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United States
Securities and Exchange Commission
 Washington, D.C. 20549
 Form 10-K
 þ
    
    Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Fiscal Year Ended December 31, 2006
 o
    
    Transition Report Under 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
  Nevada
    
    88-0448389(State or other jurisdiction of incorporation or 
organization)
    
    (I.R.S. Employer Identification No.)
 
 (713) 307-8700
  Title of Each Class of Stock
    
    Name of Each Exchange on Which RegisteredCommon Stock - $0.001 par value per share
    
    American Stock Exchange
  o þ
 o þ
 þ o
 o
  o þ o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE:




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Table of Contents
 Part I
    
    
    1Item 1. Business
    
    
    1Item 1A. Risk Factors
    
    
    9Item 1B. Unresolved Staff Comments
    
    
    19Item 2. Properties
    
    
    19Item 3. Legal Proceedings
    
    
    27Item 4. Submission of Matters to a Vote of Security Holders
    
    
    27Part II
    
    
    28Item 5. Market for Registrants Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
    
    
    28Item 6. Selected Financial Data
    
    
    29Item 7. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    30Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    44Item 8. Financial Statements and Supplementary Data
    
    
    46Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
    
    
    95Item 9A. Controls and Procedures
    
    
    95Item 9B. Other Information
    
    
    99Part III
    
    
    99Item 10. Directors, Executive Officers and Corporate Governance of the
Registrant
    
    
    99Item 11. Executive Compensation
    
    
    99Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholders Matters
    
    
    99Item 13. Certain Relationships and Related Transactions, and Director
Independence
    
    
    99Item 14. Principal Accounting Fees and Services
    
    
    100Part IV
    
    
    100Item 15. Exhibits and Financial Statement Schedules
    
    
    100SIGNATURES
    
    
    101Waiver and Consent to $225,000,000 Secured Revolving Loan and Letter of Credit Facility AgreementAmendment and Second Lien Credit and Guarantee AgreementList of SubsidiariesConsent of KPMG LLPConsent of Independent Reserve EngineersConsent of Gaffney, Cline & Associates Ltd.Certification Pursuant to Rule 13a-14(a)Certification Pursuant to Rule 13a-14(a)Certification Pursuant to Rule 13a-14(a)Certification Pursuant to 18 U.S.C. Section 1350Certification Pursuant to 18 U.S.C. Section 1350Certification Pursuant to 18 U.S.C. Section 1350
  (i)




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Endeavour International Corporation
 Forward-Looking Statements
  
 Part I
 
 Item 1. Business
   General
   1




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Endeavour International Corporation
   Business Strategy
  Exploration Focus
  Expand through Acquisitions
  Grow through Exploration
 3-D MegaSurvey North Sea Digital Atlas
 2




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Endeavour International Corporation
  Executive Officers
 Name
    
    Age
    
    PositionWilliam L. Transier
    
    52
    
    Chief Executive Officer, President and Chairman of the Board of Directors since September 2006Lance Gilliland
    
    39
    
    Executive Vice President, Chief Financial OfficerBruce H. Stover
    
    57
    
    Executive Vice President Operations and Business DevelopmentH. Don Teague
    
    64
    
    Executive Vice President, Administration, General Counsel and SecretaryRobert L. Thompson
    
    60
    
    Vice President, Chief Accounting Officer and Corporate Planning
  William L. Transier 
 Lance Gilliland 
 Bruce H. Stover 
 H. Don Teague 
 3




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Endeavour International Corporation
 Robert L. Thompson 
 Company History
   
    
    a new management team;
    
    a new business strategy of exploration, exploitation and acquisition focused on the North Sea;
    
    the acquisition of NSNV, Inc. which possessed the seismic data and management team
that were central to our new strategy; and
    
    a restructuring which resulted in the sale of all our interests in U.S. oil and gas
properties.
     4




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Endeavour International Corporation
      
    
    a new management team;
    
    a new business strategy of exploration, exploitation and acquisition focused on the North Sea;
    
    the acquisition of NSNV, Inc. which possessed the seismic data and management team
that were central to our new strategy; and
    
    a restructuring which resulted in the sale of all our interests in U.S. oil and gas
properties.
  5




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Endeavour International Corporation
   
    
    37.8 million shares of common stock in the fourth quarter of 2006 for $89 million in gross proceeds;
    
    125,000 shares of Series C Convertible Preferred Stock for $125 million in gross proceeds;
    
    $150 million in a borrowing base debt facility, before financing costs paid of $3.2 million; and
    
    $75 million in a second lien term loan, before financing costs paid of $2.6 million.
 Competition
   Regulation
  6




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Endeavour International Corporation
   Environmental
     7




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Endeavour International Corporation
   Operational Hazards and Insurance
   Significant Customers
  Employees
  Other Matters
  8




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Endeavour International Corporation
  Financial Information about Segment and Geographical Areas
  Available Information
  
 Item 1A. Risk Factors
  Risks related to our business
 We have had operating losses to date and may not be profitable in the foreseeable future.
  9




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Endeavour International Corporation
 Because we have a limited operating history in the North Sea, you may not be able to evaluate
our current business and future earnings prospects accurately.
  Our ability to produce commercial quantities of oil and gas from our properties may be adversely
affected by factors outside of our control. If we are unable to produce oil and gas from our
properties in commercial quantities, our operations will be severely affected.
  We may not be able to replace production with new reserves which could cause our production and
reserves to decline.
  We have limited control over the availability or cost of drilling rigs and other equipment and
services which are essential to our operations, and market conditions or transportation impediments
may hinder access to oil and gas markets or delay production.
  10




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Endeavour International Corporation
   Our debt level could negatively impact our financial condition, results of operations and business
prospects.
  
    
    placing restrictions on certain operating activities;
    
    making it more difficult for us to satisfy our obligations under our indentures or
the terms of our other debt and increasing the risk that we may default on our debt
obligations;
    
    requiring us to dedicate a substantial portion of our cash flow from operating
activities to required payments on debt, thereby reducing the availability of cash flow
for working capital, capital expenditures and other general business activities;
    
    limiting our ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions and other general business activities;
    
    decreasing our ability to withstand a downturn in our business or the economy generally; and
    
    placing us at a competitive disadvantage against other less leveraged competitors.
   11




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Endeavour International Corporation
 Variable rate indebtedness subjects us to interest rate risk, which could cause our debt
service obligations to increase significantly.
  We will not be the operator of all of the interests we own or acquire, and therefore we may not be
in a position to control the timing of development efforts, the associated costs, or the rate of
production of the reserves in respect of such interests.
  
    
    the timing and amount of their capital expenditures;
    
    the availability of suitable offshore drilling rigs, drilling equipment, support
vessels, production and transportation infrastructure and qualified operating
personnel;
    
    the operators expertise and financial resources;
    
    approval of other participants to drill wells and implement other work programs;
    
    selection of technology; and
    
    the rate of production of the reserves.
 If we are unable to obtain additional financing or generate sufficient operating cash flow, we may
not be able to adequately fund our existing development and exploration projects, acquire
additional oil and gas interests, or maintain our rights in such projects.
  12




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Endeavour International Corporation
 Competition for oil and gas properties and prospects is intense and some of our competitors have
larger financial, technical and personnel resources that give them an advantage in evaluating,
obtaining and developing properties and prospects.
  If we are unable to identify additional oil and gas prospects in which we can acquire an interest
at an affordable price, we may not be able to grow successfully.
  
    
    we may not be able to identify additional desirable oil and gas prospects and
acquire interests in such prospects at a desirable price;
    
    any acquisition of interests in oil and gas prospects may be found not to include
prospects that contain proven oil or gas reserves;
    
    we may not have the ability to develop prospects that contain proven oil or gas
reserves to the point of commercial production;
    
    we may not have the financial ability to complete additional acquisitions of
interests in oil and gas prospects or to develop the prospects that we acquire to the
point of production; and
    
    we may not be able to consummate additional acquisitions on terms favorable to us or
at all.
 Acquiring interests in properties for oil and natural gas exploration is speculative in nature and
may not ever result in operating revenues or profits.
  We face risks associated with our acquisition strategy.
  
    
    we will be able to finance or consummate the transactions we select;
    
    any acquisitions will be profitable or be successfully integrated into our operations;
    
    we will be able to retain and motivate key personnel of acquired businesses;
    
    any acquisitions and integrations will not divert management resources; or
    
    any acquisitions and integrations will not have an adverse effect on our results of
operations or financial condition.
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Endeavour International Corporation
 Market fluctuations in the prices of oil and gas could adversely affect the price at which we can
sell oil or gas discovered on our properties, and lower oil and gas prices may cause us to record
ceiling test write-downs.
   Our results of operations could be adversely affected by goodwill impairments.
  Derivative transactions may limit our potential gains and involve other risks.
  14




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Endeavour International Corporation
  
    
    our production is less than expected;
    
    the counterparties to our contracts fail to perform under the contracts; or
    
    a sudden, unexpected event materially impacts oil or gas prices or interest rates.
 The use of 3-D seismic is only an interpretive tool and we may be unable to recognize significant
geological features.
  We operate internationally and are subject to political, economic and other uncertainties.
  
    
    the risk of war, acts of terrorism, revolution, border disputes, expropriation,
renegotiation or modification of existing contracts, and import, export and
transportation regulations and tariffs;
    
    taxation policies, including royalty and tax increases and retroactive tax claims;
    
    exchange controls, currency fluctuations and other uncertainties arising out of
foreign government sovereignty over our international operations;
    
    laws and policies of the U.S. affecting foreign trade, taxation and investment; and
    
    the possibility of being subject to the exclusive jurisdiction of foreign courts in
connection with legal disputes and the possible inability to subject foreign persons to
the jurisdiction of courts in the United States.
 Our insurance may not protect us against business and operating risks, including the potential that
an operator of a prospect in which we participate may fail to maintain or obtain adequate
insurance.
  15




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Endeavour International Corporation
 The cost of decommissioning is uncertain.
  Reserve estimates depend on many assumptions that may turn out to be inaccurate and any material
inaccuracies in the reserve estimates or underlying assumptions of our assets will materially
affect the quantities and present value of those reserves.
   If we are unable to fulfill commitments under any of our licenses, we will lose our interest, and
our entire investment, in such license.
  We are subject to environmental regulations that can have a significant impact on our operations.
  16




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Endeavour International Corporation
     Governmental regulations to which we are subject could expose us to significant fines and/or
penalties and our cost of compliance with such regulations could be substantial.
  We are dependent on our executive officers and need to attract and retain additional qualified
personnel.
   We are unable to predict the outcome of the pending SEC investigation.
  17




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Endeavour International Corporation
  Risks relating to our common stock
 The trading price of our common stock may be volatile.
  There is a limited market for our common stock.
  If we, our existing stockholders or holders of our securities that are convertible into shares of
our common stock sell additional shares of our common stock, the market price of our common stock
could decline.
    18




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Endeavour International Corporation
   Provisions in our articles of incorporation, bylaws and the Nevada Revised Statutes may discourage
a change of control.
    
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
  19




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Endeavour International Corporation
  20




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Endeavour International Corporation
 
 21




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Endeavour International Corporation
  Prospect
    
    
    
    
    
    
    
    Endeavouror Field
    
    
    
    
    
    
    
    Working
    
    Gross AcresLicense
    
    Name
    
    Country
    
    Operator
    
    Status
    
    Interest
    
    (in thousands)Inner Moray Firth:P1397
    
    
    
    United Kingdom
    
    Endeavour
    
    Exploration
    
    
    33.3
    %
    
    
    27P1399
    
    
    
    United Kingdom
    
    Endeavour
    
    Exploration
    
    
    33.3
    %
    
    
    168Outer Moray Firth:P213
    
    Alba
    
    United Kingdom
    
    Chevron
    
    Producing
    
    
    2.25
    %
    
    
    53P213
    
    Caledonia
    
    United Kingdom
    
    Chevron
    
    Producing
    
    
    2.83
    %
    
    
    7P218, P588
    
    Ivanhoe, Rob Roy,
Hamish
    
    United Kingdom
    
    Hess
    
    Producing
    
    
    23.46
    %
    
    
    6P226
    
    Renee
    
    United Kingdom
    
    Endeavour
    
    Producing
    
    
    77.5
    %
    
    
    6P226
    
    Rochelle
    
    United Kingdom
    
    Endeavour
    
    Discovery
    
    
    55.62
    %
    
    
    59P339
    
    Rubie
    
    United Kingdom
    
    Endeavour
    
    Producing
    
    
    40.78
    %
    
    
    3P592
    
    Goldeneye
    
    United Kingdom
    
    Shell
    
    Producing
    
    
    7.029
    %
    
    
    55P1297
    
    
    
    United Kingdom
    
    Endeavour
    
    Exploration
    
    
    50
    %
    
    
    49Central Graben:P255
    
    Bacchus
    
    United Kingdom
    
    Apache
    
    Evaluating
    
    
    10
    %
    
    
    15P361
    
    Bittern
    
    United Kingdom
    
    Shell
    
    Producing
    
    
    2.42
    %
    
    
    14P1051
    
    
    
    United Kingdom
    
    Dana
    
    Exploration
    
    
    20
    %
    
    
    11P1176
    
    
    
    United Kingdom
    
    Endeavour
    
    Exploration
    
    
    75
    %
    
    
    63P1180
    
    
    
    United Kingdom
    
    Serica
    
    Exploration
    
    
    47.5
    %
    
    
    6P1183
    
    Turnberry
    
    United Kingdom
    
    Endeavour
    
    Exploration
    
    
    40
    %
    
    
    52Turriff
    
    United Kingdom
    
    Endeavour
    
    Exploration
    
    
    60
    %P1228
    
    Balgownie
    
    United Kingdom
    
    Endeavour
    
    Exploration
    
    
    60
    %
    
    
    40P1313
    
    
    
    United Kingdom
    
    Gaz de France
    
    Exploration
    
    
    25
    %
    
    
    42P1314
    
    Columbus
    
    United Kingdom
    
    Serica
    
    Discovery
    
    
    25
    %
    
    
    13P1321
    
    
    
    United Kingdom
    
    Gaz de France
    
    Exploration
    
    
    25
    %
    
    
    13P1323
    
    
    
    United Kingdom
    
    Endeavour
    
    Exploration
    
    
    40
    %
    
    
    14P1324
    
    
    
    United Kingdom
    
    Endeavour
    
    Exploration
    
    
    40
    %
    
    
    11PL354
    
    
    
    Norway
    
    Endeavour
    
    Exploration
    
    
    50
    %
    
    
    88Southern Gas:P1055
    
    Cygnus
    
    United Kingdom
    
    Gaz de France
    
    Discovery
    
    
    12.5
    %
    
    
    59P1132
    
    
    
    United Kingdom
    
    Centrica
    
    Exploration
    
    
    22.5
    %
    
    
    120P1242
    
    Emu
    
    United Kingdom
    
    CalEnergy
    
    Exploration
    
    
    30
    %
    
    
    29P1339
    
    
    
    United Kingdom
    
    Endeavour
    
    Exploration
    
    
    50
    %
    
    
    36P1343
    
    
    
    United Kingdom
    
    Gaz de France
    
    Exploration
    
    
    33
    %
    
    
    97P1356
    
    
    
    United Kingdom
    
    Endeavour
    
    Exploration
    
    
    100
    %
    
    
    28Sogn Graben:PL270
    
    Agat
    
    Norway
    
    RWE
    
    Discovery
    
    
    49
    %
    
    
    60Halten Terrace:PL107, PL132
    
    Njord
    
    Norway
    
    Norsk Hydro
    
    Producing
    
    
    2.5
    %
    
    
    35
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Endeavour International Corporation
 Prospect
    
    
    
    
    
    
    
    Endeavouror Field
    
    
    
    
    
    
    
    Working
    
    Gross AcresLicense
    
    Name
    
    Country
    
    Operator
    
    Status
    
    Interest
    
    (in thousands)PL347
    
    
    
    Norway
    
    Norsk Hydro
    
    Exploration
    
    
    7.5
    %
    
    
    86PL348
    
    
    
