##### Table of Contents



United States
Securities and Exchange Commission
 Washington, D.C. 20549
 Form 10-Q
 (Mark One)
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the Quarterly Period Ended March 31, 2011
 or
 o
    
    Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934For the transition period from _________ to ___________
  Commission file number: 1-32212
 Endeavour International Corporation
  Nevada
    
    88-0448389(State or other jurisdiction of incorporation
    
    (I.R.S. Employer Identification No.)or organization)
 1001 Fannin Street, Suite 1600, Houston, Texas 77002
 (713) 307-8700
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
(Do not check if a smaller reporting
company)
    
    Smaller reporting company o
 o þ




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##### 



Index
 Part I: Financial InformationItem 1: Financial StatementsCondensed Consolidated Balance Sheets
    
    
    1Condensed Consolidated Statements of Operations
    
    
    3Condensed Consolidated Statements of Cash Flows
    
    
    4Notes to Condensed Consolidated Financial Statements
    
    
    5Item 2: Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    16Item 3: Quantitative and Qualitative Disclosures About Market Risk
    
    
    29Item 4: Controls and Procedures
    
    
    29Part II. Other InformationItem 1A: Risk Factors
    
    
    30Item 6: Exhibits
    
    
    30Signatures
    
    
    31EX-31.1EX-31.2EX-32.1EX-32.2
  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 Bbl 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 natural gas wells or acreage is determined
by multiplying gross wells or acreage by our working interest therein. References to number of
potential well locations are gross, unless otherwise indicated.
 References to GAAP refer to U.S. generally accepted accounting principles.




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##### Table of Contents



Part I: Financial Information
 
 Item 1: Financial Statements
 Endeavour International Corporation
 
 Condensed Consolidated Balance Sheets
   March 31,
    
    
    December 31,2011
    
    
    2010AssetsCurrent Assets:Cash and cash equivalents
    
    $
    152,146
    
    
    $
    99,267Restricted cash
    
    
    33,072
    
    
    
    31,776Accounts receivable
    
    
    6,922
    
    
    
    8,068Prepaid expenses and other current assets
    
    
    6,547
    
    
    
    8,718Total Current Assets
    
    
    198,687
    
    
    
    147,829Property and Equipment, Net
    
    
    444,728
    
    
    
    364,677Goodwill
    
    
    211,886
    
    
    
    211,886Other Assets
    
    
    22,256
    
    
    
    25,895Total Assets
    
    $
    877,557
    
    
    $
    750,287
  1




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Endeavour International Corporation
Condensed Consolidated Balance Sheets
 March 31,
    
    
    December 31,2011
    
    
    2010Liabilities and Stockholders EquityCurrent Liabilities:Accounts payable
    
    $
    45,138
    
    
    $
    32,442Current maturities of debt
    
    
    100,350
    
    
    
    21,600Accrued expenses and other
    
    
    20,564
    
    
    
    22,642Total Current Liabilities
    
    
    166,052
    
    
    
    76,684Long-Term Debt
    
    
    244,152
    
    
    
    323,706Deferred Taxes
    
    
    92,604
    
    
    
    77,200Other Liabilities
    
    
    56,839
    
    
    
    64,927Total Liabilities
    
    
    559,647
    
    
    
    542,517Commitments and ContingenciesSeries C Convertible Preferred Stock:Face value (liquidation preference)
    
    
    45,000
    
    
    
    45,000Net non-cash premiums under fair value accounting on redemption
    
    
    8,152
    
    
    
    8,152Total Series C Convertible Preferred Stock
    
    
    53,152
    
    
    
    53,152Stockholders Equity:Series B preferred stock - Liquidation preference: $3,312Common stock; shares issued and outstanding  36,668
and 24,784 shares at 2011 and 2010, respectively
    
    
    37
    
    
    
    25Additional paid-in capital
    
    
    406,124
    
    
    
    287,995Treasury stock, at cost - 72 and 72 shares at 2011
and 2010, respectively
    
    
    (587
    )
    
    
    (587
    )Accumulated deficit
    
    
    (140,816
    )
    
