W&T Offshore Reports on Q1 Financial, Operational Results
W&T Offshore has provided financial and operational results for the first quarter 2009.
Some of the highlights for the first quarter 2009 include:
- 75% success in the drilling program, successfully drilling three out of four conventional shelf wells
- Successfully drilling two of three wells including a deep shelf and one conventional shelf well after the close of the first quarter Production increased 32% from fourth quarter of 2008 to 21.4 Bcfe and EBITDA increased from $22 million to $57 million
- LOE guidance revised due to lower forecasted service and supply costs
- Liquidity availability set with a new borrowing base at $405 million and cash of $251 million on March 31, 2009
- Repurchased 1.4 million shares of our common stock at $6.47 per share
Revenues, Net Income/Loss and EPS
Net loss for the first quarter of 2009 was $230.7 million, or $3.04 per common share, on revenues of $117.4 million, compared to net income for the same quarter of 2008 of $79.8 million, or $1.05 per common share, on revenues of $356.5 million. Net loss for the first quarter of 2009 reflects the impact of a $210.2 million ceiling test impairment and a $1.0 million unrealized derivative gain ($0.9 million after-tax). Without the effect of the ceiling test impairment and the unrealized derivative gain, net loss for the first quarter of 2009 would have been $41.2 million, or $0.54 per common share.
Net income for the first quarter of 2008 included an unrealized derivative loss of $6.2 million ($4.1 million after-tax). Without the effect of the unrealized derivative loss, net income for the first quarter of 2008 would have been $83.9 million, or $1.10 per common share. See "Non-GAAP Information" later in this press release.
We recorded a net loss principally due to a ceiling test impairment, a lower realized price of $5.48 per thousand cubic feet equivalent ("Mcfe"), versus $11.57 per Mcfe (unhedged) in 2008, and the decrease in sales volumes for oil and natural gas related to the deferral of production caused by Hurricanes Gustav and Ike.
Cash Flow from Operating Activities and Adjusted EBITDA
EBITDA and Adjusted EBITDA are non-GAAP measures and are hereinafter defined in "Non-GAAP Information" later in this press release. Net cash provided by operating activities for the three months ended March 31, 2009 decreased 86% to $34.4 million from $242.4 million in the three months ended March 31, 2008. The decrease was mainly a result of lower realized prices and lower volumes. First quarter 2009 Adjusted EBITDA was $56.2 million compared to $279.2 million during first quarter 2008, or an 80% decrease.
Production and Prices
We sold 12.6 billion cubic feet ("Bcf") of natural gas at an average price of $5.08 per thousand cubic feet ("Mcf") in the first quarter of 2009. We also sold 1.5 million barrels ("MMBbls") of oil and natural gas liquids at an average price of $36.29 per barrel ("Bbl") during the same period. For the first quarter of 2008, we sold 17.7 Bcf of natural gas at an average price of $8.70 per Mcf and 2.2 MMBbls of oil and natural gas liquids at an average price of $92.52 per Bbl. On a natural gas equivalent ("Bcfe") basis, we sold 21.4 Bcfe at an average price of $5.48 per Mcfe in the first quarter of 2009 compared to 30.8 Bcfe sold at an average price of $11.57 per Mcfe in the first quarter of 2008.
Production increased 36% during the first quarter of 2009 compared to fourth quarter of 2008. During the fourth quarter of 2008, we sold 10.5 billion cubic feet ("Bcf") of natural gas at an average price of $5.90 per thousand cubic feet ("Mcf") and 1.0 million barrels ("MMBbls") of oil and natural gas liquids at an average price of $48.59 per barrel ("Bbl"). On a natural gas equivalent ("Bcfe") basis, we sold 16.2 Bcfe at an average price of $6.68 per Mcfe.
Lease Operating Expenses
LOE for the first quarter of 2009 decreased to $45.1 million, or $2.10 per Mcfe, from $49.8 million, or $1.62 per Mcfe, in the first quarter of 2008. Included in lease operating expenses for the first quarter of 2009 are $5.0 million of hurricane remediation costs related to Hurricanes Ike and Gustav that were either not yet recovered from our insurance underwriters or are not covered by insurance.
Depreciation, depletion, amortization and accretion
DD&A decreased to $91.5 million, or $4.27 per Mcfe, in the first quarter of 2009 from $145.5 million, or $4.72 per Mcfe, in the first quarter of 2008. DD&A decreased primarily as a result of lower depreciable base (due to an impairment charge at year-end 2008 of $1.2 billion) and lower production volumes compared to 2008.
Ceiling Test Impairment
The Company incurred a non-cash ceiling test impairment of $210.2 million to the carrying value of the Company's proved oil and gas properties as of March 31, 2009, through application of the full cost ceiling limitation as prescribed by the SEC. The impairment is primarily attributable to lower prices for natural gas at March 31, 2009.
Our cash balance at March 31, 2009 was $251.0 million. We just completed the semi-annual redetermination of our borrowing base, which is now set at $405 million. Also during May, we paid off our Term Loan B with a draw under the revolving portion of our Credit Agreement, which results in a remaining revolver availability of $200 million.
Capital Expenditures and Operations Update
The level of our investment in oil and natural gas properties changes from time to time depending on numerous factors, including the prices of oil and natural gas, acquisition opportunities and the results of our exploration and development activities. For the three months ended March 31, 2009, capital expenditures for oil and natural gas properties of $128.4 million included $35.8 million for exploration activities, $88.2 million for development activities and $4.4 million for seismic, capitalized interest and other leasehold costs. Our development and exploration capital expenditures consisted of $16.8 million in the deepwater, $0.1 million on the deep shelf and $107.1 million on the conventional shelf and other projects. Cash from operating activities and cash on hand financed our capital expenditures for the three months ended March 31, 2009.
Tracy W. Krohn, Chairman and Chief Executive Officer, commented, "We have had success with our drilling program so far in 2009 and will change our focus in the second half of the year to build cash for new strategic opportunities. Although our credit line was negatively impacted by lower commodity prices, we believe that our liquidity is ample to take advantage of acquisition or joint venture opportunities. In addition, by pursuing assets that banks will lend against, we can expand the size of the acquisition target."
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