W&T Offshore has reported operational and financial results for the fourth quarter and full year 2021, including the Company’s year-end 2021 reserve report. Guidance for 2022 was also provided. 

Key highlights for the fourth quarter and full year 2021 included:

• Increased production by 7% to 37.2 thousand barrels of oil equivalent per day (“MBoe/d”) (45% liquids), or 3.4 million barrels of oil equivalent (“MMBoe”), in the fourth quarter of 2021 compared to the prior quarter and above the midpoint of guidance;
• Generated net income of $48.9 million or $0.34 per diluted share in the fourth quarter of 2021 and net loss for the full year 2021 of $41.5 million or $0.29 per diluted share;
• Reported Adjusted Net Income of $14.8 million or $0.10 per diluted share in the fourth quarter of 2021, and Adjusted Net Income of $33.3 million or $0.23 per diluted share for the full year;
• Grew Adjusted EBITDA by 42% quarter-over-quarter to $65.7 million for the fourth quarter of 2021, and full year 2021 Adjusted EBITDA increased 35% year-over-year to $220.3 million;
• Generated significant Free Cash Flow of $22.5 million in the fourth quarter of 2021 and $90.9 million for the full year 2021;
• Reduced Net Debt to $485.1 million at year-end 2021, representing decreases of $96.5 million over a one-year period and $202.0 million over a two-year period;
• Increased year-end 2021 proved reserves at SEC pricing by 9% to 157.6 MMBoe and increased the present value of SEC proved reserves discounted at 10% (“PV-10”) by 119% to $1.6 billion compared to year-end 2020, despite no additions from drilling activities and negligible acquisition activity during 2021;
• Benefited from positive well performance and technical revisions of 5.2 MMBoe and 21.9 MMBoe of positive price revisions; and
• Highlighted value of resource base in the current commodity environment with PV-10 of year-end 2021 proved reserves of $2.0 billion using NYMEX strip pricing as of March 2, 2022.

Important developments following year-end included:

• Closed the previously-announced acquisition of oil and gas producing properties from ANKOR E&P Holdings Corporation and KOA Energy LP (“ANKOR”) in Federal shallow waters in the central region of the Gulf of Mexico (“GOM”) for approximately $30.2 million (after normal and customary post-effective date adjustments) which was funded using cash on hand;
• The transaction included internally-estimated proved reserves of 5.5 MMBoe (69% oil) and proved and probable, or 2P, reserves of 7.6 MMBoe (75% oil) as of July 1, 2021 assuming NYMEX strip pricing as of December 7, 2021 and adds over 50 gross producing wells (average working interest of 80%) across three shallow water fields; and
• Announced 2022 capital spending budget of $70 to $90 million while maintaining focus on generating free cash flow to fund potential acquisitions and the reduction of debt.

Tracy W. Krohn, Chairman and Chief Executive Officer, stated, 
“We are very pleased with our ability to deliver solid operational and financial results in 2021. We ended the year strong with fourth quarter production of 37.2 MBoe/d, which was above the midpoint of guidance. Our fourth quarter Adjusted EBITDA grew to $65.7 million, up 42% compared with the third quarter. For the full year 2021, we generated $220 million of Adjusted EBITDA and $90 million of Free Cash Flow. We also substantially reduced Net Debt, which is down $97 million since year-end 2020 and $202 million since year-end 2019, while significantly increasing our liquidity to $296 million from $174 million at year-end 2020 and $172 million at year-end 2019.   Operationally, we were able to restore a significant amount of production following another active hurricane season while also completing numerous high return workover projects.”

“So far in 2022, we have announced and closed an attractive acquisition of shallow water producing properties with a solid base of proved reserves and strong free cash flow with upside potential, but without significant amounts of ongoing capital costs. Favorable industry conditions provide us confidence to expand our drilling program in 2022, but we will not lose our commitment to generating free cash flow. We plan to spend between $70 and $90 million in capital expenditures in 2022 before acquisitions, which includes capital related to one deepwater well and three wells on the shelf as well as expenditures for recompletions, facilities, leasehold, and seismic.”

