Endeavour International reported discretionary cash flow for first quarter 2009 of $23.4 million and adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) of $17.9 million. For the period, net loss to common stockholders, excluding the impairment charge caused by falling natural gas prices of $29.4 million, unrealized gains on derivatives and currency impacts on deferred taxes (net loss, as adjusted), was $2.2 million as compared to a loss of $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 $19.5 million or $0.15 per diluted share as compared to a loss of $19.5 million or $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 US $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 $68 million of goodwill to the assets being sold, the company expects to recognize a gain at closing of approximately $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.
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.
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 $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 $25 - $30 million which will decrease Endeavour's net debt to approximately $50 million.
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