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United States

Securities and Exchange Commission

Washington, D.C. 20549





Form 10-Q





(Mark One)

|x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------------

For the Quarterly Period Ended March 31, 2009

or



| ̈ | Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------

For the transition period from  to

Commission file number: 1-13463





Endeavour International Corporation

(Exact name of registrant as specified in
its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Nevada                                                         |  | 88-0448389                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

1001 Fannin Street, Suite 1600, Houston, Texas 77002

(Address of principal executive offices) (Zip code)

(713) 307-8700

(Registrants telephone number, including area code)

None

(Former name, former address
and former fiscal year, if changed since last report.)





Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.    x  Yes     ̈  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     ̈  Yes     ̈  No

Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of accelerated filer, large accelerated filer, and smaller reporting company in
Rule 12b-2 of the Exchange Act (check one):



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈ |  | Accelerated filer         |  | x
|                        |  |   | 
|Non-accelerated filer   |  |  ̈ |  | Smaller reporting company |  |  ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).     ̈  Yes    x  No

As of May 4, 2009, 130.4 million shares of the registrants common stock were outstanding.









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Endeavour International Corporation

Index



|                                                                                              |  |   
|--------------------------------------------------------------------------------------------- |  | --
|Part I: Financial Information                                                                 |  |   
|Item 1: Financial Statements                                                                  |  |   
|Condensed Consolidated Balance Sheets                                                         |  | 1 
|Condensed Consolidated Statements of Operations                                               |  | 3 
|Condensed Consolidated Statements of Cash Flows                                               |  | 4 
|Notes to Condensed Consolidated Financial Statements                                          |  | 5 
|Item 2: Managements Discussion and Analysis of Financial Condition and Results of
Operations |  | 19
|Item 3: Quantitative and Qualitative Disclosures About Market Risk                            |  | 30
|Item 4: Controls and Procedures                                                               |  | 32
|Part II. Other Information                                                                    |  |   
|Item 1A: Risk Factors                                                                         |  | 32
|Item 6: Exhibits                                                                              |  | 32
|Signatures                                                                                    |  | 33

Quantities of natural gas are expressed in this report 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 energy equivalent of six Mcf of natural gas. 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.



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##### Table of Contents

Part I: Financial Information

Item 1: Financial Statements

Endeavour International Corporation

Condensed Consolidated Balance Sheet

(Unaudited)

(Amounts in thousands, except
share data)



|                                            |  |                |         |                   |   |        
|------------------------------------------- |  | -------------- | ------- | ----------------- | - | -------
|                                            |  | March 31, 2009 |         | December 31, 2008
|Assets                                      |  |                |         |                   |   |        
|Current Assets:                             |  |                |         |                   |   |        
|Cash and cash equivalents                   |  | $              | 12,599  |                   | $ | 31,421 
|Restricted cash                             |  |                | 32,553  |                   |   | 20,739 
|Accounts receivable                         |  |                | 20,555  |                   |   | 22,325 
|Prepaid expenses and other current assets   |  |                | 38,702  |                   |   | 42,194 
|Current assets of discontinued operations   |  |                | 13,907  |                   |   | 16,726 
|                                            |  |                |         |                   |   |        
|Total Current Assets                        |  |                | 118,316 |                   |   | 133,405
|                                            |  |               
|Property and Equipment, Net                 |  |                | 217,518 |                   |   | 232,346
|Goodwill                                    |  |                | 213,949 |                   |   | 213,949
|Other Assets                                |  |                | 9,674   |                   |   | 9,165  
|Long Term Assets of Discontinued Operations |  |                | 151,122 |                   |   | 148,605
|                                            |  |                |         |                   |   |        
|Total Assets                                |  | $              | 710,579 |                   | $ | 737,470
|                                            |  |                |         |                   |   |        



1



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##### Table of Contents

Endeavour International Corporation

Condensed Consolidated Balance Sheets

(Unaudited)

Amounts in thousands, except share data)



|                                                                                               |  |                |          |   |                   |   |          |  
|---------------------------------------------------------------------------------------------- |  | -------------- | -------- | - | ----------------- | - | -------- | -
|                                                                                               |  | March 31, 2009 |          |   | December 31, 2008 |  
|Liabilities and Stockholders Equity                                                           |  |                |          |   |                   |   |          |  
|Current Liabilities:                                                                           |  |                |          |   |                   |   |          |  
|Accounts payable                                                                               |  | $              | 52,545   |   |                   | $ | 38,630   |  
|Current maturities of debt                                                                     |  |                | 6,652    |   |                   |   | 13,000   |  
|Accrued expenses and other                                                                     |  |                | 37,895   |   |                   |   | 36,642   |  
|Current liabilities of discontinued operations                                                 |  |                | 14,434   |   |                   |   | 22,231   |  
|                                                                                               |  |                |          |   |                   |   |          |  
|Total Current Liabilities                                                                      |  |                | 111,526  |   |                   |   | 110,503  |  
|                                                                                               |  |               
|Long-Term Debt                                                                                 |  |                | 212,552  |   |                   |   | 214,855  |  
|Deferred Taxes                                                                                 |  |                | 55,689   |   |                   |   | 67,299   |  
|Other Liabilities                                                                              |  |                | 56,740   |   |                   |   | 55,791   |  
|Long-term Liabilities of Discontinued Operations                                               |  |                | 49,432   |   |                   |   | 46,051   |  
|                                                                                               |  |                |          |   |                   |   |          |  
|Total Liabilities                                                                              |  |                | 485,939  |   |                   |   | 494,499  |  
|                                                                                               |  |               
|Commitments and Contingencies                                                                  |  |                |          |   |                   |   |          |  
|                                                                                               |  |               
|Series C Convertible Preferred Stock (Liquidation preference: $125,000)                        |  |                | 125,000  |   |                   |   | 125,000  |  
|                                                                                               |  |               
|Stockholders Equity:                                                                          |  |                |          |   |                   |   |          |  
|Series B preferred stock (Liquidation preference: $2,997)                                      |  |                |         |   |                   |   |         |  
|Common stock; shares issued and outstanding  130,124,133 and 128,571,995 shares, respectively |  |                | 130      |   |                   |   | 129      |  
|Treasury stock (434,641 and 326,854 shares, respectively)                                      |  |                | (500     | ) |                   |   | (450     | )
|Additional paid-in capital                                                                     |  |                | 245,202  |   |                   |   | 244,471  |  
|Accumulated other comprehensive loss                                                           |  |                | (748     | ) |                   |   | (1,266   | )
|Accumulated deficit                                                                            |  |                | (144,444 | ) |                   |   | (124,913 | )
|                                                                                               |  |                |          |   |                   |   |          |  
|Total Stockholders Equity                                                                     |  |                | 99,640   |   |                   |   | 117,971  |  
|                                                                                               |  |                |          |   |                   |   |          |  
|Total Liabilities and Stockholders Equity                                                     |  | $              | 710,579  |   |                   | $ | 737,470  |  
|                                                                                               |  |                |          |   |                   |   |          |  

See accompanying notes to condensed consolidated financial statements.



2



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Endeavour International Corporation

Condensed Consolidated Statement of Operations

(Unaudited)

(Amounts in thousands, except per share data)



|                                                                       |  |                              |         |   |      |   |         |  
|---------------------------------------------------------------------- |  | ---------------------------- | ------- | - | ---- | - | ------- | -
|                                                                       |  | Three Months Ended March 31, |        
|                                                                       |  | 2009                         |         |   | 2008 |  
|Revenues                                                               |  | $                            | 16,338  |   |      | $ | 45,809  |  
|                                                                       |  |                             
|Cost of Operations:                                                    |  |                              |         |   |      |   |         |  
|Operating expenses                                                     |  |                              | 6,182   |   |      |   | 7,347   |  
|Depreciation, depletion and amortization                               |  |                              | 11,324  |   |      |   | 18,888  |  
|Impairment of oil and gas properties                                   |  |                              | 29,402  |   |      |   |        |  
|General and administrative                                             |  |                              | 3,835   |   |      |   | 3,709   |  
|                                                                       |  |                              |         |   |      |   |         |  
|                                                                       |  |                             
|Total Expenses                                                         |  |                              | 50,743  |   |      |   | 29,944  |  
|                                                                       |  |                              |         |   |      |   |         |  
|                                                                       |  |                             
|Income (Loss) From Operations                                          |  |                              | (34,405 | ) |      |   | 15,865  |  
|                                                                       |  |                              |         |   |      |   |         |  
|                                                                       |  |                             
|Other Income (Expense):                                                |  |                              |         |   |      |   |         |  
|Derivatives:                                                           |  |                              |         |   |      |   |         |  
|Realized gains (losses)                                                |  |                              | 11,936  |   |      |   | (3,150  | )
|Unrealized losses                                                      |  |                              | (1,373  | ) |      |   | (29,642 | )
|Interest expense                                                       |  |                              | (3,911  | ) |      |   | (8,316  | )
|Interest income and other                                              |  |                              | (341    | ) |      |   | 91      |  
|                                                                       |  |                              |         |   |      |   |         |  
|                                                                       |  |                             
|Total Other Income (Expense)                                           |  |                              | 6,311   |   |      |   | (41,017 | )
|                                                                       |  |                              |         |   |      |   |         |  
|                                                                       |  |                             
|Loss Before Income Taxes                                               |  |                              | (28,094 | ) |      |   | (25,152 | )
|Income Tax Benefit                                                     |  |                              | (10,952 | ) |      |   | (8,627  | )
|                                                                       |  |                              |         |   |      |   |         |  
|                                                                       |  |                             
|Loss from Continuing Operations                                        |  |                              | (17,142 | ) |      |   | (16,525 | )
|Income (Loss) from Discontinued Operations                             |  |                              | 279     |   |      |   | (267    | )
|                                                                       |  |                              |         |   |      |   |         |  
|                                                                       |  |                             
|Net Loss                                                               |  |                              | (16,863 | ) |      |   | (16,792 | )
|Preferred Stock Dividends                                              |  |                              | 2,669   |   |      |   | 2,695   |  
|                                                                       |  |                              |         |   |      |   |         |  
|                                                                       |  |                             
|Net Loss to Common Stockholders                                        |  | $                            | (19,532 | ) |      | $ | (19,487 | )
|                                                                       |  |                              |         |   |      |   |         |  
|                                                                       |  |                             
|Basic and Diluted Loss per Common Share:                               |  |                              |         |   |      |   |         |  
|Continuing operations                                                  |  | $                            | (0.15   | ) |      | $ | (0.15   | )
|Discontinued operations                                                |  |                              |        |   |      |   |        |  
|                                                                       |  |                              |         |   |      |   |         |  
|Net loss to common stockholders                                        |  | $                            | (0.15   | ) |      | $ | (0.15   | )
|                                                                       |  |                              |         |   |      |   |         |  
|                                                                       |  |                             
|Weighted Average Number of Common Shares OutstandingBasic and Diluted |  |                              | 129,291 |   |      |   | 127,537 |  
|                                                                       |  |                              |         |   |      |   |         |  

See accompanying notes to condensed consolidated financial statements.



