W&T Offshore Reports First Quarter 2007 Financial and Operational Results

HOUSTON, May 8 /PRNewswire-FirstCall/ -- W&T Offshore, Inc. (NYSE: WTI) today announces financial and operational results for the first quarter 2007. Some of the highlights include:

    --  W&T successfully drilled two conventional shelf exploration wells and
        one conventional shelf development well in the first quarter
    --  Production increased 86% and revenues increased 57%
    --  Cash flow from operating activities increased 29% to $146.7 million in
        the first quarter 2007 versus $113.3 million in the first quarter 2006
    --  First quarter 2007 Adjusted EBITDA increased, as defined below, 32% to
        $168.7 million compared to $128.2 million in the first quarter 2006

Net Income and Earnings Per Share ("EPS"): Net income for the three months ended March 31, 2007 was $13.0 million, or $0.17 per diluted share, on revenues of $246.5 million. For the first quarter of 2006 net income was $55.8 million, or $0.85 per diluted share, on revenues of $156.9 million. Net income for the first quarter of 2007 includes an unrealized loss of $9.0 million (after taxes) related to W&T's commodity derivative contracts compared to an unrealized gain of $3.4 million (after taxes) in the first quarter of 2006. Adjusted net income for the first quarter 2007 was $22.1 million or $0.29 per diluted share compared to $52.4 million or $0.79 per diluted share in the first quarter of 2006. Net income declined in the first quarter 2007 due to lower realized sales prices, significantly higher lease operating expenses, including higher than expected workover and facility expenses and substantially higher insurance premiums. Much of the higher costs were associated with the Kerr-McGee properties acquired in the third quarter of 2006. Hurricane remediation costs were included in lease operating expenses during the first quarter of 2007 and were not included in 2006 as such amounts were covered by insurance. Earnings were also affected by increased charges for DD&A and increased interest expense. The decrease in net income was partially offset by higher production volumes. EPS was lower in the 2007 period due to a 15% increase in the weighted average number of shares outstanding resulting from an equity offering that was completed in July 2006.

Production and Prices: Total production for the first quarter 2007 was 32.1 billion cubic feet natural gas equivalent ("Bcfe"), sold at an average price of $7.67 per thousand cubic feet equivalent ("Mcfe"), compared to 17.3 Bcfe sold at an average price of $9.06 Mcfe in the first quarter of 2006. Natural gas sales in the first quarter of 2007 were 20.4 billion cubic feet ("Bcf") sold at an average price of $7.20 per Mcf, compared to 10.9 Bcf of natural gas sold at an average price of $8.82 in the first quarter of 2006. Oil sales were 2.0 million barrels ("MMBbls") sold at an average price of $51.00 per barrel ("Bbl") for the first quarter of 2007, compared to 1.1 MMBbls of oil sold at an average price of $56.90 in the first quarter of 2006. Increased natural gas, oil and liquids volumes are attributable to production from the former Kerr-McGee properties and successful exploration and development drilling.

Lease Operating Expenses ("LOE"): Lease operating expenses increased to $1.92 per Mcfe in the first quarter of 2007 from $0.91 per Mcfe in the first quarter of 2006. On a nominal basis, lease operating expenses increased to $61.7 million in the first quarter of 2007 from $15.8 million in the same period of 2006 despite higher total sales volumes in the 2007 period. The increase of $45.9 million is attributable to increases in operating costs of $20.3 million, workover expenditures of $7.5 million, major maintenance expenses of $11.1 million and $7.0 million in higher insurance premiums resulting from the hurricanes in 2005. Approximately $17.0 million of the increase in lease operating costs and the increase in amounts spent for workovers is primarily associated with the former Kerr-McGee properties. The increase in major maintenance expenses is somewhat due to $7.1 million of hurricane remediation expenses that were not covered by insurance. All amounts spent in 2006 related to hurricane remediation efforts were covered by insurance and therefore were not included in lease operating expenses.

Depreciation, depletion, amortization and accretion ("DD&A"): DD&A increased to $124.2 million, or $3.87 per Mcfe, in the first quarter of 2007 from $49.1 million, or $2.84 per Mcfe, in the same period of 2006, and $3.79 per Mcfe in the fourth quarter of 2006. The $75.1 million increase from first quarter 2006 consists of $42.0 million due to higher production volumes and $33.1 million due to the higher DD&A rate in 2007. Per unit DD&A increased in part due to increases in total depletable costs as a result of acquisition and capital spending activities and higher estimated future development costs.

