W&T Offshore Reports Third Quarter Earnings Per Share of $1.03 and Adjusted Earnings Per Share of $0.79
HOUSTON, Nov. 4 /PRNewswire-FirstCall/ -- W&T Offshore, Inc. (NYSE: WTI) today provides financial and operational results for the third quarter 2008. Some of the highlights for the third quarter 2008 include:
-- Revenues increased 14% to $289.8 million from $255.2 million in third quarter 2007
-- Adjusted earnings per share increased 49% to $0.79 per share, compared to adjusted earnings per share of $0.53 in third quarter 2007
-- Adjusted EBITDA increased 9% to $208.4 million from $191.4 million in third quarter 2007
-- Production decreased to 3.3 million barrels of oil equivalent ("BOE"), consisting of 1.5 million barrels ("MMBbls") of oil and 10.9 billion cubic feet ("Bcf") of natural gas, or 19.9 billion cubic feet equivalent ("Bcfe") compared to 28.9 Bcfe in the third quarter 2007 primarily due to Hurricanes Gustav and Ike
-- Lenders reaffirmed the borrowing base of the undrawn $500 million revolving loan facility
Tracy W. Krohn, Chairman and Chief Executive Officer, stated, "The third quarter certainly had its share of challenges including two hurricanes in the Gulf of Mexico. Although we did have some damage from the storms, we are working hard to restore production. Currently our production rate is 8,800 barrels per day plus 106 million cubic feet ("Mcf") per day or 159 million cubic feet equivalent ("MMcfe") per day or approximately 52% of production prior to the storms. The majority of our production is ready to come back on line and we are waiting for downstream third party pipeline and processing facilities to complete their repairs. However our strong balance sheet, which included $685 million in cash on September 30, 2008, and our $500 million undrawn revolver, positions us to take advantage of the unique opportunities that are being created by the recent credit crisis. "continued Mr. Krohn. "As it relates to our drilling operations, we were three of five in exploration wells and one for one in development wells. Our overall drilling success rate for the year is 80%."
Revenues, Net Income and EPS: Net income for the third quarter of 2008 was $78.2 million, or $1.03 per diluted share, on revenues of $289.8 million, compared to net income for the same quarter of 2007 of $36.3 million, or $0.48 per diluted share, on revenues of $255.2 million. Net income increased in the third quarter 2008 principally due to a higher realized price of $14.57 per thousand cubic feet equivalent ("Mcfe"), a 65% increase over the $8.83 per Mcfe realized in the comparable period in 2007. Operating income for the third quarter of 2008 also reflects the impact of a $27.3 million unrealized derivative gain ($18.2 million after-tax), or $0.24 per diluted share, while operating income for the third quarter of 2007 included an unrealized derivative loss of $6.4 million ($4.2 million after-tax), or $0.05 per diluted share. Without the effect of these respective unrealized gains and losses, net income for the third quarter 2008 would have been $60.0 million, or $0.79 per diluted share, and net income for the corresponding quarter of 2007 would have been $40.5 million, or $0.53 per diluted share. Net income for the nine months ended September 30, 2008 was $292.6 million, or $3.85 per diluted share, on revenues of $1.1 billion, compared to net income of $94.9 million, or $1.25 per diluted share, on revenues of $774.3 million for the first nine months of 2007. See "Non-GAAP Information" later in this press release.
Cash Flow from Operating activities and Adjusted EBITDA: EBITDA and Adjusted EBITDA are non-GAAP measures and are defined in "Non-GAAP Information" later in this press release. Net cash provided by operating activities for the nine months ended September 30, 2008 increased 120% to approximately $1.0 billion from $472.7 million in the comparable period in 2007. The increase was associated with higher realized prices on sales of our oil and natural gas. Third quarter 2008 Adjusted EBITDA was $208.4 million, which represents a 9% increase over the $191.4 million reported during the prior year's third quarter. Adjusted EBITDA was $861.7 million for the nine months ended September 30, 2008, compared to $567.6 million for the comparable period of 2007.