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Endeavour International Corporation

Condensed Consolidated Statement of Cash Flows

(Unaudited)

(Amounts in thousands)



|                                                                                |  |                              |         |   |      |   |         |  
|------------------------------------------------------------------------------- |  | ---------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                |  | Three Months Ended March 31, |        
|                                                                                |  | 2009                         |         |   | 2008 |  
|Cash Flows from Operating Activities:                                           |  |                              |         |   |      |   |         |  
|Net loss                                                                        |  | $                            | (16,863 | ) |      | $ | (16,792 | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                              |         |   |      |   |         |  
|Depreciation, depletion and amortization                                        |  |                              | 16,059  |   |      |   | 21,403  |  
|Impairment of oil and gas properties                                            |  |                              | 29,402  |   |      |   |        |  
|Deferred tax benefit                                                            |  |                              | (8,423  | ) |      |   | (3,144  | )
|Unrealized loss on derivatives                                                  |  |                              | 1,373   |   |      |   | 29,642  |  
|Amortization of non-cash compensation                                           |  |                              | 657     |   |      |   | 544     |  
|Amortization of loan costs and discount                                         |  |                              | 1,201   |   |      |   | 3,156   |  
|Non-cash interest expense                                                       |  |                              | 1,279   |   |      |   | 869     |  
|Other                                                                           |  |                              | (1,293  | ) |      |   | 632     |  
|Changes in assets and liabilities:                                              |  |                              |         |   |      |   |         |  
|(Increase) decrease in receivables                                              |  |                              | 4,504   |   |      |   | (3,213  | )
|Decrease in other current assets                                                |  |                              | 4,707   |   |      |   | 4,158   |  
|Increase (decrease) in current liabilities                                      |  |                              | 7,136   |   |      |   | (8,115  | )
|                                                                                |  |                              |         |   |      |   |         |  
|Net Cash Provided by Operating Activities                                       |  |                              | 39,739  |   |      |   | 29,140  |  
|                                                                                |  |                             
|Cash Flows From Investing Activities:                                           |  |                              |         |   |      |   |         |  
|Capital expenditures                                                            |  |                              | (30,584 | ) |      |   | (19,581 | )
|Increase in restricted cash                                                     |  |                              | (11,814 | ) |      |   |        |  
|                                                                                |  |                              |         |   |      |   |         |  
|Net Cash Used in Investing Activities                                           |  |                              | (42,398 | ) |      |   | (19,581 | )
|                                                                                |  |                             
|Cash Flows From Financing Activities:                                           |  |                              |         |   |      |   |         |  
|Repayments of borrowings                                                        |  |                              | (10,678 | ) |      |   | (90,000 | )
|Borrowings under debt agreements                                                |  |                              |        |   |      |   | 88,000  |  
|Payment of preferred dividends                                                  |  |                              | (2,656  | ) |      |   |        |  
|Financing costs paid                                                            |  |                              |        |   |      |   | (3,294  | )
|Other financing                                                                 |  |                              | (50     | ) |      |   | (246    | )
|                                                                                |  |                              |         |   |      |   |         |  
|Net Cash Used in Financing Activities                                           |  |                              | (13,384 | ) |      |   | (5,540  | )
|                                                                                |  |                             
|Net Increase (Decrease) in Cash and Cash Equivalents                            |  |                              | (16,043 | ) |      |   | 4,019   |  
|Cash and Cash Equivalents, Beginning of Period                                  |  |                              | 38,156  |   |      |   | 16,440  |  
|                                                                                |  |                              |         |   |      |   |         |  
|                                                                                |  |                             
|Cash and Cash Equivalents, End of Period                                        |  | $                            | 22,113  |   |      | $ | 20,459  |  
|                                                                                |  |                              |         |   |      |   |         |  
|                                                                                |  |                             
|Cash and Cash Equivalents, End of Period:                                       |  |                              |         |   |      |   |         |  
|Continuing operations                                                           |  | $                            | 12,599  |   |      | $ | 14,980  |  
|Discontinued operations                                                         |  |                              | 9,514   |   |      |   | 5,479   |  
|                                                                                |  |                              |         |   |      |   |         |  
|Total                                                                           |  | $                            | 22,113  |   |      | $ | 20,459  |  
|                                                                                |  |                              |         |   |      |   |         |  

See accompanying notes to condensed consolidated financial statements.



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Endeavour International Corporation

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(Amounts in thousands, except per unit data)

Note 1  General

Endeavour International Corporation (a Nevada
corporation formed in 2000) is an independent oil and gas company engaged in the acquisition, exploration and development of energy reserves. As used in these Notes to Condensed Consolidated Financial Statements, the terms Endeavour,
we, us, our and similar terms refer to Endeavour International Corporation and, unless the context indicates otherwise, its consolidated subsidiaries. The accompanying condensed consolidated financial statements
of Endeavour should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10K for the year ended December 31, 2008.

Basis of Presentation and Use of Estimates

The accompanying unaudited condensed consolidated financial
statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (US GAAP) and have been presented on a going concern basis, which contemplates
the realization of assets and satisfaction of liabilities in the normal course of business. These accounting principles require management to use estimates, judgments and assumptions that affect the reported amounts of assets and liabilities as of
the date of the financial statements, and revenues and expenses during the reporting period. Management reviews its estimates, including those related to the determination of proved reserves, estimates of future dismantlement costs, income taxes and
litigation. Actual results could materially differ from those estimates. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included in these financial statements. Certain amounts
for prior periods have been reclassified to conform to the current presentation.

Management believes it is reasonably possible that the following material
estimates affecting the financial statements could change in the coming year: (1) estimates of proved oil and gas reserves, (2) estimates as to the expected future cash flow from proved oil and gas properties, (3) estimates of future
dismantlement and restoration costs, (4) estimates of fair values used in purchase accounting and (5) estimates of the fair value of derivative instruments.

Loss Per Share

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



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Endeavor International Corporation

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(Amounts in thousands, except per unit data)



For each of the periods presented, shares associated with stock options, warrants, convertible debt, convertible
preferred stock and certain stock incentive plans are not included because their inclusion would be antidilutive (i.e., reduce the net loss per share).

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



|                                     |  |           |  |       
|------------------------------------ |  | --------- |  | ------
|                                     |  | March 31,
|                                     |  | 2009      |  | 2008  
|Options and stock-based compensation |  | 282       |  |      
|Warrants                             |  |          |  |      
|Convertible debt                     |  | 35,581    |  | 33,502
|Convertible preferred stock          |  | 50,000    |  | 50,000
|                                     |  |           |  |       
|                                     |  |          
|Common shares potentially issuable   |  | 85,863    |  | 83,502
|                                     |  |           |  |       

New Accounting Developments

In December 2007, the FASB issued enhanced guidance related to the measurement of identifiable assets acquired, liabilities assumed and disclosure of information related to business combinations and their effect. Our
adoption of this new standard on January 1, 2009 did not have a material effect on our results of operations or financial position.

In December 2007,
the FASB issued a new standard for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Specifically, this statement requires the recognition of a noncontrolling interest (minority interest) as a component of
consolidated equity. This is a change from the current practice to present noncontrolling interests in liabilities or between liabilities and stockholders 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. Our adoption of this new standard on January 1, 2009 did not have an effect on our results of operations or financial
position.

In March 2008, the FASB issued a new standard that requires entities to present expanded and detailed financial statement disclosures for their
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. Our adoption of this new
standard on January 1, 2009 did not have an effect on our results of operations or financial position.

In May 2008, the FASB posted a new staff
position that applies to convertible debt that may be settled in part or in whole in cash upon conversion. The new staff position required issuers of this form of debt to account for its debt and equity components separately. The new position



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Endeavor International Corporation

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(Amounts in thousands, except per unit data)



also expands the definition of convertible preferred shares of an entitys stock that are mandatorily redeemable financial instruments classified as
liabilities. Our adoption of this new standard on January 1, 2009 did not have an effect on our results of operations or financial position.

In June
2008, the FASB issued a new staff position that addresses whether instruments that are granted in share-based payment transactions are participating securities prior to vesting; and therefore are required to be included in the earnings allocation in
the calculation of earnings per share (EPS) under the two-class method as described in a prior FASB standard. The new staff position requires entities to treat unvested share-based payment awards with non-forfeitable rights to dividend or dividend
equivalents as a separate class of securities in calculating EPS. Our adoption of this new standard on January 1, 2009 did not have an effect on our results of operations or financial position. The impact of the adoption of this standard our
weighted average shares outstanding and EPS were not material, therefore, we have not restated prior periods.

On January 1, 2008, we applied the new
standards which defined fair value, established a framework for measuring fair value in generally accepted accounting principles and expanded disclosures about fair value measurements. The new standards do not require new fair value measurements,
rather, the provisions apply when fair value measurements are performed under other accounting pronouncements. In February 2008, the standard was deferred for one year as it applies to nonfinancial assets and liabilities that are recognized or
disclosed at fair value on a nonrecurring basis (e.g. those measured at fair value in a business combination, asset retirement obligations and goodwill impairment). Our adoption of this new standard on January 1, 2009 did not have an effect on
our results of operations or financial position.

Note 2  Discontinued Operations

On April 2, 2009, we announced that we signed a definitive agreement to divest our Norwegian subsidiary, Endeavour Energy Norge AS, to Verbundnetz Gas AG for cash
consideration of $150 million (the Norway Sale). The transaction is subject to certain government approvals and regulatory compliance processes that are expected to be completed by the end of May 2009. We expect to recognize a gain upon
closing the Norway Sale of approximately $47 million, after the allocation of $68 million of goodwill to the assets sold.



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Endeavor International Corporation

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(Amounts in thousands, except per unit data)



As a result of the pending Norway Sale, we have classified the results of operations and financial position of our
Norwegian subsidiary as discontinued operations for all periods presented. The following table details selected financial data for the assets included in the Norway Sale:



|                                               |  |                             |         |   |                  |   |         |  
|---------------------------------------------- |  | --------------------------- | ------- | - | ---------------- | - | ------- | -
|                                               |  | March 31,2009               |         |   | December 31,2008 |  
|Current Assets:                                |  |                             |         |   |                  |   |         |  
|Cash                                           |  | $                           | 9,514   |   |                  | $ | 6,735   |  
|Accounts receivable                            |  |                             | 1,826   |   |                  |   | 4,559   |  
|Prepaid expenses and other                     |  |                             | 2,567   |   |                  |   | 5,432   |  
|                                               |  |                             |         |   |                  |   |         |  
|                                               |  |                             | 13,907  |   |                  |   | 16,726  |  
|                                               |  |                            
|Long-term Assets:                              |  |                             |         |   |                  |   |         |  
|Property, plant and equipment, net             |  |                             | 83,128  |   |                  |   | 80,611  |  
|Goodwill                                       |  |                             | 67,994  |   |                  |   | 67,994  |  
|                                               |  |                             |         |   |                  |   |         |  
|                                               |  |                             | 151,122 |   |                  |   | 148,605 |  
|                                               |  |                            
|Current Liabilities:                           |  |                             |         |   |                  |   |         |  
|Accounts payable                               |  |                             | (2,714  | ) |                  |   | (3,717  | )
|Accrued expenses and other                     |  |                             | (11,720 | ) |                  |   | (18,514 | )
|                                               |  |                             |         |   |                  |   |         |  
|                                               |  |                             | (14,434 | ) |                  |   | (22,231 | )
|                                               |  |                            
|Long-term Liabilities:                         |  |                             |         |   |                  |   |         |  
|Deferred tax liability                         |  |                             | (39,679 | ) |                  |   | (36,828 | )
|Asset retirement obligation                    |  |                             | (9,753  | ) |                  |   | (9,223  | )
|                                               |  |                             |         |   |                  |   |         |  
|                                               |  |                             | (49,432 | ) |                  |   | (46,051 | )
|                                               |  |                            
|Net Assets and Liabilities                     |  | $                           | 101,163 |   |                  | $ | 97,049  |  
|                                               |  |                             |         |   |                  |   |         |  
|                                               | 
|                                               |  | Three Months EndedMarch 31, |        
|                                               |  | 2009                        |         |   | 2008             |  
|Sales                                          |  | $                           | 13,370  |   |                  | $ | 15,446  |  
|                                               |  |                             |         |   |                  |   |         |  
|                                               |  |                            
|Income before Taxes                            |  | $                           | 2,846   |   |                  | $ | 8,830   |  
|Income Tax Expense                             |  |                             | 2,567   |   |                  |   | 9,097   |  
|                                               |  |                             |         |   |                  |   |         |  
|Net Income (Loss) from Discontinued Operations |  | $                           | 279     |   |                  | $ | (267    | )
|                                               |  |                             |         |   |                  |   |         |  

