Endeavour Files Q1 Financial Results, Cites Best Ever Drilling Results

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.

  • Cygnus -- Two appraisal wells drilled in Block 44/12a in the Southern Gas Basin during the first quarter successfully extended the productive area of the Cygnus area to a second and third fault block. The company estimates that gross recoverable reserves from the eastern portion of the field alone may be in excess of 500 billion cubic feet. This number is expected to increase as the fourth and fifth fault blocks are drilled and proven successful. A revised field development plan for the area was submitted to the Department of Energy and Climate Change (DECC) in March that called for a phased development scenario with initial production to begin in the fourth quarter of 2010. Endeavour holds a 12.5 percent interest in the Cygnus area spread over two United Kingdom blocks, 44/11a and 12a.
  • Rochelle -- The commerciality of the undeveloped Rochelle discovery in Block 15/27 was confirmed when the Rochelle 15/27-11 well tested at flow rates of 41 million cubic feet of gas per day and 2,300 barrels of oil condensate per day from perforations in the upper 20-foot section of a 77-foot hydrocarbon column. Reserves are estimated at more than 30 million barrels of oil equivalent. The company is developing a plan for the exploitation of the Rochelle field and expects to file a field development plan with the DECC by the end of 2009. Endeavour holds a 55.6 percent interest in the well and is operator for the block.

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.

  • Tesla -- An exploratory well began drilling this week at the Tesla prospect on Block 22/24c in the United Kingdom sector of the North Sea. Plans call for the well to be drilled to a projected 15,300 feet to test the gas condensate reserve potential of the Triassic Judy sandstones. Endeavour holds a 15 percent working interest in the well.
  • Dalwhinnie -- Endeavour is participating in its third South Texas well since launching its onshore initiative in the United States in late 2008. The Dalwhinnie prospect in Wharton County began drilling in mid-April. Endeavour holds a 20 percent working interest in the prospect.
  • Alligator Bayou -- The Armour Runnels #1 in Matagorda County in South Texas has been drilled to 23,800 feet with numerous potential gas sands. Testing is in progress and will be reported once there are definitive results. Endeavour holds a 10 percent interest in the prospect.

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.

Company: Endeavour International Corporation more info
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