HOUSTON, May 1 /PRNewswire/ --
Endeavour International Corporation (NYSE-Amex: END) (LSE: ENDV) today reported discretionary cash flow for first quarter 2009 of US$23.4 million and adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) of US$17.9 million. For the period, net loss to common stockholders, excluding the impairment charge caused by falling natural gas prices of US$29.4 million, unrealized gains on derivatives and currency impacts on deferred taxes (net loss, as adjusted), was US$2.2 million as compared to a loss of US$4.7 million in the same quarter in 2008.
The first quarter of 2009 was the best in our history for drilling results and of strategic importance for the company, said William L. Transier, chairman, chief executive officer and president. Successful appraisal wells at our Rochelle and Cygnus fields in the North Sea significantly enhanced our reserve base and will serve as the foundation for substantial production growth over the next two years. The sale of our Norway assets demonstrates the true value within Endeavour. The proceeds and our continuing cash flow from producing assets will provide the secure financial platform from which to pursue our growth strategies in the United Kingdom and United States.
On a GAAP basis, net loss to common stockholders for the first quarter of 2009 was US$19.5 million or US$0.15 per diluted share as compared to a loss of US$19.5 million or US$0.15 per diluted share in the same quarter in 2008. The impairment charge recorded in the first quarter of 2009 resulted primarily from a 50 percent drop in North Sea natural gas prices during the period. Under U.S. generally accepted accounting principles, the company's oil and gas hedges cannot be considered in the current impairment calculations and, if used, would have eliminated the need for the impairment.
Highlights for the first quarter are as follows:
The sale of Endeavour Energy Norge AS for USD $150 million - The company announced in early April that it signed a definitive agreement with Verbundnetz Gas AG, a German utility, to divest its Norwegian subsidiary. The proposed sale will generate a significant amount of capital that will enable Endeavour to pursue a number of strategic opportunities, including accelerating the development of its drilling successes in the United Kingdom and actively pursuing shorter-cycle, lower-cost opportunities in the United States. After allocation of US$68 million of goodwill to the assets being sold, the company expects to recognize a gain at closing of approximately US$47 million. The transaction is expected to be completed by the end of May.
Continued successful appraisal drilling at two of the company's major field developments - Endeavour participated in the drilling of three appraisal wells in the United Kingdom sector of the North Sea resulting in a significant increase in the overall potential of the previous discoveries.
- Cygnus - Two appraisal wells drilled in Block 44/12a in the Southern Gas Basin during the first quarter successfully extended the productive area of the Cygnus area to a second and third fault block. The company estimates that gross recoverable reserves from the eastern portion of the field alone may be in excess of 500 billion cubic feet. This number is expected to increase as the fourth and fifth fault blocks are drilled and proven successful. A revised field development plan for the area was submitted to the Department of Energy and Climate Change (DECC) in March that called for a phased development scenario with initial production to begin in the fourth quarter of 2010. Endeavour holds a 12.5 percent interest in the Cygnus area spread over two United Kingdom blocks, 44/11a and 12a. - Rochelle - The commerciality of the undeveloped Rochelle discovery in Block 15/27 was confirmed when the Rochelle 15/27-11 well tested at flow rates of 41 million cubic feet of gas per day and 2,300 barrels of oil condensate per day from perforations in the upper 20-foot section of a 77-foot hydrocarbon column. Reserves are estimated at more than 30 million barrels of oil equivalent. The company is developing a plan for the exploitation of the Rochelle field and expects to file a field development plan with the DECC by the end of 2009. Endeavour holds a 55.6 percent interest in the well and is operator for the block.
Three active exploratory prospects in progress - Drilling operations have commenced on two more wells as part of the company's 2009 exploration campaign and testing continues at a third well.