    Norway
    
    Norsk Hydro
    
    Exploration
    
    
    7.5
    %
    
    
    51Viking Graben:P219
    
    Enoch
    
    United Kingdom
    
    Talisman
    
    Development
    
    8% on unitized
field, 10% on
exploration block
    
    
    4PL055, 
PL055B, 
PL185
    
    Brage
    
    Norway
    
    Norsk Hydro
    
    Producing
    
    3.2% on the 
license, 4.4% on
the Brage unit
    
    
    43PL053B
    
    
    
    Norway
    
    Norsk Hydro
    
    Producing
    
    
    20.6
    %
    
    
    2PL304
    
    
    
    Norway
    
    Lundin
    
    Exploration
    
    
    40
    %
    
    
    109PL363
    
    
    
    Norway
    
    Lundin
    
    Exploration
    
    
    40
    %
    
    
    41Donegal Basin:To be determined
    
    
    
    Ireland
    
    Island Oil and Gas
    
    Exploration
    
    
    20
    %
    
    
    119Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,734
 Planned Exploration and Development Expenditures
  Reserves
   23




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Endeavour International Corporation
   OilOil
    
    Gas
    
    Equivalents(MBbls)
    
    (MMcf)
    
    (MBOE)2006:United Kingdom
    
    
    4,566
    
    
    
    17,172
    
    
    
    7,428Norway
    
    
    1,186
    
    
    
    7,673
    
    
    
    2,4655,752
    
    
    
    24,845
    
    
    
    9,8932005:Norway
    
    
    1,164
    
    
    
    6,297
    
    
    
    2,2142004:Norway
    
    
    1,543
    
    
    
    6,725
    
    
    
    2,664Equity Interest in Entities
with Oil and Gas Properties
(Thailand)
    
    
    75
    
    
    
    25,006
    
    
    
    4,243
 Drilling Statistics
  24




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Endeavour International Corporation
 Productive Wells
    
    Dry Holes
    
    In Progress WellsGross
    
    Net
    
    Gross
    
    Net
    
    Gross
    
    Net2006:United Kingdom
    
    
    2
    
    
    
    0.38
    
    
    
    1
    
    
    
    0.10
    
    
    
    
    
    
    
    Norway
    
    
    2
    
    
    
    0.05
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    0.042005:United Kingdom
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    1.5
    
    
    
    
    
    
    
    Norway
    
    
    2
    
    
    
    0.07
    
    
    
    1
    
    
    
    0.03
    
    
    
    1
    
    
    
    0.032004:Norway
    
    
    1
    
    
    
    0.03
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    0.07Equity Interest
in Entities
with Oil and
Gas Properties
(Thailand)
    
    
    2
    
    
    
    0.14
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  Sales Volumes and Prices
  25




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Endeavour International Corporation
 Year Ended December 31,2006
    
    2005
    
    2004United Kingdom:Oil and condensate sales (Mbbl)
    
    
    209
    
    
    
    
    
    
    
    Oil and condensate price, before hedging ($  per
Barrel (Bbl))
    
    
    49.88
    
    
    
    
    
    
    
    Oil and condensate price, after hedging ($  per Bbl)
    
    
    49.88
    
    
    
    
    
    
    
    Gas sales (MMcf)
    
    
    1,539
    
    
    
    
    
    
    
    Gas price, before and after hedging ($  per Mcf)
    
    
    9.38
    
    
    
    
    
    
    
    Total sales (MBOE)
    
    
    466
    
    
    
    
    
    
    
    Operating costs ($  per BOE)
    
    
    9.44
    
    
    
    
    
    
    
    Norway:Oil and condensate sales (Mbbl)
    
    
    508
    
    
    
    726
    
    
    
    91Oil and condensate price, before hedging ($  per Bbl)
    
    
    64.89
    
    
    
    54.92
    
    
    
    40.28Oil and condensate price, after hedging ($  per Bbl)
    
    
    54.12
    
    
    
    51.74
    
    
    
    40.28Gas sales (MMcf)
    
    
    203
    
    
    
    184
    
    
    
    15Gas price, before and after hedging ($  per Mcf)
    
    
    8.75
    
    
    
    6.06
    
    
    
    0.66Total sales (MBOE)
    
    
    542
    
    
    
    756
    
    
    
    93Operating costs ($  per BOE)
    
    
    20.48
    
    
    
    15.86
    
    
    
    22.15United States:Gas sales (MMcf)
    
    
    
    
    
    
    
    
    
    
    2Gas price, before and after hedging ($  per Mcf)
    
    
    
    
    
    
    
    
    
    
    4.45Total sales (MBOE)
    
    
    
    
    
    
    
    
    
    
    1Operating costs ($  per BOE)
    
    
    
    
    
    
    
    
    
    
    0.80Total:Oil and condensate sales (Mbbl)
    
    
    717
    
    
    
    726
    
    
    
    91Oil and condensate price, before hedging ($  per Bbl)
    
    
    60.51
    
    
    
    54.92
    
    
    
    40.28Oil and condensate price, after hedging ($  per Bbl)
    
    
    52.88
    
    
    
    51.74
    
    
    
    40.28Gas sales (MMcf)
    
    
    1,742
    
    
    
    184
    
    
    
    17Gas price, before and after hedging ($  per Mcf)
    
    
    9.30
    
    
    
    6.06
    
    
    
    1.06Total sales (MBOE)
    
    
    1,008
    
    
    
    756
    
    
    
    94Operating costs ($  per BOE)
    
    
    15.45
    
    
    
    15.86
    
    
    
    22.17
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Endeavour International Corporation
 Productive Well Summary
  Oil
    
    GasGross
    
    Net
    
    Gross
    
    NetUnited Kingdom
    
    
    50
    
    
    
    3.55
    
    
    
    5
    
    
    
    0.35Norway
    
    
    29
    
    
    
    1.11
    
    
    
    
    
    
    
    Total
    
    
    79
    
    
    
    4.66
    
    
    
    5
    
    
    
    0.35
 Undeveloped Acreage
   Developed
    
    UndevelopedGross
    
    Net
    
    Gross
    
    NetUnited Kingdom
    
    
    143,287
    
    
    
    12,818
    
    
    
    955,998
    
    
    
    369,608Norway
    
    
    74,355
    
    
    
    2,498
    
    
    
    440,492
    
    
    
    143,513Ireland
    
    
    
    
    
    
    
    
    
    
    118,540
    
    
    
    23,708Total
    
    
    217,642
    
    
    
    15,316
    
    
    
    1,515,030
    
    
    
    536,829
  
 Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  27




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##### Table of Contents



Endeavour International Corporation
   For
    
    Against
    
    Abstained
    
    Broker Non-VotesExchange of the
Series A Preferred
Stock for the
Series C
Convertible
Preferred Stock and
the issuance of all
shares of common
stock potentially
issuable to the
terms of the Series
C Convertible
Preferred Stock
    
    
    73,398,334
    
    
    
    917,229
    
    
    
    555,095
    
    
    
    
 
 Part II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
  2006
    
    2005High
    
    Low
    
    High
    
    LowFirst Quarter
    
    $
    3.79
    
    
    $
    2.75
    
    
    $
    4.29
    
    
    $
    3.35Second Quarter
    
    
    3.80
    
    
    
    2.10
    
    
    
    3.90
    
    
    
    2.94Third Quarter
    
    
    3.19
    
    
    
    2.28
    
    
    
    5.69
    
    
    
    3.62Fourth Quarter
    
    
    2.68
    
    
    
    2.01
    
    
    
    5.02
    
    
    
    3.00
 Holders
  28




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##### Table of Contents



Endeavour International Corporation
 Dividends
    
 Item 6. Selected Financial Data
  29




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##### Table of Contents



Endeavour International Corporation
 Selected Financial Data(1)Year Ended December 31,(Amounts in thousands, except per share data)
    
    2006
    
    2005
    
    2004
    
    2003
    
    2002Revenues
    
    $
    54,131
    
    
    $
    38,656
    
    
    $
    3,663
    
    
    $
    27
    
    
    $
    16Operating Loss
    
    
    (4,374
    )
    
    
    (28,089
    )
    
    
    (15,492
    )
    
    
    (31,922
    )
    
    
    (1,805
    )Net Loss to Common Shareholders
    
    
    (8,829
    )
    
    
    (31,531
    )
    
    
    (23,372
    )
    
    
    (36,829
    )
    
    
    (4,487
    )Net Loss Per Common Share  Basic and Diluted
    
    
    (0.10
    )
    
    
    (0.42
    )
    
    
    (0.37
    )
    
    
    (1.18
    )
    
    
    (0.24
    )Summary Balance Sheet Data:Working Capital
    
    
    47,431
    
    
    
    49,638
    
    
    
    4,699
    
    
    
    (6,051
    )
    
    
    (1,215
    )Total Assets
    
    
    774,470
    
    
    
    186,966
    
    
    
    101,737
    
    
    
    12,582
    
    
    
    25,019Debt
    
    
    306,250
    
    
    
    81,250
    
    
    
    2,150
    
    
    
    
    
    
    
    Convertible Preferred Stock
    
    
    125,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity
    
    
    116,828
    
    
    
    40,344
    
    
    
    56,972
    
    
    
    3,181
    
    
    
    21,475
 (1)
    
    Includes the following acquisitions and dispositions: 
    
    acquisition of Talisman Expro Limited in November 2006;
    
    acquisition of working interests in the Enoch and Bacchus prospects in 2006;
    
    disposition of Thailand assets in 2005;
    
    acquisition of OER in November 2004 and January 2005;
    
    disposition of BWP, Knox Miss and La. Shelf in 2004;
    
    acquisition of NSNV in 2004;
    
    acquisition of BWP in 2003; and
    
    disposition of CSR-Waha in 2003.
  
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
  30




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##### Table of Contents



Endeavour International Corporation
   Acquisitions
 
    
    The acquisition of producing properties in the UK for $366 million was completed in
November 2006. The transaction was financed through the issuance of common stock,
preferred stock and debt.
    
    The acquisition of an interest in the Enoch development project for $12 million was
completed in May 2006.
    
    The acquisition of the 76.66% majority interest in OER was completed in November 2004
for approximately $28 million. The acquisition of the remaining 23.34% minority interest
was completed in January 2005 for an aggregate consideration paid of $11 million,
approximately $1.4 million in cash and 2,183,617 shares of our common stock.
    
    The NSNV Acquisition was completed in February 2004. As the NSNV Acquisition was
accounted for as a purchase of assets and not a business combination, the consideration
given was allocated to the fair value of the identifiable assets and liabilities acquired
with the excess of $10.8 million expensed.
 Dispositions
 
    
    The sale of our partnership interests in Thailand to a private entity for net proceeds
of approximately $19 million was completed in the second quarter of 2005. We recorded a
gain on the sale of these interests of approximately $15 million.
    
    The sale of all of our equity interest in Louisiana Shelf Partners, L.P. (La. Shelf)
was completed in the second quarter of 2005 for $250,000 in cash and a $2 million
contingent deferred payment that is payable from proceeds from production of drilling
activities on the oil and gas leases held by La. Shelf. We recorded a loss on the sale of
these interests of approximately $0.9 million.
    
    The sale of our entire limited partnership interests in partnership with interests in
certain oil and gas leases located in Mississippi was completed in the first quarter of
2004 for $5.0 million. We recorded a gain on the sale of these interests of approximately
$1.3 million.
 Financing
 
    
    As part of the acquisition of UK producing properties, we issued the following:
 
    
    37.8 million shares of common stock in the fourth quarter of 2006 for
$89 million in gross proceeds;
    
    125,000 shares of Series C Convertible Preferred Stock for $125 million
in gross proceeds;
    
    $150 million in a borrowing base debt facility, before financing costs
paid of $3.2 million; and
    
    $75 million in a second lien term loan, before financing costs paid of
$2.6 million.
 
    
    We issued $81.25 million aggregate principal amount of 6.00% convertible senior notes
due 2012 in a private placement during the first quarter of 2005.
 31




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##### Table of Contents



Endeavour International Corporation
 
    
    We issued 25 million shares of common stock at $2.00 per share in a private placement in
February 2004 for estimated net proceeds of $46 million after deduction of offering
expenses.
    
    Simultaneous with the consummation of the NSNV Acquisition and the offering of 25
million shares of common stock, we restructured our non-core assets, debt and equity by
repaying, converting or repurchasing all outstanding debt and nearly all outstanding
preferred stock.
 Operations
 
    
    The first of our wells in our 2006 drilling program, the Cygnus prospect, was spud in
early February 2006 in the UK sector of the North Sea. The well has successfully tested as
a gas discovery and is located within close proximity to several potential transportation
routes.
    
    In the fourth quarter of 2006, we drilled the Columbus exploratory prospect on Block
23/16f in the Central Graben region of the North Sea. We served as operator of the well.
In December 2006, we completed successful testing of the well and began evaluations to
determine the appropriate appraisal program of this gas and condensate discovery.
    
    In the fourth quarter of 2006, we purchased a 10 percent working interest in the Bacchus
prospect in the northern part of block 22/6a in the Central Graben region. The Bacchus
prospect was drilled in late 2006 to test the commercial potential of an oil discovery well
that was drilled in 2005. While the appraisal well was determined to be dry, evaluations
are continuing to determine the commerciality of the field.
    
    In the fourth quarter of 2006, we held an option to purchase a 10 percent working
interest in the Howgate prospect in Block 9/4a in the event of a discovery. We have
elected not to purchase the working interest in the Howgate prospect.
    
    During the third quarter of 2005, we began drilling on the first wells in our ongoing
exploration campaign. By the end of 2005, we had determined that each of the four wells
drilled during 2005 in the UK area of the North Sea were unsuccessful and recorded $27.1
million in impairments in 2005 and an additional $0.8 million in 2006.
    
