W&T Offshore, Inc. (NYSE: WTI) (“W&T” or the “Company”)
today reported operational and financial results for the third
quarter of 2022. This press release includes non-GAAP financial
measures, including Adjusted Net Income, Adjusted EBITDA, Free Cash
Flow, and Net Debt, which are described and reconciled to the most
comparable GAAP measures below in the accompanying tables under
“Non-GAAP Information.”
Key highlights for the third quarter of 2022 and
through the date of this press release included:
- Maintained strong production of
41.5 thousand barrels of oil equivalent per day (“MBoe/d”) (50%
liquids), or 3.8 million barrels of oil equivalent (“MMBoe”);
- Generated net
income of $66.7 million or $0.46 per diluted share in the third
quarter of 2022;
- Adjusted Net Income
totaled $48.7 million, or $0.33 per diluted share in the third
quarter of 2022, mainly reflecting the adjustment for unrealized
derivative gain and derivative premiums;
- Reported Adjusted
EBITDA of $113.9 million for the third quarter of 2022;
- Year-to-date
Adjusted EBITDA totaled $497.6 million;
- Produced Free Cash
Flow of $71.1 million for the third quarter of 2022, the 19th
consecutive quarter of positive Free Cash Flow;
- Year-to-date Free
Cash Flow totaled $351.5 million;
- Increased cash and
cash equivalents to $447.1 million, up 74% from $257.6 million at
September 30, 2021;
- Decreased Net Debt
by 48% year-over-year to $254.3 million as of September 30,
2022;
- Continued
significant improvement in the Company’s leverage profile with Net
Debt to trailing twelve months (“TTM”) Adjusted EBITDA of 0.5 times
compared to 2.5 times one year ago; and
- Subsequent to
quarter-end, the Company entered into an amendment to the credit
agreement for its first priority secured revolving facility, which,
among other things, extended the maturity date and the lender’s
commitment by up to one year to January 3, 2024.
Tracy W. Krohn, Chairman and Chief Executive
Officer, stated, “We had another very strong quarter of outstanding
operational and financial results. Delivering consistent production
volumes, coupled with sustained higher pricing allowed W&T to
generate significant Adjusted EBITDA and Free Cash Flow. We
delivered Adjusted EBITDA of $113.9 million in the third quarter
and nearly $500 million for the first nine months of 2022. We also
generated positive Free Cash Flow for the 19th consecutive quarter,
totaling $71.1 million in the third quarter and over $350 million
for the nine months ended September 30, 2022. This has placed
W&T in a much stronger financial position, with cash on hand of
$447 million and our Net Debt to Adjusted EBITDA ratio down to 0.5
times. Our proven strategy focused on free cash flow generation and
operational excellence has positioned us well for the future.”
“As you can see, we are well-positioned for
continued success in this strong commodity price environment, with
stable production that we expect to support our positive outlook on
continuing to generate meaningful free cash flow. Our strong
financial position provides us with optionality and flexibility
moving forward. We will continue to evaluate growth opportunities,
both organically and inorganically, and we are poised to execute on
accretive opportunities that meet our long-standing and proven
criteria. We remain focused on executing our strategy and committed
to increasing shareholder value.”
Production, Prices, and
Revenue: Production for the third quarter of
2022 was 41.5 MBoe/d, which was at the mid-point of the Company’s
guidance range provided for the quarter. This
represented a decrease of 2% compared to the second quarter of 2022
and an increase of 19% from 34.8 MBoe/d for the corresponding
period in 2021. Third quarter 2022 production was comprised of 15.7
MBbl/d of oil (38%), 4.9 MBbl/d of natural gas liquids (“NGLs”)
(12%), and 125.0 million cubic feet per day (“MMcf/d”) of natural
gas (50%).
W&T’s average realized price per barrel of
oil equivalent (“Boe”) before realized derivative settlements was
$68.39 per Boe in the third quarter of 2022, a decrease of 2% from
$69.55 per Boe in the second quarter of 2022 and an increase of 67%
from $41.05 per Boe in the third quarter of 2021. Crude oil, NGL,
and natural gas prices, before realized derivative settlements, for
the third quarter of 2022 were $90.23 per barrel, $37.17 per
barrel, and $9.89 per Mcf, respectively.
Revenues for the third quarter of 2022 were
$266.5 million, which was slightly lower than second quarter 2022
revenue of $273.8 million and 99% higher than $133.9 million in the
third quarter of 2021.
Lease Operating
Expense: Lease operating expense (“LOE”),
which includes base lease operating expenses, insurance premiums,
workovers, facilities maintenance, and hurricane repairs, was $59.0
million in the third quarter of 2022, which was within the
previously provided guidance range. This compared to $53.0 million
in the second quarter of 2022 and $39.5 million for the
corresponding period in 2021. On a component basis for the third
quarter of 2022, base LOE and insurance premiums were $50.0
million, workovers were $1.3 million, and facilities maintenance
and other expenses were $7.7 million. On a unit of production
basis, LOE was $15.46 per Boe in the third quarter of 2022. This
compares to $13.73 per Boe for the second quarter of 2022 and
$12.32 per Boe for the third quarter of 2021.
