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Endeavour International Corporation (END)

Wall Street Analyst Forum's 20th Annual Institutional Investor Conference Transcript

March 26, 2009 10:30 am ET


Hellen Bard – Director of Client Services, The Wall Street Analyst Forum

Michael Kirksey – EVP and CFO


Hellen Bard

Everyone, my name Hellen Bard of the Wall Street Analyst Forum and I am your host in the room for today. At the registration desk we have Sydney Bard, who is able to assist you with any requests you may have or information on any of the presenting companies.

I would ask at this time if you have a cell phone, pager, and hand held device to switch it to either the off or silent position, so it not interrupt the presentation and it’s also in accordance with the rules of the University Club.

The next company we have presenting here this morning is Endeavour International Corporation. Endeavour International Corporation is an international oil and gas exploration and production company, focused on the acquisition, exploration and development of energy reserves in the North Sea and United States. For more information, please visit Presenting this morning is Mike Kirksey, the Chief Financial Officer.

Michael Kirksey

Thank you, good morning everyone. The oil and gas industry a while ago some one refer to as some sharks out there, we are not one of the sharks, we are one of the –

Unidentified Participant

They are swimming around near your rig.

Michael Kirksey

They are swimming around near our rigs sometimes, except in the winter when the North Sea is still volatile no one goes out there, but again, thank you for coming this morning and learning a little bit more about Endeavour.

Endeavour is a fully functioning E&P company. The Company is only about five years old; in fact March is our fifth anniversary. It is a well balanced, self-funding E&P company, that started in the North Sea five years ago and has now grown to be a very valuable and producing company that is a balanced E&P – about balanced E&P, I'll talk about that in just a second what we mean by balanced. We have significant organic growth opportunities, which I'll cover in just a second and a very valuable reserve holding.

We'll talk a little bit about North Sea gas today. North Sea gas, when you hear gas, you think the U.S. low price, Carrizo, people unloading properties. In the North Sea gas is a very valuable commodity, probably a couple of weeks ago you read about Russia-Ukraine controversies about pipelines and that so the U.K. Northern Europe utilities are very concerned about gas and gas supplies. So owning a large reserve of gas which we do is a very valuable commodity.

You're going to hear about a company that's only five years old but today is generating over 120 million of cash flow that we've reinvested in the North Sea over the past year with a very valuable reserve portfolio. And just this past year, we've started to diversify that into the U.S. to balance the cost cycle times that you see in the North Sea.

So, Endeavour today we released our earnings last week and they have been very favorably received, the stock is up a 100% since the beginning of the year but a long way to go we think in terms of achieving fair value. We generated a 121 million of cash flow and we manage our company based on discretionary cash flow. That's a cash flow available to invest in the business before capital, before CapEx.

We ended the year with about 60 million of cash and cash deposits. One of more important things I'll talk about is our hedge philosophy. In the presentation I made before, I had a slide towards the back that was a very unique slide of the picture of an oil rig with the lightning thunderstorm over it and a tornado next to it. And that's the market that we've been in over the last few months and hedging is the way to avoid such storms.

A lot of companies didn’t hedge but Endeavour has a philosophy of building the company over time securing cash flow, investing in our projects and resources and building the company. We are not – if you want to gamble on oil price go down the hall and find someone from Las Vegas. We are not about gambling on commodity prices and that has paid off for us very, very well over the last few months.

In 2008, we produced about 8,800 to 8,900 barrels a day. We’ve had a very successful exploration and appraisal process. We are not wild caters, we have a – we take a business like approach to drilling, exploration and appraisal wells. We’ve had 12 consecutive successes that kind of untouched in our industry. We’ll talk about that a little bit.

We've recently launched during 2008, our U.S. campaign. We grew up as a North Sea company from 2004, and the reason for that was both the UK and the Norway sectors have been very favorable regimes for new oil and gas companies. They're basically incentivizing new exploration in the North Sea so it was a very favorable regime for the company to start. We started there, built up and now we believe it’s time to balance ourselves. The North Sea is much longer cycle times, more costly, more regulation from a health and safety standpoint. And it takes three years to five years to turn a major project on production or in the U.S. and we did this in 2008. You can drill a well, hook it to the pipeline and turn it on in a matter of months. So we felt it was time to take some of the capital that we are generating from the North Sea and diversify our portfolio. We had a good year from reserve replacement, we’ve replaced reserves of 175%, 2P reserves are 32 million. We'll talk about that a little bit.

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