    With the completion of the OER Acquisition in November 2004, we had our first reserves
and revenues from properties in the North Sea. 2005 represents the first full-year
contribution of these assets.
 Results of Operations
 Revenues, Production and Operating Costs
   32




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Endeavour International Corporation
   33




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##### Table of Contents



Endeavour International Corporation
 Year Ended December 31,2006
    
    2005
    
    2004United Kingdom:Oil and condensate sales (Mbbl)
    
    
    209
    
    
    
    
    
    
    
    Oil and condensate price, before hedging ($  per Bbl)
    
    
    49.88
    
    
    
    
    
    
    
    Oil and condensate price, after hedging ($  per Bbl)
    
    
    49.88
    
    
    
    
    
    
    
    Gas sales (MMcf)
    
    
    1,539
    
    
    
    
    
    
    
    Gas price, before and after hedging ($  per Mcf)
    
    
    9.38
    
    
    
    
    
    
    
    Total sales (MBOE)
    
    
    466
    
    
    
    
    
    
    
    Operating costs ($  per BOE)
    
    
    9.44
    
    
    
    
    
    
    
    Norway:Oil and condensate sales (Mbbl)
    
    
    508
    
    
    
    726
    
    
    
    91Oil and condensate price, before hedging ($  per Bbl)
    
    
    64.89
    
    
    
    54.92
    
    
    
    40.28Oil and condensate price, after hedging ($  per Bbl)
    
    
    54.12
    
    
    
    51.74
    
    
    
    40.28Gas sales (MMcf)
    
    
    203
    
    
    
    184
    
    
    
    15Gas price, before and after hedging ($  per Mcf)
    
    
    8.75
    
    
    
    6.06
    
    
    
    0.66Total sales (MBOE)
    
    
    542
    
    
    
    756
    
    
    
    93Operating costs ($  per BOE)
    
    
    20.48
    
    
    
    15.86
    
    
    
    22.15United States:Gas sales (MMcf)
    
    
    
    
    
    
    
    
    
    
    2Gas price, before and after hedging ($  per Mcf)
    
    
    
    
    
    
    
    
    
    
    4.45Total sales (MBOE)
    
    
    
    
    
    
    
    
    
    
    1Operating costs ($  per BOE)
    
    
    
    
    
    
    
    
    
    
    0.80Total:Oil and condensate sales (Mbbl)
    
    
    717
    
    
    
    726
    
    
    
    91Oil and condensate price, before hedging ($  per Bbl)
    
    
    60.51
    
    
    
    54.92
    
    
    
    40.28Oil and condensate price, after hedging ($  per Bbl)
    
    
    52.88
    
    
    
    51.74
    
    
    
    40.28Gas sales (MMcf)
    
    
    1,742
    
    
    
    184
    
    
    
    17Gas price, before and after hedging ($  per Mcf)
    
    
    9.30
    
    
    
    6.06
    
    
    
    1.06Total sales (MBOE)
    
    
    1,008
    
    
    
    756
    
    
    
    94Operating costs ($  per BOE)
    
    
    15.45
    
    
    
    15.86
    
    
    
    22.17
 34




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##### Table of Contents



Endeavour International Corporation
 DD&A and Impairment of Oil and Gas Properties
  General and Administrative Expenses
  Year Ended December 31,(Amounts in thousands)
    
    2006
    
    2005
    
    2004Compensation
    
    $
    13,027
    
    
    $
    9,742
    
    
    $
    4,544Consulting, legal and accounting fees
    
    
    4,989
    
    
    
    5,235
    
    
    
    2,893Occupancy costs
    
    
    845
    
    
    
    1,070
    
    
    
    439Other expenses
    
    
    2,342
    
    
    
    2,273
    
    
    
    2,057Total gross cash G&A expenses
    
    
    21,203
    
    
    
    18,320
    
    
    
    9,933Non-cash stock-based compensation
    
    
    11,573
    
    
    
    7,908
    
    
    
    7,995Fair market value adjustment of stock options  non-cash
    
    
    
    
    
    
    (555
    )
    
    
    1,183Total gross non-cash G&A expenses
    
    
    11,573
    
    
    
    7,353
    
    
    
    9,178Gross G&A expenses
    
    
    32,776
    
    
    
    25,673
    
    
    
    19,111Less: capitalized G&A expenses
    
    
    (10,852
    )
    
    
    (7,450
    )
    
    
    (4,403
    )Net G&A expenses
    
    $
    21,924
    
    
    $
    18,223
    
    
    $
    14,708
 Other (Income) and Expense
    35




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##### Table of Contents



Endeavour International Corporation
   Income Taxes
    Liquidity and Capital Resources
 (Amounts in thousands)
    
    December 31, 2006
    
    December 31, 2005Net working capital
    
    $
    47,431
    
    
    $
    49,638Long-term debt
    
    $
    303,840
    
    
    $
    81,250
 Year Ended December 31,(Amounts in thousands)
    
    2006
    
    2005
    
    2004Net cash provided by (used in):Operating activities
    
    $
    (14,100
    )
    
    $
    27,962
    
    
    $
    7,389Investing activities
    
    $
    (427,118
    )
    
    $
    (34,972
    )
    
    $
    (35,233
    )Financing activities
    
    $
    403,369
    
    
    $
    75,411
    
    
    $
    36,487
 36




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##### Table of Contents



Endeavour International Corporation
  
    
    in the fourth quarter of 2006 in conjunction with the Talisman Acquisition, we issued
 
    
    37.8 million shares of common stock for $89 million in gross proceeds,
    
    125,000 shares of Series C Convertible Preferred Stock for $125 million in gross
proceeds,
    
    $150 million in a borrowing base debt facility, before financing costs of $3.2
million, and
    
    $75 million in a second lien term loan, before financing costs of $2.6 million,
to acquire producing properties in the UK;
 
    
    in May 2006, we completed the $11.6 million purchase of an eight percent interest in the
Enoch field;
    
    in the first quarter of 2005, we completed the issuance of $81.25 million in senior
convertible notes due 2012;
    
    in January 2005, we purchased the remaining minority interest in OER for an aggregate
consideration paid of $10.7 million, which was approximately $1.4 million in cash and
2,183,617 shares of our common stock;
    
    in November 2004, we purchased OER for $28.4 million in cash;
    
    in February 2004, we issued 25 million shares of common stock and 0.7 million warrants
at an exercise price of $2.00 per share for net proceeds of $46 million; and
    
    in February 2004, we funded the purchase of NSNV through the issuance of 12.5 million
shares of common stock.
   Outlook
 Drilling Program
  37




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##### Table of Contents



Endeavour International Corporation
 Rig Commitments
  Revenues and Production
    Liquidity and Financial Resources
   38




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##### Table of Contents



Endeavour International Corporation
    Critical Accounting Policies and Estimates
    Full Cost Accounting
  39




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##### Table of Contents



Endeavour International Corporation
       40




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##### Table of Contents



Endeavour International Corporation
 Business Combinations
  Purchase Price Allocation
  Goodwill
  Dismantlement, Restoration and Environmental Costs
  Revenue Recognition
  41




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##### Table of Contents



Endeavour International Corporation
  Derivative Instruments and Hedging Activities
    Income Taxes
  Stock-Based Compensation Arrangements
  42




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##### Table of Contents



Endeavour International Corporation
  Recent Accounting Pronouncements
    Disclosures about Contractual Obligations and Commercial Commitments
  (Amounts in thousands)
    
    Payments due by PeriodLess than
    
    
    
    
    
    
    
    
    
    After 5Contractual Obligations
    
    Total
    
    1 Year
    
    1-3 Years
    
    3-5 Years
    
    YearsLong-term debtPrincipal (1)
    
    $
    306,250
    
    
    $
    2,410
    
    
    $
    142,600
    
    
    $
    79,990
    
    
    $
    81,250Interest (2)
    
    
    99,004
    
    
    
    24,328
    
    
    
    61,497
    
    
    
    12,773
    
    
    
    406Asset retirement obligations
    
    
    32,503
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,503Operating leases for office
leases and equipment
    
    
    93
    
    
    
    70
    
    
    
    23
    
    
    
    
    
    
    
    Office leases
    
    
    1,497
    
    
    
    671
    
    
    
    726
    
    
    
    100
    
    
    
    Rig commitments (3)
    
    
    103,800
    
    
    
    66,000
    
    
    
    37,800
    
    
    
    
    
    
    
    Total Contractual Obligations
    
    $
    543,147
    
    
    $
    93,479
    
    
    $
    242,646
    
    
    $
    92,863
    
    
    $
    114,159
 (1)
    
    Repayment of the initial borrowing base on the senior bank facility is based on reserve
estimates, which are reassessed every six months. 43




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##### Table of Contents



Endeavour International Corporation
 (2)
    
    Assumes a 5.4% LIBOR rate.(3)
    
    As is common in the oil and gas industry, we operate in many instances through joint ventures
under joint operating or similar agreements. Typically, the operator under a joint operating
agreement enters into contracts, such as rig commitment contracts, for the benefit of all
joint venture partners. Through the joint operating agreement, the non-operators reimburse,
and in some cases advance, the funds necessary to meet the contractual obligations entered
into by the operator. These obligations are typically shared on a working interest basis. The joint
operating agreement provides remedies to the operator in the event that the non-operator
does not satisfy its share of the contractual obligations. Occasionally, the operator is
permitted by the joint operating agreement to enter into lease obligations and other
contractual commitments that are then passed on to the non-operating joint interest owners
as lease operating expenses, frequently without any identification as to the long-term
nature of any commitments underlying such expenses. 
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk
 Foreign Exchange Risk
  Commodity Price Risk
  44




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##### Table of Contents



Endeavour International Corporation
  EstimatedAverage
    
    Fair Value2010 -
    
    Asset2007
    
    2008
    
    2009
    
    2011
    
    (in thousands)Oil:Fixed Price Swap
(Mbbl) 
Platts Dated
Brent(2)
    
    
    1,111
    
    
    
    907
    
    
    
    697
    
    
    
    530
    
    
    $
    11,711Weighted
Average Price
($/Barrel)
    
    $
    69.07
    
    
    $
    68.87
    
    
    $
    69.08
    
    
    $
    67.30Gas:Fixed Price Swap
(MMcf)  Heren
National
Balancing Point
(1)
(2)
    
    
    2,575
    
    
    
    2,676
    
    
    
    1,387
    
    
    
    829
    
    
    $
    30,545Weighted
Average Price
(£/Mcf)
    
    £
    6.13
    
    
    £
    5.81
    
    
    £
    5.59
    
    
    £
    5.28
 
 (1)
    
    Gas derivative contracts are designated in therms and have been converted to Mcf at
a rate of 10 therm to 1 Mcf. The exchange rate at December 31, 2006 was $1.96 to £1.00.(2)
    
    We paid $7.7 million in deal contingent costs during 2006 to enter these contracts
prior to closing the Talisman Acquisition. Interest Rate Risk
   45




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##### Table of Contents



Item 8. Financial Statements and Supplementary Data
 Report of Independent Registered Public Accounting Firm
 
     Internal
ControlIntegrated Framework
  
 46




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##### Table of Contents



Endeavour International Corporation
Consolidated Balance Sheets
  December 31,2006
    
    
    2005AssetsCurrent Assets:Cash and cash equivalents
    
    $
    39,814
    
    
    $
    76,127Accounts receivable
    
    
    61,104
    
    
    
    4,876Prepaid expenses and other current assets
    
    
    27,650
    
    
    
    8,070Total Current Assets
    
    
    128,568
    
    
    
    89,073Property and Equipment, Net (Notes 2 and 7)
    
    
    319,315
    
    
    
    59,084Goodwill
    
    
    291,752
    
    
    
    27,795Other Assets
    
    
    34,835
    
    
    
    11,014Total Assets
    
    $
    774,470
    
    
    $
    186,966Liabilities and Stockholders EquityCurrent Liabilities:Accounts payable
    
    $
    36,928
    
    
    $
    18,194Current maturities of debt
    
    
    2,410
    
    
    
    Accrued expenses and other
    
    
    41,799
    
    
    
    21,240Total Current Liabilities
    
    
    81,137
    
    
    
    39,434Long-Term Debt
    
    
    303,840
    
    
    
    81,250Deferred Taxes
    
    
    115,155
    
    
    
    19,185Other Liabilities
    
    
    32,510
    
    
    
    6,753Total Liabilities
    
    
    532,642
    
    
    
    146,622Commitments and ContingenciesSeries C Convertible Preferred Stock (Liquidation
preference: $126,833)
    
    
    125,000
    
    
    
    Stockholders Equity:Series B Preferred stock (Liquidation preference: $2,615)
    
    
    
    
    
    
    Common stock; shares issued and outstanding 
118,577,369 at 2006 and 75,489,052 at 2005
    
    
    119
    
    
    
    75Additional paid-in capital
    
    
    226,988
    
    
    
    155,734Accumulated other comprehensive loss
    
    
    
    
    
    
    (4,578
    )Deferred compensation
    
    
    
    
    
    
    (9,437
    )Accumulated deficit
    
    
    (110,279
    )
    
    
    (101,450
    )Total Stockholders Equity
    
    
    116,828
    
    
    
    40,344Total Liabilities and Stockholders Equity
    
    $
    774,470
    
    
    $
    186,966
  47




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##### Table of Contents



Endeavour International Corporation
Consolidated Statements of Operations
  For the Year Ended December 31,2006
    
    
    2005
    
    
    2004Revenues
    
    $
    54,131
    
    
    $
    38,656
    
    
    $
    3,663Expenses:Operating expenses
    
    
    15,568
    
    
    
    11,990
    
    
    
    2,066Depreciation, depletion and amortization
    
    
    20,164
    
    
    
    9,337
    
    
    
    2,180Impairment of oil and gas properties
    
    
    849
    
    
    
    27,116
    
    
    
    Equity loss from entities with oil and
gas properties
    
    
    
    
    
    
    79
    
    
    
    201General and administrative
    
    
    21,924
    
    
    
    18,223
    
    
    
    14,708Total expenses
    
    
    58,505
    
    
    
    66,745
    
    
    
    19,155Operating Loss
    
    
    (4,374
    )
    
    
    (28,089
    )
    
    
    (15,492
    )Other (Income) Expense:Unrealized gain on derivative instruments
    
    
    (34,531
    )
    
    
    
    
    
    
    Interest expense
    
    
    7,941
    
    
    
    4,322
    
    
    
    295Interest income
    
    
    (2,265
    )
    
    
    (2,605
    )
    
    
    (536
    )Litigation settlement expense
    
    
    
    
    
    
    5,265
    
    
    
    Gain on sale of oil and gas assets
    
    
    
    
    
    
    (14,966
    )
    
    
    (355
    )Consideration given in excess of fair
market value of assets acquired
    
    
    
    
    
    
    
    
    
    
    10,779Gain on collection of promissory notes
    
    
    
    
    
    
    
    
    
    
    (1,848
    )Other
    
    
    7,406
    
    
    
    (263
    )
    
    
    (1,003
    )Total Other (Income) Expense
    
    
    (21,449
    )
    
    
    (8,247
    )
    
    
    7,332Income (Loss) Before Minority Interest
    
    
    17,075
    
    
    
    (19,842
    )
    
    
    (22,824
    )Minority Interest
    
    
    
    
    
    
    (470
    )
    
    
    122Income (Loss) Before Income Taxes
    
    
    17,075
    
    
    
    (20,312
    )
    
    
    (22,702
    )Income Tax Expense
    
    
    23,913
    
    
    
    11,061
    
    
    
    670Net Loss
    
    
    (6,838
    )
    
    
    (31,373
    )
    
    
    (23,372
    )Preferred Stock Dividends
    
    
    (1,991
    )
    
    
    (158
    )
    
    
    (425
    )Net Loss to Common Stockholders
    
    $
    (8,829
    )
    
    $
    (31,531
    )
    
    $
    (23,797
    )Net Loss Per Common Share  Basic and Diluted
    
    $
    (0.10
    )
    
    $
    (0.42
    )
    
    $
    (0.37
    )Weighted Average Number of Common Shares
Outstanding  Basic and Diluted
    
    
    86,636
    
    
    
    74,433
    
    
    
    64,400
  48




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##### Table of Contents



Endeavour International Corporation
Consolidated Statements of Cash Flows
  Year Ended December 31,2006
    
    
    2005
    
    
    2004Cash Flows from Operating Activities:Net loss
    
    $
    (6,838
    )
    
    $
    (31,373
    )
    
    $
    (23,372
    )Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:Depreciation, depletion and amortization
    
    
    20,164
    
    
    
    9,337
    
    
    
    2,180Impairment of oil and gas properties
    
    
    849
    
    
    
    27,116
    
    
    
    Consideration given in excess of fair value of
identifiable assets acquired
    
    
    
    
    
    
    
    
    
    
    10,779Deferred tax expense
    
    
    13,038
    
    
    
    3,243
    
    
    
    670Unrealized gain on derivative instruments
    
    
    (34,531
    )
    
    
    
    
    
    
    Amortization of non-cash compensation
    
    
    11,573
    
    
    
    7,070
    
    
    
    6,830Financing costs expensed
    
    
    3,750
    
    
    
    
    
    
    
    Impairment of marketable securities
    
    
    1,775
    
    
    
    
    
    
    
    Litigation settlement expense
    
    
    
    
    
    
    5,265
    
    
    
    Gain on collection of promissory notes
    
    
    
    
    
    
    
    
    
    
    (1,848
    )Fair market value adjustment of stock options
    
    
    
    
    
    
    (555
    )
    
    
    1,183Gain on sale
of oil and gas assets
    
    
    
    
    
    
    (14,966
    )
    
    
    (355
    )Amortization of discount on notes payable
    
    
    731
    
    
    
    
    
    
    
    195Equity loss from entities with oil and gas properties
    
    
    
    
    
    
    79
    
    
    
    201Other
    
    
    152
    
    
    
    1,043
    
    
    
    259Changes in assets and liabilities:(Increase) Decrease in receivables
    
    
    (32,165
    )
    
    
    (688
    )
    
    
    1,859(Increase) Decrease in prepaid expenses and other
    
    
    (9,749
    )
    
    
    3,637
    
    
    
    3,847Increase (Decrease) in current liabilities
    
    
    17,151
    
    
    
    18,754
    
    
    
    4,961Net Cash Provided by (Used in) Operating Activities
    
    
    (14,100
    )
    
    
    27,962
    
    
    
