Endeavour International 10-K/A 2009 FY Annual report (amended)

United States
Securities and Exchange Commission

Washington, D.C. 20549

Form 10-K/A

(Amendment No. 1)

þ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Fiscal Year Ended December 31, 2009

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

For the transition period from                    to                    

Commission file number: 001-32212

Endeavour International Corporation

(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)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class of Stock	Name of Each Exchange on Which Registered
Common Stock - $0.001 par value per share	NYSE-Amex

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act.o Yesþ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.o Yesþ No

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.þ Yeso 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 (§ 232.405 of this chapter) during the preceding 2 months (or for such shorter period that the registrant was required to submit and post such files).o Yeso No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.þ

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filero	Accelerated filerþ	Non-accelerated filero	Smaller reporting companyo
		(Do not check if a smaller reporting company)

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was $154.0 million computed by reference to the closing sale price of the registrant’s common stock on the NYSE-Amex on June 30, 2009, the last business day of the registrant’s most recently completed second fiscal quarter. Shares of common stock held by executive officers and directors of the registrant are not included in the computation. However, the registrant has made no determination that such individuals are “affiliates” within the meaning of Rule 405 of the Securities Act of 1933.

As of March 12, 2010, 160,247,205 shares of the registrant’s common stock were outstanding.

Documents Incorporated By Reference:

None

Explanatory Note

We are filing this amendment (the “Amendment”) to our Annual Report on Form 10-K for the year ended December 31, 2009 (our “Annual Report”) to reflect the changes made in response to a comment letter received by us from the Staff of the Securities and Exchange Commission in connection with the Staff’s review of our Annual Report and Proxy Statement on Schedule 14A. Our consolidated financial position and consolidated results of operations for the periods presented have not been restated from the consolidated financial position and consolidated results of operations originally reported. We are only filing the items of our Annual Report that have been revised in response to the Staff’s comment letter and all other information in our Annual Report remains unchanged. Accordingly, this Amendment should be read in conjunction with our Annual Report.

Pursuant to the Rules of the SEC, currently dated certifications from our Chief Executive Officer and Chief Financial Officer as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are filed or furnished herewith, as applicable.

Table of Contents

Part II
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1
Item 8. Financial Statements and Supplementary Data	23
Part III
Item 11. Executive Compensation	87
Part IV
Item 15. Exhibits and Financial Statement Schedules	107
Signatures	108

Quantities of natural gas are expressed in this Annual Report on Form 10-K/A 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. References to number of potential well locations are gross, unless otherwise indicated.

References to “GAAP” refer to U.S. generally accepted accounting principles.

Endeavour International Corporation

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other parts of this Annual Report on Form 10-K/A contain forward-looking statements that involve risks and uncertainties. All forward-looking statements included in this Annual Report on Form 10-K/A are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth in the section captioned “Risk Factors” in Item 1A and elsewhere in this Annual Report on Form 10-K/A. The following should be read in conjunction with the audited financial statements and the notes thereto included in “Item 8. Financial Statements and Supplementary Data.” 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. Historically, we have focused our operations in the North Sea, but have recently expanded our focus to target unconventional U.S. onshore resource shale plays with shorter production-cycle times and compelling risk/return profiles.

On May 14, 2009, we completed the sale of our Norwegian subsidiary, Endeavour Energy Norge AS, to Verbundnetz Gas AG for cash consideration of $150 million (the “Norway Sale”). We recognized a gain upon closing the Norway Sale of $47.0 million, after the allocation of $68 million of goodwill to the assets sold. Proceeds from this sale enabled us to enter into a joint venture relationship with an established U.S. shale operator, providing us with acreage positions and production in the Haynesville and Marcellus Shales. We also entered into additional joint venture agreements with other selected operators, providing exposure to emerging shale plays in Alabama and Montana.

Our North Sea activities and assets represented the majority of our activity in 2007 and 2008. During 2009, our North Sea assets continued to represent the primary focus of our activities but we also began pursuing activity in the U.S. and sold our Norwegian assets and operations. Our major North Sea development projects – Bacchus, Columbus, Cygnus and Rochelle – continued to move toward development throughout the year with appraisal wells drilled at Cygnus and Rochelle in early 2009. Further appraisal drilling is planned for 2010 at Cygnus. In the U.S., we expanded our operations primarily by completing acquisitions of exploration acreage and producing properties in 2009 and anticipate expanded U.S. exploration and development programs in 2010.

Our revenues for the year ended December 31, 2009 decreased as compared to the prior year primarily as a result of lower commodity prices and lower production volumes from our producing assets. Our realized price per BOE, after derivatives, decreased from $71.70 per BOE in 2008 to $64.15 per BOE in 2009 largely as a result of lower gas prices in the U.K. Our realized price per BOE, after derivatives, increased 25% from 2007 to 2008 largely as a result of oil prices climbing to record levels in the summer of 2008 and gas prices in our markets improving. This substantial increase in prices in the first half of 2008 helped revenue grow from $135.9 million in

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2007 to $170.8 million in 2008, however, the subsequent decrease in commodity prices and normal declines in our production during 2009 led to a material reduction in our revenues to $62.3 million for the year. In addition, we had revenues for our Norwegian assets included in discontinued operations of $17.6 million, $89.7 million and $40.2 million for the year ended December 31, 2009, 2008 and 2007, respectively. We sold our Norwegian assets in May 2009.

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. Cash flow provided by (used in) operations was $55.7 million in 2009 versus $133.2 million in 2008 and $128.5 million in 2007. Discretionary cash flow was $71.4 million in 2009 compared to $120.8 million in 2008 and $113.0 million in 2007.

Net loss to common stockholders was $62.2 million for 2009, representing $(0.48) per diluted share and reflecting a gain on the sale of our discontinued operations, an impairment of oil and gas properties, significant unrealized losses on the mark-to-market of commodity derivatives and a non-cash preferred stock dividend upon the valuation of the redemption and modification of a portion of our Series C Preferred Stock. Net income to common stockholders was $45.7 million for 2008, or $0.32 per diluted share, reflecting an impairment of oil and gas properties and significant unrealized gains on the mark-to-market of commodity derivatives. Net loss to common stockholders for 2007 was $60.3 million, or $0.49 per share, reflecting the significant unrealized loss on the mark-to-market of commodity derivatives.

Net income as adjusted for 2009 would have been $41.1 million without the effect of impairments, derivative transactions and currency impacts of deferred taxes. Net income as adjusted for 2008 would have been $16.5 million, as compared to net loss as adjusted of $0.3 million in 2007.

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 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.

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.”

Results of Operations

Our revenues and sales volumes have fluctuated significantly since 2006 primarily due to the following:

• Our Enoch field began first production in mid 2007 and each of 2009 and 2008 reflect a full year’s contribution of this asset.

• U.S. production reflects the results of our successful drilling of the Garwood well at the end of 2008 and the purchase of producing assets in October 2009.

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Endeavour International Corporation

• In the first quarter of 2009, we suspended production at the IVRRH, Renee and Rubie fields due to high operating costs.

• Natural production declines at certain of our fields have not been offset by infield drilling resulting in production decreases at certain fields, particularly in 2009 at our largest gas field – Goldeneye.

• There was an increase in gas production from our discontinued operations at the end of 2007 with the completion of a gas project at the Njord field in Norway during the fourth quarter of 2007.

• Extreme volatility in commodity prices over the last three years as discussed above.

• Sale of our discontinued operations in Norway in May 2009.

The following table shows our annual average sales volumes, sales prices and average production costs. None of our current producing fields represent more than 15% of our total proved reserves during 2009 or 2008. However, certain of our non-producing North Sea development assets — the Rochelle, Cygnus and Columbus fields — each represent more than 15% of our proved reserves during these years. As these fields do not have any current sales or production, they have not been separately identified in the table below. See “Business — Our Areas of Operation — North Sea.”

During 2007, two producing fields each represented more than 15% of reserves — Goldeneye and Njord. The Goldeneye field in the U.K. had sales volumes of 1,677 MBOE. Goldeneye is predominately a gas field and represented 8.3 MMcf of our 8.9 MMcf of gas sales and 297 MBOE of liquids sales. As our development projects have added additional reserves to our total proved reserves base, Goldeneye’s percentage of our total proved reserves decreased in 2009 and 2008 although, it remains the primary source of our gas sales. During 2007, the Njord field had sales volumes of 199 MBOE, consisting of 188 MBOE and 61 MMcf. The Njord field was part of our discontinued operations that were sold in 2009.

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	Year Ended December 31,
	2009		2008			2007
Sales volume (1)
Oil and condensate sales (Mbbls):
United Kingdom		690		1,032			1,274
United States		4		—			—
Continuing operations		694		1,032			1,274
Discontinued operations — Norway		310		726			519
Total		1,004		1,758			1,793
Gas sales (MMcf):
United Kingdom		3,743		6,532			8,556
United States		320		—			—
Continuing operations		4,063		6,532			8,556
Discontinued operations — Norway		686		2,322			328
Total		4,749		8,854			8,884
Oil equivalent sales (MBOE)
United Kingdom		1,314		2,121			2,700
United States		58		—			—
Continuing operations		1,372		2,121			2,700
Discontinued operations — Norway		425		1,113			574
Total		1,797		3,234			3,274
Total BOE per day		4,923		8,835			8,969
Physical production volume (BOE per day): (2)
United Kingdom		3,669		5,804			7,660
United States		162		—			—
Continuing operations		3,831		5,804			7,660
Discontinued operations — Norway		1,156		3,033			1,608
Total		4,987		8,837			9,268
Realized Prices (3)
Oil and condensate price ($  per Bbl):
Before commodity derivatives	$	52.15	$	90.53		$	67.11
Effect of commodity derivatives		22.51		(14.50	)		(2.13	)
Realized prices including commodity derivatives	$	74.66	$	76.03		$	64.98
Gas price ($  per Mcf):
Before commodity derivatives	$	5.77	$	11.44		$	6.27
Effect of commodity derivatives		2.69		(0.35	)		1.79
Realized prices including commodity derivatives	$	8.46	$	11.09		$	8.06
Equivalent oil price ($  per BOE):
Before commodity derivatives	$	44.44	$	80.54		$	53.78
Effect of commodity derivatives		19.71		(8.84	)		3.68
Realized prices including commodity derivatives	$	64.15	$	71.70		$	57.46
Operating Costs ($  per BOE) (4)	$	12.97	$	14.40		$	12.56

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Endeavour International Corporation

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

Our revenues and cash flows from operating activities are very sensitive to changes in the prices we receive for the oil and natural gas we produce. Our production is sold at prevailing market prices which may be volatile and subject to numerous factors which are outside of our control. Further, the current tightly balanced supply and demand market allows a small variation in supply or demand to significantly impact the market prices for these commodities.

The markets in which we sell our oil and natural gas also materially impact our revenues and cash flows. Oil trades on a worldwide market and consequently, price movements for all types and grades of crude oil generally trend in the same direction and within a relatively narrow price range. However, natural gas prices vary among geographic areas as the prices received are largely impacted by local supply and demand conditions as the global transportation infrastructure for natural gas is still developing. As such, the oil we produce and sell is typically in line with global prices, whereas our natural gas is to a large extent impacted by regional supply and demand issues and to a lesser extent by global fuel prices, including oil and coal. Specifically, we sell a majority of our gas into the U.K. market, which is very sensitive to and impacted by tighter European gas supplies and gas deliveries from Russia. Therefore, the price for natural gas in the U.K. market is typically higher than the price for natural gas in other geographic regions and markets, including the U.S.

We utilize various oil and gas derivative instruments to achieve a more predictable cash flow by reducing our exposure to price fluctuations. Hedge accounting has not been elected for these instruments resulting in the application of mark-to-market accounting — effectively pulling forward into current periods the non-cash gains and losses from commodity price fluctuations relating to all future delivery periods. The derivative instruments cover a portion of our production through 2011. The significant volatility in commodity prices and the multi-year nature of the derivative instruments leads to large fluctuations in the fair market value of the derivative instruments at the end of each year. This non-cash change in the fair market value are recorded in unrealized gains (losses) on derivatives in the income statement. The realized prices above show the effect of the cash settlements for our derivative instruments each year. We expect to continue to have fluctuations in net earnings for the change in the fair market value each period as commodity prices fluctuate based on all remaining unsettled contracts. See Note 18 to the consolidated financial statements for additional information on these derivatives.

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Endeavour International Corporation

Operating Expenses

For 2009, operating expenses decreased to $17.8 million as compared to $32.3 million for 2008. Operating costs per BOE decreased to $12.97 per BOE for 2009 from $14.40 per BOE for 2008. In general, the changes in operating costs reflect the increase in fuel costs in 2008 at a non-operated facility which gathered the production from the IVRRH, Renee and Rubie and then the absence of those costs when we suspended production from those fields in 2009.

DD&A and Impairment of Oil and Gas Properties

Decreased depreciation, depletion and amortization (“DD&A”) expense from 2008 to 2009 reflects the impact of a decrease in production and the lower DD&A rates as a result of impairments in oil and gas properties in 2008 and earlier 2009. Decreased DD&A expense from 2007 to 2008 reflects the impact of a decrease in production from 2007 to 2008 partially offset by an increase in the DD&A rate.

In 2009, we recorded $43.9 million in impairment of oil and gas properties, pre-tax, through the application of the full cost ceiling test. At December 31, 2009, the prices used to determine the estimates of future cash inflows were $60.40 per Bbl for oil and $4.96 per Mcf for gas.

In 2008, we recorded $37.0 million in impairment of oil and gas properties, pre-tax, through the application of the full cost ceiling test at year-end. The prices used to determine the impairment were $36.55 per barrel for oil and $8.70 per Mcf for gas. While our commodity derivatives had a fair value of $31.0 million at December 31, 2008, 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.

General and Administrative (“G&A”) Expenses

Our have only slightly increased since 2007 as we have been able to absorb a significant amount of our expanded operations without a corresponding increase in the number of employees. The increase in G&A expenses to $17.0 million for 2009 is a result of an increase in employee compensation and consulting fees associated with the additional staff to pursue our expanding development projects in the U.K. Much of this increase in staff costs was offset by recoveries from our partner on the development project we operate, Rochelle. Non-cash stock-based compensation decreased as a result of the final vesting of grants given in prior years, current year forfeitures and declining fair values on each year’s grants. Components of G&A expenses for these periods are as follows:

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	Year Ended December 31,
	2009			2008			2007
Compensation	$	14,659		$	11,203		$	10,181
Consulting, legal and accounting fees		5,118			4,679			5,045
Occupancy costs		982			1,130			994
Other expenses		1,364			4,004			2,352
Total gross cash G&A expenses		22,123			21,016			18,572
Non-cash stock-based compensation		2,612			2,928			4,487
Gross G&A expenses		24,735			23,944			23,059
Less: capitalized G & A expenses		(7,769	)		(8,012	)		(7,206	)
Net G&A expenses	$	16,966		$	15,932		$	15,853

Interest Expense and Other

The decrease in interest expense from $23.0 million in 2008 to $16.6 million in 2009 reflects the partial repayment of outstanding balances under our senior bank facility with a portion of the proceeds from the sale of our Norwegian operations. Interest expense increased to $23.0 million in 2008 primarily as a result of $4.3 million in expenses, including $2.1 million in cash, related to the early repayment of the second lien term loan.

Income Taxes

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

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Endeavour International Corporation

										Total			Discontinued
										Continuing			Operations –
(Amounts in thousands)	U.K.			U.S.			Other			Operations			Norway			Total
Year Ended December 31, 2009:
Net income (loss) before taxes	$	(52,041	)	$	(31,167	)	$	(11,479	)	$	(94,687	)	$	51,963		$	(42,724	)
Current tax (benefit) expense		(5,739	)		40			(26	)		(5,725	)		(603	)		(6,328	)
Deferred tax (benefit) expense		(20,260	)		(20	)		(35	)		(20,315	)		4,791			(15,524	)
Foreign currency losses on deferred tax liabilities		18,882			—			—			18,882			1,241			20,123
Total tax (benefit) expense		(7,117	)		20			(61	)		(7,158	)		5,429			(1,729	)
Net income (loss) after taxes	$	(44,924	)	$	(31,187	)	$	(11,418	)	$	(87,529	)	$	46,534		$	(40,995	)
Year Ended December 31, 2008:
Net income (loss) before taxes	$	66,129		$	(11,969	)	$	(4,185	)	$	49,975		$	63,244		$	113,219
Current tax expense		11,158			—			10			11,168			27,879			39,047
Deferred tax expense		22,673			—			303			22,976			15,415			38,391
Foreign currency gains on deferred tax liabilities		(10,028	)		—			—			(10,028	)		(10,681	)		(20,709	)
Total tax expense		23,803			—			313			24,116			32,613			56,729
Net income (loss) after taxes	$	42,326		$	(11,969	)	$	(4,498	)	$	25,859		$	30,631		$	56,490
Year Ended December 31, 2007:
Net income (loss) before taxes	$	(68,704	)	$	(10,233	)	$	6,584		$	(72,353	)	$	14,095		$	(58,258	)
Current tax (benefit) expense		2,898			(3	)		289			3,184			562			3,746
Deferred tax (benefit) expense		(27,430	)		—			711			(26,719	)		8,951			(17,768	)
Foreign currency losses on deferred tax liabilities		1,327			—			—			1,327			3,514			4,841
Total tax (benefit) expense		(23,205	)		(3	)		1,000			(22,208	)		13,027			(9,181	)
Net income (loss) after taxes	$	(45,499	)	$	(10,230	)	$	5,584		$	(50,145	)	$	1,068		$	(49,077	)

Our income tax expense during the periods indicated relates primarily to our operations in the U.K. and our discontinued operations in Norway. Income taxes decreased in 2009 to a benefit of $7.2 million reflecting the decrease in revenues and the weakening of the U.S. dollar versus the U.K. pound. Income tax expense in 2008 represents the significant increase in revenues as a result of higher realized prices, the strengthening of the U.S. dollar versus the U.K. pound and the shift in anticipated capital expenditures from late 2008 to early 2009. During 2007, we incurred taxes in all of the jurisdictions in which we do business, except for the U.S.

At December 31, 2009, we had net operating loss carryforwards of $77.6 million in the U.S.

In 2009, 2008 and 2007, we have not recorded 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.

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Capital Program

We spent $88.6 million, $88.5 million and $87.9 million on our oil and gas capital program, excluding acquisitions, in 2009, 2008 and 2007, respectively. We spent $16.5 million in 2009 and $15 million to $20 million in both 2008 and 2007 on development activities at our producing properties. The remaining costs were spent on exploration and appraisal activities, including $11.4 million and $5.5 million in 2009 and 2008, respectively, related to our new operations in the U.S. Expenditures for 2009 also included $32.2 million for our acquisitions, primarily located in the U.S.

2009 Capital Resources

	Year Ended December 31,
(Amounts in thousands)	2009			2008
Cash	$	27,287		$	31,421
Restricted Cash, related to rig commitments	$	2,879		$	20,739
Debt, including current maturities	$	(223,385	)	$	(227,855	)
Debt, net of Cash	$	(193,219	)	$	(175,695	)

	Year Ended December 31,
	2009			2008
Net cash provided by operating activities	$	55,711		$	133,180
Net cash provided by (used in) investing activities	$	31,120		$	(64,851	)
Net cash used in financing activities	$	(97,700	)	$	(46,613	)

Our primary sources of financial resources and liquidity are internally generated cash flows from operations and access to the credit and capital markets, to the extent available. During 2009, we principally relied on cash flow from operations and proceeds from our sale of Norwegian assets to fund our capital needs and repay a portion of outstanding debt and preferred stock. Going forward, we believe the combination of our available cash on hand, cash flow from operations and our ability to control capital expenditures will allow us to manage our business effectively while enabling us to further our strategic objectives.

Operating, Investing and Financing Activities include the net cash flows from our discontinued operations. For the years ended December 31, 2009, 2008, and 2007, our discontinued operations had net cash flows provided by (used in) operating activities of approximately $9.0 million, $38.8 million and $26.3 million, respectively. These net cash flows were substantially offset by net cash used by investing activities of approximately $9.0 million, $34.7 million and $25.5 million during 2009, 2008, and 2007, respectively.

Cash flow from operations decreased to $55.7 million for 2009 from $133.2 million for 2008 primarily due to lower realized commodity prices and lower sales volumes, particularly the reduction in gas sales as a result of production declines at Goldeneye.

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In addition to cash flows from operations, we have utilized issuances of debt and equity securities to enhance our liquidity and support the execution of our strategic objectives. Significant issuances and repayments of debt and equity, as well as the uses of the net proceeds, in 2009, 2008, and 2007 were as follows:

• repaid the outstanding balance of the second lien term loan in the first quarter of 2008;

• issued $40 million of the 11.5% convertible bonds in the first quarter of 2008;

• repaid $63.0 million of net debt in 2009; and

• repaid $75 million of the Series C Convertible Preferred Stock in the fourth quarter of 2009 with $25 million in cash and a $50 million note payable.

On November 17, 2009, we redeemed 60% of the outstanding shares of Series C Preferred Stock, for face value of $75 million, and amended the terms of the remaining shares of Series C Preferred Stock. The redemption price consisted of a $25 million cash payment and the issuance of $50 million Subordinated Notes.

The redemption and modification of the Series C Preferred Stock required the modified Series C Preferred Stock to be recorded at fair market value at the redemption date. As there was not a market observable price for the Series C Preferred Stock, we utilized a valuation approach to estimate the price that would be paid to transfer the Series C Preferred Stock in an orderly transaction between market participants. The fair value of the modified Series C Preferred Stock was greater than the carrying value by $11.5 million. This excess of fair value over carrying value was recorded as a non-cash charge to preferred stock dividends and increased the carrying value of the Series C Preferred Stock. As holders convert the Series C Preferred Stock, the $11.5 million non-cash charge will be transferred to equity on a ratio of shares converted to shares of Series C Preferred Stock outstanding.

In the November 2009 amendment, we amended terms of the Series C Preferred Stock to reduce the annual dividend rate to 4.5% (from 8.5%), adjust the conversion price to $1.25 per share (from $2.50) and remove certain anti-dilution provisions.

See Note 9 to the Consolidated Financial Statements for additional discussion of our debt.

Our future revenues and cash flows from operating activities will continue to be 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, 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,

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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 U.K. market. Market prices for both oil and natural gas were at high levels throughout much of 2007 and 2008. North Sea gas prices declined in the first quarter of 2007 but recovered in the second half of the year and remained strong during 2008 and 2009.

Our cash flows will be significantly impacted by the amount of hydrocarbons we produce, the price we obtain for our produced commodities and taxes paid on operations. Oil prices continue to be impacted by supply and demand on a worldwide basis, while natural gas prices are more impacted by regional economic and weather patterns. Although oil and gas prices have remained volatile, the full impact on our cash flows will be partially mitigated by our balance of gas to oil production and our commodity derivative positions. As of December 31, 2009, our outstanding commodity derivatives covered 30% to 45% of expected 2010 production.

Recent Financing Arrangements

In February 2010, we issued 23.5 million shares of common stock in a private placement for aggregate net proceeds of $20.5 million. We also entered $25 million junior lending facility, with a maturity date of February 5, 2011, and interest at LIBOR plus 8%. Upon entering the new junior lending facility, we borrowed $15 million against the facility. The net proceeds from the private placement and the borrowing under the junior facility will be used to partially fund our 2010 capital budget.

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 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

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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.

These non-GAAP measures should not be considered in isolation or as an alternative to net income, operating income or any other performance measures derived in accordance with GAAP or as alternatives to cash flows generated by operating, investing or financing activities as a measure of our liquidity. 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

• 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.

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As required under Regulation G of the Securities Exchange Act of 1934, provided 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.

