W&T Offshore Announces Third Quarter 2020 Results

HOUSTON, Nov. 04, 2020 (GLOBE NEWSWIRE) -- W&T Offshore, Inc. (NYSE: WTI) (“W&T” or the “Company”) today reported operational and financial results for the third quarter 2020.

Key highlights included:

  • Produced 34,459 barrels of oil equivalent per day (“Boe/d”), or 3.2 million Boe (48% liquids), in the third quarter of 2020, reflecting a 16% decrease from the third quarter of 2019, primarily due to shut-ins related to the extraordinary 2020 hurricane season;
  • Experienced no material damage to the Company’s platforms or infrastructure from the series of storms that entered the Gulf of Mexico (“GOM”) from June through October, but expects to incur in the fourth quarter of 2020 approximately $5 million in lease operating expenses (“LOE”) related to repairs and restoring production associated with the multiple shut-ins from the storms;
  • Reported a net loss of $13.3 million or $0.09 per share and Adjusted Net Loss of $19.9 million or $0.14 per share in the third quarter of 2020;
  • Generated Adjusted EBITDA of $19.5 million for the third quarter of 2020, despite a significantly lower pricing environment and shut-in production due to hurricane activity, while capital expenditures were held to just $1.2 million; Free Cash Flow totaled $5.9 million for the quarter;
  • Generated Adjusted EBITDA of $123.7 million for the first nine months of 2020 and Free Cash Flow of $61.8 million;
  • Consolidating natural gas treatment plants at Mobile Bay late in the fourth quarter of 2020, with expected future cost savings of approximately $5 million per year; and
  • Responded to the current low oil price environment with definitive actions to maintain financial flexibility, protect cash flow and preserve future value:

    • Suspended all drilling activities and significantly reduced its estimate of 2020 capital expenditures to $15 million to $25 million (which excludes $28.2 million in working capital changes associated with capital expenditures incurred in 2019 but paid during the nine months ended September 30, 2020);
    • Proactively curtailed production at selected oil-weighted fields operated by W&T;
    • Implemented reductions in LOE without compromising safety or operational capabilities.

Tracy W. Krohn, W&T's Chairman and Chief Executive Officer, stated, “This year has been extraordinary and particularly difficult for energy producers, including a global COVID-19 pandemic and supply and demand imbalances. In addition, there have been an unusually large number of named storms enter the GOM in 2020, which have caused significant production shut-ins by W&T but, fortunately, have resulted in minimal physical damage to our facilities. These storms and unplanned downtime at Mobile Bay adversely impacted our third quarter 2020 production by nearly 9,000 Boe/d.  There is expected to be a continued impact to production in the fourth quarter as well, depending on when Magnolia and other fields are restored to production, the effect of additional shut-ins at Mobile Bay including consolidation of the gas plants and the impact from additional tropical weather through November.  Despite these difficult conditions, we have generated positive Adjusted EBITDA and maintained our significantly reduced capital spending in 2020 to ensure that we continue to generate Free Cash Flow which totaled $5.9 million in the third quarter of 2020 and $61.8 million for the nine months ending September 30. As a reminder, earlier this year we quickly and decisively responded to this downturn by stopping all drilling and completion activity, shut-in uneconomic fields, and reduced LOE significantly without compromising safety or our operational capabilities.  Late in the fourth quarter, we expect to consolidate our two natural gas treatment facilities that serve the Mobile Bay area into the larger of the two facilities which we acquired last year from ExxonMobil. This single facility provides us with more than enough capacity for our current operations as well as production from future natural gas drilling projects in the area. The consolidation of these facilities will help us reduce our future LOE by approximately $5 million per year. Additionally, we have capitalized on opportunities in 2020, where we retired $72.5 million of our senior notes for a total cost of $23.9 million, thereby saving over $7.1 million in annualized interest and preserving long-term capital.” 

“This is a cyclical business and we have faced adversity in the past, but our success over nearly 40 years has been because of our focus on cash flow generation and operating efficiently. We remain focused on these touchstones of our strategy.  We have also been active in completing accretive acquisitions and we will continue to evaluate opportunities presented by the current market backdrop that meet all the criteria we have outlined in the past which target producing properties that generate Free Cash Flow with upside potential.  We believe that we are well positioned to deliver near-term and long-term value creation at W&T,” concluded Mr. Krohn.

For the third quarter of 2020, W&T reported a net loss of $13.3 million, or $0.09 per share. The Company’s Adjusted Net Loss was $19.9 million, or $0.14 per share, primarily excluding a non-cash tax benefit of $21.2 million and a $13.1 million unrealized commodity derivative loss. In the third quarter of 2019, W&T reported net income of $75.9 million, or $0.53 per share, which included a non-cash tax benefit of $55.5 million ($0.39 per share) primarily due to the reduction of a valuation allowance previously recorded against net deferred tax assets. Adjusted Net Income for the third quarter of 2019 was $18.5 million, or $0.13 per share. In the second quarter of 2020, W&T reported a net loss of $5.9 million, or $0.04 per share, which included a $38.0 million unrealized commodity derivative loss, a $29.0 million non-cash gain on debt transaction, and $8.7 million of non-cash deferred tax benefit. For that same period, Adjusted Net Loss was $2.2 million or $0.02 per share.

