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W&T Offshore Reports First Quarter Results

HOUSTON, May 5 /PRNewswire-FirstCall/ -- W&T Offshore, Inc. (NYSE: WTI) today provides financial and operational results for the first quarter 2009. Some of the highlights for the first quarter 2009 include:

    --  75% success in the drilling program, successfully drilling three out of
        four conventional shelf wells
    --  Successfully drilling two of three wells including a deep shelf and one
        conventional shelf well after the close of the first quarter
    --  Production increased 32% from fourth quarter of 2008 to 21.4 Bcfe and
        EBITDA increased from $22 million to $57 million
    --  LOE guidance revised due to lower forecasted service and supply costs
    --  Liquidity availability set with a new borrowing base at $405 million and
        cash of $251 million on March 31, 2009

-- Repurchased 1.4 million shares of our common stock at $6.47 per share

Revenues, Net Income/Loss and EPS: Net loss for the first quarter of 2009 was $230.7 million, or $3.04 per common share, on revenues of $117.4 million, compared to net income for the same quarter of 2008 of $79.8 million, or $1.05 per common share, on revenues of $356.5 million. Net loss for the first quarter of 2009 reflects the impact of a $210.2 million ceiling test impairment and a $1.0 million unrealized derivative gain ($0.9 million after-tax). Without the effect of the ceiling test impairment and the unrealized derivative gain, net loss for the first quarter of 2009 would have been $41.2 million, or $0.54 per common share. Net income for the first quarter of 2008 included an unrealized derivative loss of $6.2 million ($4.1 million after-tax). Without the effect of the unrealized derivative loss, net income for the first quarter of 2008 would have been $83.9 million, or $1.10 per common share. See "Non-GAAP Information" later in this press release. We recorded a net loss principally due to a ceiling test impairment, a lower realized price of $5.48 per thousand cubic feet equivalent ("Mcfe"), versus $11.57 per Mcfe (unhedged) in 2008, and the decrease in sales volumes for oil and natural gas related to the deferral of production caused by Hurricanes Gustav and Ike.

Cash Flow from Operating Activities and Adjusted EBITDA: EBITDA and Adjusted EBITDA are non-GAAP measures and are hereinafter defined in "Non-GAAP Information" later in this press release. Net cash provided by operating activities for the three months ended March 31, 2009 decreased 86% to $34.4 million from $242.4 million in the three months ended March 31, 2008. The decrease was mainly a result of lower realized prices and lower volumes. First quarter 2009 Adjusted EBITDA was $56.2 million compared to $279.2 million during first quarter 2008, or an 80% decrease.

Production and Prices: We sold 12.6 billion cubic feet ("Bcf") of natural gas at an average price of $5.08 per thousand cubic feet ("Mcf") in the first quarter of 2009. We also sold 1.5 million barrels ("MMBbls") of oil and natural gas liquids at an average price of $36.29 per barrel ("Bbl") during the same period. For the first quarter of 2008, we sold 17.7 Bcf of natural gas at an average price of $8.70 per Mcf and 2.2 MMBbls of oil and natural gas liquids at an average price of $92.52 per Bbl. On a natural gas equivalent ("Bcfe") basis, we sold 21.4 Bcfe at an average price of $5.48 per Mcfe in the first quarter of 2009 compared to 30.8 Bcfe sold at an average price of $11.57 per Mcfe in the first quarter of 2008.

Production increased 36% during the first quarter of 2009 compared to fourth quarter of 2008. During the fourth quarter of 2008, we sold 10.5 billion cubic feet ("Bcf") of natural gas at an average price of $5.90 per thousand cubic feet ("Mcf") and 1.0 million barrels ("MMBbls") of oil and natural gas liquids at an average price of $48.59 per barrel ("Bbl"). On a natural gas equivalent ("Bcfe") basis, we sold 16.2 Bcfe at an average price of $6.68 per Mcfe.

Lease Operating Expenses: LOE for the first quarter of 2009 decreased to $45.1 million, or $2.10 per Mcfe, from $49.8 million, or $1.62 per Mcfe, in the first quarter of 2008. Included in lease operating expenses for the first quarter of 2009 are $5.0 million of hurricane remediation costs related to Hurricanes Ike and Gustav that were either not yet recovered from our insurance underwriters or are not covered by insurance.

