WTI - Earnings call transcript Q1 2018

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Operator

Greetings and welcome to the W&T Offshore, Incorporated First Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Lisa Elliott with Dennard Lascar, Investor Relations. Please go ahead.

Lisa Elliott

Thank you, Operator and good morning everyone.

have review us for financial quarter XXXX. to conference W&T the glad of to call and are you on join Offshore's first We operational results

like call this and accurate on operational statements refer announcement first non-GAAP to speaks call XXXX as longer financial Mr. Krohn, of therefore, a only would forward-looking the May date released over Company, W&T on measures. Before time-sensitive I Tracy for information today, the call over W&T's and results yesterday any to of time, of quarter please that of XXXX turn you turn that the the Chairman like to I I At replay. and be would discussion X, to this as reconciliations CEO. information remind reported no to Also, and may

Tracy Krohn

Thanks, Lisa.

thanks Steve Development. everyone are Danny us So, going of Officer; Financial Tom and call. Corporate Chief our questions Business Janet Vice this and to our President are Yang, With morning Gibbons, Chief later Murphy, good for to Operations Officer; answer Technical Officer; available Schroeder, me during Chief this be and They joining morning, our our today.

months leases contributing program. of and been Mexico joint over agreements associated we the next the joint XX% a this The since So is couple each revenue refer would projects initially years. infrastructure. as to in March access of Gulf drilled project the that specified XX% venture in received available structured transaction initial to of fourth last a up combining the cost cost such On we it’s investors, entered quarter call. busy with our various of XX, into to I XX three

managed in of XX fund threshold, Boston While funds JV assets the about own the Heidelberg The with we drilling investor leading economics over partners billion on sponsor investors management. controlled based of is by program every a by entity of world-by-world basis. an received XX% under certain received

initial Krohn investors X% W&T invested with our additional minority partners. are Hughes GE second each closing joint to capital we outlay. as we its same working investment a in investors myself. own of in XX.XX% XX third interest. team contributed an to Energy The venture planning, of on entity inventory conditions other the closing projects the the closing, The partnership by which expect had buying contributed initial in development [indiscernible] retained capital and whole and The future. different program invested the created including to high new contributed. total have of relatively allows the drilling and the with is W&T XX.XX% project Baker controlled to Since a W&T LLC newly us return reduced Monza the interest working interest by accelerate terms

along cost contributing are specs leases We drilling operations. the - with and

us believe So in enhance enhances during to to financial Mexico. flexibility inventory diversify our develop create shareholder of manage faster, program drilling we We that Gulf opportunities believe acquisition the allow to and our is reduce JV this and the sheet to the additional our accretive drilling pursue value. the risk JV program will the profile balance strategy opportunities, greatly drilling

XXX. Heidelberg call field company and when that pretty directed distinguishes even in hope Cobalt. the on going XXX on our we field working Heidelberg been well we it model we acquisition pretty box and purchased is closed work forward that a busy that I XXX, can that Green interest X.XXX% of in I the Canyon interest working good have forward. believe mentioned that’s going since and something we includes think I acquisition and better earlier towards last opportunities. the

$XX.X purchase is gross million. price Our

per oil in a this barrel was which per from benefit will or of so Our day barrels the Heidelberg million types oil we’re day was day month for cubic and of flows an net gross of day, XX,XXX XX into The the example accretive far - the Heidelberg is prudently Gulf the of of equivalent field on February. from that that gas of production feet XX,XXX nature - generate oil equivalent of almost opportunities barrels that cash an seeing acquisition basis. an X,XXX in and per per

Production and the We’ve the maintenance. barrels compares pipeline by we production for a have These XXXX unscheduled production middle outages which of - the averaged seen oil So now matter, we’re equivalent oil that earnings X,XXX that collectively in is of pipeline oil downtime production which resulted quarter first scheduling us. XXXX weather, per cash for of impacted of behind much far month due maintenance, have about production this deferrals our exceed This oil guidance been a of with issues. quarter falls similar bonds maintenance in and the fourth close, outages day differed range. quarter XXX barrels would yes, and shows substantial day. that for equivalent which was produced XX,XXX lot guidance starting we that of per platform strong around now in equivalent and estimate was to per results are Again to day this we of flow. associated

are to rates per equivalent XX,XXX oil day. Our current closer barrels production

will as service. we to are prices go capital return that expect offline We up

oil So Heidelberg of the late we wells on of producing we JV A always new XXX online X wells Mahogany business. of program believe capable going per day. an that will with March at production drilling restricted XX,XXX of well, oil and around and equivalent XX,XXX production barrels Mahogany be the are forward. The help will starting day from came portion the came including end also barrels equivalent we per the XXX internally