    
    (132,815
    )Total Stockholders Equity
    
    
    264,758
    
    
    
    154,618Total Liabilities and Stockholders Equity
    
    $
    877,557
    
    
    $
    750,287
  2




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Endeavour International Corporation
 
 Condensed Consolidated Statement of Operations
 
 Three Months EndedMarch 31,2011
    
    
    2010Revenues
    
    $
    14,104
    
    
    $
    13,721Cost of Operations:Operating expenses
    
    
    5,041
    
    
    
    2,821Depreciation, depletion and amortization
    
    
    6,323
    
    
    
    5,681Impairment of oil and gas properties
    
    
    
    
    
    
    7,692General and administrative
    
    
    4,713
    
    
    
    4,431Total Expenses
    
    
    16,077
    
    
    
    20,625Loss From Operations
    
    
    (1,973
    )
    
    
    (6,904
    )Other Income (Expense):Derivatives:Realized gains
    
    
    
    
    
    
    232Unrealized gains (losses)
    
    
    4,464
    
    
    
    (1,072
    )Interest expense
    
    
    (12,523
    )
    
    
    (5,636
    )Interest income and other
    
    
    (139
    )
    
    
    3,024Total Other Expense
    
    
    (8,198
    )
    
    
    (3,452
    )Loss Before Income Taxes
    
    
    (10,171
    )
    
    
    (10,356
    )Income Tax Expense (Benefit)
    
    
    (2,714
    )
    
    
    4,834Net Loss
    
    
    (7,457
    )
    
    
    (15,190
    )Preferred Stock Dividends
    
    
    545
    
    
    
    589Net Loss to Common Stockholders
    
    $
    (8,002
    )
    
    $
    (15,779
    )Net Loss per Common Share  Basic and Diluted
    
    $
    (0.30
    )
    
    $
    (0.74
    )Weighted Average Number of Common Shares Outstanding:Basic and Diluted
    
    
    26,750
    
    
    
    21,364
  3




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Endeavour International Corporation
 
 Condensed Consolidated Statement of Cash Flows
 
 Three Months Ended March 31,2011
    
    
    2010Cash Flows from Operating Activities:Net loss
    
    $
    (7,457
    )
    
    $
    (15,190
    )Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:Depreciation, depletion and amortization
    
    
    6,323
    
    
    
    5,681Impairment of oil and gas properties
    
    
    
    
    
    
    7,692Deferred tax expense (benefit)
    
    
    (2,182
    )
    
    
    3,477Unrealized (gains) losses on derivatives
    
    
    (4,464
    )
    
    
    1,072Amortization of non-cash compensation
    
    
    875
    
    
    
    1,153Amortization of loan costs and discount
    
    
    3,916
    
    
    
    1,528Non-cash interest expense
    
    
    3,031
    
    
    
    1,683Other
    
    
    2,602
    
    
    
    (3,023
    )Changes in operating assets and liabilities:Decrease in receivables
    
    
    1,145
    
    
    
    4,056Increase in other current assets
    
    
    (2,787
    )
    
    
    (2,166
    )Increase (decrease) in liabilities
    
    
    (16,424
    )
    
    
    3,451Net Cash Provided by (Used in) Operating Activities
    
    
    (15,422
    )
    
    
    9,414Cash Flows From Investing Activities:Capital expenditures
    
    
    (20,148
    )
    
    
    (21,768
    )Acquisitions
    
    
    (20,964
    )
    
    
    (29,407
    )(Increase) decrease in restricted cash
    
    
    (1,295
    )
    
    
    2,859Net Cash Used in Investing Activities
    
    
    (42,407
    )
    
    
    (48,316
    )Cash Flows From Financing Activities:Repayments of borrowings
    
    
    (5,400
    )
    
    
    Borrowings under debt agreements
    
    
    
    
    
    
    25,000Proceeds from issuance of common stock
    
    
    116,822
    
    
    
    20,011Dividends paid
    
    
    (506
    )
    
    
    (550
    )Other financing
    
    
    (208
    )
    
    
    (923
    )Net Cash Provided by Financing Activities
    
    
    110,708
    
    
    
