Earnings call transcript: W&T Offshore Q4 2024 earnings miss, stock falls

W&T Offshore Inc (NYSE:WTI). reported its fourth-quarter 2024 earnings, revealing a slight miss on revenue expectations. The company posted an earnings per share (EPS) of -$0.18, slightly better than the forecasted -$0.20. However, revenue fell short of expectations at $120.34 million compared to the forecast of $133.75 million. Following the announcement, W&T Offshore’s stock price dropped by 12.42%, closing at $1.34, marking a significant decline from its previous close of $1.53.

Key Takeaways

• W&T Offshore’s EPS surpassed forecasts but revenue missed expectations.
• Stock price declined by over 12% post-earnings announcement.
• Company focuses on acquisitions over drilling for 2025.
• Liquidity remains strong with $159 million available.
• Oil price stabilization and potential gas price increase noted.

Company Performance

W&T Offshore’s performance in 2024 showed resilience despite market challenges. The company generated $154 million in adjusted EBITDA and produced $45 million in free cash flow. The total debt at year-end stood at $393 million, with net debt at $284 million. The company’s liquidity position was robust, with $159 million available. The PV-10 value of reserves increased by 14% to $1.2 billion, highlighting the company’s strong asset base.

Financial Highlights

• Revenue: $120.34 million, below the forecast of $133.75 million.
• EPS: -$0.18, better than the forecast of -$0.20.
• Adjusted EBITDA for 2024: $154 million.
• Free cash flow: $45 million.
• Total (EPA:TTEF) debt: $393 million; net debt: $284 million.

Earnings vs. Forecast

W&T Offshore’s EPS of -$0.18 slightly exceeded the forecast of -$0.20, but the revenue of $120.34 million missed the expected $133.75 million by approximately 10%. This revenue miss marked a significant deviation from expectations, impacting investor sentiment.

Market Reaction

Following the earnings release, W&T Offshore’s stock experienced a sharp decline, falling by 12.42% to $1.34. This decline reflects investor concerns over the revenue shortfall and uncertainty about future growth prospects. The stock is now trading closer to its 52-week low of $1.30, indicating a challenging market environment.

Outlook & Guidance

For 2025, W&T Offshore projects a production midpoint of 34,000 barrels of oil equivalent per day. The company plans to focus on acquiring producing properties rather than drilling new wells, aligning with its strategic shift towards acquisitions. The company also anticipates restarting three additional fields in the second quarter of 2025.

Executive Commentary

CEO Tracy Krone emphasized the company’s strategic focus, stating, "Anytime we can substitute acquisitions for drilling, that’s probably the better thing to do." Krone also noted the stabilization of oil prices around $70 and the potential for natural gas price increases, which could benefit the company’s financial performance.

Risks and Challenges

• Revenue shortfall poses a risk to investor confidence.
• Market volatility in oil and natural gas prices could impact profitability.
• High debt levels may constrain financial flexibility.
• Delays in restarting fields or executing acquisitions could affect growth.

Q&A

During the earnings call, analysts inquired about the company’s strategy for 2025, particularly regarding the lack of new drilling plans. Executives reiterated their focus on refurbishing acquired assets and exploring potential acquisitions, emphasizing the preference for acquiring producing properties over initiating new drilling projects.

Full transcript - W&T Offshore Inc (WTI) Q4 2024:

Conference Operator: Ladies and gentlemen, thank you for standing by. Welcome to the W and T Offshore Fourth Quarter and Full Year twenty twenty four Conference Call. During today’s call, all parties will be in a listen only mode. Following the company’s prepared comments, the call will be open for questions and answers. This conference is being recorded and a replay will be made available on the company’s website following the call.

I would now like to turn the conference over to Al Petrie, Investor Relations Coordinator. Please go ahead.

