W&T Offshore Reports First Quarter Adjusted Earnings of $1.10 per Share
HOUSTON, May 6 /PRNewswire-FirstCall/ -- W&T Offshore, Inc. (NYSE: WTI) today provides financial and operational results for the first quarter 2008. Some of the highlights for the first quarter 2008 include:
-- Revenues increased 45% to a record $356.5 million and Adjusted EBITDA increased 66% to a record $279.2 million for the first quarter 2008 -- Production was 5.1 million barrels of oil equivalent ("BOE") (30.8 billion cubic feet equivalent "Bcfe"), which exceeded the high end of guidance -- Oil sales represent 57% of our revenue in first quarter 2008 compared to 40% in the same quarter last year -- 100% success in the exploration drilling program, successfully drilling four conventional shelf exploration wells -- Drilled four additional exploration wells after the close of the first quarter for a 100% success rate -- Adjusted earnings per share increased 279% to an all time record quarter of $1.10
Tracy W. Krohn, Chairman and Chief Executive Officer, stated, "We are very pleased with our financial and operating results. As our numbers suggest, we are truly benefiting from higher commodity prices and we continue to see the benefits from the Kerr-McGee transaction and the efforts we are making in our operations," continued Mr. Krohn. "So far this year, our exploration drilling program has been 100% successful. We believe that our continued level of high success is further evidence that the Gulf of Mexico continues to be a basin with above average exploration success rates for W&T. Additionally, with our large inventory of high quality prospects and a highly experienced operations team, we believe we can maintain our attractive success rates in this basin. Furthermore, our drilling activity has recently increased further and we have eleven rigs running today and believe we are on track to achieve our corporate goals for 2008."
Revenues, Net Income and EPS: Net income for the first quarter of 2008 was $79.8 million, or $1.05 per diluted share, on revenues of $356.5 million compared to net income for the same quarter of 2007 of $13.0 million, or $0.17 per diluted share, on revenues of $246.5 million. Net income increased in the first quarter 2008 principally due to a higher realized price of $11.57 per thousand cubic feet equivalent ("Mcfe"), versus $7.67 per Mcfe in 2007. Operating income for the first quarter of 2008 also reflects the impact of a $6.2 million unrealized derivative loss ($4.1 million after-tax), or $0.05 per diluted share, while operating income for the first quarter of 2007 included an unrealized loss of $13.9 million ($9.0 million after-tax), or $0.12 per diluted share. Without the effect of these unrealized derivative losses, net income for the first quarter 2008 would have been $83.9 million, or $1.10 per diluted share, and net income for the corresponding quarter of 2007 would have been $22.1 million, or $0.29 per diluted share. See "Non-GAAP Information" later in this press release.
Cash Flow from Operating activities and Adjusted EBITDA: EBITDA and Adjusted EBITDA are non-GAAP measures and are hereinafter defined in "Non-GAAP Information" later in this press release. Net cash provided by operating activities for the three months ended March 31, 2008 increased 65% to $242.4 million from $146.7 million in the first three months of 2007. The increase was associated with higher sales as a result of higher realized prices. First quarter 2008 Adjusted EBITDA was $279.2 million compared to $168.7 million during the prior year's first quarter, or a 66% increase.
Production and Prices: We sold 17.7 billion cubic feet ("Bcf") of natural gas at an average price of $8.70 per thousand cubic feet ("Mcf") in the first quarter of 2008. We also sold 2.2 million barrels ("MMBbls") of oil and natural gas liquids at an average price of $92.52 per barrel ("Bbl") during the same time period. On a natural gas equivalent ("Bcfe") basis, we sold 30.8 Bcfe at an average price of $11.57 per Mcfe. For the first quarter of 2007, we sold 20.4 Bcf of natural gas at an average price of $7.20 per Mcf and 2.0 MMBbls of oil and natural gas liquids at an average price of $51.00 per Bbl. On a Bcfe basis, we sold 32.1 Bcfe at an average price of $7.67 per Mcfe. Volumes in 2008 were lower due to natural reservoir declines, partially offset by an increase from our exploration and development drilling efforts.
Lease Operating Expenses: LOE for the first quarter of 2008 decreased to $49.8 million, or $1.62 per Mcfe, from $63.6 million, or $1.98 per Mcfe, in the first quarter of 2007. The decrease in LOE is primarily due to lower workover expenses, decreased facility expenditures, reduced insurance premiums, and the completion of our hurricane remediation efforts at the end of 2007.
Depreciation, depletion, amortization and accretion: DD&A increased to $145.5 million, or $4.72 per Mcfe, in the first quarter of 2008 from $124.2 million, or $3.87 per Mcfe, in the same period of 2007. DD&A increased due to capital expenditures, increased future development costs and higher estimated asset retirement obligations, partially offset by the addition of reserves from the acquisition of the remaining interest in the Ship Shoal 349/359 "Mahogany" field.
