United States Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
(Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended September 30, 2014 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _________ to ___________
(Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended March 31, 2015 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _________ to ___________
Commission file number: 001-32212
Endeavour International Corporation
(Exact name of registrant as specified in its charter)
Nevada		88-0448389
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
811 Main Street, Suite 2100, Houston, Texas 77002 (Address of principal executive offices) (Zip code)
(713) 307-8700
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☑ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one): Large accelerated filer ☐ Accelerated filer ☑ Non-accelerated filer ☐ (Do not check if a smaller reporting company)Smaller reporting company ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No
As of November 5, 2014, 53.0 million shares of the registrant’s common stock were outstanding.
As of May 1, 2015, 52.8 million shares of the registrant’s common stock were outstanding.

Index

	Page
Part I: Financial Information
Item 1: Financial Statements
Condensed Consolidated Balance Sheets	1
Condensed Consolidated Statements of Operations	3
Condensed Consolidated Statements of Cash Flows	4
Notes to Condensed Consolidated Financial Statements	5
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of	3634
Operations
Item 3: Quantitative and Qualitative Disclosures About Market Risk	5857
Item 4: Controls and Procedures	5957
Part II. Other Information
Item 1: Legal Proceedings	6058
Item 1A: Risk Factors	6059
Item 6: Exhibits	6460
Signatures	6762

Quantities of natural gas are expressed in this ~~report~~Quarterly Report on Form 10-Q in terms of thousand cubic feet (“mcf”), million cubic feet (“mmcf”) or million British thermal ~~unit~~units (~~Mmbtu~~“mmbtu”). We have assumed one mmbtu is equal to one mmcf. Oil, which includes natural gas liquids, is quantified in terms of barrels (“bbls”) and thousands of barrels (“mbbls”). Natural gas and oil are compared in terms of barrels of oil equivalent (“boe”), thousand barrels of oil equivalent (“mboe”) orand million barrels of oil equivalent (“mmboe”) or thousand cubic feet equivalent (“mcfe”) and million cubic feet equivalent (“mmcfe”). Daily volumes are expressed as barrels of oil equivalent per day (“boed”), millions of barrels of oil equivalent per day (“mmboed”) or million cubic feet per day (“mmcfd”). One barrel of oil is the approximate energy equivalent of six mcf of natural gas. This is a physical correlation and does not reflect a value or price relationship between the commodities. With respect to information relating to our working interest in wells or acreage, “net” oil and ~~natural~~ gas wells or acreage is determined by multiplying gross wells or acreage by our working interest therein. References to number of potential well locations are gross, unless otherwise indicated.

References to “GAAP” refer to U.S. generally accepted accounting principles.

Table Of Contents

Part I: Financial Information

Item 1: Financial Statements

Endeavour International Corporation

(Debtor-in-Possession)

Condensed Consolidated Balance Sheets

(Amounts in thousands except per share data)

	September 30,		December 31,
	March 31,		December 31,
	2014		2013
	2015		2014
	(unaudited)
Assets
Current Assets:
Cash and cash equivalents	$	9766,~~745~~498	$	3481,~~742~~850
Accounts receivable		3334,~~881~~270		6435,~~993~~507
Prepaid expenses and other current assets		9036,~~100~~821		6047,~~496~~397
Total Current Assets		~~221~~137,~~726~~589		~~160~~164,~~231~~754
Property and Equipment, Net ($390,504 and $368,660 not subject to
Property and Equipment, Net ($11,466 and $10,784 not subject to
amortization at September 30, 2014 and December 31, 2013, respectively)		1,018,289		1,072,151
amortization at March 31, 2015 and December 31, 2014, respectively)		343,735		469,509
Goodwill		-		259,238
Restricted Cash, Long-Term Portion		95,356		100,241
Restricted Cash, Long-Term Portion		89,533		-
Other Assets		73		72
Other Assets		13,059		33,222
Total Assets	$	576,753	$	734,576
Total Assets	$	1,342,607	$	1,524,842

See accompanying notes to condensed consolidated financial statements.

Table Of Contents

Endeavour International Corporation

(Debtor-in-Possession)

Condensed Consolidated Balance Sheets

(Amounts in thousands)

	September 30,		December 31,
	March 31,		December 31,
	2014		2013
	2015		2014
	(unaudited)
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	2732,~~636~~697	$	3827,~~033~~364
Accrued interest		40,732		29,512
Current maturities of debt		433,141		432,181
Current maturities of debt		776,151		-
Deferred revenue		594		14,157
Deferred revenue		33,931		20,965
Asset retirement obligations, current portion		29,835		40,547
Monetary Production Payments, current portion		-		74,167
Accrued expenses and other		5,332		15,196
Accrued expenses and other		61,370		59,113
Total Current Liabilities		501,599		529,445
Total Current Liabilities		939,820		221,790
Deferred Taxes		39,118		56,670
Long-Term Debt		431,200		870,878
Other Liabilities		64,496		66,077
Deferred Taxes		151,177		146,213
Total Liabilities Not Subject to Compromise		605,213		652,192
Monetary Production Payments, long-term portion		-		92,500
Liabilities Subject to Compromise		840,900		841,044
Other Liabilities		111,700		131,370
Total Liabilities		1,446,113		1,493,236
Total Liabilities		1,633,897		1,462,751
Commitments and Contingencies
Series C Convertible Preferred Stock:
Series C preferred stock - Liquidation preference: $14,800 and $37,000
Series C preferred stock - Liquidation preference: $14,800 and $14,800
at September 30, 2014 and December 31, 2013, respectively		17,481		43,703
at March 31, 2015 and December 31, 2014, respectively		17,481		17,481
Stockholders’ Equity (Deficit):
Series B preferred stock - Liquidation preference: $3,864 and $3,745
Series B preferred stock - Liquidation preference: $1,971 and $1,971
at September 30, 2014 and December 31, 2013, respectively		-		-
at March 31, 2015 and December 31, 2014, respectively		-		-
Common stock; shares issued and outstanding – 53,016 and 46,981
Common stock; shares issued and outstanding – 52,834 and 52,900
at September 30, 2014 and December 31, 2013, respectively		53		47
at March 31, 2015 and December 31, 2014, respectively		53		53
Additional paid-in capital		~~560~~557,~~004~~072		~~510~~557,~~062~~111
Treasury stock, at cost - 72 and 72 shares at September 30, 2014
Treasury stock, at cost - 72 and 72 shares at March 31, 2015
and December 31, 2013, respectively		(587)		(587)
and December 31, 2014, respectively		(587)		(587)
Accumulated deficit		(~~868~~1,~~241~~443,379)		(~~491~~1,~~134~~332,718)
Total Stockholders’ Equity (Deficit)		(~~308~~886,~~771~~841)		18(776,~~388~~141)
Total Liabilities and Stockholders’ Equity	$	1576,~~342,607~~753	$	1734,~~524,842~~576

See accompanying notes to condensed consolidated financial statements.

Table Of Contents

Endeavour International Corporation

(Debtor-in-Possession)

Condensed Consolidated Statements of Operations

(Unaudited)

(Amounts in thousands except per share data)

	Three Months Ended				~~Nine Months Ended~~
	September 30,				September 30,
	March 31,
	2014		2013		2014		2013
	2015		2014
Revenues	$	8664,~~445~~329	$	3694,~~901~~163	$	~~225,466~~	$	~~220,738~~
Cost of Operations:
Operating expenses		2824,~~874~~145		1627,~~358~~170		~~62,891~~		~~71,951~~
Depreciation, depletion and amortization		4656,~~248~~561		1844,~~596~~968		~~123,468~~		~~93,466~~
Impairment of oil and gas properties		-90,087		~~6,032~~-		-		~~9,566~~
Goodwill impairment loss		259,238		-		259,238		-
Insurance proceeds		(8,425)		-
General and administrative		42,~~152~~572		34,~~913~~849		~~14,240~~		~~14,276~~
Total Expenses		~~338~~164,~~512~~940		4476,~~899~~987		~~459,837~~		~~189,259~~
Income (Loss) From Operations		(~~252~~100,~~067~~611)		(717,~~998)~~176		~~(234,371)~~		~~31,479~~
Other Income (Expense):
Unrealized gains on derivatives		~~5,987~~-		~~855~~2,659		~~10,656~~		~~1,158~~
Interest expense		(3114,~~178~~351)		(2631,~~461~~477)		~~(94,086)~~		~~(72,346)~~
Letter of credit fees		(~~2,249~~58)		(73,~~274~~789)		~~(8,308)~~		~~(25,782)~~
Financing and transaction costs		(41,~~957~~025)		(21,~~252~~816)		~~(8,198)~~		~~(5,148)~~
Loss on early extinguishment of financing agreements		~~(30,717)~~-		-(3,543)		~~(34,259)~~		-
Litigation settlement expense		-		-(19,034)		~~(19,034)~~		-
Unrealized gain (loss) on foreign currency exchange		8,684		(10,793)		2,900		38
Reorganization items		(6,866)		-
Other income (expense)		252		(292)		68		643
Unrealized gain (loss) on foreign currency exchange		4		(1,273)
Total Other Income (Expense)		(54,178)		(46,217)		(150,261)		(101,437)
Other income (expense)		105		(204)
Loss Before Income Taxes		(306,245)		(54,215)		(384,632)		(69,958)
Total Other Expense		(22,191)		(58,477)
Petroleum Revenue Tax ("PRT") Expense (Benefit)		(2,888)		(5,785)		1,080		1,423
Loss Before Income Taxes		(122,802)		(41,301)
Corporate Tax Benefit		(9,100)		(8,545)		(9,911)		(3,564)
Petroleum Revenue Tax Expense (Benefit)		(12,141)		1,725
Total Tax Benefit		(11,988)		(14,330)		(8,831)		(2,141)
Corporate Tax Expense		-		1,844
Net Loss		(294,257)		(39,885)		(375,801)		(67,817)
Total Tax Expense (Benefit)		(12,141)		3,569
Preferred Stock Dividends		395		456		1,306		1,367
Net Loss		(110,661)		(44,870)
Net Loss to Common Stockholders	$	(294,652)	$	(40,341)	$	(377,107)	$	(69,184)
Preferred Stock Dividends		-		456
Net Loss per Common Share:
Net Loss to Common Stockholders	$	(110,661)	$	(45,326)
Basic and Diluted	$	(5.64)	$	(0.86)	$	(7.37)	$	(1.47)
Net Loss per Common Share:
Weighted Average Number of Common Shares Outstanding:
Basic and Diluted	$	(2.10)	$	(0.91)
Basic and Diluted		52,276		47,092		51,158		47,082
Weighted Average Number of Common Shares Outstanding:
Basic and Diluted		52,763		49,590

See accompanying notes to condensed consolidated financial statements.

Table Of Contents

Endeavour International Corporation

(Debtor-in-Possession)

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in thousands)

	Nine Months Ended
	Three Months Ended
		September 30,
		March 31,
	2014		2013
	2015		2014
Cash Flows from Operating Activities:
Net loss	$	(~~375~~110,~~801~~661)	$	(6744,~~817~~870)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation, depletion and amortization		~~123~~56,~~468~~561		9344,~~466~~968
Impairment of oil and gas properties		-90,087		~~9,566~~-
Goodwill impairment loss		259,238		-
Deferred tax expense (benefit)		(11,137)		1,969
Deferred tax benefit		(16,604)		(17,262)
Unrealized gains on derivatives		-		(2,659)
Unrealized gains on derivatives		(10,656)		(1,158)
Amortization of non-cash compensation		(10)		971
Amortization of non-cash compensation		2,993		2,352
Amortization of loan costs and discount		2,238		6,705
Amortization of loan costs and discount		19,785		15,330
Non-cash interest expense		-		1,883
Non-cash interest expense		5,790		5,246
Loss on early extinguishment of financing agreements		-		6,856
Loss on early extinguishment of financing agreements		22,708		-
Non-cash litigation settlement expense		-		19,034
Litigation settlement expense		14,034		-
Other		(5,017)		1,847
Other		(1,152)		10,192
Changes in operating assets and liabilities:
Decrease in receivables		311,~~112~~237		2119,~~685~~001
(Increase) decrease in other current assets		112,~~500~~624		(35,~~226~~056)
Decrease in liabilities		(3023,~~246~~058)		(1323,~~587~~100)
Net Cash Provided by Operating Activities		562,~~169~~864		5427,~~787~~549
Cash Flows From Investing Activities:
Capital expenditures		(7323,~~992~~101)		(~~178~~28,~~773~~845)
Proceeds from sale of oil and gas interests		~~1,352~~-		-1,352
Proceeds from insurance settlement		12,606		-
(Increase) decrease in restricted cash		4,885		(2,457)
Increase in restricted cash		(89,533)		-
Net Cash Used in Investing Activities		(18,216)		(29,950)
Net Cash Used in Investing Activities		(149,567)		(178,773)
Cash Flows From Financing Activities:
Repayments of borrowings		~~(240,163)~~-		-(115,163)
Borrowings under debt agreements, net of debt discount		~~571,825~~-		-140,625
Proceeds from issuance of common stock		~~12,396~~-		-12,376
Proceeds from issuance of Monetary Production Payments		-		150,000
Repayments of Monetary Production Payments		-		(5,000)
Repayments of Monetary Production Payments		(166,667)		(4,167)
Financing costs paid		-		(9,273)
Financing costs paid		(19,803)		(19,427)
Other financing		-		(416)
Other financing		(1,187)		(1,248)
Net Cash Provided by (Used in) Financing Activities		-		23,149
Net Cash Provided by Financing Activities		156,401		125,158
Net Increase (Decrease) in Cash and Cash Equivalents		(15,352)		20,748
Net Increase in Cash and Cash Equivalents		63,003		1,172
Cash and Cash Equivalents, Beginning of Period		81,850		34,742
Cash and Cash Equivalents, Beginning of Period		34,742		59,185
Cash and Cash Equivalents, End of Period	$	66,498	$	55,490
Cash and Cash Equivalents, End of Period	$	97,745	$	60,357

See accompanying notes to condensed consolidated financial statements.

Table Of Contents

Endeavour International Corporation

(Debtor-in-Possession)

Notes to Condensed Consolidated Financial Statements

(~~Unaudited~~Amounts in thousands, except per share data)

(Amounts in tables in thousands, except per unit data)

Note 1 – General

Description of Business

Endeavour International Corporation is an independent oil and gas company engaged in the exploration, development, production and acquisition of energy reserves in the U.S. and U.K. Endeavour was incorporated under the laws of the state of Nevada on January 13, 2000. As used in these Notes to Condensed Consolidated Financial Statements, the terms “Endeavour,” “Company,” “we,” “us,” “our” and similar terms refer to Endeavour International Corporation and, unless the context indicates otherwise, its consolidated subsidiaries. The accompanying financial statements should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, ~~2013~~2014.

