Endeavour Announces Fourth Quarter and Year-End 2011 Financial and Operational Results
HOUSTON, February 29, 2012 /PRNewswire/ --
Endeavour International Corporation (NYSE: END) (LSE: ENDV) today reported fourth quarter 2011 net income (loss), as adjusted of $(5.8) million compared to $81.1 million for 2010, when it reported an $87 million gain on the sale of its North Sea asset Cygnus. On a GAAP basis, net loss for the fourth quarter of 2011 was $44.6 million as compared to net income of $82.8 million for the same quarter in 2010. Production for the fourth quarter 2011 averaged approximately 4,100 barrels of oil equivalent per day ("boepd").
Fourth quarter business highlights include:
- North Sea:
- Announced the acquisition of three North Sea oil fields with production of ~10,000 boepd and 31 million barrels of oil equivalent ("mmboe") proved and probable ("2P") reserves
- At Bacchus, the first of three planned production wells reached total depth
- Rochelle remains on schedule to commence production by year-end 2012
- U.S. Onshore:
- 4 gross Haynesville wells brought on production during the quarter
- Capital expenditures in U.S. shale gas plays restricted until environment allows for reasonable rates of return
- U.S. net production exited the quarter at approximately 20 million cubic feet of gas equivalent per day ("MMCFe/D")
- Core and log analyses of the four vertical test wells, in the Heath Shale oil play is ongoing
- Other Items:
- Completed the sale of $500 million of Senior Notes due 2018 to fund the North Sea acquisition and retire the Senior Term Loan
- Year-over-year proved reserve replacement rate of 423% of 2011 production
- A capital expenditure budget of $150 - $175 million is planned for 2012
"2011 was a pivotal year for Endeavour as we positioned the company for the next stage of its evolution. Although the anticipated production from Bacchus was delayed, the Company successfully reached key milestones to move the Rochelle project closer to its start-up. We also announced a significant and accretive acquisition in our core area of the U.K. North Sea," said William L. Transier, chairman, chief executive officer and president. "During 2012, we will stay focused on activities designed to increase our U.K. North Sea crude and natural gas production."
Operational Update
United Kingdom
In December, Endeavour announced the acquisition of interests in three producing oil fields in the North Sea. Current net production from the group of assets is approximately 10,000 boepd of Brent oil and estimated 2P reserves as of December 31, 2011 are approximately 31 mmboe. The Company is acquiring an additional 23.43% working interest in Alba, a field where it currently owns a 2.25% working interest, a 40% working interest in and, subject to partner approval, operatorship of MacCulloch, and an 18% interest in Nicol. The transaction is expected to close in the first quarter of 2012.
At the Bacchus field in Block 22/06a in the Central North Sea, in which Endeavour holds a 30% working interest, drilling at the first of three planned production wells has reached total depth. The liner for the well has been cemented in place and preparations are being made to run the production string. The operator has announced that production is expected to begin in the first quarter of 2012.
The Rochelle development continues on schedule for first production in the fourth quarter of 2012 with the contracted drilling rig expected to arrive in the spring to commence drilling of the two planned production wells. Endeavour is operator and holds a 44% ownership interest in the Rochelle development which is comprised of Blocks 15/26b, 15/26c and 15/27.
United States Onshore
In the fourth quarter of 2011, Endeavour significantly decelerated its capital spending program in its Haynesville area. The Company currently has one Haynesville well in progress, and key acreage is held by production. Any additional Haynesville wells drilled during 2012 will be discretionary. U.S. net daily production averaged 19 MMCFe/D for the fourth quarter with the quarter exit volumes at approximately 20 MMCFe/D.
In the Heath Shale tight oil play, the Company and its partners are completing core and log data analysis from its four vertical pilot wells. Endeavour plans to define possible horizontal re-entry target zones and test the play later this year.
Other Items
Endeavour priced $500 million of Priority Notes, due 2018. The Company intends to use the net proceeds from the offering to fund its previously announced acquisition of interests in three oil fields in the United Kingdom North Sea, to repay all amounts outstanding under its Senior Term Loan due 2013 and for general corporate purposes. The transaction was completed and funded on February 23, 2012.