Depreciation, depletion, amortization and accretion: DD&A decreased to $91.5 million, or $4.27 per Mcfe, in the first quarter of 2009 from $145.5 million, or $4.72 per Mcfe, in the first quarter of 2008. DD&A decreased primarily as a result of lower depreciable base (due to an impairment charge at year-end 2008 of $1.2 billion) and lower production volumes compared to 2008.

Ceiling Test Impairment: The Company incurred a non-cash ceiling test impairment of $210.2 million to the carrying value of the Company's proved oil and gas properties as of March 31, 2009, through application of the full cost ceiling limitation as prescribed by the SEC. The impairment is primarily attributable to lower prices for natural gas at March 31, 2009.

Liquidity: Our cash balance at March 31, 2009 was $251.0 million. We just completed the semi-annual redetermination of our borrowing base, which is now set at $405 million. Also during May, we paid off our Term Loan B with a draw under the revolving portion of our Credit Agreement, which results in a remaining revolver availability of $200 million.

Capital Expenditures and Operations Update: The level of our investment in oil and natural gas properties changes from time to time depending on numerous factors, including the prices of oil and natural gas, acquisition opportunities and the results of our exploration and development activities. For the three months ended March 31, 2009, capital expenditures for oil and natural gas properties of $128.4 million included $35.8 million for exploration activities, $88.2 million for development activities and $4.4 million for seismic, capitalized interest and other leasehold costs. Our development and exploration capital expenditures consisted of $16.8 million in the deepwater, $0.1 million on the deep shelf and $107.1 million on the conventional shelf and other projects. Cash from operating activities and cash on hand financed our capital expenditures for the three months ended March 31, 2009.

Drilling Highlights: In the first quarter of 2009, the Company drilled or participated in the drilling of four conventional shelf wells, three of which were commercially successful.

Commercial Wells


    Lease Name/Well                    Category            Working Interest %
    Main Pass 283 A-3ST           Exploration/Shelf              100%
    South Marsh Island 39 C-4     Exploration/Shelf               50%
    South Timbalier 320 A-7       Exploration/Shelf              100%

Non-commercial Wells


    Lease Name/Well                    Category            Working Interest %
    Vermilion 23 C-2ST            Development/Shelf               50%

After the close of the first quarter, the Company drilled or participated in the drilling of three wells, two of which were commercially successful:

Commercial Wells


    Lease Name/Well                    Category            Working Interest %
    Ship Shoal 359 A-12ST         Development/Deep Shelf         100%
    Main Pass 279 A-5ST           Exploration/Shelf             88.5%

Non-commercial Wells


    Lease Name/Well                    Category             Working Interest %
    South Timbalier 316 A-4       Exploration/Shelf              80%

Tracy W. Krohn, Chairman and Chief Executive Officer, commented, "We have had success with our drilling program so far in 2009 and will change our focus in the second half of the year to build cash for new strategic opportunities. Although our credit line was negatively impacted by lower commodity prices, we believe that our liquidity is ample to take advantage of acquisition or joint venture opportunities. In addition, by pursuing assets that banks will lend against, we can expand the size of the acquisition target."

Outlook: Guidance for the second quarter and full year 2009 is shown in the table below, which represents the Company's best estimate of likely future results, and is affected by the factors described below in "Forward-Looking Statements."

Second Quarter and Revised Full-Year 2009 Production and Cost Guidance:


                                    Second
    Estimated Production            Quarter                        Full-Year
                                     2009                            2009
    Crude oil (MMBbls)             1.6 - 2.0                       6.5 - 8.4
    Natural gas (Bcf)             11.4 - 13.9                     43.6 - 56.1
    Total (Bcfe)                  21.1 - 25.8                     82.8 - 106.4


    Operating Expenses ($ in      Second          Prior            Revised
    millions, except as           Quarter        Full-Year         Full-Year
    noted)                         2009            2009              2009
    Lease operating expenses     $50 - $63      $214 - $256       $205 - $245
    Gathering,
     transportation &
     production taxes             $5 - $6        $20 - $24         No Change
    General and
     administrative              $10 - $12       $45 - $48         No Change
    Income tax rate                  9%             35%                9%

Conference Call Information: W&T will hold a conference call to discuss financial and operational results on Tuesday May 5, 2009 at 9:30 a.m. Eastern Time / 8:30 a.m. Central Time. To participate, dial (480) 629-9868 a few minutes before the call begins. The call will also be broadcast live over the Internet from the Company's website at www.wtoffshore.com. A replay of the conference call will be available approximately two hours after the end of the call until Tuesday, May 12, 2009, and may be accessed by calling (303) 590-3030 and using the pass code 4065057.