    43,538Net Increase in Cash and Cash Equivalents
    
    
    52,879
    
    
    
    4,636Cash and Cash Equivalents, Beginning of Period
    
    
    99,267
    
    
    
    27,287Cash and Cash Equivalents, End of Period
    
    $
    152,146
    
    
    $
    31,923
  4




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Endeavour International Corporation
 
 Notes to Condensed Consolidated Financial Statements
 (Unaudited)
 Note 1  General
  Basis of Presentation and Use of Estimates
   
    
    proved oil and gas reserves,
 
    
    expected future cash flow from proved oil and gas properties,
 
    
    future dismantlement and restoration costs,
 
    
    fair values used in purchase accounting; and
 
    
    fair value of derivative instruments.
 Loss Per Share
   5




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Endeavour International Corporation
Notes to Condensed Consolidated Financial Statements
(Unaudited)
  March 31,2011
    
    
    2010Warrants, options and
stock-based compensation
    
    
    148
    
    
    
    96Convertible debt
    
    
    5,788
    
    
    
    5,416Convertible preferred stock
    
    
    5,143
    
    
    
    5,32911,079
    
    
    
    10,841
 Note 2  Property and Equipment
  March 31,
    
    
    December 31,2011
    
    
    2010Oil and gas properties under the full cost method:Subject to amortization
    
    $
    407,266
    
    
    $
    389,575Not subject to amortization:Acquired in 2011
    
    
    72,025
    
    
    
    Acquired in 2010
    
    
    65,356
    
    
    
    67,612Acquired in 2009
    
    
    30,867
    
    
    
    31,134Acquired prior to 2009
    
    
    60,358
    
    
    
    62,684635,872
    
    
    
    551,005Computers, furniture and fixtures
    
    
    4,357
    
    
    
    4,222Total property and equipment
    
    
    640,229
    
    
    
    555,227Accumulated depreciation, depletion and amortization
    
    
    (195,501
    )
    
    
    (190,550
    )Net property and equipment
    
    $
    444,728
    
    
    $
    364,677
  6




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Endeavour International Corporation
Notes to Condensed Consolidated Financial Statements
(Unaudited)
  Assets Acquisition
  Note 3  Debt Obligations
  March 31,
    
    
    December 31,2011
    
    
    2010Senior notes, 6% fixed rate, due 2012
    
    $
    81,250
    
    
    $
    81,250Convertible bonds, 11.5%, due 2016
    
    
    57,426
    
    
    
    55,821Subordinated notes, 12.0%, due 2014
    
    
    46,388
    
    
    
    51,132Senior term loan, 15%, due 2013
    
    
    162,181
    
    
    
    161,371347,245
    
    
    
    349,574Less: debt discount
    
    
    (2,743
    )
    
    
    (4,268
    )Less: current maturities
    
    
    (100,350
    )
    
    
    (21,600
    )Long-term debt
    
    $
    244,152
    
    
    $
    323,706Standby letters of credit
outstanding for abandonment
liabilities
    
    $
    32,960
    
    
    $
    31,726
   7




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Endeavour International Corporation
Notes to Condensed Consolidated Financial Statements
(Unaudited)
 6% Senior Notes
  11.5% Convertible Bonds
  
    
    the amendment of the maturity date of the 2014 Convertible Bonds from January 24, 2014
to January 24, 2016;
 
    
    the amendment of the date upon which the holders of the 2014 Convertible Bonds may first
exercise a put right, and the occurrence of the conversion price reset if such put right is
not exercised, from January 24, 2012 to January 24, 2016; and
 
    
    a reduction in the interest rate payable from 11.5% to 7.5% on and after March 31, 2014.
  Senior Term Loan
   Note 4  Asset Retirement Obligations
  8




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Endeavour International Corporation
Notes to Condensed Consolidated Financial Statements
(Unaudited)
 Three Months EndedMarch 31,2011
    
    
    2010Carrying amount of asset retirement obligations as of beginning of
period
    
    $
    42,997
    
    
    $
    47,362Accretion expense
    
    
    1,233
    
    
    
    1,134Impact of foreign currency exchange rate changes
    
    
    1,765
    
    
    
