UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

  

FORM 8-K

 

  

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported) August 5, 2020

 

W&T Offshore, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

 

1-32414

 

 

(Commission File Number)

 

Texas

 

72-1121985

(State or Other Jurisdiction of Incorporation)

 

(IRS Employer Identification No.)

 

 

 

Nine Greenway Plaza, Suite 300

Houston, Texas 77046

(Address of Principal Executive Offices)

 

 

 

713.626.8525

(Registrant’s Telephone Number, Including Area Code)

 

N/A

(Former Name or Former Address, If Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934   

 

Emerging growth company     ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol

 

Name of each exchange on which registered

Common Stock, par value $0.00001

 

WTI

 

New York Stock Exchange

 

 

 

 

 

 

Item 2.02

Results of Operations and Financial Condition.

 

On August 5, 2020, W&T Offshore, Inc. (the “Company”) issued a press release reporting on financial and operational results for the second quarter of 2020 and provided guidance for the third quarter and full year of 2020.  A copy of the press release, dated August 5, 2020, is furnished herewith as Exhibit 99.1.

 

This information is furnished pursuant to Item 2.02 of Form 8-K and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, unless specifically incorporated by reference in a document filed under the Securities Act of 1933, as amended, or the Exchange Act. By filing this report on Form 8-K and furnishing this information, the Company makes no admission as to the materiality of any information in this report that is required to be disclosed solely by Item 2.02.

 

 

 

Item 9.01

Financial Statements and Exhibits.

 

Exhibit No.

 

Description

99.1

 

Press release dated August 5, 2020

 

2

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

W&T OFFSHORE, INC.

(Registrant)

 

 

 

 

 

 

 

 

 

Dated: August 5, 2020

By:

/s/ Shahid A. Ghauri

 

 

Name:

Shahid A. Ghauri

 

 

Title:

Vice President, General Counsel and Corporate Secretary

 

 

 

 
ex_174902.htm

 

Exhibit 99.1

 

 

 

 

W&T Offshore Announces Second Quarter 2020 Results 

 

 

HOUSTON, August 5, 2020 – W&T Offshore, Inc. (NYSE: WTI) (“W&T” or the “Company”) today reported operational and financial results for the second quarter 2020. 

 

Key highlights included:

 



Produced 42,037 barrels of oil equivalent per day (“Boe/d”), or 3.8 million Boe (48% liquids), in the second quarter of 2020, reflecting a 20% increase from the second quarter of 2019;



Reported a net loss of $5.9 million or $0.04 per share and Adjusted Net Loss of $2.2 million or $0.02 per share in the second quarter of 2020;



Generated Adjusted EBITDA of $42.1 million for the second quarter of 2020, despite a significantly lower pricing environment, and capital expenditures were held to just $6.4 million; Adjusted EBITDA for the first six months of 2020 totaled $104.2 million;



Reported mid-year 2020 SEC proved reserves, based on a reserve report prepared by Netherland, Sewell and Associates, Inc. (“NSAI”), were 157.5 MMBoe, essentially unchanged from 157.4 MMBoe at year-end 2019, that included positive reserve revisions from field performance that were offset by revisions due to lower SEC base pricing and year-to-date production;



Reduced long-term debt associated with its Senior Second Lien Notes since year-end 2019 by $72.5 million for a total cost of $23.9 million, resulting in annualized interest savings of $7.1 million;



Awarded two blocks on which W&T was the apparent high bidder in the recent Gulf of Mexico Lease Sale 254 held by the Bureau of Ocean Energy Management ("BOEM") on March 18, 2020, which includes Eugene Island 345 and Garden Banks 782;



Responded to the current low oil price environment with definitive actions to maintain financial flexibility, protect cash flow and preserve future value:


o  


Suspended all drilling activities and significantly reduced its estimate of 2020 capital expenditures to $15 million to $25 million;


o  


Proactively curtailed production at selected oil-weighted fields operated by W&T;

 

o  

Implemented reductions in lease operating expenses (“LOE”) without compromising safety or operational capabilities that resulted in LOE per Boe declining significantly from the first quarter of 2020; and



Completed the semi-annual redetermination of the borrowing base under the revolving credit facility in June 2020 which was reduced modestly from $250 million to $215 million.