~~Voluntary~~Bankruptcy ~~Reorganization under Chapter 11~~Cases

On ~~September~~October 210, 2014, (the ~~Company~~“Petition ~~announced~~Date”), ~~that~~Endeavour itand ~~had~~certain ~~decided~~of ~~not~~its towholly ~~pay~~owned ~~approximately $33~~U.5S. ~~million~~subsidiaries in- ~~interest~~Endeavour ~~due~~Operating onCorporation, ~~September~~Endeavour 2Colorado Corporation, ~~2014~~Endeavour onEnergy ~~its~~New ~~12%~~Ventures ~~First~~Inc., ~~Priority~~and ~~Notes~~END ~~due~~Management ~~March~~Company ~~2018~~- ~~(“First~~and ~~Priority~~one ~~Notes”),~~of ~~12%~~its ~~Second~~foreign ~~Priority~~subsidiaries ~~Notes~~- ~~due~~Endeavour ~~June~~Energy ~~2018~~Luxembourg S.à.r.l. (~~“Second~~collectively, ~~Priority~~the ~~Notes~~“Debtors”) ~~and~~- ~~6.5%~~filed ~~Convertible~~voluntary ~~Senior~~petitions ~~Notes~~under ~~due~~Chapter ~~November~~11 ~~2017~~of ~~(“6.5%~~the ~~Convertible~~United ~~Senior~~States ~~Notes~~Bankruptcy Code (the “Bankruptcy Code”)~~. Under~~ in the ~~term~~United ofStates ~~the~~Bankruptcy ~~indentures~~Court for the ~~First~~District ~~Priority~~of ~~Notes,~~Delaware ~~Second~~(the ~~Priority~~“Bankruptcy ~~Notes~~Court”). The ~~and~~Chapter ~~6.5%~~11 ~~Convertible~~cases ~~Senior~~are ~~Notes,~~being ~~there~~jointly ~~was~~administered aby ~~30-day~~the ~~grace~~Bankruptcy ~~period~~Court ~~during~~as ~~which~~Case No. 14-12308 (the ~~Company~~“Bankruptcy ~~could~~Cases”). See ~~elect~~Note to3 ~~make~~– ~~the~~Voluntary ~~interest~~Reorganization ~~payment~~Under ~~and~~Chapter ~~cure~~11 ~~any~~for ~~potential~~a ~~event~~discussion of ~~default~~the ~~for~~Bankruptcy ~~non-payment~~Cases.

OnGoing September 30, 2014, the Company entered into forbearance agreements (the “Forbearance Agreements”) with holders of a majority of its debt as to which the interest payment was not made. Under the terms of the Forbearance Agreements, the holders agreed to forbear from exercising remedies against the Company arising from the failure by the Company to pay (following the passing of the 30-day grace period that ended on October 1, 2014) the September 2, 2014 interest payments due. The forbearance period, initially scheduled to expire on October 7, 2014, was subsequently extended to October 10, 2014.Concern

~~Subsequent~~Our toaccompanying ~~the~~condensed ~~close~~consolidated offinancial ~~the~~statements ~~third~~were ~~quarter~~prepared ofassuming ~~2014,~~that ~~on October~~we ~~10,~~will ~~2014,~~continue ~~the~~as ~~Company~~a ~~announced~~going ~~that~~concern, itwhich ~~reached~~contemplates ~~agreements~~realization ~~with holders~~ of ~~more~~assets ~~than~~and ~~two-thirds~~the satisfaction of ~~its~~liabilities ~~First~~in ~~Priority~~the ~~Notes,~~normal ~~Second~~course ~~Priority~~of ~~Notes~~business ~~and 7.5%~~for ~~Convertible~~the ~~Bonds~~twelve ~~(see~~month ~~Note~~period 6)following ~~and~~the ~~its~~date ~~6.5%~~of ~~Convertible~~these ~~Senior~~condensed ~~Notes~~consolidated ~~and~~financial 5statements.5% However, ~~Convertible~~as ~~Senior~~a ~~Notes~~result ~~(see~~of ~~Note~~our 6Bankruptcy Cases and ~~collectively,~~other ~~“Significant~~matters ~~Debt~~described ~~Holders”)~~herein, inincluding the ~~form~~termination of athe ~~consensual~~ Restructuring Support Agreement (“RSA”) ~~that~~on April 29, if2015 ~~implemented~~(see asNote ~~proposed,~~3 ~~would~~- ~~significantly reduce~~Voluntary Reorganization under Chapter 11) and the ~~Company’s~~potential ~~outstanding~~breach ~~debt~~of our leverage covenant under our Amended Term Loan Facility applicable to our U. ~~The~~K. ~~RSA~~subsidiary ~~contemplated~~in ~~that~~or about the ~~recapitalization~~third quarter of ~~the~~2015 ~~Company~~(see ~~would~~Note ~~occur~~3 ~~pursuant~~– Voluntary Reorganization Under Chapter 11 and Note 8 – Debt Obligations), there is substantial doubt about our ability to continue as a ~~pre-~~going concern.

We continue to have discussions with certain of our creditors and their advisors and the advisors to the Official Committee of Unsecured Creditors appointed by the Bankruptcy Court concerning the impact of the price declines that began in late 2014. Additionally, we have and continue to

Table Of Contents

Endeavour International Corporation

(Debtor-in-Possession)

Notes to Condensed Consolidated Financial Statements

(~~Unaudited~~Amounts in thousands, except per share data)

~~(Amounts~~engage in ~~tables~~discussions with certain of our U.S. and U.K. creditors regarding the possibility of raising new capital to reduce the principal amount of outstanding indebtedness under the Amended Term Loan Facility in ~~thousands~~an amount adequate to avoid a potential default of the leverage covenant, ~~except~~refinancing ~~per~~all ~~unit~~or ~~data)~~a portion of the Amended Term Loan Facility, or obtaining a waiver or amendment from the lenders under the Amended Term Loan Facility prior to any default thereunder.

~~arranged~~ During ~~plan of reorganization. On~~ the ~~same~~pendency ~~day~~of (the ~~“Petition~~Bankruptcy ~~Date”)~~Cases, ~~Endeavour~~ ~~and~~we ~~certain~~expect ofthat ~~its~~our ~~wholly~~primary ~~owned~~sources ~~U.S.~~of ~~subsidiaries~~liquidity -will ~~Endeavour~~continue ~~Operating~~to ~~Corporation,~~be ~~Endeavour~~cash ~~Colorado~~on ~~Corporation,~~hand ~~Endeavour Energy New Ventures Inc.,~~ and ~~END~~cash ~~Management~~flows ~~Company~~from ~~- and one of its foreign subsidiaries - Endeavour Energy Luxembourg S~~operations.~~a.r.l.~~ In ~~(collectively~~addition, the ~~“Debtors”) -~~negative ~~filed~~covenants ~~voluntary petitions~~ under ~~Chapter 11 of~~ the ~~United~~Amended ~~States~~Term ~~Bankruptcy~~Loan ~~Code~~Facility ~~(the~~restrict ~~“Bankruptcy~~us ~~Code”)~~from inobtaining ~~the~~additional ~~United~~capital, ~~States~~including ~~Bankruptcy~~limits ~~Court~~on ~~for~~intercompany ~~the District of Delaware (the “Bankruptcy Court”)~~transfers. ~~The Chapter 11 cases are being jointly administered by the Bankruptcy Court as Case No. 14-12308 (the “Bankruptcy Cases”).~~

~~Since~~Our ~~the~~ability ~~Petition~~to ~~Date,~~continue ~~the~~as ~~Debtors~~a ~~have~~going ~~operated~~concern ~~their~~is ~~business~~dependent ason ~~“debtors-in-possession"~~many ~~pursuant~~factors, toincluding, ~~Sections~~among ~~1107~~other things: (ai) the cost, duration and ~~1108~~outcome of the Bankruptcy ~~Code,~~Cases; ~~which~~(ii) ~~will~~our ~~allow~~ability ~~the~~to ~~Company~~maintain toadequate ~~continue~~cash on hand and generate cash from operations; ~~during~~(iii) ~~the~~our ~~reorganization~~ability ~~proceedings. Each~~to ~~Debtor~~maintain ~~will~~compliance ~~remain~~with indebt ~~possession~~covenant requirements of ~~its~~the ~~assets~~Amended ~~and~~Term ~~properties,~~Loan Facility; and ~~its~~(iv) ~~business~~our ~~and~~ability ~~affairs~~to ~~will~~achieve ~~continue~~profitability tofollowing bea ~~managed~~restructuring. The byaccompanying ~~its~~condensed ~~directors~~consolidated ~~and~~financial ~~officers,~~statements ~~subject~~do innot ~~each~~include ~~case~~any adjustments that might be necessary if our actions to ~~the~~address ~~supervision~~these offactors ~~the~~are ~~Bankruptcy~~not ~~Court~~successful.

~~None~~Note of2 ~~the~~– ~~Company’s~~Summary ~~direct~~of orSignificant ~~indirect~~Accounting subsidiaries or affiliates incorporated in the U.K. has filed under Chapter 11 and none is expected to file for reorganization or protection from creditors under any insolvency or similar law in the U.S. or elsewhere. Such non-filing subsidiaries and affiliates are called “non-Debtors.”Policies

~~The~~Basis ~~RSA~~of ~~provides~~Presentation ~~for several milestones for consummation~~ and ~~implementation~~Use of ~~the consensual restructuring:~~Estimates

· The ~~approval~~accompanying unaudited condensed consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the ~~RSA~~United noStates ~~later~~of ~~than~~America 35(“U.S. ~~days~~GAAP”) ~~after~~and have been presented on a going concern basis, which contemplates the ~~Petition~~realization ~~Date;~~of assets and satisfaction of liabilities in the normal course of business. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability of assets or the amounts of liabilities that may result from the outcome of this uncertainty. See Note 1 – General – Going Concern.

· In ~~filing~~the opinion of ~~the~~management, ~~plan~~all ~~and~~normal ~~disclosure~~recurring ~~statement~~adjustments ~~with~~considered ~~the~~necessary ~~Bankruptcy~~for ~~Court~~a nofair ~~later~~presentation ~~than~~have 45been ~~days~~included ~~after~~in these financial statements. Certain amounts for prior periods have been reclassified to conform to the ~~Petition~~current ~~Date;~~presentation.

· U.S. ~~approval~~GAAP ofrequires ~~the~~management ~~disclosure~~to ~~statement~~use byestimates, judgments and assumptions that affect the ~~Bankruptcy~~amounts ~~Court~~of noassets, ~~later~~liabilities, ~~than~~revenues 90and ~~days~~expenses ~~after~~reported ~~the~~herein. While ~~Petition~~management ~~Date;~~regularly reviews its estimates, actual results could differ from those estimates.

· approval of the restructuring plan no later than 170 days after the Petition Date; and

· effectuation of the confirmed plan no later than 200 days after the Petition Date.

Pursuant to the agreed upon term sheet of the RSA, the Company’s existing debt and accrued interest will be reduced by approximately $568 million, including the cancellation of all of the Company’s First Priority Notes, Second Priority Notes, 7.5% Convertible Bonds, 5.5% Convertible Senior Notes and 6.5% Convertible Senior Notes. As consideration for such cancellation, the reorganized Company would issue:

(a) $262.5 million of new notes to the holders of its First Priority Notes;

(b) an aggregate of approximately $237.5 million of new convertible preferred shares to holders of its First Priority Notes and Second Priority Notes; and

(c) new common shares to holders of its Second Priority Notes, 6.5% Convertible Senior Notes, 7.5% Convertible Bonds and 5.5% Convertible Senior Notes.

Table Of Contents

Endeavour International Corporation

(Debtor-in-Possession)

Notes to Condensed Consolidated Financial Statements

(~~Unaudited~~Amounts in thousands, except per share data)

(Amounts in tables in thousands, except per unit data)

All of the Company’s existing equity securities, including its shares of common stock and preferred stock and warrants, will be cancelled without receiving any distribution.

On the Petition Date, the Company sought, and thereafter obtained, authority to take a broad range of actions, including, among others, authority to pay royalty interests and joint interest billings, certain employee obligations and pre-Petition contractor claims and taxes. Additionally, other orders were obtained, including adequate assurance of payment to utility companies as well as continued use of cash management systems.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation and Use of Estimates

The accompanying unaudited condensed consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”). On October 10, 2014, the Company filed a voluntary petition under Chapter 11 of the Bankruptcy Code. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability of assets or the amounts of liabilities that may result from the outcome of this uncertainty.

In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included in these financial statements. Certain amounts for prior periods have been reclassified to conform to the current presentation.

US GAAP requires management to use estimates, judgments and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported herein. While management regularly reviews its estimates, actual results could differ from those estimates.

Management believes that it is reasonably possible that the following material estimates affecting the financial statements could change in the current year:

estimates of proved oil and gas reserves;

· estimates as to the expected future cash flow from proved oil and gas properties; and

· estimates of future dismantlement and restoration costs;.

· Recent ~~estimates~~Accounting ~~of fair values used in purchase accounting; and~~Pronouncements

· In ~~estimates~~March 2015, the Financial Accounting Standards Board (FASB) issued an update to the accounting standards to simplify the presentation of debt issuance costs. The amendments in this update require that debt issuance costs related to a recognized debt liability be presented in the ~~fair~~balance ~~value~~sheet as a direct deduction from the carrying amount of ~~derivative~~that ~~instruments~~debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this update. The guidance is effective for interim periods and annual period beginning after December 15, 2015; however early adoption is permitted. We are currently evaluating the effect that adopting this guidance will have on our financial position, results of operations or cash flows.

In May 2014, the FASB issued a new standard on revenue recognition. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard is effective for annual periods beginning after December 31, 2016 and can be adopted either retrospectively to each reporting period or retrospectively with a cumulative-effect adjustment as of the date of adoption. In April 2015, the FASB proposed to delay the effective date one year, effective for annual periods beginning after December 31, 2017. The proposal will be subject to the FASB’s due process requirement, which includes a period for public comments. We are currently evaluating the effect that adopting this guidance will have on our financial position, results of operations or cash flows.

Note 3 – Voluntary Reorganization Under Chapter 11

Background

On September 2, 2014, the Company announced that it had decided not to pay approximately $33.5 million in interest due on September 2, 2014 on its 12% First Priority Notes due March 2018 (“First Priority Notes”), 12% Second Priority Notes due June 2018 (“Second Priority Notes”) and 6.5% Convertible Senior Notes due November 2017 (“6.5% Convertible Senior Notes”).

Table Of Contents

Endeavour International Corporation

(Debtor-in-Possession)

Notes to Condensed Consolidated Financial Statements

(~~Unaudited~~Amounts in thousands, except per share data)

On October 10, 2014, the Company announced that it reached agreements with holders of more than two-thirds of its First Priority Notes, Second Priority Notes and 7.5% Convertible Bonds (~~Amounts~~see Note 8 – Debt Obligations) and its 6.5% Convertible Senior Notes and 5.5% Convertible Senior Notes (see Note 8 – Debt Obligations and collectively, “Consenting Debt Holders”), in ~~tables~~the form of a consensual Restructuring Support Agreement (“RSA”) that, if implemented as proposed, would significantly reduce the Company’s outstanding debt. The RSA contemplated that the recapitalization of the Company would occur pursuant to a pre-arranged plan of reorganization. On the Petition Date, the Debtors filed voluntary petitions under Chapter 11 of the Bankruptcy Code in ~~thousands~~the Bankruptcy Court. Since the Petition Date, ~~except~~the ~~per~~Debtors ~~unit~~have ~~data~~operated their business as “debtors-in-possession" pursuant to Sections 1107(a) and 1108 of the Bankruptcy Code, which will allow the Company to continue operations and carry on the business in the ordinary course of business during the reorganization proceedings. Each Debtor will remain in possession of its assets and properties, and its business and affairs will continue to be managed by its directors and officers, subject in each case to the supervision of the Bankruptcy Court.

~~Adoption~~ On the Petition Date, the Company sought, and thereafter obtained, authority to take a broad range of ~~New~~actions, ~~Accounting~~including, ~~Standards~~among others, authority to pay royalty interests and joint interest billings, certain employee obligations and pre-Petition contractor claims and taxes. Additionally, other orders were obtained, including adequate assurance of payment to utility companies as well as continued use of cash management systems.

InNone ~~April~~of ~~2014,~~ the ~~Financial~~Company’s ~~Accounting~~subsidiaries ~~Standards~~incorporated ~~Board~~in (“FASB”) issued an updated standard on reporting discontinued operations and disclosures of disposals of components of an entity. The guidance applies prospectively to new disposals and new classifications of disposal groups as held for sale after the ~~effective date~~U. ~~The~~K. ~~guidance~~has isfiled ~~effective~~under ~~for~~Chapter ~~interim and annual periods beginning on or after December 15, 2014~~11. WeSuch donon-filing ~~not~~subsidiaries ~~expect~~are ~~the~~referred ~~adoption of this guidance~~ to ~~have~~herein aas ~~material impact on our financial position or results of operations~~“non-Debtors.”

