W&T's Profit Down for First Quarter

W&T Offshore, Inc. on Tuesday announced its 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.

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.

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.

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