Note 3  Stock-Based Compensation Arrangements

We grant restricted stock and stock options, including notional restricted stock and options, to employees and directors as incentive compensation. The notional
restricted stock and options may be settled in cash or stock upon vesting at our option; however, it has been our practice to settle in stock. The restricted stock and options generally vest over three years and the options have a five-year term.
The vesting of these shares and options is dependent upon the continued service of the grantees with Endeavour. Upon the occurrence of a change in control, each outstanding share of restricted stock and stock option will immediately vest.



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##### Table of Contents

Endeavor International Corporation

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(Amounts in thousands, except per unit data)



For the first quarter of 2009, we included non-cash stock-based compensation of $0.1 million in general and
administrative (G&A) expenses and $0.4 million in capitalized G&A expenses. For the first quarter of 2008, we included non-cash stock-based compensation of $0.2 million and $0.2 million in G&A expenses and capitalized G&A
expenses, respectively. At March 31, 2009, total compensation costs related to awards not yet recognized was approximately $4.3 million and is expected to be recognized over a weighted average period of less than three years.

Stock Options

The fair value of each option award is
estimated on the date of grant using the Black-Scholes option-pricing model. Expected volatility is based on an average of historical volatility of common stock prices of Endeavour. The expected term is the average of the vesting period and the term
of the option. We use historical data to estimate option exercises and employee terminations within the valuation model. The risk-free rate for the expected term is the yield on the zero-coupon U.S. treasury security with a term comparable to the
expected term of the option. We do not include an estimated dividend yield since we have not paid dividends on our common stock historically.

The
estimated fair value of each option granted was calculated using the Black-Scholes model. The following table summarizes the weighted average of the assumptions used in the method.



|                              |  |                              |   |  |      |  
|----------------------------- |  | ---------------------------- | - |  | ---- | -
|                              |  | Three Months Ended March 31, |  
|                              |  | 2009                         |   |  | 2008 |  
|Risk-free rate                |  | 1.3                          | % |  | 3.2  | %
|Expected years until exercise |  | 4.5                          |   |  | 4.25 |  
|Expected stock volatility     |  | 56                           | % |  | 46   | %
|Dividend yield                |  |                             |   |  |     |  



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##### Table of Contents

Endeavor International Corporation

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(Amounts in thousands, except per unit data)



Information relating to stock options, including notional stock options, is summarized as follows:



|                                       |  |                                  |   |  |                                       |      |                                         |     |                         |   |    
|-------------------------------------- |  | -------------------------------- | - |  | ------------------------------------- | ---- | --------------------------------------- | --- | ----------------------- | - | ---
|                                       |  | Number ofSharesUnderlyingOptions |   |  | WeightedAverageExercisePrice perShare |      | WeightedAverageContractualLife in Years |     | AggregateIntrinsicValue
|Balance outstanding  January 1, 2009  |  | 4,807                            |   |  | $                                     | 2.35 |                                         |     |                         |   |    
|Granted                                |  | 1,170                            |   |  |                                       | 0.54 |                                         |     |                         |   |    
|Forfeited                              |  | (3                               | ) |  |                                       | 4.99 |                                         |     |                         |   |    
|Expired                                |  | (1,112                           | ) |  |                                       | 2.01 |                                         |     |                         |   |    
|                                       |  |                                  |   |  |                                       |      |                                         |     |                         |   |    
|                                       |  |                                  |   | 
|Balance outstanding  March 31, 2009   |  | 4,862                            |   |  | $                                     | 1.99 |                                         | 5.6 |                         | $ | 469
|                                       |  |                                  |   |  |                                       |      |                                         |     |                         |   |    
|Currently exercisable  March 31, 2009 |  | 2,072                            |   |  | $                                     | 3.24 |                                         | 2.7 |                         | $ |   
|                                       |  |                                  |   |  |                                       |      |                                         |     |                         |   |    

The weighted average grant-date fair value of options granted for the three months ended March 31, 2009 was
$0.25 per option.

Restricted Stock

At
March 31, 2009, our employees and directors held 3.8 million restricted shares of our common stock that vest over service periods of up to three years. The restricted stock awards were valued based on the closing price of our common stock
on the measurement date, typically the date of grant. Compensation expense is recorded on a straight-line basis over the restricted share vesting period.

Status of the restricted shares as of March 31, 2009 and the changes during the three months ended March 31, 2009 are presented below:



|                                                                |  |                 |        |   |                                              |   |     
|--------------------------------------------------------------- |  | --------------- | ------ | - | -------------------------------------------- | - | ----
|                                                                |  | Number ofShares |        |   | WeightedAverage GrantDate FairValue perShare
|Balance outstanding  January 1, 2009                           |  |                 | 3,966  |   |                                              | $ | 1.88
|Granted                                                         |  |                 | 1,247  |   |                                              |   | 0.54
|Vested                                                          |  |                 | (1,385 | ) |                                              |   | 2.68
|Forfeited                                                       |  |                 | (43    | ) |                                              |   | 1.80
|                                                                |  |                 |        |   |                                              |   |     
|                                                                |  |                
|Balance outstanding  March 31, 2009                            |  |                 | 3,785  |   |                                              | $ | 1.15
|                                                                |  |                 |        |   |                                              |   |     
|                                                                |  |                
|Total grant date fair value of shares vesting during the period |  | $               | 3,711  |   |                                              |   |     
|                                                                |  |                 |        |   |                                              |   |     



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##### Table of Contents

Endeavor International Corporation

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(Amounts in thousands, except per unit data)



Note 4  Property and Equipment

Property and equipment included the following at the indicated dates below:



|                                                     |  |               |          |   |                  |   |          |  
|---------------------------------------------------- |  | ------------- | -------- | - | ---------------- | - | -------- | -
|                                                     |  | March 31,2009 |          |   | December 31,2008 |  
|Oil and gas properties under the full cost method:   |  |               |          |   |                  |   |          |  
|Subject to amortization                              |  | $             | 218,117  |   |                  | $ | 239,024  |  
|Not subject to amortization:                         |  |               |          |   |                  |   |          |  
|Acquired in 2009                                     |  |               | 22,306   |   |                  |   |         |  
|Acquired in 2008                                     |  |               | 36,203   |   |                  |   | 37,288   |  
|Acquired in 2007                                     |  |               | 12,737   |   |                  |   | 14,746   |  
|Acquired prior to 2007                               |  |               | 79,739   |   |                  |   | 82,522   |  
|                                                     |  |               |          |   |                  |   |          |  
|                                                     |  |               | 369,102  |   |                  |   | 373,580  |  
|                                                     |  |              
|Other oil and gas assets                             |  |               | 4,875    |   |                  |   | 4,873    |  
|                                                     |  |              
|Computers, furniture and fixtures                    |  |               | 3,107    |   |                  |   | 3,238    |  
|                                                     |  |               |          |   |                  |   |          |  
|Total property and equipment                         |  |               | 377,084  |   |                  |   | 381,691  |  
|                                                     |  |              
|Accumulated depreciation, depletion and amortization |  |               | (159,566 | ) |                  |   | (149,345 | )
|                                                     |  |               |          |   |                  |   |          |  
|                                                     |  |              
|Net property and equipment                           |  | $             | 217,518  |   |                  | $ | 232,346  |  
|                                                     |  |               |          |   |                  |   |          |  

The costs not subject to amortization relate to unproved properties and properties being made ready to be placed
in service, which are excluded from amortizable capital costs until it is determined whether or not proved reserves can be assigned to such properties. We capitalized $1.0 million and $1.1 million in interest related to exploration activities for
the quarters ended March 31, 2009 and 2008, respectively. We capitalized $1.7 million and $2.2 million in certain employee costs directly related to exploration activities for the quarters ended March 31, 2009 and 2008, respectively.

In 2009, we recorded $29.4 million in impairment of oil and gas properties, pre-tax, through the application of the full cost ceiling test at the end of
the quarter. The prices used to determine the impairment were $46.52 per barrel for oil and $6.37 per Mcf for gas. While our commodity derivatives had a fair value of $31.4 million at March 31, 2009, these derivatives were not included in the
calculation of the full cost ceiling test as the derivatives are not accounted for as cash flow hedges.



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##### Table of Contents

Endeavor International Corporation

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(Amounts in thousands, except per unit data)



Note 5  Debt Obligations

Our debt consisted of the following at the indicated dates:



|                                                                  |  |               |         |   |                  |   |         |  
|----------------------------------------------------------------- |  | ------------- | ------- | - | ---------------- | - | ------- | -
|                                                                  |  | March 31,2009 |         |   | December 31,2008 |  
|Senior notes, due 2012                                            |  | $             | 81,250  |   |                  | $ | 81,250  |  
|Senior bank facility, variable rate, due 2011                     |  |               | 102,322 |   |                  |   | 113,000 |  
|Convertible bonds, due 2014                                       |  |               | 45,775  |   |                  |   | 44,496  |  
|                                                                  |  |               |         |   |                  |   |         |  
|                                                                  |  |               | 229,347 |   |                  |   | 238,746 |  
|                                                                  |  |              
|Less: debt discount                                               |  |               | (10,143 | ) |                  |   | (10,891 | )
|Less: current maturities                                          |  |               | (6,652  | ) |                  |   | (13,000 | )
|                                                                  |  |               |         |   |                  |   |         |  
|                                                                  |  |              
|Long-term debt                                                    |  | $             | 212,552 |   |                  | $ | 214,855 |  
|                                                                  |  |               |         |   |                  |   |         |  
|                                                                  |  |              
|Standby letters of credit outstanding for abandonment liabilities |  | $             | 29,534  |   |                  | $ | 30,115  |  
|                                                                  |  |               |         |   |                  |   |         |  

The capacity and amounts available under our senior bank facility is subject to a number of considerations,
including certain borrowing base limitations. Our borrowing base is primarily established through the evaluation of all of our oil and gas assets which are used as collateral to support the senior bank facility. This borrowing base is subject to a
redetermination every six months (on April 1 and October 1) with an independent reserve report required every 12 months. Upon any sale of assets that are included in the borrowing base, such as the Norway Sale, a borrowing base
redetermination is required. Accordingly, the borrowing base redetermination scheduled for April 1, 2009 has been delayed in order for the redetermination to reflect the impact of the proposed Norway Sale.

