Endeavour Announces First Quarter 2010 Financial and Operational Results

Estimated Average Production (A)

  Daily Production (BOE per day)

4,500 

to

6,000 

Differentials (B)

  Oil ($/Bbl)

$

(5.00)

to

$

(6.00)

  Gas ($Mcf)

$

(0.50)

to

$

(0.60)

Gas percentage of Total

55%

to

60%

Lease Operating Expense ($ per barrel)

$

8.00 

to

$

10.00 

(A) Actual results may differ materially from these estimates.

(B) For purposes of the estimates, assumptions of price differentials are based on location, quality and other factors, excluding the effects of derivative financial instruments.  Gas price differentials are stated as premiums (discounts) from Henry Hub pricing, and oil price differentials are stated as premiums (discounts) from West Texas Intermediate pricing.

Endeavour International Corporation

Condensed Consolidated Balance Sheets

(Unaudited)

(Amounts in thousands)

March 31,

December 31,

2010

2009

Assets

Current Assets:

Cash and cash equivalents

$

31,923

$

27,287

Restricted cash

19

2,879

Accounts receivable

10,744

14,800

Prepaid expenses and other current assets

11,863

10,118

Total Current Assets

54,549

55,084

Property and Equipment, Net

305,913

266,587

Goodwill

211,886

211,886

Other Assets

5,725

5,322

Total Assets

$

578,073

$

538,879

Liabilities and Stockholders' Equity

Current Liabilities:

Accounts payable

$

26,045

$

12,401

Current maturities of debt

79,942

-

Accrued expenses and other

18,180

17,798

Total Current Liabilities

124,167

30,199

Long-Term Debt

170,964

223,385

Deferred Taxes

83,033

80,692

Other Liabilities

75,295

85,412

Total Liabilities

453,459

419,688

Commitments and Contingencies

Series C Convertible Preferred Stock:

Face value (liquidation preference)

46,625

50,000

Net non-cash premiums under fair value accounting

  on redemption

8,447

9,058

Total Series C Convertible Preferred Stock

55,072

59,058

Stockholders' Equity:

69,542

60,133

Total Liabilities and Stockholders' Equity

$

578,073

$

538,879

Endeavour International Corporation

Condensed Consolidated Statement of Operations

(Unaudited)

(Amounts in thousands, except per share data)

Three Months Ended

March 31,

2010

2009

Revenues

$

13,721

$

16,338

Cost of Operations:

Operating expenses

2,821

6,182

Depreciation, depletion and amortization

5,681

11,324

Impairment of oil and gas properties

7,692

29,402

General and administrative

4,431

3,835

Total Expenses

20,625

50,743

Income (Loss) From Operations

(6,904)

(34,405)

Other Income (Expense):

Derivatives:

Realized gains

232

11,936

Unrealized losses

(1,072)

(1,373)

Interest expense

(5,636)

(3,911)

Interest income and other

3,024

(341)

Total Other Income (Expense)

(3,452)

6,311

Loss Before Income Taxes

(10,356)

(28,094)

Income Tax Expense (Benefit)

4,834

(10,952)

Loss from Continuing Operations

(15,190)

(17,142)

Income from Discontinued Operations

-

279

Net Loss

(15,190)

(16,863)

Preferred Stock Dividends

589

2,669

Net Loss to Common Stockholders

$

(15,779)

$

(19,532)

Basic and Diluted Net Loss per Common Share:

Continuing operations

$

(0.11)

$

(0.15)

Discontinued operations

-

-

Total

$

(0.11)

$

(0.15)

Weighted Average Number of Common Shares Outstanding:

Basic and Diluted

149,546

129,291

Endeavour International Corporation

Condensed Consolidated Statement of Cash Flows

(Unaudited)

(Amounts in thousands)

Three Months Ended March 31,

2010 

2009 

Cash Flows from Operating Activities:

Net loss

$

(15,190)

$

(16,863)

Adjustments to reconcile net loss to net cash

provided by operating activities:

Depreciation, depletion and amortization

5,681

16,059

Impairment of oil and gas properties

7,692

29,402

Deferred tax expense (benefit)

3,477

(8,423)

Unrealized losses on derivatives

1,072

1,373

Amortization of non-cash compensation

1,153

657

Amortization of loan costs and discount

1,528

1,201

Non-cash interest expense

1,683

1,279

Other

(3,023)

(1,293)

Changes in operating assets and liabilities

5,341

16,347

Net Cash Provided by Operating Activities

9,414

39,739

Cash Flows From Investing Activities:

