ENDEAVOUR INTERNATIONAL CORP: Endeavour Announces Q3 2012 Financial Results

ENDEAVOUR INTERNATIONAL CORP: Endeavour Announces Q3 2012 Financial Results
Endeavour Announces 2012 Third Quarter Financial and Operational Results 
HOUSTON, Nov. 1, 2012 -- Endeavour International Corporation (NYSE: END) 
(LSE: ENDV) today reported third quarter 2012 Adjusted EBITDA of $51.6 
million compared to $2.4 million for the same quarter of 2011. On a GAAP 
basis, for the third quarter of 2012 net loss was $33.7 million as compared 
to net loss of $63.3 million for the same quarter in 2011.  
Production for the quarter ending September 30, 2012 was up 370% from the 
comparable quarter in 2011, with U.K. crude oil accounting for 100% of the 
increase. For the first nine months of 2012 compared to the same period in 
2011, sales volumes increased 215% from U.K. crude production. For the third 
quarter 2012, entitlement production averaged approximately 10,700 barrels of 
oil equivalent per day ("boepd") compared to actual sales volumes for the 
period of approximately 11,000 boepd.  
Business highlights include: 
-- North Sea:  


     -  At Rochelle, the installation of subsea pipelines and umbilicals
        has been completed ahead of schedule 
     -  The first of the two planned production wells was drilled to a
        final casing point 
     -  Awarded seven licenses covering ten exploration blocks in the


    U.K.'s 27th Licensing Round around existing core areas
  -- U.S. Onshore:  


     -  Closed an exchange with co-owner J-W Operating to obtain operator
        status, control of upstream and midstream assets and an
        additional 15,500 net acres in the Pennsylvania Marcellus 
     -  U.S. net production averaged 12.9 million cubic feet of gas


    equivalent per day (MMCFe/D) for the third quarter
  -- Finance:  


     -  Completed an offering of an additional $54 million of 12% Senior
        Notes due 2018 for net proceeds of $58 million 
     -  Fully redeemed the $25.1 million 12% Senior Subordinated Notes
        due 2014

"The Company enjoyed significant progress in the third quarter with strong 
increases in Brent priced crude oil production in the U.K. North Sea. We are 
focused on and making great progress to deliver first production at our 
Rochelle development," said William L. Transier, chairman, chief executive 
officer and president. "For health and safety reason, drilling and 
infrastructure implementation cannot occur in the same area simultaneously. 
By making the difficult decision to suspend drilling before final completion, 
we were able to keep our service contractor on schedule to complete the 
necessary subsea infrastructure. This decision preserves the option to 
achieve first production at Rochelle in early 2013." 

Operational Update

United Kingdom

The contracted rig at Rochelle, the Diamond Ocean Nomad, completed the 
drilling on the first of two planned development wells to the final casing 
point before moving the rig off location to allow for the hook-up of the 
pipelines and flow-lines to the subsea manifolds. Final drilling and 
completion of this first development well will be done by the Transocean 
Prospect which is scheduled to arrive in field in December. Due to the change 
in the timing of completion of the first well, first production at the field 
is now expected in January 2013 assuming the rig arrives as scheduled. The 
Rochelle subsea infrastructure installation has been substantially completed. 
Endeavour is the operator of the Rochelle development project and holds a 44% 
ownership interest in the Rochelle development which is comprised of Blocks 
15/26b, 15/26c and 15/27.

During the 27th Licensing Round, the U.K. government awarded the Company 
seven new licenses, covering ten exploration blocks located around existing 
core areas. All the licenses, which have a traditional four year term, will 
be operated by the Company and offer additional growth opportunities in the 
future. There are no firm well obligations on any of the licenses and minimal 
upfront capital commitments. 

United States Onshore

Effective October 1, 2012 Endeavour completed an exchange of assets with co-
owner J-W Operating to trade the Company's Bull Bayou Haynesville and Willow 
Springs Cotton Valley projects for all of J-W's upstream and midstream 
Marcellus assets in Pennsylvania. The transaction adds 15,500 net acres to 
Endeavour's position in the Marcellus bringing the total to 31,000 net acres 
and decreases the Company's position in the Haynesville/Cotton Valley by 
2,100 net acres and approximately 3.2 MMCFe/d (530 boepd) of net production. 
Also in the Marcellus, Endeavour has secured an off-take solution in the key 
Daniel area of Cameron County for up to an additional 10 mmcf/d of production 
with a local gatherer by year-end 2013. In conjunction with the transaction, 
the Company currently has three wells drilled and cased in the area waiting 
on completion with no additional drilling requirements until 2014. 