    (3,062
    )Payment of asset retirement obligation
    
    
    (4,033
    )
    
    
    (483
    )Reduction in asset retirement obligation
    
    
    
    
    
    
    (1,812
    )41,962
    
    
    
    43,139Less: ARO Liability  Current
    
    
    (6,667
    )
    
    
    (5,000
    )Carrying amount of asset retirement obligations as of end of period
    
    $
    35,295
    
    
    $
    38,139
 Note 5  Equity Transactions
 New York Stock Exchange Listing of Common Stock
  Common Stock Offering
  Series C Convertible Preferred Stock
  Note 6  Stock-Based Compensation Arrangements
  9




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Endeavour International Corporation
Notes to Condensed Consolidated Financial Statements
(Unaudited)
 Three Months EndedMarch 31,2011
    
    
    2010G & A Expenses
    
    $
    642
    
    
    $
    883Capitalized G & A
    
    
    233
    
    
    
    270Total non-cash stock-based
compensation
    
    $
    875
    
    
    $
    1,153
  Stock Options
  Weighted
    
    
    WeightedNumber of
    
    
    Average
    
    
    AverageShares
    
    
    Exercise
    
    
    Contractual
    
    
    AggregateUnderlying
    
    
    Price per
    
    
    Life in
    
    
    IntrinsicOptions
    
    
    Share
    
    
    Years
    
    
    ValueBalance outstanding January 1, 2011
    
    
    464
    
    
    $
    10.04Exercised
    
    
    (55
    )
    
    
    6.81Forfeited
    
    
    (21
    )
    
    
    13.00Expired
    
    
    (45
    )
    
    
    24.57Balance outstanding   March 31, 2011
    
    
    343
    
    
    $
    8.46
    
    
    
    6.7
    
    
    $
    1,603Currently exercisable  March 31, 2011
    
    
    299
    
    
    $
    9.08
    
    
    
    6.6
    
    
    $
    1,232
 Restricted Stock
  10




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Endeavour International Corporation
Notes to Condensed Consolidated Financial Statements
(Unaudited)
 WeightedAverage GrantDate FairNumber of
    
    
    Value perShares
    
    
    ShareBalance outstanding  January 1, 2011
    
    
    816
    
    
    $
    7.39Granted
    
    
    335
    
    
    
    13.68Vested
    
    
    (244
    )
    
    
    7.03Forfeited
    
    
    (39
    )
    
    
    7.06Balance outstanding  March 31, 2011
    
    
    868
    
    
    $
    9.94Total grant date fair value of shares vesting during the period
    
    $
    3,259
 Note 7  Fair Value Measurements
  Level 1:
    
    Fair value is based on actively-quoted market prices, if available.
 Level 2:
    
    In the absence of actively-quoted market prices, we seek price information from external sources, including broker
quotes and industry publications. Substantially all of these inputs are observable in the marketplace during the
entire term of the instrument, can be derived from observable data, or supported by observable levels at which
transactions are executed in the marketplace.
 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.
  11




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Endeavour International Corporation
Notes to Condensed Consolidated Financial Statements
(Unaudited)
 Quoted Market Prices
    
    
    Significant Other
    
    
    Significantin Active Markets -
    
    
    Observable Inputs -
    
    
    Unobservable Inputs
    
    
    TotalLevel 1
    
    
    Level 2
    
    
    Level - 3
    
    
    Fair ValueAs of March 31, 2011:Oil and gas puts
    
    $
    
    
    
    $
    905
    
    
    $
    327
    
    
    $
    1,232Embedded derivatives
    
    
    
    
    
    
    
    
    
    
    (21,020
    )
    
    
    (21,020
    )Total
    
    $
    
    
    
    $
    905
    
    
    $
    (20,693
    )
    
    $
    (19,788
    )As of December 31, 2010:Oil and gas puts
    
    $
    
    
    
    $
    1,213
    
    
    $
    792
    
    
    $
    2,005Embedded derivatives
    
    
    
    
    
    
    
    
    
    
    (27,495
    )
    
    
    (27,495
    )Total
    
    $
    
    
    
