Provides Guidance for the Second Quarter
HOUSTON, May 4 /PRNewswire-FirstCall/ -- W&T Offshore, Inc. (NYSE: WTI) announced today financial and operational results for the first quarter 2006.
-- Record earnings of $0.85 per diluted share (before adjustment) in first quarter 2006 vs. $0.60 in first quarter 2005. -- W&T was successful in six of six exploration wells, including two in the deepwater and two in the deep shelf. -- W&T also successfully drilled two out of two conventional shelf development wells. -- Current production rate is at 210 mmcfe/d or 85% of pre-Katrina production.
Net Income: Net income for the three months ended March 31, 2006 was $55.8 million, or $0.85 per diluted share, on revenue of $162.1 million. Net income reflects the impact of $5.3 million of unrealized income ($3.4 million after-tax), or $0.05 per share, associated with the fair market value of W&T's open derivative contracts. Without the effect of the open derivatives contracts, net income for the quarter would have been $52.4 million, or $0.79 per share. See "Reconciliation of Adjusted Net Income Available to Common Shareholders" later in this release.
This compares to net income of $39.3 million or $0.60 per diluted share, on revenue of $129.1 million for the first quarter of 2005.
Cash Flow from Operations and Adjusted EBITDA: Net cash provided by operating activities increased 56% to $113.3 million during the first quarter 2006 from $72.4 million during the prior year's first quarter. The increase in cash provided by operating activities was attributable to higher realized prices on oil and natural gas in the first quarter of 2006 coupled with a reduction in accounts payable in the first quarter of 2005, offset by lower sales volumes and the payment of a $25.0 million performance deposit in connection with the Kerr-McGee transaction in 2006. First quarter adjusted EBITDA was $128.2 million, compared to $101.5 million during the prior year's first quarter. For additional information regarding EBITDA, please refer to "Reconciliation of Net Income to EBITDA."
Production and Prices: Total production in the first quarter of 2006 was 10.9 billion cubic feet ("Bcf") of natural gas at an average price of $8.82 per thousand cubic feet ("Mcf") and 1.1 million barrels ("MMBbls") of oil at an average price of $56.90 per Bbl, or 17.3 billion cubic feet of gas equivalent ("Bcfe") at an average price of $9.06 per Mcfe. This compares to production of 12.4 Bcf of gas at an average price of $6.33 per Mcf and 1.2 MMBbls of oil at an average price of $43.67 per Bbl, or 19.3 Bcfe at an average price of $6.67 per Mcfe in the first quarter of 2005. The reduction in sales volumes for all products is attributable to hurricane deferrals and normal production declines.
Lease Operating Expenses ("LOE"): LOE for the first quarter of 2006 decreased to $15.8 million from $16.2 million in the first quarter of 2005, primarily due to the reduced production attributable to hurricane deferrals and lower workover expenses.
Depreciation, depletion, amortization and accretion ("DD&A"): DD&A increased to $49.1 million, or $2.84 per Mcfe, in the first quarter of 2006 from $41.3 million, or $2.14 per Mcfe, in the same period of 2005. The increase in DD&A during the first quarter of 2006 is a result of higher depletable costs due to higher capital expenditures.
Production and Hurricane Update: W&T Offshore is producing approximately 210 million cubic feet of gas equivalent (MMcfe) net per day, which represents 85% of the Company's pre-Hurricane Katrina production rate. W&T Offshore anticipates achieving pre-Hurricane Katrina production levels in the third quarter. Currently, the Company estimates that 19 MMcfe per day of net production is shut-in because of Hurricanes Katrina and Rita, primarily due to issues related to field infrastructure and product sales pipelines. W&T has $21 million in hurricane insurance receivables that it believes it will collect over the course of the year. Additional receivables will accrue during the year as work commences, which are also expected to be collected.
Capital Expenditures and Drilling Update: During the first quarter of 2006, W&T participated in the drilling of six gross exploration wells and two development wells, all of which were successful. W&T spent $62.6 million on development projects, $51.9 million on exploration and $8.4 million on other capital expenditure items. Of the exploration wells drilled in the first quarter of 2006, two were in deepwater, two were in the deep shelf, and two were on the conventional shelf.
