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      Endeavour Announces 2012 Third Quarter Financial and Operational Results


      News provided by

      Endeavour International Corporation

      01 Nov, 2012, 06:00 GMT

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      HOUSTON, Nov. 1, 2012 /PRNewswire/ -- Endeavour International Corporation (NYSE: END) (LSE: ENDV) today reported third quarter 2012 Adjusted EBITDA of $51.6 million compared to $2.4 million for the same quarter of 2011. On a GAAP basis, for the third quarter of 2012 net loss was $33.7 million as compared to net loss of $63.3 million for the same quarter in 2011.

      Production for the quarter ending September 30, 2012 was up 370% from the comparable quarter in 2011, with U.K. crude oil accounting for 100% of the increase. For the first nine months of 2012 compared to the same period in 2011, sales volumes increased 215% from U.K. crude production. For the third quarter 2012, entitlement production averaged approximately 10,700 barrels of oil equivalent per day ("boepd") compared to actual sales volumes for the period of approximately 11,000 boepd.

      Business highlights include:

      • North Sea:
        • At Rochelle, the installation of subsea pipelines and umbilicals has been completed ahead of schedule
        • The first of the two planned production wells was drilled to a final casing point
        • Awarded seven licenses covering ten exploration blocks in the U.K.'s 27th Licensing Round around existing core areas
      • U.S. Onshore:
        • Closed an exchange with co-owner J-W Operating to obtain operator status, control of upstream and midstream assets and an additional 15,500 net acres in the Pennsylvania Marcellus
        • U.S. net production averaged 12.9 million cubic feet of gas equivalent per day (MMCFe/D) for the third quarter
      • Finance:
        • Completed an offering of an additional $54 million of 12% Senior Notes due 2018 for net proceeds of $58 million
        • Fully redeemed the $25.1 million 12% Senior Subordinated Notes due 2014

      "The Company enjoyed significant progress in the third quarter with strong increases in Brent priced crude oil production in the U.K. North Sea. We are focused on and making great progress to deliver first production at our Rochelle development," said William L. Transier, chairman, chief executive officer and president. "For health and safety reason, drilling and infrastructure implementation cannot occur in the same area simultaneously. By making the difficult decision to suspend drilling before final completion, we were able to keep our service contractor on schedule to complete the necessary subsea infrastructure. This decision preserves the option to achieve first production at Rochelle in early 2013."

      Operational Update

      United Kingdom

      The contracted rig at Rochelle, the Diamond Ocean Nomad, completed the drilling on the first of two planned development wells to the final casing point before moving the rig off location to allow for the hook-up of the pipelines and flow-lines to the subsea manifolds. Final drilling and completion of this first development well will be done by the Transocean Prospect which is scheduled to arrive in field in December. Due to the change in the timing of completion of the first well, first production at the field is now expected in January 2013 assuming the rig arrives as scheduled. The Rochelle subsea infrastructure installation has been substantially completed. Endeavour is the operator of the Rochelle development project and holds a 44% ownership interest in the Rochelle development which is comprised of Blocks 15/26b, 15/26c and 15/27.

      During the 27th Licensing Round, the U.K. government awarded the Company seven new licenses, covering ten exploration blocks located around existing core areas. All the licenses, which have a traditional four year term, will be operated by the Company and offer additional growth opportunities in the future. There are no firm well obligations on any of the licenses and minimal upfront capital commitments.

      United States Onshore

      Effective October 1, 2012 Endeavour completed an exchange of assets with co-owner J-W Operating to trade the Company's Bull Bayou Haynesville and Willow Springs Cotton Valley projects for all of J-W's upstream and midstream Marcellus assets in Pennsylvania. The transaction adds 15,500 net acres to Endeavour's position in the Marcellus bringing the total to 31,000 net acres and decreases the Company's position in the Haynesville/Cotton Valley by 2,100 net acres and approximately 3.2 MMCFe/d (530 boepd) of net production. Also in the Marcellus, Endeavour has secured an off-take solution in the key Daniel area of Cameron County for up to an additional 10 mmcf/d of production with a local gatherer by year-end 2013. In conjunction with the transaction, the Company currently has three wells drilled and cased in the area waiting on completion with no additional drilling requirements until 2014.