Production and Prices: We sold 10.9 billion cubic feet ("Bcf") of natural gas at an average price of $10.60 per thousand cubic feet ("Mcf") in the third quarter of 2008. We also sold 1.5 million barrels ("MMBbls") of oil and natural gas liquids at an average price of $116.54 per barrel ("Bbl") during the same time period. On a natural gas equivalent ("Bcfe") basis, we sold 19.9 Bcfe at an average price of $14.57 per Mcfe. For the third quarter of 2007, we sold 16.8 Bcf of natural gas at an average price of $6.45 per Mcf and 2.0 MMBbls of oil and natural gas liquids at an average price of $72.72 per Bbl. On a Bcfe basis for 2007, we sold 28.9 Bcfe at an average price of $8.83 per Mcfe. The production volume decrease is primarily attributable to the deferral of production caused by Hurricanes Gustav and Ike and properties that experienced natural reservoir declines, partially offset by increased production from our successful drilling and development efforts and the acquisition of the remaining interest in the Ship Shoal 349 field.
For the nine months ended September 30, 2008, our natural gas production totaled 45.6 Bcf and was sold at an average price of $10.21 per Mcf while our oil and natural gas liquids production totaled 6.0 MMBbls, which was sold at an average price of $106.71 per Bbl. On a combined basis our production was 81.7 Bcfe sold at an average price of $13.56 per Mcfe. For the comparable 2007 period, we produced 55.5 Bcf of natural gas that was sold at an average price of $7.17 per Mcf and 6.1 MMBbls of oil and natural gas liquids production sold at an average price of $61.49 per Bbl. On a combined basis for 2007 our production was 92.2 Bcfe sold at an average price of $8.40 per Mcfe.
Lease Operating Expenses: On a nominal basis, LOE for the third quarter of 2008 was up slightly to $52.4 million, from $51.6 million in the third quarter of 2007. LOE increased to $2.64 per Mcfe in the third quarter 2008 from $1.79 per Mcfe in the third quarter of 2007. On an absolute basis, the increase in LOE is due to higher facility expense associated with various maintenance projects and higher workover costs, partially offset by lower base operating costs due to lower production volumes.
On an absolute basis, LOE for the nine months ended September 30, 2008 decreased to $156.6 million, compared to $169.2 million for the same period in 2007. The 2007 period included $14.8 million of hurricane remediation costs related to Hurricanes Katrina and Rita not covered by insurance. Also contributing to the decrease in 2008 is $4.2 million of lower insurance premiums and $2.7 million of lower workover expenditures. This was partially offset by higher facility expenditures associated with maintenance projects and higher base operating expense associated with higher fuel costs.
Depreciation, depletion, amortization and accretion: DD&A decreased to $113.9 million for the third quarter 2008 from $123.1 million for the same period in 2007. DD&A decreased due to lower total sales volumes, the addition of reserves from the acquisition of an additional interest in the Ship Shoal 349 field and reserves added as a result of our successful drilling efforts. This was partially offset by capital expenditures, increased estimated future development costs and higher estimated asset retirement obligations. On a per Mcfe basis, DD&A was $5.73 for the quarter ended September 30, 2008, compared to $4.26 for the quarter ended September 30, 2007. The increase of $1.47 per Mcfe is primarily due to higher total depletable costs and lower estimated oil and natural gas reserves in the 2008 period. DD&A for the nine months ended 2008 was $413.2 million or $5.06 per Mcfe, compared to DD&A of $373.4 million, or $4.05 per Mcfe, for the same period in 2007.
Capital Expenditures and Operations Update: During the third quarter of 2008, the Company was 67% successful in the drilling of three conventional shelf and two deep shelf exploration wells and one conventional shelf development well. For the quarter ended September 30, 2008, capital expenditures for oil and gas properties were $222.5 million split between $120.0 million for development activities, $69.1 million for exploration, and $33.4 million for other capital items.
For the first nine months of 2008, our capital expenditures for oil and gas properties were $621.6 million, including $253.5 million for development activities, $196.1 million for exploration, $116.6 million for the acquisition of an additional interest in SS349 "Mahogany" and $55.4 million for seismic, capitalized interest and other leasehold costs.
Capital expenditures for 2008 are expected to generally be inline with our revised capital budget of $611 million.