Adjusted EBITDA for the third quarter of 2020 totaled $19.5 million, a decrease of 73% compared to $72.0 million in the third quarter of 2019 primarily due to lower commodity prices and lower production volumes. Third quarter 2020 Adjusted EBITDA declined 54% from $42.1 million in the second quarter of 2020 primarily due to lower commodity prices and curtailed volumes.

Free Cash Flow for the third quarter of 2020 totaled $5.9 million compared with $13.3 million in the same period in 2019 and $20.8 million in the second quarter of 2020. For the first nine months of 2020, Free Cash Flow totaled $61.8 million compared with $47.2 million in the same period in 2019.

Adjusted Net Income/Loss, Adjusted EBITDA and Free Cash Flow are non-GAAP financial measures, which are described in more detail and reconciled to net income/loss, their most comparable GAAP measure, in the attached tables below under “Non-GAAP Information.”

Production, Prices and Revenues: Production for the third quarter of 2020 was 34,459 Boe/d or 3.2 million Boe, down 16% versus 41,149 Boe/d in the third quarter of 2019 and a decrease of 18% compared to 42,037 Boe/d in the second quarter of 2020. Third quarter 2020 production declined compared to prior periods primarily due to the significant impact on operated and non-operated production from the large number of named storms that entered the GOM. In addition, and to a lesser extent, the Company experienced unplanned downtime at Mobile Bay, previously-announced planned downtime at the Magnolia field and a combination of operated and non-operated production that remained shut-in due to the decline in oil prices, and natural decline.  Third quarter 2020 production was comprised of 1.1 million barrels (“MMBbls”) of oil, 0.4 MMBbls of natural gas liquids (“NGLs”) and 9.9 billion cubic feet (“Bcf”) of natural gas.  Liquids production comprised 48% of total production in the third quarter of 2020.  W&T’s production across the GOM has been significantly impacted by an extraordinary number of storms in this historic tropical storm season. All of these storms resulted in varying amounts of production being shut-in depending on the size and path of the storms. Tropical Storm Cristobal impacted W&T’s second quarter 2020 production while Hurricanes Hanna, Marco, Laura, Sally and Beta caused production shut-ins during the third quarter of 2020. In addition, Hurricanes Delta and Zeta caused production shut-ins in October, and will impact the fourth quarter of 2020. W&T has restored a portion of its shut-in operated and non-operated production but continues to have production shut-in primarily due to extended storm-related downtime at several fields and at a third-party operated platform downstream from the Magnolia field. As disclosed below under “Guidance”, production in the fourth quarter of 2020 will continue to be impacted by hurricane-related downtime, curtailments due to low commodity prices, proactive reservoir management during a period of continued low prices, downtime at the Magnolia field, and natural decline.

For the third quarter of 2020, W&T’s average realized crude oil sales price was $41.81 per barrel. The Company’s realized NGL sales price was $10.99 per barrel and its realized natural gas sales price was $1.94 per Mcf. The Company’s combined average realized sales price for the quarter was $22.16 per Boe, which represents a 36% decrease from $34.56 per Boe that was realized in the third quarter of 2019 and an increase of 57% compared to $14.10 per Boe in the second quarter of 2020.

Revenues for the third quarter of 2020 decreased 45% to $72.5 million compared to $132.2 million in the third quarter of 2019, and increased 31% compared to $55.2 million in the second quarter of 2020. The decreases compared to prior year was driven primarily by significantly lower commodity prices and lower production primarily due to the impact of hurricanes in 2020.

Lease Operating Expenses: LOE, which includes base lease operating expenses, insurance premiums, workovers and facilities maintenance was $36.4 million in the third quarter of 2020, down 23% compared to $47.2 million in the third quarter of 2019 but up 29% from $28.3 million in the second quarter of 2020. Costs declined from the year-ago period despite the impact of the Mobile Bay and Magnolia acquisitions. On a component basis for the third quarter of 2020, base lease operating expenses and insurance premiums were $35.4 million, and workovers and facilities maintenance expenses were $1.0 million. W&T has significantly reduced its LOE expense in 2020 primarily by replacing higher cost contract personnel with full time employees, reducing transportation costs by lowering the number of boats and helicopters needed through operational efficiencies, and cutting its workover and facilities costs through vendor and supplier costs reductions and increasing its focus on projects that maintain and optimize production. In the third quarter, W&T benefited by $1.2 million from refunds of amounts previously paid to the Office of Natural Resources Revenue (“ONRR”). LOE in the second quarter of 2020 also benefited from ONRR refunds of $3.1 million, $2.3 million in credits from W&T’s Paycheck Protection Program (“PPP”) funds, lower activity levels, and reversals of accruals for costs that have been deferred or eliminated. As disclosed below under “Guidance”, W&T expects to incur approximately $5 million in LOE in the fourth quarter of 2020 related to repairs and restoring production following multiple shut-ins due to the series of hurricanes.

