W&T Offshore(WTI) - 2025 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements This section presents W&T Offshore, Inc.'s unaudited condensed consolidated financial statements for Q1 2025 and 2024, highlighting a net loss of $30.6 million in Q1 2025 driven by lower revenues and a debt extinguishment loss Condensed Consolidated Balance Sheet Highlights (In thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $1,024,946 | $1,098,930 | | Cash and cash equivalents | $105,933 | $109,003 | | Total current assets | $221,930 | $218,458 | | Oil and natural gas properties, net | $691,788 | $777,741 | | Total Liabilities and Shareholders' Deficit | $1,024,946 | $1,098,930 | | Total current liabilities | $187,931 | $246,084 | | Long-term debt, net | $349,481 | $365,935 | | Asset retirement obligations | $532,753 | $502,506 | | Total shareholders' deficit | ($82,796) | ($52,577) | Condensed Consolidated Statements of Operations (In thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Total revenues | $129,867 | $140,787 | | Total operating expenses | $138,111 | $140,791 | | Operating loss | ($8,244) | ($4) | | Loss on extinguishment of debt | $15,015 | $— | | Net loss | ($30,577) | ($11,474) | | Net loss per common share (basic and diluted) | ($0.21) | ($0.08) | Condensed Consolidated Statements of Cash Flows (In thousands) | Cash Flow Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($3,196) | $11,642 | | Net cash provided by (used in) investing activities | $63,267 | ($87,619) | | Net cash used in financing activities | ($63,141) | ($2,539) | | Change in cash, cash equivalents and restricted cash | ($3,070) | ($78,516) | Note 1 — Nature of Operations and Basis of Presentation W&T Offshore, Inc. is an independent oil and natural gas producer primarily operating offshore in the Gulf of America, with financial statements prepared under GAAP and SEC regulations - The company is an independent oil and natural gas producer with operations primarily in the Gulf of America, focusing on exploration, development, and acquisition[19] Note 2 — Financial Instruments This note details the company's financial instruments, including derivative contracts for natural gas price hedging and fair value of debt estimated using Level 2 inputs Open Henry Hub (NYMEX) Derivative Contracts as of March 31, 2025 | Period | Instrument Type | Daily Volumes (Mmbtu) | Total Volumes (Mmbtu) | Weighted Floor Price ($/Mmbtu) | Weighted Ceiling Price ($/Mmbtu) | | :--- | :--- | :--- | :--- | :--- | :--- | | Apr 2025 - Dec 2025 | costless collar | 70,000 | 19,250,000 | $4.02 | $5.32 | | Apr 2025 - Dec 2025 | puts | 62,182 | 17,100,000 | $2.27 | N/A | | Jan 2026 - Dec 2026 | puts | 55,890 | 20,400,000 | $2.35 | N/A | | Jan 2027 - Dec 2027 | puts | 52,603 | 19,200,000 | $2.37 | N/A | | Jan 2028 - Apr 2028 | puts | 49,587 | 6,000,000 | $2.50 | N/A | - For Q1 2025, the company recorded a net derivative loss of $2.76 million, compared to a net gain of $4.88 million in Q1 2024[26] Note 3 — Asset Retirement Obligations Asset Retirement Obligations increased to $561.9 million in Q1 2025, primarily due to accretion expense and revisions of estimated liabilities Changes in Asset Retirement Obligations (In thousands) | Description | Three Months Ended March 31, 2025 | | :--- | :--- | | Beginning Balance | $548,832 | | Liabilities settled | ($3,771) | | Accretion expense | $8,392 | | Liabilities incurred | $1,029 | | Revisions of estimated liabilities | $7,369 | | Ending Balance | $561,851 | Note 4 — Debt The company completed a $350.0 million debt refinancing in January 2025, resulting in a $15.1 million loss on extinguishment and establishing a new $50.0 million revolving credit facility - On January 28, 2025, the Company issued $350.0 million of 10.75% Senior Second Lien Notes due 2029[30] - Net proceeds were used to purchase tendered 11.75% Notes, repay the $114.2 million Term Loan, and fund the redemption of the remaining 11.75% Notes[35] - The refinancing transactions were accounted for as an extinguishment, resulting in a recognized loss of $15.1 million in Q1 2025[38] - The company entered into a new Credit Agreement for a $50.0 million revolving credit facility maturing in July 2028, with no borrowings outstanding as of March 31, 2025[39][46] Note 5 — Commitments and Contingencies The company faces significant legal and regulatory matters, including $254.7 million in demanded collateral from surety providers and $21.4 million in contingent decommissioning obligations - The company is in litigation with multiple surety providers who have demanded approximately $183.7 million in collateral, with an additional provider demanding $71 million, bringing the total Demanded Collateral to approximately $254.7 million[55] - The company is appealing a $4.7 million disallowance of royalty reductions by the ONRR and has accrued $5.0 million for this matter, including estimated penalties[47] - As of March 31, 2025, the company has an accrual of $21.4 million for contingent decommissioning obligations related to properties previously divested or held by bankrupt third parties[62][63] Note 6 — Stockholders' Equity The company declared and paid a $0.01 per share quarterly dividend totaling $1.5 million for Q1 2025, with a similar dividend declared for Q2 2025 - A quarterly dividend of $0.01 per share ($1.5 million total) was paid on March 24, 2025[66] - A subsequent quarterly dividend of $0.01 per share was declared on May 6, 2025, to be paid on May 27, 2025[67] Note 7 — Income Taxes The effective tax rate was 13.1% for Q1 2025, influenced by nondeductible compensation and a $30.9 million valuation allowance against deferred tax assets - The effective tax rate was 13.1% for Q1 2025 and (10.0%) for Q1 2024, differing from the federal statutory rate mainly due to nondeductible compensation and valuation allowance adjustments[69] - As of March 31, 2025, the company maintained a valuation allowance of $30.9 million against its deferred tax assets[70] Note 8 — Net Loss Per Common Share The company reported a net loss per common share of $0.21 for Q1 2025, based on a $30.6 million net loss and 147.6 million weighted