Gathering, Transportation Costs, and
Production Taxes: Gathering, transportation costs, and
production taxes totaled $12.2 million ($3.20 per Boe) in the third
quarter of 2022, compared to $9.2 million ($2.38 per Boe) in the
second quarter of 2022 and $6.6 million ($2.06 per Boe) in the
third quarter of 2021. Production taxes increased due
to higher realized natural gas prices during the third quarter of
2022.
Depreciation, Depletion, Amortization,
and Accretion (“DD&A”): DD&A,
including accretion expense related to asset retirement obligations
(“ARO”), was $8.93 per Boe in the third quarter of 2022. This
compares to $8.90 per Boe and $8.20 per Boe for the second quarter
of 2022 and the third quarter of 2021, respectively.
General & Administrative Expenses
(“G&A”): G&A was $23.0 million for the
third quarter of 2022, which included non-recurring costs for
professional services related to transitioning substantially all of
the Company’s information technology infrastructure and related
services from the incumbent provider to new internal IT staff or to
other providers. This compares to $15.0 million in the second
quarter of 2022 and $13.4 million in the third quarter of 2021. On
a unit of production basis, G&A was $6.04 per Boe in the third
quarter of 2022 compared to $3.88 per Boe in the second quarter of
2022 and $4.18 per Boe in the corresponding period of
2021.
Derivative (Gain)
Loss: In the third quarter of 2022, W&T
reported a net loss of $38.7 million related to commodity
derivative activities. Realized derivative loss for the quarter was
$132.3 million. These realized derivative losses during the third
quarter were partially offset by an unrealized gain of $93.5
million, resulting from the change in value of outstanding
derivative contracts since the end of the second quarter of 2022.
The Company reported a net gain of $8.9 million in the second
quarter of 2022 and a net loss of $73.1 million in the third
quarter of 2021 related to commodity derivative activities.
For the remainder of 2022, W&T is
approximately 20% hedged for oil and is fully hedged for natural
gas. A significant portion of the W&T’s natural gas hedges, in
the form of sold swaps and purchased calls and puts, were entered
into in conjunction with the non-recourse Mobile Bay term loan
entered into by borrowers owned by the Company’s wholly-owned
subsidiary Aquasition Energy LLC and will continue through the life
of that loan.
A summary of the Company’s outstanding
derivative positions is provided on W&T’s website in the
“Investors” section under the “Financial Information” tab.
Interest Expense:
Net interest expense in the third quarter of 2022 was
$16.8 million compared to $18.2 million in the second quarter
of 2022 and $18.9 million in the third quarter of
2021.
Income Tax: W&T
reported income tax expense of $16.4 million in the third quarter
of 2022, a substantial majority of which was deferred. This
compares to the recognition of income tax expense of $31.1 million
and an income tax benefit of $5.9 million for the quarters ended
June 30, 2022 and September 30, 2021, respectively.
Balance Sheet and
Liquidity: As of September 30, 2022, W&T
had available liquidity of $497.1 million comprised of $447.1
million in cash and cash equivalents and $50.0 million of borrowing
availability under W&T’s first priority secured revolving
facility provided by Calculus Lending LLC (“Calculus”). At
quarter-end, the Company had total debt of $701.5 million (or Net
Debt of $254.3 million, net of cash and cash equivalents),
consisting of the balance of the non-recourse Mobile Bay term loan
of $152.0 million and $549.5 million of 9.75% Senior Second Lien
Notes, net of unamortized debt issuance costs for both
instruments. Total debt decreased by $7.7 million
during the third quarter of 2022. Net Debt decreased by $77.1
million in the third quarter of 2022 due to the increase in cash
and cash equivalents resulting from strong cash flows throughout
the quarter driven by high oil and gas prices. As of
September 30, 2022, Net Debt to TTM Adjusted EBITDA was 0.5
times.
Subsequent to quarter-end, the Company entered
into an amendment to the credit agreement for its first priority
secured revolving facility, which, among other things, extended the
maturity date and Calculus’ commitment by up to one year to January
3, 2024.
The Company continues to monitor the capital
markets for opportunities to refinance all or a portion of its
9.75% Senior Second Lien Notes (due November 2023). Mr. Krohn
commented, “We are evaluating the available options to refinance
the outstanding Second Lien Notes. Should the capital markets
remain volatile, we’re confident that the Company will be able to
repay these notes prior to maturity out of future expected free
cash flows, cash on hand, and access to our unused $100 million
at-the-market equity program.”
Capital Expenditures and
Acquisitions: Capital expenditures (excluding changes in
working capital associated with investing activities) in the third
quarter of 2022 were $4.5 million and $30.0 million in the first
nine months of 2022. Additionally, during the first
nine months of 2022, the Company spent $51.5 million to acquire
working interests in the Ship Shoal 230, South Marsh
Island/Vermilion 191, and South Marsh Island 73 fields.
2022 CAPITAL INVESTMENT
PROGRAM
W&T’s guidance range for capital
expenditures in 2022 has been reduced to a range of $65 million to
$75 million for the full year, which excludes acquisition
opportunities. The reduction from the previously
provided range of $70 million to $90 million reflects timing
deferrals related to capital expected to now be deployed in early
2023 rather than late 2022. Included in this range are planned
expenditures related to one deepwater well and three shelf wells,
as well as capital costs for facilities, leasehold, seismic and
recompletions. The Company has significant flexibility to adjust
its spending because it has no long-term rig commitments or
near-term drilling obligations.
