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W&T Offshore Reports Fourth Quarter and Full Year 2005 Financial and Operational Results

HOUSTON, March 16 /PRNewswire-FirstCall/ -- W&T Offshore, Inc. (NYSE: WTI) today announces record earnings, and provides financial and operational results for the fourth quarter and full year 2005. Some of the highlights include:

  • Proved reserves increased 5% to 491.5 Bcfe at year-end 2005 from proved reserves of 467.5 Bcfe at year-end 2004;
  • 2005 reserve replacement ratio of 134%;
  • Fourth quarter 2005 net income increased 31.5% and EBITDA increased 18.0% over the fourth quarter of 2004.

"The year 2005 was a momentous one for W&T Offshore. We began the year with the completion of our initial public offering, which positioned us to pursue larger transactions, and finished it recovering from the aftermath of two category 5 hurricanes. In spite of the distractions, we achieved a drilling success rate of 79% by successfully drilling 23 of 29 wells, generated 5% reserve growth and had the best financial year in the Company's history. Boosted by favorable commodity prices, our fourth quarter financial results were particularly solid, even with the significant production deferral following the hurricanes. In the midst of all these interruptions, we began the process that led to the signing of the merger agreement involving Kerr- McGee's Gulf of Mexico properties, the largest transaction in the history of the Company. These achievements are due to the hard work and determination of all the employees at W&T. They all deserve the recognition of a job well done," said Tracy W. Krohn, Chairman and Chief Executive Officer.

Net Income: Net income for the three months ended December 31, 2005 was $50.9 million, or $0.77 per diluted share, on revenues of $152.9 million, compared to net income of $38.7 million, or $0.59 per diluted share, on revenues of $138.9 million for the fourth quarter of 2004. Net income for the full year 2005 was $189.0 million, or $2.87 per diluted share, on revenues of $585.1 million, compared to net income of $149.5 million, or $2.27 per diluted share, on revenues of $508.7 million for 2004.

Cash Flow from Operations and EBITDA: Net cash provided by operating activities decreased 13% to $102.0 million during the fourth quarter from $117.5 million during the prior year's fourth quarter. Fourth quarter EBITDA increased 18.0% to $121.6 million, compared to $103.0 million during the prior year's fourth quarter. Net cash provided by operating activities for 2005 increased 17.7% to $444.0 million from $377.3 million in 2004. Full year 2005 EBITDA increased 19.2% to $472.3 million, compared to $396.1 million for the prior year. For additional information regarding EBITDA, please refer to the attached schedule later in this release for a reconciliation of net income to EBITDA.

Production and Prices: Total production in the fourth quarter of 2005 was 9.4 billion cubic feet ("Bcf") of natural gas at an average price of $12.06 per thousand cubic feet ("Mcf") and 0.7 million barrels ("MMBbls") of oil and liquids at an average price of $55.87 per Bbl, or 13.6 billion cubic feet of gas equivalent ("Bcfe") at an average price of $11.20 per Mcfe. This compares to production of 13.1 Bcf of gas at an average price of $7.00 per Mcf and 1.1 MMBbls of oil at an average price of $42.72 per Bbl, or 19.8 Bcfe at an average price of $7.04 per Mcfe in the fourth quarter of 2004. Sales volumes for all products were negatively impacted by the curtailment of production due primarily to Hurricanes Katrina and Rita, which reduced anticipated production in the fourth quarter of 2005 by approximately 11.7 Bcfe or 46% of anticipated production for the period.

For the full year 2005, total production was 46.5 Bcf of gas at an average price of $8.27 per Mcf and 4.1 MMBbls of oil and liquids at an average price of $48.85 per Bbl, or 71.1 Bcfe at an average price of $8.23 per Mcfe. This compares to 53.3 Bcf of gas at an average price of $6.18 per Mcf and 4.8 MMBbls of oil at an average price of $36.77 per Bbl, or 82.4 Bcfe at an average price of $6.16 per Mcfe for the full year 2004. The Company did not have any hedges in place in 2005 or 2004; however, in January 2006, the Company entered into commodity hedging arrangements in connection with the financing planned for the Kerr-McGee transaction. In 2005, the Company was forced to defer company-wide production of approximately 5.7 Bcfe during the third quarter and approximately 11.7 Bcfe during the fourth quarter as a result of Tropical Storm Cindy and Hurricanes Dennis, Katrina and Rita, or 20% of anticipated production for the entire year 2005.