 

 

1

 

Tracy W. Krohn, W&T's Chairman and Chief Executive Officer, stated, “The continued global COVID-19 pandemic coupled with supply and demand imbalances created an environment of uncertainty across the oil sector and temporarily reduced oil prices to unprecedented low levels in the second quarter of 2020. Despite numerous downturns in the past, we have succeeded for nearly 40 years in this cyclical business by focusing on cash flow and operating efficiently. We quickly responded to the most recent commodity price decline and stopped all drilling and completion activity, shut-in oil-weighted operated properties and experienced production curtailments from non-operated oil and gas properties, and reduced LOE per Boe over 25% without compromising safety or our operational capabilities, and lowered our G&A expense. In addition, we completed our semi-annual borrowing base redetermination, which resulted in a modest reduction to the revolving credit facility with more manageable covenants in light of changes in oil prices and continues to provide us with liquidity and financial flexibility in the current environment.  We also capitalized on the opportunity to retire $72.5 million of senior notes for a total cost of $23.9 million, thereby saving over $7 million in annualized interest and preserving long-term capital.” 


“After successfully addressing the unprecedented sharp decline in oil prices in March and April, we are encouraged by the recent stabilization in crude oil prices and the outlook for natural gas prices. We remain confident in our strong asset base and I am proud of how we continue to operate in this environment, which is a testament to our operations team. This was clearly evident in our mid-year 2020 reserve report that included 17.6 MMBoe of positive revisions due to field performance which was more than double our year-to-date production of 8.7 MMBoe.”  


“We have completed accretive acquisitions over the past year 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 second quarter of 2020, W&T reported a net loss of $5.9 million, or $0.04 per share. The Company’s Adjusted Net Loss was $2.2 million, or $0.02 per share, primarily excluding a $38.0 million unrealized commodity derivative loss, a $29.0 million non-cash gain on debt transaction, and $8.7 million of deferred tax benefit. In the second quarter of 2019, W&T reported net income of $36.4 million, or $0.25 per share, which included a $3.8 million unrealized commodity derivative gain. Adjusted Net Income for the second quarter of 2019 was $36.5 million, or $0.25 per share. In the first quarter of 2020, net income was $66.0 million, or $0.46 per share, which included a $52.5 million unrealized commodity derivative gain and an $18.5 million non-cash gain on debt transaction. For that same period, Adjusted Net Income was $5.8 million or $0.04 per share. 


Adjusted EBITDA for the second quarter of 2020 totaled $42.1 million, a decrease of 44% compared to $75.0 million in the second quarter of 2019 primarily due to lower commodity prices that were partially offset by significantly higher production volumes. Second quarter 2020 Adjusted EBITDA declined 32% from $62.1 million in the first quarter of 2020 primarily due to lower commodity prices and curtailed volumes. 

2


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


Production, Prices and Revenues: Production for the second quarter of 2020 was 42,037 Boe/d or 3.8 million Boe, up 20% versus 35,045 Boe/d in the second quarter of 2019 and a decrease of 22% compared to 53,553 Boe/d in the first quarter of 2020. Second quarter 2020 production increased from the same period a year ago due to the 2019 acquisitions. The decline in production from the first quarter of 2020 was due to a combination of operated and non-operated production that was shut-in due to the decline in oil prices, production curtailments related to Tropical Storm Cristobal, proactive reservoir management, and, to a lesser extent, natural decline.  Second quarter 2020 production was comprised of 1.4 million barrels (“MMBbls”) of oil, 0.4 MMBbls of natural gas liquids (“NGLs”) and 12.0 billion cubic feet (“Bcf”) of natural gas.  Liquids production comprised 48% of total production in the second quarter of 2020.  W&T has restored the majority of its non-operated production that was previously shut-in due to the decline in oil prices, as well as volumes impacted by Tropical Storm Cristobal.  The Company was also able to restore some of its operated production that was shut-in due to low oil prices, but continues to monitor commodity prices to determine the appropriate time to return the remaining fields online.  As disclosed below under “Guidance”, production in the third quarter of 2020 will continue to be impacted by W&T-operated volumes that remain shut-in due to low commodity prices, proactive reservoir management during a period of continued low prices, planned downtime at the Magnolia Field due to turnaround activity at the third-party operated platform that processes production from the field, and natural decline.

