Endeavour Announces 2013 Second Quarter Financial and Operational Results

HOUSTON, Aug. 6, 2013 /PRNewswire/ -- Endeavour International Corporation (NYSE: END) (LSE: ENDV) today reported second quarter 2013 net loss, as adjusted of $12.6 million compared to a net loss, as adjusted of $17.4 million for the same period in 2012. On a GAAP basis, net loss for the second quarter of 2013 was $14.3 million as compared to net loss of $51.3 million for the same quarter in 2012.

Sales volumes for the second quarter of 2013 were 14,497 barrels of oil equivalent per day ("boepd"), compared to 4,677 boepd for the same quarter in the prior year. Second quarter 2013 sales numbers were impacted by two liftings at the Alba field during the period. Physical production for the second quarter of 2013 averaged 9,498 boepd compared to 6,437 boepd for the same quarter of 2012.

Recent Business Highlights:

• North Sea:
  • Drilling of the West Rochelle (W-1) well has been completed. First production is expected in September 2013
  • At East Rochelle, the E-2 well commenced drilling on July 25th
  • At Bacchus, the third production well was completed and flowed at a rate of 9,600 barrels of oil per day ("bopd")
• North America:
  • First vertical pilot well in the Piceance Basin was successfully drilled, cored and logged
• Finance:
  • In March, the Company received a payment of $22.5 million under a Forward Sale agreement. The Forward Sale commitment has now been fulfilled 
  • In May, the Company completed the sale of an additional $17.5 million expansion to the Monetary Production Payment, bringing the total to $125 million outstanding
• Guidance Update:
  • Direct capital expenditures for the year are expected to be $170 million – $180 million in the U.K. and $10 million – $30 million in the U.S.
  • Physical production for the third quarter is expected to be in the range of 8,000 – 9,000 boepd due to planned shutdown work on certain U.K. assets during the period

"We remain focused and are making progress on operational matters related to the commencement of first production at Rochelle and improved performance at Alba," said William L. Transier, chairman, chief executive officer and president. "The start-up of production from the Bacchus B-1 development is another achievement for the Company. The performance of this field continues to be very positive."

Operational Update

North Sea

At the Rochelle development, the West Rochelle well was completed and flow tested at the end of June. During a 56-hour flow test, the well flowed up to 60 million standard cubic feet per day, which was the limit of the well test equipment on the drilling rig. Final installation of the subsea pipeline infrastructure has been completed and the well is connected back to the Scott Platform. First production from the West Rochelle well (W-1) is expected in September 2013 following the completion of the annual maintenance period at the Scott Platform. In addition, the Transocean Prospect rig returned to the Rochelle field and commenced drilling the E-2 well at East Rochelle on July 25th. The second well of the development, E-2, is expected to be on-line during the fourth quarter. Endeavour has a 44% working interest in the Rochelle development.

At the Bacchus field, the third planned production well (B-1) has been completed and flowed at 9,600 bopd. The well logged 2,057 feet net oil pay along a horizontal completion segment in high quality Jurassic-aged Fulmar sandstone in the field's western fault block. Production performance from the three wells was over 17,600 bopd gross. The third well was completed ahead of schedule and below estimated costs. Endeavour has a 30% working interest in the field.

At Alba, the first of three planned development wells at the field was completed in June and a second subsea well was drilled and completed over the past few days. During the planned 28-day summer maintenance program, both the produced water and well-related issues will be addressed and production for the field is expected to improve by year-end. Endeavour has a 25.68% working interest in the Alba field.

North America

In the Piceance Basin in Northwest Colorado, Endeavour successfully drilled, cored and logged its first Wiley federal unit vertical pilot well, targeting the liquids-rich Niobrara and Frontier formations. The Company is evaluating the results and will likely drill a horizontal re-entry later in the year. In this play, Endeavour has accumulated leasehold and drill-to-earn options totaling about 40,000 gross acres.

Finance

In March, Endeavour entered into a Forward Sale agreement receiving a payment of $22.5 million and 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. During the second quarter, the Company fulfilled the delivery requirements for the Forward Sale agreement. This had a positive effect on the Company's realized oil prices year-to-date.

In May, the Company completed the sale of an additional $17.5 million expansion to the Monetary Production Payment (MPP), bringing the total to $125 million outstanding. The MPP has a two-year term and will be satisfied out of the production from the Alba and Bacchus fields. Repayment of the MPP began in July 2013 under its terms.

Current liabilities were impacted during the quarter due to the reclassification of the $115 million Credit Revolver from long-term into short-term liabilities. Endeavour intends to refinance the Credit Revolver, due in June of 2014, with a new revolving credit facility. Discussions are in process with a syndicate of financial institutions.

Guidance Update

Direct capital expenditures for the U.K. North Sea are expected to be in the $170 million – $180 million range. As disclosed, the increase from previous capital expenditure estimates are related to cost overruns on Rochelle, primarily from an extended drilling duration of the West well(W-1) and the drilling of the E-2 well at East Rochelle. Direct capital expenditures for the U.S. remain in the range of $10 million – $30 million and are largely discretionary.

Each year during the third quarter, routine maintenance work is performed on platforms and infrastructure in the U.K. North Sea. Due to this planned downtime, physical production levels for the third quarter are expected to be in the range of 8,000 – 9,000 boepd. With the summer maintenance work at the Alba field, there are no scheduled liftings during the third quarter. While the lack of liftings will impact the estimated sales volumes for the third quarter, the Company continues to receive payments monthly for its physical production volumes under its existing marketing agreement.

Earnings Conference Call, Tuesday, August 6, 2013 at 9:00 a.m., Central Daylight Time, 3:00 p.m. British Summer Time

Endeavour International will host a conference call and web cast to discuss its 2013 second quarter financial and operating results on Tuesday, August 6, 2013 at 9:00 a.m. Central Daylight 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 8946017. The toll-free numbers are 800-753-0420 in the United States and 0-808-101-1152 in the United Kingdom. Other international callers should dial 913-312-0968 (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 August 6, 2013 through 12:00 p.m. on August 13, 2013 by dialing toll free 888-203-1112 (U.S.) or 719-457-0820 (international), confirmation code 8946017.

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
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.