Quarterly report pursuant to Section 13 or 15(d)

Note 4 - Joint Venture Drilling Program

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Note 4 - Joint Venture Drilling Program
6 Months Ended
Jun. 30, 2019
Notes to Financial Statements  
Joint Venture Drilling Program [Text Block]
4.
Joint Venture Drilling Program
 
On
March 12, 2018,
W&T and
two
other initial members formed and initially funded Monza, which jointly participates with us in the exploration, drilling and development of up to
14
identified drilling projects (the “JV Drilling Program”) in the Gulf of Mexico.  The projects are expected to be completed during the years
2018
through
2020,
but some projects
may
possibly extend into years beyond
2020.
  W&T initially contributed
88.94%
of its working interest in
14
identified undeveloped drilling projects to Monza and retained
11.06%
of its working interest. Subsequent to the initial closing, additional investors joined as members of Monza during
2018
and total commitments by all members, including W&T, are
$361.4
million.  The JV Drilling Program is structured so that we initially receive an aggregate of
30.0%
of the revenues less expenses, through both our direct ownership of our working interest in the projects and our indirect interest through our interest in Monza, for contributing
20.0%
of the estimated total well costs plus associated leases and providing access to available infrastructure at agreed upon rates.  Any exceptions are approved by the Monza board.  W&T is or will be the operator of each well in the JV Drilling Program unless there is a designated
third
-party operator.
 
Monza is an entity separate from any other entity with its own separate creditors who will be entitled, upon its liquidation, to be satisfied out of Monza’s assets prior to any value in Monza becoming available to holders of its equity.  The assets of Monza are
not
available to pay creditors of the Company and its affiliates.
 
The members of Monza are made up of
third
-party investors, W&T and an entity owned and controlled by Mr. Tracy W. Krohn, our Chairman and Chief Executive Officer.  The Krohn entity invested as a minority investor on the same terms and conditions as the
third
-party investors and its investment is limited to
4.5%
of total invested capital within Monza.  The entity affiliated with Mr. Krohn has made a capital commitment to Monza of
$14.5
million.
 
As of
June 
30,
2019,
members of Monza made partner capital contribution payments to Monza totaling
$184.9
million, of which
$70.2
million was contributed during the
six
 months ended
June 
30,
2019.
  Our net contribution to Monza, reduced by distributions received, as of
June 
30,
2019
was
$57.6
 million.  W&T
may
be obligated to fund certain cost overruns, subject to certain exceptions, for the JV Drilling Program wells above budgeted and contingency amounts, of which the total exposure cannot be estimated at this time.
 
Consolidation and Carrying Amounts.
Our interest in Monza is considered to be a variable interest that we account for using proportional consolidation.  We do
not
fully consolidate Monza because we are
not
considered the primary beneficiary and we utilize proportional consolidation to account for our interests in the Monza properties.  As of
June 
30,
2019,
in the Condensed Consolidated Balance Sheet, we recorded
$13.4
 million, net, in
Oil and natural gas properties and other, net
,
$2.3
 million in
Other assets
and
$3.4
 million, net, increase in working capital in connection with our proportional interest in Monza’s assets and liabilities.  As of
December 31, 2018,
in the Condensed Consolidated Balance Sheet, we recorded
$8.8
million, net, in
Oil and natural gas properties and other, net
,
$3.3
million in
Other assets
and
$0.7
million, net, increase in working capital in connection with our proportional interest in Monza’s assets and liabilities.  For the
six
 months ended
June 
30,
2019,
we recorded
$4.0
 million in
Total revenues
and
$2.5
 million in
Operating costs and expenses
in connection with our proportional interest in Monza’s operations.  For the
six
 months ended
June 
30,
2018,
we recorded
$0.5
 million in
Total revenues, 
$0.4
 million in
Operating costs and expenses
 and
$0.2
million in
Other (income) expense, net
in connection with our proportional interest in Monza’s operations.
 
Additionally, during the
six
months ended
June 30, 2019,
we called on Monza to provide, and received, 
$80.3
million to fund upcoming JV Drilling Program projects, of which
$39.1
 million is included in the Condensed Consolidated Balance Sheet in
Advances from joint interest partners
as of
June 30, 2019.