W&T Offshore Shines in 3Q10

W&T Offshore provided financial and operational results for the third quarter 2010. Some of the highlights for the third quarter 2010 include:

  • Earnings per share increased for the third quarter to $0.36 from a loss per share of $0.02 in last year's third quarter and EPS excluding special items increased to $0.43 from a loss per share of $0.04 during the third quarter of 2009.
  • Adjusted EBITDA increased 26% to $117.9 million for the quarter.
  • Net cash provided by operating activities for the first nine months of 2010 was $392.9 million, an increase of $301.0 million over the nine month period of 2009. For the quarter, net cash provided by operating activities increased 227% to $148.6 million from $45.5 million for the quarter ended September 30, 2009.
  • Lease operating expenses decreased 36% to $34.4 million in the third quarter from the prior year period.
  • Oil and natural gas liquids were 51% of sales volumes during the quarter, up from 45% during the third quarter of 2009.
  • Cash balance at September 30, 2010 was $180.5 million, an increase of $142.3 million since year-end, bringing total current liquidity to $585.7 million.

Tracy W. Krohn, Chairman and Chief Executive Officer, commented, "We had another very good quarter with higher oil production, higher average realized sales prices and much lower lease operating expenses as compared to the last quarter. Our adjusted EPS was $0.43 and exceeded both second quarter this year and last year's third quarter. In addition, we are excited about the results of the Main Pass 108 E-3 well, which we finished drilling shortly after the end of the third quarter. This successful conventional shelf well has discovered over 300 feet of gas condensate in six sands. Furthermore, our liquidity continues to gain strength, positioning us to take advantage of acquisition opportunities that we are seeing more frequently both offshore and onshore. We added to our oil hedge positions recently to allow us better price support when and if a financing requirement arises."

Revenues, Net Income/Loss and Earnings Per Share ("EPS"): Net income for the third quarter of 2010 was $27.2 million, or $0.36 per common share, on revenues of $169.6 million, compared to a net loss for the same quarter of 2009 of ($1.3) million, or ($0.02) per share, on revenues of $167.0 million. Net income for the nine months ended September 30, 2010 was $97.4 million, or $1.30 per common share, on revenues of $518.8 million, compared to a net loss of ($251.9) million, or ($3.35) per share, on revenues of $434.9 million for the first nine months of 2009. Included in revenues for the three and nine months ended September 30, 2010 are approximately $4.8 million and $24.9 million, respectively, related to the recoupment of royalties paid to the Bureau of Ocean Energy Management (the "BOEM" and formerly the Minerals Management Service) in prior periods. Volumes associated with this adjustment were 0.5 Bcfe and 3.0 Bcfe for the three months and nine months ended September 30, 2010, respectively. Also included in revenues for the three and nine months ended September 30, 2010 is a charge of $4.7 million for royalty relief originally recognized in 2009 on deepwater production transported through our subsea pipeline system that has been partially disallowed by the BOEM. We are contesting this adjustment.

Net income for the third quarter of 2010 excluding special items was approximately $32.0 million, or $0.43 per common share. Excluding special items for the corresponding quarter of 2009, our net loss was approximately ($2.6) million, or ($0.04) per common share. Net income for the nine months ended September 30, 2010 excluding special items was approximately $87.1 million, or $1.17 per common share, compared to a net loss excluding special items of ($109.0) million, or ($1.45) per common share, in the corresponding period of 2009. See the "Reconciliation of Net Income (Loss) to Net Income (Loss) Excluding Special Items" table at the back of this press release for a description of the special items.

Cash Flow from Operating Activities and Adjusted EBITDA: Net cash provided by operating activities for the three months ended September 30, 2010 increased 227% to $148.6 million from $45.5 million for the three months ended September 30, 2009. Net cash provided by operating activities for the nine months ended September 30, 2010 increased 328% to $392.9 million from $91.9 million for the nine months ended September 30, 2009. The increase was primarily a result of higher prices, lower expenses and net changes in working capital, which included the receipt of $99.8 million in tax reimbursements and $46.9 million in insurance reimbursements.

