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W&T Offshore Reports Second Quarter 2005 Financial and Operational Results

Provides Guidance for the Third Quarter

HOUSTON, Aug. 10 /PRNewswire-FirstCall/ -- W&T Offshore, Inc. (NYSE: WTI) announced today financial and operational results for the second quarter 2005.

  • Cash flow from operations up 69% over second quarter 2004, and 74% over first quarter 2005
  • Production exceeded high-end of second quarter guidance by 7%
  • Successful in five of six exploration wells, and one of one development well
  • Completed acquisition of all remaining working interest at East Cameron 321

Net Income: Net income for the three months ended June 30, 2005 was $45.8 million, or $0.69 per diluted share, on revenue of $149.8 million, compared to net income of $34.7 million, or $0.53 per diluted share, on revenue of $126.1 million for the second quarter of 2004. Net income for the six months ended June 30, 2005 was $85.1 million, or $1.29 per diluted share, on revenue of $278.9 million, compared to net income of $72.8 million or $1.10 per diluted share, on revenue of $249.3 million for 2004.

Cash Flow from Operations and EBITDA: Net cash provided by operating activities increased 69% to $126.1 million during the second quarter 2005 from $74.8 million during the prior year's second quarter. The increase in cash provided by operating activities was primarily attributable to higher realized prices on sales of oil and natural gas in the second quarter of this year as compared to last year. Second quarter 2005 EBITDA was $123.0 million, compared to $99.5 million during the prior year's second quarter. Net cash provided by operating activities for the six months ended June 30, 2005 increased 16% to $198.6 million from $171.8 million in the first half of 2004. EBITDA was $224.5 million for the six months ended June 30, 2005, compared to $198.2 million for the prior year period. 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 second quarter of 2005 was 13.3 billion cubic feet ("Bcf") of natural gas at an average price of $7.08 per thousand cubic feet ("Mcf") and 1.2 million barrels ("MMBbls") of oil at an average price of $45.22 per Bbl, or 20.7 billion cubic feet of natural gas equivalent ("Bcfe") at an average price of $7.24 per Mcfe. This compares to production of 13.4 Bcf of natural gas at an average price of $6.14 per Mcf and 1.3 MMBbls of oil at an average price of $33.86 per Bbl, or 21.0 Bcfe at an average price of $5.96 per Mcfe in the second quarter of 2004. As detailed in the outlook section of the release, production is expected to increase in the second half of the year as additional existing reserves projects come on-line. There were no hedges in place during the second quarter of 2005 or 2004.

For the six months ended June 30, 2005, total production was 25.6 Bcf of natural gas at an average price of $6.72 per Mcf and 2.4 MMBbls of oil at an average price of $44.47 per Bbl, or 40.0 Bcfe at an average price of $6.97 per Mcfe. This compares to 27.6 Bcf of natural gas at an average price of $5.93 per Mcf and 2.5 MMBbls of oil at an average price of $33.41 per Bbl, or 42.8 Bcfe at an average price of $5.80 per Mcfe for the same period in 2004.

Lease Operating Expenses ("LOE"): LOE for the second quarter of 2005 decreased to $17.9 million, or $0.86 per Mcfe, from $18.4 million, or $0.88 per Mcfe, in the second quarter of 2004. The decline in LOE was due to lower operating expenses at certain properties and increases in fees collected for processing third party production, partially offset by increased expenses for planned maintenance projects at certain facilities and increases in service costs. LOE for the six months ended June 30, 2005 was $34.0 million or $0.85 per Mcfe, compared to $35.8 million or $0.84 per Mcfe in 2004 with the increase in the first half of 2005 resulting from lower sales volumes.

Depreciation, depletion, amortization and accretion ("DD&A"): DD&A increased to $51.9 million, or $2.51 per Mcfe, in the second quarter of 2005 from $45.5 million, or $2.16 per Mcfe, in the same period of 2004. DD&A for the six months ended 2005 was $93.2 million or $2.33 per Mcfe, compared to DD&A of $85.1 million, or $1.99 per Mcfe, for the same period in 2004 because of our higher depletable costs associated with our increased drilling activities.

