W&T Offshore, Inc. (NYSE: WTI) (“W&T” or the “Company”)
today reported operational and financial results for the third
quarter 2020.
Key highlights included:
- Produced 34,459
barrels of oil equivalent per day (“Boe/d”), or 3.2 million Boe
(48% liquids), in the third quarter of 2020, reflecting a 16%
decrease from the third quarter of 2019, primarily due to shut-ins
related to the extraordinary 2020 hurricane season;
- Experienced no
material damage to the Company’s platforms or infrastructure from
the series of storms that entered the Gulf of Mexico (“GOM”) from
June through October, but expects to incur in the fourth quarter of
2020 approximately $5 million in lease operating expenses (“LOE”)
related to repairs and restoring production associated with the
multiple shut-ins from the storms;
- Reported a net
loss of $13.3 million or $0.09 per share and Adjusted Net Loss of
$19.9 million or $0.14 per share in the third quarter of 2020;
- Generated
Adjusted EBITDA of $19.5 million for the third quarter of 2020,
despite a significantly lower pricing environment and shut-in
production due to hurricane activity, while capital expenditures
were held to just $1.2 million; Free Cash Flow totaled $5.9 million
for the quarter;
- Generated
Adjusted EBITDA of $123.7 million for the first nine months of 2020
and Free Cash Flow of $61.8 million;
- Consolidating
natural gas treatment plants at Mobile Bay late in the fourth
quarter of 2020, with expected future cost savings of approximately
$5 million per year; and
- Responded to the
current low oil price environment with definitive actions to
maintain financial flexibility, protect cash flow and preserve
future value:
- Suspended all
drilling activities and significantly reduced its estimate of 2020
capital expenditures to $15 million to $25 million (which excludes
$28.2 million in working capital changes associated with capital
expenditures incurred in 2019 but paid during the nine months ended
September 30, 2020);
- Proactively
curtailed production at selected oil-weighted fields operated by
W&T;
- Implemented
reductions in LOE without compromising safety or operational
capabilities.
Tracy W. Krohn, W&T's Chairman and Chief
Executive Officer, stated, “This year has been extraordinary and
particularly difficult for energy producers, including a global
COVID-19 pandemic and supply and demand imbalances. In addition,
there have been an unusually large number of named storms enter the
GOM in 2020, which have caused significant production shut-ins by
W&T but, fortunately, have resulted in minimal physical damage
to our facilities. These storms and unplanned downtime at Mobile
Bay adversely impacted our third quarter 2020 production by nearly
9,000 Boe/d. There is expected to be a continued impact to
production in the fourth quarter as well, depending on when
Magnolia and other fields are restored to production, the effect of
additional shut-ins at Mobile Bay including consolidation of the
gas plants and the impact from additional tropical weather through
November. Despite these difficult conditions, we have
generated positive Adjusted EBITDA and maintained our significantly
reduced capital spending in 2020 to ensure that we continue to
generate Free Cash Flow which totaled $5.9 million in the third
quarter of 2020 and $61.8 million for the nine months ending
September 30. As a reminder, earlier this year we quickly and
decisively responded to this downturn by stopping all drilling and
completion activity, shut-in uneconomic fields, and reduced LOE
significantly without compromising safety or our operational
capabilities. Late in the fourth quarter, we expect to
consolidate our two natural gas treatment facilities that serve the
Mobile Bay area into the larger of the two facilities which we
acquired last year from ExxonMobil. This single facility provides
us with more than enough capacity for our current operations as
well as production from future natural gas drilling projects in the
area. The consolidation of these facilities will help us reduce our
future LOE by approximately $5 million per year. Additionally, we
have capitalized on opportunities in 2020, where we retired $72.5
million of our senior notes for a total cost of $23.9 million,
thereby saving over $7.1 million in annualized interest and
preserving long-term capital.”
“This is a cyclical business and we have faced
adversity in the past, but our success over nearly 40 years has
been because of our focus on cash flow generation and operating
efficiently. We remain focused on these touchstones of our
strategy. We have also been active in completing accretive
acquisitions and we will continue to evaluate opportunities
presented by the current market backdrop that meet all the criteria
we have outlined in the past which target producing properties that
generate Free Cash Flow with upside potential. We believe
that we are well positioned to deliver near-term and long-term
value creation at W&T,” concluded Mr. Krohn.
For the third quarter of 2020, W&T reported
a net loss of $13.3 million, or $0.09 per share. The Company’s
Adjusted Net Loss was $19.9 million, or $0.14 per share, primarily
excluding a non-cash tax benefit of $21.2 million and a $13.1
million unrealized commodity derivative loss. In the third quarter
of 2019, W&T reported net income of $75.9 million, or $0.53 per
share, which included a non-cash tax benefit of $55.5 million
($0.39 per share) primarily due to the reduction of a valuation
allowance previously recorded against net deferred tax assets.
Adjusted Net Income for the third quarter of 2019 was $18.5
million, or $0.13 per share. In the second quarter of 2020, W&T
reported a net loss of $5.9 million, or $0.04 per share, which
included a $38.0 million unrealized commodity derivative loss, a
$29.0 million non-cash gain on debt transaction, and $8.7 million
of non-cash deferred tax benefit. For that same period, Adjusted
Net Loss was $2.2 million or $0.02 per share.
Adjusted EBITDA for the third quarter of 2020
totaled $19.5 million, a decrease of 73% compared to $72.0 million
in the third quarter of 2019 primarily due to lower commodity
prices and lower production volumes. Third quarter 2020 Adjusted
EBITDA declined 54% from $42.1 million in the second quarter of
2020 primarily due to lower commodity prices and curtailed
volumes.
Free Cash Flow for the third quarter of 2020
totaled $5.9 million compared with $13.3 million in the same period
in 2019 and $20.8 million in the second quarter of 2020. For the
first nine months of 2020, Free Cash Flow totaled $61.8 million
compared with $47.2 million in the same period in 2019.
Adjusted Net Income/Loss, Adjusted EBITDA and
Free Cash Flow are non-GAAP financial measures, which are described
in more detail and reconciled to net income/loss, their most
comparable GAAP measure, in the attached tables below under
“Non-GAAP Information.”