average shares outstanding Net Loss Per Common Share Calculation | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net loss (in thousands) | $(30,577) | $(11,474) | | Weighted average common shares outstanding (in thousands) | 147,598 | 146,857 | | Net loss per common share (basic and diluted) | $(0.21) | $(0.08) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 financial performance, noting decreased revenues to $129.9 million due to lower production and oil prices, a $15.1 million debt extinguishment loss, and sufficient liquidity of $105.9 million cash and a $50.0 million credit facility Business Overview W&T Offshore, an independent oil and gas producer, received $11.9 million from asset sales and $58.5 million from insurance, while completing a $350.0 million debt refinancing and securing a new $50.0 million credit facility - In January 2025, the company received $11.9 million for the sale of a non-core interest and $58.5 million from an insurance claim settlement[88] - The company executed a major debt refinancing in January 2025, issuing $350.0 million of 10.75% Notes due 2029 to redeem its 11.75% Notes and repay its Term Loan[90][91] Regulatory Update The company views recent Trump administration executive orders and Department of Interior filings as positive for reducing regulatory burdens and financial assurance requirements in the Gulf of America - The Trump administration issued executive orders in early 2025 aimed at reducing the regulatory burden on domestic energy companies[96][99] - The Department of Interior indicated it will not seek supplemental financial assurance in the Gulf of America except for sole liability properties and certain other specific cases, which is viewed as a positive development by the company[97] Results of Operations Q1 2025 total revenues decreased to $129.9 million due to lower production and oil prices, resulting in an operating loss of $8.2 million and a net loss of $30.6 million including a debt extinguishment loss Revenues and Production Volumes Comparison | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Revenues (in thousands) | $129,867 | $140,787 | | Total Production (MBoe) | 2,744 | 3,199 | | Avg. Realized Oil Price ($/Bbl) | $71.31 | $76.44 | | Avg. Realized NGL Price ($/Bbl) | $23.86 | $21.78 | | Avg. Realized Nat Gas Price ($/Mcf) | $4.45 | $2.48 | - Production volumes decreased by 0.5 MMBoe (14%) YoY, primarily due to deferred production at Mobile Bay properties and shut-ins at other fields[106] Operating Expenses Comparison (per Boe) | Expense Category ($/Boe) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Lease operating expenses | $25.88 | $22.14 | | Gathering, transportation and production taxes | $2.06 | $2.36 | | Depreciation, depletion and amortization | $11.99 | $10.61 | | General and administrative expenses | $7.35 | $6.41 | | Total operating expenses | $50.34 | $44.01 | - A loss on debt extinguishment of $15.1 million was recorded in Q1 2025 related to the debt refinancing[117] Liquidity and Capital Resources The company's liquidity includes $105.9 million cash and a $50.0 million credit facility, with Q1 2025 showing $3.2 million net cash used in operations and $8.9 million in capital expenditures - As of March 31, 2025, the company had $105.9 million of unrestricted cash and $50.0 million available under its credit facility[122] Cash Flow Summary (In thousands) | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Operating activities | ($3,196) | $11,642 | | Investing activities | $63,267 | ($87,619) | | Financing activities | ($63,141) | ($2,539) | Capital Expenditures (In thousands) | Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Exploration and development | $7,555 | $3,022 | | Acquisitions of interests | $400 | $80,515 | | Seismic and other | $917 | $134 | | Total (accrual basis) | $8,872 | $83,671 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's market risk primarily stems from commodity price fluctuations, with a hypothetical 10% price decline impacting Q1 2025 revenue by $12.8 million, partially mitigated by natural gas derivatives - A hypothetical 10% decline in average realized sales prices for oil, NGL, and natural gas in Q1 2025 would have reduced revenue by approximately $12.8 million[138] Impact of Derivatives on Realized Natural Gas Prices ($/Mcf) | Description | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Average realized sales price (pre-derivatives) | $4.45 | $2.48 | | Effects of realized commodity derivatives | ($0.46) | $0.43 | | Average realized sales price (post-derivatives) | $3.99 | $2.91 | Item 4. Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures are effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of March 31, 2025, the company's disclosure controls and procedures are effective[142] - No material changes to internal control over financial reporting occurred during the quarter ended March 31, 2025[143] PART II – OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 5 of the financial statements for detailed information regarding the company's ongoing legal proceedings - Information on legal proceedings is detailed in Part I, Item 1, Note 5 – Commitments and Contingencies[145] Item 1A. Risk Factors The company identifies changes in U.S. trade policy and potential 10% tariffs as a risk factor that could decrease commodity demand, increase operating costs, and cause market volatility - A new risk factor is identified related to changes in U.S. trade policy and tariffs, which could adversely affect business operations and financial results[147] - Specifically, a 10% tariff on product imports announced on April 2, 2025, could decrease demand for commodities, increase operating costs, and cause financial market volatility[147] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report for the period - None[149] Item 5. Other Information No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during the first quarter of 2025 - No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during the quarter[152] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, debt indentures, credit agreements, and officer certifications