##### Table of Contents



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, 2010
 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
    
    NYSE-Amex
  o þ
 o þ
 þ o
 o o
 þ
  Large accelerated filer o
Accelerated filer 
þNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company 
o o þ
   Documents
Incorporated By Reference:




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##### 



Table of Contents
 Part I
    
    
    
    
    1Item 1.
    
    Business
    
    
    1Item 1A.
    
    Risk Factors
    
    
    19Item 1B.
    
    Unresolved Staff Comments
    
    
    37Item 2.
    
    Properties
    
    
    38Item 3.
    
    Legal Proceedings
    
    
    40Part II
    
    
    
    
    40Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
    
    
    40Item 6.
    
    Selected Financial Data
    
    
    42Item 7.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    43Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    65Item 8.
    
    Financial Statements and Supplementary Data
    
    
    67Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
    
    
    125Item 9A.
    
    Controls and Procedures
    
    
    125Item 9B.
    
    Other Information
    
    
    128Part IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance of the
Registrant
    
    
    128Item 11.
    
    Executive Compensation
    
    
    128Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
    
    
    128Item 13.
    
    Certain Relationships and Related Transactions, and Director
Independence
    
    
    128Item 14.
    
    Principal Accounting Fees and Service
    
    
    129Part IV
    
    
    
    
    129Item 15.
    
    Exhibits and Financial Statement Schedules
    
    
    129Signatures
    
    
    
    
    130EX-2.1EX-2.2EX-3.1.DEX-3.4EX-10.22EX-12.1EX-12.2EX-14.1EX-21.1EX-23.1EX-23.2EX-31.1EX-31.2EX-32.1EX-32.2EX-99.1
  Quantities of natural gas are expressed in this Annual Report on Form 10-K in terms of
thousand cubic feet (Mcf) and million cubic feet (MMcf). Oil is quantified in terms of barrels
(Bbls) and thousands of barrels (Mbbls). Natural gas is compared to oil in terms of barrels of oil
equivalent (BOE), thousand barrels of oil equivalent (MBOE) or million barrels of oil equivalent
(MMBOE). One barrel of oil is the approximate energy equivalent of six Mcf of natural gas. This
is a physical correlation and does not reflect a value or price relationship between the
commodities. With respect to information relating to our working interest in wells or acreage,
net oil and gas wells or acreage is determined by multiplying gross wells or acreage by our
working interest therein. References to number of potential well locations are gross, unless
otherwise indicated.
 References to GAAP refer to U.S. generally accepted accounting principles.




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Endeavour International Corporation
 
 Part I
 
 Item 1. Business
  Our Company
      Our Business Strategy
   
    
    Efficiently develop and commence production from our North Sea development assets.We
currently have three large development projects in the North Sea  the Bacchus, Greater
Rochelle and Columbus fields  which have the potential to significantly increase our
current production levels over the next several years. We intend to efficiently manage our
interests in each of these prospects in order to commence production in a timely and
cost-effective manner. We expect to achieve first production from the Bacchus field in the
second half of 2011. We expect that production from our two-phase development of the
Greater Rochelle area will commence with first production from East Rochelle in the second
half of 2012 and from West Rochelle shortly thereafter. Finally, Columbus is expected to
commence production as early as 2012.
    
    Develop and exploit existing acreage in resource-rich plays. We have established a mix
of U.S. producing assets and undeveloped acreage in both established and emerging resource
plays, including the Haynesville and Marcellus areas and our emerging plays in Alabama and
Montana. We have the ability to adjust our domestic drilling activities in accordance with
current and future commodity prices and our operating results.
    
    Maintain a balanced portfolio of production, development and exploration assets. We
intend to actively manage our assets in a manner that maximizes value and enables us to
allocate resources to effectively pursue our balanced growth strategy. Recognizing this,
we have established a portfolio that balances assets that are characterized by shorter
production-cycles with assets that have larger potential reserves with longer
production-cycles.
 
    
    Exploit potential growth opportunities in our emerging domestic plays. We have
approximately 73,000 and 61,000 net acres, respectively, in exploratory plays in central
Montana and western Alabama, which give us exposure to emerging oil and natural gas shale
plays, respectively. We believe that the relatively modest capital investment required to
drill pilot wells in each of these two areas helps to mitigate the inherent risk in
attempting to develop assets in emerging plays. We may seek to explore these emerging
plays following a review of the projected return on capital from these plays based on early
well results.
    
    Reduce leverage and simplify our capital structure. To fund our growth over the last
several years, we relied primarily on financing structures available to small and
developing companies, some of which were considered relatively complicated. These
financial instruments include several series of convertible notes and our senior term loan.
We are currently exploring our options to replace these instruments with more traditional
financing arrangements. We plan to continue strengthening our balance sheet and lowering
our overall cost of capital, which we believe will give us access to a wider variety of
more favorable financing options on a long-term basis.
 1




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Endeavour International Corporation
 Our Competitive Strengths
  
    
    Significant North Sea development assets and attractive positions in resource-rich shale
plays. We believe that successful development of our three primary development
assets in the North Sea could have the potential to significantly increase our production
levels over the next several years. Moreover, our assets in the U.S. cover a broad
spectrum of resource plays, from established areas, such as Haynesville and Marcellus, to
emerging plays, in Alabama and Montana. This combination should allow us to balance the
capital intensive, long lead-time nature of our North Sea assets with the shorter
development times and lower capital requirements of our U.S. properties.
    
    Balanced producing and development and exploration assets. We have taken important
steps to balance our asset portfolio in several dimensions: U.S. versus U.K. properties;
oil versus natural gas; and short-term versus long-term realizations. We have constructed
our asset portfolio in this manner in an attempt to mitigate the risks of over-emphasizing
any one of these variables. Specifically, we believe that the resource-rich plays in the
U.S., with less capital-intensive and shorter production-cycles relative to our North Sea
development projects, will provide a stable platform for the successful execution of our
strategy by helping to provide cash flows from operations as we develop our longer-term,
more capital-intensive North Sea development projects.
    
    Improving exposure to liquids. With the expected first production from our Bacchus
asset in the second half of 2011, we expect that our liquids production will increase
significantly. In addition, our current portfolio of assets includes other liquids-rich
opportunities in the North Sea as well as upside development acreage in the Heath oil shale
play in Montana. These assets and prospects should provide us with both near- and
long-term liquids exposure.
 
    
    Experienced and skilled management team with proven track records. We were co-founded
in 2004 by William L. Transier, our President and Chief Executive Officer, and John N.
Seitz, one of our directors. Our management team has extensive technical expertise and
industry experience across the full cycle of development of oil and gas assets and
operations. The members of our management team, including our senior geoscience and
engineering professionals, average more than 24 years of experience in the oil and gas
industry. Under this management team, we have executed several significant transactions,
including the sale of our Norwegian subsidiary, the sale of our Cygnus reserves in the North
Sea, our recent Bacchus acquisition and several acquisitions of U.S. onshore properties.
Substantially all of the members of the team have previously worked for a major oil company
or a large independent producer.
 o
    
    Our President and Chief Executive Officer, William L. Transier, was the
former Chief Financial Officer of Ocean Energy, which merged with Devon Energy in
2003, and has over 35 years of experience in the oil and gas industry.o
    
    Our Chief Financial Officer, J. Michael Kirksey, has an extensive
background in both operational and financial management in the energy industry,
having served in various executive roles for Metals USA, Input Output, Inc. and
Keystone International, Inc.o
    
    Carl D. Grenz, our Executive Vice President  International, has 33
years of experience in the oil and gas industry, having spent a majority of his
career working for BHP Billiton and Hamilton Oil, focused in the North Sea.o
    
    Our Executive Vice President  North America, James J. Emme, has 30
years of experience in the oil and gas industry, with an extensive background in
unconventional hydrocarbon exploration and development while working for Anadarko
Petroleum Corporation and Source Exploration, LLC.
 Our Areas of Operation
 North Sea
    2




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Endeavour International Corporation
 Primary Development Fields
 Bacchus
   Greater Rochelle
  3




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Endeavour International Corporation
 East Rochelle
  West Rochelle
  Columbus
  Producing Fields
     4




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Endeavour International Corporation
 United States
   
    
    a one to two rig drilling program in Louisiana and East Texas for our interests in the
Haynesville area and Cotton Valley trend;
    
    a measured drilling program to delineate our position in the Marcellus area while
pipeline infrastructure issues are resolved; and
    
    a thorough analysis of test well results in Alabama and Montana before finalizing any
development plans in these exploratory areas.
  Haynesville Area
    5




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Endeavour International Corporation
 Marcellus Area
   Alabama
  Central Montana
  Reserves
  6




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Endeavour International Corporation
 Oil
    
    Gas
    
    Oil Equivalents(MBbls)
    
    (MMcf)
    
    (MBOE)2010:United Kingdom
    
    
    3,664
    
    
    
    56,177
    
    
    
    13,027United States
    
    
    59
    
    
    
    31,777
    
    
    
    5,3553,723
    
    
    
    87,954
    
    
    
    18,3822009:United Kingdom
    
    
    3,348
    
    
    
    78,316
    
    
    
    16,401United States
    
    
    18
    
    
    
    10,784
    
    
    
    1,8153,366
    
    
    
    89,100
    
    
    
    18,2162008:United Kingdom
    
    
    2,131
    
    
    
    27,130
    
    
    
    6,653United States
    
    
    18
    
    
    
    690
    
    
    
    133Discontinued operations  Norway
    
    
    1,406
    
    
    
    4,977
    
    
    
    2,2363,555
    
    
    
    32,797
    
    
    
    9,022
  7




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Endeavour International Corporation
 Proved
    
    ProvedDeveloped
    
    Undeveloped
    
    Total ProvedReserves
    
    Reserves
    
    Reserves(MBOE)
    
    (MBOE)
    
    (MBOE)2010:United Kingdom
    
    
    1,333
    
    
    
    11,694
    
    
    
    13,027United States
    
    
    2,227
    
    
    
    3,128
    
    
    
    5,3553,560
    
    
    
    14,822
    
    
    
    18,3822009:United Kingdom
    
    
    2,103
    
    
    
    14,298
    
    
    
    16,401United States
    
    
    792
    
    
    
    1,023
    
    
    
    1,8152,895
    
    
    
    15,321
    
    
    
    18,2162008:United Kingdom
    
    
    2,595
    
    
    
    4,058
    
    
    
    6,653United States
    
    
    46
    
    
    
    87
    
    
    
    133Discontinued
Operations  Norway
    
    
    2,122
    
    
    
    114
    
    
    
    2,2364,763
    
    
    
    4,259
    
    
    
    9,022
 Preparation of Oil and Gas Reserve Information
    8




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Endeavour International Corporation
   Qualification of Reserves Preparers and Auditors
   9




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Endeavour International Corporation
 2011 Planned Capital Expenditures
     Company History
    10




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Endeavour International Corporation
         
    
    6% Senior Convertible Notes  During 2005, we issued in a private offering $81.25
million aggregate principal amount of convertible senior notes due in January 2012.
    
    11.5% Convertible Senior Bonds  In January 2008, we issued 11.5% Convertible Bonds due
2014 for gross proceeds of $40 million pursuant to a private offering to a sophisticated
investor in Norway.
    
    Senior Term Loan  In August 2010, we entered into a credit agreement with Cyan
Partners, LP, as administrative agent, and various lenders for a senior, secured term loan,
in the aggregate amount of $150 million, which was subsequently increased to $160 million.
 11




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Endeavour International Corporation
 
    
    Senior Bank Facility  In 2006, we issued a $225 million senior bank facility,
which was subject to a borrowing base limitation with interest of LIBOR plus 1.3%. We
terminated the Senior Bank Facility and repaid the outstanding indebtedness in its entirety
on August 16, 2010
    
    Junior Facility  In the first quarter of 2010, we entered into the $25 million junior
facility, which had a maturity date of February 5, 2011, and bore interest at LIBOR plus
8%. We terminated the Junior Facility and repaid the outstanding indebtedness in its
entirety on August 16, 2010.
    
    $50 million Subordinated Notes  In November 2009, we issued an aggregate $50 million
of subordinated notes due 2014.
    
    Series C Preferred Stock  In 2006, we issued $125 million of convertible preferred
stock. In November 2009, we redeemed 60% of the outstanding shares of Series C Preferred
Stock and amended the terms of the remaining shares of Series C Preferred Stock. The
redemption price consisted of a $25 million cash payment and the issuance of $50 million of
Subordinated Notes.
  Geographical Data
  Competition
   Significant Customers
  12




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Endeavour International Corporation
  Employees
  Environmental Matters and Regulation
  North Sea
   13




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Endeavour International Corporation
 United States
    14




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Endeavour International Corporation
  Climate Change
     15




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Endeavour International Corporation
     Other Regulation of the Oil and Gas Industry
   16




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Endeavour International Corporation
 Production Regulation
  
    
    the location of wells;
    
    the method of drilling and casing wells;
    
    the surface use and restoration of properties upon which wells are drilled;
    
    the plugging and abandoning of wells; and
    
    notice to surface owners and other third parties.
  Regulation
  Title to Properties
  17




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Endeavour International Corporation
 Offices
  Available Information
    Financial Information about Segment and Geographical Areas
  Average Sales Prices and Production Costs by Geographical Area
  18




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Endeavour International Corporation
 
 Item 1A. Risk Factors
 Cautionary Statement Concerning Forward-Looking Statements
  
    
    our future financial position;
    
    our business strategy;
    
    budgets;
    
    projected costs, savings and plans;
    
    objectives of management for future operations;
    
    legal strategies; and
    
    legal proceedings.
  
    
    discovery, estimation, development and replacement of oil and gas reserves;
    
    decreases in proved reserves due to technical or economic factors;
    
    drilling of wells and other planned exploitation activities;
    
    timing and amount of future production of oil and gas;
    
    the volatility of oil and gas prices;
    
    availability and terms of capital;
    
    operating costs such as lease operating expenses, administrative costs and other
expenses;
    
    our future operating or financial results;
    
    amount, nature and timing of capital expenditures, including future development costs;
    
    cash flow and anticipated liquidity;
    
    availability of drilling and production equipment;
    
    uncertainties related to drilling and production operations in a new region;
    
    cost and access to natural gas gathering, treatment and pipeline facilities;
    
    business strategy and the availability of acquisition opportunities; and
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Endeavour International Corporation
 
    
    factors not known to us at this time.
  Risks related to our business
 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 U.S.
  20




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Endeavour International Corporation
  Economic conditions in the U.S. and key international markets may materially adversely impact our
operating results, which could hinder or prevent us from meeting our future capital needs.
   Oil and gas prices are volatile, and a decline in oil and gas prices would reduce our revenues,
profitability and cash flow and impede our growth.
  21




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Endeavour International Corporation
  
    
    global supply of oil and gas;
    
    level of consumer product demand;
    
    technological advances affecting oil and gas consumption;
    
    global economic conditions;
    
    price and availability of alternative fuels;
    
    actions of the Organization of Petroleum Exporting Countries and other state-controlled
oil companies relating to oil price and production controls;
    
    governmental regulations and taxation;
    
    political conditions in or affecting other oil-producing and gas-producing countries;
    
    weather conditions;
    
    the proximity, capacity, cost and availability of pipeline and other transportation
facilities; and
    
    the impact of energy conservation efforts.
   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.
  22




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Endeavour International Corporation
  Our use of derivative transactions may limit future revenues from price increases and involves the
risk that our counterparties may be unable to satisfy their obligations to us.
   We are dependent on our executive officers and need to attract and retain additional qualified
personnel.
   23




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Endeavour International Corporation
 Our operations are sensitive to currency rate fluctuations.
  Risks related to executing our strategy and operations
 To maintain and grow our production and cash flow, we must continue to develop and produce
existing reserves and discover or acquire new oil and gas reserves to develop and produce.
   We may be unable to make attractive acquisitions, and any acquisition we complete is subject to
substantial risks that could impact our business.
  
    
    the inability to estimate accurately the costs to develop the interests in oil and gas
prospects, the recoverable volumes of reserves, rates of future production and future net
cash flows attainable from the reserves;
    
    the assumption of unknown liabilities, losses or costs for which we are not indemnified
or for which the indemnity we receive is inadequate;
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Endeavour International Corporation
 
    
    the validity of assumptions about costs, including synergies;
    
    the impact on our liquidity or financial leverage of using available cash or debt to
finance acquisitions;
    
    the diversion of managements attention from other business concerns; and
    
    an inability to hire, train or retain qualified personnel to manage and operate our
growing business and assets.
  Our expectations for future drilling and development activities will be realized over several
years, making them susceptible to uncertainties that could materially alter the occurrence or
timing of such activities.
  Our drilling projects are based in part on seismic and other technical data, which cannot ensure
the commercial success of a prospect.
  25




