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
Forward-Looking Statements
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
investorrelations@wtoffshore.com
713-297-8024
Ken Dennard / ksdennard@drg-e.com
Lisa Elliott / lelliott@drg-e.com
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