About W&T Offshore

W&T Offshore is an independent oil and natural gas company focused primarily in the Gulf of Mexico, including exploration in the deepwater and deep shelf regions, where it has developed significant technical expertise. W&T has grown through acquisition, exploitation and exploration and now holds working interests in over 148 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 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, uncertainties and other factors discussed in our Annual Report on 10-K for the year ended December 31, 2008 (www.sec.gov).


    Contacts:
    Manuel Mondragon, 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. AND SUBSIDIARIES
             Condensed Consolidated Statements of Income (Loss)
                             (Unaudited)

                                                        Three Months Ended
                                                             March 31,
                                                             ---------
                                                        2009           2008
                                                        ----           ----
                                                    (In thousands, except per
                                                             share data)

    Revenues                                          $117,422       $356,495
                                                      --------       --------
    Operating costs and expenses:
      Lease operating expenses                          45,056         49,822
      Gathering, transportation costs and
       production taxes                                  3,305          8,821
      Depreciation, depletion and
       amortization                                     80,788        135,969
      Asset retirement obligation accretion             10,747          9,519
      Impairment of oil and natural gas
       properties                                      210,205              -
      General and administrative expenses               11,436         12,575
      Derivative loss                                      392         12,304
                                                         -----         ------
        Total costs and expenses                       361,929        229,010
                                                       -------        -------
        Operating income (loss)                       (244,507)       127,485
    Interest expense:
      Incurred                                          12,509         14,378
      Capitalized                                       (1,782)        (5,673)
    Other income                                           505          2,440
                                                         -----          -----
        Income (loss) before income tax
         expense (benefit)                            (254,729)       121,220
    Income tax expense (benefit)                       (23,992)        41,414
                                                       -------         ------
        Net income (loss)                            $(230,737)       $79,806
                                                     =========        =======


    Basic earnings (loss) per common share              $(3.04)        $1.05

    Weighted average common shares
     outstanding                                        75,980         75,903

    Consolidated Cash Flow Information
      Net cash provided by operating
       activities                                      $34,397       $242,399
      Capital expenditures-oil and natural
       gas properties                                  128,364        245,834

    Other Financial Information
      EBITDA                                           $57,233       $272,973
      Adjusted EBITDA                                   56,240        279,158


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

                                                         Three Months Ended
                                                              March 31,
                                                              ---------
                                                         2009           2008
                                                         ----           ----
    Net sales:
      Natural gas (MMcf)                                12,552         17,684
      Oil (MBbls)                                        1,477          2,189
      Total natural gas and oil (MBoe) (1)               3,569          5,136
      Total natural gas and oil (MMcfe) (2)             21,413         30,816

    Average daily equivalent sales (MBoe/d)               39.7           56.4
    Average daily equivalent sales (MMcfe/d)             237.9          338.6

    Average realized sales prices (Unhedged):
      Natural gas ($/Mcf)                                $5.08          $8.70
      Oil ($/Bbl)                                        36.29          92.52
      Barrel of oil equivalent ($/Boe)                   32.90          69.40
      Natural gas equivalent ($/Mcfe)                     5.48          11.57

    Average per Boe ($/Boe):
      Lease operating expenses                          $12.63          $9.70
      Gathering and transportation costs and
       production taxes                                   0.93           1.72
      Depreciation, depletion, amortization and
       accretion                                         25.65          28.33
      General and administrative expenses                 3.20           2.45
      Net cash provided by operating activities           9.64          47.19
      Adjusted EBITDA                                    15.76          54.35

    Average per Mcfe ($/Mcfe):
      Lease operating expenses                           $2.10          $1.62
      Gathering and transportation costs and
       production taxes                                   0.15           0.29
      Depreciation, depletion, amortization and
       accretion                                          4.27           4.72
      General and administrative expenses                 0.53           0.41
      Net cash provided by operating activities           1.61           7.87
      Adjusted EBITDA                                     2.63           9.06

    (1)  One million barrels of oil equivalent (MMBoe), one thousand barrels
         of oil equivalent (Mboe) and one barrel of oil equivalent (Boe) are
         determined using the ratio of one Bbl of crude oil, condensate or
         natural gas liquids to six Mcf of natural gas (totals may not add
         due to rounding).
    (2)  One billion cubic feet equivalent (Bcfe), one million cubic feet
         equivalent (MMcfe) and one thousand cubic feet equivalent (Mcfe)
         are determined using the ratio of six Mcf of natural gas to one Bbl
         of crude oil, condensate or natural gas liquids (totals may not add
         due to rounding).