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Endeavour International Corporation
  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.
  A significant portion of our total estimated net proved reserves at December 31, 2010 were
undeveloped, and those reserves may not ultimately be developed.
  Our offshore operations involve special risks that could increase our cost of operations and
adversely affect our ability to produce oil and gas.
  26




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Endeavour International Corporation
  We have commenced exploration, production and development operations in the United States, and as a
result, our ability to successfully achieve our goals is subject to greater risk and uncertainty
  We are not the operator of our producing fields and 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 operators expertise and financial resources;
    
    the timing and amount of their capital expenditures;
    
    the rate of production of the reserves;
    
    approval of other participants to drill wells and implement other work programs;
    
    the availability of suitable drilling rigs, drilling equipment, support vessels,
production and transportation infrastructure and qualified operating personnel; and
    
    selection of technology.
  27




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Actual production could differ significantly from forecasts.
  Our insurance may not protect us against business and operating risks, including an operator of a
prospect in which we participate failing to maintain or obtain adequate insurance.
  The cost of decommissioning is uncertain.
  28




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Endeavour International Corporation
 Risks related to access to capital and financing
 Our development and exploration operations require substantial capital, and we may be unable
to obtain needed capital or financing on satisfactory terms, which could lead to a loss of
properties and a decline in our oil and gas reserves.
  
    
    our oil and gas reserves;
    
    the level of natural gas and crude oil we are able to produce from existing wells;
    
    the prices at which natural gas and crude oil are sold; and
    
    our ability to acquire, locate and produce new reserves.
   Our debt levels could negatively impact our financial condition, results of operations and business
prospects.
  29




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Endeavour International Corporation
 
    
    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 instruments 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.
   Failure to satisfy certain covenants in our Senior Term Loan could cause this debt to come due
prematurely.
  30




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Endeavour International Corporation
 A change of control may adversely affect our liquidity and require refinancing of certain debt
instruments.
  If we are unable to fulfill commitments under any of our oil and gas interests, we will lose our
interest, and our entire investment, in such interest.
  Risks related to environmental and other regulations
 We are subject to environmental regulations that can have a significant impact on our
operations.
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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.
  Federal and state legislative regulatory initiatives relating to hydraulic fracturing could result
in increased costs and additional operating restrictions or delays.
  32




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Endeavour International Corporation
  Climate change legislation or regulations restricting emissions of greenhouse gases could
result in increased operating costs and reduced demand for the crude oil and natural gas that we
produce.
    The recent adoption of derivatives legislation by the United States Congress could have an adverse
effect on our ability to use derivative instruments to reduce the effect of commodity price,
interest rate and other risks associated with our business.
  33




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Endeavour International Corporation
  Certain federal income tax deductions currently available with respect to oil and natural gas
exploration and development may be eliminated as a result of proposed legislation.
  34




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Endeavour International Corporation
 Risks related to potential impairments
 Our financial results could be adversely affected by goodwill impairments.
  Lower oil and gas prices and other factors may result in ceiling test write-downs or other
impairments.
    Risks relating to our common stock
 An active liquid trading market for our common stock may not be maintained and the trading
price of our common stock may be volatile.
  35




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Endeavour International Corporation
  If we, our existing stockholders or holders of our securities that are convertible into shares
of our common stock sell any shares of our common stock, the market price of our common stock could
significantly decline.
    Provisions in our articles of incorporation, bylaws and the Nevada Revised Statutes may
discourage a change of control.
   36




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Endeavour International Corporation
  
 Item 1B. Unresolved Staff Comments
  37




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Endeavour International Corporation
 
 Item 2. Properties
 Drilling Statistics
  Productive Wells
    
    
    Dry Holes
    
    
    In Progress WellsGross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    NetExploration2010:United Kingdom
    
    
    3
    
    
    
    0.38
    
    
    
    1
    
    
    
    0.10
    
    
    
    
    
    
    
    United States
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    1.002009:United Kingdom
    
    
    3
    
    
    
    0.82
    
    
    
    2
    
    
    
    0.52
    
    
    
    1
    
    
    
    0.10United States
    
    
    3
    
    
    
    1.32
    
    
    
    1
    
    
    
    0.22
    
    
    
    3
    
    
    
    1.042008:United Kingdom
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    0.68United States
    
    
    1
    
    
    
    0.20
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    0.10Discontinued Operations   Norway
    
    
    5
    
    
    
    0.14
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Development2010:United Kingdom
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    0.05United States
    
    
    13
    
    
    
    3.00
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    1.002009:United Kingdom
    
    
    2
    
    
    
    0.05
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    0.022008:United Kingdom
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    0.02Discontinued Operations   Norway
    
    
    3
    
    
    
    0.08
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  38




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Endeavour International Corporation
 Productive Well Summary
  Oil
    
    GasGross
    
    Net
    
    Gross
    
    NetUnited Kingdom
    
    
    44
    
    
    
    4.74
    
    
    
    5
    
    
    
    0.35United States
    
    
    2
    
    
    
    1.12
    
    
    
    42
    
    
    
    12.15Total
    
    
    46
    
    
    
    5.86
    
    
    
    47
    
    
    
    12.50
 Acreage
  Developed
    
    UndevelopedGross
    
    Net
    
    Gross
    
    NetUnited Kingdom
    
    
    31,790
    
    
    
    8,108
    
    
    
    252,052
    
    
    
    70,047United States
    
    
    12,425
    
    
    
    5,561
    
    
    
    574,871
    
    
    
    165,065Total
    
    
    44,215
    
    
    
    13,669
    
    
    
    826,923
    
    
    
    235,112
  Sales Volumes and Prices
  39




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##### Table of Contents



Endeavour International Corporation
 Reserves
  
 Item 3. Legal Proceedings
  
 Part II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
  Reverse Stock Split
   40




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##### Table of Contents



Endeavour International Corporation
 Historical Stock Prices
  2010
    
    2009High
    
    Low
    
    High
    
    LowFirst Quarter
    
    $
    10.36
    
    
    $
    5.60
    
    
    $
    7.21
    
    
    $
    3.22Second Quarter
    
    
    12.18
    
    
    
    8.68
    
    
    
    15.47
    
    
    
    5.81Third Quarter
    
    
    10.22
    
    
    
    6.72
    
    
    
    10.50
    
    
    
    7.14Fourth Quarter
    
    
    14.16
    
    
    
    8.12
    
    
    
    9.10
    
    
    
    5.74
 Holders
  Dividends
    
    
    cumulative;
    
    compounded quarterly based on the original issue price;
    
    payable in cash or common stock, at 4.5% or 4.92%, respectively, since November 2009
and at 8.5% or 8.92%, respectively, in prior periods; and
    
    payable to the preferred stock investors prior to payment of any other dividend on any
other shares of our capital stock.
 41




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##### Table of Contents



Endeavour International Corporation
  
 Item 6. Selected Financial Data
   Summary Financial Data (1)Year Ended December 31,(Amounts in thousands, except per share data)
    
    2010
    
    2009
    
    2008
    
    2007
    
    2006Summary Income Statement Data:Revenues
    
    $
    71,675
    
    
    $
    62,293
    
    
    $
    170,781
    
    
    $
    135,876
    
    
    $
    24,881Operating Profit (Loss)
    
    
    1,327
    
    
    
    (50,398
    )
    
    
    18,236
    
    
    
    23,778
    
    
    
    (11,516
    )Net Income (Loss) to
Common Shareholders
    
    
    54,304
    
    
    
    (62,206
    )
    
    
    45,681
    
    
    
    (60,315
    )
    
    
    (8,829
    )Net Income (Loss) PerCommon Share  Basic:Continuing Operations
    
    $
    2.34
    
    
    $
    (5.84
    )
    
    $
    0.82
    
    
    $
    (3.50
    )
    
    $
    (0.56
    )Discontinued Operations
    
    
    
    
    
    
    2.50
    
    
    
    1.67
    
    
    
    0.07
    
    
    
    (0.14
    )Total
    
    $
    2.34
    
    
    $
    (3.34
    )
    
    $
    2.49
    
    
    $
    (3.43
    )
    
    $
    (0.70
    )Net Income (Loss) Per Common Share  Diluted:Continuing Operations
    
    $
    1.95
    
    
    $
    (4.70
    )
    
    $
    0.59
    
    
    $
    (3.50
    )
    
    $
    (0.56
    )Discontinued Operations
    
    
    
    
    
    
    2.50
    
    
    
    1.20
    
    
    
    0.07
    
    
    
    (0.14
    )Total
    
    $
    1.95
    
    
    $
    (2.20
    )
    
    $
    1.79
    
    
    $
    (3.43
    )
    
    $
    (0.70
    )Summary Balance Sheet Data:Working Capital
    
    $
    71,145
    
    
    $
    24,885
    
    
    $
    22,902
    
    
    $
    37,198
    
    
    $
    47,431Total Assets
    
    
    750,287
    
    
    
    538,879
    
    
    
    737,470
    
    
    
    747,623
    
    
    
    774,470Debt
    
    
    345,306
    
    
    
    223,385
    
    
    
    227,855
    
    
    
    266,250
    
    
    
    306,250Convertible Preferred Stock
    
    
    53,152
    
    
    
    59,058
    
    
    
    125,000
    
    
    
    125,000
    
    
    
    125,000Equity
    
    
    154,618
    
    
    
    60,133
    
    
    
    117,971
    
    
    
    70,149
    
    
    
    116,828
 42




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##### Table of Contents



Endeavour International Corporation
 
 (1)
    
    Includes the following:   acquisition of producing properties and exploration acreage in the U.S. in 2009 and
2010;   disposition of our interests in the Cygnus reserves in 2010 for a gain of $87.2
million;   acquisition of Talisman Expro Limited in November 2006;   acquisition of working interests in the Enoch and Bacchus prospects in 2006; and   unrealized gains (losses) on derivatives of $12.3 million, $(55.6) million, $76.7
million, $(89.1) million and $34.5 million in 2010, 2009, 2008, 2007 and 2006,
respectively.  
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
   43




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Endeavour International Corporation
       44




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##### Table of Contents



Endeavour International Corporation
      Results of Operations
  
    
    As a result of substantially increased oil prices and increased sales from our U.S.
operations, partially offset by decreases in natural gas prices, our revenues have
increased from $62.3 million for the period ended December 31, 2009 to $71.7 million as of
December 31, 2010.
    
    U.S. production reflects the results of our purchase of producing assets in October 2009
and ongoing drilling in 2010, primarily in the Haynesville area.
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##### Table of Contents



Endeavour International Corporation
 
    
    In the first quarter of 2009, we suspended production at the IVRRH, Renee and Rubie
fields due to high operating costs.
    
    In the U.K., natural production declines at certain of our fields have not been offset
by infield drilling resulting in production decreases at certain fields, particularly in
2010 and 2009 at our largest producing gas field  Goldeneye.
    
    Sale of our discontinued operations in Norway in May 2009.
    46




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##### Table of Contents



Endeavour International Corporation
 Year Ended December 31,2010
    
    2009
    
    2008Sales volume (1)Oil and condensate sales (Mbbls):United Kingdom
    
    
    545
    
    
    
    690
    
    
    
    1,032United States
    
    
    6
    
    
    
    4
    
    
    
    Continuing operations
    
    
    551
    
    
    
    694
    
    
    
    1,032Discontinued operations  Norway
    
    
    
    
    
    
    310
    
    
    
    726Total
    
    
    551
    
    
    
    1,004
    
    
    
    1,758Gas sales (MMcf):United Kingdom
    
    
    3,071
    
    
    
    3,743
    
    
    
    6,532United States
    
    
    2,636
    
    
    
    320
    
    
    
    Continuing operations
    
    
    5,707
    
    
    
    4,063
    
    
    
    6,532Discontinued operations  Norway
    
    
    
    
    
    
    686
    
    
    
    2,322Total
    
    
    5,707
    
    
    
    4,749
    
    
    
    8,854Oil equivalent sales (MBOE)United Kingdom
    
    
    1,057
    
    
    
    1,314
    
    
    
    2,121United States
    
    
    445
    
    
    
    58
    
    
    
    Continuing operations
    
    
    1,502
    
    
    
    1,372
    
    
    
    2,121Discontinued operations  Norway
    
    
    
    
    
    
    425
    
    
    
    1,113Total
    
    
    1,502
    
    
    
    1,797
    
    
    
    3,234Total BOE per day
    
    
    4,115
    
    
    
    4,923
    
    
    
    8,835Physical production volume (BOE per day) (2):United Kingdom
    
    
    2,904
    
    
    
    3,669
    
    
    
    5,804United States
    
    
    1,221
    
    
    
    162
    
    
    
    Continuing operations
    
    
    4,125
    
    
    
    3,831
    
    
    
    5,804Discontinued operations  Norway
    
    
    
    
    
    
    1,156
    
    
    
    3,033Total
    
    
    4,125
    
    
    
    4,987
    
    
    
    8,837Realized Prices (3)Oil and
condensate price ($ per Bbl):Before commodity derivatives
    
    $
    76.39
    
    
    $
    52.15
    
    
    $
    90.53Effect of commodity derivatives
    
    
    (5.61
    )
    
    
    22.51
    
    
    
    (14.50
    )Realized prices including commodity derivatives
    
    $
    70.78
    
    
    $
    74.66
    
    
    $
    76.03Gas price ($ per Mcf):Before commodity derivatives
    
    $
    5.18
    
    
    $
    5.77
    
    
    $
    11.44Effect of commodity derivatives
    
    
    0.27
    
    
    
    2.69
    
    
    
    (0.35
    )Realized prices including commodity derivatives
    
    $
    5.45
    
    
    $
    8.46
    
    
    $
    11.09Equivalent oil price ($ per BOE):Before commodity derivatives
    
    $
    47.72
    
    
    $
    44.44
    
    
    $
    80.54Effect of commodity derivatives
    
    
    (1.03
    )
    
    
    19.71
    
    
    
    (8.84
    )Realized prices including commodity derivatives
    
    $
    46.69
    
    
    $
    64.15
    
    
    $
    71.70Operating Costs ($ per BOE)(4)
    
    $
    10.22
    
    
    $
    12.97
    
    
    $
    14.40
 47




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##### Table of Contents



Endeavour International Corporation
 (1)
    
    We record oil revenues on the sales method, i.e. when delivery has occurred. We use
the entitlements method to account for sales of gas production.(2)
    
    Physical production may differ from sales volumes based on the timing of tanker
liftings for our international sales.(3)
    
    The average sales prices reflect both our continuing and discontinued operations
and include realized gains and losses for derivative contracts we utilize to manage
price risk related to our future cash flows.(4)
    
    Operating costs reflect both our continuing and discontinued operations and are
costs incurred to operate and maintain our wells and related equipment and include cost
of labor, well service and repair, location maintenance, power and fuel, transportation,
cost of product and production related general and administrative costs.
    48




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Endeavour International Corporation
 Operating Expenses
   DD&A and Impairment of Oil and Gas Properties
    General and Administrative (G&A) Expenses
   49




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##### Table of Contents



Endeavour International Corporation
 Year Ended December 31,(Amounts in thousands)
    
    2010
    
    2009
    
    2008Compensation
    
    $
    18,110
    
    
    $
    14,659
    
    
    $
    11,203Consulting, legal and accounting fees
    
    
    5,843
    
    
    
    5,118
    
    
    
    4,679Occupancy costs
    
    
    1,158
    
    
    
    982
    
    
    
    1,130Other expenses
    
    
    2,730
    
    
    
    1,364
    
    
    
    4,005Total gross cash G&A expenses
    
    
    27,841
    
    
    
    22,123
    
    
    
    21,017Non-cash stock-based compensation
    
    
    3,692
    
    
    
    2,612
    
    
    
    2,928Gross G&A expenses
    
    
    31,533
    
    
    
    24,735
    
    
    
    23,945Less: capitalized G&A expenses
    
    
    (13,118
    )
    
    
    (7,769
    )
    
    
    (8,013
    )Net G&A expenses
    
    $
    18,415
    
    
    $
    16,966
    
    
    $
    15,932
 Interest Expense and Other
    Income Taxes
  50




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Endeavour International Corporation
 Total
    
    DiscontinuedContinuing
    
    Operations (Amounts in thousands)
    
    U.K.
    