Cash Provided by Operating Activities and Adjusted EBITDA: Net cash provided by operating activities increased to $146.7 million during the first quarter from $113.3 million during the prior year's first quarter. Cash provided by operating activities increased due to higher DD&A and a change in unrealized commodity derivative results, somewhat offset by lower earnings and lower deferred taxes. First quarter 2007 Adjusted EBITDA was $168.7 million, compared to $128.2 million during the prior year's first quarter. For more complete information regarding EBITDA and Adjusted EBITDA please see "Non-GAAP Information" later in this press release.

Capital Expenditures and Operations Update: During the first quarter of 2007, the Company was 100% successful in the drilling of two exploration wells (gross) and one development well on the conventional shelf. For the quarter ended March 31, 2007, capital expenditures of $134.8 million included $81.3 million for development activities, $41.6 million for exploration, $11.4 million for acquisition and other leasehold costs and $0.5 million for other capital items.

During the first quarter of 2007, development and exploration capital expenditures consisted of $64.5 million in the deepwater, $21.4 million on the deep shelf and $37.0 million on the conventional shelf and other projects.

    Drilling Highlights:

    Wells Drilled and Participation:

    Field Name/Well                Category             Working Interest %
    High Island 22 B3ST        Exploration / Shelf            100%
    High Island 24L #1         Exploration / Shelf             25%
    West Cameron 181 C2ST3     Development / Shelf            100%

Outlook: The following information does not include the potential impact of any future acquisitions or divestitures that may be completed after the date of this news release. The guidance for 2007 represents the Company's best estimate of likely future results, and is affected by the factors described below in "Forward-Looking Statements."

The increase in amounts spent for workovers (which are a component of LOE) in the first quarter of 2007 versus the same period in 2006 is primarily associated with the former Kerr-McGee properties. The Company believes that incurring such costs following such a large acquisition of properties like Kerr-McGee is not unusual. Similarly, the magnitude and timing of additional expenditures on these properties for such expenditures as workovers and facility expenses has not yet been fully determined, but it is part of our basis for adjusting full-year guidance. Accordingly, based on experience to date, the Company feels it is prudent to adjust LOE higher to reflect the most recent increase in LOE and to budget for possible unforeseen workover and facility expenses.

The Company is also revising production guidance lower to reflect significant project start up delays at fields that would have contributed considerable production had they been brought on as scheduled.

Guidance for the second quarter and revised full year 2007 is shown in the table below.

   Second Quarter and Revised Full Year 2007 Production and Cost Guidance:

    Estimated          Second Quarter    Prior Full-Year   Revised Full-Year
    Production              2007              2007               2007

    Crude oil (MMBbls)   2.1 - 2.2         9.6 - 10.5         8.1 - 8.5
    Natural gas (Bcf)   20.0 - 21.0       92.2 - 101.2       84.1 - 88.7
    Total (Bcfe)        32.7 - 34.4      149.7 - 164.3      132.7 - 140.0


    Operating          Second Quarter    Prior Full-Year    Revised Full-Year
    Expenses ($ in          2007              2007               2007
    millions, except
    as noted)

    Lease operating
     expenses          $50.0 - $58.0    $166.9 - $199.4    $197.0 - $220.0
    Lease operating
     expenses -
     Hurricane-
     related            $6.0 - $10.0     $15.0 - $20.0      $18.0 - $26.0
    Gathering,
     transportation &
     production taxes   $6.2 - $7.4      $24.9 - $29.7       No Change
    General and        $12.3 - $14.5     $50.0 - $55.0       No Change
     administrative
     Income tax rate,
     % deferred         35.0%, 80%        35.0%, 80%         No Change

Conference Call Information: W&T will hold a conference call to discuss financial and operational results on Tuesday, May 8, 2007 at 10:00 a.m. Eastern Time / 9:00 a.m. Central Time. To participate, dial (303) 375-2170 a few minutes before the call begins. The call will also be broadcast live over the Internet from the Company's website 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 15, 2007, and may be accessed by calling (303) 590-3000 and using the pass code 11089320.