InTermination ~~May 2014, the FASB issued a new standard on revenue recognition. The new revenue recognition standard provides a five-step analysis~~ of ~~transactions~~RSA ~~to determine when~~ and ~~how~~Sale ~~revenue is recognized. The core principle~~ of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or servicesU. The new standard is effective for annual periods beginning after December 31, 2016 and can be adopted either retrospectively to each reporting period or retrospectively with a cumulative-effect adjustment as of the date of adoptionS. We ~~are currently evaluating the effect that adopting this guidance will have on our financial position, results of operations or cash flows.~~Assets

~~Note~~On 3April ~~– Property~~29, 2015, the Debtors terminated the RSA and ~~Equipment~~filed a notice with the Bankruptcy Court to withdraw its proposed plan or reorganization that had been filed to implement the terms of the RSA (the “Plan”). We have determined that as a result of the recent decline in commodity prices, the Plan was not feasible and, accordingly, we will not continue to seek its confirmation. Even if the Plan were to be confirmed, if oil and gas prices remain at their depressed levels, we could breach our leverage covenant under our Amended Term Loan Facility applicable to our U.K. subsidiary in or about the third quarter of 2015, which would result in a default under the terms of the Amended Term Loan Facility and a liquidity shortfall at the end of the fourth quarter of 2015.

~~Property~~We have and ~~equipment~~continue ~~included~~to engage in discussions with certain of our U.S. and U.K. creditors regarding the ~~following~~possibility atof executing a new RSA, raising new capital to reduce the ~~dates~~principal ~~indicated~~amount ~~below:~~of outstanding indebtedness under the Amended Term Loan Facility in an amount adequate to avoid a potential default of the leverage covenant, refinancing all or a portion of the Amended Term Loan Facility, or obtaining a waiver or amendment from the lenders under the

		September 30,		December 31,
		2014		2013
Oil and gas properties under the full cost method:
Subject to amortization	$	1,113,088	$	1,084,669
Not subject to amortization:
Incurred in 2014		30,306		-
Incurred in 2013		50,247		52,748
Incurred in 2012		134,016		138,641
Incurred prior to 2012		175,935		177,271
		1,503,592		1,453,329
Computers, furniture and fixtures		8,733		8,734
Total property and equipment		1,512,325		1,462,063
Accumulated depreciation, depletion and amortization		(494,036)		(389,912)
Net property and equipment	$	1,018,289	$	1,072,151

Table Of Contents

Endeavour International Corporation

(Debtor-in-Possession)

Notes to Condensed Consolidated Financial Statements

(~~Unaudited~~Amounts in thousands, except per share data)

~~(Amounts~~Amended inTerm ~~tables~~Loan inFacility ~~thousands~~prior to any default thereunder, ~~except~~or ~~per~~other ~~unit~~agreed ~~data)~~terms to sustain a restructuring and avoid default.

~~The~~ There ~~costs~~can be no assurance that a reduction, refinancing, waiver or amendment of the Amended Term Loan Facility could be accomplished. If we are not ~~subject~~able to ~~amortization~~reach ~~include:~~a satisfactory agreement with certain of our U.S. and U.K. creditors and are unable to refinance the Amended Term Loan Facility, which is not possible without financial support from certain of our U.S. or U.K. creditors, we may be compelled, either voluntarily or involuntarily, into liquidation of our U.K. operations through an administration proceeding in the U.K., in addition to any Chapter 11 or Chapter 7 liquidation proceeding in the U.S.

· On ~~values~~April ~~assigned~~29, 2015, in light of the foregoing, the Company also filed with the Bankruptcy Court a motion to, ~~unproved~~among ~~reserves~~other ~~acquired;~~things, approve the sale of substantially all of the Company’s U.S. assets and, in connection with such sale, establish bidding procedures and an auction. Certain non-Debtors are also exploring restructuring alternatives, including preparing for the commencement of a separate marketing process in the U.K. for the sale of substantially all their U.K.-based oil and gas assets.

· Note ~~exploration~~4 ~~costs~~– ~~such~~Debtors asCondensed ~~drilling~~Combined ~~costs~~Financial ~~for projects awaiting approved development plans or the determination of whether or not proved reserves can be assigned; and~~Statements

· Condensed ~~other~~combined ~~seismic~~financial statements of the Debtors are set forth below. The Condensed Combined Financial Statements exclude the financial statements of the non-Debtors. Transactions and ~~geological~~balances of receivables and ~~geophysical~~payables ~~costs~~between Debtors are eliminated in consolidation. However, the Condensed Combined Balance Sheet includes receivables from related non-Debtors and payables to related non-Debtors. Actual settlement of these related party receivables and payables is, by historical practice, made on a net basis or through an equity contribution.

These costs are transferred to the amortization base when it is determined whether or not proved reserves can be assigned to such properties. This analysis is dependent upon well performance, results of infill drilling, approval of development plans, drilling results and development of identified projects and periodic assessment of reserves. We expect acquisition costs and exploration costs excluded from amortization to be transferred to the amortization base over the next three years due to a combination of well performance and results of infill drilling relating to currently producing assets and the drilling and development of identified projects. Because of the nature of offshore oil and gas activities, development activities, including sanctioning and regulatory approvals, may take a significant amount of time to implement. Even though our expectation is that most costs not subject to amortization are to be transferred to the amortization base over the next three years, it is not uncommon for the cycle times to be longer, particularly in the North Sea. We have one U.K. field, Columbus, where costs have been excluded from amortization for greater than five years; however, we continue to work on the development planning for the field.

For the three months ended September 30, 2014 and 2013, we capitalized $2.4 million and $7.5 million, respectively, in interest related to exploration and development, primarily related to our U.K. activities. For the nine months ended September 30, 2014 and 2013, we capitalized $7.4 million and $21.2 million, respectively, in interest related to exploration and development, primarily related to our U.K. activities.

For the three months ended September 30, 2014 and 2013, we capitalized $2.2 million and $3.1 million, respectively, in certain directly related employee costs. For the nine months ended September 30, 2014, and 2013, we capitalized $8.2 million and $10.0 million, respectively, in certain directly related employee costs.

We did not have an impairment of oil and gas properties through the application of the full cost ceiling test for the three or nine months ended September 30, 2014. For the three and nine months ended September 30, 2013, we recorded a pre-tax impairment of $6.0 million and $9.6 million, respectively, related to our U.S. oil and gas properties.

For the third quarter of 2014, the prices used for our U.S. impairment analysis were $99.08 per barrel for oil and $4.24 per mcf for gas and our U.K. impairment analysis utilized prices of $107.42 per barrel for oil and $8.90 per mcf for gas. For the third quarter of 2013, the prices used for our U.S. impairment analysis were $95.06 per barrel for oil and $3.61 per mcf for gas

Table Of Contents

Endeavour International Corporation

(Debtor-in-Possession)

Notes to Condensed Consolidated Financial Statements

(~~Unaudited~~Amounts in thousands, except per share data)

(Amounts in tables in thousands, except per unit data)



Condensed Combined Balance Sheet
As of March 31, 2015

Assets:
Current Assets	$	25,592
Property and Equipment, Net ($11,466 not subject to amortization)		30,077
Long-Term Receivables Due from Affiliates (1)		648,801
Investments in Subsidiaries		295,816
Other Assets		9
Total Assets	$	1,000,295

Liabilities Not Subject to Compromise:
Accrued expenses and other	$	7,495
Current Liabilities Due to Affiliates (1)		101,386
Other		630
Liabilities Subject to Compromise (2)		840,900
Series C Convertible Preferred Stock - Liquidation Preference: $14,800		17,481
Stockholders' Equity (3)		32,403
Total Liabilities and Stockholders’ Equity	$	1,000,295

~~and~~(1) ~~our~~It ~~U.K.~~is ~~impairment~~expected ~~analysis~~that ~~utilized~~upon ~~prices~~consummation of ~~$108.67~~the ~~per~~Bankruptcy ~~barrel~~Cases, ~~for~~all ~~oil~~intercompany receivables and ~~$10~~payables will be offset and settled through equity contributions.51 ~~per~~No ~~mcf~~allowances for ~~gas~~intercompany receivables from the Debtors have been recorded in the condensed combined financial statements.

(2) See Note 45 – ~~Goodwill~~ Liabilities Subject to Compromise

~~All~~(3) ofIt ~~our goodwill~~ is ~~attributable~~expected tothat aupon ~~single~~consummation ~~reporting unit. Although the carrying amount~~ of ~~goodwill is tested annually for impairment, as a result of a number of factors which occurred during and subsequent to~~ the ~~third~~Bankruptcy ~~quarter of 2013~~Cases, ~~including~~all ~~our~~common ~~filing~~stock ~~under Chapter 11~~ of the ~~United~~Debtors ~~States~~will ~~Bankruptcy~~be ~~Code,~~cancelled weand ~~performed~~new acommon ~~preliminary~~stock ~~goodwill~~will ~~impairment~~be ~~test~~issued asto ofpartially ~~September~~satisfy ~~30,~~the ~~2014~~bankruptcy claims.

As a result of the preliminary goodwill impairment test, the entire amount of our goodwill, or $259.2 million, was charged to “Goodwill impairment loss” in cost of operations on our condensed consolidated statements of operations for the nine and three months ended September 30, 2014.

Fair value of the reporting unit was determined based on a combination of gross asset value, present value of future cash flows and comparison with comparable trading companies. The impairment loss is an estimate that is not yet finalized.

Note 5 – Deferred Revenue

For certain of our U.K. fields, we sell production on a monthly basis; however, the production remains in the field’s storage tanks. The inventory associated with these sales remains on our balance sheet and the revenue is deferred until the production is shipped out of our storage tanks.

In 2013 and 2014, we entered into three separate forward sale agreements with one of our established purchasers for payments of approximately $22.5 million each. This effectively hedged a portion of production from our U.K. North Sea assets by locking in pricing for in excess of 200,000 barrels of oil, over a six month delivery period for each forward sale transaction. Payment for two of these agreements was received in the first and third quarters of 2013. Payment for the 2014 transaction was received in the second quarter of this year.

The 2013 forward sale commitments were fulfilled in June 2013 and March 2014. The 2014 forward sale commitment is expected to be fulfilled during the fourth quarter of the current year. The forward sale liabilities are included in deferred revenue until the purchaser takes possession of the product.

Table Of Contents

Endeavour International Corporation

(Debtor-in-Possession)

Notes to Condensed Consolidated Financial Statements

(~~Unaudited~~Amounts in thousands, except per share data)

(Amounts in tables in thousands, except per unit data)


Condensed Combined Statement of Operations
Three Months Ended March 31, 2015

Revenues	$	1,082
Cost of Operations		11,314
Loss from Operations		(10,232)

Other Income (Expense):
Interest income		15,000
Financing and transaction costs		(58)
Reorganization items (4)		(6,866)
Other expense		26
Total Other Income		8,102

Net Loss		(2,130)

At(4) ~~September~~See ~~30,~~Note ~~2014,~~5 ~~our~~– ~~deferred~~Liabilities ~~revenue~~Subject ~~was~~to ~~attributable~~Compromise tofor ~~our~~additional ~~fields~~discussion asof ~~follows:~~ Reorganization items.

			Amount		Delivery Date
Condensed Combined Cash Flow
Alba			$	11,597	Estimated for Fourth Quarter 2014
Three Months Ended March 31, 2015
Rochelle				5,479	Estimated for Fourth Quarter 2014
Net cash provided by (used in):
Forward Sale				16,855	Estimated for Fourth Quarter 2014
Operating	$	36,603
Total			$	33,931
Investing		(52,784)
Financing		16
Net decrease in cash and cash equivalents		(16,165)
Cash and Cash Equivalents, Beginning of Period		131,656
Cash and Cash Equivalents, End of Period	$	115,491

Note 6 5 – Liabilities ~~Debt~~Subject ~~Obligations~~to Compromise

AtLiabilities ~~September~~Subject ~~30,~~to ~~2014,~~Compromise werepresents ~~had~~liabilities ~~$1,230.2~~incurred ~~million~~prior into ~~outstanding~~the ~~debt~~Petition Date which may be affected by the Chapter 11 process. ~~Our~~These ~~debt~~amounts ~~consisted~~represent the Debtors’ allowed claims and their best estimate of ~~the~~claims ~~following~~expected atto ~~September~~be ~~30, 2014~~allowed ~~and~~which ~~December~~will ~~31, 2013:~~be resolved as part of the bankruptcy proceedings.

		September 30,		December 31,
		2014		2013
Senior notes, 12% fixed rate, due 2018	$	554,000	$	554,000
Convertible senior notes, 5.5% fixed rate, due 2016		135,000		135,000
Convertible bonds, 11.5% until March 31, 2014 and 7.5% thereafter, due 2016		83,746		78,437
Revolving credit facility, 13% fixed rate, due 2014		-		115,163
Convertible senior notes, 6.5% fixed rate, due 2017		17,500		-
Amended term loan facility, variable rate, due 2017		440,000		-
		1,230,246		882,600
Less: debt discount, net of premium		(22,895)		(11,722)
Less: current maturities		(776,151)		-
Long-term debt	$	431,200	$	870,878

For discussion of the potential impact of our filing under Chapter 11 of the Bankruptcy Code on our debt obligations, see “Note 1 – General.”

Senior Notes

In February 2012, we closed the private placement of $350 million aggregate principal amount of 12% First Priority Notes due 2018 and $150 million aggregate principal amount of 12% Second Priority Notes due 2018. In October 2012, we completed a private placement of an additional $54 million aggregate principal amount of 12% First Priority Notes due 2018 (collectively, the “2018 Notes”).

Table Of Contents

Endeavour International Corporation

(Debtor-in-Possession)

Notes to Condensed Consolidated Financial Statements

(~~Unaudited~~Amounts in thousands, except per share data)

~~(Amounts~~Liabilities inSubject ~~tables~~to inCompromise ~~thousands,~~consists ~~except~~of ~~per~~the ~~unit~~following ~~data)~~as of March 31, 2015:

5.5% Convertible Senior Notes



Accounts Payable	$	5,935
Debt		790,246
Accrued Interest and Dividends		44,719
Total Liabilities Subject to Compromise	$	840,900

~~In July 2011, we issued $135 million aggregate principal amount of our 5.5% Convertible Senior Notes due July 15, 2016.~~ Interest on these notes is payable semi-annually at a rate of 5.5% per annum. The 5.5% Convertible Senior Notes are convertible into shares of our common stock at an initial conversion rate of 54.019 shares (equivalent to $18.51 per share) of common stock per $1,000 principal amount of the notes, subject to certain anti-dilution adjustments.Expense

7The Debtors have discontinued recording interest expense on unsecured or under-secured liabilities subject to compromise on the Petition Date.5% Contractual ~~Convertible~~interest ~~Bonds~~not accrued during the first quarter of 2015 was approximately $21.4 million.

~~Our~~Reorganization 7.5% Convertible Bonds bore interest at a rate of 11.5% per annum until March 31, 2014, and at a rate of 7.5% thereafter. Interest is compounded quarterly and added to the outstanding principal balance each quarter. The bonds are convertible into shares of our common stock at an initial conversion price of $16.52 per $1,000 of principal, which represents a conversion rate of approximately 61 shares of our common stock per $1,000 of principal. Items

~~Term~~Reorganization ~~Loan~~items ~~Facility~~represent the direct and incremental costs of being in bankruptcy, such as professional fees, pre-petition liability claim adjustments and losses related to terminated contracts that are probable and can be estimated. Reorganization fees for the quarter ended March 31, 2015 related solely to professional fees.

