Offshore Oil Driller Boosts Output to 3.9 MMBoe in Q2

Source: Streetwise Reports   08/08/2022

W&T Offshore Inc.’s shares traded 17% higher after the oil and gas producer reported Q2/22 financial results featuring a 106% YoY increase in revenue. The company noted it has been successful in increasing its proven reserves, reducing net debt levels, and is continuing to focus on generating free cash flow for shareholders.

Offshore Gulf of Mexico oil and gas explorer and producer W&T Offshore Inc. (WTI:NYSE), today announced operational and financial results for the second quarter of 2022 ended June 30, 2022.

The company led off the report by stating that in Q2/22 it increased production by 12% sequentially to 42.4 thousand barrels of oil equivalent per day (MBoe/d), or 3.9 million barrels of oil equivalent (MMBoe), which it said exceeded its prior estimates for the full quarter.

The company reported that total revenue in Q2/22 increased by 106% year-over-year to $273.8 million, compared to $132.8 million in Q2/21.

W&T mentioned that in Q2/22 its average realized price per barrel of oil equivalent (Boe) rose to $69.55, compared to $55.29 in Q1/22 and $34.75 in Q2/21. The firm listed that crude oil prices averaged $107.90/bbl, natural gas liquids (NGLs) averaged $43.58 per barrel, and natural gas averaged $7.70 per Mcf before settlement adjustments.

The company recorded a net income of $123.4 million, or $0.85 per diluted share in Q2, versus a net loss of $51.7 million, or a net loss of $0.36 per diluted share in Q2/21.

The firm stated that in Q2/22 it had adjusted EBITDA of $294.0 million, compared to $50.25 million in Q2/21, and highlighted that “it expanded Free Cash Flow to $233.5 million for Q2/22, which was more Free Cash Flow than FY/21 and FY/20 combined.”

The company advised that its mid-year SEC proven reserves report for H1/22 showed a total of 168.3 MMBoe, representing a 7% increase over reserves of 157.6 MMBoe as of YE/21. The firm listed that over the same period pre-tax PV-10 value (SEC pricing) had increased by 62% to $2.6 billion.

W&T Offshore’s Chairman and CEO Tracy W. Krohn commented, “The combination of solid operational results and opportunistically monetizing a portion of our hedge position allowed us to deliver one of our best quarterly financial results in W&T’s long history. Our second quarter production was up 12% over the first quarter and well above the high end of our guidance range. Adjusted EBITDA was $294.0 million for the second quarter, and we have now generated $383.7 million during the first half of 2022 … We generated Free Cash Flow in the second quarter of $233.5 million, which marked our 18th consecutive quarter of Free Cash Flow generation.”

“We are very pleased with our mid-year reserve report that showed strong reserve growth. Positive performance and pricing revisions, combined with the acquisitions made in the first half of the year allowed us to replace about two and a half times our production … The Company is well positioned with a solid balance sheet and stable production that will allow us to generate meaningful cash flow for years to come,” Krohn added.

The company claimed that for the rest of FY/22 it is hedged for roughly 25% of its oil and 100% of its natural gas production. The firm noted that for the balance of FY/22, it was able to secure average call options on natural gas at an average strike price of $7.48 per MMBTU, which is up considerably from prior levels of $3.78 per MMBTU.

The firm said it conducted two recompletions and four workovers in Q2/22 which had a positive impact on the latest quarter’s production. W&T stated it will perform similar work at other sites where the economics are good. The company also mentioned that is currently making preparations to drill the Holy Grail well at Garden Banks 783 in the Magnolia Field with drilling expected to begin in Q1/23.

The firm offered some forward production guidance and advised that for Q3/22 it expects oil production of 1,350-1,550 Mbbl, NGLs production of 335-375 MBbl, and natural gas production of 11,300-12,800 MMcf. In aggregate, the company expects to produce total equivalents of 3,550-4,050 MBoe in Q3/22 for an average daily equivalent of 39.0-44.0 MBoe/d.

For FY/22 W&T expects that it will produce total equivalents of 14,450-15,450 MBoe, equating to an average daily equivalent of 39.5-42.0 MBoe/d.

W&T Offshore is an independent Houston, Texas-based offshore oil and natural gas explorer, developer, and producer. The company operates in state and federal waters in the Gulf of Mexico and as of June 30, 2022, had working interests in 47 underwater fields with total leases covering about 637,000 gross acres, of which 462,000 acres are located in the shallower Gulf of Mexico Shelf and around 175,000 acres lie in deeper waters.

W&T Offshore started the day with a market cap of around $657.86 million with approximately 143.01 million shares outstanding and a short interest of about 10.1%. WTI shares opened almost 10% higher today at $5.05 (+$0.45, +9.78%) over Friday’s $4.60 closing price. The stock has traded today between $5.01 and $5.70 per share and closed for trading at $5.37 (+$0.77, +16.74%).

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