W&T Offshore Reports Third Quarter 2007 Financial and Operational Results
Provides Revised Production and Expense Guidance for the Fourth Quarter
HOUSTON, Nov. 7 /PRNewswire-FirstCall/ -- W&T Offshore, Inc. (NYSE: WTI) announced today financial and operational results, including:
-- Production for the third quarter of 2007 increased 10% to 314 MMcfe per day compared to the third quarter of 2006 -- Production during the third quarter of 2007 was 42% oil and liquids -- Revenues for the third quarter of 2007 increased 20% to $255 million compared to the third quarter of 2006 -- For the first nine months of 2007, cash flow from operating activities increased 34% to $472.7 million and Adjusted EBITDA increased 31% to $567.6 million compared to the first nine months of 2006 -- Apparent high bidder on three Outer Continental Shelf (OCS) blocks offered in the Central Gulf of Mexico Lease Sale 205 held October 3, 2007 -- Increased borrowing availability under amended bank credit agreement from $300 million to $500 million
Revenues, Net Income and EPS: Net income for the third quarter of 2007 was $36.3 million, or $0.48 per diluted share, on revenue of $255.2 million, compared to net income for the same quarter in 2006 of $66.7 million, or $0.91 per diluted share. Net income for the third quarter of 2007 reflects the impact of a $6.4 million unrealized derivative loss ($4.2 million after-tax), or $0.05 per diluted share, while net income for the third quarter of 2006 included an unrealized derivative gain of $22.7 million. Without the effect of these unrealized derivative gains and losses, net income for the third quarter of 2007 would have been $40.5 million, or $0.53 per diluted share, and net income for the corresponding quarter of 2006 would have been $51.9 million, or $0.71 per diluted share. See "Non-GAAP Information" later in this release.
Net income for the nine months ended September 30, 2007 was $94.9 million, or $1.25 per diluted share ($1.46 per diluted share without the effect of the unrealized derivative loss and the loss on extinguishment of debt), on revenues of $774.3 million, compared to net income of $161.0 million or $2.35 per diluted share ($2.21 per diluted share without the effect of the unrealized derivative gain), on revenues of $536.1 million for the nine months ended September 30, 2006.
Cash Flow from Operating Activities and 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 nine months ended September 30, 2007 increased 34% to $472.7 million from $351.5 million in the first nine months of 2006. The increase was due to significantly higher revenues, partially offset by higher operating expenses. Adjusted EBITDA was $567.6 million for the nine months ended September 30, 2007, compared to $434.1 million for the prior nine-month period in 2006.
Production and Prices: Total production in the third quarter of 2007 was 16.8 billion cubic feet ("Bcf") of natural gas sold at an average price of $6.45 per thousand cubic feet ("Mcf") and 2.0 million barrels ("MMBbls") of oil sold at an average price of $72.72 per barrel ("Bbl"), or 28.9 billion cubic feet of natural gas equivalent ("Bcfe") sold at an average price of $8.83 per thousand cubic feet of natural gas equivalent ("Mcfe"). This compares to production of 15.4 Bcf of natural gas sold at an average price of $6.58 per Mcf and 1.8 MMBbls of oil sold at an average price of $62.08 per Bbl, or 26.2 Bcfe sold at an average price of $8.14 per Mcfe in the third quarter of 2006.
For the nine months ended September 30, 2007, total production was 55.5 Bcf of natural gas sold at an average price of $7.17 per Mcf and 6.1 MMBbls of oil sold at an average price of $61.49 per Bbl, or 92.2 Bcfe sold at an average price of $8.40 per Mcfe. This compares to 37.5 Bcf of natural gas sold at an average price of $7.35 per Mcf and 4.3 MMBbls of oil sold at an average price of $60.48 per Bbl, or 63.3 Bcfe sold at an average price of $8.46 per Mcfe for the same period in 2006.
The increase in volumes is primarily attributable to the properties acquired by merger in the Kerr-McGee transaction, partially offset by properties that experienced natural reservoir declines.
Lease Operating Expenses ("LOE"): LOE for the third quarter of 2007 increased to $51.6 million, or $1.79 per Mcfe, from $35.2 million, or $1.34 per Mcfe, in the third quarter of 2006. LOE for the nine months ended September 30, 2007 was $169.2 million or $1.83 per Mcfe, compared to $68.7 million or $1.08 per Mcfe for the same period in 2006. The increases are attributable to higher operating costs, hurricane repairs, major maintenance expenses, and insurance premiums, partially offset by lower workover expenditures. A significant portion of the increase is attributable to properties acquired by merger in the Kerr-McGee transaction. The Company believes the incurrence of such costs following a large acquisition of properties is not unusual, and the magnitude and timing of additional workover and maintenance expenditures on the properties acquired by merger in the Kerr- McGee transaction may fluctuate as integration of the properties continues. The remainder of the increase in operating costs is primarily attributable to new production and increases in service costs.