    $
    1,213
    
    
    $
    (26,703
    )
    
    $
    (25,490
    )
   Three months ended March 31, 2011
Balance at beginning of period
    
    $
    (26,703
    )Realized and unrealized gains (losses) included in earnings
    
    
    6,010Balance at end of period
    
    $
    (20,693
    )Changes in unrealized gains (losses) relating to derivatives assets and liabilities still held at
March 31, 2011
    
    $
    5,984
 Note 8  Derivative Instruments
  12




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Endeavour International Corporation
Notes to Condensed Consolidated Financial Statements
(Unaudited)
   March 31,
    
    
    December 31,2011
    
    
    2010Derivatives not designated as hedges:Oil and gas commodity derivatives:Assets:Prepaid expenses and other current assets
    
    $
    575
    
    
    $
    709Other assets  long term
    
    
    658
    
    
    
    1,296$
    1,233
    
    
    $
    2,005Embedded derivatives related to debt and equity instruments:Assets:Other assets  long term
    
    
    
    
    
    
    315Liabilities:Other liabilities  long-term
    
    
    (21,020
    )
    
    
    (27,810
    )
   Three Months EndedMarch 31,2011
    
    
    2010Derivatives not designated as hedges:Oil and gas commodity derivativesRealized gains
    
    $
    
    
    
    $
    232Unrealized gains (losses)
    
    
    (2,010
    )
    
    
    205(2,010
    )
    
    
    437Embedded derivatives related to debt and equity instruments
Unrealized gains (losses)
    
    $
    6,475
    
    
    $
    (1,277
    )
  13




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Endeavour International Corporation
Notes to Condensed Consolidated Financial Statements
(Unaudited)
  Note 9  Supplemental Cash Flow Information
  Three Months Ended March 31,2011
    
    
    2010Interest paid
    
    $
    8,557
    
    
    $
    4,119Income taxes paid
    
    $
    4,634
    
    
    $
    217
 Note 10  Commitments and Contingencies
  Note 11  Subsequent Events
   14




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Endeavour International Corporation
Notes to Condensed Consolidated Financial Statements
(Unaudited)
  15




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Endeavour International Corporation
 
 Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
    16




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Endeavour International Corporation
  
    
    On March 30, 2011, we closed a public offering of 11,500,000 shares of our common stock
offering for net proceeds of $116.8 million.
    
    On March 15, 2011, we completed the transfer of the primary listing for our common stock
from the NYSE Amex to the New York Stock Exchange.
    
    On March 11, 2011, we entered into an Amendment to the Trust Deed dated as of January
24, 2008 with Smedvig QIF PLC and the other parties thereto related to our 11.5%
Convertible Bonds. The amendment provides for an extension of the maturity date of the
2014 Bonds; extends the date on which holders may exercise a put right, and the occurrence
of price reset if not exercised; and a reduction in the interest rate payable after a
designated date.
    
    On February 28, 2011, the Department of Energy and
Climate Change (the DECC) approved the
Rochelle FDP for Block 15/27 in East Rochelle. On April 18, 2011, we announced agreement
of the commercial terms for the processing and transportation of East Rochelle production
on the Scott Platform in the Central North Sea. As the operator, we plan to award
contracts and commence immediate construction of the production facilities. First
production from East Rochelle is planned for the second half of 2012. See Note 11 
Subsequent Events.
    
    On February 23, 2011, we finalized our acquisition of an additional 20% working interest
in the Bacchus development for approximately $9.2 million in cash payable at closing and
approximately $6.2 million in cash payable at the earlier of three months after first
production or the last business day of 2011. In addition, we paid capital costs previously
incurred by the seller of $9.4 million. Following the acquisition, we now hold an
aggregate working interest of 30%.
    
