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
3 Months Ended
Mar. 31, 2020
Notes to Financial Statements  
Joint Venture Drilling Program [Text Block]
4.
Joint Venture Drilling Program
 
In
March 
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 certain drilling projects (the “Joint Venture Drilling Program”) in the Gulf of Mexico.  Subsequent to the initial closing, additional investors joined as members of Monza during
2018
and total commitments by all members, including W&T's commitment to fund its retained interest in Monza projects held outside of Monza, are
$361.4
million.  Through
March 
31,
2020,
nine
wells have been completed.  As of
March 31, 2020,
one
additional well was drilled to target depth, but
not
completed as of this date.  W&T contributed
88.94%
of its working interest in certain identified undeveloped drilling projects to Monza and retained
11.06%
of its working interest.  The Joint Venture 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 retained working interest in the Monza 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 to this structure are approved by the Monza board.  W&T is the operator for
seven
of the
nine
wells completed through
March 
31,
2020.
  
 
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.
 
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.
 
Through
March 
31,
2020,
members of Monza made partner capital contributions, including our contributions of working interest in the drilling projects, to Monza totaling
$289.3
 million and received cash distributions totaling
$45.9
 million.  Our net contribution to Monza, reduced by distributions received, as of
March 
31,
2020
 was
$57.1
 million.  W&T is obligated to fund certain cost overruns to the extent they occur, subject to certain exceptions, for the Joint Venture 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.  Through
March 
31,
2020,
there have been
no
 events or changes that would cause a redetermination of the variable interest status.  We do
not
fully consolidate Monza because we are
not
considered the primary beneficiary of Monza.  As of
March 
31,
2020,
in the Consolidated Balance Sheet, we recorded
$15.1
 million, net, in Oil and natural gas properties and other, net,
$4.2
 million in Other assets, 
$0.1
million in ARO and
$2.4
 million, net, increase in working capital in connection with our proportional interest in Monza’s assets and liabilities.  As of
December 31, 2019,
in the Consolidated Balance Sheet, we recorded
$16.1
 million, net, in Oil and natural gas properties and other, net,
$5.3
 million in Other assets,
$0.1
million in ARO and
$2.7
 million, net, increase in working capital in connection with our proportional interest in Monza’s assets and liabilities.  Additionally, during the
three
months ended
March 31, 2020 
and during the year ended
December 31, 2019,
we called on Monza to provide cash to fund its portion of certain Joint Venture Drilling Program projects in advance of capital expenditure spending, and the unused balances as of
March 31, 2020
and
December 31, 2019 
were
$18.3
 million and
$5.3
 million, respectively, which are included in the Consolidated Balance Sheet in Advances from joint interest partners.  For the
three
months ended
March 31, 2020,
in the Consolidated Statement of Operations, we recorded
$3.3
million in Total revenues and
$3.1
 million in Operating costs and expenses in connection with our proportional interest in Monza’s operations.  For the
three
months ended
March 31, 2019,
in the Consolidated Statement of Operations, we recorded
$1.6
 million in Total revenues and, 
$0.9
 million in Operating costs and expenses in connection with our proportional interest in Monza’s operations.