Production, Prices and
Revenues: Production for the third quarter of 2020 was
34,459 Boe/d or 3.2 million Boe, down 16% versus 41,149 Boe/d in
the third quarter of 2019 and a decrease of 18% compared to 42,037
Boe/d in the second quarter of 2020. Third quarter 2020 production
declined compared to prior periods primarily due to the significant
impact on operated and non-operated production from the large
number of named storms that entered the GOM. In addition, and to a
lesser extent, the Company experienced unplanned downtime at Mobile
Bay, previously-announced planned downtime at the Magnolia field
and a combination of operated and non-operated production that
remained shut-in due to the decline in oil prices, and natural
decline. Third quarter 2020 production was comprised of 1.1
million barrels (“MMBbls”) of oil, 0.4 MMBbls of natural gas
liquids (“NGLs”) and 9.9 billion cubic feet (“Bcf”) of natural
gas. Liquids production comprised 48% of total production in
the third quarter of 2020. W&T’s production across the
GOM has been significantly impacted by an extraordinary number of
storms in this historic tropical storm season. All of these storms
resulted in varying amounts of production being shut-in depending
on the size and path of the storms. Tropical Storm Cristobal
impacted W&T’s second quarter 2020 production while Hurricanes
Hanna, Marco, Laura, Sally and Beta caused production shut-ins
during the third quarter of 2020. In addition, Hurricanes Delta and
Zeta caused production shut-ins in October, and will impact the
fourth quarter of 2020. W&T has restored a portion of its
shut-in operated and non-operated production but continues to have
production shut-in primarily due to extended storm-related downtime
at several fields and at a third-party operated platform downstream
from the Magnolia field. As disclosed below under “Guidance”,
production in the fourth quarter of 2020 will continue to be
impacted by hurricane-related downtime, curtailments due to low
commodity prices, proactive reservoir management during a period of
continued low prices, downtime at the Magnolia field, and natural
decline.
For the third quarter of 2020, W&T’s average
realized crude oil sales price was $41.81 per barrel. The Company’s
realized NGL sales price was $10.99 per barrel and its realized
natural gas sales price was $1.94 per Mcf. The Company’s combined
average realized sales price for the quarter was $22.16 per Boe,
which represents a 36% decrease from $34.56 per Boe that was
realized in the third quarter of 2019 and an increase of 57%
compared to $14.10 per Boe in the second quarter of 2020.
Revenues for the third quarter of 2020 decreased
45% to $72.5 million compared to $132.2 million in the third
quarter of 2019, and increased 31% compared to $55.2 million in the
second quarter of 2020. The decreases compared to prior year was
driven primarily by significantly lower commodity prices and lower
production primarily due to the impact of hurricanes in 2020.
Lease Operating Expenses: LOE,
which includes base lease operating expenses, insurance premiums,
workovers and facilities maintenance was $36.4 million in the third
quarter of 2020, down 23% compared to $47.2 million in the third
quarter of 2019 but up 29% from $28.3 million in the second quarter
of 2020. Costs declined from the year-ago period despite the impact
of the Mobile Bay and Magnolia acquisitions. On a component basis
for the third quarter of 2020, base lease operating expenses and
insurance premiums were $35.4 million, and workovers and facilities
maintenance expenses were $1.0 million. W&T has significantly
reduced its LOE expense in 2020 primarily by replacing higher cost
contract personnel with full time employees, reducing
transportation costs by lowering the number of boats and
helicopters needed through operational efficiencies, and cutting
its workover and facilities costs through vendor and supplier costs
reductions and increasing its focus on projects that maintain and
optimize production. In the third quarter, W&T benefited by
$1.2 million from refunds of amounts previously paid to the Office
of Natural Resources Revenue (“ONRR”). LOE in the second quarter of
2020 also benefited from ONRR refunds of $3.1 million, $2.3 million
in credits from W&T’s Paycheck Protection Program (“PPP”)
funds, lower activity levels, and reversals of accruals for
costs that have been deferred or eliminated. As disclosed below
under “Guidance”, W&T expects to incur approximately $5 million
in LOE in the fourth quarter of 2020 related to repairs and
restoring production following multiple shut-ins due to the series
of hurricanes.
On a unit of production basis, LOE was $11.49
per Boe in the third quarter of 2020, down 8% from $12.46 per Boe
in the third quarter of 2019, and up 55% from $7.40 per Boe in the
second quarter of 2020. The large decline in year-over-year LOE per
Boe was driven by lower costs achieved in 2020, while the increase
from the second quarter of 2020 was primarily the result of lower
production volumes due to hurricane shut-ins, credits from the PPP
funds and other production matters discussed previously.
Gathering, Transportation Costs and
Production Taxes: Gathering, transportation costs and
production taxes totaled $4.8 million, or $1.52 per Boe in the
third quarter of 2020, compared to $6.5 million, or $1.73 per Boe
in the third quarter of 2019, and $4.4 million, or $1.16 per Boe in
the second quarter of 2020. Costs decreased from the prior year
primarily due to lower transportation rates as well as lower
volumes at certain fields.
Depreciation, Depletion, Amortization
and Accretion (“DD&A”): DD&A, including accretion
for asset retirement obligations, was $7.93 per Boe of production
for the third quarter of 2020 compared to $10.26 per Boe for the
third quarter of 2019 and $7.71 per Boe for the second quarter of
2020. The year-over-year decline in the DD&A rate per Boe was
driven by the large reserve additions relative to the purchase
price associated with the acquisitions of the Mobile Bay and
Magnolia assets.
General and Administrative Expenses
(“G&A”): G&A was $14.5 million for the third
quarter of 2020, compared to $10.1 million in the third quarter of
2019 and $5.6 million for the second quarter of 2020. The increase
in third quarter 2020 G&A expense compared with the same period
in 2019 was driven primarily by lower fees charged to partners
(credits to expense), increased legal costs incurred in reviewing
potential acquisition opportunities and higher benefits costs. The
increase in third quarter 2020 G&A compared with the second
quarter of 2020 was driven primarily by compensation costs that
returned to normal levels after benefitting from credits in the
prior quarter from W&T’s PPP funds. On a unit of production
basis, G&A was $4.57 per Boe in the third quarter of 2020,
$2.67 per Boe in the third quarter of 2019, and $1.47 per Boe in
the second quarter of 2020. The increase in G&A cost per Boe
was primarily driven by lower production volumes due to hurricane
shut-ins and other production matters discussed previously and
higher G&A costs incurred.
COVID-19
Response:
W&T is committed to the health and safety of
all its employees and contractors and has taken steps to ensure
their continued safety in its response to the COVID-19 pandemic. At
W&T’s corporate offices, the Company has implemented procedures
to protect its employees working in its offices including
temperature checks and social distancing. The Company continues to
monitor the situation and will follow the advice of government and
health advisors.
For its field operations, the Company instituted
screening, which includes a questionnaire and temperature check, of
all personnel prior to entry into heliports and shorebases as well
as its two Alabama gas treatment plants. The Company conducts daily
temperature screenings at all offshore facilities and implemented
procedures for distancing and hygiene at its field
locations.
Derivative (Gain) Loss: In the
third quarter of 2020, W&T recorded a net loss of $11.2 million
on its outstanding commodity derivative contracts, of which $13.1
million was an unrealized commodity derivative loss, largely due to
higher quarter-end oil prices compared to second quarter of 2020.