    On February 6, 2011, we amended our Senior Term Loan to increase the security reserved
for potential letters of credit from $25 million to $35 million. The increase in the
security amount should allow us to release the approximately $32 million of restricted cash
that is serving as collateral for existing letters of credit.
 Results of Operations
   17




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Endeavour International Corporation
     Revenue and Sales Volume
   18




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Endeavour International Corporation
 Three Months EndedMarch 31,2011
    
    
    2010Sales volume (1)Oil and condensate sales (Mbbls):United Kingdom
    
    
    100
    
    
    
    113United States
    
    
    2
    
    
    
    1Total
    
    
    102
    
    
    
    114Gas sales (MMcf):United Kingdom
    
    
    44
    
    
    
    766United States
    
    
    965
    
    
    
    280Total
    
    
    1,009
    
    
    
    1,046Oil equivalent sales (MBOE):United Kingdom
    
    
    108
    
    
    
    241United States
    
    
    162
    
    
    
    48Total
    
    
    270
    
    
    
    289Total BOE per day
    
    
    3,001
    
    
    
    3,209Physical production volume (BOE per day): (2)United Kingdom
    
    
    1,307
    
    
    
    3,118United States
    
    
    1,885
    
    
    
    578Total
    
    
    3,192
    
    
    
    3,696Realized Prices (3)Oil and condensate price ($  per Bbl):Before commodity derivatives
    
    $
    98.79
    
    
    $
    70.24Effect of commodity derivatives
    
    
    
    
    
    
    (7.50
    )Realized prices including commodity derivatives
    
    $
    98.79
    
    
    $
    62.74Gas price ($  per Mcf):Before commodity derivatives
    
    $
    4.00
    
    
    $
    5.43Effect of commodity derivatives
    
    
    
    
    
    
    1.25Realized prices including commodity derivatives
    
    $
    4.00
    
    
    $
    6.68Equivalent oil price ($  per BOE):Before commodity derivatives
    
    $
    52.22
    
    
    $
    47.51Effect of commodity derivatives
    
    
    
    
    
    
    1.55Realized prices including commodity derivatives
    
    $
    52.22
    
    
    $
    49.06
 
 (1)
    
    We record oil revenues using 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)
    
    Physical production may differ from sales volumes based on the timing
of tanker liftings for our international sales.(3)
    
    The average sales prices include gains and losses for derivative
contracts we utilize to manage price risk related to our future cash flows. 19




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Endeavour International Corporation
     Expenses
  20




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##### Table of Contents



Endeavour International Corporation
    Three Months EndedMarch 31,2011
    
    
    2010Compensation
    
    $
    5,038
    
    
    $
    4,243Consulting, legal and accounting fees
    
    
    1,721
    
    
    
    1,527Occupancy costs
    
    
    365
    
    
    
    249Other expenses
    
    
    503
    
    
    
    173Total gross cash G&A expenses
    
    
    7,627
    
    
    
    6,192Non-cash stock-based compensation
    
    
    875
    
    
    
    1,153Gross G&A expenses
    
    
    8,502
    
    
    
    7,345Less: capitalized G & A expenses
    
    
    (3,789
    )
    
    
    (2,914
    )Net G&A expenses
    
    $
    4,713
    
    
    $
    4,431
  Income Taxes
  21




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Endeavour International Corporation
 UK
    
    
    U.S.
    
    
    Other
    
    
    TotalThree Months Ended March 31, 2011Net income (loss) before taxes
    
    $
    (3,881
    )
    
    $
    (9,066
    )
    
    $
    2,776
    
    
    $
    (10,171
    )Current tax expense (benefit)
    
    
    (532
    )
    
    
    
    
    
    
    
    
    
    
    (532
    )Deferred tax expense (benefit)
    
    
    (2,182
    )
    
    
    
    
    
    
    
    
    
    
    (2,182
    )Income tax expense (benefit)
    
    
    (2,714
    )
    
    
    
    
    
    
    
    
    
    
    (2,714
    )Net income (loss)
    
    $
    (1,167
    )
    
    $
    (9,066
    )
    
    $
    2,776
    
    
    $
    (7,457
    )Three Months Ended March 31, 2010Net income (loss) before taxes
    
    $
    4,127
    
    
    $
    (11,842
    )
    
    $
    (2,641
    )
    
    $
    (10,356
    )Current tax expense (benefit)
    
    
    1,356
    
    
    
    
    
    
    
    
    
    
    
    1,356Deferred tax expense (benefit)
    
