W&T Offshore, Inc. (NYSE: WTI) (the “Company” or “W&T”)
today announced that the Company has completed the accretive
acquisition of six fields in shallow waters of the Gulf of Mexico.
W&T was the successful bidder for certain synergistic assets in
the Gulf of Mexico offered by MLCJR LLC, Cox Oil Offshore, L.L.C.,
Cox Operating, L.L.C., Energy XXI GOM, LLC, Energy XXI Gulf Coast,
LLC, EPL Oil & Gas, LLC and M21K, LLC (collectively, the
“Debtors”), as described in the Order Approving the Purchase And
Sale Agreement With W&T Offshore, Inc. issued on January 16,
2024, the closing and effective date of the transaction. The final
purchase price for the assets was $72.0 million, excluding certain
closing costs, which was funded from the Company’s cash on hand.
Key highlights of the transaction are as follows:
- Provides
strong producing properties, all of which are 100% working interest
(average 82% net revenue interest) and are located adjacent to
W&T existing area of operations;
- The six
fields acquired include Eugene Island 064, Main Pass 061, Mobile
904, Mobile 916, South Pass 049 and West Delta 073;
- Includes
estimated production that has ranged from approximately 3,700 to
5,700 barrels of oil equivalent per day ("BOEPD") (around 68%
liquids) during the period month-to-date January 19, 2024. The
Company believes that it can meaningfully increase production on
these properties through workovers, recompletions and facility
repairs;
- The six
fields acquired produced approximately 8,300 BOEPD (48% liquids) on
average in April 2023, the month prior to the bankruptcy filing by
the Debtors in May 2023;
- Adds
significant proved reserves (“1P”) of 18.7 million barrels of oil
equivalent (“MMBOE”) (62% liquids) as of January 1, 2024 at
year-end 2023 SEC pricing with a present value discounted at 10%
(“PV-10”) value of $250.4 million1 based on an independent
engineering report prepared by Netherland Sewell and Associates
(“NSAI”);
- Provides
material upside with proved plus probable reserves (“2P”) of 60.6
MMBOE (78% liquids) as of January 1, 2024 at year-end 2023 SEC
pricing with a PV-10 value of $629.2 million1 based on an
independent engineering report prepared by NSAI; and
- Accretive
cash multiple of approximately 1.0x last twelve months asset cash
flows as of October 31, 20232, and production multiple of
approximately $16,950 per BOEPD based on average estimated
production range for the period month-to-date January 19,
2024.
Tracy W. Krohn, Chairman, President and CEO,
commented, “We are very pleased to announce our second accretive
acquisition of GOM producing properties in the last four months. As
was the case with the purchase announced in September 2023, the
producing properties included in the acquisition announced today
meet the time-tested investment criteria we have used for all
acquisitions. These assets have attractive production rates, are
generating positive free cash flow, and have a solid base of proved
developed reserves and identified upside potential with strong 2P
reserves. We plan to increase production in the near-term with
capital-efficient, low-cost workover, recompletion and maintenance
projects. We expect to realize synergies on these new assets due to
their close proximity to our existing fields, which can reduce
operating costs and further increase free cash flow. Combined with
our acquisition last fall, we have added almost 22 million barrels
of oil equivalent of proved reserves for about $104 million, or
around $4.75 per BOE, which we believe is a very attractive price
for properties with significant upside. We plan to continue to
utilize our strong balance sheet and expertise in acquiring
complementary GOM assets to further enhance the scale of W&T.
Acquisitions continue to be a key component of how we build and
grow value, reserves and production at W&T, and we are well
positioned to continue to execute on our successful strategy.”
The six fields acquired include Eugene Island
064, Main Pass 061, Mobile 904, Mobile 916, South Pass 049 and West
Delta 073, all of which include a 100% working interest and an
average 82% net revenue interest. They are located in water depths
ranging between approximately 15 and 400 feet. Their proximity to
W&T’s areas of existing operations provide the ability for
W&T to capture synergies. Recent estimated production for the
fields has ranged from approximately 3,700 to 5,700 BOEPD (around
68% liquids) during the period month-to-date January 19, 2024.
W&T plans to implement a series of workovers, recompletions and
general maintenance work that the Company expects will increase
total production from the fields.
As a result of this additional accretive
acquisition, W&T plans to invest additional funds for
increasing production and reducing costs in these assets long term.
The Company now plans to defer the drilling of Holy Grail, which is
a proven undeveloped well in our Magnolia field. The Company will
be exploring a Drilling Joint Venture, similar to what it did with
investors in 2018 through Monza Energy LLC, that may include
certain of the Company’s 100% owned and operated deepwater wells,
including Holy Grail (approximately 3,900 feet of water),
Thunderbolt (approximately 500 feet of water), Zeus (approximately
500 feet of water) and Redbolt (approximately 500 feet of water).
Additionally, the Company plans to drill at least one shelf
exploratory well in the Drilling Joint Venture. We believe that
such a structure aligns investor interests and provides ongoing
liquidity through cash distributions. Additional information and
expectations from the acquisitions will be incorporated into
W&T’s 2024 guidance that will be discussed during the Company’s
year-end 2023 conference call in early March.
