W&T Offshore, Inc. (NYSE: WTI) (“W&T” or the “Company”)
today reported operational and financial results for the fourth
quarter and full year 2022, including the Company’s year-end 2022
reserve report. Guidance for 2023 was also provided. This press
release includes non-GAAP financial measures, including Adjusted
Net Income, Adjusted EBITDA, Free Cash Flow, Net Debt, Net Leverage
Ratio and PV-10 which are described and reconciled to the most
comparable GAAP measures below in the accompanying tables under
“Non-GAAP Information.”
Key highlights for the fourth quarter and full
year 2022 included:
- Increased full year
2022 production by 5% year-over-year to 40.1 thousand barrels of
oil equivalent per day (“MBoe/d”) (49% liquids), or 14.6 million
barrels of oil equivalent (“MMBoe”), and in the fourth quarter of
2022 reported 38.6 MBoe/d (49% liquids), or 3.6 MMBoe;
- Increased year-end
2022 proved reserves at SEC pricing by 5% to 165.3 MMBoe and
increased the present value of SEC proved reserves discounted at
10% (“PV-10”) by 93% to $3.1 billion compared to year-end 2021;
- Benefited from
positive well performance and technical revisions of 7.3 MMBoe, 6.0
MMBoe of acquisitions and 9.0 MMBoe of positive price revisions,
partially offset by 14.6 MMBoe of production, resulting in
replacement of 153% of 2022 production with new reserves;
- Continued to very
efficiently replace reserves with a 2022 reserve replacement cost
of $4.10 per barrel of oil equivalent (“Boe”) and a 3-year reserve
replacement cost average of $2.85 per Boe;
- Generated net
income of $43.4 million or $0.30 per diluted share in the fourth
quarter of 2022 and net income for the full year 2022 of $231.1
million or $1.59 per diluted share;
- Reported Adjusted
Net Income of $15.2 million or $0.10 per diluted share in the
fourth quarter of 2022, and Adjusted Net Income of $284.8 million
or $1.96 per diluted share for the full year;
- Increased full year
2022 Adjusted EBITDA 156% year-over-year to $563.7 million and
maintained strong Adjusted EBITDA with $66.1 million for the fourth
quarter of 2022;
- Generated
significant Free Cash Flow of $376.4 million for the full year of
2022, more than four times the $90.9 million of Free Cash Flow for
full year 2021;
- Generated $25.0
million of Free Cash Flow in the fourth quarter of 2022, the 20th
consecutive quarter of reporting Free Cash Flow;
- Reported strong
cash and cash equivalents of $461.4 million at year-end 2022,
representing an increase of $215.6 million over year-end 2021;
- Reduced Net Debt to
$232.1 million at year-end 2022, down $253.0 million from $485.1
million at year-end 2021; represents a total Net Debt reduction of
$455.0 million over the last three years and a Net Debt to trailing
twelve months Adjusted EBITDA ratio (“Net Leverage Ratio”) of 0.4x
at year-end 2022;
- Closed two
strategic bolt-on acquisitions of complementary oil and gas
producing properties in Federal shallow waters in the central
region of the Gulf of Mexico (“GOM”), with a total 100% working
interest, for approximately $51.5 million (after normal and
customary post-effective date adjustments) in early 2022, which
were both funded using cash on hand; and
-
Announced Memorandum of Understanding with Korea National Oil
Corporation to jointly consider and pursue various opportunities in
upstream oil and gas in North America.
Important developments following year-end
included:
- Closed the
previously-announced offering of $275 million in aggregate
principal amount of 11.75% Senior Second Lien Notes due 2026 (the
“2026 Senior Second Lien Notes”) on January 27, 2023;
- The Company used
the net proceeds of the offering, along with cash on hand, to fund
the redemption of all of the Company’s outstanding 9.75% Senior
Second Lien Notes due 2023 (the “2023 Senior Second Lien Notes”);
and
-
Announced 2023 guidance including capital spending budget of $90 to
$110 million while maintaining focus on generating free cash flow
to fund potential acquisitions and the reduction of debt.
Tracy W. Krohn, Chairman and Chief Executive
Officer, stated, “We are very pleased with our ability to
consistently deliver on our strategic vision focused on generating
meaningful free cash flow and growing shareholder value. Our
outstanding operational and financial results in 2022 and our
year-end 2022 reserve report reflect the strength of our assets. We
generated significant Adjusted EBITDA of $563.7 million in 2022,
and Free Cash Flow of $376.4 million. We increased production by 5%
in 2022 to just over 40 MBoe/d. Our ability to maintain solid
production coupled with strong pricing enabled us to generate $1.59
per diluted share of net income in 2022. We also substantially
reduced Net Debt, which was down by $253 million since year-end
2021, while significantly increasing our liquidity to $511 million.
This placed W&T in a much stronger financial position, with
cash on hand at year-end 2022 of $461 million and our Net Leverage
Ratio down to 0.4 times. Entering 2023, we further
strengthened our balance sheet by issuing $275 million in new 2026
Senior Second Lien Notes and using the proceeds along with our
considerable cash position to repurchase all $552.5 million of the
outstanding 2023 Senior Second Lien Notes. This significantly
reduces our interest payments, preserves our financial flexibility
and improves our balance sheet moving forward. We are increasingly
better positioned to take advantage of potential business
opportunities regardless what the economic situation may be this
year.”
“Turning to our outstanding year-end reserve
results, I would like to point out that we continue to see positive
well performance and technical revisions. This directly points to
our ability to enhance production and our reserve base through
operational excellence. In 2022, we had 7.3 MMBoe of positive
performance revisions and an increase of 6.0 MMBoe due to
acquisitions we made early in 2022. This nearly replaced our entire
production for the year, even before you take into account the
strong positive pricing revisions. We believe we have built a
sustainable group of high performing GOM assets that will continue
to provide meaningful cash flow to our shareholders for many years.
Where you see the biggest impact of higher pricing is in the PV-10
value of our SEC proved reserves, which at year-end 2022 nearly
doubled to $3.1 billion, the highest since the Company’s IPO in
2005. If you compare that to our enterprise value, I believe that
you will see a stock that is quite undervalued with a lot of upside
potential.”
“Our 2023 plans have been developed to
facilitate continued success, which includes implementing organic
drilling, recompletion and workover opportunities to take advantage
of our substantial inventory of projects with potentially high
rates of return. Additionally, with improved financial flexibility
and meaningful liquidity, we will continue to evaluate accretive
acquisition opportunities that meet our criteria, while continuing
to focus on free cash flow generation. We are also considering
opportunities to enter the carbon capture market to utilize our
extensive expertise in managing GOM reservoirs as well as
potentially utilizing our properties and infrastructure. We have a
successful track record of executing our strategic vision and
remain committed to growing shareholder value.”
Production, Prices, and
Revenue: Production for the fourth quarter of 2022
averaged 38.6 MBoe/d. This represented a decrease of 7% compared to
the third quarter of 2022, primarily driven by the impact of
weather delays that were wind and/or low temperature related, and
temporary pipeline downtime at Mobile Bay. Production increased 4%
from the fourth quarter of 2021. Fourth quarter 2022 production was
comprised of 14.9 MBbl/d of oil (39%), 4.0 MBbl/d of natural gas
liquids (10%) (“NGLs”), and 117.9 million cubic feet per day
(“MMcf/d”) of natural gas (51%).
W&T’s average realized price before realized
derivative settlements was $52.82 per Boe in the fourth quarter of
2022, a decrease of 23% from $68.39 per Boe in the third quarter of
2022, and an increase of 11% from $47.70 per Boe in the fourth
quarter of 2021. Average realized crude oil, NGL, and natural gas
prices, before realized derivative settlements, for the fourth
quarter of 2022 were $81.27 per barrel, $25.70 per barrel, and
$6.12 per Mcf, respectively.