    
    3,536
    
    
    
    
    
    
    
    (58
    )
    
    
    3,478Income tax expense (benefit)
    
    
    4,892
    
    
    
    
    
    
    
    (58
    )
    
    
    4,834Net loss
    
    $
    (765
    )
    
    $
    (11,842
    )
    
    $
    (2,583
    )
    
    $
    (15,190
    )
   Proposed 2011 U.K. Budget
  Reconciliation of Non-GAAP Measures
  22




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Endeavour International Corporation
    Three Months EndedMarch 31,2011
    
    
    2010Net loss
    
    $
    (7,457
    )
    
    $
    (15,190
    )Impairment of oil and gas properties (net of tax) (1)
    
    
    
    
    
    
    7,692Unrealized (gain) loss on derivatives (net of tax) (2)
    
    
    (5,469
    )
    
    
    1,174Currency impact on deferred taxes
    
    
    
    
    
    
    (59
    )Net Loss as Adjusted
    
    $
    (12,926
    )
    
    $
    (6,383
    )Net loss
    
    $
    (7,457
    )
    
    $
    (15,190
    )Unrealized (gain) loss on derivatives
    
    
    (4,464
    )
    
    
    1,072Net interest expense
    
    
    12,418
    
    
    
    5,633Depreciation, depletion and amortization
    
    
    6,323
    
    
    
    5,681Impairment of oil and gas properties
    
    
    
    
    
    
    7,692Income tax expense (benefit)
    
    
    (2,714
    )
    
    
    4,834Adjusted EBITDA
    
    $
    4,106
    
    
    $
    9,722
 
 (1)
    
    Net of tax benefits of none and none, respectively.(2)
    
    Net of tax (benefit) expense of $(1,005) and $102, respectively. 23




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Endeavour International Corporation
 Liquidity and Capital Resources
  Three Months Ended March 31,2011
    
    
    2010Net cash provided by (used in) operating activities
    
    $
    (15,422
    )
    
    $
    9,414Net cash used in investing activities
    
    $
    (42,407
    )
    
    $
    (48,316
    )Net cash provided by financing activities
    
    $
    110,708
    
    
    $
    43,538
     
    
    the amendment of the maturity date of the 2014 Convertible Bonds from January 24, 2014
to January 24, 2016;
    
    the amendment of the date upon which the holders of the 2014 Convertible Bonds may first
exercise a put right, and the occurrence of the conversion price reset if such put right is
not exercised, from January 24, 2012 to January 24, 2016; and
    
    a reduction in the interest rate payable from 11.5% to 7.5% on and after March 31, 2014.
  24




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Endeavour International Corporation
  Capital Program
     United Kingdom Activity
  25




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Endeavour International Corporation
     United States Drilling
    2011 Outlook and Liquidity
  26




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Endeavour International Corporation
   
    
    Initial production date of the Bacchus field We expect first production of the
Bacchus field to commence in the second half of 2011. The precise initial production date
and how long it may take for Bacchus to reach full production are key variables to our
overall 2011 production levels.
    
    U.S. drilling program results We are continuing our drilling operations in the U.S.
and expect to have additional production as new successful wells are completed. Currently,
we have 11 wells in the US that are either being completed or awaiting completion.
    
    Flow testing at the Goldeneye field In early December 2010, the Goldeneye field was
shut-in due to flow assurance issues resulting from increased water production. During the
first quarter of 2011, the field operator performed flow trials to study pipeline hydraulic
performance which showed that production from the Goldeneye field was no longer
economically sustainable.
   Cautionary Statement for Forward-Looking Statements
  27




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##### Table of Contents



Endeavour International Corporation
  
    
    our future financial position;
    
    our business strategy;
    
    budgets;
    
    projected costs, savings and plans;
    
    objectives of management for future operations;
    
    legal strategies; and
    
    legal proceedings.
  