Drilling Highlights: In the third quarter of 2008, the Company drilled or participated in the drilling of the following successful wells:
Working
Lease Name/Well Category Interest %
MP-283 A-1ST Exploration/Shelf 75%
ST-230 A-7ST Development/Shelf 100%
SS 232 B-2ST Exploration/Deep shelf 90%
MP Area Exploration/Shelf 75%
The Company also drilled or participated in the drilling of two non- commercial wells, as follows:
Working
Lease Name/Well Category Interest %
VK 519 #1 Exploration/Deep shelf 90%
MP 266 A-5 Exploration/Shelf 50%
After the close of the quarter, the Company drilled or participated in the drilling of two commercially successful wells:
Working
Lease Name/Well Category Interest %
EI 186 #1 Exploration/Deep shelf 100%
SS 224 E-20ST Exploration/Shelf 100%
Outlook: Guidance for the fourth quarter and revised full year 2008 is shown in the table below, which represents the Company's best estimate of likely future results, and is affected by the factors described below in "Forward-Looking Statements." Fourth quarter and full year 2008 guidance has been revised to reflect current information gathered by W&T and third party sources, which include other operators and pipeline companies about the progress of storm repairs and the return of production. Actual production and cost estimates could change suddenly because a significant portion of production and costs are beyond our control.
During the month of October 2008, market prices for oil and natural gas were much lower than the average for either the third quarter or the first nine months of 2008. As a result of lower production and lower realized prices on sales of our oil and natural gas, our cash flows for the fourth quarter are expected to be significantly less than what we realized in each of the first three quarters of 2008.
Fourth Quarter and Full-Year 2008 Production and Cost Guidance:
Estimated Production Fourth Quarter Prior Full-Year Revised Full-Year
2008 2008 2008
Crude oil (MMBbls) 0.8 - 1.0 8.6 - 9.3 6.8 - 7.0
Natural gas (Bcf) 8.1 - 9.6 63.6 - 69.1 53.8 - 55.2
Total (MMBoe) 2.2 - 2.6 19.2 - 20.8 15.8 - 16.2
Total (Bcfe) 12.9 - 15.6 115.0 - 125.0 94.6 - 97.2
Operating Expenses Fourth Quarter Prior Full-Year Revised Full-Year
($ in millions, 2008 2008 2008
except as noted)
Lease operating expenses $59 - $69 $212 - $232 $217 - $227
Gathering,
transportation &
production taxes $6 - $8 $35 - $39 $29 - $31
General and
administrative $11 - $13 $45 - $52 $44 - $47
Income tax rate,
% deferred (1) 34%, NM% 34%, 40% 34%, 70%
(1) Percentage change not meaningful ("NM")
Conference Call Information: W&T will hold a conference call to discuss financial and operational results on Tuesday, November 4, 2008 at 11:00 a.m. Eastern Time / 10:00 a.m. Central Time. To participate, dial (303) 262-2053 a few minutes before the call begins. The call will also be broadcast live over the Internet from the Company's website at www.wtoffshore.com. A replay of the conference call will be available approximately two hours after the end of the call until Tuesday, November 11, 2008, and may be accessed by calling (303) 590-3000 and using the pass code 11121166.
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 155 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 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, 2007 (www.sec.gov).
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
W&T OFFSHORE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
(In thousands, except per share data)
Revenues $289,793 $255,191 $1,107,303 $774,293
Operating costs and
expenses:
Lease operating expenses 52,403 51,627 156,554 169,154
Gathering, transportation
costs and production taxes 6,207 5,783 22,953 14,626
Depreciation, depletion and
amortization 104,201 117,539 384,078 356,881
Asset retirement obligation
accretion 9,671 5,574 29,117 16,477
General and administrative
expenses 10,657 9,952 34,294 29,240
Derivative (gain) loss (15,174) 2,809 20,897 15,082
Total costs and expenses 167,965 193,284 647,893 601,460
Operating income 121,828 61,907 459,410 172,833
Interest expense:
Incurred 13,371 14,332 40,210 47,774
Capitalized (4,605) (6,024) (15,040) (19,117)
Loss on extinguishment of debt - - - 2,806
Other income 4,140 1,567 9,271 2,508
Income before income taxes 117,202 55,166 443,511 143,878
Income taxes 39,021 18,826 150,914 48,988
Net income $78,181 $36,340 $292,597 $94,890
Earnings per common share:
Basic $1.03 $0.48 $3.85 $1.25
Diluted 1.03 0.48 3.85 1.25
Weighted average shares outstanding:
Basic 75,913 75,787 75,909 75,787