This compared to a net gain of $5.9 million in the third quarter of
2019 of which $5.7 million was an unrealized commodity derivative
gain and a net loss of $15.4 million in the second quarter of 2020
of which $38.0 million was an unrealized commodity derivative
loss.
In the third quarter of 2020, W&T added the
following derivative positions:
Production Period |
|
Instrument |
|
Avg. DailyVolumes |
|
Weighted AvgSwap Price |
|
Weighted AvgPut Price |
|
Weighted AvgCall Price |
Crude Oil - WTI NYMEX: |
|
|
|
(bbls) |
|
(per Bbl) |
|
(per Bbl) |
|
(per Bbl) |
Jan 2021 - Dec 2021 |
|
Swaps |
|
1,000 |
|
$42.05 |
|
|
|
|
Jan 2021 - Dec 2021 |
|
Swaps |
|
1,000 |
|
$42.18 |
|
|
|
|
Jan 2021 - Dec 2021 |
|
Swaps |
|
1,000 |
|
$43.00 |
|
|
|
|
Jan 2022 - Feb 2022 |
|
Swaps |
|
1,000 |
|
$42.75 |
|
|
|
|
Jan 2022 - Feb 2022 |
|
Swaps |
|
1,000 |
|
$42.80 |
|
|
|
|
Jan 2022 - Feb 2022 |
|
Swaps |
|
1,000 |
|
$43.40 |
|
|
|
|
Jan 2021 - Jan 2021 |
|
Costless Collars |
|
2,895 |
|
|
|
$35.00 |
|
$50.00 |
Feb 2021 - Feb 2021 |
|
Costless Collars |
|
3,340 |
|
|
|
$35.00 |
|
$50.00 |
Mar 2021 - Mar 2021 |
|
Costless Collars |
|
2,382 |
|
|
|
$35.00 |
|
$50.00 |
Apr 2021 - Apr 2021 |
|
Costless Collars |
|
2,362 |
|
|
|
$35.00 |
|
$50.00 |
May 2021 - May 2021 |
|
Costless Collars |
|
1,944 |
|
|
|
$35.00 |
|
$50.00 |
Jun 2021 - Jun 2021 |
|
Costless Collars |
|
1,924 |
|
|
|
$35.00 |
|
$50.00 |
Jul 2021 - Jul 2021 |
|
Costless Collars |
|
1,525 |
|
|
|
$35.00 |
|
$50.00 |
Aug 2021 - Aug 2021 |
|
Costless Collars |
|
1,346 |
|
|
|
$35.00 |
|
$50.00 |
Sep 2021 - Sep 2021 |
|
Costless Collars |
|
1,350 |
|
|
|
$35.00 |
|
$50.00 |
Oct 2021 - Oct 2021 |
|
Costless Collars |
|
1,012 |
|
|
|
$35.00 |
|
$50.00 |
Nov 2021 - Nov 2021 |
|
Costless Collars |
|
948 |
|
|
|
$35.00 |
|
$50.00 |
Dec 2021 - Dec 2021 |
|
Costless Collars |
|
625 |
|
|
|
$35.00 |
|
$50.00 |
Jan 2022 - Jan 2022 |
|
Costless Collars |
|
1,473 |
|
|
|
$35.00 |
|
$50.00 |
Feb 2022 - Feb 2022 |
|
Costless Collars |
|
1,790 |
|
|
|
$35.00 |
|
$50.00 |
|
|
|
|
|
|
|
|
|
|
|
Natural Gas - Henry Hub NYMEX: |
|
|
|
(MMBTU) |
|
(per MMBTU) |
|
|
|
|
Nov 2020 - Dec 2020 |
|
Swaps |
|
15,000 |
|
$2.21 |
|
|
|
|
Jan 2021 - Dec 2021 |
|
Swaps |
|
10,000 |
|
$2.62 |
|
|
|
|
Jan 2022 - Jan 2022 |
|
Swaps |
|
20,000 |
|
$2.79 |
|
|
|
|
Feb 2022 - Feb 2022 |
|
Swaps |
|
30,000 |
|
$2.79 |
|
|
|
|
A listing of the Company’s current outstanding
derivative positions is included in the tables below as well as in
the Investor Relations section of W&T’s web site under the
“Financial Info” tab.
Interest
Expense: Interest expense, net of interest income,
as reported in the income statement, in the third quarter of 2020
was $14.1 million compared with $14.4 million in the same period in
2019 and $14.8 million in the second quarter of 2020. The reduction
in expense from the prior year relates primarily to reduced
interest costs following the retirement of $72.5 million in
principal of W&T’s 9.75% Senior Second Lien Notes earlier in
2020.
Income Tax: W&T recorded an
income tax benefit of $21.1 million in the third quarter of
2020 and $55.5 million for the same period in 2019. In the
second quarter of 2020, the Company recorded an income tax benefit
of $8.7 million. For the first three quarters of 2020, the income
tax benefit was impacted by adjustments related to the enactment of
the CARES Act on March 27, 2020. Additionally, the third quarter of
2020 was impacted by the Treasury issuing regulations under IRC
Section 163(j) on July 28, 2020 related to the business interest
expense limitation. During the third quarter of 2019, W&T
reversed a liability related to an uncertain tax position that was
resolved which resulted in a net tax benefit for the
period. W&T’s effective tax rate was not meaningful
for the three months ended September 30, 2020 or
2019. As of September 30, 2020, W&T’s deferred
tax valuation allowance was $24.7 million. The Company
continually evaluates the need to maintain a valuation allowance on
its deferred tax assets. Any future reduction of a portion or
all of the valuation allowance would result in a non-cash income
tax benefit in the period the decision occurs. W&T is not
currently forecasting any cash income tax expense for the
near-term.
Balance Sheet, Cash
Flow and Liquidity: Net cash provided by
operating activities for the third quarter of 2020 was $21.3
million. Total liquidity on September 30, 2020 was $187.1 million,
consisting of cash and cash equivalents of $56.5 million and $130.6
million of availability under W&T’s revolving bank credit
facility. At September 30, 2020, the Company had $80.0 million in
borrowings on its revolving credit facility and $4.4 million of
letters of credit outstanding. Total long-term debt, including
$80.0 million in revolving credit facility borrowings, was $624.7
million net of unamortized debt issuance costs. W&T
was in compliance with all applicable covenants of the Credit
Agreement and the Senior Second Lien Notes indenture as of
September 30, 2020.
Since year-end 2019, W&T has reduced the
amount of its long-term debt associated with its Senior Second Lien
Notes by $72.5 million to $552.5 million for $23.9 million,
resulting in annualized interest savings of $7.1 million.
