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

3 Months Ended

Mar. 31, 2014

W&T OFFSHORE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(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 or contain any assets. 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 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 March 31, 2014

									Consolidated
	Parent			Guarantor					W&T
	Company			Subsidiaries		Eliminations			Offshore, Inc.
	(In thousands)
Assets
Current assets:
Cash and cash equivalents	$	20,335		$	—	$	—		$	20,335
Receivables:
Oil and natural gas sales		66,314			27,623		—			93,937
Joint interest and other		27,588			—		—			27,588
Income tax		92,708			—		(89,553	)		3,155
Total receivables		186,610			27,623		(89,553	)		124,680
Prepaid expenses and other assets		21,769			5,246		—			27,015
Total current assets		228,714			32,869		(89,553	)		172,030
Property and equipment – at cost:
Oil and natural gas properties and equipment		6,624,335			819,398		—			7,443,733
Furniture, fixtures and other		21,633			—		—			21,633
Total property and equipment		6,645,968			819,398		—			7,465,366
Less accumulated depreciation, depletion and amortization		4,862,077			340,889		—			5,202,966
Net property and equipment		1,783,891			478,509		—			2,262,400
Restricted deposits for asset retirement obligations		39,961			—		—			39,961
Other assets		780,337			518,958		(1,279,082	)		20,213
Total assets	$	2,832,903		$	1,030,336	$	(1,368,635	)	$	2,494,604
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	113,459		$	1,885	$	—		$	115,344
Undistributed oil and natural gas proceeds		37,968			344		—			38,312
Asset retirement obligations		66,080			2,599		—			68,679
Accrued liabilities		—			133,251		(89,553	)		43,698
Total current liabilities		217,507			138,079		(89,553	)		266,033
Long-term debt, less current maturities		1,193,847			—		—			1,193,847
Asset retirement obligations, less current portion		210,959			74,761		—			285,720
Deferred income taxes		130,811			57,372		—			188,183
Other liabilities		532,455			—		(518,958	)		13,497
Shareholders’ equity:
Common stock		1			—		—			1
Additional paid-in capital		406,752			509,326		(509,326	)		406,752
Retained earnings		164,738			250,798		(250,798	)		164,738
Treasury stock, at cost		(24,167	)		—		—			(24,167	)
Total shareholders’ equity		547,324			760,124		(760,124	)		547,324
Total liabilities and shareholders’ equity	$	2,832,903		$	1,030,336	$	(1,368,635	)	$	2,494,604

Condensed Consolidating Balance Sheet as of December 31, 2013

									Consolidated
	Parent			Guarantor					W&T
	Company			Subsidiaries		Eliminations			Offshore, Inc.
	(In thousands)
Assets
Current assets:
Cash and cash equivalents	$	15,800		$	—	$	—		$	15,800
Receivables:
Oil and natural gas sales		75,486			21,266		—			96,752
Joint interest and other		27,984			—		—			27,984
Income tax		124,393			—		(121,273	)		3,120
Total receivables		227,863			21,266		(121,273	)		127,856
Prepaid expenses and other assets		23,674			6,272		—			29,946
Total current assets		267,337			27,538		(121,273	)		173,602
Property and equipment – at cost:
Oil and natural gas properties and equipment		6,770,396			568,701		—			7,339,097
Furniture, fixtures and other		21,431			—		—			21,431
Total property and equipment		6,791,827			568,701		—			7,360,528
Less accumulated depreciation, depletion and amortization		4,784,932			299,772		—			5,084,704
Net property and equipment		2,006,895			268,929		—			2,275,824
Restricted deposits for asset retirement obligations		37,421			—		—			37,421
Other assets		574,280			427,619		(981,444	)		20,455
Total assets	$	2,885,933		$	724,086	$	(1,102,717	)	$	2,507,302
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	144,492		$	720	$	—		$	145,212
Undistributed oil and natural gas proceeds		41,735			372		—			42,107
Asset retirement obligations		75,977			1,808		—			77,785
Accrued liabilities		28,000			121,273		(121,273	)		28,000
Total current liabilities		290,204			124,173		(121,273	)		293,104
Long-term debt, less current maturities		1,205,421			—		—			1,205,421
Asset retirement obligations, less current portion		238,270			38,367		—			276,637
Deferred income taxes		170,419			7,723		—			178,142
Other liabilities		441,009			—		(427,621	)		13,388
Shareholders’ equity:
Common stock		1			—		—			1
Additional paid-in capital		403,564			317,776		(317,776	)		403,564
Retained earnings		161,212			236,047		(236,047	)		161,212
Treasury stock, at cost		(24,167	)		—		—			(24,167	)
Total shareholders’ equity		540,610			553,823		(553,823	)		540,610
Total liabilities and shareholders’ equity	$	2,885,933		$	724,086	$	(1,102,717	)	$	2,507,302