    7,389Cash Flows From Investing Activities:Capital expenditures
    
    
    (55,496
    )
    
    
    (47,396
    )
    
    
    (7,064
    )Investment in entities with oil and gas properties
    
    
    
    
    
    
    (156
    )
    
    
    (2,081
    )Acquisitions, net of cash acquired
    
    
    (376,915
    )
    
    
    (1,437
    )
    
    
    (26,817
    )Proceeds from sale of assets
    
    
    
    
    
    
    19,465
    
    
    
    740(Increase) decrease in restricted cash and other
investing activities
    
    
    5,293
    
    
    
    (5,448
    )
    
    
    (11
    )Net Cash Used in Investing Activities
    
    $
    (427,118
    )
    
    $
    (34,972
    )
    
    $
    (35,233
    )
  49




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##### Table of Contents



Endeavour International Corporation
Consolidated Statements of Cash Flows
  Year Ended December 31,2006
    
    2005
    
    2004Cash Flows From Financing Activities:Repayment of borrowings
    
    $
    
    
    
    $
    (4,006
    )
    
    $
    (6,156
    )Proceeds from borrowings
    
    
    225,000
    
    
    
    81,250
    
    
    
    Financing costs paid
    
    
    (9,565
    )
    
    
    (3,661
    )
    
    
    Purchase and retirement of common stock and
Series B preferred stock
    
    
    
    
    
    
    
    
    
    
    (5,031
    )Proceeds from warrant and stock option exercises
    
    
    3,310
    
    
    
    1,956
    
    
    
    1,250Proceeds from common issued and issuable, net
of issuance costs
    
    
    83,967
    
    
    
    
    
    
    
    46,539Proceeds from preferred stock issued and
issuable, net of issuance costs
    
    
    100,657
    
    
    
    
    
    
    
    Other financing activities
    
    
    
    
    
    
    (128
    )
    
    
    (115
    )Net Cash Provided by Financing Activities
    
    
    403,369
    
    
    
    75,411
    
    
    
    36,487Net Increase (Decrease) in Cash and Cash Equivalents
    
    
    (37,849
    )
    
    
    68,401
    
    
    
    8,643Effect of foreign currency changes on cash
    
    
    1,536
    
    
    
    (1,249
    )
    
    
    275Cash and Cash Equivalents, Beginning of Period
    
    
    76,127
    
    
    
    8,975
    
    
    
    57Cash and Cash Equivalents, End of Period
    
    $
    39,814
    
    
    $
    76,127
    
    
    $
    8,975
  50




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##### Table of Contents



Endeavour International Corporation
Consolidated Statements of Stockholders Equity
  Preferred
    
    
    
    
    
    
    
    
    
    Additional Paid-In
    
    Stock Subscription
    
    Deferred
    
    Accumulated Other
    
    
    
    
    
    Total Stockholders'
    
    Total ComprehensiveStock - A
    
    Preferred Stock - C
    
    Common Stock
    
    Capital
    
    Receivable
    
    Compensation
    
    Comprehensive Loss
    
    Accumulated Deficit
    
    Equity
    
    Income (Loss)Balance, December 31, 2003
    
    $
    4
    
    
    $
    1
    
    
    $
    37
    
    
    $
    50,175
    
    
    $
    (425
    )
    
    $
    
    
    
    $
    (489
    )
    
    $
    (46,122
    )
    
    $
    3,181Exchange of non-core
assets in the
Restructuring
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    (2,352
    )
    
    
    425
    
    
    
    
    
    
    
    207
    
    
    
    
    
    
    
    (1,724
    )Conversion of preferred
stock in the
Restructuring
    
    
    
    
    
    
    (1
    )
    
    
    3
    
    
    
    211
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    213Conversion of notes in
the Restructuring
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1,958
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,959Issuance of common
stock and warrants in
the Offering, net of
expenses
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    46,064
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,089Issuance of common
stock and warrants for
acquisition of NSNV,
net of expenses
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    25,687
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,700Issuance of common
stock and stock options
as deferred
compensation
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    13,397
    
    
    
    
    
    
    
    (13,400
    )
    
    
    
    
    
    
    
    
    
    
    Other issuances of
common stock
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1,352
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,353Repurchase and
retirement of common
and preferred stock
    
    
    
    
    
    
    
    
    
    
    (14
    )
    
    
    (5,005
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,019
    )Amortization of
deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,830
    
    
    
    
    
    
    
    
    
    
    
    6,830Conversion of warrants
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1,249
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,250Preferred stock dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (425
    )
    
    
    (425
    )Fair market value
adjustment of stock
options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,183
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,183Comprehensive Loss:Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,372
    )
    
    
    (23,372
    )
    
    $
    (23,372
    )Other comprehensive
income (net of tax):Unrealized gain
(loss) on
available-for-
sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (246
    )
    
    
    
    
    
    
    (246
    )
    
    
    (246
    )Balance, December 31, 2004
    
    $
    
    
    
    $
    
    
    
    $
    70
    
    
    $
    133,919
    
    
    $
    
    
    
    $
    (6,570
    )
    
    $
    (528
    )
    
    $
    (69,919
    )
    
    $
    56,972
    
    
    $
    (23,618
    )
  51




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##### Table of Contents



Endeavour International Corporation
Consolidated Statements of Stockholders Equity
  Stock
    
    
    
    
    
    Accumulated
    
    
    
    
    
    Total
    
    TotalPreferred
    
    Preferred
    
    
    
    
    
    Additional
    
    Subscription
    
    Deferred
    
    Other
    
    Accumulated
    
    Stockholders
    
    ComprehensiveStock  A
    
    Stock  C
    
    Common Stock
    
    Paid-In Capital
    
    Receivable
    
    Compensation
    
    Comprehensive Loss
    
    Deficit
    
    Equity
    
    Income (Loss)Balance, December 31, 2004
    
    $
    
    
    
    $
    
    
    
    $
    70
    
    
    $
    133,919
    
    
    $
    
    
    
    $
    (6,570
    )
    
    $
    (528
    )
    
    $
    (69,919
    )
    
    $
    56,972Issuance of common
stock for acquisition
of OER, net of expenses
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    9,256
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,258Issuance of common
stock as deferred
compensation
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    11,102
    
    
    
    
    
    
    
    (9,967
    )
    
    
    
    
    
    
    
    
    
    
    1,137Exercise of warrants
and options
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1,955
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,956Other issuances of
common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57
    
    
    
    
    
    
    
    267
    
    
    
    
    
    
    
    
    
    
    
    324Amortization of
deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,833
    
    
    
    
    
    
    
    
    
    
    
    6,833Preferred stock dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (158
    )
    
    
    (158
    )Fair market value
adjustment of stock
options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (555
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (555
    )Comprehensive Loss:Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31,373
    )
    
    
    (31,373
    )
    
    $
    (31,373
    )Other comprehensive
income (net of tax):Unrealized loss
on derivative
instruments,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,690
    )
    
    
    
    
    
    
    (3,690
    )
    
    
    (3,690
    )Unrealized gain
(loss) on
available-for-
sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (360
    )
    
    
    
    
    
    
    (360
    )
    
    
    (360
    )Balance, December 31, 2005
    
    $
    
    
    
    $
    
    
    
    $
    75
    
    
    $
    155,734
    
    
    $
    
    
    
    $
    (9,437
    )
    
    $
    (4,578
    )
    
    $
    (101,450
    )
    
    $
    40,344
    
    
    $
    (35,423
    )
  52




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##### Table of Contents



Endeavour International Corporation
Consolidated Statements of Stockholders Equity
  Stock
    
    
    
    
    
    Accumulated
    
    
    
    
    
    Total
    
    TotalPreferred
    
    Preferred
    
    
    
    
    
    Additional
    
    Subscription
    
    Deferred
    
    Other
    
    Accumulated
    
    Stockholders
    
    ComprehensiveStock  A
    
    Stock  C
    
    Common Stock
    
    Paid-In Capital
    
    Receivable
    
    Compensation
    
    Comprehensive Loss
    
    Deficit
    
    Equity
    
    IncomBalance, December 31, 2005
    
    $
    
    
    
    $
    
    
    
    $
    75
    
    
    $
    155,734
    
    
    $
    
    
    
    $
    (9,437
    )
    
    $
    (4,578
    )
    
    $
    (101,450
    )
    
    $
    40,344Adoption of stock-based
compensation accounting
standards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,110
    )
    
    
    
    
    
    
    9,437
    
    
    
    
    
    
    
    
    
    
    
    327Issuance of common
stock as deferred
compensation
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    473
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    475Exercise of warrants
and options
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    3,308
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,310Other issuances of
common stock
    
    
    
    
    
    
    
    
    
    
    40
    
    
    
    89,353
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    89,393Amortization of
deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,573
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,573Expenses
related to Convertible Preferred Stock offering
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,343
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,343
    )Preferred stock dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,991
    )
    
    
    (1,991
    )Comprehensive Loss:Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,838
    )
    
    
    (6,838
    )
    
    $
    (6,838
    )Other comprehensive
income (net of tax):Unrealized loss
on derivative
instruments,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,690
    
    
    
    
    
    
    
    3,690
    
    
    
    3,690Unrealized gain
(loss) on
available-for-
sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    888
    
    
    
    
    
    
    
    888
    
    
    
    888Balance, December 31, 2006
    
    $
    
    
    
    $
    
    
    
    $
    119
    
    
    $
    226,988
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (110,279
    )
    
    $
    116,828
    
    
    $
    (2,260
    )
  53




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
 Note 1  Description of Business
   
    
    a new management team;
    
    a new business strategy of exploration, exploitation and acquisition that is focused on
the North Sea;
    
    the acquisition of NSNV, Inc. which possessed the seismic data and management team that
is central to the Companys new strategy; and
    
    a restructuring which resulted in the sale of all interests in U.S. oil and gas
properties.
  Note 2  Summary of Significant Accounting Policies
 Basis of Presentation and Use of Estimates
   Principles of Consolidation
  54




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
  Cash and Cash Equivalents
  Inventories
  Full Cost Accounting for Oil and Gas Operations
     55




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
   Other Property and Equipment
  Capitalized Interest
  Marketable Securities
  Goodwill and Intangible Assets
  56




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
  Dismantlement, Restoration and Environmental Costs
  Revenue Recognition
  Significant Customers
  Derivative Instruments and Hedging Activities
   57




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Endeavour International Corporation
Notes to Consolidated Financial Statements
     Concentrations of Credit and Market Risk
    58




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
  Foreign Currency Translation
  Income Taxes
  Adoption of Fair Value Accounting for Share-Based Payments
   59




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
   Loss Per Share
   December 31,(Amounts in thousands)
    
    2006
    
    2005
    
    2004Options and stock-based compensation
    
    
    626
    
    
    
    1,796
    
    
    
    1,093Warrants
    
    
    219
    
    
    
    1,275
    
    
    
    1,472Convertible debt
    
    
    16,185
    
    
    
    14,984
    
    
    
    Convertible preferred stock
    
    
    8,356
    
    
    
    
    
    
    
    Common shares potentially issuable
    
    
    25,386
    
    
    
    18,055
    
    
    
    2,565
 Recent Accounting Pronouncements
   60




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
   Note 3  Acquisitions and Dispositions
 Acquisition of Talisman Expro Limited
   (Amounts in thousands)Purchase price
    
    $
    359,594Legal, accounting and other direct expenses
    
    
    6,051Total purchase price
    
    $
    365,645Allocation of purchase price:Current assets
    
    $
    26,086Property and equipment
    
    
    209,534Goodwill
    
    
    263,957Current liabilities
    
    
    (23,940
    )Deferred tax liability
    
    
    (85,103
    )Other long-term liabilities
    
    
    (24,889
    )$
    365,645
   61




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
  Year Ended December 31,(Amounts in thousands, except per share data)
    
    2006
    
    2005Revenues
    
    $
    219,346
    
    
    $
    209,014Net income (loss) to common stockholders
    
    
    2,878
    
    
    
    (12,320
    )Net income (loss) per share  basic and diluted
    
    $
    0.02
    
    
    
    (0.11
    )
 Purchase of Interest in Bacchus Prospect
  Purchase of Interest in Enoch Field
  Acquisition of OER oil AS
   62




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
  OER Majority
    
    OER Minority(Amounts in thousands)
    
    Acquisition
    
    AcquisitionCurrent assets
    
    $
    8,099
    
    
    $
    Property and equipment
    
    
    34,032
    
    
    
    (2,654
    )Goodwill
    
    
    20,119
    
    
    
    7,676Other assets
    
    
    2,428
    
    
    
    Current liabilities
    
    
    (1,250
    )
    
    
    16Long-term debt, including current portion of long-term debt
    
    
    (8,480
    )
    
    
    Deferred tax liability
    
    
    (16,646
    )
    
    
    2,070Other long-term liabilities
    
    
    (6,720
    )
    
    
    Minority interest
    
    
    (3,224
    )
    
    
    3,587Consideration given
    
    $
    28,358
    
    
    $
    10,695
 Acquisition of NSNV, Inc.
   The Restructuring
  
    
    Repaid $1.5 million principal amount of our outstanding convertible notes and issued 0.4
million shares of our common stock in exchange for the remaining principal balance due
under the Trident convertible debenture at a contractual conversion price of $1.60 per
share;
    
    Issued approximately one million shares of our common stock in exchange for the $1.55
million principal balance and accrued interest due under the Marcus convertible debenture
at a contractual conversion price of $1.75 per share;
    
    Issued 2.8 million shares of our common stock upon conversion of all of the outstanding
Series C Preferred Stock, and accrued dividends, at a contractual conversion price of $1.70
per share;
    
    Purchased 14.1 million shares of common stock and 103,500 shares of Series B Preferred
Stock for $5.3 million in cash; and
 63




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Endeavour International Corporation
Notes to Consolidated Financial Statements
 
    
    Purchased all outstanding shares of Series A Preferred Stock and a portion of the
Series B Preferred Stock in exchange for certain of our non-core assets, including:
 
    
    100% of our ownership interest in BWP Gas, LLC;
    
    864,560 shares of restricted common stock of BPK Resources, Inc.;
    
    400,000 shares of common stock of Trimedia Group, Inc.;
    
    Notes receivable due from CSR Hackberry, LLC, Snipes, LLC and BPK Resources,
Inc. (BPK) with a combined principal of $0.8 million; and
    
    Subscription receivables due from FEQ Investments, Inc. (FEQ) and GWR Trust
with a combined principal of $0.4 million.
 Sale of PHT Partners, L.P.
  Sale of Louisiana Shelf Partners, L.P.
  Sale of Knox Miss. Partners, L.P.
  64




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Endeavour International Corporation
Notes to Consolidated Financial Statements
 Note 4  Prepaid Expenses and Other Current Assets
  December 31,(Amounts in thousands)
    
    2006
    
    2005Crude oil inventory
    
    $
    892
    
    
    $
    Fair market value of commodity derivatives  current
    
    
    18,396
    
    
    
    Prepaid insurance
    
    
    1,280
    
    
    
    933Escrow accounts for turnkey drilling contracts
    
    
    1,867
    
    
    
    1,341Collateral account for derivative instruments
    
    
    478
    
    
    
    4,065Other
    
    
    4,737
    
    
    
    1,731$
    27,650
    
    
    $
    8,070
    65




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
 Note 5  Property and Equipment
  December 31,(Amounts in thousands)
    
    2006
    
    2005Oil and gas properties under the full cost method:Subject to amortization
    
    $
    219,114
    
    
    $
    50,424Not subject to amortization:Acquired in 2006
    
    
    117,281
    
    
    
    Acquired in 2005
    
    
    15,108
    
    
    
    15,785Acquired in 2004
    
    
    16,797
    
    
    
    24,339368,300
    
    
    
    90,548Other oil and gas activities
    
    
    4,875
    
    
    
    4,875Computers, furniture and fixtures
    
    
    1,940
    
    
    
    1,351Total property and equipment
    
    
    375,115
    
    
    
    96,774Accumulated depreciation, depletion and amortization
    
    
    (55,800
    )
    