	Year Ended December 31,
	2009			2008			2007
Net income (loss)	$	(40,995	)	$	56,490		$	(49,077	)
Depreciation, depletion and amortization		38,701			81,734			76,850
Impairment of oil and gas properties		43,929			36,970			—
Deferred tax expense (benefit)		4,599			17,682			(12,925	)
Gain on asset sales		(47,308	)		—			—
Unrealized (gain) loss on derivatives		55,598			(76,666	)		89,132
Other		16,835			4,597			8,994
Discretionary Cash Flow (1)	$	71,359		$	120,807		$	112,974
Net income (loss)	$	(40,995	)	$	56,490		$	(49,077	)
Impairment of oil and gas properties (net of tax) (2)		28,263			18,485			—
Unrealized (gain) loss on derivatives (net of tax) (3)		33,702			(37,743	)		44,566
Currency impact on deferred taxes		20,123			(20,709	)		4,842
Net Income as Adjusted	$	41,093		$	16,523		$	331
Net income (loss)	$	(40,995	)	$	56,490		$	(49,077	)
Unrealized (gain) loss on derivatives		55,598			(76,666	)		89,132
Net interest expense		16,420			21,301			16,430
Depreciation, depletion and amortization		38,701			81,734			76,850
Impairment of oil and gas properties		43,929			36,970			—
Income tax expense (benefit)		(1,729	)		56,729			(9,180	)
Gain on asset sales		(47,308	)		—			—
Adjusted EBITDA	$	64,616		$	176,558		$	124,155

(1)	Discretionary cash flow is equal to cash flow from operating activities before the changes in operating assets and liabilities.
(2)	Net of tax benefits of $ (15,666) and $ (18,485) for 2009 and 2008, respectively.
(3)	Net of tax expense (benefit) of $ (21,896), $38,923 and (44,566), respectively.

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Outlook
2010 Planned Capital Expenditures

We anticipate spending approximately $90 million during 2010 to fund oil and gas activities in the U.S. and U.K. The majority of this amount is controllable by Endeavour. Our primary focus during 2010 in the U.S. will be in the Haynesville area as we believe this acreage contains near-term production potential. The ongoing U.S. program and expenditures will be tailored based on early drilling results. During 2010, we also expect to begin the evaluation program of our other U.S. assets in the Marcellus area and the two frontier plays in Alabama and Montana. Four U.K. wells have been or will be drilled in 2010; two Cygnus appraisal wells in the western portion of the field; the Deacon well that began in 2009 and finished in 2010, and the exploration well west of the Rochelle development. While this drilling is occurring, we expect to continue further our development programs at our four existing development projects, including ongoing engineering assessments for future production and commercial off-take solutions. We intend to fund these development activities through cash on hand, and cash flow generated from operations, as well as expansion of our credit facilities as needed.

The timing, completion and process of our 2010 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.

Estimated Average Production (A)
Daily Production (BOE per day)		4,500		to		6,000
Differentials (B)
Oil ($/Bbl)	$	(5.00	)	to	$	(6.00	)
Gas ($Mcf)	$	(0.50	)	to	$	(0.60	)
Gas Percentage of Total		55	%	to		60	%
Lease Operating Expense ($  per barrel)	$	8.00		to	$	10.00

(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 Henry Hub pricing, and oil price differentials are stated as premiums (discounts) from West Texas Intermediate pricing.

Liquidity and Financial Resources

Our primary sources of financial resources and liquidity are internally generated cash flows from operations and access to the credit and capital markets, to the extent available. We believe the

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combination of our available cash on hand, cash flow from operations and our ability to control capital expenditures will allow us to manage our business effectively while enabling us to further our strategic objectives.

Our cash flows will be significantly impacted by the amount of hydrocarbons we produce, the price we obtain for our produced commodities and taxes paid on operations. Oil prices continue to be impacted by supply and demand on a worldwide basis, while natural gas prices are more impacted by regional economic and weather patterns. Although oil and gas prices have remained volatile, the full impact on our cash flows will be partially mitigated by our balance of gas to oil production and our commodity derivative positions. As of December 31, 2009, our outstanding commodity derivatives covered 30% to 45% of expected 2010 production.

Our income tax expense relates primarily to our operations in the UK (statutory income tax rate of 50%). We are currently not able to record income tax benefits on our U.S. loss as there is no assurance that we can generate any U.S. taxable earnings. As operations expand in the U.S., we will be able to record income tax benefits in the U.S., however we do not anticipate paying current federal income taxes in the U.S. for quite some time.

In February 2010, we issued 23.5 million shares of common stock for an aggregate net proceeds of $20.5 million. We also entered into a $25 million junior lending facility, with a maturity date of February 5, 2011, and interest at LIBOR plus 8%. Upon entering the new junior lending facility, we borrowed $15 million against the facility. The net proceeds from these transactions will be used to partially fund our 2010 capital budget.

At December 31, 2009, we had $49.9 million outstanding under our senior bank facility. The senior bank facility has a current borrowing base capacity of $50 million. In February 2010, the maturity date of the senior bank facility was changed to January 31, 2011. We also have $50.1 million of Subordinated Notes that amortize over four years commencing in March 2011.

Our senior bank facility is secured by certain of our oil and gas assets. In determining the value of our reserves for purposes of setting the borrowing base and making covenant compliance calculations under our senior bank facility, the lenders have the right to make an independent determination of our reserves. The standards and definitions used by the lenders in these determinations may not be the same as those promulgated under the Society of Petroleum Engineers or by the SEC. As of December 31, 2009, we were in compliance with all covenants under our senior bank facility. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Financial Resources.”

As more fully described in Note 9 to our audited consolidated financial statements, our bank facilities contain certain financial ratio covenants. We were in compliance with all financial and restrictive covenants of our debt obligations as of December 31, 2009 and 2008. With the junior facility and senior bank facility, we will have $65 million in debt due in the first quarter of 2011, based on outstanding balances at February 28, 2010. During 2010, we plan to utilize our existing U.K. oil and gas assets, as well as our growing U.S. reserve base, as a basis for refinancing and expanding the size of our credit facilities. We are currently in discussions with several parties concerning this process. There can be no guarantee that we can complete any refinancing or remain in compliance with financial covenants in which case a waiver from our lenders would be required.

We strive to synchronize our capital expenditures with our cash flow. However, we believe our existing U.K. reserves are of significant value and together with our U.S. assets can be used as support for increased financial resources when necessary to fund our on-going activities or refinance indebtedness. We continually monitor the capital markets to evaluate the most appropriate actions to fund our activities.

On March 15, 2010, we announced that our board of directors has approved a review of strategic alternatives for its North Sea assets. In an effort to unlock the value of our underlying North Sea assets, we will study a full range of options, including:

• Continuing to execute current operations plan;

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• Entering into a joint venture to accelerate activities in the North Sea; and

• Selling specific assets or the North Sea entire business.

We will announce the results of the effort once a course of action is chosen. At the end of this review process, we may elect to make no changes.

Disclosures about Contractual Obligations and Commercial Commitments

The following table sets forth our obligations and commitments to make future payments under its lease agreements and other long-term obligations as of December 31, 2009:

	Payments due by Period
			Less
			than 1		1-3		3-5		After 5
(Amounts in thousands)	Total		Year		Years		Years		Years
Long-term debt
Principal	$	231,152	$	—	$	161,192	$	69,960	$	—
Interest (1)		56,962		11,323		13,728		31,911		—
Asset retirement obligations		47,362		3,249		51		—		44,062
Operating leases for office leases and equipment		1,073		638		393		42		—
Rig commitments (2)		17,055		17,055		—		—		—
Total Contractual Obligations	$	353,604	$	32,265	$	175,364	$	101,913	$	44,062

(1)

Assumes a 1.5% LIBOR rate. In addition, interest on our 11.5% convertible debt and $50 million note is added to the outstanding principal balance each quarter and reflected as due upon maturity.

(2)

As is common in the oil and gas industry, we operate in many instances through joint ventures under joint operating or similar agreements. Typically, the operator under a joint operating agreement enters into contracts, such as rig commitment contracts, for the benefit of all joint venture partners. Through the joint operating agreement, the non-operators reimburse, and in some cases advance, the funds necessary to meet the contractual obligations entered into by the operator. These obligations are typically shared on a “working interest” basis. The joint operating agreement provides remedies to the operator in the event that the non-operator does not satisfy its share of the contractual obligations. Occasionally, the operator is permitted by the joint operating agreement to enter into lease obligations and other contractual commitments that are then passed on to the non-operating joint interest owners as lease operating expenses, frequently without any identification as to the long-term nature of any commitments underlying such expenses. Once the timing for rig delivery and the specific well to be drilled are determined, this obligation will be shared with the other working interest owners.

Off-Balance Sheet Arrangements

At December 31, 2010, we did not have any off-balance sheet arrangements.

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Rig Commitments

Our rig commitments represent one commitment for 46 days of a rig in the U.K. We are currently considering the timing of rig deliverability and completion of the commitment.

Critical Accounting Policies and Estimates

The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America 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 differ from those estimates.

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. In addition, alternatives may exist among various accounting methods. In such cases, the choice of accounting method may also have a significant impact on reported amounts.

Our critical accounting policies are as follows:

Full Cost Accounting

Under the full cost method, all acquisition, exploration and development costs, including certain directly related employee costs and a portion of interest expense, incurred for the purpose of finding oil and gas are capitalized and accumulated in pools on a country-by-country basis. Capitalized costs include the cost of drilling and equipping productive wells, including the estimated costs of dismantling and abandoning these assets, dry hole costs, lease acquisition costs, seismic and other geological and geophysical costs, delay rentals and costs related to such activities. Employee costs associated with production and other operating activities and general corporate activities are expensed in the period incurred.

Capitalized costs are limited on a country-by-country basis (the ceiling test). The ceiling test limitation is calculated as the sum of the present value of future net cash flows related to estimated production of proved reserves, using the average, first-day-of-the-month price during the 12-month period before the end of the year for 2009 and the year-end price for 2008 and 2007, including the effect of derivative instruments that qualify as cash flow hedges, discounted at 10%, plus the lower of cost or estimated fair value of unproved properties, all net of expected

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income tax effects. Under the ceiling test, if the capitalized cost of the full cost pool, net of deferred taxes, exceeds the ceiling limitation, the excess is charged as an impairment expense.

We utilize a single cost center for each country where we have operations for amortization purposes. Any conveyances of properties are treated as adjustments to the cost of oil and gas properties with no gain or loss recognized unless the operations are suspended in the entire cost center or the conveyance is significant in nature.

Unproved property costs include the costs associated with unevaluated properties and properties under development and are not included in the full cost amortization base (where proved reserves exist) until the project is evaluated. These costs include unproved leasehold acreage, seismic data, wells and production facilities in progress and wells pending determination, together with interest costs capitalized for these projects. Seismic data costs are associated with specific unevaluated properties where the seismic data is acquired for the purpose of evaluating acreage or trends covered by a leasehold interest owned by us. Significant unproved properties are assessed periodically for possible impairment or reduction in value. If a reduction in value has occurred, these property costs are considered impaired and are transferred to the related full cost pool. Geological and geophysical costs included in unproved properties are transferred to the full cost amortization base along with the associated leasehold costs on a specific project basis. Costs associated with wells in progress and wells pending determination are transferred to the amortization base once a determination is made whether or not proved reserves can be assigned to the property. Costs of dry holes are transferred to the amortization base immediately upon determination that the well is unsuccessful. Unproved properties whose acquisition costs are not individually significant are aggregated, the portion of such costs estimated to be ultimately nonproductive, based on experience, are amortized to the full cost pool over an average holding period.

In countries where the existence of proved reserves has not yet been determined, unevaluated property costs remain capitalized in unproved property cost centers until proved reserves have been established, exploration activities cease or impairment and reduction in value occurs. If exploration activities result in the establishment of a proved reserve base, amounts in the unproved property cost center are reclassified as proved properties and become subject to amortization and the application of the ceiling test. When it is determined that the value of unproved property costs have been permanently diminished (in part or in whole) based on the impairment evaluation and future exploration plans, the unproved property cost centers related to the area of interest are impaired, and accumulated costs charged against earnings.

We capitalize interest on expenditures for significant exploration and development projects while activities are in progress to bring the assets to their intended use. Capitalized interest is calculated by multiplying our weighted-average interest rate on debt by the amount of qualifying costs and is limited to gross interest expense. As costs are transferred to the full cost pool, the associated capitalized interest is also transferred to the full cost pool.

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Business Combinations

Assets and liabilities acquired through a business combination are recorded at estimated fair value. We use all available information to make these fair value determinations, including information commonly considered by our engineers in valuing individual oil and gas properties and sales prices for similar assets. Estimated deferred taxes are based on available information concerning the tax basis of the acquired company’s assets and liabilities and carryforwards at the merger date.

Any excess of the acquisition cost of the acquired business over the fair value amounts assigned to assets and liabilities is recorded as goodwill. Any excess of the amounts assigned to assets and liabilities over the acquisition of the acquired business is recorded as a gain on acquisition on the income statement. The amount of goodwill recorded in any particular business combination can vary significantly depending upon the fair values attributed to assets acquired and liabilities assumed relative to the total acquisition cost.

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the estimated fair value of the assets acquired and liabilities assumed in an acquisition. Intangible assets represent the purchase price allocation to the assembled workforce as a result of the acquisition of NSNV, Inc. We assess the carrying amount of goodwill and other indefinite-lived intangible assets by testing the asset for impairment annually at year-end, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test requires allocating goodwill and all other assets and liabilities to reporting units. The fair value of each reporting unit is determined and compared to the book value of the reporting unit. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value.

At December 31, 2009, we had $211.9 million of goodwill recorded related to past business combinations. This goodwill is not amortized, but is required to be assessed for impairment annually, or more often as facts and circumstances warrant. 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. The reporting units used to evaluate and measure goodwill for impairment are determined from the manner in which the business is managed. We have determined we have a single reporting unit. Goodwill is tested annually at year end. Although we cannot predict when or if goodwill will be impaired, impairment charges may occur if we are unable to replace the value of our depleting asset base or if other adverse events (for example, lower sustained oil and gas prices) reduce the fair value of the reporting unit.

We completed our 2009 annual goodwill impairment test with no impairment indicated as the estimated fair value of our reporting unit was substantially greater than its book value. We considered our market capitalization based on average stock prices for 20 days before December 31, 2009.

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A lower fair value estimate in the future could result in impairment. Examples of factors that could cause a lower fair value estimate could be sustained declines in prices, increases in costs, and changes in discount rate assumptions due to market conditions.

Dismantlement, Restoration and Environmental Costs

We recognize liabilities for asset retirement obligations associated with tangible long-lived assets, such as producing well sites, offshore production platforms, and natural gas processing plants, with a corresponding increase in the related long-lived asset. The asset retirement cost is depreciated along with the property and equipment in the full cost pool. The asset retirement obligation is recorded at fair value and accretion expense, recognized over the life of the property, increases the liability to its expected settlement value. If the fair value of the estimated asset retirement obligation changes, an adjustment is recorded for both the asset retirement obligation and the asset retirement cost. Our asset retirement obligations are substantially all related to our North Sea operations, with North Sea-related obligations accounting for $47.2 million of the total $47.4 million in asset retirement obligations.

Estimating future asset retirement obligations requires us to make estimates and judgments regarding timing, amount and existence of a liability, as well as what constitutes adequate restoration. We use the present value of estimated cash flows related to our asset retirement obligations to determine the fair value. Our liability is determined using significant assumptions, including current estimates of plugging and abandonment costs, inflation factors, the productive lives of wells and our risk-adjusted interest rate. In addition, there are other external factors which could significantly affect the ultimate settlement costs for these obligations including changes in environmental regulations and other statutory requirements, fluctuations in industry costs and advances in technology.

Revenue Recognition

We use the entitlements method to account for sales of gas production. We may receive more or less than our entitled share of production. Under the entitlements method, if we receive more than our entitled share of production, the imbalance is treated as a liability at the market price at the time the imbalance occurred. If we receive less than our entitled share, the imbalance is recorded as an asset at the lower of the current market price or the market price at the time the imbalance occurred. Oil revenues are recognized when production is sold to a purchaser at a fixed or determinable price, when delivery has occurred, title has transferred and collectability of the revenue is probable.

Derivative Instruments and Hedging Activities

From time to time, we may utilize derivative financial instruments to hedge cash flows from operations or to hedge the fair value of financial instruments. We may use 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 embedded derivatives related to our debt instruments and convertible preferred stock.

We record all derivatives at fair market value in our Consolidated Balance Sheets at the end of each period. The accounting for the fair market value, and the changes from period to period, depends on the intended use of the derivative and the resulting designation. This evaluation is determined at each derivative’s inception and begins with the decision to account for the derivative as a hedge, if applicable. The accounting for changes in the fair value of a derivative

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instrument that is not accounted for as a hedge is included in other (income) expense as an unrealized gain or loss. Where we intend to account for a derivative as a hedge, we document, at its inception, the hedging relationship, the risk management objective and the strategy for undertaking the hedge. The documentation includes the identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged, and the method that will be used to assess effectiveness of derivative instruments that receive hedge accounting treatment.

Changes in fair value to hedge instruments, to the extent the hedge is effective, are recognized in other comprehensive income until the forecasted transaction occurs. Hedge effectiveness is assessed at least quarterly based on total changes in the derivative’s fair value. Any ineffective portion of the derivative instrument’s change in fair value is recognized immediately in other (income) expense.

We discontinue hedge accounting prospectively when (1) we determine that the derivative is no longer effective in offsetting changes in the fair value or cash flows of a hedged item (including hedged items such as firm commitments or forecasted transactions); (2) the derivative expires; (3) it is no longer probable that the forecasted transaction will occur; (4) a hedged firm commitment no longer meets the definition of a firm commitment; or (5) management determines that designating the derivative as a hedging instrument is no longer appropriate.

Income Taxes

We use the liability method of accounting for income taxes under which deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities, and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as part of the provision for income taxes in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of, or all of, the deferred tax assets will not be realized.

Stock-Based Compensation Arrangements

We recognize all share-based payments to employees, including grants of employee stock options, based on their fair values. The share-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as general and administrative expense over the employee’s requisite service period (generally the vesting period of the equity award). We apply the fair value method in accounting for stock option grants to non-employees using the Black-Scholes Method.

It is our policy to use authorized but unissued shares of stock when stock options are exercised. At December 31,2009, we had approximately 7.0 million additional shares available for issuance pursuant to our existing stock incentive plan.

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Fair Value

We estimate fair value for the measurement of derivatives, long-lived assets during certain impairment tests, reporting units for goodwill impairment testing, the initial measurement of an asset retirement obligation and the initial measurement of our Series C Preferred Stock upon its redemption and modification. When we are required to measure fair value, and there is not a market observable price for the asset or liability, or a market observable price for a similar asset or liability, we generally utilize an income valuation approach. This approach utilizes management’s best assumptions regarding expectations of projected cash flows, and discounts the expected cash flows using a commensurate risk adjusted discount rate. Such evaluations involve a significant amount of judgment since the results are based on expected future events or conditions, such as sales prices; estimates of future oil and gas production; development and operating costs and the timing thereof; economic and regulatory climates and other factors. Our estimates of future net cash flows are inherently imprecise because they reflect management’s expectation of future conditions that are often outside of management’s control. However, assumptions used reflect a market participant’s view of long-term prices, costs and other factors, and are consistent with assumptions used in our business plans and investment decisions.

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Endeavour International Corporation

Item 8. Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Endeavour International Corporation:

We have audited the accompanying consolidated balance sheets of Endeavour International Corporation and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2009. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Endeavour International Corporation and subsidiaries as of December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.

As discussed in note 2 to the consolidated financial statements, effective January 1, 2008, the Company changed its method of accounting and disclosures for fair value measurements and fair value reporting of financial assets and liabilities. Also as discussed in note 2 to the consolidated financial statements, effective December 31, 2009, the Company has changed it reserve estimates and related disclosures as a result of adopting new oil and gas reserve estimation and disclosure requirements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Endeavour International Corporation’s internal control over financial reporting as of December 31, 2009, based on criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 16, 2010 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/S/ KPMG LLP
Houston, Texas
March 16, 2010

23

Endeavour International Corporation
Consolidated Balance Sheets
(Amounts in thousands)

	December 31,
	2009		2008
Assets
Current Assets:
Cash and cash equivalents	$	27,287	$	31,421
Restricted cash		2,879		20,739
Accounts receivable		14,800		22,325
Prepaid expenses and other current assets		10,118		42,194
Current assets of discontinued operations		—		16,726
Total Current Assets		55,084		133,405
Property and Equipment, Net ($154,553 and $134,556 not subject to amortization at 2009 and 2008, respectively)		266,587		232,346
Goodwill		211,886		213,949
Other Assets		5,322		9,165
Long Term Assets of Discontinued Operations		—		148,605
Total Assets	$	538,879	$	737,470

See accompanying notes to condensed consolidated financial statements.

24

Endeavour International Corporation
Consolidated Balance Sheets
(Amounts in thousands)

	December 31,
	2009			2008
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	12,401		$	38,630
Current maturities of debt		—			13,000
Accrued expenses and other		17,798			36,642
Current liabilities of discontinued operations		—			22,231
Total Current Liabilities		30,199			110,503
Long-Term Debt		223,385			214,855
Deferred Taxes		80,692			67,299
Other Liabilities		85,412			55,791
Long-term Liabilities of Discontinued Operations		—			46,051
Total Liabilities		419,688			494,499
Commitments and Contingencies
Series C Convertible Preferred Stock:
Face value (liquidation preference)		50,000			125,000
Net non-cash premiums under fair value accounting on redemption		9,058			—
Total Series C Convertible Preferred Stock		59,058			125,000
Stockholders’ Equity:
Series B preferred stock (Liquidation preference: $3,115 and $2,983 at 2009 and 2008, respectively)		—			—
Common stock; shares issued and outstanding - 131,618 and 128,572 shares at 2009 and 2008, respectively		132			129
Additional paid-in capital		247,707			244,471
Treasury stock, at cost (498 and 327 shares at 2009 and 2008), respectively		(587	)		(450	)
Accumulated other comprehensive loss		—			(1,266	)
Accumulated deficit		(187,119	)		(124,913	)
Total Stockholders’ Equity		60,133			117,971
Total Liabilities and Stockholders’ Equity	$	538,879		$	737,470

See accompanying notes to condensed consolidated financial statements.

25

Endeavour International Corporation
Consolidated Statement of Operations
(Amounts in thousands, except per share data)

	Year Ended December 31,
	2009			2008			2007
Revenues	$	62,293		$	170,781		$	135,876
Cost of Operations:
Operating expenses		17,776			32,317			27,263
Depreciation, depletion and amortization		34,020			67,326			68,982
Impairment of oil and gas properties		43,929			36,970			—
General and administrative		16,966			15,932			15,853
Total Expenses		112,691			152,545			112,098
Income (Loss) From Operations		(50,398	)		18,236			23,778
Other Income (Expense):
Derivatives:
Realized gains (losses)		35,422			(28,578	)		12,048
Unrealized gains (losses)		(55,598	)		76,666			(89,132	)
Interest expense		(16,630	)		(22,975	)		(19,282	)
Interest income and other		(7,483	)		6,626			235
Total Other Income (Expense)		(44,289	)		31,739			(96,131	)
Income (Loss) Before Income Taxes		(94,687	)		49,975			(72,353	)
Income Tax Expense (Benefit)		(7,158	)		24,116			(22,208	)
Income (Loss) from Continuing Operations		(87,529	)		25,859			(50,145	)
Discontinued Operations, net of tax:
Income (loss) from operations		(774	)		30,631			1,068
Gain on sale		47,308			—			—
Income from Discontinued Operations		46,534			30,631			1,068
Net Income (Loss)		(40,995	)		56,490			(49,077	)
Preferred Stock Dividends:
Dividends declared		9,757			10,809			11,238
Non-cash charge under fair value accounting upon redemption		11,454			—			—
Total Preferred Stock Dividends		21,211			10,809			11,238
Net Income (Loss) to Common Stockholders	$	(62,206	)	$	45,681		$	(60,315	)
Basic Net Income (Loss) per Common Share:
Continuing operations	$	(0.84	)	$	0.12		$	(0.50	)
Discontinued operations		0.36			0.24			0.01
Total	$	(0.48	)	$	0.36		$	(0.49	)
Diluted Net Income (Loss) per Common Share:
Continuing operations	$	(0.84	)	$	0.15		$	(0.50	)
Discontinued operations		0.36			0.17			0.01
Total	$	(0.48	)	$	0.32		$	(0.49	)
Weighted Average Number of Common Shares Outstanding:
Basic		130,291			128,312			123,118
Diluted		130,291			178,312			123,118

See accompanying notes to condensed consolidated financial statements.