Capital Expenditures and Operations Update: During the first quarter of 2008, the Company was 100% successful in the drilling of four conventional shelf exploration wells. For the quarter ended March 31, 2008, capital expenditures for oil and gas properties of $245.8 million included $116.7 million to acquire the remaining interest in the Ship Shoal 349/359 "Mahogany," $74.4 million for development activities, $41.3 million for exploration, and $13.4 million for other capital items.
Drilling Highlights: In the first quarter of 2008, the Company drilled or participated in the drilling of four conventional shelf exploration wells, all of which were commercially successful.
Lease Name/Well Category Working Interest % Ship Shoal 300 A-2ST Exploration/Shelf 100% Ship Shoal 314 A-4ST Exploration/Shelf 100% Ship Shoal 315 A-3ST Exploration/Shelf 100% South Timbalier 217 A-3 Exploration/Shelf 50%
After the close of the quarter, the Company drilled or participated in the drilling of four commercially successful exploration wells:
Lease Name/Well Category Working Interest % Eugene Island 175 H-5 Exploration/Shelf 25% High Island A-376 Exploration/Shelf 30% Ship Shoal 224 E-18 Exploration/Deep Shelf 47% Ship Shoal 314 A-2ST Exploration/Shelf 75%
Outlook: Guidance for the second quarter and full year 2008 is shown in the table below, which represents the Company's best estimate of likely future results, and is affected by the factors described below in "Forward-Looking Statements."
Second Quarter and Full-Year 2008 Production and Cost Guidance: Revised Estimated Production Second Quarter Prior Full-Year Full-Year 2008 2008 2008 Crude oil (MMBbls) 2.2 - 2.4 7.4 - 9.4 8.1 - 9.9 Natural gas (Bcf) 17.2 - 18.5 65.9 - 83.8 66.2 - 80.6 Total (MMBoe) 5.1 - 5.5 18.3 - 23.3 19.2 - 23.3 Total (Bcfe) 30.7 - 32.9 110.0 - 140.0 115.0 - 140.0 Operating Expenses ($ in millions, except as noted) Second Quarter Full-Year 2008 2008 Lease operating expenses $55 - $65 $204 - $243 Gathering, transportation & production taxes $8 - $10 $27 - $33 General and administrative $12 - $14 $45 - $52 Income tax rate, % deferred 34%, 60% 34%, 60%
Conference Call Information: W&T will hold a conference call to discuss financial and operational results on Tuesday, May 6, 2008 at 11:00 a.m. Eastern Time / 10:00 a.m. Central Time. To participate, dial (303) 205-0033 a few minutes before the call begins. The call will also be broadcast live over the Internet from the Company's Web site at http://www.wtoffshore.com. A replay of the conference call will be available approximately two hours after the end of the call until Tuesday, May 13, 2008, and may be accessed by calling (303) 590-3000 and using the pass code 11112873.
About W&T Offshore
Founded in 1983, W&T Offshore is an independent oil and natural gas company focused primarily in the Gulf of Mexico, including exploration in the deepwater and deep shelf regions, where it has developed significant technical expertise. W&T has grown through acquisition, exploitation and exploration and now holds working interests in over 155 fields in federal and state waters and a majority of its daily production is derived from wells it operates. For more information on W&T Offshore, please visit its Web site at http://www.wtoffshore.com
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements reflect our current views with respect to future events, based on what we believe are reasonable assumptions. No assurance can be given, however, that these events will occur. These statements are subject to risks and uncertainties that could cause actual results to differ materially including, among other things, market conditions, oil and gas price volatility, uncertainties inherent in oil and gas production operations and estimating reserves, unexpected future capital expenditures, competition, the success of our risk management activities, governmental regulations, uncertainties and other factors discussed in our Annual Report on 10-K for the year ended December 31, 2007 (http://www.sec.gov).