 

For the second quarter of 2020, W&T’s average realized crude oil sales price was $21.67 per barrel. The Company’s realized NGL sales price was $4.67 per barrel and its realized natural gas sales price was $1.78 per Mcf. The Company’s combined average realized sales price for the quarter was $14.10 per Boe, which represents a 66% decrease from $41.83 per Boe that was realized in the second quarter of 2019 and a decrease of 43% compared to $24.71 per Boe in the first quarter of 2020.


Revenues for the second quarter of 2020 decreased 59% to $55.2 million compared to $134.7 million in the second quarter of 2019, and decreased 56% compared to $124.1 million in the first quarter of 2020. The decreases compared to prior quarters were driven primarily by significantly lower commodity prices.

 
Lease Operating Expenses: LOE, which includes base lease operating expenses, insurance premiums, workovers and facilities maintenance was $28.3 million in the second quarter of 2020, down 30% compared to $40.3 million in the second quarter of 2019 and down 48% from $54.8 million in the first quarter of 2020. On a component basis for the second quarter of 2020, base lease operating expenses and insurance premiums were $26.7 million, and workovers and facilities maintenance expenses were $1.6 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. LOE in the second quarter of 2020 also benefited from refunds of amounts previously paid to the Office of Natural Resources Revenue (“ONRR”), $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”, third quarter 2020 LOE will be higher than second quarter as field work levels return to more normal levels but third quarter costs are still expected to be about 20% to 25% lower than the first quarter of 2020.


On a unit of production basis, LOE was $7.40 per Boe in the second quarter of 2020, down 42% from $12.65 per Boe in the second quarter of 2019, and down 34% from $11.24 per Boe in the first quarter of 2020. The large decline in year-over-year LOE per Boe was driven by a combination of the increase in production associated with the acquisitions and the lower costs achieved in 2020, while the significant decline from the first quarter of 2020 was primarily the result of the cost reductions efforts described above.

 
Gathering, Transportation Costs and Production Taxes: Gathering, transportation costs and production taxes totaled $4.4 million, or $1.16 per Boe in the second quarter of 2020, compared to $7.4 million, or $2.32 per Boe in the second quarter of 2019, and $6.4 million, or $1.31 per Boe in the first quarter of 2020. Costs decreased from prior periods primarily due to lower transportation rates as well as lower volumes at certain fields.

3

 

Depreciation, Depletion, Amortization and Accretion (“DD&A”):  DD&A, including accretion for asset retirement obligations, was $7.71 per Boe of production for the second quarter of 2020 compared to $11.94 per Boe for the second quarter of 2019 and $8.03 per Boe for the first quarter of 2020. The large year-over-year decline was driven by the large reserve additions relative to the purchase price associated with the acquisitions of Mobile Bay and Magnolia assets.


General and Administrative Expenses (“G&A”):  G&A was $5.6 million for the second quarter of 2020, compared to $13.3 million in the second quarter of 2019 and $14.0 million for the first quarter of 2020. The decrease in costs in the second quarter of 2020 was driven by credits to expense of $5.0 million from W&T’s PPP funds and lower incentive compensation expense. On a unit of production basis, G&A was $1.47 per Boe in the second quarter of 2020, $4.18 per Boe in the second quarter of 2019, and $2.87 per Boe in the first quarter of 2020. The large decline in year-over-year G&A cost per Boe was driven by the significant increase in production volumes that did not require additional overhead expense, cost cutting initiatives realized in 2020, and credits to expense related to the PPP funds.


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 actions to protect its employees working in its offices including temperature checks, social distancing and facemask requirements. The Company continues to monitor the situation and will follow the advice of government and health leaders. 
 
For its field operations, the Company instituted screening of all personnel prior to entry to heliports and shorebases as well as its two Alabama gas plants, which includes a questionnaire and temperature check. The Company conducts daily temperature screenings at all offshore facilities and implemented procedures for distancing and hygiene at its field locations as well as facemask requirements, where practicable.

 

Derivative (Gain) Loss:  In the second quarter of 2020, W&T recorded a net loss of $15.4 million on its outstanding commodity derivative contracts, of which $38.0 million was an unrealized commodity derivative loss, largely due to higher quarter-end oil prices compared to first quarter of 2020. This compared to a net gain of $1.8 million in the second quarter of 2019 of which $3.8 million was an unrealized commodity derivative gain and a net gain of $61.9 million in the first quarter of 2020 of which $52.5 million was an unrealized commodity derivative gain.

