
Loss before taxes		(4,415)		(86,968)		(20,615)		-		(111,998)
Income tax expense		-		-		21,225		(6,997)		14,228
Net loss		(4,415)		(86,968)		(41,840)		6,997		(126,226)
Preferred stock dividends		1,823		-		-		-		1,823
Net loss to common shareholders	$	(6,238)	$	(86,968)	$	(41,840)	$	6,997	$	(128,049)



For the Year Ended December 31, 2014
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Cash Flows from Operating Activities:
Net loss	$	(23,957)	$	(113,483)	$	(702,815)	$	—	$	(840,255)
Adjustments to reconcile net loss to
net cash provided by (used in) operations
DD&A expense		—		2,523		173,221		—		175,744
Impairment of oil and gas properties		—		71,562		405,159		—		476,721
Goodwill impairment loss		—		—		259,238		—		259,238
Deferred tax benefit		—		—		(63,755)		—		(63,755)
Unrealized gains on derivatives		(5,115)		—		(5,703)		—		(10,818)
Amortization of non-cash compensation		741		—		—		(857)		(116)
Amortization of loan costs and discount		7,065		—		15,174		—		22,239
Non-cash interest expense		—		—		5,739		—		5,739
Loss on early extinguishment of debt		—		—		22,708		—		22,708
Non-cash litigation settlement expense		—		—		—		14,034		14,034
Non-cash reorganization items		29,619		—		3,899		—		33,518
Other		—		(182,517)		175,170		—		(7,347)
Changes in operating assets and liabilities:
Decrease (increase) in receivables		—		55,069		(25,583)		—		29,486
Decrease (increase) in other current assets		142		(6,651)		(9,758)		—		(16,267)
Increase (decrease) in liabilities		19,405		150,614		(203,001)		—		(32,982)
Net Cash Provided by (Used in)
Operating Activities		27,900		(22,883)		49,693		13,177		67,887

Cash Flows From Investing Activities:
Capital expenditures		—		(16,077)		(75,542)				(91,619)
Proceeds from sales, net of cash		—		1,353		—		—		1,353
Proceeds from insurance settlement		—		—		15,120		—		15,120
Increase in restricted cash		—		—		(100,113)		—		(100,113)
Net Cash Used in Investing Activities		—		(14,724)		(160,535)		—		(175,259)

Cash Flows From Financing Activities:
Repayments of borrowings		—		—		(240,163)		—		(240,163)
Borrowings under debt agreements, net
of debt discount		17,500		—		554,325		—		571,825
Proceeds from issuance of common stock		12,396		—		—		—		12,396
Repayments of MPP		—		—		(166,667)				(166,667)
Financing costs paid		(625)		—		(19,184)		—		(19,809)
Intercompany cash management		(54,069)		67,246		—		(13,177)		—
Other financing		(3,102)		(1)		1		—		(3,102)
Net Cash Provided by (Used in)
Financing Activities		(27,900)		67,245		128,312		(13,177)		154,480

Net Change in Cash and Cash Equivalents		—		29,638		17,470		—		47,108
Cash and Cash Equivalents, Beginning
of Period		—		2,417		32,325		—		34,742
Cash and Cash Equivalents, End of Period	$	—	$	32,055	$	49,795	$	—	$	81,850



For the Year Ended December 31, 2013
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Cash Flows from Operating Activities:
Net loss	$	(84,432)	$	39,841	$	(50,888)	$	—	$	(95,479)
Adjustments to reconcile net loss to
net cash provided by (used in) operations
DD&A expense		—		4,249		138,799		—		143,048
Impairment of oil and gas properties		—		9,566		—		—		9,566
Deferred tax benefit		—		—		(14,255)		—		(14,255)
Unrealized losses on derivatives		503		—		1,340		—		1,843
Amortization of non-cash compensation		622		—		—		2,984		3,606
Amortization of loan costs and discount		7,826		—		14,533		—		22,359
Non-cash interest expense (income)		—		(12,958)		20,040		—		7,082
Other		44		12,942		3,344		—		16,330
Changes in operating assets and liabilities:
Decrease (increase) in receivables		—		863		(19,854)		—		(18,991)
Decrease (increase) in other current assets		—		(14,252)		15,576		—		1,324
Increase (decrease) in liabilities		—		(13,628)		(24,395)		19,038		(18,985)
Net Cash Provided by (Used in)
Operating Activities		(75,437)		26,623		84,240		22,022		57,448

