W&T Offshore Posts Higher Earnings for Second Quarter



W&T Offshore (NYSE: WTI) reported financial and operational results for the second quarter of 2007.

Revenues, Net Income and EPS: Net income for the second quarter of 2007 was $45.5 million, or $0.60 per diluted share, on revenue of $272.6 million. This compares to net income of $38.5 million, or $0.58 per diluted share, on revenues of $165.8 million for the second quarter of 2006. The increase in revenues was primarily a result of the addition of the Kerr-McGee properties in August 2006. Net income for the six months ended June 30, 2007 was $58.6 million, or $0.77 per diluted share, on revenues of $519.1 million, compared to net income of $94.3 million or $1.43 per diluted share, on revenues of $322.7 million for the six months of 2006.

Cash Flow from Operating Activities and EBITDA: EBITDA and Adjusted EBITDA are non-GAAP measures. Net cash provided by operating activities for the six months ended June 30, 2007 increased 35% to $308.4 million from $228.1 million in the first six months of 2006. The increase was due to significantly higher revenues, partially offset by higher cash operating expenses. Adjusted EBITDA was $376.2 million for the six months ended June 30, 2007, compared to $265.6 million for the prior six months period.

Production and Prices: Total production in the second quarter of 2007 was 18.3 billion cubic feet ("Bcf") of natural gas sold at an average price of $7.81 per thousand cubic feet ("Mcf") and 2.1 million barrels ("MMBbls") of oil sold at an average price of $60.44 per barrel ("Bbl"), or 31.2 billion cubic feet of natural gas equivalent ("Bcfe") sold at an average price of $8.74 per thousand cubic feet of natural gas equivalent ("Mcfe"). This compares to production of 11.2 Bcf of natural gas sold at an average price of $6.98 per Mcf and 1.4 MMBbls of oil sold at an average price of $61.13 per Bbl, or 19.8 Bcfe sold at an average price of $8.37 per Mcfe in the second quarter of 2006.

For the six months ended June 30, 2007, total production was 38.7 Bcf of natural gas sold at an average price of $7.49 per Mcf and 4.1 MMBbls of oil sold at an average price of $55.94 per Bbl, or 63.3 Bcfe sold at an average price of $8.20 per Mcfe. This compares to 22.1 Bcf of natural gas sold at an average price of $7.88 per Mcf and 2.5 MMBbls of oil sold at an average price of $59.32 per Bbl, or 37.1 Bcfe sold at an average price of $8.69 per Mcfe for the same period in 2006.

Lease Operating Expenses ("LOE"): LOE for the second quarter of 2007 increased to $51.2 million, or $1.64 per Mcfe, from $16.3 million, or $0.82 per Mcfe, in the second quarter of 2006. The increase in LOE was due to operating expenses associated with the Kerr-McGee properties, higher insurance premiums and hurricane remediation costs not covered by insurance. LOE for the six months ended June 30, 2007 was $112.8 million or $1.78 per Mcfe, compared to $32.1 million or $0.86 per Mcfe for the same period in 2006.

Depreciation, Depletion, Amortization and Accretion ("DD&A"): DD&A increased to $126.0 million, or $4.04 per Mcfe, in the second quarter of 2007 from $67.3 million, or $3.40 per Mcfe, in the same period of 2006. DD&A for the six months ended 2007 was $250.2 million or $3.95 per Mcfe, compared to DD&A of $116.4 million, or $3.14 per Mcfe, for the same period in 2006. The increase in DD&A primarily reflects a significant increase in depletable costs and reserves associated with the Kerr-McGee transaction and to a lesser extent to the higher finding and development costs associated with the Company's exploration and development programs.

Capital Expenditures and Operations Update: During the second quarter of 2007, we participated in the drilling of one development well. For the six months ended June 30, 2007, capital expenditures totaled $199.0 million, of which $130.6 million was spent on development activities, $48.2 million for exploration, $19.0 million for acquisition and other leasehold costs and $1.2 million on other capital items. Over half of the development activities were spent on the Company's deepwater drilling program and recompletion program.

As a result of higher than expected commodity prices and the benefits of refinancing Term Loan A, the Company has increased its 2007 exploration and development capital and major expenditures budget by $100 million to $557.5 million.

For the remainder of the year, the Company anticipates drilling between 10 and 13 wells including two wells in the deep shelf and two wells in the deepwater. At this time, all wells planned are exploration wells with the majority of the prospects to be drilled from existing structures.

Tracy W. Krohn, Chairman and Chief Executive Officer stated, "During the second quarter we continued to focus on integrating the properties we acquired from Kerr- McGee last fall. We are making progress toward maximizing well performance of these assets. Historically, we have demonstrated that we can build significant value through exploitation of acquired assets; that is why we are increasing our capital and major expenditures budget by $100 million. This increase in the budget is the beginning of higher drilling activity to come."

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