Revenues for the fourth quarter of 2022 were
$189.7 million, which were lower than third quarter 2022 revenues
of $266.5 million due to lower commodity pricing and lower
production, and 15% higher than $165.6 million in the fourth
quarter of 2021 due to higher commodity pricing and higher
production.
Lease Operating
Expense: Lease operating expense (“LOE”), which
includes base lease operating expenses, insurance premiums,
workovers, facilities maintenance, and hurricane repairs, was $69.0
million in the fourth quarter of 2022, which was below the midpoint
of the Company’s guidance range for the quarter, which was provided
in W&T’s last earnings release. This compared to $59.0 million
in the third quarter of 2022 and $45.2 million for the
corresponding period in 2021. LOE in the fourth quarter of 2022
increased compared to the third quarter of 2022 primarily due to
forecasted increases in base operating expense, increased workover
costs, and higher facilities expenses. Additionally, fourth quarter
2022 LOE increased compared to the fourth quarter of 2021,
primarily due to the acquisition of additional oil and gas
producing properties as noted above, as well as inflationary
increases in base operating expense, and higher workover and
facilities costs. On a component basis for the fourth quarter of
2022, base LOE and insurance premiums were $54.4 million, workovers
were $6.0 million, and facilities maintenance expenses were $8.6
million. On a unit of production basis, LOE was $19.42 per Boe in
the fourth quarter of 2022. This compares to $15.46 per Boe for the
third quarter of 2022 and $13.22 per Boe for the fourth quarter of
2021.
Gathering, Transportation Costs, and
Production Taxes: Gathering, transportation costs, and
production taxes totaled $8.5 million ($2.39 per Boe) in the fourth
quarter of 2022, compared to $12.2 million ($3.20 per Boe) in the
third quarter of 2022 and $8.2 million ($2.41 per Boe) in the
fourth quarter of 2021. Fourth quarter 2022 costs were below the
low end of guidance and decreased compared to the third quarter
primarily due to decreases in natural gas prices in the fourth
quarter as well as a decrease in production volumes.
Depreciation, Depletion, Amortization,
and Accretion (“DD&A”): DD&A, including
accretion expense related to asset retirement obligations, was
$9.64 per Boe in the fourth quarter of 2022. This compares to $8.93
per Boe and $8.65 per Boe for the third quarter of 2022 and the
fourth quarter of 2021, respectively.
General & Administrative Expenses
(“G&A”): G&A was $22.0 million for the fourth
quarter of 2022. This compares to $23.0 million in the third
quarter of 2022 and $14.3 million in the fourth quarter of 2021. On
a unit of production basis, G&A was $6.18 per Boe in the fourth
quarter of 2022 compared to $6.04 per Boe in the third quarter of
2022 and $4.19 per Boe in the corresponding period of 2021. General
and administrative expense increased in 2022 primarily due to costs
for non-recurring 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 as well as increased
incentive compensation costs as compared to 2021.
Derivative (Gain) Loss: In
the fourth quarter of 2022, W&T recognized a net gain of $24.4
million related to commodity derivative activities comprised of a
$53.1 million unrealized gain related primarily to the change in
value of outstanding derivative contracts since the end of the
third quarter of 2022 offset by a $28.8 million realized loss
related to hedge settlements during the quarter. The Company
recognized a net loss of $38.7 million in the third quarter of 2022
and a net gain of $3.8 million in the fourth quarter of 2021
related to commodity derivative activities.
A summary of the Company’s current 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 fourth quarter of 2022 was
$14.5 million compared to $16.8 million in the third quarter
of 2022 and $19.6 million in the fourth quarter of 2021. The
decrease in expense reflects the decrease in absolute debt.
Other Income: In the fourth
quarter of 2022, the Company reported net other expense of $15.5
million which primarily related to additional plugging and
abandonment contingent liability related to a number of legacy GOM
properties. In the fourth quarter of 2021, net other income was
$7.1 million composed primarily of $11.6 million related to the
release of restrictions on the Black Elk Escrow fund offset by the
establishment of a $4.5 million plugging and abandonment contingent
liability related to these legacy GOM properties.
Income Tax: W&T
recognized $6.9 million in income tax expense in the fourth quarter
of 2022, all of which was deferred. This compares to income tax
expense of $16.4 million and $10.8 million for the quarters ended
September 30, 2022 and December 31, 2021.
Balance Sheet and
Liquidity: As of December 31, 2022, W&T had
available liquidity of $511.4 million comprised of $461.4 million
in cash and cash equivalents and $50.0 million of availability
under W&T’s first priority lien secured revolving facility (the
“Credit Facility”) with Calculus Lending, LLC (“Calculus”), an
affiliated company of Mr. Krohn. At year-end 2022, the Company had
total debt of $693.4 million (or Net Debt of $232.1 million, net of
cash and cash equivalents), consisting of the balance of the
non-recourse Mobile Bay term loan of $143.3 million and $550.1
million of 2023 Senior Second Lien Notes, net of amortized debt
issuance costs for both instruments. Net Debt decreased by $253.1
million for the year ended December 31, 2022. W&T has reduced
its total Net Debt by $455.0 million over the last three
years. W&T sold 2.97 million shares of common stock
through its at-the-market program at an average price
of $5.72 per share resulting in gross proceeds
of approximately $17.0 million.
On January 27, 2023 W&T closed an offering
of $275 million in aggregate principal amount of 2026 Senior Second
Lien Notes at par in a private offering that was exempt from
registration under the Securities Act of 1933, as amended. The
Company used the net proceeds of the offering, along with cash on
hand, to fund the redemption of all of the Company’s outstanding
2023 Senior Second Lien Notes. On the closing date of the offering
of the 2026 Senior Second Lien Notes, the Company satisfied and
discharged the indenture governing the existing 2023 Senior Second
Lien Notes.
Additionally, in the fourth quarter of 2022, the
Company entered into an amendment to its Credit Facility, which,
among other things, extended the maturity date and Calculus’
commitment by up to one year to January 3, 2024.
Capital Expenditures: Capital
expenditures (excluding changes in working capital associated with
investing activities) in the fourth quarter and full year 2022 were
$11.7 million and $41.6 million, respectively. In the fourth
quarter of 2022, the Company incurred $14.9 million in asset
retirement costs and $76.2 million in the full year 2022. For the
full year 2022, W&T spent $51.5 million on acquisitions.
Acquisitions of Producing
PropertiesAcquisition-related capital expenditures in 2022
are attributable to the February 2022 ANKOR acquisition of
approximately 80% of the working interests in oil and gas producing
properties in Federal shallow waters in the central region of the
GOM at Ship Shoal 230, South Marsh Island 27/Vermilion 191, and
South Marsh Island 73 fields for approximately $47 million and the
assumption of related asset retirement obligations. After normal
and customary post-effective date adjustments to reflect an
effective date of July 1, 2021, cash consideration of approximately
$34.0 million was paid to the sellers using cash on hand.
Subsequent to the end of the first quarter of 2022, the Company
purchased the remaining working interests in those properties from
an undisclosed private seller for approximately $17.5 million and
the assumption of related asset retirement obligations.
2023 Capital Investment
Program
W&T’s capital expenditure budget for 2023 is
expected to be in the range of $90 million to $110 million, which
excludes acquisition opportunities. Included in this range are
planned expenditures related to long-lead items, front-end
engineering design and other work for one deepwater well and three
shelf wells that may be drilled later this year, as well as capital
costs for facilities, leasehold, seismic, and recompletions. The
Company has significant flexibility to adjust its spending since it
has no long-term rig commitments or near-term drilling
obligations.
