EX-99.1 2 d767393dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

For immediate release

Endeavour Announces 2014 Second Quarter

Financial and Operational Results

Houston, August 5, 2014 – Endeavour International Corporation (NYSE: END) (LSE: ENDV) today reported physical production for the quarter that exceeded the Company’s revised guidance range of 10,500 – 11,500 barrels of oil equivalent per day (“boepd”) previously announced on June 10, 2014. Physical production for the second quarter of 2014 averaged 12,900 boepd compared to 9,500 boepd for the same quarter of 2013. Sales volumes for the second quarter of 2014 were 7,400 boepd, compared to 14,500 boepd for the same quarter in the prior year.

The Company did not have a lifting of production at the Alba field during the quarter, so revenues were significantly lower than would have been if based on physical production. Physical production for the quarter produced but not lifted is recorded as deferred revenue on the balance sheet. Endeavour estimates that there will be three to four liftings per year at the Alba field. The most recent lifting occurred on July 4, 2014 and the associated revenues of approximately $50 million will be reflected in the Company’s third quarter results. A similar situation occurred in the third quarter of 2013, when there was no lifting at the Alba field.

The Company reported a second quarter 2014 net loss, as adjusted of $38.7 million compared to a net loss, as adjusted of $12.6 million for the same period in 2013. On a GAAP basis, net loss for the second quarter was $36.7 million as compared to net loss of $13.9 million for the same quarter in 2013.

Recent Events:

 

    Rochelle field fully operational with both wells producing during the quarter

 

    Settled and received $12.6 million in proceeds for the Rochelle E1Y well insurance claim

 

    Executed a forward sale for $22.5 million

 

    Successfully finished the hydraulic fracture stimulation of a third Pennsylvania Marcellus well

“During the quarter we were able to establish production from both wells at the Rochelle field. We experienced periods during the quarter where production rates exceeded 100 million cubic feet of gas per day (“mmcfd”) and 4,000 boepd. This confirms our confidence in the Rochelle field’s potential,”


said William L. Transier, chairman, chief executive officer and president. “However, we continue to be challenged by unexpected downtime and lower production efficiency rates which are directly attributable to the production facilities we do not control. We are working with the operators at Alba and Rochelle to improve ongoing performance.”

Operational Update

North Sea

At Rochelle, the West Rochelle (W1) development well was returned to production in mid-May. The E2 and W1 wells produced together during the quarter and achieved production rates greater than 100 million cubic feet equivalent per day (“mmcfed”) for 32 days during the second quarter. The Scott Platform began its planned shutdown period on July 27, 2014 and so the Rochelle Field is expected to be shut-in for three weeks until the Scott Platform goes back into service. The shutdown at the Scott Platform is being executed to coincide with the previously announced maintenance work occurring on the Forties Pipeline System. Endeavour has a 44% working interest in Rochelle.

At Alba, the A69 well is being completed and is expected to start production this month. Progress was made in the southern part of the field with partial water injection being reinstated. Installation of the replacement pipeline is planned early in the first quarter of 2015, with start-up expected in the second quarter. The partial reinstatement of water injection in the southern part of the field has sustained production throughout the second quarter. Well A69 is expected to increase overall production rates in the third quarter. Endeavour has a 25.68% working interest in Alba.

Bacchus continues to perform at rates above the Company’s expectations. The B3Y well has not, as expected, been turned into a water injector because of certain technical issues. Future options for the B3Y well continue to be evaluated. Endeavour has a 30% working interest in the field.

North America

In the Pennsylvania Marcellus, Endeavour successfully completed hydraulic fracture stimulation of the C-13 horizontal well, the third completion this year in the Daniel Field. The Company’s operated activity included more than double the number of frac stages on the longest laterals to date relative to previous wells. Following these successful well completions, operatorship of the Marcellus assets was transferred to Samson Exploration, LLC. Later this year, the wells will be tied into a new third-party pipeline being commissioned by EQT Corporation that allows firm capacity of up to 10 mmcfd, with potential for future expansion.