Capital Expenditures: Due to
the uncertain commodity outlook in light of the COVID-19 pandemic,
W&T suspended drilling and completion activities in March and
significantly reduced its estimate of 2020 capital expenditures to
$15 million to $25 million from its prior level of $50 million to
$100 million. Per the Statement of Cash Flows, capital expenditures
in the third quarter of 2020 (excluding acquisitions) were $1.2
million. Capital expenditures for the first nine months
of 2020 totaled $41.2 million, which includes $28.2 million in
capital expenditures incurred in 2019 but paid during the nine
months ended September 30, 2020.
OPERATIONS UPDATE
W&T successfully drilled one well in the
first quarter of 2020 at East Cameron 338/349 but has since
suspended all other drilling activity in the current uncertain
pricing environment.
Well Recompletions and
Workovers: During the third quarter of 2020, the Company
performed two recompletions and five workovers that in total added
approximately 500 net Boe/d to production. W&T currently plans
to continue to perform recompletions and workovers that meet
economic thresholds.
Consolidation of
Onshore Natural
Gas Treatment Plants
Supporting Mobile Bay Assets: During the fourth quarter of
2020, the Company plans to consolidate its two onshore natural gas
treatment facilities that service the Mobile Bay area into the
Onshore Treating Facility (“OTF”) which was acquired in 2019 from
ExxonMobil. W&T will close its Yellowhammer Plant. The OTF has
more than sufficient capacity to meet W&T’s current and
expected needs as it further develops its Mobile Bay and regional
natural gas assets in the future. The consolidation of the
facilities is expected to result in savings of approximately $5
million per year beginning in 2021.
Guidance
Due to the sharp decline in oil prices in early
2020, W&T significantly reduced its 2020 capital spending
expectations to $15 million to $25 million and has also reduced its
planned asset retirement expenditures to $2 million to $4 million.
W&T estimates its fourth quarter production will average 31,500
to 35,000 Boe/d which includes the ongoing impact from prior storms
as well as storms that already have impacted the fourth quarter,
other planned shut-ins, as well as an estimate of additional
potential storm-related downtime for the balance of the fourth
quarter. The Company expects fourth quarter 2020 LOE
will include approximately $5.0 million in expenses associated with
the series of storms through October for minor repairs and costs to
restore shut-in production.
|
Fourth Quarter |
Production |
2020 |
|
|
Oil
(MMBbls) |
1.0 - 1.1 |
|
|
NGL's
(MMBbls) |
0.31 - 0.35 |
|
|
Natural Gas
(Bcf) |
9.5 - 10.6 |
|
|
Total
(MMBoe) |
2.9 - 3.2 |
|
|
Total
(Boe/d) |
31,500 - 35,000 |
|
|
Operating Expenses |
Fourth Quarter |
($ in millions) |
2020 |
|
|
Lease
operating expenses |
$43 - $48 |
|
|
Gathering,
transportation & |
|
production
taxes |
$5.4 - $5.9 |
|
|
General and
administrative |
$11.7 - $12.9 |
|
|
Cash income
tax rate |
0% |
Conference Call Information:
W&T will hold a conference call to discuss its financial and
operational results on Thursday, November 5, 2020, at 10:00 a.m.
Central Time (11:00 a.m. Eastern Time). Interested parties may
participate by dialing (844) 739-3797. International parties may
dial (412) 317-5713. Participants should request to connect to the
“W&T Offshore Call.” This call will also be webcast and
available on W&T’s website at www.wtoffshore.com on the
“Overview” page under the “Investor Relations” section. An audio
replay will be available on the Company’s website following the
call.
About W&T Offshore
W&T Offshore, Inc. is an independent oil and
natural gas producer with operations offshore in the Gulf of Mexico
and has grown through acquisitions, exploration and development.
The Company currently has working interests in 50 producing fields
in federal and state waters and has under lease approximately
772,000 gross acres, including approximately 557,000 gross acres on
the Gulf of Mexico Shelf and approximately 215,000 gross acres in
the Gulf of Mexico deepwater. A majority of the Company’s daily
production is derived from wells it operates. For more information
on W&T, please visit the Company’s website at
www.wtoffshore.com.
Forward-Looking and Cautionary
Statements
This press release contains forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. These forward-looking statements reflect our
current views with respect to future events, based on what we
believe are reasonable assumptions. No assurance can be given,
however, that these events will occur. These statements are subject
to risks and uncertainties that could cause actual results to
differ materially including, among other things, market conditions,
oil and gas price volatility, uncertainties inherent in oil and gas
production operations and estimating reserves, unexpected future
capital expenditures, competition, the success of our risk
management activities, governmental regulations, uncertainties and
other factors discussed in W&T Offshore’s Annual Report on Form
10-K for the year ended December 31, 2019 and subsequent Form 10-Q
reports found at www.sec.gov or at our website at
www.wtoffshore.com under the Investor Relations section. Investors
are urged to consider closely the disclosures and risk factors in
these reports. We refer to feet of “pay” in our discussions
concerning the evaluation of our recently drilled wells. This
refers to geological indications, typically obtained from well
logging, of the estimated thickness of sands which we believe are
capable of producing hydrocarbons in commercial quantities. These
indications of “pay” may not necessarily forecast the amount of
future production or reserve quantities from the well, which can be
dependent upon numerous other factors.
