W&T Offshore Reports First Quarter 2007 Financial and Operational Results
HOUSTON, May 8 /PRNewswire-FirstCall/ -- W&T Offshore, Inc. (NYSE: WTI) today announces financial and operational results for the first quarter 2007. Some of the highlights include:
-- W&T successfully drilled two conventional shelf exploration wells and one conventional shelf development well in the first quarter -- Production increased 86% and revenues increased 57% -- Cash flow from operating activities increased 29% to $146.7 million in the first quarter 2007 versus $113.3 million in the first quarter 2006 -- First quarter 2007 Adjusted EBITDA increased, as defined below, 32% to $168.7 million compared to $128.2 million in the first quarter 2006
Net Income and Earnings Per Share ("EPS"): Net income for the three months ended March 31, 2007 was $13.0 million, or $0.17 per diluted share, on revenues of $246.5 million. For the first quarter of 2006 net income was $55.8 million, or $0.85 per diluted share, on revenues of $156.9 million. Net income for the first quarter of 2007 includes an unrealized loss of $9.0 million (after taxes) related to W&T's commodity derivative contracts compared to an unrealized gain of $3.4 million (after taxes) in the first quarter of 2006. Adjusted net income for the first quarter 2007 was $22.1 million or $0.29 per diluted share compared to $52.4 million or $0.79 per diluted share in the first quarter of 2006. Net income declined in the first quarter 2007 due to lower realized sales prices, significantly higher lease operating expenses, including higher than expected workover and facility expenses and substantially higher insurance premiums. Much of the higher costs were associated with the Kerr-McGee properties acquired in the third quarter of 2006. Hurricane remediation costs were included in lease operating expenses during the first quarter of 2007 and were not included in 2006 as such amounts were covered by insurance. Earnings were also affected by increased charges for DD&A and increased interest expense. The decrease in net income was partially offset by higher production volumes. EPS was lower in the 2007 period due to a 15% increase in the weighted average number of shares outstanding resulting from an equity offering that was completed in July 2006.
Production and Prices: Total production for the first quarter 2007 was 32.1 billion cubic feet natural gas equivalent ("Bcfe"), sold at an average price of $7.67 per thousand cubic feet equivalent ("Mcfe"), compared to 17.3 Bcfe sold at an average price of $9.06 Mcfe in the first quarter of 2006. Natural gas sales in the first quarter of 2007 were 20.4 billion cubic feet ("Bcf") sold at an average price of $7.20 per Mcf, compared to 10.9 Bcf of natural gas sold at an average price of $8.82 in the first quarter of 2006. Oil sales were 2.0 million barrels ("MMBbls") sold at an average price of $51.00 per barrel ("Bbl") for the first quarter of 2007, compared to 1.1 MMBbls of oil sold at an average price of $56.90 in the first quarter of 2006. Increased natural gas, oil and liquids volumes are attributable to production from the former Kerr-McGee properties and successful exploration and development drilling.
Lease Operating Expenses ("LOE"): Lease operating expenses increased to $1.92 per Mcfe in the first quarter of 2007 from $0.91 per Mcfe in the first quarter of 2006. On a nominal basis, lease operating expenses increased to $61.7 million in the first quarter of 2007 from $15.8 million in the same period of 2006 despite higher total sales volumes in the 2007 period. The increase of $45.9 million is attributable to increases in operating costs of $20.3 million, workover expenditures of $7.5 million, major maintenance expenses of $11.1 million and $7.0 million in higher insurance premiums resulting from the hurricanes in 2005. Approximately $17.0 million of the increase in lease operating costs and the increase in amounts spent for workovers is primarily associated with the former Kerr-McGee properties. The increase in major maintenance expenses is somewhat due to $7.1 million of hurricane remediation expenses that were not covered by insurance. All amounts spent in 2006 related to hurricane remediation efforts were covered by insurance and therefore were not included in lease operating expenses.
Depreciation, depletion, amortization and accretion ("DD&A"): DD&A increased to $124.2 million, or $3.87 per Mcfe, in the first quarter of 2007 from $49.1 million, or $2.84 per Mcfe, in the same period of 2006, and $3.79 per Mcfe in the fourth quarter of 2006. The $75.1 million increase from first quarter 2006 consists of $42.0 million due to higher production volumes and $33.1 million due to the higher DD&A rate in 2007. Per unit DD&A increased in part due to increases in total depletable costs as a result of acquisition and capital spending activities and higher estimated future development costs.
Cash Provided by Operating Activities and Adjusted EBITDA: Net cash provided by operating activities increased to $146.7 million during the first quarter from $113.3 million during the prior year's first quarter. Cash provided by operating activities increased due to higher DD&A and a change in unrealized commodity derivative results, somewhat offset by lower earnings and lower deferred taxes. First quarter 2007 Adjusted EBITDA was $168.7 million, compared to $128.2 million during the prior year's first quarter. For more complete information regarding EBITDA and Adjusted EBITDA please see "Non-GAAP Information" later in this press release.
