W&T Offshore, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Supplemental Guarantor Information

Supplemental Guarantor Information

6 Months Ended

Jun. 30, 2013

W&T OFFSHORE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

13. Supplemental Guarantor Information

Our payment obligations under the 8.50% Senior Notes and the Credit Agreement (see Note 6) are fully and unconditionally guaranteed by certain of our wholly-owned subsidiaries, including W&T Energy VI, LLC and W&T Energy VII, LLC (together, the “Guarantor Subsidiaries”). W&T Energy VII, LLC does not currently have any active operations. Guarantees of the 8.50% Senior Notes will be released under certain circumstances, including:

(1) in connection with any sale or other disposition of all or substantially all of the assets of a Guarantor Subsidiary (including by way of merger or consolidation) to a person that is not (either before or after giving effect to such transaction) the Company or a Restricted Subsidiary (as such term is defined in the indenture governing the 8.50% Senior Notes) of the Company, if the sale or other disposition does not violate the “Asset Sales” provisions of the indenture;

(2) in connection with any sale or other disposition of the capital stock of such Guarantor Subsidiary to a person that is not (either before or after giving effect to such transaction) the Company or a Restricted Subsidiary of the Company, if the sale or other disposition does not violate the “Asset Sales” provisions of the indenture and the Guarantor Subsidiary ceases to be a subsidiary of the Company as a result of such sales or disposition;

(3) if such Guarantor Subsidiary is a Restricted Subsidiary and the Company designates such Guarantor Subsidiary as an Unrestricted Subsidiary in accordance with the applicable provisions of the indenture;

(4) upon Legal Defeasance or Covenant Defeasance (as such terms are defined in the indenture) or upon satisfaction and discharge of the indenture;

(5) upon the liquidation or dissolution of such Guarantor Subsidiary, provided no event of default has occurred and is continuing; or

(6) at such time as such Guarantor Subsidiary is no longer required to be a Guarantor Subsidiary of the 8.50% Senior Notes as described in the indenture, provided no event of default has occurred and is continuing.

The following unaudited condensed consolidating financial information presents the financial condition, results of operations and cash flows of W&T Offshore, Inc. (the “Parent Company”) and the Guarantor Subsidiaries, together with consolidating adjustments necessary to present the Company’s results on a consolidated basis.

Condensed Consolidating Balance Sheet as of June 30, 2013

	Parent Company			Guarantor Subsidiaries		Eliminations			Consolidated W&T Offshore, Inc.
	(In thousands)
Assets
Current assets:
Cash and cash equivalents	$	9,276		$	—	$	—		$	9,276
Receivables:
Oil and natural gas sales		65,290			15,411		(31	)		80,670
Joint interest and other		22,921			—		—			22,921
Income taxes		165,239			—		(125,683	)		39,556
Total receivables		253,450			15,411		(125,714	)		143,147
Prepaid expenses and other assets		37,214			—		—			37,214
Total current assets		299,940			15,411		(125,714	)		189,637
Property and equipment – at cost:
Oil and natural gas properties and equipment		6,624,347			385,488		—			7,009,835
Furniture, fixtures and other		20,848			—		—			20,848
Total property and equipment		6,645,195			385,488		—			7,030,683
Less accumulated depreciation, depletion and amortization		4,614,980			236,993		—			4,851,973
Net property and equipment		2,030,215			148,495		—			2,178,710
Restricted deposits for asset retirement obligations		33,469			—		—			33,469
Deferred income taxes		—			8,689		(8,689	)		—
Other assets		468,352			434,660		(884,814	)		18,198
Total assets	$	2,831,976		$	607,255	$	(1,019,217	)	$	2,420,014

Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	123,101		$	—	$	(31	)	$	123,070
Undistributed oil and natural gas proceeds		41,788			280		—			42,068
Asset retirement obligations		74,687			—		—			74,687
Accrued liabilities		13,468			126,199		(125,683	)		13,984
Deferred income tax - current		5,760			—		—			5,760
Total current liabilities		258,804			126,479		(125,714	)		259,569
Long-term debt		1,099,537			—		—			1,099,537
Asset retirement obligations, less current portion		279,295			30,623		—			309,918
Deferred income taxes		171,637			—		(8,689	)		162,948
Other liabilities		440,525			—		(434,661	)		5,864
Shareholders’ equity:
Common stock		1			—		—			1
Additional paid-in capital		401,097			231,759		(231,759	)		401,097
Retained earnings		205,247			218,394		(218,394	)		205,247
Treasury stock, at cost		(24,167	)		—		—			(24,167	)
Total shareholders’ equity		582,178			450,153		(450,153	)		582,178
Total liabilities and shareholders’ equity	$	2,831,976		$	607,255	$	(1,019,217	)	$	2,420,014

W&T OFFSHORE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

Condensed Consolidating Balance Sheet as of December 31, 2012

	Parent Company			Guarantor Subsidiaries		Eliminations			Consolidated W&T Offshore, Inc.
	(In thousands)
Assets
Current assets:
Cash and cash equivalents	$	12,245		$	—	$	—		$	12,245
Receivables:
Oil and natural gas sales		80,729			17,004		—			97,733
Joint interest and other		56,439			—		—			56,439
Income taxes		163,750			—		(115,866	)		47,884
Total receivables		300,918			17,004		(115,866	)		202,056
Deferred income taxes		267			—		—			267
Prepaid expenses and other assets		25,555			—		—			25,555
Total current assets		338,985			17,004		(115,866	)		240,123
Property and equipment – at cost:
Oil and natural gas properties and equipment		6,356,529			337,981		—			6,694,510
Furniture, fixtures and other		21,786			—		—			21,786
Total property and equipment		6,378,315			337,981		—			6,716,296
Less accumulated depreciation, depletion and amortization		4,461,886			193,955		—			4,655,841
Net property and equipment		1,916,429			144,026		—			2,060,455
Restricted deposits for asset retirement obligations		28,466			—		—			28,466
Deferred income taxes		—			13,509		(13,509	)		—
Other assets		442,540			393,499		(816,096	)		19,943
Total assets	$	2,726,420		$	568,038	$	(945,471	)	$	2,348,987

Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	123,792		$	93	$	—		$	123,885
Undistributed oil and natural gas proceeds		36,791			282		—			37,073
Asset retirement obligations		92,595			—		35			92,630
Accrued liabilities		20,755			116,132		(115,866	)		21,021
Total current liabilities		273,933			116,507		(115,831	)		274,609
Long-term debt		1,087,611			—		—			1,087,611
Asset retirement obligations, less current portion		262,524			28,934		(35	)		291,423
Deferred income taxes		158,758			—		(13,509	)		145,249
Other liabilities		402,407			—		(393,499	)		8,908
Shareholders’ equity:
Common stock		1			—		—			1
Additional paid-in capital		396,186			231,759		(231,759	)		396,186
Retained earnings		169,167			190,838		(190,838	)		169,167
Treasury stock, at cost		(24,167	)		—		—			(24,167	)
Total shareholders’ equity		541,187			422,597		(422,597	)		541,187
Total liabilities and shareholders’ equity	$	2,726,420		$	568,038	$	(945,471	)	$	2,348,987

W&T OFFSHORE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

Condensed Consolidating Statement of Income for the Three Months Ended June 30, 2013

	Parent Company			Guarantor Subsidiaries		Eliminations			Consolidated W&T Offshore, Inc.


	(In thousands)

Revenues	$	185,899		$	49,484	$	—		$	235,383

Operating costs and expenses:
Lease operating expenses		64,977			3,271		—			68,248
Production taxes		1,780			—		—			1,780
Gathering and transportation		3,731			877		—			4,608
Depreciation, depletion, amortization and accretion		77,951			21,945		—			99,896
General and administrative expenses		18,758			1,110		—			19,868
Derivative gain		(12,840	)		—		—			(12,840	)
Total costs and expenses		154,357			27,203		—			181,560
Operating income		31,542			22,281		—			53,823
Earnings of affiliates		14,456			—		(14,456	)		—
Interest expense:
Incurred		21,536			—		—			21,536
Capitalized		(2,532	)		—		—			(2,532	)
Income before income tax expense		26,994			22,281		(14,456	)		34,819
Income tax expense		4,598			7,825		—			12,423
Net income	$	22,396		$	14,456	$	(14,456	)	$	22,396