Capital Expenditures and Operations Update: During the second quarter of 2005, we participated in the drilling of six exploration wells (gross) in the Gulf of Mexico of which five were successful. We were successful drilling one development well during the period. During the second quarter of 2005, we spent $31.3 million for development, $44.5 million for exploration and $15.3 million for other capital items, including acquisitions. For the six months ended June 30, 2005, $61.6 million was spent on development, $69.7 million for exploration and $15.8 million on other capital items, including acquisitions.

We believe our capital expenditures budget for the reminder of 2005 will remain substantially consistent with our previously reported budget of $307 million. However, the mix of second half 2005 drilling projects has changed to include more shelf wells and fewer deepwater and deep shelf wells as we optimize our use of drilling rigs in a tight market.

Acquisition Update: We completed the acquisition of a 25% working interest in East Cameron 321 from Marathon Oil Company on June 28, 2005, with an effective date of May 1, 2005. We estimate the acquired reserves, at the effective date, to have been approximately 9.0 Bcfe. East Cameron 321 is currently producing approximately 1,300 barrels (gross) of oil and 6,000 Mcf (gross) natural gas per day. As a result of acquiring this remaining 25% working interest, W&T now owns 100% of the working interest and has become operator at East Cameron 321.

Drilling Highlights: In the second quarter of 2005, the Company participated in the drilling of seven wells, all in the Gulf of Mexico. Of the wells drilled in the second quarter of 2005, one was in deepwater and six were on the conventional shelf. One shelf well was unsuccessful.

    Successful Wells:

    Block Name/Well                 Category           Working Interest %
    Eugene Island 218 #D-5ST        Exploration              100.0%
    Eugene Island 219 #E-8ST        Exploration              100.0%
    Ewing Bank 949 #2ST3/4          Exploration              100.0%
    High Island A568 #A-19          Exploration               33.3%
    West Cameron 328 #2             Exploration               25.0%

    Eugene Island 53 #G-1ST         Development               14.0%

    Unsuccessful Well:

    Block Name/Well                 Category           Working Interest %
    Eugene Island 93 #14            Exploration               23.3%

In the second half of the year, the Company anticipates drilling 14 exploration wells on the conventional shelf, two in the deep shelf and three in the deepwater. Additionally, we have nine development wells scheduled for the second half of 2005.

Dividends: On June 28, 2005, the board of directors declared a cash dividend of $0.02 per common share, which was paid on August 1, 2005 to shareholders of record on July 15, 2005. On May 2, 2005, the Company paid a cash dividend of $0.02 per common share to shareholders of record on April 15, 2005.

"We enter the second half of 2005 having achieved exploration success with the drillbit and look forward to continuing our drilling success with our inventory of exploration projects. We believe our recent increase in production in the second quarter over the first quarter will continue with sequential quarterly production increases as a result of our exploration success," said Tracy W. Krohn, Chairman and Chief Executive Officer. "Our strategy of investing in high rate of return projects, while limiting our use of leverage and hedges, allows us to realize the benefits of record high commodity prices and position ourselves for continued success in the future."

Outlook: Certain factors affecting these forward-looking statements are listed in this news release. Guidance has been revised to reflect the updated mix of development projects, and the shift of costs from second half of 2005 to 2006. Guidance on performance for the third quarter, full year of 2005 and previous guidance are shown in the table below.


    Estimated Daily      Third Quarter   Revised Estimate     Prior Estimate
      Production             2005       for Full-Year 2005  for Full-Year 2005
    Crude oil (MMBbls)    1.4 - 1.5         5.2 - 5.5           4.9 - 5.2
    Natural gas (Bcf)    13.1 - 13.8       51.7 - 54.4         53.5 - 56.2
    Total (Bcfe)         21.6 - 22.7       83.1 - 87.4         83.1 - 87.4