Plugging and abandonment expenditures are
expected to be in the range of $25 million to $35
million. The Company spent $76.2 million on asset
retirement obligation settlements in 2022, driven by obligations
and prior deferrals on terminated leases with U.S. Bureau of Safety
and Environmental Enforcement deadlines before year-end 2022.
Environmental, Social, and Governance
(“ESG”) Commentary
W&T continues to progress its ESG reporting
and transparency. In spring 2021, the Company issued its initial
annual corporate ESG report and in spring 2022 issued its second
annual corporate ESG report. The Company expects to release another
report in the spring of 2023 that will build on the solid
foundation of the previous reports as W&T remains committed to
its ESG journey. In the creation of its ESG reports, the Company
consulted the Sustainability Accounting Standards Board’s Oil and
Gas Exploration and Production Sustainability Accounting Standard,
the Global Reporting Initiative’s standard for the oil and gas
sector, the Sustainable Development Goals promoted by the United
Nations, and other reporting guidance from industry frameworks and
standards.
Full Year-End 2022 Financial
Review
W&T reported net income for the full year
2022 of $231.1 million, or $1.59 per diluted share, and Adjusted
Net Income of $284.8 million, or $1.96 per diluted share. For the
full year 2021, the Company reported a net loss of $41.5 million,
or $0.29 per diluted share, and Adjusted Net Income of $24.1
million, or $0.17 per diluted share. W&T generated strong
Adjusted EBITDA of $563.7 million for the full year 2022 compared
to $220.3 million in 2021 due primarily to stronger commodity
prices and increased oil production year-over-year. Revenues
totaled $921.0 million for 2022 compared with $558.0 million in
2021. Net Cash provided by operating activities for the twelve
months ended December 31, 2022 was $339.5 million compared with
$133.7 million for the same period in 2021. Free Cash Flow totaled
$376.4 million in 2022 compared with $90.9 million in 2021.
Production for 2022 averaged 40.1 MBoe/d for a
total of 14.6 MMBoe, comprised of 5.6 MMBbl of oil, 1.6 MMBbl of
NGLs, and 44.8 Bcf of natural gas. Full year 2021 production
averaged 38.1 MBoe/d or 13.9 MMBoe in total and was composed of 5.0
MMBbl of oil, 1.5 MMBbl of NGLs, and 44.8 Bcf of natural
gas. Capital expenditures, including some acquisitions
in 2022, helped to increase production year-over-year by about 5%,
which was partially offset by the natural decline of the producing
assets in W&T’s portfolio.
For the full year 2022, W&T’s average
realized sales price per barrel of crude oil was $93.59, per barrel
of NGLs was $36.66, and per Mcf of natural gas was $7.23. The
equivalent sales price for 2022 was $61.89 per Boe, which was 57%
higher than the equivalent price of $39.36 per Boe realized in
2021. For 2021, the Company’s realized crude oil sales price was
$65.94 per barrel, NGL sales price was $30.59 per barrel, and
natural gas price was $3.88 per Mcf.
For the full year 2022, LOE was $224.4 million
compared to $174.6 million in 2021. The increase in LOE in 2022
reflects higher up-time across the asset base, increased costs from
acquisitions and incremental spending on workovers and facilities
during the year.
Gathering, transportation, and production taxes
totaled $35.1 million in 2022, an increase from the $27.9 million
in 2021. Higher realized prices for natural gas and
NGLs drove severance tax expense higher year-over-year.
For the full year 2022, G&A was $73.7
million, which was an increase over the $52.4 million reported in
2021. On a per unit basis, G&A per Boe was $5.04 in 2021, up
from $3.77 per Boe in 2021. The increase year-over-year is
primarily due to non-recurring professional services and legal
costs incurred during the second half of 2022 after a review of
processes and controls within the Company’s information technology
department, including costs to transfer that infrastructure and
related services internally or to other providers. Additionally,
W&T incurred increased employee costs related to salaries,
benefits and incentive compensation as a result of higher grant
date fair values of stock awards, the lack of an employee retention
credit provided under the CARES Act (which was received in 2021 and
not received in 2022) and in response to wage and price inflation
as compared to 2021.
Operations Update
Front-end Engineering and Design and permitting
processes are underway on the Holy Grail well at Garden Banks 783
in the Magnolia Field.
Well Recompletions and
Workovers
During the fourth quarter of 2022, the Company
performed no recompletions and four workovers that positively
impacted production for the quarter. For the full year 2022,
W&T completed $7.2 million of recompletions and $12.9 million
of workovers. W&T plans to continue to perform recompletions
and workovers that meet economic thresholds.
Year-End 2022 Proved
Reserves
The Company’s year-end 2022 SEC proved reserves
grew to 165.3 MMBoe, up 5% from 157.6 MMBoe at year-end 2021.
W&T recorded positive performance revisions of 7.3 MMBoe,
acquisitions of reserves of 6.0 MMBoe, and 9.0 MMBoe of positive
price revisions in 2022, which were partially offset by 14.6 MMBoe
of production for the year. During 2022, W&T focused on
reducing Net Debt and executing two attractive bolt-on
acquisitions. Successful workovers and recompletions, improved
reservoir performance and pricing, and acquisitions allowed W&T
to replace 153% of production with new reserves. All-in reserve
replacement costs for 2022 were $4.10 per Boe and the three-year
average was $2.85 per Boe.
The SEC twelve-month first day of the month
average spot prices used in the preparation of the report for
year-end 2022 were $94.14 per barrel of oil and $6.36 per MMBtu of
natural gas. Comparable prices used for the prior year report were
$66.55 per barrel of oil and $3.60 per MMBtu of natural gas. The
PV-10 of W&T’s proved reserves at year-end 2022 grew
significantly to $3.1 billion, up 93% from $1.6 billion at the end
of 2021.
Approximately 36% of year-end 2022 SEC-case
proved reserves were liquids (25% crude oil and 11% NGLs) and 64%
natural gas. The reserves were classified as 75% proved developed
producing, 13% proved developed non-producing, and 12% proved
undeveloped. W&T’s reserve life ratio at year-end 2022, based
on year-end 2022 proved reserves and 2022 production was 11.3
years.
Summary
Reconciliation of Proved Reserves |
|
|
|
|
Oil |
NGL |
Natural Gas |
Equivalents |
PV-101 |
|
MMBbl |
MMBbl |
Bcf |
MMBoe |
$MM |
Balance, December 31, 2021 |
37.2 |
|
19.1 |
|
607.6 |
|
157.6 |
|
$ |
1,621.9 |
Revisions of previous estimates |
3.1 |
|
0.3 |
|
23.7 |
|
7.3 |
|
|
Revisions due to SEC price change |
1.4 |
|
0.9 |
|
40.6 |
|
9.0 |
|
|
Extensions & discoveries |
-- |
|
-- |
|
-- |
|
-- |
|
|
Purchases of minerals in place |
4.5 |
|
0.2 |
|
7.5 |
|
6.0 |
|
|
Sales of minerals in place |
-- |
|
-- |
|
-- |
|
-- |
|
|
Production |
(5.6 |
) |
(1.6 |
) |
(44.8 |
) |
(14.6 |
) |
|
Balance, December 31, 2022 |
40.6 |
|
18.9 |
|
634.6 |
|
165.3 |
|
$ |
3,128.6 |
(1) PV-10 for this presentation excludes any
provision for asset retirement obligations or income taxes.
In accordance with guidelines established by the
SEC, estimated proved reserves as of December 31, 2022 were
determined to be economically producible under existing economic
conditions, which requires the use of the 12-month average of the
first-day-of-the-month price for the year ended December 31, 2022.