In the Heath Shale tight oil play, the Company has deferred horizontal re-
entries of its vertical pilot wells until 2013 while it evaluates results 
from offset operators and operational efficiencies. In Colorado, the Company 
continues to acquire acreage for Upper Cretaceous targets and has formed a 
23,000 acre Federal unit, where it expects to drill an initial test in 2013.

There is currently no drilling activity underway in the Company's U.S. gas 
fields in the Louisiana, Haynesville or the Pennsylvania Marcellus. Net daily 
production averaged 12.9 MMCFe/D for the third quarter and 15.5 MMCFe/D for 
the first nine months of 2012. 

Finance

Operating expenses during the quarter included a non-recurring expense of 
approximately $9.7 million related to the initial purchase price value 
allocation of inventory at Alba at the date of acquisition. 

In October, Endeavour completed a $54 million addition to its 12% Senior 
Notes due 2018 at 109% of principal amount, resulting in a yield of 9.4%. 
Proceeds of $58 million were used to fully redeem $25.1 million of the 
Company's 12% Senior Subordinated Notes due 2014. The remaining proceeds will 
be used to finance a portion of the construction, improvement and other 
capital costs related to its U.S. and U.K oil and natural gas properties. The 
redemption of the 12% Senior Subordinated Notes was an important step in 
preparing for the syndicated bank revolver Endeavour expects to put in place 
in 2013.

In addition, the Company increased the amount available to be borrowed under 
the Revolving Credit Facility an additional $25 million and drew down an 
additional $15 million bringing the outstanding balance to approximately $115 
million. 

Earnings Conference Call, Thursday, November 1, 2012 at 9:00 a.m. Central 
Daylight Time, 2:00 p.m. British Time 

Endeavour International will host a conference call and web cast to discuss 
its 2012 third quarter financial and operating results on Thursday, November 
1, 2012 at 9 a.m. Central Daylight Time, 2 p.m. British Time. To participate 
and ask questions during the conference call, dial the local country 
telephone number and the confirmation code 2204201. The toll-free numbers are 
888-677-8751 in the United States and 0-808-101-1402 in the United Kingdom. 
Other international callers should dial +1-913-312-0682(tolls apply). To 
listen only to the live audio web cast access Endeavour's home page at 
www.endeavourcorp.com. A replay will be available beginning at 12:00 p.m. 
Central Daylight Time on November 1, 2012 through 12:00 p.m. on November 8, 
2012 by dialing toll free 888-203-1112 (U.S.) or +1-719-457-0820 
(international), confirmation code 2204201.

Endeavour International Corporation is an oil and gas exploration and 
production company focused on the acquisition, exploration and development of 
energy reserves in the North Sea and the United States. For more information, 
visit www.endeavourcorp.com. 

Additional information for investors:

Certain statements in this news release should be regarded as "forward-
looking" statements within the meaning of the securities laws. These 
statements speak only as of the date made. Such statements are subject to 
assumptions, risk and uncertainty. Actual results or events may vary 
materially.

The Securities and Exchange Commission (SEC) permits oil and gas companies, 
in their filings with the SEC, to disclose not only proved reserves, but also 
probable reserves and possible reserves that meet the SEC's definitions for 
such terms, and price and cost sensitivities for such reserves, and prohibits 
disclosure of resources that do not constitute such reserves. We use may use 
certain terms in our news releases, such as "reserve potential," that the 
SEC's guidelines strictly prohibit us from including in filings with the SEC. 
These estimates are by their nature more speculative than estimates of 
proved, probable and possible reserves and accordingly are subject to 
substantially greater risk of being actually realized. In addition, we do not 
represent that the probable or possible reserves described herein meet the 
recoverability thresholds established by the SEC in its new definitions. 
Investors are urged to also consider closely the disclosure in our filings 
with the SEC, available from our website at www.endeavourcorp.com. Endeavour 
is also subject to the requirements of the London Stock Exchange and 
considers the disclosures in this release to be appropriate and/or required 
under the guidelines of that exchange.
                  Endeavour International Corporation
                 Condensed Consolidated Balance Sheets
                              (Unaudited)
                         (Amounts in thousands)
                               September 30,              December 31,
                                   2012                       2011
                                   ----                       ----