26

Endeavour International Corporation
Consolidated Statement of Cash Flows
(Amounts in thousands)

	Year Ended December 31,
	2009			2008			2007
Cash Flows from Operating Activities:
Net income (loss)	$	(40,995	)	$	56,490		$	(49,077	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization		38,701			81,734			76,850
Impairment of oil and gas properties		43,929			36,970			—
Deferred tax expense (benefit)		4,599			17,682			(12,925	)
Unrealized (gains) losses on derivatives		55,598			(76,666	)		89,132
Gain on sale of Norwegian operations		(47,308	)		—			—
Other		16,835			4,597			8,994
Changes in operating assets and liabilities:
Decrease in receivables		3,978			9,795			30,127
(Increase) decrease in other current assets		7,489			(3,745	)		(984	)
Increase (decrease) in liabilities		(27,115	)		6,323			(13,611	)
Net Cash Provided by Operating Activities		55,711			133,180			128,506
Cash Flows From Investing Activities:
Capital expenditures		(131,393	)		(66,370	)		(88,007	)
Proceeds from sales, net of cash		144,653			259			—
(Increase) decrease in restricted cash		17,860			1,260			(20,133	)
Net Cash Provided by (Used in) Investing Activities		31,120			(64,851	)		(108,140	)
Cash Flows From Financing Activities:
Repayments of borrowings		(64,458	)		(120,000	)		(47,000	)
Borrowings under debt agreements		1,400			88,000			7,000
Redemption of preferred stock		(25,000	)		—			—
Dividends paid		(9,625	)		(10,625	)		(2,656	)
Financing costs paid		—			(3,538	)		(263	)
Other financing		(17	)		(450	)		(821	)
Net Cash Used in Financing Activities		(97,700	)		(46,613	)		(43,740	)
Net Increase (Decrease) in Cash and Cash Equivalents		(10,869	)		21,716			(23,374	)
Cash and Cash Equivalents, Beginning of Period		38,156			16,440			39,814
Cash and Cash Equivalents, End of Period	$	27,287		$	38,156		$	16,440
Cash and Cash Equivalents, End of Period:
Continuing operations	$	27,287		$	31,421		$	13,810
Discontinued operations		—			6,735			2,630
Total	$	27,287		$	38,156		$	16,440

See accompanying notes to condensed consolidated financial statements.

27

Endeavour International Corporation
Consolidated Statement of Stockholders’ Equity
(Amounts in thousands)

									Accumulated
						Additional			Other						Total			Total
	Common		Treasury			Paid-In			Comprehensive			Accumulated			Stockholder’s			Comprehensive
	Stock		Stock			Capital			Loss			Deficit			Equity			Income (Loss)
Balance, December 31, 2006	$	119	$	—		$	226,988		$	—		$	(110,279	)	$	116,828		$
Preferred stock dividend		6		—			10,509			—			(11,238	)		(723	)
Amortization of deferred compensation		—		—			4,975			—			—			4,975
Other		2		—			(933	)		—			—			(931	)
Comprehensive Loss:
Net Loss		—		—			—			—			(49,077	)		(49,077	)		(49,077	)
Other comprehensive loss (net of tax):
Unrealized loss on derivative instruments, net of tax		—		—			—			(852	)		—			(852	)		(852	)
Unrealized gain (loss) on available-for-sale securities		—		—			—			(71	)		—			(71	)		(71	)
Balance, December 31, 2007	$	127	$	—		$	241,539		$	(923	)	$	(170,594	)	$	70,149		$	(50,000	)
Preferred stock dividend		—		—			—			—			(10,809	)		(10,809	)
Amortization of deferred compensation		—		—			3,226			—			—			3,226
Treasury stock repurchase		—		(450	)		—			—			—			(450	)
Other		1		—			(294	)		—			—			(293	)
Comprehensive Loss:
Net Loss		—		—			—			—			56,490			56,490			56,490
Other comprehensive loss (net of tax):
Unrealized loss on derivative instruments, net of tax		—		—			—			(342	)		—			(342	)		(342	)
Unrealized gain (loss) on available-for-sale securities		—		—			—			(1	)		—			(1	)
Balance, December 31, 2008	$	128	$	(450	)	$	244,471		$	(1,266	)	$	(124,913	)	$	117,970		$	56,148

See accompanying notes to condensed consolidated financial statements.

28

Endeavour International Corporation
Consolidated Statement of Stockholders’ Equity
(Amounts in thousands)

								Accumulated
						Additional		Other						Total			Total
	Common		Treasury			Paid-In		Comprehensive			Accumulated			Stockholder’s			Comprehensive
	Stock		Stock			Capital		Loss			Deficit			Equity			Income (Loss)
Balance, December 31, 2008	$	128	$	(450	)	$	244,471	$	(1,266	)	$	(124,913	)	$	117,970		$	56,148
Preferred stock dividend		—		—			—		—			(21,211	)		(21,211	)
Amortization of deferred compensation		—		—			3,163		—			—			3,163
Treasury stock repurchase		—		(137	)		—		—			—			(137	)
Other		4		—			73		—			—			77
Comprehensive Loss:
Net Loss		—		—			—		—			(40,995	)		(40,995	)		(40,995	)
Other comprehensive income (net of tax):
Unrealized loss on derivative instruments, net of tax		—		—			—		1,194			—			1,194			1,194
Unrealized gain (loss) on available-for-sale securities		—		—			—		72			—			72			72
Balance, December 31, 2009	$	132	$	(587	)	$	247,707	$	—		$	(187,119	)	$	60,133		$	(39,729	)

See accompanying notes to condensed consolidated financial statements.

29

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

Note 1—Description of Business

Endeavour International Corporation was incorporated under the laws of the state of Nevada on January 13, 2000. As used in these Notes to 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.

Note 2—Summary of Significant Accounting Policies

Basis of Presentation and Use of Estimates

The accompanying 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 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.

Principles of Consolidation

The accompanying consolidated financial statements include all of the accounts of Endeavour and our consolidated subsidiaries. All significant intercompany accounts and transactions have been eliminated. Investments in entities over which we have significant influence, but not control, are carried at cost adjusted for equity in earnings or (losses) and distributions received.

Cash and Cash Equivalents

We consider all highly liquid instruments with an original maturity of 90 days or less at the time of purchase to be cash equivalents.

30

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

Restricted Cash

Restricted cash includes amounts held in escrow for drilling rig commitments and for purchase price of the acquisition of properties from Hillwood Energy. The escrow for the Hillwood Energy properties was release upon closing of the acquisition in January 2010. The remaining reserved amounts in escrow will be released as payments are made for this drilling activity.

Inventories

Materials and supplies and oil inventories are valued at the lower of cost or market value (net realizable value).

Full Cost Accounting for Oil and Gas Operations

Under the full cost method, all acquisition, exploration and development costs, including certain directly related employee costs and a portion of interest expense, incurred for the purpose of finding oil and gas are capitalized and accumulated in pools on a country-by-country basis. Capitalized costs include the cost of drilling and equipping productive wells, including the estimated costs of dismantling and abandoning these assets, dry hole costs, lease acquisition costs, seismic and other geological and geophysical costs, delay rentals and costs related to such activities. Employee costs associated with production and other operating activities and general corporate activities are expensed in the period incurred.

Capitalized costs are limited on a country-by-country basis (the ceiling test). The ceiling test limitation is calculated as the sum of the present value of future net cash flows related to estimated production of proved reserves, using the average, first-day-of-the-month price during the 12-month period before the end of the year for 2009 and the year-end price for 2008 and 2007, including the effect of derivative instruments that qualify as cash flow hedges, discounted at 10%, plus the lower of cost or estimated fair value of unproved properties, all net of expected income tax effects. Under the ceiling test, if the capitalized cost of the full cost pool, net of deferred taxes, exceeds the ceiling limitation, the excess is charged as an impairment expense.

We utilize a single cost center for each country where we have operations for amortization purposes. Any conveyances of properties are treated as adjustments to the cost of oil and gas properties with no gain or loss recognized unless the operations are suspended in the entire cost center or the conveyance is significant in nature.

Unproved property costs include the costs associated with unevaluated properties and properties under development and are not initially included in the full cost amortization base (where proved reserves exist) until the project is evaluated. These costs include unproved leasehold acreage, seismic data, wells and production facilities in progress and wells pending determination,

31

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

together with interest costs capitalized for these projects. Seismic data costs are associated with specific unevaluated properties where the seismic data is acquired for the purpose of evaluating acreage or trends covered by a leasehold interest owned by us. Significant unproved properties are assessed periodically for possible impairment or reduction in value. If a reduction in value has occurred, these property costs are considered impaired and are transferred to the related full cost pool. Geological and geophysical costs included in unproved properties are transferred to the full cost amortization base along with the associated leasehold costs on a specific project basis. Costs associated with wells in progress and wells pending determination are transferred to the amortization base once a determination is made whether or not proved reserves can be assigned to the property. Costs of dry holes are transferred to the amortization base immediately upon determination that the well is unsuccessful. Unproved properties whose acquisition costs are not individually significant are aggregated, the portion of such costs estimated to be ultimately nonproductive, based on experience, are amortized to the full cost pool over an average holding period.

In countries where the existence of proved reserves has not yet been determined, unevaluated property costs remain capitalized in unproved property cost centers until proved reserves have been established, exploration activities cease or impairment and reduction in value occurs. If exploration activities result in the establishment of a proved reserve base, amounts in the unproved property cost center are reclassified as proved properties and become subject to amortization and the application of the ceiling test. When it is determined that the value of unproved property costs have been permanently diminished (in part or in whole) based on the impairment evaluation and future exploration plans, the unproved property cost centers related to the area of interest are impaired, and accumulated costs charged against earnings.

Other Property and Equipment

Other oil and gas assets, computer equipment and furniture and fixtures are recorded at cost, less accumulated depreciation. The assets are depreciated using the straight-line method over their estimated useful lives of two to five years.

Capitalized Interest

We capitalize interest on expenditures for significant exploration and development projects while activities are in progress to bring the assets to their intended use. Capitalized interest is calculated by multiplying our weighted-average interest rate on debt by the amount of qualifying costs and is limited to gross interest expense. As costs are transferred to the full cost pool, the associated capitalized interest is also transferred to the full cost pool.

32

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

Marketable Securities

The marketable securities reflected in these financial statements are deemed by management to be “available-for-sale” and, accordingly, are reported at fair value, with unrealized gains and losses reported in other comprehensive income and reflected as a separate component within the Statement of Stockholders’ Equity unless we determine that an other-than-temporary impairment has occurred. Realized gains and losses on securities available-for-sale are included in other income/expense and, when applicable, are reported as a reclassification adjustment, net of tax, in other comprehensive income. Gains and losses on the sale of available-for-sale securities are determined using the specific-identification method.

Business Combinations

Assets and liabilities acquired through a business combination are recorded at estimated fair value. We use all available information to make these fair value determinations, including information commonly considered by our engineers in valuing individual oil and gas properties and sales prices for similar assets. Estimated deferred taxes are based on available information concerning the tax basis of the acquired company’s assets and liabilities and carryforwards at the merger date.

Any excess of the acquisition cost of the acquired business over the fair value amounts assigned to assets and liabilities is recorded as goodwill. Any excess of the amounts assigned to assets and liabilities over the acquisition of the acquired business is recorded as a gain on acquisition on the income statement. The amount of goodwill recorded in any particular business combination can vary significantly depending upon the fair values attributed to assets acquired and liabilities assumed relative to the total acquisition cost.

Goodwill and Intangible Assets

We assess the carrying amount of goodwill and other indefinite-lived intangible assets by testing the asset for impairment annually at year-end, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test requires allocating goodwill and all other assets and liabilities to reporting units. The fair value of each reporting unit is determined and compared to the book value of the reporting unit. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value.

Dismantlement, Restoration and Environmental Costs

We recognize liabilities for asset retirement obligations associated with tangible long-lived assets, such as producing well sites, offshore production platforms, and natural gas processing plants, with a corresponding increase in the related long-lived asset. The asset retirement cost is depreciated along with the property and equipment in the full cost pool. The asset retirement

33

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

obligation is recorded at fair value and accretion expense, recognized over the life of the property, increases the liability to its expected settlement value. If the fair value of the estimated asset retirement obligation changes, an adjustment is recorded for both the asset retirement obligation and the asset retirement cost.

Revenue Recognition

We use the entitlements method to account for sales of gas production. We may receive more or less than our entitled share of production. Under the entitlements method, if we receive more than our entitled share of production, the imbalance is treated as a liability at the market price at the time the imbalance occurred. If we receive less than our entitled share, the imbalance is recorded as an asset at the lower of the current market price or the market price at the time the imbalance occurred. Oil revenues are recognized when production is sold to a purchaser at a fixed or determinable price, when delivery has occurred, title has transferred and collectability of the revenue is probable.

Significant Customers

Our sales in the U.K. are to a limited number of customers, each of which accounts for more than 10% of revenue: Chevron North Sea Ltd; Shell U.K. Limited, and Esso Exploration and Production. Our sales in the U.S. are sold through our arrangements with the operators of the fields, with substantially all of the sales being to Cohort Energy.

Derivative Instruments and Hedging Activities

From time to time, we may utilize derivative financial instruments to hedge cash flows from operations or to hedge the fair value of financial instruments. We may use 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 embedded derivatives related to our debt instruments and convertible preferred stock.

We record all derivatives at fair market value in our Consolidated Balance Sheets at the end of each period. The accounting for the fair market value, and the changes from period to period, depends on the intended use of the derivative and the resulting designation. This evaluation is determined at each derivative’s inception and begins with the decision to account for the derivative as a hedge, if applicable. The accounting for changes in the fair value of a derivative instrument that is not accounted for as a hedge is included in other (income) expense as an

34

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

unrealized gain or loss. At December 31, 2009, we have no outstanding derivatives that are accounted for as a hedge.

Where we intend to account for a derivative as a hedge, we document, at its inception, the hedging relationship, the risk management objective and the strategy for undertaking the hedge. The documentation includes the identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged, and the method that will be used to assess effectiveness of derivative instruments that receive hedge accounting treatment.

Changes in fair value to hedge instruments, to the extent the hedge is effective, are recognized in other comprehensive income until the forecasted transaction occurs. Hedge effectiveness is assessed at least quarterly based on total changes in the derivative’s fair value. Any ineffective portion of the derivative instrument’s change in fair value is recognized immediately in other (income) expense.

We discontinue hedge accounting prospectively when (1) we determine that the derivative is no longer effective in offsetting changes in the fair value or cash flows of a hedged item (including hedged items such as firm commitments or forecasted transactions); (2) the derivative expires; (3) it is no longer probable that the forecasted transaction will occur; (4) a hedged firm commitment no longer meets the definition of a firm commitment; or (5) management determines that designating the derivative as a hedging instrument is no longer appropriate.

Concentrations of Credit and Market Risk

Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash deposits at financial institutions. At various times during the year, we may exceed the federally insured limits. To mitigate this risk, we place our cash deposits only with high credit quality institutions. Management believes the risk of loss is minimal.

Derivative financial instruments that hedge the price of oil and gas, interest rates or currency exposure will be generally executed with major financial or commodities trading institutions which expose us to market and credit risks, and may at times be concentrated with certain counterparties or groups of counterparties. Although notional amounts are used to express the volume of these contracts, the amounts potentially subject to credit risk, in the event of non-performance by the counterparties, are substantially smaller. We review the credit ratings of our counterparties to derivative contracts (who are all lenders under our senior bank facility) on a regular basis and to date we have not experienced any non-performance by any of our counterparties, currently BNP Paribas S.A. At December 31, 2009 our derivative instruments do not require either side to maintain collateral or margin accounts.

As an independent oil and gas producer, our revenue, profitability and future rate of growth are substantially dependent upon prevailing prices for oil and gas, which are dependent upon

35

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

numerous factors beyond our control, such as economic, political and regulatory developments and competition from other sources of energy. The energy markets have historically been very volatile, and there can be no assurance that oil and gas prices will not be subject to wide fluctuations in the future. A substantial or extended decline in oil and gas prices could have a material adverse effect on our financial position, results of operations, cash flows and our access to capital and on the quantities of oil and gas reserves that may be economically produced.

Foreign Currency Translation

The U.S. dollar is the functional currency for all of our existing operations, as a majority of all revenue and financing transactions in these operations are denominated in U.S. dollars. For foreign operations with the U.S. dollar as the functional currency, monetary assets and liabilities are remeasured into U.S. dollars at the exchange rate on the balance sheet date. Nonmonetary assets and liabilities are translated into U.S. dollars at historical exchange rates. Income and expense items are translated at exchange rates prevailing during each period. Adjustments are recognized currently as a component of foreign currency gain or loss and deferred income taxes. To the extent that business transactions are not denominated in U.S. dollars, we are exposed to foreign currency exchange rate risk.

Income Taxes

We use the liability method of accounting for income taxes under which deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities, and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as part of the provision for income taxes in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of, or all of, the deferred tax assets will not be realized.

Share-Based Payments

We recognize all share-based payments to employees, including grants of employee stock options, based on their fair values. The share-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as general and administrative expense over the employee’s requisite service period (generally the vesting period of the equity award). We apply the fair value method in accounting for stock option grants using the Black-Scholes Method.

36

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

It is our policy to use authorized but unissued shares of stock when stock options are exercised. At December 31, 2009, we had approximately 7.0 million additional shares available for issuance pursuant to our existing stock incentive plan.

Adoption of New Accounting Standards

On January 1, 2008, we adopted the following new standards without material effects on our results of operations or financial position:

• Fair value option— Guidance allowing entities to choose to measure many financial instruments and certain other items at fair value. This standard expanded the use of fair value measurement and applied to entities that elect the fair value option.

• Fair value measurement and disclosure— Framework for measuring fair value and expanded disclosures about such 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.

On January 1, 2009, we adopted the following new standards without material effects on our results of operations or financial position:

• Business combinations— Guidance related to the measurement of identifiable assets acquired, liabilities assumed and disclosure of information related to business combinations and their effect.

• Noncontrolling interests— Guidance for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Specifically, this standard requires the recognition of a noncontrolling interest (minority interest) as a component of consolidated equity. Similarly, the new standard requires consolidated net income and comprehensive income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interests.

• Expanded disclosures of derivatives— Expanded and detailed financial statement disclosures for derivatives and hedged financial instruments. This standard applies to all derivatives and non-derivative instruments designated and qualifying as hedges, including bifurcated derivative instruments and related hedged items.

• Convertible debt— Guidance for convertible debt that may be settled in part or in whole in cash upon conversion requiring issuers of this form of debt to account for its debt and equity components separately. The new guidance also expands the definition of mandatorily redeemable convertible preferred shares that should be classified as liabilities.

• Share-based payments— Guidance for instruments that are granted in share-based payment transactions to treat unvested share-based payment awards with non-forfeitable rights to dividend or dividend equivalents as a separate class of securities in calculating earnings per share (“EPS”). The impact of the adoption of this standard on our weighted

37

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

average shares outstanding and EPS was not material, therefore, we have not restated prior periods.

• Fair value— Framework for measuring fair value and expanded disclosures about fair value measurements. New fair value measurements are not required; rather, the provisions apply when fair value measurements are performed under other accounting pronouncements.

On June 30, 2009, we adopted the following new standard that did not have a material effect on our results of operations or financial position:

• Subsequent Events— Standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued.

On December 31, 2009, we adopted the following new standard that did not have a material effect on our results of operations or financial position:

• Oil and gas modernization— Revised oil and gas reserve estimation and disclosure requirements. The accounting standards update revised the definition of proved oil and gas reserves to require that the average, first-day-of-the-month price during the 12-month period before the end of the year rather than the year-end price, must be used when estimating whether reserve quantities are economical to produce and when calculating the aggregate amount of (and changes in) future cash inflows related to the standardized measure of discounted future net cash flows.

Note 3 — Discontinued Operations

On May 14, 2009, we completed the divestiture of our Norwegian subsidiary, Endeavour Energy Norge AS, to Verbundnetz Gas AG for cash consideration of $150 million (the “Norway Sale”). We recognized a gain upon closing the Norway Sale of $47.0 million, after the allocation of $68 million of goodwill to the assets sold.

As a result of the 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:

38

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

	December 31, 2009		December 31, 2008
Current Assets:
Cash	$	—	$	6,735
Accounts receivable		—		4,559
Prepaid expenses and other		—		5,432
		—		16,726
Long-term Assets:
Property, plant and equipment, net		—		80,611
Goodwill		—		67,994
		—		148,605
Current Liabilities:
Accounts payable		—		(3,717	)
Accrued expenses and other		—		(18,514	)
		—		(22,231	)
Long-term Liabilities:
Deferred tax liability		—		(36,828	)
Asset retirement obligation		—		(9,223	)
				(46,051	)
Net Assets and Liabilities	$	—	$	97,049

39

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

	Year Ended December 31,
	2009			2008			2007
Sales	$	17,550		$	89,660		$	40,188
Income before Taxes	$	4,654		$	63,244		$	14,096
Income Tax Expense		(5,428	)		(32,613	)		(13,028	)
Income (Loss) from Operations		(774	)		30,631			1,068
Gain on sale		47,308			—			—
Net Income from Discontinued Operations	$	46,534		$	30,631		$	1,068

Note 4—Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

	December 31,
	2009		2008
Fair market value of commodity derivatives — current	$	2,890	$	31,649
Prepaid insurance		1,506		1,322
Inventory		4,450		5,109
Other		1,272		4,114
	$	10,118	$	42,194

40

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

Note 5—Property and Equipment

Property and equipment included the following:

	December 31,
	2009			2008
Oil and gas properties under the full cost method:
Subject to amortization	$	275,278		$	239,024
Not subject to amortization:
Acquired in 2009		51,797			—
Acquired in 2008		32,970			37,288
Acquired in 2007		10,235			14,746
Acquired prior to 2007		59,551			82,522
		429,831			373,580
Other oil and gas assets		—			4,875
Computers, furniture and fixtures		3,560			3,236
Total property and equipment		433,391			381,691
Accumulated depreciation, depletion and amortization		(166,804	)		(149,345	)
Net property and equipment	$	266,587		$	232,346

The majority of costs not subject to amortization relate to values assigned to unproved reserves acquired. The remainder of costs not subject to amortization relate to exploration costs such as drilling costs for projects awaiting approved development plans or the determination of whether or not proved reserves can be assigned and other seismic and geological and geophysical costs. These costs are transferred to the amortization base when it is determined whether or not proved reserves can be assigned to such properties. This analysis is dependent upon well performance, results of infield drilling, approval of development plans, drilling results and development of identified projects and periodic assessment of reserves. We expect acquisition costs excluded from amortization to be transferred to the amortization base over the next five years due to a combination of well performance and results of infield drilling relating to currently producing assets and the drilling and development of identified projects acquired, such as the Rochelle field. We expect exploration costs not subject to amortization to be transferred to the amortization base over the next three years as development plans are completed and production commences on existing discoveries including the Bacchus, Columbus, Cygnus and Rochelle projects.

The following is a summary of our oil and gas properties not subject to amortization as of December 31, 2009:

41

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

Costs Incurred in the Year Ended December 31,
	2009		2008		2007		Prior to 2007		Total
Acquisition costs	$	10,662	$	807	$	—	$	30,292	$	41,761
Exploration costs		38,158		28,528		9,260		29,261		105,207
Capitalized interest		2,977		3,635		975		—		7,587
Total oil and gas properties not subject to amortization	$	51,797	$	32,970	$	10,235	$	59,553	$	154,555

During 2009, 2008 and 2007, we capitalized $7.8 million, $8.0 million and $7.2 million, respectively, in certain directly related employee costs. During 2009, 2008 and 2007, we capitalized $3.1 million, $4.0 million and $6.4 million, respectively, in interest.

Note 6 — Goodwill

In connection with the several acquisitions, we recorded goodwill for the excess of the purchase price over the value assigned to individual assets acquired and liabilities assumed. With the 2009 settlement of a liability for a metering mis-measurement liability at a purchased field, the goodwill was reduced by $2.1 million. The following is a reconciliation of the changes in goodwill for the year ended December 31, 2009 and 2008:

	December 31,
	2009			2008
Balance at beginning of year	$	281,943		$	283,324
Allocation of goodwill to discontinued operations sold		(67,994	)		—
Adjustments		(2,063	)		(1,381	)
Balance at end of year	$	211,886		$	281,943

42

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

Note 7 — Other Assets

Other long-term assets consisted of the following at December 31:

	2009			2008
Intangible assets — workforce in place:
Gross	$	4,800		$	4,800
Accumulated amortization		(3,919	)		(3,363	)
		881			1,437
Debt issuance costs		3,875			5,714
Fair market value of long-term portion of commodity derivatives		318			1,702
Other		248			312
	$	5,322		$	9,165

Intangible assets represent the purchase price allocated to the assembled workforce as a result of an acquisition and is being amortized over its estimated life using the straight-line method. Estimated amortization expense is $0.6 million and $0.3 million in 2010 and 2011, respectively.