The WTI spot price and the Henry Hub spot price were utilized as
the reference prices and after adjusting for quality,
transportation, fees, energy content, and regional price
differentials, the average realized prices were $91.50 per barrel
for oil, $41.92 per barrel for NGLs, and $6.85 per Mcf for natural
gas. In determining the estimated realized price for NGLs, a ratio
was computed for each field of the NGLs realized price compared to
the crude oil realized price. This ratio was then applied to the
crude price using SEC guidance. Such prices were held constant
throughout the estimated lives of the reserves. Future estimated
production and development costs are based on year-end costs with
no escalations.
The standardized measure of future net cash
flows was $2,263.0 million at December 31, 2022, which is
calculated as the PV-10 of $3,128.6 million less discounted cash
outflows of $271.5 million associated with asset retirement
obligations and $594.1 million associated with income taxes. At
December 31, 2021, it was $1,156.0 million, which is calculated as
the PV-10 of $1,621.9 million less discounted cash outflows of
$241.1 million associated with asset retirement obligations and
$224.8 million associated with income taxes.
First Quarter and Full Year 2023
Production and Expense Guidance
Looking ahead to 2023, Tracy Krohn commented,
“In the first quarter of 2023, we have had several planned periodic
facility and pipeline maintenance projects underway at the Mobile
Bay field as well as prolonged downtime at several non-operated
fields that have temporarily reduced our production volumes. Most
of the non-operated fields that were shut-in are now back online
and the maintenance project is nearly complete with volumes
returning to normal levels. Taking into consideration the current
acquisition opportunities in the Gulf of Mexico and the recent
weakness in the near-term outlook for both oil and natural gas
prices, we have decided to limit our capital expenditure plans for
2023 to $90 million to $110 million and are focused on building
cash. We want to be fully prepared to act quickly should we see the
right acquisition opportunity arise. We have built W&T over the
past 40 years with a proven acquisition strategy and believe the
market will afford us several attractive opportunities in 2023,
particularly if prices stay lower. As a result, we will defer our
drilling plans until later this year or into 2024 unless we see a
sustained strengthening of commodity pricing. One of the most
attractive attributes of our conventional asset base is our ability
to adjust our drilling plans without a major impact on our
production or lose opportunities since our leases are largely held
by existing production. As a result of concentrating on building
cash, we expect to see only modest declines in our 2023 production
compared to 2022.”
The guidance for the first quarter and full year
2023 in the table below represents the Company’s current
expectations. Please refer to the section entitled “Forward-Looking
and Cautionary Statements” below for risk factors that could impact
guidance.
Production |
First Quarter 2023 |
Full Year 2023 |
Oil (MBbl) |
1,230 – 1,340 |
5,220 – 5,820 |
NGLs (MBbl) |
300 – 330 |
1,370 – 1,550 |
Natural gas (MMcf) |
8,300 – 9,000 |
41,500 – 45,500 |
Total equivalents (MBoe) |
2,915 – 3,170 |
13,510 – 14,955 |
Average daily equivalents (MBoe/d) |
32.4 – 35.2 |
37.0 – 41.0 |
Expenses |
First Quarter 2023 |
Full Year 2023 |
Lease operating expense ($MM) |
$63.0 – $70.0 |
$235.0 – $265.0 |
Gathering, transportation & production taxes ($MM) |
$7.0 – $8.0 |
$33.0 – $36.0 |
|
|
|
General & administrative - cash ($MM) |
$16.5 – $18.5 |
$55.0 – $62.0 |
General & administrative – non-cash ($MM) |
$1.7 – $2.1 |
$10.5 – $12.0 |
|
|
|
DD&A ($ per Boe) |
|
$9.00 – $10.00 |
Interest expense, net ($MM) |
$12.7 – $14.0 |
$42.0 – $46.0 |
Conference Call
Information: W&T will hold a conference
call to discuss its financial and operational results on Wednesday,
March 8, 2023 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, Inc. 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, active in the exploration, development and
acquisition of oil and natural gas properties in the Gulf of
Mexico. As of December 31, 2022, the Company holds working
interests in 47 offshore fields in federal and state waters (45
fields producing and 2 fields capable of producing, which include
39 fields in federal waters and 8 in state waters). The Company
currently has under lease approximately 625,000 gross acres
(457,000 net acres) spanning across the outer continental shelf off
the coasts of Louisiana, Texas, Mississippi and Alabama, with
approximately 8,000 gross acres in Alabama State waters, 458,000
gross acres on the conventional shelf and approximately 159,000
gross acres in the 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. All statements other than statements of
historical facts included in this release regarding the Company’s
financial position, operating and financial performance, business
strategy, plans and objectives of management for future operations,
projected costs, industry conditions, and indebtedness are
forward-looking statements. When used in this release,
forward-looking statements are generally accompanied by terms or
phrases such as “estimate,” “project,” “predict,” “believe,”
“expect,” “continue,” “anticipate,” “target,” “could,” “plan,”
“intend,” “seek,” “goal,” “will,” “should,” “may” or other words
and similar expressions that convey the uncertainty of future
events or outcomes, although not all forward-looking statements
contain such identifying words. Items contemplating or making
assumptions about actual or potential future production and sales,
prices, market size, and trends or operating results also
constitute such forward-looking statements.
These forward-looking statements are based on
the Company’s current expectations and assumptions about future
events and speak only as of the date of this release. While
management considers these expectations and assumptions to be
reasonable, they are inherently subject to significant business,
economic, competitive, regulatory and other risks, contingencies
and uncertainties, most of which are difficult to predict and many
of which are beyond the Company’s control. Accordingly, you are
cautioned not to place undue reliance on these forward-looking
statements, as results actually achieved may differ materially from
expected results described in these statements. The Company does
not undertake, and specifically disclaims, any obligation to update
any forward-looking statements to reflect events or circumstances
occurring after the date of such statements, unless required by
law.
