"In only our second year as a company, we accomplished much in building a North Sea-focused company with assets, people and tools that will be successful over time," said William L. Transier, co-chief executive officer of the company. "Although our Norwegian assets performed better than expected due to higher commodity prices, our year-end results were negatively impacted by unsuccessful exploration drilling. We are steadfast in our belief that our exploration campaign will yield positive results and that our business model will create substantial future value."
For the fourth quarter 2005, the company reported a loss of $25.6 million or $0.34 per diluted share, which includes $23.0 million for the effect of impairment of oil and gas properties and litigation settlement, as compared to a loss of $4.5 million or $0.06 per diluted share the same quarter in 2004. Revenues for the period were $11.0 million, and production was 205,000 barrels of oil equivalent (BOE). The average oil price for the quarter was $54.17 per barrel.
"Although we did not make a commercial discovery in 2005, our exploration activity laid the foundation for a larger and improved portfolio that will benefit our ongoing drilling campaign," added John N. Seitz, co-chief executive officer. "We already have one well underway and our pool of developing prospects for the next two years will provide an opportunity to create significant value for our stockholders."
Significant events for the company during the year included: * Participated in license rounds in the UK and Norway that increased total leasehold position to 1.8 million acres -- In 2005, Endeavour was awarded 11 production licenses encompassing 17 blocks during the 23rd Seaward Licensing Round held by the UK Department of Trade and Industry. This added to the nine licenses and 18 blocks awarded in 2004. Six of the new licenses cover six blocks in the Central North Sea with Endeavour serving as operator of three of the blocks. The company was also named operator of six blocks on two licenses in the Inner Moray Firth. The remaining three licenses (comprising five blocks) are located in the Southern Gas Basin with Endeavour serving as operator of two blocks. Total gross acreage held by the company in the UK Continental Shelf is now 1.3 million acres. In Norway, Endeavour holds interests in 11 production licenses, two of which were awarded in December as part of the 2005 Awards in Predefined Areas process. Total gross acreage in the Norwegian Continental Shelf comprises approximately 500,000 acres of Endeavour's portfolio. * Launched multiple-well exploratory campaign -- In 2005, Endeavour drilled four exploratory wells, with the company acting as operator of two of the wells. The four wells were plugged and abandoned when they did not encounter commercial hydrocarbons. In early February, drilling operations began on the company's fifth well, the Cygnus prospect on Block 44/12, as part of a farm-in agreement covering blocks 44/11 and 44/12 in the Southern North Sea. The prospect is located in a prolific part of the basin northwest of the Hawksley gas field. The company holds a 12.5 percent working interest in the blocks. Endeavour has obtained two drilling slots on the Global Santa Fe 140, a semisubmersible rig, and will operate two wells in the second half of the year that are expected to be drilled in the UKCS Central Graben region. Other wells will be drilled as technical and partnership details and rig arrangements are finalized. * Expanded role in Norway as an operator and explorer -- After an extensive evaluation by the Ministry of Petroleum and Energy of its technical; operational; and health, safety and environmental competencies, Endeavour Energy Norge AS was notified of its prequalification as an operator in the NCS in November. That was followed by the award of an operating interest in a production license in the greater Ekofisk area located in the southernmost part of the Norwegian sector of the North Sea. To ensure its ability to fulfil its role as an operator, the company joined with several other operators in the NCS to form a consortium that has entered into a contract for the use of a drilling rig for a three-year period beginning the second half of 2006. Endeavour is committed to two rig slots in late 2007 and 2008 as its part of the contract with Dolphin AS, a subsidiary of Fred Olsen Energy ASA. Drilling will be conducted by the Bredford Dolphin, a semi submersible drilling rig. * Acquired interest in a field under development that will deliver first production from the UK -- Late in the year, Endeavour entered into a definitive agreement to purchase an eight percent interest in the Enoch Field, one of the first discoveries to be developed along the median line between the UK and Norway. The company's net share of daily production, slated to begin in late 2006, is expected to be approximately 1,000 barrels of oil equivalent. * Continued effort to optimize production from existing Norwegian assets -- Production from the company's Njord and Brage interests remained stable throughout the year at approximately 2,000 barrels of oil equivalent. Development wells were drilled in both fields to offset natural declines in existing wells and extend the life of the assets. Although volumes are forecast to decline somewhat over the next two years, an upgrading of facilities in the Njord field will allow for a significant increase in the production of natural gas beginning in late 2007 and other development wells will be drilled to maintain oil volumes from both facilities.
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