    Operating Expenses   Third Quarter   Revised Estimate    Prior Estimate
    ($ in millions,          2005       for Full-Year 2005  for Full-Year 2005
     except as noted)
    Lease operating
     expenses           $21.0 - $22.0     $75.0 - $78.0       $82.0 - $85.0
    Gathering,
     transportation
     & production taxes  $3.5 - $ 4.0     $15.0 - $16.0       $14.0 - $15.0
    General and
     administrative      $6.0 - $ 7.0     $26.0 - $30.0       $26.0 - $30.0
    Income tax rate,
     % deferred           35.0%, 20%        35.0%, 20%          35.0%, 20%

Conference Call Information: W&T will hold a conference call to discuss financial and operational results on Wednesday, August 10, 2005 at 10:00 a.m. Eastern Time / 9:00 a.m. Central Time. To participate, dial (303) 262-2141 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 Wednesday, August 17, 2005, and may be accessed by calling (303) 590-3000 and using the pass code 11034458.

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 conditions, oil and gas price volatility, uncertainties inherent in oil and gas production operations and estimating reserves, 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 (www.sec.gov).

Contacts:
Manuel Mondragon, Assistant Vice President 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


                              W&T OFFSHORE, INC.
                      Consolidated Statements of Income
                   (In thousands, except per share amounts)
                                 (Unaudited)

                                       Three Months Ended   Six Months Ended
                                            June 30,            June 30,
                                         2005      2004      2005      2004
    Revenues:
        Oil and natural gas            $149,665  $125,409  $278,389  $248,527
        Other                               114       650       462       799
            Total revenues              149,779   126,059   278,851   249,326
    Expenses:
        Lease operating                  17,874    18,441    34,027    35,809
        Gathering, transportation
         costs and production taxes       3,139     3,704     7,635     6,558
        Depreciation, depletion, and
         amortization                    49,607    43,261    88,564    80,636
        Asset retirement obligation
         accretion                        2,314     2,257     4,626     4,485
        General and administrative        5,754     4,446    12,663     8,764
            Total operating expenses     78,688    72,109   147,515   136,252

    Income from operations               71,091    53,950   131,336   113,074

    Net interest income (expense)           108      (550)     (113)   (1,146)

    Income before income taxes           71,199    53,400   131,223   111,928

    Income tax expense                   25,417    18,690    46,159    39,175

    Net income                           45,782    34,710    85,064    72,753

    Less: Preferred stock dividends         -         300       -         300

    Net income applicable to common
     and common equivalent shares       $45,782   $34,410   $85,064   $72,453

    Earnings per common share:
        Basic                             $0.69     $0.65     $1.33     $1.38

        Diluted                           $0.69     $0.53     $1.29     $1.10

    Weighted average shares
     outstanding:
        Basic                            65,970    52,612    63,977    52,596

        Diluted                          65,970    65,950    65,967    65,934

    Consolidated Cash Flow Information
    Net cash provided by operating
     activities                        $126,123   $74,778  $198,551  $171,787
    Capital expenditures                $91,070   $68,385  $147,110  $120,994

    Other Financial Information
    EBITDA                             $123,012   $99,468  $224,526  $198,195


     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   Six Months Ended
                                              June 30,            June 30,
                                           2005     2004      2005      2004
    Net income                           $45,782  $34,710   $85,064   $72,753
    Income tax expense                    25,417   18,690    46,159    39,175
    Net interest (income) expense           (108)     550       113     1,146
    Depreciation, depletion,
     amortization and accretion           51,921   45,518    93,190    85,121

    EBITDA                              $123,012  $99,468  $224,526  $198,195



                              W&T OFFSHORE, INC.
                                Operating Data
                                 (Unaudited)

                                             Three Months     Six Month
                                                Ended           Ended
                                               June 30,        June 30,
                                             2005    2004    2005    2004
    Net sales:
        Natural gas (MMcf)                  13,276  13,380  25,652  27,638
        Oil (MBbls)                          1,232   1,277   2,386   2,535
        Total natural gas and oil (MMcfe)   20,667  21,041  39,966  42,847

    Average daily equivalent sales
     (MMcfe/d)                               227.1   231.2   220.8   235.4

