W&T Offshore (WTI) Tops Q1 EPS by 2c, Revenues Miss

W&T Offshore (NYSE: WTI) reported Q1 EPS of $0.04, $0.02 better than the analyst estimate of $0.02. Revenue for the quarter came in at $124.13 million versus the consensus estimate of $130.05 million.

Key highlights included:

• Produced 53,553 barrels of oil equivalent per day (“Boe/d”), or 4.9 million Boe (48% liquids), in the first quarter of 2020, near the high end of W&T’s guidance range, reflecting a 61% increase from the first quarter of 2019 and slightly higher than the fourth quarter of 2019;
• Reported net income of $66.0 million or $0.46 per share and Adjusted Net Income of $5.8 million or $0.04 per share in the first quarter of 2020;
• Generated significant Adjusted EBITDA of $62.1 million for the first quarter of 2020, despite a lower pricing environment;
• Recorded strong cash flow from operating activities of $84.3 million in the first quarter;
• Closed the acquisition of an additional 25% working interest in the deepwater Magnolia Field;
• Since December 31,2019, W&T has reduced its long-term debt associated with its Senior Second Lien Notes by $72.5 million as of the date of this press release resulting in annualized interest savings of $7.1 million;
• Announced on March 23, 2020 that W&T was the apparent high bidder on two blocks in the Gulf of Mexico Lease Sale 254 held by the Bureau of Ocean Energy Management ("BOEM") on March 18, 2020;
• Responded to the current low oil price environment with definitive actions to maintain financial flexibility, protect cash flow and preserve future value:o Suspended all drilling activities and significantly reduced its estimate of 2020 capital expenditures to $15 million to $25 million;o Proactively curtailed production at selected oil-weighted fields operated by W&T;o Implementing 15% to 25% reductions in lease operating expenses (“LOE”) without compromising safety or operational capabilities; and
• Completed the semi-annual redetermination of the borrowing base under the revolving credit facility which was reduced modestly from $250 million to $215 million.

Tracy W. Krohn, W&T's Chairman and Chief Executive Officer, stated, “Since the formation of W&T in 1983, we have been able to persevere through multiple pricing downturns in the past because our focus and strategy is to maximize cash flow generation and continuously improve the profitability of our assets, at any commodity price. We are very pleased that, thus far, none of our onshore or offshore employees have tested positive for COVID-19. However, the global COVID-19 pandemic coupled with supply and demand imbalances have created an environment of uncertainty across the oil sector and temporarily reduced oil prices to unprecedented low levels. We acted quickly to address these issues. We continue working to minimize the operational and financial impacts for the remainder of 2020, while also looking to preserve liquidity and value. We have reduced our capital expenditure budget for the remainder of 2020, shut-in a limited number of oil-weighted operated properties and experienced production shut-ins from non-operated oil and gas properties. Additionally, we are reducing LOE without compromising safety or our operational capabilities. We also recently completed our semi-annual borrowing base redetermination, which resulted in a modest reduction to the revolving credit facility and the amended agreement provides more manageable covenants in light of changes in oil prices and flexibility in both the current environment and going forward.”

“I am proud of how we have operated over the past three months and pleased with our strong first quarter results. Production was near the high end of guidance, we generated $62.1 million in Adjusted EBITDA, despite lower commodity prices, and we completed the acquisition of an additional 25% working interest in the deepwater Magnolia Field. After successfully addressing the unprecedented decline in oil prices in March and April, we are encouraged by the recent improvement in crude oil prices and the outlook for natural gas price improvements this winter. In addition, the proactive actions that we have undertaken to reduce capex and LOE coupled with our strong hedge book offering downside protection on commodity prices should allow us to continue to generate strong cash flow. Our management team’s interests are highly aligned with those of our shareholders through management’s 34% stake in the Company’s equity, which ensures that we are doing what is best for the near-term and long-term profitability of W&T,” concluded Mr. Krohn.

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 mandated a work-from-home policy as of March 23, 2020 and assured that all employees had the ability to continue performing their work duties remotely. W&T recently reopened its corporate office and has implemented actions to protect its employees working in its offices including weekly temperature checks. The Company will continue to monitor the situation and will follow the advice of government and health leaders.

For its field operations, the Company instituted screening of all personnel prior to entry to heliports and shorebases as well as its two Alabama gas plants, which includes a questionnaire and temperature check. The Company conducts daily temperature screenings at all offshore facilities and implemented procedures for distancing and hygiene at its field locations.

2020 Guidance

Due to the recent sharp decline in oil prices, W&T significantly reduced its 2020 capital spending expectations and has also reduced its planned asset retirement expenditures. As of April 20, 2020, W&T temporarily shut-in production of approximately 3,300 Boe/d in selected oil-weighted fields operated by the Company but its Mahogany field and its key natural gas fields including its Mobile Bay complex were not affected. The Company continues to monitor these fields to determine the appropriate timing of returning these fields to production. W&T’s production was also deferred at certain non-operated fields. Those third-party deferrals totaled approximately 3,400 Boe/d net to W&T. Recently, approximately 2,900 Boe/d of third party deferrals were returned to production. Lastly, W&T temporarily shut-in a portion of its production due to Tropical Storm Cristobal which resulted in a total of approximately 110,000 net Boe of deferred production. There was no material damage done by the storm to any of W&T’s infrastructure.

As a result of the combination of ongoing uncertainty in commodity markets, production curtailments, and proactive efforts to continually reduce costs in the lower price environment, the Company has withdrawn the annual guidance it provided earlier this year and will provide such guidance again in the future when there is increased forward visibility in oil and gas markets.

For earnings history and earnings-related data on W&T Offshore (WTI) click here.

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