Al Petrie, Investor Relations Coordinator, W and T Offshore: Thank you, Wyatt. And on behalf of the management team, I’d like to welcome all of you to today’s conference call to review W and T Offshore’s fourth quarter and full year twenty twenty four financial and operational results. Before we begin, I would like to remind you that our comments may include forward looking statements. It should be noted that a variety of factors could cause W and T’s actual results to differ materially from the anticipated results or expectations expressed in these forward looking statements. Today’s call may also contain certain non GAAP financial measures.

Please refer to the earnings release that we issued yesterday for disclosures on forward looking statements and reconciliations of non GAAP measures. With that, I’d like

Tracy Krone, Chairman and CEO, W and T Offshore: to turn the call over to Tracy Krone, our Chairman and CEO. Thanks, Al. Good morning, everyone, and welcome to our year end twenty twenty four conference call. So with me today are William Wilford, our Executive Vice President and Chief Operating Officer Sameer Parastas, our Executive Vice President and Chief Financial Officer and Trey Hartman, our Vice President and Chief Accounting Officer. They’re available to answer questions later during the call.

So So our proven strategy is simple and effective. We focus on generating free cash flow, maintaining and optimizing our high quality conventional assets and opportunistically capitalize on accretive opportunities to build shareholder value. We have a strong balance sheet and further enhanced it in early twenty twenty five. We’ve built a sustainable business with a long term vision that’s committed to profitability, operational execution, returning value to our stakeholders and ensuring the safety of our employees and contractors. Our ability to deliver low decline production, meaningful EBITDA and integrate accretive property acquisitions has helped WT grow during our four year plus history.

Over the past year, we’ve accomplished many things I’d like to highlight now. In January 2024, we invested about $77,000,000 of cash to purchase 100 working interest in six shallow water Gulf Of America fields from COGS, which added 21,700,000 barrels oil equivalent of twenty twenty four proved reserves. This equates to a price of about $3.38 per barrel oil equivalent booked when accounting for twenty twenty four production from these fields. Those properties are adjacent to our existing operations, which provides the ability for us to capture synergies regarding personnel, well optimization, gathering and transportation. While this helped us by adding about 3,500 barrels oil equivalent per day to production in 2024, several fields were all flying for most of 2024.

As we announced in January, we expect to return the remaining three fields production in the second quarter of twenty twenty five. Benefit of that production increase is included in our guidance for fiscal year twenty twenty five. So while we’re busy integrating our acquisition, we also continued to execute operationally. So for the full year 2024, we generated $150,000,000 1 hundred and 50 4 million dollars in adjusted EBITDA and $45,000,000 in free cash flow. We delivered production of 33,300 barrels oil equivalent per day despite impacts from hurricanes and other downtime related to the Cox acquisition.

We’ve paid five quarterly cash dividends since initiating the dividend policy in late twenty twenty three and announced the first quarter twenty twenty five payment that will occur later this month. We carried this momentum into 2025 and started this year with several transactions that have strengthened and simplified our balance sheet, added material cash to the bottom line and improved our credit ratings from S and P and Moody’s. So in January, we closed $350,000,000 in new second lien notes that decreased our interest rate by 100 basis points and allowed us to redeem our outstanding $275,000,000 of second lien notes and pay off the $114,000,000 outstanding under the term loading under the term loan provided by Munich Re. This also reduced debt by $39,000,000 We entered into a new credit agreement for a $50,000,000 revolving credit facility, which matures in July 2028 that’s undrawn and replaces the previous credit facility provided by Calculus Lending. Additionally, in January 2025, we sold a non core interest in Garden Bank’s Block three eighty five and three eighty six, which was about 200 barrels oil equivalent per day for $12,000,000 or over $60,000 per flowing barrel.

In early twenty twenty five, we also received $58,500,000 in cash for an insurance settlement related to the Mobile Bay 70 Eight-one well. Lastly, to take advantage of the uptick in natural gas prices, we recently added costless collars for $50,000,000 per day from March to December that helps us lock in a favorable price range for our natural gas. Our ability to execute our strategy has delivered very positive results that have improved our balance sheet, expanded our asset base and positioned us for success in 2025 and beyond. Turning to our year end reserve results, I’d like to point out that we continue to see positive performance and technical revisions, which demonstrates the strength of our world class conventional Gulf Of America assets. While total proved reserves at SEC pricing increased 3% year over year to 127,000,000 barrels oil equivalent.