Debt issuance costs are amortized over the life of the related debt obligation.

Note 8—Accrued Expenses

We had the following accrued expenses outstanding:

	December 31,
	2009		2008
Derivative liability	$	6,817	$	1,193
Foreign taxes payable		1,926		6,655
Deferred foreign taxes payable		—		15,825
Accrued interest		2,432		30
Preferred dividends		1,143		1,011
Accrued compensation		4,311		2,135
Crude oil imbalance		—		8,954
Other		1,169		839
	$	17,798	$	36,642

43

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

Note 9 — Debt Obligations

Our debt consisted of the following at the indicated dates:

	December 31,			December 31,
	2009			2008
Senior notes, 6% fixed rate, due 2012	$	81,250		$	81,250
Senior bank facility, variable rate, due 2011		49,942			113,000
Convertible bonds, 11.5%, due 2014		49,838			44,496
Subordinated notes, 12.5%, due 2014		50,122			—
		231,152			238,746
Less: debt discount		(7,767	)		(10,891	)
Less: current maturities		—			(13,000	)
Long-term debt	$	223,385		$	214,855
Standby letters of credit outstanding for abandonment liabilities	$	33,388		$	30,115

Principal maturities of debt at December 31, 2009 are as follows:

2010	$	—
2011		69,942
2012		91,250
2013		10,000
2014		59,960
Thereafter		—

The fair value of our debt obligations was $219 million and $191 million at December 31, 2009 and 2008, respectively. The fair values of long-term debt were determined based upon quotes obtained from banks for our senior notes, discounted cash flows for our 11.5% convertible debt and book value for other debt. Book value approximates fair value for our senior bank facility as this instrument bears interest at a market rate.

6% Senior notes, due 2012

During 2005, we issued in a private offering $81.25 million aggregate principal amount of convertible senior notes due 2012. The notes bear interest at a rate of 6.00% per annum, payable in January and July. The notes are convertible into shares of our common stock at an initial conversion rate of 199.2032 shares of common stock per $1,000 principal amount of notes,

44

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

subject to adjustment, which represents an initial conversion price of approximately $5.02 per share. In connection with the issuance of these notes, we paid $3.6 million in financing and other costs. Upon specified change of control events, each holder of those notes may require us to purchase all or a portion of the holder’s notes at a price equal to 100% of the principal amount, plus accrued and unpaid interest, if any, up to but excluding the date of purchase.

Senior bank facility

We have a $225 million senior bank facility, which is subject to a borrowing base limitation. The borrowing base is subject to redetermination every six months with an independent reserve report required every 12 months. At December 31, 2009, the borrowing base capacity was $50 million, which was fully drawn at year-end. The senior bank facility also provides for issuances of letters of credit of up to an aggregate $60 million. As of December 31, 2009, we have $33.4 million of outstanding letters of credit related to abandonment liabilities on certain of our oil and gas properties.

Indebtedness under the facility is secured by cross guarantees from all of our subsidiaries, share pledges from all of our subsidiaries and floating charges over the operating assets held in the United Kingdom. Our borrowings under the senior bank facility bear interest at LIBOR plus 1.3% for the first $46.1 million of availability (the first tranche), and LIBOR plus 1.7% for up to an additional $3.9 million of availability (the second tranche).

We were in compliance with all financial and restrictive covenants of our debt obligations as of December 31, 2009 and 2008.

The senior bank facility contains customary covenants, which, among other things, limit our ability to incur indebtedness, pledge our assets and dispose of our assets. In addition, the senior bank facility contains various financial and technical covenants, based on our financial results as of June 30^th and December 31^st each year, including:

• a maximum consolidated net debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratio of 3.0:1; and

• a minimum current assets to current liabilities ratio of 1.1:1.

In addition, while not a financial covenant, the senior bank facility utilizes the following ratios, among other things, to compare asset values, as determined by the lenders, to the maximum borrowing base capacity;

• a minimum debt coverage ratio of 1.2:1 for the initial tranche and 1.15:1 for the second tranche;

• a minimum field life net present value (“NPV”) to loans outstanding coverage ratio of 1.5:1 for the initial tranche, and 1.3:1 for the second tranche; and

• a minimum loan life NPV to loans outstanding coverage ratio of 1.3:1 for the initial tranche, and 1.2:1 for the second tranche.

The final maturity is the earlier of January 31, 2011 or the reserve tail date, being the date when the remaining borrowing base reserves are projected to be 20% or less of the initially approved borrowing base reserves. The senior bank facility is subject to mandatory prepayment in the event of a change of control of any obligor under the senior bank facility agreement. It is prepayable at our option at any time without penalty.

45

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

The borrowing base is subject to redetermination every six months (on April 1 and October 1), and we are required to provide our lenders with an independent reserve report every 12 months. Based on our reserve report at December 31 and June 30 each year, commodity prices set by our lenders and terms set forth in the credit agreement, the maximum capacity of our borrowing base is set, and any amounts outstanding over the redetermined borrowing base must be repaid within 45 days of the redetermination date. The senior bank facility is also subject to maximum commitment levels by the participating lenders that change over time. We are currently undergoing the redetermination process based on our reserve report as of December 31, 2009, which will be effective as of April 1, 2010. We cannot estimate the level of the borrowing base capacity that will be in effect as of April 1, 2010.

Convertible Bonds

In January 2008, we issued 11.5% Convertible Bonds due 2014 (the “Convertible Bonds”) for gross proceeds of $40 million pursuant to a private offering to a sophisticated investor in Norway. The net proceeds from the issuance of the Convertible Bonds were used to repay a portion of our outstanding indebtedness. The Convertible Bonds bear interest at a rate of 11.5% per annum, compounded quarterly. Interest is compounded quarterly and added to the outstanding principal balance each quarter. The bonds are convertible into shares of our common stock at an initial conversion price of $2.36 per $1,000 of principal, which represents a conversion rate of approximately 424 shares of our common stock per $1,000 of principal. The conversion price will be adjusted in accordance with the terms of the bonds upon occurrence of certain events, including payment of common stock dividends, common stock splits or issuance of common stock at a price below the then current market price.

Upon the fourth anniversary of the issuance of the Convertible Bonds, the holders have the right to cause us to redeem the Convertible Bonds if the weighted average closing price of our common stock for the preceding 30 days is less than the conversion price, as adjusted. If the holders do not exercise this right, the right will lapse and the conversion price will be reset to the then current market price of our common stock if such price is lower than the conversion price, as adjusted.

If we undergo a “change of control” as defined, the holders of the bonds have the right, subject to certain conditions, to redeem the bonds and accrued interest. The bonds may become immediately due upon the occurrence of certain events of default, as defined.

Two derivatives are associated with the conversion and change in control features of the Convertible Bonds. At December 31, 2009, the combined fair market value of these derivatives is $26.9 million, reflecting a $12.3 million increase during 2009 that was recorded in unrealized gains (losses) on derivatives.

46

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

Subordinated Notes

On November 17, 2009, we entered into Stock Redemption Agreements with each of the holders of our outstanding shares of Series C convertible preferred stock (“Series C Preferred Stock”) whereby we redeemed 60% of the outstanding shares of Series C Preferred Stock, for face value of $75 million, and amended the terms of the remaining shares of Series C Preferred Stock. The redemption price consisted of a $25 million cash payment and the issuance of $50 million Subordinated Notes.

The Subordinated Notes bear interest at an annual rate of 10%, plus 2% capitalized to the outstanding principal amount. We will pay interest, in cash, on the unpaid principal amount of the Subordinated Notes quarterly on March 31, June 30, September 30 and December 31 of each year commencing on December 31, 2009. The Subordinated Notes are payable over four years commencing in March 2011, but may be prepaid at any time at face value. The Subordinated Notes are unsecured and subordinated to our outstanding obligations under our senior bank facility and rank on parity with our other existing debt obligations.

Note 10—Other Liabilities

Other liabilities included the following:

	December 31,
	2009		2008
Asset retirement obligations	$	47,362	$	38,776
Long-term derivative liabilities		38,050		17,015
Total Other Liabilities	$	85,412	$	55,791

Our asset retirement obligations relate to obligation of the plugging and abandonment of oil and gas properties. The asset retirement obligation is recorded at fair value and accretion expense, recognized over the life of the property, increases the liability to its expected settlement value. If the fair value of the estimated asset retirement obligation changes, an adjustment is recorded for both the asset retirement obligation and the asset retirement cost. The following table provides a rollforward of the asset retirement obligations for the year ended December 31, 2009 and 2008:

47

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

	Year Ended
	December 31,
	2009			2008
Carrying amount of asset retirement obligations as of beginning of period	$	38,776		$	30,790
Increase (decrease) due to revised estimates of asset retirement obligations		7,762			13,840
Accretion expense		4,117			2,795
Impact of foreign currency exchange rate changes		4,280			(8,649	)
Payment of asset retirement obligation		(7,325	)		—
Sale of assets		(248	)		—
Carrying amount of asset retirement obligations as of end of period	$	47,362		$	38,776

Note 11—Equity

The activity in shares of our common and preferred stock during 2009, 2008 and 2007 included the following:

48

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

	Year Ended December 31,
	2009			2008			2007
Common Stock:
Outstanding at the beginning of the year		128,572			127,006			118,577
Issuance of common stock to pay preferred dividends		—			—			6,403
Exercise of stock options		164			—			—
Issuance of stock based compensation		2,882			1,566			2,026
Outstanding at the end of the year		131,618			128,572			127,006
Series B Preferred Stock:
Outstanding at the end of the year		20			20			20
Convertible Preferred Stock:
Outstanding at the beginning of the year		125			125			—
Redemptions		(75	)
Issuance of preferred stock		—			—			125
Outstanding at the end of the year		50			125			125
Treasury Stock:
Outstanding at the beginning of the year		(327	)		—			—
Purchase of treasury shares for stock vesting		(171	)		(327	)		—
Outstanding at the end of the year		(498	)		(327	)		—

Common Stock

The Common Stock is $0.001 par value common stock, 300,000,000 shares authorized.

In 2008, we issued inducement grants of 300,000 shares of our restricted common stock, and options to purchase 250,000 shares of our common stock at an exercise price of $0.75 per share upon commencement of employment of one executive officer. In 2007, we issued inducement grants of 800,000 shares of our restricted common stock, options to purchase 400,000 shares of our common stock at an exercise price of $2.00 per share and options to purchase 200,000 shares of our common stock at an exercise price of $1.14 per share upon commencement of employment of two executive officers.

49

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

Convertible Preferred Stock

The Series C Preferred Stock ranks senior to any of our other existing or future shares of capital stock. Dividends are cumulative and payable in cash, or common stock if we are unable to pay such dividends in cash, and any dividends will be paid to the preferred stock investors prior to payment of any other dividend on any other shares of our capital stock. The Series C Preferred Stock also participates on an as-converted basis with respect to any dividends paid on the common stock.

We initially agreed to pay a cumulative dividend on the Series C Preferred Stock equal to 8.5% per annum of the original issue price (compounded quarterly) if paid in cash and 8.92% per annum of the original issue price (compounded quarterly) if paid in stock. On November 17, 2009, we redeemed 60% of the outstanding shares of Series C Preferred Stock, for face value of $75 million, and amended the terms of the remaining shares of Series C Preferred Stock. The redemption price consisted of a $25 million cash payment and the issuance of $50 million Subordinated Notes.

The redemption and modification of the Series C Preferred Stock required the modified Series C Preferred Stock to be recorded at fair market value at the redemption date. The fair value of the modified Series C Preferred Stock was greater than the carrying value by $11.5 million. This excess of fair value over carrying value was recorded as a non-cash charge to preferred stock dividends and increased the carrying value of the Series C Preferred Stock. As holders convert the Series C Preferred Stock, the $11.5 million non-cash charge will be transferred to equity on a ratio of shares converted to shares of Series C Preferred Stock outstanding.

In addition, the modification of the Series C Preferred Stock, we also recorded an embedded derivative are associated with the change in control features of the Series C Preferred Stock of $2.4 million. This embedded derivative was recorded in other liabilities and reduced the premium on the Series C Preferred Stock at the date of issuance. At December 31, 2009, the fair market value of this derivative was $1.9 million, reflecting a $0.5 million gain during 2009 that was recorded in unrealized gains (losses) on derivatives.

Prior to the November 2009 amendment, the Series C Preferred Stock was convertible into common stock at any time at the option of the preferred stock investors, at (i) a conversion price of $2.50 (the “Conversion Price”) and (ii) in an amount of common stock equal to the quotient of the liquidation preference of $1,000 per share plus accrued but unpaid dividends (the “Liquidation Preference”) divided by the Conversion Price.

In the November 2009 amendment, we amended terms of the Series C Preferred Stock to reduce the annual dividend rate to 4.5% (from 8.5%), adjust the conversion price to $1.25 per share (from $2.50) and remove certain anti-dilution provisions.

50

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

Issuance of dividends in the form of common stock are subject to the following equity conditions (the “Equity Conditions”), which are waivable by two-thirds of the holders of the Series C Preferred Stock: (i) such common stock is listed on the NYSE AMEX, the New York Stock Exchange or the Nasdaq Stock Market, and not subject to any trading suspension; (ii) we are not then subject to any bankruptcy event; and (iii) such common stock will be immediately re-saleable by the holders pursuant to an effective registration statement and otherwise in compliance with all applicable laws. If we have not maintained the effectiveness of the registration statement pursuant to the registration rights section below, then the dividend rate on the Series C Preferred Stock will be increased by the product of 2.5% (if the dividend is paid in cash) or 2.63% (if the dividend is paid in stock) times the number of quarters (or portions thereof) in which the failure occurs or we fail to cure such failure.

After the fourth anniversary of the initial issuance of the Series C Preferred Stock, we may redeem all of the Series C Preferred Stock in exchange for a cash payment to the preferred stock investors of an amount equal to 102% of the sum of the Liquidation Preference. If we call the Series C Preferred Stock for redemption, the holders thereof will have the right to convert their shares into a newly issued preferred stock identical in all respects to the Convertible Preferred Stock except that such newly issued preferred stock will not bear a dividend (the “Alternate Preferred Stock”). We may not redeem the Convertible Preferred Stock if the Equity Conditions are not then satisfied with respect to the common stock into which the Alternate Preferred Stock is convertible.

Upon the tenth anniversary of the initial issuance of the Convertible Preferred Stock, we must redeem all of the Convertible Preferred Stock for an amount equal to the Liquidation Preference plus accrued and unpaid dividends payable by us in cash or common stock at our election. Issuance by us of common stock for such redemption is subject to the Equity Conditions and to the market value of the outstanding shares of common stock immediately prior to such redemption equaling at least $500 million.

In the event of a change of control of Endeavour, we will be required to offer to redeem all of the Convertible Preferred Stock for the greater of: (i) the amount equal to which such holder would be entitled to receive had the holder converted such Convertible Preferred Stock into common stock; (ii) 115% of the sum of the Liquidation Preference plus accrued and unpaid dividends; and (iii) the amount resulting in an internal rate of return to such holder of 15% from the date of issuance of such Convertible Preferred Stock through the date that Endeavour pays the redemption price for such shares.

Series B Preferred Stock

In September 2002, we authorized and designated 500,000 shares of Preferred Stock, as Series B Preferred Stock par value $.001 per share.

51

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

The Series B Preferred Stock is to pay dividends of 8% of the original issuing price per share per annum, which are cumulative prior to any dividends on the common stock and on parity with the payment of any dividend or other distribution on any other series of preferred stock that has similar characteristics. The holders of each share of Series B Preferred Stock are entitled to be paid out of available funds prior to any distributions to holders of common stock in the amount of $100.00 per outstanding share plus all accrued dividends. We may, upon approval of our Board, redeem all or a portion of the outstanding shares of Series B preferred stock at a cost of the liquidation preference and all accrued and unpaid dividends.

Note 12—Income Taxes

The loss before income taxes and the components of the income tax expense recognized on the Consolidated Statement of Income are as follows:

52

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

										Total			Discontinued
										Continuing			Operations -
(Amounts in thousands)	U.K.			U.S.			Other			Operations			Norway			Total
Year Ended December 31, 2009:
Net income (loss) before taxes	$	(52,041	)	$	(31,167	)	$	(11,479	)	$	(94,687	)	$	51,963		$	(42,724	)
Current tax (benefit) expense		(5,739	)		40			(26	)		(5,725	)		(603	)		(6,328	)
Deferred tax (benefit) expense		(20,260	)		(20	)		(35	)		(20,315	)		4,791			(15,524	)
Foreign currency losses on deferred tax liabilities		18,882			—			—			18,882			1,241			20,123
Total tax (benefit) expense		(7,117	)		20			(61	)		(7,158	)		5,429			(1,729	)
Net income (loss) after taxes	$	(44,924	)	$	(31,187	)	$	(11,418	)	$	(87,529	)	$	46,534		$	(40,995	)
Year Ended December 31, 2008:
Net income (loss) before taxes	$	66,129		$	(11,969	)	$	(4,185	)	$	49,975		$	63,244		$	113,219
Current tax expense		11,158			—			10			11,168			27,879			39,047
Deferred tax expense		22,673			—			303			22,976			15,415			38,391
Foreign currency gains on deferred tax liabilities		(10,028	)		—			—			(10,028	)		(10,681	)		(20,709	)
Total tax expense		23,803			—			313			24,116			32,613			56,729
Net income (loss) after taxes	$	42,326		$	(11,969	)	$	(4,498	)	$	25,859		$	30,631		$	56,490
Year Ended December 31, 2007:
Net income (loss) before taxes	$	(68,704	)	$	(10,233	)	$	6,584		$	(72,353	)	$	14,095		$	(58,258	)
Current tax (benefit) expense		2,898			(3	)		289			3,184			562			3,746
Deferred tax (benefit) expense		(27,430	)		—			711			(26,719	)		8,951			(17,768	)
Foreign currency losses on deferred tax liabilities		1,327			—			—			1,327			3,514			4,841
Total tax (benefit) expense		(23,205	)		(3	)		1,000			(22,208	)		13,027			(9,181	)
Net income (loss) after taxes	$	(45,499	)	$	(10,230	)	$	5,584		$	(50,145	)	$	1,068		$	(49,077	)

The following table presents the principal reasons for the difference between our effective tax rates and the United States federal statutory income tax rate of 35%.

53

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

	Year Ended December 31,
	2009			2008			2007
Federal income tax expense (benefit) at statutory rate	$	(33,141	)	$	17,491		$	(25,323	)
Taxation of foreign operations		1,572			12,464			(1,790	)
Change in valuation allowance — US		10,464			4,150			3,515
Foreign tax benefit from foreign currency tax law change		(5,400	)		—			—
Foreign currency (gain)/loss on deferred taxes		18,882			(10,028	)		1,327
Other		465			39			63
Income Tax Expense, continuing operations		(7,158	)		24,116			(22,208	)
Discontinued operations — Norway		5,429			32,613			13,207
Total Income Tax Expense	$	(1,729	)	$	56,729		$	(9,001	)
Effective Income Tax Rate		8	%		45	%		(32	)%

During 2009, 2008 and 2007, we incurred taxes in all of the jurisdictions that we do business in except for the U.S. In 2009, 2008 and 2007, we had a loss before taxes of $31.2 million, $8.3 million and $6.9 million, respectively, in the U.S. and we did not record any income tax benefits as there was no assurance that we could generate any U.S. taxable earnings, and therefore recorded a valuation allowance of the full amount of deferred tax asset generated.

Deferred income taxes result from the net tax effects of temporary timing differences between the carrying amounts of assets and liabilities reflected on the financial statements and the amounts recognized for income tax purposes. The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities are as follows at December 31:

54

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

	2009			2008
Deferred tax asset:
Deferred compensation	$	6,236		$	5,771
Unrealized loss on derivative instruments		16,560			4,506
Asset retirement obligation		7,026			5,244
Net operating loss and capital loss carryforward		34,635			21,633
Other		621			621
Total deferred tax assets		65,078			37,775
Less valuation allowance		(38,771	)		(23,701	)
Total deferred tax assets after valuation allowance		26,307			14,074
Deferred tax liability:
Property, plant and equipment		(97,111	)		(67,810	)
Unrealized gain on derivative instruments		—			(23,628	)
Petroleum revenue tax, net of tax benefit		(1,264	)		(1,642	)
Debt discount		(2,330	)		(3,267	)
Other		(6,294	)		(850	)
Total deferred tax liabilities		(106,999	)		(97,197	)
Net deferred tax liability	$	(80,692	)	$	(83,123	)

At December 31, 2009, we had the following carryforwards available to reduce future income taxes:

	Years of		Carryforward
Types of Carryforward	Expiration		Amounts
U.S. — Net operating loss		2022 – 2029	$	77,630
U.K. — Corporate tax net operating loss	Indefinite			24,570

With the exception of $77.6 million of net operating loss carryforward attributable to our U.S. operations for which a valuation allowance has been established, the remaining carryforward amounts shown above have been recognized for financial statement reporting purposes to reduce deferred tax liability.

Recognition of the benefits of the deferred tax assets will require that we generate future taxable income. There can be no assurance that we will generate any earnings or any specific level of earnings in future years. Therefore, we have established a valuation allowance for deferred tax assets of approximately $38.8 million, $23.7 million and $19.7 million as of December 31, 2009, 2008 and 2007, respectively. During 2009, the valuation allowance in the U.S. increased $10.5 million due to net operating losses and increased $4.6 million in other jurisdictions. During 2008, the valuation allowance in the U.S. increased $2.9 million due to net operating losses and

55

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

increased $1.1 million for net operating losses in other jurisdictions. During 2007, the valuation allowance in the U.S. increased $2.4 million due to net operating losses and adjustments.

For U.S. federal income tax purposes, certain limitations are imposed on an entity’s ability to utilize its NOLs in future periods if a change of control, as defined for federal income tax purposes, has taken place. In general terms, the limitation on utilization of NOLs and other tax attributes during any one year is determined by the value of an acquired entity at the date of the change of control multiplied by the then-existing long-term, tax-exempt interest rate. The manner of determining an acquired entity’s value has not yet been addressed by the Internal Revenue Service. We have determined that, for federal income tax purposes, a change of control occurred during 2004 and 2007, however, we do not believe such limitations will significantly impact our ability to utilize the NOL. The timing of NOL utilization will be determined by our future net income.

At December 2007, we provided for a liability of $1.7 million for unrecognized tax benefits relating to various U.K. matters. The statute of limitations for assessing tax for these benefits expired during 2008, thus allowing the full recognition of these benefits. The benefit was recorded as a reduction to goodwill. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	Year Ended December 31,
	2009		2008			2007
Balance at the beginning of the year	$	—	$	1,727		$	—
Increase (decrease) in unrecognized tax benefits from current period tax position		—		(1,727	)		1,727
Balance at the end of the year	$	—	$	—		$	1,727

As of December 31, 2009, we believe that no current tax positions that have resulted in unrecognized tax benefits will significantly increase or decrease within the next year.

As of December 31, 2009, we had unremitted earnings in our foreign subsidiaries. If these unremitted earnings had been dividend to the U.S., the U.S. NOL’s not subject to the limitations mentioned above would be fully available to offset any incremental U.S. federal income tax. Further, the foreign tax credits associated with the unremitted earnings would be sufficient to offset any incremental U.S. tax liabilities associated with the dividend.

Note 13 — Stock-Based Compensation Arrangements

We grant restricted stock and stock options to employees and directors as incentive compensation. The restricted stock and options generally vest over three years. 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.

