W&T Offshore completed another year with success in its exploration and development program. During the fourth quarter, W&T Offshore successfully drilled four exploration wells and three development wells, as listed below. Additionally, four wells were initiated in 2005 but had not reached total depth by year-end. Of those four wells, the South Timbalier 230 A-7 and Ewing Bank 977 #1ST were successful and two wells remain in progress. East Cameron 321 A-28ST3 began drilling in early January and remains in progress at this time.
Lease Name/Well Category Working Interest % High Island A443 A-2ST Expl 84% Mustang Island 889 F-1 Expl 50% Eugene Island 349 B-9ST Expl 29% Ship Shoal 130 #9 Expl 100% Ship Shoal 177 A-4ST Dev 75% Eugene Island 107 A-3 Dev 25% East Cameron 321 A-20ST Dev 100% South Timbalier 230 A-7 Expl 100% Ewing Bank 977 #1ST Expl 60% Wells in progress Ship Shoal 130 #10 Expl 100% Grand Isle 3 #1 Expl 25% East Cameron 321 A-28ST3 Dev 100%
In the fourth quarter, the Company was unsuccessful at two exploration wells and one development well location.
Lease Name/Well Category Working Interest % Mississippi Canyon 804 #1 Expl 25% High Island A443 A-13 Expl 92% High Island A572 C-23ST Dev 5%
For full year 2005, the Company successfully drilled 17 of 22 exploration wells, which included two of four in the deepwater, and six of seven development wells; all of which were conventional shelf wells.
"Our 2005 success rate of 77% for exploration wells and 86% for development wells continues to demonstrate our ability to create value with the drill bit in the Gulf of Mexico," said Tracy W. Krohn, Chairman and Chief Executive Officer. "As we remain focused on achieving high rates of return and a rapid return on investment, the Gulf of Mexico continues to offer outstanding opportunities for our seasoned professional staff to achieve our objectives."
Capital and Major Expenditure Budget: The Board of Directors has approved the Company's capital and major expenditures budget of approximately $400 million, which includes major expense items, for 2006. The 2006 budget represents a 30% increase over the announced 2005 budget.
Category Amount in $MM % Exploration $198 49% Development 148 37% Other (includes P&A & Seismic) 39 10% Major Expense Items 15 4% Total $400 100%
The budget includes 25 exploration wells and seven development wells to be drilled in 2006. Of the exploration wells, 14 are conventional shelf wells, four are on the deep shelf, and seven are in the deepwater. All of the development wells are conventional shelf wells.
"From our substantial inventory of quality projects we have created a drilling program for 2006 that contains an excellent balance of conventional shelf projects, which historically generate solid cash flow, coupled with the substantial upside potential of deep shelf and deepwater projects. Our ability to consistently achieve high EBITDA margins of at least 77% since 2000, is one of the many reasons we remain committed to the Gulf and confident of our future success there," continued Mr. Krohn.
Hurricane Update: W&T Offshore is currently producing approximately 190 million cubic feet of gas equivalent (MMcfe) net per day, which represents 78% of the Company's pre-Hurricane Katrina production rate. Currently, the company estimates that 38 MMcfe per day of additional net production is shut- in because of Hurricanes Katrina and Rita, primarily due to issues related to field infrastructure and product sales pipelines. W&T Offshore anticipates achieving pre-Hurricane Katrina production levels in late second quarter.
Property Acquisition: W&T Offshore completed an acquisition of an additional interest in the Green Canyon 18 Field, which includes Ewing Bank blocks 988 and 944, and an interest in the Green Canyon 60 Field from BHP Billiton Petroleum (Americas) Inc. on December 22, 2005, with an effective date of September 1, 2005. W&T Offshore estimates the acquired reserves, at the effective date, to be approximately 5.5 Bcfe. The property acquired is currently producing approximately 1.9 MMcfe per day, net to the acquired interest.
Outlook: Certain factors affecting these forward-looking statements are listed in this news release. Guidance for the first quarter and full year of 2006 is shown in the table below. Production and operating expense guidance is based on the Company's best assessment of when hurricane-affected field infrastructure and product sales pipelines issues are resolved. The Company is revising its previous full-year 2006 production guidance to better reflect the delays caused by the hurricanes, most notably the Pluto project being moved from the 1st quarter into the 2nd quarter 2006. These statements do not include the potential impact of any future acquisitions or divestitures that may be completed after the date of this news release.
Estimated Daily Production First Quarter 2006 Full-Year 2006 Crude Oil (MMBbls) 1.1 - 1.2 5.8 - 6.1 Natural Gas (Bcf) 10.6 - 11.1 48.2 - 51.1 Total (Bcfe) 17.2 - 18.3 83.0 - 87.7 Operating expenses ($ in millions, except as noted) First Quarter 2006 Full-Year 2006 Lease operating expense $16.6 - $18.2 $75.3 - $82.3 Gathering, Transportation & Production Taxes 3.8 - 4.1 15.1 - 16.5 General and administrative 7.8 - 9.0 30.0 - 35.0 Income tax rate, % deferred 35.0%, 40% 35.0%, 40% 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, where it has developed significant technical expertise. W&T has grown through acquisition, exploitation and exploration and now holds working interests in over 100 fields in federal and state waters and a majority of its daily production is derived from wells it operates.
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