Our oil reserves increased by 39%. This was driven by the oil weighted contracts acquisition and positive performance provisions. For 2024, our reserves increased by 21,700,000 barrels oil equivalent due to acquisitions and 5,000,000 barrels oil equivalent from positive performance revisions, which were partially offset by 12,200,000 barrels oil equivalent of production in 2024. This translates to a reserve replacement of 219% of 2024 production. Devonte’s reserve life ratio at year end twenty four based on year end ’24 proved reserves and ’24 production was ten point four years.

So while we had strong performance from the factors the factors that we can control, we did see a decrease of 10,500,000 barrels oil equivalent due to pricing revisions as we saw SEC natural gas pricing decreased by 19% in 2023 and SEC oil pricing declined by about 3%. As a result, the majority of the price revisions impacted our natural gas reserves. So because the pricing impact was weighted more toward natural gas, our overall PV-ten value wasn’t impacted as much. Plus, we benefited from a meaningful increase in oil reserves. We’re pleased that the PV-ten value of our SEC pre approved reserves at year end 2024 increased by almost $150,000,000 or 14% to $1,200,000,000 despite the lower SEC pricing.

So approximately 51% of year end twenty twenty four second proved reserves were liquids with 41% crude oil and 10% NGLs and we had 49% natural gas. The reserves were classified as 52% proved developed producing, 31% proved developed non producing and 17% proved undeveloped. So over the years, we’ve consistently created significant value by methodically integrating producing property acquisitions. After we close any acquisition, we take time to assess and inspect the newly acquired fields, which potentially requires refurbishing some of the fields in the process. We have a large footprint across the Gulf Of America, so we look for ways to optimize operations, increase production and utilize that large footprint where we can to reduce costs and maximize value.

Our focus on cost control and capturing synergies associated with our asset acquisitions contributed to our lease operating expense coming in at the low end of our reduced guidance range. In addition, we’re expecting further production uplift associated with the remaining fields from the Cossacks acquisition coming online in the second quarter of twenty twenty five that were previously shut in. So as I mentioned previously, in early twenty twenty five, we strengthened and simplified our balance sheet by closing the new senior second lien notes offering and entering into a new revolving credit facility. I’d like to thank our banks for running such a smooth process. TCB is leading that facility.

The new senior second lien notes, which reduced improved excuse me, the new second lien notes, which received improved credit ratings from S and P and Moody’s at a broad distribution, we were oversubscribed. This included international investors and was significantly oversubscribed, further demonstrating the investment community’s confidence in W and T’s underlying asset base. We likewise are pleased to now have access to the bank revolver market again. At year end 2024, company had total debt of $393,000,000 and net debt of $284,000,000 with liquidity of $159,000,000 Assuming the debt refinance asset sale and insurance settlement had occurred on 12/31/2024 on a pro form a basis, our cash and cash equivalents would have been about $350,000,000 and net debt would have been about $245,000,000 which reflects the improvements made to our balance sheet. Yesterday, we also provided our detailed guidance for 2025.

In the first quarter of twenty twenty five, we had several planned facility and pipeline maintenance projects as well as unplanned downtime at several fields due to multiple winter freezes that have temporarily reduced our production volumes. We’re predicting the midpoint of Q1 twenty twenty five production to be around 29,000 barrels of oil equivalent per day. But with the expected restarting of fields in the second quarter of twenty twenty five related to the Caak acquisition, as well as additional workover facility upgrades, our full year 2025 production midpoint is about 34,000 barrels of oil equivalent per day, which is about 6% higher than our Q4 twenty twenty four production. Despite projecting to spend only about $34,000,000 to $42,000,000 in CapEx in 2025, we believe the additional fields coming online from the Cox acquisitions will help us offset natural decline and grow production this year. We focus more on acquisitions over the last few years rather than on drilling many new wells.