Endeavour's capital expenditure budget will be between $150 million and $175 million for 2012. The Company expects to spend approximately $125 million to $150 million of the total budget in the U.K. primarily on the advancement of its key development projects - Bacchus and Rochelle. The acquisition of the three new North Sea assets would add another $20 million to $25 million to Endeavour's planned capital budget, subsequent to the completion of the transaction.
The Company's year-over-year proved reserve replacement rate was 423% of 2011 production. Pro forma for the announced North Sea acquisition, 2P reserves would increase to 76.0 mmboe at year-end 2011, compared to 43.7 mmboe at year-end 2010.
North Sea
Asset Pro
Endeavour Historical Acquisition Forma(4)
As of As of As of
December 31, December 31, December 31,
2009 2010 (3) 2011 2011 2011
Net 1P reserves:
United Kingdom:
Oil (MBbls)(1) 3,348 3,967 4,060 19,302 23,362
Gas (MMcf) 78,316 56,267 50,723 1,409 52,132
Oil equivalents
(MBOE)(2) 16,401 13,345 12,514 19,537 32,051
United States:
Oil (MBbls)(1) 18 59 41 - 41
Gas (MMcf) 10,784 31,777 60,978 - 60,978
Oil equivalents
(MBOE)(2) 1,815 5,355 10,204 - 10,204
Total:
Oil (MBbls)(1) 3,366 4,026 4,101 19,302 23,403
Gas (MMcf) 89,100 88,044 111,701 1,409 113,110
Oil equivalents
(MBOE)(2) 18,216 18,700 22,718 19,537 42,255
Percentage oil 18 % 22 % 18 % 99 % 55%
Percentage proved
developed 16 % 19 % 23 % 71 % 45%
Net 2P reserves:
Total:
Oil (MBbls)(1) 10,738 14,897 14,556 30,504 45,060
Gas (MMcf) 169,019 172,820 182,989 2,426 185,415
Oil equivalents
(MBOE)(2) 38,908 43,700 45,054 30,908 75,962
Percentage oil 28 % 34 % 32% 99 % 59%
(1) Includes natural gas liquids.
(2) One Bbl of oil is equal to six Mcfe based on an approximate energy
equivalency. This is a physical correlation and does not reflect a
value or price relationship between the commodities.
(3) Reserve information includes the purchase of the additional 20%
(approximately 3.4 mmboe of 2P reserves) of the Bacchus field in the
North Sea, which closed in February 2011.
(4) Pro forma includes the acquisition of the three ConocoPhillips
assets. The transaction is scheduled to close during the first
quarter of 2012.
Earnings Conference Call, Wednesday, February 29, 2012 at 9:00 a.m., Central Time, 3:00 p.m. British Time
Endeavour International will host a conference call and web cast to discuss its 2011 year-end and fourth quarter financial and operating results on Wednesday, February 29, 2012 at 9 a.m. Central Time, 3 p.m. British Time. To participate and ask questions during the conference call, dial the local country telephone number and the confirmation code 7049567. The toll-free numbers are 888-710-3981 in the United States and 0-808-101-1402 in the United Kingdom. Other international callers should dial +1-913-312-1397 (tolls apply). To listen only to the live audio web cast access Endeavour's home page at http://www.endeavourcorp.com . A replay will be available beginning at 12:00 p.m. Central Time on February 29, 2012 through 12:00 p.m. on March 7, 2012 by dialing toll free 888-203-1112 (U.S.) or +1-719-457-0820 (international), confirmation code 7049567.
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 http://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.