EBITDA and Adjusted EBITDA are non-GAAP measures and are hereinafter defined in "Non-GAAP Information" later in this press release.For the quarter ended September 30, 2010, EBITDA was $112.2 million versus $95.4 million during the corresponding quarter of 2009, or an 18% increase. For the nine months ended September 30, 2010, EBITDA increased 57% to $353.3 million from $225.4 million during the nine months ended September 30, 2009. Third quarter 2010 Adjusted EBITDA was $117.9 million compared to $93.4 million during third quarter 2009, or a 26% increase. Adjusted EBITDA increased 45% to $328.6 million for the nine months ended September 30, 2010 from $226.3 million for the comparable period of 2009.

Production and Prices: On a natural gas equivalent ("Bcfe") basis, we sold 21.6 Bcfe at an average price of $8.02 per Mcfe in the third quarter of 2010, of which 51% was from oil and natural gas liquids. This compares to 25.7 Bcfe sold at an average price of $6.30 per Mcfe in the third quarter of 2009, of which 45% was from oil and natural gas liquids. For the nine months ended September 30, 2010, we sold 64.4 Bcfe with an average realized price of $8.12 per Mcfe. For the comparable 2009 period, we sold 71.9 Bcfe with an average realized price of $5.98 per Mcfe. The sales volume decrease for both the quarter and year to date periods is primarily attributable to the downtime experienced at our MP 108 field, which has been impacted by a third-party pipeline outage since early June 2010.

Lease Operating Expenses ("LOE"): LOE for the third quarter of 2010 decreased to $34.4 million, or $1.59 per Mcfe, from $53.8 million, or $2.10 per Mcfe, in the third quarter of 2009. LOE is made up of base LOE, insurance premiums, workovers, facilities maintenance and hurricane remediation costs, net. Base LOE is lower due to the property divestitures that occurred in 2009, partially offset by increases associated with the Matterhorn and Virgo fields we purchased in the second quarter of 2010. Insurance costs are lower with the policy renewal that occurred on June 1, 2010, while workover costs are lower with reduced activity. Facilities maintenance increased with work performed on the new platforms and repairs and refurbishments on other platforms primarily involving sandblasting and painting. Hurricane remediation costs, net, were down approximately $11.1 million due to insurance reimbursements exceeding expenditures on hurricane repairs.

LOE for the nine months ended September 30, 2010 decreased to $122.2 million, or $1.90 per Mcfe, compared to $158.1 million, or $2.20 per Mcfe for the same period in 2009. LOE for the nine months ended September 30, 2010 decreased as hurricane remediation costs, net, a component of LOE, decreased $30.6 million compared to the first nine months of 2009 as insurance reimbursements exceeded costs incurred. LOE was also lower as a result of the property divestitures that occurred in 2009. These decreases in LOE were partially offset by increases associated with the Matterhorn and Virgo fields we purchased in the second quarter of 2010 and increases from Green Canyon 646 (Daniel Boone), which began production in late September 2009.

Depreciation, depletion, amortization and accretion ("DD&A"): DD&A decreased to $75.3 million, or $3.48 per Mcfe, in the third quarter of 2010 from $88.1 million, or $3.43 per Mcfe, in the third quarter of 2009. DD&A decreased primarily as a result of lower production volumes. DD&A for the nine months ended September 30, 2010 was $220.5 million, or $3.42 per Mcfe, compared to DD&A of $264.2 million, or $3.68 per Mcfe, for the same period in 2009.

Liquidity: Our cash balance at September 30, 2010 was $180.5 million. Also, we had no amounts outstanding under our committed revolving loan facility, which was recently reaffirmed by our lenders and has an availability of $405.2 million.

Capital Expenditures and Operations Update: For the three months ended September 30, 2010, our capital expenditures for oil and natural gas properties was $37.7 million, comprised of $20.1 million for exploration activities, $14.7 million for development activities and $2.9 million for seismic, capitalized interest and other leasehold costs. Our development and exploration capital expenditures consisted of $26.5 million on the conventional shelf, $5.5 million onshore, $1.6 million in the deepwater and $1.2 million on other projects.

For the first nine months of 2010, our capital expenditures for oil and natural gas properties were $244.0 million, including $116.6 million for acquisitions, $68.6 million for exploration activities, $40.5 million for development activities and $18.3 million for seismic, capitalized interest and other leasehold costs. Our development and exploration capital expenditures consisted of $93.8 million on the conventional shelf, $5.5 million onshore, $6.4 million in the deepwater and $3.4 million on other projects. Our capital expenditures were funded from cash from operating activities and cash on hand.

Drilling Highlights: In the third quarter of 2010, the Company participated in the drilling of two non-commercial wells, both of which were onshore.

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