    U.S.
    
    Other
    
    Operations
    
    Norway
    
    TotalYear Ended December 31, 2010:Net income (loss) before taxes
    
    $
    90,160
    
    
    $
    (30,978
    )
    
    $
    (3,439
    )
    
    $
    55,743
    
    
    $
    
    
    
    $
    55,743Current tax (benefit) expense
    
    
    2,734
    
    
    
    
    
    
    
    (154
    )
    
    
    2,580
    
    
    
    
    
    
    
    2,580Deferred tax (benefit) expense
    
    
    (2,388
    )
    
    
    
    
    
    
    (929
    )
    
    
    (3,317
    )
    
    
    
    
    
    
    (3,317
    )Foreign currency losses on
deferred tax liabilities
    
    
    
    
    
    
    
    
    
    
    (51
    )
    
    
    (51
    )
    
    
    
    
    
    
    (51
    )Total tax (benefit) expense
    
    
    346
    
    
    
    
    
    
    
    (1,134
    )
    
    
    (788
    )
    
    
    
    
    
    
    (788
    )Net income (loss) after taxes
    
    $
    89,814
    
    
    $
    (30,978
    )
    
    $
    (2,305
    )
    
    $
    56,531
    
    
    $
    
    
    
    $
    56,531Year Ended December 31, 2009:Net income (loss) before taxes
    
    $
    (52,041
    )
    
    $
    (31,167
    )
    
    $
    (11,479
    )
    
    $
    (94,687
    )
    
    $
    51,963
    
    
    $
    (42,724
    )Current tax expense
    
    
    (5,739
    )
    
    
    40
    
    
    
    (26
    )
    
    
    (5,725
    )
    
    
    (603
    )
    
    
    (6,328
    )Deferred tax expense
    
    
    (20,260
    )
    
    
    (20
    )
    
    
    (35
    )
    
    
    (20,315
    )
    
    
    4,791
    
    
    
    (15,524
    )Foreign currency gains on
deferred tax liabilities
    
    
    18,882
    
    
    
    
    
    
    
    
    
    
    
    18,882
    
    
    
    1,241
    
    
    
    20,123Total tax expense
    
    
    (7,117
    )
    
    
    20
    
    
    
    (61
    )
    
    
    (7,158
    )
    
    
    5,429
    
    
    
    (1,729
    )Net income (loss) after taxes
    
    $
    (44,924
    )
    
    $
    (31,187
    )
    
    $
    (11,418
    )
    
    $
    (87,529
    )
    
    $
    46,534
    
    
    $
    (40,995
    )Year Ended December 31, 2008:Net income (loss) before taxes
    
    $
    66,129
    
    
    $
    (11,969
    )
    
    $
    (4,185
    )
    
    $
    49,975
    
    
    $
    63,244
    
    
    $
    113,219Current tax (benefit) expense
    
    
    11,158
    
    
    
    
    
    
    
    10
    
    
    
    11,168
    
    
    
    27,879
    
    
    
    39,047Deferred tax (benefit) expense
    
    
    22,673
    
    
    
    
    
    
    
    303
    
    
    
    22,976
    
    
    
    15,415
    
    
    
    38,391Foreign currency losses on
deferred tax liabilities
    
    
    (10,028
    )
    
    
    
    
    
    
    
    
    
    
    (10,028
    )
    
    
    (10,681
    )
    
    
    (20,709
    )Total tax (benefit) expense
    
    
    23,803
    
    
    
    
    
    
    
    313
    
    
    
    24,116
    
    
    
    32,613
    
    
    
    56,729Net income (loss) after taxes
    
    $
    42,326
    
    
    $
    (11,969
    )
    
    $
    (4,498
    )
    
    $
    25,859
    
    
    $
    30,631
    
    
    $
    56,490
   51




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Endeavour International Corporation
 Liquidity and Capital Resources
 Capital Expenditures
  Capital Resources
 Year Ended December 31,(Amounts in thousands)
    
    2010
    
    2009Cash
    
    $
    99,267
    
    
    $
    27,287Restricted Cash
    
    $
    31,776
    
    
    $
    2,879Debt, including current maturities
    
    $
    (345,306
    )
    
    $
    (223,385
    )Debt, net of Cash
    
    $
    (214,263
    )
    
    $
    (193,219
    )
 Year Ended December 31,2010
    
    2009Net cash provided by operating activities
    
    $
    17,019
    
    
    $
    55,711Net cash provided by (used in) investing activities
    
    $
    (56,314
    )
    
    $
    31,120Net cash provided by (used in) financing activities
    
    $
    111,275
    
    
    $
    (97,700
    )
  
    
    completed the Cygnus Sale for $110 million in cash in October 2010;
    
    entered into a $160 million Senior Term Loan during 2010 Loan in August 2010;
    
    repaid and terminated the Senior Bank Facility and the $25 million Junior Facility;
    
    completed a registered direct offering of common stock, in connection with the Senior
Term Loan, to sell 1.3 million shares of our common stock for aggregate cash consideration
of approximately $10.1 million, after expenses;
    
    completed a private placement of our common stock, pursuant to a Common Stock Purchase
Agreement, selling 3.4 million shares for aggregate net cash consideration of approximately
$20.5 million in February 2010;
 52




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Endeavour International Corporation
 
    
    repaid $63.1 million of net debt in 2009;
    
    redeemed $75 million of the Series C Convertible Preferred Stock in the fourth quarter
of 2009 with $25 million in cash and $50 million subordinated notes;
    
    repaid the $75 million second lien term loan in the first quarter of 2008; and
    
    issued $40 million of 11.5% Convertible Bonds in the first quarter of 2008.
       53




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Endeavour International Corporation
     Outlook
 2011 Planned Capital Expenditures
    54




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##### Table of Contents



Endeavour International Corporation
 2011 Liquidity and Capital Resources
   
    
    Initial production date of the Bacchus field We expect first production of the
Bacchus field to commence in mid 2011.  The
precise initial production date and how long it may take for Bacchus to reach full
production are key variables to our overall 2011 production.
    
    U.S. drilling program results We are continuing our drilling operations in the U.S.
and expect to have additional production as new successful wells are completed. Currently,
we have seven wells in the US that are either being completed or awaiting completion.
    
    Flow testing at the Goldeneye field In early December 2010, the Goldeneye field was
shut-in due to flow assurance issues resulting from increased water production. As
discussed earlier, the Goldeneye field is a mature gas field, nearing the end of its
production life. In February 2011, production was re-started to commence flow trials
which, when concluded, should help us determine how much more production may be expected
from the Goldeneye field.
  55




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##### Table of Contents



Endeavour International Corporation
   2011 and 2012 Debt Maturities
  Non-GAAP Measures
  56




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Endeavour International Corporation
   57




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Endeavour International Corporation
 Year Ended December 31,(Amounts in thousands)
    
    2010
    
    2009
    
    2008Net income (loss)
    
    $
    56,531
    
    
    $
    (40,995
    )
    
    $
    56,490Depreciation, depletion and amortization
    
    
    28,894
    
    
    
    38,701
    
    
    
    81,734Impairment of oil and gas properties
    
    
    7,692
    
    
    
    43,929
    
    
    
    36,970Deferred tax expense (benefit)
    
    
    (3,367
    )
    
    
    4,599
    
    
    
    17,682Gain on sales
    
    
    (87,171
    )
    
    
    (47,308
    )
    
    
    (258
    )Unrealized (gain) loss on derivatives
    
    
    (12,291
    )
    
    
    55,598
    
    
    
    (76,666
    )Early termination of commodity derivatives
    
    
    10,201
    
    
    
    
    
    
    
    Other
    
    
    20,632
    
    
    
    16,835
    
    
    
    5,114Discretionary Cash Flow (1)
    
    $
    21,121
    
    
    $
    71,359
    
    
    $
    121,066Net income (loss)
    
    $
    56,531
    
    
    $
    (40,995
    )
    
    $
    56,490Impairment of oil and gas properties (net of
tax) (2)
    
    
    7,692
    
    
    
    28,263
    
    
    
    18,485Unrealized (gain) loss on derivatives (net of
tax) (3)
    
    
    (6,820
    )
    
    
    33,702
    
    
    
    (37,743
    )Currency impact on deferred taxes
    
    
    (51
    )
    
    
    20,123
    
    
    
    (20,709
    )Net Income as Adjusted
    
    $
    57,352
    
    
    $
    41,093
    
    
    $
    16,523Net income (loss)
    
    $
    56,531
    
    
    $
    (40,995
    )
    
    $
    56,490Unrealized (gain) loss on derivatives
    
    
    (12,291
    )
    
    
    55,598
    
    
    
    (76,666
    )Net interest expense
    
    
    34,517
    
    
    
    16,420
    
    
    
    21,301Depreciation, depletion and amortization
    
    
    28,894
    
    
    
    38,701
    
    
    
    81,734Impairment of oil and gas properties
    
    
    7,692
    
    
    
    43,929
    
    
    
    36,970Income tax expense (benefit)
    
    
    (788
    )
    
    
    (1,729
    )
    
    
    56,729Early termination of commodity derivatives
    
    
    10,201
    
    
    
    
    
    
    
    Gain on sale of discontinued operations
    
    
    
    
    
    
    (47,308
    )
    
    
    Adjusted EBITDA
    
    $
    124,756
    
    
    $
    64,616
    
    
    $
    176,558
 
 (1)
    
    Discretionary Cash Flow is equal to cash flow from operating activities
before the changes in operating assets and liabilities, excluding the early termination of
commodity derivatives.(2)
    
    Net of tax benefits of none, $(15,666) and $(18,485) in 2010,
2009 and 2008, respectively.(3)
    
    Net of tax expense (benefit) of $5,471, $(21,896) and $38,923 in 2010,
2009 and 2008, respectively. 58




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Endeavour International Corporation
 Disclosures about Contractual Obligations and Commercial Commitments
  Payments due by PeriodLessthan 1
    
    1-3
    
    
    
    
    
    After 5(Amounts in thousands)
    
    Total
    
    Year
    
    Years
    
    3-5 Years
    
    YearsLong-term debtPrincipal
    
    $
    349,575
    
    
    $
    21,600
    
    
    $
    261,021
    
    
    $
    66,954
    
    
    $
    Interest (1)
    
    
    106,598
    
    
    
    34,817
    
    
    
    47,531
    
    
    
    24,250
    
    
    
    Asset retirement obligations
    
    
    42,996
    
    
    
    5,987
    
    
    
    18,428
    
    
    
    1,467
    
    
    
    17,114Operating leases for office
leases and equipment
    
    
    1,085
    
    
    
    767
    
    
    
    318
    
    
    
    
    
    
    
    Total Contractual Obligations
    
    $
    500,254
    
    
    $
    63,171
    
    
    $
    327,298
    
    
    $
    92,671
    
    
    $
    17,114
 Off-Balance Sheet Arrangements
  Rig Commitments
  Critical Accounting Policies and Estimates
  59




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##### Table of Contents



Endeavour International Corporation
   Full Cost Accounting
   
    
    the future net cash flows related to estimated production of proved reserves;
    
    the effect of derivative instruments that qualify as cash flow hedges;
    
    the lower of cost or estimated fair value of unproved properties; and
    
    the expected income tax effects of the above items.
    60




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##### Table of Contents



Endeavour International Corporation
    Business Combinations
   61




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##### Table of Contents



Endeavour International Corporation
 Goodwill and Intangible Assets
     Dismantlement, Restoration and Environmental Costs
  62




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##### Table of Contents



Endeavour International Corporation
  Revenue Recognition
  Derivative Instruments and Hedging Activities
   63




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##### Table of Contents



Endeavour International Corporation
   Income Taxes
  Stock-Based Compensation Arrangements
   Fair Value
  64




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##### Table of Contents



Endeavour International Corporation
  
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk
 Foreign Exchange Risk
  65




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##### Table of Contents



Endeavour International Corporation
 Commodity Price Risk
   2011
    
    2012
    
    TotalOil:Fixed Price Puts (Mbbl)
    
    
    144
    
    
    
    40
    
    
    
    184Weighted Average Price ($/Barrel)
    
    $
    90.18
    
    
    $
    91.85
    
    
    
    90.55Gas: (1)Fixed Price Puts (MMcf)
    
    
    118
    
    
    
    55
    
    
    
    173Weighted Average Price ($/Mcf)
    
    $
    7.48
    
    
    $
    8.20
    
    
    
    7.71
 
 (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, 2010 was $1.54 to
£1.00.  Interest Rate Risk
  66




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Endeavour International Corporation
 
 Item 8. Financial Statements and Supplementary Data
 Report of Independent Registered Public Accounting Firm
 
     Internal Control  Integrated
Framework
  
 67




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##### Table of Contents



Endeavour International Corporation
Consolidated Balance Sheets
 December 31,2010
    
    
    2009AssetsCurrent Assets:Cash and cash equivalents
    
    $
    99,267
    
    
    $
    27,287Restricted cash
    
    
    31,776
    
    
    
    2,879Accounts receivable
    
    
    8,068
    
    
    
    14,800Prepaid expenses and other current assets
    
    
    8,718
    
    
    
    10,118Total Current Assets
    
    
    147,829
    
    
    
    55,084Property and Equipment, Net ($161,430 and $154,553 not subject
to amortization at 2010 and 2009, respectively)
    
    
    364,677
    
    
    
    266,587Goodwill
    
    
    211,886
    
    
    
    211,886Other Assets
    
    
    25,895
    
    
    
    5,322Total Assets
    
    $
    750,287
    
    
    $
    538,879
  68




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Endeavour International Corporation
Consolidated Balance Sheets
 December 31,2010
    
    2009Liabilities and Stockholders EquityCurrent Liabilities:Accounts payable
    
    $
    32,442
    
    
    $
    12,401Current maturities of debt
    
    
    21,600
    
    
    
    Accrued expenses and other
    
    
    22,642
    
    
    
    17,798Total Current Liabilities
    
    
    76,684
    
    
    
    30,199Long-Term Debt
    
    
    323,706
    
    
    
    223,385Deferred Taxes
    
    
    77,200
    
    
    
    80,692Other Liabilities
    
    
    64,927
    
    
    
    85,412Total Liabilities
    
    
    542,517
    
    
    
    419,688Commitments and ContingenciesSeries C Convertible Preferred Stock:Face value (liquidation preference)
    
    
    45,000
    
    
    
    50,000Net non-cash premiums under fair value accounting on redemption
    
    
    8,152
    
    
    
    9,058Total Series C Convertible Preferred Stock
    
    
    53,152
    
    
    
    59,058Stockholders Equity:Series B preferred stock (Liquidation preference: $3,273
and $3,115 at 2010 and 2009, respectively)
    
    
    
    
    
    
    Common stock; shares issued and outstanding (24,784 and
18,803 shares at 2010 and 2009, respectively)
    
    
    25
    
    
    
    19Additional paid-in capital
    
    
    287,995
    
    
    
    247,820Treasury stock, at cost (72 and 72 shares at 2010
and 2009, respectively)
    
    
    (587
    )
    
    
    (587
    )Accumulated deficit
    
    
    (132,815
    )
    
    
    (187,119
    )Total Stockholders Equity
    
    
    154,618
    
    
    
    60,133Total Liabilities and Stockholders Equity
    
    $
    750,287
    
    
    $
    538,879
  69




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Endeavour International Corporation
Consolidated Statement of Operations
 Year Ended December 31,2010
    
    
    2009
    
    
    2008Revenues
    
    $
    71,675
    
    
    $
    62,293
    
    
    $
    170,781Cost of Operations:Operating expenses
    
    
    15,347
    
    
    
    17,776
    
    
    
    32,317Depreciation, depletion and amortization
    
    
    28,894
    
    
    
    34,020
    
    
    
    67,326Impairment of oil and gas properties
    
    
    7,692
    
    
    
    43,929
    
    
    
    36,970General and administrative
    
    
    18,415
    
    
    
    16,966
    
    
    
    15,932Total Expenses
    
    
    70,348
    
    
    
    112,691
    
    
    
    152,545Income (Loss) From Operations
    
    
    1,327
    
    
    
    (50,398
    )
    
    
    18,236Other Income (Expense):Derivatives:Realized gains (losses)
    
    
    (11,753
    )
    
    
    35,422
    
    
    
    (28,578
    )Unrealized gains (losses)
    
    
    12,291
    
    
    
    (55,598
    )
    
    
    76,666Interest expense
    
    
    (34,592
    )
    
    
    (16,630
    )
    