During the third quarter of 2007, the Company reclassified certain industry related reimbursements for overhead expenses from lease operating expenses to general and administrative expenses in order to better match the underlying reimbursement with the actual cost recorded. All prior year amounts have been reclassified to conform with the 2007 presentation. The effect of these reclassifications had no impact on net income.
Depreciation, Depletion, Amortization and Accretion ("DD&A"): DD&A increased to $123.1 million, or $4.26 per Mcfe, in the third quarter of 2007 from $85.5 million, or $3.26 per Mcfe, in the same period in 2006. For the nine months ended September 30, 2007 DD&A was $373.4 million or $4.05 per Mcfe, compared to $201.9 million, or $3.19 per Mcfe, for the same period in 2006. The increase primarily reflects higher finding and development costs and increased production volumes.
Capital Expenditures and Operations Update: In the third quarter, the Company successfully drilled one exploration well (see table below). For the nine months ended September 30, 2007, the Company has drilled or participated in the drilling of three exploration wells and two development wells. After the close of the third quarter, the Company drilled one non-commercial well at a cost, net to our interest, of $7.3 million (see table below).
For the nine months ended September 30, 2007, capital expenditures totaled $277.3 million (before dispositions of $3.7 million), of which $162.3 million was spent on development activities, $71.6 million for exploration, $43.4 million for seismic, leasehold costs and other capital items.
During the nine months ended September 30, 2007, development and exploration capital expenditures consisted of $98.7 million in the deepwater, $34.5 million on the deep shelf and $100.7 million on the conventional shelf and other projects.
Successful Well: Field Name/Well Category Working Interest South Timbalier 41 B-3ST Exploration / Deep Shelf 40% After the Close of the Quarter Non-commercial Well: Field Name/Well Category Working Interest Main Pass 162 A-3 Exploration / Shelf 67%
Outlook: Certain factors affecting these forward-looking statements are listed in this news release. Guidance on performance for the fourth quarter and full year of 2007 is shown in the table below.
Fourth Quarter and Full Year 2007 Production and Revised Cost Guidance: Fourth Quarter Full-Year Estimated Production 2007 2007 Crude oil (MMBbls) 1.5 - 1.9 7.7 - 8.0 Natural gas (Bcf) 19.2 - 23.2 74.7 - 78.7 Total (Bcfe) 28.8 - 34.8 121.0 - 127.0 Operating Expenses Fourth Quarter Prior Full-Year Revised ($ in millions, 2007 2007 Full-Year 2007 except as noted) Lease operating expenses $48.6 - $58.6 $197.0 - $220.0 $203.0 - $213.0 Lease operating expenses - hurricane-related $4.2 - $6.2 $18.0 - $26.0 $19.0 - $21.0 Gathering, transportation & production taxes $6.4 - $8.4 $24.9 - $29.7 $21.0 - $23.0 General and administrative $8.8 - $12.8 $50.0 - $55.0 $38.0 - $42.0 Income tax rate, % deferred 34%, 10% 34%, 80% 34%, 15%
Conference Call Information: W&T will hold a conference call to discuss financial and operational results on Wednesday, November 7, 2007 at 10:00 a.m. Eastern Time / 9:00 a.m. Central Time. To participate, dial (303) 262-2130 a few minutes before the call begins. The call will also be broadcast live over the Internet from the Company's website at www.wtoffshore.com. A replay of the conference call will be available approximately two hours after the end of the call until Wednesday, November 14, 2007, and may be accessed by calling (303) 590-3000 and using the pass code 11099965.