As of January 1, 2010, the Securities and Exchange Commission (SEC) changed its rules to permit oil and gas companies, in their filings with the SEC, to disclose not only proved reserves, but also probable reserves and possible reserves. Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geosciences and engineering data, can be estimated with reasonable certainty to be economically producible - from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations - prior to the time at which contracts providing the right to operate expire. Probable reserves include those additional reserves that a company believes are as likely as not to be recovered and possible reserves include those additional reserves that are less certain to be recovered than probable 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. We note that the SEC also prohibits companies from aggregating proved and probable reserves in filings with the SEC due to the different level of certainty associated with each reserve category. 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 http://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)
December December
31, 31,
2011 2010
Assets
Current Assets:
Cash and cash equivalents $ 106,036 $ 99,267
Restricted cash - 31,776
Accounts receivable 8,649 8,068
Prepaid expenses and other current
assets 18,840 8,718
Total Current Assets 133,525 147,829
Property and Equipment, Net 549,196 364,677
Goodwill 211,886 211,886
Other Assets 30,384 25,895
Total Assets $ 924,991 $ 750,287
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 62,275 $ 32,442
Current maturities of debt 12,350 21,600
Accrued expenses and other 20,549 22,642
Total Current
Liabilities 95,174 76,684
Long-Term Debt 455,028 323,706
Deferred Taxes 115,759 77,200
Other Liabilities 61,248 64,927
Total Liabilities 727,209 542,517
Commitments and Contingencies
Series C Convertible Preferred Stock 43,703 53,152
Stockholders' Equity 154,079 154,618
Total Liabilities and Stockholders'
Equity $ 924,991 $ 750,287
Endeavour International Corporation
Condensed Consolidated Statement of Operations
(Unaudited)
(Amounts in thousands, except per share data)
Fourth Quarter Year Ended
December 31, December 31,
2011 2010 2011 2010
Revenues $ 16,632 $ 16,573 $ 60,091 $ 71,675
Cost of Operations:
Operating
expenses 2,779 4,467 17,668 15,347
Depreciation,
depletion and
amortization 7,780 7,604 26,478 28,894
Impairment of
U.S. oil and gas
properties 36,913 - 65,706 7,692
General and
administrative 3,328 5,542 17,853 18,415
Total Expenses 50,800 17,613 127,705 70,348
Income (Loss) From
Operations (34,168) (1,040) (67,614) 1,327
Other Income
(Expense):
Derivatives:
Realized
gains
(losses) - - - (11,753)
Unrealized
gains
(losses) (2,719) 814 8,378 12,291
Interest expense (12,688) (12,859) (45,295) (34,592)
Gain on sale of
reserves in place - 87,171 - 87,171
Interest income
and other 172 19 597 1,299
Total Other Income
(Expense) (15,235) 75,145 (36,320) 54,416
Income (Loss) Before
Income Taxes (49,403) 74,105 (103,934) 55,743
Income Tax Expense
(Benefit) (4,758) (8,704) 27,061 (788)
Net Income (Loss) (44,645) 82,809 (130,995) 56,531
Preferred Stock
Dividends 455 546 1,974 2,227
Net Income (Loss) to
Common Stockholders $ (45,100) $ 82,263 $ (132,969) $ 54,304
Net Income (Loss) per Common Share:
Basic (1.15) 3.34 (3.70) 2.34
Diluted (1.15) 2.37 (3.70) 1.95
Weighted Average Number of Common Shares
Outstanding:
Basic 39,231 24,647 35,957 23,252
Diluted 39,231 35,956 35,957 28,886
Endeavour International Corporation
Condensed Consolidated Statement of Cash Flows
(Unaudited)
(Amounts in thousands)
Year Ended December 31,
2011 2010
Cash Flows from Operating Activities:
Net income (loss) $ (130,995) $ 56,531
Adjustments to reconcile net income
(loss) to net cash
provided by (used in) operating
activities:
Depreciation, depletion and
amortization 26,478 28,894
Impairment of oil and gas