    
    (22,975
    )Gain on sale of reserves in place
    
    
    87,171
    
    
    
    
    
    
    
    Interest income and other
    
    
    1,299
    
    
    
    (7,483
    )
    
    
    6,626Total Other Income (Expense)
    
    
    54,416
    
    
    
    (44,289
    )
    
    
    31,739Income (Loss) Before Income Taxes
    
    
    55,743
    
    
    
    (94,687
    )
    
    
    49,975Income Tax Expense (Benefit)
    
    
    (788
    )
    
    
    (7,158
    )
    
    
    24,116Income (Loss) from Continuing Operations
    
    
    56,531
    
    
    
    (87,529
    )
    
    
    25,859Discontinued Operations, net of tax:Income (loss) from operations
    
    
    
    
    
    
    (774
    )
    
    
    30,631Gain on sale
    
    
    
    
    
    
    47,308
    
    
    
    Income (Loss) from Discontinued Operations
    
    
    
    
    
    
    46,534
    
    
    
    30,631Net Income (Loss)
    
    
    56,531
    
    
    
    (40,995
    )
    
    
    56,490Preferred Stock Dividends:Dividends declared
    
    
    2,227
    
    
    
    9,757
    
    
    
    10,809Non-cash charge under fair value accounting upon
redemption
    
    
    
    
    
    
    11,454
    
    
    
    Total Preferred Stock Dividends
    
    
    2,227
    
    
    
    21,211
    
    
    
    10,809Net Income (Loss) to Common Stockholders
    
    $
    54,304
    
    
    $
    (62,206
    )
    
    $
    45,681Basic Net Income (Loss) per Common Share:Continuing operations
    
    $
    2.34
    
    
    $
    (5.84
    )
    
    $
    0.82Discontinued operations
    
    
    
    
    
    
    2.50
    
    
    
    1.67Total
    
    $
    2.34
    
    
    $
    (3.34
    )
    
    $
    2.49Diluted Net Income (Loss) per Common Share:Continuing operations
    
    $
    1.95
    
    
    $
    (4.70
    )
    
    $
    0.59Discontinued operations
    
    
    
    
    
    
    2.50
    
    
    
    1.20Total
    
    $
    1.95
    
    
    $
    (2.20
    )
    
    $
    1.79Weighted Average Number of Common Shares Outstanding:Basic
    
    
    23,252
    
    
    
    18,613
    
    
    
    18,330Diluted
    
    
    28,886
    
    
    
    18,613
    
    
    
    25,473
  70




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Endeavour International Corporation
Consolidated Statement of Cash Flows
 Year Ended December 31,2010
    
    2009
    
    2008Cash Flows from Operating Activities:Net income (loss)
    
    $
    56,531
    
    
    $
    (40,995
    )
    
    $
    56,490Adjustments to reconcile net income (loss) to net
cash provided by operating activities:Depreciation, depletion and amortization
    
    
    28,894
    
    
    
    38,701
    
    
    
    81,734Impairment of oil and gas properties
    
    
    7,692
    
    
    
    43,929
    
    
    
    36,970Deferred tax expense (benefit)
    
    
    (3,367
    )
    
    
    4,599
    
    
    
    17,682Unrealized (gains) losses on derivatives
    
    
    (12,291
    )
    
    
    55,598
    
    
    
    (76,666
    )Gain on sales
    
    
    (87,171
    )
    
    
    (47,308
    )
    
    
    (258
    )Non-cash interest expense
    
    
    8,764
    
    
    
    5,464
    
    
    
    4,496Amortization of deferred financing costs
    
    
    10,262
    
    
    
    4,963
    
    
    
    7,279Other
    
    
    1,606
    
    
    
    6,408
    
    
    
    (6,920
    )Changes in operating assets and liabilities:Decrease in receivables
    
    
    6,732
    
    
    
    3,978
    
    
    
    9,795(Increase) decrease in other current assets
    
    
    (4,668
    )
    
    
    7,489
    
    
    
    (3,745
    )Increase (decrease) in liabilities
    
    
    4,035
    
    
    
    (27,115
    )
    
    
    6,323Net Cash Provided by Operating Activities
    
    
    17,019
    
    
    
    55,711
    
    
    
    133,180Cash Flows From Investing Activities:Capital expenditures
    
    
    (92,007
    )
    
    
    (99,241
    )
    
    
    (64,194
    )Acquisitions
    
    
    (43,726
    )
    
    
    (32,152
    )
    
    
    (2,176
    )Proceeds from sales, net of cash
    
    
    108,316
    
    
    
    144,653
    
    
    
    259(Increase) decrease in restricted cash
    
    
    (28,897
    )
    
    
    17,860
    
    
    
    1,260Net Cash Provided by (Used in) Investing Activities
    
    
    (56,314
    )
    
    
    31,120
    
    
    
    (64,851
    )Cash Flows From Financing Activities:Repayments of borrowings
    
    
    (75,342
    )
    
    
    (64,458
    )
    
    
    (120,000
    )Borrowings under debt agreements
    
    
    185,000
    
    
    
    1,400
    
    
    
    88,000Redemption of preferred stock
    
    
    
    
    
    
    (25,000
    )
    
    
    Proceeds from issuance of common stock
    
    
    30,181
    
    
    
    
    
    
    
    Dividends paid
    
    
    (2,070
    )
    
    
    (9,625
    )
    
    
    (10,625
    )Financing costs paid
    
    
    (26,590
    )
    
    
    
    
    
    
    (3,538
    )Other financing
    
    
    96
    
    
    
    (17
    )
    
    
    (450
    )Net Cash Provided by (Used in) Financing Activities
    
    
    111,275
    
    
    
    (97,700
    )
    
    
    (46,613
    )Net Increase (Decrease) in Cash and Cash Equivalents
    
    
    71,980
    
    
    
    (10,869
    )
    
    
    21,716Cash and Cash Equivalents, Beginning of Period
    
    
    27,287
    
    
    
    38,156
    
    
    
    16,440Cash and Cash Equivalents, End of Period
    
    $
    99,267
    
    
    $
    27,287
    
    
    $
    38,156Cash and Cash Equivalents, End of Period:Continuing operations
    
    $
    99,267
    
    
    $
    27,287
    
    
    $
    31,421Discontinued operations
    
    
    
    
    
    
    
    
    
    
    6,735Total
    
    $
    99,267
    
    
    $
    27,287
    
    
    $
    38,156
  71




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Endeavour International Corporation
Consolidated Statement of Stockholders Equity
 AccumulatedAdditional
    
    Other
    
    
    
    
    
    Total
    
    TotalCommon
    
    Treasury
    
    Paid-In
    
    Comprehensive
    
    Accumulated
    
    Stockholders
    
    ComprehensiveStock
    
    Stock
    
    Capital
    
    Loss
    
    Deficit
    
    Equity
    
    Income (Loss)Balance, January 1, 2008
    
    $
    19
    
    
    $
    
    
    
    $
    241,647
    
    
    $
    (923
    )
    
    $
    (170,594
    )
    
    $
    70,149Preferred stock dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,809
    )
    
    
    (10,809
    )Amortization of deferred
compensation
    
    
    
    
    
    
    
    
    
    
    3,226
    
    
    
    
    
    
    
    
    
    
    
    3,226Treasury stock repurchase
    
    
    
    
    
    
    (450
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (450
    )Other
    
    
    
    
    
    
    
    
    
    
    (293
    )
    
    
    
    
    
    
    
    
    
    
    (293
    )Comprehensive Income:Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56,490
    
    
    
    56,490
    
    
    $
    56,490Other comprehensive loss (net of tax):Unrealized loss on derivative
instruments, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (342
    )
    
    
    
    
    
    
    (342
    )
    
    
    (342
    )Unrealized gain (loss) on
available-for-sale
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )
    
    
    Balance, December 31, 2008
    
    $
    19
    
    
    $
    (450
    )
    
    $
    244,580
    
    
    $
    (1,266
    )
    
    $
    (124,913
    )
    
    $
    117,970
    
    
    $
    56,148Preferred stock dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,211
    )
    
    
    (21,211
    )Amortization of deferred
compensation
    
    
    
    
    
    
    
    
    
    
    3,163
    
    
    
    
    
    
    
    
    
    
    
    3,163Treasury stock repurchase
    
    
    
    
    
    
    (137
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (137
    )Other
    
    
    
    
    
    
    
    
    
    
    77
    
    
    
    
    
    
    
    
    
    
    
    77Comprehensive Loss:Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40,995
    )
    
    
    (40,995
    )
    
    
    (40,995
    )Other comprehensive income (net of tax):Unrealized loss on derivative
instruments, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,194
    
    
    
    
    
    
    
    1,194
    
    
    
    1,194Unrealized gain (loss) on
available-for-sale
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72
    
    
    
    
    
    
    
    72
    
    
    
    72Balance, December 31, 2009
    
    $
    19
    
    
    $
    (587
    )
    
    $
    247,820
    
    
    $
    
    
    
    $
    (187,119
    )
    
    $
    60,133
    
    
    $
    (39,729
    )
  72




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Endeavour International Corporation
Consolidated Statement of Stockholders Equity
 AccumulatedAdditional
    
    Other
    
    
    
    
    
    Total
    
    TotalCommon
    
    Treasury
    
    Paid-In
    
    Comprehensive
    
    Accumulated
    
    Stockholders
    
    ComprehensiveStock
    
    Stock
    
    Capital
    
    Loss
    
    Deficit
    
    Equity
    
    Income (Loss)Balance, December 31, 2009
    
    $
    19
    
    
    $
    (587
    )
    
    $
    247,820
    
    
    $
    
    
    
    $
    (187,119
    )
    
    $
    60,133Preferred stock dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,227
    )
    
    
    (2,227
    )Common stock issuance
    
    
    5
    
    
    
    
    
    
    
    30,176
    
    
    
    
    
    
    
    
    
    
    
    30,181Series C preferred stock conversion
    
    
    1
    
    
    
    
    
    
    
    5,906
    
    
    
    
    
    
    
    
    
    
    
    5,907Amortization of deferred
compensation
    
    
    
    
    
    
    
    
    
    
    3,660
    
    
    
    
    
    
    
    
    
    
    
    3,660Other
    
    
    
    
    
    
    
    
    
    
    433
    
    
    
    
    
    
    
    
    
    
    
    433Comprehensive Loss:Net Income (Loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56,531
    
    
    
    56,531
    
    
    $
    56,531Balance, December 31, 2010
    
    $
    25
    
    
    $
    (587
    )
    
    $
    287,995
    
    
    $
    
    
    
    $
    (132,815
    )
    
    $
    154,618
    
    
    $
    56,531
  73




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Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
 Note 1  Description of Business
  Note 2  Summary of Significant Accounting Policies
 Basis of Presentation and Use of Estimates
    
    
    estimates of proved oil and gas reserves,
    
    estimates as to the expected future cash flow from proved oil and gas properties,
    
    estimates of future dismantlement and restoration costs,
    
    estimates of fair values used in purchase accounting and
    
    estimates of the fair value of derivative instruments.
 Principles of Consolidation
  74




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Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
 Cash and Cash Equivalents
  Restricted Cash
  Inventories
  Full Cost Accounting for Oil and Gas Operations
   
    
    the future net cash flows related to estimated production of proved reserves;
    
    the effect of derivative instruments that qualify as cash flow hedges;
    
    the lower of cost or estimated fair value of unproved properties; and
    
    the expected income tax effects of the above items.
 75




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Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
      Other Property and Equipment
  76




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
 Capitalized Interest
  Marketable Securities
  Business Combinations
   Goodwill and Intangible Assets
  77




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Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
 Dismantlement, Restoration and Environmental Costs
  Revenue Recognition
  Significant Customers
  Derivative Instruments and Hedging Activities
   
    
    reduce our exposure to declines in the market prices of crude oil and natural gas that
we produce and sell,
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Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
 
    
    reduce our exposure to increases in interest rates, and
    
    manage cash flows in support of our annual capital expenditure budget.
     Concentrations of Credit and Market Risk
   79




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Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
   Foreign Currency Translation
  Income Taxes
  Share-Based Payments
  80




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
   Adoption of New Accounting Standards
  
    
    Business combinations Guidance related to the measurement of identifiable assets
acquired, liabilities assumed and disclosure of information related to business
combinations and their effect.
    
    Noncontrolling interests Guidance for the noncontrolling interest in a subsidiary and
for the deconsolidation of a subsidiary. Specifically, this standard requires the
recognition of a noncontrolling interest (minority interest) as a component of consolidated
equity. Similarly, the new standard requires consolidated net income and comprehensive
income to be reported at amounts that include the amounts attributable to both the parent
and the noncontrolling interests.
    
    Expanded disclosures of derivatives Expanded and detailed financial statement
disclosures for derivatives and hedged financial instruments. This standard applies to all
derivatives and non-derivative instruments designated and qualifying as hedges, including
bifurcated derivative instruments and related hedged items.
    
    Convertible debt Guidance for convertible debt that may be settled in part or in
whole in cash upon conversion requiring issuers of this form of debt to account for its
debt and equity components separately. The new guidance also expands the definition of
mandatorily redeemable convertible preferred shares that should be classified as
liabilities.
    
    Share-based payments Guidance for instruments that are granted in share-based payment
transactions to treat unvested share-based payment awards with non-forfeitable
rights to dividend or dividend equivalents as a separate class of securities in calculating
earnings per share (EPS). The impact of the adoption of this standard on our weighted
average shares outstanding and EPS was not material, therefore, we have not restated prior
periods.
    
    Fair value Framework for measuring fair value and expanded disclosures about fair
value measurements. New fair value measurements are not required; rather, the provisions
apply when fair value measurements are performed under other accounting pronouncements.
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Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
  
    
    Subsequent events Standards of accounting for and disclosure of events that occur
after the balance sheet date but before the financial statements are issued.
  
    
    Oil and gas modernization Revised oil and gas reserve estimation and disclosure
requirements. The accounting standards update revised the definition of proved oil and gas
reserves to require that the average, first-day-of-the-month price during the 12-month
period before the end of the year rather than the year-end price, must be used when
estimating whether reserve quantities are economical to produce and when calculating the
aggregate amount of (and changes in) future cash inflows related to the standardized
measure of discounted future net cash flows.
  
    
    Subsequent events Amended standards of accounting for and disclosure of events that
occur after the balance sheet date but before the financial statements are issued.
    