The guidance range for plugging and abandonment
expenditures in 2022 is revised to between $65 million and $75
million. The Company spent $21.5 million on ARO settlements in the
third quarter of 2022 and $61.3 million in the first nine months of
2022.
OPERATIONS UPDATE
Front-end Engineering and Design (“FEED”) and
permitting processes are underway on the Holy Grail well at Garden
Banks 783 in the Magnolia Field. The Company expects to activate
and mobilize the drilling rig in the first half of 2023. The well
is planned to commence drilling in the second quarter of 2023.
Well Recompletions and
Workovers
During the third quarter of 2022, the Company
performed two recompletions and five workovers that positively
impacted production for the quarter. W&T plans to continue to
perform recompletions and workovers that meet its economic
thresholds.
Fourth Quarter 2022 Production and
Expense Guidance
The guidance for the fourth quarter 2022 in the
table below represents the Company’s current
expectations. Fourth quarter production guidance was reduced
by 1.5 MBoe/d at the midpoint, primarily due to unplanned downtime
at the outside-operated Neptune field and temporary maintenance
downtime at the Mobile Bay field. Please refer to the section
entitled “Forward-Looking and Cautionary Statements” below for risk
factors that could impact guidance.
Production |
Fourth Quarter 2022 |
Oil (MBbl) |
1,332 – 1,472 |
NGLs (MBbl) |
385 – 425 |
Natural gas (MMcf) |
10,676 – 11,800 |
Total equivalents (MBoe) |
3,500 – 3,860 |
Average daily equivalents (MBoe/d) |
38.0 – 42.0 |
|
|
Expenses |
Fourth Quarter 2022 |
Lease operating expense ($MM) |
$67.0 – $73.0 |
Gathering, transportation & production taxes ($MM) |
$10.0 – $12.0 |
|
|
General & administrative - cash ($MM) |
$17.0 – $19.0 |
General & administrative – non-cash ($MM) |
$2.5 – $2.7 |
|
|
DD&A ($ per Boe) |
$8.50 – $9.50 |
Interest expense, net ($MM) |
$17.0 – $19.0 |
The effective income tax rate for the full year
2022 is expected to be in a range between 20% and 21%, of which
approximately 85% is expected to be deferred, non-cash tax
expense.
Conference Call
Information: W&T will hold a conference
call to discuss its financial and operational results on Wednesday,
November 9, 2022 at 9:00 a.m. Central Time (10:00 Eastern Time).
Interested parties may dial 1-844-739-3797. International parties
may dial 1-412-317-5713. Participants should request to connect to
the “W&T Offshore Conference Call”. This call will also be
webcast and available on W&T’s website at www.wtoffshore.com
under “Investors”. 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.
As of September 30, 2022, the Company had working interests in 47
fields in federal and state waters and has under lease
approximately 622,000 gross acres, including approximately 457,000
gross acres on the Gulf of Mexico Shelf and approximately 165,000
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, including
but not limited to, any forward-looking guidance provided herein,
reflect our current views with respect to future events, based on
what we believe are reasonable estimates and assumptions. No
assurance can be given, however, that these events will occur or
that our estimates will be correct. 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, uncertainties of the
timing and impact of bringing new wells online and repairing and
restoring infrastructure hurricane damage, the ability to achieve
leverage targets, unexpected future capital expenditures,
competition, the success of our risk management activities,
governmental regulations, uncertainties and other factors described
or referenced in W&T’s Annual Report on Form 10-K for the year
ended December 31, 2021 and subsequent Form 10-Q reports found at
www.sec.gov or on our website at www.wtoffshore.com under the
Investor Relations section. Our forward-looking statements in this
press release are based upon assumptions made, and information
known, by the Company as of the date of this release; it should not
be assumed that the Company will undertake to revise or update any
such forward-looking statements as such assumptions and information
changes, except as required under applicable law. Investors are
urged to consider closely the disclosures and risk factors in these
reports.