Condensed Consolidating Statement of Income for the Six Months Ended June 30, 2013

										Consolidated
	Parent			Guarantor						W&T
	Company			Subsidiaries			Eliminations			Offshore, Inc.
	(In thousands)

Revenues	$	395,428			$	99,177	$	—		$	494,605

Operating costs and expenses:
Lease operating expenses		119,507				8,083		—			127,590
Production taxes		3,569				—		—			3,569
Gathering and transportation		7,393				1,659		—			9,052
Depreciation, depletion, amortization and accretion		164,366				44,401		—			208,767
General and administrative expenses		38,363				2,592		—			40,955
Derivative gain		(9,473	)			—		—			(9,473	)
Total costs and expenses		323,725				56,735		—			380,460
Operating income		71,703				42,442		—			114,145
Earnings of affiliates		27,556				—		(27,556	)		—
Interest expense:
Incurred		42,770				—		—			42,770
Capitalized		(4,964	)			—		—			(4,964	)
Income before income tax expense		61,453				42,442		(27,556	)		76,339
Income tax expense		12,439				14,886		—			27,325
Net income	$	49,014			$	27,556	$	(27,556	)	$	49,014

W&T OFFSHORE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

Condensed Consolidating Statement of Income for the Three Months Ended June 30, 2012

									Consolidated
	Parent			Guarantor					W&T
	Company			Subsidiaries		Eliminations			Offshore, Inc.
	(In thousands)

Revenues	$	155,595		$	59,918	$	—		$	215,513

Operating costs and expenses:
Lease operating expenses		53,490			6,786		—			60,276
Production taxes		1,335			—		—			1,335
Gathering and transportation		3,221			889		—			4,110
Depreciation, depletion, amortization and accretion		63,459			22,482		—			85,941
General and administrative expenses		14,623			—		—			14,623
Derivative gain		(49,872	)		—		—			(49,872	)
Total costs and expenses		86,256			30,157		—			116,413
Operating income		69,339			29,761		—			99,100
Earnings of affiliates		19,328			—		(19,328	)		—
Interest expense:
Incurred		14,706			—		—			14,706
Capitalized		(3,326	)		—		—			(3,326	)
Income before income tax expense		77,287			29,761		(19,328	)		87,720
Income tax expense		23,720			10,433		—			34,153
Net income	$	53,567		$	19,328	$	(19,328	)	$	53,567

Condensed Consolidating Statement of Income for the Six Months Ended June 30, 2012

									Consolidated
	Parent			Guarantor					W&T
	Company			Subsidiaries		Eliminations			Offshore, Inc.
	(In thousands)

Revenues	$	332,157		$	119,242	$	—		$	451,399

Operating costs and expenses:
Lease operating expenses		103,507			13,431		—			116,938
Production taxes		2,821			—		—			2,821
Gathering and transportation		6,704			1,626		—			8,330
Depreciation, depletion, amortization and accretion		131,082			43,350		—			174,432
General and administrative expenses		41,510			2,592		—			44,102
Derivative gain		(10,238	)		—		—			(10,238	)
Total costs and expenses		275,386			60,999		—			336,385
Operating income		56,771			58,243		—			115,014
Earnings of affiliates		37,844			—		(37,844	)		—
Interest expense:
Incurred		28,612			—		—			28,612
Capitalized		(6,517	)		—		—			(6,517	)
Income before income tax expense		72,520			58,243		(37,844	)		92,919
Income tax expense		15,735			20,399		—			36,134
Net income	$	56,785		$	37,844	$	(37,844	)	$	56,785

W&T OFFSHORE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

Condensed Consolidating Statement of Cash Flows for the Six Months Ended June 30, 2013