                       W&T OFFSHORE, INC. AND SUBSIDIARIES
                      Condensed Consolidated Balance Sheets
                                   (Unaudited)


                                                      March 31,   December 31,
                                                      ---------   -----------
                                                         2009        2008
                                                         ----        ----
                                                      (In thousands, except
                                                            share data)
                         Assets
    Current assets:
      Cash and cash equivalents                       $251,038       $357,552
      Receivables:
         Oil and natural gas sales                      42,847         36,550
         Joint interest and other                       69,764         83,178
         Insurance                                      10,453          2,040
         Income taxes                                   40,505         34,077
                                                        ------         ------
            Total receivables                          163,569        155,845
      Prepaid expenses and other assets                 20,110         30,417
                                                        ------         ------
        Total current assets                           434,717        543,814
      Property and equipment - at cost:
        Oil and natural gas properties and equipment
         (full cost method, of which $99,746 at
         March 31, 2009 and $99,139 at
         December 31, 2008 were excluded from
         amortization)                               4,809,339      4,684,730
        Furniture, fixtures and other                   14,634         14,370
                                                        ------         ------
          Total property and equipment               4,823,973      4,699,100
        Less accumulated depreciation, depletion
         and amortization                            3,508,753      3,217,759
                                                     ---------      ---------
          Net property and equipment                 1,315,220      1,481,341
      Restricted deposits for asset
       retirement obligations and other
       assets                                           32,387         31,031
                                                        ------         ------
          Total assets                              $1,782,324     $2,056,186
                                                    ==========     ==========

          Liabilities and Shareholders' Equity
    Current liabilities:
      Current maturities of long-term debt              $3,000         $3,000
      Accounts payable                                 198,849        228,899
      Undistributed oil and natural gas proceeds        25,513         29,716
      Asset retirement obligations -
       current portion                                  85,784         67,007
      Accrued liabilities                               20,621         18,254
                                                        ------         ------
        Total current liabilities                      333,767        346,876
    Long-term debt, less current maturities
     - net of discount                                 649,768        650,172
    Asset retirement obligations, less
     current portion                                   461,272        480,890
    Other liabilities                                    4,607          6,021
    Commitments and contingencies
    Shareholders' equity:
      Common stock, $0.00001 par value;
       118,330,000 shares authorized;
       77,399,019 issued and 75,969,533
       outstanding at March 31, 2009;
       76,291,408 issued and
       outstanding at December 31, 2008                      1              1
      Additional paid-in capital                       375,395        372,595
      Retained earnings (accumulated deficit)          (32,752)       200,274
      Treasury stock, at cost                           (9,247)             -
      Accumulated other comprehensive loss                (487)          (643)
                                                          ----           ----
        Total shareholders' equity                     332,910        572,227
                                                       -------        -------
        Total liabilities and shareholders' equity  $1,782,324     $2,056,186
                                                    ==========     ==========


                    W&T OFFSHORE, INC. AND SUBSIDIARIES
              Condensed Consolidated Statements of Cash Flows
                                 (Unaudited)

                                                         Three Months Ended
                                                              March 31,
                                                              ---------
                                                         2009           2008
                                                         ----           ----
                                                           (In thousands)

    Operating activities:
    Net income (loss)                                $(230,737)       $79,806
    Adjustments to reconcile net income (loss)
     to net cash provided by operating
     activities:
      Depreciation, depletion, amortization and
       accretion                                        91,535        145,488
      Impairment of oil and natural gas properties     210,205              -
      Amortization of debt issuance costs and
       discount on indebtedness                            709            659
      Share-based compensation related to
       restricted stock issuances                        1,238          1,547
      Unrealized derivative (gain) loss                   (993)         6,185
      Deferred income taxes                                  -         23,682
      Changes in operating assets and liabilities      (37,799)       (15,056)
      Other                                                239             88
                                                           ---            ---
        Net cash provided by operating activities       34,397        242,399
                                                        ------        -------

