Endeavour Announces 2014 Second Quarter Financial and Operational Results
HOUSTON, Aug. 5, 2014 /PRNewswire/ -- 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.
|
Endeavour International Corporation | |||||||||||||
|
Condensed Consolidated Balance Sheets | |||||||||||||
|
(Amounts in thousands) | |||||||||||||
|
June 30, |
December 31, | ||||||||||||
|
2014 |
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. |
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