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Endeavour International (END)

Q1 2013 Earnings Call

May 09, 2013 10:00 am ET

Executives

K. Darcey Matthews - Director of Investor Relations and Corporate Communications

William L. Transier - Executive Chairman, Chief Executive Officer and President

Carl D. Grenz - Executive Vice President of International

Catherine L. Stubbs - Chief Financial Officer and Senior Vice President

James J. Emme - Executive Vice President of North America

Analysts

Stephen F. Berman - Canaccord Genuity, Research Division

Chad L. Mabry - KLR Group Holdings, LLC, Research Division

Michael Kelly - Global Hunter Securities, LLC, Research Division

Welles W. Fitzpatrick - Johnson Rice & Company, L.L.C., Research Division

Amy Stepnowski

Steven Karpel - Crédit Suisse AG, Research Division

David Epstein - CRT Capital Group LLC, Research Division

Ravi S. Kamath - Global Hunter Securities, LLC, Research Division

Randy Laufman - Odeon Capital Group LLC, Research Division

Stephen Puckowitz

Presentation

Operator

Good day everyone, and welcome to this Endeavour International Corporation's First Quarter Earnings Conference Call and Webcast. Today's conference is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Ms. Darcey Matthews, Director of Investor Relations. Please go ahead, ma'am.

K. Darcey Matthews

Thank you, Lisa. Good morning, good afternoon, everyone, and thank you for joining us today for Endeavour's 2013 First Quarter Earnings Conference Call. On the phone today, we have Bill Transier, our Chief Executive Officer; Cathy Stubbs, our Chief Financial Officer; Carl Grenz, Executive Vice President for international operations; and Jim Emme, Executive Vice President for North American operations.

Before we begin, I'd like to let everyone know that there is a slide deck supporting this call available on our web page at endeavourcorp.com. Also, let me remind everyone that our comments today reflect our current information and understanding. There are a number of factors, however, that can cause actual results to differ materially from what we present here today.

For the risk factors associated with our business, please read our full disclosures in our latest 10-K and 10-Q. Our quarterly 10-Q is expected to be filed tomorrow. And with that, let me turn the call over to Bill for some opening comments.

William L. Transier

Thank you, Darcey. Good morning, everybody. Appreciate you being here with us today.

The last time we got together to talk was in March when we were talking about year-end numbers. Just to bring you up-to-date since we spoke last, as you know, at the time of that call, we had just moved the Transocean Prospect from East Rochelle over to West Rochelle. That has continued to work full speed since we spoke last. We have now completed the drilling of the well and are in the completion stage for our first production well in the Rochelle field.

We've also moved the Rowan Gorilla VII heavy-duty jack-up back to Bacchus and started work on our third production well there. As you know, Bacchus continues to outperform our expectations to date. So we're anxious to get this last well on production and see what we get going forward from that point.

We've also worked really hard as a team and with the operator on issues related to processing matters at Alba that caused our production to actually be below what our expectations were even though, it's our largest producing field in the portfolio right now. I believe, and you'll hear more about it from Carl, that we have come a long ways in resolving the immediate process problems encountered at Alba. I also believe that the work done will yield much better production going forward in the second half of the year and will likely enhance the long-term recoveries from the field as we move throughout its life.

From a financing point of view, we also extended the remaining $15 million of our revolver into next year. So we now have no short-term debt repayments until the middle of 2014. And as you've probably seen in the last week or 2, we've completed the funding of the monetary production payment that we talked about that provides liquidity for us to get through first production at Rochelle and continue with the strategic review process.

In North America, our gas production for the quarter was stable at about 9 million a day, and our key acreage there is held by production. We will continue to expend minimal capital in the U.S. while we watch gas prices. Although as you've seen them, they appear to be firming up in a positive direction for us. We do plan to drill an initial pilot well test in our liquid-rich Niobrara play in Northwest Colorado this summer, where we now have an improved federal unit and drilling permit in hand.

Many of you are interested in the strategic review process. Just a general color on the process itself, and I made these comments the last time we got together, but there is a lot of interest in the U.K. North Sea. It's showing impressive signs of renewal and activity, and interested investors who know the value of the petroleum basin are coming in from all parts of the world. The U.K. government, as you know, has been in the process of making some changes to the tax and regulatory legislation to stimulate investment in the North Sea. All indications are that, that investment criteria in the North Sea will have a dramatic improvement this year. Some of those initiatives will improve how decommissioning is handled and provide allowances for smaller fields and fields that are candidates for redevelopment, all of which are good for our portfolio.

We announced back in February that the board would consider a full range of alternatives, including a sale, joint venture or partnership in respect to the company's activity in the North Sea, a sale of specific assets, a sale or merger of the company in total or continue to execute on the company's operational plans as we now have them. The objective of the process is to accelerate the de-leveraging of our balance sheet and to unlock what we believe is the underlying value of the company's assets.

I can't really give you any more guidance today in terms of the timing. I can tell you this that the process is robust. There is a lot of interest in this. And for obvious reasons, we can't really say any more than that, but we expect to move through these alternatives thoughtfully and expeditiously to try to get this thing to some sort of conclusion as soon as we can.

Our quarter, this quarter was focused on the execution and keeping developments on schedule. Carl will give you some very -- some more specific updates on our U.K. operations. But I will say this, we are positive in achieving the long-stated goal that you've heard us talking about of having a portfolio of assets that can have a run rate of more than 20,000 Boes per day. I'm confident that we will be at that level in the second half of this year with what we've got going on. Obviously, the key drivers for 2013 remaining are getting first production at Rochelle, getting the third development well on at Bacchus and improve production levels from our Alba field.

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