      In the Heath Shale tight oil play, the Company has deferred horizontal re-entries of its vertical pilot wells until 2013 while it evaluates results from offset operators and operational efficiencies. In Colorado, the Company continues to acquire acreage for Upper Cretaceous targets and has formed a 23,000 acre Federal unit, where it expects to drill an initial test in 2013.

      There is currently no drilling activity underway in the Company's U.S. gas fields in the Louisiana, Haynesville or the Pennsylvania Marcellus. Net daily production averaged 12.9 MMCFe/D for the third quarter and 15.5 MMCFe/D for the first nine months of 2012.

      Finance

      Operating expenses during the quarter included a non-recurring expense of approximately $9.7 million related to the initial purchase price value allocation of inventory at Alba at the date of acquisition.

      In October, Endeavour completed a $54 million addition to its 12% Senior Notes due 2018 at 109% of principal amount, resulting in a yield of 9.4%. Proceeds of $58 million were used to fully redeem $25.1 million of the Company's 12% Senior Subordinated Notes due 2014. The remaining proceeds will be used to finance a portion of the construction, improvement and other capital costs related to its U.S. and U.K oil and natural gas properties. The redemption of the 12% Senior Subordinated Notes was an important step in preparing for the syndicated bank revolver Endeavour expects to put in place in 2013.

      In addition, the Company increased the amount available to be borrowed under the Revolving Credit Facility an additional $25 million and drew down an additional $15 million bringing the outstanding balance to approximately $115 million.

      Earnings Conference Call, Thursday, November 1, 2012 at 9:00 a.m. Central Daylight Time, 2:00 p.m. British Time

      Endeavour International will host a conference call and web cast to discuss its 2012 third quarter financial and operating results on Thursday, November 1, 2012 at 9 a.m. Central Daylight Time, 2 p.m. British Time. To participate and ask questions during the conference call, dial the local country telephone number and the confirmation code 2204201. The toll-free numbers are 888-677-8751 in the United States and 0-808-101-1402 in the United Kingdom. Other international callers should dial +1-913-312-0682(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 Daylight Time on November 1, 2012 through 12:00 p.m. on November 8, 2012 by dialing toll free 888-203-1112 (U.S.) or +1-719-457-0820 (international), confirmation code 2204201.

      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 use 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.


      Endeavour International Corporation

      Condensed Consolidated Balance Sheets

      (Unaudited)

      (Amounts in thousands)













      September 30,



      December 31,





      2012



      2011









      Assets

      Current Assets:







      Cash and cash equivalents

      $

      75,722


      $

      106,036


      Restricted cash


      178



      -


      Accounts receivable


      16,131



      8,649


      Prepaid expenses and other current assets


      28,047



      18,840



      Total Current Assets


      120,078



      133,525









      Property and Equipment, Net


      836,369



      549,196

      Goodwill


      258,973



      211,886

      Other Assets


      51,417



      30,384







      Total Assets

      $

      1,266,837


      $

      924,991







      Liabilities and Stockholders' Equity

      Current Liabilities:







      Accounts payable

      $

      84,744


      $

      62,275


      Current maturities of debt


      12,500



      12,350


      Accrued expenses and other


      23,680



      20,549



      Total Current Liabilities


      120,924



      95,174

















      Long-Term Debt


      812,926



      455,028

      Deferred Taxes


      111,806



      115,759

      Other Liabilities


      72,338



      61,248



      Total Liabilities


      1,117,994



      727,209









      Commitments and Contingencies














      Series C Convertible Preferred Stock


      43,703



      43,703









      Stockholders' Equity


      105,140



      154,079









      Total Liabilities and Stockholders' Equity

      $

      1,266,837


      $

      924,991



      Endeavour International Corporation

      Condensed Consolidated Statement of Operations

      (Unaudited)

      (Amounts in thousands, except per share data)