CONTACT: |
Al Petrie |
Janet Yang |
|
Investor Relations Coordinator |
Executive Vice President and CFO |
|
investorrelations@wtoffshore.com |
jyang@wtoffshore.com |
|
713-297-8024 |
713-626-8525 |
W&T
OFFSHORE, INC. AND SUBSIDIARIES |
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, |
|
|
2022 |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil |
|
$ |
130,560 |
|
|
$ |
159,264 |
|
|
$ |
74,265 |
|
|
$ |
412,526 |
|
|
$ |
240,418 |
|
NGLs |
|
|
16,875 |
|
|
|
16,735 |
|
|
|
12,205 |
|
|
|
47,430 |
|
|
|
30,397 |
|
Natural gas |
|
|
113,673 |
|
|
|
92,413 |
|
|
|
45,137 |
|
|
|
257,452 |
|
|
|
113,816 |
|
Other |
|
|
5,377 |
|
|
|
5,396 |
|
|
|
2,339 |
|
|
|
13,889 |
|
|
|
7,790 |
|
Total revenues |
|
|
266,485 |
|
|
|
273,808 |
|
|
|
133,946 |
|
|
|
731,297 |
|
|
|
392,421 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating expenses |
|
|
59,010 |
|
|
|
52,976 |
|
|
|
39,490 |
|
|
|
155,397 |
|
|
|
129,399 |
|
Gathering, transportation costs and production taxes |
|
|
12,199 |
|
|
|
9,181 |
|
|
|
6,593 |
|
|
|
26,647 |
|
|
|
19,687 |
|
Depreciation, depletion, amortization and accretion |
|
|
34,113 |
|
|
|
34,360 |
|
|
|
26,291 |
|
|
|
99,384 |
|
|
|
83,879 |
|
General and administrative expenses |
|
|
23,047 |
|
|
|
14,967 |
|
|
|
13,391 |
|
|
|
51,790 |
|
|
|
38,090 |
|
Total operating expenses |
|
|
128,369 |
|
|
|
111,484 |
|
|
|
85,765 |
|
|
|
333,218 |
|
|
|
271,055 |
|
Operating income |
|
|
138,116 |
|
|
|
162,324 |
|
|
|
48,181 |
|
|
|
398,079 |
|
|
|
121,366 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net |
|
|
16,849 |
|
|
|
18,183 |
|
|
|
18,910 |
|
|
|
54,915 |
|
|
|
50,474 |
|
Derivative
loss (gain) |
|
|
38,749 |
|
|
|
(8,854 |
) |
|
|
73,137 |
|
|
|
109,892 |
|
|
|
179,156 |
|
Other
(income) expense, net |
|
|
(600 |
) |
|
|
(1,534 |
) |
|
|
— |
|
|
|
(1,229 |
) |
|
|
964 |
|
Income (loss) before income taxes |
|
|
83,118 |
|
|
|
154,529 |
|
|
|
(43,866 |
) |
|
|
234,501 |
|
|
|
(109,228 |
) |
Income tax
expense (benefit) |
|
|
16,397 |
|
|
|
31,093 |
|
|
|
(5,902 |
) |
|
|
46,801 |
|
|
|
(18,846 |
) |
Net income (loss) |
|
$ |
66,721 |
|
|
$ |
123,436 |
|
|
$ |
(37,964 |
) |
|
$ |
187,700 |
|
|
$ |
(90,382 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic(1) |
|
$ |
0.46 |
|
|
$ |
0.85 |
|
|
$ |
(0.27 |
) |
|
$ |
1.30 |
|
|
$ |
(0.64 |
) |
Diluted |
|
|
0.46 |
|
|
|
0.85 |
|
|
|
(0.27 |
) |
|
|
1.30 |
|
|
|
(0.64 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
143,116 |
|
|
|
143,020 |
|
|
|
142,297 |
|
|
|
143,026 |
|
|
|
142,231 |
|
Diluted |
|
|
145,882 |
|
|
|
144,525 |
|
|
|
142,297 |
|
|
|
144,696 |
|
|
|
142,231 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes
the effect of income allocated to nonvested shares. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W&T
OFFSHORE, INC. AND SUBSIDIARIES |
Condensed
Operating Data |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
|
2022 |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Net sales
volumes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil (MBbls) |
|
|
1,447 |
|
|
1,476 |
|
|
1,083 |
|
|
4,227 |
|
|
3,812 |
NGL (MBbls) |
|
|
454 |
|
|
384 |
|
|
376 |
|
|
1,187 |
|
|
1,105 |
Natural gas (MMcf) |
|
|
11,499 |
|
|
11,995 |
|
|
10,481 |
|
|
33,965 |
|
|
33,469 |
Total oil and natural gas (MBoe) (1) |
|
|
3,818 |
|
|
3,859 |
|
|
3,206 |
|
|
11,075 |
|
|
10,495 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
daily equivalent sales (MBoe/d) |
|
|
41.5 |
|
|
42.4 |
|
|
34.8 |
|
|
40.6 |
|
|
38.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
realized sales prices (before the impact of derivative
settlements): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil ($/Bbl) |
|
$ |
90.23 |
|
$ |
107.90 |
|
$ |
68.57 |
|
$ |
97.59 |
|
$ |
63.07 |
NGLs ($/Bbl) |
|
|
37.17 |
|
|
43.58 |
|
|
32.46 |
|
|
39.96 |
|
|
27.51 |
Natural gas ($/Mcf) |
|
|
9.89 |
|
|
7.70 |
|
|
4.31 |
|
|
7.58 |
|
|
3.40 |
Barrel of oil equivalent ($/Boe) |
|
|
68.39 |
|
|
69.55 |
|
|
41.05 |
|
|
64.78 |
|
|
36.65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
operating expenses per Boe ($/Boe): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating expenses |
|
$ |
15.46 |
|
$ |
13.73 |
|
$ |
12.32 |
|
$ |
14.03 |
|
$ |
12.33 |
Gathering, transportation and production taxes |
|
|
3.20 |
|
|
2.38 |
|
|
2.06 |
|
|
2.41 |
|
|
1.88 |
Depreciation, depletion, amortization and accretion |
|
|
8.93 |
|
|
8.90 |
|
|
8.20 |
|
|
8.97 |
|
|
7.99 |
General and administrative expenses |
|
|
6.04 |
|
|
3.88 |
|
|
4.18 |
|
|
4.68 |
|
|
3.63 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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. The realized prices presented
above are volume-weighted for production in the respective
period.
