Endeavour has reported discretionary cash flow for the second quarter of 2009 of $19.0 million and net income, as adjusted, of $38.5 million. Production for the period averaged 5,360 barrels of oil equivalent per day.
"This was a quarter of strategic significance for Endeavour with the completion of the sale of our Norwegian operations, a significant reduction in debt, and the expansion of our portfolios both in the United Kingdom and United States," said William L. Transier, chairman, chief executive officer and president. "Together with continued good operating performance and better than anticipated results from appraisal drilling at the Rochelle and Cygnus discoveries, we are now moving forward with three North Sea developments that will significantly increase our UK production and provide the financial foundation to pursue other growth opportunities."
On a GAAP basis, net income to common stockholders was $7.1 million for the second quarter of 2009 as compared to a loss of $66.7 million in the same quarter in 2008. Included in 2009 second quarter after-tax results are $47.1 million in gain on sale of the Norwegian operations, non-cash charges of $31.4 million primarily relating to unrealized losses on derivatives and the impact of deferred taxes on the change in currency exchange rates.
Endeavour recorded unrealized losses on commodity derivatives during the second quarter of $27 million as compared to $122 million for the same period in 2008 largely due to increases in commodity prices during these periods. The results reflect the hedging program for future oil and gas production that applies mark-to-market accounting principles to pull forward into current periods the non-cash gains and losses from commodity price fluctuations relating to all upcoming deliveries.
Highlights for the second quarter are as follows:
The closing on the sale of Norwegian operations for $150 million -- In mid-May, Endeavour completed the sale of its Norwegian operations to VNG-Verbundnetz Gas AG. The sale is a significant strategic step as it increases the company's financial flexibility and strength to capitalize on recent drilling success in the United Kingdom and to actively pursue growth strategies. It also demonstrates the implied value underlying Endeavour's remaining asset portfolio.
Significant debt reduction -- Endeavour repaid approximately $54 million in bank debt during the second quarter resulting in a total debt reduction of $65 million thus far in 2009. Proceeds from the Norway sale are expected to be used to supplement cash flow from operations and to fund field developments in the United Kingdom as well as growth opportunities in the North Sea and United States.
Continuous development of a more balanced and extensive exploration portfolio -- Endeavour continues to focus on maintaining a drilling inventory that is well-balanced between risk, potential and timing of impact. Portfolio and risk management initiatives implemented in late 2007 have resulted in 13 successful exploration and appraisal wells out of 15 wells drilled. The company plans to drill an estimated 10 wells per year during 2009 and 2010 in the United Kingdom sector of the North Sea and onshore United States.
Increased exploration activity in the United Kingdom -- Endeavour completed testing of two significant wells in the North Sea and entered into agreements to participate in three new prospects. Activities include:
Maureen -- Planned for drilling during the third quarter to target an untested fault block of a previously producing oil field abandoned in 1999 due to low prices. Endeavour holds a 38.5 percent interest.
Deacon -- Scheduled to be drilled in late 2009 as a high-potential, medium-risk prospect with Endeavour holding a 10 percent interest.
Centurion -- Slated for drilling in late 2010 as an appraisal of a previous discovery. Endeavour holds a 33.3 percent interest.
Onshore exploration program in the United States accelerates -- Endeavour plans to drill approximately 10 wells over the next two years in its three exploratory focus areas in South Texas, South Louisiana and Southeast New Mexico. Activities include:
Continued development of new fields in the United Kingdom sector of the North Sea -- Endeavour continues to aggressively pursue the development of three previous discoveries following successful appraisal programs that heightened the potential of the fields.
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