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 region, where it has developed significant technical expertise. W&T has grown through acquisition, exploitation and exploration and now holds working interests in over 200 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 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, 2006 (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 - Tables to Follow - W&T OFFSHORE, INC. AND SUBSIDIARIES Consolidated Statements of Income (In thousands, except per share amounts) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006 Revenues $255,191 $213,431 $774,293 $536,082 Operating costs and expenses: Lease operating expenses 51,627 35,227 169,154 68,704 Gathering, transportation costs and production taxes 5,783 5,186 14,626 11,694 Depreciation, depletion and amortization 117,539 82,142 356,881 194,052 Asset retirement obligation accretion 5,574 3,324 16,477 7,840 General and administrative expenses 9,952 8,845 29,240 28,164 Derivative loss (gain) 2,809 (27,065) 15,082 (21,793) Total costs and expenses 193,284 107,659 601,460 288,661 Operating income 61,907 105,772 172,833 247,421 Interest expense: Incurred 14,332 9,876 47,774 10,514 Capitalized (6,024) (4,138) (19,117) (4,138) Loss on extinguishment of debt - - 2,806 - Other income 1,567 2,111 2,508 5,505 Income before income taxes 55,166 102,145 143,878 246,550 Income taxes 18,826 35,444 48,988 85,553 Net income $36,340 $66,701 $94,890 $160,997 Earnings per common share: Basic $0.48 $0.92 $1.25 $2.36 Diluted 0.48 0.91 1.25 2.35 Weighted average shares outstanding: Basic 75,787 72,882 75,787 68,300 Diluted 75,949 73,039 75,914 68,412 Consolidated Cash Flow Information Net cash provided by operating activities $164,290 $123,364 $472,668 $351,468 Capital expenditures 79,452 1,177,782 277,299 1,449,095 Other Financial Information Adjusted EBITDA $191,389 $168,524 $567,551 $434,089 W&T OFFSHORE, INC. AND SUBSIDIARIES Operating Data (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006 Net sales: Natural gas (MMcf) 16,753 15,374 55,498 37,490 Oil (MBbls) 2,022 1,809 6,116 4,307 Total natural gas and oil (MMcfe) (1) 28,886 26,228 92,194 63,333 Average daily equivalent sales (MMcfe/d) 314.0 285.1 337.7 232.0 Average realized sales prices: (2) Natural gas ($/Mcf) $6.45 $6.58 $7.17 $7.35 Oil ($/Bbl) 72.72 62.08 61.49 60.48 Natural gas equivalent ($/Mcfe) 8.83 8.14 8.40 8.46 Average per Mcfe ($/Mcfe): Lease operating expenses (3) $1.79 $1.34 $1.83 $1.08 Gathering and transportation costs and production taxes 0.20 0.20 0.16 0.18 Depreciation, depletion, amortization and accretion 4.26 3.26 4.05 3.19 General and administrative expenses (3) 0.34 0.34 0.32 0.44 Net cash provided by operating activities 5.69 4.70 5.13 5.55 Adjusted EBITDA 6.63 6.43 6.16 6.85 (1) 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). (2) Average realized prices exclude the effects of commodity derivative contracts that do not qualify for hedge accounting. Had the company included the effects of these derivatives, the average realized sales prices for natural gas would have been $6.69 per Mcf and $6.87 per Mcf for the third quarter of 2007 and 2006, respectively, and $7.27 per Mcf and $7.54 per Mcf for the nine months ended September 30, 2007 and 2006, respectively. The average realized sales prices for oil would have been $72.52 per barrel and $62.00 per barrel for the third quarter of 2007 and 2006, respectively, and $61.64 per barrel and $60.33 per barrel for the nine months ended September 30, 2007 and 2006, respectively. On a natural gas equivalent basis, the average realized sales prices would have been $8.96 per Mcfe and $8.30 per Mcfe for the third quarter of 2007 and 2006, respectively, and $8.47 per Mcfe and $8.57 per Mcfe for the nine months ended September 30, 2007 and 2006, respectively. (3) Certain industry related reimbursements for overhead expenses from joint interest owners have been reclassified from lease operating expenses to general and administrative expenses in order to better match the underlying reimbursement with the actual cost recorded. All prior year amounts have been reclassified to conform with the 2007 presentation. The effect of these reclassifications had no impact on net income. W&T OFFSHORE, INC. AND SUBSIDIARIES Consolidated Balance Sheets (In thousands) (Unaudited) September 30, December 31, 2007 2006 Assets Current assets: Cash and cash equivalents $187,807 $39,235 Accounts receivable 135,493 149,043 Insurance receivable - 75,151 Income taxes receivable - 15,705 Total receivables 135,493 239,899 Prepaid expenses and other assets 42,594 49,559 Total current assets 365,894 328,693 Property and equipment - at cost: Oil and gas property and equipment (full cost method, of which $286,535 at September 30, 2007 and $308,231 at December 31, 2006 were excluded from amortization) 3,575,536 3,297,153 Furniture, fixtures and other 