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Endeavour International Corporation (END)

Q4 2008 Earnings Call

March 12, 2009 10:00 am ET


J. Michael Kirksey – Executive Vice President & Chief Financial Officer

William L. Transier – Chairman & Chief Executive Officer

John G. Williams – Executive Vice President & Exploration Officer

Bruce H. Stover – Executive Vice President & Business Development Officer


Irene Haas - Canaccord Adams

Peter Nicol - Tristone Capital

Ed [Adhusen] – Private Investor

David [Merzi – Highstone Capital]



Good day and welcome to this Endeavour International Corporation’s 2008 fourth quarter and year end earnings release conference call. Today’s conference is being recorded.

At this time for opening remarks and introductions I would like to turn the call over to Executive Vice President and Chief Financial Officer, Mr. Mike Kirksey. Please go ahead sir.

J. Michael Kirksey

Welcome everyone to our conference call today. Our management team is here in London this afternoon and we’d like to welcome you to this call. With me today is Bill Transier, our Chairman and Chief Executive Officer; also John Williams, our Executive Vice President and Exploration Officer; as well as Bruce Stover, our Executive Vice President and Business Development Officer.

Let me remind you today that this presentation contains our best and most readable estimates. However, a number of factors can cause actual results to differ materially from what we present today. For the risk factors associated with our business you should read our full disclosures in our 10-K and 10-Qs. Our 2008 10-K will be filed this weekend.

With that, I’ll turn it over to Bill for our opening comments.

William L. Transier

Thank you Mike. Let me also add my thanks for everybody being here with us today. I think its common sense and logic that we’ve had historic and unprecedented events in the world that have created now the volatility both in the energy business and the financial markets. Fortunately for Endeavour we were able to build a business model that’s sustainable and watch these events really from a distance.

Many companies in our peer group have been forced to curtail their activities or deal with the financial institutions, while Endeavour enjoyed a very busy and probably a hugely successful year. Let me talk just briefly a overview of 2008 performance. Our combination of strong and reliable production from prior acquisitions provided for us record cash flows to fund our exploration and appraisal drilling, still allowing us to continue to pay down debt. Almost 15% of our debt was paid down this year.

We launched a pretty active drilling campaign and really had uncommon success by E&P standards with 100% success ratio in 2008. And if you go back to the leadership changes we made in October of 2007, we’ve had 12 successive successes in our exploration and appraisal efforts to date.

Our technical capabilities and disciplined process in exploration have begun to reap real benefits and are showing up in reserve editions. John Williams will discuss the significant successes at both Rochelle and Cygnus later in more detail, but I’d like to point out what we said in our press release this morning, that we had 175% reserve replacement ratio and that does not include Cygnus Fault Block 2b, which we announced last month.

We also launched a drilling campaign in the U.S. Many of you have asked me questions about that but that was designed really to balance the longer cycle times and higher costs in the North Sea with what would be shorter cycle times and lower costs. And also importantly to unlock an unrecognized tax benefit that is a significant asset to our shareholders. We will continue down that path and John will talk more about that in a few minutes.

Endeavour today now has three major development projects in process. That’s Rochelle, Cygnus and Columbus that, when on production we hope all three of them will be by the end of 2010 or early 2011, will more than double our existing production today. We’ve already filed field development plans for Cygnus and Columbus and we plan to file our field development plan for Rochelle as soon as possible this year.

Production has held basically flat during 2008 compared with 2007. This was actually a major accomplishment inviting off normal decline from the assets and down time some expected and some had planned. As you can see from our guidance we expect normal declines in 2009. However, our hedging activity assures us good cash flow to continue to prosecute our development, appraisal and exploration activities.

Just another comment about cycle times. We had two projects this year, one Knockandoo in Norway that was drilled, tested and put on production during 2008. And then our Garwood project in south Texas which was spudded in October and was flowing production before year end. Although these are small, they have added to our production and they show our ability to offset normal declines with shorter cycle time projects and we will continue to focus on those as we move forward and put on our major development projects.

A couple of other comments. The leadership additions and changes we made in late 2007 and in 2008 have added a great deal of strength in both the financial, exploration and operation areas. Our company performed really well in all metrics important to a developing small cap E&P company. Our production was as forecasted. In fact it was at the high end of the range. We had strong cash flow underpinned by an intelligent hedging strategy. We had improved operating metrics. As I said a minute ago we had really uncommon drilling success. Our reserve replacement ratio was very commendable at reasonable costs. And we have a strong foundation for future growth in the company.

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