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 September 30, 2013
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Cash and cash equivalents	$	-	$	3,584	$	56,773	$	-	$	60,357
Accounts receivable		-		1,936		22,560		-		24,496
Current receivables due from affiliates		854,025		5,530		47,597		(907,152)		-
Prepaid expenses and other		-		404		48,292		-		48,696
Current Assets		854,025		11,454		175,222		(907,152)		133,549

Property, plant and equipment, net		-		91,871		987,035		-		1,078,906
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		21,865		6,056		8,475		-		36,396
Total Assets	$	933,552	$	828,439	$	1,429,970	$	(1,683,872)	$	1,508,089

Accounts payable	$	-	$	2,843	$	41,959	$	-	$	44,802
Current maturities of debt		-		-		115,163		-		115,163
Deferred revenue		-		-		40,691		-		40,691
Monetary production payment, current portion		-		-		19,167		-		19,167
Current liabilities due to affiliates		-		901,429		5,723		(907,152)		-
Accrued expenses and other		8,948		2,589		42,885		-		54,422
Current Liabilities		8,948		906,861		265,588		(907,152)		274,245

Long-term debt		678,241		(1)		74,529		-		752,769
Long-term liabilities due to affiliates		-		-		599,000		(599,000)		-
Deferred taxes		-		-		127,658		-		127,658
Monetary production payment, long-term portion		-		-		126,667		-		126,667
Other liabilities		3,323		676		132,799		-		136,798
Total Liabilities		690,512		907,536		1,326,241		(1,506,152)		1,418,137

Series C convertible preferred stock		43,703		-		-		-		43,703
Stockholders' equity		199,337		(79,097)		103,729		(177,720)		46,249
Total Liabilities and Equity	$	933,552	$	828,439	$	1,429,970	$	(1,683,872)	$	1,508,089



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 September 30, 2013
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Revenue	$	-	$	1,952	$	34,949	$	-	$	36,901
Operating expenses		-		1,090		15,268		-		16,358
DD&A expense		-		1,093		17,503		-		18,596
Impairment of oil and gas properties		-		6,032		-		-		6,032
G&A expenses		596		1,173		2,144		-		3,913
Income (loss) from Operations		(596)		(7,436)		34		-		(7,998)

Derivatives:
Unrealized gains		85		-		770		-		855
Interest expense		(19,994)		895		(11,567)		4,205		(26,461)
Letter of credit fees		-		-		(7,274)		-		(7,274)
Loss on early extinguishment of debt		-		-		-		-		-
Unrealized foreign currency gains (losses)		-		1	-	(10,794)	-	-	-	(10,793)
Other income (expense)		-		14,347		(12,686)		(4,205)		(2,544)
Income (loss) before taxes		(20,505)		7,807		(41,517)		-		(54,215)
Income tax benefit		-		-		(14,330)		-		(14,330)
Net income (loss)		(20,505)		7,807		(27,187)		-		(39,885)
Preferred stock dividends		456		-		-		-		456
Net income (loss) to common shareholders	$	(20,961)	$	7,807	$	(27,187)	$	-	$	(40,341)



For the Nine Months Ended September 30, 2013
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Revenue	$	-	$	6,803	$	213,935	$	-	$	220,738
Operating expenses		-		6,550		65,401		-		71,951
DD&A expense		-		3,239		90,227		-		93,466
Impairment of oil and gas properties		-		9,566		-		-		9,566
G&A expenses		1,905		5,484		6,887		-		14,276
Income (loss) from Operations		(1,905)		(18,036)		51,420		-		31,479

Derivatives:
Unrealized gains (losses)		(292)		-		1,450		-		1,158
Interest expense		(60,967)		2,394		(58,811)		45,038		(72,346)
Letter of credit fees		-		-		(25,782)		-		(25,782)
Loss on early extinguishment of debt		-		-		-		-		-
Unrealized foreign currency gains (losses)		-		-	-	38	-	-	-	38
Other income (expense)		-		43,346		(2,813)		(45,038)		(4,505)
Income (loss) before taxes		(63,164)		27,704		(34,498)		-		(69,958)
Income tax benefit		-		-		(2,141)		-		(2,141)
Net income (loss)		(63,164)		27,704		(32,357)		-		(67,817)
Preferred stock dividends		1,367		-		-		-		1,367
Net income (loss) to common shareholders	$	(64,531)	$	27,704	$	(32,357)	$	-	$	(69,184)