X% quarter average side increased and Viosca sales per day. a rate way $XXX.X A-XX producing grew It’s online well. to per we $XX.XX placed recently revenues test prices XXX Boe from Knoll Boe. completed currently the $X.XX ago to XX,XXX realized a as year per So Virgo Boe of our million By track first

from XX,XXX crude derivative through for a flow continue I under that barrel We as year. Total list cash of the the April this ensure oil do The generate a our excuse balance ended Relations total the to commodity financial reduced into by and for believe swaps, debt great X% purchase Total PDP day the positions beginning job above of driven expenses. Investor to legal of going for posted of operating ago. remainder different performance came a at hedged the So other expenses costless - to of in quarter year by derivative of barrels of expected the offset and serves we this and and starting came first include through those four our per function end May year costs. expectations G&A website lease of managing we positions increases We contracts per we in partially incentive substantial we a in portion reports. is are in expenses section XXXX. pursue collars of stream reductions about which and acquisitions. $XX puts. better compensation portion down me, cash XXXX The in commodity for in

by EBITDA has quarter XXXX the of quarter adjusted Both first grew these to XX.X%. our EBITDA of of margin adjusted activities we are when improvements first increased XX% XX.X%. of reported million provided now for adjusted first million the three was $XX $XX.X and XXXX for EBITDA of adjusted operating margin cash to million. EBITDA XXXX Net and $XX.X of the So months over

generation pretty good. So was cash

$XX we first find Hurricane of good as received where We quarter million from. XXXX related a to claim also insurance reimbursement from Ike

for reflects million. in drilling XXXX of of program The first JV our quarter advantages investors $XX.X

excluding in periods, XXXX results both online in items So the these of better were than XXXX. both

per compared was includes March balance the million million $XXX,XXX a cash for and $XXX $XX the under or from share. total tax income million. to year the an bank of grew income or $X.X availability quarter XXXX, million our quarter end $XXX.X first million. per whereas net XXXX unrestricted for adjusted first XXXX of income the tax adjusted XXXX of of balance quarter of share of net Net $XXX.X XXXX, $X.XX liquidity for million $XX.X at $XX.X benefit million, income up our That’s facility. $X.XX consisting XX, $XXX.X Our of income expense, cash At was as of included first income credit million liquidity revolving $XXX.X our million net

we to funds do to for receive income So expect continue $XX in tax million in federal XXXX.

timeframe. timeframe We $XX.X expect October $XX.X million the to September in receive to in million June and

that what to tax to activities, these associated is recall liabilities tax losses be you refunds the the operating longer with and back with allows probation abandonment periods. our called is net plugging associated are of If which losses carried flow specified

for will revised are million which are Other as JV drilled our reimbursements year have will field at at Knoll Viosca drilling as year one A-XX program. budget JV major is the sidetrack is XXX, well the this The as million The reductions freeing drilled drilling the program. contribute date. JV of is in program of after a A-X of outlay part only to the revised also result with part The million at this thus of Mahogany not JV being drilling wells CapEx program completed. sidetrack growth currently drilling accretive a high reported. wells and be including JV is capital closing that does for JV later drilling $XX well incurred of interest establishing The the and less well in drilled $XXX capital program, wells cost field acquisitions. XX from before downward working in Mahogany W&T we of the Ewing debt million net a return acquisitions. well So generate program field. XXX the approximately Virgo and which cash Bank up capital rate include $XX A-X that expenditures, previously XXXX amount for $XX

number that cost So with approximately $XX of a also includes are to million. expected budget recompletions

activities that XXXX predict further estimate expenditure in XXXX, even from million on the spend abandonment currently is we We years. million and will several will substantially we down which $XX $XX.X the last drop our P&A approximately to Additionally, plugging range.