    Investing activities:
    Acquisition of property interest                         -       (116,669)
    Investment in oil and natural gas properties
     and equipment                                    (128,364)      (129,165)
    Proceeds from insurance                                  7              -
    Purchases of furniture, fixtures and other            (268)          (672)
                                                          ----           ----
        Net cash used in investing activities         (128,625)      (246,506)
                                                      --------       --------

    Financing activities:
    Repayments of long-term debt                          (750)          (750)
    Dividends to shareholders                           (2,289)       (32,286)
    Repurchases of common stock                         (9,247)             -
    Other                                                    -            (80)
                                                           ---            ---
        Net cash used in financing activities          (12,286)       (33,116)
                                                       -------        -------
        Decrease in cash and cash equivalents         (106,514)       (37,223)
    Cash and cash equivalents, beginning
     of period                                         357,552        314,050
                                                       -------        -------
    Cash and cash equivalents, end of period          $251,038       $276,827
                                                      ========       ========

W&T OFFSHORE, INC. AND SUBSIDIARIES

Non-GAAP Information

Certain financial information included in our financial results are not measures of financial performance recognized by accounting principles generally accepted in the United States, or GAAP. These non-GAAP financial measures are "Adjusted Net Income," "EBITDA," and "Adjusted EBITDA." Our management uses these non-GAAP measures in its analysis of our performance. These disclosures may not be viewed as a substitute for results determined in accordance with GAAP and are not necessarily comparable to non-GAAP performance measures, which may be reported by other companies.

Reconciliation of Net Income to Adjusted Net Income

"Adjusted Net Income" does not include the unrealized derivative (gain) loss, the impairment of oil and natural gas properties and associated tax effects. Adjusted Net Income is presented because the timing and amount of the derivative items cannot be reasonably estimated and affect the comparability of operating results from period to period, and current periods to prior periods.


                                                         Three Months Ended
                                                              March 31,
                                                              ---------
                                                         2009           2008
                                                         ----           ----
                                                          (In thousands,
                                                     except per share amounts)
                                                            (Unaudited)

    Net income (loss)                                $(230,737)       $79,806
    Unrealized derivative (gain) loss                     (993)         6,185
    Impairment of oil and natural gas
     properties                                        210,205              -
    Income tax adjustment for above items              (19,704)        (2,113)
                                                       -------         ------
    Adjusted net income (loss)                        $(41,229)       $83,878
                                                      ========        =======

    Adjusted earnings (loss) per common
     share                                              $(0.54)         $1.10
                                                        ======          =====

Reconciliation of Net Income to Adjusted EBITDA

We define EBITDA as net income (loss) plus income tax expense (benefit), net interest expense, depreciation, depletion, amortization and accretion and impairment of oil and natural gas properties. Adjusted EBITDA excludes the unrealized gain or loss related to our derivative contracts. Although not prescribed under generally accepted accounting principles, we believe the presentation of EBITDA and Adjusted EBITDA provide useful information regarding our ability to service debt and to fund capital expenditures and help our investors understand our operating performance and make it easier to compare our results with those of other companies that have different financing, capital and tax structures. EBITDA and Adjusted 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 and Adjusted EBITDA, as we calculate them, may not be comparable to EBITDA and Adjusted EBITDA measures reported by other companies. In addition, EBITDA and Adjusted EBITDA do not represent funds available for discretionary use.

The following table presents a reconciliation of our consolidated net income to consolidated EBITDA and Adjusted EBITDA.


                                                         Three Months Ended
                                                              March 31,
                                                              ---------
                                                         2009           2008
                                                         ----           ----
                                                           (In thousands)
                                                             (Unaudited)

    Net income (loss)                                $(230,737)       $79,806
    Income tax expense (benefit)                       (23,992)        41,414
    Net interest expense                                10,222          6,265
    Depreciation, depletion,
     amortization and accretion                         91,535        145,488
    Impairment of oil and natural gas
     properties                                        210,205              -
                                                       -------       --------
    EBITDA                                              57,233        272,973

    Adjustments:
    Unrealized derivative (gain) loss                     (993)         6,185
                                                          ----          -----
    Adjusted EBITDA                                    $56,240       $279,158
                                                       =======       ========

SOURCE W&T Offshore, Inc.