Condensed Consolidated Statements of
Operations |
(In thousands, except per share data) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
|
2020 |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil |
|
$ |
46,589 |
|
|
$ |
30,645 |
|
|
$ |
102,786 |
|
|
$ |
161,884 |
|
|
$ |
298,684 |
|
NGLs |
|
|
4,464 |
|
|
|
1,917 |
|
|
|
4,373 |
|
|
|
12,833 |
|
|
|
15,461 |
|
Natural gas |
|
|
19,213 |
|
|
|
21,364 |
|
|
|
23,686 |
|
|
|
69,877 |
|
|
|
65,091 |
|
Other |
|
|
2,251 |
|
|
|
1,315 |
|
|
|
1,376 |
|
|
|
7,292 |
|
|
|
3,766 |
|
Total revenues |
|
|
72,517 |
|
|
|
55,241 |
|
|
|
132,221 |
|
|
|
251,886 |
|
|
|
383,002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating expenses |
|
|
36,437 |
|
|
|
28,313 |
|
|
|
47,185 |
|
|
|
119,525 |
|
|
|
130,982 |
|
Gathering, transportation costs and production taxes |
|
|
4,826 |
|
|
|
4,444 |
|
|
|
6,543 |
|
|
|
15,635 |
|
|
|
20,767 |
|
Depreciation, depletion, amortization and accretion |
|
|
25,127 |
|
|
|
29,483 |
|
|
|
38,841 |
|
|
|
93,736 |
|
|
|
110,680 |
|
General and administrative expenses |
|
|
14,476 |
|
|
|
5,628 |
|
|
|
10,106 |
|
|
|
34,067 |
|
|
|
37,543 |
|
Derivative loss (gain) |
|
|
11,161 |
|
|
|
15,414 |
|
|
|
(5,853 |
) |
|
|
(35,337 |
) |
|
|
41,228 |
|
Total costs and expenses |
|
|
92,027 |
|
|
|
83,282 |
|
|
|
96,822 |
|
|
|
227,626 |
|
|
|
341,200 |
|
Operating (loss) income |
|
|
(19,510 |
) |
|
|
(28,041 |
) |
|
|
35,399 |
|
|
|
24,260 |
|
|
|
41,802 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
14,135 |
|
|
|
14,816 |
|
|
|
14,445 |
|
|
|
46,061 |
|
|
|
42,934 |
|
Gain on purchase of debt |
|
|
- |
|
|
|
(28,968 |
) |
|
|
- |
|
|
|
(47,469 |
) |
|
|
- |
|
Other expense |
|
|
751 |
|
|
|
751 |
|
|
|
555 |
|
|
|
2,225 |
|
|
|
1,364 |
|
(Loss) income before income tax benefit |
|
|
(34,396 |
) |
|
|
(14,640 |
) |
|
|
20,399 |
|
|
|
23,443 |
|
|
|
(2,496 |
) |
Income tax benefit |
|
|
(21,057 |
) |
|
|
(8,736 |
) |
|
|
(55,500 |
) |
|
|
(23,294 |
) |
|
|
(67,023 |
) |
Net (loss) income |
|
$ |
(13,339 |
) |
|
$ |
(5,904 |
) |
|
$ |
75,899 |
|
|
$ |
46,737 |
|
|
$ |
64,527 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted (loss) earnings per common share |
|
$ |
(0.09 |
) |
|
$ |
(0.04 |
) |
|
$ |
0.53 |
|
|
$ |
0.33 |
|
|
$ |
0.45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
141,624 |
|
|
|
141,597 |
|
|
|
140,567 |
|
|
|
141,589 |
|
|
|
140,520 |
|
W&T OFFSHORE, INC. AND SUBSIDIARIES |
Condensed Operating Data |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
|
2020 |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Net sales volumes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil (MBbls) |
|
|
1,115 |
|
|
|
1,414 |
|
|
|
1,735 |
|
|
|
4,356 |
|
|
|
4,896 |
|
NGL (MBbls) |
|
|
407 |
|
|
|
410 |
|
|
|
283 |
|
|
|
1,312 |
|
|
|
856 |
|
Oil and NGLs (MBbls) |
|
|
1,521 |
|
|
|
1,824 |
|
|
|
2,018 |
|
|
|
5,667 |
|
|
|
5,752 |
|
Natural gas (MMcf) |
|
|
9,897 |
|
|
|
12,006 |
|
|
|
10,606 |
|
|
|
37,210 |
|
|
|
25,344 |
|
Total oil and natural gas (MBoe) (1) |
|
|
3,170 |
|
|
|
3,826 |
|
|
|
3,786 |
|
|
|
11,869 |
|
|
|
9,976 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average daily equivalent sales (MBoe/d) |
|
|
34.5 |
|
|
|
42.0 |
|
|
|
41.1 |
|
|
|
43.3 |
|
|
|
36.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average realized sales prices: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil ($/Bbl) |
|
$ |
41.81 |
|
|
$ |
21.67 |
|
|
$ |
59.24 |
|
|
$ |
37.17 |
|
|
$ |
61.00 |
|
NGLs ($/Bbl) |
|
|
10.99 |
|
|
|
4.67 |
|
|
|
15.45 |
|
|
|
9.78 |
|
|
|
18.07 |
|
Oil and NGLs ($/Bbl) |
|
|
33.57 |
|
|
|
17.85 |
|
|
|
53.10 |
|
|
|
30.83 |
|
|
|
54.61 |
|
Natural gas ($/Mcf) |
|
|
1.94 |
|
|
|
1.78 |
|
|
|
2.23 |
|
|
|
1.88 |
|
|
|
2.57 |
|
Barrel of oil equivalent ($/Boe) |
|
|
22.16 |
|
|
|
14.10 |
|
|
|
34.56 |
|
|
|
20.61 |
|
|
|
38.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average costs and expenses per Boe ($/Boe): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating expenses |
|
$ |
11.49 |
|
|
$ |
7.40 |
|
|
$ |
12.46 |
|
|
$ |
10.07 |
|
|
$ |
13.13 |
|
Gathering, transportation costs and production taxes |
|
|
1.52 |
|
|
|
1.16 |
|
|
|
1.73 |
|
|
|
1.32 |
|
|
|
2.08 |
|
Depreciation, depletion, amortization and accretion |
|
|
7.93 |
|
|
|
7.71 |
|
|
|
10.26 |
|
|
|
7.90 |
|
|
|
11.09 |
|
General and administrative expenses |
|
|
4.57 |
|
|
|
1.47 |
|
|
|
2.67 |
|
|
|
2.87 |
|
|
|
3.76 |
|
(1) MBoe is determined using the ratio of six Mcf of natural gas
to one Bbl of crude oil, condensate or NGLs (totals may not compute
due to rounding). The conversion ratio does not assume price
equivalency and the price on an equivalent basis for oil, NGLs and
natural gas may differ significantly.
