W&T Offshorehas reported operational and financial results for the first quarter 2021.
Key highlights included:
- Produced 39,657 barrels of oil equivalent per day (“Boe/d”), or 3.6 million Boe (50% liquids), in the first quarter of 2021, above the midpoint of W&T’s guidance range and reflecting a 4% increase from the fourth quarter of 2020;
- Reported net loss of $0.7 million or $0.01 per share and Adjusted Net Income of $15.9 million or $0.11 per share in the first quarter of 2021;
- Generated significant Adjusted EBITDA of $57.6 million for the first quarter of 2021, up 63% from $35.3 million in the fourth quarter of 2020;
- Recorded strong net cash provided by operating activities of $45.0 million in the first quarter;
- Increased Free Cash Flow to $40.0 million in the first quarter of 2021, an increase of 182% from $14.2 million in the fourth quarter of 2020;
- Remained focused on controlling expenses and reported first quarter 2021 lease operating expense (“LOE”) and general and administrative (“G&A”) costs at the low end or below W&T’s guidance ranges
Tracy W. Krohn, W&T’s Chairman and Chief Executive Officer, stated,
“We had a good first quarter with our operational and financial results and believe that the improved commodity price environment and our commitment to expanding margins will lead to a very good year for us in 2021. Operationally we exceeded guidance in several areas. We were above the midpoint in production, below the midpoint in LOE and below the low end of guidance for G&A. Our strong operational performance coupled with higher commodity pricing led to a 182% increase in Free Cash Flow and a 63% increase in Adjusted EBITDA compared to the fourth quarter of 2020. The efforts we made in 2020 to reduce costs, maintain production and pay down debt are paying off. Additionally, in the first quarter of 2021 we continued to pay down our debt and increase our liquidity position. We have remained true to our strategic vision that has guided us for nearly 40 years to maximize the value of our premier assets that have strong, stable production and generate solid free cash flow.”
“While I am pleased with our results, I am equally proud of our inaugural ESG report that we released in March. We founded W&T with core values centered around safely and sustainably operating our assets and this has guided our success and provided the foundation for W&T to grow into a trusted operator. We have empowered our management to allocate resources and tools necessary to create a working environment focused on accomplishing our ESG objectives and believe that it is every employee’s responsibility to ensure that we operate with the highest regards toward ESG.”
“As we look to the remainder of 2021, we will continue to prioritize operational excellence and free cash flow generation. We have grown W&T through the right combination of attractive property acquisitions, methodical integration and exploitation of those acquisitions, and successful development and exploratory drilling on our legacy fields. We believe that market conditions in the Gulf remain very favorable for accretive acquisitions. Our improved balance sheet and strong cash flow generation have positioned W&T to actively pursue these opportunities. We also have favorable drilling opportunities within our legacy fields that we plan to drill or complete in the second half of 2021. With our 34% equity stake in W&T, our management team’s interests are highly aligned with those of our shareholders, which ensures that we are doing what is best for the near-term and long-term profitability of W&T,” concluded Mr. Krohn.
For the first quarter of 2021, W&T reported a net loss of $0.7 million, or $0.01 per share. Primarily excluding a $16.3 million unrealized commodity derivative loss, the Company’s Adjusted Net Income was $15.9 million, or $0.11 per share. In the first quarter of 2020, W&T reported net income of $66.0 million, or $0.46 per share, which included a $52.5 million unrealized commodity derivative gain, an $18.5 million non-cash gain on debt transaction, and $6.5 million in non-cash deferred tax expense. Adjusted Net Income for the first quarter of 2020 was $5.8 million, or $0.04 per share. In the fourth quarter of 2020, net loss was $8.9 million, or $0.06 per share, which included 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”). For that same period, Adjusted Net Loss was $6.7 million or $0.05 per share.
Adjusted EBITDA for the first quarter of 2021 totaled $57.6 million, an increase of 63% compared to $35.3 million in the fourth quarter of 2020 primarily due to higher commodity prices and increased production volumes. First quarter 2021 Adjusted EBITDA declined 7% from $62.1 million in the first quarter of 2020 primarily due to lower production volumes partially offset by higher prices and lower operating expenses, as well as the impact from derivatives that went from a realized gain in the first quarter of 2020 to a realized loss in the first quarter of 2021.
Free Cash Flow for the first quarter of 2021 totaled $40.0 million, an increase of 182% compared with $14.2 million in the fourth quarter of 2020, and an increase of 14% compared with $35.1 million in the first quarter of 2020.
Production, Prices and Revenues
Production for the first quarter of 2021 was 39,657 Boe/d or 3.6 MMBoe, an increase of 4% compared to 38,261 Boe/d in the fourth quarter of 2020 and down 26% versus 53,553 Boe/d in the first quarter of 2020. Production for the first quarter of 2021 was above the midpoint of guidance due to better runtime efficiency despite downtime in February associated with the winter storms. First quarter 2021 production was comprised of 1.4 million barrels (“MMBbls”) of oil, 0.4 MMBbls of natural gas liquids (“NGLs”) and 10.8 billion cubic feet (“Bcf”) of natural gas. Liquids production comprised 50% of total production in the first quarter of 2021.
For the first quarter of 2021, W&T’s average realized crude oil sales price was $56.73 per barrel. The Company’s realized NGL sales price was $23.88 per barrel and its realized natural gas sales price was $3.35 per Mcf. The Company’s combined average realized sales price for the quarter was $34.66 per Boe, which represents a 35% increase from $25.63 per Boe that was realized in the fourth quarter of 2020 and an increase of 40% compared to $24.71 per Boe in the first quarter of 2020.
Revenues for the first quarter of 2021 increased 33% to $125.6 million compared to $94.7 million in the fourth quarter of 2020, and increased slightly compared to $124.1 million in the first quarter of 2020. The quarter-over-quarter increase was driven primarily by increased realized commodity prices. The year-over-year increase was driven by improved commodity prices, but was significantly offset by lower production.
Capital expenditures in the first quarter of 2021, excluding changes in working capital associated with investing activities, were $1.6 million. As previously disclosed, W&T’s 2021 estimated capital budget of $30 million to $60 million (excluding potential acquisitions) is weighted toward the second half of 2021.
W&T successfully drilled one well at East Cameron 338/349 in the first quarter of 2020, the Cota well, which 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 remains in the development phase of the project, with initial production 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 did not initiate new drilling activity in the first quarter of 2021 as it plans for its capital investment program to be weighted toward the second half of 2021.
Well Recompletions and Workovers: During the first quarter of 2021, the Company performed one recompletion and one workover that in total added approximately 400 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: In January 2021, the Company completed the consolidation of 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, and closed its Yellowhammer treatment facility. 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.
KeyFacts Energy: W&T Offshore US Gulf of Mexico country profile