First Quarter Exploration Wells: Field Name/Well Category Working Interest % Grand Isle 3 #1 Exploration / Deep Shelf 25% Venice MLF C-11 Exploration / Deep Shelf 100% Ewing Bank 977#1ST Exploration / Deepwater 60% Green Canyon 82 #1 Exploration / Deepwater 100% Ship Shoal 130 J-2 Exploration / Shelf 100% South Timbalier 230 A-7 Exploration / Shelf 100% First Quarter Development Wells: Field Name/Well Category Working Interest % East Cameron 321 A-28ST Development / Shelf 100% Eugene Island 349 B-3ST Development / Shelf 29%
Lease Sale Update: W&T was the apparent high bidder on four of seven leases at the Central Gulf of Mexico lease sale on March 15, 2006. Of the four blocks, one is on the shelf and three in the deepwater. W&T's net financial exposure totaled $4.9 million. The Viosca Knoll 520 and 916 leases have already been awarded, and the remaining two, Green Canyon 73 and 74, are pending the necessary approvals from the MMS.
Dividends: On March 13, 2006, the Company's board of directors declared a cash dividend of $0.03 per common share, which was paid on May 1, 2006 to shareholders of record on April 14, 2006.
"We have had an excellent start to 2006. I am proud of our teams' achievements through the drill bit," said Tracy W. Krohn, Chairman and Chief Executive Officer. "We were also pleased to have achieved better than expected production in the first quarter. We were able to reestablish production at Green Canyon 178 (Baccarat) much sooner than anticipated and at higher rates than expected. Furthermore, production going forward will continue to ramp up significantly throughout the year. We believe our accomplishments reflect the quality and mix of our drilling prospects and the expertise of our operations and exploration teams. We are particularly excited about the Green Canyon 82 (Healey) discovery and look forward to obtaining additional information to fully evaluate this well."
"We continue to work with Kerr-McGee and the regulatory agencies towards completing the transaction, the largest in the Company's history. We are virtually done with due diligence, and our staff and management are prepared to close immediately," said Mr. Krohn.
Outlook: Certain factors affecting these forward-looking statements are listed in this news release. Guidance on performance for the second quarter and full year of 2006 is shown in the table below. This guidance is for W&T stand-alone and does not include the impact of the pending Kerr-McGee transaction.
Estimated Daily Production Second Quarter 2006 Full-Year 2006 Crude Oil (MMBbls) 1.2 - 1.3 5.8 - 6.1 Natural Gas (Bcf) 10.7 - 11.0 48.2 - 51.1 Total (Bcfe) 18.1 - 18.6 83.0 - 87.7 Operating expenses Second Quarter 2006 Full-Year 2006 ($ in millions, except as noted) Lease Operating Expense $18.4 - 19.4 $73.3 - $82.3 Gathering, Transportation & Production Taxes $3.6 - $4.0 $15.1 - $16.5 General and Administrative $7.8 - $9.8 $35.0 - $40.0 Income Tax Rate, % deferred 35.0%, 40% 35.0%, 40%
Conference Call Information: W&T will hold a conference call to discuss financial and operational results on Thursday, May 4, 2006 at 10:00 a.m. Eastern Time / 9:00 a.m. Central Time. To participate, dial (303) 205-0033 a few minutes before the call begins. The call will also be broadcast live over the Internet from the Company's website at http://www.wtoffshore.com. A replay of the conference call will be available approximately two hours after the end of the call until Thursday, May 11, 2006. To access the replay, dial (303) 590-3000 and reference conference ID 11059579.