Forward-looking statements are subject to risks
and uncertainties that could cause actual results to differ
materially including, among other things, the regulatory
environment, including availability or timing of, and conditions
imposed on, obtaining and/or maintaining permits and approvals,
including those necessary for drilling and/or development projects;
the impact of current, pending and/or future laws and regulations,
and of legislative and regulatory changes and other government
activities, including those related to permitting, drilling,
completion, well stimulation, operation, maintenance or abandonment
of wells or facilities, managing energy, water, land, greenhouse
gases or other emissions, protection of health, safety and the
environment, or transportation, marketing and sale of the Company’s
products; inflation levels, particularly the recent rise to
historically high levels; the length, scope and severity of the
COVID-19 pandemic or the emergence of a new pandemic, including the
effects of related public health concerns and the impact of actions
taken by governmental authorities and other third parties in
response to the pandemic and its impact on commodity prices, supply
and demand considerations, global supply chain disruptions and
labor constraints; global economic trends, geopolitical risks and
general economic and industry conditions, such as the economic
impact from the COVID-19 pandemic, including the global supply
chain disruptions and the government interventions into the
financial markets and economy, among other factors; volatility of
oil, natural gas and NGL prices; the global energy future,
including the factors and trends that are expected to shape it,
such as concerns about climate change and other air quality issues,
the transition to a low-emission economy and the expected role of
different energy sources; supply of and demand for oil, natural gas
and NGLs, including due to the actions of foreign producers,
importantly including OPEC and other major oil producing companies
(“OPEC Plus”) and change in OPEC Plus’s production levels;
disruptions to, capacity constraints in, or other limitations on
the pipeline systems that deliver the Company’s oil and natural gas
and other processing and transportation considerations; inability
to generate sufficient cash flow from operations or to obtain
adequate financing to fund capital expenditures, meet the Company’s
working capital requirements or fund planned investments; price
fluctuations and availability of natural gas and electricity; the
Company’s ability to use derivative instruments to manage commodity
price risk; the Company’s ability to meet the Company’s planned
drilling schedule, including due to the Company’s ability to obtain
permits on a timely basis or at all, and to successfully drill
wells that produce oil and natural gas in commercially viable
quantities; uncertainties associated with estimating proved
reserves and related future cash flows; the Company’s ability to
replace the Company’s reserves through exploration and development
activities; drilling and production results, lower–than–expected
production, reserves or resources from development projects or
higher–than–expected decline rates; the Company’s ability to obtain
timely and available drilling and completion equipment and crew
availability and access to necessary resources for drilling,
completing and operating wells; changes in tax laws; effects of
competition; uncertainties and liabilities associated with acquired
and divested assets; the Company’s ability to make acquisitions and
successfully integrate any acquired businesses; asset impairments
from commodity price declines; large or multiple customer defaults
on contractual obligations, including defaults resulting from
actual or potential insolvencies; geographical concentration of the
Company’s operations; the creditworthiness and performance of the
Company’s counterparties with respect to its hedges; impact of
derivatives legislation affecting the Company’s ability to hedge;
failure of risk management and ineffectiveness of internal
controls; catastrophic events, including tropical storms,
hurricanes, earthquakes and pandemics; environmental risks and
liabilities under U.S. federal, state, tribal and local laws and
regulations (including remedial actions); potential liability
resulting from pending or future litigation; the Company’s ability
to recruit and/or retain key members of the Company’s senior
management and key technical employees; information technology
failures or cyberattacks; and governmental actions and political
conditions, as well as the actions by other third parties that are
beyond the Company’s control, and other factors discussed in
W&T Offshore’s most recent Annual Report on Form 10-K and
subsequent Quarterly Reports on Form 10-Q found at www.sec.gov or
at the Company’s website at www.wtoffshore.com under the
Investor Relations section.
CONTACT: |
Al Petrie |
Janet Yang |
|
Investor Relations Coordinator |
Executive VP 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 |
|
Year Ended |
|
|
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
|
|
2022 |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil |
|
$ |
111,748 |
|
|
$ |
130,560 |
|
|
$ |
89,139 |
|
|
$ |
524,274 |
|
$ |
329,557 |
|
|
NGLs |
|
|
9,534 |
|
|
|
16,875 |
|
|
|
13,945 |
|
|
|
56,964 |
|
|
44,343 |
|
|
Natural gas |
|
|
66,379 |
|
|
|
113,673 |
|
|
|
59,934 |
|
|
|
323,831 |
|
|
173,749 |
|
|
Other |
|
|
2,039 |
|
|
|
5,377 |
|
|
|
2,571 |
|
|
|
15,928 |
|
|
10,361 |
|
|
Total revenues |
|
|
189,700 |
|
|
|
266,485 |
|
|
|
165,589 |
|
|
|
920,997 |
|
|
558,010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating expenses |
|
|
69,017 |
|
|
|
59,010 |
|
|
|
45,183 |
|
|
|
224,414 |
|
|
174,582 |
|
|
Gathering, transportation and production taxes |
|
|
8,481 |
|
|
|
12,199 |
|
|
|
8,233 |
|
|
|
35,128 |
|
|
27,919 |
|
|
Depreciation, depletion, amortization and accretion |
|
34,246 |
|
|
|
34,113 |
|
|
|
29,567 |
|
|
|
133,630 |
|
|
113,447 |
|
|
General and administrative expenses |
|
|
21,957 |
|
|
|
23,047 |
|
|
|
14,310 |
|
|
|
73,747 |
|
|
52,400 |
|
|
Total operating expenses |
|
|
133,701 |
|
|
|
128,369 |
|
|
|
97,293 |
|
|
|
466,919 |
|
|
368,348 |
|
|
Operating income |
|
|
55,999 |
|
|
|
138,116 |
|
|
|
68,296 |
|
|
|
454,078 |
|
|
189,662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net |
|
|
14,526 |
|
|
|
16,849 |
|
|
|
19,574 |
|
|
|
69,441 |
|
|
70,049 |
|
|
Derivative
(gain) loss |
|
|
(24,359 |
) |
|
|