Contacts: Manuel Mondragon, Vice President of Finance firstname.lastname@example.org 713-297-8024 Ken Dennard / email@example.com Lisa Elliott / firstname.lastname@example.org DRG&E / 713-529-6600 W&T OFFSHORE, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Income (Unaudited) Three Months Ended March 31, 2008 2007 (In thousands, except per share data) Revenues $356,495 $246,539 Operating costs and expenses: Lease operating expenses (1) 49,822 63,640 Gathering, transportation costs and production taxes 8,821 4,257 Depreciation, depletion and amortization 135,969 118,754 Asset retirement obligation accretion 9,519 5,447 General and administrative expenses (1) 12,575 11,907 Derivative loss 12,304 11,971 Total costs and expenses 229,010 215,976 Operating income 127,485 30,563 Interest expense: Incurred 14,378 17,759 Capitalized (5,673) (6,828) Other income 2,440 413 Income before income taxes 121,220 20,045 Income taxes 41,414 7,016 Net income $79,806 $13,029 Earnings per common share: Basic $1.05 $0.17 Diluted 1.05 0.17 Weighted average shares outstanding: Basic 75,903 75,787 Diluted 75,999 75,804 Consolidated Cash Flow Information Net cash provided by operating activities $242,399 $146,661 Capital expenditures-oil and gas properties 245,834 134,276 Other Financial Information EBITDA $272,973 $154,764 Adjusted EBITDA 279,158 168,652 (1) The amounts for 2007 reflect a reclassification of certain industry related reimbursements for overhead expenses from joint interest owners from lease operating expenses to general and administrative expenses in order to better match the underlying reimbursement with the actual cost recorded. The effect of this reclassification had no impact on net income. W&T OFFSHORE, INC. AND SUBSIDIARIES Condensed Operating Data (Unaudited) Three Months Ended March 31, 2008 2007 Net sales: Natural gas (MMcf) 17,684 20,402 Oil (MBbls) 2,189 1,953 Total natural gas and oil (MBoe) (1) 5,136 5,354 Total natural gas and oil (MMcfe) (2) 30,816 32,122 Average daily equivalent sales (MBoe/d) 56.4 59.5 Average daily equivalent sales (MMcfe/d) 338.6 356.9 Average realized sales prices (Unhedged): Natural gas ($/Mcf) $8.70 $7.20 Oil ($/Bbl) 92.52 51.00 Barrel of oil equivalent ($/Boe) 69.40 46.04 Natural gas equivalent ($/Mcfe) 11.57 7.67 Average realized sales prices (Hedged): (3) Natural gas ($/Mcf) $8.70 $7.23 Oil ($/Bbl) 89.79 51.68 Barrel of oil equivalent ($/Boe) 68.23 46.40 Natural gas equivalent ($/Mcfe) 11.37 7.73 Average per Boe ($/Boe): Lease operating expenses (4) $9.70 $11.89 Gathering and transportation costs and production taxes 1.72 0.80 Depreciation, depletion, amortization and accretion 28.33 23.20 General and administrative expenses (4) 2.45 2.22 Net cash provided by operating activities 47.19 27.39 Adjusted EBITDA 54.35 31.50 Average per Mcfe ($/Mcfe): Lease operating expenses (4) $1.62 $1.98 Gathering and transportation costs and production taxes 0.29 0.13 Depreciation, depletion, amortization and accretion 4.72 3.87 General and administrative expenses (4) 0.41 0.37 Net cash provided by operating activities 7.87 4.57 Adjusted EBITDA 9.06 5.25 (1) One million barrels of oil equivalent (MMBoe), one thousand barrels of oil equivalent (Mboe) and one barrel of oil equivalent (Boe) are determined using the ratio of one Bbl of crude oil, condensate or natural gas liquids to six Mcf of natural gas (totals may not add due to rounding). (2) One billion cubic feet equivalent (Bcfe), one million cubic feet equivalent (MMcfe) and one thousand cubic feet equivalent (Mcfe) are determined using the ratio of six Mcf of natural gas to one Bbl of crude oil, condensate or natural gas liquids (totals may not add due to rounding). (3) Data for 2008 and 2007 includes the effects of our commodity derivative contracts that do not qualify for hedge accounting. (4) The amounts for 2007 reflect a reclassification of certain industry related reimbursements for overhead expenses from joint interest owners from lease operating expenses to general and administrative expenses in order to better match the underlying reimbursement with the actual cost recorded. The effect of this reclassification had no impact on net income. W&T OFFSHORE, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Unaudited) March 31, December 31, 2008 2007 (1) (In thousands, except share data) Assets Current assets: Cash and cash equivalents $276,827 $314,050 Receivables 184,002 150,373 Prepaid expenses and other assets 35,158 43,645 Total current assets 495,987 508,068 Property and equipment - at cost: Oil and gas properties and equipment (full cost method, of which $253,382 at March 31, 2008 and $278,947 at December 31, 2007 were excluded from amortization) 4,087,145 3,805,208 Furniture, fixtures and other 10,734 10,267 Total property and equipment 4,097,879 3,815,475 Less accumulated depreciation, depletion and amortization 1,688,713 1,552,744 Net property and equipment 2,409,166 2,262,731 Restricted deposits for asset retirement obligations and other assets 29,650 29,780 Total assets $2,934,803 $2,800,579 Liabilities and Shareholders' Equity Current liabilities: Current maturities of long-term debt $3,000 $3,000 Accounts payable 157,564 148,348 