About W&T Offshore
Founded in 1983, W&T Offshore is an independent oil and natural gas company focused primarily in the Gulf of Mexico, including exploration in the deepwater, where it has developed significant technical expertise. W&T has grown through acquisition, exploitation and exploration and now holds working interests in over 100 fields in federal and state waters and a majority of its daily production is derived from wells it operates. For more information on W&T Offshore, please visit its Web site at http://www.wtoffshore.com
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements reflect our current views with respect to future events, based on what we believe are reasonable assumptions. No assurance can be given, however, that these events will occur. These statements are subject to risks and uncertainties that could cause actual results to differ materially including, among other things, market position and conditions, oil and gas price volatility, uncertainties inherent in oil and gas production operations and estimating reserves, prospects unexpected future capital expenditures, competition, the success of our risk management activities, governmental regulations and other factors discussed in our Annual Report on 10-K for the year ended December 31, 2005 (http://www.sec.gov)
W&T OFFSHORE, INC. Consolidated Statements of Income Three Months Ended March 31, 2006 2005 (In thousands, except per share amounts) (Unaudited) Revenues: Oil and natural gas $156,852 $128,724 Commodity derivative income 5,276 - Other 2 348 Total revenues 162,130 129,072 Expenses: Lease operating 15,780 16,153 Gathering, transportation costs and production taxes 1,256 4,496 Depreciation, depletion, and amortization 46,838 38,957 Asset retirement obligation accretion 2,254 2,312 General and administrative 11,660 6,909 Total operating expenses 77,788 68,827 Income from operations 84,342 60,245 Net interest income (expense) 1,322 (221) Income before income taxes 85,664 60,024 Income tax expense 29,833 20,742 Net income $55,831 $39,282 Earnings per common share: Basic $0.85 $0.63 Diluted $0.85 $0.60 Shares outstanding: Weighted average shares - Basic 65,971 61,962 Weighted average shares - Diluted 65,994 65,964 Consolidated Cash Flow Information Net cash provided by operating activities $113,305 $72,428 Capital expenditures $122,894 $56,040 Other Financial Information Adj. EBITDA $128,158 $101,515 W&T OFFSHORE, INC. Operating Data Three Months Ended March 31, 2006 2005 (Unaudited) Net sales: Natural gas (MMcf) 10,904 12,375 Oil (MBbls) 1,067 1,154 Total natural gas and oil (MMcfe) 17,307 19,299 Average daily equivalent sales (MMcfe/d) 192.3 214.4 Average realized sales price: Natural gas ($/Mcf) $8.82 $6.33 Oil ($/Bbl) 56.90 43.67 Natural gas equivalent ($/Mcfe) 9.06 6.67 Average per Mcfe data ($/Mcfe): Lease operating expenses $0.91 $0.84 Gathering, transportation cost and production taxes 0.07 0.23 Depreciation, depletion, amortization and accretion 2.84 2.14 General and administrative 0.67 0.36 Net cash provided by operating activities 6.55 3.75 Adj. EBITDA 7.41 5.26 W&T OFFSHORE, INC. Consolidated Balance Sheets March 31, December 31, 2006 2005 (In thousands) (Unaudited) Assets Current assets: Cash and equivalents $136,053 $187,698 Accounts receivable 85,215 83,623 Prepaid expenses and other 36,595 12,503 Total current assets 257,863 283,824 Property and equipment - at cost 1,609,451 1,486,865 Less accumulated depreciation, depletion and amortization 764,421 717,583 Net property and equipment 845,030 769,282 Other assets 18,293 11,414 Total assets $1,121,186 $1,064,520 Liabilities and Shareholders' Equity Current liabilities: Accounts payable $155,843 $143,049 Asset retirement obligations 37,511 39,653 Accrued liabilities and other 50,951 48,990 Total current liabilities 244,305 231,692 Long-term debt - 40,000 Asset retirement obligations, less current portion 115,367 112,621 Deferred income taxes 158,833 134,395 Other liabilities 4,021 2,429 Shareholders' equity: Common stock 1 1 Additional paid-in capital 53,762 52,332 Retained earnings 544,897 491,050 Total shareholders' equity 598,660 543,383 Total liabilities and shareholders' equity $1,121,186 $1,064,520 W&T OFFSHORE, INC. Consolidated Statements of Cash Flows Three Months Ended March 31, 2006 2005 (In thousands) (Unaudited) Operating activities: Net income $55,831 $39,282 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion, amortization and accretion 49,092 41,269 Amortization of debt issuance costs 80 103 Share-based compensation 1,430 381 Commodity derivative income (5,276) - Deferred income taxes 24,438 7,038 Changes in operating assets and liabilities (12,290) (15,645) Net cash provided by operating activities 113,305 72,428 Investing activities: Investment in oil and gas property and equipment (120,637) (56,025) Purchases of furniture, fixtures and other (2,257) (15) Change in restricted deposits (77) (47) Net cash used in investing activities (122,971) (56,087) Financing activities: Repayments of borrowings of long-term debt (40,000) (35,000) Dividends (1,979) - Debt issuance costs - (889) Net cash used in financing activities (41,979) (35,889) Decrease in cash and cash equivalents (51,645) (19,548) Cash and cash equivalents, beginning of period 187,698 64,975 Cash and cash equivalents, end of period $136,053 $45,427 W&T OFFSHORE, INC. Reconciliation of Adjusted Net Income Available to Common Shareholders
Earnings stated without the effect of certain items is a non-GAAP financial measure. Earnings without the effects of these items are presented because the timing and amount of these items cannot be reasonably estimated and affect the comparability of operating results from period to period. In addition, earnings without the effects of these items are more comparable to earnings estimates provided by securities analysts.