In the Piceance Basin Rim play in Northwest Colorado, Endeavour has two projects targeting liquids-rich Niobrara and Frontier objectives. At present, a rig has commenced drilling an initial horizontal Niobrara test at the Company’s Wiley prospect. Endeavour has leasehold and drilling options on 40,000 gross acres and 27,000 net acres.

Finance

In May, Endeavour entered into a third forward sale agreement receiving a payment of $22.5 million. This effectively hedged a portion of production by locking in pricing for in excess of 200,000 barrels of oil, over a six-month delivery period. The forward sale is expected to be fulfilled in November 2014. The first forward sale commitment was fulfilled in June 2013 and the second in March 2014.

In January of this year, the Company refinanced its revolving credit facility ($115 million at 13%) and two reimbursement agreements ($120 million at 13% and $33 million at 9% interest) into a new senior


secured first lien term loan with an interest rate of 8.25% (libor + 700 basis points). During the second quarter, the first full quarter reflecting the refinancing impact, Endeavour realized cash interest expense savings of $4 million ($16 million on annualized basis). In addition, gross general and administrative expenses were reduced, as a result of the previously announced consolidation of the Company’s U.K. offices, headcount reductions and other cost reduction initiatives.

Also during the quarter, the Company settled an insurance claim for the Rochelle E1Y well, which was damaged in early 2013, for £7.5 million (approximately $12.6 million). The proceeds from the settlement were received in June.

Third Quarter Production Guidance and Maintenance Downtime

In the U.K. North Sea, the third quarter is typically the time to perform maintenance and other tasks on infrastructure. During 2014, Endeavour anticipates that all of its producing fields will be modestly impacted. These shutdowns will be less invasive than those experienced in 2013, but will still have an impact on third quarter physical production.

At present, there is a 16 day shutdown on the Forties Pipeline System planned in August that will affect oil production from Bacchus and Rochelle. Currently underway is a three week Rochelle shutdown which coincides with the work being done at Forties. At Alba during August, a short shutdown of three days is planned to test the emergency systems. Average daily physical production volumes are expected to be in the range of 9,500 – 10,500 boepd for the third quarter of 2014.

Earnings Conference Call, Tuesday, August 5, 2014 at 9:00 a.m., Central Time, 3:00 p.m. British Summer Time

Endeavour International will host a conference call and web cast to discuss its 2014 second quarter financial and operating results on Tuesday, August 5, 2014 at 9:00 a.m. Central Time, 3:00 p.m. British Summer Time. A supporting slide deck for the conference call is available on the home page of Endeavour’s website at www.endeavourcorp.com and under the Investor Relations section in conjunction with the details for the conference call. To participate and ask questions during the conference call, dial the local country telephone number and the confirmation code 3569591. The toll-free numbers are 888-221-3886 in the United States and 0-808-101-7548 in the United Kingdom. Other international callers should dial 913-312-1453 (tolls apply). To listen only to the live audio web cast access Endeavour’s home page at www.endeavourcorp.com. A replay will be available beginning at 12:00 p.m. Central Time on August 5, 2014 through 12:00 p.m. on August 11, 2014 by dialing toll free 888-203-1112 (U.S.) or 719-457-0820 (international), confirmation code 3569591.

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 www.endeavourcorp.com.

Additional information for investors:

Certain statements in this news release should be regarded as “forward-looking” statements within the meaning of the securities laws. These statements speak only as of the date made. Such statements are subject to assumptions, risk and uncertainty. Actual results or events may vary materially.

The Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose not only proved reserves, but also probable reserves and possible reserves that meet the SEC’s definitions for such terms, and


price and cost sensitivities for such reserves, and prohibits disclosure of resources that do not constitute such reserves. We may use certain terms in our news releases, such as “reserve potential,” that the SEC’s guidelines strictly prohibit us from including in filings with the SEC. These estimates are by their nature more speculative than estimates of proved, probable and possible reserves and accordingly are subject to substantially greater risk of being actually realized. In addition, we do not represent that the probable or possible reserves described herein meet the recoverability thresholds established by the SEC in its new definitions. Investors are urged to also consider closely the disclosure in our filings with the SEC, available from our website at www.endeavourcorp.com. Endeavour is also subject to the requirements of the London Stock Exchange and considers the disclosures in this release to be appropriate and/or required under the guidelines of that exchange.

For further information:

 

Endeavour – Investor Relations
Darcey Matthews    713.307.8711
Pelham Public Relations – UK Media
Philip Dennis    +44 (0)207 861 3919
Henry Lerwill    +44 (0)207 861 3169


Endeavour International Corporation

Condensed Consolidated Balance Sheets

(Amounts in thousands)

 

    

June 30,

2014

    December 31,
2013
 
     (unaudited)    

 

 
Assets     

Current Assets:

    

Cash and cash equivalents

   $ 83,209     $ 34,742  

Accounts receivable

     46,992       65,171  

Prepaid expenses and other current assets

     103,550       60,318  
  

 

 

   

 

 

 

Total Current Assets

     233,751       160,231  

Property and Equipment, Net

     1,032,281       1,072,151  

Goodwill

     259,238       259,238  

Other Assets

     30,455       33,222  
  

 

 

   

 

 

 

Total Assets

   $ 1,555,725     $ 1,524,842  
  

 

 

   

 

 

 
Liabilities and Stockholders’ Equity     

Current Liabilities:

    

Accounts payable

   $ 32,907     $ 38,033  

Current maturities of debt

     2,131       —     

Deferred revenue

     57,811       20,965  

Monetary production payment, current

     125,833       74,167  

Accrued expenses and other

     94,748       88,625  
  

 

 

   

 

 

 

Total Current Liabilities

     313,430       221,790  

Long-Term Debt

     894,122       870,878  

Deferred Taxes

     183,501       146,213  

Other Liabilities

     162,457       223,870  
  

 

 

   

 

 

 

Total Liabilities

     1,553,510       1,462,751  

Commitments and Contingencies

    

Series C Convertible Preferred Stock

     43,703       43,703  

Stockholders’ Equity

     (41,488     18,388  
  

 

 

   

 

 

 

Total Liabilities and Stockholders’ Equity

   $ 1,555,725     $ 1,524,842  
  

 

 

   

 

 

 


Endeavour International Corporation

Condensed Consolidated Statement of Operations

(Unaudited)

(Amounts in thousands, except per share data)

 

     Three Months Ended     Six Months Ended  
     June 30,     June 30,  
     2014     2013     2014     2013  

Revenues

   $ 44,857      $ 126,165      $ 139,021      $ 183,837   

Cost of Operations:

        

Operating expenses

     6,847        38,103        34,017        55,593   

Depreciation, depletion and amortization

     32,251        51,923        77,220        74,870   

Impairment of oil and gas properties

     —          —          —          3,534   

General and administrative

     5,240        4,882        10,089        10,364   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Expenses

     44,338        94,908        121,326        144,361   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income From Operations

     519        31,257        17,695        39,476   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other Income (Expense):

        

Unrealized gains (losses) on derivatives

     2,010        (1,277     4,669        303   

Interest expense

     (31,431     (24,447     (62,908     (45,885

Letter of credit fees

     (2,270     (7,128     (6,059     (18,508

Loss on early extinguishment of financing agreements

     —          —          (3,543     —     

Litigation settlement expense

     —          —          (19,034     —     

Unrealized gain (loss) on foreign currency exchange

     (4,511     1,072        (5,784     10,831   

Other expense

     (1,402     (2,081     (3,423     (1,960
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Other Expense

     (37,604     (33,861     (96,082     (55,219
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss Before Income Taxes

