W&T Offshore today reported operational and financial results for the fourth quarter and full year 2020 including the Company’s year-end 2020 reserves report and 2021 guidance.

Key highlights included:

• Produced 38,261 barrels of oil equivalent per day (“Boe/d”), or 3.5 million barrels of oil equivalent (“MMBoe”) (47% liquids), in the fourth quarter of 2020, above the high end of W&T’s guidance range, reflecting an 11% increase from the third quarter of 2020 as production was brought back online from hurricane and other unplanned downtime;
• Reported net income for full year 2020 of $37.8 million or $0.26 per share, and a net loss of $8.9 million or $0.06 per share in the fourth quarter of 2020;
• Reported Adjusted Net Loss1 of $22.9 million or $0.16 per share for full year 2020, and an Adjusted Net Loss of $6.7 million or $0.05 per share in the fourth quarter of 2020;
• Generated significant Adjusted EBITDA1 of $159.0 million for the full year 2020, and $35.3 million for the fourth quarter of 2020, despite a difficult pricing environment and substantial production downtime associated with an extraordinarily active hurricane season;
• Free Cash Flow totaled $76.0 million for the full year 2020 and $14.2 million in the fourth quarter of 2020;
• Reported year-end 2020 proved reserves (utilizing SEC pricing) of 144.4 million barrels of oil equivalent (“MMBoe”), compared with 157.4 MMBoe at year-end 2019;
• Upward revisions of 26.2 MMBoe in 2020 related to improved well performance and technical revisions, and 3.9 MMBoe from acquisitions and drilling, were offset by 27.7 MMBoe of reductions due to lower commodity prices, and 15.4 MMBoe of production;
• Disclosed that year-end 2020 proved reserves (utilizing NYMEX strip pricing as of December 31, 2020) would have been 169.5 MMBoe;
• Remained focused on controlling expenses and reported fourth quarter 2020 lease operating, gathering and transportation, and general and administrative costs that were at the low end or below W&T’s guidance ranges;
• Announced 2021 preliminary capital spending of between $30 million and $60 million to achieve stable production and maintain the ability to generate free cash flow to fund the reduction of debt and potential acquisitions

Tracy W. Krohn, W&T's Chairman and Chief Executive Officer, stated, 
“I am quite pleased with our response to the extraordinary challenges that 2020 presented. We managed through a global pandemic, commodity price declines and a record number of named storms in the Gulf of Mexico. We have continued to take steps to protect our employees and contractors during the pandemic and, to-date, our people and our operations have not been materially impacted by COVID-19. In the fourth quarter, our operations team did an excellent job of returning our properties to production ahead of schedule which helped us exceed our guidance.   In addition, we were able to keep our operating and overhead costs low despite the additional operational work required to restore production.”

“Despite the difficulties we faced in 2020, we continued our focus on delivering free cash flow. By adjusting quickly to the changing environment early in 2020 and reducing our planned capital expenditures, we were able to generate $76.0 million in Free Cash Flow in 2020 compared with $74.0 million in 2019. We utilized a portion of our 2020 Free Cash Flow to retire $72.5 million of our senior notes for $23.9 million, with the added benefit of saving over $7.1 million in annualized interest and preserving long-term capital. Additionally, we recently   completed the consolidation of our two natural gas treatment facilities that serve the Mobile Bay area into a single facility 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 is expected to result in approximately $5 million per year in savings, beginning in 2021, as well as lower our Scope 1 emissions.”

“It is my pleasure to announce that W&T Offshore’s inaugural Environment, Social and Governance (“ESG”) report will be coming out shortly with our annual report and include key metrics for the past three years. We founded W&T nearly 40 years ago with the same core values we have today that have guided our success and provided the foundation for W&T to grow into a trusted operator. We believe that every employee has a responsibility to ensure that we operate with the highest regards toward ESG and we have empowered our management to allocate resources and tools necessary to create a working environment focused on accomplishing our ESG objectives.”

“Entering 2021, while market and pricing conditions are improving, our strategy remains unchanged. We have assembled a premier portfolio of conventional, low-declining producing properties that generate a solid foundation of cash flow with significant upside. While we have a substantial inventory of drilling opportunities with potentially high rates of return, we are not devoting all of our free cash flow to drilling, rather we are maximizing financial flexibility. The current price environment should allow us to generate meaningful free cash flow which we can use to reduce debt or potentially fund additional opportunities. Accordingly, our capital spending in 2021 is expected to be in the range of $30 to $60 million. The timing of our capital spending will be weighted to late 2021, which should benefit production in 2022. As a result, our 2021 production guidance of 38,000 to 42,000 Boe/d is modestly lower than our full year 2020 average, but higher than the fourth quarter of 2020. The lower decline profile of our conventional asset base allows for reductions in capital expenditures without significantly impacting near-term production levels. The energy industry is cyclical and we have faced adversity many times in the past, but our success over nearly 40 years has been because of our unwavering strategic focus that has positioned W&T to create value,” concluded Mr. Krohn.  

For the fourth quarter of 2020, W&T reported a net loss of $8.9 million, or $0.06 per share. Excluding primarily an $11.5 million unrealized commodity derivative loss, a $6.9 million non-cash tax benefit, and a $2.7 million credit related to a settlement with the U.S. Bureau of Safety and Environmental Enforcement (“BSEE”), the Company’s Adjusted Net Loss was $6.7 million, or $0.05 per share. In the fourth quarter of 2019, W&T reported net income of $9.6 million, or $0.07 per share, and Adjusted Net Income of $24.4 million or $0.17 per share. In the third quarter of 2020, W&T reported a net loss of $13.3 million, or $0.09 per share. For that same period, Adjusted Net Loss was $19.9 million or $0.14 per share.