We have currently reflected $6.7 million in current maturities of long-term debt at March 31, 2009 based upon our estimates of reductions in the borrowing base
capacity and maximum commitment levels following completion of the borrowing base redetermination. In addition, the borrowing base capacity will decrease following the completion of the Norway Sale and we expect to repay approximately $25 to $30
million of principal under our senior bank facility to satisfy this anticipated reduction in borrowing base capacity.



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##### Table of Contents

Endeavor International Corporation

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(Amounts in thousands, except per unit data)



Note 6  Asset Retirement Obligations

Our asset retirement obligations relate to obligations for the future plugging and abandonment of oil and gas properties. The following table provides a rollforward of our asset retirement obligations for the three
months ended March 31, 2009 and 2008:



|                                                                          |  |                              |        |   |      |   |       
|------------------------------------------------------------------------- |  | ---------------------------- | ------ | - | ---- | - | ------
|                                                                          |  | Three Months Ended March 31,
|                                                                          |  | 2009                         |        |   | 2008
|Carrying amount of asset retirement obligations as of beginning of period |  | $                            | 38,776 |   |      | $ | 30,790
|Accretion expense                                                         |  |                              | 965    |   |      |   | 719   
|Impact of foreign currency exchange rate changes                          |  |                              | (744   | ) |      |   | 18    
|Payment of asset retirement obligation                                    |  |                              | (97    | ) |      |   |      
|                                                                          |  |                              |        |   |      |   |       
|                                                                          |  |                             
|Carrying amount of asset retirement obligations as of end of period       |  | $                            | 38,900 |   |      | $ | 31,527
|                                                                          |  |                              |        |   |      |   |       

Note 7  Fair Value Measurements

We apply fair value measurements to certain assets and liabilities including commodity and interest rate derivative instruments, marketable securities and embedded derivatives relating to conversion and change in
control features in certain of our debt instruments. We seek to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value measurements are classified and disclosed in one of the following
categories:



|         |  |                                                                                                                                                                                                                                                                                                                                                                                                 
|-------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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.
|         | 
|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.                                                                                              

Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair
value measurement. The following table summarizes the valuation of our investments and financial instruments by pricing levels as of March 31, 2009:



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Endeavor International Corporation

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(Amounts in thousands, except per unit data)



|                                  |  |                                                |   |                                             |   |        |                                         |  |   |                 |   |  |   |         |  
|--------------------------------- |  | ---------------------------------------------- | - | ------------------------------------------- | - | ------ | --------------------------------------- |  | - | --------------- | - |  | - | ------- | -
|                                  |  | Quoted Market Pricesin Active Markets -Level 1 |   | Significant OtherObservable Inputs -Level 2 |   |        | SignificantUnobservable Inputs -Level 3 |  |   | Total FairValue |  
|Oil and gas derivative contracts: |  |                                                |   |                                             |   |        |                                         |  |   |                 |   |  |   |         |  
|Oil and gas swaps                 |  | $                                              |  |                                             | $ | 13,283 |                                         |  | $ |                |   |  | $ | 13,283  |  
|Oil and gas collars               |  |                                                |  |                                             |   | 14,036 |                                         |  |   | 4,054           |   |  |   | 18,090  |  
|Interest rate swaps               |  |                                                |  |                                             |   | (1,088 | )                                       |  |   |                |   |  |   | (1,088  | )
|Embedded derivatives              |  |                                                |  |                                             |   |       |                                         |  |   | (16,410         | ) |  |   | (16,410 | )
|                                  |  |                                                |   |                                             |   |        |                                         |  |   |                 |   |  |   |         |  
|                                  |  |                                                |   |                                            
|Total derivative liabilities      |  | $                                              |  |                                             | $ | 26,231 |                                         |  | $ | (12,356         | ) |  | $ | 13,875  |  
|                                  |  |                                                |   |                                             |   |        |                                         |  |   |                 |   |  |   |         |  

Our commodity and interest rate derivative contracts were measured based on quotes from our counterparties, which
are major financial institutions or commodities trading institutions. Such quotes have been derived using models that consider various inputs including current market and contractual prices for the underlying instruments, quoted forward prices for
natural gas and crude oil, volatility factors and interest rates, such as a LIBOR curve for a similar length of time as the derivative contract term. The inputs for the fair value models for our swaps and Brent oil collars are all observable market
data and these instruments have been classified as Level 2. Although we utilize the same option pricing models to assess the reasonableness of the fair values of our gas collars, an active futures market does not exist for our UK gas options. We
base the inputs to the option models for our UK gas collars on observable market data in other markets to verify the reasonableness of the counterparty quotes. These UK gas collars are classified as Level 3.

The following is a reconciliation of changes in fair value of net derivative assets and liabilities classified as Level 3:



|                                                                                                                |  |                                  |         |  
|--------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ------- | -
|                                                                                                                |  | Three Months EndedMarch 31, 2009 |        
|Balance at beginning of period                                                                                  |  | $                                | (12,057 | )
|Total gains or losses (realized/unrealized):                                                                    |  |                                  |         |  
|Included in earnings                                                                                            |  |                                  | (299    | )
|                                                                                                                |  |                                  |         |  
|                                                                                                                | 
|Balance at end of period                                                                                        |  | $                                | (12,356 | )
|                                                                                                                |  |                                  |         |  
|                                                                                                                | 
|Changes in unrealized gains (losses) relating to derivative assets and liabilities still held at March 31, 2009 |  | $                                | 528     |  
|                                                                                                                |  |                                  |         |  

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are reported at fair value on a nonrecurring basis in our consolidated balance sheets. The following methods and assumptions were used to
estimate the fair values:

Asset Retirement ObligationsThe initial measurement of asset retirement obligations at fair value is calculated
using discounted cash flow techniques and based on internal estimates of future retirement costs associated with oil and gas properties. Significant Level 3 inputs used in the calculation of asset retirement obligations include plugging costs and
reserve lives. A reconciliation of our asset retirement obligations is presented in Note 6.



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##### Table of Contents

Endeavor International Corporation

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(Amounts in thousands, except per unit data)



GoodwillGoodwill is tested annually at year end for impairment. The first step of that process is to
compare the fair value of the reporting unit to which goodwill has been assigned to the carrying amount of the associated net assets and goodwill. Significant Level 3 inputs are used in the determination of the fair value of the reporting unit,
including present values of expected cash flows from operations.

Note 8  Derivative Instruments

From time to time, we manage fluctuations in derivative financial instruments with respect to a portion of our oil and gas production or a portion of our variable rate
debt to achieve a more predictable cash flow by reducing our exposure to price fluctuations. These transactions are likely to be swaps, collars or options and to be entered into with major financial institutions or commodities trading institutions.
Derivative financial instruments are intended to reduce our exposure to declines in the market prices of crude oil and natural gas that we produce and sell, to increases in interest rates and to manage cash flows in support of our annual capital
expenditure budget. We also have two embedded derivatives related to our debt instruments.



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##### Table of Contents

Endeavor International Corporation

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(Amounts in thousands, except per unit data)



The fair market value of these derivative instruments is included in our balance sheet as follows:



|                                                |  |               |         |   |                  |   |         |  
|----------------------------------------------- |  | ------------- | ------- | - | ---------------- | - | ------- | -
|                                                |  | March 31,2009 |         |   | December 31,2008 |  
|Derivatives not designated as hedges:           |  |               |         |   |                  |   |         |  
|Oil and gas commodity derivatives:              |  |               |         |   |                  |   |         |  
|Assets:                                         |  |               |         |   |                  |   |         |  
|Prepaid expenses and other current assets       |  | $             | 30,000  |   |                  | $ | 31,649  |  
|Other assets  long-term                        |  |               | 2,803   |   |                  |   | 1,702   |  
|Liabilities:                                    |  |               |         |   |                  |   |         |  
|Other liabilities  long-term                   |  |               | (1,430  | ) |                  |   | (2,375  | )
|                                                |  |               |         |   |                  |   |         |  
|                                                |  | $             | 31,373  |   |                  | $ | 30,976  |  
|                                                |  |              
|Embedded derivatives related to debt instrument |  |               |         |   |                  |   |         |  
|Liabilities:                                    |  |               |         |   |                  |   |         |  
|Other liabilities  long-term                   |  |               | (16,410 | ) |                  |   | (14,640 | )
|                                                |  |              
|Derivatives designated as cash flow hedge:      |  |               |         |   |                  |   |         |  
|Interest rate swap                              |  |               |         |   |                  |   |         |  
|Liabilities:                                    |  |               |         |   |                  |   |         |  
|Accrued expenses and other                      |  |               | (1,088  | ) |                  |   | (1,334  | )

If all counterparties failed to perform, our maximum loss would be $32.8 million as of March 31, 2009.

The effect of the derivatives not designated as hedges on our results of operations was as follows:



|                                                    |  |                              |   |  |         |  
|--------------------------------------------------- |  | ---------------------------- | - |  | ------- | -
|                                                    |  | Three Months Ended March 31, |  
|                                                    |  | 2009                         |   |  | 2008    |  
|Derivatives not designated as hedges:               |  |                              |   |  |         |  
|Oil and gas commodity derivatives                   |  |                              |   |  |         |  
|Realized gains (losses) on derivative instruments   |  | 11,936                       |   |  | (3,150  | )
|Unrealized gains (losses) on derivative instruments |  | 397                          |   |  | (30,312 | )
|                                                    |  |                              |   |  |         |  
|                                                    |  | 12,333                       |   |  | (33,462 | )
|Embedded derivatives related to debt instrument     |  |                              |   |  |         |  
|Unrealized gains (losses) on derivative instruments |  | (1,770                       | ) |  | 670     |  
|                                                    |  |                              |   |  |         |  



16



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##### Table of Contents

Endeavor International Corporation

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(Amounts in thousands, except per unit data)



The effect of derivatives designated as cash flow hedges on our results of operations and other comprehensive income
was as follows:



|                                                                                 |  |                                        |  |                              |     |      |   |      |  
|-------------------------------------------------------------------------------- |  | -------------------------------------- |  | ---------------------------- | --- | ---- | - | ---- | -
|                                                                                 |  |                                        |  | Three Months Ended March 31, |    
|                                                                                 |  | Location ofReclassificationinto Income |  | 2009                         |     | 2008 |  
|Interest rate swap                                                               |  |                                        |  |                              |     |      |   |      |  
|(Gain) loss recognized in other comprehensive income                             |  |                                        |  | $                            | 136 |      | $ | (980 | )
|(Gain) loss reclassified from accumulated other comprehensive income into income |  | Interestexpense                        |  |                              | 309 |      |   | 122  |  

We did not exclude any component of the hedging instruments gain or loss when assessing effectiveness. The
ineffective portion of the hedges is not material for the periods presented and is included in other income (expense).

As of March 31, 2009, our
outstanding commodity derivatives covered approximately 1,883 Mbbl and 3,754 MMcf cumulative through 2011 and consist of a combination of fixed price swaps and collars. These include four oil and two gas swaps with J. Aron & Company, an
affiliate of Goldman, Sachs & Co., and three oil and five gas collars with BNP Paribas.