 

In the second 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

$41.00

   
                 

Natural Gas - Henry Hub NYMEX:

       

(MMBTU)

(per MMBTU)

(per MMBTU)

(per MMBTU)

Aug 2020 - Dec 2020

 

Costless Collars

   

10,000

 

$1.75

$2.58

Sep 2020 - Dec 2020

 

Swaps

   

10,000

$2.03

   

Jan 2021 - Dec 2021

 

Costless Collars

   

20,000

 

$2.17

$3.00

Jan 2021 - Dec 2021

 

Costless Collars

   

10,000

 

$2.20

$3.00

Jan 2022 - Feb 2022

 

Costless Collars

   

30,000

 

$2.20

$4.50

 

 

4

 

Since the end of the second quarter 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

   
                   

Natural Gas - Henry Hub NYMEX:

       

(MMBTU)

(per MMBTU)

(per MMBTU)

(per MMBTU)

Sep 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 second quarter of 2020 was $14.8 million compared with $12.2 million in the same period in 2019 and $17.1 million in the first quarter of 2020. The year-over-year increase was primarily driven by increased interest expense incurred following the draw-down of a portion of the credit facility to fund the Mobile Bay acquisition announced in 2019, while the decline from the first quarter of 2020 relates to the recent reduction in long-term debt and $1.1 million of credits to expense related to the PPP funds.

 

Income Tax:  W&T recorded an income tax benefit of $8.7 million in the second quarter of 2020 compared to an income tax benefit of $11.7 million in the second quarter of 2019 and an income tax expense of $6.5 million in the first quarter of 2020. For the three months ended June 30, 2020, income taxes were impacted by adjustments recorded related to the enactment of the CARES Act on March 27, 2020. The CARES Act modified certain income tax statutes including changes related to the business interest expense limitation under Internal Revenue Code Section 163(j). During the second quarter of 2019, W&T reversed a liability related to an uncertain tax position that was effectively favorably  settled with the IRS, which resulted in a net tax benefit for the three months ended June 30, 2019. The Company’s effective tax rate was not meaningful for the three months ended June 30, 2020 or 2019. 

 

As of June 30, 2020, W&T’s deferred tax asset valuation allowance was $45.9 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. During the second quarter of 2020, W&T received a refund of income taxes of $1.9 million, which relates primarily to a net operating loss (“NOL”) carryback claim for 2017 that was carried back to prior years. There are no further amounts due in income tax refunds. 

 

5


Balance Sheet, Cash Flow and Liquidity: Net cash provided by operating activities for the second quarter of 2020 was $9.2 million. Total liquidity on June 30, 2020 was $165.4 million, consisting of cash and cash equivalents of $36.5 million and $128.9 million of availability under W&T’s revolving bank credit facility. At June 30, 2020, the Company had $80.0 million in borrowings on its revolving credit facility and $6.1 million of letters of credit outstanding. Total long-term debt, including $80.0 million in revolving credit facility borrowings, was $624.2 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 June 30, 2020.


During the three months ended June, 2020, W&T repurchased $45.1 million in principal of its outstanding 9.75% Senior Second Lien Notes for $15.4 million and recorded a non-cash gain of $29.0 million related to the purchase. As previously announced, W&T repurchased $27.5 million in principal of its outstanding 9.75% Senior Second Lien Notes for $8.5 million in the first quarter of 2020. In total, 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 in 2020 for $23.9 million, resulting in annualized interest savings of $7.1 million.

 
In the second quarter of 2020, W&T’s bank group completed its regularly scheduled spring borrowing base redetermination. The borrowing base was set by the bank group at $215 million, down modestly from $250 million. In connection with the borrowing base redetermination, the Credit Agreement was amended to provide a suspension of the total leverage covenant and the addition of a first lien leverage covenant of 2.00 to 1.00 through year-end 2021. The amendments also include some increased pricing and hedging requirements of 50% of oil and gas proved developed producing (“PDP”) production for 18 months. The next regularly scheduled redetermination is in the fall of 2020. 


Capital Expenditures:  Due to the uncertain commodity outlook in the 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. Capital expenditures for oil and gas properties in the second quarter of 2020 (excluding acquisitions) were $6.4 million related to its 2020 capital budget.