Adjusted EBITDA totaled $35.3 million for the fourth quarter 2020, which represents an increase of 81% compared to $19.5 million in the third quarter of 2020 driven by increased pricing and production, and a decrease of 55% compared to $79.0 million in the fourth quarter of 2019 driven by lower realized pricing and lower production.

Free Cash Flow for the fourth quarter of 2020 totaled $14.2 million compared with $26.8 million in the same period in 2019 and $5.9 million in the third quarter of 2020.

Production, Prices and Revenues

Production for the fourth quarter of 2020 was 38,261 Boe/d or 3.5 MMBoe, an increase of 11% compared to 34,459 Boe/d in the third quarter of 2020 and down 28% versus 52,773 Boe/d in the fourth quarter of 2019. Production for the fourth quarter of 2020 was above the high end of production guidance due to faster recovery from hurricane downtime and unplanned downtime compared to forecast. Fourth quarter 2020 production was comprised of 1.3 million barrels (“MMBbls”) of oil, 0.4 MMBbls of natural gas liquids (“NGLs”) and 11.2 billion cubic feet (“Bcf”) of natural gas. Liquids production comprised 47% of total production in the fourth quarter of 2020.

For the fourth quarter of 2020, W&T’s average realized crude oil sales price was $42.84 per barrel. The Company’s realized NGL sales price was $16.30 per barrel and its realized natural gas sales price was $2.63 per Mcf. The Company’s combined average realized sales price for the quarter was $25.63 per Boe, which represents a 17% decrease from $30.75 per Boe that was realized in the fourth quarter of 2019 and an increase of 16% compared to $22.16 per Boe in the third quarter of 2020.

Revenues for the fourth quarter of 2020 decreased 38% to $94.7 million compared to $151.9 million in the fourth quarter of 2019 driven by lower pricing and production, and increased 31% compared to $72.5 million in the third quarter of 2020, driven by increased production and pricing quarter-over-quarter.

Operations update

W&T successfully drilled one well in the first quarter of 2020 at East Cameron 338/349, the Cota well, but suspended all other drilling activity in 2020 due to the uncertain pricing environment.

The Cota well is in over 290 feet of water and was drilled to a total depth of over 6,000 feet and encountered approximately 100 feet of net oil pay. The well is currently in the development phase of the project. Initial production is expected in the latter part of 2021. The Company has an initial 30% working interest in the Cota well but the interest will increase to 38.4% once the well is brought online and certain performance thresholds are met.

W&T participated in two federal GOM lease sales in 2020 and was awarded a total of four blocks including Eugene Island block 345, Eugene Island South Addition block 389 and Ewing Banks block 979, all in shallow water, and Garden Banks block 782 in deepwater. The Company invested approximately $1.2 million in the leases.

During the fourth quarter of 2020, the Company performed two workovers that in total added approximately 800 net Boe per day to production.

Year-End 2020 Proved Reserves

The Company's year-end 2020 SEC proved reserves were 144.4 MMBoe, down modestly from 157.4 MMBoe at year-end 2019.   W&T recorded upward revisions of 26.2 MMBoe in 2020 related to improved well performance and technical revisions, and 3.9 MMBoe from acquisitions, primarily from the purchase of additional interests in the Mobile Bay area and in the Magnolia field. These additions were offset by 27.7 MMBoe of reductions due to lower commodity prices, and 15.4 MMBoe of production. The SEC twelve-month first day of the month average realized prices used in the report for year-end 2020 were $37.78 per barrel of oil and $2.05 per Mcf of natural gas, while for year-end 2019 they were $58.11 per barrel of oil and $2.63 per Mcf of natural gas.

About 34% of year-end 2020 SEC proved reserves were liquids (22% crude oil and 12% NGLs) and 66% natural gas. At year end, approximately 83% of 2020 proved reserves were classified as proved developed producing, 8% as proved developed non-producing and 9% as proved undeveloped.

Using average realized NYMEX strip prices at year-end 2020 of $44.43 per barrel of oil and $2.66 per Mcf of natural gas, proved reserves would have been 169.5 MMBoe, comprised of 34.7 MMBbls of oil, 20.7 MMBbls of NGLs, and 684.7 Bcf of natural gas.

W&T’s reserve life ratio at year-end 2020, based on year-end 2020 SEC proved reserves and 2020 production was 9.4 years, while based on NYMEX strip pricing reserves, it was 11.0 years.

The present value of W&T’s reported SEC proved reserves, discounted at 10% ("PV-10"), at year-end 2020 was $741 million, down about 43% from $1.3 billion at the end of 2019. The 2020 SEC PV-10 is based on twelve-month first day of the month average realized prices of $37.78 per barrel of crude oil and $2.05 per Mcf of natural gas, both after adjustment for quality, transportation, fees, energy content, and regional price differentials. For 2019, the SEC PV-10 was based on twelve-month first day of the month average realized prices of $58.11 per barrel and an average natural gas price of $2.63 per Mcf, both after adjustments for quality, transportation, fees, energy content, and regional price differential.

Utilizing average realized NYMEX strip pricing as of December 31, 2020 of $44.43 per barrel of oil and $2.66 per Mcf of natural gas, the PV-10 would have been $1.1 billion.

KeyFacts Energy: W&T Offshore US Gulf of Mexico country profile