W&T Offshore Reviews 4Q, Full Year 2009 Results
W&T Offshore announces financial and operational results for the fourth quarter and full year 2009. Some of the highlights include:
- Fourth quarter of 2009 net income and earnings per share were $64.0 million and $0.84 per share, respectively, versus a net loss of $851.4 million and loss per share of $11.21 during the fourth quarter of 2008.
- Production for 2009 was 94.8 Bcfe, sold at an average realized price of $6.39 per Mcfe.
- Long-term debt and asset retirement obligations decreased $200.2 million and $199.1 million, respectively.
- Capital budget for 2010 of $450 million, an increase of 63% over 2009 expenditures.
- 77% success in 2009 exploration and development drilling program, including successfully drilling eight of ten exploration wells and two of three development wells.
- LOE decreased $25.8 million for the year through divestitures of non-core assets and cost reduction initiatives.
Tracy W. Krohn, Chairman and Chief Executive Officer, commented, "In 2009, we focused on analyzing the best investment opportunities, be it drilling, joint ventures or acquisitions, while implementing a profitability initiative and divesting certain non-core assets to improve our margins. As a result, we have identified over 160 prospects that we are tracking in our prospect inventory database, and we significantly reduced both operating costs and long-term asset retirement obligations. We are better able to take advantage of rising energy prices with a lower cost structure. We enter 2010 as a leaner, more efficient company with internally identified opportunities, the ability to capitalize on acquisitions and/or joint ventures and a Capital Budget of $450 million, which represents a 63% increase over our capital expenditures in 2009."
Revenues, Net Income and EPS: Net income for the fourth quarter of 2009 was $64.0 million, or $0.84 per common share, on revenues of $176.1 million, compared to a net loss for the same quarter of 2008 of $851.4 million, or $11.21 per common share, on revenues of $108.3 million. Net income increased in the fourth quarter of 2009, principally due to the $1.2 billion ceiling test impairment in 2008, $38.4 million in additional tax benefits related to new tax legislation in 2009, higher production volumes in 2009 and an increase in our average realized unhedged price to $7.67 per thousand cubic feet equivalent ("Mcfe") in 2009 from $6.68 per Mcfe in 2008. Production was higher during the fourth quarter of 2009 compared to the corresponding period in 2008 due to the deferral of production caused by Hurricane Gustav in late August 2008 and Hurricane Ike in early September 2008. The Worker, Homeownership and Business Assistance Act of 2009, which extended the net operating loss carryback period from two years to five years, resulted in additional tax benefits to us.
Net income for the fourth quarter of 2009 excluding special items would have been approximately $27.1 million, or $0.36 per common share. The net loss excluding special items for the corresponding quarter of 2008 was approximately $84.3 million, or $1.11 per common share. See the "Reconciliation of Net Income (Loss) to Net Income (Loss) Excluding Special Items" table at the back of this press release for a description of the special items.
The net loss for the year ended December 31, 2009 was $187.9 million, or $2.51 per common share, on revenues of $611.0 million, compared to a net loss of $558.8 million, or $7.36 per common share, on revenues of $1.2 billion for 2008. Excluding special items, the net loss for 2009 would have been $81.5 million, or $1.09 per common share, compared to net income excluding special items of $200.9 million, or $2.63 per common share, in the 2008 period. The net loss, before special items, for the year 2009 compared to net income, before special items, in 2008 resulted from lower average commodity prices throughout a majority of 2009 and lower production volumes. This decrease was partially offset by lower lease operating expenses ("LOE"), gathering and transportation costs, production taxes, depreciation, depletion, amortization and accretion ("DD&A") and general and administrative expenses ("G&A").
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. Adjusted EBITDA for the fourth quarter of 2009 was $113.9 million, compared to $22.2 million during the prior year's fourth quarter. Net cash provided by (used in) operating activities for the fourth quarter of 2009 increased to $64.4 million from ($157.8) million in 2008, respectively. Adjusted EBITDA and cash flow from operating activities for the fourth quarter of 2009 were significantly higher than for the corresponding period in the previous year due to the deferral of production caused by Hurricane Gustav in late August 2008 and Hurricane Ike in early September 2008.
For the year ended December 31, 2009, adjusted EBITDA was $342.2 million, compared to $883.9 million for the year 2008. Net cash provided by operating activities for the full year of 2009 decreased to $156.3 million from $882.5 million in 2008. Cash flow from operating activities and adjusted EBITDA were lower for the year ended December 31, 2009 compared to the prior year due to lower realized prices on sales of our oil and natural gas production, lower production volumes and a significant increase in working capital requirements, primarily to fund accounts payable, plugging and abandonment work and accounts receivable balances.
Production and Prices: During the fourth quarter of 2009, we sold, on a natural gas equivalent ("Bcfe") basis, 22.9 Bcfe at an average price of $7.67 per Mcfe, compared to 16.2 Bcfe sold at an average price of $6.68 per Mcfe in the comparable 2008 period. Higher production volumes during the fourth quarter of 2009 versus 2008 were largely due to deferred production from Hurricanes Gustav and Ike during 2008.