      Third Quarter


      Nine Months Ended




      September 30,


      September 30,




      2012


      2011


      2012


      2011

      Revenues

      $

      83,275


      $

      10,302


      $

      121,444


      $

      43,459















      Cost of Operations:













      Operating expenses


      23,973



      3,496



      34,613



      14,888


      Depreciation, depletion and amortization


      23,759



      5,372



      42,292



      18,698


      Impairment of U.S. oil and gas properties


      11,416



      28,793



      47,116



      28,793


      General and administrative


      5,026



      4,863



      15,379



      14,525


      Total Expenses


      64,174



      42,524



      139,400



      76,904















      Income (Loss) From Operations


      19,101



      (32,222)



      (17,956)



      (33,445)















      Other Income (Expense):













      Derivatives:














      Unrealized gains (losses)


      (1,204)



      13,081



      (2,178)



      11,098


      Interest expense


      (18,053)



      (12,253)



      (63,016)



      (32,607)


      Loss on early extinguishment of debt


      -



      -



      (21,661)



      (402)


      Letter of credit fees


      (9,378)



      -



      (12,442)



      -


      Other income (expense)


      (2,663)



      611



      (5,944)



      826

      Total Other Income (Expense)


      (31,298)



      1,439



      (105,241)



      (21,085)















      Loss Before Income Taxes


      (12,197)



      (30,783)



      (123,197)



      (54,530)















      Income Tax Expense (Benefit)


      21,505



      32,507



      (3,424)



      31,820

      Net Loss


      (33,702)



      (63,290)



      (119,773)



      (86,350)

      Preferred Stock Dividends


      456



      466



      1,367



      1,518















      Net Loss to Common Stockholders

      $

      (34,158)


      $

      (63,756)


      $

      (121,140)


      $

      (87,868)















      Net Loss per Common Share:









      Basic and Diluted

      $

      (0.73)


      $

      (1.63)


      $

      (2.94)


      $

      (2.52)















      Weighted Average Number of Common
      Shares Outstanding:









      Basic and Diluted


      46,555



      39,064



      41,163



      34,854



      Endeavour International Corporation

      Condensed Consolidated Statement of Cash Flows

      (Unaudited)

      (Amounts in thousands)



      Nine Months Ended September 30,


      2012



      2011

      Cash Flows from Operating Activities:







      Net loss

      $

      (119,773)


      $

      (86,350)


      Adjustments to reconcile net loss to net cash








      provided by (used in) operating activities:








      Depreciation, depletion and amortization


      42,292



      18,698



      Impairment of U.S. oil and gas properties


      47,116



      28,793



      Deferred tax expense
      (benefit)



      (15,849)




      23,052



      Unrealized (gains) losses on derivatives


      2,178



      (11,098)



      Amortization of non-cash compensation


      3,605



      2,733



      Amortization of loan costs and discount


      10,536



      9,151



      Non-cash interest expense


      7,077



      9,306



      Loss on early extinguishment of debt


      21,661



      402



      Other


      9,692



      1,839



      Changes in operating assets and liabilities


      (7,191)



      (25,145)

      Net Cash Provided by (Used in) Operating Activities


      1,344



      (28,619)







      Cash Flows From Investing Activities:







      Capital expenditures


      (175,597)



      (113,137)


      Acquisitions


      (228,437)



      (22,898)


      (Increase) decrease in restricted cash


      (178)



      31,726

      Net Cash Used in Investing Activities


      (404,212)



      (104,309)







      Cash Flows From Financing Activities:







      Repayments of borrowings


      (247,065)



      (97,638)


      Borrowings under debt agreements, net of debt discount


      595,000



      210,000


      Proceeds from issuance of common stock


      60,805



      118,444


      Dividends paid


      (833)



      (1,400)


      Payments for early extinguishment of debt


      (7,248)



      -


      Financing costs paid


      (28,109)



      (11,226)


      Other financing


      4



      511

      Net Cash Provided by Financing Activities


      372,554



      218,691







      Net Increase (Decrease) in Cash and Cash Equivalents


      (30,314)