W&T
OFFSHORE, INC. AND SUBSIDIARIES |
Condensed
Consolidated Balance Sheets |
(In
thousands) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
447,130 |
|
|
$ |
245,799 |
|
Restricted cash |
|
|
4,417 |
|
|
|
4,417 |
|
Receivables: |
|
|
|
|
|
|
Oil and natural gas sales |
|
|
89,195 |
|
|
|
54,919 |
|
Joint interest, net |
|
|
16,815 |
|
|
|
9,745 |
|
Total receivables |
|
|
106,010 |
|
|
|
64,664 |
|
Prepaid expenses and other assets |
|
|
53,014 |
|
|
|
43,379 |
|
Total current assets |
|
|
610,571 |
|
|
|
358,259 |
|
|
|
|
|
|
|
|
Oil and
natural gas properties and other |
|
|
8,801,788 |
|
|
|
8,657,252 |
|
Less accumulated depreciation, depletion, amortization and
impairment |
|
|
8,071,830 |
|
|
|
7,992,000 |
|
Oil and natural gas properties and other, net |
|
|
729,958 |
|
|
|
665,252 |
|
Restricted
deposits for asset retirement obligations |
|
|
21,760 |
|
|
|
16,019 |
|
Deferred
income taxes |
|
|
62,334 |
|
|
|
102,505 |
|
Other
assets |
|
|
65,681 |
|
|
|
51,172 |
|
Total assets |
|
$ |
1,490,304 |
|
|
$ |
1,193,207 |
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Deficit |
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
Accounts payable |
|
$ |
72,051 |
|
|
$ |
67,409 |
|
Undistributed oil and natural gas proceeds |
|
|
59,518 |
|
|
|
36,243 |
|
Advances from joint interest partners |
|
|
3,017 |
|
|
|
15,072 |
|
Asset retirement obligations |
|
|
54,886 |
|
|
|
56,419 |
|
Accrued liabilities |
|
|
155,849 |
|
|
|
106,273 |
|
Current portion of long-term debt |
|
|
35,450 |
|
|
|
42,960 |
|
Total current liabilities |
|
|
380,771 |
|
|
|
324,376 |
|
|
|
|
|
|
|
|
Long-term
debt, net |
|
|
665,973 |
|
|
|
687,938 |
|
Asset
retirement obligations, less current portion |
|
|
398,724 |
|
|
|
368,076 |
|
Other
liabilities |
|
|
99,853 |
|
|
|
59,997 |
|
Shareholders’ deficit: |
|
|
|
|
|
|
Common stock, $0.00001 par value; 200,000 shares authorized;
146,031 issued and 143,162 outstanding at
September 30, 2022; 145,732 issued and 142,863
outstanding at December 31, 2021 |
|
|
1 |
|
|
|
1 |
|
Additional paid-in capital |
|
|
557,386 |
|
|
|
552,923 |
|
Retained deficit |
|
|
(588,237 |
) |
|
|
(775,937 |
) |
Treasury stock, at cost; 2,869 shares for both dates presented |
|
|
(24,167 |
) |
|
|
(24,167 |
) |
Total shareholders’ deficit |
|
|
(55,017 |
) |
|
|
(247,180 |
) |
Total liabilities and shareholders’ deficit |
|
$ |
1,490,304 |
|
|
$ |
1,193,207 |
|
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, |
|
|
2022 |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
66,721 |
|
|
$ |
123,436 |
|
|
$ |
(37,964 |
) |
|
$ |
187,700 |
|
|
$ |
(90,382 |
) |
Adjustments
to reconcile net income (loss) to net cash provided by operating
activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion, amortization and accretion |
|
|
34,113 |
|
|
|
34,360 |
|
|
|
26,292 |
|
|
|
99,384 |
|
|
|
83,879 |
|
Amortization of debt items and other items |
|
|
1,749 |
|
|
|
1,771 |
|
|
|
1,128 |
|
|
|
6,114 |
|
|
|
4,095 |
|
Share-based compensation |
|
|
2,645 |
|
|
|
2,014 |
|
|
|
859 |
|
|
|
5,179 |
|
|
|
1,779 |
|
Derivative loss (gain) |
|
|
38,749 |
|
|
|
(8,854 |
) |
|
|
73,137 |
|
|
|
109,892 |
|
|
|
179,156 |
|
Derivative cash (payments) receipts, net |
|
|
(71,249 |
) |
|
|
100,742 |
|
|
|
(24,000 |
) |
|
|
(1,022 |
) |
|
|
(39,554 |
) |
Derivative cash premium payments |
|
|
— |
|
|
|
(46,111 |
) |
|
|
(6,793 |
) |
|
|
(46,111 |
) |
|
|
(32,368 |
) |
Deferred income taxes |
|
|
13,140 |
|
|
|
27,764 |
|
|
|
(5,820 |
) |
|
|
40,171 |
|
|
|
(18,826 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and natural gas receivables |
|
|
9,960 |
|
|
|
(6,462 |
) |
|
|
11,894 |
|
|
|
(34,276 |
) |
|
|
504 |
|
Joint interest receivables |
|
|
(3,445 |
) |
|
|
851 |
|
|
|
(1,262 |
) |
|
|
(7,070 |
) |
|
|
(2,172 |
) |
Prepaid expenses and other assets |