On a unit of production basis, LOE was $11.49 per Boe in the third quarter of 2020, down 8% from $12.46 per Boe in the third quarter of 2019, and up 55% from $7.40 per Boe in the second quarter of 2020. The large decline in year-over-year LOE per Boe was driven by lower costs achieved in 2020, while the increase from the second quarter of 2020 was primarily the result of lower production volumes due to hurricane shut-ins, credits from the PPP funds and other production matters discussed previously.

Gathering, Transportation Costs and Production Taxes: Gathering, transportation costs and production taxes totaled $4.8 million, or $1.52 per Boe in the third quarter of 2020, compared to $6.5 million, or $1.73 per Boe in the third quarter of 2019, and $4.4 million, or $1.16 per Boe in the second quarter of 2020. Costs decreased from the prior year primarily due to lower transportation rates as well as lower volumes at certain fields.

Depreciation, Depletion, Amortization and Accretion (“DD&A”): DD&A, including accretion for asset retirement obligations, was $7.93 per Boe of production for the third quarter of 2020 compared to $10.26 per Boe for the third quarter of 2019 and $7.71 per Boe for the second quarter of 2020. The year-over-year decline in the DD&A rate per Boe was driven by the large reserve additions relative to the purchase price associated with the acquisitions of the Mobile Bay and Magnolia assets.

General and Administrative Expenses (“G&A”): G&A was $14.5 million for the third quarter of 2020, compared to $10.1 million in the third quarter of 2019 and $5.6 million for the second quarter of 2020. The increase in third quarter 2020 G&A expense compared with the same period in 2019 was driven primarily by lower fees charged to partners (credits to expense), increased legal costs incurred in reviewing potential acquisition opportunities and higher benefits costs. The increase in third quarter 2020 G&A compared with the second quarter of 2020 was driven primarily by compensation costs that returned to normal levels after benefitting from credits in the prior quarter from W&T’s PPP funds. On a unit of production basis, G&A was $4.57 per Boe in the third quarter of 2020, $2.67 per Boe in the third quarter of 2019, and $1.47 per Boe in the second quarter of 2020. The increase in G&A cost per Boe was primarily driven by lower production volumes due to hurricane shut-ins and other production matters discussed previously and higher G&A costs incurred.

COVID-19 Response:

W&T is committed to the health and safety of all its employees and contractors and has taken steps to ensure their continued safety in its response to the COVID-19 pandemic. At W&T’s corporate offices, the Company has implemented procedures to protect its employees working in its offices including temperature checks and social distancing. The Company continues to monitor the situation and will follow the advice of government and health advisors.

For its field operations, the Company instituted screening, which includes a questionnaire and temperature check, of all personnel prior to entry into heliports and shorebases as well as its two Alabama gas treatment plants. The Company conducts daily temperature screenings at all offshore facilities and implemented procedures for distancing and hygiene at its field locations.  

Derivative (Gain) Loss: In the third quarter of 2020, W&T recorded a net loss of $11.2 million on its outstanding commodity derivative contracts, of which $13.1 million was an unrealized commodity derivative loss, largely due to higher quarter-end oil prices compared to second quarter of 2020. This compared to a net gain of $5.9 million in the third quarter of 2019 of which $5.7 million was an unrealized commodity derivative gain and a net loss of $15.4 million in the second quarter of 2020 of which $38.0 million was an unrealized commodity derivative loss.

In the third quarter of 2020, W&T added the following derivative positions:

Production Period   Instrument   Avg. Daily
Volumes
  Weighted Avg
Swap Price
  Weighted Avg
Put Price
  Weighted Avg
Call Price
Crude Oil - WTI NYMEX:       (bbls)   (per Bbl)   (per Bbl)   (per Bbl)
Jan 2021 - Dec 2021   Swaps   1,000   $42.05        
Jan 2021 - Dec 2021   Swaps   1,000   $42.18        
Jan 2021 - Dec 2021   Swaps   1,000   $43.00        
Jan 2022 - Feb 2022   Swaps   1,000   $42.75        
Jan 2022 - Feb 2022   Swaps   1,000   $42.80        
Jan 2022 - Feb 2022   Swaps   1,000   $43.40        
Jan 2021 - Jan 2021   Costless Collars   2,895       $35.00   $50.00
Feb 2021 - Feb 2021   Costless Collars   3,340       $35.00   $50.00
Mar 2021 - Mar 2021   Costless Collars   2,382       $35.00   $50.00
Apr 2021 - Apr 2021   Costless Collars   2,362       $35.00   $50.00
May 2021 - May 2021   Costless Collars   1,944       $35.00   $50.00
Jun 2021 - Jun 2021   Costless Collars   1,924       $35.00   $50.00
Jul 2021 - Jul 2021   Costless Collars   1,525       $35.00   $50.00
Aug 2021 - Aug 2021   Costless Collars   1,346       $35.00   $50.00
Sep 2021 - Sep 2021   Costless Collars   1,350       $35.00   $50.00
Oct 2021 - Oct 2021   Costless Collars   1,012       $35.00   $50.00
Nov 2021 - Nov 2021   Costless Collars   948       $35.00   $50.00
Dec 2021 - Dec 2021   Costless Collars   625       $35.00   $50.00
Jan 2022 - Jan 2022   Costless Collars   1,473       $35.00   $50.00
Feb 2022 - Feb 2022   Costless Collars   1,790       $35.00   $50.00
                     
Natural Gas - Henry Hub NYMEX:       (MMBTU)   (per MMBTU)        
Nov 2020 - Dec 2020   Swaps   15,000   $2.21        
Jan 2021 - Dec 2021   Swaps   10,000   $2.62        
Jan 2022 - Jan 2022   Swaps   20,000   $2.79        
Feb 2022 - Feb 2022   Swaps   30,000   $2.79        

A listing of the Company’s current outstanding derivative positions is included in the tables below as well as in the Investor Relations section of W&T’s web site under the “Financial Info” tab.