     (37,085     (2,604     (78,387     (15,743

Petroleum Revenue Tax (“PRT”) Expense

     2,243        7,012        3,968        7,208   

Corporate Tax Expense (Benefit)

     (2,655     4,269        (811     4,981   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Tax Expense

     (412     11,281        3,157        12,189   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Loss

     (36,673     (13,885     (81,544     (27,932

Preferred Stock Dividends

     456        456        911        911   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Loss to Common Stockholders

   $ (37,129   $ (14,341   $ (82,455   $ (28,843
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Loss per Common Share:

        

Basic and Diluted

   $ (0.72   $ (0.30   $ (1.63   $ (0.61
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted Average Number of Common Shares Outstanding:

        

Basic and Diluted

     51,580        47,092        50,591        47,076   
  

 

 

   

 

 

   

 

 

   

 

 

 


Endeavour International Corporation

Condensed Consolidated Statement of Cash Flows

(Unaudited)

(Amounts in thousands)

 

     Six Months Ended  
     June 30,  
     2014     2013  

Cash Flows from Operating Activities:

    

Net loss

   $ (81,544   $ (27,932

Adjustments to reconcile net loss to net cash provided by operating activities:

    

Depreciation, depletion and amortization

     77,220        74,870   

Impairment of oil and gas properties

     —          3,534   

Deferred tax benefit

     (7,951     (2,457

Unrealized gains on derivatives

     (4,669     (303

Amortization of non-cash compensation

     2,123        1,632   

Amortization of loan costs and discount

     13,376        8,695   

Non-cash interest expense

     3,812        3,454   

Loss on early extinguishment of financing agreements

     6,856        —     

Litigation settlement expense

     14,034        —     

Other

     6,605        (2,444

Changes in operating assets and liabilities

     30,068        12,562   
  

 

 

   

 

 

 

Net Cash Provided by Operating Activities

     59,930        71,611   

Cash Flows From Investing Activities:

    

Capital expenditures

     (39,302     (108,786

Acquisitions, net of cash acquired

     —          —     

Proceeds from sales, net of cash

     1,352        —     

Proceeds from insurance settlement

     12,606     

Increase in restricted cash

     (2,521     —     
  

 

 

   

 

 

 

Net Cash Used in Investing Activities

     (27,865     (108,786

Cash Flows From Financing Activities:

    

Repayments of borrowings

     (115,699     —     

Borrowings under debt agreements, net of debt discount

     140,625        —     

Proceeds from issuance of common stock

     12,336        —     

Proceeds from issuance of monetary production payment

     —          125,000   

Repayments of monetary production payment

     (10,833     —     

Financing costs paid

     (9,193     (15,804

Other financing

     (834     (416
  

 

 

   

 

 

 

Net Cash Provided by Financing Activities

     16,402        108,780   

Net Increase in Cash and Cash Equivalents

     48,467        71,605   

Cash and Cash Equivalents, Beginning of Period

     34,742        59,185   
  

 

 

   

 

 

 

Cash and Cash Equivalents, End of Period

   $ 83,209      $ 130,790   
  

 

 

   

 

 

 


Endeavour International Corporation

Operating Statistics

(Unaudited)

 

     Three Months Ended      Six Months Ended  
     June 30,      June 30,  
     2014      2013      2014      2013  

Sales volume: (1)

           

Oil and condensate sales (mbbls):

           

United Kingdom

     255         1,205         1,087         1,713   

United States

     —           1         —           1   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     255         1,206         1,087         1,714   
  

 

 

    

 

 

    

 

 

    

 

 

 

Gas sales (mmcf):

           

United Kingdom

     2,109         15         2,694         26   

United States

     415         667         846         1,489   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     2,524         682         3,540         1,515   
  

 

 

    

 

 

    

 

 

    

 

 

 

Oil equivalent sales (mboe):

           

United Kingdom

     606         1,207         1,536         1,717   

United States

     70         112         141         249   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     676         1,319         1,677         1,966   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total boed