We have an interest rate swap with BNP Paribas for a notional
amount of $37.5 million whereby we pay a fixed rate of 5.05% and receive three-month LIBOR through November 2009.

Additional information regarding our
derivative instruments is presented in Note 7 to these Condensed Consolidated Financial Statements.

Note 9  Supplemental Cash Flow Information

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



|                  |  |                              |       |      |   |      
|----------------- |  | ---------------------------- | ----- | ---- | - | -----
|                  |  | Three Months Ended March 31,
|                  |  | 2009                         |       | 2008
|Interest paid     |  | $                            | 2,438 |      | $ | 8,712
|                  |  |                              |       |      |   |      
|Income taxes paid |  | $                            | 3,654 |      | $ | 5,690
|                  |  |                              |       |      |   |      



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##### Table of Contents

Endeavor International Corporation

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(Amounts in thousands, except per unit data)



Note 10  Comprehensive Loss

Excluding net loss, our source of comprehensive loss is due to the net unrealized loss on derivative instruments and marketable securities, which are classified as available-for-sale. The following table summarizes
the components of comprehensive loss:



|                                                                               |  |                              |         |   |      |   |         |  
|------------------------------------------------------------------------------ |  | ---------------------------- | ------- | - | ---- | - | ------- | -
|                                                                               |  | Three Months Ended March 31, |        
|                                                                               |  | 2009                         |         |   | 2008 |  
|Net loss                                                                       |  | $                            | (16,863 | ) |      | $ | (16,792 | )
|                                                                               |  |                             
|Unrealized (gain) loss on interest rate swap derivative instrument, net of tax |  |                              | 136     |   |      |   | (980    | )
|Reclassification adjustment for (income) loss realized in net loss above       |  |                              | 381     |   |      |   | 122     |  
|                                                                               |  |                              |         |   |      |   |         |  
|                                                                               |  |                             
|Net impact on comprehensive income (loss)                                      |  |                              | 517     |   |      |   | (858    | )
|                                                                               |  |                              |         |   |      |   |         |  
|                                                                               |  |                             
|Comprehensive loss                                                             |  | $                            | (16,346 | ) |      | $ | (17,650 | )
|                                                                               |  |                              |         |   |      |   |         |  

Note 11  Commitments and Contingencies

Rig Commitments

We have commitment for the use of drilling rig in our North Sea operations. The
commitment was partially utilized for the drilling rig that commenced drilling at the Rochelle field in December 2008. We have $33 million in escrow toward this commitment, included in Restricted Cash on our Condensed Consolidated
Balance Sheet. The reserved amounts in escrow will be released as payments are made for this drilling activity. Upon completion of the drilling at Rochelle in the first quarter of 2009, we have a remaining commitment for one well slot that we expect
to utilize in late 2009.

We also have a commitment for a semi-submersible rig in Norway through a consortium with several other operators in the Norwegian
Continental Shelf. The contract commits us to 100 days (for two wells) for drilling services for $38 million. This rig commitment will be included in the Norway Sale.

Contingencies

In November 2006, we purchased various oil and gas properties, including the Ivanhoe,
Rob Roy, Hamish (collectively, IVRRH), Renee and Rubie fields. Hess Limited, the operator of the facility supporting production from the IVRRH fields, has advised us that there has been a mis-measurement of the volumes of oil produced from the IVRRH
fields. At March 31, 2009 the estimate of our liability from this mis-measurement was at $4.1 million.



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Endeavour International Corporation

Operating Statistics

(Unaudited)



|Item 2: | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

Unless the context otherwise requires, references to Endeavour, we, us, our and similar terms refer to Endeavour International Corporation and, unless the contest
indicates otherwise, any of our consolidated subsidiaries or partnership interests. The following discussion should be read in conjunction with our unaudited Condensed Consolidated Financial Statements and related notes thereto included elsewhere in
this Report. The following discussion also includes non-GAAP financial measures, which may not be comparable to similarly titled measures presented by other companies. Accordingly, we strongly encourage investors to review our financial statements
in their entirety and not rely on any single financial measure.

Overview

We are an international oil and gas exploration and production company focused on the acquisition, exploration and development of energy reserves in the North Sea and
United States. To date, we have invested a significant amount of our resources on various development, acquisition and exploration projects.

On
April 2, 2009, we signed a definitive agreement to divest our Norwegian subsidiary, Endeavour Energy Norge AS, to Verbundnetz Gas AG for cash consideration of $150 million (the Norway Sale). The transaction is subject to certain
government approvals and regulatory compliance processes that are expected to be completed by the end of May 2009. We expect to recognize a gain upon closing the Norway Sale of approximately $47 million, after the allocation of $68 million of
goodwill to the assets sold.

Our revenues and cash flows from operating activities are very sensitive to changes in prices received for our products.
Market prices for both oil and natural gas have significantly declined since the beginning of 2008 as a result of the global economic decline. Accordingly, revenues have decreased from $45.8 million in the first three months of 2008 to $16.3 million
in the same period of 2009. With our various oil and gas derivative instruments, discretionary cash flow did not drop as precipitously as revenue. Discretionary cash flow was $23.4 million for the first three months of 2009 as compared to $36.3
million for the same period in 2008.

Our net income can be significantly affected by various non-cash items, such as unrealized gains and losses on our
commodity derivatives, impairment of oil and gas properties, currency impact of long-term liabilities and deferred taxes. Net loss to common shareholders for the first three months of 2009 was $19.5 million, or $0.15 per share. For the first three
months of 2008, net loss to common shareholders was $19.5 million, or $0.15 per share. The net loss for 2009 reflects a smaller unrealized loss on the mark-to-market of commodity derivatives and an impairment of oil and gas properties of $29.4
million. Net loss as adjusted for 2009 would have been $2.2 million without the effect of derivative transactions, impairment of oil and gas properties and currency impacts of deferred taxes as compared to net loss as adjusted of $4.7 million in
2008. Adjusted EBITDA decreased to $17.9 million in 2009 from $31.7 million in



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Endeavour International Corporation

Operating Statistics

(Unaudited)



2008. For definitions of Adjusted EBITDA and Discretionary Cash Flow, and a reconciliation of Adjusted EBITDA to net income as adjusted, please see
Reconciliation of Non-GAAP Accounting Measures.

The cash flows provided by operating activities increased to $39.7 million for the three
months ended March 31, 2009 as compared to $29.1 million for the three months ended March 31, 2008 primarily due to an increase in cash flows provided by changes in net operating assets and liabilities partially offset by decreases in
revenues as a result of lower commodity prices.

Results of Operations

The following table shows our average sales volumes and sales prices for our continuing operations for the periods presented.



|                                                |  |                              |       |      |   |        |  
|----------------------------------------------- |  | ---------------------------- | ----- | ---- | - | ------ | -
|                                                |  | Three Months Ended March 31, |      
|                                                |  | 2009                         |       | 2008 |  
|Sales volume(1):                                |  |                              |       |      |   |        |  
|Oil and condensate sales (Mbbl)                 |  |                              | 179   |      |   | 265    |  
|Gas sales (MMcf)                                |  |                              | 1,129 |      |   | 2,035  |  
|Total sales (MBOE)                              |  |                              | 367   |      |   | 604    |  
|BOE per day                                     |  |                              | 4,080 |      |   | 6,648  |  
|                                                |  |                             
|Physical production volume (BOE per day)        |  |                              | 4,405 |      |   | 7,234  |  
|                                                |  |                              |       |      |   |        |  
|                                                |  |                             
|Realized Prices (2):                            |  |                              |       |      |   |        |  
|Oil and condensate price ($ per Bbl):           |  |                              |       |      |   |        |  
|Before commodity derivatives                    |  | $                            | 38.84 |      | $ | 86.87  |  
|Effect of commodity derivatives                 |  | $                            | 55.08 |      | $ | (23.89 | )
|                                                |  |                              |       |      |   |        |  
|Realized prices including commodity derivatives |  | $                            | 93.92 |      | $ | 62.97  |  
|                                                |  |                              |       |      |   |        |  
|                                                |  |                             
|Gas price ($ per Mcf):                          |  |                              |       |      |   |        |  
|Before commodity derivatives                    |  | $                            | 8.31  |      | $ | 11.16  |  
|Effect of commodity derivatives                 |  | $                            | 1.84  |      | $ | 1.57   |  
|                                                |  |                              |       |      |   |        |  
|Realized prices including commodity derivatives |  | $                            | 10.15 |      | $ | 12.74  |  
|                                                |  |                              |       |      |   |        |  
|Equivalent oil price ($ per BOE):               |  |                              |       |      |   |        |  
|Before commodity derivatives                    |  | $                            | 44.49 |      | $ | 75.72  |  
|Effect of commodity derivatives                 |  | $                            | 32.51 |      | $ | (5.21  | )
|                                                |  |                              |       |      |   |        |  
|Realized prices including commodity derivatives |  | $                            | 77.00 |      | $ | 70.51  |  
|                                                |  |                              |       |      |   |        |  



|(1) | We record oil revenues on the sales method, i.e. when delivery has occurred. Actual production may differ based on the
timing of tanker liftings. We use the entitlements method to account for sales of gas production.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The average sales prices include gains and losses for derivative
contracts we utilize to manage price risk related to our future cash flows.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------



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Endeavour International Corporation

Operating Statistics

(Unaudited)



Our revenues and cash flows from operating activities are very sensitive to changes in prices received for our
products. Our production is sold at prevailing market prices which fluctuate in response to many factors that are outside of our control. Given the current tightly balanced supply-demand market for oil and natural gas, small variations in either
supply or demand, or both, can have dramatic effects on prices we receive for our oil and natural gas production. While the market price received for oil and natural gas varies among geographic areas, oil trades in a worldwide market, whereas
natural gas, which is still developing a global transportation system, is more subject to local supply and demand conditions. Consequently, price movements for all types and grades of crude oil generally move in the same direction. Natural gas
prices in the North Sea have been influenced by fuel prices around the world, including crude oil and coal. These prices are also impacted by European gas supplies, particularly deliveries from Russian gas supplies. In addition, regional supply and
demand issues affect gas prices. The majority of our natural gas is sold in the UK market. Market prices for both oil and natural gas were at high levels during 2008. Both crude oil and natural gas prices have declined in 2009 as a result of the
global economic decline.

For the first quarter of 2009 and 2008, we had sales volume of 7,600 BOE per day and 8,800 BOE per day, respectively. Our
physical daily production was approximately 7,800 BOE and 10,100 BOE for 2009 and 2008, respectively. The decrease in sales volume is primarily attributable to maintenance down time at Goldeneye, the timing of liftings and the suspension of
production at IVRRH, Renee and Rubie. The production from IVRRH, Renee and Rubie has been suspended until the development activities at Rochelle are operational which we currently anticipate to be late 2010. After the start of Rochelle production,
we expect to re-develop these fields if economically feasible.

During the three months ended March 31, 2009, we realized $12 million in gains on the
settlement of commodity derivatives, compared to $3 million in losses for the same period in 2008. In the first quarter of 2009, we also recognized $0.4 million in gains on the mark-to-market of our commodity derivatives versus a loss of $30.3
million for the same period in 2008.