|
|
3,276 |
|
|
|
(17,909 |
) |
|
|
(12,868 |
) |
|
|
(26,816 |
) |
|
|
(30,473 |
) |
Income tax |
|
|
(1,743 |
) |
|
|
3,179 |
|
|
|
(61 |
) |
|
|
1,480 |
|
|
|
(153 |
) |
Asset retirement obligation settlements |
|
|
(21,510 |
) |
|
|
(34,283 |
) |
|
|
(8,531 |
) |
|
|
(61,285 |
) |
|
|
(19,744 |
) |
Cash advances from joint interest partners |
|
|
(2,242 |
) |
|
|
(1,263 |
) |
|
|
13,924 |
|
|
|
(12,055 |
) |
|
|
9,999 |
|
Accounts payable, accrued liabilities and
other |
|
|
18,928 |
|
|
|
30,987 |
|
|
|
35,162 |
|
|
|
65,566 |
|
|
|
65,551 |
|
Net cash provided by operating activities |
|
|
89,092 |
|
|
|
210,222 |
|
|
|
65,097 |
|
|
|
326,851 |
|
|
|
111,291 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
in oil and natural gas properties, equipment, and other |
|
|
(4,477 |
) |
|
|
(8,050 |
) |
|
|
(10,169 |
) |
|
|
(29,966 |
) |
|
|
(16,023 |
) |
Changes in
operating assets and liabilities associated with investing
activities |
|
|
(2,451 |
) |
|
|
(8,416 |
) |
|
|
6,695 |
|
|
|
(8,237 |
) |
|
|
3,617 |
|
Acquisition
of property interests |
|
|
(3,849 |
) |
|
|
(17,472 |
) |
|
|
— |
|
|
|
(51,474 |
) |
|
|
— |
|
Net cash used in investing activities |
|
|
(10,777 |
) |
|
|
(33,938 |
) |
|
|
(3,474 |
) |
|
|
(89,677 |
) |
|
|
(12,406 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments
on credit facility |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(80,000 |
) |
Proceeds
from Term Loan |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
215,000 |
|
Repayments
on Term Loan |
|
|
(8,896 |
) |
|
|
(12,311 |
) |
|
|
(11,778 |
) |
|
|
(33,837 |
) |
|
|
(11,778 |
) |
Debt
issuance costs |
|
|
(716 |
) |
|
|
(1,290 |
) |
|
|
(1,409 |
) |
|
|
(2,006 |
) |
|
|
(8,249 |
) |
Other |
|
|
703 |
|
|
|
(434 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net cash (used in) provided by financing activities |
|
|
(8,909 |
) |
|
|
(14,035 |
) |
|
|
(13,187 |
) |
|
|
(35,843 |
) |
|
|
114,973 |
|
Increase (decrease) in cash and cash equivalents |
|
|
69,406 |
|
|
|
162,249 |
|
|
|
48,436 |
|
|
|
201,331 |
|
|
|
213,858 |
|
Cash and
cash equivalents and restricted cash, beginning of period |
|
|
382,141 |
|
|
|
219,892 |
|
|
|
209,148 |
|
|
|
250,216 |
|
|
|
43,726 |
|
Cash and
cash equivalents and restricted cash, end of period |
|
$ |
451,547 |
|
|
$ |
382,141 |
|
|
$ |
257,584 |
|
|
$ |
451,547 |
|
|
$ |
257,584 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W&T OFFSHORE, INC. AND
SUBSIDIARIESNon-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 “Net Debt”, “Adjusted Net Income (Loss)”, “Adjusted EBITDA” and
“Free Cash Flow”. Management uses these non-GAAP financial measures
in its analysis of performance. These disclosures may not be viewed
as a substitute for results determined in accordance with GAAP and
are not necessarily comparable to non-GAAP performance measures
which may be reported by other companies. Prior period amounts have
been conformed to the methodology and presentation of the current
period.
We calculate Net Debt as total debt (current and
long-term portions), less cash and cash equivalents. Management
uses Net Debt to evaluate the Company’s financial position,
including its ability to service its debt obligations.
Reconciliation of Net Income (Loss) to
Adjusted Net Income (Loss)
Adjusted Net Income (Loss) adjusts for certain
items that the Company believes affect comparability of operating
results, including items that are generally non-recurring in nature
or whose timing and/or amount cannot be reasonably
estimated. These items include unrealized commodity
derivative loss (gain), amortization and write-off of derivative
premium, bad debt reserve, deferred tax benefit, gain on debt
transactions, release of restricted funds, litigation (including
nonrecurring IT-related legal fees), share-based compensation and
other.
