Yahoo Finance W&T Offshore Inc (WTI) Q1 2024 Earnings Call Transcript Highlights: Surging Production and ...
Production: Over 35,000 barrels oil equivalent per day, up 30% from the previous quarter.
Oil Production: Increased by about 15% compared to the previous quarter.
Adjusted EBITDA: $49.4 million, a 10% increase quarter-over-quarter.
Free Cash Flow: $32 million, more than double the previous quarter.
Lease Operating Expenses: Recorded below the low end of guidance.
Dividend: Continued payment in Q1 2024 with an announcement for Q2 2024.
Proved SEC Reserves: 21.8 million barrels of oil equivalent, 17% higher than expected.
CapEx: $35 million to $45 million expected in 2024, with $3.2 million incurred in Q1.
Lease Operating Expense Forecast: Approximately $23 per barrel oil equivalent for full year 2024.
Release Date: May 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
W&T Offshore Inc reported a strong start to 2024 with solid operational and financial results, continuing to generate positive free cash flow for the 25th consecutive quarter.
The company successfully integrated newly acquired Gulf of Mexico fields, which immediately contributed to a 30% increase in production and a 15% increase in oil production from the previous quarter.
Adjusted EBITDA increased to $49.4 million, a 10% increase quarter-over-quarter, outpacing the 3% increase in production, benefiting from higher oil production.
W&T Offshore Inc maintains a strong balance sheet with significant cash on hand, which facilitated the strategic acquisition of the Cox assets.
The company continues to focus on cost control, recording lease operating expenses below the guidance range and generating $32 million in free cash flow, more than double the previous quarter.
Negative Points
Three of the newly acquired fields were shut in during the first quarter, delaying their expected positive impact on the company's operational and financial results.
There are ongoing challenges with integrating the Cox assets, including necessary remediation work primarily around corrosion due to inadequate maintenance by the previous operator.
The company anticipates higher lease operating expenses in the second quarter due to deferred projects from the first quarter and necessary maintenance work.
Operational costs and general and administrative expenses are expected to rise initially with the integration of new acquisitions, which could impact short-term profitability.
While W&T Offshore Inc has a strategy for growth through acquisitions, the integration process involves significant effort and resources, which could divert focus from other operational areas.
Q & A Highlights
Q: I noticed on the guidance, the new guidance, gathering and transportation and G&A were a little lower than I had in my estimates, do you want to comment on that? A: Tracy Krohn, W&T Offshore Inc - Founder, Chairman, Chief Executive Officer & President: Yes. So that reason is because we have some of that production is still shut in. That reflects some of that. We're negotiating somewhat on -- some of the midstream issues around that and there's still maintenance that we need to do on some of that property.
Q: And the lower G&A? A: Unidentified Company Representative: Look, the G&A was slightly higher than the midpoint just because of some one-off costs that we had. But again, we maintain our guidance for the full year. We don't expect that to change.
Q: Tracy, on the Cox assets, how long does it typically take to evaluate what kind of remediation work you need to do to bring the assets up to standards you're comfortable with and then also to quantify and put a plan together for any kind of development or recompletion work to enhance the production profile of the assets? A: Tracy Krohn, W&T Offshore Inc - Founder, Chairman, Chief Executive Officer & President: Yeah. Normally, it takes a few months, Jeff. In this particular case, the one -- the normal kind of care that we see in making these types of acquisitions, this company, the predecessor Cox, went into bankruptcy and the maintenance wasn't what we normally would expect to see. So as a result, we're having to do some remediation primarily around corrosion, and that's taken a bit of time.
Q: Tracy, you talked on the year-end earnings call about the potential of forming a drilling partnership that would include or could include Holy Grail. Can you provide any kind of an update on where that effort stands? A: Tracy Krohn, W&T Offshore Inc - Founder, Chairman, Chief Executive Officer & President: Yeah, really good question. We -- again, as I said earlier, we struggled a little bit with late '22 and whether we should just go ahead and pay off all the debt that we had in the second lien and not do another issuance. We ultimately decided to go ahead and redeem all those notes and do another -- a new issuance for $275 million just to make sure that we had additional liquidity. And that was the right decision. So as we look at the situation going forward, we see the ability to make more acquisitions and grow the company from that methodology.
Q: I thought the numbers look good. Thank you, and I'll pass it back to the operator. A: Tracy Krohn, W&T Offshore Inc - Founder, Chairman, Chief Executive Officer & President: Jeff, I'm sorry, I didn't directly answer your question with regard to drilling. We did focus on making the acquisitions. That's why we haven't unveiled the drilling joint venture. We mentioned it. We told shareholders and potential investors and investors that we would probably defer for about a year. We are looking at that now and we're putting together that program. It's going to be relatively extensive.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
