W&T Offshore, Inc. (WTI) Earnings

Management highlights

- 2026 started on a positive note with strong operational and financial results meeting or exceeding guidance. Production was 36,200 barrels oil equivalent per day, realized prices increased, LOE decreased, and adjusted EBITDA and free cash flow were strong. - Capital expenditures in Q1 2026 were $7 million, and full-year capital expenditures are expected to be between $20 million and $25 million including potential acquisitions. ARO budget remains $34 million to $42 million. - Second quarter has a planned third party Mobile Bay natural gas processing facility turnaround impacting NGL volumes and temporarily increasing LOE, but full-year guidance unchanged. Forecasted Q2 2026 production midpoint is around 34,300 BOE/day, LOEs $71M - $79M, transportation and production taxes $7M - $8M, cash G&A costs comparable to Q1. - Prefer to spend on low risk, high rate of return work overs and facility optimization, and have a history of creating value by integrating producing property acquisitions.

Guidance

- Reiterated unchanged full year production and cost guidance. - Second quarter 2026 forecasted production midpoint around 34,300 BOE/day, a 5% decrease from Q1 due to Mobile Bay turnaround. - Second quarter LOEs expected $71M - $79M, transportation and production taxes $7M - $8M, cash G&A costs comparable to Q1. - Full-year capital expenditures expected between $20M and $25M, ARO budget $34M - $42M.

Segment performance

In the first quarter of 2026, production was 36,200 barrels oil equivalent per day, toward the higher end of guidance and flat with the fourth quarter of 2025 despite adverse weather impacts. Realized prices were $45.08 per barrel oil, an increase of 26% from the fourth quarter, with March realized oil price at $88.61 per barrel. Lease operating expense (LOE) was down 11% to $66 million below the midpoint of guidance. Adjusted EBITDA was $55 million, and free cash flow was $21 million. Capital expenditures in the first quarter were $7 million, and asset retirement settlement costs totaled $17 million. For the second quarter of 2026, planned production midpoint is around 34,300 barrels of oil equivalent per day, a 5% decrease from the first quarter mainly due to the Mobile Bay natural gas processing facility turnaround. Second quarter LOEs are expected to be $71 million to $79 million, up from $66 million in the first quarter. Transportation and production taxes in the second quarter are expected to be between $7 million and $8 million, and cash G&A costs are expected to remain comparable to Q1 results.

Risks & headwinds

- Department of Interior proposed regulatory changes which will be open for 60-day public comment. - In surety litigation, district court rejected surety's attempt to require W&T to immediately pay their demands, surety is appealing, and W&T will continue to vigorously defend its position.

Analyst Q&A

• Q: Good morning, Tracy and team, and thanks for your time. Starting with your guidance, while I understand you are reiterating production guidance for the full year, how would you characterize your desire to further lean into workovers in a favorable environment?

  A: Yeah, well, that's always a key factor for us. We've always got a good – inventory of things to do and as we've acquired assets over the years we take the time to study them and restudy them and that allows us to continue doing these workovers so do expect to see some more of that You know, we'll ramp up a little bit during the summer because the weather is better. And, you know, late spring, summer, which is about now. In fact, we're moving some things around in the Gulf now to begin that process. But, yeah, I mean, this has always been a key strong point for us, along with not only workovers but recompletions.

• Q: Tracy, and then maybe just shifting over to the M&A environment, wanted to get your thoughts on the competitive landscape at present. Is it safe to assume we're in a pencils-down environment for larger packages, or are you seeing reasonable action in the market at present?

  A: You know, the company's got a very strong liquidity position right now. There's been a dearth of significant transactions for the last several years in the Gulf. We feel pretty good about where we are. We're in different data rooms almost continuously over the years. So I think that there's real good possibility that things are going to start moving around. We certainly have aspirations in that direction and intend to continue to pursue things that will fit our normal financial criteria. That criteria usually starts with cash flow. And then also, what is the reserve base? And what are the things that we can do to increase cash flow near term, such as workovers and recompletions and facilities upgrades that will generate those numbers near term?