Capital Expenditures and Operations Update: During the first quarter of 2007, the Company was 100% successful in the drilling of two exploration wells (gross) and one development well on the conventional shelf. For the quarter ended March 31, 2007, capital expenditures of $134.8 million included $81.3 million for development activities, $41.6 million for exploration, $11.4 million for acquisition and other leasehold costs and $0.5 million for other capital items.
During the first quarter of 2007, development and exploration capital expenditures consisted of $64.5 million in the deepwater, $21.4 million on the deep shelf and $37.0 million on the conventional shelf and other projects.
Drilling Highlights: Wells Drilled and Participation: Field Name/Well Category Working Interest % High Island 22 B3ST Exploration / Shelf 100% High Island 24L #1 Exploration / Shelf 25% West Cameron 181 C2ST3 Development / Shelf 100%
Outlook: The following information does not include the potential impact of any future acquisitions or divestitures that may be completed after the date of this news release. The guidance for 2007 represents the Company's best estimate of likely future results, and is affected by the factors described below in "Forward-Looking Statements."
The increase in amounts spent for workovers (which are a component of LOE) in the first quarter of 2007 versus the same period in 2006 is primarily associated with the former Kerr-McGee properties. The Company believes that incurring such costs following such a large acquisition of properties like Kerr-McGee is not unusual. Similarly, the magnitude and timing of additional expenditures on these properties for such expenditures as workovers and facility expenses has not yet been fully determined, but it is part of our basis for adjusting full-year guidance. Accordingly, based on experience to date, the Company feels it is prudent to adjust LOE higher to reflect the most recent increase in LOE and to budget for possible unforeseen workover and facility expenses.
The Company is also revising production guidance lower to reflect significant project start up delays at fields that would have contributed considerable production had they been brought on as scheduled.
Guidance for the second quarter and revised full year 2007 is shown in the table below.
Second Quarter and Revised Full Year 2007 Production and Cost Guidance: Estimated Second Quarter Prior Full-Year Revised Full-Year Production 2007 2007 2007 Crude oil (MMBbls) 2.1 - 2.2 9.6 - 10.5 8.1 - 8.5 Natural gas (Bcf) 20.0 - 21.0 92.2 - 101.2 84.1 - 88.7 Total (Bcfe) 32.7 - 34.4 149.7 - 164.3 132.7 - 140.0 Operating Second Quarter Prior Full-Year Revised Full-Year Expenses ($ in 2007 2007 2007 millions, except as noted) Lease operating expenses $50.0 - $58.0 $166.9 - $199.4 $197.0 - $220.0 Lease operating expenses - Hurricane- related $6.0 - $10.0 $15.0 - $20.0 $18.0 - $26.0 Gathering, transportation & production taxes $6.2 - $7.4 $24.9 - $29.7 No Change General and $12.3 - $14.5 $50.0 - $55.0 No Change administrative Income tax rate, % deferred 35.0%, 80% 35.0%, 80% No Change
Conference Call Information: W&T will hold a conference call to discuss financial and operational results on Tuesday, May 8, 2007 at 10:00 a.m. Eastern Time / 9:00 a.m. Central Time. To participate, dial (303) 375-2170 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 Tuesday, May 15, 2007, and may be accessed by calling (303) 590-3000 and using the pass code 11089320.
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 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 200 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 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, 2006 (www.sec.gov).
W&T OFFSHORE, INC. Consolidated Statements of Income (In thousands, except per share amounts) (Unaudited) Three Months Ended March 31, 2007 2006 Revenues $246,539 $156,854 Expenses: Lease operating 61,663 15,780 Gathering, transportation costs and production taxes 4,257 1,256 Depreciation, depletion, and amortization 118,754 46,838 Asset retirement obligation accretion 5,447 2,254 General and administrative 13,884 11,660 Commodity derivative loss (gain) 11,971 (5,276) Total operating expenses 215,976 72,512 Income from operations 30,563 84,342 Interest expense: Incurred 17,759 305 Capitalized (6,828) -- Other income 413 1,627 Income before income taxes 20,045 85,664 Income taxes 7,016 29,833 Net income $13,029 $55,831 Earnings per common share: Basic $0.17 $0.85 Diluted $0.17 $0.85 Weighted average shares outstanding: Basic 75,787 65,971 Diluted 75,804 65,994 Consolidated Cash Flow Information Net cash provided by operating activities $146,661 $113,305 Capital expenditures $134,802 $122,894 Other Financial Information Adjusted EBITDA $168,652 $128,158 W&T OFFSHORE, INC. Operating Data (Unaudited) Three Months Ended March 31, 2007 2006 Net sales: Natural gas (MMcf) 20,402 10,904 Oil (MBbls) 1,953 1,067 Total natural gas and oil (MMcfe) (1) 32,122 17,307 Average daily equivalent sales (MMcfe/d) 356.9 192.3 Average realized sales price: (2) Natural gas ($/Mcf) $7.20 $8.82 Oil ($/Bbl) 51.00 56.90 Natural gas equivalent ($/Mcfe) 7.67 9.06 Average per Mcfe data ($/Mcfe): Lease operating expenses $1.92 $0.91 