													Consolidated
	Parent				Guarantor								W&T
	Company				Subsidiaries				Eliminations				Offshore, Inc.
	(In thousands)
Operating activities:
Net income	$	49,014		$		27,556		$		(27,556	)	$		49,014
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, amortization and accretion		164,366				44,401				—				208,767
Amortization of debt issuance costs and premium		910				—				—				910
Share-based compensation		4,950				—				—				4,950
Derivative gain		(9,473	)			—				—				(9,473	)
Cash payments on derivative settlements		(2,310	)			—				—				(2,310	)
Deferred income taxes		18,906				4,820				—				23,726
Earnings of affiliates		(27,556	)			—				27,556				—
Changes in operating assets and liabilities:
Oil and natural gas receivables		15,439				1,624				—				17,063
Joint interest and other receivables		33,620				—				—				33,620
Insurance receivables		5,015				—				—				5,015
Income taxes		(1,487	)			10,066				—				8,579
Prepaid expenses and other assets		(12,381	)			(41,160	)			41,160				(12,381	)
Asset retirement obligation settlements		(32,723	)			(163	)			—				(32,886	)
Accounts payable, accrued liabilities and other		44,054				(126	)			(41,160	)			2,768
Net cash provided by operating activities		250,344				47,018				—				297,362

Investing activities:
Investment in oil and natural gas properties and equipment		(252,195	)			(47,018	)			—				(299,213	)
Purchases of furniture, fixtures and other		(981	)			—				—				(981	)
Net cash used in investing activities		(253,176	)			(47,018	)			—				(300,194	)

Financing activities:
Borrowings of long-term debt – revolving bank credit facility		252,000				—				—				252,000
Repayments of long-term debt – revolving bank credit facility		(239,000	)			—				—				(239,000	)
Dividends to shareholders		(12,795	)			—				—				(12,795	)
Other		(342	)			—				—				(342	)
Net cash used in financing activities		(137	)			—				—				(137	)
Decrease in cash and cash equivalents		(2,969	)			—				—				(2,969	)
Cash and cash equivalents, beginning of period		12,245				—				—				12,245
Cash and cash equivalents, end of period	$	9,276		$		—		$		—		$		9,276

Condensed Consolidating Statement of Cash Flows for the Six Months Ended June 30, 2012

										Consolidated
	Parent			Guarantor						W&T
	Company			Subsidiaries			Eliminations			Offshore, Inc.
	(In thousands)
Operating activities:
Net income	$	56,785		$	37,844		$	(37,844	)	$	56,785
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, amortization and accretion		131,082			43,350			—			174,432
Amortization of debt issuance costs		1,287			—			—			1,287
Share-based compensation		5,818			—			—			5,818
Derivative gain		(10,238	)		—			—			(10,238	)
Cash payments on derivative settlements		(6,084	)		—			—			(6,084	)
Deferred income taxes		46,010			2,110			—			48,120
Earnings of affiliates		(37,844	)		—			37,844			—
Changes in operating assets and liabilities:
Oil and natural gas receivables		22,750			3,371			—			26,121
Joint interest and other receivables		3,630			—			—			3,630
Insurance receivables		500			—			—			500
Income taxes		(40,351	)		18,289			—			(22,062	)
Prepaid expenses and other assets		(14,110	)		(71,419	)		71,419			(14,110	)
Asset retirement obligations		(29,228	)		—			—			(29,228	)
Accounts payable, accrued liabilities and other		79,539			(1,766	)		(71,419	)		6,354
Net cash provided by operating activities		209,546			31,779			—			241,325

Investing activities:
Investment in oil and natural gas properties and equipment		(155,505	)		(31,779	)		—			(187,284	)
Proceeds from sales of oil and gas properties and equipment		30,453			—			—			30,453
Change in restricted cash		(30,763	)		—			—			(30,763	)
Purchases of furniture, fixtures and other		(668	)		—			—			(668	)
Net cash used in investing activities		(156,483	)		(31,779	)		—			(188,262	)

Financing activities:
Borrowings of long-term debt – revolving bank credit facility		197,000			—			—			197,000
Repayments of long-term debt – revolving bank credit facility		(234,000	)		—			—			(234,000	)
Dividends to shareholders		(11,898	)		—			—			(11,898	)
Other		(124	)		—			—			(124	)
Net cash used in financing activities		(49,022	)		—			—			(49,022	)
Increase in cash and cash equivalents		4,041			—			—			4,041
Cash and cash equivalents, beginning of period		4,512			—			—			4,512
Cash and cash equivalents, end of period	$	8,553		$	—		$	—		$	8,553