Interest Expense: Interest expense, net of interest income, as reported in the income statement, in the third quarter of 2020 was $14.1 million compared with $14.4 million in the same period in 2019 and $14.8 million in the second quarter of 2020. The reduction in expense from the prior year relates primarily to reduced interest costs following the retirement of $72.5 million in principal of W&T’s 9.75% Senior Second Lien Notes earlier in 2020.

Income Tax: W&T recorded an income tax benefit of $21.1 million in the third quarter of 2020 and $55.5 million for the same period in 2019. In the second quarter of 2020, the Company recorded an income tax benefit of $8.7 million. For the first three quarters of 2020, the income tax benefit was impacted by adjustments related to the enactment of the CARES Act on March 27, 2020. Additionally, the third quarter of 2020 was impacted by the Treasury issuing regulations under IRC Section 163(j) on July 28, 2020 related to the business interest expense limitation. During the third quarter of 2019, W&T reversed a liability related to an uncertain tax position that was resolved which resulted in a net tax benefit for the period.  W&T’s effective tax rate was not meaningful for the three months ended September 30, 2020 or 2019.
  
As of September 30, 2020, W&T’s deferred tax valuation allowance was $24.7 million.  The Company continually evaluates the need to maintain a valuation allowance on its deferred tax assets.  Any future reduction of a portion or all of the valuation allowance would result in a non-cash income tax benefit in the period the decision occurs. W&T is not currently forecasting any cash income tax expense for the near-term.

Balance Sheet, Cash Flow and Liquidity: Net cash provided by operating activities for the third quarter of 2020 was $21.3 million. Total liquidity on September 30, 2020 was $187.1 million, consisting of cash and cash equivalents of $56.5 million and $130.6 million of availability under W&T’s revolving bank credit facility. At September 30, 2020, the Company had $80.0 million in borrowings on its revolving credit facility and $4.4 million of letters of credit outstanding. Total long-term debt, including $80.0 million in revolving credit facility borrowings, was $624.7 million net of unamortized debt issuance costs.   W&T was in compliance with all applicable covenants of the Credit Agreement and the Senior Second Lien Notes indenture as of September 30, 2020.

Since year-end 2019, W&T has reduced the amount of its long-term debt associated with its Senior Second Lien Notes by $72.5 million to $552.5 million for $23.9 million, resulting in annualized interest savings of $7.1 million.

Capital Expenditures: Due to the uncertain commodity outlook in light of the COVID-19 pandemic, W&T suspended drilling and completion activities in March and significantly reduced its estimate of 2020 capital expenditures to $15 million to $25 million from its prior level of $50 million to $100 million. Per the Statement of Cash Flows, capital expenditures in the third quarter of 2020 (excluding acquisitions) were $1.2 million.   Capital expenditures for the first nine months of 2020 totaled $41.2 million, which includes $28.2 million in capital expenditures incurred in 2019 but paid during the nine months ended September 30, 2020.  

OPERATIONS UPDATE

W&T successfully drilled one well in the first quarter of 2020 at East Cameron 338/349 but has since suspended all other drilling activity in the current uncertain pricing environment.

Well Recompletions and Workovers: During the third quarter of 2020, the Company performed two recompletions and five workovers that in total added approximately 500 net Boe/d to production. W&T currently plans to continue to perform recompletions and workovers that meet economic thresholds.  

Consolidation of Onshore Natural Gas Treatment Plants Supporting Mobile Bay Assets: During the fourth quarter of 2020, the Company plans to consolidate its two onshore natural gas treatment facilities that service the Mobile Bay area into the Onshore Treating Facility (“OTF”) which was acquired in 2019 from ExxonMobil. W&T will close its Yellowhammer Plant. The OTF has more than sufficient capacity to meet W&T’s current and expected needs as it further develops its Mobile Bay and regional natural gas assets in the future. The consolidation of the facilities is expected to result in savings of approximately $5 million per year beginning in 2021.

Guidance

Due to the sharp decline in oil prices in early 2020, W&T significantly reduced its 2020 capital spending expectations to $15 million to $25 million and has also reduced its planned asset retirement expenditures to $2 million to $4 million. W&T estimates its fourth quarter production will average 31,500 to 35,000 Boe/d which includes the ongoing impact from prior storms as well as storms that already have impacted the fourth quarter, other planned shut-ins, as well as an estimate of additional potential storm-related downtime for the balance of the fourth quarter.   The Company expects fourth quarter 2020 LOE will include approximately $5.0 million in expenses associated with the series of storms through October for minor repairs and costs to restore shut-in production.