Undistributed oil and gas proceeds 48,404 47,911 Asset retirement obligations 30,366 19,749 Accrued liabilities 41,007 65,328 Income taxes 18,643 12,975 Total current liabilities 298,984 297,311 Long-term debt, less current maturities - net of discount 651,366 651,764 Asset retirement obligations, less current portion 462,616 438,932 Deferred income taxes 281,935 255,097 Other liabilities 7,769 6,135 Commitments and contingencies Shareholders' equity: Common stock, $0.00001 par value; 118,330,000 shares authorized; issued and outstanding 76,367,771 and 76,175,159 shares at March 31, 2008 and December 31, 2007, respectively 1 1 Additional paid-in capital 368,889 365,667 Retained earnings 864,318 786,803 Accumulated other comprehensive loss (1,075) (1,131) Total shareholders' equity 1,232,133 1,151,340 Total liabilities and shareholders' equity $2,934,803 $2,800,579 (1) Certain reclassifications have been made to the December 31, 2007 Balance Sheet to conform to our current reporting practices. W&T OFFSHORE, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended March 31, 2008 2007 (In thousands) Operating activities: Net income $79,806 $13,029 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion, amortization and accretion 145,488 124,201 Amortization of debt issuance costs and discount on indebtedness 659 3,414 Share-based compensation related to restricted stock issuances 1,547 528 Unrealized derivative loss 6,185 13,888 Deferred income taxes 23,682 8,322 Other 88 50 Changes in operating assets and liabilities (15,056) (16,771) Net cash provided by operating activities 242,399 146,661 Investing activities: Acquisition of property interest (116,669) - Investment in oil and gas properties and equipment (129,165) (134,276) Purchases of furniture, fixtures and other, net (672) (540) Net cash used in investing activities (246,506) (134,816) Financing activities: Borrowings of long-term debt - 290,000 Repayments of long-term debt (750) (334,500) Dividends to shareholders (32,286) (2,277) Other (80) - Net cash used in financing activities (33,116) (46,777) Decrease in cash and cash equivalents (37,223) (34,932) Cash and cash equivalents, beginning of period 314,050 39,235 Cash and cash equivalents, end of period $276,827 $4,303 W&T OFFSHORE, INC. AND SUBSIDIARIES Non-GAAP Information
Certain financial information included in our financial results are not measures of financial performance recognized by accounting principles generally accepted in the United States, or GAAP. These non-GAAP financial measures are "Adjusted Net Income," "EBITDA," and "Adjusted EBITDA." Our management uses these non-GAAP measures in its analysis of our performance. These disclosures may not be viewed as a substitute for results determined in accordance with GAAP and are not necessarily comparable to non-GAAP performance measures, which may be reported by other companies.
Reconciliation of Net Income to Adjusted Net Income
"Adjusted Net Income" does not include the unrealized derivative (gain) loss and associated tax effects. Adjusted Net Income is presented because the timing and amount of the derivative items cannot be reasonably estimated and affect the comparability of operating results from period to period, and current periods to prior periods.
Three Months Ended March 31, 2008 2007 (In thousands, except per share amounts) (Unaudited) Net Income $79,806 $13,029 Unrealized derivative loss 6,185 13,888 Income tax adjustment for above items (2,113) (4,861) Adjusted net income $83,878 $22,056 Adjusted earnings per share-diluted $1.10 $0.29 Reconciliation of Net Income to Adjusted EBITDA
We define EBITDA as net income plus income tax expense, net interest expense, and depreciation, depletion, amortization and accretion. Adjusted EBITDA excludes the unrealized gain or loss related to our open derivative contracts. Although not prescribed under generally accepted accounting principles, we believe the presentation of EBITDA and Adjusted EBITDA provide useful information regarding our ability to service debt and to fund capital expenditures and help our investors understand our operating performance and make it easier to compare our results with those of other companies that have different financing, capital and tax structures. EBITDA and Adjusted EBITDA should not be considered in isolation from or as a substitute for net income, as an indication of operating performance or cash flows from operating activities or as a measure of liquidity. EBITDA and Adjusted EBITDA, as we calculate them, may not be comparable to EBITDA and Adjusted EBITDA measures reported by other companies. In addition, EBITDA and Adjusted EBITDA do not represent funds available for discretionary use.
The following table presents a reconciliation of our consolidated net income to consolidated EBITDA and Adjusted EBITDA.
Three Month Ended March 31, 2008 2007 (In thousands) (Unaudited) Net Income $79,806 $13,029 Income taxes 41,414 7,016 Net interest expense 6,265 10,518 Depreciation, depletion, amortization and accretion 145,488 124,201 EBITDA 272,973 154,764 Adjustments: Unrealized derivative loss 6,185 13,888 Adjusted EBITDA $279,158 $168,652
SOURCE W&T Offshore, Inc.
Released May 6, 2008