W&T Offshore, Inc. has announced its update on the impact of Hurricanes Gustav and Ike on its operations in the Gulf of Mexico.
Two operated and nine non-operated platforms sank, including the operated Eugene Island 371 "B" and Eugene Island 397 "A" platforms (in which we have a 50% working interest in each such operated platform). The Company is currently evaluating its alternatives for those facilities including utilizing other platforms.
Production associated with these platforms prior to the hurricane was approximately 7.5 MMcfe per day, net to our interest. All other operated structures inspected by air or by physical inspection appear to be intact, but some have incurred damage. The Company has begun the remediation process.
The Company is currently producing 72 MMcfe net per day (2,264 barrels per day and 58 MMcfe per day). Based on current production rates and actual production thus far in the quarter the Company believes that its production for the third quarter of 2008 will be between 19 Bcfe and 21 Bcfe. In addition to addressing the damage to its facilities, in order to increase production above current levels, the Company is dependent on the completion of repairs to third party owned pipelines and processing facilities that carry or process its production.
Although the Company is working diligently to increase its production, at this time its production for the fourth quarter and therefore full year of 2008 is not determinable with any certainty. The Company intends to provide an update of the hurricane impact and production guidance for the fourth quarter of 2008 in connection with its third quarter 2008 earnings release.
Prior to Hurricanes Gustav and Ike the Company had eight rigs drilling and have been able to recommence drilling operations at seven of the eight locations thus far.
W&T maintains adequate insurance coverage for property damage due to named windstorms. The insurance policy has a retention of $10 million. The Company does not carry business interruption insurance.
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