W&T Offshore Announces Enhancement to Capital Structure
May 20 2021 - 6:45AM
W&T Offshore, Inc. (NYSE: WTI) (“W&T” or the “Company”)
today announced that it has enhanced its capital structure by
entering into a transaction with its wholly-owned special purpose
vehicles (the “SPVs”) and Munich Re Reserve Risk Financing, Inc.
("MRRF"). In this transaction, the Company transferred 100% of its
Mobile Bay Area producing assets (the “Mobile Bay Assets”) and
related gas treatment facilities to the SPVs in return for the net
cash proceeds from a $215 million first-lien non-recourse term loan
to the SPVs provided by MRRF. Through its 100% ownership in the
SPVs, W&T retains the upside value in the Mobile Bay Assets.
A portion of the proceeds to the Company from
the transaction were used to repay the $48 million outstanding
balance on its reserve-based lending facility (“RBL”) and to enter
into commodity hedging contracts related to the anticipated future
production of the Mobile Bay Assets. The majority of the proceeds
to W&T are expected to be used for general corporate purposes,
including oil and gas acquisitions, development activities, and
other opportunities to grow W&T’s broader asset base. The
Company anticipates an adjustment to its borrowing base under its
RBL as a result of the transfer of the Mobile Bay Assets to the
SPVs. The combination of the cash provided by this transaction
along with the amended RBL is expected to provide the Company
significant liquidity.
Key terms of the transaction
include:
- A $215 million first-lien secured
term loan that is non-recourse to W&T and is amortized over
seven years at a fixed interest rate of 7%;
- W&T continuing to operate the
assets under a Master Services Agreement (“MSA”) which provides
flexibility to continue its drilling and completions program in the
area; and
- Excess cash flows from the Mobile
Bay Assets, after debt-service and administrative costs, and
subject to meeting certain conditions, being distributed to
W&T.
Additional benefits of the transaction
include:
- Provides long-term capital without
maintenance covenants or borrowing base redetermination
requirements and with no covenants at the parent level;
- More efficiently utilizes existing
collateral value to generate larger front-end cash proceeds to
better capitalize the Company, as this term loan offers a greater
loan-to-value amount than W&T’s RBL, at a reasonable cost;
- Retains upside associated with
Mobile Bay Assets;
- Facilitates a financing transaction
in a non-recourse SPV structure; and
- Significantly increases the
Company’s cash position and pays down the RBL completely.
Tracy W. Krohn, W&T's Chairman and Chief
Executive Officer, commented, “We believe this transaction
meaningfully improves our financial flexibility moving forward by
more efficiently utilizing the collateral value of our Mobile Bay
Area assets, allowing us to pay off our existing RBL balance, and
adding cash to the balance sheet. This transaction does not impact
us operationally or affect our ability to generate significant free
cash flow. We still retain the upside with our Mobile Bay Area
assets and this transaction allows us to take advantage of the
long-lived nature of these assets. Importantly, it provides us the
dry powder we need to continue to accretively grow W&T through
attractive producing property acquisitions. We believe that market
conditions in the Gulf remain very favorable for accretive
acquisitions. With our further improved balance sheet, increased
cash position and strong projected cash flow generation, we have
positioned W&T to actively pursue opportunities and continue to
deliver on our strategic vision.”
Vikram Nath, Managing Director, Munich Re
Reserve Risk Financing, commented, “We are glad to provide this
financing for W&T’s Mobile Bay Assets. These are low decline,
conventional producing assets with considerable free cash flows and
hence are particularly suitable to our amortizing term loan
structure. Moreover, our organization is fully committed to energy
transition and the Mobile Bay Assets are heavily natural gas
weighted, which we view as critical for energy transition."
About W&T Offshore
W&T Offshore, Inc. is an independent oil and
natural gas producer with operations offshore in the Gulf of Mexico
and has grown through acquisitions, exploration and development.
The Company currently has working interests in 42 producing fields
in federal and state waters and has under lease approximately
709,000 gross acres, including approximately 500,000 gross acres on
the Gulf of Mexico Shelf and approximately 209,000 gross acres in
the Gulf of Mexico deepwater. A majority of the Company’s daily
production is derived from wells it operates. For more information
on W&T, please visit the Company’s website at
www.wtoffshore.com.
Forward-Looking and Cautionary
Statements
This press release contains forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. These forward-looking statements reflect our
current views with respect to future events, based on what we
believe are reasonable assumptions. No assurance can be given,
however, that these events will occur. These statements are subject
to risks and uncertainties that could cause actual results to
differ materially including, among other things, market conditions,
oil and gas price volatility, uncertainties inherent in oil and gas
production operations and estimating reserves, unexpected future
capital expenditures, competition, the success of our risk
management activities, governmental regulations, uncertainties and
other factors discussed in W&T Offshore’s Annual Report on Form
10-K for the year ended December 31, 2020 and subsequent Form 10-Q
reports found at www.sec.gov or at our website at
www.wtoffshore.com under the Investor Relations section. Investors
are urged to consider closely the disclosures and risk factors in
these reports.
CONTACT: Al PetrieInvestor Relations
Coordinatorapetrie@wtoffshore.com713-297-8024
Janet YangEVP &
CFOinvestorrelations@wtoffshore.com713-624-7326
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