38,749 |
|
|
|
(3,843 |
) |
|
|
85,533 |
|
|
175,313 |
|
|
Other
expense (income), net |
|
|
15,524 |
|
|
|
(600 |
) |
|
|
(7,128 |
) |
|
|
14,295 |
|
|
(6,165 |
) |
|
Income (loss) before income taxes |
|
|
50,308 |
|
|
|
83,118 |
|
|
|
59,693 |
|
|
|
284,809 |
|
|
(49,535 |
) |
|
Income tax
expense (benefit) |
|
|
6,859 |
|
|
|
16,397 |
|
|
|
10,789 |
|
|
|
53,660 |
|
|
(8,057 |
) |
|
Net income (loss) |
|
$ |
43,449 |
|
|
$ |
66,721 |
|
|
$ |
48,904 |
|
|
$ |
231,149 |
|
$ |
(41,478 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.30 |
|
|
$ |
0.46 |
|
|
$ |
0.34 |
|
|
$ |
1.61 |
|
$ |
(0.29 |
) |
|
Diluted |
|
|
0.30 |
|
|
|
0.46 |
|
|
|
0.34 |
|
|
|
1.59 |
|
|
(0.29 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
143,490 |
|
|
|
143,116 |
|
|
|
142,389 |
|
|
|
143,143 |
|
|
142,271 |
|
|
Diluted |
|
|
146,260 |
|
|
|
145,882 |
|
|
|
144,138 |
|
|
|
145,090 |
|
|
142,271 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W&T
OFFSHORE, INC. AND SUBSIDIARIES |
|
Condensed
Operating Data |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Year Ended |
|
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
|
2022 |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Net sales
volumes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
(MBbls) |
|
1,375 |
|
|
1,447 |
|
|
1,186 |
|
|
5,602 |
|
|
4,998 |
|
NGLs
(MBbls) |
|
371 |
|
|
454 |
|
|
345 |
|
|
1,554 |
|
|
1,450 |
|
Natural gas
(MMcf) |
|
10,843 |
|
|
11,499 |
|
|
11,321 |
|
|
44,808 |
|
|
44,790 |
|
Total oil
and natural gas (MBoe) (1) |
|
3,553 |
|
|
3,818 |
|
|
3,418 |
|
|
14,624 |
|
|
13,913 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
daily equivalent sales (MBoe/d) |
|
38.6 |
|
|
41.5 |
|
|
37.2 |
|
|
40.1 |
|
|
38.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
realized sales prices (before the impact of derivative
settlements): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
($/Bbl) |
$ |
81.27 |
|
$ |
90.23 |
|
$ |
75.14 |
|
$ |
93.59 |
|
$ |
65.94 |
|
NGLs
($/Bbl) |
|
25.70 |
|
|
37.17 |
|
|
40.46 |
|
|
36.66 |
|
|
30.59 |
|
Natural gas
($/Mcf) |
|
6.12 |
|
|
9.89 |
|
|
5.29 |
|
|
7.23 |
|
|
3.88 |
|
Barrel of
oil equivalent ($/Boe) |
|
52.82 |
|
|
68.39 |
|
|
47.70 |
|
|
61.89 |
|
|
39.36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
operating expenses per Boe ($/Boe): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease
operating expenses |
$ |
19.42 |
|
$ |
15.46 |
|
$ |
13.22 |
|
$ |
15.35 |
|
$ |
12.55 |
|
Gathering,
transportation and production taxes |
|
2.39 |
|
|
3.20 |
|
|
2.41 |
|
|
2.40 |
|
|
2.00 |
|
Depreciation, depletion, amortization and accretion |
|
9.64 |
|
|
8.93 |
|
|
8.65 |
|
|
9.14 |
|
|
8.15 |
|
General and
administrative expenses |
|
6.18 |
|
|
6.04 |
|
|
4.19 |
|
|
5.04 |
|
|
3.77 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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) |
|
|
|
|
|
|
|
|
|
December 31, |
|
December 31, |
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
461,357 |
|
|
$ |
245,799 |
|
Restricted cash |
|
|
4,417 |
|
|
|
4,417 |
|
Receivables: |
|
|
|
|
|
|
Oil and natural gas sales |
|
|
66,146 |
|
|
|
54,919 |
|
Joint interest, net |
|
|
14,000 |
|
|
|
9,745 |
|
Total receivables |
|
|
80,146 |
|
|
|
64,664 |
|
Prepaid expenses and other assets |
|
|
24,343 |
|
|
|
43,379 |
|
Total current assets |
|
|
570,263 |
|
|
|
358,259 |
|
|
|
|
|
|
|
|
Oil and
natural gas properties and other |
|
|
8,834,319 |
|
|
|
8,657,252 |
|
Less accumulated depreciation, depletion, amortization and
impairment |
|
|
8,099,104 |
|
|
|
7,992,000 |
|
Oil and natural gas properties and other, net |
|
|
735,215 |
|
|
|
665,252 |
|
Restricted
deposits for asset retirement obligations |
|
|
21,483 |
|
|
|
16,019 |
|
Deferred
income taxes |
|
|
57,280 |
|
|
|
102,505 |
|
Other
assets |
|
|
47,549 |
|
|
|
51,172 |
|
Total assets |
|
$ |
1,431,790 |
|
|
$ |
1,193,207 |
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity
(Deficit) |
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
Accounts payable |
|
$ |
65,158 |
|
|
$ |
67,409 |
|
Undistributed oil and natural gas proceeds |
|
|
41,934 |
|
|
|
36,243 |
|
Advances from joint interest partners |
|
|
3,181 |
|
|
|
15,072 |
|
Asset retirement obligations |
|
|
25,359 |
|
|
|
56,419 |
|
Accrued liabilities |
|
|
74,453 |
|
|
|
106,273 |
|
Current portion of long-term debt, net |
|
|
582,249 |
|
|
|
42,960 |
|
Total current liabilities |
|
|
792,334 |
|
|
|
324,376 |
|
|
|
|
|
|
|
|
Long-term
debt, net |
|
|
111,188 |
|
|
|
687,938 |
|
Asset
retirement obligations, less current portion |
|
|
441,071 |
|
|
|
368,076 |
|
Other
liabilities |
|
|
79,563 |
|
|
|
59,997 |
|
Shareholders’ equity (deficit): |
|
|
|
|
|
|
Common stock, $0.00001 par value; 200,000 shares authorized;
149,002 issued and 146,133 outstanding at
December 31, 2022; 145,732 issued and 142,863 outstanding
at December 31, 2021 |
|
|
1 |
|
|
|
1 |
|
Additional paid-in capital |
|
|
576,588 |
|
|
|
552,923 |
|
Retained deficit |
|
|
(544,788 |
) |
|
|
(775,937 |
) |
Treasury stock, at cost; 2,869 shares for both dates presented |
|
|
(24,167 |
) |
|
|
(24,167 |
) |
Total shareholders’ equity (deficit) |
|
|
7,634 |
|
|
|
(247,180 |
) |
Total liabilities and shareholders’ equity (deficit) |
|
$ |
1,431,790 |
|
|
$ |
1,193,207 |
|
|
|
|
|
|
|
|
W&T
OFFSHORE, INC. AND SUBSIDIARIES |
|
Condensed
Consolidated Statements of Cash Flows |
|
(In
thousands) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Year Ended |
|
|
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
|
|
2022 |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
43,449 |
|
|
$ |
66,721 |
|
|
$ |
48,904 |
|
|
$ |
231,149 |
|
|
$ |
(41,478 |
) |
|
Adjustments
to reconcile net income (loss) to net cash provided by operating
activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion, amortization and accretion |
|
|
34,246 |
|
|
|
34,113 |
|
|
|
29,568 |
|
|
|
133,630 |
|
|
|
113,447 |
|
|
Amortization of debt items and other items |
|
|
1,437 |
|
|
|
1,749 |
|
|
|
2,460 |
|
|
|
7,551 |
|
|
|
6,555 |
|
|
Share-based compensation |
|
|
2,743 |
|
|
|
2,645 |
|
|
|
1,585 |
|
|
|
7,922 |
|
|
|
3,364 |
|
|
Derivative (gain) loss |
|
|
(24,359 |
) |
|
|
38,749 |
|
|
|
(3,843 |
) |
|
|
85,533 |
|
|
|
175,313 |
|
|
Derivative cash (payments) receipts, net |
|
|
(40,858 |
) |
|
|
(71,249 |
) |
|
|
(41,744 |
) |
|
|
(41,880 |
) |
|
|
(81,298 |
) |
|
Derivative cash premium payments |
|
|
— |
|
|
|
— |
|
|
|
(8,116 |
) |
|
|
(46,111 |
) |
|
|
(40,484 |
) |
|
Deferred income taxes |
|
|
5,013 |
|
|
|
13,140 |
|
|
|
10,637 |