Non-cash stock-based compensation is recorded in general and administrative (“G&A”) expenses or capitalized G&A as follows:

56

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

	Fourth Quarter				Year Ended
	December 31,				December 31,
	2009		2008		2009		2008
G & A Expenses	$	705	$	723	$	2,786	$	2,641
Capitalized G & A		227		299		573		901
Total non-cash stock-based compensation	$	932	$	1,022	$	3,359	$	3,542

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 to ten year expiration. The vesting of these shares and options is dependent upon the continued service of the grantees to Endeavour. Upon the occurrence of a change in control, each share of restricted stock and stock option outstanding on the date on which the change in control occurs will immediately become vested.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. For 2007, expected volatility is based on an average of our peer companies where there is a lack of relevant Endeavour volatility information for the length of the expected term and the expected term is the average of the vesting date and the expiration of the option. After 2007, expected volatility is based on historical Endeavour volatility for the length of the expected term, which was determined by historical data. We use historical data to estimate option exercises and employee terminations within the valuation model. The risk-free rate for periods within the contractual life of the option is based on the U.S. treasury yield curve in effect at the time of grant. We do not include an estimated dividend yield since we have not paid dividends on our common stock historically.

The following summarizes the weighted average of the assumptions used in the method:

	For the Year Ended December 31,
	2009			2008			2007
Risk-free rate		1.5	%		3.1	%		4.4	%
Expected years until exercise		4.25			4.00			4.00
Expected stock volatility		56	%		46	%		45	%
Dividend yield		—			—			—

57

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

At December 31, 2009, total compensation cost related to nonvested awards not yet recognized was approximately $2.3 million and is expected to be recognized over a weighted average period of less than two years. For the year ended December 31, 2009, we included approximately $0.6 million of stock-based compensation in capitalized G&A in property and equipment.

Stock Options

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

				Weighted		Weighted
	Number of			Average		Average
	Shares			Exercise		Contractual		Aggregate
	Underlying			Price per		Life in		Intrinsic
	Options			Share		Years		Value
Balance outstanding January 1, 2009		4,807		$	2.35
Granted		1,181			0.54
Exercised		(164	)		0.81
Forfeited		(680	)		3.39
Expired		(932	)		2.09
Balance outstanding — December 31, 2009		4,212		$	1.87		6.2	$	665
Currently exercisable — December 31, 2009		2,124		$	2.79		4.1	$	42

The weighted average grant-date fair value of options granted during 2009, 2008 and 2007 was $0.25, $0.50 and $0.40, respectively.

Of options granted during 2009, 2008 and 2007, 1.2 million, 1.2 million and 0.1 million options, respectively, were granted pursuant to incentive plans which have been approved by our stockholders. All other stock options have been granted pursuant to stock option plans that were not subject to stockholder approval.

Information relating to stock options outstanding at December 31, 2009 is summarized as follows:

58

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

	Options Outstanding						Options Exercisable
			Weighted		Weighted				Weighted
			Average		Average				Average
	Number of		Remaining		Exercise				Exercise
Range of Exercise	Options		Contractual		Price Per		Number		Price Per
Prices	Outstanding		Life		Share		Exercisable		Share
Less than $1.00		1,329		9.00	$	0.58		123	$	0.74
$1.00 – $2.00		1,597		7.84		1.48		741		1.54
$2.00 – $3.00		265		3.88		2.44		238		2.48
$3.00 – $4.00		386		0.86		3.57		386		3.57
Greater than $4.00		635		0.79		4.28		635		4.28
Total		4,212		6.25	$	1.87		2,123	$	2.79

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

Restricted Stock

At December 31, 2009, our employees and directors held 3,420,703 million restricted shares of our common stock that vest over the service period 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, and compensation expense is recorded on a straight-line basis over the restricted share vesting period.

Status of the restricted shares as of December 31, 2009 and the changes during the year ended December 31, 2009 are presented below:

59

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

				Weighted
				Average Grant
				Date Fair
	Number of			Value per
	Shares			Share
Balance outstanding — January 1, 2009		3,966		$	1.88
Granted		2,545			0.72
Vested		(2,917	)		1.92
Forfeited		(174	)		1.46
Balance outstanding — December 31, 2009		3,420		$	1.00
Total grant date fair value of shares vesting during the period	$	5,594

Note 14 — Earnings per Share

Basic income (loss) per common share is computed by dividing net income (loss) to common stockholders by the weighted average number of common shares outstanding for the period. Diluted income (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.

	Year Ended December 31,
	2009			2008		2007
Net income (loss) to common shareholders
Basic	$	(62,206	)	$	45,681	$	(60,315	)
Add Effect of:
Preferred dividends		—			10,625		—
Diluted	$	(62,206	)	$	56,306	$	(60,315	)
Weighted Average Number of Common Shares Outstanding:
Basic		130,291			128,312		123,118
Add Effect of:
Preferred stock		—			50,000		—
Diluted		130,291			178,312		123,118

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:

60

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

	December 31,
	2009		2008		2007
Options and stock-based compensation		1,910		2		—
Convertible debt		37,303		32,725		16,185
Convertible preferred stock		40,000		—		50,000
Common shares potentially issuable		79,213		32,727		66,185

Note 15—Comprehensive Income (Loss)

The following summarizes the components of comprehensive loss:

	Year Ended December 31,
	2009			2008			2007
Net income (loss)	$	(40,995	)	$	56,490		$	(49,077	)
Related to derivative instruments:
Unrealized gain (loss)		—			428			(852	)
Reclassification adjustment for gain (loss) realized in net income (loss) above		1,194			(770	)		—
Related to marketable securities:
Unrealized loss		—			(1	)		(71	)
Reclassification adjustment for loss realized in net income (loss) above		72			—			—
Net impact on comprehensive income (loss)		1,266			(343	)		(923	)
Comprehensive income (loss)	$	(39,729	)	$	56,147		$	(50,000	)

The components of accumulated other comprehensive income (loss) are:

61

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

	Year Ended December 31,
	2009			2008			2007
Related to derivative instruments:
Balance at beginning of year	$	(1,194	)	$	(852	)	$	—
Change during the year		1,194			(342	)		(852	)
Balance at end of year		—			(1,194	)		(852	)
Related to marketable securities:
Balance at beginning of year		(72	)		(71	)		—
Change during the year		72			(1	)		(71	)
Balance at end of year		—			(72	)		(71	)
Accumulated other comprehensive loss	$	—		$	(1,266	)	$	(923	)

Note 16 — Financial Instruments

	December 31, 2009						December 31, 2008
	Fair			Carrying						Carrying
	Value			Value			Fair Value			Value
Assets:
Derivative instruments	$	3,208		$	3,208		$	33,351		$	33,351
Liabilities:
Long-term debt		219,959			223,385			190,681			214,855
Derivative instruments		(44,866	)		(44,866	)		(18,208	)		(18,208	)

The carrying amounts reflected in the consolidated balance sheets for cash and equivalents, short-term receivables and short-term payables approximate their fair value due to the short maturity of the instruments. The fair values of commodity derivative instruments interest rate swaps and were determined based upon quotes obtained from brokers. The fair values of long-term debt were determined based upon quotes obtained from brokers for our senior notes, discounted cash flows for our 11.5% convertible debt and book value for other debt. Book value approximates fair value for our senior bank facility and second lien term loan as these instruments bear interest at a market rate.

62

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

Note 17 — Fair Value Measurements

Effective January 1, 2008, we adopted the new guidance for fair value measurements of financial assets and liabilities measured on a recurring basis. This new standard defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It also clarifies that fair value should be based on assumptions that market participants would use when pricing an asset or liability, including assumptions about risk and the risks inherent in valuation techniques and the inputs to valuations. This includes not only the credit standing of counterparties involved and the impact of credit enhancements but also the impact of our own nonperformance risk on our liabilities. According to this new standard, 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.

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.

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 December 31, 2009:

63

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

	Quoted Market Prices		Significant Other			Significant
	in Active Markets -		Observable Inputs -			Unobservable Inputs -			Total
	Level 1		Level 2			Level 3			Fair Value
Oil and gas derivative contracts:
Oil and gas swaps	$	—	$	(12,816	)	$	—		$	(12,816	)
Embedded derivatives		—		—			(28,843	)		(28,843	)
Total derivative liabilities	$	—	$	(12,816	)	$	(28,843	)	$	(41,659	)

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 were all observable market data and these instruments have been classified as Level 2. Although we utilized 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 U.K. gas options. We based the inputs to the option models for our U.K. gas collars on observable market data in other markets to verify the reasonableness of the counterparty quotes. These U.K. gas collars are classified as Level 3. There are no outstanding oil or gas collars at December 31, 2009.

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

	Year Ended
	December 31,
	2009
Balance at beginning of period	$	(12,057	)
Total gains or losses (realized/unrealized)
Included in earnings		(14,390	)
Purchases, issuance and settlements		(2,396	)
Balance at end of period	$	(28,843	)
Changes in unrealized gains (losses) relating to derivatives assets and liabilities still held at December 31, 2009	$	(9,713	)

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:

64

Endeavour International Corporation
Notes to Consolidated Financial Statements
(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 may be used in the determination of the fair value of the reporting unit, including present values of expected cash flows from operations.

When we are required to measure fair value, and there is not a market observable price for the asset or liability, or a market observable price for a similar asset or liability, we generally utilize an income valuation approach. This approach utilizes management’s best assumptions regarding expectations of projected cash flows, and discounts the expected cash flows using a commensurate risk adjusted discount rate. Such evaluations involve a significant amount of judgment since the results are based on expected future events or conditions, such as sales prices; estimates of future oil and gas production; development and operating costs and the timing thereof; economic and regulatory climates and other factors. Our estimates of future net cash flows are inherently imprecise because they reflect management’s expectation of future conditions that are often outside of management’s control. However, assumptions used reflect a market participant’s view of long-term prices, costs and other factors, and are consistent with assumptions used in our business plans and investment decisions.

Note 18 — Derivative Instruments

As discussed in Note 2 — Accounting Policies, we have oil and gas commodity derivatives, interest rate derivatives and embedded derivatives related to debt instruments. The fair market value of these derivative instruments is included in our balance sheet as follows:

65

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

	December 31,			December 31,
	2009			2008
Derivatives not designated as hedges:
Oil and gas commodity derivatives:
Assets:
Prepaid expenses and other current assets	$	2,890		$	31,649
Other assets — long term		318			1,702
Liabilities:
Accrued expenses and other		(6,817	)		—
Other liabilities — long-term		(9,207	)		(2,375	)
	$	(12,816	)	$	30,976
Embedded derivatives related to debt instrument:
Liabilities:
Other liabilities — long-term		(28,843	)		(14,640	)
Derivatives designated as cash flow hedge:
Interest rate swap
Liabilities:
Accrued expenses and other		—			(1,334	)

If all counterparties failed to perform, our maximum loss would be $3.2 million as of December 31, 2009.

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

	Year Ended December 31,
	2009			2008			2007
Derivatives not designated as hedges:
Oil and gas commodity derivatives
Realized gains (losses)	$	35,422		$	(28,578	)	$	12,048
Unrealized gains (losses)		(43,791	)		77,846			(89,132	)
		(8,369	)		49,268			(77,084	)
Embedded derivatives related to debt instrument
Unrealized gains (losses)	$	(11,807	)	$	(1,180	)	$	—

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

66

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

		Year Ended December 31,
	Location of
	Reclassification
	into Income	2009		2008			2007
Interest rate swap
(Gain) loss recognized in other comprehensive income, net of tax		$	—	$	428		$	(852	)
(Gain) loss reclassified from accumulated other comprehensive income into income	Interest expense		1,194		(770	)		—

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 December 31, 2009, our outstanding commodity derivatives covered approximately 1,020 Mbbl of oil and 1,659 MMcf of gas cumulative through 2011 and consist of fixed price swaps with BNP Paribas.

During 2007, we entered into an interest rate swap with BNP Paribas for a notional amount of $37.5 million whereby we paid a fixed rate of 5.05% and received three-month LIBOR through November 2009.

Note 19—Supplementary Cash Flow Disclosures

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

	Year Ended December 31,
	2009		2008		2007
Interest paid	$	7,074	$	15,966	$	22,164
Income taxes paid	$	4,738	$	20,088	$	7,662

Non-Cash Investing and Financing Transactions

As discussed in Note 9, we redeemed 60% of the outstanding shares of Series C Preferred Stock, for face value of $75 million with a $25 million cash payment and the issuance of $50 million Subordinated Notes.

67

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

We recorded $11.4 million in preferred stock dividends in 2009 for a non-cash valuation under fair value accounting relating to the redemption and modification of our Series C Preferred Stock. Prior to the fourth quarter of 2007, we paid outstanding dividends on the Series C Preferred Stock through the issuance of common stock.

In 2009 and 2008, we recorded $5.3 million and $4.5 million, respectively, in non-cash interest expense that was added to the principal balance of the 11.5% convertible notes.

Note 20 — Commitments and Contingencies

General

The oil and gas industry is subject to regulation by federal, state and local authorities. In particular, oil and gas production operations and economics are affected by environmental protection statutes, tax statutes and other laws and regulations relating to the petroleum industry. We believe we are in compliance with all federal, state and local laws, regulations applicable to Endeavour and its properties and operations, the violation of which would have a material adverse effect on us or our financial condition.

Operating Leases

We have leases for office space and equipment with lease payments of $0.6 million, $0.2 million and $0.2 million for the years ended December 31, 2010, 2011 and 2012, respectively.

Rig Commitments

Our rig commitments represent one commitment for 46 days of a rig in the U.K. We are currently considering the timing of rig deliverability and completion of the commitment.

Participation Agreement

In April 2009, we executed an agreement with Caza Petroleum Inc., a subsidiary of Caza Oil and Gas, Inc., (“Caza”) to participate in a jointly established exploration and development program covering Caza’s onshore acreage position and opportunity portfolio in the United States. We have the option but not the obligation to participate in the acquisition, exploration and appraisal activities of selected assets. Caza provides economic and engineering analysis on projects submitted for our selection. We receive 75% of Caza’s interest in exchange for $250,000 per

68

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

month and payment of our share of all external costs on any projects we select. We have elected to terminate the agreement effective April 2010.

Contingencies

Hess Limited, the operator of the facility supporting production from the Ivanhoe, Rob Roy, and Hamish fields (collectively, “IVRRH”), had advised us that there had been a mis-measurement of the volumes of oil produced from the IVRRH fields. As of December 31, 2009, the estimated liability from this mis-measurement was extinguished. As the settlement of the mis-measurement liability is covered under the purchase agreement for these assets, the decrease in our net liability was recorded as a decrease to goodwill during the third quarter of 2009.

Note 21—Segment and Geographic Information

We have determined we have one reportable operating segment being the acquisition, exploration and development of oil and gas properties. Our operations are conducted in geographic areas as follows:

	2009				2008				2007
			Long-				Long				Long
			lived				lived				lived
	Revenue		Assets		Revenue		Assets		Revenue		Assets
United States	$	1,627	$	46,172	$	—	$	12,125	$	—	$	6,920
United Kingdom		60,666		436,016		170,782		441,195		135,876		488,377
Other		—		1,607		—		2,140		—		4,386
Continuing Operations		62,293		483,795		170,782		455,460		135,876		499,683
Discontinued operations — Norway		17,550		—		89,660		148,605		40,188		129,693
Total	$	79,843	$	483,795	$	260,442	$	604,065	$	176,064	$	629,376
Total International	$	78,216	$	437,623	$	260,442	$	583,943	$	176,064	$	622,456

69

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

Note 22 — Quarterly Financial Data (Unaudited)

				Second			Third			Fourth
	First Quarter			Quarter			Quarter			Quarter
	2009
Revenues from continuing operations	$	16,338		$	18,082		$	7,759		$	20,113
Operating expenses from continuing operations		50,743			17,614			13,613			30,722
Operating profit (loss) from continuing operations		(34,405	)		468			(5,854	)		(10,609	)
Net income (loss) to common stockholders		(19,532	)		7,124			(7,179	)		(42,618	)
Net loss from continuing operations per common share
Basic		(0.15	)		(0.31	)		(0.06	)		(0.33	)
Diluted		(0.15	)		(0.31	)		(0.06	)		(0.33	)
Net income (loss) from discontinued operations per common share
Basic		—			0.36			—			—
Diluted		—			0.36			—			—
	2008
Revenues from continuing operations	$	45,809		$	55,343		$	44,160		$	25,469
Operating expenses from continuing operations		29,944			32,528			26,074			63,999
Operating profit (loss) from continuing operations		15,865			22,815			18,086			(38,530	)
Net income (loss) to common stockholders		(19,487	)		(66,733	)		75,487			56,414
Net income (loss) from continuing operations per common share
Basic		(0.15	)		(0.56	)		0.48			0.35
Diluted		(0.15	)		(0.56	)		0.29			0.24
Net income (loss) from discontinued operations per common share
Basic		(0.15	)		0.04			0.11			0.09
Diluted		(0.15	)		0.04			0.07			0.05

70

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

Note 23 — Subsequent Events

Asset Acquisitions

On January 6, 2010, we acquired significant positions in several U.S. resource plays. We funded the initial cash contributions for these new joint ventures from existing cash reserves.

We entered into a participation agreement with Cohort Energy Company (a subsidiary of J-W Operating Company) and acquired 50 percent of Cohort’s interests in certain acreage in North Louisiana/East Texas and Western Pennsylvania, primarily in the Haynesville and Marcellus gas shale plays. Our initial investment is $15 million cash and we will pay a share of Cohort’s drilling and completion expenditures as wells are drilled over the next few years.

We also acquired 50 percent of Hillwood Energy Alabama LP’s position in its exploratory gas shale play in Alabama with an initial net investment of approximately $8.0 million.

Series C Convertible Preferred Stock

On January 29, 2010, we and the holders of our outstanding Series C Convertible Preferred Stock corrected a technical oversight in the Subscription and Registration Rights Agreement of our Series C Convertible Preferred Stock. The amendment aligns the number of common shares reserved for the potential conversion of the Series C Convertible Preferred Stock to the terms of the Series C Convertible Preferred Stock after our partial redemption in November 2009. On March 10, 2010, we also amended in the Certificate of Designation for the Series C Convertible Preferred Stock and the $50 million Note issued to the holders of the Series C Convertible Preferred Stock for technical changes. These technical changes align certain definitions and provisions relating to potential repurchases of securities by Endeavour.

In February and March 2010, a combined 2,100 shares of our Series C Convertible Preferred Stock were converted into 1.8 million shares of our common stock.

Common Stock Issuance

On February 4, 2010, we entered into and closed a private placement of common stock pursuant to a Common Stock Purchase Agreement primarily with existing stockholders and certain directors and with certain other third-party investors to sell 23.5 million shares of our common stock, par value $0.001 per share, for aggregate net cash consideration of approximately $20.5 million. The purchase price per Share was $0.90, the closing price of our shares on the NYSE Amex on February 3, 2010. We intend to use the net proceeds from the Private Placement to partially fund our 2010 capital budget.

71

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

The Private Placement was made in reliance upon an exemption from the registration requirements of the Securities Act of 1933, pursuant to Section 4(2) thereof.

Junior Facility

On February 5, 2010, we announced the closing of a $25 million lending facility between us, our subsidiaries and Bank of Scotland PLC (the “Junior Facility”), with a maturity date of February 5, 2011, and interest at LIBOR plus 8%. Upon entering the Junior Facility, we borrowed $15 million against the facility. Our indebtedness under the Junior Facility remains secured by cross guarantees from our subsidiaries and a second ranking interest in the security package provided under our senior bank facility. Outstanding amounts under the Junior Facility may be prepaid.

The Junior Facility contains customary covenants, similar to those in our senior bank facility, which limit our ability to incur indebtedness, create certain liens; dispose of our assets and, make dividend payments or other distributions with respect to equity securities. The Junior Facility also includes mandatory prepayment terms for the amount of net proceeds received upon a capital raise of more than $50 million or the sale of an asset. The Junior Facility also contains a covenant to maintain a minimum fair market value of reserves, as calculated by the lenders under our Junior Facility, to consolidated secured debt ratio of 2:1.

Senior Bank Facility

On February 5, 2010, we also amended our senior bank facility. Previously, the final maturity date of the Senior Bank Facility was the earlier of October 31, 2011 or the reserve tail date, being the date when the remaining borrowing base reserves are projected to be 20% or less of the initially approved borrowing base reserves. The amendment brings the maturity date of the senior bank facility into alignment with the originally expected reserve tail date and maturity of the Junior Facility by changing the final maturity date to the earlier of January 31, 2011 or the reserve tail date.

2011 Debt Maturities

With the Junior Facility and Senior Bank Facility, we will have $65 million in debt due in the first quarter of 2011, based on outstanding balances at February 28, 2010. We plan to utilize our existing U.K. oil and gas assets, as well as our growing U.S. reserve base, as a basis for refinancing and expansion of our credit facilities. We are currently in discussions with several parties concerning this process. We strive to synchronize our capital expenditures with our cash flow. However, we believe our existing U.K. reserves are of significant value and together with our U.S. assets can be used as support for increased financial resources when necessary to fund our on-going activities. We continually monitor the capital markets to evaluate the most appropriate actions in our capital market activities.

72

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

Strategic Alternatives for North Sea Assets

On March 15, 2010, we announced that our board of directors has approved a review of strategic alternatives for its North Sea assets. In an effort to unlock the value of our underlying North Sea assets, we will study a full range of options, including:

• Continuing to execute current operations plan;

• Entering into a joint venture to accelerate activities in the North Sea; and

• Selling specific assets or the North Sea entire business.

We will announce the results of the effort once a course of action is chosen. At the end of this review process, we may elect to make no changes.

73

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

Note 24 — Supplemental Oil and Gas Disclosures (Unaudited)

Capitalized Costs Relating to Oil and Gas Producing Activities

									Total			Discontinued
	United			United					Continuing			Operations
	Kingdom			States			Other		Operations			Norway (1)			Total
December 31, 2009:
Proved	$	266,893		$	8,385		$	—	$	275,278		$	—		$	275,278
Unproved		125,996			26,817			1,740		154,553			—			154,553
Total capitalized costs		392,889			35,202			1,740		429,831			—			429,831
Accumulated depreciation, depletion and amortization		(164,703	)		(810	)		—		(165,513	)		—			(165,513	)
Net capitalized costs	$	228,186		$	34,392		$	1,740	$	264,318		$	—		$	264,318
December 31, 2008:
Proved	$	232,730		$	629		$	9	$	233,368		$	65,522		$	298,890
Unproved		131,688			5,876			2,132		139,696			48,714			188,410
Total capitalized costs		364,418			6,505			2,141		373,064			114,236			487,300
Accumulated depreciation, depletion and amortization		(142,686	)		—			—		(142,686	)		(33,914	)		(176,600	)
Net capitalized costs	$	221,732		$	6,505		$	2,141	$	230,378		$	80,322		$	310,700

74

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

Costs Incurred in Oil and Gas Property Acquisition, Exploration and Development Activities

								Total		Discontinued
	United		United					Continuing		Operations
	Kingdom		States		Other			Operations		Norway (1)		Total
Year Ended December 31, 2009:
Acquisition costs:
Proved	$	7,589	$	8,999	$	—		$	16,588	$		$	16,588
Unproved		1,450		14,091		23			15,564				15,564
Exploration costs		49,937		17,757		(382	)		67,312		4,776		72,088
Development costs		11,443		—		—			11,443		5,067		16,510
Total costs incurred	$	70,419	$	40,847	$	(359	)	$	110,907	$	9,843	$	120,750
Year Ended December 31, 2008:
Acquisition costs:
Proved		1,178		971		27			2,176		—		2,176
Exploration costs		34,641		5,515		(62	)		40,094		22,796		62,890
Development costs		16,752		19		—			16,771		8,808		25,579
Total costs incurred	$	52,571	$	6,505	$	(35	)	$	59,041	$	31,604	$	90,645
Year Ended December 31, 2007:
Acquisition costs:
Proved		774		—		18			792		—		792
Exploration costs		54,916		—		268			55,184		10,392		65,576
Development costs		7,562		—		—			7,562		14,063		21,625
Total costs incurred	$	63,252	$	—	$	286		$	63,538	$	24,455	$	87,993

75

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

Results of Operations for Oil and Gas Producing Activities

							Total			Discontinued
	United			United			Continuing			Operations -
	Kingdom			States			Operations			Norway (1)		Total
Year Ended December 31, 2009:
Revenues	$	60,666		$	1,627		$	62,293		$	17,550	$	79,843
Production expenses		16,911			865			17,776			5,536		23,312
DD&A		31,915			817			32,732			4,595		37,327
Impairment of oil and gas properties		31,332			12,597			43,929			—		43,929
Income tax expense		(9,746	)		(4,428	)		(14,174	)		5,787		(8,387	)
Results of activities	$	(9,746	)	$	(8,224	)	$	(17,970	)	$	1,632	$	(16,338	)
Year Ended December 31, 2008:
Revenues	$	170,781		$	—		$	170,781		$	89,660	$	260,441
Production expenses		31,489			828			32,317			14,259		46,576
DD&A		65,764			—			65,764			14,078		79,842
Impairment of oil and gas properties		36,970			—			36,970			—		36,970
Income tax expense		18,279			(290	)		17,989			47,832		65,821
Results of activities	$	18,279		$	(538	)	$	17,741		$	13,491	$	31,232
Year Ended December 31, 2007:
Revenues	$	135,876		$	—		$	135,876		$	40,188	$	176,064
Production expenses		27,263			—			27,263			13,781		41,044
DD&A		67,338			—			67,338			7,722		75,060
Income tax expense		20,638			—			20,638			14,574		35,212
Results of activities	$	20,637			—		$	20,637		$	4,111	$	24,748

⁽¹⁾ We completed the divestiture of our Norwegian subsidiary on May 14, 2009. The results of operations and financial position of this subsidiary are classified as discontinued operations for all periods presented.