    
    (37,690
    )Net property and equipment
    
    $
    319,315
    
    
    $
    59,084
   66




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Endeavour International Corporation
Notes to Consolidated Financial Statements
 Note 6  Other Assets
  (Amounts in thousands)
    
    2006
    
    2005Intangible assets  workforce in place:Gross
    
    $
    4,800
    
    
    $
    4,800Accumulated amortization
    
    
    (2,250
    )
    
    
    (333
    )2,550
    
    
    
    4,467Fair market value of long-term portion
of commodity derivatives (see Note 7)
    
    
    23,860
    
    
    
    Debt issuance costs
    
    
    8,249
    
    
    
    3,165Available-for-sale securities
    
    
    73
    
    
    
    960Restricted cash
    
    
    
    
    
    
    2,304Other
    
    
    103
    
    
    
    118$
    34,835
    
    
    $
    11,014
     December 31, 2006
    
    December 31, 2005Gross Unrealized
    
    
    
    
    
    
    
    
    
    Gross Unrealized(Amounts in thousands)
    
    Cost
    
    Loss
    
    Fair Value
    
    Cost
    
    Loss
    
    Fair ValueTouchstone Shares
    
    $
    73
    
    
    $
    
    
    
    $
    73
    
    
    $
    1,848
    
    
    $
    (888
    )
    
    $
    960
  67




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Endeavour International Corporation
Notes to Consolidated Financial Statements
  Note 7  Derivative Instruments
    Estimated FairValue Asset2007
    
    2008
    
    2009
    
    Average 2010 - 2011
    
    (in thousands)Oil:Fixed Price Swap
(Mbbl) 
Platts Dated
Brent(2)
    
    
    1,111
    
    
    
    907
    
    
    
    697
    
    
    
    530
    
    
    $
    11,711Weighted
Average Price
($/Barrel)
    
    $
    69.07
    
    
    $
    68.87
    
    
    $
    69.08
    
    
    $
    67.30Gas:Fixed Price Swap
(MMcf)  Heren
National
Balancing Point
(1)
(2)
    
    
    2,575
    
    
    
    2,676
    
    
    
    1,387
    
    
    
    829
    
    
    $
    30,545Fixed Price
Swap (Mbbl)
 Platts
Dated
Brent(2)
    
    £
    6.13
    
    
    £
    5.81
    
    
    £
    5.59
    
    
    £
    5.28
 68




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Endeavour International Corporation
Notes to Consolidated Financial Statements
 
 (1)
    
    Gas derivative contracts are designated in therms and have been converted to Mcf at
a rate of 10 therm to 1 Mcf. The exchange rate at December 31, 2006 was $1.96 to £1.00.(2)
    
    We paid $7.7 million during 2006 to enter into these contracts prior to closing the
Talisman Acquisition. Note 8  Accrued Expenses
  December 31,(Amounts in thousands)
    
    2006
    
    2005Accrued liabilities for certain stock-based compensation plans
    
    $
    
    
    
    $
    803Accrued joint interest costs
    
    
    3,811
    
    
    
    Accrued compensation
    
    
    2,641
    
    
    
    1,989Accrued interest
    
    
    4,446
    
    
    
    2,234Preferred dividends
    
    
    2,477
    
    
    
    486Prepaid revenue
    
    
    2,776
    
    
    
    Derivative liability
    
    
    
    
    
    
    4,291Foreign taxes payable
    
    
    16,509
    
    
    
    4,366Foreign deferred taxes
    
    
    5,335
    
    
    
    Litigation settlement accrual
    
    
    
    
    
    
    5,265Other
    
    
    3,804
    
    
    
    1,806$
    41,799
    
    
    $
    21,240
 Note 9  Financial Instruments
 December 31, 2006
    
    December 31, 2005Fair Value
    
    Carrying Value
    
    Fair Value
    
    Carrying ValueAssets:Investment in equity securities
    
    $
    73
    
    
    $
    73
    
    
    $
    960
    
    
    $
    960Derivative instruments
    
    
    42,256
    
    
    
    42,256
    
    
    
    
    
    
    
    Liabilities:Long-term debt
    
    
    300,156
    
    
    
    306,250
    
    
    
    76,400
    
    
    
    81,250Derivative
instruments
    
    
    
    
    
    
    
    
    
    
    4,291
    
    
    
    4,291
  69




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Endeavour International Corporation
Notes to Consolidated Financial Statements
 Note 10  Debt and Notes Payable
  December 31,(Amounts in thousands)
    
    2006
    
    20056% Senior notes, due 2012
    
    $
    81,250
    
    
    $
    81,250Senior bank facility
    
    
    150,000
    
    
    
    Second lien term loan
    
    
    75,000
    
    
    
    306,250
    
    
    
    81,250Less: current maturities
    
    
    (2,410
    )Long-term debt
    
    $
    303,840
    
    
    $
    81,250
  (Amounts in thousands)2007
    
    $
    2,4102008
    
    
    32,6002009
    
    
    70,0002010
    
    
    40,0002011
    
    
    79,990Thereafter
    
    
    81,250
 6% Senior notes, due 2012
  Senior bank facility
  70




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
    
    
    a maximum consolidated debt to earnings before interest, taxes, depreciation and
amortization (EBITDA) ratio of 3.0:1;
    
    a minimum current assets to current liabilities ratio of 1.1:1;
    
    a minimum debt coverage ratio of 1.2:1 for the initial tranche and 1.15:1 for the second
tranche;
    
    a minimum field life net present value (NPV) to loans outstanding coverage ratio of
1.4:1 for the period through March 31, 2009 and 1.5:1 thereafter for the initial tranche,
and 1.25:1 for the period through March 31, 2009 and 1.3:1 thereafter for the second
tranche; and
    
    a minimum loan life NPV to loans outstanding coverage ratio of 1.2:1 for the period
through March 31, 2009 and 1.3:1 thereafter for the initial tranche, and 1.15:1 for the
period through March 31, 2009 and 1.2:1 thereafter for the second tranche.
  Second lien term loan
  
    
    a maximum consolidated debt to EBITDA ratio of 2.75:1 for 2006 and 2007, decreasing to
1.5:1 by 2011;
    
    a minimum EBITDA to interest expense ratio of 3.0:1;
    
    a minimum PV-10% to consolidated debt ratio of 0.75:1 for 2006 and 1.0:1 thereafter; and
 71




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Endeavour International Corporation
Notes to Consolidated Financial Statements
 
    
    a minimum PV-10% to consolidated secured debt ratio of 1.15:1 for 2006, 1.25:1 for 2007
and 2008 and 1.5:1 thereafter.
   Note 11  Income Taxes
  Year Ended December 31,(Amounts in thousands)
    
    2006
    
    2005
    
    2004Income (loss) before income taxes:Domestic
    
    $
    (20,588
    )
    
    $
    (2,945
    )
    
    $
    (19,905
    )Foreign
    
    
    37,663
    
    
    
    (17,367
    )
    
    
    (2,797
    )$
    17,075
    
    
    $
    (20,312
    )
    
    $
    (22,702
    )Current Taxes:Federal
    
    $
    (45
    )
    
    $
    48
    
    
    $
    Foreign
    
    
    10,920
    
    
    
    7,770
    
    
    
    Total current taxes
    
    
    10,875
    
    
    
    7,818
    
    
    
    Deferred Taxes:Federal
    
    
    
    
    
    
    
    
    
    
    Foreign
    
    
    13,038
    
    
    
    3,243
    
    
    
    670Total deferred taxes
    
    
    13,038
    
    
    
    3,243
    
    
    
    670Income tax expense
    
    $
    23,913
    
    
    $
    11,061
    
    
    $
    670
   72




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Endeavour International Corporation
Notes to Consolidated Financial Statements
   (Amounts in thousands)
    
    2006
    
    2005Deferred tax asset:Deferred compensation
    
    $
    5,792
    
    
    $
    2,833Asset retirement obligation
    
    
    19,492
    
    
    
    5,650Litigation settlement
    
    
    
    
    
    
    1,843Net operating loss and capital loss carryforward
    
    
    53,541
    
    
    
    25,145Uplift carryforward
    
    
    3,644
    
    
    
    1,079Other
    
    
    621
    
    
    
    Total deferred tax assets
    
    
    83,090
    
    
    
    36,550Less valuation allowance
    
    
    (17,291
    )
    
    
    (27,073
    )Total deferred tax assets after valuation allowance
    
    
    65,799
    
    
    
    9,477Deferred tax liability:Property, plant and equipment
    
    
    (161,180
    )
    
    
    (25,478
    )Unrealized gain on derivative instruments
    
    
    (17,608
    )
    
    
    Petroleum revenue tax, net of tax benefit
    
    
    (6,001
    )
    
    
    Sale/leaseback
    
    
    (822
    )
    
    
    (950
    )Other
    
    
    (678
    )
    
    
    (2,234
    )Total deferred tax liabilities
    
    
    (186,289
    )
    
    
    (28,662
    )Net deferred tax liability
    
    $
    (120,490
    )
    
    $
    (19,185
    )
   73




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Endeavour International Corporation
Notes to Consolidated Financial Statements
 (Amounts in thousands)Types of Carryforward
    
    Years of Expiration
    
    Carryforward AmountsNet operating loss  U.S. federal
    
    
    2022  2026
    
    
    $
    43,170Net operating loss  U.K.
    
    Indefinite
    
    $
    73,752Uplift  U.K.
    
    Indefinite
    
    $
    4,242Uplift  Norway
    
    Indefinite
    
    $
    2,921
      74




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##### Table of Contents



Endeavour International Corporation  Notes to Consolidated Financial Statements
 Year Ended December 31,(Amounts in thousands)
    
    2006
    
    2005
    
    2004Federal income tax expense (benefit) at
statutory rate
    
    $
    5,976
    
    
    $
    (7,109
    )
    
    $
    (7,946
    )Book deductions not deductible for income tax
purposes
    
    
    44
    
    
    
    13
    
    
    
    3,849Taxation of foreign operations
    
    
    11,935
    
    
    
    3,309
    
    
    
    25Change in valuation allowance  US
    
    
    7,280
    
    
    
    968
    
    
    
    3,118Change in valuation allowance  UK
    
    
    (6,013
    )
    
    
    15,983
    
    
    
    1,139Foreign currency (gain)/loss on deferred taxes
    
    
    4,773
    
    
    
    (1,824
    )
    
    
    471Other
    
    
    (82
    )
    
    
    (279
    )
    
    
    14Income Tax Expense
    
    $
    23,913
    
    
    $
    11,061
    
    
    $
    670Effective Income Tax Rate
    
    
    140
    %
    
    
    (54
    )%
    
    
    (3
    )%
 Note 12  Other Liabilities
  December 31,(Amounts in thousands)
    
    2006
    
    2005Asset retirement obligations
    
    $
    32,503
    
    
    $
    6,740Other
    
    
    7
    
    
    
    13$
    32,510
    
    
    $
    6,753
  December 31,(Amounts in thousands)
    
    2006
    
    2005Carrying amount of asset retirement obligations as of beginning of year
    
    $
    6,740
    
    
    $
    6,902Liabilities incurred related to acquired properties
    
    
    25,255
    
    
    
    Decrease due to revised estimates of asset retirement obligations
    
    
    (1,489
    )
    
    
    Accretion expense
    
    
    985
    
    
    
    542Impact of foreign currency exchange rate changes
    
    
    1,012
    
    
    
    (704
    )Carrying amount of asset retirement obligations as of end of year
    
    $
    32,503
    
    
    $
    6,740
 75




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##### Table of Contents



Endeavour International Corporation  Notes to Consolidated Financial Statements
 Note 13  Equity
  Year Ended December 31,(Amounts in thousands)
    
    2006
    
    2005
    
    2004Common Stock:Outstanding at the beginning of the year
    
    
    75,489
    
    
    
    69,995
    
    
    
    37,145Issuance of common stock in the offerings
    
    
    39,257
    
    
    
    
    
    
    
    25,000Issuance of common stock in the NSNV Acquisition
    
    
    
    
    
    
    
    
    
    
    12,675Issuance of common stock in the OER Acquisition
    
    
    
    
    
    
    2,184
    
    
    
    Repurchases of common stock
    
    
    
    
    
    
    
    
    
    
    (14,098
    )Conversion of notes payable
    
    
    
    
    
    
    
    
    
    
    1,402Conversion of preferred stock
    
    
    
    
    
    
    
    
    
    
    2,809Exercise of warrants and stock options
    
    
    1,655
    
    
    
    762
    
    
    
    600Other issuances
    
    
    2,176
    
    
    
    2,548
    
    
    
    4,462Outstanding at the end of the year
    
    
    118,577
    
    
    
    75,489
    
    
    
    69,995Series A Preferred Stock:Outstanding at the beginning of the year
    
    
    
    
    
    
    
    
    
    
    4,091Transfer of non-core assets
    
    
    
    
    
    
    
    
    
    
    (4,091
    )Outstanding at the end of the year
    
    
    
    
    
    
    
    
    
    
    Series B Preferred Stock:Outstanding at the beginning of the year
    
    
    20
    
    
    
    20
    
    
    
    143Repurchases of preferred stock
    
    
    
    
    
    
    
    
    
    
    (103
    )Transfer of non-core assets
    
    
    
    
    
    
    
    
    
    
    (20
    )Outstanding at the end of the year
    
    
    20
    
    
    
    20
    
    
    
    20Series C Preferred Stock:Outstanding at the beginning of the year
    
    
    
    
    
    
    
    
    
    
    478Issuances of preferred stock
    
    
    
    
    
    
    
    
    
    
    Conversion to common stock
    
    
    
    
    
    
    
    
    
    
    (478
    )Outstanding at the end of the year
    
    
    
    
    
    
    
    
    
    
    Convertible Preferred Stock:Outstanding at the beginning of the year
    
    
    
    
    
    
    
    
    
    
    Issuances of preferred stock
    
    
    125
    
    
    
    
    
    
    
    Outstanding at the end of the year
    
    
    125
    
    
    
    
    
    
    
    
 76




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##### Table of Contents



Endeavour International Corporation  Notes to Consolidated Financial Statements
 Common Stock
        Convertible Preferred Stock
  77




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##### Table of Contents



Endeavour International Corporation  Notes to Consolidated Financial Statements
       78




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##### Table of Contents



Endeavour International Corporation  Notes to Consolidated Financial Statements
 Series A Preferred Stock
  Series B Preferred Stock
    Series C Preferred Stock
   Stock Warrants
  December 31, 2006
    
    December 31, 2005(Amounts in thousands, except per share data)
    
    Exercise
    
    
    
    
    
    ExerciseExpiration Date
    
    Price
    
    Shares
    
    Price
    
    SharesMay 2006
    
    
    
    
    
    
    
    
    
    $
    2.00
    
    
    
    1,538October 2006
    
    
    
    
    
    
    
    
    
    $
    2.00
    
    
    
    50February 2009
    
    $
    2.00
    
    
    
    700
    
    
    $
    2.00
    
    
    
    700April 2012
    
    $
    2.00
    
    
    
    90
    
    
    $
    2.00
    
    
    
    90790
    
    
    
    
    
    
    
    2,378
 79




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##### Table of Contents



Endeavour International Corporation  Notes to Consolidated Financial Statements
   Note 14  Stock-Based Compensation Arrangements
    2006
    
    2005
    
    2004Pro forma
    
    Pro formaRisk free rate
    
    
    4.4
    %
    
    
    3.8
    %
    
    
    4.0
    %Expected years until exercise
    
    
    4
    
    
    
    5
    
    
    
    5Expected stock volatility
    
    
    38
    %
    
    
    71
    %
    
    
    31
    %Dividend yield
    
    
    
    
    
    
    
    
    
    
    
  80




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##### Table of Contents



Endeavour International Corporation  Notes to Consolidated Financial Statements
 Year Ended December 31,(Amounts in thousands, except per share data)
    
    2005
    
    2004Net loss to common stockholders, as reported
    
    $
    (31,531
    )
    
    $
    (23,797
    )Add:Stock-based compensation expense as reported
    
    
    4,091
    
    
    
    6,360Less:Total stock-based compensation expense
determined under fair-value-based method
for all awards, net of tax
    
    
    (5,676
    )
    