or capable production V so is our I results produced in per about T have well A-XX above. [indiscernible] the now of producing sand. of or with rate around fields. behind has on and drilling equivalent deeper is which of well this XX% AXX Shoal side towards far it can Virgo sand end of T combined that’s been found oil believe with the the March success of with well fleet per We The restricted internally with day a XXXX XXX, is year this sand from equivalent also discovered sand the in producing independently XXXX barrels future. previously which completed is an Ship pleased came barrels Mahogany approximately are oil and The day continued We online

bring activities is since let until the little XXXX. now. field. was brought or Virgo Virgo The time has field development The So that a in bit line our me that field drilling on on XXXX occurred Virgo feet was of redevelopment the sidetrack in a in the program in late of field No fourth it began conventional planet. January. and A-XX on water in in We installed it initiated on a drilling rig late January the field platform XXXX and platform was globalized when deepest operations in

track well and of now in have A-XX XXX hydrocarbon the up feet is side production. X relatively program nice sidetrack is impact upper in encounter believe line to on well have next of deep column Virgo placed rate another oils are and Oils we We measured hold have various could and bottom did test modes, in JV that XXX per oil monitor feet is on other day. low we was our activities. a risk of rig. first it identified The producing Well and and structurally barrels A-XX equivalent a oil is currently as April pressure test which higher sand. that well well XXXX The

move is all then well A-XX Virgo to of well, completed once new part these that wells So drilling we are program. the JV will

phases. risk XXX. cash quickly projects Bank well field about let’s generate high Ewing activities flow Finally existing Tim all Oil XXX as Ewing XXX assuming Ewing effort as the putting Ewing talk of success. different with XXX is Bank that can quality XXX access field. This redevelopment infrastructure South to XXX are field that three and The low field includes

The bottom Both that XXXX. sidetrack I in the of contributions Ewing first and in phase XXXX think online back in the the XXX wells are Tim making those sidetrack successful XXXAX was the A A-X to good of - drilling back South line.

the Tim will wells. consists A-X phase of XXX/XXX So and A-X second the South

we We through will oil XXX. be drilling and have mobilized then, Tim A-X platform A-X. rigs drilling have the begin South South XXX Once complete begun is that Tim

a this include heads. are likely will multiple with Ewing well XXX We opportunities phase Ewing believe risk low stack third XXX, of year open of The an location. exploration program which both water wells is space

reflects you see impact ahead As from production positive can estimate success. acquisition for full guidance effort buying drilling biased which with the our Heidelberg the year, we consent the of our

just reiterate refinance pay maturities fourth debt both. either quarter we to XXXX be of able upcoming or XXXX and and me expect or quarter Let XXXX that continue off to first combination of during do the the

for expect We open that we take operator, we available of of of in the advantage to track questions. the Mexico. acquisition opportunities lines that believe Gulf also up are will With

Operator

Instructions] first question Please is with state John from question. Capital. White [Operator ROTH Our your

John White

bringing wells a Bank bit wells mentioned drilling about Ewing release little reaching Could depth those and of and at got press you timing Mahogany on? you Your XXX, the talk Virgo. total

Tracy Krohn

next PV-XX. Tim kind time days will couple again frame, days get to going weeks maybe is or about XXX the probably The bit so the XX Mahogany of longer with little Virgo the probably A-X XX… TD same within at XX take a in South well probably be sidetrack of to

John White

all wells drilling in are those of And joint program? venture three the

Tracy Krohn

are. They

Operator

Evans from your Our SG Management. state question. Jon Capital with next question comes Please

Jon Evans

been pipeline the the have that is now and frustrated maintenance you et cetera. know I by

QX. platform QX? QX as better Do outages the You go and getting talked you about in into it was see XXXX you those maintenance in

Tracy Krohn

do. behind scheduled that's that We some so time. ahead knew We we that most of think of us, was it of