                   Assets
Current Assets:
  Cash and cash 
equivalents                   $75,722                   $106,036
  Restricted cash                    178                          -
  Accounts receivable             16,131                      8,649
  Prepaid expenses and 
other current assets           28,047                     18,840
  ---------------------           ------                     ------ 
Total Current Assets         120,078                    133,525 
Property and Equipment,
 Net                             836,369                    549,196
Goodwill                         258,973                    211,886
Other Assets                      51,417                     30,384
------------                      ------                     ------ 
Total Assets                  $1,266,837                   $924,991
------------                  ----------                   -------- 
 Liabilities and Stockholders' Equity
Current Liabilities:
  Accounts payable               $84,744                    $62,275
  Current maturities of 
debt                           12,500                     12,350
  Accrued expenses and 
other                          23,680                     20,549
  --------------------            ------                     ------ 
Total Current 
 Liabilities                 120,924                     95,174 
Long-Term Debt                   812,926                    455,028
Deferred Taxes                   111,806                    115,759
Other Liabilities                 72,338                     61,248
-----------------                 ------                     ------ 


    Total Liabilities          1,117,994                    727,209

Commitments and
 Contingencies

Series C Convertible
 Preferred Stock                  43,703                     43,703

Stockholders' Equity             105,140                    154,079
--------------------             -------                    -------

Total Liabilities and
 Stockholders' Equity         $1,266,837                   $924,991
---------------------         ----------                   --------
                        Endeavour International Corporation
               Condensed Consolidated Statement of Operations
                                 (Unaudited)
                (Amounts in thousands, except per share data)
                                              Third Quarter
                                              September 30,


                                     2012                2011
Revenues                              $83,275             $10,302 
Cost of Operations:
  Operating expenses                   23,973               3,496
  Depreciation, depletion and 
amortization                        23,759               5,372
  Impairment of U.S. oil and 
gas properties                      11,416              28,793
  General and administrative            5,026               4,863
  --------------------------            -----               -----
  Total Expenses                       64,174              42,524
  --------------                       ------              ------ 
Income (Loss) From
 Operations                            19,101             (32,222)
------------------                     ------             ------- 
Other Income (Expense):
  Derivatives: 
Unrealized gains (losses)          (1,204)             13,081
  Interest expense                    (18,053)            (12,253)
  Loss on early 
extinguishment of debt                   -                   -
  Letter of credit fees                (9,378)                  -
  Other income (expense)               (2,663)                611
  ----------------------               ------                 ---
Total Other Income
 (Expense)                            (31,298)              1,439
------------------                    -------               ----- 
Loss Before Income Taxes              (12,197)            (30,783) 
Income Tax Expense
 (Benefit)                             21,505              32,507
------------------                     ------              ------
Net Loss                              (33,702)            (63,290)
Preferred Stock Dividends                 456                 466
-------------------------                 ---                 --- 
Net Loss to Common
 Stockholders                        $(34,158)           $(63,756)
------------------                   --------            -------- 
Net Loss per Common Share:
  Basic and Diluted                    $(0.73)             $(1.63)
  -----------------                    ------              ------ 
Weighted Average Number of
 Common
Shares Outstanding:
  Basic and Diluted                    46,555              39,064
  -----------------                    ------              ------ 


                                            Nine Months Ended
                                               September 30,


                                      2012                2011
Revenues                              $121,444             $43,459 
Cost of Operations:
  Operating expenses                    34,613              14,888
  Depreciation, depletion and 
amortization                         42,292              18,698
  Impairment of U.S. oil and 
gas properties                       47,116              28,793
  General and administrative            15,379              14,525
  --------------------------            ------              ------
  Total Expenses                       139,400              76,904
  --------------                       -------              ------ 
Income (Loss) From
 Operations                            (17,956)            (33,445)
------------------                     -------             ------- 
Other Income (Expense):
  Derivatives: 
Unrealized gains (losses)           (2,178)             11,098
  Interest expense                     (63,016)            (32,607)
  Loss on early 
extinguishment of debt              (21,661)               (402)
  Letter of credit fees                (12,442)                  -
  Other income (expense)                (5,944)                826
  ----------------------                ------                 ---
Total Other Income
 (Expense)                            (105,241)            (21,085)
------------------                    --------             ------- 
Loss Before Income Taxes              (123,197)            (54,530) 
Income Tax Expense
 (Benefit)                              (3,424)             31,820
------------------                      ------              ------
Net Loss                              (119,773)            (86,350)
Preferred Stock Dividends                1,367               1,518
-------------------------                -----               ----- 
Net Loss to Common
 Stockholders                        $(121,140)           $(87,868)
------------------                   ---------            -------- 
Net Loss per Common Share:
  Basic and Diluted                     $(2.94)             $(2.52)
  -----------------                     ------              ------ 
Weighted Average Number of
 Common
Shares Outstanding:
  Basic and Diluted                     41,163              34,854
  -----------------                     ------              ------ 