Oil and Gas Reserves

Proved reserves are estimated quantities of oil, gas and natural gas liquids that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from

76

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

known reservoirs under existing economic and operating conditions. Proved developed reserves are proved reserves that can reasonably be expected to be recovered through existing wells with existing equipment and operating methods. The reserve volumes presented are estimates only and should not be construed as being exact quantities. These reserves may or may not be recovered and may increase or decrease as a result of our future operations and changes in economic conditions. During 2009, our oil and gas reserves were audited by independent reserve engineers. Our oil and gas reserves were prepared by independent reserve engineers at December 31, 2008 and 2007.

In the fourth quarter of 2009, we adopted revised oil and gas reserve estimation and disclosure requirements. The primary impact of the new disclosures is to conform the definition of proved reserves to the SEC Modernization of Oil and Gas Reporting rules, which were issued by the SEC at the end of 2008. The accounting standards update revised the definition of proved oil and gas reserves to require that the average, first-day-of-the-month price during the 12-month period before the end of the year rather than the year-end price, must be used when estimating whether reserve quantities are economical to produce. This same 12-month average price is also used in calculating the aggregate amount of (and changes in) future cash inflows related to the standardized measure of discounted future net cash flows. The rules also allow for the use of reliable technology to estimate proved oil and gas reserves if those technologies have been demonstrated to result in reliable conclusions about reserve volumes. The unaudited supplemental information on oil and gas exploration and production activities for 2009 has been presented in accordance with the new reserve estimation and disclosure rules, which may not be applied retrospectively. The 2008, 2007 and 2006 data are presented in accordance with FASB oil and gas disclosure requirements effective during those periods.

77

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

							Total			Discontinued
	United			United			Continuing			Operations -
	Kingdom			States			Operations			Norway (1)			Total
Proved Oil Reserves (MBbls):
Proved reserves at January 1, 2006		4,566			—			4,566			1,186			5,752
Production		(1,274	)		—			(1,274	)		(519	)		(1,793	)
Extensions and discoveries		—			—			—			340			340
Revisions of previous estimates		(8	)		—			(8	)		1,049			1,041
Proved reserves at December 31, 2007		3,284			—			3,284			2,056			5,340
Production		(1,032	)		—			(1,032	)		(726	)		(1,758	)
Extensions and discoveries		522			18			540			121			661
Revisions of previous estimates		(643	)		—			(643	)		(45	)		(688	)
Proved reserves at December 31, 2008		2,131			18			2,149			1,406			3,555
Production		(690	)		(4	)		(694	)		(310	)		(1,004	)
Purchases of reserves		—			2			2			—			2
Sales of reserves in place		—			—			—			(1,107	)		(1,107	)
Extensions and discoveries		1,209			3			1,212			—			1,212
Revisions of previous estimates		698			(1	)		697			11			708
Proved reserves at December 31, 2009		3,348			18			3,366			—			3,366
Proved Developed Oil Reserves (MBbls):
At December 31, 2007		2,544			—			2,544			1,650			4,194
At December 31, 2008		1,468			7			1,475			1,302			2,777
At December 31, 2009		1,381			8			1,389			—			1,389

78

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

							Total			Discontinued
	United			United			Continuing			Operations -
	Kingdom			States			Operations			Norway (1)			Total
Proved Gas Reserves (MMcf):
Proved reserves at January 1, 2006		17,172			—			17,172			7,673			24,845
Production		(8,556	)		—			(8,556	)		(328	)		(8,884	)
Extensions and discoveries		—			—			—			1,821			1,821
Revisions of previous estimates		3,196			—			3,196			(732	)		2,464
Proved reserves at December 31, 2007		11,812			—			11,812			8,434			20,246
Production		(6,532	)		—			(6,532	)		(2,322	)		(8,854	)
Extensions and discoveries		20,370			690			21,060			52			21,112
Revisions of previous estimates		1,480			—			1,480			(1,187	)		293
Proved reserves at December 31, 2008		27,130			690			27,820			4,977			32,797
Production		(3,743	)		(320	)		(4,063	)		(686	)		(4,749	)
Purchases of reserves		—			10,037			10,037			—			10,037
Sales of reserves in place		—			—			—			(4,241	)		(4,241	)
Extensions and discoveries		52,895			6			52,901			—			52,901
Revisions of previous estimates		2,034			371			2,405			(50	)		2,355
Proved reserves at December 31, 2009		78,316			10,784			89,100			—			89,100
Proved Developed Gas Reserves (MMcf):
At December 31, 2007		8,416			—			8,416			6,614			15,030
At December 31, 2008		6,761			234			6,995			4,917			11,912
At December 31, 2009		4,329			4,707			9,036			—			9,036

79

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

							Total			Discontinued
	United			United			Continuing			Operations -
	Kingdom			States			Operations			Norway			Total
Proved Reserves (MBOE):
Proved reserves at January 1, 2007		7,428			—			7,428			2,465			9,893
Extensions and discoveries		—			—			—			643			643
Production		(2,700	)		—			(2,700	)		(574	)		(3,274	)
Revisions of previous estimates		524			—			524			927			1,451
Proved reserves at December 31, 2007		5,252			—			5,252			3,461			8,713
Production		(2,121	)		—			(2,121	)		(1,113	)		(3,234	)
Extensions and discoveries		3,917			133			4,050			130			4,180
Revisions of previous estimates		(395	)		—			(395	)		(242	)		(637	)
Proved reserves at December 31, 2008		6,653			133			6,786			2,236			9,022
Production		(1,314	)		(57	)		(1,371	)		(424	)		(1,795	)
Extensions and discoveries		10,025			4			10,029			—			10,029
Purchae of Reserves		—			1,675			1,675			—			1,675
Sales of Reserves		—			—			—			(1,815	)		(1,815	)
Revisions of previous estimates		1,037			60			1,097			3			1,100
Proved reserves at December 31, 2009		16,401			1,815			18,216			—			18,216
Proved Developed Reserves (MBOE):
At December 31, 2007		3,947			—			3,947			2,752			6,699
At December 31, 2008		2,595			46			2,641			2,122			4,763
At December 31, 2009		2,103			792			2,895			—			2,895

Standardized Measure of Discounted Future Net Cash Flows

Future cash inflows and future production and development costs are determined by applying average 12-month pricing for 2009 and year-end prices for 2008 and year-end costs to the estimated quantities of oil and gas to be produced. Oil, gas and condensate prices are escalated only for fixed and determinable amounts under provisions in some contracts. Estimated future income taxes are computed using current statutory income tax rates where production occurs. The resulting future net cash flows are reduced to present value amounts by applying a 10% annual discount factor.

At December 31, 2009 and 2008, the prices used to determine the estimates of future cash inflows were $60.40 and $36.55 per barrel, respectively, for oil and $4.96 and $8.70 per Mcf, respectively, for gas. Estimated future cash inflows are reduced by estimated future

80

Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

development, production, abandonment and dismantlement costs based on year-end cost levels, assuming continuation of existing economic conditions, and by estimated future income tax expense. Income tax expense, both U.S. and foreign, is calculated by applying the existing statutory tax rates, including any known future changes, to the pretax net cash flows giving effect to any permanent differences and reduced by the applicable tax basis. The effect of tax credits is considered in determining the income tax expense.

The standardized measure of discounted future net cash flows is not intended to present the fair market value of our oil and gas reserves. An estimate of fair value would also take into account, among other things, the recovery of reserves in excess of proved reserves, anticipated future changes in prices and costs, an allowance for return on investment and the risks inherent in reserve estimates.

Under the full cost method of accounting, a noncash charge to earnings related to the carrying value of our oil and gas properties on a country-by-country basis may be required when prices are low. Whether we will be required to take such a charge depends on the prices for crude oil and natural gas at the end of any quarter, as well as the effect of both capital expenditures and changes to proved reserves during that quarter. Given the volatility of natural gas and oil prices, it is reasonably possible that our estimate of discounted future net cash flows from proved oil and gas reserves will change in the near term. If a noncash charge were required, it would reduce earnings for the period and result in lower DD&A expense in future periods.

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Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

Standardized Measure of Discounted Future Net Cash Flows

										Discontinued
	United			United			Continuing			Operations -
	Kingdom			States			Operations			Norway			Total
December 31, 2009:
Future cash inflows	$	424,007		$	36,799		$	460,806		$	—		$	460,806
Future production costs		(89,696	)		(9,893	)		(99,589	)		—			(99,589	)
Future development costs		(274,456	)		(12,602	)		(287,058	)		—			(287,058	)
Future income tax expense		(17,433	)		—			(17,433	)		—			(17,433	)
Future net cash flows (undiscounted)		42,422			14,304			56,726			—			56,726
Annual discount of 10% for estimated timing		(6,770	)		7,798			1,028						1,028
Standardized measure of future net cash flows	$	49,192		$	6,506		$	55,698		$	—		$	55,698
December 31, 2008:
Future cash inflows	$	306,021		$	4,599		$	310,620		$	88,039		$	398,659
Future production costs		(71,242	)		(1,005	)		(72,247	)		(25,157	)		(97,404	)
Future development costs		(157,984	)		(2,100	)		(160,084	)		(25,579	)		(185,663	)
Future income tax expense		(33,977	)		—			(33,977	)		(17,036	)		(51,013	)
Future net cash flows (undiscounted)		42,818			1,494			44,312			20,267			64,579
Annual discount of 10% for estimated timing		12,548			563			13,111			1,806			14,917
Standardized measure of future net cash flows	$	30,270		$	931		$	31,201		$	18,461		$	49,662

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Endeavour International Corporation
Notes to Consolidated Financial Statements
(Amounts in thousands, except per unit data)

Principal Sources of Change in the Standardized Measure
of Discounted Future Net Cash Flows

	Year Ended December 31,
	2009			2008			2007
Standardized measure, beginning of period	$	49,662		$	191,920		$	145,541
Net changes in prices and production costs		(30,155	)		(144,547	)		199,343
Future development costs incurred		16,511			8,912			21,625
Net changes in estimated future development costs		(81,864	)		(105,784	)		(48,873	)
Revisions of previous quantity estimates		22,318			(19,381	)		79,636
Extensions and discoveries		128,090			127,182			35,345
Accretion of discount		8,139			39,734			24,078
Changes in income taxes, net		(1,054	)		163,445			(135,233	)
Sale of oil and gas produced, net of production costs		(56,531	)		(213,865	)		(135,020	)
Purchased reserves		8,827			—			—
Sales of reserves in place		(11,514	)		—			—
Change in production, timing and other		3,269			2,046			5,478
Standardized measure, end of period	$	55,698		$	49,662		$	191,920

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Endeavour International Corporation

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our chief executive officer, chief financial officer and chief accounting officer, we evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K, December 31, 2009. Based on that evaluation, our chief executive officer, chief financial officer and chief accounting officer concluded that our disclosure controls and procedures are effective 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 accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosures.

Management’s Report on Internal Control Over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal controls over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended. Our internal controls were designed to provide reasonable assurance as to the reliability of our financial reporting and the preparation and presentation of the consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States.

Because of its inherent limitations, internal control over financial reporting may not detect or prevent misstatements. Projections of any evaluation of the effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2009. In making this assessment, our management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment, our internal control over financial reporting was effective as of December 31, 2009.

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Endeavour International Corporation

KPMG LLP, an independent registered public accounting firm, audited management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009 and issued their attestation report set forth in this Item 9A.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting during the quarterly period ended December 31, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Endeavour International Corporation:

We have audited Endeavour International Corporation’s internal control over financial reporting as of December 31, 2009, based on criteria established inInternal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Endeavour International Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Endeavour International Corporation

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Endeavour International Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Endeavour International Corporation and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2009, and our report dated March 16, 2010 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Houston, Texas
March 16, 2010

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Endeavour International Corporation

Item 11. Executive Compensation

Compensation Discussion and Analysis

This Compensation Discussion and Analysis discusses the objectives of our executive compensation program, including the behaviors and results it is designed to encourage and reward; it discusses the elements of our executive compensation program and their purposes; and explains how we make compensation decisions, in general and in fiscal 2009.

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Business Context

We are an independent oil and natural gas company engaged in the acquisition, development and exploration of oil and natural gas properties with operations onshore in the United States and in the United Kingdom sector of the North Sea. The oil and gas exploration and production segment of the international energy industry is highly complex, requiring a broad spectrum of technical, management and commercial skills in order to succeed.

We were founded as a startup competitor in an established market to take advantage of an industry transition as major integrated companies restructured their portfolios away from more mature producing areas. Our strategy involved continued pursuit of niche opportunities in the North Sea and the US that were viewed as marginally economic by the large players already in each market. In addition to competing against a number of companies of significant size and scale that have been operating in the market for many years, we have seen an influx of newcomers to the market that seek to capitalize on the changing industry dynamics. We have recently undergone an important shift in our business strategy, as evidenced by our recent entrance into the onshore United States market.

In order to execute our business strategy, we must attract and retain highly qualified and technically proficient executives and key employees, competing for a limited talent base with both major and independent oil and gas companies worldwide. As a smaller, expanding organization, we seek individuals who are more entrepreneurial in their business approach and are willing to accept the risk associated with an evolving business venture, but also have the capacity and experience to be involved in a much larger organization.

We operate in a very cyclical industry because of volatility in demand and prices for oil and gas. We rely on our executive team to develop, maintain and execute our strategy over the long-term in order to build significant stockholder wealth — through the up and down cycles of the industry. The skills, technical requirements, experience and personal qualities of the executives needed to successfully manage this type of business are currently in very high demand, given the strength of commodity prices and worldwide demand for energy. This high demand for energy and qualified executives presents a significant management challenge for all participants in the industry.

Our executive compensation programs have been designed and are administered to support our long-term strategic objectives and to address the unique characteristics of the competitive market for talent in our industry. The compensation packages of our named executive officers recognize our need to hire and retain experienced, talented personnel to execute the business strategy for an exploration and production company operating in multiple countries. The strategic concepts that launched Endeavour and led to our growth over the last several years represent the combined vision, insight and worldwide energy industry knowledge of the highly experienced management team we have assembled. We continue to compete for executive talent with much larger, established companies and may pay premiums to attract and retain personnel and compensate for the inherently riskier nature of a newer and smaller company. Our Compensation Committee annually reviews and approves compensation arrangements of all executive officers in conjunction with a review of the evaluation of their performance.

The Purpose of Our Executive Compensation Program

The purpose of our executive compensation program is to provide a meaningful reward system that motivates our executives to be good stewards over our stakeholders’ and stockholders’ interests. It is also intended to provide a competitive total reward program that allows us to attract and retain qualified executive talent from among the pool of talent in our industry, and among other industries, as appropriate.

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Our executive compensation programs are intended to provide incentives for executives to:

• Continue to grow our business in alignment with our stated long-term strategy;

• Build significant stockholder wealth over the long-term;

• Deliver annual performance that reflects the execution of our stated strategy based on annual goals;

• Focus on delivering results as a leader in safety and environmental performance;

• Remain with us over the long-term; and

• Reflect the value we place on innovation and personal contribution.

Our Philosophy

Our compensation philosophy reflects the realities of the competitive market in which we operate and the characteristics of our entrepreneurial environment. The program for executive officers, which consists of base salary, performance-based annual bonus and long-term stock-based incentive awards, is designed to promote the strategic objectives that are critical to our long-term success while closely aligning the interests of our executives with the interests of our stockholders. The Compensation Committee’s philosophy in establishing executive compensation programs is:

• Compensation programs should be designed to allow us to attract and retain very experienced and high caliber professionals and executives in the oil and gas industry. This is a challenge to all in our industry, but we strongly believe that the attraction and retention of highly qualified executive talent is a key to the execution of our strategy. As we seek to expand our operations, we have designed our compensation program to attract the type of executive who has the talent and experience to successfully carry out our business model.

• Compensation programs should relate to both individual and Company performance. We believe that our compensation programs should provide the opportunity for our CEO and other executive officers to earn performance-based compensation that is competitive with similarly situated executives of other public companies within the oil and gas industry in the U.S. and European markets. To help ensure that we understand the competitive environment, the Committee has retained Hewitt Associates as an compensation consultant to assist with this competitive analysis. While we believe that the definition of competitors should generally consider companies in our peer group of similarly situated oil and gas companies, we also recognize that it is difficult to limit the definition to that universe since the competition for talent often crosses many segments of the industry and several different countries.

• Compensation programs should closely align the interests of executives with those of stockholders. For this reason, we have designed programs that base a significant portion of executive compensation on stock-based incentive awards. We believe that this strong focus on equity compensation best reflects our place in the business cycle and provides the best opportunity for attracting the right mix of executive talent.

• Compensation programs should reflect our place in the business cycle and the accompanying risk profile of the business. We understand that a company in a growth mode of the business cycle generally represents greater career risk to employees than employment at a mature energy company. For this reason, our incentive compensation programs provide for a higher percentage of at-risk compensation for our executives. Similarly, we generally de-emphasize executive benefits and perquisites compared to more mature companies in our industry.

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Factors Influencing Compensation

Market Data

During 2009, the Compensation Committee retained Hewitt Associates as an independent compensation consultant to assist it with a market analysis and provide it with general consulting services. Hewitt provided the Compensation Committee with market data to assist with its determination of compensation. While we do not establish compensation based solely on benchmarking, we believe that reviewing the market data is useful for two reasons. First, our compensation practices must be competitive in order to attract and retain executives with the ability and experience necessary to provide leadership and to deliver strong performance to our stockholders. Second, the market data allows us to assess the reasonableness of our compensation practices. The Compensation Committee does not react to or structure our executive compensation program on market data alone, and it does not utilize any true “benchmarking” techniques when making compensation decisions. Moreover, the Compensation Committee retains full discretion to award compensation at the level it deems reasonable under the circumstances, but we typically intend to compensate our Named Executive Officers within a range of reasonableness around the middle of our peer group.

The market data reflected compensation provided at other similarly-sized companies within the exploration and production industry. As our operations are in the U.K. and the U.S., we recruit employees from both areas and our executive officers may spend significant time in both countries. We review market data from a group of U.K. companies and a group of U.S. companies that might be considered our peers to allow comparisons across the geographic areas. The following “peer group” companies were included:

U.S.-based Companies:

ATP Oil & Gas Corporation
Carrizo Oil & Gas, Inc.
Denbury Resources Inc.
Forest Oil Corporation
Harvest Natural Resources, Inc.
Newfield Exploration Company
Stone Energy Corporation
Swift Energy Company

U.K.-based companies:

Cairn Energy
Dana Petroleum
JKX Oil and Gas
Premier Oil
SOCO International
Tullow Oil
Venture Production

Company Performance — 2009

Our strategic business focus during 2009 consisted of the following objectives, taking into account the difficulties associated with the global economic downturn:

• Maintain or reduce G&A and operating expenses;

• Negotiate removal of the Series C Preferred Stock anti-dilution provisions;

• Maintain or expand credit facilities;

• Complete at least one acquisition and two business development activities to improve growth potential in core areas;

• File Field Development Plans for U.K. development projects;

• Optimize production;

• Add reserves through exploration success; and

• Improve shareholder returns and value.

In evaluating our performance during 2009, we substantially met or exceeded these goals. Specifically:

• We reduced our operating and G&A expenses by a combined $13 million from 2008 to 2009;

• In November 2009, we redeemed a portion and amended the terms of our Series C Preferred Stock to, among other things, remove the anti-dilution provisions. These amendments reduced dilution to common stockholders by approximately 80 million shares and reduced overall cost of this capital;

• We executed two capital raises during the later part of 2009 culminating in early 2010;

• During 2009, we completed the sale of our Norwegian assets and operations and purchased producing and exploration acreage in the U.S. This sale represented a significant return on invested capital for investors and resulted in a gain on sale of $47 million;

• Field development plans for our development projects at Cygnus and Columbus were submitted;

• Maintained production, after the sale of our Norwegian assets, at budgeted levels;

• Significant appraisal drilling successes at Cygnus and Rochelle and our U.S. acquisitions added proved reserves to our reserve base; and

• Endeavour’s stock price increased from $0.50 per share at December 31, 2008 to $1.08 per share at December 31, 2009.

The Compensation Committee considered the goals for 2009 to be more fully achieved than those that we set for previous years. The Compensation Committee took a long-term view of our performance in evaluating 2009, understanding that the objectives we met in 2009 should help set us up for growth and success in the future. We believe, and the Compensation Committee concurred, that this potential for long-term growth was more important in evaluating the success of 2009 than our period-specific financial results.

The Compensation Committee believes an assessment of Company performance is a key element in determining compensation for the executive officers. After discussions with the CEO, the Compensation Committee evaluated the Company performance independently. The Compensation Committee conducted a detailed analysis of company performance in a number of areas including:

• Continued execution of the development program.The Company’s three major development projects, the Rochelle, Cygnus and Columbus development fields in the UK sector of the North Sea, continued to progress with field development plans submitted for review and approval by the UK regulatory authorities.

• Success of the exploration program.We had continued successful appraisal drilling at our Rochelle and Cygnus development projects.

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• Optimizing value of our Norwegian operations.The sale of our Norwegian operations provided significant returns over our investment in Norway and allowed Endeavour to pursue US onshore opportunities through acquisition or Joint Ventures reducing its interests in higher risk exploration.

• Improving the Company’s portfolio through business development.Our expansion into the U.S. allows us to include projects that have a lower cost and short lead-time to first production than our operations in the North Sea.

• Maintain existing production.The Company successfully managed production during 2009, meeting our goals and guidance established at the beginning of the year.

• Managing both operational and G&A expenses.The Company reduced operating expenses from 2008 and controlled general and administrative expenses, keeping 2009 costs in line with 2008.

• Simplifying and strengthening our capital structure.With cash flow from operations and our Norwegian operations sale, we repaid a portion of outstanding debt, redeemed a portion of our outstanding preferred stock and eliminated certain anti-dilution provisions in the outstanding preferred stock

Overall, the Compensation Committee evaluated 2009 as a very successful year as much of our strategic goals were accomplished during the year and our closing common stock price more than doubled from year-end 2008 to year-end 2009. Consequently, bonus funding was generally at or slightly below target and higher than 2008, which was slightly below target. 2009 stock-based incentive awards were granted in early 2009 and therefore, the grant date values did not reflect 2009 performance, but the ultimate value realized from these grants will reflect the future value of our common stock, linking performance to the ultimate value received.

Individual Performance

The Compensation Committee believes that individual performance should be a key factor in determining compensation. The Compensation Committee evaluated individual performance independent of Company performance for 2009.

The Compensation Committee does not use a formulaic approach but takes the Company performance into consideration along with individual performance, market data, competition for qualified talent, compensation history and internal equity, and applies its discretion in determining compensation levels.

Elements of Executive Compensation

Our Compensation Committee reviews the base salary of our CEO and all other executive officers periodically to ensure that a competitive position is maintained. Changes made to executive salaries usually occur annually, but may be more or less frequent based on the situation. Generally, our CEO recommends to the Compensation Committee changes to salaries for executive officers other than himself. The Compensation Committee independently reviews the market data provided by Hewitt, our compensation consultant, considers the CEO’s recommendations and then makes its own independent determinations for our executives. In general, the Compensation Committee seeks to establish compensation of our executive officers that promotes the strategic objectives that are critical to our long-term success, aligns our executives with the interests of stockholders, is competitive with the market and maintains our ability to attract and retain highly qualified personnel.

