Note 16 – Guarantor Subsidiaries

Certain of our wholly-owned domestic subsidiaries have, jointly and severally, fully and unconditionally guaranteed the 2018 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 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 2018 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 condensed consolidated results of operations or financial statements of position.

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



As of March 31, 2015
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Cash and cash equivalents	$	-	$	17,515	$	48,983	$	-	$	66,498
Accounts receivable		-		2,187		32,083		-		34,270
Current receivables due from affiliates		494,133		68,055		100,272		(662,460)		-
Prepaid expenses and other		-		5,881		30,940		-		36,821
Current Assets		494,133		93,638		212,278		(662,460)		137,589

Property, plant and equipment, net		-		30,077		313,658		-		343,735
Restricted cash, long-term portion		-		-		95,356		-		95,356
Long-term receivables due from affiliates		554,000		500,000		-		(1,054,000)		-
Investments in subsidiaries		57,662		219,058		-		(276,720)		-
Other assets		-		11		62		-		73
Total Assets	$	1,105,795	$	842,784	$	621,354	$	(1,993,180)	$	576,753

Accounts payable	$	-	$	2,833	$	29,864	$	-	$	32,697
Current maturities of debt		-		-		433,141		-		433,141
Deferred revenue		-		-		594		-		594
Current liabilities due to affiliates		648		594,376		67,436		(662,460)		-
Asset retirement obligations, current portion		-		41		29,794		-		29,835
Accrued expenses and other		621		3,946		765		-		5,332
Current Liabilities		1,269		601,196		561,594		(662,460)		501,599

Long-term liabilities due to affiliates		-		554,000		500,000		(1,054,000)		-
Deferred taxes		-		-		39,118		-		39,118
Other liabilities		(3)		449		64,050		-		64,496
Total Liabilities Not Subject to Compromise		1,266		1,155,645		1,164,762		(1,716,460)		605,213

Liabilities Subject to Compromise		751,221		5,933		83,746		-		840,900

Series C convertible preferred stock		17,481		-		-		-		17,481
Stockholders' equity (deficit)		335,827		(318,794)		(627,154)		(276,720)		(886,841)
Total Liabilities and Equity	$	1,105,795	$	842,784	$	621,354	$	(1,993,180)	$	576,753



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


For the Three Months Ended March 31, 2015
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Revenue	$	-	$	1,083	$	63,246	$	-	$	64,329
Operating expenses		-		1,289		22,856		-		24,145
DD&A expense		-		562		55,999		-		56,561
Impairment of oil and gas properties		-		10,078		80,009		-		90,087
Insurance proceeds		-		-		(8,425)		-		(8,425)
G&A expenses		33		(649)		3,188		-		2,572
Loss from Operations		(33)		(10,197)		(90,381)		-		(100,611)

Other Income (Expense):
Interest expense		-		(16,620)		(29,351)		31,620		(14,351)
Letter of credit fees		-		-		(58)		-		(58)
Financing and transaction costs		-		(45)		(980)		-		(1,025)
Reorganization items		-		(6,866)		-		-		(6,866)
Unrealized foreign currency gains (losses)		-		-		4		-		4
Other income (expense)		16,620		15,018		87		(31,620)		105
Income (loss) before income taxes		16,587		(18,710)		(120,679)		-		(122,802)

Petroleum Revenue Tax ("PRT") Benefit		-		-		(12,141)		-		(12,141)
Corporate Tax Benefit		-		-		-		-		-
Total tax benefit		-		-		(12,141)		-		(12,141)

Net income (loss)		16,587		(18,710)		(108,538)		-		(110,661)

Preferred stock dividends		-		-		-		-		-

Net income (loss) to common shareholders	$	16,587	$	(18,710)	$	(108,538)	$	-	$	(110,661)



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
G&A expenses		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)		(16,042)		(26,435)		31,620		(31,477)
Letter of credit fees		-		-		(3,789)		-		(3,789)
Financing and transaction costs		(323)		(590)		(903)				(1,816)
Loss on early extinguishment of financing agreements		-		-		(3,543)		-		(3,543)
Litigation settlement expense		-		(19,034)		-		-		(19,034)
Unrealized foreign currency gains (losses)		-		-		(1,273)		-		(1,273)
Other income (expense)		16,621		14,996		(201)		(31,620)		(204)
Loss before income taxes		(4,848)		(24,334)		(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		(4,848)		(24,334)		(15,688)		-		(44,870)

Preferred stock dividends		456		-		-		-		456

Net loss to common shareholders	$	(5,304)	$	(24,334)	$	(15,688)	$	-	$	(45,326)



For the Three Months Ended March 31, 2015
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Cash Flows from Operating Activities:
Net loss	$	16,587	$	(18,710)	$	(108,538)	$	-	$	(110,661)
Adjustments to reconcile net loss to
net cash provided by (used in) operations
Depreciation, depletion and amortization		-		562		55,999		-		56,561
Impairment of oil and gas properties		-		10,078		80,009		-		90,087
Deferred tax expense (benefit)		-		-		(11,137)		-		(11,137)
Amortization of non-cash compensation		-		-		-		(10)		(10)
Amortization of loan costs and discount		-		-		2,238		-		2,238
Other		(39)		6,338		(11,316)		-		(5,017)
Changes in operating assets and liabilities:
(Increase) decrease in receivables		-		240		997		-		1,237
(Increase) decrease in other current assets		-		(17,219)		19,843		-		2,624
Increase (decrease) in liabilities		236		(7,399)		(15,895)		-		(23,058)
Net Cash Provided by (Used in)
Operating Activities		16,784		(26,110)		12,200		(10)		2,864

Cash Flows From Investing Activities:
Capital expenditures		-		(5,826)		(17,897)		622		(23,101)
Increase in restricted cash		-		-		4,885		-		4,885
Net Cash Used in Investing Activities		-		(5,826)		(13,012)		622		(18,216)

Cash Flows From Financing Activities:
Intercompany cash management		(16,784)		17,396		-		(612)		-
Other financing		-		-		-		-		-
Net Cash Provided by (Used in)
Financing Activities		(16,784)		17,396		-		(612)		-

Net Change in Cash and Cash Equivalents		-		(14,540)		(812)		-		(15,352)
Cash and Cash Equivalents, Beginning
of Period		-		32,055		49,795		-		81,850
Cash and Cash Equivalents, End of Period	$	-	$	17,515	$	48,983	$	-	$	66,498



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	$	(4,848)	$	(24,334)	$	(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
Litigation settlement expense		-		19,034		-		-		19,034
Loss on early extinguishment of debt		-		-		6,856		-		6,856
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		(20,544)		14,708		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)
Intercompany cash management		(8,460)		25,604		(17,144)		-		-
Financing costs paid		(456)		-		(8,817)		-		(9,273)
Other financing		(416)		-		-		-		(416)
Net Cash Provided by (Used in)
Financing Activities		20,544		25,604		(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