10,711 10,948 Total property and equipment 3,586,247 3,308,101 Less accumulated depreciation, depletion and amortization 1,399,196 1,042,315 Net property and equipment 2,187,051 2,265,786 Restricted deposits for asset retirement obligations 10,463 10,680 Other assets 6,290 4,526 Total assets $2,569,698 $2,609,685 Liabilities and Shareholders' Equity Current liabilities: Current maturities of long-term debt $3,000 $271,380 Accounts payable 123,566 247,324 Undistributed oil and gas proceeds 51,829 46,933 Asset retirement obligations - current portion 24,762 41,718 Accrued liabilities 27,364 28,825 Income taxes 22,164 - Deferred income taxes - current portion - 7,896 Total current liabilities 252,685 644,076 Long-term debt, less current maturities - net of discount 652,164 13,617 Asset retirement obligations, less current portion 281,632 272,350 Deferred income taxes, less current portion 242,579 232,835 Other liabilities 5,553 3,890 Commitments and contingencies Shareholders' equity: Common stock, $0.00001 par value; 118,330,000 shares authorized; issued and outstanding 76,227,713 and 75,900,082 shares at September 30, 2007 and December 31, 2006, respectively 1 1 Additional paid-in capital 366,219 361,855 Retained earnings 769,670 681,634 Accumulated other comprehensive loss (801) (573) Total shareholders' equity 1,135,089 1,042,917 Total liabilities and shareholders' equity $2,569,698 $2,609,685 W&T OFFSHORE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands, except share data) (Unaudited) Nine Months Ended September 30, 2007 2006 Operating activities: Net income $94,890 $160,997 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion, amortization and accretion 373,358 201,892 Amortization of debt issuance costs and discount on indebtedness 5,840 3,238 Loss on extinguishment of debt 2,806 - Share-based compensation related to restricted stock issuances 2,491 2,177 Unrealized derivative loss (gain) 21,360 (15,224) Deferred income taxes 92 65,977 Other 746 - Changes in operating assets and liabilities: Oil and gas receivables 20,429 (34,599) Joint interest and other receivables (7,240) 3,617 Insurance receivables 75,151 (36,449) Income taxes 37,869 19,575 Prepaid expenses and other assets (1,199) (39,306) Asset retirement obligations (28,890) (20,781) Accounts payable and accrued liabilities (125,024) 40,354 Other liabilities (11) - Net cash provided by operating activities 472,668 351,468 Investing activities: Acquisition of Kerr-McGee properties - (1,061,769) Investment in oil and gas property and equipment, net (273,638) (387,326) Purchases of furniture, fixtures and other, net (348) (6,985) Net cash used in investing activities (273,986) (1,456,080) Financing activities: Issuance of Senior Notes 450,000 - Borrowings of other long-term debt 458,000 819,732 Repayments of long-term debt (945,750) (191,000) Proceeds from equity offering, net of costs - 306,980 Dividends to shareholders (6,850) (5,947) Debt issuance costs and other (5,510) (780) Net cash (used in) provided by financing activities (50,110) 928,985 Increase (decrease) in cash and cash equivalents 148,572 (175,627) Cash and cash equivalents, beginning of period 39,235 187,698 Cash and cash equivalents, end of period $187,807 $12,071 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 the loss on extinguishment of debt and associated tax effects. Adjusted Net Income is presented because the timing and amount of these 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 Nine Months Ended September 30, September 30, 2007 2006 2007 2006 (In thousands, except per share amounts) (Unaudited) Net Income $36,340 $66,701 $94,890 $160,997 Loss on extinguishment of debt - - 2,806 - Unrealized derivative loss (gain) 6,369 (22,714) 21,360 (15,224) Income tax adjustment for above items (2,173) 7,882 (8,228) 5,283 Adjusted net income $40,536 $51,869 $110,828 $151,056 Adjusted earnings per share-diluted $0.53 $0.71 $1.46 $2.21
We define EBITDA as net income plus income tax expense, net interest expense (income), and depreciation, depletion, amortization and accretion. 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. Adjusted EBITDA excludes the loss on extinguishment of debt and 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 are relevant and useful because they 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 Months Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006 (In thousands) (Unaudited) Net Income $36,340 $66,701 $94,890 $160,997 Income taxes 18,826 35,444 48,988 85,553 Net interest expense 6,741 3,627 26,149 871 Depreciation, depletion, amortization and accretion 123,113 85,466 373,358 201,892 EBITDA 185,020 191,238 543,385 449,313 Adjustments: Loss on extinguishment of debt - - 2,806 - Unrealized derivative loss (gain) 6,369 (22,714) 21,360 (15,224) Adjusted EBITDA $191,389 $168,524 $567,551 $434,089
SOURCE W&T Offshore, Inc.
Released November 7, 2007