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
|
2022 |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
(In thousands, except per share amounts) |
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
66,721 |
|
|
$ |
123,436 |
|
|
$ |
(37,964 |
) |
|
$ |
187,700 |
|
|
$ |
(90,382 |
) |
Selected items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
commodity derivative (gain) loss and effect of derivative premiums,
net |
|
|
(28,161 |
) |
|
|
86,272 |
|
|
|
43,916 |
|
|
|
98,607 |
|
|
|
127,374 |
|
Allowance
for credit losses |
|
|
(418 |
) |
|
|
181 |
|
|
|
1 |
|
|
|
(119 |
) |
|
|
9 |
|
Non-recurring costs related to IT services transition |
|
|
6,393 |
|
|
|
— |
|
|
|
— |
|
|
|
6,393 |
|
|
|
— |
|
Other |
|
|
(600 |
) |
|
|
(1,534 |
) |
|
|
— |
|
|
|
(1,229 |
) |
|
|
80 |
|
Tax effect
of selected items (1) |
|
|
4,785 |
|
|
|
(17,833 |
) |
|
|
(9,223 |
) |
|
|
(21,767 |
) |
|
|
(26,767 |
) |
Adjusted Net Income (Loss) |
|
$ |
48,720 |
|
|
$ |
190,522 |
|
|
$ |
(3,270 |
) |
|
$ |
269,585 |
|
|
$ |
10,314 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net
income (loss) per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.34 |
|
|
$ |
1.33 |
|
|
$ |
(0.02 |
) |
|
$ |
1.88 |
|
|
$ |
0.07 |
|
Diluted |
|
$ |
0.33 |
|
|
$ |
1.32 |
|
|
$ |
(0.02 |
) |
|
$ |
1.86 |
|
|
$ |
0.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Shares Outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
143,116 |
|
|
|
143,020 |
|
|
|
142,297 |
|
|
|
143,026 |
|
|
|
142,231 |
|
Diluted |
|
|
145,882 |
|
|
|
144,525 |
|
|
|
142,297 |
|
|
|
144,696 |
|
|
|
143,497 |
|
(1) Selected items were tax effected with the Federal Statutory
Rate of 21% for each respective period.
W&T OFFSHORE, INC. AND
SUBSIDIARIESNon-GAAP Information
Adjusted EBITDA/ Free Cash Flow
Reconciliations
The Company also presents the non-GAAP financial
measures Adjusted EBITDA and Free Cash Flow. The Company defines
Adjusted EBITDA as net income (loss) plus net interest expense,
income tax (benefit) expense, depreciation, depletion, amortization
and accretion, excluding the unrealized commodity derivative gain
or loss, amortization and write-off of derivative premium,
allowance for credit losses, gain on debt transactions, share-based
compensation, litigation (including nonrecurring IT-related legal
fees), and other. Company management 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 (all on an accrual basis).
For this purpose, the Company’s definition of capital expenditures
includes costs incurred related to oil and natural gas properties
(such as drilling and infrastructure costs and the lease
maintenance costs) and equipment, furniture and fixtures, but
excludes acquisition costs of oil and gas properties from third
parties that are not included in the Company’s capital expenditures
guidance provided to investors. Company management believes that
Free Cash Flow is an important financial performance measure for
use in evaluating the performance and efficiency of its current
operating activities after the impact of accrued capital
expenditures, plugging and abandonment costs and interest expense
and without being impacted by items such as changes associated with
working capital, which can vary substantially from one period to
another. There is no commonly accepted definition of Free Cash Flow
within the industry. Accordingly, Free Cash Flow, as defined and
calculated by the Company, may not be comparable to Free Cash Flow
or other similarly named non-GAAP measures reported by other
companies. While the Company includes interest expense in the
calculation of Free Cash Flow, other mandatory debt service
requirements of future payments of principal at maturity (if such
debt is not refinanced) are excluded from the calculation of Free
Cash Flow. These and other non-discretionary expenditures that are
not deducted from Free Cash Flow would reduce cash available for
other uses.
The following tables present (i) a
reconciliation of cash flow from operating activities, a GAAP
measure, to Free Cash Flow, as defined by the Company and (ii) a
reconciliation of the Company’s net income (loss), a GAAP measure,
to Adjusted EBITDA and Free Cash Flow, as such terms are defined by
the Company.