On January 24, 2014, we entered into a $255 million agreement consisting of a $125 million senior secured first lien term loan facility (“Term Loan Facility”) and a $130 million Combined Procurement Agreement (see Note 16). The Term Loan Facility bore quarterly interest of LIBOR plus 7.00% annually (provided LIBOR equals at least 1.25% annually).

The Term Loan Facility matured the earlier of:

(i) December 1, 2017; or

(ii) 92 days prior to the maturity date of our outstanding 5.5% Convertible Senior Notes or our 7.5% Convertible Bonds, if still outstanding on that date.

The proceeds of the Term Loan Facility were used to repay the outstanding amounts under our Revolving Credit Facility. The repayment included a prepayment fee and accrued interest of approximately $2.0 million. Subsequent to the repayment, the Revolving Credit Facility was terminated, all of the associated liens on our collateral obligations were released, and we recorded a loss of $3.5 million on the early extinguishment of financing agreements.

On September 30, 2014, we repaid the balance outstanding under the Term Loan Facility with proceeds from the Amended Term Loan Facility. See below.

Amended Term Loan Facility

On September 30, 2014, two wholly-owned subsidiaries, Endeavour International Holding B.V. (“EIH”) and End Finco LLC (“Finco” and collectively, “Borrowers”) entered into an amended and restated credit agreement (the “Amended Credit Agreement”) in respect of our Term Loan

Table Of Contents

Endeavour International Corporation

(Debtor-in-Possession)

Notes to Condensed Consolidated Financial Statements

(~~Unaudited~~Amounts in thousands, except per share data)

~~(Amounts~~Note in6 – Property ~~tables~~and ~~in thousands, except per unit data)~~Equipment

~~Facility. EIH~~ Property and ~~Finco~~equipment ~~are~~included ~~non-Debtors, and as such,~~ the ~~Amended~~following ~~Credit~~at ~~Agreement is not subject to~~ the ~~RSA~~dates ~~and~~indicated ~~related Bankruptcy Cases.~~below:

Pursuant to the Amended Credit Agreement, the lenders advanced approximately $440 million in aggregate principal amount of term loans to the Borrowers (“Amended Term Loan Facility”). The proceeds were used to:



		March 31,		December 31,
		2015		2014
Oil and Gas Properties Under the Full Cost Method:
Subject to Amortization	$	916,437	$	989,758
Not Subject to Amortization:
Incurred in 2015		682		-
Incurred in 2014		945		945
Incurred in 2013		774		774
Incurred prior to 2013		9,065		9,065
		927,903		1,000,542
Computers, Furniture and Fixtures		8,733		8,733
Total Property and Equipment		936,636		1,009,275

Accumulated Depreciation, Depletion and Amortization		(592,901)		(539,766)

Net Property and Equipment	$	343,735	$	469,509

· As ~~repay~~of March 31, 2015 and December 31, 2014, our properties not subject to amortization balance of $11.5 million and $10.8 million relate to unevaluated well costs in ~~full~~the Marcellus. These costs will be transferred to the ~~balance~~amortization ~~outstanding~~base ~~under~~when it is determined whether or not proved reserves can be assigned to such properties. This analysis is dependent upon well performance, drilling results and development of identified projects and periodic assessment of reserves. We expect costs excluded from amortization to be transferred to the ~~existing~~amortization ~~Term~~base ~~Loan~~over ~~Facility;~~the next year as previously drilled wells in the U.S. are completed and tied into infrastructure. We have no unevaluated costs in the U.K.

· For ~~repay~~the three months ended March 31, 2015 and 2014, we capitalized none and $2.6 million, respectively, in ~~full~~interest related to exploration and development, primarily related to our U.K. activities. For the ~~Monetary~~three ~~Production~~months ~~Payments~~ended ~~(See~~March ~~Note~~31, ~~8);~~2015 and 2014, we capitalized $2.4 million and $3.1 million, respectively, in certain directly related employee costs.

· Oil ~~repay~~and inGas ~~full all reimbursement obligations outstanding with respect to the Combined Procurement Agreement (See Note 16);~~Impairments

· During ~~provide~~the ~~cash~~first ~~collateral~~quarter of 2015, we recorded $90.1 million in impairment of oil and gas properties, pre-tax, through the application of the full cost ceiling test. The primary reason for the LCimpairment ~~Issuance~~was ~~Agreement~~the ~~(See~~precipitous ~~Note~~fall ~~16)~~in oil and ~~pay~~gas ~~related~~pricing ~~expenses;~~which began during the fourth quarter of 2014 and which has not yet recovered. The pricing used for the U.K. for the first

· provide additional liquidity to the Company.

We deferred financing costs of $10.3 million related to the Amended Term Loan Facility. The repayments of the Term Loan Facility, Monetary Production Payments and Combined Procurement Agreement included prepayment fees of approximately $3.3 million, $7.8 million and $2.4 million, respectively, and accrued interest of $2.6 million, $3.7 million and $1.9 million, respectively.

Subsequent to the repayment, the Term Loan Facility, Monetary Production Payments and Combined Procurement Agreement were terminated, and all of the associated liens on our collateral obligations were released. As a result, we wrote off deferred financing costs of $7.6 million and $6.7 million related to the Term Loan Facility and Monetary Production Payments, respectively. Additionally, we wrote off a debt discount of $1.5 million related to the Term Loan Facility and charged $1.9 million to loss on foreign currency exchange related to the Combined Procurement Agreement. All charges related to prepayment fees and write off of deferred financing costs, debt discount and loss on foreign currency exchange are included in other income as “Loss on early extinguishment of financing agreements” in our condensed consolidated statements of operations.

The Amended Term Loan Facility bears interest quarterly at a rate of LIBOR plus 10.00% per year (with a LIBOR floor of 1% per year) and matures on January 2, 2017. The loans under the Amended Term Loan Facility were issued with original issue discount of 2.0%. Borrowings under the Amended Term Loan Facility are guaranteed by the Company and certain of its current and future subsidiaries, including Endeavour Operating Corporation and Endeavour UK, subject to certain exceptions. The Amended Term Loan Facility is secured by the same assets securing the Company’s Term Loan Facility other than cash and cash equivalents in the United States.

The Amended Credit Agreement contains covenants and provisions with respect to events of default that are substantially similar to the covenants in the Company’s Term Loan Facility

Table Of Contents

Endeavour International Corporation

(Debtor-in-Possession)

Notes to Condensed Consolidated Financial Statements

(~~Unaudited~~Amounts in thousands, except per share data)

~~(Amounts~~quarter inof ~~tables~~2015 inwas ~~thousands,~~$83.49 ~~except~~per barrel for oil and $7.60 per ~~unit~~mcf ~~data)~~for gas. The pricing used for the U.S. for the first quarter of 2015 was $78.58 per barrel for oil and $3.73 per mcf for gas. Should oil and gas prices remain depressed for the remainder of 2015, further impairments of our oil and gas properties are likely to be recorded throughout 2015.

~~including,~~ We ~~but~~did not ~~limited~~have ~~to,~~an ~~restrictions~~impairment onof ~~the~~U.S. ~~Company’s~~oil and ~~its subsidiaries’~~gas ~~abilities~~properties ~~to:~~through ~~(i)~~the ~~pay~~application ~~distributions~~of ~~or repurchase or redeem~~ the ~~Company’s~~full ~~capital~~cost ceiling ~~stock~~test orfor ~~subordinated~~the ~~debt;~~first ~~(ii)~~quarter ~~make certain~~of ~~investments;~~2014, ~~(iii)~~which ~~incur~~utilized ~~additional~~prices ~~indebtedness;~~of ~~(iv)~~$98.43 ~~create~~per orbarrel ~~incur~~for ~~certain~~oil ~~liens;~~and $3.99 ~~(v)~~per ~~sell~~mcf ~~assets;~~for ~~(vi) consolidate~~gas. Additionally, ~~merge~~we ~~or transfer~~did ~~all~~not orhave ~~substantially~~an ~~all~~impairment of ~~the~~U.K. ~~Company’s~~oil ~~assets;~~and ~~(vii)~~gas ~~enter~~properties ~~into~~through ~~agreements that restrict distributions from~~ the ~~Company’s~~ ~~subsidiaries~~application toof the ~~Company;~~full ~~(viii)~~cost ~~engage~~ceiling intest ~~transactions~~for ~~with~~the ~~affiliates;~~first ~~and~~quarter ~~(ix) allow EIH or any~~ of ~~its subsidiaries to make dividends~~2014, ~~payments~~which orutilized ~~other~~prices ~~distributions~~ of $107.06 ~~any~~per ~~kind~~barrel tofor ~~the~~oil ~~Debtors,~~and ~~other~~$10.57 ~~than~~per ~~pursuant~~mcf ~~to specific limited amounts and~~ for ~~specified~~ ~~purposes~~gas.

~~The~~Insurance Amended Credit Agreement contains customary events of default, subject to certain exceptions. In particular, the following events do not constitute events of default under the Amended Credit Agreement: (a) payment defaults or other defaults to the Company’s existing notes or to certain intercompany indebtedness or (b) a bankruptcy filing by the Company or its domestic subsidiaries and one foreign subsidiary.Settlements

InWe ~~addition~~have made an insurance claim to recover certain loss of production and replacement costs related to our insurance claim for the loss of production income resulting from the rupture of the Alba water injection pipeline, and received $13.0 million during the ~~Amended~~fourth ~~Credit~~quarter ~~Agreement~~of ~~contains~~2014 ~~various~~and ~~financial~~$8.4 ~~covenants~~million during the first quarter of 2015 as ~~defined~~preliminary insettlements. The entirety of the ~~agreement~~amount received during the first quarter of 2015 relates to loss of production. The claims remain in progress for potential additional recoveries, ~~including:~~which are expected to be in the range of $5 million to $7 million.

· Note a7 ~~maximum~~– ~~leverage~~Deferred ~~ratio of 2.75:1.00 beginning with the fiscal quarter ending December 31, 2014 and~~Revenue

· For certain of our U.K. fields, we sell production on a ~~minimum~~monthly ~~asset~~basis; ~~coverage~~however, ~~ratio~~the ofproduction ~~1.0~~remains toin 1the field’s storage tanks.0 The asinventory ofassociated ~~June~~with 30these sales remains on our balance sheet and ~~December~~the 31revenue is deferred until the production is shipped out of ~~each~~our ~~year~~storage tanks.

~~Revolving~~At ~~Credit~~March ~~Facility~~31, 2015, our deferred revenue was entirely attributable to our Alba field. Delivery of the production is expected to occur during the second quarter of 2015.

On April 12, 2012, we entered into a Revolving Credit Facility, with Cyan Partners, LP, as administrative agent, under which we ultimately borrowed $115 million.

On January 24, 2014, we repaid the balance outstanding under the Revolving Credit Facility with proceeds from the Term Loan Facility. Following the repayment, the Revolving Credit Facility was terminated and all of the associated liens on the collateral securing our obligations were released.

6.5% Convertible Senior Notes

On February 28, 2014, we entered into a securities purchase agreement (the “Securities Purchase Agreement”) relating to the issuance of up to $55 million in common stock, warrants and convertible notes. We closed on an initial $30 million in late February and early March 2014, comprised of:

· 2.9 million shares of our common stock;

· warrants to purchase 0.7 million shares of our common stock at an exercise price of $5.292 per share, expiring on February 28, 2019; and

· $17.5 million in aggregate principal amount of our 6.5% Convertible Senior Notes.

Table Of Contents

Endeavour International Corporation

(Debtor-in-Possession)

Notes to Condensed Consolidated Financial Statements

(~~Unaudited~~Amounts in thousands, except per share data)

~~(Amounts~~Note in8 ~~tables~~– inDebt ~~thousands, except per unit data)~~Obligations

~~The~~ At ~~6.5%~~March ~~Convertible~~31, ~~Senior~~2015, ~~Notes~~we ~~have~~had a$1,230.2 ~~maturity~~million ~~date~~in ~~the~~outstanding ~~same as the Term Loan Facility~~debt. ~~Interest~~ Our isdebt ~~payable~~consisted onof the ~~6.5%~~following ~~Convertible~~at ~~Senior~~March ~~Notes~~31, 2015 ~~quarterly.~~and December 31, 2014:

The 6.5% Convertible Senior Notes are:



		March 31,		December 31,
		2015		2014
Liabilities Subject to Compromise: (1)
Senior Notes, 12% Fixed Rate, Due 2018	$	554,000	$	554,000
Convertible Senior Notes, 5.5% Fixed Rate, Due 2016		135,000		135,000
Convertible Bonds, 11.5% Until March 31, 2014 and 7.5% Thereafter, due 2016		83,746		83,746
Convertible Senior Notes, 6.5% Fixed Rate, Due 2017		17,500		17,500
Total Liabilities Subject to Compromise		790,246		790,246

Liabilities Not Subject to Compromise:
Amended Term Loan Facility, Variable Rate, Due 2017		440,000		440,000

Total Debt Obligations		1,230,246		1,230,246

Less: Debt Discount		(6,859)		(7,819)
Less: Liabilities Subject to Compromise		(790,246)		(790,246)
Less: Current Maturities		(433,141)		(432,181)
Long-Term Debt	$	-	$	-

·(1) ~~convertible~~For atdiscussion ~~any~~of ~~time;~~the potential impact of our filing under Chapter 11 of the Bankruptcy Code on our debt obligations, see Note 3 – Voluntary Reorganization under Chapter 11. As a result of our filing under Chapter 11 of the Bankruptcy Code, we are in default of the debt covenants related to the Senior Notes, 5.5% Convertible Senior Notes, 7.5% Convertible Bonds and 6.5% Convertible Senior Notes. All outstanding balances related to these obligations have been reclassified as Liabilities Subject to Compromise in our Condensed Consolidated Balance Sheets.

· Liabilities ~~convertible~~Not ~~initially~~Subject ~~at a rate 214.5002 shares of our common stock per $1,000 principal amount of 6.5% Convertible Notes (equivalent~~ to ~~an initial conversion price of approximately $4.662 per share of our common stock);~~Compromise

· Amended ~~subject~~Term toLoan ~~certain anti-dilution adjustments;~~Facility

· On September 30, 2014, two wholly-owned subsidiaries, Endeavour International Holding B.V. (“EIH”) and End Finco LLC (“Finco” and collectively, “Borrowers”) entered into an amended and restated credit agreement (the “Amended Credit Agreement”) replacing our previous $125 million senior secured first lien term loan facility originally entered into on January 24, 2014 (the “Term Loan Facility”). EIH and Finco are non-Debtors, and as such, the Amended Credit Agreement is not subject to ~~customary~~the ~~events~~Bankruptcy ofCases. Pursuant ~~default;~~to the Amended Credit Agreement,

· general unsecured and unsubordinated obligations; and

· equally ranked in right of payment with all of our existing and future unsubordinated indebtedness and senior in right of payment to any of our future indebtedness that is expressly subordinated to the 6.5% Convertible Notes.

Fair Value

The fair value of our outstanding debt obligations was $791.6 million and $868.4 million at September 30, 2014 and December 31, 2013, respectively. The fair values of our 2018 Notes and 5.5% Convertible Senior Notes were determined based upon external market quotes and the 6.5% Convertible Senior Notes and 7.5% Convertible Bonds were determined based upon implied valuations in the RSA. The fair value of our Amended Term Loan Facility was determined based upon a discounted cash flow model. As a result, all fair value measures related to our debt are considered Level 3.

Note 7 – Income Taxes

Our U.S. operations are taxed at a statutory rate of 35%. However, we currently do not record tax benefits due to losses in the U.S. as there is no assurance that we will generate any U.S. taxable earnings, resulting in a full valuation allowance of all deferred tax assets generated.