Condensed Consolidating Statement of Income for the Three Months Ended March 31, 2014

										Consolidated
	Parent			Guarantor						W&T
	Company			Subsidiaries			Eliminations			Offshore, Inc.
	(In thousands)
Revenues	$	176,657		$	77,859		$	—		$	254,516
Operating costs and expenses:
Lease operating expenses		46,148			9,469			—			55,617
Production taxes		1,992			—			—			1,992
Gathering and transportation		3,984			1,312			—			5,296
Depreciation, depletion, amortization and accretion		81,105			42,201			—			123,306
General and administrative expenses		21,364			2,224			—			23,588
Derivative loss		7,492			—			—			7,492
Total costs and expenses		162,085			55,206			—			217,291
Operating income		14,572			22,653			—			37,225
Earnings of affiliates		14,751			—			(14,751	)		—
Interest expense:
Incurred		21,293			167			—			21,460
Capitalized		(1,905	)		(167	)		—			(2,072	)
Income before income tax expense		9,935			22,653			(14,751	)		17,837
Income tax expense		(1,254	)		7,902			—			6,648
Net income	$	11,189		$	14,751		$	(14,751	)	$	11,189

Condensed Consolidating Statement of Income for the Three Months Ended March 31, 2013

									Consolidated
	Parent			Guarantor					W&T
	Company			Subsidiaries		Eliminations			Offshore, Inc.
	(In thousands)
Revenues	$	209,528		$	49,694	$	—		$	259,222
Operating costs and expenses:
Lease operating expenses		54,529			4,812		—			59,341
Production taxes		1,789			—		—			1,789
Gathering and transportation		3,662			782		—			4,444
Depreciation, depletion, amortization and accretion		86,416			22,456		—			108,872
General and administrative expenses		19,604			1,483		—			21,087
Derivative loss		3,368			—		—			3,368
Total costs and expenses		169,368			29,533		—			198,901
Operating income		40,160			20,161		—			60,321
Earnings of affiliates		13,100			—		(13,100	)		—
Interest expense:
Incurred		21,234			—		—			21,234
Capitalized		(2,433	)		—		—			(2,433	)
Income before income tax expense		34,459			20,161		(13,100	)		41,520
Income tax expense		7,841			7,061		—			14,902
Net income	$	26,618		$	13,100	$	(13,100	)	$	26,618

Condensed Consolidating Statement of Cash Flows for the Three Months Ended March 31, 2014