- Tesla - An exploratory well began drilling this week at the Tesla prospect on Block 22/24c in the United Kingdom sector of the North Sea. Plans call for the well to be drilled to a projected 15,300 feet to test the gas condensate reserve potential of the Triassic Judy sandstones. Endeavour holds a 15 percent working interest in the well. - Dalwhinnie - Endeavour is participating in its third South Texas well since launching its onshore initiative in the United States in late 2008. The Dalwhinnie prospect in Wharton County began drilling in mid-April. Endeavour holds a 20 percent working interest in the prospect. - Alligator Bayou - The Armour Runnels #1 in Matagorda County in South Texas has been drilled to 23,800 feet with numerous potential gas sands. Testing is in progress and will be reported once there are definitive results. Endeavour holds a 10 percent interest in the prospect.
The signing of a participation agreement for onshore exploration and development opportunities in the United States - In April, Endeavour entered into a definitive agreement with Caza Petroleum Inc., a subsidiary of Caza Oil and Gas, Inc., to participate in a jointly established exploration and development program covering Caza's onshore acreage position and opportunity portfolio in the United States. During the initial two-year term of the agreement, Endeavour will have the option but not the obligation to participate in the acquisition, exploration and appraisal activities of selected assets. Caza currently holds interests in 42,000 gross acres in Texas, New Mexico and Louisiana.
Continuing progress in debt reduction - Endeavour repaid US$10 million in long term debt during the quarter. In conjunction with the sale of its Norwegian subsidiary, the company anticipates reducing debt by an additional US$25 - US$30 million which will decrease Endeavour's net debt to approximately US$50 million.
Revised Guidance for Year 2009 The table below sets forth estimates for the company's operating statistics for the full year ending December 31, 2009 following the completion of the sale of Endeavour Energy Norge AS. (All amounts in US Dollars unless otherwise noted) Estimated Average Production (A) Daily Production (boepd) 4,000 to 5,000 Differentials (B) Oil ($/bbl) $(5.50) to $(6.50) Gas ($/mcf) $(0.10) to $(0.20) Gas Percentage of Total 50% to 55% Lease Operating Expense (per barrel) $9.50 to $12.00 (A) Actual results may differ materially from these estimates. (B) For purposes of the estimates, assumptions of price differentials are based on location, quality and other factors, excluding the effects of derivative financial instruments. Gas price differentials are stated as premiums (discounts) from National Balancing Point pricing, and oil price differentials are stated as premiums (discounts) from Dated Brent pricing.
Earnings Conference Call Today, Friday, May 1, 2009 at 9:00 a.m., Central Daylight Time, 3:00 p.m. British Summer Time
Endeavour will host an analyst conference call and web cast today, Friday, May 1, 2009, to discuss its 2009 first quarter financial and operating results at 9 a.m. Central Daylight Time, 3 p.m. British Summer Time. To participate and ask questions during the conference call, dial the local country telephone number and the confirmation code 4312643. The toll-free numbers are 888-708-5692 in the United States, 0-800-051-7166 in the United Kingdom, and 800-191-83 in Norway. Other international callers should dial +1-913-312-0962 (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 Daylight Time on May 1 through 12:00 p.m. on May 7 by dialing toll free +1-888-203-1112 (U.S.) or +1-719-457-0820 (international), confirmation code 4312643.
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 press release are forward-looking and are based upon Endeavour's current belief as to the outcome and timing of future events. All statements, other than statements of historical facts, that address activities that Endeavour plans, expects, believes, projects, estimates, or anticipates will, should or may occur in the future, including future production of oil and gas, future capital expenditures and drilling of wells and future financial or operating results are forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements herein include the timing and extent of changes in commodity prices for oil and gas, operating risks and other risk factors as described in Endeavour's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission (SEC). Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, Endeavour's actual results and plans could differ materially from those expressed in the forward-looking statements.
The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We may use certain terms such as probable and possible reserves that the SEC's guidelines strictly prohibit us from including in our filings with the SEC. These estimates are by their nature more speculative than estimates of proved reserves and accordingly are subject to substantially greater risk of being actually realized by Endeavour. 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. Factors affecting ultimate recovery include oil and gas pricing, the scope of our ongoing drilling program, which will be directly affected by the availability of capital, drilling and production costs, availability of drilling services and equipment, drilling results, transportation constraints, regulatory approvals and other factors; and actual drilling results, including geological and mechanical factors affecting recovery rates. Investors are urged to consider closely the disclosure in our Form 10-K and each of our Form 10-Qs, available free of charge on our internet site (http://www.endeavourcorp.com). You can also obtain these forms from the SEC on the SEC's internet site (http://www.sec.gov) or by calling +1-800-SEC-0330.
