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Endeavor Energy Resources First Quarter 2020 Results

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   |    Thursday,May 14,2020

Endeavor Energy Resources LP reported its Q1 2020 results, including touting improvements in well cost and drilling efficiency.

First Quarter 2020 Highlights

  • Average daily net production of approximately 174.1 MBoe per day (68% oil) during 1Q20, a 14% increase over Q4 2019 and an 85% increase from 1Q19
  • Lease operating expense per Boe decreased to $7.15, a 17% decrease as compared to 1Q19
  • Improved cycle times across the Midland Basin. Spud-to-rig release cycle time decreased by 18%, and the number of stages completed per day improved by 6% in 1Q20, in each case, as compared to 1Q19

2020 Outlook Highlights

  • Reducing rig count to one operated horizontal rig by mid-May 2020 for the remainder of the year while suspending completions activity from May 2020 through August 2020
  • Full-year 2020 average production volumes are expected to be higher than average full-year 2019 production volumes even after giving effect to voluntary production curtailments
  • Initiating a partial voluntary curtailment strategy in response to lower oil prices
  • Beginning April 2020, the Company implemented fixed cost reduction measures by reducing the Service Division workforce and reducing the salaries of its service division employees and all Endeavor executives
  • Ongoing negotiations with service providers to reduce pricing

Operational Update

1Q20 total net production was 15.8 MMBoe, an 87% increase from 8.5 MMBoe in 1Q19. Total net production increased 13% from 14.0 MMBoe as compared to 4Q19.

During 1Q20, the Company spudded 53, and placed on production 45, gross operated horizontal wells. Endeavor’s working interest in operated horizontal wells placed on production was approximately 96%, with an average completed lateral length of approximately 9,800 feet.

Given recent commodity price volatility and recent changes in the macroeconomic outlook, Endeavor began reducing activity effective March 2020 and, to date, Endeavor has reduced its number of completions crews from four to zero and expects to drop to one drilling rig by mid-May 2020. Drilling, completing and equipping investment for 2020 is expected to decrease through a reduction in the number of wells spudded and completed and lower well costs. In addition, as a result of the COVID-19 pandemic, which has caused significant deterioration in the oil markets with anticipated storage capacity constraints and weak wellhead pricing, the Company is considering modest voluntary production curtailments dependent on crude oil prices. Endeavor will continue to review its development plans and make necessary adjustments.

Capital Investment

Total capital expenditures during 1Q20 were $474.3 million compared to $385.8 million for 1Q19. During 1Q20, approximately $406.6 million of the Company’s capital investment was related to its DC&E of operated and non-operated wells, $25.0 million was related to leasehold additions and acquisitions, and $42.7 million was related to additions to other property and equipment including, water disposal and electrical facilities.

During 1Q2020, the Company improved its DC&E costs per foot. DC&E costs averaged approximately $725 per foot, representing an 8% reduction from 2019 levels.

Updated Full-Year 2020 Outlook

A series of unprecedented events impacting the oil and natural gas industry have occurred since the beginning of 2020, including the worldwide destruction of demand for crude oil resulting from the outbreak of the novel coronavirus, COVID-19. In response, on March 26, 2020, Endeavor announced its plans to reduce its operated drilling program from ten to two rigs by the end of the second quarter of 2020.

Given the further deterioration in the oil markets and continued demand destruction, Endeavor is planning to further reduce its rig count to one operated rig by mid-May 2020. The Company will continue to monitor the near and long-term commodity price environment and may further adjust its development plan should it deem appropriate.

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