Three Months Ended March 31, 2006 2005 (In thousands, except per share amounts) (Unaudited) Net income $55,831 $39,282 Less: Commodity derivative income (5,276) - Plus: Income tax provision adjustment for above item 1,847 - Earnings stated without effect of the above item $52,402 $39,282 Earnings per share-diluted without the effect of the above item $0.79 $0.60 Reconciliation of Net Income to EBITDA
We define EBITDA as net income plus income tax expense, net interest expense, depreciation, depletion, amortization and accretion and non-cash expenses associated with unrealized changes in the fair market value of open derivative contracts. Although not prescribed under GAAP, we believe the presentation of EBITDA is relevant and useful because it helps our investors understand our operating performance and makes it easier to compare our results with those of other companies that have different financing, capital or tax structures. EBITDA should not be considered in isolation from or as a substitute for net income, as an indication of operating performance or cash flows from operating activities or as a measure of liquidity. EBITDA, as we calculate it, may not be comparable to EBITDA measures reported by other companies. In addition, EBITDA does not represent funds available for discretionary use.
The following table presents a reconciliation of our consolidated net income to consolidated EBITDA:
Three Months Ended March 31, 2006 2005 (In thousands, except per share amounts) (Unaudited) Net income $55,831 $39,282 Income tax expense 29,833 20,742 Net interest (income) expense (1,322) 221 Depreciation, depletion, amortization and accretion 49,092 41,269 EBITDA $133,434 $101,515 Adjustments: Non-cash change in commodity derivatives (before tax) (5,276) - Adjusted EBITDA* $128,158 $101,515 * Adjusted EBITDA excludes certain items that management believes affect the comparability of operating results. W&T Offshore Inc. Commodity Hedging Activities at March 31, 2006 Collars Effective Termination Notional NYMEX Contract Price Commodity Date Date Quantity Floor Ceiling Natural Gas 5/1/2006 6/30/2006 3,233,000 MMBtu $7.14 $12.65 Natural Gas 7/1/2006 9/30/2006 2,116,000 MMBtu 7.32 13.10 Natural Gas 10/1/2006 12/31/2006 3,036,000 MMBtu 8.04 14.49 Natural Gas 1/1/2007 12/31/2007 8,760,000 MMBtu 7.76 16.80 Oil 1/1/2007 12/31/2007 1,569,500 Bbls 61.68 76.40 Natural Gas 1/1/2008 12/31/2008 5,124,000 MMBtu 7.31 15.80 Oil 1/1/2008 12/31/2008 1,024,800 Bbls 60.00 74.50 Swaps Effective Termination Notional Commodity Date Date Quantity Price Oil 4/1/2006 6/30/2006 364,000 Bbls $69.33 Oil 7/1/2006 9/30/2006 165,600 Bbls 69.72 Oil 10/1/2006 12/31/2006 248,400 Bbls 69.85
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