   
Mid-Year 2020 Proved Reserves:  As calculated by NSAI, W&T’s independent reserve engineering consultants, SEC proved reserves as of June 30, 2020 totaled 157.5 MMBoe compared with 157.4 MMBoe at year-end 2019.   Strong positive revisions of previous estimates from field performance of 17.6 MMBoe in the first six months of 2020 was offset by a combination of negative revisions due to SEC price changes of 9.9 MMBoe and year-to-date 2020 production of 8.7 MMBoe. The mid-year 2020 reserves, which were 85% proved developed producing and proved developed non-producing, were 34% liquids. The PV-10 of those proved reserves was $1.0 billion, before consideration of cash outflows related to asset retirement obligations, compared with $1.3 billion at year-end 2019. The mid-year SEC PV-10 was based on an average crude oil price of $48.84 per barrel (compared with $58.11 at year-end 2019) and an average natural gas price of $2.09 per Mcf (compared with $2.63 at year-end 2019), after adjustments for quality, transportation fees, energy content, and regional price differentials and excludes provision for asset retirement obligations or income taxes.


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 second quarter of 2020, the Company performed three recompletions and two workovers that in total added approximately 600 net Boe/d to production. W&T currently plans to continue to perform recompletions and workovers that meet economic thresholds.


Gulf of Mexico Lease Sale 254:


W&T was awarded two blocks on which it was the apparent high bidder in the Gulf of Mexico Lease Sale 254 held by the BOEM on March 18, 2020, which included one deepwater block, Garden Banks block 782, and one shallow water block, Eugene Island Area South Addition block 345.

 

6


Guidance


Due to the recent sharp decline in oil prices, 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. As of April 20, 2020, W&T temporarily shut-in production of approximately 3,300 Boe/d in selected oil-weighted fields operated by the Company. W&T also experienced shut-in production at third-party operated fields that totaled approximately 3,400 Boe/d. Lastly, W&T temporarily shut-in a portion of its production due to Tropical Storm Cristobal which resulted in a total of approximately 110,000 net Boe of deferred production. W&T has recently restored production associated with the tropical storm as well as the majority of its non-operated production, but third quarter 2020 volumes will be impacted by W&T-operated fields that remain shut-in due to low commodity prices, proactive reservoir management during a period of continued low prices, planned downtime of 41 days at the Magnolia Field due to turnaround activity at the third-party operated platform that processes production from the field, and natural decline. The Company expects third quarter 2020 LOE will be higher than second quarter as field work levels return to more normal levels but third quarter LOE is still expected to be about 20% to 25% lower than the first quarter of 2020. 

 

 

 

Third Quarter

Full Year

Production

2020

2020

     

Oil (MMBbls)

1.3 - 1.4

5.5 - 6.5

     

NGL's (MMBbls)

0.49 - 0.55

1.85 - 1.95

     

Natural Gas (Bcf)

11.8 - 13.1

51.5 - 52.5

     

Total (MMBoe)

3.8 - 4.1

16.0 - 17.0

     

Total (Boe/d)

40,900 - 45,100

43,750 - 46,500

     

Operating Expenses

Third Quarter

Full Year

($ in millions)

2020

2020

     

Lease operating expenses

$40 - $44

$158 - $165

     

Gathering, transportation &

   

production taxes

$6.5 - $7.5

$24 - $26

     

General and administrative

$11.5 - $13.0

$42 - $46

     

Cash income tax rate

 

0%

 

 

7

 

 

Conference Call Information:  W&T will hold a conference call to discuss its financial and operational results on August 6, 2020, at 11:00 a.m. Central Time (12:00 p.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 51 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.
 

 

8

 

 

W&T OFFSHORE, INC. AND SUBSIDIARIES

 

Condensed Consolidated Statements of Operations

 

(In thousands, except per share data)

 

(Unaudited)

 
                                         
   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

March 31,

   

June 30,

   

June 30,

 
   

2020

   

2020

   

2019

   

2020

   

2019

 
                                         

Revenues:

                                       

Oil

  $ 30,645     $ 84,650     $ 109,195     $ 115,295     $ 195,898  

NGLs

    1,917       6,452       4,640       8,369       11,088  

Natural gas

    21,364       29,300       19,567       50,664       41,405  

Other

    1,315       3,726       1,299       5,041       2,390  

Total revenues

    55,241       124,128       134,701       179,369       250,781  
                                         

Operating costs and expenses:

                                       