  Fourth Quarter
Production 2020
   
Oil (MMBbls) 1.0 - 1.1
   
NGL's (MMBbls) 0.31 - 0.35
   
Natural Gas (Bcf) 9.5 - 10.6
   
Total (MMBoe) 2.9 - 3.2
   
Total (Boe/d) 31,500 - 35,000
   
Operating Expenses Fourth Quarter
($ in millions) 2020
   
Lease operating expenses $43 - $48
   
Gathering, transportation &  
production taxes $5.4 - $5.9
   
General and administrative $11.7 - $12.9
   
Cash income tax rate 0%

Conference Call Information: W&T will hold a conference call to discuss its financial and operational results on Thursday, November 5, 2020, at 10:00 a.m. Central Time (11:00 a.m. Eastern Time). Interested parties may participate by dialing (844) 739-3797. International parties may dial (412) 317-5713. Participants should request to connect to the “W&T Offshore Call.” This call will also be webcast and available on W&T’s website at www.wtoffshore.com on the “Overview” page under the “Investor Relations” section. An audio replay will be available on the Company’s website following the call.

About W&T Offshore

W&T Offshore, Inc. is an independent oil and natural gas producer with operations offshore in the Gulf of Mexico and has grown through acquisitions, exploration and development. The Company currently has working interests in 50 producing fields in federal and state waters and has under lease approximately 772,000 gross acres, including approximately 557,000 gross acres on the Gulf of Mexico Shelf and approximately 215,000 gross acres in the Gulf of Mexico deepwater. A majority of the Company’s daily production is derived from wells it operates. For more information on W&T, please visit the Company’s website at www.wtoffshore.com.

Forward-Looking and Cautionary Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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 W&T Offshore’s Annual Report on Form 10-K for the year ended December 31, 2019 and subsequent Form 10-Q reports found at www.sec.gov or at our website at www.wtoffshore.com under the Investor Relations section. Investors are urged to consider closely the disclosures and risk factors in these reports. We refer to feet of “pay” in our discussions concerning the evaluation of our recently drilled wells. This refers to geological indications, typically obtained from well logging, of the estimated thickness of sands which we believe are capable of producing hydrocarbons in commercial quantities. These indications of “pay” may not necessarily forecast the amount of future production or reserve quantities from the well, which can be dependent upon numerous other factors.




Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
                               
    Three Months Ended   Nine Months Ended
    September 30,   June 30,   September 30,   September 30,
    2020   2020   2019   2020   2019
                 
Revenues:                              
Oil   $ 46,589     $ 30,645     $ 102,786     $ 161,884     $ 298,684  
NGLs     4,464       1,917       4,373       12,833       15,461  
Natural gas     19,213       21,364       23,686       69,877       65,091  
Other     2,251       1,315       1,376       7,292       3,766  
Total revenues     72,517       55,241       132,221       251,886       383,002  
                               
Operating costs and expenses:                              
Lease operating expenses     36,437       28,313       47,185       119,525       130,982  
Gathering, transportation costs and production taxes     4,826       4,444       6,543       15,635       20,767  
Depreciation, depletion, amortization and accretion     25,127       29,483       38,841       93,736       110,680  
General and administrative expenses     14,476       5,628       10,106       34,067       37,543  
Derivative loss (gain)     11,161       15,414       (5,853 )     (35,337 )     41,228  
Total costs and expenses     92,027       83,282       96,822       227,626       341,200  
Operating (loss) income     (19,510 )     (28,041 )     35,399       24,260       41,802  
                               
Interest expense, net     14,135       14,816       14,445       46,061       42,934  
Gain on purchase of debt     -       (28,968 )     -       (47,469 )     -  
Other expense     751       751       555       2,225       1,364  
(Loss) income before income tax benefit     (34,396 )     (14,640 )     20,399       23,443       (2,496 )
Income tax benefit     (21,057 )     (8,736 )     (55,500 )     (23,294 )     (67,023 )
Net (loss) income   $ (13,339 )   $ (5,904 )   $ 75,899     $ 46,737     $ 64,527  
                               
                               
Basic and diluted (loss) earnings per common share   $ (0.09 )   $ (0.04 )   $ 0.53     $ 0.33     $ 0.45  
                               
Weighted average common shares outstanding     141,624       141,597       140,567       141,589       140,520  




W&T OFFSHORE, INC. AND SUBSIDIARIES
Condensed Operating Data
(Unaudited)
                                         
    Three Months Ended   Nine Months Ended
    September 30,   June 30,   September 30,   September 30,
    2020   2020   2019   2020   2019
Net sales volumes:                                        
Oil (MBbls)     1,115       1,414       1,735       4,356       4,896  
NGL (MBbls)     407       410       283       1,312       856  
Oil and NGLs (MBbls)     1,521       1,824       2,018       5,667       5,752  
Natural gas (MMcf)     9,897       12,006       10,606       37,210       25,344  
Total oil and natural gas (MBoe) (1)     3,170       3,826       3,786       11,869       9,976  
                                         