|
|
|
45,184 |
|
|
|
(8,189 |
) |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and natural gas receivables |
|
|
23,049 |
|
|
|
9,960 |
|
|
|
(16,593 |
) |
|
|
(11,227 |
) |
|
|
(16,089 |
) |
|
Joint interest receivables |
|
|
2,815 |
|
|
|
(3,445 |
) |
|
|
3,267 |
|
|
|
(4,255 |
) |
|
|
1,095 |
|
|
Prepaid expenses and other assets |
|
|
58,722 |
|
|
|
3,276 |
|
|
|
25,370 |
|
|
|
31,906 |
|
|
|
(5,103 |
) |
|
Income tax |
|
|
(1,201 |
) |
|
|
(1,743 |
) |
|
|
133 |
|
|
|
279 |
|
|
|
(20 |
) |
|
Asset retirement obligation settlements |
|
|
(14,940 |
) |
|
|
(21,510 |
) |
|
|
(7,565 |
) |
|
|
(76,225 |
) |
|
|
(27,309 |
) |
|
Cash advances from joint interest partners |
|
|
163 |
|
|
|
(2,242 |
) |
|
|
(2,234 |
) |
|
|
(11,892 |
) |
|
|
7,765 |
|
|
Accounts payable, accrued liabilities and
other |
|
|
(77,600 |
) |
|
|
18,928 |
|
|
|
(19,453 |
) |
|
|
(12,034 |
) |
|
|
46,099 |
|
|
Net cash provided by operating activities |
|
|
12,679 |
|
|
|
89,092 |
|
|
|
22,376 |
|
|
|
339,530 |
|
|
|
133,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
in oil and natural gas properties and equipment |
|
|
(11,666 |
) |
|
|
(4,477 |
) |
|
|
(16,037 |
) |
|
|
(41,632 |
) |
|
|
(32,062 |
) |
|
Changes in
operating assets and liabilities associated with investing
activities |
|
|
6,343 |
|
|
|
(2,451 |
) |
|
|
1,660 |
|
|
|
(1,894 |
) |
|
|
5,277 |
|
|
Acquisition
of property interests |
|
|
— |
|
|
|
(3,849 |
) |
|
|
(661 |
) |
|
|
(51,474 |
) |
|
|
(661 |
) |
|
Purchases of
furniture, fixtures and other |
|
|
(80 |
) |
|
|
— |
|
|
|
— |
|
|
|
(80 |
) |
|
|
2 |
|
|
Net cash used in investing activities |
|
|
(5,403 |
) |
|
|
(10,777 |
) |
|
|
(15,038 |
) |
|
|
(95,080 |
) |
|
|
(27,444 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments
on credit facility |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(80,000 |
) |
|
Proceeds
from Term Loan |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
215,000 |
|
|
Repayments
on Term Loan |
|
|
(9,122 |
) |
|
|
(8,896 |
) |
|
|
(12,364 |
) |
|
|
(42,959 |
) |
|
|
(24,142 |
) |
|
Debt
issuance costs |
|
|
331 |
|
|
|
(716 |
) |
|
|
(1,561 |
) |
|
|
(1,675 |
) |
|
|
(9,810 |
) |
|
Proceeds
from at-the-market equity offering |
|
|
16,998 |
|
|
|
— |
|
|
|
— |
|
|
|
16,998 |
|
|
|
— |
|
|
Commission
& fees related to at-the-market sales |
|
|
(540 |
) |
|
|
— |
|
|
|
— |
|
|
|
(540 |
) |
|
|
— |
|
|
Other |
|
|
(716 |
) |
|
|
703 |
|
|
|
(781 |
) |
|
|
(716 |
) |
|
|
(782 |
) |
|
Net cash provided by (used in) financing activities |
|
|
6,951 |
|
|
|
(8,909 |
) |
|
|
(14,706 |
) |
|
|
(28,892 |
) |
|
|
100,266 |
|
|
Increase (decrease) in cash and cash equivalents |
|
|
14,227 |
|
|
|
69,406 |
|
|
|
(7,368 |
) |
|
|
215,558 |
|
|
|
206,490 |
|
|
Cash and
cash equivalents and restricted cash, beginning of period |
|
|
451,547 |
|
|
|
382,141 |
|
|
|
257,584 |
|
|
|
250,216 |
|
|
|
43,726 |
|
|
Cash and
cash equivalents and restricted cash, end of period |
|
$ |
465,774 |
|
|
$ |
451,547 |
|
|
$ |
250,216 |
|
|
$ |
465,774 |
|
|
$ |
250,216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 , or are derived from “Net Debt”, “Net Leverage Ratio”,
“Adjusted Net Income (Loss)”, “Adjusted EBITDA,” “Free Cash Flow”
and “PV-10.” 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.
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
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 of derivative premium, bad debt reserve, deferred tax
benefit, gain on debt transactions, non-recurring IT transition
costs, release of restricted funds, non-ARO P&A costs, and
other.
|
|
Three Months Ended |
|
Year Ended |
|
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
|
2022 |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
(In thousands, except per share amounts) |
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
43,449 |
|
|
$ |
66,721 |
|
|
$ |
48,904 |
|
|
$ |
231,149 |
|
|
$ |
(41,478 |
) |
Selected items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
commodity derivative (gain) loss and effect of derivative premiums,
net |
|
|
(53,132 |
) |
|
|
(28,161 |
) |
|
|
(39,471 |
) |
|
|
45,475 |
|
|
|
87,901 |
|
Allowance
for credit losses |
|
|
43 |
|
|
|
(418 |
) |
|
|
315 |
|
|
|
(76 |
) |
|
|
323 |
|
Write-off
debt issue costs |
|
|
— |
|
|
|
— |
|
|
|
989 |
|
|
|
— |
|
|
|
1,230 |
|
Non-recurring costs related to IT services transition |
|
|
1,844 |
|
|
|
6,393 |
|
|
|
— |
|
|
|
8,237 |
|
|
|
— |
|
Release of
restricted funds |
|
|
— |
|
|
|
— |
|
|
|
(11,102 |
) |
|
|
— |
|
|
|
(11,102 |
) |
Non-ARO
P&A costs |
|
|
15,899 |
|
|
|
1,428 |
|
|
|
4,495 |
|
|
|
18,402 |
|
|
|
4,495 |
|
Other |
|
|
(372 |
) |
|
|
(2,028 |
) |
|
|
46 |
|
|
|
(4,104 |
) |
|
|
126 |
|
Tax effect
of selected items (1) |
|
|
7,501 |
|
|
|
4,785 |
|
|
|
9,393 |
|
|
|
(14,266 |
) |
|
|
(17,424 |
) |
Adjusted Net Income |
|
$ |
15,232 |
|
|
$ |
48,720 |
|
|
$ |
13,569 |
|
|
$ |
284,817 |
|
|
$ |
24,071 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net
income per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.11 |
|
|
$ |
0.34 |
|
|
$ |
0.10 |
|
|
$ |
1.99 |
|
|
$ |
0.17 |
|
Diluted |
|
$ |
0.10 |
|
|
$ |
0.33 |
|
|
$ |
0.09 |
|
|
$ |
1.96 |
|
|
$ |
0.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Shares Outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
143,490 |
|
|
|
143,116 |
|
|
|
142,389 |
|
|
|
143,143 |
|
|
|
142,271 |
|
Diluted |
|
|
146,260 |
|
|
|
145,882 |
|
|
|
144,138 |
|
|
|
145,090 |
|
|
|
143,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Selected items were 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 income tax expense
(benefit), net interest expense, and depreciation, depletion,
amortization and accretion, excluding the unrealized commodity
derivative gain or loss, and the effects of derivative premium
payments, allowance for credit losses, write-off of debt issuance
costs, non-cash incentive compensation, non-recurring IT transition
costs, release of restricted funds, non-ARO P&A costs, and
other miscellaneous costs. 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, asset retirement
obligations and net 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, asset retirement obligations and net 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 net 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 the
Company’s net (loss) income, a GAAP measure, to Adjusted EBITDA and
Free Cash Flow, as such terms are defined by the Company, and (ii)
a reconciliation of net cash provided by operating activities, a
GAAP measure, to Free Cash Flow.