Our ability to maintain low decline production is a testament to our culture of operational excellence and the strength of our 2P reserves, which are manifested by cash flow and future 1P reserves that do not require additional CapEx. So turning to our costs, our guidance for 2025 LOE, gathering, transportation and production taxes and G and A costs are in line with 2024. We see some additions to LOE, but believe that overall we can offset some of those increases with lower G and A and G and T expenses, so gathering and transportation. With that said, we do believe that there are more opportunities to reduce our operating costs and find synergies to drive cost lowers lower in the long term. So we’re always working hard to reduce costs without impacting safety or deferring asset integrity work.

I also want to congratulate our folks offshore for achieving zero accidents in 2024. Well done, everyone. Our first quarter LOE is expected to be between $72,500,000 and $80,500,000 which reflects some of the increased maintenance and repair costs, as well as additional facilities upgrade work. First quarter cash G and A costs are expected to be between $17,800,000 and $19,800,000 I want to sincerely thank our team at W and T as we’re well positioned to add value in 2025. We have a solid cash position and good liquidity that enables us to evaluate growth opportunities both organically and inorganically.

We have a long track record of successfully integrating assets into our portfolio. And we continue to believe that the Gulf Of America is and will continue to be a world class basin. We will maintain our focus on operational excellence and maximizing the cash flow potential of our asset base. As the company’s largest shareholder, I believe WT is very well positioned to succeed in 2025 and beyond. Our entire management team’s interests are highly aligned with those of our shareholders given our 34% stake in W and T’s equity, which is one of the highest of any public E and P company.

So with that operator, we can now open the lines for questions.

Conference Operator: Thank you. We will now begin the question and answer session. And the first question will come from John White with Roth Capital. Please go ahead.

Al Petrie, Investor Relations Coordinator, W and T Offshore: Good morning and congratulations on the nice results and the very nice reserve proved reserve report. Well done.

Tracy Krone, Chairman and CEO, W and T Offshore: Thanks, John. Good morning.

Al Petrie, Investor Relations Coordinator, W and T Offshore: Good morning. The midpoint of your full year production guidance shows some nice growth. Is that all coming from restarting of well fields that were shut in, in the first quarter and recompletions and workovers? I didn’t see any mention of new drilling in the press release.

Tracy Krone, Chairman and CEO, W and T Offshore: Yes, you’re correct, John. That doesn’t include any new drilling. It doesn’t mean we’re not going to do any. We are faced with a quality dilemma. We’re seeing assets come on come available in the market.

We’re contemplating, we are working on the asset acquisitions that we’re seeing. And that may change our thought process with regards to additional drilling this year. We still expect to be drilling in 2026, but it could defer something in 2025 late scheduled for late twenty twenty five as opposed to chasing some acquisitions that we think would be a nice addition to our portfolio.

Al Petrie, Investor Relations Coordinator, W and T Offshore: Okay. Thanks for that detail and good luck with your transactions.

Jeff Robertson, Analyst, Water Tower Research: I’ll

Al Petrie, Investor Relations Coordinator, W and T Offshore: turn it back to the operator.

Tracy Krone, Chairman and CEO, W and T Offshore: Thanks, John.

Conference Operator: The next question will come from Jeff Robertson with Water Tower Research. Please go ahead.

Jeff Robertson, Analyst, Water Tower Research: Thank you. Tracy, to follow-up on the drilling comments, can you provide or can you share an update on the drilling partnership that you spoke about in 2024?

Tracy Krone, Chairman and CEO, W and T Offshore: Yes. We’re continuing to follow through on that. That still looks like first well we would want to drill is at Holy Grail, which is our Magnolia Fields floating vessel out there. We’ll have to put a platform rig on it. Fortunately, that’s those approved reserves that we would be chasing there.