										Consolidated
	Parent			Guarantor						W&T
	Company			Subsidiaries			Eliminations			Offshore, Inc.
	(In thousands)
Operating activities:
Net income	$	11,189		$	14,751		$	(14,751	)	$	11,189
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, amortization and accretion		81,105			42,201			—			123,306
Amortization of debt issuance costs and premium		187			—			—			187
Share-based compensation		3,758			—			—			3,758
Derivative loss		7,492			—			—			7,492
Cash payments on derivative settlements (realized)		(4,670	)		—			—			(4,670	)
Deferred income taxes		10,722			(4,077	)		—			6,645
Earnings of affiliates		(14,751	)		—			14,751			—
Changes in operating assets and liabilities:
Oil and natural gas receivables		9,172			(6,357	)		—			2,815
Joint interest and other receivables		2,286			—			—			2,286
Income taxes		(12,014	)		11,979			—			(35	)
Prepaid expenses and other assets		(51,920	)		(36,588	)		91,217			2,709
Asset retirement obligations settlements		(11,936	)		(4,406	)		—			(16,342	)
Accounts payable, accrued liabilities and other		69,230			1,137			(91,217	)		(20,850	)
Net cash provided by operating activities		99,850			18,640			—			118,490
Investing activities:
Investment in oil and natural gas properties and equipment		(71,788	)		(23,279	)		—			(95,067	)
Investment in subsidiary		(4,639	)		—			4,639			—
Purchases of furniture, fixtures and other		(260	)		—			—			(260	)
Net cash used in investing activities		(76,687	)		(23,279	)		4,639			(95,327	)
Financing activities:
Borrowings of long-term debt – revolving bank credit facility		92,000			—			—			92,000
Repayments of long-term debt – revolving bank credit facility		(103,000	)		—			—			(103,000	)
Dividends to shareholders		(7,563	)		—			—			(7,563	)
Other		(65	)		—			—			(65	)
Investment from parent		—			4,639			(4,639	)		—
Net cash provided (used) in financing activities		(18,628	)		4,639			(4,639	)		(18,628	)
Increase in cash and cash equivalents		4,535			—			—			4,535
Cash and cash equivalents, beginning of period		15,800			—			—			15,800
Cash and cash equivalents, end of period	$	20,335		$	—		$	—		$	20,335

Condensed Consolidating Statement of Cash Flows for the Three Months Ended March 31, 2013

										Consolidated
	Parent			Guarantor						W&T
	Company			Subsidiaries			Eliminations			Offshore, Inc.
	(In thousands)
Operating activities:
Net income	$	26,618		$	13,100		$	(13,100	)	$	26,618
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, amortization and accretion		86,416			22,456			—			108,872
Amortization of debt issuance costs and premium		447			—			—			447
Share-based compensation		2,255			—			—			2,255
Derivative loss		3,368			—			—			3,368
Cash payments on derivative settlements (realized)		(4,271	)		—			—			(4,271	)
Deferred income taxes		11,774			733			—			12,507
Earnings of affiliates		(13,100	)		—			13,100			—
Changes in operating assets and liabilities:
Oil and natural gas receivables		172			251			—			423
Joint interest and other receivables		25,875			—			—			25,875
Income taxes		(3,957	)		6,329			—			2,372
Prepaid expenses and other assets		4,911			(24,155	)		24,155			4,911
Asset retirement obligations settlements		(23,311	)		(153	)		—			(23,464	)
Accounts payable, accrued liabilities and other		34,191			(115	)		(24,155	)		9,921
Net cash provided by operating activities		151,388			18,446			—			169,834
Investing activities:
Investment in oil and natural gas properties and equipment		(118,180	)		(18,446	)		—			(136,626	)
Purchases of furniture, fixtures and other		(114	)		—			—			(114	)
Net cash used in investing activities		(118,294	)		(18,446	)		—			(136,740	)
Financing activities:
Borrowings of long-term debt – revolving bank credit facility		112,000			—			—			112,000
Repayments of long-term debt – revolving bank credit facility		(139,000	)		—			—			(139,000	)
Dividends to shareholders		(6,020	)		—			—			(6,020	)
Other		(42	)		—			—			(42	)
Net cash used in financing activities		(33,062	)		—			—			(33,062	)
Increase in cash and cash equivalents		32			—			—			32
Cash and cash equivalents, beginning of period		12,245			—			—			12,245
Cash and cash equivalents, end of period	$	12,277		$	—		$	—		$	12,277