Endeavour International Corporation Comparative Condensed Consolidated Balance Sheets (Unaudited) (Amounts in thousands) (Reflects the classification of our Norwegian subsidiary as discontinued operations.) (All amounts in US Dollars unless otherwise noted) March 31, December 31, 2009 2008 Assets Current Assets: Cash and cash equivalents $12,599 $31,421 Restricted cash 32,553 20,739 Accounts receivable 20,555 22,325 Prepaid expenses and other current assets 38,702 42,194 Current assets of discontinued operations 13,907 16,726 Total Current Assets 118,316 133,405 Property and Equipment, Net 217,518 232,346 Goodwill 213,949 213,949 Other Assets 9,674 9,165 Long Term Assets of Discontinued Operations 151,122 148,605 Total Assets $710,579 $737,470 Liabilities and Stockholders' Equity Current Liabilities: Accounts payable $52,545 $38,630 Current maturities of debt 6,652 13,000 Accrued expenses and other 37,895 36,642 Current liabilities of discontinued operations 14,434 22,231 Total Current Liabilities 111,526 110,503 Long-Term Debt 212,552 214,855 Deferred Taxes 55,689 67,299 Other Liabilities 56,740 55,791 Long-term Liabilities of Discontinued Operations 49,432 46,051 Total Liabilities 485,939 494,499 Commitments and Contingencies Series C Convertible Preferred Stock 125,000 125,000 Stockholders' Equity 99,640 117,971 Total Liabilities and Stockholders' Equity $710,579 $737,470 Endeavour International Corporation Comparative Condensed Consolidated Statement of Operations (Unaudited) (Amounts in thousands, except per share data) (Reflects the classification of our Norwegian subsidiary as discontinued operations.) Three Months Ended March 31, 2009 2008 Revenues $16,338 $45,809 Cost of Operations: Operating expenses 6,182 7,347 Depreciation, depletion and amortization 11,324 18,888 Impairment of oil and gas properties 29,402 - General and administrative 3,835 3,709 Total Expenses 50,743 29,944 Income (Loss) From Operations (34,405) 15,865 Other Income (Expense): Derivatives: Realized gains (losses) 11,936 (3,150) Unrealized losses (1,373) (29,642) Interest expense (3,911) (8,316) Interest income and other (341) 91 Total Other Income (Expense) 6,311 (41,017) Loss Before Income Taxes (28,094) (25,152) Income Tax Benefit (10,952) (8,627) Loss from Continuing Operations (17,142) (16,525) Income (Loss) from Discontinued Operations 279 (267) Net Loss (16,863) (16,792) Preferred Stock Dividends 2,669 2,695 Net Loss to Common Stockholders $(19,532) $(19,487) Basic and Diluted Loss per Common Share: Continuing operations $(0.15) $(0.15) Discontinued operations - - Net loss to common stockholders $(0.15) $(0.15) Weighted Average Number of Common Shares Outstanding - Basic and Diluted 129,291 127,537
Endeavour International Corporation Comparative Condensed Consolidated Statement of Cash Flows (Unaudited) (Amounts in thousands) Three Months Ended March 31, 2009 2008 Cash Flows from Operating Activities: Net loss $(16,863) $(16,792) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation, depletion and amortization 16,059 21,403 Impairment of oil and gas properties 29,402 - Deferred tax benefit (8,423) (3,144) Unrealized loss on derivatives 1,373 29,642 Amortization of non-cash compensation 657 544 Amortization of loan costs and discount 1,201 3,156 Non-cash interest expense 1,279 869 Other (1,293) 632 Changes in assets and liabilities 16,347 (7,170) Net Cash Provided by Operating Activities 39,739 29,140 Cash Flows From Investing Activities: Capital expenditures (30,584) (19,581) Increase in restricted cash (11,814) - Net Cash Used in Investing Activities (42,398) (19,581) Cash Flows From Financing Activities: Net repayments of borrowings (10,678) (2,000) Payment of preferred