The following describes the primary elements of our executive compensation program and the influence of our philosophy on those elements.

Base Salary

All of our employees are paid a base salary which represents a fixed sum of compensation due the individual in return for their service to us. In establishing base salaries for the executive officers, the Compensation Committee considers a number of factors including the executive’s job responsibilities, individual achievements and contributions, level of experience, personal compensation history, the base salaries typically paid for similar positions within the oil and gas industry and the geographic location of our offices.

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Annual Bonus

Annual bonuses are used to focus our management on achieving key corporate objectives, positioning us for long-term growth, motivating certain desired individual behaviors and rewarding substantial achievement of our objectives and individual goals. Executive positions have an annual bonus target range that reflects their level of responsibility in the organization and industry practices. For 2009, the individual annual bonus targets remained unchanged at 60 percent of base salary for executive vice presidents and 100 percent of base salary for our chief executive officer. The Compensation Committee has set these levels to provide linkage between performance and compensation. In this way, compensation can be adjusted from year to year reflective of both Company and individual performance. The Compensation Committee has set the bonus target for the CEO higher than that of the other executive officers to reflect the Compensation Committee’s belief that the CEO should have a greater portion of compensation tied to the success of the Company. The Compensation Committee considers individual performance as well as corporate financial performance in determining the amount of an executive’s annual bonus with a maximum award of 200 percent of the target bonus. Our approach in administering the annual incentive program is non-formulaic and does not include specific objective measures. We believe this provides needed flexibility to address the unique aspects of our Company as an entity in an early growth cycle and motivate the executives to respond to the changing market and maximize long-term performance.

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Stock-Based Incentive Compensation

We generally use a combination of restricted stock, stock options and other stock-based compensation to reward long-term performance, encourage the achievement of superior results over time, align executive and stockholder interests, and retain executive management. As we expand operations in the U.S. and work toward development of projects in the U.K., we base a significant portion of our executive compensation on stock-based compensation. The Compensation Committee believes this aligns the executive’s interest with shareholder value and return as we complete our expansion and growth strategies. In late 2008, the Compensation Committee altered the design for the long-term incentive portion of our compensation program. The Compensation Committee sought to simplify the program and manage shareholder dilution while maintaining the focus on stock price performance. The Compensation Committee approved the structure and amount of the awards after reviewing a proposal from management, considering market data prepared by Hewitt, considering individual performance, long-term potential, retention risk, difficulty of replacement, long-term impact of position and internal equity. In January 2009, the Compensation Committee granted the executives long-term incentive awards structured as set forth in the following table:

		Percentage of
		Total Award
Type of Award	Vesting Period	Value
Restricted Stock	Time based, one-third per year		32.5	%
Stock Options	Time based, one-third per year with the exercise price set based on the closing price on the date of the grant.		12.5	%
Cash Performance Target Award	Time based, one-third per year. Cash award made based on the average closing stock price for the last 20 trading days prior to the vesting date:
	•   If average stock price is greater than or equal to $1.20 at the end of each period, 200% of target is paid.		55	%
	•   If average stock price is between $0.60 and $1.19 at the end of each period, between 100% and 200% of target is paid.
	•   If average stock price is between $0.30 and $0.60 at the end of each period, between 50% and 100% of the target is paid
	•   If the average stock price is less than $0.30 at the end of each period, no award is earned.

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The 2009 program continues a balanced approach to long-term incentives which aligns executives with stockholders, provides incentives tied to performance, and serves as a retention vehicle.

The structure of our long-term incentive awards reflects the Compensation Committee’s view that the purpose of the executive’s equity compensation should strengthen alignment with stockholders, provide incentives tied to our performance and serve as a retention vehicle. The Compensation Committee determined that the proper recognition of executive performance in light of the current stock prices should be heavily weighted on long-term incentives which serve to reward executives while aligning their interests with the stockholders.

To determine the size to grant, the Compensation Committee considers corporate financial and stock price performance but does not employ a specific formula. In addition, the Compensation Committee considers individual performance and the value of previous stock grants when determining the grant sizes for executive officers. The Compensation Committee considers recommendations from our CEO when making decisions regarding the granting of equity compensation to executive officers. Such guidance is based on his assessment of annual contributions and overall value to us and the achievement of our objectives. As with the CEO’s recommendations on base salary and bonus, the Committee considers his recommendations and then exercises independent judgment to make the final determinations of the individual awards to the Named Executive Officers.

We do not have any program, plan or obligation that requires us to grant equity compensation on specified dates. Generally, we grant equity compensation annually at the beginning of the year and upon initial employment with us. At its December meeting, the Compensation Committee approves equity compensation grants to be issued generally on the first business day of the next year. Grants for newly hired employees, or promoted employees, are approved by the Compensation Committee for executive officers and by the CEO for all other employees. Stock option exercise prices are set at the closing price on the date of grant or higher. The Compensation Committee encourages executives to maintain ownership of our stock. See “Stock Ownership Guidelines” for specific ownership guidelines for our named executive officers, directors and other employees.

2009 Compensation Assessment

Base Salary

Based on the Compensation Committee’s review of the above discussed factors and independent judgments, there were no changes made to the salaries of our named executive officers in 2009 except for Mr. Williams and Mr. Kirksey. There has been no change in the CEO’s base salary since he was elected to the role in September 2006. Mr. Williams was provided an increase of $25,000 (6.25%) in January 2009 to reward the significant success our North Sea exploration achieved in 2008. Mr. Kirksey was provided an increase of $50,000 (14.3%) to his base salary effective January 2009 to bring his compensation in line with the other Executive Vice Presidents and to reward his continued outstanding performance in ensuring adequate capital for the Company to execute its business strategy.

Annual Bonus

In 2009, bonus amounts were recommended to the Compensation Committee by our CEO for the senior and executive vice presidents based upon his overall assessment of the Company’s 2009 performance and individual performance. The CEO recommended and the Committee approved bonuses at 78 to 120 percent of target for the other executive officers based on the material factors described below. The Compensation Committee considered the recommendations along with the market data provided by Hewitt, and then exercised independent judgment to set the bonuses. In general, bonuses in 2009 reflect the Compensation Committee’s recognition of a significant improvement in company performance from 2008.

	Percent of
Officer	Target Earned			Material Factors
William L. Transier		150	%	Assessed based on the overall performance of the Company in relation to the 2009 goals that were achieved and significant involvement in the negotiation and ultimate sale of Norway, renegotiation and redemption of Series C Convertible Preferred Stock and initiation of U.S, portfolio. All three represented significant strategic steps for the Company.
Carl D. Grenz		85	%	Continued efforts to bring North Sea developments on line.
J. Michael Kirksey		100	%	Played a key role in simplifying capital structure and maintaining capital flexibility for our operating activities.
Bruce H. Stover		120	%	Played a key role in expanding our operations into the US.
John G. Williams		78	%	Played a key role in the sale of Norway and appraisal drilling successes in 2009.

These bonuses for 2009 performance were paid in 2010.

Stock-Based Incentive Compensation

In early 2009, the Company based its decisions on company and individual performance in 2008. The grants to each individual were as follows:

					Cash
	Restricted		Stock		Performance
Officer	Shares		Options		Award		Comments
William L. Transier		375,000		340,909	$	825,000	The Committee desired to provide a significant performance tie to longer-term performance
Carl D. Grenz		50,000		45,455	$	110,000	Reduced award due to recently receiving sign-on award for late 2008 hire
J. Michael Kirksey		175,000		159,091	$	385,000	Generally reflective of his position in our industry
Bruce H. Stover		150,000		136,364	$	330,000	Generally reflective of his position in our industry
John G. Williams		200,000		181,818	$	440,000	Generally reflective of his position in our industry

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Stock-Based Incentive Awards Program — 2010

In late 2009, the Compensation Committee altered the design for the long-term incentive program. The Compensation Committee sought to further manage shareholder dilution, while maintaining the focus on stock price performance, by eliminating the use of stock options. In January 2010 the Compensation Committee granted the executives long-term incentive awards structured as set forth in the following table:

		Percentage of Total
Type of Award	Vesting Period	Award Value
Restricted Stock	Time based, one-third per year		40	%
Cash Performance Target Award	Cash award made based on one month average closing stock price at end of each year during three year period		60	%

The 2010 program continues a balanced approach to long-term incentives which aligns executives with stockholders, provides incentives tied to performance, and serves as a retention vehicle.

Perquisites and Personal Benefits

We provide our executive officers the same employee benefits that we provide to all full-time employees, such as health, disability and life insurance. In addition, Mr. Grenz, who transferred to our London office in 2008, is provided housing and a foreign-service premium to offset the higher cost of living in London. This arrangement is in line with our International Assignment Policy which is available to all employees on full time international assignment.

In 2009, Mssrs. Stover and Williams repatriated to the United States and ended their international assignment status. Mr. Stover returned in June and Mr. Williams returned in September. At the time of their repatriation, all benefits provided under the International Assignment Policy ceased.

We provide a 401(k) savings plan for all employees. Our executive officers participate on the same level as all employees, with Company matching of contributions up to $9,800 for 2009, which was four percent of compensation up to the maximum annual compensation limit of $245,000 in accordance with Section 415 of the Internal Revenue Code of 1986, as amended (the “Code”).

International Assignment Policy

We recognize that execution of our business strategy may require certain U.S. employees to spend extended time in our London and Aberdeen offices. For employees, including executives, assigned to job

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duties outside their country of permanent residence, we have an international assignment policy designed to achieve:

• fair and equitable treatment between employees on international assignments and their home-country counterparts;

• compliance with applicable legal statutes in countries of operation; and

• cost effective, common and consistent policies and procedures.

Under this policy, we pay reasonable travel and moving costs associated with moving to, or returning from, the host country and housing costs in the host country. Upon acceptance of the international assignment, the employee will generally be eligible for a foreign-service premium. This premium is a based on a cost-of-living index that is prepared by an independent firm. The foreign-service premium recognizes the higher costs of goods and services in the host country. The employee and Company jointly contribute to the costs of taxes in the host country in a manner designed to ensure that the total tax burden of international assignment generally approximates the tax burden the employees would have paid with respect to their incomes from the Company had they remained in their home countries.

As outlined in our international assignment policy, Messrs. Stover and Williams were eligible for Company-provided housing, a foreign-service premium to offset the higher costs for goods and services in London and tax equalization payments until their repatriation. These costs are considered taxable compensation.

Extensive Travel Policy

Given the international nature of our business, certain U.S. employees may be required to spend extended time in our foreign offices assigned to those offices. For these employees, we have and extensive travel policy that provides an excess travel payment and a per diem amount as follows:

• Excess Travel Payment — 1% of base pay for each 10 day period the extensive traveler is away from their permanent residence and is taxable compensation. This payment is in addition to the normal performance bonus the Company may from time to time have in effect.

• Per Diem Payment — per diem reimbursement, as outlined by the IRS, for their travel days, and is not considered taxable income.

Severance Benefits

We provide severance benefits through our chief executive officer’s employment agreement and through change-in-control agreements with each of our remaining executive officers. These agreements provide for severance compensation to be paid if employment is terminated under certain conditions, such as at the executive’s election for “good reason” following a change in control or a termination by us other than for “misconduct” or “disability”, each as defined in the agreements. Additionally, our long-term incentive grant agreements provide for accelerated vesting of equity awards upon the occurrence of a change in control. These provisions are generally based on market practices as provided to us by Hewitt and assist us in recruiting and retaining the members of the executive team. Please read “Executive Compensation — Employment, Change in Control and Severance Agreements” for a description of the material terms of the employment agreements and the change in control provisions of the stock grant agreements.

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Oversight of the Executive Compensation Programs and Compensation Committee Membership

Our executive compensation program is administered by the Compensation Committee of our board of directors. The Compensation Committee members include Mr. Thomas D. Clark, Jr., Mr. Sheldon R. Erikson, Ms. Nancy K. Quinn and Mr. John B. Connally III, who serves as the committee chair. Mr. Erikson was appointed to the Compensation Committee in February 2010.

The Compensation Committee’s responsibilities include:

• Evaluating and approving the Company’s overall compensation strategy;

• Annually reviewing the performance of and setting the compensation (i.e., salary, incentive awards, and all other elements) for the Company’s CEO;

• Annually reviewing the performance of and setting the compensation for the other executive officers after considering the CEO’s recommendations; and

• Reviewing and approving annual incentive payouts and long-term incentive awards under our plans.

A more complete description of the Committee’s responsibilities and functions is set forth in the Committee’s charter, which can be found on our website at http://www.endeavourcorp.com.

Consistent with the listing requirements of the NYSE-Amex, the Compensation Committee is composed entirely of independent, non-employee members of the board of directors. Each year, the Compensation Committee reviews any and all relationships that each director may have with us and the board of directors reviews the Compensation Committee’s findings.

Accounting and Tax Implications

Section 162(m) of the Code limits the deductibility of certain items of compensation paid to our named executives to $1,000,000 annually. When stock awards vest or are otherwise includible in the taxable compensation of the affected executives, we may not be able to recognize current or future tax benefits that would be available to us related to such awards. Currently, this is not an issue for us because we have no taxable income in the United States.

We expense stock awards under the fair value method rather than the intrinsic value method. This will result in higher expenses for our stock option awards. When considering the design of compensation programs, the Committee considers the potential accounting implications of the design and seeks to ensure the design does not have a significant adverse affect on our income statement.

Executive Compensation

Summary Compensation Table

The following table sets forth the annual and long-term compensation for services in all capacities to the Company for the fiscal year ended December 31, 2009 for our CEO, our Chief Financial Officer and the three other most highly compensated executive officers (the “Named Executive Officers”). All of the Named Executive Officers were employed in their positions with us at December 31, 2009.

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							Stock		Option		All Other
			Salary		Bonus		Awards		Awards		Compensation		Total
Name and Principal Position	Year		($)		($)		($)		($)		($)		($)
						(6)		(7)		(7)		(8)
William L. Transier (1)		2009		800,000		1,200,000		202,500		83,615		153,800		2,439,915
Chief Executive Officer, President		2008		800,000		600,000		673,200		266,564		297,716		2,637,480
and Director		2007		800,000		—		575,000		—		53,162		1,428,162
Carl D. Grenz (2)		2009		400,000		204,000		27,000		11,149		711,794		1,353,943
Executive Vice President, Operations		2008		70,666		—		225,000		84,537		74,107		454,310
J. Michael Kirksey (3)		2009		400,000		240,000		94,500		39,020		106,300		879,820
Executive Vice President and Chief		2008		350,000		180,000		73,920		29,618		51,200		684,738
Financial Officer		2007		91,538		37,500		408,000		83,704		—		620,742
Bruce H. Stover (4)		2009		415,000		300,000		81,000		33,446		766,198		1,595,644
Executive Vice President, Business		2008		415,000		180,000		297,000		117,396		717,166		1,726,562
Development and New Ventures		2007		400,000		80,000		230,000		—		568,096		1,278,096
John G. Williams (5)		2009		425,000		200,000		108,000		44,595		636,536		1,414,131
Executive Vice President, Exploration		2008		400,000		240,000		73,920		29,618		582,709		1,326,247
		2007		100,000		—		456,000		93,201		127,637		776,838

(1)	Mr. Transier’s bonus for 2009 consisted of $1,000,000 paid in cash and $200,000 paid by the issuance of 200,000 fully vested shares of common stock.
(2)	Mr. Grenz joined the Company in November 2008, as Executive Vice President, Operations.
(3)	Mr. Kirksey joined the Company in September 2007, as Executive Vice President and Chief Financial Officer.
(4)	Mr. Stover retired effective March 1, 2010.
(5)	Mr. Williams joined the Company in October 2007 as Executive Vice President, Exploration.
(6)	The amounts represent annual bonus amounts earned during the year and paid at the beginning of the subsequent year.
(7)	For a discussion of restricted stock and stock option awards granted in 2009, see “Compensation Discussion and Analysis — Stock-Based Incentive Compensation.” The amounts reflect the full fair market value on the date of grant, assuming the completion of service-based vesting conditions. However, as required, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. There is no assurance that the FAS 123R amounts reflected in this table will ever be realized by the Named Executive Officers. See Note 13 of the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009 regarding assumptions underlying valuation of equity awards.
(8)	This column includes personal benefits and other items shown in the table below. Other compensation costs of $37,560 for Mr. Williams during 2007 represent relocation costs. In valuing personal benefits, we use the incremental cost to the Company of the benefit.

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			Cost Of		Foreign Tax and		Extensive		Housing		Company
			Living		Tax Equalization		Travel		Lease		401(k) Matching
	Year		Adjustment		Payments		Payments		Costs		Contributions		Other		Total
Mr. Transier		2009		—		—		144,000		—		9,800		—		153,800
		2008		—		—		288,516		—		9,200		—		297,716
		2007		—		—		44,162		—		9,000		—		53,162
Mr. Grenz		2009		133,669		398,049		—		170,276	��	9,800		—		711,794
		2008		19,018		—		—		55,089		—		—		74,107
Mr. Kirksey		2009		—		—		96,500		—		9,800		—		106,300
		2008		—		—		42,000		—		9,200		—		51,200
Mr. Stover		2009		55,244		562,935		—		138,219		9,800		—		766,198
		2008		110,488		310,076		—		287,402		9,200		—		717,166
		2007		96,065		208,662		—		262,503		—		866		568,096
Mr. Williams		2009		78,046		388,239		—		160,451		9,800		—		636,536
		2008		104,728		210,899		—		257,882		9,200		—		582,709
		2007		21,133		—		—		68,944		—		37,560		127,637

As discussed in “Employment, Change-in-Control and Severance Agreements,” Mr. Transier’s compensation is subject to an employment agreement. Our other executive officers were not covered by employment agreements at December 31, 2009.

2009 Grants of Plan-Based Awards Table

The following table sets forth certain information with respect to restricted stock awards and stock option awards granted during the year ended December 31, 2009 to each of our Named Executive Officers. All awards become fully vested upon a “corporate change” or “change in control” as discussed in “Employment, Change in Control and Severance Agreements.”

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					Estimated
					Possible		Estimated
					Payouts		Future		All Other		All Other Option
					Under Non-		Payouts		Stock		Awards:				Grant Date
					Equity		Under Equity		Awards:		Number of		Exercise or		Fair Value of
					Incentive Plan		Incentive		Number of		Securities		Base Price		Stock and
					Awards		Plan Awards		Shares of		Underlying		of Option		Option
					Target		Target		Stock or Units		Options		Awards		Awards
Name	Grant Date		Approval Date		($)		(#)		(#) (2)		(#)		($/Sh)		($)
		(1)		(1)		(2)				(3)		(3)
Mr. Transier		01/02/2009		12/11/2008		825,000		—		375,000		340,909	$	0.54		83,615
Mr. Grenz		01/02/2009		12/11/2008		110,000		—		50,000		45,455	$	0.54		11,149
Mr. Kirksey		01/02/2009		12/11/2008		385,000		—		175,000		159,091	$	0.54		39,020
Mr. Stover		01/02/2009		12/11/2008		330,000		—		150,000		136,364	$	0.54		33,446
Mr. Williams		01/02/2009		12/11/2008		440,000		—		200,000		181,818	$	0.54		44,595

(1)	Under our compensation policy, the Compensation Committee approves annual grants of stock awards at its regularly scheduled meeting in December for awards to be issued at the beginning of the following year. The exercise price of any options granted is set at the closing price on the grant date.
(2)	The awards vest in equal annual installments over a three-year period. Cash award is paid based on the change in the on the average closing stock price for the last 20 trading days prior to the vesting date versus $0.60. See “Stock-Based Incentive Awards — 2009 Grants” above for details of the payout.
(3)	The awards vest in equal annual installments over a three-year period.

2009 Outstanding Equity Awards at Fiscal Year-End Table

The following table includes certain information with respect to the value of all unexercised options and unvested stock awards previously awarded to the Named Executive Officers at December 31, 2009.

	Option Awards									Stock Awards
	Number of Securities Underlying									Number of Shares			Market Value of
	Unexercised Options					Option				or Units of Stock			Shares or Units of
	(#)					Exercise				That Have Not			Stock That Have
						Price		Option		Vested			Not Vested
Name	Exercisable		Unexercisable			($)		Expiration Date		(#)			($)
Mr. Transier		—		340,909	(1)		0.54		01/02/2019		798,333	(6)		862,200
		165,000		330,000	(2)		1.32		01/02/2018
		125,000		—			3.51		01/02/2011
		250,000		—			4.20		01/02/2010
Mr. Grenz		—		45,455	(1)		0.54		01/02/2019		183,333	(7)		198,000
		116,667		133,333	(3)		0.75		11/03/2018

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	Option Awards									Stock Awards
	Number of Securities Underlying									Number of Shares			Market Value of
	Unexercised Options					Option				or Units of Stock			Shares or Units of
	(#)					Exercise				That Have Not			Stock That Have
						Price		Option		Vested			Not Vested
Name	Exercisable		Unexercisable			($)		Expiration Date		(#)			($)
Mr. Kirksey		—		159,091	(1)		0.54		01/02/2019		345,666	(8)		373,319
		18,334		36,666	(4)		1.32		01/02/2018
		266,667		133,333			2.00		09/26/2017
Mr. Stover		—		136,364	(1)		0.54		01/02/2019		333,333	(9)		360,000
		72,667		145,333	(2)		1.32		01/02/2018
		50,000		—			3.51		01/02/2011
		100,000		—			4.20		01/02/2010
Mr. Williams		—		181,818	(1)		0.54		01/02/2019		370,666	(10)		400,319
		18,334		36,666	(2)		1.32		01/02/2018
		133,333		66,666	(5)		1.14		10/01/2017

(1)	These options vest and become exercisable in three equal annual installments beginning on January 1, 2010.
(2)	These options vest in and become exercisable in equal installments on January 1, 2010 and 2011.
(3)	These options vest in and become exercisable in equal installments on November 3, 2010 and 2011.
(4)	These options vest and become exercisable on September 26, 2010.
(5)	These options vest and become exercisable on October 1, 2010.
(6)	83,333 of these restricted stock awards vested on January 1, 2010. 340,000 of these restricted stock awards vest in two equal annual installments beginning on January 1, 2010. 375,000 of these restricted stock awards vest in three equal annual installments beginning on January 1, 2010.
(7)	133,333 of these restricted stock awards vest in two equal annual installments beginning on November 3, 2010. 50,000 of these restricted stock awards vest in three equal annual installments beginning on January 1, 2010.
(8)	133,333 of these restricted stock awards vest on September 26, 2010. 37,333 of these restricted stock awards vest in two equal annual installments beginning on January 1, 2010. 175,000 of these restricted stock awards vest in three equal annual installments beginning on January 1, 2010.
(9)	33,333 of these restricted stock awards vested on January 1, 2010. 150,000 of these restricted stock awards vest in two equal annual installments beginning on January 1, 2010. 150,000 of these restricted stock awards vest in three equal annual installments beginning on January 1, 2010.
(10)	133,333 of these restricted stock awards vest on October 1, 2010. 37,333 of these restricted stock awards vest in two equal annual installments beginning on January 1, 2010. 200,000 of these restricted stock awards vest in three equal annual installments beginning on January 1, 2010.

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2009 Option Exercises and Stock Vested Table

The following table includes certain information with respect to options exercised and stock award vesting by the Named Executive Officers during the year ended December 31, 2009.

	Option Awards				Stock Awards
	Number of Shares				Number of Shares
	Acquired on		Value Realized		Acquired on		Value Realized
	Exercise		on Exercise		Vesting		on Vesting
Name	(#)		($)		(#)		($)
Mr. Transier		—		—		503,333	$	271,800
Mr. Grenz		—		—		166,667	$	178,334
Mr. Kirksey		—		—		152,000	$	176,746
Mr. Stover		—		—		208,333	$	112,500
Mr. Williams		—		—		152,000	$	156,746

Risk Assessment Related to our Compensation Structure

We believe our compensation plans are appropriately structured and are not reasonably likely to result in material risk to Endeavour. We believe our approach to goal setting and evaluation of performance results assist in mitigating excessive risk-taking that could harm our value or reward poor judgment by our executives. Several features of our programs reflect sound risk management practices. We set performance goals that we believe are reasonable in light of past performance and market conditions. We also believe we have allocated our compensation among base salary and short and long-term compensation target opportunities in such a way as to not encourage excessive risk-taking. Further, with respect to our incentive compensation programs, the metrics that determine payouts for our employees are company-wide metrics only. This is based on our belief that applying Company-wide metrics encourages decision-making that is in the best long-term interests of Endeavour and our stockholders as a whole. Finally, the multi-year vesting for our long-term incentive awards, even after achievement of any performance criteria, ensures that our employees’ interests align with those of our stockholders for the long-term performance of the Company.