About W&T Offshore
W&T Offshore, Inc. is an independent oil and
natural gas producer with operations offshore in the Gulf of Mexico
and has grown through acquisitions, exploration and development. As
of September 30, 2023, the Company had working interests in 54
fields in federal and state waters (which include 45 fields in
federal waters and nine in state waters). The Company has under
lease approximately 602,100 gross acres (446,800 net acres)
spanning across the outer continental shelf off the coasts of
Louisiana, Texas, Mississippi and Alabama, with approximately
440,600 gross acres on the conventional shelf, approximately
153,500 gross acres in the deepwater and 8,000 gross acres in
Alabama onshore. A majority of the Company’s daily production is
derived from wells it operates. For more information on W&T,
please visit the Company’s website at www.wtoffshore.com.
Cautionary Note Regarding Forward
Looking Statements
This press release contains forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. These forward-looking statements, including
but not limited to, statements regarding the benefits of the
acquisition, expected synergies, expected production and increases
in production, expected cash flow generated by the assets, uses of
capital, drilling and operations plans and potential joint ventures
and financing structures, and other statements herein, reflect our
current views with respect to future events, based on what we
believe are reasonable estimates and assumptions. No assurance can
be given, however, that these events will occur or that our
expectations will be correct. These statements are subject to risks
and uncertainties that could cause actual results to differ
materially including, among other things, risks pertaining to the
integration of the assets, market conditions, commodity price
volatility, uncertainties inherent in oil and gas production
operations and estimating reserves, uncertainties of the timing and
impact of bringing new wells online and repairing and restoring
infrastructure due to hurricane damage, the ability to achieve
leverage targets, unexpected future capital expenditures,
competition, the success of our risk management activities,
governmental regulations, uncertainties and other factors described
or referenced in W&T’s Annual Report on Form 10-K for the year
ended December 31, 2022, and subsequent Quarterly Reports on Form
10-Q found at www.sec.gov or on our website at www.wtoffshore.com
under the Investor Relations section. Our forward-looking
statements in this press release are based upon assumptions made,
and information known, by the Company as of the date of this
release; the Company does not undertake, and specifically
disclaims, any obligation to revise or update any such
forward-looking statements as such assumptions and information
changes, except as required under applicable law. Investors are
urged to consider closely the disclosures and risk factors in these
reports.
W&T OFFSHORE, INC. AND SUBSIDIARIES
Non-GAAP Information
The Company has disclosed the present value of
future net pre-tax cash flows attributable to estimated net proved
(1P) and net probable (2P) reserves, discounted at 10% (PV-10),
which is not a financial measure defined under GAAP. Both PV-10 and
PV-10 after Asset Retirement Obligation (ARO) are computed on the
same basis as the standardized measure of discounted future net
cash flows but does not include a provision for federal income
taxes. Management believes that PV-10 and PV-10 after ARO are
relevant and useful for evaluating the relative monetary
significance of oil and natural gas properties. PV-10 and PV-10
after ARO are used internally when assessing the potential return
on investment related to oil and natural gas properties and in
evaluating acquisition opportunities. W&T believes the use of
pre-tax measures, including PV-10, is valuable because there are
many unique factors that can impact an individual company when
estimating the amount of future income taxes to be paid. Management
believes that both PV-10 and PV-10 after ARO provide useful
information to investors because they are widely used by
professional analysts and sophisticated investors in evaluating oil
and natural gas companies. PV-10 and PV-10 after ARO are not
measures of financial or operating performance under GAAP, nor is
it intended to represent the current market value of W&T’s
estimated oil and natural gas reserves. PV-10 and PV-10 after ARO
should not be considered in isolation or as substitutes for the
standardized measure of discounted future net cash flows as defined
under GAAP.
The table below provides a reconciliation of
PV-10 and PV-10 after ARO to the standardized measure of discounted
future net cash flows (in millions of dollars):
|
1P |
|
2P |
Standardized measure |
$ |
184.2 |
|
$ |
472.3 |
Future income taxes, discounted at 10% |
|
43.2 |
|
|
132.5 |
PV-10 after ARO (Non-GAAP) |
|
227.4 |
|
|
604.8 |
Present value of estimated ARO, discounted at 10%3 |
|
23.0 |
|
|
24.4 |
PV-10 (Non-GAAP) |
$ |
250.4 |
|
$ |
629.2 |
CONTACTS: |
Al Petrie |
Sameer Parasnis |
|
Investor Relations
Coordinator |
Executive VP and CFO |
|
investorrelations@wtoffshore.com |
sparasnis@wtoffshore.com |
|
713-297-8024 |
713-513-8654 |
1 PV-10 is a non-GAAP financial measure, which is described and
reconciled to the most comparable GAAP measure below in the
accompanying table under “Non-GAAP Information.”2 Based on the
latest available lease operating statement provided by the
Debtors.3 Estimates for Asset Retirement Obligation are internal
management estimates and subject to change.
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