Lease operating expenses

    28,313       54,775       40,341       83,088       83,797  

Gathering, transportation costs and production taxes

    4,444       6,365       7,385       10,809       14,224  

Depreciation, depletion, amortization and accretion

    29,483       39,126       38,073       68,609       71,839  

General and administrative expenses

    5,628       13,963       13,328       19,591       27,437  

Derivative loss (gain)

    15,414       (61,912 )     (1,805 )     (46,498 )     47,081  

Total costs and expenses

    83,282       52,317       97,322       135,599       244,378  

Operating (loss) income

    (28,041 )     71,811       37,379       43,770       6,403  
                                         

Interest expense, net

    14,816       17,110       12,207       31,926       28,489  

Gain on purchase of debt

    (28,968 )     (18,501 )     -       (47,469 )     -  

Other expense

    751       723       478       1,474       809  

(Loss) income before income tax (benefit) expense

    (14,640 )     72,479       24,694       57,839       (22,895 )

Income tax (benefit) expense

    (8,736 )     6,499       (11,695 )     (2,237 )     (11,523 )

Net (loss) income

  $ (5,904 )   $ 65,980     $ 36,389     $ 60,076     $ (11,372 )
                                         
                                         

Basic and diluted earnings (loss) per common share

  $ (0.04 )   $ 0.46     $ 0.25     $ 0.42     $ (0.08 )
                                         

Weighted average common shares outstanding

    141,597       141,546       140,567       141,571       140,507  

 

 

 

 

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W&T OFFSHORE, INC. AND SUBSIDIARIES

 

Condensed Operating Data

 

(Unaudited)

 
                                         
   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

March 31,

   

June 30,

   

June 30,

 
   

2020

   

2020

   

2019

   

2020

   

2019

 

Net sales volumes:

                                       

Oil (MBbls)

    1,414       1,827       1,683       3,241       3,161  

NGL (MBbls)

    410       495       264       905       573  

Oil and NGLs (MBbls)

    1,824       2,322       1,947       4,146       3,734  

Natural gas (MMcf)

    12,006       15,307       7,450       27,313       14,738  

Total oil and natural gas (MBoe) (1)

    3,826       4,873       3,189       8,699       6,190  
                                         

Average daily equivalent sales (MBoe/d)

    42.0       53.6       35.0       47.8       34.2  
                                         

Average realized sales prices:

                                       

Oil ($/Bbl)

  $ 21.67     $ 46.33     $ 64.86     $ 35.57     $ 61.96  

NGLs ($/Bbl)

    4.67       13.03       17.59       9.25       19.36  

Oil and NGLs ($/Bbl)

    17.85       39.23       58.46       29.82       55.43  

Natural gas ($/Mcf)

    1.78       1.91       2.63       1.85       2.81  

Barrel of oil equivalent ($/Boe)

    14.10       24.71       41.83       20.04       40.13  
                                         

Average costs and expenses per Boe ($/Boe):

                                       

Lease operating expenses

  $ 7.40     $ 11.24     $ 12.65     $ 9.55     $ 13.54  

Gathering, transportation costs and production taxes

    1.16       1.31       2.32       1.25       2.30  

Depreciation, depletion, amortization and accretion

    7.71       8.03       11.94       7.89       11.61  

General and administrative expenses

    1.47       2.87       4.18       2.25       4.43  

 

 

(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.

 

 

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W&T OFFSHORE, INC. AND SUBSIDIARIES

 

Condensed Consolidated Balance Sheets

 
(In thousands)  
         
                   
   

June 30,

     

December 31,

 
   

2020

     

2019

 
   

(Unaudited)

           

Assets

                 

Current assets:

                 

Cash and cash equivalents

  $ 36,506       $ 32,433  

Receivables:

                 

Oil and natural gas sales

    22,383         57,367  

Joint interest and other, net

    14,657         19,400  

Income taxes

    -         1,861  

Total receivables

    37,040         78,628  

Prepaid expenses and other assets

    32,566         30,691  

Total current assets

    106,112         141,752  
                   

Oil and natural gas properties and other

    8,573,693         8,552,513  

Less accumulated depreciation, depletion and amortization

    7,860,630         7,803,715  

Oil and natural gas properties and other, net

    713,063         748,798  

Restricted deposits for asset retirement obligations

    29,912         15,806  

Deferred income taxes

    66,124         63,916  

Other assets

    27,535         33,447  

Total assets

  $ 942,746       $ 1,003,719  
                   

Liabilities and Shareholders’ Deficit

                 

