Endeavour Highlights 4Q and Full Year '09 Results
Endeavour International Corporation reported discretionary cash flow for the fourth quarter of 2009 of $21.4 million compared to $15.7 million in the fourth quarter of 2008. Net income (loss), as adjusted, for the year ended December 31, 2009 was $41.1 million compared to $16.5 million last year. For the full year ended December 31, 2009, discretionary cash flow was $71.4 million.
"For Endeavour, the year 2009 was a period of refining our vision as an independent oil and gas exploration and production company. The funds from the sale of our Norwegian subsidiary supplemented cash flow to accelerate our strategic onshore initiative in the United States and progress the development of four North Sea fields in the United Kingdom," said William L. Transier, chairman, chief executive officer and president. "The value of our current portfolio has been enhanced by the record reserve replacement rate and increases in proved and probable reserves for the year. We also took steps to improve our financial flexibility through the redemption of a portion of our convertible preferred stock and an amendment to the terms of the agreement that eliminated anti-dilution provisions and reduced the issue's overall cost of capital."
On a GAAP basis, net income (loss) was $(29.5) million for the fourth quarter of 2009 as compared to $59.1 million in the same quarter in 2008. On a GAAP basis, net income (loss) was $(41.0) million for the year ended December 31, 2009 as compared to $56.5 million in the same period in 2008. These GAAP basis amounts for the year ended December 31, 2009 include non-cash charges resulting primarily from currency translation, mark-to-market accounting for derivatives and asset impairments totaling $82.1 million as outlined on the attached reconciliation schedule.
Highlights for 2009 and early 2010 are as follows:
Reported record 2P reserve replacement rate for 2009 -- Endeavour reported a 49 percent increase in proved and probable reserves for the year and a 2P record reserve replacement ratio of 980 percent of 2009 production based on 1.4 million barrels of oil equivalent (mmboe). Proved and probable reserves at year-end 2009 increased to 38.9 mmboe compared to 26.1 mmboe a year ago excluding Norwegian assets sold during the year. Extensions, discoveries and upward revisions to prior estimates and purchases less production and the reserves associated with the sale of Norwegian assets added 13.7 mmboe during 2009. The majority of the proven reserves added in 2009 are a result of two successful appraisal wells in the Cygnus field, combined with positive production performance from other assets.
Launched onshore U.S. initiative including significant interests in gas shale and frontier plays -- During 2009, Endeavour announced an onshore exploration and production program in the United States to pursue opportunities with shorter cycle times and lower costs that complement its growing North Sea asset base. In early 2010, the company acquired asset positions in four resource plays in the highly prospective Haynesville and Marcellus gas shale plays and frontier plays in Alabama and Montana where the company is one of the first participants. Endeavour has acquired interests in 526,000 gross acres (165,000 net acres) in these four areas. During the first quarter of 2010, Endeavour and its partner, Cohort, began drilling two wells in the Haynesville area. Much of the 2010 activity will occur in the Haynesville gas shale play in northern Louisiana where some of the most prolific new wells in the play are being completed.
Projected 2010 capital spending of approximately $90 million -- Endeavour expects to fund its planned capital spending from cash on hand and cash flow generated by operations. A significant portion of the budget will be directed at its initiative in the U.S. toward near-term production and reserve adds from the company's Haynesville portfolio. A majority of the estimated capital spending is within the company's control and will be increased or curtailed depending on the availability of capital, progress on developments and other opportunities during the year.
Continued progress on three UK field developments with a fourth matured to development phase -- Endeavour currently has four field developments in various stages of completion.
- Rochelle -- The field development plan for the Endeavour-operated project has been filed with production expected in 2011. The environmental impact study for the subsea development and pipeline corridor has been completed with no sensitivities identified. Endeavour holds 55.6 percent interest in the field.
- Cygnus -- Appraisal drilling to test two additional fault blocks in the western portion of the field has begun with drilling underway of a well in the fourth fault block. A field development plan has been filed with production from the eastern section of the field expected to begin in 2011. Endeavour has a 12.5 percent interest in the Cygnus area.
- Bacchus -- The development of the Bacchus field in Block 22/6a in the Central North Sea is expected to be sanctioned in 2010 with first production expected to commence in 2011. The discovery well was drilled in 2005 followed by a down-dip sidetrack that tested at 1,000 barrels of oil per day from the upper part of the reservoir. A three-well subsea development tie-back to the Forties field is planned. Endeavour holds a 10 percent interest in the field.
- Columbus -- The host platform has been identified and commercial agreements are under negotiation with first production expected in 2012. Endeavour holds a 25 percent interest in this development.
Demonstrated underlying value of North Sea assets with sale of Norwegian subsidiary for $150 million -- In May, Endeavour sold its Norwegian operations for $150 million to a German natural gas utility and industry partner. The sale was a significant strategic step as it monetized a significant asset for investors and increased the company's financial flexibility to progress its four UK field developments and launch the company's initiative into onshore U.S. unconventional shale resource plays.
Simplified capital structure for greater financial flexibility -- The redemption and amendment of a convertible preferred stock agreement eliminated the significant potential dilution common stockholders faced under the terms of the original agreement. The redemption of $75 million of $125 million in Series C Convertible Preferred Stock included a $25 million cash payment and the issuance of a five-year $50 million subordinated note payable. The remaining $50 million outstanding of Series C Convertible Preferred Stock was amended to reduce the annual dividend rate to 4.5 percent from 8.5 percent and adjust the conversion price to $1.25 per share.
Closed two financing transactions for $45 million to accelerate U.S. shale initiative -- In early 2010, Endeavour successfully completed a $25 million lending facility with the Bank of Scotland PLC and a $20.5 million private placement of common stock sold primarily to existing shareholders. The net proceeds from these capital transactions will be used largely to accelerate the company's 2010 drilling program in the onshore U.S. shale acreage.
- Endeavour Halts Drilling Ops at East Rochelle (Feb 14)
- Endeavour: Transocean Semisub Mobilized to Rochelle Field (Jan 07)
- Endeavour CFO Resigns (Oct 29)