Diluted 76,132 75,949 76,083 75,914
Consolidated Cash Flow Information
Net cash provided by
operating activities $492,297 $164,290 $1,040,259 $472,668
Capital expenditures-oil
and gas properties 222,468 79,452 621,624 277,299
Other Financial Information
EBITDA $235,700 $185,020 $872,605 $543,385
Adjusted EBITDA 208,372 191,389 861,672 567,551
W&T OFFSHORE, INC. AND SUBSIDIARIES
Condensed Operating Data
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
Net sales:
Natural gas (MMcf) 10,923 16,753 45,587 55,498
Oil (MBbls) 1,493 2,022 6,012 6,116
Total natural gas and oil
(MBoe) (1) 3,313 4,814 13,610 15,366
Total natural gas and oil
(MMcfe) (2) 19,880 28,886 81,659 92,194
Average daily equivalent sales
(MBoe/d) 36.0 52.3 49.7 56.3
Average daily equivalent sales
(MMcfe/d) 216.1 314.0 298.0 337.7
Average realized sales prices (Unhedged):
Natural gas ($/Mcf) $10.60 $6.45 $10.21 $7.17
Oil ($/Bbl) 116.54 72.72 106.71 61.49
Barrel of oil equivalent ($/Boe) 87.44 53.01 81.34 50.39
Natural gas equivalent ($/Mcfe) 14.57 8.83 13.56 8.40
Average realized sales prices (Hedged):(3)
Natural gas ($/Mcf) $10.60 $6.69 $10.21 $7.27
Oil ($/Bbl) 109.01 72.52 101.75 61.64
Barrel of oil equivalent ($/Boe) 84.05 53.74 79.15 50.79
Natural gas equivalent ($/Mcfe) 14.01 8.96 13.19 8.47
Average per Boe ($/Boe):
Lease operating expenses $15.82 $10.72 $11.50 $11.01
Gathering and transportation costs
and production taxes 1.87 1.20 1.69 0.95
Depreciation, depletion,
amortization and accretion 34.37 25.57 30.36 24.30
General and administrative expenses 3.22 2.07 2.52 1.90
Net cash provided by operating
activities 148.58 34.13 76.43 30.76
Adjusted EBITDA 62.89 39.75 63.31 36.94
Average per Mcfe ($/Mcfe):
Lease operating expenses $2.64 $1.79 $1.92 $1.83
Gathering and transportation costs
and production taxes 0.31 0.20 0.28 0.16
Depreciation, depletion,
amortization and accretion 5.73 4.26 5.06 4.05
General and administrative expenses 0.54 0.34 0.42 0.32
Net cash provided by operating
activities 24.76 5.69 12.74 5.13
Adjusted EBITDA 10.48 6.63 10.55 6.16
(1) One million barrels of oil equivalent (MMBoe), one thousand barrels of oil equivalent (Mboe) and one barrel of oil equivalent (Boe) are determined using the ratio of one Bbl of crude oil, condensate or natural gas liquids to six Mcf of natural gas (totals may not add due to rounding).
(2) 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).
(3) Data for 2008 and 2007 includes the effects of our commodity derivative contracts that do not qualify for hedge accounting.
W&T OFFSHORE, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
September 30, December 31,
2008 2007 (1)
(In thousands, except
share data)
Assets
Current assets:
Cash and cash equivalents $685,311 $314,050
Receivables 101,078 161,998
Prepaid expenses and other assets 47,965 43,645
Total current assets 834,354 519,693
Property and equipment - at cost:
Oil and gas properties and equipment
(full cost method, of which $233,820
at September 30, 2008 and $278,947 at
December 31, 2007 were excluded from
amortization) 4,512,578 3,805,208
Furniture, fixtures and other 13,745 10,267
Total property and equipment 4,526,323 3,815,475
Less accumulated depreciation,
depletion and amortization 1,936,822 1,552,744
Net property and equipment 2,589,501 2,262,731
Restricted deposits for asset
retirement obligations and other
assets 31,225 29,780
Total assets $3,455,080 $2,812,204
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of long-term debt $3,000 $3,000
Accounts payable 340,084 159,973
Undistributed oil and gas proceeds 66,144 47,911
Asset retirement obligations -
current portion 41,057 19,749
Accrued liabilities 29,016 65,328
Income taxes 72,986 12,975
Total current liabilities 552,287 308,936
Long-term debt, less current
maturities - net of discount 650,568 651,764
Asset retirement obligations, less
current portion 488,886 438,932
Deferred income taxes 314,726 255,097
Other liabilities 4,982 6,135
Commitments and contingencies
Shareholders' equity:
Common stock, $0.00001 par value;
118,330,000 shares authorized;
issued and outstanding 76,353,100
and 76,175,159 shares at September
30, 2008 and December 31, 2007,
respectively 1 1
Additional paid-in capital 371,905 365,667
Retained earnings 1,072,529 786,803
Accumulated other comprehensive loss (804) (1,131)
Total shareholders' equity 1,443,631 1,151,340
Total liabilities and shareholders'
equity $3,455,080 $2,812,204
(1) Certain reclassifications have been made to the December 31, 2007 balance sheet to conform to our current reporting practices.