Current liabilities:

                 

Accounts payable

  $ 52,368       $ 102,344  

Undistributed oil and natural gas proceeds

    15,776         29,450  

Advance from joint interest partner

    11,129         5,279  

Asset retirement obligations

    12,506         21,991  

Accrued liabilities

    22,668         30,896  

Total current liabilities

    114,447         189,960  
                   

Long-term debt

    624,222         719,533  

Asset retirement obligations

    362,301         333,603  

Other liabilities

    28,998         9,988  

Commitments and contingencies

    -         -  

Shareholders’ deficit:

                 

Common stock, $0.00001 par value; 200,000 shares authorized; 144,538 issued and

                 

141,669 outstanding for both dates presented

    1         1  

Additional paid-in capital

    549,117         547,050  

Retained deficit

    (712,173 )       (772,249 )

Treasury stock, at cost; 2,869 shares for both dates presented

    (24,167 )       (24,167 )

Total shareholders’ deficit

    (187,222 )       (249,365 )

Total liabilities and shareholders’ deficit

  $ 942,746       $ 1,003,719  

 

 

 

11

 

 

W&T OFFSHORE, INC. AND SUBSIDIARIES

 

Condensed Consolidated Statements of Cash Flows

 

(In thousands)

 

(Unaudited)

 
                                         
                                         
   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

March 31,

   

June 30,

   

June 30,

 
   

2020

   

2020

   

2019

   

2020

   

2019

 

Operating activities:

                                       

Net (loss) income

  $ (5,904 )   $ 65,980     $ 36,389     $ 60,076     $ (11,372 )

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

                                       

Depreciation, depletion, amortization and accretion

    29,483       39,126       38,073       68,609       71,839  

Amortization of debt items and other items

    2,057       1,625       1,333       3,682       2,485  

Share-based compensation

    1,019       1,048       1,259       2,067       1,181  

Derivative loss (gain)

    15,414       (61,912 )     (1,805 )     (46,498 )     47,081  

Cash receipts on derivative settlements, net

    33,162       4,404       844       37,566       12,792  

Gain on purchase of debt

    (28,968 )     (18,501 )     -       (47,469 )     -  

Deferred income taxes

    (8,706 )     6,499       (11,695 )     (2,207 )     (11,523 )

Changes in operating assets and liabilities:

    -                                  

Oil and natural gas receivables

    13,030       21,954       (504 )     34,984       5,992  

Joint interest receivables

    (2,380 )     7,123       (21,176 )     4,743       (24,162 )

Prepaid expenses and other assets

    (7,506 )     11,011       (3,865 )     3,505       (8,134 )

Income tax

    2,008       -       -       2,008       -  

Asset retirement obligation settlements

    (1,915 )     (249 )     (2,387 )     (2,164 )     (2,641 )

Cash advance from JV partner

    (7,156 )     13,006       (26,117 )     5,850       18,527  

Accounts payable, accrued liabilities and other

    (24,484 )     (6,790 )     11,122       (31,274 )     4,251  

Net cash provided by operating activities

    9,154       84,324       21,471       93,478       106,316  
                                         

Investing activities:

                                       

Investment in oil and natural gas properties and equipment

    (6,374 )     (33,575 )     (31,568 )     (39,949 )     (63,149 )

Acquisition of property interest in oil and natural gas properties

    1,546       (2,002 )     (10,000 )     (456 )     (10,000 )

Purchases of furniture, fixtures and other

    -       (70 )     -       (70 )     -  

Net cash used in investing activities

    (4,828 )     (35,647 )     (41,568 )     (40,475 )     (73,149 )
                                         

Financing activities:

                                       

Borrowings on credit facility

    25,000       -       -       25,000       -  

Repayments on credit facility

    (25,000 )     (25,000 )     -       (50,000 )     -  

Purchase of Senior Second Lien Notes

    (15,394 )     (8,536 )     -       (23,930 )     -  

Debt issuance costs and other

    -       -       (310 )     -       (751 )

Net cash used in financing activities

    (15,394 )     (33,536 )     (310 )     (48,930 )     (751 )

Increase (decrease) in cash and cash equivalents

    (11,068 )     15,141       (20,407 )     4,073       32,416  

Cash and cash equivalents, beginning of period

    47,574       32,433       86,116       32,433       33,293  

Cash and cash equivalents, end of period

  $ 36,506     $ 47,574     $ 65,709     $ 36,506     $ 65,709  

 