Gathering, transportation cost and production taxes 0.13 0.07 Depreciation, depletion, amortization and accretion 3.87 2.84 General and administrative 0.43 0.67 Net cash provided by operating activities 4.57 6.55 Adjusted EBITDA 5.25 7.40 (1) 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). (2) Average realized prices exclude the effects of our derivative contracts that do not qualify for hedge accounting. Had we included the effect of these derivatives, our average realized sales prices for natural gas and oil would have been $7.23 per Mcf and $51.68 per barrel, respectively, for first quarter 2007. On a natural gas equivalent basis, our average realized sales price would have been $7.73 per Mcfe for first quarter 2007. There were no realized gains or losses related to our commodity derivative contracts during the period ended in 2006. W&T OFFSHORE, INC. Consolidated Balance Sheets (In thousands) (Unaudited) March 31, December 31, 2007 2006 Assets Current assets: Cash and equivalents $4,303 $39,235 Accounts receivable 167,340 164,748 Insurance receivable -- 75,151 Prepaid expenses and other 27,741 49,559 Total current assets 199,384 328,693 Property and equipment - at cost 3,442,511 3,308,101 Less accumulated depreciation, depletion and amortization 1,161,069 1,042,315 Net property and equipment 2,281,442 2,265,786 Other assets 13,633 15,206 Total assets $2,494,459 $2,609,685 Liabilities and Shareholders' Equity Current liabilities: Current maturities of long-term debt-net of discount $161,800 $271,380 Accounts payable 172,436 247,324 Asset retirement obligations- current portion 40,256 41,718 Accrued liabilities and other 53,662 83,654 Total current liabilities 428,154 644,076 Long-term debt, less current maturities-net of discount 481,903 413,617 Asset retirement obligations, less current portion 276,766 272,350 Deferred income taxes, less current portion 246,338 232,835 Other liabilities 5,615 3,890 Commitments and contingencies Shareholders' equity: Common stock 1 1 Additional paid-in capital 364,255 361,855 Retained earnings 692,378 681,634 Accumulated other comprehensive loss (951) (573) Total shareholders' equity 1,055,683 1,042,917 Total liabilities and shareholders' equity $2,494,459 $2,609,685 W&T OFFSHORE, INC. Consolidated Statements of Cash Flows (In thousands) (Unaudited) Three Months Ended March 31, 2007 2006 Operating activities: Net income $13,029 $55,831 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion, amortization and accretion 124,201 49,092 Amortization of debt issuance costs 208 80 Accretion of discount on long-term debt 3,206 -- Share-based compensation related to restricted stock issuances 528 1,430 Unrealized commodity derivative loss (gain) 13,888 (5,276) Deferred income taxes 8,322 24,438 Changes in operating assets and liabilities, net (16,721) (12,290) Net cash provided by operating activities 146,661 113,305 Investing activities: Investment in oil and gas property and equipment (134,276) (120,637) Purchases of furniture, fixtures and other, net (416) (2,257) Other (124) (77) Net cash used in investing activities (134,816) (122,971) Financing activities: Borrowings of long-term debt 290,000 -- Repayments of borrowings of long-term debt (334,500) (40,000) Dividends to shareholders (2,277) (1,979) Net cash used in financing activities (46,777) (41,979) Decrease in cash and cash equivalents (34,932) (51,645) Cash and cash equivalents, beginning of period 39,235 187,698 Cash and cash equivalents, end of period $4,303 $136,053 W&T OFFSHORE, INC. 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 and associated tax effects. Adjusted Net Income is presented because the timing and amount of these items cannot be reasonably estimated and affect the comparability of operating results from period to period, and period to prior periods. Three Months Ended March 31, 2007 2006 (In thousands, except per share amounts) (Unaudited) Net income $13,029 $55,831 Unrealized commodity derivative loss (gain) 13,888 (5,276) Income tax adjustment for above item (4,861) 1,847 Adjusted net income $22,056 $52,402 Adjusted earnings per share-diluted $0.29 $0.79 Reconciliation of Net Income to EBITDA
EBITDA is defined as net income plus income tax expense, net interest (income) 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. "Adjusted EBITDA" excludes certain non-cash items that management believes affect the comparability of operating results, including the unrealized gain or loss related to open derivative contracts.
The following table presents a reconciliation of our consolidated net income to consolidated EBITDA and Adjusted EBITDA:
Three Months Ended March 31, 2007 2006 (In thousands) (Unaudited) Net income $13,029 $55,831 Income tax expense 7,016 29,833 Net interest (income) expense 10,518 (1,322) Depreciation, depletion, amortization and accretion 124,201 49,092 EBITDA $154,764 $133,434 Adjustments: Non-cash change in commodity derivatives (before tax) 13,888 (5,276) Adjusted EBITDA $168,652 $128,158 Contacts: Manuel Mondragon, Vice President of Finance firstname.lastname@example.org 713-297-8024 Ken Dennard / email@example.com Lisa Elliott / firstname.lastname@example.org DRG&E / 713-529-6600
SOURCE W&T Offshore, Inc.
Released May 8, 2007