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 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 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, 2006 (www.sec.gov).


                              W&T OFFSHORE, INC.
                      Consolidated Statements of Income
                   (In thousands, except per share amounts)
                                 (Unaudited)

                                                       Three Months Ended
                                                            March 31,
                                                      2007              2006

    Revenues                                       $246,539          $156,854
    Expenses:
        Lease operating                              61,663            15,780
        Gathering, transportation costs
         and production taxes                         4,257             1,256
        Depreciation, depletion, and
         amortization                               118,754            46,838
        Asset retirement obligation
         accretion                                    5,447             2,254
        General and administrative                   13,884            11,660
        Commodity derivative loss (gain)             11,971            (5,276)
            Total operating expenses                215,976            72,512

    Income from operations                           30,563            84,342

    Interest expense:
        Incurred                                     17,759               305
        Capitalized                                  (6,828)               --
    Other income                                        413             1,627
    Income before income taxes                       20,045            85,664

    Income taxes                                      7,016            29,833

    Net income                                      $13,029           $55,831

    Earnings per common share:
        Basic                                         $0.17             $0.85
        Diluted                                       $0.17             $0.85

    Weighted average shares outstanding:
        Basic                                        75,787            65,971
        Diluted                                      75,804            65,994

    Consolidated Cash Flow Information
    Net cash provided by operating
     activities                                    $146,661          $113,305
    Capital expenditures                           $134,802          $122,894

    Other Financial Information
    Adjusted EBITDA                                $168,652          $128,158


                              W&T OFFSHORE, INC.
                                Operating Data
                                 (Unaudited)

                                                       Three Months Ended
                                                            March 31,
                                                      2007              2006

    Net sales:
        Natural gas (MMcf)                          20,402            10,904
        Oil (MBbls)                                  1,953             1,067
        Total natural gas and oil (MMcfe) (1)       32,122            17,307

    Average daily equivalent sales (MMcfe/d)         356.9             192.3

    Average realized sales price: (2)
        Natural gas ($/Mcf)                          $7.20             $8.82
        Oil ($/Bbl)                                  51.00             56.90
        Natural gas equivalent ($/Mcfe)               7.67              9.06

    Average per Mcfe data ($/Mcfe):
        Lease operating expenses                     $1.92             $0.91
        Gathering, transportation cost
         and production taxes                         0.13              0.07
        Depreciation, depletion,
         amortization and accretion                   3.87              2.84
        General and administrative                    0.43              0.67
        Net cash provided by operating
         activities                                   4.57              6.55
        Adjusted EBITDA                               5.25              7.40


    (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 our derivative
    contracts that do not qualify for hedge accounting.  Had we included the
    effect of these derivatives, our average realized sales prices for
    natural gas and oil would have been $7.23 per Mcf and $51.68 per barrel,
    respectively, for first quarter 2007.  On a natural gas equivalent basis,
    our average realized sales price would have been $7.73 per Mcfe for first
    quarter 2007.  There were no realized gains or losses related to our
    commodity derivative contracts during the period ended in 2006.


                              W&T OFFSHORE, INC.
                         Consolidated Balance Sheets
                                (In thousands)
                                 (Unaudited)

                                                  March 31,       December 31,
                                                    2007              2006
                           Assets

    Current assets:
       Cash and equivalents                         $4,303           $39,235
       Accounts receivable                         167,340           164,748
       Insurance receivable                             --            75,151
       Prepaid expenses and other                   27,741            49,559
          Total current assets                     199,384           328,693

    Property and equipment - at cost             3,442,511         3,308,101
    Less accumulated depreciation,
     depletion and amortization                  1,161,069         1,042,315
          Net property and equipment             2,281,442         2,265,786

    Other assets                                    13,633            15,206
          Total assets                          $2,494,459        $2,609,685

        Liabilities and Shareholders' Equity

    Current liabilities:
       Current maturities of long-term
        debt-net of discount                      $161,800          $271,380
       Accounts payable                            172,436           247,324
       Asset retirement obligations-
        current portion                             40,256            41,718
       Accrued liabilities and other                53,662            83,654
          Total current liabilities                428,154           644,076