 

12

 

 

 

 

                     
 

W&T OFFSHORE, INC. AND SUBSIDIARIES

 

Financial Commodity Derivative Positions

 

As of August 5, 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)

 
 

Aug 2020 - Dec 2020

 

Costless Collars

   

1,000

 

$45.00

$63.60

 
 

Aug 2020 - Dec 2020

 

Costless Collars

   

9,000

 

$45.00

$63.50

 
 

Aug 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

     
                     
                       
 

Natural Gas - Henry Hub NYMEX:

       

(MMBTU)

(per MMBTU)

(per MMBTU)

(per MMBTU)

 
 

Aug 2020 - Dec 2022

 

Calls (long)

   

40,000

   

$3.00

 
 

Aug 2020 - Dec 2022

 

Costless Collars

   

40,000

 

$1.83

$3.00

 
 

Aug 2020 - Dec 2020

 

Costless Collars

   

10,000

 

$1.75

$2.58

 
 

Sep 2020 - Dec 2020

 

Swaps

   

10,000

$2.03

     
 

Sep 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

     

 

 

13

 

 

 

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” and “Adjusted EBITDA.”   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 Income to Adjusted Net Income

 

Adjusted Net Income does not include the unrealized commodity derivative loss (gain), amortization of derivative premium, bad debt reserve, deferred tax benefit, gain on debt transactions, write-off contingent liability, litigation and other. 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

   

Six Months Ended

 
   

June 30,

   

March 31,

   

June 30,

   

June 30,

 
   

2020

   

2020

   

2019

   

2020

   

2019

 
   

(In thousands, except per share amounts)

 
   

(Unaudited)

 
                                         

Net (loss) income

  $ (5,904 )   $ 65,980     $ 36,389     $ 60,076     $ (11,372 )

Unrealized commodity derivative loss (gain)

    37,992       (52,520 )     (3,839 )     (14,528 )     46,621  

Amortization of derivative premium

    3,407       4,349       3,888       7,756       7,733  

Bad debt reserve

    47       36       18       83       138  

Income tax (benefit) expense

    (8,736 )     6,499       -       (2,237 )     -  

Gain on debt transactions

    (28,968 )     (18,501 )     -       (47,469 )     -  

Adjusted Net (Loss) Income

  $ (2,162 )   $ 5,843     $ 36,456     $ 3,681     $ 43,120  
                                         

Basic and diluted adjusted (loss) earnings per common share

  $ (0.02 )   $ 0.04     $ 0.25     $ 0.03     $ 0.30  

 

 

 

14

 

 

 

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

 

Reconciliation of Net Income to Adjusted EBITDA

 

The Company defines Adjusted EBITDA as net 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, gain on debt transactions, litigation and other. 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 following table presents a reconciliation of W&T’s net income to Adjusted EBITDA.

 

 

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

March 31,

   

June 30,

   

June 30,

 
   

2020

   

2020

   

2019

   

2020

   

2019

 
   

(In thousands)

 
   

(Unaudited)

 
                                         

Net (loss) income

  $ (5,904 )   $ 65,980     $ 36,389     $ 60,076     $ (11,372 )

Interest expense, net

    14,816       17,110       12,207       31,926       28,489  

Income tax (benefit) expense

    (8,736 )     6,499       (11,695 )     (2,237 )     (11,523 )

Depreciation, depletion, amortization and accretion

    29,483       39,126       38,073       68,609       71,839  

Unrealized commodity derivative loss (gain)

    37,992       (52,520 )     (3,839 )     (14,528 )     46,621  

Amortization of derivative premium

    3,407       4,349       3,888       7,756       7,733  

Bad debt reserve

    47       36       18       83       138  

Gain on debt transactions

    (28,968 )     (18,501 )     -       (47,469 )     -  

Adjusted EBITDA

  $ 42,137     $ 62,079     $ 75,041     $ 104,216     $ 131,925  

 

 

 

 

 

 

15

 

 

 

 

CONTACT

Al Petrie

Janet Yang

 

Investor Relations Coordinator

EVP & CFO

 

apetrie@wtoffshore.com

investorrelations@wtoffshore.com

 

713-297-8024

713-624-7326

 

16