For the Three Months Ended September 30, 2012
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Revenue	$	-	$	2,549	$	80,726	$	-	$	83,275
Operating expenses		-		1,239		22,734		-		23,973
DD&A expense		-		1,526		22,233		-		23,759
Impairment of oil and gas properties		-		11,416		-		-		11,416
G&A expenses		769		2,824		1,433		-		5,026
Income (loss) from Operations		(769)		(14,456)		34,326		-		19,101

Derivatives:
Unrealized gains (losses)		1,301		-		(2,505)		-		(1,204)
Interest expense		(20,015)		561		(15,035)		16,436		(18,053)
Letter of credit fees		-		-		(9,378)		-		(9,378)
Loss on early extinguishment of debt		-		-		-		-		-
Unrealized foreign currency gains (losses)		-		-	-	(1,448)	-	-	-	(1,448)
Other income (expense)		-		14,566		655		(16,436)		(1,215)
Income (loss) before taxes		(19,483)		671		6,615		-		(12,197)
Income tax expense		-		-		21,505		-		21,505
Net income (loss)		(19,483)		671		(14,890)		-		(33,702)
Preferred stock dividends		456		-		-		-		456
Net income (loss) to common shareholders	$	(19,939)	$	671	$	(14,890)	$	-	$	(34,158)



For the Nine Months Ended September 30, 2012
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Revenue	$	-	$	9,168	$	112,276	$	-	$	121,444
Operating expenses		-		4,476		30,137		-		34,613
DD&A expense		-		7,414		34,878		-		42,292
Impairment of oil and gas properties		-		47,116		-		-		47,116
G&A expenses		2,003		8,632		4,744		-		15,379
Income (loss) from Operations		(2,003)		(58,470)		42,517		-		(17,956)

Derivatives:
Unrealized gains (losses)		922		-		(3,100)		-		(2,178)
Interest expense		(33,509)		(1,553)		(51,697)		23,743		(63,016)
Letter of credit fees		-		-		(12,442)		-		(12,442)
Loss on early extinguishment of debt		-		-		(21,661)		-		(21,661)
Unrealized foreign currency gains (losses)		-		-	-	(4,186)	-	-	-	(4,186)
Other income (expense)		-		19,338		2,647		(23,743)		(1,758)
Loss before taxes		(34,590)		(40,685)		(47,922)		-		(123,197)
Income tax benefit		-		-		(3,424)		-		(3,424)
Net loss		(34,590)		(40,685)		(44,498)		-		(119,773)
Preferred stock dividends		1,367		-		-		-		1,367
Net loss to common shareholders	$	(35,957)	$	(40,685)	$	(44,498)	$	-	$	(121,140)



For the Nine Months Ended September 30, 2013
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations⁽¹⁾		Consolidated
Cash Flows from Operating Activities:
Net loss	$	(63,164)	$	27,704	$	(32,357)	$		$	(67,817)
Adjustments to reconcile net loss to
net cash provided by (used in) operations
DD&A expense		-		3,239		90,227		-		93,466
Impairment of oil and gas properties		-		9,566		-		-		9,566
Deferred tax benefit		-		-		(17,262)		-		(17,262)
Unrealized (gains) losses on derivatives		292		-		(1,450)		-		(1,158)
Amortization of non-cash compensation		470		-		-		1,882		2,352
Amortization of loan costs and discount		5,870		-		9,460		-		15,330
Non-cash interest expense		-		(10,379)		15,625		-		5,246
Other		44		11,169		(1,021)		-		10,192
Changes in operating assets and liabilities:
(Increase) decrease in receivables		-		760		20,925		-		21,685
(Increase) decrease in other current assets		72,254		(53,060)		(22,420)		-		(3,226)
Increase (decrease) in liabilities		(14,517)		2,603		1,785		(3,458)		(13,587)
Net Cash Provided by (Used in)
Operating Activities		1,249		(8,398)		63,512		(1,576)		54,787

