Endeavour reported adjusted EBITDA for the second quarter of 2011 was $7.6 million compared to $13.1 million in the second quarter of 2010 and $4.1 million in the first quarter of 2011. On a GAAP basis, net loss was $15.6 million for the second quarter of 2011 as compared to net income of $0.6 million for the same quarter in 2010.
"During the second quarter financial results were as expected, while we made substantive progress on our U.K. development projects and our U.S. Haynesville unconventional gas play. Adding to this progress, our announced strategic acquisition of acreage and infrastructure gives us exposure to 1.0 to 1.3 trillion cubic feet of gross recoverable natural gas resource potential in the Marcellus area. We are confident that the balanced portfolio can deliver significant growth in both oil and natural gas production in the near-term," said William L. Transier, chairman, chief executive officer and president. "During July, the Company enhanced its flexibility and growth potential by adding approximately $100 million in available liquidity in addition to funding the $110 million needed for the Marcellus acquisition. The additional capital provides the resources to take advantage of opportunities for growth from existing and emerging parts of our portfolios, while also providing liquidity in case of any unforeseen events."
The drilling of the three planned development wells is underway in the Bacchus field in Block 22/06a in the Central North Sea. Production from the development is expected to begin in the fourth quarter. The Company has a 30% working interest in the field.
In the Greater Rochelle area, the Company awarded two contracts for the design and fabrication of components for the subsea development that will link production for processing and transport to the nearby Scott platform. The contract for the drilling rig for the development will be finalized during the third quarter. Endeavour is operator and holds a 44% ownership interest in the Greater Rochelle development which is now comprised of Blocks 15/26b, 15/26c and 15/27.
Endeavour will assume operated interests in leasehold, producing wells, pipeline and related facilities held by SM Energy Company and its minority partners in McKean and Potter Counties. The transaction increases Endeavour's leasehold interest in the Marcellus shale to approximately 93,000 gross (68,000 net) acres with more than 300 identified drilling locations in McKean and Cameron counties alone. The purchase will strengthen the Company's position in one of the most active and low-cost U.S. shale plays and provides significant production and reserve potential. The transaction is expected to close in the fourth quarter. In the Company's existing Marcellus acreage in Cameron County, two horizontal wells are waiting on completion, while the existing Daniel Field gathering infrastructure is being expanded.
During the quarter, Endeavour brought six gross wells on production in its Haynesville and Cotton Valley plays in Louisiana and East Texas, respectively. In July, production commenced from two additional gross wells with four other wells currently completing or drilling.
In the Montana Heath shale oil play, the Company and its partners expect to launch drilling operations on four vertical wells in the third quarter. In the Alabama Devonian shale gas play, Endeavour has successfully drilled and cased a horizontal re-entry of a previously drilled vertical pilot well. This well is anticipated to be completed and tested by the fourth quarter.
During the second quarter, the Company completed the redemption of all of its outstanding $81.25 million of 6% Senior Notes due 2012. The Notes were exchanged at 100% of principal amount plus accrued and unpaid interest.
In July, Endeavour closed on its private placement of $135 million aggregate principal amount of 5.5% convertible senior notes due 2016, including the full exercise by the initial purchasers of their option to purchase an additional $15 million principal amount of the offering. The Company intends to use the net proceeds of the offering primarily to fund its announced acquisition of operated interest in the Pennsylvania Marcellus shale play. Endeavour also expanded its credit facility by $75 million under the terms of its Senior Term Loan.
In addition, the Company entered into a letter of credit facility agreement with Commonwealth Bank of Australia in the amount of pounds Sterling 20,600,000 (approximately $33 million). Associated with the letters of credit was the release of the restrictions on approximately $33 million of cash.
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