properties 65,706 7,692
Deferred tax expense (benefit) 21,116 (3,367)
Gain on sales - (87,171)
Unrealized gains on derivatives (8,378) (12,291)
Amortization of non-cash
compensation 3,697 3,692
Amortization of loan costs and
discount 12,637 10,262
Non-cash interest expense 12,811 8,764
Other 1,517 (2,086)
Changes in operating assets and
liabilities (43,932) 6,099
Net Cash Provided by (Used in) Operating
Activities (39,343) 17,019
Cash Flows From Investing Activities:
Capital expenditures (165,062) (92,007)
Acquisitions (33,075) (43,726)
Proceeds from sales, net of cash - 108,316
(Increase) decrease in restricted
cash 31,726 (28,897)
Net Cash Used in Investing Activities (166,411) (56,314)
Cash Flows From Financing Activities:
(Repayments) borrowings under debt
agreements 106,775 109,658
Proceeds from issuance of common
stock 118,444 30,181
Dividends paid (1,816) (2,070)
Other financing (10,880) (26,494)
Net Cash Provided by Financing
Activities 212,523 111,275
Net Increase in Cash and Cash
Equivalents 6,769 71,980
Cash and Cash Equivalents, Beginning of
Period 99,267 27,287
Cash and Cash Equivalents, End of Period $ 106,036 $ 99,267
Endeavour International Corporation
Operating Statistics
(Unaudited)
Fourth Quarter Year Ended
December 31, December 31,
2011 2010 2011 2010
Sales volume (1)
Oil and condensate
sales (Mbbls):
United Kingdom 98 116 373 545
United States 3 1 7 6
Total 101 117 380 551
Gas sales (MMcf):
United Kingdom 16 456 94 3,071
United States 1,728 937 5,033 2,636
Total 1,744 1,393 5,127 5,707
Oil equivalent sales
(MBOE)
United Kingdom 101 192 388 1,057
United States 291 157 846 445
Total 392 349 1,234 1,502
Total BOE per day 4,253 3,800 3,382 4,115
Physical production
volume (BOE per day):
United Kingdom 925 2,390 1,095 2,904
United States 3,158 1,708 2,319 1,221
Total 4,083 4,098 3,414 4,125
Realized Prices (2)
Oil and condensate
price ($ per Bbl):
Before
commodity
derivatives $ 110.93 $ 82.56 $ 109.20 $ 76.39
Effect of
commodity
derivatives - - - (5.61)
Realized
prices
including
commodity
derivatives $ 110.93 $ 82.56 $ 109.20 $ 70.78
Gas price ($ per
Mcf):
Before
commodity
derivatives $ 3.14 $ 4.94 $ 3.63 $ 5.18
Effect of
commodity
derivatives - - - 0.27
Realized
prices
including
commodity
derivatives $ 3.14 $ 4.94 $ 3.63 $ 5.45
Equivalent oil price
($ per BOE):
Before
commodity
derivatives $ 42.51 $ 47.41 $ 48.67 $ 47.72
Effect of
commodity
derivatives - - - (1.03)
Realized
prices
including
commodity
derivatives $ 42.51 $ 47.41 $ 48.67 $ 46.69
(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. We use the entitlements method to account for sales of gas
production.
(2) The average sales prices include gains and losses for derivative
contracts we utilize to manage price risk related to our future cash
flows.
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.
Fourth Quarter Year Ended
December 31, December 31,
2011 2010 2011 2010
Net income (loss) $ (44,645) $ 82,809 $ (130,995) $ 56,531
Impairment of U.S.
oil and gas
properties (net of
tax) (1) 36,913 - 65,706 7,692
Unrealized (gain)
loss on derivatives
(net of tax) (2) 1,976 (1,750) (10,269) (6,820)
Currency impact on
deferred taxes - - - (51)
Net Income (Loss) as
Adjusted $ (5,756) $ 81,059 $ (75,558) $ 57,352
Net income (loss) $ (44,645) $ 82,809 $ (130,995) $ 56,531
Unrealized (gain)
loss on derivatives 2,719 (814) (8,378) (12,291)
Net interest expense 12,547 12,813 44,781 34,517
Depreciation,
depletion and
amortization 7,780 7,604 26,478 28,894
Impairment of U.S.
oil and gas
properties 36,913 - 65,706 7,692
Income tax expense
(benefit) (4,758) (8,704) 27,061 (788)
Early termination of
commodity derivatives - - - 10,201
Adjusted EBITDA $ 10,556 $ 93,708 $ 24,653 $ 124,756
(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 $743 and $936 and $1,891 and
$(5,472), respectively.
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