Our income tax expense relates primarily to our operations in the U.K. which are taxed at a statutory rate of 62% plus an additional Petroleum Revenue Tax on our Alba field. With the utilization of our tax attributes in the U.K., we have not paid any corporate taxes in the U.K. Because of our accumulated tax attributes, we do not expect to pay U.K. corporate taxes until after 2016. The current tax expense is related to Petroleum Revenue Tax (“PRT”) on our Alba field. We have no other producing fields subject to PRT.

Table Of Contents

Endeavour International Corporation

(Debtor-in-Possession)

Notes to Condensed Consolidated Financial Statements

(~~Unaudited~~Amounts in thousands, except per share data)

~~(Amounts~~the inlenders ~~tables~~advanced approximately $440 million in ~~thousands,~~aggregate ~~except~~principal ~~per~~amount ~~unit~~of ~~data~~term loans to the Borrowers (“Amended Term Loan Facility”).

~~Note~~ The 8Amended –Term ~~Monetary~~Loan ~~Production~~Facility ~~Payments~~bears interest quarterly at a rate of LIBOR plus 10.00% per year (with a LIBOR floor of 1% per year) and matures on January 2, 2017. The loans under the Amended Term Loan Facility were issued with original issue discount of 2.0%. Borrowings under the Amended Term Loan Facility are guaranteed by the Company and certain of its current and future subsidiaries, including Endeavour Operating Corporation and Endeavour Energy UK Limited (“Endeavour UK”), subject to certain exceptions. The Amended Term Loan Facility is secured by the same assets that previously secured the Company’s Term Loan Facility other than cash and cash equivalents in the United States.

~~Our~~The ~~production~~Amended ~~payment~~Credit ~~liability,~~Agreement ~~net~~contains covenants and provisions with respect to events of ~~repayments~~default, including restrictions ~~consisted~~on ofthe Company’s and its subsidiaries’ abilities to: (i) pay distributions or repurchase or redeem the ~~following~~Company’s atcapital ~~September~~stock 30or subordinated debt; (ii) make certain investments; (iii) incur additional indebtedness; (iv) create or incur certain liens; (v) sell assets; (vi) consolidate, merge or ~~2014~~transfer all or substantially all of the Company’s assets; (vii) enter into agreements that restrict distributions from the Company’s subsidiaries to the Company; (viii) engage in transactions with affiliates; and ~~December~~(ix) 31allow EIH or any of its subsidiaries to make dividends, ~~2013:~~payments or other distributions of any kind to the Debtors, other than pursuant to specific limited amounts and for specified purposes.

		September 30,		December 31,
		2014		2013
Monetary production payments	$	-	$	166,667
Less: current portion		-		(74,167)
Long-term monetary production payments	$	-	$	92,500

The Amended Credit Agreement contains customary events of default, subject to certain exceptions. In particular, the following events do not constitute events of default under the Amended Credit Agreement: (a) payment defaults or other defaults to the Company’s existing notes or to certain intercompany indebtedness or (b) a bankruptcy filing by the Company or its domestic subsidiaries and one foreign subsidiary.

~~During~~In ~~2013~~addition, ~~we entered into various monetary production payment arrangements (collectively,~~ the ~~“Monetary~~Amended ~~Production~~Credit ~~Payments”)~~Agreement ~~covering~~contains ~~the~~various ~~proceeds~~financial ofcovenants ~~sale~~as ~~from~~defined ~~a portion of EEUK’s entitlement to production from its interests~~ in the ~~certain~~agreement, ~~fields located in the U.K. sector of the North Sea. We issued the Monetary Production Payments in the following manner~~including:

· ~~In March through May 2013,~~ a ~~total~~maximum ofleverage ~~$125~~ratio ~~million, with an effective interest rate~~ of 102.~~0%,~~75:1.00 ~~associated~~beginning with ~~production~~the ~~from~~fiscal ~~our~~quarter ~~interests~~ending inDecember ~~the~~31, ~~Alba~~2014; and ~~Bacchus fields;~~

· Ina ~~August~~minimum ~~2013,~~asset ~~$25~~coverage ~~million,~~ratio ~~with an effective interest rate~~ of 81.~~75%,~~0 ~~associated~~to ~~with~~1.0 ~~production~~as ~~from~~of ~~our~~June ~~interests~~30 inand ~~the~~December ~~Alba~~31 ~~and~~of ~~Bacchus~~each ~~fields; and~~year.

· If Inoil ~~December~~and ~~2013~~gas prices remain at their depressed levels, ~~$25~~we ~~million~~could breach our leverage covenant under our Amended Term Loan Facility in or about the third quarter of 2015, ~~with~~which anwould ~~effective~~result ~~interest~~in ~~rate~~a default under the terms of 9the Amended Term Loan Facility and a liquidity shortfall at the end of the fourth quarter of 2015.~~75%~~ Based on this determination, ~~associated~~we ~~with~~have ~~production~~classified ~~from~~the ~~our~~outstanding ~~interests~~balance of the Amended Term Loan Facility as a current liability in the ~~Rochelle~~line ~~field.~~item

We made principal payments of $5.0 million in January 2014 and $5.8 million each in April 2014 and July 2014.

On September 30, 2014, we repaid the balance of the Monetary Production Payments outstanding with proceeds from the Amended Term Loan Facility. Following the repayment, the Monetary Production Payments were terminated and all of the associated liens on the collateral securing our obligations were released (see Note 6).

Table Of Contents

Endeavour International Corporation

(Debtor-in-Possession)

Notes to Condensed Consolidated Financial Statements

(~~Unaudited~~Amounts in thousands, except per share data)

~~(Amounts~~“Current inmaturities ~~tables~~of debt” and the related remaining deferred financing costs as a current asset in ~~thousands~~our Condensed Consolidated Balance Sheets as of March 31, ~~except~~2015 ~~per~~and ~~unit~~December ~~data)~~31, 2014.

~~Note~~ Liabilities 9Subject –to ~~Other Long-Term Liabilities~~Compromise

AtSenior ~~September 30, 2014 and December 31, 2013, our other liabilities included the following:~~Notes

		September 30,		December 31,
		2014		2013
Asset retirement obligations	$	107,831	$	121,534
Long-term derivative liabilities		-		9,245
Other		3,869		591
Total Other Liabilities	$	111,700	$	131,370

In February 2012, we closed the private placement of $350 million aggregate principal amount of 12% First Priority Notes due 2018 and $150 million aggregate principal amount of 12% Second Priority Notes due 2018 (collectively, the “2018 Notes”). In October 2012, we completed a private placement of an additional $54 million aggregate principal amount of 12% First Priority Notes due 2018.

~~Asset~~5.5% ~~Retirement~~Convertible ~~Obligations~~Senior Notes

~~Our~~In ~~asset~~July ~~retirement~~2011, ~~obligations~~we ~~relate~~issued to$135 ~~our~~million ~~obligation~~aggregate ~~for~~principal ~~the~~amount ~~plugging and abandonment~~ of ~~oil~~our ~~and gas properties~~5. ~~The~~5% ~~asset~~Convertible ~~retirement~~Senior ~~obligations~~Notes ~~are~~due ~~recorded~~July ~~at fair value and accretion expense~~15, ~~recognized~~2016. Interest ~~over~~on ~~the~~these ~~life~~notes ofis ~~the~~payable ~~property,~~semi-annually ~~increases~~at ~~the~~a ~~liability~~rate toof ~~its~~5.5% ~~expected~~per ~~settlement value~~annum. IfThe ~~the~~5.5% ~~fair~~Convertible ~~value~~Senior ofNotes ~~the~~are ~~estimated~~convertible ~~asset~~into ~~retirement~~shares ~~obligation~~of ~~changes,~~our ancommon ~~adjustment~~stock isat ~~recorded~~an ~~for~~initial ~~both~~conversion ~~the~~rate ~~asset~~of ~~retirement~~54.019 ~~obligation~~shares ~~and~~(equivalent ~~the~~to ~~asset retirement cost~~$18. ~~The~~51 ~~following~~per ~~table~~share) ~~provides~~of acommon ~~rollforward~~stock ofper ~~our~~$1,000 ~~asset~~principal ~~retirement~~amount ~~obligations~~of ~~for~~ the ~~nine~~notes, ~~months~~subject ~~ended September~~to ~~30, 2014~~certain ~~and~~anti-dilution ~~2013:~~adjustments.

		Nine Months Ended
		September 30,
		2014		2013
Carrying amount of asset retirement obligations as of beginning of period	$	170,429	$	176,076
Accretion expense (included in DD&A expense)		19,343		17,298
Impact of foreign currency exchange rate changes		(3,084)		(207)
Payment of asset retirement obligations		(33,728)		(22,779)
Liabilities incurred and assumed		3,266		(4,333)
Carrying amount of asset retirement obligations, as of end of period		156,226		166,055
Less: Current portion of asset retirement obligations		(48,395)		(35,945)
Long-term asset retirement obligations	$	107,831	$	130,110

7.5% Convertible Bonds

~~Note~~In 10July –2008, ~~Equity~~we ~~Transactions~~issued 7.5% Convertible Bonds which bore interest at a rate of 11.5% per annum until March 31, 2014, and at a rate of 7.5% thereafter. Interest is compounded quarterly and added to the outstanding principal balance each quarter. The bonds are convertible into shares of our common stock at an initial conversion price of $16.52 per $1,000 of principal, which represents a conversion rate of approximately 61 shares of our common stock per $1,000 of principal.

~~In February 2014, we entered into the Securities Purchase Agreement whereby we issued 2~~6.~~9 million shares of our common stock and warrants to purchase 0.7 million shares of our common stock for a total of $12.~~5% ~~million~~Convertible inSenior ~~cash. The warrants have an exercise price of $5.292 per share and expire on February 28, 2019 and are subject to customary anti-dilution provisions.~~Notes

On February 28, 2014, we entered into a securities purchase agreement (the “Securities Purchase Agreement”). We closed on an initial $30 million during the first quarter of 2014, comprised of 2.9 million shares of our common stock; warrants to purchase 0.7 million shares of our common stock at an exercise price of $5.292 per share, expiring on February 28, 2019; and $17.5 million in aggregate principal amount of our 6.5% Convertible Senior Notes.

Interest on the 6.5% Convertible Senior Notes is payable quarterly and matures the earlier of (i) December 1, 2017 or (ii) 92 days prior to the maturity date of our outstanding 5.5% Convertible Senior Notes or our 7.5% Convertible Bonds, if still outstanding on that date.

Table Of Contents

Endeavour International Corporation

(Debtor-in-Possession)

Notes to Condensed Consolidated Financial Statements

(~~Unaudited~~Amounts in thousands, except per share data)

~~(Amounts~~The in6.5% ~~tables~~Convertible inSenior ~~thousands~~Notes are convertible at any time at an initial rate of 214.5002 shares of our common stock per $1,000 ~~except~~principal amount of 6.5% Convertible Notes (equivalent to an initial conversion price of approximately $4.662 per ~~unit~~share ~~data~~of our common stock).

In Fair April 2014, we issued the warrants to purchase 2,130,680 shares of our common stock, with an exercise price of $5.29 per share, in connection with our litigation settlement. The Warrants expire on April 16, 2019 and are subject to customary anti-dilution provisions. See Note 16 for additional information.Value

~~For~~The ~~discussion~~fair value of ~~the~~our ~~potential~~outstanding ~~impact~~debt obligations was $446.7 million and $446.1 million at March 31, 2015 and December 31, 2014, respectively. The fair value of our ~~filing~~Amended ~~under~~Term ~~Chapter~~Loan 11Facility ofwas ~~the~~determined ~~Bankruptcy~~based ~~Code~~upon ona ~~our~~discounted ~~equity~~cash flow model. As a result, ~~see~~all ~~“Note~~fair 1value –measures ~~General~~related to our debt are considered Level 3.”

Note 119 – ~~Stock-Based~~Income ~~Compensation Arrangements~~Taxes

WeOur ~~grant~~U.S. ~~restricted~~operations ~~stock~~are ~~and~~taxed ~~stock~~at ~~options~~a tostatutory ~~employees~~rate ~~and~~of ~~directors~~35%. However, aswe ~~incentive~~currently ~~compensation. The~~do ~~restricted~~not ~~stock~~record ~~and~~tax ~~options~~benefits ~~generally~~due ~~vest~~to ~~over~~losses ~~three~~in ~~years~~the U. ~~Non-cash~~S. ~~stock-based~~as ~~compensation~~there is ~~recorded~~no assurance that we will generate any U.S. taxable earnings, resulting in ~~general~~a ~~and~~full ~~administrative~~valuation ~~(“G&A”)~~allowance ~~expenses~~of orall ~~capitalized~~deferred ~~G&A~~tax asassets ~~follows:~~generated.

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
Accounts	2014		2013		2014		2013
G&A Expenses	$	936	$	954	$	3,142	$	2,803
Capitalized G&A		152		510		691		1,869
Total non-cash stock-based compensation	$	1,088	$	1,464	$	3,833	$	4,672

For years prior to January 1, 2015, our U.K. operations were taxed at a statutory rate of 62% (composed of a Ring Fence Corporation Tax rate of 30% and Supplementary Charge rate of 32%). In March 2015, the Supplementary Charge rate decreased to 20%, which was retroactive to January 1, 2015, so that for 2015 the statutory rate is 50%. However, we currently do not record tax benefits due to losses in the U.K. relating to Ring Fence Corporation Tax and Supplemental Charge as there is no assurance that we will generate any U.K. taxable earnings. As a result, we have a full valuation allowance on the deferred tax assets generated relating to these taxes.

AtIn ~~September 30~~addition, ~~2014,~~certain ~~total~~of ~~compensation~~our ~~cost~~U.K. ~~related~~fields are subject to ~~awards~~a ~~not~~Petroleum ~~yet~~Revenue ~~recognized~~Tax ~~was~~(“PRT”) ~~approximately~~rate $7of 50%.7 Our ~~million~~current ~~and~~tax expense is ~~expected~~related to bePRT ~~recognized~~on ~~over~~the aAlba ~~weighted~~field, ~~average~~our ~~period~~only ofproducing ~~less~~field ~~than~~subject ~~three~~to PRT. In March 2015, tax legislation was enacted that will decrease the PRT rate from 50% to 35% for years beginning on January 1, 2016.

~~Stock~~UK ~~Options~~Finance Act 2015

~~The~~On ~~fair~~March ~~value~~26, of2015, ~~each~~the ~~option~~Finance ~~award~~Act is2015 ~~estimated~~received onRoyal ~~the~~Assent ~~date~~and ofwas ~~grant~~enacted ~~using~~by the ~~Black-Scholes~~U.K. ~~option-pricing model~~government. We The ~~did~~Finance ~~not~~Act ~~grant~~2015 ~~any~~implemented ~~stock~~several ~~options~~changes ~~during~~affecting ~~2013~~our ~~or 2014~~U. K. activities, including:

a decrease in the Supplementary Charge rate from 32% to 20%, which is retroactive to January 1, 2015; and

a decrease in the PRT rate from 50% to 35%, beginning on January 1, 2016.

Table Of Contents

Endeavour International Corporation

(Debtor-in-Possession)

Notes to Condensed Consolidated Financial Statements

(~~Unaudited~~Amounts in thousands, except per share data)

~~(Amounts~~As ina ~~tables~~result of this enacted legislation, the Company recorded an $11.4 million deferred tax expense related to the decrease in ~~thousands~~the Supplementary Charge rate change during the first quarter of 2015, ~~except~~exactly ~~per~~offset ~~unit~~by ~~data)~~a reduction in the U.K. valuation allowance which resulted in a zero net charge to the Condensed Consolidated Statements of Operations for the quarter ended March 31, 2015.