               Endeavour International Corporation
          Condensed Consolidated Statement of Cash Flows
                           (Unaudited)
                      (Amounts in thousands)
                                     Nine Months Ended September 30,


                                    2012                 2011
Cash Flows from Operating
 Activities:
  Net loss                         $(119,773)            $(86,350)
  Adjustments to reconcile net 
loss to net cash 
provided by (used in) 
operating activities: 


    Depreciation, depletion and
     amortization                     42,292               18,698
    Impairment of U.S. oil and gas
     properties                       47,116               28,793
    Deferred tax expense
    (benefit)                        (15,849)              23,052
    Unrealized (gains) losses on
     derivatives                       2,178              (11,098)
    Amortization of non-cash
     compensation                      3,605                2,733
    Amortization of loan costs and
     discount                         10,536                9,151
    Non-cash interest expense          7,077                9,306
    Loss on early extinguishment
     of debt                          21,661                  402
    Other                              9,692                1,839
    Changes in operating assets


 and liabilities                  (7,191)             (25,145)
Net Cash Provided by (Used in)
 Operating Activities                  1,344              (28,619) 
Cash Flows From Investing
 Activities:
  Capital expenditures              (175,597)            (113,137)
  Acquisitions                      (228,437)             (22,898)
  (Increase) decrease in 
restricted cash                      (178)              31,726
Net Cash Used in Investing
 Activities                         (404,212)            (104,309) 
Cash Flows From Financing
 Activities:
  Repayments of borrowings          (247,065)             (97,638)
  Borrowings under debt 
agreements, net of debt 
discount                          595,000              210,000
  Proceeds from issuance of 
common stock                       60,805              118,444
  Dividends paid                        (833)              (1,400)
  Payments for early 
extinguishment of debt             (7,248)                   -
  Financing costs paid               (28,109)             (11,226)
  Other financing                          4                  511
Net Cash Provided by Financing
 Activities                          372,554              218,691 
Net Increase (Decrease) in
 Cash and Cash Equivalents           (30,314)              85,763
Cash and Cash Equivalents,
 Beginning of Period                 106,036               99,267 
Cash and Cash Equivalents,
 End of Period                       $75,722             $185,030 


                            Endeavour International Corporation
                                    Operating Statistics
                                        (Unaudited)
                                        Third Quarter
                                        September 30,
                                   2012               2011


                               ----               ----
Sales volume (1)
  Oil and condensate 
sales (Mbbls): 


    United Kingdom                  812                 49
    United States                     1                  3
    -------------                   ---                ---
    Total                           813                 52
    -----                           ---                ---

  Gas sales (MMcf):
    United Kingdom                   19                  -
    United States                 1,182              1,329
    -------------                 -----              -----
    Total                         1,201              1,329
    -----                         -----              -----

  Oil equivalent sales
   (MBOE)
    United Kingdom                  815                 49
    United States                   198                225
    -------------                   ---                ---
    Total                         1,013                274
    -----                         -----                ---

  Total BOE per day              11,006              2,972
  -----------------              ------              -----

Physical production
 volume (BOE per day)
 (1)
    United Kingdom                8,573                838
    United States                 2,151              2,436
    -------------                 -----              -----
    Total                        10,724              3,274
    -----                        ------              -----

Realized Price,
 before and after
 derivatives
  Oil and condensate
   price ($ per Bbl)             $99.31            $106.57
  ------------------             ------            -------
  Gas price ($ per Mcf)           $2.16              $3.59
  ---------------------           -----              -----
  Equivalent oil price
   ($ per BOE)                   $82.24             $37.68
  --------------------           ------             ------
                                        Nine Months Ended
                                           September 30,
                                      2012               2011


                                  ----               ----
Sales volume (1)
  Oil and condensate 
sales (Mbbls): 


    United Kingdom                   1,099                274
    United States                        2                  5
    -------------                      ---                ---
    Total                            1,101                279
    -----                            -----                ---

  Gas sales (MMcf):
    United Kingdom                      69                 78
    United States                    4,234              3,305
    -------------                    -----              -----
    Total                            4,303              3,383
    -----                            -----              -----

  Oil equivalent sales
   (MBOE)
    United Kingdom                   1,110                287
    United States                      708                556
    -------------                      ---                ---
    Total                            1,818                843
    -----                            -----                ---

  Total BOE per day                  6,635              3,089
  -----------------                  -----              -----

Physical production
 volume (BOE per day)
 (1)
    United Kingdom                   4,474              1,152
    United States                    2,585              2,036
    -------------                    -----              -----
    Total                            7,059              3,188
    -----                            -----              -----