The following table shows our average sales volumes and sales prices for both continuing and discontinued operations
for the periods presented.



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|                                                         |  |                              |       |      |   |        |  
|-------------------------------------------------------- |  | ---------------------------- | ----- | ---- | - | ------ | -
|                                                         |  | Three Months Ended March 31, |      
|                                                         |  | 2009                         |       | 2008 |  
|Sales volume(1):                                         |  |                              |       |      |   |        |  
|Oil and condensate sales (Mbbl):                         |  |                              |       |      |   |        |  
|United Kingdom                                           |  |                              | 178   |      |   | 265    |  
|United States                                            |  |                              | 1     |      |   |       |  
|                                                         |  |                              |       |      |   |        |  
|Continuing operations                                    |  |                              | 179   |      |   | 265    |  
|Discontinued operationsNorway                           |  |                              | 224   |      |   | 96     |  
|                                                         |  |                              |       |      |   |        |  
|Total                                                    |  |                              | 403   |      |   | 361    |  
|                                                         |  |                              |       |      |   |        |  
|                                                         |  |                             
|Gas sales (MMcf):                                        |  |                              |       |      |   |        |  
|United Kingdom                                           |  |                              | 1,078 |      |   | 2,035  |  
|United States                                            |  |                              | 51    |      |   |       |  
|                                                         |  |                              |       |      |   |        |  
|Continuing operations                                    |  |                              | 1,129 |      |   | 2,035  |  
|Discontinued operationsNorway                           |  |                              | 533   |      |   | 599    |  
|                                                         |  |                              |       |      |   |        |  
|Total                                                    |  |                              | 1,662 |      |   | 2,634  |  
|                                                         |  |                              |       |      |   |        |  
|                                                         |  |                             
|Total sales (MBOE):                                      |  |                              |       |      |   |        |  
|United Kingdom                                           |  |                              | 358   |      |   | 604    |  
|United States                                            |  |                              | 9     |      |   |       |  
|                                                         |  |                              |       |      |   |        |  
|Continuing operations                                    |  |                              | 367   |      |   | 604    |  
|Discontinued operationsNorway                           |  |                              | 313   |      |   | 196    |  
|                                                         |  |                              |       |      |   |        |  
|Total                                                    |  |                              | 680   |      |   | 800    |  
|                                                         |  |                              |       |      |   |        |  
|                                                         |  |                             
|BOE per day                                              |  |                              | 7,551 |      |   | 8,796  |  
|                                                         |  |                              |       |      |   |        |  
|                                                         |  |                             
|Physical production volume:                              |  |                              |       |      |   |        |  
|Total production (BOE per day):                          |  |                              |       |      |   |        |  
|United Kingdom                                           |  |                              | 4,315 |      |   | 7,234  |  
|United States                                            |  |                              | 90    |      |   |       |  
|                                                         |  |                              |       |      |   |        |  
|Continuing Operations                                    |  |                              | 4,405 |      |   | 7,234  |  
|Discontinued operationsNorway                           |  |                              | 3,365 |      |   | 2,894  |  
|                                                         |  |                              |       |      |   |        |  
|Total                                                    |  |                              | 7,770 |      |   | 10,128 |  
|                                                         |  |                              |       |      |   |        |  
|                                                         |  |                             
|Realized Prices (including discontinued operations) (2): |  |                              |       |      |   |        |  
|Oil and condensate price ($ per Bbl):                    |  |                              |       |      |   |        |  
|Before commodity derivatives                             |  | $                            | 41.68 |      | $ | 89.84  |  
|Effect of commodity derivatives                          |  | $                            | 24.50 |      | $ | (17.57 | )
|                                                         |  |                              |       |      |   |        |  
|Realized prices including commodity derivatives          |  | $                            | 66.18 |      | $ | 72.27  |  
|                                                         |  |                              |       |      |   |        |  
|                                                         |  |                             
|Gas price ($ per Mcf):                                   |  |                              |       |      |   |        |  
|Before commodity derivatives                             |  | $                            | 7.78  |      | $ | 10.93  |  
|Effect of commodity derivatives                          |  | $                            | 1.25  |      | $ | 1.22   |  
|                                                         |  |                              |       |      |   |        |  
|Realized prices including commodity derivatives          |  | $                            | 9.03  |      | $ | 12.15  |  
|                                                         |  |                              |       |      |   |        |  
|                                                         |  |                             
|Equivalent oil price ($ per BOE):                        |  |                              |       |      |   |        |  
|Before commodity derivatives                             |  | $                            | 43.71 |      | $ | 76.53  |  
|Effect of commodity derivatives                          |  | $                            | 17.56 |      | $ | (3.94  | )
|                                                         |  |                              |       |      |   |        |  
|Realized prices including commodity derivatives          |  | $                            | 61.27 |      | $ | 72.59  |  
|                                                         |  |                              |       |      |   |        |  



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|(1) | We record oil revenues on the sales method, i.e. when delivery has occurred. Actual production may differ based on the
timing of tanker liftings. We use the entitlements method to account for sales of gas production.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The average sales prices include gains and losses for derivative
contracts we utilize to manage price risk related to our future cash flows.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------

Expenses

Operating expenses decreased to $6.2 million during the first quarter of 2009 as compared to $7.3 million in the first quarter of 2008, primarily as a result of fewer
liftings in 2009 due to timing. While operating expenses decreased, the lower volumes due to production declines at Goldeneye and the suspension of production at IVRRH, Renee and Rubie caused operating expenses per BOE to increase from $12.14 per
BOE in the first quarter of 2008 to $16.84 per BOE in the first quarter of 2009.

G&A expenses remained relatively flat from $3.8 million during the
first quarter of 2009 as compared to $3.7 million for the corresponding period in 2008. The material components of G&A expenses for these periods are as follows:



|                                      |  |                              |        |   |      |   |        |  
|------------------------------------- |  | ---------------------------- | ------ | - | ---- | - | ------ | -
|(Amounts in thousands)                |  | Three Months Ended March 31, |       
|                                      |  | 2009                         |        |   | 2008 |  
|Compensation                          |  | $                            | 3,411  |   |      | $ | 3,336  |  
|Consulting, legal and accounting fees |  |                              | 901    |   |      |   | 919    |  
|Occupancy costs                       |  |                              | 224    |   |      |   | 315    |  
|Other expenses                        |  |                              | 441    |   |      |   | 950    |  
|                                      |  |                              |        |   |      |   |        |  
|Total gross cash G&A expenses         |  |                              | 4,977  |   |      |   | 5,520  |  
|                                      |  |                             
|Non-cash stock-based compensation     |  |                              | 538    |   |      |   | 365    |  
|                                      |  |                              |        |   |      |   |        |  
|Gross G&A expenses                    |  |                              | 5,515  |   |      |   | 5,885  |  
|Less: capitalized G&A expenses        |  |                              | (1,680 | ) |      |   | (2,176 | )
|                                      |  |                              |        |   |      |   |        |  
|Net G&A expenses                      |  | $                            | 3,835  |   |      | $ | 3,709  |  
|                                      |  |                              |        |   |      |   |        |  

Interest expense decreased to $3.9 million for the three months ended March 31, 2009 as compared to $8.3
million for the corresponding period in 2008 and is primarily associated with financing costs of $4.3 million incurred for our early retirement of the second lien term loan in the first quarter of 2008.



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Income Taxes

The
following summarizes the components of tax expense (benefit):



|                                                    |  |    |         |   |      |   |        |       |  |   |        |   |  |   |         |  
|--------------------------------------------------- |  | -- | ------- | - | ---- | - | ------ | ----- |  | - | ------ | - |  | - | ------- | -
|(Amounts in thousands)                              |  | UK |         |   | U.S. |   |        | Other |  |   | Total  |  
|Three Months Ended March 31, 2009                   |  |    |         |   |      |   |        |       |  |   |        |   |  |   |         |  
|Net loss before taxes                               |  | $  | (22,610 | ) |      | $ | (831   | )     |  | $ | (4,653 | ) |  | $ | (28,094 | )
|                                                    |  |    |         |  
|Current tax expense                                 |  |    | 594     |   |      |   |       |       |  |   |       |   |  |   | 594     |  
|Deferred tax benefit                                |  |    | (9,600  | ) |      |   |       |       |  |   |       |   |  |   | (9,600  | )
|Foreign currency losses on deferred tax liabilities |  |    | (1,946  | ) |      |   |       |       |  |   |       |   |  |   | (1,946  | )
|                                                    |  |    |         |   |      |   |        |       |  |   |        |   |  |   |         |  
|Total tax benefit                                   |  |    | (10,952 | ) |      |   |       |       |  |   |       |   |  |   | (10,952 | )
|                                                    |  |    |         |   |      |   |        |       |  |   |        |   |  |   |         |  
|                                                    |  |    |         |  
|Net loss from continuing operations after taxes     |  | $  | (11,658 | ) |      | $ | (831   | )     |  | $ | (4,653 | ) |  | $ | (17,142 | )
|                                                    |  |    |         |   |      |   |        |       |  |   |        |   |  |   |         |  
|                                                    |  |    |         |  
|Three Months Ended March 31, 2008                   |  |    |         |   |      |   |        |       |  |   |        |   |  |   |         |  
|Net loss before taxes                               |  | $  | (19,565 | ) |      | $ | (3,216 | )     |  | $ | (2,371 | ) |  | $ | (25,152 | )
|                                                    |  |    |         |  
|Current tax expense                                 |  |    | 1,470   |   |      |   |       |       |  |   |       |   |  |   | 1,470   |  
|Deferred tax expense (benefit)                      |  |    | (10,231 | ) |      |   |       |       |  |   | 122    |   |  |   | (10,109 | )
|Foreign currency losses on deferred tax liabilities |  |    | 12      |   |      |   |       |       |  |   |       |   |  |   | 12      |  
|                                                    |  |    |         |   |      |   |        |       |  |   |        |   |  |   |         |  
|Total tax expense (benefit)                         |  |    | (8,749  | ) |      |   |       |       |  |   | 122    |   |  |   | (8,627  | )
|                                                    |  |    |         |   |      |   |        |       |  |   |        |   |  |   |         |  
|                                                    |  |    |         |  
|Net loss from continuing operations after taxes     |  | $  | (10,816 | ) |      | $ | (3,216 | )     |  | $ | (2,493 | ) |  | $ | (16,525 | )
|                                                    |  |    |         |   |      |   |        |       |  |   |        |   |  |   |         |  

The change in income tax benefit from $8.6 million to $11.0 million for the first three months of 2008 and 2009,
respectively, is primarily due to the effect of lower commodity prices on decreased income, the impairment of oil and gas properties and the effect of foreign currency changes on the deferred tax liabilities as a result of the weakening of the
British pound versus the U.S. dollar.

In the first quarter of 2009 and 2008, we did not record any income tax benefits in the U.S. as there was no
assurance that we could generate any U.S. taxable earnings, resulting in a full valuation allowance of deferred tax assets generated.

As our deferred tax
liabilities are denominated in the respective currencies of the countries in which we have operations, we revalue those deferred tax liabilities to the applicable foreign currency exchange rate at the end of each period. Those foreign currency gains
and losses are included in income tax expense as shown above.