Cash Flows From Investing Activities:
Capital expenditures		-		(11,519)		(166,228)		1,576		(176,171)
Acquisitions, net of cash acquired		-		-		(2,602)		-		(2,602)
Net Cash Used in Investing Activities		-		(11,519)		(168,830)		1,576		(178,773)

Cash Flows From Financing Activities:
Proceeds from issuance of MPP		-		-		150,000		-		150,000
Repayments of MPP		-		-		(4,167)				(4,167)
Dividends paid		(1,249)		-		-		-		(1,249)
Financing costs paid		-		(4,301)		(15,126)		-		(19,427)
Other financing		-		2		(1)		-		1
Net Cash Provided by (Used in)
Financing Activities		(1,249)		(4,299)		130,706		-		125,158

Net Change in Cash and Cash Equivalents		-		(24,216)		25,388		-		1,172
Cash and Cash Equivalents, Beginning
of Period		-		27,800		31,385		-		59,185
Cash and Cash Equivalents, End of Period	$	-	$	3,584	$	56,773	$	-	$	60,357



For the Nine Months Ended September 30, 2012
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations⁽¹⁾		Consolidated
Cash Flows from Operating Activities:
Net loss	$	(34,590)	$	(40,685)	$	(44,498)	$		$	(119,773)
Adjustments to reconcile net loss to
net cash provided by (used in) operations
DD&A expense		-		7,414		34,878		-		42,292
Impairment of oil and gas properties		-		47,116		-		-		47,116
Deferred tax benefit		-		-		(15,849)		-		(15,849)
Unrealized (gains) losses on derivatives		(922)		-		3,100		-		2,178
Amortization of non-cash compensation		689		-		-		2,916		3,605
Amortization of loan costs and discount		4,935		5		5,596		-		10,536
Non-cash interest expense		160		605		6,312		-		7,077
Loss on early extinguishment of debt		-		-		21,661		-		21,661
Other		(37)		(3)		9,732		-		9,692
Changes in operating assets and liabilities:
(Increase) decrease in receivables		-		1,585		3,968		-		5,553
(Increase) decrease in other current assets		-		(8,945)		(5,605)		-		(14,550)
Increase (decrease) in liabilities		(489,766)		541,941		(47,453)		(2,916)		1,806
Net Cash Provided by (Used in)
Operating Activities		(519,531)		549,033		(28,158)		-		1,344

Cash Flows From Investing Activities:
Capital expenditures		368		(37,337)		(138,628)		-		(175,597)
Acquisitions, net of cash acquired		-		(2,036)		(226,401)		-		(228,437)
Issuance of note receivable to affiliate		-		(500,000)		-		500,000		-
Increase in restricted cash		-		(51)		(128)		-		(179)
Net Cash Used in Investing Activities		368		(539,424)		(365,157)		500,000		(404,213)

Cash Flows From Financing Activities:
Repayments of borrowings		-		(5,000)		(242,065)		-		(247,065)
Borrowings under debt agreements, net
of debt discount		480,000		-		615,000		(500,000)		595,000
Proceeds from issuance of common stock		61,088		(283)		-		-		60,805
Dividends paid		(833)		-		-		-		(833)
Payments for early extinguishment of debt		-		-		(7,248)		-		(7,248)
Financing costs paid		(20,728)		(1,190)		(6,191)		-		(28,109)
Other financing		4		369		-		(368)		5
Net Cash Provided by (Used in)
Financing Activities		519,531		(6,104)		359,496		(500,368)		372,555

Net Change in Cash and Cash Equivalents		-		3,505		(33,819)		-		(30,314)
Cash and Cash Equivalents, Beginning
of Period		-		2,951		103,085		-		106,036
Cash and Cash Equivalents, End of Period	$	-	$	6,456	$	69,266	$	-	$	75,722