• Q: Hey, Tracy, this is actually Neil. I just have two quick ones for you. How you doing? And nice to be back on the call. Good, Neil. My first question, Tracy, just I know part of the upside for you all is converting a lot of the 2P to primary reserves. And again, I'm just wondering, again, seems like with the plan you've laid out, I still feel like there's a lot of that going on. Could you just tell us, you know, what do you think the timing of that would be?

  A: Yeah, well, the really cool part about our 2P reserves is that a lot of those reserves come to us in the form of cash and then later on booked reserves. So as time moves forward, we see that first as cash flow. So that's cash flow and reserves that we don't have to spend any CapEx on. And that's been a real challenge. focal point of the company over many years. It's why we have traditionally very low decline rates. And that shows itself up as massive amounts of cash and reserves over time. And it seems to have always been that way for the company since we started. And I try to reiterate that to investors in just about every presentation that we do. There are additional reserves that are probables that we do have to spend some CapEx on. So we look forward to doing that in the near future. We haven't done that. Been doing a lot of drilling lately because we haven't needed to. One of the hallmarks of the company is making sure that we try to continue the cash flow stream. So if any time that I can acquire reserves as opposed to going and drilling for them at approximately the same price, then that's what we're going to do. We're going to take the risk out of it and do that. And that's one of the reasons why we're still here after 40-something years. So that's a great question, Neil. I appreciate it.

• Q: No, I love that upside. And then secondly, as you said, not that you're going to have to go drill much, but, you know, kind of you have a very low CapEx guide. And I'm just wondering, does that factor in, you know, around the workovers that Derek talked about? Just service costs and all, Tracy, are they holding in right now? Or what are you seeing for service costs?

  A: Well, part of that is exactly what you suggested, holding on and making judicious decisions about workovers and recompletions. Part of it's to make sure that we maintain really good liquidity. I think there will be opportunities going forward in the market for us to make additional acquisitions. And again, It's not that we don't have wells to drill. We do. We have a pretty good inventory of exploration opportunities and, in fact, even proven reserve opportunities that are substantial. So it's not because we don't have inventory. It's because management, including myself, believes that opportunities to do additional acquisitions are good, and we like the way that we're positioned in this market and we have good liquidity.

• Q: Thank you, Tracy. Just to follow up on your previous comments, W&T has a pretty low reinvestment rate when you think about cash flow from operations in 2026, and yet production is expected to stay relatively flat for the year from where you were in the first quarter based on your midpoint guidance. To your point about capital light business model, is a lot of that production performance just related to, as Neil talked about, moving 2P reserves into PDP without any capital? And is that something that goes on for 2026, 2027 and beyond just based on your reserve profile and performance of your assets?

  A: Yeah, the short answer to that is yes. We, again, with probable reserves, because of the quirks around the booking of those via the SEC, we have to wait a while before we can put them back in as approved reserves. And often... Those are just additions to approved producing. So we get a dual effect there of not only do we increase the reserves, but we increase our borrowing capacity as well. So that's a double plus for us. And this is normal. This is the actions of the corporation. I've done this illustration in just about every investor meeting we've ever had. I have an illustration in the deck that shows you the effects of the probable reserves and how they get to be proof-producing reserves over time. But But we generally book them, again, as cash flow and reserves over time. And then, again, it's not that we don't have inventory to drill with. We do. But it's nice to have that additional bit of reserves. You know, in Europe, they look at this as companies are valued more on the 2P basis than they are just 1P. And our regulators have been a little bit slow to do that. That's always been a complaint. I don't understand the rationale behind it. It seems ridiculous to me because we've proven it over and over and over again that we definitely increase the reserves and the cash flow over time without additional capex. When you think about acquisitions, two-part question. One is, are you able to buy on a 1P basis? And then secondly... You spoke about the regulatory environment and some of the things that are coming down the road. Will that have an impact on M&A activity in the Gulf of Mexico, do you think?