W&T OFFSHORE, INC. AND SUBSIDIARIES |
Condensed Consolidated Balance Sheets |
(In
thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
2020 |
|
|
2019 |
|
|
|
(Unaudited) |
|
|
|
|
Assets |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
56,532 |
|
|
|
$ |
32,433 |
|
Receivables: |
|
|
|
|
|
|
|
Oil and natural gas sales |
|
|
21,407 |
|
|
|
|
57,367 |
|
Joint interest and other, net |
|
|
10,361 |
|
|
|
|
19,400 |
|
Income taxes |
|
|
- |
|
|
|
|
1,861 |
|
Total receivables |
|
|
31,768 |
|
|
|
|
78,628 |
|
Prepaid expenses and other assets |
|
|
23,607 |
|
|
|
|
30,691 |
|
Total current assets |
|
|
111,907 |
|
|
|
|
141,752 |
|
|
|
|
|
|
|
|
|
Oil and natural gas properties and other, net - at cost |
|
|
8,574,736 |
|
|
|
|
8,552,513 |
|
Less accumulated depreciation, depletion and amortization |
|
|
7,880,432 |
|
|
|
|
7,803,715 |
|
Oil and natural gas properties and other, net |
|
|
694,304 |
|
|
|
|
748,798 |
|
Restricted deposits for asset retirement obligations |
|
|
30,161 |
|
|
|
|
15,806 |
|
Deferred income taxes |
|
|
87,470 |
|
|
|
|
63,916 |
|
Other assets |
|
|
25,638 |
|
|
|
|
33,447 |
|
Total assets |
|
$ |
949,480 |
|
|
|
$ |
1,003,719 |
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Deficit |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accounts payable |
|
$ |
36,790 |
|
|
|
$ |
102,344 |
|
Undistributed oil and natural gas proceeds |
|
|
20,250 |
|
|
|
|
29,450 |
|
Advance from joint interest partner |
|
|
7,721 |
|
|
|
|
5,279 |
|
Asset retirement obligations |
|
|
19,522 |
|
|
|
|
21,991 |
|
Accrued liabilities |
|
|
44,460 |
|
|
|
|
30,896 |
|
Total current liabilities |
|
|
128,743 |
|
|
|
|
189,960 |
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
624,747 |
|
|
|
|
719,533 |
|
Asset retirement obligations |
|
|
362,213 |
|
|
|
|
333,603 |
|
Other liabilities |
|
|
33,263 |
|
|
|
|
9,988 |
|
Commitments and contingencies |
|
|
- |
|
|
|
|
- |
|
Shareholders’ deficit: |
|
|
|
|
|
|
|
Common stock, $0.00001 par value; 200,000 shares authorized;
144,647 issued and |
|
|
|
|
|
|
|
141,778 outstanding at September 30, 2020; 144,538 issued and |
|
|
|
|
|
|
|
141,669 outstanding at December 31, 2019 |
|
|
1 |
|
|
|
|
1 |
|
Additional paid-in capital |
|
|
550,192 |
|
|
|
|
547,050 |
|
Retained deficit |
|
|
(725,512 |
) |
|
|
|
(772,249 |
) |
Treasury stock, at cost; 2,869 shares for both dates presented |
|
|
(24,167 |
) |
|
|
|
(24,167 |
) |
Total shareholders’ deficit |
|
|
(199,486 |
) |
|
|
|
(249,365 |
) |
Total liabilities and shareholders’ deficit |
|
$ |
949,480 |
|
|
|
$ |
1,003,719 |
|
W&T OFFSHORE, INC. AND SUBSIDIARIES |
Condensed Consolidated Statements of Cash
Flows |
(In thousands) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
|
2020 |
|
2020 |
|
2019 |
|
|
2020 |
|
2019 |
Operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(13,339 |
) |
|
$ |
(5,904 |
) |
|
$ |
75,899 |
|
|
$ |
46,737 |
|
|
$ |
64,527 |
|
Adjustments to reconcile net (loss) income to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion, amortization and accretion |
|
|
25,127 |
|
|
|
29,483 |
|
|
|
38,841 |
|
|
|
93,736 |
|
|
|
110,680 |
|
Amortization of debt items and other items |
|
|
1,569 |
|
|
|
2,057 |
|
|
|
1,429 |
|
|
|
5,251 |
|
|
|
3,914 |
|
Share-based compensation |
|
|
1,075 |
|
|
|
1,019 |
|
|
|
1,248 |
|
|
|
3,142 |
|
|
|
2,429 |
|
Derivative loss (gain) |
|
|
11,161 |
|
|
|
15,414 |
|
|
|
(5,853 |
) |
|
|
(35,337 |
) |
|
|
41,228 |
|
Cash receipts on derivative settlements, net |
|
|
4,462 |
|
|
|
33,162 |
|
|
|
4,791 |
|
|
|
42,028 |
|
|
|
17,583 |
|
Gain on purchase of debt |
|
|
- |
|
|
|
(28,968 |
) |
|
|
- |
|
|
|
(47,469 |
) |
|
|
- |
|
Deferred income taxes |
|
|
(21,200 |
) |
|
|
(8,706 |
) |
|
|
(44,241 |
) |
|
|
(23,407 |
) |
|
|
(55,764 |
) |
Changes in operating assets and liabilities: |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Oil and natural gas receivables |
|
|
975 |
|
|
|
13,030 |
|
|
|
(9,814 |
) |
|
|
35,959 |
|
|
|
(3,822 |
) |
Joint interest receivables |
|
|
4,296 |
|
|
|
(2,380 |
) |
|
|
8,312 |
|
|
|
9,039 |
|
|
|
(15,850 |
) |
Prepaid expenses and other assets |
|
|
4,446 |
|
|
|
(7,506 |
) |
|
|
(6,077 |
) |
|
|
7,951 |
|
|
|
(14,211 |
) |
Income tax |
|
|
(15 |
) |
|
|
2,008 |
|
|
|
17,205 |
|
|
|
1,993 |
|
|
|
17,165 |
|
Asset retirement obligation settlements |
|
|
(624 |
) |
|
|
(1,915 |
) |
|
|
(5,099 |
) |
|
|
(2,788 |
) |
|
|
(7,740 |
) |
Cash advance from JV partner |
|
|
(3,408 |
) |
|
|
(7,156 |
) |
|
|
(2,680 |
) |
|
|
2,442 |
|
|
|
15,847 |
|
Accounts payable, accrued liabilities and other |
|
|
6,735 |
|
|
|
(24,484 |
) |
|
|
6,319 |
|
|
|
(24,539 |
) |
|
|
10,610 |
|
Net cash provided by operating activities |
|
|
21,260 |
|
|
|
9,154 |
|
|
|
80,280 |
|
|
|
114,738 |
|
|
|