Average daily equivalent sales (MBoe/d)     34.5       42.0       41.1       43.3       36.5  
                                         
Average realized sales prices:                                        
Oil ($/Bbl)   $ 41.81     $ 21.67     $ 59.24     $ 37.17     $ 61.00  
NGLs ($/Bbl)     10.99       4.67       15.45       9.78       18.07  
Oil and NGLs ($/Bbl)     33.57       17.85       53.10       30.83       54.61  
Natural gas ($/Mcf)     1.94       1.78       2.23       1.88       2.57  
Barrel of oil equivalent ($/Boe)     22.16       14.10       34.56       20.61       38.01  
                                         
Average costs and expenses per Boe ($/Boe):                                        
Lease operating expenses   $ 11.49     $ 7.40     $ 12.46     $ 10.07     $ 13.13  
Gathering, transportation costs and production taxes     1.52       1.16       1.73       1.32       2.08  
Depreciation, depletion, amortization and accretion     7.93       7.71       10.26       7.90       11.09  
General and administrative expenses     4.57       1.47       2.67       2.87       3.76  

(1) MBoe is determined using the ratio of six Mcf of natural gas to one Bbl of crude oil, condensate or NGLs (totals may not compute due to rounding). The conversion ratio does not assume price equivalency and the price on an equivalent basis for oil, NGLs and natural gas may differ significantly.

 



W&T OFFSHORE, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
                               (In thousands)    
               
    September 30,     December 31,
    2020     2019
      (Unaudited)        
Assets              
Current assets:              
Cash and cash equivalents   $ 56,532       $ 32,433  
Receivables:              
Oil and natural gas sales     21,407         57,367  
Joint interest and other, net     10,361         19,400  
Income taxes     -         1,861  
  Total receivables     31,768         78,628  
Prepaid expenses and other assets     23,607         30,691  
Total current assets     111,907         141,752  
               
Oil and natural gas properties and other, net - at cost     8,574,736         8,552,513  
Less accumulated depreciation, depletion and amortization     7,880,432         7,803,715  
  Oil and natural gas properties and other, net     694,304         748,798  
Restricted deposits for asset retirement obligations     30,161         15,806  
Deferred income taxes     87,470         63,916  
Other assets     25,638         33,447  
  Total assets   $ 949,480       $ 1,003,719  
               
Liabilities and Shareholders’ Deficit              
Current liabilities:              
Accounts payable   $ 36,790       $ 102,344  
Undistributed oil and natural gas proceeds     20,250         29,450  
Advance from joint interest partner     7,721         5,279  
Asset retirement obligations     19,522         21,991  
Accrued liabilities     44,460         30,896  
Total current liabilities     128,743         189,960  
               
Long-term debt     624,747         719,533  
Asset retirement obligations     362,213         333,603  
Other liabilities     33,263         9,988  
Commitments and contingencies     -         -  
Shareholders’ deficit:              
Common stock, $0.00001 par value; 200,000 shares authorized; 144,647 issued and              
141,778 outstanding at September 30, 2020; 144,538 issued and              
141,669 outstanding at December 31, 2019     1         1  
Additional paid-in capital     550,192         547,050  
Retained deficit     (725,512 )       (772,249 )
Treasury stock, at cost; 2,869 shares for both dates presented     (24,167 )       (24,167 )
Total shareholders’ deficit     (199,486 )       (249,365 )
Total liabilities and shareholders’ deficit   $ 949,480       $ 1,003,719  




W&T OFFSHORE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
 (Unaudited)
                               
    Three Months Ended
  Nine Months Ended
    September 30,   June 30,   September 30,   September 30,
    2020   2020   2019     2020   2019
Operating activities:                              
Net (loss) income   $ (13,339 )   $ (5,904 )   $ 75,899     $ 46,737     $ 64,527  
Adjustments to reconcile net (loss) income to net cash provided by operating activities:                              
Depreciation, depletion, amortization and accretion     25,127       29,483       38,841       93,736       110,680  
Amortization of debt items and other items     1,569       2,057       1,429       5,251       3,914  
Share-based compensation     1,075       1,019       1,248       3,142       2,429  
Derivative loss (gain)     11,161       15,414       (5,853 )     (35,337 )     41,228  
Cash receipts on derivative settlements, net     4,462       33,162       4,791       42,028       17,583  
Gain on purchase of debt     -       (28,968 )     -       (47,469 )     -  
Deferred income taxes     (21,200 )     (8,706 )     (44,241 )     (23,407 )     (55,764 )
Changes in operating assets and liabilities:     -       -                    
Oil and natural gas receivables     975       13,030       (9,814 )     35,959       (3,822 )
Joint interest receivables     4,296       (2,380 )     8,312       9,039       (15,850 )
Prepaid expenses and other assets     4,446       (7,506 )     (6,077 )     7,951       (14,211 )
Income tax     (15 )     2,008       17,205       1,993       17,165  
Asset retirement obligation settlements     (624 )     (1,915 )     (5,099 )     (2,788 )     (7,740 )
Cash advance from JV partner     (3,408 )     (7,156 )     (2,680 )     2,442       15,847  
Accounts payable, accrued liabilities and other     6,735       (24,484 )     6,319       (24,539 )     10,610  
Net cash provided by operating activities     21,260       9,154       80,280       114,738       186,596  
                               