    Average realized sales price:
        Natural gas ($/Mcf)                  $7.08   $6.14   $6.72   $5.93
        Oil ($/Bbl)                          45.22   33.86   44.47   33.41
        Natural gas equivalent ($Mcfe)        7.24    5.96    6.97    5.80

    Average per Mcfe data ($/Mcfe):
        Lease operating expenses             $0.86   $0.88   $0.85   $0.84
        Gathering, transportation cost and
         production taxes                     0.15    0.18    0.19    0.15
        Depreciation, depletion,
         amortization and accretion           2.51    2.16    2.33    1.99
        General and administrative            0.28    0.21    0.32    0.20
        Net cash provided by operating
         activities                           6.10    3.55    4.97    4.01
        EBITDA                                5.95    4.73    5.62    4.63



                              W&T OFFSHORE, INC.
                         Consolidated Balance Sheets
                                (In thousands)
                                 (Unaudited)

                                                       June 30,   December 31,
                                                         2005        2004
                              Assets

    Current assets:
     Cash                                               $79,110     $64,975
     Accounts receivable                                 60,896      71,714
     Prepaid expenses and other                           8,231       9,293
      Total current assets                              148,237     145,982

    Property and equipment - at cost                  1,296,194   1,147,367
    Less accumulated depreciation,
     depletion and amortization                         631,718     543,154
      Net property and equipment                        664,476     604,213

    Other assets                                         11,401      10,589
      Total assets                                     $824,114    $760,784

               Liabilities and Shareholders' Equity

    Current liabilities:
     Accounts payable                                  $109,135    $107,220
     Asset retirement obligations                        25,296      27,489
     Accrued liabilities and other                       18,818      21,738
      Total current liabilities                         153,249     156,447

    Long-term debt                                            -      35,000
    Asset retirement obligations,
     less current portion                               114,941     114,937
    Deferred income taxes                               110,807      92,093
    Other liabilities                                     2,429       2,429
    Shareholders' equity:
     Preferred stock                                          -      45,435
     Common stock                                             1           -
     Additional paid-in capital                          52,298       6,478
     Retained earnings                                  390,389     307,965
      Total shareholders' equity                        442,688     359,878
       Total liabilities and shareholders' equity      $824,114    $760,784



                              W&T OFFSHORE, INC.
                    Consolidated Statements of Cash Flows
                                (In thousands)
                                 (Unaudited)

                                                           Six Months Ended
                                                               June 30,
                                                           2005        2004
    Operating activities:
     Net income                                          $85,064     $72,753
     Adjustments to reconcile net income
      to net cash provided by operating activities:
       Depreciation, depletion, amortization
        and accretion                                     93,190      85,121
       Amortization of debt issuance costs                   183         230
       Share-based compensation                              385         391
       Deferred income taxes                              18,714      10,751
       Changes in operating assets and liabilities         1,015       2,541
       Net cash provided by operating activities         198,551     171,787

    Investing activities:
     Investment in oil and gas property and equipment   (146,995)   (120,777)
     Proceeds from sales of oil and gas property
      and equipment                                           10         119
     Purchases of furniture, fixtures and other             (115)       (217)
     Change in restricted deposits                          (108)         28
       Net cash used in investing activities            (147,208)   (120,847)

    Financing activities:
     Borrowings of long-term debt                              -     137,300
     Repayments of borrowings of long-term debt          (35,000)   (179,300)
     Dividends to shareholders                            (1,319)     (1,484)
     Equity offering costs                                     -        (806)
     Debt issuance costs                                    (889)          -
      Net cash used in financing activities              (37,208)    (44,290)
      Increase in cash and cash equivalents               14,135       6,650
    Cash and cash equivalents, beginning of period        64,975       4,016
    Cash and cash equivalents, end of period             $79,110     $10,666

SOURCE W&T Offshore, Inc.
08/10/2005
CONTACT: Manuel Mondragon, Assistant Vice President of Finance of W&T
Offshore, Inc., +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, for W&T Offshore, Inc.
Web site: http://www.wtoffshore.com
(WTI)