“In early 2021, we issued our inaugural Environmental, Social and Governance (“ESG”) report with key metrics for the prior three years. In the coming weeks, we will be releasing an updated ESG report with 2021 data that will demonstrate our continued commitment to our employees and the communities in which we operate and live, as well as our commitment to protecting and preserving the environment in all aspects of our business. We will build on the foundation that we established in our initial report and discuss our accomplishments over the past year and areas where we can continue to show improvement. We take ESG seriously and it is a key part of our core values and the culture that we have built over the past 40 years that will allow us to sustainably and profitably grow into the future.”

“Entering 2022, we are encouraged with the strong pricing environment which, together with the additional production volumes from our recently completed acquisition and our Cota well which was placed online this month, should allow us to generate increased cash flow this year. We are well-positioned to increase our capital spending and implement a more active drilling program to take advantage of our substantial inventory of drilling opportunities with potentially high rates of return. Additionally, with enhanced liquidity, improved financial flexibility, and a meaningful amount of cash on hand, we will continue to evaluate accretive opportunities that meet our criteria, while systematically paying down debt. We have a successful track record of executing our strategic vision and are committed to growing shareholder value.”   

Production, Prices, and Revenue: Production for the fourth quarter of 2021 was 37.2 MBoe/d, which was above the midpoint of the guidance range provided for the quarter. This represented an increase of 7% compared to the third quarter of 2021 and down 3% from 38.3 MBoe/d for the corresponding period in 2020. Fourth quarter 2021 production was comprised of 12.9 MBbl/d of oil (35%), 3.7 MBbl/d of natural gas liquids (10%) (“NGLs”), and 123.1 million cubic feet per day (“MMcf/d”) of natural gas (55%).

W&T’s average realized price per barrel of oil equivalent (“Boe”) before realized derivative settlements was $47.70 per Boe in the fourth quarter of 2021, an increase of 16% from $41.05 per Boe in the third quarter in 2021 and an increase of 86% from $25.63 per Boe in the fourth quarter of 2020. Crude oil, NGL, and natural gas prices, before realized derivative settlements, for the fourth quarter of 2021 were $75.14 per barrel, $40.46 per barrel, and $5.29 per Mcf, respectively.

Revenues for the fourth quarter of 2021 were $165.6 million, which were 24% higher than third quarter 2021 revenue of $133.9 million and 75% higher than $94.7 million in the fourth quarter of 2020.

ACQUISITION OF PRODUCING PROPERTIES

In early February 2022, W&T closed its previously announced ANKOR acquisition of oil and gas producing properties in Federal shallow waters in the central region of the GOM at Ship Shoal 230, South Marsh Island 27/Vermilion 191, and South Marsh Island 73 fields from privately-held entities. After normal and customary post-effective date adjustments to reflect an effective date of July 1, 2021, cash consideration of approximately $30.2 million was paid to the sellers using cash on hand.

The transaction included internally-estimated proved reserves of 5.5 MMBoe (69% oil) and proved and probable, or 2P, reserves of 7.6 MMBoe (75% oil) as of July 1, 2021 assuming strip pricing as of December 7, 2021. Estimated production for the properties was approximately 3.4 MBoe/d per day (74% oil) at the time of the acquisition and adds over 50 gross producing wells (average working interest of 80%) across three shallow water fields.

2022 CAPITAL INVESTMENT PROGRAM

W&T’s capital expenditure budget for 2022 is expected to be in the range of $70 million to $90 million, which excludes acquisition opportunities. Included in this range are planned expenditures related to one deepwater well and three shelf wells, as well as capital costs for facilities, leasehold, seismic, and recompletions. The Company has significant flexibility to adjust its spending since it has no long-term rig commitments or near-term drilling obligations.

Plugging and abandonment expenditures are expected to be in the range of $55 million to $75 million, driven by obligations and prior deferrals on terminated leases with U.S. Bureau of Safety and Environmental Enforcement (“BSEE”) deadlines before year-end 2022. The Company spent $27.3 million on asset retirement obligation settlements in 2021.

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