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Endeavour Enters Chapter 11; NYSE Suspends Trading

The New York Stock Exchange (NYSE) said Monday it has suspended trading shares of Endeavour International Corp. and would begin delisting the stock, three days after the Houston-based company and some of its subsidiaries filed for bankruptcy protection and executed an agreement to restructure its debt obligations.

Endeavour filed for Chapter 11 bankruptcy protection on Friday. It cited cost overruns and more than a year of delays in bringing into development two large development in the UK's North Sea -- Bacchus and Rochelle -- which impacted cash flow and operating margins.

"To maintain [our] ownership rights in these valuable assets, [we] incurred additional debt at a high cost of capital," the company said Friday. "As of the filing, the large capital commitment for most of the North Sea assets has been completed and the assets are online."

In the United States, Endeavour holds 26,500 gross (13,100 net) acres in Pennsylvania’s Marcellus Shale and 7,200 gross (3,300 net) acres in Louisiana’s Haynesville Shale, both prospective for dry natural gas. The company also holds 40,000 gross (27,000 net) acres, including leased and optioned acreage, in Colorado above rich gas and oil targets in the Niobrara and Frontier formations, and 192,500 gross (33,000 net) acres above oil targets in central Montana in the Williston Basin's Heath formation.

According to Endeavour's website, the company had a working interest in 442,600 gross (109,000 net) acres, with exposure to oil and gas, at the end of 2013. Average production during 4Q2013 from 5.9 MMcfe/d, primarily from the Haynesville. In 2012, Endeavour's net unconventional portfolio in North America included 94,000 acres in the Heath, 18,400 acres in the Haynesville and 7,100 acres in the Marcellus (see Shale Daily, March 16, 2012).

Under the Chapter 11 filing, Endeavour has executed a Restructuring Support Agreement (RSA) with holders of more than two-thirds of its 12% First Priority Notes, 12% Second Priority Notes, 7.5% Convertible Bonds, and 5.5% and 6.5% Convertible Notes. Under the RSA, Endeavour's existing debt will be reduced by approximately $568 million. All of the company's existing notes will be cancelled and its annual interest burden reduced by 43%.

Staff of NYSE Regulation Inc. determined Endeavour is no longer suitable for listing, citing three sections of its Listed Company Manual (LCM). Specifically, the exchange said Endeavour has fallen below the listing standards set forth in Section 802.01B, which requires a company to maintain either an average global market capitalization over a consecutive 30-day trading period of not less than $50 million, or stockholders' equity of not less than $50 million.

NYSE said Endeavour was also below the standard outlined in Section 802.01C, which requires listed companies to maintain an average closing price per share of not less than $1.00/share over a consecutive 30-day trading period. Section 802.01D states that any company running afoul of Section 802.01B that files or announces an intention to file for relief under any provisions of bankruptcy protection is subject to immediate suspension and delisting.

"All of the company's existing equity securities, including its shares of common stock and preferred stock, will be cancelled, without receiving any distribution," NYSE said Monday. The exchange said it would apply to the U.S. Securities and Exchange Commission to delist Endeavour's common stock upon completion of all applicable procedures. The company has the right to appeal.

In exchange, Endeavour agreed to issue $262.5 million of new 9.75% notes to holders of the 12% First Priority Notes; an aggregate of $237.5 million of new 3.5% convertible preferred shares to holders of its 12% First Priority Notes and 12% Second Priority Notes; and common shares to holders of its 12% Second Priority Notes, 7.5% Convertible Bonds, 6.5% Convertible Notes and 5.5% Convertible Notes. The company added that all of its existing equity securities, including its shares of common stock and preferred stock, will be cancelled without receiving any distribution.

Endeavour said its UK subsidiaries and certain other affiliates had not sought bankruptcy protection and would not be affected by the reorganization. It added that a $440 million senior secured term loan incurred by Endeavour Energy UK Ltd. and other foreign subsidiaries would not be affected. The company owns interests in five producing oil and gas fields in the North Sea -- Alba, Bacchus, Bittern, Enoch and Rochelle.

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