Realized Price,
 before and after
 derivatives
  Oil and condensate
   price ($ per Bbl)               $101.76            $108.57
  ------------------               -------            -------
  Gas price ($ per Mcf)              $2.19              $3.88
  ---------------------              -----              -----
  Equivalent oil price
   ($ per BOE)                      $66.80             $51.53
  --------------------              ------             ------


(1)  We record oil revenues using the sales method, i.e. when delivery has
     occurred. Actual production may differ based on the timing of tanker
     liftings. Physical production may differ from sales volumes based on
     the timing of tanker liftings for our international sales. We use
     the entitlements method to account for sales of gas production.
                     Endeavour International Corporation
                 Reconciliation of GAAP to Non-GAAP Measures
                                 (Unaudited)
                           (Amounts in thousands)

As required under Regulation G of the Securities Exchange Act of
1934, provided below are reconciliations of net income (loss) to the
following non-GAAP financial measures: net income, as adjusted and
Adjusted EBITDA. We use these non-GAAP measures as key metrics for
our management and to demonstrate our ability to internally fund
capital expenditures and service debt. The non-GAAP measures are
useful in comparisons of oil and gas exploration and production
companies as they exclude non-operating fluctuations in assets and
liabilities.

(amounts in thousands)                Third Quarter
                                      September 30,
                                      -------------
                                   2012            2011


                               ----            ----
Net loss                       $(33,702)       $(63,290)
Impairment of U.S. oil
 and gas properties
 (net of tax) (1)                11,416          28,793
Unrealized (gain) loss
 (net of tax) (2)                   265         (13,034)
Loss on early
 extinguishment of debt
 (net of tax)(3)                      -               -
Deferred tax expense
 related to U.K. tax
 rate change                      8,393          25,387
--------------------              -----          ------ 
Net Loss as Adjusted           $(13,628)       $(22,144)
--------------------           --------        -------- 
Net loss                       $(33,702)       $(63,290)
Unrealized loss on
 derivatives                      1,204         (13,081)
Net interest expense             18,005          12,084
Letter of credit fees             9,378               -
Loss on early
 extinguishment of debt               -               -
Depreciation, depletion
 and amortization                23,759           5,372
Impairment of U.S. oil
 and gas properties              11,416          28,793
Income tax expense
 (benefit)                       21,505          32,507 
                             ------          ------ 
Adjusted EBITDA (4)             $51.565          $2,385
-------------------             -------          ------ 


    

(amounts in thousands)              Nine Months Ended
                                      September 30,
                                      -------------
                                    2012            2011


                                ----            ----
Net loss                       $(119,773)       $(86,350)
Impairment of U.S. oil
 and gas properties
 (net of tax) (1)                 47,116          28,793
Unrealized (gain) loss
 (net of tax) (2)                     58         (12,245)
Loss on early
 extinguishment of debt
 (net of tax)(3)                  17,762             402
Deferred tax expense
 related to U.K. tax
 rate change                       8,393          25,387
--------------------               -----          ------ 
Net Loss as Adjusted            $(46,444)       $(44,013)
--------------------            --------        -------- 
Net loss                       $(119,773)       $(86,350)
Unrealized loss on
 derivatives                       2,178         (11,098)
Net interest expense              62,789          31,832
Letter of credit fees             12,442               -
Loss on early
 extinguishment of debt           21,661             402
Depreciation, depletion
 and amortization                 42,292          18,698
Impairment of U.S. oil
 and gas properties               47,116          28,793
Income tax expense
 (benefit)                        (3,424)         31,820 
                              ------          ------ 
Adjusted EBITDA (4)              $65,281         $14,097
-------------------              -------         ------- 
(1) Since the impairments related to U.S. oil and gas properties, we
recognized no tax benefits as there was no assurance that we could
generate any U.S. taxable earnings.
(2) Net of tax (benefit) expense of $939 and $(47) and $2,120 and
$1,147, respectively.
(3) Net of tax benefit of $3,899 for the nine months ended September
30, 2012.
(4) Includes operating expenses of approximately $9.7 million for the
third quarter of 2012 and nine months ended September 30, 2012
related to the initial purchase price value allocation of inventory
at Alba at acquisition date.
 

SOURCE  Endeavour International Corporation 
CONTACT: Endeavour - Investor Relations, Darcey Matthews, +1-713-307-8711; or 
Pelham Public Relations - UK Media, Philip Dennis, +44(0)207-861-3919, or 
Henry Lerwill, +44(0)207-861-3169 
END 
-0- Nov/01/2012 07:00 GMT