Reconciliation of Non-GAAP Measures

Net income can be significantly affected by various non-cash items, such as unrealized gains and losses on our commodity derivatives, currency impact of long-term
liabilities and deferred taxes. Given the significant impact that non-cash items may have on our net income, we use various measures in addition to net income, including non-financial performance indicators and non-GAAP measures as key metrics to
manage our business. These key metrics demonstrate the companys ability to maintain or grow production levels and reserves, internally fund capital expenditures and service debt as well as provide comparisons to other oil and gas exploration



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and production companies. These measures include, among others, debt and cash balances, production levels, oil and gas reserves, drilling results,
Discretionary Cash Flow, adjusted earnings before interest, taxes, depreciation, depletion and amortization (Adjusted EBITDA) and adjusted net income.

Net Income (Loss) as Adjusted, Adjusted EBITDA and Discretionary Cash Flow are internal, supplemental measures of our performance that are not required by, or presented in accordance with, GAAP. We use these non-GAAP measures as internal
measures of performance and to aid in our budgeting and forecasting processes. We view these non-GAAP measures, and we believe that others in the oil and gas industry view these, or similar, non-GAAP measures, as commonly used analytic indicators to
compare performance among companies. We further believe that these non-GAAP measures are frequently used by securities analysts, investors, and other interested parties in the evaluation of issuers, many of which present these measures when
reporting their results. We believe these non-GAAP measures provide useful information to both management and investors to gain an overall understanding of our current financial performance and provide investors with financial measures that most
closely align to our internal measurement processes. Since the application of mark-to-market accounting has the effect of pulling forward into current periods non-cash gains and losses related to commodity derivatives relating to future delivery
periods, analysis of results of operations from one period to another can be difficult. We believe that excluding these unrealized non-cash gains and losses related to commodity derivatives and currency exchange changes provides a more meaningful
representation of our economic performance in the reporting period and is therefore useful to us, investors, analysts and others in facilitating the analysis of our results of operations from one period to another. These measures should not be
considered as measures of financial performance under GAAP, and the items excluded from these measures are significant components in understanding and assessing financial performance.

Because Net Income (Loss) as Adjusted, Adjusted EBITDA and Discretionary Cash Flow are not measurements determined in accordance with GAAP and thus susceptible to varying calculations, Net Income (Loss) as Adjusted,
Adjusted EBITDA and Discretionary Cash Flow as presented may not be comparable to other similarly titled measures of other companies.

Net Income (Loss) as
Adjusted, Adjusted EBITDA and Discretionary Cash Flow have limitations as an analytical tool, and you should not consider these measures in isolation, or as a substitute for analysis of our financial statement data presented in the consolidated
financial statements as reported under GAAP. For example, Net Income (Loss) as Adjusted, Adjusted EBITDA and Discretionary Cash Flow may not reflect:



| |  |  | our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | changes in, or cash requirements for, our working capital needs;
| | - |  | ----------------------------------------------------------------



| |  |  | unrealized gains (losses) on derivatives;
| | - |  | -----------------------------------------



| |  |  | non-cash foreign currency gains (losses);
| | - |  | -----------------------------------------



| |  |  | our interest expense, or the cash requirements necessary to service interest and principal payments on our debts;
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | our preferred stock dividend requirements; and
| | - |  | ----------------------------------------------



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| |  |  | depreciation, depletion and amortization.
| | - |  | -----------------------------------------

Because
of these limitations, Net Income (Loss) as Adjusted, Adjusted EBITDA and Discretionary Cash Flow should not be considered as measures of cash available to us to invest in the growth of our business. We compensate for these limitations by relying
primarily on our GAAP results and by using Net Income (Loss) as Adjusted, Adjusted EBITDA and Discretionary Cash Flow only supplementally.

Below are
reconciliations of net income (loss) to the following non-GAAP financial measures: Net Income (Loss) as Adjusted, Adjusted EBITDA and Discretionary Cash Flow.



|                                                          |  |                              |         |   |      |   |         |  
|--------------------------------------------------------- |  | ---------------------------- | ------- | - | ---- | - | ------- | -
|(Amounts in thousands)                                    |  | Three Months Ended March 31, |        
|                                                          |  | 2009                         |         |   | 2008 |  
|Net loss                                                  |  | $                            | (16,863 | ) |      | $ | (16,792 | )
|                                                          |  |                             
|Depreciation, depletion and amortization                  |  |                              | 16,059  |   |      |   | 21,403  |  
|Impairment of oil and gas properties                      |  |                              | 29,402  |   |      |   |        |  
|Deferred tax benefit                                      |  |                              | (8,423  | ) |      |   | (3,144  | )
|Unrealized loss on derivative instruments                 |  |                              | 1,373   |   |      |   | 29,642  |  
|Amortization of non-cash compensation                     |  |                              | 657     |   |      |   | 544     |  
|Amortization of loan costs and discount                   |  |                              | 1,201   |   |      |   | 3,156   |  
|Non-cash interest expense                                 |  |                              | 1,279   |   |      |   | 869     |  
|Other                                                     |  |                              | (1,293  | ) |      |   | 632     |  
|                                                          |  |                              |         |   |      |   |         |  
|                                                          |  |                             
|Discretionary cash flow                                   |  | $                            | 23,392  |   |      | $ | 36,310  |  
|                                                          |  |                              |         |   |      |   |         |  
|                                                          |  |                             
|Net loss to common shareholders, as reported              |  | $                            | (19,532 | ) |      | $ | (19,487 | )
|Impairment of oil and gas properties (net of 50% tax)     |  |                              | 14,701  |   |      |   |        |  
|Unrealized (gains) losses on derivatives (net of 50% tax) |  |                              | 687     |   |      |   | 14,821  |  
|Currency impact of deferred taxes                         |  |                              | 1,946   |   |      |   | 12      |  
|                                                          |  |                              |         |   |      |   |         |  
|                                                          |  |                             
|Net loss, as adjusted                                     |  | $                            | (2,198  | ) |      | $ | (4,654  | )
|                                                          |  |                              |         |   |      |   |         |  
|                                                          |  |                             
|Net loss to common shareholders, as reported              |  | $                            | (19,532 | ) |      | $ | (19,487 | )
|                                                          |  |                             
|Unrealized losses on derivatives                          |  |                              | 1,373   |   |      |   | 29,642  |  
|Interest expense                                          |  |                              | 3,911   |   |      |   | 8,316   |  
|Depreciation, depletion and amortization                  |  |                              | 11,324  |   |      |   | 18,888  |  
|Impairment of oil and gas properties                      |  |                              | 29,402  |   |      |   |        |  
|Income tax benefit                                        |  |                              | (10,952 | ) |      |   | (8,627  | )
|(Income) loss from discontinued operations                |  |                              | (279    | ) |      |   | 267     |  
|Preferred stock dividends                                 |  |                              | 2,669   |   |      |   | 2,695   |  
|                                                          |  |                              |         |   |      |   |         |  
|                                                          |  |                             
|Adjusted EBITDA                                           |  | $                            | 17,916  |   |      | $ | 31,694  |  
|                                                          |  |                              |         |   |      |   |         |  



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Liquidity and Capital Resources

The following table summarizes our net cash flows from operating, investing and financing activities for the periods indicated. For additional details regarding the components of our primary cash flow amounts, see the
Condensed Consolidated Statements of Cash Flows under Item 1 of this report.



|                                          |  |                                 |         |   |      |   |         |  
|----------------------------------------- |  | ------------------------------- | ------- | - | ---- | - | ------- | -
|(Amounts in thousands)                    |  | For the Quarter Ended March 30, |        
|                                          |  | 2009                            |         |   | 2008 |  
|Net cash provided by Operating Activities |  | $                               | 39,739  |   |      | $ | 29,140  |  
|                                          |  |                                 |         |   |      |   |         |  
|Net cash used in Investing Activities     |  | $                               | (42,398 | ) |      | $ | (19,581 | )
|                                          |  |                                 |         |   |      |   |         |  
|Net cash used in Financing Activities     |  | $                               | (13,384 | ) |      | $ | (5,540  | )
|                                          |  |                                 |         |   |      |   |         |  

The net cash flows provided by operating activities are primarily impacted by the earnings from our business
activities. The cash flows provided by operating activities increased to $39.7 million for the three months ended March 31, 2009 as compared to $29.1 million for the three months ended March 31, 2008 primarily due to an increase in cash
flows provided by changes in net operating assets and liabilities partially offset by decreased revenues as a result of lower commodity prices.

The cash
used in investing activities represents expenditures for capital projects and asset purchases, as discussed in Drilling Program below, and increases to restricted cash under escrow for our rig commitments.

The cash used in financing activities consists of borrowings and repayments of debt, payments of preferred dividends and payment of financing costs.

Drilling Program

We currently anticipate spending approximately
$50$60 million during 2009 to fund oil and gas exploration, production and development activities in our core areas of operation in the North Sea and the US, reflecting a reduction in anticipated expenditures due to the Norway sale. Through
March 31, 2009, we have spent $30.6 million in capital, primarily on drilling activities at Rochelle, Cygnus and $7.0 million incurred by our discontinued operations.

Subsequent to March 31, 2009, we announced the successful results of the drilling at Cygnus. In the second quarter of 2009, we have also begun drilling an exploratory well in the UK called Tesla and one in the
U.S. called Dalwhinnie. Testing is still in progress at our Alligator Bayou well in the US.

As in 2008, we intend to finance this capital program through
our cash flow generated from operations. To the extent our cash flow from operations is unable to completely finance our capital program, we will postpone certain proposed capital projects until our capital spending does not exceed our available
resources. However, we believe our existing production base, combined with our commodity derivatives in place, should generate sufficient cash flows to fund our ongoing operations and capital program.



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A significant portion of our 2009 capital program will be directed towards developing our three major projects in the
UK sector of the North Sea, the Rochelle, Cygnus and Columbus prospects. In addition, we expect to spend approximately $12 million to $15 million on infield drilling and facilities improvements to maintain production levels on our producing
properties. Lastly, we also intend to continue our exploration activities in both the North Sea and the US, subject to the availability of sufficient capital.

In April 2009, we entered into a definitive agreement with Caza Petroleum Inc., a subsidiary of Caza Oil and Gas, Inc., to participate in a jointly established exploration and development program covering Cazas onshore acreage
position and opportunity portfolio in the United States. During the initial two-year term of the agreement, we have the right to participate in assets presented to us at our sole discretion. In return, we will fund 100 percent of Cazas cost to
earn 75 percent of Cazas interest in assets in which we elect to participate, as well as a program fee of US$3 million per annum to be paid monthly.

The timing, completion and process of our 2009 capital program is subject to a number of factors, including availability of capital, drilling results, drilling and production costs, availability of drilling services and equipment, partner
approvals and technical work. Based on these and other factors, we may increase or decrease our planned capital program or prioritize certain projects over others.

Rig Commitments

We have a commitment for the use of a drilling rig in our North Sea operations. This commitment was partially utilized for
drilling at the Rochelle field in December 2008. We have $33 million in escrow toward this commitment included in Restricted Cash on our Condensed Consolidated Balance Sheet. The reserved amounts in escrow will be released as payments
are made for this drilling activity. Upon completion of the drilling at Rochelle in the first quarter of 2009, we have a remaining commitment for one well slot that we expect to utilize in late 2009.