~~Information~~Furthermore, ~~relating~~the Company recorded a deferred PRT tax benefit of $7.9 million during the first quarter of 2015 related to ~~outstanding~~the ~~stock~~enacted ~~options~~decrease isin ~~summarized~~the asPRT ~~follows:~~rate for the deferred tax liabilities that will reverse subsequent to the January 1, 2016 effective date.

	Number of		Weighted	Weighted
	Shares		Average	Average		Aggregate
	Underlying		Exercise Price	Contractual		Intrinsic
	Options		per Share	Life in Years		Value
Balance outstanding - January 1, 2014	120	$	7.55
Expired	(6)		7.86
Balance outstanding - September 30, 2014	114	$	7.53	3.3	$	-
Currently exercisable - September 30, 2014	114	$	7.53	3.3	$	-

Note 10 – Other Long-Term Liabilities

~~Restricted~~At ~~Stock~~March 31, 2015 and December 31, 2014, our other liabilities included the following:

Restricted stock awards are valued based on the closing price of our common stock on the measurement date, which is typically the date of grant.



		March 31,		December 31,
		2015		2014
Asset Retirement Obligations	$	64,359	$	65,935
Other		137		142
Total Other Liabilities	$	64,496	$	66,077

~~The~~Asset ~~status~~Retirement ~~of the restricted shares outstanding as of September 30, 2014 is presented below:~~Obligations

				Weighted
				Average Grant
		Number of		Date Fair Value
		Shares		per Share
Balance outstanding - January 1, 2014		628	$	7.44
Granted		687		4.56
Vested		(352)		8.30
Forfeited		(107)		5.39
Balance outstanding - September 30, 2014		856	$	5.03
Total grant date fair value of shares vesting during the period	$	1,660

Our asset retirement obligations relate to our obligation for the plugging and abandonment of oil and gas properties. The asset retirement obligations are recorded at fair value and accretion expense, recognized over the life of the property, increases the liability to its expected settlement value. If the fair value of the estimated asset retirement obligation changes, an adjustment is recorded for both the asset retirement obligation and the asset retirement cost.

Performance-Based Share Awards

Certain of our executive officers were granted a target number of performance shares under individual Performance Unit Award Agreements. The performance shares will be earned as the relative total shareholder return ranking is measured among a designated peer group at the end of a three-year performance period. Payouts will be based on a predetermined schedule at the end of the performance period. The shares issued may range from 0% to 200% of the number of Performance Units specified in the agreements. The fair value of each performance-based award is estimated on the date of grant using a Monte Carlo simulation model.

Table Of Contents

Endeavour International Corporation

(Debtor-in-Possession)

Notes to Condensed Consolidated Financial Statements

(~~Unaudited~~Amounts in thousands, except per share data)

~~(Amounts~~The infollowing ~~tables~~table inprovides ~~thousands,~~a ~~except~~rollforward ~~per~~of ~~unit~~our ~~data)~~asset retirement obligations for the three months ended March 31, 2015:

The status of the performance-based share awards as of September 30, 2014 is presented below:



		Three Months Ended
		March 31,
		2015
Carrying amount of asset retirement obligations as of December 31, 2014	$	106,482
Accretion expense (included in DD&A expense)		3,425
Impact of foreign currency exchange rate changes		(5,014)
Payment of asset retirement obligations		(10,699)
Liabilities incurred and assumed		-
Carrying amount of asset retirement obligations, as of end of period		94,194
Less: Current portion of asset retirement obligations		(29,835)
Long-term asset retirement obligations	$	64,359

			Weighted
			Average Grant
	Number of		Date Fair Value
	Shares		per Share
Balance outstanding - January 1, 2014	707	$	11.02
Granted	516		8.29
Forfeited	(127)		10.13
Balance outstanding - September 30, 2014	1,096	$	9.84

Note 11 – Equity Transactions

~~For~~In ~~discussion~~February of2014, we entered into the ~~potential~~Securities ~~impact~~Purchase Agreement whereby we issued 2.9 million shares of our ~~filing~~common ~~under~~stock ~~Chapter~~and 11warrants to purchase 0.7 million shares of ~~the~~our ~~Bankruptcy~~common ~~Code~~stock for a total of $12.5 million in cash. The warrants have an exercise price of $5.292 per share and expire on ~~our~~February ~~equity~~28, ~~see~~2019 ~~“Note~~and 1are –subject ~~General~~to customary anti-dilution provisions.”

For discussion of the potential impact of our filing under Chapter 11 of the Bankruptcy Code on our equity, see Note 123 – ~~Loss~~Voluntary ~~per~~Reorganization ~~Share~~under Chapter 11.

~~Basic~~Note ~~loss~~12 ~~per~~– ~~common~~Stock- Based ~~share~~Compensation is computed by dividing net loss to common stockholders by the weighted average number of common shares outstanding for the period. Diluted loss per share includes the effect of our outstanding stock options, warrants and shares issuable pursuant to convertible debt, convertible preferred stock and certain stock incentive plans under the treasury stock method, if including such instruments would be dilutive.Arrangements

~~For~~We ~~each~~grant ofrestricted ~~the~~stock ~~periods~~and ~~presented,~~stock ~~shares~~options ~~associated~~to ~~with~~employees ~~stock~~and ~~options,~~directors ~~warrants,~~as ~~convertible~~incentive ~~debt,~~compensation. The ~~convertible~~restricted ~~preferred~~ stock and ~~certain~~options ~~stock~~generally ~~incentive~~vest ~~plans~~over ~~were~~three years. We have not ~~included~~granted ~~because~~any ~~their~~restricted ~~inclusion~~stock ~~would~~or bestock ~~anti-dilutive~~options during 2015.

The common shares potentially issuable arising from these instruments, which were outstanding during the periods presented in the financial statements consisted of:

	September 30,
	2014	2013
Warrants, options and stock-based compensation	10,217	8,148
Convertible debt	16,117	11,908
Convertible preferred stock	1,691	4,229
	28,025	24,285

Table Of Contents

Endeavour International Corporation

(Debtor-in-Possession)

Notes to Condensed Consolidated Financial Statements

(~~Unaudited~~Amounts in thousands, except per share data)

~~(Amounts~~Non-cash instock-based ~~tables~~compensation inis ~~thousands,~~recorded ~~except~~in ~~per~~general ~~unit~~and ~~data~~administrative (“G&A”) expenses or capitalized G&A as follows:

Note 13 – Fair Value Measurements



		Three Months Ended
		March 31,
	2015		2014
G&A Expenses	$	(10)	$	971
Capitalized G&A		(29)		163

Total non-cash stock-based compensation	$	(39)	$	1,134

WeAt ~~measure~~March ~~the~~31, ~~fair value of financial assets and liabilities on a recurring basis~~2015, ~~defining~~total ~~fair~~compensation ~~value~~cost asrelated ~~the price that would be received~~ to ~~sell~~awards annot ~~asset~~yet orrecognized ~~paid~~was toapproximately ~~transfer a liability in an orderly transaction between market participants at the measurement date~~$3. ~~The~~4 ~~fair~~million ~~value~~and is ~~based~~expected ~~on assumptions that market participants would use when pricing an asset or liability, including assumptions about risk and the risks inherent in valuation techniques and the inputs~~ to ~~valuations. This~~be ~~includes~~recognized ~~not~~over ~~only~~a ~~the~~weighted ~~credit~~average ~~standing~~period of ~~counterparties~~less ~~involved~~than ~~and~~two ~~the impact of credit enhancements but also the impact of our own nonperformance risk on our liabilities~~years. ~~Fair value measurements are classified and disclosed in one of the following categories:~~

~~Level 1:Fair~~Stock ~~value is based on actively-quoted market prices, if available.~~Options

~~Level 2:In~~The ~~the~~fair ~~absence~~value of ~~actively-quoted~~each ~~market~~option ~~prices,~~award weis ~~seek~~estimated ~~price~~on ~~information~~the ~~from~~date ~~external sources, including broker quotes and industry publications. Substantially all~~ of ~~these~~grant ~~inputs~~using ~~are observable in~~ the ~~marketplace~~Black-Scholes ~~during~~option-pricing ~~the~~model. Information ~~entire~~relating ~~term~~to ofoutstanding ~~the~~stock ~~instrument,~~options ~~derived~~is ~~from~~summarized ~~observable~~as ~~data, or supported by observable levels at which transactions are executed in the marketplace.~~follows:

Level 3:If valuations require inputs that are both significant to the fair value measurement and less observable from objective sources, we must estimate prices based on available historical and near-term future price information and certain statistical methods that reflect our market assumptions.



	Number of		Weighted	Weighted
	Shares		Average	Average		Aggregate
	Underlying		Exercise Price	Contractual		Intrinsic
	Options		per Share	Life in Years		Value
Balance outstanding - January 1, 2015	107	$	7.76
Expired	(87)		8.21

Balance outstanding - March 31, 2015	20	$	5.83	3.4	$	-
Currently exercisable - March 31, 2015	20	$	5.83	3.4	$	-

WeRestricted apply fair value measurements to certain assets and liabilities including embedded derivatives relating to conversion and change in control features in certain of our debt instruments and three-way collars related to our U.K. gas production. We seek to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.Stock

~~Financial~~Restricted ~~assets~~stock ~~and~~awards ~~liabilities~~ are ~~classified~~valued based on the ~~lowest~~closing ~~level~~price of ~~input~~our ~~that~~common isstock ~~significant~~on tothe measurement date, which is typically the ~~fair~~date ~~value~~of ~~measurement~~grant.

Table Of Contents

Endeavour International Corporation

(Debtor-in-Possession)

Notes to Condensed Consolidated Financial Statements

(~~Unaudited~~Amounts in thousands, except per share data)

~~(Amounts~~The instatus ~~tables~~of inthe ~~thousands,~~restricted ~~except~~shares ~~per~~outstanding ~~unit~~as ~~data)~~of March 31, 2015 is presented below:

The following table summarizes the valuation of our financial instruments by pricing levels as of September 30, 2014 and December 31, 2013:



				Weighted
				Average Grant
		Number of		Date Fair Value
		Shares		per Share
Balance outstanding - January 1, 2015		740	$	4.93
Vested		(245)		5.90
Forfeited		(27)		5.69

Balance outstanding - March 31, 2015		468	$	4.40

Total grant date fair value of shares vesting during the period	$	38.3

	Quoted Market Prices			Significant Other			Significant
	in Active Markets -			Observable Inputs -			Unobservable Inputs			Total
	Level 1			Level 2			Level - 3			Fair Value
Derivative liabilities:
As of September 30, 2014		$	-		$	(169)		$	-		$	(169)
As of December 31, 2013		$	-		$	-		$	(9,245)		$	(9,245)

Performance-Based Share Awards

~~For~~Certain ~~the~~of ~~Company’s~~our ~~three-way~~executive ~~collars,~~officers ~~which~~were ~~are~~granted ~~classified~~a target number of performance shares under individual Performance Unit Award Agreements. The performance shares will be earned as ~~Level~~the 2,relative wetotal ~~used~~shareholder return ranking is measured among a ~~closed~~designated ~~option~~peer ~~model~~group toat ~~derive~~the end of a three-year performance period. Payouts will be based on a predetermined schedule at the ~~value~~end of ~~our~~the ~~derivatives~~performance period. The ~~key~~shares ~~inputs~~issued ~~into~~may ~~this~~range ~~valuation~~from ~~model~~0% ~~are~~to ~~quoted~~200% ~~forward~~of ~~prices~~the ~~for~~number ~~natural~~of ~~gas, volatility~~Performance ~~factors~~Units ~~and~~specified ~~interest~~in ~~rates~~the ~~for~~agreements. The afair ~~similar~~value ~~length~~ of ~~time~~each asperformance-based award is estimated on the ~~derivative~~date ~~contract~~of ~~term~~grant asusing ~~applicable~~a Monte Carlo simulation model. We have not granted any performance-based share awards during 2015

~~For~~The ~~the~~status ~~Company’s~~of ~~embedded derivatives,~~ the ~~key inputs into this valuation model are our current stock price, risk~~performance-~~free interest rates, the stock volatility and our implied credit spread. The first two aforementioned inputs are~~ based onshare ~~observable~~awards ~~market~~as ~~data~~of ~~and~~March ~~are~~31, ~~considered Level 2 inputs while the last two aforementioned inputs are unobservable and thus require management’s judgment and are considered Level 3 inputs. The following~~ 2015 is apresented ~~reconciliation of changes in fair value of derivative liabilities classified as Level 3~~below:

	Nine Months Ended
				Weighted
	September 30,
				Average Grant
		2014		2013
		Number of		Date Fair Value
Balance at beginning of period	$	(9,245)	$	(7,402)
		Shares		per Share
Derivative issuance		(1,580)		-
Balance outstanding - January 1, 2015		424	$	8.05
Unrealized gains included in earnings		10,825		1,158
Forfeited		(26)		7.91
Balance at end of period	$	-	$	(6,244)
Balance outstanding - March 31, 2015		398	$	8.05
Changes in unrealized gains relating to derivative liabilities
still held at the end of the period	$	9,245	$	1,158

For discussion of the potential impact of our filing under Chapter 11 of the Bankruptcy Code on our equity, see Note 143 – ~~Derivative~~Voluntary ~~Instruments~~Reorganization under Chapter 11.

During the three months ended September 30, 2014, the Company entered into three-way collars to mitigate commodity pricing risks related to a portion of its U.K. gas production. These three-

Table Of Contents

Endeavour International Corporation

(Debtor-in-Possession)

Notes to Condensed Consolidated Financial Statements

(~~Unaudited~~Amounts in thousands, except per share data)

~~(Amounts~~Note in13 ~~tables~~– inLoss ~~thousands, except~~ per ~~unit data)~~Share

~~way~~ Basic ~~collars~~loss ~~expire~~per oncommon ~~December~~share ~~31,~~is ~~2014. As~~computed by dividing net loss to common stockholders by the weighted average number of ~~September~~common ~~30,~~shares ~~2014,~~outstanding for the ~~Company~~period. Diluted ~~had~~loss per share includes the ~~following~~effect of our outstanding ~~three-way~~stock ~~collars~~options, ~~all~~warrants ~~which~~and ~~settle~~shares ~~monthly~~issuable ~~based~~pursuant onto convertible debt, convertible preferred stock and certain stock incentive plans under the ~~U.K.~~treasury ~~National~~stock ~~Balancing~~method, ~~Point~~if ~~(“NBP”)~~including ~~index:~~such instruments would be dilutive.

		Weighted Average Prices
Settlement Period:	Total NotionalAmount of Gas		Sub-Floor		Floor		Ceiling
	(MMBtu)	(£/MMBtu)
October 2014	465,000	£	3.90	£	4.80	£	5.25
November 2014	450,000	£	5.10	£	6.30	£	6.90
December 2014	465,000	£	5.10	£	6.30	£	6.90

For each of the periods presented, shares associated with stock options, warrants, convertible debt, convertible preferred stock and certain stock incentive plans were not included because their inclusion would be anti-dilutive.