Lease Operating Expenses ("LOE"): LOE for the fourth quarter of 2005 decreased to $19.5 million or $1.43 per Mcfe from $20.5 million or $1.04 per Mcfe in the fourth quarter of 2004. On a per unit basis, LOE increased during the fourth quarter of 2005 primarily due to lower volumes associated with the production deferrals caused by the hurricanes. LOE for the full year 2005 declined to $71.8 million or $1.01 per Mcfe compared to $73.5 million or $0.89 per Mcfe in 2004. Included in the 2005 period is approximately $1.9 million to repair damage to our facilities caused by Hurricanes Katrina and Rita. Of this amount, $1.7 million was included in the fourth quarter 2005.

Depreciation, depletion, amortization and accretion ("DD&A"): Depreciation, depletion, amortization and accretion increased to $45.0 million in the fourth quarter of 2005 from $43.7 million in the same period of 2004. DD&A for the full year 2005 was $183.8 million or $2.59 per Mcfe, compared to DD&A of $164.8 million or $2.00 per Mcfe for the full year 2004. The increase in DD&A on a per unit basis during the fourth quarter and full year of 2005 is in part a result of increased capital spending, higher drilling and service costs, and higher estimated future development cost.

Capital Expenditures, Acquisitions, and Drilling Highlights: During the fourth quarter of 2005, W&T spent $52.1 million for development activity, $37.3 million for exploration and $4.7 million for other capital expenditure items including acquisitions. For the full year 2005, $174.6 million was spent on development activity, $122.1 million on exploration and $27.0 million on other capitalized items including acquisitions.

During 2005, W&T completed an acquisition of an additional interest in the East Cameron 321 field from Marathon, and an acquisition of an additional interest in the Green Canyon 18 Field, which includes Ewing Bank blocks 988 and 944, and an interest in the Green Canyon 60 Field from BHP Billiton Petroleum (Americas) Inc.

For full year 2005, the Company achieved an exploration success rate of 77% by successfully drilling 17 of 22 exploration wells, which included two of four in the deepwater. W&T also drilled six of seven development wells in 2005, all of which were conventional shelf wells.

Reserves: In 2005, W&T replaced 134% of production. As of December 31, 2005, proved reserves were 491.5 Bcfe compared to proved reserves of 467.5 Bcfe as of December 31, 2004. Year-end 2005 proved reserves consist of 215.9 Bcf of natural gas (44% of proved reserves) and 45.9 million barrels, or 275.6 Bcfe of oil and liquids (56% of proved reserves). The present value of the proved reserves discounted at 10% and without deducting any future income taxes, is $2.4 billion based on year-end prices of $9.73 per MMBtu of natural gas and $57.75 per Bbl of oil. Our estimates of proved reserves are based on a reserve report prepared by Netherland, Sewell & Associates, Inc., our independent petroleum consultants.

Our proved reserves as of December 31, 2005 are summarized in the table below.

                                          As of December 31, 2005
    Classification of Reserves (1)  Oil and    Gas    Total   % of    PV-10
                                    Liquids   (Bcf)   (Bcfe)  Total   (in
                                   (MMBbls)                  Proved  millions)

    Proved developed producing       8.5       69.0    120.1   24%    $737.0
    Proved developed
     non-producing (2)              16.3      101.0    198.5   41%   1,055.4
     Total proved developed         24.8      170.0    318.6   65%   1,792.4
    Proved undeveloped              21.1       45.9    172.9   35%     624.1
     Total proved                   45.9      215.9    491.5  100%  $2,416.5

    (1) Totals may not add due to rounding
    (2) Includes 23.5 Bcfe of reserves with a PV-10 of $134.3 million at
        December 31, 2005 shut-in because of Hurricanes Katrina and Rita in
        2005

    2005 Reserve Reconciliation:
                                                     Oil and
                                                     Liquids      Natural Gas
                                                     (MBbls)         (MMcf)

    Proved reserves as of December 31, 2004           39,981        227,573
     Revisions of previous estimates                   2,456          5,546
     Extensions, discoveries and other additions       5,920         25,120
     Purchase of producing properties                  1,665          4,229
    Production                                        (4,085)       (46,548)

    Proved reserves as of December 31, 2005           45,937        215,920

    Proved developed reserves as of
     December 31, 2005                                24,773        169,995

Mr. Krohn continued, "As we look to 2006, we are excited about our numerous opportunities to significantly increase our production and reserves. Our inventory of high quality exploration and development projects is substantially larger than any we have had in the past. In addition, once we complete the pending acquisition of Kerr-McGee's Gulf of Mexico properties, we can leverage our demonstrated capability for successfully exploiting acquired assets."