    
    (6,503
    )Pro forma net loss
    
    $
    (33,116
    )
    
    $
    (23,940
    )Loss per share:Basic and diluted  as reported
    
    $
    (0.42
    )
    
    $
    (0.37
    )Basic and diluted  pro forma
    
    $
    (0.44
    )
    
    $
    (0.37
    )
   81




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##### Table of Contents



Endeavour International Corporation  Notes to Consolidated Financial Statements
 Stock Options
  Number
    
    Weighted Average
    
    Weighted Average
    
    Aggregateof
    
    Exercise Price
    
    Contractual
    
    Intrinsic(Amounts in thousands, except per share and year data)
    
    Shares
    
    per Share
    
    Life in Years
    
    ValueBalance outstanding  December 31, 2005
    
    
    4,908
    
    
    $
    3.13Granted
    
    
    1,020
    
    
    
    3.34Exercised
    
    
    (67
    )
    
    
    2.00Forfeited
    
    
    (155
    )
    
    
    2.99Expired
    
    
    (302
    )
    
    
    3.08Balance outstanding  December 31, 2006
    
    
    5,404
    
    
    
    3.19
    
    
    
    2.9
    
    
    $
    531Currently exercisable  December 31, 2006
    
    
    2,422
    
    
    
    2.74
    
    
    
    2.4
    
    
    $
    354
    Options Outstanding
    
    Options Exercisable(Amounts in thousands, except per share data)
    
    Number of
    
    Weighted Average
    
    Weighted Average
    
    
    
    
    
    Weighted AverageRange of Exercise
    
    Options
    
    Remaining
    
    Exercise Price
    
    Number
    
    Exercise PricePrices
    
    Outstanding
    
    Contractual Life
    
    Per Share
    
    Exercisable
    
    Per Share$2.00  $2.99
    
    
    2,502
    
    
    
    2.2
    
    
    $
    2.11
    
    
    
    1,716
    
    
    $
    2.09$3.00  $3.99
    
    
    1,110
    
    
    
    3.8
    
    
    $
    3.53
    
    
    
    115
    
    
    $
    3.65Greater than $4.00
    
    
    1,792
    
    
    
    3.3
    
    
    $
    4.49
    
    
    
    591
    
    
    $
    4.475,404
    
    
    
    2.9
    
    
    $
    3.19
    
    
    
    2,422
    
    
    $
    2.74
 82




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##### Table of Contents



Endeavour International Corporation  Notes to Consolidated Financial Statements
 Restricted Stock
   Number
    
    Weighted Averageof
    
    Grant Date Fair(Amounts in thousands, except per share data)
    
    Shares
    
    Value per ShareBalance outstanding  December 31, 2005
    
    
    4,412
    
    
    $
    3.99Granted
    
    
    2,403
    
    
    $
    3.32Vested
    
    
    (2,005
    )
    
    $
    3.80Forfeited
    
    
    (396
    )
    
    $
    3.47Balance outstanding  December 31, 2006
    
    
    4,414
    
    
    $
    3.76Total fair value of shares vesting during the period
    
    $
    7,079
 Note 15  Supplementary Cash Flow Disclosures
  Year Ended December 31,(Amounts in thousands)
    
    2006
    
    2005
    
    2004Interest paid
    
    $
    5,895
    
    
    $
    2,340
    
    
    $
    130Income taxes paid
    
    $
    7,064
    
    
    $
    3,206
    
    
    $
    
 Non-Cash Investing and Financing Transactions
    83




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##### Table of Contents



Endeavour International Corporation  Notes to Consolidated Financial Statements
    Note 16  Leases
 Operating Leases
  Note 17  Comprehensive Loss
  84




---



##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
 Year Ended December 31,(Amounts in thousands)
    
    2006
    
    2005
    
    2004Net loss
    
    $
    (6,838
    )
    
    $
    (31,373
    )
    
    $
    (23,372
    )Related to derivative instruments:Unrealized loss
    
    
    (1,012
    )
    
    
    (5,672
    )
    
    
    Reclassification adjustment
for loss realized in net loss
above
    
    
    4,702
    
    
    
    1,982
    
    
    
    Related to marketable securities:Unrealized loss
    
    
    (887
    )
    
    
    (360
    )
    
    
    (528
    )Reclassification adjustment
for loss realized in net loss
above
    
    
    1,775
    
    
    
    
    
    
    
    282Unrealized gain (loss), net
    
    
    4,578
    
    
    
    (4,050
    )
    
    
    (246
    )Comprehensive loss
    
    $
    (2,260
    )
    
    $
    (35,423
    )
    
    $
    (23,618
    )
  December 31,(Amounts in thousands)
    
    2006
    
    2005
    
    2004Related to derivative instruments:Balance at beginning of year
    
    $
    (3,690
    )
    
    $
    
    
    
    $
    Change during the year
    
    
    3,690
    
    
    
    (3,690
    )
    
    
    Balance at end of year
    
    
    
    
    
    
    (3,690
    )
    
    
    Related to marketable securities:Balance at beginning of year
    
    
    (888
    )
    
    
    (528
    )
    
    
    (489
    )Change during the year
    
    
    888
    
    
    
    (360
    )
    
    
    (39
    )Balance at end of year
    
    
    
    
    
    
    (888
    )
    
    
    (528
    )Accumulated comprehensive loss
    
    $
    
    
    
    $
    (4,578
    )
    
    $
    (528
    )
 Note 18Commitments and Contingencies
 General
  85




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
 Rig Commitments
   Note 19Segment and Geographic Information
  2006
    
    2005
    
    2004(Amounts in thousands)
    
    Revenue
    
    Long-lived Assets
    
    Revenue
    
    Long-lived Assets
    
    Revenue
    
    Long-lived AssetsUnited States
    
    $
    
    
    
    $
    33,120
    
    
    $
    
    
    
    $
    11,298
    
    
    $
    8
    
    
    $
    32,846United Kingdom
    
    
    24,881
    
    
    
    537,936
    
    
    
    
    
    
    
    16,381
    
    
    
    
    
    
    
    8,918Norway
    
    
    29,250
    
    
    
    72,957
    
    
    
    38,656
    
    
    
    68,620
    
    
    
    3,655
    
    
    
    39,210The Netherlands
    
    
    
    
    
    
    1,799
    
    
    
    
    
    
    
    1,594Ireland
    
    
    
    
    
    
    90
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Thailand
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,688Total International
    
    
    54,131
    
    
    
    612,782
    
    
    
    38,656
    
    
    
    86,595
    
    
    
    3,655
    
    
    
    51,816Total
    
    $
    54,131
    
    
    $
    645,902
    
    
    $
    38,656
    
    
    $
    97,893
    
    
    $
    3,663
    
    
    $
    84,662
 86




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
 Note 20  Quarterly Financial Data
 (Amounts in thousands, except per share data)
    
    First Quarter
    
    Second Quarter
    
    Third Quarter
    
    Fourth Quarter2006Revenues
    
    $
    8,476
    
    
    $
    7,645
    
    
    $
    6,726
    
    
    $
    31,284Operating expenses
    
    
    10,741
    
    
    
    10,540
    
    
    
    11,377
    
    
    
    25,847Operating profit (loss)
    
    
    (2,265
    )
    
    
    (2,895
    )
    
    
    (4,651
    )
    
    
    5,437Net income (loss) to common stockholders
    
    
    (6,938
    )
    
    
    (10,389
    )
    
    
    15,225
    
    
    
    (6,727
    )Net income (loss) per common share  basic
    
    
    (0.09
    )
    
    
    (0.13
    )
    
    
    0.19
    
    
    
    (0.06
    )Net income (loss) per common share  diluted
    
    
    (0.09
    )
    
    
    (0.13
    )
    
    
    0.17
    
    
    
    (0.06
    )2005Revenues
    
    $
    7,703
    
    
    $
    9,091
    
    
    $
    10,852
    
    
    $
    11,010Operating
expenses
    
    
    8,865
    
    
    
    9,574
    
    
    
    20,092
    
    
    
    28,214Operating loss
    
    
    (1,162
    )
    
    
    (483
    )
    
    
    (9,240
    )
    
    
    (17,204
    )Net income (loss) to common stockholders
    
    
    (2,692
    )
    
    
    11,218
    
    
    
    (14,461
    )
    
    
    (25,596
    )Net income (loss) per common share  basic
    
    
    (0.04
    )
    
    
    0.15
    
    
    
    (0.19
    )
    
    
    (0.34
    )Net income (loss) per common share  diluted
    
    
    (0.04
    )
    
    
    0.13
    
    
    
    (0.19
    )
    
    
    (0.34
    )
 Note 21  Supplemental Oil and Gas Disclosures  Unaudited
 Capitalized Costs Relating to Oil and Gas Producing Activities(Amounts in thousands)
    
    United Kingdom
    
    Norway
    
    Ireland
    
    Thailand
    
    The Netherlands
    
    TotalDecember 31, 2006:Proved
    
    $
    156,441
    
    
    $
    34,228
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    190,669Unproved
    
    
    151,794
    
    
    
    23,949
    
    
    
    90
    
    
    
    
    
    
    
    1,799
    
    
    
    177,632Total capitalized
costs
    
    
    308,235
    
    
    
    58,177
    
    
    
    90
    
    
    
    
    
    
    
    1,799
    
    
    
    368,301Accumulated
depreciation,
depletion and
amortization
    
    
    (37,812
    )
    
    
    (13,288
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (51,100
    )Net capitalized costs
    
    $
    270,423
    
    
    $
    44,889
    
    
    $
    90
    
    
    $
    
    
    
    $
    1,799
    
    
    $
    317,201
 87




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
 Capitalized Costs Relating to Oil and Gas Producing Activities(Amounts in thousands)
    
    United Kingdom
    
    Norway
    
    Ireland
    
    Thailand
    
    The Netherlands
    
    TotalDecember 31, 2005:Proved
    
    $
    
    
    
    $
    23,308
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    23,308Unproved
    
    
    43,101
    
    
    
    22,545
    
    
    
    
    
    
    
    
    
    
    
    1,594
    
    
    
    67,240Total
capitalized
costs
    
    
    43,101
    
    
    
    45,853
    
    
    
    
    
    
    
    
    
    
    
    1,594
    
    
    
    90,548Accumulated
depreciation,
depletion and
amortization
    
    
    (27,116
    )
    
    
    (7,662
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34,778
    )Net
capitalized
costs
    
    $
    15,985
    
    
    $
    38,191
    
    
    $
    
    
    
    $
    
    
    
    $
    1,594
    
    
    $
    55,770
 Costs Incurred in Oil and Gas Property Acquisition, Exploration and Development Activities(Amounts in thousands)
    
    United Kingdom
    
    Norway
    
    Ireland
    
    Thailand
    
    The Netherlands
    
    TotalYear Ended December 31, 2006:Acquisition costs:Proved
    
    $
    139,456
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    139,456Unproved
    
    
    81,715
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81,715Exploration costs
    
    
    35,002
    
    
    
    5,089
    
    
    
    90
    
    
    
    
    
    
    
    205
    
    
    
    40,386Development costs
    
    
    8,960
    
    
    
    7,235
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,195Total costs incurred
    
    $
    265,133
    
    
    $
    12,324
    
    
    $
    90
    
    
    $
    
    
    
    $
    205
    
    
    $
    277,752Year Ended December 31, 2005:Acquisition costs:Proved
    
    $
    
    
    
    $
    (2,151
    )
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (2,151
    )Unproved
    
    
    
    
    
    
    (503
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (503
    )Exploration costs
    
    
    34,332
    
    
    
    7,626
    
    
    
    
    
    
    
    
    
    
    
    1,446
    
    
    
    43,404Development costs
    
    
    
    
    
    
    3,277
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,277Total costs incurred
    
    $
    34,332
    
    
    $
    8,249
    
    
    $
    
    
    
    $
    
    
    
    $
    1,446
    
    
    $
    44,027Year Ended December 31, 2004:Acquisition costs:Proved
    
    $
    
    
    
    $
    19,210
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    19,210Unproved
    
    
    4,534
    
    
    
    14,822
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,356Exploration costs
    
    
    4,235
    
    
    
    2,700
    
    
    
    
    
    
    
    309
    
    
    
    148
    
    
    
    7,392Development costs
    
    
    
    
    
    
    872
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    872Total costs incurred
    
    $
    8,769
    
    
    $
    37,604
    
    
    $
    
    
    
    $
    309
    
    
    $
    148
    
    
    $
    46,830Equity Method Investees for
the year ended December 31, 2004:
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2,127
    
    
    $
    
    
    
    $
    2,127
 88




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
 Results of Operations for Oil and Gas Producing Activities(Amounts in thousands)
    
    United Kingdom
    
    Norway
    
    United States
    
    Thailand
    
    The Netherlands
    
    TotalYear Ended December 31, 2006:Revenues
    
    $
    24,881
    
    
    $
    29,250
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    54,131Production expenses
    
    
    4,477
    
    
    
    11,091
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,568DD&A
    
    
    10,292
    
    
    
    6,217
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,509Impairment of oil
and gas properties
    
    
    849
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    849Income tax expense
    
    
    4,631
    
    
    
    9,315
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,946Results of activities
    
    $
    4,632
    
    
    $
    2,627
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    7,259Year Ended December 31, 2005:Revenues
    
    $
    
    
    
    $
    38,656
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    38,656Production expenses
    
    
    
    
    
    
    11,990
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,990DD&A
    
    
    
    
    
    
    7,377
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,377Impairment of oil
and gas properties
    
    
    27,116
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,116Income tax expense
    
    
    
    
    
    
    15,046
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,046Results of activities
    
    $
    (27,116
    )
    
    $
    4,243
    
    
    $
    
    
    
    $
    
    
    
    $
    $-
    
    
    $
    (22,873
    )Year Ended December 31, 2004:Revenues
    
    $
    
    
    
    $
    3,655
    
    
    $
    8
    
    
    $
    
    
    
    $
    
    
    
    $
    3,663Production expenses
    
    
    
    
    
    
    2,064
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    2,065DD&A
    
    
    
    
    
    
    901
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    903Income tax expense
    
    
    
    
    
    
    538
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    538Results of activities
    
    $
    
    
    
    $
    152
    
    
    $
    5
    
    
    $
    
    
    
    $
    
    
    
    $
    157Equity Method Investees for
the year ended December 31, 2004:
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (201
    )
    
    $
    
    
    
    $
    (201
    )
 Oil
and Gas Reserves
  89




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
  United
    
    
    
    
    
    UnitedProved Oil Reserves (MBbls):
    
    Kingdom
    
    Norway
    
    States
    
    TotalProved reserves at January 1, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase of proved reserves, in place
    
    
    
    
    
    
    1,634
    
    
    
    
    
    
    
    1,634Production
    
    
    
    
    
    
    (91
    )
    
    
    
    
    
    
    (91
    )Sales of reserves, in place
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Extensions, discoveries and
revisions of previous estimates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Proved reserves at December 31, 2004
    
    
    
    
    
    
    1,543
    
    
    
    
    
    
    
    1,543Production
    
    
    
    
    
    
    (726
    )
    
    
    
    
    
    
    (726
    )Extensions, discoveries and
revisions of previous estimates
    
    
    
    
    
    
    347
    
    
    
    
    
    
    
    347Proved reserves at December 31, 2005
    
    
    
    
    
    
    1,164
    
    
    
    
    
    
    
    1,164Purchase of proved reserves, in place
    
    
    4,593
    
    
    
    
    
    
    
    
    
    
    
    4,593Production
    
    
    (210
    )
    
    
    (508
    )
    
    
    
    
    
    
    (718
    )Extensions, discoveries and
revisions of previous estimates
    
    
    183
    
    
    
    530
    
    
    
    
    
    
    
    713Proved reserves at December 31, 2006
    
    
    4,566
    
    
    
    1,186
    
    
    
    
    
    
    
    5,752Proved Developed Oil Reserves (MBbls):At December 31, 2004
    
    
    
    
    
    
    1,094
    
    
    
    
    
    
    
    1,094At December 31, 2005
    
    
    
    
    
    
    816
    
    
    
    
    
    
    