~~During~~The ~~the~~common ~~three~~shares ~~and~~potentially ~~nine~~issuable ~~months~~arising ~~ended~~from ~~September~~these ~~30, 2014, we also had recognized embedded derivative liabilities related to debt and equity~~ instruments~~. Based on our filing under Chapter 11 of the Bankruptcy Code as discussed in “Note 1 – General” and the related probable cancellation of the underlying debt and equity instruments~~, wewhich ~~wrote~~were ~~off~~outstanding ~~the entire amount of the embedded derivatives and recorded a gain of $6.2 million~~ during the ~~third~~periods ~~quarter~~presented ofin ~~2014. None of~~ the ~~Company’s~~financial ~~derivatives~~statements ~~are~~consisted ~~designated as hedges for accounting purposes.~~ of:

The fair market value of these derivative instruments is included in our balance sheets as follows for the periods indicated:



	March 31,
	2015	2014

Warrants, options and stock-based compensation	10,216	9,055
Convertible debt	16,117	15,933
Convertible preferred stock	1,691	4,229
	28,024	29,217

		September 30,		December 31,
		2014		2013
Liabilities:
Other liabilities - current	$	(169)	$	-
Other liabilities - long-term		-		(9,245)

Note 14 – Supplemental Cash Flow Information

~~The~~Cash ~~effect~~paid of(refunded) ~~derivatives~~during onthe ~~our~~period ~~condensed~~for ~~consolidated~~interest, ~~statements~~income oftaxes ~~operations~~and reorganization items was as follows:

			Three Months Ended					Nine Months Ended
		Three Months Ended March 31,
			September 30,					September 30,
		2015			2014
			2014			2013		2014		2013
Interest paid	$	12,100		$	47,814
Derivatives not designated as hedges:
Income taxes paid (refunded), all related to PRT	$	13,834		$	(14,002)
Unrealized losses on oil and gas commodity derivatives			$	(169)		$	-	$	(169)	$	-
Reorganization items paid	$	6,805		$	-
Unrealized gains on embedded derivatives
related to debt and equity instruments			$	6,156		$	855	$	10,825	$	1,158

Table Of Contents

Endeavour International Corporation

(Debtor-in-Possession)

Notes to Condensed Consolidated Financial Statements

(~~Unaudited~~Amounts in thousands, except per share data)

~~(Amounts~~Note in15 ~~tables~~– inCommitments ~~thousands,~~and ~~except per unit data)~~Contingencies

Note 15 – Supplemental Cash Flow Information

Cash paid (refunded) during the period for interest and income taxes was as follows:

		Nine Months Ended September 30,
		2014		2013
Interest paid	$	69,208	$	88,027
Income taxes paid (refunded), all related to PRT	$	(21,519)	$	28,736

Note 16 – Commitments and Contingencies

Commitments Related to Asset Retirement Obligations

We have entered into decommissioning security agreements related to abandonment liabilities for certain of our U.K. oil and gas properties. Under these agreements, we are required to post security from time to time in the form of letters of credit, cash or other agreed-upon consideration. Prior to entry into the LC Issuance Agreement on September 30, 2014 (see below), the commitments under these agreements were not recorded as liabilities, and fees and expenses related to these agreements were included in “Letter of credit fees” in other expenses on our ~~condensed~~Condensed ~~consolidated~~Consolidated ~~statements~~Statements of ~~operations~~ Operations.

Decommissioning Security Agreements

LC Issuance Agreement

On September 30, 2014, in conjunction with the Amended Term Loan Facility, the Company entered into an LC Issuance Agreement (the “LC Issuance Agreement”), pursuant to which Credit Suisse agreed to issue letters of credit for Endeavour UK’s account in the amount of approximately £63.1 million ~~$89~~as of March 31, 2015, of which £42.5 million, £11.9 million asand of£8.7 million and relate to decommissioning obligations at ~~September~~Alba, 30IVRRH and Renee and Rubie, ~~2014~~respectively.

The letters of credit secure decommissioning obligations in connection with certain of Endeavour’s U.K. Continental Shelf petroleum production. The Company ~~has~~ collateralized its obligations under the LC Issuance Agreement and all letters of credit issued thereunder by posting cash collateral, which has been funded with the proceeds from the Amended Term Loan Facility.

The posted cash collateral balance of $8995.54 million related to the LC Issuance Agreement as of ~~September~~March 3031, ~~2014~~2015 is reflected as “Restricted cash, long-term portion” in our ~~condensed~~Condensed ~~consolidated~~Consolidated ~~balance~~Balance ~~sheets~~Sheets. The liability related to the posted cash collateral is included as part of the $440 million Amended Term Loan Facility long-term debt obligation. The LC Issuance Agreement was entered into to replace the Combined Procurement Agreement.

Combined Procurement Agreement

On January 24, 2014, we entered into a letter of credit procurement agreement (the “Combined Procurement Agreement”) with an unaffiliated third party (“Payee”), where we agreed to reimburse the Payee for any expense incurred by it in connection with the posting of cash collateral to secure letters of credit issued for our account in the amount of approximately £78 million. The letters of credit secured decommissioning obligations in connection with certain of our U.K. licenses. The Combined Procurement Agreement was entered into to replace the previous procurement agreements.

Table Of Contents

Endeavour International Corporation

(Debtor-in-Possession)

Notes to Condensed Consolidated Financial Statements

(~~Unaudited~~Amounts in thousands, except per share data)

(Amounts in tables in thousands, except per unit data)

of the $440 million Amended Term Loan Facility long-term debt obligation. The LC Issuance Agreement was entered into to replace the Combined Procurement Agreement.

As of September 30, 2014, we do not expect to begin decommissioning activities for the Alba field for many years. The timing of decommissioning activities will be determined by the ultimate performance and life of the reservoir, which is not expected to occur until 2029 or later.

Combined Procurement Agreement

On January 24, 2014, we entered into a letter of credit procurement agreement (the “Combined Procurement Agreement”) with an unaffiliated third party (“Payee”), where we agreed to reimburse the Payee for any expense incurred by it in connection with the posting of cash collateral to secure letters of credit issued for our account in the amount of approximately £78 million (approximately $130 million as of January 24, 2014, subsequently reduced as discussed below). The letters of credit secured decommissioning obligations in connection with certain of our U.K. licenses. The Combined Procurement Agreement was entered into to replace the LOC Procurement Agreement (see below) and a previous agreement related to the Alba field.

Due to a change in the U.K. tax treatment for decommissioning, we amended our Decommissioning Securities Agreement for the Alba field. The new tax law, which allows companies to treat decommissioning on an after-tax basis (including PRT), enabled us to reduce our current letter of credit amount. Prior to entry into the LC Issuance Agreement, we had approximately $90 million in outstanding letters of credit securing decommissioning obligations under the Combined Procurement Agreement.

Under the Combined Procurement Agreement, we paid a quarterly fee computed at a rate of LIBOR plus 7.00% per year (provided that LIBOR shall equal at least 1.25% per year) on the aggregate balance of posted cash collateral.

Concurrent with our entry into the LC Issuance Agreement on September 30, 2014, the Combined Procurement Agreement was terminated, and we paid all outstanding interest and fees of $1.9 million and $2.4 million, respectively.

LOC Procurement Agreement

On January 9, 2013, we entered into an LOC Procurement agreement (the “LOC Procurement Agreement”) with an unaffiliated third party entity, which matured on July 9, 2014. The LOC Procurement Agreement was entered into in connection with the unaffiliated third party’s entry into a credit support arrangement with a providing bank. Pursuant to this credit support arrangement, the third party pledged cash, contributed by one of our shareholders, to secure letters of credit in the amount of $33.0 million for the support of decommissioning obligations in connection with certain of our U.K. license agreements.

Table Of Contents

Endeavour International Corporation

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(Amounts in tables in thousands, except per unit data)

Concurrent with our entry into the Combined Procurement Agreement on January 24, 2014, the LOC Procurement Agreement was terminated, and we paid all outstanding and accrued fees totaling approximately $0.2 million.

Terminated Acquisition of Marcellus Assets

OnSM ~~July 17,~~Energy ~~2011,~~Company we“SM ~~entered~~Energy” ~~into~~filed ~~agreements~~a ~~with~~lawsuit SMagainst ~~Energy~~us ~~Company~~in ~~and~~Texas ~~certain~~state ~~other~~court ~~sellers~~on ~~named~~December 20, ~~therein~~2011 ~~(“SM~~alleging ~~Energy”)~~that we breached an agreement for the purchase of oil and gas leases, producing properties, geophysical data, a pipeline and related assets in the Marcellus shale play in Pennsylvania ~~for~~by ~~aggregate~~terminating ~~consideration~~it ofand ~~approximately~~refusing ~~$110~~to ~~million~~close (on the ~~“SM Purchase Agreements”)~~transactions. WeOn ~~terminated~~April ~~the agreements on December 14~~16, ~~2011~~2014, ~~based on our conclusion that (i) the title defects~~ we ~~identified,~~reached ~~after~~an ~~analyzing~~agreement with SM Energy’s ~~responses~~ to ~~the~~settle ~~notice of defects~~ and ~~valuation~~dismiss of the ~~defects;~~litigation. In ~~and~~accordance ~~(ii) the~~with ~~condition of~~ the ~~pipeline~~settlement ~~was~~agreement, ~~not in compliance with applicable regulatory standards.~~we:

SM Energy filed a lawsuit against us in Texas state court on December 20, 2011 alleging that we breached the SM Purchase Agreements by terminating them and refusing to close on the transactions.

On April 16, 2014, we reached an agreement with SM Energy to settle and dismiss the litigation. In accordance with the settlement agreement, we:

forfeited our $6 million deposit;

paid SM Energy $5 million;

will pay an additional $4.5 million in three graduated payments, beginning in April 2015; and

issued warrants to purchase 2.1 million shares of our common stock with exercise price of $5.29 per share.

As a result of this settlement, we recorded $19.0 million in total settlement expense during the first quarter of 2014.

Claim by Mr. William Transier

We maintained an employment agreement with Mr. Transier that provided for certain severance benefits. Mr. Transier resigned from his positions as Chief Executive Officer and President effective December 1, 2014. Mr. Transier filed a claim with the United States Bankruptcy Court for the District of Delaware on December 16, 2014 in the amount of approximately $6.2 million.

Mr. Transier has asserted that, per his employment agreement, he is entitled to a pro-rata portion of his annual target bonus for the year in which his termination occurred which equates to approximately $0.7 million.

Table Of Contents

Endeavour International Corporation

(Debtor-in-Possession)

Notes to Condensed Consolidated Financial Statements

(Amounts in thousands, except per share data)

Additionally he asserts that his contract requires the payment on termination of employment during the contract term (i) at the Company’s election other than as a result of the executive’s misconduct or disability or (ii) at the executive’s election following a “corporate change” or a breach of the employment agreement by us or other “good reason.” Citing “corporate change” and “good reason,” Mr. Transier’s severance claim of approximately $5.5 million is calculated as follows:

(i)

three times the sum of the executive’s most recent annual salary and deemed bonus (the average bonus paid during the most recent two years);

(ii)

all unvested employee restricted stock awards, performance shares and cash performance awards would vest upon any such termination; and

(iii)

three years of continued coverage for accident and group health insurance benefits substantially similar to those he received immediately prior to the date of termination.

We have not accrued any portion of the severance claim as a pre-petition liability as of March 31, 2015.

Legal Proceedings

Refer to “Note 1 — General” for information concerning the Bankruptcy Cases.

Note 1716 – Guarantor Subsidiaries

Certain of our wholly-owned domestic subsidiaries have, jointly and severally, fully and unconditionally guaranteed the 2018 Notes. Pursuant to Securities and Exchange Commission (“SEC”) regulations, we have presented in columnar format the condensed consolidating financial information for Endeavour International Corporation, the guarantor subsidiaries on a combined basis, and all non-guarantor subsidiaries on a combined basis.

The subsidiary guarantees are unsecured obligations of each subsidiary guarantor and rank equally in right of payment with all senior indebtedness of that subsidiary guarantor and senior in right of payment to all subordinated indebtedness of that subsidiary guarantor. The subsidiary guarantees are effectively subordinated to any secured indebtedness of the subsidiary guarantor with respect to the assets securing the indebtedness. In addition, the subsidiary guarantees may be released in certain customary circumstances, including (i) the sale of all or substantially all of the properties or assets or a guarantor, (ii) the sale of the capital stock of a guarantor, (iii) the designation of a guarantor as an “Unrestricted Subsidiary,” (iv) upon legal defeasance of the 2018 Notes or satisfaction and discharge of the indentures governing the 2018 Notes, (v) upon the liquidation or dissolution of the guarantor or (vi) if the guarantor ceases to guarantee other of our indebtedness and ceases to be a material subsidiary, each of which is subject to important limitations in the indentures governing the 2018 Notes.

Table Of Contents

Endeavour International Corporation

(Debtor-in-Possession)

Notes to Condensed Consolidated Financial Statements

(~~Unaudited~~Amounts in thousands, except per share data)

~~(Amounts~~During in2014, ~~tables~~we inexecuted ~~thousands~~an intercompany loan agreement, ~~except~~effective ~~per~~May ~~unit~~2012, ~~data)~~between Endeavour International Corporation and one of its wholly-owned subsidiaries that is a guarantor of the 2018 Notes. As the intercompany loan is effective for prior periods, the revisions for this loan and related interest to the applicable prior periods are reflected in the financial information herein. The intercompany loan has no effect on our condensed consolidated results of operations or financial statements of position.

Condensed consolidating financial ~~information~~statements for ~~Endeavour~~our ~~International Corporation, the~~ guarantor subsidiaries ~~on a combined basis,~~ and ~~all~~ non-guarantor subsidiaries onare apresented ~~combined~~in ~~basis.~~the following tables:



As of March 31, 2015
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Cash and cash equivalents	$	-	$	17,515	$	48,983	$	-	$	66,498
Accounts receivable		-		2,187		32,083		-		34,270
Current receivables due from affiliates		494,133		68,055		100,272		(662,460)		-
Prepaid expenses and other		-		5,881		30,940		-		36,821
Current Assets		494,133		93,638		212,278		(662,460)		137,589

Property, plant and equipment, net		-		30,077		313,658		-		343,735
Restricted cash, long-term portion		-		-		95,356		-		95,356
Long-term receivables due from affiliates		554,000		500,000		-		(1,054,000)		-
Investments in subsidiaries		57,662		219,058		-		(276,720)		-
Other assets		-		11		62		-		73
Total Assets	$	1,105,795	$	842,784	$	621,354	$	(1,993,180)	$	576,753

Accounts payable	$	-	$	2,833	$	29,864	$	-	$	32,697
Current maturities of debt		-		-		433,141		-		433,141
Deferred revenue		-		-		594		-		594
Current liabilities due to affiliates		648		594,376		67,436		(662,460)		-
Asset retirement obligations, current portion		-		41		29,794		-		29,835
Accrued expenses and other		621		3,946		765		-		5,332
Current Liabilities		1,269		601,196		561,594		(662,460)		501,599

Long-term liabilities due to affiliates		-		554,000		500,000		(1,054,000)		-
Deferred taxes		-		-		39,118		-		39,118
Other liabilities		(3)		449		64,050		-		64,496
Total Liabilities Not Subject to Compromise		1,266		1,155,645		1,164,762		(1,716,460)		605,213

Liabilities Subject to Compromise		751,221		5,933		83,746		-		840,900

Series C convertible preferred stock		17,481		-		-		-		17,481
Stockholders' equity (deficit)		335,827		(318,794)		(627,154)		(276,720)		(886,841)
Total Liabilities and Equity	$	1,105,795	$	842,784	$	621,354	$	(1,993,180)	$	576,753

During 2014, we executed an intercompany loan agreement, effective May 2012, between Endeavour International Corporation and one of its wholly-owned subsidiaries that is a guarantor of the 2018 Notes. As the intercompany loan is effective for prior periods, the revisions for this loan and related interest to the applicable prior periods are reflected in the financial information herein. The intercompany loan has no effect on our condensed consolidated results of operations or financial statement positions.