Conference Call Information: W&T will hold a conference call to discuss financial and operational results on Thursday, March 16, 2006 at 10:00 a.m. Eastern Time / 9:00 a.m. Central Time. To participate, dial (303) 262-2211 a few minutes before the call begins. Or listen to a live broadcast from the Company's website at http://www.wtoffshore.com. A replay of the conference call will be available until March 23, 2006. To access the replay, dial. (303) 590-3000 and use the pass code 11054969.

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

Forward-Looking Statements

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, 2004 (http://www.sec.gov)


                              W&T Offshore, Inc.
                      Consolidated Statements of Income

                                       Three Months Ended      Year Ended
                                          December 31,         December 31,
                                         2005      2004      2005      2004
                                      (In thousands, except per share amounts)
                                                    (Unaudited)
    Consolidated Statement of Income
    Revenues:
        Oil and natural gas            $152,820  $139,287  $584,564  $508,195
        Other                                40      (432)      572       520
            Total revenues              152,860   138,855   585,136   508,715
    Expenses:
        Lease operating                  19,505    20,519    71,758    73,475
        Gathering, transportation cost
         and production taxes             2,516     3,634    12,702    14,099
        Depreciation, depletion, and
         amortization                    42,804    41,341   174,771   155,640
        Asset retirement obligation
         accretion                        2,233     2,338     9,062     9,168
        General and administrative        9,231    11,685    28,418    25,001
            Total operating expenses     76,289    79,517   296,711   277,383

    Income from operations               76,571    59,338   288,425   231,332

    Net interest income (expense)         1,133      (318)    1,601    (1,842)

    Income before income taxes           77,704    59,020   290,026   229,490

    Income tax expense                   26,847    20,344   101,003    80,008

    Net income                           50,857    38,676   189,023   149,482

    Preferred stock dividends               -         300       -         900

    Net income applicable to common
     shareholders                       $50,857   $38,376  $189,023  $148,582

    Earnings per common share:
        Basic                             $0.77     $0.73     $2.91     $2.82

        Diluted                           $0.77     $0.59     $2.87     $2.27

    Shares Outstanding
        Weighted average shares          65,971    52,612    64,982    52,604

        Weighted average shares -
         fully diluted                   65,980    65,950    65,971    65,942

    Consolidated Cash Flow Information
    Net cash provided by operating
     activities                        $101,971  $117,486  $444,043  $377,275
    Capital expenditures                 94,144   111,257   323,743   284,847

    Other Financial Information
    EBITDA                             $121,608  $103,017  $472,258  $396,140

    We define EBITDA as net income plus income tax expense, net interest
    expense, depreciation, depletion, amortization and accretion. 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      Year Ended
                                          December 31,        December 31,
                                         2005      2004      2005      2004
    Net income                          $50,857   $38,676  $189,023  $149,482
    Income tax expense                   26,847    20,344   101,003    80,008
    Net interest (income) expense        (1,133)      318    (1,601)    1,842
    Depreciation, depletion,
     amortization and accretion          45,037    43,679   183,833   164,808

    EBITDA                             $121,608  $103,017  $472,258  $396,140


                              W&T Offshore, Inc.
                                Operating Data

                                        Three Months Ended    Year Ended
                                          December 31,       December 31,
                                         2005     2004      2005     2004
                                      (In thousands, except per share amounts)
                                                   (Unaudited)

    Operating Data
    Net sales:
      Natural gas (MMcf)                  9,399   13,085   46,548   53,348
      Oil (MBbls)                           706    1,115    4,085    4,847
      Total natural gas and oil (MMcfe)  13,639   19,775   71,060   82,432

    Average daily equivalent sales
     (MMcfe/d)                            148.2    214.9    194.7    225.2

    Average realized sales price:
      Natural gas ($/Mcf)                $12.06    $7.00    $8.27    $6.18
      Oil ($/Bbl)                         55.87    42.72    48.85    36.77
      Natural gas equivalent ($/Mcfe)     11.20     7.04     8.23     6.16

    Average per Mcfe data ($/Mcfe):
      Lease operating expenses            $1.43    $1.04    $1.01    $0.89
      Gathering, transportation cost
       and production taxes                0.18     0.18     0.18     0.17
      Depreciation, depletion,
       amortization and accretion          3.30     2.21     2.59     2.00
      General and administrative           0.68     0.59     0.40     0.30
      Net cash provided by operating
       activities                          7.48     5.94     6.25     4.58
      EBITDA                               8.92     5.21     6.65     4.81