Investing activities:                              
Investment in oil and natural gas properties and equipment     (1,234 )     (6,374 )     (30,333 )     (41,183 )     (93,482 )
Acquisition of property interest in oil and natural gas properties     -       1,546       (157,718 )     (456 )     (167,718 )
Purchases of furniture, fixtures and other     -       -       (20 )     (70 )     (20 )
Net cash used in investing activities     (1,234 )     (4,828 )     (188,071 )     (41,709 )     (261,220 )
                               
Financing activities:                              
Borrowings on credit facility     -       25,000       150,000       25,000       150,000  
Repayments on credit facility     -       (25,000 )     (66,000 )     (50,000 )     (66,000 )
Purchase of Senior Second Lien Notes     -       (15,394 )     -       (23,930 )     -  
Debt issuance costs and other     -       -       (177 )     -       (928 )
Net cash (used in) provided by financing activities     -       (15,394 )     83,823       (48,930 )     83,072  
Increase (decrease) in cash and cash equivalents     20,026       (11,068 )     (23,968 )     24,099       8,448  
Cash and cash equivalents, beginning of period     36,506       47,574       65,709       32,433       33,293  
Cash and cash equivalents, end of period   $ 56,532     $ 36,506     $ 41,741     $ 56,532     $ 41,741  




W&T OFFSHORE, INC. AND SUBSIDIARIES
Financial Commodity Derivative Positions
As of November 4, 2020
   
Production Period   Instrument   Avg. Daily
Volumes
  Weighted Avg
Swap Price
  Weighted Avg
Put Price
  Weighted Avg
Call Price
Crude Oil - WTI NYMEX:       (bbls)   (per Bbl)   (per Bbl)   (per Bbl)
Nov 2020 - Dec 2020   Costless Collars   1,000       $45.00   $63.60
Nov 2020 - Dec 2020   Costless Collars   9,000       $45.00   $63.50
Nov 2020 - Dec 2020   Calls (long)   10,000           $67.50
Jan 2021 - Dec 2021   Swaps   1,000   $41.00        
Jan 2021 - Dec 2021   Swaps   1,000   $42.05        
Jan 2021 - Dec 2021   Swaps   1,000   $42.18        
Jan 2021 - Dec 2021   Swaps   1,000   $43.00        
Jan 2022 - Feb 2022   Swaps   1,000   $42.75        
Jan 2022 - Feb 2022   Swaps   1,000   $42.80        
Jan 2022 - Feb 2022   Swaps   1,000   $43.40        
Jan 2021 - Jan 2021   Costless Collars   2,895       $35.00   $50.00
Feb 2021 - Feb 2021   Costless Collars   3,340       $35.00   $50.00
Mar 2021 - Mar 2021   Costless Collars   2,382       $35.00   $50.00
Apr 2021 - Apr 2021   Costless Collars   2,362       $35.00   $50.00
May 2021 - May 2021   Costless Collars   1,944       $35.00   $50.00
Jun 2021 - Jun 2021   Costless Collars   1,924       $35.00   $50.00
Jul 2021 - Jul 2021   Costless Collars   1,525       $35.00   $50.00
Aug 2021 - Aug 2021   Costless Collars   1,346       $35.00   $50.00
Sep 2021 - Sep 2021   Costless Collars   1,350       $35.00   $50.00
Oct 2021 - Oct 2021   Costless Collars   1,012       $35.00   $50.00
Nov 2021 - Nov 2021   Costless Collars   948       $35.00   $50.00
Dec 2021 - Dec 2021   Costless Collars   625       $35.00   $50.00
Jan 2022 - Jan 2022   Costless Collars   1,473       $35.00   $50.00
Feb 2022 - Feb 2022   Costless Collars   1,790       $35.00   $50.00
                     
                     
                     
Production Period   Instrument   Avg. Daily Volumes   Weighted Avg Swap Price   Weighted Avg Put Price   Weighted Avg Call Price
Natural Gas - Henry Hub NYMEX:       (MMBTU)   (per MMBTU)   (per MMBTU)   (per MMBTU)
Nov 2020 - Dec 2022   Calls (long)   40,000           $3.00
Nov 2020 - Dec 2022   Costless Collars   40,000       $1.83   $3.00
Nov 2020 - Dec 2020   Costless Collars   10,000       $1.75   $2.58
Nov 2020 - Dec 2020   Swaps   10,000   $2.03        
Nov 2020 - Dec 2020   Swaps   15,000   $2.21        
Jan 2021 - Dec 2021   Costless Collars   20,000       $2.17   $3.00
Jan 2021 - Dec 2021   Swaps   10,000   $2.62        
Jan 2021 - Dec 2021   Costless Collars   10,000       $2.20   $3.00
Jan 2022 - Feb 2022   Costless Collars   30,000       $2.20   $4.50
Jan 2022 - Jan 2022   Swaps   20,000   $2.79        
Feb 2022 - Feb 2022   Swaps   30,000   $2.79        