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
|
2022 |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
(In thousands) |
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
66,721 |
|
|
$ |
123,436 |
|
|
$ |
(37,964 |
) |
|
$ |
187,700 |
|
|
$ |
(90,382 |
) |
Interest
expense, net |
|
|
16,849 |
|
|
|
18,183 |
|
|
|
18,910 |
|
|
|
54,915 |
|
|
|
50,474 |
|
Income tax
expense (benefit) |
|
|
16,397 |
|
|
|
31,093 |
|
|
|
(5,902 |
) |
|
|
46,801 |
|
|
|
(18,846 |
) |
Depreciation, depletion, amortization and accretion |
|
|
34,113 |
|
|
|
34,360 |
|
|
|
26,291 |
|
|
|
99,384 |
|
|
|
83,879 |
|
Unrealized
commodity derivative (gain) loss and effect of derivative premiums,
net |
|
|
(28,161 |
) |
|
|
86,272 |
|
|
|
43,916 |
|
|
|
98,607 |
|
|
|
127,374 |
|
Allowance
for credit losses |
|
|
(418 |
) |
|
|
181 |
|
|
|
1 |
|
|
|
(119 |
) |
|
|
9 |
|
Non-cash
incentive compensation |
|
|
2,645 |
|
|
|
2,014 |
|
|
|
859 |
|
|
|
5,179 |
|
|
|
1,779 |
|
Non-recurring costs related to IT services transition |
|
|
6,393 |
|
|
|
— |
|
|
|
— |
|
|
|
6,393 |
|
|
|
— |
|
Other |
|
|
(600 |
) |
|
|
(1,534 |
) |
|
|
— |
|
|
|
(1,229 |
) |
|
|
80 |
|
Adjusted EBITDA |
|
$ |
113,939 |
|
|
$ |
294,005 |
|
|
$ |
46,111 |
|
|
$ |
497,631 |
|
|
$ |
154,367 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
in oil and natural gas properties, equipment and other |
|
|
(4,477 |
) |
|
|
(8,050 |
) |
|
|
(10,169 |
) |
|
|
(29,966 |
) |
|
|
(16,023 |
) |
Asset
retirement obligation settlements |
|
|
(21,510 |
) |
|
|
(34,283 |
) |
|
|
(8,531 |
) |
|
|
(61,285 |
) |
|
|
(19,744 |
) |
Interest
expense, net |
|
|
(16,849 |
) |
|
|
(18,183 |
) |
|
|
(18,910 |
) |
|
|
(54,915 |
) |
|
|
(50,474 |
) |
Free
Cash Flow |
|
$ |
71,103 |
|
|
$ |
233,489 |
|
|
$ |
8,501 |
|
|
$ |
351,465 |
|
|
$ |
68,126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
|
2022 |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
(In thousands) |
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
$ |
89,092 |
|
|
$ |
210,222 |
|
|
$ |
65,097 |
|
|
$ |
326,851 |
|
|
$ |
111,291 |
|
Allowance
for credit losses |
|
|
(418 |
) |
|
|
181 |
|
|
|
1 |
|
|
|
(119 |
) |
|
|
9 |
|
Litigation
and other contingent loss |
|
|
(600 |
) |
|
|
(1,534 |
) |
|
|
— |
|
|
|
(1,229 |
) |
|
|
80 |
|
Amortization
of debt items and other items |
|
|
(1,749 |
) |
|
|
(1,771 |
) |
|
|
(1,128 |
) |
|
|
(6,114 |
) |
|
|
(4,095 |
) |
Non-recurring costs related to IT services transition |
|
|
6,393 |
|
|
|
— |
|
|
|
— |
|
|
|
6,393 |
|
|
|
— |
|
Current tax
benefit (1) |
|
|
3,257 |
|
|
|
3,329 |
|
|
|
(82 |
) |
|
|
6,630 |
|
|
|
(20 |
) |
Changes in
derivatives receivable (payable) (1) |
|
|
4,339 |
|
|
|
40,495 |
|
|
|
1,571 |
|
|
|
35,848 |
|
|
|
20,140 |
|
Changes in
operating assets and liabilities, excluding asset retirement
obligation settlements |
|
|
(24,734 |
) |
|
|
(9,383 |
) |
|
|
(46,789 |
) |
|
|
13,171 |
|
|
|
(43,256 |
) |
Investment
in oil and natural gas properties, equipment and other |
|
|
(4,477 |
) |
|
|
(8,050 |
) |
|
|
(10,169 |
) |
|
|
(29,966 |
) |
|
|
(16,023 |
) |
Free Cash
Flow |
|
$ |
71,103 |
|
|
$ |
233,489 |
|
|
$ |
8,501 |
|
|
$ |
351,465 |
|
|
$ |
68,126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) A reconciliation of the adjustment used to calculate Free Cash
Flow to the Condensed Consolidated Financial Statements is included
below: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current tax
benefit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense (benefit) |
|
$ |
16,397 |
|
|
$ |
31,093 |
|
|
$ |
(5,902 |
) |
|
$ |
46,801 |
|
|
$ |
(18,846 |
) |
Less:
Deferred income taxes |
|
|
13,140 |
|
|
|
27,764 |
|
|
|
(5,820 |
) |
|
|
40,171 |
|
|
|
(18,826 |
) |
Current tax
benefit |
|
$ |
3,257 |
|
|
$ |
3,329 |
|
|
$ |
(82 |
) |
|
$ |
6,630 |
|
|
$ |
(20 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in
derivatives receivable: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
payable, end of period |
|
$ |
(16,659 |
) |
|
$ |
(20,998 |
) |
|
$ |
(12,511 |
) |
|
$ |
(16,659 |
) |
|
$ |
(12,511 |
) |
Derivatives
payable, beginning of period |
|
|
20,998 |
|
|
|
15,382 |
|
|
|
7,289 |
|
|
|
6,396 |
|
|
|
282 |
|
Derivative
premiums paid |
|
|
— |
|
|
|
46,111 |
|
|
|
6,793 |
|
|
|
46,111 |
|
|
|
32,369 |
|
Change in
derivatives receivable (payable) |
|
$ |
4,339 |
|
|
$ |
40,495 |
|
|
$ |
1,571 |
|
|
$ |
35,848 |
|
|
$ |
20,140 |
|
W and T Offshore (NYSE:WTI)
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