For the year ended December 31, 2009, we sold, on a natural gas equivalent basis, 94.8 Bcfe at an average price of $6.39 per Mcfe, compared to 97.9 Bcfe sold at an average price of $12.42 per Mcfe for the 2008 period. The decline in production is largely attributable to divestitures completed in 2009 as well as natural reservoir declines, partially offset by deferred production from Hurricane Gustav and Ike that came back online during 2009.
Lease Operating Expenses: LOE for the fourth quarter of 2009 decreased to $45.8 million from $73.2 million in the fourth quarter of 2008. This LOE decline was due to lower base lease operating expenditures as a result of the divestitures, our cost reduction efforts and lower hurricane remediation expenditures.
LOE for the year ended December 31, 2009 was $203.9 million, or $2.15 per Mcfe, compared to $229.7 million, or $2.35 per Mcfe, in 2008. LOE on a nominal basis decreased due to our cost reduction efforts, the sale of certain non-core assets and decreased expenditures on our facilities for maintenance, partially offset by higher insurance costs and increased workover activity. Included in lease operating expenses for 2009 and 2008 are $18.4 million and $17.7 million, respectively, of hurricane remediation costs related to Hurricanes Ike and Gustav that were either not yet approved by our insurance underwriters' adjuster or were not covered by insurance.
Depreciation, depletion, amortization and accretion: DD&A decreased to $78.3 million, or $3.42 per Mcfe, in the fourth quarter of 2009 from $108.6 million, or $6.69 per Mcfe, in the same period of 2008. DD&A for the year ended 2009 was $342.5 million, or $3.61 per Mcfe, compared to DD&A of $521.8 million, or $5.33 per Mcfe, for the same period in 2008. The decrease is primarily attributable to a lower depreciable base (resulting from ceiling test impairments of $1.2 billion and $218.9 million recognized in the fourth quarter of 2008 and the first quarter of 2009, respectively, and a net reduction of our asset retirement obligations of $199.1 million from the sale of certain non-core assets, revisions to our estimates and other items), partially offset by lower oil and natural gas reserves.
Capital Expenditures and Operations Update: For the year ended December 31, 2009, our capital expenditures were $276.1 million, consisting of $90.6 million for exploration activities, $162.1 million for development activities and $23.4 million for acquisitions, seismic, capitalized interest and other leasehold costs. Our capital expenditures were funded by operating cash flow and cash on hand. Capital expenditures and acquisitions in 2008 were $774.9 million.
In 2009, the Company made discoveries and successfully completed drilling on eight of 10 exploration wells, for a success rate of 80%, which included seven out of nine conventional shelf wells, and one well in the marshlands of southern Louisiana. Additionally, the Company successfully drilled and completed two of three development wells, both of which were on the conventional shelf. For the 13 wells drilled in 2009, the Company achieved a success rate of 77%.
Drilling Highlights: In the fourth quarter of 2009, the Company was 100% successful in the drilling of two exploration wells. One of the wells was located onshore in South Louisiana while the other was on the conventional shelf.
Reserves: As of December 31, 2009, total proved reserves were 371.0 Bcfe, compared to proved reserves of 491.1 Bcfe as of December 31, 2008. This decline in reserves was primarily due to production, the divestiture of certain non-core assets, the use of average prices versus end of year prices, and downward revisions because of the de-booking of proved undeveloped reserves ("PUDs") as a result of the SEC's new five-year limitation on the life of PUDs from the date they were initially recorded. Partially offsetting this decline were discoveries and extensions from our drilling, recomplete and workover programs. Year-end 2009 proved reserves are comprised of 45% natural gas and 55% oil and natural gas liquids. In accordance with guidelines established by the SEC, our proved reserves as of December 31, 2009 were determined to be economically producible under existing economic conditions, which requires the use of the 12-month average price for each product, calculated as the unweighted arithmetic average of the first-day-of-the-month price for the period January 2009 through December 2009. The present value of our total proved reserves discounted at 10% (referred to as "PV-10"*), which includes the impact of estimated asset retirement obligations, is $890 million. This is based on average prices of $3.87 per Mcf for natural gas and $57.65 per Bbl for oil and natural gas liquids, adjusted by lease for quality, transportation fees and regional price differentials. The estimate of proved reserves is based on a reserve report prepared by Netherland, Sewell & Associates, Inc., the Company's independent petroleum consultant.
2010 Capital Expenditures Budget: Our total capital expenditure budget for 2010 is $450 million and is expected to be funded with internally generated cash flow and cash on hand. The budget included seven conventional shelf exploration wells. It also included other capital items such as well recompletions, facilities capital, seismic and leasehold items. We have recently added three wells to the plan and continue to evaluate the expected costs associated with the original seven wells. Our plan now includes ten wells plus the other capital items budgeted at $153 million. The balance of the $450 million budget will be allocated to acquisitions, additional drilling opportunities from the Company's prospect inventory, joint venture projects and/or other drilling ventures. WTI is determined to remain as flexible as possible and believes this strategy holds the best promise for value creation and growth.
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