W&T Offshore has provided financial and operational results for the third quarter 2008.
Some of the highlights for the third quarter 2008 include:
Tracy W. Krohn, Chairman and Chief Executive Officer, stated, "The third quarter certainly had its share of challenges including two hurricanes in the Gulf of Mexico. Although we did have some damage from the storms, we are working hard to restore production. Currently our production rate is 8,800 barrels per day plus 106 million cubic feet ("Mcf") per day or 159 million cubic feet equivalent ("MMcfe") per day or approximately 52% of production prior to the storms. The majority of our production is ready to come back on line and we are waiting for downstream third party pipeline and processing facilities to complete their repairs.
"However our strong balance sheet, which included $685 million in cash on September 30, 2008, and our $500 million undrawn revolver, positions us to take advantage of the unique opportunities that are being created by the recent credit crisis. "continued Krohn. "As it relates to our drilling operations, we were three of five in exploration wells and one for one in development wells. Our overall drilling success rate for the year is 80%."
Revenues, Net Income and EPS
Net income for the third quarter of 2008 was $78.2 million, or $1.03 per diluted share, on revenues of $289.8 million, compared to net income for the same quarter of 2007 of $36.3 million, or $0.48 per diluted share, on revenues of $255.2 million.
Net income increased in the third quarter 2008 principally due to a higher realized price of $14.57 per thousand cubic feet equivalent ("Mcfe"), a 65% increase over the $8.83 per Mcfe realized in the comparable period in 2007.
Operating income for the third quarter of 2008 also reflects the impact of a $27.3 million unrealized derivative gain ($18.2 million after-tax), or $0.24 per diluted share, while operating income for the third quarter of 2007 included an unrealized derivative loss of $6.4 million ($4.2 million after-tax), or $0.05 per diluted share. Without the effect of these respective unrealized gains and losses, net income for the third quarter 2008 would have been $60.0 million, or $0.79 per diluted share, and net income for the corresponding quarter of 2007 would have been $40.5 million, or $0.53 per diluted share.
Net income for the nine months ended September 30, 2008 was $292.6 million, or $3.85 per diluted share, on revenues of $1.1 billion, compared to net income of $94.9 million, or $1.25 per diluted share, on revenues of $774.3 million for the first nine months of 2007. See "Non-GAAP Information" later in this press release.
Cash Flow from Operating activities and Adjusted EBITDA
EBITDA and Adjusted EBITDA are non-GAAP measures and are defined in "Non-GAAP Information" later in this press release. Net cash provided by operating activities for the nine months ended September 30, 2008 increased 120% to approximately $1.0 billion from $472.7 million in the comparable period in 2007. The increase was associated with higher realized prices on sales of our oil and natural gas.
Third quarter 2008 Adjusted EBITDA was $208.4 million, which represents a 9% increase over the $191.4 million reported during the prior year's third quarter. Adjusted EBITDA was $861.7 million for the nine months ended September 30, 2008, compared to $567.6 million for the comparable period of 2007.
Production and Prices: We sold 10.9 billion cubic feet ("Bcf") of natural gas at an average price of $10.60 per thousand cubic feet ("Mcf") in the third quarter of 2008. We also sold 1.5 million barrels ("MMBbls") of oil and natural gas liquids at an average price of $116.54 per barrel ("Bbl") during the same time period. On a natural gas equivalent ("Bcfe") basis, we sold 19.9 Bcfe at an average price of $14.57 per Mcfe.
For the third quarter of 2007, we sold 16.8 Bcf of natural gas at an average price of $6.45 per Mcf and 2.0 MMBbls of oil and natural gas liquids at an average price of $72.72 per Bbl. On a Bcfe basis for 2007, we sold 28.9 Bcfe at an average price of $8.83 per Mcfe. The production volume decrease is primarily attributable to the deferral of production caused by Hurricanes Gustav and Ike and properties that experienced natural reservoir declines, partially offset by increased production from our successful drilling and development efforts and the acquisition of the remaining interest in the Ship Shoal 349 field.
For the nine months ended September 30, 2008, our natural gas production totaled 45.6 Bcf and was sold at an average price of $10.21 per Mcf while our oil and natural gas liquids production totaled 6.0 MMBbls, which was sold at an average price of $106.71 per Bbl.
On a combined basis our production was 81.7 Bcfe sold at an average price of $13.56 per Mcfe. For the comparable 2007 period, we produced 55.5 Bcf of natural gas that was sold at an average price of $7.17 per Mcf and 6.1 MMBbls of oil and natural gas liquids production sold at an average price of $61.49 per Bbl. On a combined basis for 2007 our production was 92.2 Bcfe sold at an average price of $8.40 per Mcfe.
Lease Operating Expenses
On a nominal basis, LOE for the third quarter of 2008 was up slightly to $52.4 million, from $51.6 million in the third quarter of 2007. LOE increased to $2.64 per Mcfe in the third quarter 2008 from $1.79 per Mcfe in the third quarter of 2007. On an absolute basis, the increase in LOE is due to higher facility expense associated with various maintenance projects and higher workover costs, partially offset by lower base operating costs due to lower production volumes.
On an absolute basis, LOE for the nine months ended September 30, 2008 decreased to $156.6 million, compared to $169.2 million for the same period in 2007. The 2007 period included $14.8 million of hurricane remediation costs related to Hurricanes Katrina and Rita not covered by insurance. Also contributing to the decrease in 2008 is $4.2 million of lower insurance premiums and $2.7 million of lower workover expenditures. This was partially offset by higher facility expenditures associated with maintenance projects and higher base operating expense associated with higher fuel costs.
Depreciation, depletion, amortization and accretion
DD&A decreased to $113.9 million for the third quarter 2008 from $123.1 million for the same period in 2007. DD&A decreased due to lower total sales volumes, the addition of reserves from the acquisition of an additional interest in the Ship Shoal 349 field and reserves added as a result of our successful drilling efforts. This was partially offset by capital expenditures, increased estimated future development costs and higher estimated asset retirement obligations. On a per Mcfe basis, DD&A was $5.73 for the quarter ended September 30, 2008, compared to $4.26 for the quarter ended September 30, 2007.
The increase of $1.47 per Mcfe is primarily due to higher total depletable costs and lower estimated oil and natural gas reserves in the 2008 period. DD&A for the nine months ended 2008 was $413.2 million or $5.06 per Mcfe, compared to DD&A of $373.4 million, or $4.05 per Mcfe, for the same period in 2007.
Capital Expenditures and Operations Update
During the third quarter of 2008, the Company was 67% successful in the drilling of three conventional shelf and two deep shelf exploration wells and one conventional shelf development well. For the quarter ended September 30, 2008, capital expenditures for oil and gas properties were $222.5 million split between $120.0 million for development activities, $69.1 million for exploration, and $33.4 million for other capital items.
For the first nine months of 2008, our capital expenditures for oil and gas properties were $621.6 million, including $253.5 million for development activities, $196.1 million for exploration, $116.6 million for the acquisition of an additional interest in SS349 "Mahogany" and $55.4 million for seismic, capitalized interest and other leasehold costs.
Capital expenditures for 2008 are expected to generally be inline with our revised capital budget of $611 million.
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