    Fair value New, expanded disclosures are required for recurring or nonrecurring
fair-value measurements and the reconciliation of specific fair value measurements.
 Note 3  Discontinued Operations
  82




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Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
 Year Ended December 31,2010
    
    2009
    
    2008Sales
    
    $
    
    
    
    $
    17,550
    
    
    $
    89,660Income before Taxes
    
    $
    
    
    
    $
    4,654
    
    
    $
    63,244Income Tax Expense
    
    
    
    
    
    
    (5,428
    )
    
    
    (32,613
    )Income (Loss) from Operations
    
    
    
    
    
    
    (774
    )
    
    
    30,631Gain on sale
    
    
    
    
    
    
    47,308
    
    
    
    Net Income from Discontinued Operations
    
    $
    
    
    
    $
    46,534
    
    
    $
    30,631
 Note 4  Prepaid Expenses and Other Current Assets
  December 31,2010
    
    2009Fair market value of commodity derivatives  current
    
    $
    709
    
    
    $
    2,890Prepaid insurance
    
    
    1,039
    
    
    
    1,506Inventory
    
    
    4,617
    
    
    
    4,450Other
    
    
    2,353
    
    
    
    1,272$
    8,718
    
    
    $
    10,118
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Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
 Note 5  Property and Equipment
  December 31,2010
    
    2009Oil and gas properties under the full cost method:Subject to amortization
    
    $
    389,575
    
    
    $
    275,278Not subject to amortization:Acquired in 2010
    
    
    67,612
    
    
    
    Acquired in 2009
    
    
    31,134
    
    
    
    51,797Acquired in 2008
    
    
    23,109
    
    
    
    32,970Acquired prior to 2008
    
    
    39,575
    
    
    
    69,786551,005
    
    
    
    429,831Computers, furniture and fixtures
    
    
    4,222
    
    
    
    3,560Total property and equipment
    
    
    555,227
    
    
    
    433,391Accumulated depreciation, depletion and amortization
    
    
    (190,550
    )
    
    
    (166,804
    )Net property and equipment
    
    $
    364,677
    
    
    $
    266,587
  
    
    values assigned to unproved reserves acquired,
 
    
    exploration costs such as drilling costs for projects awaiting approved development
plans or the determination of whether or not proved reserves can be assigned, and
 
    
    other seismic and geological and geophysical costs.
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Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
 Costs Incurred in the Year Ended December 31,2010
    
    2009
    
    2008
    
    Prior to 2008
    
    TotalAcquisition costs
    
    $
    32,476
    
    
    $
    10,385
    
    
    $
    650
    
    
    $
    10,345
    
    
    $
    53,856Exploration costs
    
    
    32,770
    
    
    
    20,593
    
    
    
    22,459
    
    
    
    29,230
    
    
    
    105,052Capitalized interest
    
    
    2,366
    
    
    
    156
    
    
    
    
    
    
    
    
    
    
    
    2,522Total oil
and gas properties not subject to amortization
    
    $
    67,612
    
    
    $
    31,134
    
    
    $
    23,109
    
    
    $
    39,575
    
    
    $
    161,430
   Assets Acquisitions
    85




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Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
 Asset Disposition
  Note 6  Goodwill
  December 31,2010
    
    2009Balance at beginning of year
    
    $
    211,886
    
    
    $
    281,943Allocation of goodwill to discontinued operations sold
    
    
    
    
    
    
    (67,994
    )Adjustments
    
    
    
    
    
    
    (2,063
    )Balance at end of year
    
    $
    211,886
    
    
    $
    211,886
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Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
 Note 7  Other Assets
  2010
    
    2009Intangible assets  workforce in place:Gross
    
    $
    4,800
    
    
    $
    4,800Accumulated amortization
    
    
    (4,475
    )
    
    
    (3,919
    )Net intangible assets
    
    
    325
    
    
    
    881Debt issuance costs
    
    
    23,702
    
    
    
    3,875Fair market value of long-term portion of derivatives
    
    
    1,611
    
    
    
    318Other
    
    
    257
    
    
    
    248$
    25,895
    
    
    $
    5,322
   Note 8  Accrued Expenses
  December 31,2010
    
    2009Derivative liability
    
    $
    
    
    
    $
    6,817Foreign taxes payable
    
    
    4,333
    
    
    
    1,926Accrued interest
    
    
    2,234
    
    
    
    2,432Preferred dividends
    
    
    1,301
    
    
    
    1,143Accrued compensation
    
    
    6,681
    
    
    
    4,311Current portion of asset retirement obligations
    
    
    6,405
    
    
    
    Other
    
    
    1,688
    
    
    
    1,169$
    22,642
    
    
    $
    17,798
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Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
 Note 9  Debt Obligations
  2010
    
    2009Senior notes, 6% fixed rate, due 2012
    
    $
    81,250
    
    
    $
    81,250Senior bank facility, variable rate, due 2011
    
    
    
    
    
    
    49,942Convertible bonds, 11.5%, due 2014
    
    
    55,821
    
    
    
    49,838Subordinated notes, 12.0%,
due 2014
    
    
    51,132
    
    
    
    50,122Senior term loan, 15%, due 2013
    
    
    161,371
    
    
    
    349,574
    
    
    
    231,152Less: debt discount
    
    
    (4,268
    )
    
    
    (7,767
    )Less: current maturities
    
    
    (21,600
    )
    
    
    Long-term debt
    
    $
    323,706
    
    
    $
    223,385Standby letters of credit outstanding for
abandonment liabilities
    
    $
    31,726
    
    
    $
    33,388
  2011
    
    $
    21,6002012
    
    
    92,8502013
    
    
    168,1712014
    
    
    66,9532015
    
    
    Thereafter
    
    
    
  Junior Facility
  88




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Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
 6% Senior Notes
  Senior Bank Facility
  11.5% Convertible Bonds
     89




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Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
  Subordinated Notes
   Senior Term Loan
     90




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Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
   
    
    our 6% Convertible Notes have been refinanced or extended and
    
    the holders conditional redemption right on our 11.5% Convertible Bonds has been
terminated or extended. Such conditional redemption right exists if our average common
stock price, as defined, is below $16.52 per share on January 18, 2012.
     
    
    a specified maximum total leverage ratio (consolidated net indebtedness to consolidated
EBITDAX), ranging from 7.85:1.00 at September 30, 2010 to 3.00:1.00 at December 31, 2012
and thereafter;
    
    a specified minimum EBITDAX for each four-quarter period, ranging from $45,000,000 for the
four-quarter period ending September 30, 2010 to $200,000,000 for the four-quarter period ending
June 30, 2013;
    
    a minimum Reserve Coverage Ratio, as defined, of not less than 3.00:1.00; and
    
    a PDP Coverage Ratio, as defined, of not less than 0.25:1.00 on or prior to
September 30, 2011 and not less than 0.50:1.00 after September 30, 2011.
 91




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Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
   92




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Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
 Note 10  Income Taxes
  Total
    
    DiscontinuedContinuing
    
    Operations (Amounts in thousands)
    
    U.K.
    
    U.S.
    
    Other
    
    Operations
    
    Norway
    
    TotalYear Ended December 31, 2010:Net income (loss) before taxes
    
    $
    90,160
    
    
    $
    (30,978
    )
    
    $
    (3,439
    )
    
    $
    55,743
    
    
    $
    
    
    
    $
    55,743Current tax (benefit) expense
    
    
    2,734
    
    
    
    
    
    
    
    (154
    )
    
    
    2,580
    
    
    
    
    
    
    
    2,580Deferred tax (benefit) expense
    
    
    (2,388
    )
    
    
    
    
    
    
    (929
    )
    
    
    (3,317
    )
    
    
    
    
    
    
    (3,317
    )Foreign currency losses on
deferred tax liabilities
    
    
    
    
    
    
    
    
    
    
    (51
    )
    
    
    (51
    )
    
    
    
    
    
    
    (51
    )Total tax (benefit) expense
    
    
    346
    
    
    
    
    
    
    
    (1,134
    )
    
    
    (788
    )
    
    
    
    
    
    
    (788
    )Net income (loss) after taxes
    
    $
    89,814
    
    
    $
    (30,978
    )
    
    $
    (2,305
    )
    
    $
    56,531
    
    
    $
    
    
    
    $
    56,531Year Ended December 31, 2009:Net income (loss) before taxes
    
    $
    (52,041
    )
    
    $
    (31,167
    )
    
    $
    (11,479
    )
    
    $
    (94,687
    )
    
    $
    51,963
    
    
    $
    (42,724
    )Current tax expense
    
    
    (5,739
    )
    
    
    40
    
    
    
    (26
    )
    
    
    (5,725
    )
    
    
    (603
    )
    
    
    (6,328
    )Deferred tax expense
    
    
    (20,260
    )
    
    
    (20
    )
    
    
    (35
    )
    
    
    (20,315
    )
    
    
    4,791
    
    
    
    (15,524
    )Foreign currency gains on
deferred tax liabilities
    
    
    18,882
    
    
    
    
    
    
    
    
    
    
    
    18,882
    
    
    
    1,241
    
    
    
    20,123Total tax expense
    
    
    (7,117
    )
    
    
    20
    
    
    
    (61
    )
    
    
    (7,158
    )
    
    
    5,429
    
    
    
    (1,729
    )Net income (loss) after taxes
    
    $
    (44,924
    )
    
    $
    (31,187
    )
    
    $
    (11,418
    )
    
    $
    (87,529
    )
    
    $
    46,534
    
    
    $
    (40,995
    )Year Ended December 31, 2008:Net income (loss) before taxes
    
    $
    66,129
    
    
    $
    (11,969
    )
    
    $
    (4,185
    )
    
    $
    49,975
    
    
    $
    63,244
    
    
    $
    113,219Current tax (benefit) expense
    
    
    11,158
    
    
    
    
    
    
    
    10
    
    
    
    11,168
    
    
    
    27,879
    
    
    
    39,047Deferred tax (benefit) expense
    
    
    22,673
    
    
    
    
    
    
    
    303
    
    
    
    22,976
    
    
    
    15,415
    
    
    
    38,391Foreign currency losses on
deferred tax liabilities
    
    
    (10,028
    )
    
    
    
    
    
    
    
    
    
    
    (10,028
    )
    
    
    (10,681
    )
    
    
    (20,709
    )Total tax (benefit) expense
    
    
    23,803
    
    
    
    
    
    
    
    313
    
    
    
    24,116
    
    
    
    32,613
    
    
    
    56,729Net income (loss) after taxes
    
    $
    42,326
    
    
    $
    (11,969
    )
    
    $
    (4,498
    )
    
    $
    25,859
    
    
    $
    30,631
    
    
    $
    56,490
  93




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Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
 Year Ended December 31,2010
    
    2009
    
    2008Federal income tax expense (benefit) at statutory rate
    
    $
    19,500
    
    
    $
    (33,141
    )
    
    $
    17,491Taxation of foreign operations
    
    
    (579
    )
    
    
    1,572
    
    
    
    12,464Tax-free gain on sale of reserves in place
    
    
    (30,510
    )Change in valuation allowance  U.S.
    
    
    (2,252
    )
    
    
    10,464
    
    
    
    4,150Foreign tax benefit from foreign currency tax law change
    
    
    
    
    
    
    (5,400
    )
    
    
    Foreign currency (gain) loss on deferred taxes
    
    
    (50
    )
    
    
    18,882
    
    
    
    (10,028
    )Deemed foreign dividend of wholly owned subsidiaries
    
    
    11,466
    
    
    
    
    
    
    
    Disallowed executive compensation
    
    
    765
    
    
    
    
    
    
    
    Other
    
    
    872
    
    
    
    465
    
    
    
    39Income Tax Expense, continuing operations
    
    
    (788
    )
    
    
    (7,158
    )
    
    
    24,116Discontinued operations  Norway
    
    
    
    
    
    
    5,429
    
    
    
    32,613Total Income Tax Expense
    
    $
    (788
    )
    
    $
    (1,729
    )
    
    $
    56,729Effective Income Tax Rate
    
    
    -1
    %
    
    
    8
    %
    
    
    45
    %
   94




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Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
 2010
    
    2009Deferred tax asset:Deferred compensation
    
    $
    6,129
    
    
    $
    6,236Unrealized loss on commodity derivative instruments
    
    
    936
    
    
    
    16,560Asset retirement obligation
    
    
    1,324
    
    
    
    7,026Net operating loss and capital loss carryforward
    
    
    57,548
    
    
    
    34,635Unrealized loss on embedded derivative instruments
    
    
    8,343
    
    
    
    621Total deferred tax assets
    
    
    74,280
    
    
    
    65,078Less valuation allowance
    
    
    (37,807
    )
    
    
    (38,771
    )Total deferred tax assets after valuation allowance
    
    
    36,473
    
    
    
    26,307Deferred tax liability:Property, plant and equipment
    
    
    (104,672
    )
    
    
    (97,111
    )Unrealized gain on derivative instruments
    
    
    (825
    )
    
    
    Petroleum revenue tax, net of tax benefit
    
    
    (488
    )
    
    
    (1,264
    )Debt discount
    
    
    (1,281
    )
    
    
    (2,330
    )Other
    
    
    (6,407
    )
    
    
    (6,294
    )Total deferred tax liabilities
    
    
    (113,673
    )
    
    
    (106,999
    )Net deferred tax liability
    
    $
    (77,200
    )
    
    $
    (80,692
    )
  Years of
    
    CarryforwardTypes of Carryforward
    
    Expiration
    
    AmountsU.S.  Net operating loss
    
    
    2023 - 2030
    
    
    $
    69,392U.S.  Capital loss
    
    
    2015
    
    
    
    1,848U.K.  Corporate tax net operating loss
    
    Indefinite
    
    
    81,767U.K.  Supplemental Corporate tax net operating loss
    
    Indefinite
    
    
    40,305
  95




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Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
    Year EndedDecember 31,2010
    
    2009
    
    2008Balance at the beginning of the year
    
    $
    
    
    
    $
    
    
    
    $
    1,727Decrease in unrecognized tax
benefits from current period tax
position
    
    
    
    
    
    
    
    
    
    
    (1,727
    )Balance at the end of the year
    
    $
    
    
    
    $
    
    
    
    $
    
   96




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Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
  Note 11  Other Liabilities
  December 31,2010
    
    2009Asset retirement obligations
    
    $
    36,592
    
    
    $
    47,362Long-term derivative liabilities
    
    
    27,810
    
    
    
    38,050Other
    
    
    525
    
    
    
    Total Other Liabilities
    
    $
    64,927
    
    
    $
    85,412
  Year EndedDecember 31,2010
    
    2009Asset retirement obligations, beginning of year
    
    $
    47,362
    
    
    $
    38,776Increase due to revised estimates
    
    
    2,949
    
    
    
    7,762Accretion expense
    
    
    4,591
    
    
    
    4,117Impact of foreign currency exchange rate changes
    
    
    (2,397
    )
    
    
    4,280Payments
    
    
    (9,508
    )
    
    
    (7,325
    )Sale of assets
    
    
    
    
    
    
    (248
    )Asset retirement obligations, end of year
    
    
    42,997
    
    
    
    47,362Less: current portion of asset retirement obligations
    
    
    (6,405
    )
    
    
    Long-term asset retirement obligations
    
    $
    36,592
    
    
    $
    47,362
 97




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
 Note 12  Equity
  Year Ended December 31,2010
    
    2009
    
    2008Common Stock:Outstanding at the beginning of the year
    
    
    18,803
    
    
    
    18,368
    
    
    
    18,144Issuance of common stock
    
    
    4,638
    
    
    
    
    
    
    
    Exercise of stock options
    
    
    23
    
    
    
    24
    
    
    
    Conversion of preferred stock
    
    
    572
    
    
    
    Issuance of stock based compensation
    
    
    748
    
    
    
    411
    
    
    
    224Outstanding at the end of the year
    
    
    24,784
    
    
    
    18,803
    
    
    
    18,368Series B Preferred Stock:Outstanding at the end of the year
    
    
    20
    
    
    
    20
    
    
    
    20Convertible Preferred Stock:Outstanding at the beginning of the year
    
    
    50
    
    
    
    125
    
    
    
    Conversion to common stock
    
    
    (5
    )
    
    
    
    
    
    
    Redemptions
    
    
    
    
    
    
    (75
    )
    
    
    Issuance of preferred stock
    
    
    
    
    
    
    
    
    
    
    125Outstanding at the end of the year
    
    
    45
    
    
    
    50
    
    
    
    125Treasury Stock:Outstanding at the beginning of the year
    
    
    (72
    )
    
    
    (47
    )
    
    
    Purchase of treasury shares for stock vesting
    
    
    
    
    
    
    (25
    )
    
    
    (47
    )Outstanding at the end of the year
    
    
    (72
    )
    
    
    (72
    )
    
    
    (47
    )
 Common Stock
   98




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
     Series C Convertible Preferred Stock
  
    
    cumulative;
    
    compounded quarterly based on the original issue price;
    
    payable in cash or common stock, at 4.5% or 4.92%, respectively, since November 2009
and at 8.5% or 8.92%, respectively, in prior periods; and
    
    payable to the preferred stock investors prior to payment of any other dividend on any
other shares of our capital stock.
  99




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Endeavour International Corporation
Notes to Consolidated Financial Statements
       100




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Endeavour International Corporation
Notes to Consolidated Financial Statements
      Series B Preferred Stock
  101




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
  Note 13  Comprehensive Income (Loss)
  Year Ended December 31,2010
    
    2009
    
    2008Net income (loss)
    
    $
    56,531
    
    
    $
    (40,995
    )
    
    $
    56,490Related to derivative instruments:Unrealized gain
    
    
    
    
    
    
    
    
    
    
    428Reclassification adjustment for gain realized in net
income (loss) above
    
    
    
    
    
    
    1,194
    
    
    
    (770
    )Related to marketable securities:Unrealized loss
    
    
    
    
    
    
    
    
    
    
    (1
    )Reclassification adjustment for loss realized in net
income (loss) above
    
    
    
    
    
    
    72
    
    
    
    Net impact on comprehensive income (loss)
    
    
    
    
    
    
    1,266
    
    
    
    (343
    )Comprehensive income (loss)
    
    $
    56,531
    
    
    $
    (39,729
    )
    
    $
    56,147
  102




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Endeavour International Corporation
Notes to Consolidated Financial Statements
 Year Ended December 31,2010
    
    2009
    
    2008Related to derivative instruments:Balance at beginning of year
    
    $
    
    
    
    $
    (1,194
    )
    
    $
    (852
    )Change during the year
    
    
    
    
    
    
    1,194
    
    
    
    (342
    )Balance at end of year
    
    
    
    
    