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2009 Outlook

The
table below sets forth a range of estimates for the companys operating statistics for the full year ending December 31, 2009 following the completion of the sale of Endeavour Energy Norge AS.



|                                       |  |   |       |   |  |    |  |   |       |  
|-------------------------------------- |  | - | ----- | - |  | -- |  | - | ----- | -
|Estimated Average Production (A)       |  |   |       |   |  |    |  |   |       |  
|Daily Production (BOE per day)         |  |   | 4,000 |   |  | to |  |   | 5,000 |  
|                                       |  |   |      
|Differentials (B)                      |  |   |       |   |  |    |  |   |       |  
|Oil ($/Bbl)                            |  | $ | (5.50 | ) |  | to |  | $ | (6.50 | )
|Gas ($/Mcf)                            |  | $ | (0.10 | ) |  | to |  | $ | (0.20 | )
|                                       |  |   |      
|Gas Percentage of Total                |  |   | 50    | % |  | to |  |   | 55    | %
|Lease Operating Expense ($ per barrel) |  | $ | 9.50  |   |  | to |  | $ | 12.00 |  



|(A) | Actual results may differ materially from these estimates.
|--- | ----------------------------------------------------------

|(B) | For purposes of the estimates, assumptions of price differentials are based on location, quality and other factors, excluding the effects of derivative financial instruments. Gas
price differentials are stated as premiums (discounts) from National Balancing Point pricing, and oil price differentials are stated as premiums (discounts) from Dated Brent pricing.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our IVRRH, Renee and Rubie fields all produce to a single floating production facility that has experienced significant increases in operating costs in recent periods.
With the decline in oil prices and rising operating costs, the operator has decided to cease operations and begin removal and salvage procedures at that floating production facility. As a result, we suspended production at these fields during the
first quarter 2009. The production from these fields will be suspended until the development activities at Rochelle are operational, which we currently anticipate to be late 2010. After the start of Rochelle production, we expect to re-develop
IVRRH, Renee and Rubie if economically feasible. We also expect to incur approximately $10 million of abandonment costs for the facility, before salvage value, by mid 2010.

The capacity and amounts available under our senior bank facility is subject to a number of considerations, including certain borrowing base limitations. Our borrowing base is primarily established through the
evaluation of all of our oil and gas assets which are used as collateral to support the senior bank facility. This borrowing base is subject to a redetermination every six months (on April 1 and October 1) with an independent reserve
report required every 12 months. Upon any sale of assets that are included in the borrowing base, such as the Norway Sale, a borrowing base redetermination is required. Accordingly, the borrowing base redetermination scheduled for April 1, 2009 has
been delayed in order for the redetermination to reflect the impact of the proposed Norway Sale.

We have currently reflected $6.7 million in current
maturities of long-term debt at March 31, 2009 based upon our estimates of reductions in the borrowing base capacity and maximum commitment levels following completion of the borrowing base redetermination. In addition, the borrowing base
capacity will decrease following the completion of the Norway Sale and we expect to repay approximately $25 to $30 million of principal under our senior bank facility to satisfy this anticipated reduction in borrowing base capacity.

After the closing of the Norway Sale, we expect to analyze our outstanding commodity derivatives position to ensure that we maintain the level of reduce protection from
declines in the market prices of crude oil and natural gas that is consistent with our derivatives policy.



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Disclosures About Contractual Obligations and Commercial Commitments

See Drilling Program for a discussion of our rig commitments and planned expenditures.

Cautionary Statement for Forward-Looking Statements

The information contained in this Quarterly Report on Form 10-Q
and in other public statements by Endeavour and our officers or directors includes or may contain certain forward-looking statements. The words may, will, expect, anticipate, believe,
continue, estimate, project, intend, and similar expressions used in this Report are intended to identify forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of
1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. You should not place undue reliance on these forward-looking statements, which speak only as of the date made. We undertake no obligation to publicly
update these forward-looking statements to reflect events or circumstances after the date they are made or to reflect the occurrence of unanticipated events. You should also know that such statements are not guarantees of future performance and are
subject to risks, uncertainties and assumptions. These factors include, but are not limited to, those risks described in detail below and in the our Annual Report on Form 10-K for the year ended December 31, 2008 under the caption Risk
Factors and other filings with the Securities and Exchange Commission. These risk factors include, among others, our ability to replace reserves and sustain production; the level of our indebtedness; the availability of capital on an economic
basis to fund reserve replacement costs; uncertainties in evaluating oil and natural gas reserves of acquired properties and associated potential liabilities; unsuccessful exploration and development drilling; and production interruptions that could
adversely affect our cash flow. Should any of these risks or uncertainties materialize, or should any of these assumptions prove incorrect, actual results may differ materially from those included within the forward-looking statements.



|Item 3: | Quantitative and Qualitative Disclosures about Market Risk
|------- | ----------------------------------------------------------

Foreign Exchange Risk

The international scope of our business operations exposes us to the risk of fluctuations in foreign currency
markets. As a result, we are subject to foreign currency exchange rate risk due to effects that foreign exchange rate movements have on our costs and on the cash flows that we receive from foreign operations. We operate a centralized currency
management operation to take advantage of potential opportunities to naturally offset exposures against each other. To date, we have addressed our foreign currency exchange rate risks principally by maintaining our liquid assets in interest-bearing
accounts, until payments in foreign currency are required, but we have not reduced this risk by hedging to date.



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Commodity Price Risk

We produce and sell crude oil and natural gas. Realized pricing is primarily driven by the prevailing worldwide price for crude oil and regional gas spot market prices that have been volatile and unpredictable for several years. As a
result, our financial results can be significantly impacted as these commodity prices fluctuate widely in response to changing market forces. We have engaged in oil and gas hedging activities to realize commodity prices that we consider favorable.
For additional information regarding our derivative instruments, see Note 8 to the Condensed Consolidated Financial Statements.

At March 31, 2009, we
had the following commodity derivative instruments outstanding:



|                                          |  |      |        |      |   |       |  |       |       |  |   |       
|----------------------------------------- |  | ---- | ------ | ---- | - | ----- |  | ----- | ----- |  | - | ------
|                                          |  | 2009 |        | 2010 |   | 2011  |  | Total
|Oil:                                      |  |      |        |      |   |       |  |       |       |  |   |       
|Fixed Price Swap (Mbbl)                   |  |      | 523    |      |   | 573   |  |       | 487   |  |   | 1,583 
|Weighted Average Price ($/Barrel)         |  | $    | 69.08  |      | $ | 68.39 |  | $     | 66.01 |  | $ | 67.89 
|                                          |  |      |        |     
|Costless Collar (Mbbl)                    |  |      | 300    |      |   |      |  |       |      |  |   | 300   
|Weighted Average Ceiling Price ($/Barrel) |  | $    | 121.88 |      | $ |      |  | $     |      |  | $ | 121.88
|Weighted Average Floor Price ($/Barrel)   |  | $    | 100.00 |      | $ |      |  | $     |      |  | $ | 100.00
|                                          |  |      |        |     
|Gas:(1)                                   |  |      |        |      |   |       |  |       |       |  |   |       
|Fixed Price Swap (MMcf)                   |  |      | 1,040  |      |   | 1,032 |  |       | 627   |  |   | 2,699 
|Weighted Average Price ($/Mcf)            |  | $    | 7.22   |      | $ | 7.68  |  | $     | 7.36  |  | $ | 7.43  
|                                          |  |      |        |     
|Costless Collar (MMcf)                    |  |      | 1,055  |      |   |      |  |       |      |  |   | 1,055 
|Weighted Average Ceiling Price ($/Mcf)    |  | $    | 13.00  |      |   |      |  |       |      |  | $ | 13.00 
|Weighted Average Floor Price ($/Mcf)      |  | $    | 9.14   |      |   |      |  |       |      |  | $ | 9.14  



|(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 March 31, 2009 was $1.43 to £1.00.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Interest Rate Risk

We are exposed to changes in interest rates. Changes in interest rates affect the interest earned on cash and cash equivalents and the interest rate paid on borrowings
under debt.

At March 31, 2009, we had an interest rate swap for a notional amount of $37.5 million whereby we pay a fixed rate of 5.05% and receive
three-month LIBOR through November 2009. A 250 change in basis points on LIBOR would not result in a material change in our results of operations.



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|Item 4: | Controls and Procedures
|------- | -----------------------

Evaluation of Disclosure Controls
and Procedures

As of the end of the period covered by this Report, our management carried out an evaluation, with the participation of our
chief executive officer (the CEO) and chief financial officer (the CFO), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(b) or 15d-15(b) of the Securities
Exchange Act of 1934, as amended). Based on that evaluation, the CEO and CFO concluded:

(i) that our disclosure controls and procedures are
designed to ensure that information we are required to disclose in our reports filed or submitted under the Securities Exchange Act of 1934, as amended, is (a) recorded, processed, summarized and reported within the time periods specified in
the SECs rules and forms, and (b) is accumulated and communicated to our management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure; and

(ii) that our disclosure controls and procedures were effective as of March 31, 2009.

Changes in Internal Control over Financial Reporting

There was no change in our system of internal
control over financial reporting during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information



|Item 1A: | Risk Factors
|-------- | ------------

There have been no material changes in our risk
factors since December 31, 2008. For a detailed discussion of our risk factors, please read, Item 1A Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2008.



|Item 6: | Exhibits
|------- | --------

The exhibits marked with the asterisk symbol (*) are
filed or furnished (in the case of Exhibits 32.1 and 32.2) with this Form 10-Q.



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The exhibits marked with the dagger symbol () are management contracts and compensatory plans or arrangements.



|       |  |                                                                                                                                                                                                    
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1(a) |  | Amended and Restated Articles of Incorporation (Incorporated by reference to Exhibit 3.2 of our Quarterly Report on Form 10-Q (Commission File No. 001-32212) for the quarter ended June 30,
2004.)
|       | 
|3.1(b) |  | Certificate of Amendment dated June 1, 2006 (Incorporated by reference to Exhibit 4.2 of our Registration Statement on Form S-3 (Commission File No. 333-139304) filed on December 13,
2006.)      
|       | 
|3.2    |  | Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.4 to our Current Report on Form 8-K (Commission File No. 001-32212) filed on November 6, 2006.)                                
|       | 
|4.1 *  |  | Agreement for the Sale and Purchase of the Endeavour Energy Norge AS dated April 2, 2009.                                                                                                          
|       | 
|31.1 * |  | Certification of William L. Transier, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                          
|       | 
|31.2 * |  | Certification of J. Michael Kirksey, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                           
|       | 
|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.                            

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.



|                                    |  |  |  |                               |  |  |  |                               
|----------------------------------- |  |  |  | ----------------------------- |  |  |  | ------------------------------
|Endeavour International Corporation
|                                    |  |  |  |                              
|Date: May 5, 2009                   |  |  |  | /s/ J. Michael Kirksey        |  |  |  | /s/ Robert L. Thompson        
|                                    |  |  |  | J. Michael Kirksey            |  |  |  | Robert L. Thompson            
|                                    |  |  |  | Executive Vice President and  |  |  |  | Senior Vice President and     
|                                    |  |  |  | Chief Financial Officer       |  |  |  | Chief Accounting Officer      
|                                    |  |  |  | (Principal Financial Officer) |  |  |  | (Principal Accounting Officer)



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