186,596 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in oil and natural gas properties and equipment |
|
|
(1,234 |
) |
|
|
(6,374 |
) |
|
|
(30,333 |
) |
|
|
(41,183 |
) |
|
|
(93,482 |
) |
Acquisition of property interest in oil and natural gas
properties |
|
|
- |
|
|
|
1,546 |
|
|
|
(157,718 |
) |
|
|
(456 |
) |
|
|
(167,718 |
) |
Purchases of furniture, fixtures and other |
|
|
- |
|
|
|
- |
|
|
|
(20 |
) |
|
|
(70 |
) |
|
|
(20 |
) |
Net cash used in investing activities |
|
|
(1,234 |
) |
|
|
(4,828 |
) |
|
|
(188,071 |
) |
|
|
(41,709 |
) |
|
|
(261,220 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings on credit facility |
|
|
- |
|
|
|
25,000 |
|
|
|
150,000 |
|
|
|
25,000 |
|
|
|
150,000 |
|
Repayments on credit facility |
|
|
- |
|
|
|
(25,000 |
) |
|
|
(66,000 |
) |
|
|
(50,000 |
) |
|
|
(66,000 |
) |
Purchase of Senior Second Lien Notes |
|
|
- |
|
|
|
(15,394 |
) |
|
|
- |
|
|
|
(23,930 |
) |
|
|
- |
|
Debt issuance costs and other |
|
|
- |
|
|
|
- |
|
|
|
(177 |
) |
|
|
- |
|
|
|
(928 |
) |
Net cash (used in) provided by financing activities |
|
|
- |
|
|
|
(15,394 |
) |
|
|
83,823 |
|
|
|
(48,930 |
) |
|
|
83,072 |
|
Increase (decrease) in cash and cash equivalents |
|
|
20,026 |
|
|
|
(11,068 |
) |
|
|
(23,968 |
) |
|
|
24,099 |
|
|
|
8,448 |
|
Cash and cash equivalents, beginning of period |
|
|
36,506 |
|
|
|
47,574 |
|
|
|
65,709 |
|
|
|
32,433 |
|
|
|
33,293 |
|
Cash and cash equivalents, end of period |
|
$ |
56,532 |
|
|
$ |
36,506 |
|
|
$ |
41,741 |
|
|
$ |
56,532 |
|
|
$ |
41,741 |
|
W&T OFFSHORE, INC. AND SUBSIDIARIES |
Financial Commodity Derivative Positions |
As of November 4, 2020 |
|
|
Production Period |
|
Instrument |
|
Avg. DailyVolumes |
|
Weighted AvgSwap Price |
|
Weighted AvgPut Price |
|
Weighted AvgCall Price |
Crude Oil - WTI NYMEX: |
|
|
|
(bbls) |
|
(per Bbl) |
|
(per Bbl) |
|
(per Bbl) |
Nov 2020 - Dec 2020 |
|
Costless Collars |
|
1,000 |
|
|
|
$45.00 |
|
$63.60 |
Nov 2020 - Dec 2020 |
|
Costless Collars |
|
9,000 |
|
|
|
$45.00 |
|
$63.50 |
Nov 2020 - Dec 2020 |
|
Calls (long) |
|
10,000 |
|
|
|
|
|
$67.50 |
Jan 2021 - Dec 2021 |
|
Swaps |
|
1,000 |
|
$41.00 |
|
|
|
|
Jan 2021 - Dec 2021 |
|
Swaps |
|
1,000 |
|
$42.05 |
|
|
|
|
Jan 2021 - Dec 2021 |
|
Swaps |
|
1,000 |
|
$42.18 |
|
|
|
|
Jan 2021 - Dec 2021 |
|
Swaps |
|
1,000 |
|
$43.00 |
|
|
|
|
Jan 2022 - Feb 2022 |
|
Swaps |
|
1,000 |
|
$42.75 |
|
|
|
|
Jan 2022 - Feb 2022 |
|
Swaps |
|
1,000 |
|
$42.80 |
|
|
|
|
Jan 2022 - Feb 2022 |
|
Swaps |
|
1,000 |
|
$43.40 |
|
|
|
|
Jan 2021 - Jan 2021 |
|
Costless Collars |
|
2,895 |
|
|
|
$35.00 |
|
$50.00 |
Feb 2021 - Feb 2021 |
|
Costless Collars |
|
3,340 |
|
|
|
$35.00 |
|
$50.00 |
Mar 2021 - Mar 2021 |
|
Costless Collars |
|
2,382 |
|
|
|
$35.00 |
|
$50.00 |
Apr 2021 - Apr 2021 |
|
Costless Collars |
|
2,362 |
|
|
|
$35.00 |
|
$50.00 |
May 2021 - May 2021 |
|
Costless Collars |
|
1,944 |
|
|
|
$35.00 |
|
$50.00 |
Jun 2021 - Jun 2021 |
|
Costless Collars |
|
1,924 |
|
|
|
$35.00 |
|
$50.00 |
Jul 2021 - Jul 2021 |
|
Costless Collars |
|
1,525 |
|
|
|
$35.00 |
|
$50.00 |
Aug 2021 - Aug 2021 |
|
Costless Collars |
|
1,346 |
|
|
|
$35.00 |
|
$50.00 |
Sep 2021 - Sep 2021 |
|
Costless Collars |
|
1,350 |
|
|
|
$35.00 |
|
$50.00 |
Oct 2021 - Oct 2021 |
|
Costless Collars |
|
1,012 |
|
|
|
$35.00 |
|
$50.00 |
Nov 2021 - Nov 2021 |
|
Costless Collars |
|
948 |
|
|
|
$35.00 |
|
$50.00 |
Dec 2021 - Dec 2021 |
|
Costless Collars |
|
625 |
|
|
|
$35.00 |
|
$50.00 |
Jan 2022 - Jan 2022 |
|
Costless Collars |
|
1,473 |
|
|
|
$35.00 |
|
$50.00 |
Feb 2022 - Feb 2022 |
|
Costless Collars |
|
1,790 |
|
|
|
$35.00 |
|
$50.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production Period |
|
Instrument |
|
Avg. Daily Volumes |
|
Weighted Avg Swap Price |
|
Weighted Avg Put Price |
|
Weighted Avg Call Price |
Natural Gas - Henry Hub NYMEX: |
|
|
|
(MMBTU) |
|
(per MMBTU) |
|
(per MMBTU) |
|
(per MMBTU) |
Nov 2020 - Dec 2022 |
|
Calls (long) |
|
40,000 |
|
|
|
|
|
$3.00 |
Nov 2020 - Dec 2022 |
|
Costless Collars |
|
40,000 |
|
|
|
$1.83 |
|
$3.00 |
Nov 2020 - Dec 2020 |
|
Costless Collars |
|
10,000 |
|
|
|
$1.75 |
|
$2.58 |
Nov 2020 - Dec 2020 |
|
Swaps |
|
10,000 |
|
$2.03 |
|
|
|
|
Nov 2020 - Dec 2020 |
|
Swaps |
|
15,000 |
|
$2.21 |
|
|
|
|
Jan 2021 - Dec 2021 |
|
Costless Collars |
|
20,000 |
|
|
|
$2.17 |
|
$3.00 |
Jan 2021 - Dec 2021 |
|
Swaps |
|
10,000 |
|
$2.62 |
|
|
|
|
Jan 2021 - Dec 2021 |
|
Costless Collars |
|
10,000 |
|
|
|
$2.20 |
|
$3.00 |
Jan 2022 - Feb 2022 |
|
Costless Collars |
|
30,000 |
|
|
|
$2.20 |
|
$4.50 |
Jan 2022 - Jan 2022 |
|
Swaps |
|
20,000 |
|
$2.79 |
|
|
|
|
Feb 2022 - Feb 2022 |
|
Swaps |
|
30,000 |
|
$2.79 |
|
|
|
|
W&T OFFSHORE, INC. AND
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 “Adjusted Net Income”, “Adjusted EBITDA” and “Free Cash Flow”.