    
    
    
    
    
    (1,194
    )Related to marketable securities:Balance at beginning of year
    
    
    
    
    
    
    (72
    )
    
    
    (71
    )Change during the year
    
    
    
    
    
    
    72
    
    
    
    (1
    )Balance at end of year
    
    
    
    
    
    
    
    
    
    
    (72
    )Accumulated other comprehensive loss
    
    $
    
    
    
    $
    
    
    
    $
    (1,266
    )
 Note 14  Stock-Based Compensation Arrangements
   103




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Endeavour International Corporation
Notes to Consolidated Financial Statements
 For the Year Ended December 31,2010
    
    2009
    
    2008
    
    Method of Determining AssumptionsRisk-free rate
    
    
    
    
    
    
    1.5
    %
    
    
    3.1
    %
    
    U.S. treasury yield curve in effect at the time of grant for the duration of estimated termExpected years until
exercise
    
    
    
    
    
    
    4.25
    
    
    
    4.00
    
    
    Historical data regarding option exercises and employee terminationsExpected stock volatility
    
    
    
    
    
    
    56
    %
    
    
    46
    %
    
    Historical Endeavour volatility for the length of the expected termDividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    Historical
  Stock Options
  Weighted
    
    WeightedNumber of
    
    Average
    
    AverageShares
    
    Exercise
    
    Contractual
    
    AggregateUnderlying
    
    Price per
    
    Life in
    
    IntrinsicOptions
    
    Share
    
    Years
    
    ValueBalance outstanding January 1, 2010
    
    
    601
    
    
    $
    13.10Exercised
    
    
    (23
    )
    
    
    4.22Forfeited
    
    
    (10
    )
    
    
    11.37Expired
    
    
    (104
    )
    
    
    29.01Balance outstanding   December 31, 2010
    
    
    464
    
    
    $
    10.04
    
    
    
    5.5
    
    
    $
    2,366Currently exercisable  December 31, 2010
    
    
    338
    
    
    $
    11.79
    
    
    
    5.0
    
    
    $
    1,301
  104




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Endeavour International Corporation
Notes to Consolidated Financial Statements
   Options Outstanding
    
    
    
    
    
    Options ExercisableWeighted
    
    Weighted
    
    
    
    
    
    WeightedAverage
    
    Average
    
    
    
    
    
    AverageNumber of
    
    Remaining
    
    Exercise
    
    
    
    
    
    ExerciseRange of Exercise
    
    Options
    
    Contractual
    
    Price Per
    
    Number
    
    Price PerPrices
    
    Outstanding
    
    Life
    
    Share
    
    Exercisable
    
    ShareLess than $10.00
    
    
    327
    
    
    
    6.3
    
    
    $
    6.55
    
    
    
    201
    
    
    $
    7.30$10.00 - $20.00
    
    
    91
    
    
    
    5.5
    
    
    
    15.10
    
    
    
    91
    
    
    
    15.10Greater than $20.00
    
    
    46
    
    
    
    0.1
    
    
    
    24.66
    
    
    
    46
    
    
    
    24.66Total
    
    
    464
    
    
    
    5.5
    
    
    $
    10.04
    
    
    
    338
    
    
    $
    11.79
 Restricted Stock
   105




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Endeavour International Corporation
Notes to Consolidated Financial Statements
 WeightedAverage GrantDate FairNumber of
    
    Value perShares
    
    ShareBalance outstanding  January 1, 2010
    
    
    489
    
    
    $
    6.99Granted
    
    
    784
    
    
    
    7.90Vested
    
    
    (422
    )
    
    
    7.95Forfeited
    
    
    (35
    )
    
    
    7.28Balance outstanding  December 31, 2010
    
    
    816
    
    
    $
    7.36Total grant date fair value of shares vesting during the period
    
    $
    3,353
  Year EndedDecember 31,2010
    
    2009
    
    2008G&A Expenses
    
    $
    3,191
    
    
    $
    2,464
    
    
    $
    2,467Capitalized G&A
    
    
    988
    
    
    
    573
    
    
    
    759Total non-cash stock-based compensation
    
    $
    4,179
    
    
    $
    3,037
    
    
    $
    3,226
 Note 15  Earnings per Share
  106




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Endeavour International Corporation
Notes to Consolidated Financial Statements
 Year Ended December 31,2010
    
    2009
    
    2008Net income (loss) to common shareholdersBasic
    
    $
    54,304
    
    
    $
    (62,206
    )
    
    $
    45,681Add Effect of:Preferred dividends
    
    
    2,070
    
    
    
    
    
    
    
    10,625Diluted
    
    $
    56,374
    
    
    $
    (62,206
    )
    
    $
    56,306Weighted Average Number of Common
Shares Outstanding:Basic
    
    
    23,252
    
    
    
    18,613
    
    
    
    18,330Add Effect of:Stock compensation grants and warrants
    
    
    380
    
    
    
    
    
    
    
    Preferred stock
    
    
    5,254
    
    
    
    
    
    
    
    7,143Diluted
    
    
    28,886
    
    
    
    18,613
    
    
    
    25,473
  For the Year Ended December 31,2010
    
    2009
    
    2008Options, warrants and stock-based compensation
    
    
    
    
    
    
    273
    
    
    
    Convertible debt
    
    
    5,691
    
    
    
    5,329
    
    
    
    4,675Convertible preferred stock
    
    
    
    
    
    
    5,714
    
    
    
    Common shares potentially issuable
    
    
    5,691
    
    
    
    11,316
    
    
    
    4,675
 107




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
 Note 16  Financial Instruments
 December 31,
    
    December 31,2010
    
    2009Carrying
    
    
    
    
    
    CarryingFair Value
    
    Value
    
    Fair Value
    
    ValueAssets:Derivative instruments
    
    $
    2,320
    
    
    $
    2,320
    
    
    $
    3,208
    
    
    $
    3,208Liabilities:Debt
    
    
    360,844
    
    
    
    323,706
    
    
    
    219,959
    
    
    
    223,385Derivative instruments
    
    
    (27,810
    )
    
    
    (27,810
    )
    
    
    (44,866
    )
    
    
    (44,866
    )
  Note 17  Fair Value Measurements
  Level 1:
    
    Fair value is based on actively-quoted market prices, if available.Level 2:
    
    In the absence of actively-quoted market prices, we seek price information from external sources, including broker
quotes and industry publications. Substantially all of these inputs are observable in the marketplace during the
entire term of the instrument, can be derived from observable data, or supported by observable levels at which
transactions are executed in the marketplace.
 108




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
 Level 3:
    
    If valuations require inputs that are both significant to the fair value measurement
and less observable from objective sources, we must estimate prices based on available
historical and near-term future price information and certain statistical methods that reflect
our market assumptions.
   Quoted Market Prices
    
    Significant Other
    
    Significantin Active Markets 
    
    Observable Inputs 
    
    Unobservable Inputs 
    
    TotalLevel 1
    
    Level 2
    
    Level 3
    
    Fair ValueOil and gas derivative contracts:Oil and gas puts
    
    $
    
    
    
    $
    1,213
    
    
    $
    792
    
    
    $
    2,005Embedded derivatives
    
    
    
    
    
    
    
    
    
    
    (27,495
    )
    
    
    (27,495
    )Total derivative liabilities
    
    $
    
    
    
    $
    1,213
    
    
    $
    (26,703
    )
    
    $
    (25,490
    )
   109




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
 Year EndedDecember 31,2010
    
    2009Balance at beginning of period
    
    $
    (28,843
    )
    
    $
    (12,057
    )Total gains or losses (realized/unrealized)Included in earnings
    
    
    1,348
    
    
    
    (14,390
    )Purchases, issuance and settlements
    
    
    792
    
    
    
    (2,396
    )Balance at end of period
    
    $
    (26,703
    )
    
    $
    (28,843
    )Changes in unrealized gains (losses) relating to derivatives assets and liabilities
still held at December 31, 2010
    
    $
    1,348
    
    
    $
    (9,713
    )
 Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
  Goodwill 
  Note 18  Derivative Instruments
  110




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
 December 31,2010
    
    2009Derivatives not designated as hedges:Oil and gas commodity derivatives:Assets:Prepaid expenses and other current assets
    
    $
    709
    
    
    $
    2,890Other assets  long term
    
    
    1,296
    
    
    
    318Liabilities:Accrued expenses and other
    
    
    
    
    
    
    (6,817
    )Other liabilities  long-term
    
    
    
    
    
    
    (9,207
    )$
    2,005
    
    
    $
    (12,816
    )Embedded derivatives related to debt instrument:Assets:Other assets  long term
    
    $
    315
    
    
    $
    Liabilities:Other liabilities  long-term
    
    
    (27,810
    )
    
    
    (28,843
    )
   Year Ended December 31,2010
    
    2009
    
    2008Derivatives not designated as hedges:Oil and gas commodity derivativesRealized gains (losses)
    
    $
    (11,753
    )
    
    $
    35,422
    
    
    $
    (28,578
    )Unrealized gains (losses)
    
    
    10,943
    
    
    
    (43,791
    )
    
    
    77,846(810
    )
    
    
    (8,369
    )
    
    
    49,268Embedded derivatives related to debt instrumentUnrealized gains (losses)
    
    $
    1,348
    
    
    $
    (11,807
    )
    
    $
    (1,180
    )
  111




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
 Year Ended December 31,Location ofReclassificationinto Income
    
    2010
    
    2009
    
    2008Interest rate swap(Gain) loss recognized in other
comprehensive income, net of tax
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    428(Gain) loss reclassified from
accumulated other comprehensive
income into income
    
    Interest expense
    
    
    
    
    
    
    1,194
    
    
    
    (770
    )
    Note 19  Supplementary Cash Flow Disclosures
  Year Ended December 31,2010
    
    2009
    
    2008Interest paid
    
    $
    18,668
    
    
    $
    7,074
    
    
    $
    15,966Income taxes paid (refunded)
    
    $
    (172
    )
    
    $
    4,738
    
    
    $
    20,088
 Non-Cash Investing and Financing Transactions
  112




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
   Note 20  Commitments and Contingencies
 General
  Operating Leases
  Rig Commitments
  Participation Agreement
  113




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
  Note 21  Segment and Geographic Information
  2010
    
    2009
    
    2008Long-
    
    
    
    
    
    Long-
    
    
    
    
    
    Long-lived
    
    
    
    
    
    lived
    
    
    
    
    
    livedRevenue
    
    Assets
    
    Revenue
    
    Assets
    
    Revenue
    
    AssetsUnited States
    
    $
    11,174
    
    
    $
    115,114
    
    
    $
    1,627
    
    
    $
    46,172
    
    
    $
    
    
    
    $
    12,125United Kingdom
    
    
    60,501
    
    
    
    486,467
    
    
    
    60,666
    
    
    
    436,016
    
    
    
    170,781
    
    
    
    441,195Other
    
    
    
    
    
    
    877
    
    
    
    
    
    
    
    1,607
    
    
    
    
    
    
    
    2,140Continuing Operations
    
    
    71,675
    
    
    
    602,458
    
    
    
    62,293
    
    
    
    483,795
    
    
    
    170,781
    
    
    
    455,460Discontinued
operations 
Norway
    
    
    
    
    
    
    
    
    
    
    17,550
    
    
    
    
    
    
    
    89,660
    
    
    
    148,605Total
    
    $
    71,675
    
    
    $
    602,458
    
    
    $
    79,843
    
    
    $
    483,795
    
    
    $
    260,441
    
    
    $
    604,065Total International
    
    $
    60,501
    
    
    $
    487,344
    
    
    $
    78,216
    
    
    $
    437,623
    
    
    $
    260,441
    
    
    $
    591,940
 114




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
 Note 22  Quarterly Financial Data (Unaudited)
 Second
    
    Third
    
    FourthFirst Quarter
    
    Quarter
    
    Quarter
    
    Quarter2010Revenues from continuing operations
    
    $
    13,721
    
    
    $
    21,532
    
    
    $
    19,849
    
    
    $
    16,573Operating expenses from continuing operations
    
    
    20,625
    
    
    
    15,582
    
    
    
    16,529
    
    
    
    17,613Operating profit (loss) from continuing operations
    
    
    (6,904
    )
    
    
    5,950
    
    
    
    3,320
    
    
    
    (1,040
    )Net income (loss) to common stockholders
    
    
    (15,779
    )
    
    
    58
    
    
    
    (12,238
    )
    
    
    82,263Net income (loss) per common share:Basic
    
    
    (0.11
    )
    
    
    
    
    
    
    (0.07
    )
    
    
    3.34Diluted
    
    
    (0.11
    )
    
    
    
    
    
    
    (0.07
    )
    
    
    2.372009Revenues from continuing operations
    
    $
    16,338
    
    
    $
    18,082
    
    
    $
    7,759
    
    
    $
    20,113Operating expenses from continuing operations
    
    
    50,743
    
    
    
    17,614
    
    
    
    13,613
    
    
    
    30,722Operating profit (loss) from continuing operations
    
    
    (34,405
    )
    
    
    468
    
    
    
    (5,854
    )
    
    
    (10,609
    )Net income (loss) to common stockholders
    
    
    (19,532
    )
    
    
    7,124
    
    
    
    (7,179
    )
    
    
    (42,618
    )Net income (loss) from
continuing operations per common share:Basic
    
    
    (0.15
    )
    
    
    (0.31
    )
    
    
    0.06
    
    
    
    0.33Diluted
    
    
    (0.15
    )
    
    
    (0.31
    )
    
    
    0.06
    
    
    
    0.33Net income (loss) from
discontinued operations per common share:Basic
    
    
    
    
    
    
    0.36
    
    
    
    
    
    
    
    Diluted
    
    
    
    
    
    
    0.36
    
    
    
    
    
    
    
    
 Note 23  Subsequent Events
   115




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
 Note 24  Supplemental Oil and Gas Disclosures (Unaudited)
 Capitalized Costs Relating to Oil and Gas Producing ActivitiesUnited
    
    UnitedKingdom
    
    States
    
    TotalDecember 31, 2010:Proved
    
    $
    346,915
    
    
    $
    42,659
    
    
    $
    389,574Unproved
    
    
    85,019
    
    
    
    76,412
    
    
    
    161,431Total capitalized costs
    
    
    431,934
    
    
    
    119,071
    
    
    
    551,005Accumulated depreciation, depletion and amortization
    
    
    (182,158
    )
    
    
    (6,058
    )
    
    
    (188,216
    )Net capitalized costs
    
    $
    249,776
    
    
    $
    113,013
    
    
    $
    362,789December 31, 2009:Proved
    
    $
    266,893
    
    
    $
    8,385
    
    
    $
    275,278Unproved
    
    
    127,736
    
    
    
    26,817
    
    
    
    154,553Total capitalized costs
    
    
    394,629
    
    
    
    35,202
    
    
    
    429,831Accumulated depreciation, depletion and amortization
    
    
    (164,703
    )
    
    
    (810
    )
    
    
    (165,513
    )Net capitalized costs
    
    $
    229,926
    
    
    $
    34,392
    
    
    $
    264,318
 116




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
 Costs Incurred in Oil and Gas Property Acquisition, Exploration and Development ActivitiesTotal
    
    DiscontinuedUnited
    
    United
    
    
    
    
    
    Continuing
    
    OperationsKingdom
    
    States
    
    Other
    
    Operations
    
    Norway (1)
    
    TotalYear Ended December 31, 2010:Acquisition costs:Proved
    
    $
    
    
    
    $
    2,386
    
    
    $
    
    
    
    $
    2,386
    
    
    $
    
    
    
    $
    2,386Unproved
    
    
    1,184
    
    
    
    40,155
    
    
    
    
    
    
    
    41,339
    
    
    
    
    
    
    
    41,339Exploration costs
    
    
    50,328
    
    
    
    32,027
    
    
    
    
    
    
    
    82,355
    
    
    
    
    
    
    
    82,355Development costs
    
    
    22,047
    
    
    
    1,884
    
    
    
    
    
    
    
    23,931
    
    
    
    
    
    
    
    23,931Total costs incurred
    
    $
    73,559
    
    
    $
    76,452
    
    
    $
    
    
    
    $
    150,011
    
    
    $
    
    
    
    $
    150,011Year Ended December 31, 2009:Acquisition costs:Proved
    
    $
    7,589
    
    
    $
    8,999
    
    
    $
    
    
    
    $
    16,588
    
    
    $
    
    
    
    $
    16,588Unproved
    
    
    1,450
    
    
    
    14,091
    
    
    
    23
    
    
    