    816At December 31, 2006
    
    
    3,400
    
    
    
    737
    
    
    
    
    
    
    
    4,137
 90




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Endeavour International Corporation
Notes to Consolidated Financial Statements
 United
    
    
    
    
    
    UnitedProved Gas Reserves (MMcf):
    
    Kingdom
    
    Norway
    
    States
    
    TotalProved reserves at January 1, 2004
    
    
    
    
    
    
    
    
    
    
    52
    
    
    
    52Purchase of proved reserves, in place
    
    
    
    
    
    
    6,740
    
    
    
    
    
    
    
    6,740Production
    
    
    
    
    
    
    (15
    )
    
    
    (2
    )
    
    
    (17
    )Sales of reserves, in place
    
    
    
    
    
    
    
    
    
    
    (50
    )
    
    
    (50
    )Extensions, discoveries and
revisions of previous estimates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Proved reserves at December 31, 2004
    
    
    
    
    
    
    6,725
    
    
    
    
    
    
    
    6,725Production
    
    
    
    
    
    
    (184
    )
    
    
    
    
    
    
    (184
    )Extensions, discoveries and
revisions of previous estimates
    
    
    
    
    
    
    (244
    )
    
    
    
    
    
    
    (244
    )Proved reserves at December 31, 2005
    
    
    
    
    
    
    6,297
    
    
    
    
    
    
    
    6,297Purchase of proved reserves, in place
    
    
    14,574
    
    
    
    
    
    
    
    
    
    
    
    14,574Production
    
    
    (1,539
    )
    
    
    (203
    )
    
    
    
    
    
    
    (1,742
    )Extensions, discoveries and
revisions of previous estimates
    
    
    4,137
    
    
    
    1,579
    
    
    
    
    
    
    
    5,716Proved reserves at December 31, 2006
    
    
    17,172
    
    
    
    7,673
    
    
    
    
    
    
    
    24,845Proved Developed Gas Reserves (MMcf):At December 31, 2004
    
    
    
    
    
    
    123
    
    
    
    
    
    
    
    123At December 31, 2005
    
    
    
    
    
    
    33
    
    
    
    
    
    
    
    33At December 31, 2006
    
    
    13,184
    
    
    
    
    
    
    
    
    
    
    
    13,184
 91




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
 United
    
    
    
    
    
    UnitedProved Reserves (MBOE):
    
    Kingdom
    
    Norway
    
    States
    
    TotalProved reserves at January 1, 2004
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    9Purchase of proved reserves, in place
    
    
    
    
    
    
    2,757
    
    
    
    
    
    
    
    2,757Production
    
    
    
    
    
    
    (93
    )
    
    
    (1
    )
    
    
    (94
    )Sales of reserves, in place
    
    
    
    
    
    
    
    
    
    
    (8
    )
    
    
    (8
    )Extensions, discoveries and
revisions of previous estimates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Proved reserves at December 31, 2004
    
    
    
    
    
    
    2,664
    
    
    
    
    
    
    
    2,664Production
    
    
    
    
    
    
    (756
    )
    
    
    
    
    
    
    (756
    )Extensions, discoveries and
revisions of previous estimates
    
    
    
    
    
    
    306
    
    
    
    
    
    
    
    306Proved reserves at December 31, 2005
    
    
    
    
    
    
    2,214
    
    
    
    
    
    
    
    2,214Purchase of proved reserves, in place
    
    
    7,022
    
    
    
    
    
    
    
    
    
    
    
    7,022Production
    
    
    (466
    )
    
    
    (542
    )
    
    
    
    
    
    
    (1,008
    )Extensions, discoveries and
revisions of previous estimates
    
    
    872
    
    
    
    793
    
    
    
    
    
    
    
    1,665Proved reserves at December 31, 2006
    
    
    7,428
    
    
    
    2,465
    
    
    
    
    
    
    
    9,893Proved Developed Reserves (MBOE):At December 31, 2004
    
    
    
    
    
    
    1,115
    
    
    
    
    
    
    
    1,115At December 31, 2005
    
    
    
    
    
    
    822
    
    
    
    
    
    
    
    822At December 31, 2006
    
    
    5,597
    
    
    
    737
    
    
    
    
    
    
    
    6,334
  Year Ended December 31,2006
    
    2005
    
    2004Equity in proved reserves of equity method investees:Gas (MMcf)
    
    
    
    
    
    
    
    
    
    
    25,006Natural gas liquids (MBbls)
    
    
    
    
    
    
    
    
    
    
    75Proved Reserves (MBOE)
    
    
    
    
    
    
    
    
    
    
    4,243
  92




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Endeavour International Corporation
Notes to Consolidated Financial Statements
 Standardized Measure of Discounted Future Net Cash Flows
     Standardized Measure of Discounted Future Net Cash Flows
 December 31,2006
    
    
    
    
    
    2005(Amounts in thousands)
    
    United Kingdom
    
    Norway
    
    Total
    
    NorwayFuture cash inflows
    
    $
    354,827
    
    
    $
    103,471
    
    
    $
    458,298
    
    
    $
    137,637Future production costs
    
    
    (74,798
    )
    
    
    (57,712
    )
    
    
    (132,510
    )
    
    
    (49,514
    )Future development costs
    
    
    (39,445
    )
    
    
    (22,098
    )
    
    
    (61,543
    )
    
    
    (17,922
    )Future income tax expense
    
    
    (99,855
    )
    
    
    (9,838
    )
    
    
    (109,693
    )
    
    
    (48,762
    )Future net cash flows (undiscounted)
    
    
    140,729
    
    
    
    13,823
    
    
    
    154,552
    
    
    
    21,439Annual discount of 10% for estimated timing
    
    
    6,372
    
    
    
    2,639
    
    
    
    9,011
    
    
    
    2,914Standardized measure of future net cash flows
    
    $
    134,357
    
    
    $
    11,184
    
    
    $
    145,541
    
    
    $
    18,525
 93




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Endeavour International Corporation
Notes to Consolidated Financial Statements
 Principal Sources of Change in the Standardized Measure of Discounted Future Net Cash Flows
 Year Ended December 31,(Amounts in thousands)
    
    2006
    
    2005
    
    2004Standardized measure, beginning of period
    
    $
    18,525
    
    
    $
    10,265
    
    
    $
    71Net changes in prices and production costs
    
    
    (25,622
    )
    
    
    44,166
    
    
    
    1,581Future development costs
    
    
    16,195
    
    
    
    3,277
    
    
    
    871Revisions of previous quantity estimates
    
    
    47,154
    
    
    
    9,502
    
    
    
    Sale of reserves in place
    
    
    
    
    
    
    
    
    
    
    (71
    )Accretion of discount
    
    
    6,037
    
    
    
    1,963
    
    
    
    Changes in income taxes, net
    
    
    20,393
    
    
    
    (26,876
    )
    
    
    1,063Sale of oil and gas produced, net of production costs
    
    
    (38,592
    )
    
    
    (26,667
    )
    
    
    (1,591
    )Purchased reserves
    
    
    101,533
    
    
    
    
    
    
    
    10,498Change in estimated future development costs,
production, timing and other
    
    
    (82
    )
    
    
    2,895
    
    
    
    (2,157
    )Standardized measure, end of period
    
    $
    145,541
    
    
    $
    18,525
    
    
    $
    10,265Equity Method Investees
    
    $
    
    
    
    $
    
    
    
    $
    15,251
 94




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Endeavour International Corporation
 
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.
  
 Item 9A. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  Managements Report on Internal Control Over Financial Reporting
    95




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Endeavour International Corporation
  Changes in Internal Control over Financial Reporting
  96




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Endeavour International Corporation
 Report of Independent Registered Public Accounting Firm
 
 Managements Report of
Internal Control over Financial Reporting Internal ControlIntegrated Framework
    Internal ControlIntegrated Framework Internal
ControlIntegrated Framework
 97




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Endeavour International Corporation
    
 98




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##### Table of Contents



Endeavour International Corporation
 
 Item 9B. Other Information
  
 Part III
 
 Item 10. Directors, Executive Officers and Corporate Governance of the Registrant
  
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholders Matters
  
 Item 13. Certain Relationships and Related Transactions, and Director Independence
  99




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Endeavour International Corporation
 
 Item 14. Principal Accounting Fees and Services
  
 Part IV
 
 Item 15. Exhibits and Financial Statement Schedules
 
     100




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Endeavour International Corporation
 
 SIGNATURES
  Endeavour International CorporationBy:
    /s/ William L. TransierWilliam L. TransierChief Executive Officer and PresidentDate: March 14, 2007  Signature
    
    Title
    
    Date/s/ William L. Transier

William L. Transier
    
    Chief Executive
Officer, President
and Director
(Principal
Executive Officer)
    
    March 14, 2007/s/ Lance Gilliland

Lance Gilliland
    
    Chief Financial
Officer (Principal
Financial Officer)
    
    March 14, 2007/s/ Robert L. Thompson

Robert L. Thompson
    
    Chief Accounting
Officer (Principal
Accounting Officer)
    
    March 14, 2007/s/ John B. Connally III

John B. Connally III
    
    Director
    
    March 14, 2007/s/ Barry J. Galt

Barry J. Galt
    
    Director
    
    March 14, 2007/s/ Nancy K. Quinn

Nancy K. Quinn
    
    Director
    
    March 14, 2007/s/ John N. Seitz

John N. Seitz
    
    Director
    
    March 14, 2007/s/ Thomas D. Clark

Thomas D. Clark
    
    Director
    
    March 14, 2007
 101




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##### Table of Contents



Index to Exhibits
 Exhibit
    
    Description2.1
    
    Agreement and Plan of Merger by and among Continental Southern Resources,
Inc., CSOR Acquisition Corp. and NSNV, Inc. (Incorporated by reference to
Exhibit 2.1 on Current Report on Form 8-K (Commission File No. 000-33439)
filed February 27, 2004)2.2
    
    Plan and Agreement of Merger, dated as of February 27, 2004, between
Continental Southern Resources, Inc. (n/k/a Endeavour International
Corporation) and its wholly-owned subsidiary Endeavour International
Corporation (Incorporated by reference to Exhibit 10.1 on Current Report on
Form 8-K (Commission File No. 000-33439) filed on March 1, 2004)3.1(a)
    
    Amended and Restated Articles of Incorporation (Incorporated by reference
to Exhibit 3.2 of our Quarterly Report on Form 10-Q (Commission File No.
001-32212) for the quarter ended June 30, 2004)3.1(b)
    
    Certificate of Amendment dated June 1, 2006 (Incorporated by reference to
Exhibit 4.2 of our Registration Statement on Form S-3 (Commission File No.
333-139304) filed on December 13, 2006)3.2
    
    Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.4 to
our Current Report on Form 8-K (Commission File No. 001-32212) filed on
November 6, 2006.)3.3
    
    Amended and Restated Certificate of Designation of Series B Preferred Stock
filed February 26, 2004 (Incorporated by reference to Exhibit 3.3 of our
Quarterly Report on Form 10-Q (Commission File No. 001-32212) for the
quarter ended June 30, 2004.)3.4
    
    Articles of Merger filed February 27, 2004 (Incorporated by reference to
Exhibit 3.4 of our Quarterly Report on Form 10-Q (Commission File No.
001-32212) for the quarter ended June 30, 2004.)3.5
    
    Specimen of Common Stock Certificate (Incorporated by reference to Exhibit
3.7 of our Quarterly Report on Form 10-Q (Commission File No. 001-32212)
for the quarter ended June 30, 2004.)3.6
    
    Certificate of Designation of Series A Preferred Stock of Endeavour
International Corporation Handelsbanken (Incorporated by reference to
Exhibit 3.1 to our Current Report on Form 8-K (Commission File No.
001-32212) filed on November 6, 2006.)3.7
    
    Certificate of Designation of Series C Preferred Stock of Endeavour
International Corporation (Incorporated by reference to Exhibit 3.2 to our
Current Report on Form 8-K (Commission File No. 001-32212) filed on
November 6, 2006.)3.8
    
    Certificate of Designation of Series D Preferred Stock of Endeavour
International Corporation (Incorporated by reference to Exhibit 3.3 to our
Current Report on Form 8-K (Commission File No. 001-32212) filed on
November 6, 2006.)4.1 (a)
    
    Warrants to Purchase Common Stock issued to Gemini Growth Fund, L.P. in
April 2002 (Incorporated by reference to Exhibit 4.6 of our Quarterly
Report on Form 10-QSB (Commission File No. 000-33439) for the Quarter Ended
June 30, 2002.)




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##### Table of Contents



Exhibit
    
    Description4.1 (b)
    
    First Amendment to Warrants to Purchase Common Stock dated July 29, 2003
(warrant # 2002-1) (Incorporated by reference to Exhibit 4.5 of our Annual
Report on Form 10-KSB (Commission File No. 000-33439) for the year ended
December 31, 2003.)4.1 (c)
    
    Second Amendment to Warrants to Purchase Common Stock dated February 26,
2004 (warrant # 2002-1) (Incorporated by reference to Exhibit 4.5 of our
Annual Report on Form 10-KSB (Commission File No. 000-33439) for the year
ended December 31, 2003.)4.2 (a)
    
    Warrants to Purchase Common Stock issued to Trident Growth Fund, LP dated
July 29, 2003 (warrant # 2003-3) (Incorporated by reference to Exhibit 4.7
of our Annual Report on Form 10-KSB (Commission File No. 000-33439) for the
year ended December 31, 2003)4.2 (b)
    
    First Amendment to Warrants to Purchase Common Stock dated February 26,
2004 (warrant # 2003-3) (Incorporated by reference to Exhibit 4.7 of our
Annual Report on Form 10-KSB (Commission File No. 000-33439) for the year
ended December 31, 2003)4.3 (a)
    
    Warrants to Purchase Common Stock issued to Trident Growth Fund, LP
(warrant # 2003-1) (Incorporated by reference to Exhibit 4.8 of our Annual
Report on Form 10-KSB (Commission File No. 000-33439) for the year ended
December 31, 2003)4.3 (b)
    
    First Amendment to Warrants to Purchase Common Stock dated July 29, 2003
(warrant #2003-1) (Incorporated by reference to Exhibit 4.8 of our Annual
Report on Form 10-KSB (Commission File No. 000-33439) for the year ended
December 31, 2003)4.3 (c)
    
    Second Amendment to Warrants to Purchase Common Stock dated February 26,
2004 (warrant # 2003-1) (Incorporated by reference to Exhibit 4.8 of our
Annual Report on Form 10-KSB (Commission File No. 000-33439) for the year
ended December 31, 2003)4.4
    
    Warrant to Purchase 25,000 Shares of Common Stock issued to Trident Growth
Fund, L.P. (Incorporated by reference to Exhibit 10.11 of our Annual Report
on Form 10-KSB (Commission File No. 000-33439) for the Year Ended December
31, 2002).4.5
    
    Indenture, dated as of January 20, 2005, between Endeavour International
Corporation and Wells Fargo Bank, National Association, as Trustee,
relating to the 6.00% Convertible Senior Notes due 2012 (Incorporated by
reference to our Exhibit 4.1 to our Current Report on Form 8-K (Commission
File No. 001-32212) filed on January 24, 2005.)4.6
    
    Registration Rights Agreement dated as of January 20, 2005, among Endeavour
International Corporation and J.P. Morgan Securities Inc. and Sanders
Morris Harris Inc., as Placement Agents (Incorporated by reference to our
Exhibit 4.2 to our Current Report on Form 8-K (Commission File No.
001-32212) filed on January 24, 2005.)4.7 (a)
    
    Debt agreement between OER oil AS and Handelsbanken (Incorporated by
reference to Exhibit 10.1 to our Current Report on Form 8-K (Commission
File No. 001-32212) filed on November 30, 2004.)