Table Of Contents

Endeavour International Corporation

(Debtor-in-Possession)

Notes to Condensed Consolidated Financial Statements

(~~Unaudited~~Amounts in thousands, except per share data)

(Amounts in tables in thousands, except per unit data)



As of December 31, 2014
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Cash and cash equivalents	$	-	$	32,055	$	49,795	$	-	$	81,850
Accounts receivable		-		2,427		33,080		-		35,507
Current receivables due from affiliates		477,351		53,174		104,085		(634,610)		-
Prepaid expenses and other		-		7,350		40,047		-		47,397
Current Assets		477,351		95,006		227,007		(634,610)		164,754

Property, plant and equipment, net		-		35,529		433,980		-		469,509
Restricted cash, long term portion		-		-		100,241		-		100,241
Long-term receivables due from affiliates		554,000		500,000		-		(1,054,000)		-
Investments in subsidiaries		57,662		219,058		-		(276,720)		-
Other assets		-		10		62		-		72
Total Assets	$	1,089,013	$	849,603	$	761,290	$	(1,965,330)	$	734,576

Accounts payable	$	-	$	2,065	$	25,299	$	-	$	27,364
Current maturities of debt		-		-		432,181		-		432,181
Deferred revenue		-		-		14,157		-		14,157
Current liabilities due to affiliates		648		581,402		52,560		(634,610)		-
Asset retirement obligations, current portion		-		42		40,505		-		40,547
Accrued expenses and other		385		5,663		9,148		-		15,196
Current Liabilities		1,033		589,172		573,850		(634,610)		529,445

Long-term liabilities due to affiliates		-		554,000		500,000		(1,054,000)		-
Deferred taxes		-		-		56,670		-		56,670
Other liabilities		1		436		65,640				66,077
Total Liabilities Not Subject to Compromise		1,034		1,143,608		1,196,160		(1,688,610)		652,192

Liabilities Subject to Compromise		751,219		6,079		83,746		-		841,044

Series C convertible preferred stock		17,481		-		-		-		17,481
Stockholders' equity (deficit)		319,279		(300,084)		(518,616)		(276,720)		(776,141)
Total Liabilities and Equity	$	1,089,013	$	849,603	$	761,290	$	(1,965,330)	$	734,576

Condensed consolidating financial statements for our guarantor subsidiaries and non-guarantor subsidiaries are presented in the following tables:

As of September 30, 2014
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Cash and cash equivalents	$	-	$	41,412	$	56,333	$	-	$	97,745
Accounts receivable		-		2,987		30,894		-		33,881
Current receivables due from affiliates		463,220		38,064		98,766		(600,050)		-
Prepaid expenses and other		16,870		10,548		62,682		-		90,100
Current Assets		480,090		93,011		248,675		(600,050)		221,726
Property, plant and equipment, net		-		97,691		920,598		-		1,018,289
Goodwill		-		-		-		-		-
Long-term receivables due from affiliates		554,000		500,000		-		(1,054,000)		-
Restricted Cash, Long-Term Portion		-		-		89,533		-		89,533
Investments in subsidiaries		57,662		219,058		-		(276,720)		-
Other assets		-		13		13,046		-		13,059
Total Assets	$	1,091,752	$	909,773	$	1,271,852	$	(1,930,770)	$	1,342,607
Accounts payable	$	-	$	1,587	$	26,049	$	-	$	27,636
Accrued interest		40,719		13		-		-		40,732
Current maturities of debt		693,488		1		82,662		-		776,151
Deferred revenue		-		-		33,931		-		33,931
Current liabilities due to affiliates		709		561,926		37,415		(600,050)		-
Accrued expenses and other		1,992		2,598		56,780		-		61,370
Current Liabilities		736,908		566,125		236,837		(600,050)		939,820
Long-term debt		-		-		431,200		-		431,200
Long-term liabilities due to affiliates		-		554,000		500,000		(1,054,000)		-
Deferred taxes		-		-		151,177		-		151,177
Monetary production payment, long-term portion		-		-		-		-		-
Other liabilities		(3)		4,460		107,243		-		111,700
Total Liabilities		736,905		1,124,585		1,426,457		(1,654,050)		1,633,897
Series C convertible preferred stock		17,481		-		-		-		17,481
Stockholders' equity (deficit)		337,366		(214,812)		(154,605)		(276,720)		(308,771)
Total Liabilities and Equity	$	1,091,752	$	909,773	$	1,271,852	$	(1,930,770)	$	1,342,607

Table Of Contents

Endeavour International Corporation

(Debtor-in-Possession)

Notes to Condensed Consolidated Financial Statements

(~~Unaudited~~Amounts in thousands, except per share data)

(Amounts in tables in thousands, except per unit data)


For the Three Months Ended March 31, 2015
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Revenue	$	-	$	1,083	$	63,246	$	-	$	64,329
Operating expenses		-		1,289		22,856		-		24,145
DD&A expense		-		562		55,999		-		56,561
Impairment of oil and gas properties		-		10,078		80,009		-		90,087
Insurance proceeds		-		-		(8,425)		-		(8,425)
G&A expenses		33		(649)		3,188		-		2,572
Loss from Operations		(33)		(10,197)		(90,381)		-		(100,611)

Other Income (Expense):
Interest expense		-		(16,620)		(29,351)		31,620		(14,351)
Letter of credit fees		-		-		(58)		-		(58)
Financing and transaction costs		-		(45)		(980)		-		(1,025)
Reorganization items		-		(6,866)		-		-		(6,866)
Unrealized foreign currency gains (losses)		-		-		4		-		4
Other income (expense)		16,620		15,018		87		(31,620)		105
Income (loss) before income taxes		16,587		(18,710)		(120,679)		-		(122,802)

Petroleum Revenue Tax ("PRT") Benefit		-		-		(12,141)		-		(12,141)
Corporate Tax Benefit		-		-		-		-		-
Total tax benefit		-		-		(12,141)		-		(12,141)

Net income (loss)		16,587		(18,710)		(108,538)		-		(110,661)

Preferred stock dividends		-		-		-		-		-

Net income (loss) to common shareholders	$	16,587	$	(18,710)	$	(108,538)	$	-	$	(110,661)

As of December 31, 2013
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Cash and cash equivalents	$	-	$	2,417	$	32,325	$	-	$	34,742
Accounts receivable		-		1,782		63,211		-		64,993
Current receivables due from affiliates		419,540		20,783		45,982		(486,305)		-
Prepaid expenses and other		-		772		59,724		-		60,496
Current Assets		419,540		25,754		201,242		(486,305)		160,231
Property, plant and equipment, net		-		87,313		984,838		-		1,072,151
Goodwill		-		-		259,238		-		259,238
Long-term receivables due from affiliates		554,000		500,000		8		(1,054,008)		-
Investments in subsidiaries		57,662		219,066		-		(276,728)		-
Other assets		20,518		6,056		6,648		-		33,222
Total Assets	$	1,051,720	$	838,189	$	1,451,974	$	(1,817,041)	$	1,524,842
Accounts payable	$	-	$	1,214	$	36,819	$	-	$	38,033
Accrued interest		25,563		-		3,949		-		29,512
Deferred revenue		-		-		20,965		-		20,965
Monetary production payment deposit		-		-		74,167		-		74,167
Current liabilities due to affiliates		648		465,485		20,171		(486,304)		-
Accrued expenses and other		1,911		3,352		53,850		-		59,113
Current Liabilities		28,122		470,051		209,921		(486,304)		221,790
Long-term debt		678,850		-		192,028		-		870,878
Long-term liabilities due to affiliates		-		554,008		500,000		(1,054,008)		-
Deferred taxes		-		-		146,213		-		146,213
Monetary production payment, long-term portion		-		-		92,500		-		92,500
Other liabilities		3,535		729		127,106		-		131,370
Total Liabilities		710,507		1,024,788		1,267,768		(1,540,312)		1,462,751
Series C convertible preferred stock		43,703		-		-		-		43,703
Stockholders' equity (deficit)		297,510		(186,599)		184,206		(276,729)		18,388
Total Liabilities and Equity	$	1,051,720	$	838,189	$	1,451,974	$	(1,817,041)	$	1,524,842

Table Of Contents

Endeavour International Corporation

(Debtor-in-Possession)

Notes to Condensed Consolidated Financial Statements

(~~Unaudited~~Amounts in thousands, except per share data)

(Amounts in tables in thousands, except per unit data)



For the Three Months Ended March 31, 2014
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Revenue	$	-	$	1,947	$	92,216	$	-	$	94,163
Operating expenses		-		1,181		25,989		-		27,170
DD&A expense		-		721		44,247		-		44,968
G&A expenses		995		3,709		145		-		4,849
Income (loss) from Operations		(995)		(3,664)		21,835		-		17,176

Other Income (Expense):
Unrealized gains on derivatives		469		-		2,190		-		2,659
Interest expense		(20,620)		(16,042)		(26,435)		31,620		(31,477)
Letter of credit fees		-		-		(3,789)		-		(3,789)
Financing and transaction costs		(323)		(590)		(903)				(1,816)
Loss on early extinguishment of financing agreements		-		-		(3,543)		-		(3,543)
Litigation settlement expense		-		(19,034)		-		-		(19,034)
Unrealized foreign currency gains (losses)		-		-		(1,273)		-		(1,273)
Other income (expense)		16,621		14,996		(201)		(31,620)		(204)
Loss before income taxes		(4,848)		(24,334)		(12,119)		-		(41,301)

Petroleum Revenue Tax ("PRT") Expense		-		-		1,725		-		1,725
Corporate Tax Expense		-		-		1,844		-		1,844
Total tax expense		-		-		3,569		-		3,569

Net loss		(4,848)		(24,334)		(15,688)		-		(44,870)

Preferred stock dividends		456		-		-		-		456

Net loss to common shareholders	$	(5,304)	$	(24,334)	$	(15,688)	$	-	$	(45,326)

For the Three Months Ended September 30, 2014
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Revenue	$	-	$	1,382	$	85,063	$	-	$	86,445
Operating expenses		-		840		28,034		-		28,874
DD&A expense		-		729		45,519		-		46,248
Impairment of oil and gas properties		-		-		-		-		-
Goodwill impairment loss		-		-		259,238		-		259,238
General and administrative		(1,543)		(5,662)		11,357		-		4,152
Income (loss) from Operations		1,543		5,475		(259,085)		-		(252,067)
Other Income (Expense):
Unrealized gains on derivatives		4,486		-		1,501		-		5,987
Interest expense		(21,122)		(16,079)		(25,597)		31,620		(31,178)
Letter of credit fees		-		-		(2,249)		-		(2,249)
Financing and transaction costs		-		(4,931)		(26)		-		(4,957)
Loss on early extinguishment of financing agreements		-		-		(30,717)		-		(30,717)
Unrealized foreign currency gains (losses)		-		(1)		8,685		-		8,684
Other income		16,620		14,977		275		(31,620)		252
Income (Loss) Before Income Taxes		1,527		(559)		(307,213)		-		(306,245)
Petroleum Revenue Tax ("PRT") Benefit		-		-		(2,888)		-		(2,888)
Corporate Tax Benefit		-		-		(9,100)		-		(9,100)
Total tax benefit		-		-		(11,988)		-		(11,988)
Net income (loss)		1,527		(559)		(295,225)		-		(294,257)
Preferred stock dividends		395		-		-		-		395
Net income (loss) to common shareholders	$	1,132	$	(559)	$	(295,225)	$	-	$	(294,652)

Table Of Contents

Endeavour International Corporation

(Debtor-in-Possession)

Notes to Condensed Consolidated Financial Statements

(~~Unaudited~~Amounts in thousands, except per share data)

(Amounts in tables in thousands, except per unit data)



For the Three Months Ended March 31, 2015
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Cash Flows from Operating Activities:
Net loss	$	16,587	$	(18,710)	$	(108,538)	$	-	$	(110,661)
Adjustments to reconcile net loss to
net cash provided by (used in) operations
Depreciation, depletion and amortization		-		562		55,999		-		56,561
Impairment of oil and gas properties		-		10,078		80,009		-		90,087
Deferred tax expense (benefit)		-		-		(11,137)		-		(11,137)
Amortization of non-cash compensation		-		-		-		(10)		(10)
Amortization of loan costs and discount		-		-		2,238		-		2,238
Other		(39)		6,338		(11,316)		-		(5,017)
Changes in operating assets and liabilities:
(Increase) decrease in receivables		-		240		997		-		1,237
(Increase) decrease in other current assets		-		(17,219)		19,843		-		2,624
Increase (decrease) in liabilities		236		(7,399)		(15,895)		-		(23,058)
Net Cash Provided by (Used in)
Operating Activities		16,784		(26,110)		12,200		(10)		2,864

Cash Flows From Investing Activities:
Capital expenditures		-		(5,826)		(17,897)		622		(23,101)
Increase in restricted cash		-		-		4,885		-		4,885
Net Cash Used in Investing Activities		-		(5,826)		(13,012)		622		(18,216)

Cash Flows From Financing Activities:
Intercompany cash management		(16,784)		17,396		-		(612)		-
Other financing		-		-		-		-		-
Net Cash Provided by (Used in)
Financing Activities		(16,784)		17,396		-		(612)		-

Net Change in Cash and Cash Equivalents		-		(14,540)		(812)		-		(15,352)
Cash and Cash Equivalents, Beginning
of Period		-		32,055		49,795		-		81,850
Cash and Cash Equivalents, End of Period	$	-	$	17,515	$	48,983	$	-	$	66,498

For the Three Months Ended September 30, 2013
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Revenue	$	-	$	1,952	$	34,949	$	-	$	36,901
Operating expenses		-		1,090		15,268		-		16,358
DD&A expense		-		1,093		17,503		-		18,596
Impairment of oil and gas properties		-		6,032		-		-		6,032
General and administrative		596		1,173		2,144		-		3,913
Income (loss) from Operations		(596)		(7,436)		34		-		(7,998)
Other Income (Expense):
Unrealized gains on derivatives		85		-		770		-		855
Interest expense		(19,994)		(15,725)		(22,361)		31,619		(26,461)
Letter of credit fees		-		-		(7,274)		-		(7,274)
Financing and transaction costs		-		(652)		(1,600)		-		(2,252)
Unrealized foreign currency gains (losses)		-		1		(10,793)		-		(10,793)
Other income (expense)		16,620		14,999		(293)		(31,619)		(292)
Loss Before Income Taxes		(3,885)		(8,813)		(41,517)		-		(54,215)
Petroleum Revenue Tax ("PRT") Expense		-		-		(5,785)		-		(5,785)
Corporate Tax Benefit		-		-		(8,545)		-		(8,545)
Total tax benefit		-		-		(14,330)		-		(14,330)
Net loss		(3,885)		(8,813)		(27,187)		-		(39,885)
Preferred stock dividends		456		-		-		-		456
Net loss to common shareholders	$	(4,341)	$	(8,813)	$	(27,187)	$	-	$	(40,341)

Table Of Contents

Endeavour International Corporation

(Debtor-in-Possession)

Notes to Condensed Consolidated Financial Statements

(~~Unaudited~~Amounts in thousands, except per share data)

(Amounts in tables in thousands, except per unit data)



For the Three Months Ended March 31, 2014
	Endeavour International Corporation		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Eliminations		Consolidated
Cash Flows from Operating Activities:
Net loss	$	(4,848)	$	(24,334)	$	(15,688)	$	-	$	(44,870)
Adjustments to reconcile net loss to
net cash provided by (used in) operations
Depreciation, depletion and amortization		-		721		44,247		-		44,968
Deferred tax expense (benefit)		-		-		1,969		-		1,969
Unrealized (gains) losses on derivatives		(469)		-		(2,190)		-		(2,659)
Amortization of non-cash compensation		162		-		-		809		971
Amortization of loan costs and discount		2,049		-		4,656		-		6,705
Non-cash interest expense		-		-		1,883		-		1,883
Litigation settlement expense		-		19,034		-		-		19,034
Loss on early extinguishment of debt		-		-		6,856		-		6,856
Other		-		(4)		1,851		-		1,847
Changes in operating assets and liabilities:
(Increase) decrease in receivables		-		(852)

Filing Compare · ENDEAVOUR INTERNATIONAL CORP