    
    discovery, estimation, development and replacement of oil and gas reserves;
    
    decreases in proved reserves due to technical or economic factors;
    
    drilling of wells and other planned exploitation activities;
    
    timing and amount of future production of oil and gas;
    
    the volatility of oil and gas prices;
    
    availability and terms of capital;
    
    operating costs such as lease operating expenses, administrative costs and other
expenses;
    
    our future operating or financial results;
    
    amount, nature and timing of capital expenditures, including future development costs;
    
    cash flow and anticipated liquidity;
    
    availability of drilling and production equipment;
    
    uncertainties related to drilling and production operations in a new region;
    
    business strategy and the availability of acquisition opportunities; and
    
    factors not known to us at this time.
  28




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Endeavour International Corporation
 
 Item 3: Quantitative and Qualitative Disclosures about Market Risk
 Commodity Price Risk
   2011
    
    
    2012
    
    
    TotalOil:Fixed Price Puts (Mbbl)
    
    
    207
    
    
    
    100
    
    
    
    307Weighted Average Price ($/Barrel)
    
    $
    94.98
    
    
    $
    90.74
    
    
    $
    93.60Gas: (1)Fixed Price Puts (MMcf)
    
    
    885
    
    
    
    548
    
    
    
    1,433Weighted Average Price ($/Mcf)
    
    $
    7.78
    
    
    $
    8.54
    
    
    $
    8.07
 
 (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, 2011 was $1.60 to £1.00. 
 Item 4: Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   29




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Endeavour International Corporation
 (ii)
    
    that our disclosure controls and procedures were effective as of March 31, 2011.
 Changes in Internal Control over Financial Reporting
  
 Part II. Other Information
 
 Item 1A: Risk Factors
 Risk Factors
 
 Item 6: Exhibits
  3.1(a)
    
    Amended and Restated Articles of Incorporation (Incorporated by reference to Exhibit 3.2 of
our Quarterly Report on Form 10-Q (Commission File No. 001-32212) for the quarter ended June
30, 2004.)
 3.1(b)
    
    Certificate of Amendment dated June 1, 2006 (Incorporated by reference to Exhibit 4.2 of our
Registration Statement on Form S-3 (Commission File No. 333-139304) filed on December 13,
2006.)
 3.1(c)
    
    Certificate of Amendment dated June 1, 2010 (Incorporated by reference to Exhibit 3.1 to our
Current Report on Form 8-K (Commission File No. 001-32212) filed on June 3, 2010).
 30




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Endeavour International Corporation
 3.1(d)
    
    Amendment to Articles of Incorporation, dated November 17, 2010 (Incorporated by
reference to Exhibit 3.1(d) of our Annual Report on Form 10-K (Commission File No. 001-32212)
for the year ended December 31, 2010).3.2(a)
    
    Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.4 to our Current Report
on Form 8-K (Commission File No. 001-32212) filed on November 6, 2006.)3.2(b)
    
    Amendment to Amended and Restated Bylaws dated December 12, 2007 (Incorporated by reference
to Exhibit 3.1 to our Current Report on Form 8-K (Commission File No. 001-32212) filed on
December 13, 2007.)10.1
    
    First Amendment to Credit Agreement, U.S. Security Agreement and Subsidiaries Guaranty, dated
February 3, 2011, by and among Endeavour International Corporation, Endeavour Energy UK
Limited, Cyan Partners, LP, as administrative agent, and the lenders party thereto
(Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K (Commission File
No. 001-32212) filed on February 9, 2011).10.2
    
    Amendment Deed dated March 11, 2011, to Trust Deed dated January 24, 2008 by and among
Endeavour International Corporation, Endeavour Energy Luxembourg S.a.r.l. and BNY Corporate
Trustee Services Limited, as trustee (Incorporated by reference to Exhibit 4.1 to our Current
Report on Form 8-K (Commission File No. 001-32212) filed on March 14, 2011).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
  Endeavour International CorporationDate: May 5, 2011
    
    /s/ J. Michael Kirksey
    
    
    
    /s/ Robert L. ThompsonJ. Michael Kirksey
    
    
    
    Robert L. ThompsonExecutive Vice President and
    
    
    
    Senior Vice President andChief Financial Officer
    
    
    
    Chief Accounting Officer(Principal Financial Officer)
    
    
    
    (Principal Accounting Officer)
 31