    Long-term debt, less current
     maturities-net of discount                    481,903           413,617
    Asset retirement obligations, less
     current portion                               276,766           272,350
    Deferred income taxes, less current
     portion                                       246,338           232,835
    Other liabilities                                5,615             3,890

    Commitments and contingencies
    Shareholders' equity:
       Common stock                                      1                 1
       Additional paid-in capital                  364,255           361,855
       Retained earnings                           692,378           681,634
       Accumulated other comprehensive loss           (951)             (573)
          Total shareholders' equity             1,055,683         1,042,917
             Total liabilities and
              shareholders' equity              $2,494,459        $2,609,685


                              W&T OFFSHORE, INC.
                    Consolidated Statements of Cash Flows
                                (In thousands)
                                 (Unaudited)

                                                       Three Months Ended
                                                            March 31,
                                                      2007              2006

    Operating activities:
       Net income                                  $13,029           $55,831
       Adjustments to reconcile net
        income to net cash provided
          by operating activities:
             Depreciation, depletion,
              amortization and accretion           124,201            49,092
             Amortization of debt issuance costs       208                80
             Accretion of discount on
              long-term debt                         3,206                --
             Share-based compensation
              related to restricted stock
              issuances                                528             1,430
             Unrealized commodity
              derivative loss (gain)                13,888            (5,276)
             Deferred income taxes                   8,322            24,438
             Changes in operating assets
              and liabilities, net                 (16,721)          (12,290)
                Net cash provided by
                 operating activities              146,661           113,305

    Investing activities:
       Investment in oil and gas property
        and equipment                             (134,276)         (120,637)
       Purchases of furniture, fixtures
        and other, net                                (416)           (2,257)
       Other                                          (124)              (77)
          Net cash used in investing activities   (134,816)         (122,971)

    Financing activities:
       Borrowings of long-term debt                290,000                --
       Repayments of borrowings of
        long-term debt                            (334,500)          (40,000)
       Dividends to shareholders                    (2,277)           (1,979)
          Net cash used in financing activities    (46,777)          (41,979)
          Decrease in cash and cash
            equivalents                            (34,932)          (51,645)
    Cash and cash equivalents, beginning
     of period                                      39,235           187,698
    Cash and cash equivalents, end of
     period                                         $4,303          $136,053


                              W&T OFFSHORE, INC.

                             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 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 period to prior
periods.

                                                       Three Months Ended
                                                            March 31,
                                                      2007              2006
                                                      (In thousands, except
                                                        per share amounts)
                                                           (Unaudited)
    Net income                                       $13,029         $55,831
    Unrealized commodity derivative
     loss (gain)                                      13,888          (5,276)
    Income tax adjustment for above
     item                                             (4,861)          1,847
    Adjusted net income                              $22,056         $52,402

    Adjusted earnings per share-diluted                $0.29           $0.79

                    Reconciliation of Net Income to EBITDA

EBITDA is defined as net income plus income tax expense, net interest (income) expense, depreciation, depletion, amortization and accretion and non-cash expenses associated with unrealized changes in the fair market value of open derivative contracts. Although not prescribed under GAAP, we believe the presentation of EBITDA is relevant and useful because it helps our investors understand our operating performance and makes it easier to compare our results with those of other companies that have different financing, capital or tax structures. 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, as we calculate it, may not be comparable to EBITDA measures reported by other companies. In addition, EBITDA does not represent funds available for discretionary use. "Adjusted EBITDA" excludes certain non-cash items that management believes affect the comparability of operating results, including the unrealized gain or loss related to open derivative contracts.

The following table presents a reconciliation of our consolidated net income to consolidated EBITDA and Adjusted EBITDA:

                                                       Three Months Ended
                                                            March 31,
                                                      2007              2006
                                                          (In thousands)
                                                            (Unaudited)
    Net income                                       $13,029          $55,831
    Income tax expense                                 7,016           29,833
    Net interest (income) expense                     10,518           (1,322)
    Depreciation, depletion,
     amortization and accretion                      124,201           49,092
    EBITDA                                          $154,764         $133,434

    Adjustments:
    Non-cash change in commodity
     derivatives (before tax)                         13,888           (5,276)

    Adjusted EBITDA                                 $168,652         $128,158


    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

SOURCE W&T Offshore, Inc.