                                W&T OFFSHORE, INC.
                           Consolidated Balance Sheets

                                                          December 31,
                                                    2005               2004
                                                         (In thousands)
                                                          (Unaudited)
                   Assets
    Current assets:
       Cash and equivalents                        $187,698           $64,975
       Accounts receivable                           83,623            71,714
       Prepaid expenses and other                    12,503             9,293
          Total current assets                      283,824           145,982

    Property and equipment - at cost              1,486,865         1,147,367
    Less accumulated depreciation,
     depletion and amortization                     717,583           543,154
          Net property and equipment                769,282           604,213

    Other assets                                     11,414            10,589
             Total assets                        $1,064,520          $760,784

     Liabilities and Shareholders' Equity
    Current liabilities:
       Accounts payable                            $143,049          $107,220
       Asset retirement obligations                  39,653            27,489
       Accrued liabilities and other                 48,990            21,738
          Total current liabilities                 231,692           156,447

    Long-term debt                                   40,000            35,000
    Asset retirement obligations, less
     current portion                                112,621           114,937
    Deferred income taxes                           134,395            92,093
    Other liabilities                                 2,429             2,429
    Shareholders' equity:
       Preferred stock                                    -            45,435
       Common stock                                       1                 -
       Additional paid-in capital                    52,332             6,478
       Retained earnings                            491,050           307,965
          Total shareholders' equity                543,383           359,878
             Total liabilities and
              shareholders' equity               $1,064,520          $760,784


                                W&T OFFSHORE, INC.
                      Consolidated Statements of Cash Flows

                                       Three Months Ended      Year Ended
                                          December 31,        December 31,
                                         2005      2004      2005      2004
                                                   (In thousands)
                                                    (Unaudited)

    Operating activities:
       Net income                       $50,857   $38,676  $189,023  $149,482
       Adjustments to reconcile net
        income to net cash provided
         by operating activities:
             Depreciation, depletion,
              amortization and
              accretion                  45,037    43,679   183,833   164,808
             Amortization of debt
              issuance costs                 80       115       342       461
             Share-based compensation        29         -       419       391
             Loss on disposal of
              equipment                      11         -        11         -
             Deferred income taxes        9,785    18,499    42,302    40,189
             Changes in operating
              assets and liabilities     (3,828)   16,517    28,113    21,944
                Net cash provided by
                 operating activities   101,971   117,486   444,043   377,275

    Investing activities:
       Investment in oil and gas
        property and equipment          (93,743) (109,392) (322,984) (282,510)
       Proceeds from sales of oil and
        gas property and equipment          770     3,008     2,547     3,127
       Purchases of furniture,
        fixtures and other                 (401)   (1,865)     (759)   (2,337)
       Change in restricted deposits        (90)    1,815      (277)    1,854
                Net cash used in
                 investing activities   (93,464) (106,434) (321,473) (279,866)

    Financing activities:
       Borrowings of long-term debt      40,000    51,800    42,550   212,100
       Repayments of borrowings of
        long-term debt                        -   (16,800)  (37,550) (244,100)
       Dividends/distributions to
        shareholders                     (1,319)   (1,482)   (3,958)   (4,450)
       Equity offering costs                  -     1,264         -         -
       Debt issuance costs                    -         -      (889)        -
                Net cash provided by
                 (used in) financing
                 activities              38,681    34,782       153   (36,450)
                Increase in cash and
                 cash equivalents        47,188    45,834   122,723    60,959
    Cash and cash equivalents,
     beginning of period                140,510    19,141    64,975     4,016
    Cash and cash equivalents, end of
     period                            $187,698   $64,975  $187,698   $64,975


    Contacts:
     Manuel Mondragon, Assistant VP of Finance
     investorrelations@wtoffshore.com
     713-297-8024

     Ken Dennard  / ksdennard@drg-e.com
     Lisa Elliott / lelliott@drg-e.com
     DRG&E / 713-529-6600

SOURCE W&T Offshore, Inc.
03/16/2006
CONTACT: Manuel Mondragon, Assistant VP of Finance of W&T Offshore,
+1-713-297-8024, investorrelations@wtoffshore.com; or Ken Dennard,
ksdennard@drg-e.com, or Lisa Elliott, lelliott@drg-e.com, both of DRG&E,
+1-713-529-6600
Web site: http://www.wtoffshore.com
(WTI)