     7,424         14,497         9,269         10,862   
  

 

 

    

 

 

    

 

 

    

 

 

 

Physical production volume (boed): (1)

           

United Kingdom

     12,079         8,083         10,351         7,973   

United States

     800         1,415         818         1,454   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     12,879         9,498         11,169         9,427   
  

 

 

    

 

 

    

 

 

    

 

 

 

Realized Price, before and after derivatives:

           

United Kingdom:

           

Oil and condensate price ($ per bbl)

   $ 106.34       $ 102.68       $ 104.19       $ 104.37   
  

 

 

    

 

 

    

 

 

    

 

 

 

Gas price ($ per mcf)

   $ 7.62       $ 8.19       $ 8.19       $ 8.06   
  

 

 

    

 

 

    

 

 

    

 

 

 

Equivalent oil price ($ per boe)

   $ 71.17       $ 102.57       $ 88.10       $ 104.23   
  

 

 

    

 

 

    

 

 

    

 

 

 

United States:

           

Oil and condensate price ($ per bbl)

   $ 97.33       $ 85.46         98.67         88.19   
  

 

 

    

 

 

    

 

 

    

 

 

 

Gas price ($ per mcf)

   $ 4.07       $ 3.40       $ 4.30       $ 3.22   
  

 

 

    

 

 

    

 

 

    

 

 

 

Equivalent oil price ($ per boe)

   $ 24.85       $ 20.72       $ 26.01       $ 19.49   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total:

           

Oil and condensate price ($ per bbl)

   $ 106.32       $ 102.67       $ 104.19       $ 104.37   
  

 

 

    

 

 

    

 

 

    

 

 

 

Gas price ($ per mcf)

   $ 7.03       $ 3.50       $ 7.26       $ 3.30   
  

 

 

    

 

 

    

 

 

    

 

 

 

Equivalent oil price ($ per boe)

   $ 66.40       $ 95.64       $ 82.87       $ 93.51   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)  We record oil revenues when deliveries have occurred and legal ownership of the oil transfers to the customer. Physical production may differ from sales volumes based on the timing of tanker liftings for our international sales.


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 loss to the following non-GAAP financial measures: net income (loss), as adjusted and Adjusted EBITDA. 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.

 

(Amounts in thousands)

   Three Months Ended     Six Months Ended  
   June 30,     June 30,  
     2014     2013     2014     2013  

Net loss

   $ (36,673   $ (13,885   $ (81,544   $ (27,932

Impairment of oil and gas properties (net of tax) (1)

     —          —          —          3,534   

Unrealized gains (losses) on derivatives (net of tax) (2)

     (2,010     1,277        (4,669     (303

Loss on early extinguishment of financing agreements (net of tax) (3)

     —          —          1,220        —     

Litigation settlement expense (net of tax) (1)

     —          —          19,034        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Loss as Adjusted

   $ (38,683   $ (12,608   $ (65,959   $ (24,701
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (36,673   $ (13,885   $ (81,544   $ (27,932

Unrealized gains on derivatives

     (2,010     1,277        (4,669     (303

Net interest expense

     31,425        24,427        62,892        45,849   

Letter of credit fees

     2,270        7,128        6,059        18,508   

Depreciation, depletion and amortization

     32,251        51,923        77,220        74,870   

Impairment of oil and gas properties

     —          —          —          3,534   

Loss on early extinguishment of financing agreements

     —          —          3,543        —     

Litigation settlement expense

     —          —          19,034        —     

Income tax expense (benefit)

     (412     11,281        3,157        12,189   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 26,851      $ 82,151      $ 85,692      $ 126,715   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)  We recognized no tax benefits as there was no assurance that we could generate any U.S. taxable earnings.
(2)  Since the unrealized gains on derivatives were related to liabilities other than the U.K., we recognized no tax benefits as there was no assurance that we could generate any taxable earnings.
(3)  Net of tax benefit of none, none, $2,323 and none, respectively.