|
|
Three Months Ended |
|
Year Ended |
|
|
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
|
|
2022 |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
(In thousands) |
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
43,449 |
|
|
$ |
66,721 |
|
|
$ |
48,904 |
|
|
$ |
231,149 |
|
|
$ |
(41,478 |
) |
|
Interest
expense, net |
|
|
14,526 |
|
|
|
16,849 |
|
|
|
19,574 |
|
|
|
69,441 |
|
|
|
70,049 |
|
|
Income tax
expense (benefit) |
|
|
6,859 |
|
|
|
16,397 |
|
|
|
10,789 |
|
|
|
53,660 |
|
|
|
(8,057 |
) |
|
Depreciation, depletion, amortization and accretion |
|
|
34,246 |
|
|
|
34,113 |
|
|
|
29,567 |
|
|
|
133,630 |
|
|
|
113,447 |
|
|
Unrealized
commodity derivative (gain) loss and effect of derivative premiums,
net |
|
|
(53,132 |
) |
|
|
(28,161 |
) |
|
|
(39,471 |
) |
|
|
45,475 |
|
|
|
87,901 |
|
|
Allowance
for credit losses |
|
|
43 |
|
|
|
(418 |
) |
|
|
315 |
|
|
|
(76 |
) |
|
|
323 |
|
|
Write-off
debt issue costs |
|
|
— |
|
|
|
— |
|
|
|
989 |
|
|
|
— |
|
|
|
1,230 |
|
|
Non-cash
incentive compensation |
|
|
2,743 |
|
|
|
2,645 |
|
|
|
1,585 |
|
|
|
7,922 |
|
|
|
3,364 |
|
|
Non-recurring costs related to IT services transition |
|
|
1,844 |
|
|
|
6,393 |
|
|
|
— |
|
|
|
8,237 |
|
|
|
— |
|
|
Release of
restricted funds |
|
|
— |
|
|
|
— |
|
|
|
(11,102 |
) |
|
|
— |
|
|
|
(11,102 |
) |
|
Non-ARO
P&A costs |
|
|
15,899 |
|
|
|
1,428 |
|
|
|
4,495 |
|
|
|
18,402 |
|
|
|
4,495 |
|
|
Other |
|
|
(372 |
) |
|
|
(2,028 |
) |
|
|
46 |
|
|
|
(4,104 |
) |
|
|
126 |
|
|
Adjusted EBITDA |
|
$ |
66,105 |
|
|
$ |
113,939 |
|
|
$ |
65,691 |
|
|
$ |
563,736 |
|
|
$ |
220,298 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
in oil and natural gas properties and equipment |
|
|
(11,666 |
) |
|
|
(4,477 |
) |
|
|
(16,037 |
) |
|
|
(41,632 |
) |
|
|
(32,062 |
) |
|
Asset
retirement obligation settlements |
|
|
(14,940 |
) |
|
|
(21,510 |
) |
|
|
(7,565 |
) |
|
|
(76,225 |
) |
|
|
(27,309 |
) |
|
Interest
expense, net |
|
|
(14,526 |
) |
|
|
(16,849 |
) |
|
|
(19,574 |
) |
|
|
(69,441 |
) |
|
|
(70,049 |
) |
|
Free
Cash Flow |
|
$ |
24,973 |
|
|
$ |
71,103 |
|
|
$ |
22,515 |
|
|
$ |
376,438 |
|
|
$ |
90,878 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Year Ended |
|
|
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
|
|
2022 |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
(In thousands) |
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
$ |
12,679 |
|
|
$ |
89,092 |
|
|
$ |
22,376 |
|
|
$ |
339,530 |
|
|
$ |
133,668 |
|
|
Allowance
for credit losses |
|
|
43 |
|
|
|
(418 |
) |
|
|
315 |
|
|
|
(76 |
) |
|
|
323 |
|
|
Litigation
and other contingent loss |
|
|
(372 |
) |
|
|
(2,028 |
) |
|
|
46 |
|
|
|
(4,104 |
) |
|
|
126 |
|
|
Release of
restricted funds |
|
|
— |
|
|
|
— |
|
|
|
(11,102 |
) |
|
|
— |
|
|
|
(11,102 |
) |
|
Amortization
of debt items and other items |
|
|
(1,437 |
) |
|
|
(1,749 |
) |
|
|
(1,471 |
) |
|
|
(7,551 |
) |
|
|
(5,325 |
) |
|
Non-recurring costs related to IT services transition |
|
|
1,844 |
|
|
|
6,393 |
|
|
|
— |
|
|
|
8,237 |
|
|
|
— |
|
|
Current tax
benefit (1) |
|
|
1,846 |
|
|
|
3,257 |
|
|
|
152 |
|
|
|
8,476 |
|
|
|
132 |
|
|
Changes in
derivatives receivable (payable) (1) |
|
|
12,085 |
|
|
|
4,339 |
|
|
|
14,231 |
|
|
|
47,933 |
|
|
|
34,370 |
|
|
Non-ARO
P&A costs |
|
|
15,899 |
|
|
|
1,428 |
|
|
|
4,495 |
|
|
|
18,402 |
|
|
|
4,495 |
|
|
Changes in
operating assets and liabilities, excluding asset retirement
obligation settlements |
|
|
(5,948 |
) |
|
|
(24,734 |
) |
|
|
9,510 |
|
|
|
7,223 |
|
|
|
(33,747 |
) |
|
Investment
in oil and natural gas properties and equipment |
|
|
(11,666 |
) |
|
|
(4,477 |
) |
|
|
(16,037 |
) |
|
|
(41,632 |
) |
|
|
(32,062 |
) |
|
Free Cash
Flow |
|
$ |
24,973 |
|
|
$ |
71,103 |
|
|
$ |
22,515 |
|
|
$ |
376,438 |
|
|
$ |
90,878 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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) |
|
$ |
6,859 |
|
|
$ |
16,397 |
|
|
$ |
10,789 |
|
|
$ |
53,660 |
|
|
$ |
(8,057 |
) |
|
Less:
Deferred income taxes |
|
|
5,013 |
|
|
|
13,140 |
|
|
|
10,637 |
|
|
|
45,184 |
|
|
|
(8,189 |
) |
|
Current tax
benefit |
|
$ |
1,846 |
|
|
$ |
3,257 |
|
|
$ |
152 |
|
|
$ |
8,476 |
|
|
$ |
132 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in
derivatives receivable: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
payable, end of period |
|
$ |
(4,574 |
) |
|
$ |
(16,659 |
) |
|
$ |
(6,396 |
) |
|
$ |
(4,574 |
) |
|
$ |
(6,396 |
) |
|
Derivatives
payable, beginning of period |
|
|
16,659 |
|
|
|
20,998 |
|
|
|
12,511 |
|
|
|
6,396 |
|
|
|
282 |
|
|
Derivative
premiums paid |
|
|
— |
|
|
|
— |
|
|
|
8,116 |
|
|
|
46,111 |
|
|
|
40,484 |
|
|
Change in
derivatives receivable (payable) |
|
$ |
12,085 |
|
|
$ |
4,339 |
|
|
$ |
14,231 |
|
|
$ |
47,933 |
|
|
$ |
34,370 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W&T OFFSHORE, INC. AND
SUBSIDIARIESNon-GAAP Information
Reconciliation of PV-10 to Standardized
Measure
The Company also discloses PV-10, which is not a
financial measure defined under GAAP. The standardized measure of
discounted future net cash flows is the most directly comparable
GAAP financial measure for proved reserves calculated using SEC
pricing. Company management believes that the non-GAAP financial
measure of PV-10 is relevant and useful for evaluating the relative
monetary significance of oil and natural gas properties. PV-10 is
also used internally when assessing the potential return on
investment related to oil and natural gas properties and in
evaluating acquisition opportunities. Company management believes
that the use of PV-10 is valuable because there are many unique
factors that can impact an individual company when estimating the
amount of future income taxes to be paid. Additionally, Company
management believes that the presentation of PV-10 provides useful
information to investors because it is widely used by professional
analysts and sophisticated investors in evaluating oil and natural
gas companies. PV-10 is not a measure of financial or operating
performance under GAAP, nor is it intended to represent the current
market value of the Company’s estimated oil and natural gas
reserves. PV-10 should not be considered in isolation or as
substitutes for the standardized measure of discounted future net
cash flows as defined under GAAP. Investors should not assume that
PV-10 of the Company’s proved oil and natural gas reserves
represents a current market value of the Company’s estimated oil
and natural gas reserves.
The following table presents a reconciliation of
the standardized measure of discounted future net cash flows
relating to the Company’s estimated proved oil and natural gas
reserves, a GAAP measure, to PV-10, as defined by the Company.
|
|
December 31, |
|
|
2022 |
|
2021 |
Present value of estimated future net revenues (PV-10) |
|
$ |
3,128.6 |
|
|
$ |
1,621.9 |
|
Present
value of estimated ARO, discounted at 10% |
|
|
(271.5 |
) |
|
|
(241.1 |
) |
PV-10 after
ARO |
|
|
2,857.1 |
|
|
|
1,380.8 |
|
Future
income taxes, discounted at 10% |
|
|
(594.1 |
) |
|
|
(224.8 |
) |
Standardized
measure |
|
$ |
2,263.0 |
|
|
$ |
1,156.0 |
|
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