Capital expenditures

(21,768)

(29,431)

Acquisitions

(29,407)

(1,153)

(Increase) decrease in restricted cash

2,859

(11,814)

Net Cash Used in Investing Activities

(48,316)

(42,398)

Cash Flows From Financing Activities:

Borrowings (repayments) of borrowings

25,000

(10,678)

Proceeds from issuance of common stock

20,011

-

Dividends paid

(550)

(2,656)

Other financing

(923)

(50)

Net Cash Provided by (Used in) Financing Activities

43,538

(13,384)

Net Increase (Decrease) in Cash and Cash Equivalents

4,636

(16,043)

Cash and Cash Equivalents, Beginning of Period

27,287

38,156

Cash and Cash Equivalents, End of Period

$

31,923

$

22,113

Cash and Cash Equivalents, End of Period:

Continuing operations

$

31,923

$

12,599

Discontinued operations

-

9,514

Total

$

31,923

$

22,113

Endeavour International Corporation

Operating Statistics

(Unaudited)

Three Months Ended

March 31,

2010

2009

Sales volume (1)

Oil and condensate sales (Mbbls):

United Kingdom

113

178

United States

1

1

Continuing operations

114

179

Discontinued operations - Norway

-

224

Total

114

403

Gas sales (MMcf):

United Kingdom

766

1,078

United States

280

51

Continuing operations

1,046

1,129

Discontinued operations - Norway

-

533

Total

1,046

1,662

Oil equivalent sales (MBOE)

United Kingdom

241

358

United States

48

9

Continuing operations

289

367

Discontinued operations - Norway

-

313

Total

289

680

Total BOE per day

3,209

7,551

Physical production volume (BOE per day):

United Kingdom

3,118

4,315

United States

578

90

Continuing operations

3,696

4,405

Discontinued operations - Norway

-

3,365

Total

3,696

7,770

Realized Prices (2)

Oil and condensate price ($ per Bbl):

Before commodity derivatives

$

70.24

$

41.68

Effect of commodity derivatives

(7.50)

24.50

Realized prices including commodity derivatives

$

62.74

$

66.18

Gas price ($ per Mcf):

Before commodity derivatives

$

5.43

$

7.78

Effect of commodity derivatives

1.25

1.25

Realized prices including commodity derivatives

$

6.68

$

9.03

Equivalent oil price ($ per BOE):

Before commodity derivatives

$

47.51

$

43.71

Effect of commodity derivatives

1.55

17.56

Realized prices including commodity derivatives

$

49.06

$

61.27

(1) We record oil revenues on the sales method, i.e. when delivery has occurred.  Actual production may differ based on the timing of tanker liftings.  We use the entitlements method to account for sales of gas production.

(2) The average sales prices reflect both our continuing and discontinued operations and include realized gains and losses for derivative contracts we utilize to manage price risk related to our future cash flows.

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, Adjusted EBITDA and discretionary cash flow.  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.

Three Months Ended

March 31,

2010 

2009 

Net loss

$

(15,190)

$

(16,863)

Depreciation, depletion and amortization

5,681 

16,059 

Impairment of oil and gas properties

7,692 

29,402 

Deferred tax expense (benefit)

3,477 

(8,423)

Unrealized loss on derivatives

1,072 

1,373 

Other

1,341 

1,844 

Discretionary Cash Flow (1)

$

4,073 

$

23,392 

Net loss to common shareholders

$

(15,779)

$

(19,532)

Impairment of oil and gas properties (net of tax) (2)

7,692 

14,745 

Unrealized loss on derivatives (net of tax) (3)

1,174 

1,571 

Currency impact on deferred taxes

(59)

(705)

Net Income (Loss) as Adjusted

$

(6,972)

$

(3,921)

Net loss to common shareholders

$

(15,779)

$

(19,532)

Unrealized loss on derivatives

1,072 

1,373 

Net interest expense

5,633 

3,820 

Depreciation, depletion and amortization

5,681 

16,059 

Impairment of oil and gas properties

7,692 

29,402 

Income tax expense (benefit)

4,834 

(8,385)

Preferred stock dividends

589 

2,669 

Adjusted EBITDA

$

9,722 

$

25,406 

(1) Discretionary cash flow is equal to cash flow from operating activities before the changes in operating assets and liabilities.

(2) Net of tax benefits of none and $14,657, respectively.

(3) Net of tax expense of $102 and $198, respectively.