    15,564
    
    
    
    
    
    
    
    15,564Exploration costs
    
    
    49,937
    
    
    
    17,757
    
    
    
    (382
    )
    
    
    67,312
    
    
    
    4,776
    
    
    
    72,088Development costs
    
    
    11,443
    
    
    
    
    
    
    
    
    
    
    
    11,443
    
    
    
    5,067
    
    
    
    16,510Total costs incurred
    
    $
    70,419
    
    
    $
    40,847
    
    
    $
    (359
    )
    
    $
    110,907
    
    
    $
    9,843
    
    
    $
    120,750Year Ended December 31, 2008:Acquisition costs:Proved
    
    $
    1,178
    
    
    $
    971
    
    
    $
    27
    
    
    $
    2,176
    
    
    $
    
    
    
    $
    2,176Exploration costs
    
    
    34,641
    
    
    
    5,515
    
    
    
    (62
    )
    
    
    40,094
    
    
    
    22,796
    
    
    
    62,890Development costs
    
    
    16,752
    
    
    
    19
    
    
    
    
    
    
    
    16,771
    
    
    
    8,808
    
    
    
    25,579Total costs incurred
    
    $
    52,571
    
    
    $
    6,505
    
    
    $
    (35
    )
    
    $
    59,041
    
    
    $
    31,604
    
    
    $
    90,645
 117




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
 Results of Operations for Oil and Gas Producing ActivitiesTotal
    
    DiscontinuedUnited
    
    United
    
    Continuing
    
    Operations Kingdom
    
    States
    
    Operations
    
    Norway (1)
    
    TotalYear Ended December 31, 2010:Revenues
    
    $
    60,501
    
    
    $
    11,174
    
    
    $
    71,675
    
    
    $
    
    
    
    $
    71,675Production expenses
    
    
    11,086
    
    
    
    4,261
    
    
    
    15,347
    
    
    
    
    
    
    
    15,347DD&A
    
    
    22,020
    
    
    
    5,273
    
    
    
    27,293
    
    
    
    
    
    
    
    27,293Impairment of oil and
gas properties
    
    
    
    
    
    
    7,692
    
    
    
    7,692
    
    
    
    
    
    
    
    7,692Income tax expense (benefit)
    
    
    13,698
    
    
    
    (2,118
    )
    
    
    11,580
    
    
    
    
    
    
    
    11,580Results of activities
    
    $
    13,697
    
    
    $
    (3,934
    )
    
    $
    9,763
    
    
    $
    
    
    
    $
    9,763Year Ended December 31, 2009:Revenues
    
    $
    60,666
    
    
    $
    1,627
    
    
    $
    62,293
    
    
    $
    17,550
    
    
    $
    79,843Production expenses
    
    
    16,911
    
    
    
    865
    
    
    
    17,776
    
    
    
    5,536
    
    
    
    23,312DD&A
    
    
    31,915
    
    
    
    817
    
    
    
    32,732
    
    
    
    4,595
    
    
    
    37,327Impairment of oil and
gas properties
    
    
    31,332
    
    
    
    12,597
    
    
    
    43,929
    
    
    
    
    
    
    
    43,929Income tax expense (benefit)
    
    
    (9,746
    )
    
    
    (4,428
    )
    
    
    (14,174
    )
    
    
    5,787
    
    
    
    (8,387
    )Results of activities
    
    $
    (9,746
    )
    
    $
    (8,224
    )
    
    $
    (17,970
    )
    
    $
    1,632
    
    
    $
    (16,338
    )Year Ended December 31, 2008:Revenues
    
    $
    170,781
    
    
    $
    
    
    
    $
    170,781
    
    
    $
    89,660
    
    
    $
    260,441Production expenses
    
    
    31,489
    
    
    
    828
    
    
    
    32,317
    
    
    
    14,259
    
    
    
    46,576DD&A
    
    
    65,764
    
    
    
    
    
    
    
    65,764
    
    
    
    14,078
    
    
    
    79,842Impairment of oil and
gas properties
    
    
    36,970
    
    
    
    
    
    
    
    36,970
    
    
    
    
    
    
    
    36,970Income tax expense (benefit)
    
    
    18,279
    
    
    
    (290
    )
    
    
    17,989
    
    
    
    47,832
    
    
    
    65,821Results of activities
    
    $
    18,279
    
    
    $
    (538
    )
    
    $
    17,741
    
    
    $
    13,491
    
    
    $
    31,232
 (1)
    
    We completed the divestiture of our Norwegian subsidiary on May 14,
2009. The results of operations and financial position of this subsidiary are classified
as discontinued operations for all periods presented. 118




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Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
 Oil and Gas Reserves
   119




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
 Total
    
    
    DiscontinuedUnited
    
    
    United
    
    
    Continuing
    
    
    Operations -Kingdom
    
    
    States
    
    
    Operations
    
    
    Norway (1)
    
    
    TotalProved Oil Reserves (MBbls):Proved reserves at January 1, 2008
    
    
    3,284
    
    
    
    
    
    
    
    3,284
    
    
    
    2,056
    
    
    
    5,340Production
    
    
    (1,032
    )
    
    
    
    
    
    
    (1,032
    )
    
    
    (726
    )
    
    
    (1,758
    )Extensions and discoveries
    
    
    522
    
    
    
    18
    
    
    
    540
    
    
    
    121
    
    
    
    661Revisions of previous estimates
    
    
    (643
    )
    
    
    
    
    
    
    (643
    )
    
    
    (45
    )
    
    
    (688
    )Proved reserves at December 31, 2008
    
    
    2,131
    
    
    
    18
    
    
    
    2,149
    
    
    
    1,406
    
    
    
    3,555Production
    
    
    (690
    )
    
    
    (4
    )
    
    
    (694
    )
    
    
    (310
    )
    
    
    (1,004
    )Purchases of reserves
    
    
    
    
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    2Sales of reserves in place
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,107
    )
    
    
    (1,107
    )Extensions and discoveries
    
    
    1,209
    
    
    
    3
    
    
    
    1,212
    
    
    
    
    
    
    
    1,212Revisions of previous estimates
    
    
    698
    
    
    
    (1
    )
    
    
    697
    
    
    
    11
    
    
    
    708Proved reserves at December 31, 2009
    
    
    3,348
    
    
    
    18
    
    
    
    3,366
    
    
    
    
    
    
    
    3,366Production
    
    
    (545
    )
    
    
    (6
    )
    
    
    (551
    )
    
    
    
    
    
    
    (551
    )Extensions and discoveries
    
    
    457
    
    
    
    34
    
    
    
    491
    
    
    
    
    
    
    
    491Revisions of previous estimates
    
    
    404
    
    
    
    13
    
    
    
    417
    
    
    
    
    
    
    
    417Proved reserves at December 31,
2010
    
    
    3,664
    
    
    
    59
    
    
    
    3,723
    
    
    
    
    
    
    
    3,723Proved Developed Oil Reserves (MBbls):At December 31, 2008
    
    
    1,468
    
    
    
    7
    
    
    
    1,475
    
    
    
    1,302
    
    
    
    2,777At December 31, 2009
    
    
    1,381
    
    
    
    8
    
    
    
    1,389
    
    
    
    
    
    
    
    1,389At December 31, 2010
    
    
    1,240
    
    
    
    14
    
    
    
    1,254
    
    
    
    
    
    
    
    1,254
 120




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Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
 Total
    
    
    DiscontinuedUnited
    
    
    United
    
    
    Continuing
    
    
    Operations Kingdom
    
    
    States
    
    
    Operations
    
    
    Norway(1)
    
    
    TotalProved Gas Reserves (MMcf):Proved reserves at January 1, 2008
    
    
    11,812
    
    
    
    
    
    
    
    11,812
    
    
    
    8,434
    
    
    
    20,246Production
    
    
    (6,532
    )
    
    
    
    
    
    
    (6,532
    )
    
    
    (2,322
    )
    
    
    (8,854
    )Extensions and discoveries
    
    
    20,370
    
    
    
    690
    
    
    
    21,060
    
    
    
    52
    
    
    
    21,112Revisions of previous estimates
    
    
    1,480
    
    
    
    
    
    
    
    1,480
    
    
    
    (1,187
    )
    
    
    293Proved reserves at December 31, 2008
    
    
    27,130
    
    
    
    690
    
    
    
    27,820
    
    
    
    4,977
    
    
    
    32,797Production
    
    
    (3,743
    )
    
    
    (320
    )
    
    
    (4,063
    )
    
    
    (686
    )
    
    
    (4,749
    )Purchases of reserves
    
    
    
    
    
    
    10,037
    
    
    
    10,037
    
    
    
    
    
    
    
    10,037Sales of reserves in place
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,241
    )
    
    
    (4,241
    )Extensions and discoveries
    
    
    52,895
    
    
    
    6
    
    
    
    52,901
    
    
    
    
    
    
    
    52,901Revisions of previous estimates
    
    
    2,034
    
    
    
    371
    
    
    
    2,405
    
    
    
    (50
    )
    
    
    2,355Proved reserves at December 31, 2009
    
    
    78,316
    
    
    
    10,784
    
    
    
    89,100
    
    
    
    
    
    
    
    89,100Production
    
    
    (3,071
    )
    
    
    (2,636
    )
    
    
    (5,707
    )
    
    
    
    
    
    
    (5,707
    )Purchases of reserves
    
    
    
    
    
    
    2,657
    
    
    
    2,657
    
    
    
    
    
    
    
    2,657Sales of reserves in place
    
    
    (51,522
    )
    
    
    
    
    
    
    (51,522
    )
    
    
    
    
    
    
    (51,522
    )Extensions and discoveries
    
    
    26,692
    
    
    
    24,181
    
    
    
    50,873
    
    
    
    
    
    
    
    50,873Revisions of previous estimates
    
    
    5,762
    
    
    
    (3,209
    )
    
    
    2,553
    
    
    
    
    
    
    
    2,553Proved reserves at December 31, 2010
    
    
    56,177
    
    
    
    31,777
    
    
    
    87,954
    
    
    
    
    
    
    
    87,954Proved Developed Gas Reserves (MMcf):At December 31, 2008
    
    
    6,761
    
    
    
    234
    
    
    
    6,995
    
    
    
    4,917
    
    
    
    11,912At December 31, 2009
    
    
    4,329
    
    
    
    4,707
    
    
    
    9,036
    
    
    
    
    
    
    
    9,036At December 31, 2010
    
    
    555
    
    
    
    13,281
    
    
    
    13,836
    
    
    
    
    
    
    
    13,836
 121




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
 Total
    
    
    DiscontinuedUnited
    
    
    United
    
    
    Continuing
    
    
    Operations Kingdom
    
    
    States
    
    
    Operations
    
    
    Norway
    
    
    TotalProved Reserves (MBOE):Proved reserves at December 31, 2007
    
    
    5,252
    
    
    
    
    
    
    
    5,252
    
    
    
    3,461
    
    
    
    8,713Extensions and discoveries
    
    
    3,917
    
    
    
    133
    
    
    
    4,050
    
    
    
    130
    
    
    
    4,180Production
    
    
    (2,121
    )
    
    
    
    
    
    
    (2,121
    )
    
    
    (1,113
    )
    
    
    (3,234
    )Revisions of previous estimates
    
    
    (395
    )
    
    
    
    
    
    
    (395
    )
    
    
    (242
    )
    
    
    (637
    )Proved reserves at December 31, 2008
    
    
    6,653
    
    
    
    133
    
    
    
    6,786
    
    
    
    2,236
    
    
    
    9,022Production
    
    
    (1,314
    )
    
    
    (57
    )
    
    
    (1,371
    )
    
    
    (424
    )
    
    
    (1,795
    )Extensions and discoveries
    
    
    10,025
    
    
    
    4
    
    
    
    10,029
    
    
    
    
    
    
    
    10,029Purchase of proved reserves, in place
    
    
    
    
    
    
    1,675
    
    
    
    1,675
    
    
    
    
    
    
    
    1,675Sales of reserves
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,815
    )
    
    
    (1,815
    )Revisions of previous estimates
    
    
    1,037
    
    
    
    60
    
    
    
    1,097
    
    
    
    3
    
    
    
    1,100Proved reserves at December 31, 2009
    
    
    16,401
    
    
    
    1,815
    
    
    
    18,216
    
    
    
    
    
    
    
    18,216Production
    
    
    (1,057
    )
    
    
    (445
    )
    
    
    (1,502
    )
    
    
    
    
    
    
    (1,502
    )Extensions and discoveries
    
    
    4,906
    
    
    
    4,064
    
    
    
    8,970
    
    
    
    
    
    
    
    8,970Purchase of proved reserves, in place
    
    
    
    
    
    
    443
    
    
    
    443
    
    
    
    
    
    
    
    443Sales of reserves
    
    
    (8,587
    )
    
    
    
    
    
    
    (8,587
    )
    
    
    
    
    
    
    (8,587
    )Revisions of previous estimates
    
    
    1,364
    
    
    
    (522
    )
    
    
    842
    
    
    
    
    
    
    
    842Proved reserves at December 31, 2010
    
    
    13,027
    
    
    
    5,355
    
    
    
    18,382
    
    
    
    
    
    
    
    18,382Proved Developed Reserves (MBOE):At December 31, 2008
    
    
    2,595
    
    
    
    46
    
    
    
    2,641
    
    
    
    2,122
    
    
    
    4,763At December 31, 2009
    
    
    2,103
    
    
    
    792
    
    
    
    2,895
    
    
    
    
    
    
    
    2,895At December 31, 2010
    
    
    1,333
    
    
    
    2,227
    
    
    
    3,560
    
    
    
    
    
    
    
    3,560
 Standardized Measure of Discounted Future Net Cash Flows
   122




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Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
   December 31,2010
    
    
    2009Oil
    
    
    Gas
    
    
    Oil
    
    
    GasUnited Kingdom ($/Barrel)
    
    
    79.37
    
    
    
    6.58
    
    
    
    60.40
    
    
    
    4.96United States ($/Mcf)
    
    
    79.81
    
    
    
    4.40
    
    
    
    61.08
    
    
    
    3.86
 123




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##### Table of Contents



Endeavour International Corporation
Notes to Consolidated Financial Statements
( )
 Standardized Measure of Discounted Future Net Cash FlowsUnited
    
    UnitedKingdom
    
    States
    
    TotalDecember 31, 2010:Future cash inflows
    
    $
    704,073
    
    
    $
    129,007
    
    
    $
    833,080Future production costs
    
    
    (101,660
    )
    
    
    (26,110
    )
    
    
    (127,770
    )Future development costs
    
    
    (374,380
    )
    
    
    (33,433
    )
    
    
    (407,813
    )Future income tax expense
    
    
    (72,870
    )
    
    
    
    
    
    
    (72,870
    )Future net cash flows (undiscounted)
    
    
    155,163
    
    
    
    69,464
    
    
    
    224,627Annual discount of 10% for estimated timing
    
    
    81,613
    
    
    
    31,717
    
    
    
    113,330Standardized measure of future net cash flows
    
    $
    73,550
    
    
    $
    37,747
    
    
    $
    111,297December 31, 2009:Future cash inflows
    
    $
    424,007
    
    
    $
    36,799
    
    
    $
    460,806Future production costs
    
    
    (89,696
    )
    
    
    (9,893
    )
    
    
    (99,589
    )Future development costs
    
    
    (274,456
    )
    
    
    (12,602
    )
    
    
    (287,058
    )Future income tax expense
    
    
    (17,433
    )
    
    
    
    
    
    
    (17,433
    )Future net cash flows (undiscounted)
    
    
    42,422
    
    
    
    14,304
    
    
    
    56,726Annual discount of 10% for estimated timing
    
    
    (6,770
    )
    
    
    7,798
    
    
    
    1,028Standardized measure of future net cash flows
    
    $
    49,192
    
    
    $
    6,506
    
    
    $
    55,698
  Principal Sources of Change in the Standardized Measure of Discounted Future Net Cash Flows2010
    
    2009
    
    2008Standardized measure, beginning of period
    
    $
    55,698
    
    
    $
    49,662
    
    
    $
    191,920Net changes in prices and production costs
    
    
    86,915
    
    
    
    (30,155
    )
    
    
    (144,547
    )Future development costs incurred
    
    
    21,112
    
    
    
    16,511
    
    
    
    8,912Net changes in estimated future development costs
    
    
    (48,356
    )
    
    
    (81,864
    )
    
    
    (105,784
    )Revisions of previous quantity estimates
    
    
    16,375
    
    
    