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##### Table of Contents



Exhibit
    
    Description4.7 (b)
    
    Amendment to debt agreement between OER oil AS and Handelsbanken
(Incorporated by reference to Exhibit 10.2 to our Current Report on Form
8-K (Commission File No. 001-32212) filed on November 30, 2004.)4.8 (a)
    
    $225,000,000 Secured Revolving Loan and Letter of Credit Facility Agreement
(Incorporated by reference to Exhibit 10.1 to our Current Report on Form
8-K (Commission File No. 001-32212) filed on November 6, 2006.)4.8 (b) *
    
    Waiver and consent to $225,000,000 Secured Revolving Loan and Letter of
Credit Facility Agreement.4.9 (a)
    
    Second Lien Credit and Guarantee Agreement (Incorporated by reference to
Exhibit 10.2 to our Current Report on Form 8-K/A (Commission File No.
001-32212) filed on November 7, 2006.)4.9 (b) *
    
    Amendment to Second Lien Credit and Guarantee Agreement.10.1
    
    Form of Amended and Restated Option to Purchase 100,000 Shares of Common
Stock dated August 8, 2003, between Endeavour and each of Stephen P.
Harrington, Humbert B. Powell, III, Gary Krupp, Thomas M. Curran and John
B. Connally III (Incorporated by reference to Exhibit 10.25 of our
Quarterly Report on Form 10-QSB (Commission File No. 000-33439) for the
quarter ended June 30, 2003).10.2 (a)
    
    Option to Purchase 200,000 shares of Common Stock issued to Joseph M.
Fioravanti (Incorporated by reference to Exhibit 10.26 of our Quarterly
Report on Form 10-QSB (Commission File No. 000-33439) for the quarter ended
June 30, 2003.)10.2 (b)
    
    Amendment to Option to Purchase Common Stock dated February 26, 2004
between Endeavour and Joseph M. Fiorvanti (Incorporated by reference to
Exhibit 10.7 of our Annual Report on Form 10-KSB (Commission File No.
000-33439) for the year ended December 31, 2003.)10.3
    
    Form of Amendment to Amended and Restated Option to Purchase Common Stock
dated February 26, 2004, executed by each of Stephen P. Harrington, Humbert
B. Powell, III Gary Krupp, Thomas M. Curran and John B. Connally.
(Incorporated by reference to Exhibit 10.8 of our Annual Report on Form
10-KSB (Commission File No. 000-33439) for the year ended December 31,
2003)10.4
    
    Form of Common Stock Purchase Warrant dated October 18, 2002 issued to
Michael Marcus and Amendment to Common Stock Purchase Warrant issued to
Michael Marcus. (Incorporated by reference to Exhibit 10.20 of our Annual
Report on Form 10-KSB (Commission File No. 000-33439) for the year ended
December 31, 2003)10.5
    
    Purchase and Sale Agreement by and between Continental Southern Resources,
Inc. and CSOR Preferred Liquidation, LLC, dated February 26, 2004.
(Incorporated by reference to Exhibit 10.21 of our Annual Report on Form
10-KSB (Commission File No. 000-33439) for the year ended December 31,
2003)10.6 (a)
    
    Stock Acquisition Agreement dated as of December 16, 2003 between
Continental Southern Resources, Inc. and Ram Trading, Ltd. (Incorporated by
reference to Exhibit 99.6 of the Schedule 13D (Commission File No.
005-62401) filed on March 9, 2004 by Ram Trading, Ltd. et al)




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##### Table of Contents



Exhibit
    
    Description10.6(b)
    
    Amendment to Stock Acquisition Agreement dated as of December 30, 2003 by
and between Ram Trading, Ltd. and Continental Southern Resources, Inc.
(Incorporated by reference to Exhibit 99.7 of the Schedule 13D (Commission
File No. 005-62401) filed on March 9, 2004 by Ram Trading, Ltd. et al)10.7
    
    Common Stock Purchase Warrant dated February 26, 2004 issued to Sanders
Morris Harris Inc. in connection with the private placement of 25,000,000
shares of the Endeavours common stock. (Incorporated by reference to
Exhibit 10.24 of our Annual Report on Form 10-KSB (Commission File No.
000-33439) for the year ended December 31, 2003)10.8
    
    Form of Securities Purchase Agreement, dated February 4, 2004, by and
between Continental Southern Resources, Inc. and certain purchasers
pursuant to a private placement of 125,000 shares of Endeavours common
stock. (Incorporated by reference to Exhibit 10.25 of our Annual Report on
Form 10-KSB (Commission File No. 000-33439) for the year ended December 31,
2003)10.9
    
    Registration Rights Agreement dated as of February 26, 2004 pursuant to the
private placement of 25,000,000 shares of the Endeavours common stock.
(Incorporated by reference to Exhibit 10.26 of our Annual Report on Form
10-KSB (Commission File No. 000-33439) for the year ended December 31,
2003)10.10
    
    Piggyback Registration Rights Agreement dated as of February 26, 2004
between Endeavour and certain purchasers. (Incorporated by reference to
Exhibit 99.2 of the Schedule 13D (Commission File No. 005-62401) filed on
March 9, 2004 by Ram Trading, Ltd. et al).10.11
    
    Interest Purchase Agreement dated February 26, 2004 by and between
Continental Southern Resources, Inc. and Knox Gas, LLC. (Incorporated by
reference to Exhibit 10.28 of our Annual Report on Form 10-KSB (Commission
File No. 000-33439) for the year ended December 31, 2003)10.12
    
    Interest Pledge Agreement, dated February 26, 2004, by and among Knox Gas,
LLC and Continental Southern Resources, Inc. (Incorporated by reference to
Exhibit 10.29 of our Annual Report on Form 10-KSB (Commission File No.
000-33439) for the year ended December 31, 2003)10.13
    
    Secured Promissory Note dated February 26, 2004, made by Knox Gas, LLC in
favor of Continental Southern Resources, Inc. (Incorporated by reference to
Exhibit 10.30 of our Annual Report on Form 10-KSB (Commission File No.
000-33439) for the year ended December 31, 2003)10.14
    
    Form of Lock Up Agreement executed by each of the current executive
officers of Endeavour and PGS Exploration (UK) Limited. (Incorporated by
reference to Exhibit 10.34 of our Annual Report on Form 10-KSB (Commission
File No. 000-33439) for the year ended December 31, 2003)10.15
    
    Form of Lock-up Agreement executed by certain of Endeavours stockholders.
(Incorporated by reference to Exhibit 10.35 of our Annual Report on Form
10-KSB (Commission File No. 000-33439) for the year ended December 31,
2003)10.16
    
    2004 Incentive Plan, effective February 26, 2004. (Incorporated by
reference to Exhibit 10.36 of our Annual Report on Form 10-KSB (Commission
File No. 000-33439) for the year ended December 31, 2003)




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##### Table of Contents



Exhibit
    
    Description10.17(a)
    
    Employment Agreement dated February 26, 2004 by and between Continental
Southern Resources, Inc. and William L. Transier. (Incorporated by
reference to Exhibit 10.37 of our Annual Report on Form 10-KSB (Commission
File No. 000-33439) for the year ended December 31, 2003)10.17(b)
    
    Amendment to employment agreement dated October 9, 2006 by and between
Endeavour International Corporation and William L. Transier 2005
(Incorporated by reference to Exhibit 10.1 to our Current Report on Form
8-K (Commission File No. 001-32212) filed on October 10, 2006.)10.18
    
    Employment Agreement dated February 26, 2004 by and between Continental
Southern Resources, Inc. and John N. Seitz. (Incorporated by reference to
Exhibit 10.38 of our Annual Report on Form 10-KSB (Commission File No.
000-33439) for the year ended December 31, 2003)10.19
    
    Form of Restricted Stock Award Agreement. (Incorporated by reference to
Exhibit 10.39 of our Annual Report on Form 10-KSB (Commission File No.
000-33439) for the year ended December 31, 2003)10.20 (a)
    
    Agreement between PGS Exploration (UK) Limited and NSNV, Inc. as Licensee.
(Portions of this exhibit have been omitted pursuant to a request for
confidential treatment.) (Incorporated by reference to Exhibit 10.1 for our
Quarterly Report on Form 10-Q (Commission File No. 000-33439) for the
quarter ended March 31, 2004.)10.20 (b)
    
    Appendix No. 1 to License Agreement No. 2004-85 between PGS Exploration
(UK) Ltd. and Endeavour Operating Corporation, dated January 10, 2005
(Incorporated by reference to Exhibit 10.1 to our Current Report on Form
8-K (Commission File No. 001-32212) filed on January 11, 2005.)10.21
    
    Share Sale and Purchase Agreement between Lundin Petroleum B.V. and
Endeavour Energy Norge AS dated October 12, 2004 (Incorporated by reference
to Exhibit 2.1 to our Current Report on Form 8-K (Commission File No.
001-32212) filed on October 14, 2004.)10.22
    
    Form of Conditional Offer to Buy Shares of Stock to the Minority
Stockholders of OER oil AS (Incorporated by reference to Exhibit 2.1 to our
Current Report on Form 8-K (Commission File No. 001-32212) filed on
November 15, 2004.)10.23
    
    Form of Nonstatutory Stock Option Agreement between Endeavour International
Corporation and William L. Transier, John N. Seitz, Michael D. Cochran,
Bruce H. Stover, H. Don Teague and Robert L. Thompson, individually
(Incorporated by reference to Exhibit 10.1 to our Current Report on Form
8-K (Commission File No. 001-32212) on January 5, 2005.)10.24
    
    Form of One-Year Restricted Stock Agreement between Endeavour International
Corporation and William L. Transier, John N. Seitz, Michael D. Cochran,
Bruce H. Stover, H. Don Teague and Robert L. Thompson, individually
(Incorporated by reference to Exhibit 10.2 to our Current Report on Form
8-K (Commission File No. 001-32212) on January 5, 2005.)10.25
    
    Form of Three-Year Restricted Stock Agreement between Endeavour
International Corporation and William L. Transier, John N. Seitz, Michael
D. Cochran, Bruce H. Stover, H. Don Teague and Robert L. Thompson,
individually (Incorporated by reference to Exhibit 10.3 to our Current
Report on Form 8-K (Commission File No. 001-32212) on January 5, 2005.)




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##### Table of Contents



Exhibit
    
    Description10.26
    
    Form of Stock Grant Agreement between Endeavour International Corporation
and William L. Transier, John N. Seitz, Michael D. Cochran, Bruce H.
Stover, H. Don Teague and Robert L. Thompson, individually (Incorporated by
reference to Exhibit 10.4 to our Current Report on Form 8-K (Commission
File No. 001-32212) filed on January 5, 2005.)10.27
    
    License Agreement No. 2004-85 between PGS Exploration (UK) Ltd. and
Endeavour Operating Corporation, dated December 21, 2004 (Incorporated by
reference to Exhibit 10.2 to our Current Report on Form 8-K (Commission
File No. 001-32212) filed on January 11, 2005.)10.28
    
    Restricted Stock Award Agreement between Endeavour International
Corporation and Lance Gilliland dated effective August 26, 2005
(Incorporated by reference to Exhibit 10.1 to our Current Report on Form
8-K (Commission File No. 001-32212) filed on September 19, 2005.)10.29
    
    Nonstatutory Stock Option Agreement between Endeavour International
Corporation and Lance Gilliland dated effective August 26, 2005
(Incorporated by reference to Exhibit 10.2 to our Current Report on Form
8-K (Commission File No. 001-32212) filed on September 19, 2005.)10.30
    
    Agreement for Sale and Purchase of Interest dated 8th December 2005 between
Petro-Canada UK Limited and Endeavour Energy UK Limited (Incorporated by
reference to Exhibit 10.1 to our Current Report on Form 8-K (Commission
File No. 001-32212) on December 13, 2005.)10.31
    
    Agreement for the Sale and Purchase of 94.77% Interest in PHT Partners,
L.P. dated April 22, 2005 (Incorporated by reference to Exhibit 2.1 to our
Current Report on Form 8-K (Commission File No. 001-32212) on April 27,
2005.)10.32
    
    Put and Call Option Agreement between Paladin Resources Limited, Endeavour
Energy UK Limited and Endeavour International Corporation, dated May 26,
2006 (Incorporated by reference to Exhibit 2.1 to our Current Report on
Form 8-K (Commission File No. 001-32212) on June 2, 2006.)10.33
    
    Hive-In Agreement between Talisman Energy (UK) Limited, Talisman Energy
Alpha Limited, Talisman North Sea Limited, Talisman Oil Trading Limited and
Talisman Expro Limited, dated May 26, 2006. (Incorporated by reference to
Exhibit 10.1 to our Current Report on Form 8-K (Commission File No.
001-32212) on June 2, 2006.)10.34
    
    Hive-Out Agreement between Talisman Expro Limited and Paladin Resources
(Montrose) Limited, dated May 26, 2006 (Incorporated by reference to
Exhibit 10.2 to our Current Report on Form 8-K (Commission File No.
001-32212) on June 2, 2006.)10.35
    
    Hive-Out Agreement between Talisman Expro Limited and Talisman Petroleum
Ltd., dated May 26, 2006 (Incorporated by reference to Exhibit 10.3 to our
Current Report on Form 8-K (Commission File No. 001-32212) on June 2,
2006.)10.36
    
    Hive-Out Agreement between Talisman Expro Limited and Talisman Oil Trading
Limited, dated May 26, 2006 (Incorporated by reference to Exhibit 10.4 to
our Current Report on Form 8-K (Commission File No. 001-32212) on June 2,
2006.)10.37
    
    Hive-Out Agreement between Talisman Expro Limited and Talisman North Sea
Limited, dated May 26, 2006 (Incorporated by reference to Exhibit 10.5 to
our Current Report on Form 8-K (Commission File No. 001-32212) on June 2,
2006.)




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##### Table of Contents



Exhibit
    
    Description10.38
    
    Hive-Out Agreement between Talisman Expro Limited and Talisman Energy (UK)
Limited, dated May 26, 2006 (Incorporated by reference to Exhibit 10.6 to
our Current Report on Form 8-K (Commission File No. 001-32212) on June 2,
2006.)10.39
    
    Underwriting Agreement, dated October 19, 2006, by and among Endeavour
International Corporation and J.P. Morgan Securities Inc. and Credit Suisse
Securities (USA) LLC, as representatives of the several underwriters named
in Schedule I thereto 2006 (Incorporated by reference to Exhibit 1.1 to our
Current Report on Form 8-K (Commission File No. 001-32212) on October 25,
2006.)10.40
    
    Subscription and Registration Rights Agreement, dated October 19, 2006, by
and among Endeavour International Corporation and the Investors party
thereto (Incorporated by reference to Exhibit 10.1 to our Current Report on
Form 8-K (Commission File No. 001-32212) on October 25, 2006.)10.41
    
    Consulting agreement dated October 9, 2006 by and between Endeavour
International Corporation and John N. Seitz (Incorporated by reference to
Exhibit 10.2 to our Current Report on Form 8-K (Commission File No.
001-32212) on October 10, 2006.)14.1
    
    Code of Ethics of Endeavour International Corporation. (Incorporated by
reference to Exhibit 14.1 of our Annual Report on Form 10-KSB (Commission
File No. 000-33439) for the year ended December 31, 2003)*21.1
    
    List of Subsidiaries.*23.1
    
    Consent of Independent Registered Public Accounting Firm  KPMG LLP.*23.2
    
    Consent of Independent Reserve
Engineers  Netherland, Sewell & Associates, Inc.*23.3
    
    Consent of Independent Reserve Engineers  Gaffney, Cline & Associates Ltd.*31.1
    
    Certification of William L. Transier, Chief Executive Officer, pursuant to
Rule 13a-14(a) of the Securities and Exchange Act of 1934, as amended.*31.2
    
    Certification of Lance Gilliland, Chief Financial Officer, pursuant to Rule
13a-14(a) of the Securities and Exchange Act of 1934, as amended.*31.3
    
    Certification of Robert L. Thompson, Chief Accounting Officer, pursuant to
Rule 13a-14(a) of the Securities and Exchange Act of 1934, as amended.*32.1
    
    Certification of William L. Transier, Chief Executive Officer, pursuant to
18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.*32.2
    
    Certification of Lance Gilliland, Chief Financial Officer, pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.*32.3
    
    Certification of Robert L. Thompson, Chief Accounting Officer, pursuant to
18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith.
    
    Identifies management contracts and compensatory plans or arrangements.