W&T Offshore has reported operational and financial results for the first quarter 2022.

Key highlights for the first quarter 2022 and through the date of this press release included:

• Increased average daily production by 2% to 37.8 thousand barrels of oil equivalent per day (“MBoe/d”) (49% liquids), or 3.4 million barrels of oil equivalent (“MMBoe”), in the first quarter of 2022 compared to the prior quarter and at the high end of guidance;
• Reported net loss of $2.5 million or $0.02 per diluted share and Adjusted Net Income of $30.3 million or $0.21 per diluted share in the first quarter of 2022;
• Grew Adjusted EBITDA by 37% quarter-over-quarter to $89.7 million for the first quarter of 2022;
• Continued progress on improving the leverage profile of the Company with Net Debt at $504.8 million as of March 31, 2022, representing a ratio of Net Debt to trailing twelve months (“TTM”) Adjusted EBITDA of 2.0 times compared to a ratio of 3.4 times a year ago;
• Generated Free Cash Flow for the 17th consecutive quarter, with Free Cash Flow more than doubling to $46.9 million in the first quarter of 2022 from $22.5 million in the fourth quarter of 2021;
• Placed the Cota well at East Cameron 338/349 online in early March 2022, with current gross production of approximately 2.6 MBoe/d;
• Closed the acquisition of an average of 80% working interests in 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 cash (after normal and customary post-effective date adjustments), which was funded using cash on hand, and acquired the remaining 20% working interests in these assets for $17.5 million from undisclosed private sellers on April 1, 2022; and
• Subsequent to quarter-end, announced Memorandum of Understanding with Korea National Oil Corporation (“KNOC”) to jointly consider and pursue various opportunities in upstream oil and gas in North America.

Tracy W. Krohn, Chairman and Chief Executive Officer, stated, 
“We are off to a strong start in 2022, with solid operational and financial results that demonstrate our ability to deliver on our strategy of free cash flow generation, maintain high-quality conventional production, and capitalize on accretive opportunities. Our first quarter production was at the top end of the guidance range, LOE costs were below the low end of the guidance range, and we grew Adjusted EBITDA by 37% quarter over quarter to $89.7 million. Additionally, we paid down $10.6 million in debt in the first quarter and our Net Debt to TTM Adjusted EBITDA ratio has declined to 2.0 times from 3.4 times at the same time last year. Assuming recent forward strip prices, we are forecasting that our Net Debt to TTM Adjusted EBITDA could end the year below 1.0 times, assuming no additional acquisitions.”

“Yesterday we announced a Memorandum of Understanding (“MOU”) with Korea National Oil Corporation (“KNOC”) that formalizes the intention of the two entities to work together to pursue various opportunities in upstream oil and gas in North America. KNOC is a highly respected company in our industry and this MOU will allow us to look at opportunities that can be made even more successful by combining our strengths and working together.”

“We remain active in our search for complementary and accretive acquisitions, and were pleased with the results of our efforts when we closed the ANKOR acquisition in February. These shallow water producing properties have a solid base of proved reserves and strong free cash flow, both of which are key factors when we consider any acquisition opportunities and shape our strategic vision. We initiated recompletion activity on those assets in the first quarter and we’ll continue to find ways to maximize the value of this acquisition. Subsequent to quarter-end, we purchased the remaining working interests in those properties from an undisclosed private seller for approximately $17.5 million, which brings W&T’s total working interest in the assets to 100%. Assuming strip pricing as of April 18, 2022, we estimate year-end 2021 proved and probable reserves for W&T’s 100% working interest in the properties were approximately 6.7 MMBoe (70% oil) and 9.5 MMBoe (75% oil), respectively. Net production to W&T’s interests at quarter-end was approximately 4.5 MBoe/d.”

“We recently issued our annual Environmental, Social, and Governance (“ESG”) report for 2022. The Company made positive strides across all three ESG elements, including another year of declining Scope 1 greenhouse gas emissions. We are committed to building upon the solid foundation we have created here at W&T. ESG is a key part of our core values and culture, and we’re excited to continue making a positive impact on our employees and the communities in which we operate and live, as well as protecting and preserving the environment in all aspects of our business.”

“We believe we are well positioned with a solid balance sheet and a substantial inventory of drilling opportunities with potentially high rates of return. Our strong financial footing also allows us to evaluate and quickly execute on accretive acquisition opportunities that meet our criteria as we did in February. We’ll continue to evaluate opportunities to be more active in our drilling program; however, our near-term focus is on continuing to improve our leverage profile and maintain our financial flexibility. We’re constantly evaluating acquisition opportunities and we have the ability to move quickly if we see something that meets our criteria. We remain committed to growing shareholder value and are well positioned for future success.”

2022 CAPITAL INVESTMENT PROGRAM

W&T’s range for capital expenditures in 2022 remains unchanged at $70 million to $90 million for the full year, 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.

Similarly, the range for plugging and abandonment expenditures remains unchanged in the range of $55 million to $75 million, driven by obligations and prior Covid-19-related deferrals on terminated leases with U.S. Bureau of Safety and Environmental Enforcement (“BSEE”) deadlines before year-end 2022. The Company spent $5.5 million on ARO settlements in the first quarter of 2022.

OPERATIONS UPDATE

The Cota well at East Cameron 338/349 was placed online in early March 2022 and is currently producing on a gross basis approximately 2.6 MBoe/d. The well, which is in over 290 feet of water and was drilled to a total depth of 6,000 feet, encountered approximately 100 feet of net oil pay. W&T has an initial working interest of 30% that can increase to 38.4 % upon satisfaction of certain performance provisions.

Well Recompletions and Workovers

During the first quarter of 2022, the Company performed two recompletions that positively impacted production for the quarter. W&T plans to continue to perform recompletions and workovers that meet its economic thresholds.

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