W&T OFFSHORE INC Q1 FY2025 earnings call

• Started 2025 with strong operational and financial results, meeting or exceeding guidance in multiple metrics.
• Delivered production of 30,500 BOE per day, near the top-end of guidance despite January freezing weather.
• Lease operating expenses came in below the low-end of guidance at $71 million.
• Generated $32.2 million in adjusted EBITDA, up 2% from Q4 2024; $10.5 million in free cash flow.
• Returned value to shareholders via quarterly dividends; announced the second quarter 2025 dividend.
• Strengthened the balance sheet through transactions: issued $350 million in new second lien notes, reduced debt by $39 million; entered into a new $50 million revolving credit facility; sold a non-core interest in Garden Bank's Blocks 385 and 386 for $12 million; received $58.5 million in insurance settlement.
• Regulatory development: The Department of Interior indicated it will not seek supplemental financial assurance in the Gulf of America except in certain cases, alleviating uncertainty.
• Acquired assets like West Delta 73 and Main Pass 108 fields, with production ramping up in Q2 2025.

In the first quarter of 2025, W&T Offshore produced 30,500 barrels oil equivalent per day, near the top-end of guidance. Adjusted EBITDA totaled $32.2 million, an increase of 2% compared to the fourth quarter of 2024. Free cash flow amounted to $10.5 million. Lease operating expenses were $71 million, which was below the low-end of guidance.

• Second quarter 2025 production midpoint is expected to be around 34,500 BOE per day, a 13% increase from the first quarter.
• Full year capital expenditures are expected to be between $34 million and $42 million, focusing on accretive low-risk producing property acquisitions rather than drilling.
• Second quarter LOE, gathering, transportation, and production taxes costs are slightly higher than the first quarter, but per BOE cost decreases are anticipated.

• Commodity price volatility, particularly impact on oil prices which are critical for W&T.
• Uncertainty related to regulatory changes and potential future policy shifts.

Q: Good morning and congratulations on getting the Cox assets fully online. It has a nice impact on your production guidance. From reading the press release, it looks like you're going to continue to focus on recompletions and workovers and there's no plans to drill a new grassroots wells. Can you confirm that?

A: Yes, that's our current strategy. A little bit of -- just a little bit too much volatility to us with regard to oil and gas prices, but oil is the more critical factor for us. We are still not hedged on oil.

Q: With the April 8th announcement from the Department of Interior, I wanted to ask if you could elaborate on the financial impact of this announcement to W&T.

A: Yes, I can. Clearly, it means we'll have less cost for financial assurance. And, of course, less cost in having to manage around that. We don't have any sole liability properties at this point in time. So we're looking for a pretty dramatic reduction in those FA costs, if you will. So that will have an impact on us, plus the aggravation and overhang on our credit facilities, that should be a positive for them as well.

Q: Regarding your full year 2025 guidance, on production, the midpoint of your guidance implies an average second half oil production of 15,400 barrels. Could you offer some color on the production cadence across the quarters?

A: Yes. Surely, I can do that, Derrick. In the first quarter, we had some weather incidents and things like that. And West Delta 73 and Main Pass 108 were not back online as a result of some of the actions promulgated by the bankruptcy of that entity. We see the production coming up at West Delta 73 and Main Pass 108 and we continue to work to optimize that. We think, there's more track room left in that endeavor as well. And we've got some ongoing work-over and acidizing and work-overs and things that we intend to get done during the better weather part of the year, which really is about now. So through now and end of the summer, we'll be working out with equipment offshore to help enhance that. So, we're fairly confident that, we'll see good results in that leading into third quarter and early fourth quarter.

Q: The sales price on that [non-core interest in Garden Bank's Blocks 385 and 386] was quite accretive to your valuation. I guess bigger picture, are there other opportunities across your portfolio that you could pursue?

A: No, that's a really good question. Yes, clearly there are. It just becomes a matter of price on that aspect of it. That was a royalty interest, and we do have other royalty interest that are kind of free floating out there that we could sell. It's not necessarily a focal point, but it does raise the awareness on that as well.

Q: Tracy, you've had the four producing fuels from Cox on for roughly a year or so now and with the two new ones, can you talk a little bit about how the performance on those fields is tracking versus your expectations before you made the acquisition?

A: Yes. Good morning, Jeff. That's a great question. They are definitely performing. Actually, we're looking at our -- we've seen opportunities to increase production in some of those fields. But as you know, when you're going in and buying stuff out of, bankruptcy, there's still some operational things that we have to look at to make sure we're able to operate as efficiently as possible. So, yes, to answer your question directly, we are seeing what we expect to see, plus we see an uplift potential as well.

Q: William, are most of the costs that you would have taken on to bring those assets up to W&T standards behind you at this point?

A: No, it's always ongoing, but majority of it is behind us. As you know, when you're trying to buy an asset, some opportunities to enhance it up to our standards takes a little bit more time to really understand what you're dealing with. So we're pretty much there. Probably got a little bit more left to spend to get all the way up to our standards, but it's going in the right direction.

Q: Does that free-up any liquidity on your balance sheet or how your credit facilities work? And what impact does that have on how you can think about acquisitions, if any?

A: Yes. I mean, the for us, the question is always, gee, whether we risk more in drilling it than any time we have the opportunity to make acquisitions, as opposed to drilling. It seems to always make more sense to acquire. There's not just operational risk on drilling, there's reserve risk as well. So those are always things that I get concerned about. I mean, it's more exciting to drill wells and make discoveries and bring new production online. But there's usually a lot less risk with just going ahead and finding something that makes sense and meets our criteria. And we've been doing that for decades now. So we know the formula works. And having said that, we've also made some really good discoveries as well. So, it's always a balance for us, but most of the time, we would opt to acquire as opposed to drill.