    22,318
    
    
    
    (19,381
    )Extensions and discoveries
    
    
    110,059
    
    
    
    128,090
    
    
    
    127,182Acretion of discount
    
    
    2,630
    
    
    
    8,139
    
    
    
    39,734Changes in income taxes, net
    
    
    (35,306
    )
    
    
    (1,054
    )
    
    
    163,445Sale of oil and gas produced, net of production costs
    
    
    (56,327
    )
    
    
    (56,531
    )
    
    
    (213,865
    )Purchased reserves
    
    
    2,386
    
    
    
    8,827
    
    
    
    Sales of reserves in place
    
    
    (48,310
    )
    
    
    (11,514
    )
    
    
    Change in production, timing and other
    
    
    4,421
    
    
    
    3,269
    
    
    
    2,046Standardized measure, end of period
    
    $
    111,297
    
    
    $
    55,698
    
    
    $
    49,662
 124




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##### Table of Contents



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
    125




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Endeavour International Corporation
  Changes in Internal Control over Financial Reporting
  Report of Independent Registered Public Accounting Firm
 
 Internal Control  Integrated Framework
   126




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##### Table of Contents



Endeavour International Corporation
   Internal Control  Integrated Framework
  /s/ KPMG LLP 
 127




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##### Table of Contents



Endeavour International Corporation
 
 Item 9B. Other Information
  
 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
  128




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##### Table of Contents



Endeavour International Corporation
 
 Item 14. Principal Accounting Fees and Services
  
 Part IV
 
 Item 15. Exhibits and Financial Statement Schedules
      129




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##### Table of Contents



Endeavour International Corporation
 
 Signatures
  Endeavour International CorporationBy:
    /s/ J. Michael KirkseyJ. Michael KirkseyExecutive Vice President and Chief Financial Officer   Signature
    
    Title
    
    Date/s/ William L. Transier

William L. Transier
    
    Chief Executive Officer,
President and Director
(Principal Executive Officer)
    
    March 10, 2011/s/ J. Michael Kirksey

J. Michael Kirksey
    
    Chief Financial Officer
(Principal Financial
Officer)
    
    March 10, 2011/s/ Robert L. Thompson

Robert L. Thompson
    
    Chief Accounting Officer
(Principal Accounting
Officer)
    
    March 10, 2011/s/ John B. Connally III
    
    Director
    
    March 10, 2011John B. Connally III/s/ Sheldon R. Erikson
    
    Director
    
    March 10, 2011Sheldon Erikson/s/ Charles Hue Williams
    
    Director
    
    March 10, 2011Charles Hue Williams/s/ Leiv R. Nergaard
    
    Director
    
    March 10, 2011Leiv L. Nergaard/s/ Nancy K. Quinn
    
    Director
    
    March 10, 2011Nancy K. Quinn/s/ John N. Seitz
    
    Director
    
    March 10, 2011John N. Seitz
 130




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Endeavour International Corporation
 Exhibit Index
 Exhibit
    
    Description*2.1
    
    Sale and Purchase Agreement
relating to Licence P.255, Block 22/6a North, between Endeavour, Shell U.K. Limited and
Shell EP Offshore Ventures Limited dated November 23, 2010.* 2.2
    
    Sale and Purchase Agreement relating to Licence P.057, Block
21/9,between Endeavour and Shell EP Offshore Ventures Limited dated
November 23, 2010.2.3
    
    Agreement for the Sale and Purchase of the Cygnus Asset dated August
27, 2010. (Incorporated by reference to Exhibit 2.1 of our Quarterly
Report on Form 10-Q (Commission File No. 001-32212) for the quarter
ended September 30, 2010).**2.4
    
    Purchase and Sale and Participation Agreement by and between Endeavour
and Hillwood Energy Alabama LP. Schedules and Exhibits are omitted
pursuant to Section 601(b)(2) of Regulation S-K. Endeavour agrees to
furnish supplementally a copy of any omitted Schedule to the SEC upon
request. (Incorporated by reference to Exhibit 2.1 of our Current
Report on Form 8-K (Commission File No. 001-32212) filed on January
19, 2010).**2.5
    
    Purchase and Sale Agreement between Endeavour and Cohort Energy
Company. Schedules and Exhibits are omitted pursuant to Section
601(b)(2) of Regulation S-K. Endeavour agrees to furnish
supplementally a copy of any omitted Schedule to the SEC upon request.
(Incorporated by reference to Exhibit 2.1 of our Current Report on
Form 8-K (Commission File No. 001-32212) filed on January 19, 2010).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).3.1(c)
    
    Certificate of Amendment dated June 1, 2010 (Incorporated by reference
to Exhibit 3.1 to our Current Report on Form 8-K (Commission File No.
001-32212) filed on June 3, 2010).*3.1(d)
    
    Amendment to Articles of Incorporation, dated November 17, 2010.3.2(a)
    
    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).3.2(b)
    
    Amendment to Amended and Restated By-laws dated December 12, 2007 by
Endeavour International Corporation (Incorporated by reference to
Exhibit 3.1 to our Current Report on Form 8-K (Commission File No.
001-32212) filed on December 13, 2007).
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Endeavour International Corporation
 Exhibit Index
 Exhibit
    
    Description3.3
    
    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
    
    Specimen of Common Stock Certificate.3.5
    
    Certificate of Designation of Series A Preferred Stock of Endeavour
International Corporation (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).3.6(a)
    
    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).3.6(b)
    
    Amendment to Certificate of Designation of Series C Preferred Stock of
Endeavour International Corporation, dated November 17, 2009
(Incorporated by reference to Exhibit 3.1 to our Current Report on
Form 8-K (Commission File No. 001-32212) filed on November 23, 2009).3.6(c)
    
    Amendment to Certificate of Designation of Series C Preferred Stock of
Endeavour International Corporation, dated March 10, 2010
(Incorporated by reference to Exhibit 3.6(c) of our Annual Report on
Form 10-K for the year ended December 31, 2009).3.7
    
    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 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).4.1(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).4.2(a)
    
    Warrants to Purchase Common Stock issued to Gemini Capital, L.P.
(Warrant #2002-1) (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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Endeavour International Corporation
 Exhibit Index
 Exhibit
    
    Description4.2(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).4.2(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).4.3
    
    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).4.4
    
    Registration Rights Agreement dated January 24, 2008 by and between
Endeavour International Corporation and Smedvig QIF Plc (Incorporated
by reference to Exhibit 4.2 to our Current Report on Form 8-K
(Commission File No. 001-32212) filed on January 24, 2008).4.5
    
    Trust Deed dated January 24, 2008 by and among Endeavour International
Corporation, Endeavour Energy Luxembourg S.a.r.l. and BNY Corporate
Trustee Services Limited, as trustee (Incorporated by reference to
Exhibit 4.1 to our Current Report on Form 8-K (Commission File No.
001-32212) filed on January 24, 2008).10.1
    
    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).10.2
    
    2007 Incentive Plan (Incorporated by reference to Exhibit 10.1 to our
Quarterly Report (Commission file No. 001-32212) for the quarter ended
June 30, 2007).10.3
    
    2010 Incentive Plan (Incorporated by reference to Exhibit A to our
definitive proxy statement on Schedule 14A filed on April 20, 2010).10.4
    
    Second Amended and Restated Employment Agreement by and between
William L. Transier and the Company (Incorporated by reference to
Exhibit 10.4 to our Annual Report on Form 10-K (Commission File No.
001-32212) for the year ended December 31, 2008).10.5
    
    Employment Offer Letter to Carl Grenz, dated August 15, 2008
(Incorporated by reference to Exhibit 10.1 of our Quarterly Report on
Form 10-Q (Commission File No. 001-32212) for the quarter ended
September 30, 2008).10.6
    
    Form of Change in Control on Termination of Benefits Agreement
(Incorporated by reference to Exhibit 10.1 to our Current Report on
Form 8-K
(Commission File No. 000-32212) filed on February 15, 2008).
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##### Table of Contents



Endeavour International Corporation
 Exhibit Index
 Exhibit
    
    Description10.7
    
    Form of Amended Change in Control Termination Benefits Agreement
between the Company and Kirksey, Grenz, Williams and Stover,
individually (Incorporated by reference to Exhibit 10.8 of our Annual
Report on Form 10-K for the year ended December 31, 2008).10.8
    
    Change in Control and Termination Benefits Agreement dated January 11,
2010, by and between Endeavour International Corporation and James
Joseph Emme (Incorporated by reference to Exhibit 10.7 of our Annual
Report on Form 10-K for the year ended December 31, 2009).10.9
    
    Form of Restricted Stock Agreement under the 2010 Incentive Plan
(Incorporated by reference to Exhibit 10.2 of our Quarterly Report on
Form 10-Q (Commission File No. 001-32212) for the quarter ended
September 31, 2010).10.10
    
    Form of Stock Option Agreement under the 2010 Incentive Plan
(Incorporated by reference to Exhibit 10.3 to our Quarterly Report on
Form 10-Q (Commission File No. 001-32212) for the quarter ended
September 31, 2010).10.11(a)
    
    Form of Stock Option Agreement under the 2010 Incentive Plan
(Incorporated by reference to Exhibit 10.3 to our Quarterly Report on
Form 10-Q (Commission File No. 001-32212) for the quarter ended
September 31, 2010).10.11(b)
    
    Incremental Term Loan Commitment and Amendment Agreement among
Endeavour International Corporation, Endeavour Energy UK Limited,
various lenders and Cyan Partners, LP dated October 21, 2010
(Incorporated by reference to Exhibit 10.4(b) to our Quarterly Report
on Form 10-Q (Commission File No. 001-32212) for the quarter ended
September 31, 2010).10.11(c)
    
    Incremental Fee Letter among Endeavour International Corporation,
Endeavour Energy UK Limited, various lenders and Cyan Partners, LP, as
supplement to the Incremental Term Loan Commitment and Amendment
Agreement, dated October 21, 2010 (Incorporated by reference to
Exhibit 10.4(b) to our Quarterly Report on Form 10-Q (Commission File
No. 001-32212) for the quarter ended September 31, 2010).10.11(d)
    
    First Amendment to Credit Agreement, U.S. Security Agreement and
Subsidiaries Guaranty, dated as of February 3, 2011, by and among
Endeavour International Corporation, Endeavour Energy UK Limited, Cyan
Partners, LP, as administrative agent, and the lenders party thereto
(Incorporated by reference to Exhibit 10.1 to our Current Report on
Form 8-K (Commission File No. 001-32212) filed on February 9, 2011).10.12(a)
    
    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) filed on October 25, 2006).
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##### Table of Contents



Endeavour International Corporation
 Exhibit Index
 Exhibit
    
    Description10.12(b)
    
    Amendment No. 1 to Subscription and Registration Rights Agreement,
January 29, 2010, 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)
filed on February 1, 2010).**10.13
    
    Final Participation Agreement between Endeavour and Cohort Energy
Company (Incorporated by reference to Exhibit 10.2 to our Current
Report on Form 8-K (Commission File No. 001-32212) filed on January
19, 2010).10.14
    
    Restricted Stock Award Agreement between Endeavour International
Corporation and J. Michael Kirksey dated September 26, 2007
(Incorporated by reference to Exhibit 10.31 to our Annual Report on
Form 10-K (Commission File No. 001-32212) for the year ended December
31, 2007).10.15
    
    Restricted Stock Award Agreement between Endeavour International
Corporation and John G. Williams dated October 1, 2007 (Incorporated
by reference to Exhibit 10.32 to our Annual Report on Form 10-K
(Commission File No. 001-32212) for the year ended December 31, 2007).10.16
    
    Stock Option Agreement between Endeavour International Corporation and
J. Michael Kirksey dated September 26, 2007 (Incorporated by reference
to Exhibit 10.33 to our Annual Report on Form 10-K (Commission File
No. 001-32212) for the year ended December 31, 2007).10.17
    
    Stock Option Agreement between Endeavour International Corporation and
John G. Williams dated October 1, 2007 (Incorporated by reference to
Exhibit 10.34 to our Annual Report on Form 10-K (Commission File No.
001-32212) for the year ended December 31, 2007).10.18
    
    Stock Option Agreement between Endeavour International Corporation and
Carl D. Grenz dated November 3, 2008 (Incorporated by reference to
Exhibit 10.22 to our Annual Report on Form 10-K (Commission File No.
001-32212) for the year ended December 31, 2008).10.19
    
    Stock Option Agreement between Endeavour International Corporation and
Carl D. Grenz dated November 3, 2008 (Incorporated by reference to
Exhibit 10.23 to our Annual Report on Form 10-K (Commission File No.
001-32212) for the year ended December 31, 2008).10.20
    
    Restricted Stock Award Agreement between Endeavour International
Corporation and Carl D. Grenz dated November 3, 2008 (Incorporated by
reference to Exhibit 10.24 to our Annual Report on Form 10-K
(Commission File No. 001-32212) for the year ended December 31, 2008).10.21
    
    Restricted Stock Award Agreement between Endeavour International
Corporation and Carl D. Grenz dated November 3, 2008 (Incorporated by
reference to Exhibit 10.25 to our Annual Report on Form 10-K
(Commission File No. 001-32212) for the year ended December 31, 2008).
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##### Table of Contents



Endeavour International Corporation
 Exhibit Index
 Exhibit
    
    Description*10.22
    
    Restricted Stock Award Agreement between Endeavour International
Corporation and James J. Emme dated January 10, 2010.10.23
    
    Agreement for the Sale and Purchase of the Endeavour Energy Norge AS
dated April 2, 2009 (Incorporated by reference to Exhibit 4.1 of our
Quarterly Report on Form 10-Q (Commission File No. 001-32212) for the
quarter ended March 31, 2009).10.24
    
    Form of Stock Redemption Agreement dated November 17, 2009 by and
among Endeavour International Corporation and the holders of its
Series C Preferred Stock (Incorporated by reference to Exhibit 10.1 to
our Current Report on Form 8-K (Commission File No. 001-32212) filed
on November 23, 2009).10.25(a)
    
    Form of Note Agreement dated November 17, 2009 by and among Endeavour
International Corporation and the holders of its Series C Preferred
Stock (Incorporated by reference to Exhibit 10.2 to our Current Report
on Form 8-K (Commission File No. 001-32212) filed on November 23,
2009).10.25(b)
    
    Amendment to Note Agreement dated November 17, 2009 by and among
Endeavour International Corporation and the holders of its Series C
Preferred Stock, dated March 10, 2010 (Incorporated by reference to
Exhibit 10.26(b) of our Annual Report on Form 10-K for the year ended
December 31, 2009).10.26
    
    Common Stock Purchase Agreement, dated as of February 4, 2010, by and
between Endeavour International Corporation and the purchasers named
therein ((Incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K (Commission File No. 001-32212) filed on February
5, 2010).10.27
    
    Registration Rights Agreement, dated as of February 4, 2010, by and
between Endeavour International Corporation and the purchasers named
therein (Incorporated by reference to Exhibit 10.2 to our Current
Report on Form 8-K (Commission File No. 001-32212) filed on February
5, 2010).10.28
    
    Common Stock Purchase Agreement, dated August 16, 2010, by and between
Endeavour International Corporation and the purchasers named therein
(Incorporated by reference to Exhibit 10.1 to our Current Report on
Form 8-K (Commission File No. 001-32212) filed on August 20, 2010.*12.1
    
    Computation of Ratios of Earnings to Fixed Charges.*12.2
    
    Computation of Ratios of Earnings to Fixed Charges and Preference
Securities Dividends.*14.1
    
    Code of Business Conduct of Endeavour International Corporation.*21.1
    
    List of Subsidiaries.
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##### Table of Contents



Endeavour International Corporation
 Exhibit Index
 Exhibit
    
    Description*23.1
    
    Consent of Independent Registered Public Accounting Firm  KPMG LLP.*23.2
    
    Consent of Independent Reserve Engineers  Netherland, Sewell &
Associates, Inc.*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 J. Michael Kirksey, Chief Financial 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 J. Michael Kirksey, Chief Financial Officer, pursuant
to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.99.1
    
    Report of Netherland, Sewell & Associates, Inc., Independent Petroleum
Engineers and Geologists.
 
 *
    
    Filed herewith.
    
    Furnished herewith.
    
    Identifies management contracts and compensatory plans or arrangements.**
    
    Portions of this exhibit have been omitted pursuant to a request for
confidential treatment under Rule 24b-2 of the Securities Exchange Act
of 1934, and the omitted material has been separately filed with the
Securities and Exchange Commission. 137