Endeavour to Commence Drilling at Greater Rochelle in 2012

Endeavour reported an operational update for the third quarter of 2011.

Business Highlights:

  • North Sea:
    • Drilling at Bacchus is progressing on the three production wells
    • Awarded a rig contract for the Greater Rochelle project and expect to commence drilling in the spring of 2012
    • Appraisal drilling at Tudor Rose is scheduled to begin in November
    • Production interruptions at the Bittern field during August and September resulted in fewer oil liftings; full production at the field recommenced in October
  • U.S. Onshore:
    • Six new Haynesville wells brought on production during the third quarter
    • U.S. production exited the quarter at approximately 17.5 million cubic feet of gas per day (MMCF/D)
    • Four vertical test wells have been drilled in Heath Shale oil play; core and log analyses are ongoing
    • Exploration activities in Alabama operations have been discontinued
  • Financial:
    • Completed the sale of $135 million of 5.5% convertible notes due 2016
    • Incurred a one-time impairment of $29 million related to the U.S. full cost pool
    • Recorded a one-time charge of $26 million in deferred tax liability for the increase in the U.K. supplemental tax rate
    • Incurred an unrealized gain of $13 million relating to the revaluation of embedded derivatives

"This was a challenging quarter for the industry, commodities and the capital markets. Likewise, Endeavour's results were negatively impacted by production interruptions and non-cash items related to the tax changes in the U.K. and the discontinuation of our activities in Alabama," said William L. Transier, chairman, chief executive officer and president. "We remain focused on turning on first production at our two key projects in the North Sea – Bacchus and Greater Rochelle. In the U.S., we are evaluating the results of four vertical pilot tests in the Heath shale oil play in Montana. Until production begins at Bacchus and we see better North American natural gas prices, the Company will conserve capital for the near-term projects yielding the highest rate of return."

Operational Update

North Sea

The drilling of the three planned production wells is underway in the Bacchus field in Block 22/06a in the Central North Sea. Based on the rate of progress drilling the production wells, first production is expected to begin early next year.

For the Greater Rochelle development, the Company has contracted for a drilling rig which is expected to arrive in the spring of 2012 to commence drilling of the two planned production wells. Endeavour is operator and holds a 44% ownership interest in the Greater Rochelle development which is comprised of Blocks 15/26b, 15/26c and 15/27.

Drilling is scheduled to commence on the Tudor Rose appraisal well, a stranded oil discovery, in November. The Company plans to test the viscosity of the oil in place and the economics of the discovery. Endeavour has a 20% working interest in the well.

Due to production interruptions at Bittern during the quarter, certain oil liftings were not completed. As of October, full oil production at the field has resumed.

U.S. Onshore

During the quarter, Endeavour brought six new wells on production in its Haynesville area. The Company currently has two additional Haynesville wells in progress to conclude the Company's 2011 planned drilling program. Due to this activity, U.S. net daily production averaged 14.6 MMCF/D for the quarter with the third quarter exit volumes at approximately 17.5 MMCF/D.

In the Heath shale oil play, the Company and its partners have completed the drilling of four vertical pilot test wells. Core and log data are currently being evaluated to define possible horizontal re-entry target zones for next year. In the Alabama Devonian shale gas play, test results at the horizontal test well indicated it was not economical to continue investing in the play. Endeavour has discontinued further operations in the area.

The due diligence is ongoing surrounding the proposed acquisition of the SM Energy and partners Pennsylvania Marcellus leasehold, which includes approximately 50,000 net acres, three producing wells, 10 miles of pipeline and related facilities.

Company: Endeavour International Corporation more info
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