And then we have another prospect lined up right after that with the potentially with the same drilling rig. Fortunately, we have a choice on the second structure over what we’re calling our Cayman prospect. So, yes, we’re still moving forward with a drilling program. The only thing that again is as I just told John, that might change that is the potential for additional acquisitions. And that market seems to be getting a little bit looser, if you will.

Jeff Robertson, Analyst, Water Tower Research: On the acquisition front, is your preference still that that adds immediate cash flow as you add producing properties rather than obviously running the risk of drilling and adding cash flow twelve to eighteen months or longer after you’ve drilled well?

Tracy Krone, Chairman and CEO, W and T Offshore: Yes, you bet, Jeff. I mean, anytime we can substitute acquisitions for drilling, that’s probably the better thing to do, primarily because you take so much of the risk out of it. We’re there’s a lot of good to be had with organic growth. There’s also risk with it. We think that prices on oil are stabilizing around $70 over the long term.

We think that gas has real potential for moving up. And we’ve made some hedges accordingly just recently as a result of that.

Conference Operator: No further questions. This concludes our question and answer session. I would like to turn the conference back over to Tracy Crum, Chairman and CEO for any closing remarks.

Tracy Krone, Chairman and CEO, W and T Offshore: Yes. It looks like we have one more question operator from Jeff Robertson.

Conference Operator: Jeff Robertson, you may go ahead.

Jeff Robertson, Analyst, Water Tower Research: Thanks, Tracy. A question on the operating expenses. How much progress did you all make in 2024 on the refurbishment on the Cox assets? How much is left to do in 2025? And can you provide some color around the range of $280,000,000 to $310,000,000 for lease operating expenses in 2025?

Tracy Krone, Chairman and CEO, W and T Offshore: Well, Jeff, just so happens I have the guys responsible for that to help you answer that question, William Wilford, our Chief Operating Officer.

William Wilford, Executive Vice President and Chief Operating Officer, W and T Offshore: Yes. Thanks, Tracy. Good morning, Jeff. We made a huge dent in that from an LOE standpoint. We still got quite a few things to do in 2025 to get these platforms up to W and T standards.

So it’s still ongoing, but we should see a lot of that completed in 2025. That’s a good question.

Jeff Robertson, Analyst, Water Tower Research: On the two West Delta and the Maine Pass fields that are scheduled to come on in the second quarter, is do those facilities need much work or have you already done whatever work’s required there?

William Wilford, Executive Vice President and Chief Operating Officer, W and T Offshore: We have, the main path stuff is actually something that got caught up in the cost issue with the bankruptcy. We’ve already have work done there. Essentially, we’re just waiting to get that back online once we get everything squared away with the vendors. And as far

Al Petrie, Investor Relations Coordinator, W and T Offshore: as the

William Wilford, Executive Vice President and Chief Operating Officer, W and T Offshore: way it goes up to 70 3, all of that is just maintenance and work we’re getting done to get that field back online. So majority of that is done.

Al Petrie, Investor Relations Coordinator, W and T Offshore: Okay. Thank you. Thank you, sir.

Conference Operator: And now with no further questions, this concludes our question and answer session. I would like to turn the conference back over to Tracy Frone, Chairman and CEO for any closing remarks.

Tracy Krone, Chairman and CEO, W and T Offshore: Thanks, operator. Last but not least, we spent several years repaying all the debt the company had and managing that in spite of a lot of changes in our business and changes throughout the world with regard to fossil fuels and philosophy around usage of same and also the fact that we’ve had some change in leadership in the country and a lot of random things that we couldn’t have predicted. The good news is that we’ve managed to get that debt down in spite of all that. And we’ve refinanced the remainder, which is in pretty good shape now. So the company is poised to turn that corner.

In fact, we are turning that corner and moving forward in 2025 as growth entity. So now we think that we’ll be able to start carrying on business more as usual with regard to making acquisitions, dispositions and drilling wells in the Gulf Of America. With that, we’ll terminate this call today, but look forward to hearing from us again in the very near future. Thanks so much. Bye bye.

Conference Operator: The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.

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