Management uses these non-GAAP financial measures in its analysis
of performance. In addition, Adjusted EBITDA is a key metric used
to determine the Company’s incentive compensation awards. These
disclosures may not be viewed as a substitute for results
determined in accordance with GAAP and are not necessarily
comparable to non-GAAP performance measures which may be reported
by other companies.
Reconciliation of Net
(Loss) Income to Adjusted Net
(Loss) Income
Adjusted Net (Loss) Income does not include the
unrealized commodity derivative loss (gain), amortization of
derivative premium, bad debt reserve, deferred tax benefit, and
gain on debt transactions. Adjusted Net Income is presented because
the timing and amount of these items cannot be reasonably estimated
and affect the comparability of operating results from period to
period, and current periods to prior periods.
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
|
2020 |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
(In thousands, except per share amounts) |
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(13,339 |
) |
|
$ |
(5,904 |
) |
|
$ |
75,899 |
|
|
$ |
46,737 |
|
|
$ |
64,527 |
|
Unrealized commodity derivative loss (gain) |
|
|
13,112 |
|
|
|
37,992 |
|
|
|
(5,670 |
) |
|
|
(1,416 |
) |
|
|
40,951 |
|
Amortization of derivative premium |
|
|
1,483 |
|
|
|
3,407 |
|
|
|
3,931 |
|
|
|
9,239 |
|
|
|
11,664 |
|
Bad debt reserve |
|
|
(1 |
) |
|
|
47 |
|
|
|
55 |
|
|
|
82 |
|
|
|
193 |
|
Deferred tax benefit |
|
|
(21,170 |
) |
|
|
(8,736 |
) |
|
|
(55,764 |
) |
|
|
(23,407 |
) |
|
|
(55,764 |
) |
Gain on debt transactions |
|
|
- |
|
|
|
(28,968 |
) |
|
|
- |
|
|
|
(47,469 |
) |
|
|
- |
|
Adjusted Net (Loss) Income |
|
$ |
(19,915 |
) |
|
$ |
(2,162 |
) |
|
$ |
18,451 |
|
|
$ |
(16,234 |
) |
|
$ |
61,571 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted adjusted (loss) earnings per common share |
|
$ |
(0.14 |
) |
|
$ |
(0.02 |
) |
|
$ |
0.13 |
|
|
$ |
(0.11 |
) |
|
$ |
0.43 |
|
W&T OFFSHORE, INC. AND
SUBSIDIARIESNon-GAAP Information
Reconciliation of Net
(Loss) Income to Adjusted EBITDA
and to Free Cash Flow
The Company defines Adjusted EBITDA as net
(loss) income plus income tax (benefit) expense, net interest
expense, and depreciation, depletion, amortization and accretion,
excluding the unrealized commodity derivative gain or loss,
amortization of derivative premium, bad debt reserve, and gain on
debt transactions. W&T believes the presentation of Adjusted
EBITDA provides useful information regarding its ability to service
debt and to fund capital expenditures. The Company believes this
presentation is relevant and useful because it helps investors
understand W&T’s operating performance and makes it easier to
compare its results with those of other companies that have
different financing, capital and tax structures. Adjusted EBITDA
should not be considered in isolation from or as a substitute for
net income, as an indication of operating performance or cash flows
from operating activities or as a measure of liquidity. Adjusted
EBITDA, as W&T calculates it, may not be comparable to Adjusted
EBITDA measures reported by other companies. In addition, Adjusted
EBITDA does not represent funds available for discretionary
use.
The Company defines Free Cash Flow as Adjusted
EBITDA (defined above), less capital expenditures, plugging and
abandonment costs and interest expense. W&T’s management
believes that Free Cash Flow is an important financial measure for
use in evaluating the Company's financial performance and measures
the Company’s ability to generate cash from business operations in
excess of its capital spending and debt servicing requirements.
Free Cash Flow, as W&T calculates it, may not be comparable to
Free Cash Flow measures reported by other companies.
These measures are widely used by investors and
research analysts for the valuation, comparison, rating and
investment recommendations of companies. The following table
presents a reconciliation of W&T’s net (loss) income to
Adjusted EBITDA and to Free Cash Flow.
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
|
2020 |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
(In thousands) |
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(13,339 |
) |
|
$ |
(5,904 |
) |
|
$ |
75,899 |
|
|
$ |
46,737 |
|
|
$ |
64,527 |
|
Interest expense, net |
|
|
14,135 |
|
|
|
14,816 |
|
|
|
14,445 |
|
|
|
46,061 |
|
|
|
42,934 |
|
Income tax benefit |
|
|
(21,057 |
) |
|
|
(8,736 |
) |
|
|
(55,500 |
) |
|
|
(23,294 |
) |
|
|
(67,023 |
) |
Depreciation, depletion, amortization and accretion |
|
|
25,127 |
|
|
|
29,483 |
|
|
|
38,841 |
|
|
|
93,736 |
|
|
|
110,680 |
|
Unrealized commodity derivative loss (gain) |
|
|
13,112 |
|
|
|
37,992 |
|
|
|
(5,670 |
) |
|
|
(1,416 |
) |
|
|
40,951 |
|
Amortization of derivative premium |
|
|
1,483 |
|
|
|
3,407 |
|
|
|
3,931 |
|
|
|
9,239 |
|
|
|
11,664 |
|
Bad debt reserve |
|
|
(1 |
) |
|
|
47 |
|
|
|
55 |
|
|
|
82 |
|
|
|
193 |
|
Gain on debt transactions |
|
|
- |
|
|
|
(28,968 |
) |
|
|
- |
|
|
|
(47,469 |
) |
|
|
- |
|
Adjusted EBITDA |
|
$ |
19,460 |
|
|
$ |
42,137 |
|
|
$ |
72,001 |
|
|
$ |
123,676 |
|
|
$ |
203,926 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures (1) |
|
|
1,184 |
|
|
|
(4,596 |
) |
|
|
(39,187 |
) |
|
|
(13,024 |
) |
|
|
(106,083 |
) |
Plug and abandonment |
|
|
(624 |
) |
|
|
(1,915 |
) |
|
|
(5,099 |
) |
|
|
(2,788 |
) |
|
|
(7,740 |
) |
Interest expense, net |
|
|
(14,135 |
) |
|
|
(14,816 |
) |
|
|
(14,445 |
) |
|
|
(46,061 |
) |
|
|
(42,934 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow |
|
$ |
5,885 |
|
|
$ |
20,810 |
|
|
$ |
13,270 |
|
|
$ |
61,803 |
|
|
$ |
47,169 |
|
(1) On an accrual basis and includes purchases of furniture,
fixtures and other.
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