W&T OFFSHORE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
September 30,
2008 2007
(In thousands)
Operating activities:
Net income $292,597 $94,890
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion, amortization
and accretion 413,195 373,358
Amortization of debt issuance costs
and discount on indebtedness 2,032 5,840
Loss on extinguishment of debt - 2,806
Share-based compensation related to
restricted stock issuances 4,563 2,491
Unrealized derivative (gain) loss (10,933) 21,360
Deferred income taxes 64,248 92
Other 505 746
Changes in operating assets and
liabilities 274,052 (28,915)
Net cash provided by operating
activities 1,040,259 472,668
Investing activities:
Acquisition of property interest (116,551) -
Investment in oil and gas properties
and equipment, net (505,073) (273,638)
Purchases of furniture, fixtures and
other, net (3,833) (348)
Net cash used in investing activities (625,457) (273,986)
Financing activities:
Issuance of Senior Notes - 450,000
Borrowings of other long-term debt - 458,000
Repayments of long-term debt (2,250) (945,750)
Dividends to shareholders (39,159) (6,850)
Debt issuance costs and other (2,132) (5,510)
Net cash used in financing activities (43,541) (50,110)
Increase in cash and cash equivalents 371,261 148,572
Cash and cash equivalents, beginning
of period 314,050 39,235
Cash and cash equivalents, end of
period $685,311 $187,807
W&T OFFSHORE, INC. AND SUBSIDIARIES
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
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
(In thousands, except per share amounts)
(Unaudited)
Net Income $78,181 $36,340 $292,597 $94,890
Unrealized derivative (gain)
loss (27,328) 6,369 (10,933) 21,360
Loss on extinguishment of debt - - - 2,806
Income tax adjustment for above
items 9,099 (2,173) 3,720 (8,228)
Adjusted net income $59,952 $40,536 $285,384 $110,828
Adjusted earnings per share-
diluted $0.79 $0.53 $3.75 $1.46
"Adjusted Net Income" does not include the unrealized derivative (gain) loss and associated tax effects. Adjusted Net Income is presented because the timing and amount of the derivative items cannot be reasonably estimated and affect the comparability of operating results from period to period, and current periods to prior periods.
Reconciliation of Net Income to Adjusted EBITDA
We define EBITDA as net income plus income tax expense, net interest expense (which includes interest income), and depreciation, depletion, amortization and accretion. Adjusted EBITDA also excludes the loss on extinguishment of debt and the unrealized gain or loss related to our derivative contracts. Although not prescribed under GAAP, we believe the presentation of EBITDA and Adjusted EBITDA provide useful information regarding our ability to service debt and fund capital expenditures and they help our investors understand our operating performance and make it easier to compare our results with those of other companies that have different financing, capital and tax structures. EBITDA and Adjusted 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 and Adjusted EBITDA, as we calculate them, may not be comparable to EBITDA and Adjusted EBITDA measures reported by other companies. In addition, EBITDA and Adjusted EBITDA do not represent funds available for discretionary use.
The following table presents a reconciliation of our consolidated net income to consolidated EBITDA and Adjusted EBITDA.
Three Month Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
(In thousands)
(Unaudited)
Net Income $78,181 $36,340 $292,597 $94,890
Income taxes 39,021 18,826 150,914 48,988
Net interest expense 4,626 6,741 15,899 26,149
Depreciation, depletion,
amortization and accretion 113,872 123,113 413,195 373,358
EBITDA 235,700 185,020 872,605 543,385
Adjustments:
Unrealized derivative (gain)
loss (27,328) 6,369 (10,933) 21,360
Loss on extinguishment of debt - - - 2,806
Adjusted EBITDA $208,372 $191,389 $861,672 $567,551
SOURCE W&T Offshore, Inc.
Released November 4, 2008