Cash Flows From Investing Activities:
Capital expenditures		—		(15,111)		(211,881)		1,237		(225,755)
Acquisitions, net of cash acquired		—		65		(2,852)		—		(2,787)
Proceeds from sales, net of cash		—		6,712		62		—		6,774
Net Cash Used in Investing Activities		—		(8,334)		(214,671)		1,237		(221,768)

Cash Flows From Financing Activities:
Proceeds from issuance of MPP		—		—		175,000		—		175,000
Repayments of MPP		—		—		(8,333)		—		(8,333)
Financing costs paid		(700)		(500)		(35,296)		11,286		(25,210)
Intercompany cash management		77,874		(43,329)		—		(34,545)		—
Other financing		(1,737)		157		—		—		(1,580)
Net Cash Provided by (Used in)
Financing Activities		75,437		(43,672)		131,371		(23,259)		139,877

Net Change in Cash and Cash Equivalents		—		(25,383)		940		—		(24,443)
Cash and Cash Equivalents, Beginning
of Period		—		27,800		31,385		—		59,185
Cash and Cash Equivalents, End of Period	$	—	$	2,417	$	32,325	$	—	$	34,742


For the Year Ended December 31, 2012
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations (1)		Consolidated
Cash Flows from Operating Activities:
Net loss	$	(4,415)	$	(86,968)	$	(41,840)	$	6,997	$	(126,226)
Adjustments to reconcile net loss to
net cash provided by (used in) operations
DD&A expense		—		8,603		57,961		—		66,564
Impairment of oil and gas properties		—		53,072		—		—		53,072
Deferred tax benefit		—		—		(10,597)		(6,997)		(17,594)
Unrealized losses (gains) on derivatives		705		—		(5,846)		—		(5,141)
Amortization of non-cash compensation		854		—		—		3,547		4,401
Amortization of loan costs and discount		6,908		5		7,266		—		14,179
Non-cash interest expense		445		—		8,239		—		8,684
Loss on early extinguishment of debt		—		—		21,661		—		21,661
Other		283		173		14,909		—		15,365
Changes in operating assets and liabilities:
Decrease (increase) in receivables		—		1,495		(25,814)		—		(24,319)
Decrease (increase) in other current assets		—		(9,223)		8,631		—		(592)
Increase (decrease) in liabilities		—		88,635		(21,617)		(38,459)		28,559
Net Cash Provided by (Used in)
Operating Activities		4,780		55,792		12,953		(34,912)		38,613

Cash Flows From Investing Activities:
Capital expenditures		—		(39,794)		(207,131)		—		(246,925)
Acquisitions, net of cash acquired		—		(2,372)		(236,482)		—		(238,854)
Proceeds from sales, net of cash		—		—		1,407		—		1,407
Issuance of note receivable to affiliate		—		(500,000)		—		500,000		—
Increase in restricted cash		—		(50)		(128)		—		(178)
Net Cash Used in Investing Activities		—		(542,216)		(442,334)		500,000		(484,550)

Cash Flows From Financing Activities:
Repayments of borrowings		(32,457)		—		(242,172)		—		(274,629)
Borrowings under debt agreements, net
of debt discount		538,860		—		115,163		—		654,023
Borrowings from affiliates		—		—		500,000		(500,000)		—
Proceeds from issuance of common stock		60,805		—		—		—		60,805
Payments for early extinguishment of debt		—		—		(7,248)		—		(7,248)
Financing costs paid		(24,141)		—		(8,063)		—		(32,204)
Intercompany cash management		(546,186)		511,274		—		34,912		—
Other financing		(1,661)		(1)		1		—		(1,661)
Net Cash Provided by (Used in)
Financing Activities		(4,780)		511,273		357,681		(465,088)		399,086

Net Change in Cash and Cash Equivalents		—		24,849		(71,700)		—		(46,851)
Cash and Cash Equivalents, Beginning
of Period		—		2,951		103,085		—		106,036
Cash and Cash Equivalents, End of Period	$	—	$	27,800	$	31,385	$	—	$	59,185

⁽¹⁾

The $7.0 million adjustment reflects the correction of an immaterial error in deferred income taxes that was corrected to beginning stockholder’s equity as of January 1, 2010 in the separate financials of the non-guarantor subsidiaries but reflected in the statement of operations for Endeavour for the year-ended December 31, 2012.

⁽²⁾

Revised to reflect intercompany cash management activities previously presented cash flows from operations in “Cash Flows From Financing Activities.” There was no impact to Consolidated balances.