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2009 Potential Payments upon Termination or Change in Control Table

The following table includes certain information with respect to potential payments upon termination or change in control to the Named Executive Officers, assuming that the termination or change in control occurred on December 31, 2009.

		Termination
		w/o Cause or
		for Good		Voluntary						Change in
Name	Benefit	Reason		Termination		Death		Disability		Control
Mr. Transier
	Severance (1)		4,800,000		—		—		—		4,800,000
	Stock options (unvested and accelerated) (2)		184,091		—		184,091		184,091		184,091
	Restricted stock awards (unvested and accelerated) (3)		862,200		—		862,200		862,200		862,200
	Health and welfare benefits continuation (1)		11,826		—		—		—		11,826
Mr. Grenz
	Severance (4)		—		—		—		—		1,044,000
	Stock options (unvested and accelerated) (2)		24,546		—		24,546		24,546		24,546
	Restricted stock awards (unvested and accelerated) (3)		198,000		—		198,000		198,000		198,000
	Health and welfare benefits continuation (4)		—		—		—		—		—
Mr. Kirksey
	Severance (4)		—		—		—		—		1,105,000
	Stock options (unvested and accelerated) (2)		85,909		—		85,909		85,909		85,909
	Restricted stock awards (unvested and accelerated) (3)		373,319		—		373,319		373,319		373,319
	Health and welfare benefits continuation (4)		—		—		—		—		22,754
Mr. Stover
	Severance (4)		—		—		—		—		1,203,333
	Stock options (unvested and accelerated) (2)		73,637		—		73,637		73,637		73,637
	Restricted stock awards (unvested and accelerated) (3)		360,000		—		360,000		360,000		360,000
	Health and welfare benefits continuation (4)		—		—		—		—		2,034
Mr. Williams
	Severance (4)		—		—		—		—		1,168,333
	Stock options (unvested and accelerated) (2)		98,182		—		98,182		98,182		98,182
	Restricted stock awards (unvested and accelerated) (3)		400,319		—		400,319		400,319		400,319
	Health and welfare benefits continuation (4)		—		—		—		—		—

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(1)	Pursuant to Mr. Transier’s employment agreement, Mr. Transier would receive (i) a payment of three times the sum of his annual salary and his average bonus for the last two years and (ii) the standard health and welfare benefits available to our employees for three years following a change in control. The amount for the health and welfare benefits is estimated based on health and welfare benefit costs for 2009.
(2)	Calculated as the in-the-money value of unvested stock options as of December 31, 2009.
(3)	Calculated as the value of unvested restricted stock awards as of December 31, 2009.
(4)	Pursuant to change in control termination benefits agreements, each executive vice president would receive (i) a payment of two times the sum of his annual salary and his average bonus for the last three years and (ii) the standard health and welfare benefits available to our employees for 18 months following a change in control. Such benefits are payable only upon termination, as defined, upon a change in control. The amount for the health and welfare benefits is estimated based on health and welfare benefit costs for 2009.

Employment, Change in Control and Severance Agreements

Chief Executive Officer

Mr. Transier is covered by an employment agreement with an annual salary of $800,000, payable in cash or stock at his election. Under the employment agreement, Mr. Transier is also eligible for annual bonus consideration of up to 200% of base pay, all or any portion of which may be awarded in the sole discretion of our board of directors on advice of its Compensation Committee. The Compensation Committee amended Mr. Transier’s employment agreement during 2008 to extend the term through May 31, 2011 and include minor technical corrections to comply with current U.S. tax regulations.

Mr. Transier’s employment agreement also requires the payment on termination of employment during the contract term (i) at our election other than as a result of the executive’s misconduct or disability or (ii) at the executive’s election following a “corporate change” or a breach of the employment agreement by us, of three times the executive’s most recent annual salary and deemed bonus (the average bonus paid during the most recent two years). In addition, all unvested employee restricted common stock and options would vest upon any such termination.

If the chief executive officer was to receive an excess parachute payment as defined in Section 280G of the Code, which would be subject to excise tax, we are required under the agreement to reimburse all such tax payable by him plus any additional excise and income taxes related to the reimbursement.

For purposes of Mr. Transier’s agreement, a “corporate change” includes: (i) the acquisition by any person, other than the Company or its affiliates, of 30% or more of our combined voting power resulting in a change of a majority of the members of the board; (ii) the replacement of a majority of the directors under certain circumstances during a two-year period; and (iii) the consummation of certain mergers or approval of a plan for the sale or disposition of substantially all of our assets.

Other Executive Officers

Each of our executive vice presidents holds stock options and restricted stock grants as to which conditions to full vesting (and, therefore, lapse of forfeiture restrictions) have not occurred. If a “Change in Control” occurs, all vesting requirements will be accelerated such that options held by executive officers to purchase approximately 1.7 million shares will become exercisable in full and all restrictions on approximately 2.0 million restricted shares will lapse in full.

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Under the terms of the options, a “Change in Control” is defined to include (i) a merger, reorganization or consolidation in which we are acquired by another person or entity (other than a holding company formed by the Company); (ii) the dissolution or liquidation of the Company; (iii) any transaction where any person or entity acquires ownership or control of 30% or more of the outstanding shares and as a result the persons who were directors of the Company before the transaction cease to constitute a majority of the board; (iv) a sale or transfer of substantially all of our assets in a transaction that requires stockholder approval; (v) during a period of two consecutive years, individuals who were directors at the beginning of the period, or whose election or nomination were approved by a vote of a majority of directors then still in office, cease for any reason to constitute a majority of the board; or (vi) any other event that a majority of the board shall determine constitutes a Change in Control.

Each of our executive vice presidents are covered by a change in control termination benefits agreement. Pursuant to these agreements, if the executive’s employment is terminated within 24 months following a change in control by us without cause or by the executive for good reason, the executive shall be entitled to receive the following payments:

• An amount equal to two times his annual base salary;

• An amount equal to two times the executive’s average bonus for the prior three years in which the date of termination occurs;

• A pro rata portion of his annual target bonus for the year in which such termination occurs; and

• Continuation of health benefits for a period of 18 months following the date of termination, with Endeavour continuing to pay the same portion of the premiums as it does for current employees.

The agreement provides for an excise tax gross-up for any excess parachute payments under Section 280G of the Code.

Equity Compensation Plan Information

The following table sets forth, as of December 31, 2009, information with respect to securities authorized for issuance under equity compensation plans.

					Number of
					securities
					remaining
					available for
	Number of		Weighted-		future issuance
	securities to be		average		under equity
	issued upon		exercise price		compensation
	exercise of		of outstanding		plans (excluding
	outstanding		options,		securities
	options, warrants		warrants and		reflected in
	and rights		rights		column (a))
	(a)		(b)		(c)
Equity compensation plans approved by security holders		3,361,522		1.98		6,178,962
Equity compensation plans not approved by security holders		850,000		1.43		—
Total		4,211,522		1.87		6,178,962

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The options issued outside of equity compensation plans approved by security holders were issued to officers upon commencement of employment with a term of five years from the date of grant and vest equally over three years.

Compensation Committee Report on Executive Compensation

We have reviewed and discussed with management the Compensation Discussion and Analysis as required by Item 402(b) of Regulation S-K. Based on the reviews and discussions, we recommend to the board of directors that the Compensation Discussion and Analysis referred to above be included in the Company’s 2010 Annual Meeting Proxy Statement.

John B. Connally III, Chairman
Nancy K. Quinn
Sheldon R. Erikson
Thomas D. Clark, Jr.

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Endeavour International Corporation

Part IV

Item 15. Exhibits and Financial Statement Schedules

(a) (1) and (2) Financial Statements and Financial Statement Schedules.

See our consolidated financial statements included in Item 8 herein.

(a) (3) Exhibits.

See “Index of Exhibits” herein which lists the documents filed as exhibits with this Annual Report on Form 10-K.

(b) Exhibits.

See “Index of Exhibits” herein which lists the documents filed as exhibits with this Annual Report on Form 10-K.

107

Endeavour International Corporation

Signatures

Pursuant to the requirements of Section 13 or 15(d) 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

By:	/s/ J. Michael KirkseyJ. Michael Kirksey
	Executive Vice President and Chief Financial Officer

Date: August 17, 2010

108

Endeavour International Corporation

Exhibit Index

Exhibit	Description
** 2.1	Purchase and Sale and Participation Agreement by and between Endeavour and Hillwood Energy Alabama LP. Schedules and Exhibits are omitted pursuant to Section 601(b)(2) of Regulation S-K. Endeavour agrees to furnish supplementally a copy of any omitted Schedule to the SEC upon request. (Incorporated by reference to Exhibit 2.1 of our Current Report on Form 8-K (Commission File No. 001-32212) filed on January 19, 2010).
** 2.2	Purchase and Sale Agreement between Endeavour and Cohort Energy Company. Schedules and Exhibits are omitted pursuant to Section 601(b)(2) of Regulation S-K. Endeavour agrees to furnish supplementally a copy of any omitted Schedule to the SEC upon request. (Incorporated by reference to Exhibit 2.1 of our Current Report on Form 8-K (Commission File No. 001-32212) filed on January 19, 2010).
3.1(a)	Amended and Restated Articles of Incorporation (Incorporated by reference to Exhibit 3.2 of our Quarterly Report on Form 10-Q (Commission File No. 001-32212) for the quarter ended June 30, 2004).
3.1(b)	Certificate of Amendment dated June 1, 2006 (Incorporated by reference to Exhibit 4.2 of our Registration Statement on Form S-3 (Commission File No. 333-139304) filed on December 13, 2006).
3.2(a)	Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.4 to our Current Report on Form 8-K (Commission File No. 001-32212) filed on November 6, 2006).
3.2(b)	Amendment to Amended and Restated By-laws dated December 12, 2007 by Endeavour International Corporation (Incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K (Commission File No. 001-32212) filed on December 13, 2007).
3.3	Amended and Restated Certificate of Designation of Series B Preferred Stock filed February 26, 2004 (Incorporated by reference to Exhibit 3.3 of our Quarterly Report on Form 10-Q (Commission File No. 001-32212) for the quarter ended June 30, 2004).
3.4	Specimen of Common Stock Certificate (Incorporated by reference to Exhibit 3.7 of our Quarterly Report on Form 10-Q (Commission File No. 001-32212) for the quarter ended June 30, 2004).
3.5	Certificate of Designation of Series A Preferred Stock of Endeavour International Corporation (Incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K (Commission File No. 001-32212) filed on November 6, 2006).

109

Endeavour International Corporation

Exhibit Index

Exhibit	Description
3.6(a)	Certificate of Designation of Series C Preferred Stock of Endeavour International Corporation, (Incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K (Commission File No. 001-32212) filed on November 6, 2006).
3.6(b)	Amendment to Certificate of Designation of Series C Preferred Stock of Endeavour International Corporation, dated November 17, 2009 (Incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K (Commission File No. 001-32212) filed on November 23, 2009).
3.6(c)	Amendment to Certificate of Designation of Series C Preferred Stock of Endeavour International Corporation, dated March 10, 2010 (Incorporated by reference to Exhibit 3.6(c) to our Annual Report on Form 10-K (Commission File No. 001-32212) for the year ended December 31, 2009).
3.7	Certificate of Designation of Series D Preferred Stock of Endeavour International Corporation (Incorporated by reference to Exhibit 3.3 to our Current Report on Form 8-K (Commission File No. 001-32212) filed on November 6, 2006).
4.1 (a)	Warrants to Purchase Common Stock issued to Trident Growth Fund, LP dated July 29, 2003 (warrant # 2003-3) (Incorporated by reference to Exhibit 4.7 of our Annual Report on Form 10-KSB (Commission File No. 000-33439) for the year ended December 31, 2003).
4.1 (b)	First Amendment to Warrants to Purchase Common Stock dated February 26, 2004 (warrant # 2003-3) (Incorporated by reference to Exhibit 4.7 of our Annual Report on Form 10-KSB (Commission File No. 000-33439) for the year ended December 31, 2003).
4.2	Warrant to Purchase 25,000 Shares of Common Stock issued to Trident Growth Fund, L.P. (Incorporated by reference to Exhibit 10.11 of our Annual Report on Form 10-KSB (Commission File No. 000-33439) for the Year Ended December 31, 2002).
4.3	Indenture, dated as of January 20, 2005, between Endeavour International Corporation and Wells Fargo Bank, National Association, as Trustee, relating to the 6.00% Convertible Senior Notes due 2012 (Incorporated by reference to our Exhibit 4.1 to our Current Report on Form 8-K (Commission File No. 001-32212) filed on January 24, 2005).
4.4	Registration Rights Agreement dated January 24, 2008 by and between Endeavour International Corporation and Smedvig QIF Plc (Incorporated by reference to Exhibit 4.2 to our Current Report on Form 8-K (Commission File No. 001-32212) filed on January 24, 2008).
4.5	Trust Deed dated January 24, 2008 by and among Endeavour International Corporation, Endeavour Energy Luxembourg S.a.r.l. and BNY Corporate Trustee Services Limited, as trustee (Incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K (Commission File No. 001-32212) filed on January 24, 2008).

110

Endeavour International Corporation

Exhibit Index

Exhibit	Description
4.6	Common Stock Purchase Warrant dated February 26, 2004 issued to Sanders Morris Harris Inc. in connection with the private placement of 25,000,000 shares of Endeavour’s common stock. (Incorporated by reference to Exhibit 10.24 of our Annual Report on Form 10-KSB (Commission File No. 000-33439) for the year ended December 31, 2003).
†10.1	2004 Incentive Plan, effective February 26, 2004 (Incorporated by reference to Exhibit 10.36 of our Annual Report on Form 10-KSB (Commission File No. 000-33439) for the year ended December 31, 2003).
†10.2	2007 Incentive Plan (Incorporated by reference to Exhibit 10.1 to our Quarterly Report (Commission file No. 001-32212) for the quarter ended June 30, 2007).
†10.3	Second Amended and Restated Employment Agreement by and between William L. Transier and the Company (Incorporated by reference to Exhibit 10.4 to our Annual Report on Form 10-K (Commission File No. 001-32212) for the year ended December 31, 2008).
†10.4	Employment Offer Letter to Carl Grenz, dated August 15, 2008 (Incorporated by reference to Exhibit 10.1 of our Quarterly Report on Form 10-Q (Commission File No. 001-32212) for the quarter ended September 30, 2008).
†10.5	Form of Change in Control on Termination of Benefits Agreement (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K (Commission File No. 001-32212) filed on February 15, 2008).
†10.6	Form of Amended Change in Control Termination Benefits Agreement between the Company and Kirksey, Grenz, Williams and Stover, individually (Incorporated by reference to Exhibit 10.8 of our Annual Report on Form 10-K for the year ended December 31, 2008).
†10.7	Change in Control and Termination Benefits Agreement dated January 11, 2010, by and between Endeavour International Corporation and James Joseph Emme (Incorporated by reference to Exhibit 10.7 to our Annual Report on Form 10-K (Commission File No. 001-32212) for the year ended December 31, 2009).
†10.8	Form of Restricted Stock Award Agreement. (Incorporated by reference to Exhibit 10.39 of our Annual Report on Form 10-KSB (Commission File No. 000-33439) for the year ended December 31, 2003).
†10.9	Form of Nonstatutory Stock Option Agreement between Endeavour International Corporation and William L. Transier, John N. Seitz, Michael D. Cochran, Bruce H. Stover, H. Don Teague and Robert L. Thompson, individually (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K (Commission File No. 001-32212) filed on January 5, 2005.)

111

Endeavour International Corporation

Exhibit Index

Exhibit	Description
†10.10	Form of Stock Grant Agreement between Endeavour International Corporation and William L. Transier, John N. Seitz, Bruce H. Stover and Robert L. Thompson, individually (Incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K (Commission File No. 001-32212) filed on January 5, 2005).
10.11(a)	Subscription and Registration Rights Agreement, dated October 19, 2006, by and among Endeavour International Corporation and the Investors party thereto (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K (Commission File No. 001-32212) filed on October 25, 2006).
10.11(b)	Amendment No. 1 to Subscription and Registration Rights Agreement, January 29, 2010, by and among Endeavour International Corporation and the Investors party thereto (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K (Commission File No. 001-32212) filed on February 1, 2010).
**10.12	Final Participation Agreement between Endeavour and Cohort Energy Company (Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K (Commission File No. 001-32212) filed on January 19, 2010).
10.13(a)	$225,000,000 Secured Revolving Loan and Letter of Credit Facility Agreement (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K (Commission File No. 001-32212) filed on November 6, 2006).
10.13(b)	Waiver and consent to $225,000,000 Secured Revolving Loan and Letter of Credit Facility Agreement (Incorporated by reference to Exhibit 4.8(b) to our Annual Report on Form 10-K (Commission File No. 001-32212) for the year ended December 31, 2006).
10.13(c)	Waiver and consent to $225,000,000 Secured Revolving Loan and Letter of Credit Facility Agreement, dated as of February 5, 2010 (Incorporated by reference to Exhibit 10.13(c) to our Annual Report on Form 10-K (Commission File No. 001-32212) for the year ended December 31, 2009).
10.14(a)	Second Lien Credit and Guarantee Agreement (Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K/A (Commission File No. 001-32212) filed on November 7, 2006).
10.14(b)	Amendment to Second Lien Credit and Guarantee Agreement (Incorporated by reference to Exhibit 4.9(b) to our Annual Report on Form 10-K (Commission File No. 001-32212) for the year ended December 31, 2006).
10.15(a)	Junior Facility Agreement dated January 22, 2008 by and among Endeavour International Holding B.V., as borrower, Endeavour International Corporation and certain of its affiliates party thereto, as guarantors, BNP Paribas and Bank of Scotland Plc, as the mandated lead arrangers and original lenders, and BNP Paribas, as agent and security trustee (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K (Commission File No. 001-32212) filed on January 28, 2008).

112

Endeavour International Corporation

Exhibit Index

Exhibit	Description
10.15(b)	Amendment to Junior Facility Agreement dated February 5, 2010 by and among Endeavour International Holding B.V., as borrower, Endeavour International Corporation and certain of its affiliates party thereto, as guarantors, BNP Paribas and Bank of Scotland Plc, as the mandated lead arrangers and original lenders, and BNP Paribas, as agent and security trustee (Incorporated by reference to Exhibit 10.15(b) to our Annual Report on Form 10-K (Commission File No. 001-32212) for the year ended December 31, 2009).
†10.16	Restricted Stock Award Agreement between Endeavour International Corporation and J. Michael Kirksey dated September 26, 2007 (Incorporated by reference to Exhibit 10.31 to our Annual Report on Form 10-K (Commission File No. 001-32212) for the year ended December 31, 2007).
†10.17	Restricted Stock Award Agreement between Endeavour International Corporation and John G. Williams dated October 1, 2007 (Incorporated by reference to Exhibit 10.32 to our Annual Report on Form 10-K (Commission File No. 001-32212) for the year ended December 31, 2007).
†10.18	Stock Option Agreement between Endeavour International Corporation and J. Michael Kirksey dated September 26, 2007 (Incorporated by reference to Exhibit 10.33 to our Annual Report on Form 10-K (Commission File No. 001-32212) for the year ended December 31, 2007).
†10.19	Stock Option Agreement between Endeavour International Corporation and John G. Williams dated October 1, 2007 (Incorporated by reference to Exhibit 10.34 to our Annual Report on Form 10-K (Commission File No. 001-32212) for the year ended December 31, 2007).
†10.20	Stock Option Agreement between Endeavour International Corporation and Carl D. Grenz dated November 3, 2008 (Incorporated by reference to Exhibit 10.22 to our Annual Report on Form 10-K (Commission File No. 001-32212) for the year ended December 31, 2008).
†10.21	Stock Option Agreement between Endeavour International Corporation and Carl D. Grenz dated November 3, 2008 (Incorporated by reference to Exhibit 10.23 to our Annual Report on Form 10-K (Commission File No. 001-32212) for the year ended December 31, 2008).
†10.22	Restricted Stock Award Agreement between Endeavour International Corporation and Carl D. Grenz dated November 3, 2008 (Incorporated by reference to Exhibit 10.24 to our Annual Report on Form 10-K (Commission File No. 001-32212) for the year ended December 31, 2008).
†10.23	Restricted Stock Award Agreement between Endeavour International Corporation and Carl D. Grenz dated November 3, 2008 (Incorporated by reference to Exhibit 10.25 to our Annual Report on Form 10-K (Commission File No. 001-32212) for the year ended December 31, 2008).

113

Endeavour International Corporation

Exhibit Index

Exhibit	Description
†10.24	Agreement for the Sale and Purchase of the Endeavour Energy Norge AS dated April 2, 2009 (Incorporated by reference to Exhibit 4.1 of our Quarterly Report on Form 10-Q (Commission File No. 001-32212) for the quarter ended March 31, 2009).
†10.25	Form of Stock Redemption Agreement dated November 17, 2009 by and among Endeavour International Corporation and the holders of its Series C Preferred Stock (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K (Commission File No. 001-32212) filed on November 23, 2009).
10.26(a)	Form of Note Agreement dated November 17, 2009 by and among Endeavour International Corporation and the holders of its Series C Preferred Stock (Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K (Commission File No. 001-32212) filed on November 23, 2009).
10.26(b)	Amendment to Note Agreement dated November 17, 2009 by and among Endeavour International Corporation and the holders of its Series C Preferred Stock, dated March 10, 2010 (Incorporated by reference to Exhibit 10.26(b) to our Annual Report on Form 10-K (Commission File No. 001-32212) for the year ended December 31, 2009).
10.27	Common Stock Purchase Agreement, dated as of February 4, 2010, by and between Endeavour International Corporation and the purchasers named therein ((Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K (Commission File No. 001-32212) filed on February 5, 2010).
10.28	Registration Rights Agreement, dated as of February 4, 2010, by and between Endeavour International Corporation and the purchasers named therein (Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K (Commission File No. 001-32212) filed on February 5, 2010).
12.1	Computation of Ratios of Earnings to Fixed Charges (Incorporated by reference to Exhibit 12.1 to our Annual Report on Form 10-K (Commission File No. 001-32212) for the year ended December 31, 2009).
12.2	Computation of Ratios of Earnings to Fixed Charges and Preference Securities Dividends (Incorporated by reference to Exhibit 12.2 to our Annual Report on Form 10-K (Commission File No. 001-32212) for the year ended December 31, 2009).
21.1	List of Subsidiaries (Incorporated by reference to Exhibit 21.1 to our Annual Report on Form 10-K (Commission File No. 001-32212) for the year ended December 31, 2009).
23.1	Consent of Independent Registered Public Accounting Firm – KPMG LLP (Incorporated by reference to Exhibit 23.1 to our Annual Report on Form 10-K (Commission File No. 001-32212) for the year ended December 31, 2009).
23.2	Consent of Independent Reserve Engineers – Netherland, Sewell & Associates, Inc. (Incorporated by reference to Exhibit 23.2 to our Annual Report on Form 10-K (Commission File No. 001-32212) for the year ended December 31, 2009).
*31.1	Certification of William L. Transier, Chief Executive Officer, pursuant to Rule 13a-14(a) of the Securities and Exchange Act of 1934, as amended.
*31.2	Certification of J. Michael Kirksey, Chief Financial Officer, pursuant to Rule 13a-14(a) of the Securities and Exchange Act of 1934, as amended.
‡32.1	Certification of William L. Transier, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

114

Endeavour International Corporation

Exhibit Index

Exhibit	Description
‡32.2	Certification of J. Michael Kirksey, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1	Report of Netherland, Sewell & Associates, Inc., Independent Petroleum Engineers and Geologists (Incorporated by reference to Exhibit 99.1 to our Annual Report on Form 10-K (Commission File No. 001-32212) for the year ended December 31, 2009).

*	Filed herewith.
‡	Furnished herewith.
†	Identifies management contracts and compensatory plans or arrangements.
**	Portions of this exhibit have been omitted pursuant to a request for confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934, and the omitted material has been separately filed with the Securities and Exchange Commission.

115