dividends (2,656) - Financing costs paid - (3,294) Other financing (50) (246) Net Cash Used in Financing Activities (13,384) (5,540) Net Increase (Decrease) in Cash and Cash Equivalents (16,043) 4,019 Cash and Cash Equivalents, Beginning of Period 38,156 16,440 Cash and Cash Equivalents, End of Period $22,113 $20,459 Endeavour International Corporation Operating Statistics (Unaudited) Quarter Ended March 31, 2009 2008 Sales volume: Oil and condensate sales (Mbbl): United Kingdom 178 265 United States 1 - Continuing operations 179 265 Discontinued operations - Norway 224 96 Total 403 361 Gas sales (MMcf): United Kingdom 1,078 2,035 United States 51 - Continuing operations 1,129 2,035 Discontinued operations - Norway 533 599 Total 1,662 2,634 Total sales (MBOE): United Kingdom 358 604 United States 9 - Continuing operations 367 604 Discontinued operations - Norway 313 196 Total 680 800 BOE per day 7,551 8,796 Physical production volume: Total production (BOE per day): United Kingdom 4,315 7,234 United States 90 - Continuing Operations 4,405 7,234 Discontinued operations - Norway 3,365 2,894 Total 7,770 10,128 Realized Prices (including discontinued operations): Oil and condensate price ($per Bbl): Before commodity derivatives $41.68 $89.84 Effect of commodity derivatives $24.50 $(17.57) Realized prices including commodity derivatives $66.18 $72.27 Gas price ($per Mcf): Before commodity derivatives $7.78 $10.93 Effect of commodity derivatives $1.25 $1.22 Realized prices including commodity derivatives $9.03 $12.15 Equivalent oil price ($per BOE): Before commodity derivatives $43.71 $76.53 Effect of commodity derivatives $17.56 $(3.94) Realized prices including commodity derivatives $61.27 $72.59
Endeavour International Corporation Reconciliation of GAAP to Non-GAAP Measures (Unaudited) (Amounts in millions) 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 (loss) as adjusted, Adjusted EBITDA and discretionary cash flow. The company uses these non-GAAP measures as key metrics for the management of the company and to demonstrate the company's 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. (in thousands, except per share) Three Months Ended March 31, 2009 2008 Net loss $(16,863) $(16,792) Depreciation, depletion and amortization 16,059 21,403 Impairment of oil and gas properties 29,402 - Deferred tax benefit (8,423) (3,144) Unrealized loss on derivative instruments 1,373 29,642 Amortization of non-cash compensation 657 544 Amortization of loan costs and discount 1,201 3,156 Non-cash interest expense 1,279 869 Other (1,293) 632 Discretionary cash flow $23,392 $36,310 Net loss to common shareholders, as reported $(19,532) $(19,487) Impairment of oil and gas properties (net of 50% tax) 14,701 - Unrealized (gains) losses on derivatives (net of 50% tax) 687 14,821 Currency impact of deferred taxes 1,946 12 Net loss, as adjusted $(2,198) $(4,654) Net loss to common shareholders, as reported $(19,532) $(19,487) Unrealized losses on derivatives 1,373 29,642 Interest expense 3,911 8,316 Depreciation, depletion and amortization 11,324 18,888 Impairment of oil and gas properties 29,402 - Income tax benefit (10,952) (8,627) (Income) loss from discontinued operations (279) 267 Preferred stock dividends 2,669 2,695 Adjusted EBITDA $17,916 $31,694 Discretionary cash flow is equal to cash flow from operating activities before the changes in operating assets and liabilities.
Investor Relations, Mike Kirksey, +44(0)207-451-2364, or +1-713-307-8788; or UK Brokers, Jeffrey Auld of Canaccord Adams, + 44(0)207-050-6500; or UK Media, Philip Dennis, +44(0)207-743-6363, or Henry Lerwill, +44(0)203-178-6242, both of Pelham Public Relations, all for Endeavour International Corporation