W&T OFFSHORE, INC. AND SUBSIDIARIES
Non-GAAP Information

Certain financial information included in W&T’s 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”, “Adjusted EBITDA” and “Free Cash Flow”. Management uses these non-GAAP financial measures in its analysis of performance. In addition, Adjusted EBITDA is a key metric used to determine the Company’s incentive compensation awards. 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 (Loss) Income to Adjusted Net (Loss) Income

Adjusted Net (Loss) Income does not include the unrealized commodity derivative loss (gain), amortization of derivative premium, bad debt reserve, deferred tax benefit, and gain on debt transactions. Adjusted Net Income is presented because the timing and amount of these items cannot be reasonably estimated and affect the comparability of operating results from period to period, and current periods to prior periods.

    Three Months Ended   Nine Months Ended
    September 30,   June 30,   September 30,   September 30,
    2020   2020   2019   2020   2019
    (In thousands, except per share amounts)
    (Unaudited)
                               
Net (loss) income   $ (13,339 )   $ (5,904 )   $ 75,899     $ 46,737     $ 64,527  
Unrealized commodity derivative loss (gain)     13,112       37,992       (5,670 )     (1,416 )     40,951  
Amortization of derivative premium     1,483       3,407       3,931       9,239       11,664  
Bad debt reserve     (1 )     47       55       82       193  
Deferred tax benefit     (21,170 )     (8,736 )     (55,764 )     (23,407 )     (55,764 )
Gain on debt transactions     -       (28,968 )     -       (47,469 )     -  
Adjusted Net (Loss) Income   $ (19,915 )   $ (2,162 )   $ 18,451     $ (16,234 )   $ 61,571  
                               
Basic and diluted adjusted (loss) earnings per common share   $ (0.14 )   $ (0.02 )   $ 0.13     $ (0.11 )   $ 0.43  




W&T OFFSHORE, INC. AND SUBSIDIARIES
Non-GAAP Information

Reconciliation of Net (Loss) Income to Adjusted EBITDA and to Free Cash Flow

The Company defines Adjusted EBITDA as net (loss) income plus income tax (benefit) expense, net interest expense, and depreciation, depletion, amortization and accretion, excluding the unrealized commodity derivative gain or loss, amortization of derivative premium, bad debt reserve, and gain on debt transactions. W&T believes the presentation of Adjusted EBITDA provides useful information regarding its ability to service debt and to fund capital expenditures. The Company believes this presentation is relevant and useful because it helps investors understand W&T’s operating performance and makes it easier to compare its results with those of other companies that have different financing, capital and tax structures. 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. Adjusted EBITDA, as W&T calculates it, may not be comparable to Adjusted EBITDA measures reported by other companies. In addition, Adjusted EBITDA does not represent funds available for discretionary use.

The Company defines Free Cash Flow as Adjusted EBITDA (defined above), less capital expenditures, plugging and abandonment costs and interest expense. W&T’s management believes that Free Cash Flow is an important financial measure for use in evaluating the Company's financial performance and measures the Company’s ability to generate cash from business operations in excess of its capital spending and debt servicing requirements. Free Cash Flow, as W&T calculates it, may not be comparable to Free Cash Flow measures reported by other companies.

These measures are widely used by investors and research analysts for the valuation, comparison, rating and investment recommendations of companies. The following table presents a reconciliation of W&T’s net (loss) income to Adjusted EBITDA and to Free Cash Flow.

    Three Months Ended   Nine Months Ended
    September 30,
  June 30,   September 30,   September 30,
    2020   2020   2019   2020   2019
     
    (In thousands)
    (Unaudited)
                               
Net (loss) income   $ (13,339 )   $ (5,904 )   $ 75,899     $ 46,737     $ 64,527  
Interest expense, net     14,135       14,816       14,445       46,061       42,934  
Income tax benefit     (21,057 )     (8,736 )     (55,500 )     (23,294 )     (67,023 )
Depreciation, depletion, amortization and accretion     25,127       29,483       38,841       93,736       110,680  
Unrealized commodity derivative loss (gain)     13,112       37,992       (5,670 )     (1,416 )     40,951  
Amortization of derivative premium     1,483       3,407       3,931       9,239       11,664  
Bad debt reserve     (1 )     47       55       82       193  
Gain on debt transactions     -       (28,968 )     -       (47,469 )     -  
Adjusted EBITDA   $ 19,460     $ 42,137     $ 72,001     $ 123,676     $ 203,926  
                               
                               
Capital expenditures (1)     1,184       (4,596 )     (39,187 )     (13,024 )     (106,083 )
Plug and abandonment     (624 )     (1,915 )     (5,099 )     (2,788 )     (7,740 )
Interest expense, net     (14,135 )     (14,816 )     (14,445 )     (46,061 )     (42,934 )
                               
Free Cash Flow   $ 5,885     $ 20,810     $ 13,270     $ 61,803     $ 47,169  

(1) On an accrual basis and includes purchases of furniture, fixtures and other.

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Source: W&T Offshore, Inc.