      85,763

      Cash and Cash Equivalents, Beginning of Period


      106,036



      99,267


      Cash and Cash Equivalents, End of Period

      $

      75,722


      $

      185,030



      Endeavour International Corporation

      Operating Statistics

      (Unaudited)












      Third Quarter


      Nine Months Ended





      September 30,


      September 30,





      2012



      2011


      2012


      2011

      Sales volume (1)













      Oil and condensate sales (Mbbls):














      United Kingdom


      812



      49



      1,099



      274



      United States


      1



      3



      2



      5



      Total


      813



      52



      1,101



      279
















      Gas sales (MMcf):














      United Kingdom


      19



      -



      69



      78



      United States


      1,182



      1,329



      4,234



      3,305



      Total


      1,201



      1,329



      4,303



      3,383
















      Oil equivalent sales (MBOE)














      United Kingdom


      815



      49



      1,110



      287



      United States


      198



      225



      708



      556



      Total


      1,013



      274



      1,818



      843















      Total BOE per day


      11,006



      2,972



      6,635



      3,089















      Physical production volume (BOE per day) (1)













      United Kingdom


      8,573



      838



      4,474



      1,152



      United States


      2,151



      2,436



      2,585



      2,036



      Total


      10,724



      3,274



      7,059



      3,188














      Realized Price, before and after derivatives













      Oil and condensate price ($ per Bbl)

      $

      99.31


      $

      106.57


      $

      101.76


      $

      108.57


      Gas price ($ per Mcf)

      $

      2.16


      $

      3.59


      $

      2.19


      $

      3.88


      Equivalent oil price ($ per BOE)

      $

      82.24


      $

      37.68


      $

      66.80


      $

      51.53


      (1)

      We record oil revenues using the sales method, i.e. when delivery has occurred. Actual production may differ based on the timing of tanker liftings. Physical production may differ from sales volumes based on the timing of tanker liftings for our international sales. We use the entitlements method to account for sales of gas production.





      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 income (loss) to the following non-GAAP financial measures: net income, 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)

      Third Quarter

      Nine Months Ended


      September 30,

      September 30,



      2012


      2011


      2012


      2011

      Net loss

      $

      (33,702)

      $

      (63,290)

      $

      (119,773)

      $

      (86,350)

      Impairment of U.S. oil and gas properties (net of tax) (1)


      11,416


      28,793


      47,116


      28,793

      Unrealized (gain) loss (net of tax) (2)


      265


      (13,034)


      58


      (12,245)

      Loss on early extinguishment of debt (net of tax)(3)


      -


      -


      17,762


      402

      Deferred tax expense related to U.K. tax rate change


      8,393


      25,387


      8,393


      25,387










      Net Loss as Adjusted

      $

      (13,628)

      $

      (22,144)

      $

      (46,444)

      $

      (44,013)










      Net loss

      $

      (33,702)

      $

      (63,290)

      $

      (119,773)

      $

      (86,350)

      Unrealized loss on derivatives


      1,204


      (13,081)


      2,178


      (11,098)

      Net interest expense


      18,005


      12,084


      62,789


      31,832

      Letter of credit fees


      9,378


      -


      12,442


      -

      Loss on early extinguishment of debt


      -


      -


      21,661


      402

      Depreciation, depletion and amortization


      23,759


      5,372


      42,292


      18,698

      Impairment of U.S. oil and gas properties


      11,416


      28,793


      47,116


      28,793

      Income tax expense (benefit)


      21,505


      32,507


      (3,424)


      31,820










      Adjusted EBITDA (4)

      $

      51.565

      $

      2,385

      $

      65,281

      $

      14,097


      (1) Since the impairments related to U.S. oil and gas properties, we recognized no tax benefits as there was no assurance that we could generate any U.S. taxable earnings.

      (2) Net of tax (benefit) expense of $939 and $(47) and $2,120 and $1,147, respectively.

      (3) Net of tax benefit of $3,899 for the nine months ended September 30, 2012.

      (4) Includes operating expenses of approximately $9.7 million for the third quarter of 2012 and nine months ended September 30, 2012 related to the initial purchase price value allocation of inventory at Alba at acquisition date.




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