Some of unscheduled. was it

deal maintenance pipes these in gotten developed to of had a older that Some with. little have bit a issues

platforms to do had pipe what connections. redesign on them we some are existing actually of around Some

of sense I do them were also during in downward in we enough to these unfortunately maintenance sure make X my of account care and invest have these now, downtimes, carrier, And think have done. goods lower, money take save Some regular prices I thing I a couple We maintenance but P&A kind years, use. targeted similar are we’re while seems over be high are even have platforms. services higher. prices with into makes surface. robust In had and same a on a prices money raising more little operation option that take and program for are last and sense doing of of our we of that our are cycles, found all bit done lower in better similarly to cost to the the we when X, we these we’ve extra pricing things it pretty worries later work It a just get to and can

reduced higher Now, that we we’re benefit cycles. into the feeling capital program pricing as going

out it to longer So plan. seems works better the term for

Jon Evans

Is you down of platform if control add you think producing, producing et range. just cetera, you now different If whether that you kind cetera, X is going the know acquisition. you because are XXXX roughly line fair to of back I the XX can’t but you bring market about that I cetera, mean get XX then control that think acquisition et fair goes does and where and a you’re the from the you but a X to I do think? et outage in to if the that day, can't you that mean So, product you're from number about

Tracy Krohn

The we answer measure, yes. is the why can yes. capacity that is there, production to Yes, that’s

Jon Evans

the been past you this in. me then for you other And struck put these uniquely, question the of in we haven’t is, hedged have I kind

debt and go do? assurance thought got want you to what it the cash maturities strategy change make trying you’re to could you just detail it’s get of you So some of and or on flow into your because you your does also process, kind some the

Tracy Krohn

and not it’s of It’s we in acquisitions We that past manage Yes, it’s we little that what have. hedge hedging not the true quite been kinds automatic the haven’t different we not of but course hedge. if our budget. of protect an normal sort to as just hedge a We things. business a us that bit for to

reinforce. So continuing fair debt ensure and we to able are that to helps to our efforts. helps our year to Hedging us that’s acquisition meet ensure this obligations

Jon Evans

of had kind scale Rose WTI in et you cetera guys when deal benefit question, last And then where any of a really that or you et that Yellow from is did sweet, cetera and just sliding getting are you light because no? that

Tracy Krohn

is to answer that Short yes.

Jon Evans

So in that in identified - will that doesn’t does through or come barrels below through it see as just Q? comes it the just comes I going through how it to or do line is be be revenue the

Tracy Krohn

- it not know not just material specifically through is don’t Since the to company at Q. It is worry It’s revenue. identified point. necessary I this comes that in this

- yes, they to I make don’t but out, mean break continuing I progress would So are out that there. I

Operator

Instructions] your question Fargo. from comes Our question. state with next Wells [Operator Please Dustin Tillman

Dustin Tillman

Can XX-K talk were to said take what What that reap, you potential you unwilling to are then other revolver banks extend or the had extend them conversations lenders. it revolver. like the in your about with, the the revolver then get does to

Tracy Krohn

there a question? I little am repeat cut sorry, Tillman, you out bit Mr. please you would

Dustin Tillman

Yes, in under banks revolver to the that XX-K, current extend the cap were structure. it unwilling the said

is it with to conversations lenders what like them potential or have replacement other So been take what get extend revolver for facility. to

Tracy Krohn

to in by about revolver, only of which you would tell a year, was it convince, good but the agreement that, since November you lines would in credit to terms. fact its have pretty restage their Wells fact I Yes, find I that, you idea the that guys first own think have amended along this Fargo that expires

usual as So, perhaps this what we in in much a agreement see to business here. think I didn’t point another time banks, type our we’ll at of with approach go see any and pretty need is

we structure, another, with entire debt way in facility, credit I do anticipate corporate and at all. shape structure one the don’t will I refinance any and that issues that anticipate So or - orders, top so get out is short so my fair hold order retention. with priority. so that’s we drawn, then It’s quite, doesn’t to undrawn in will not not it revolver change

Dustin Tillman

a a to is deals facilities in care type of What looks like include to buyouts do the the bonding letter It that ability revolver of your in large have of P&A? or are place terms go wiliness assets. terms of of credit having lot today relatively of taking taking

Tracy Krohn

Well, our cheapest capital. our form of is revolver

we dry our for feel quickly. in that’s which we like to So move need powder fairly things would

is that regular that years. always in double Our do XX And the last over financial we of business our insurance is course of any deal we something events.

So, kind say we’ll, cover you to it’s nice have an of is manage hard facility the it’s to support how always of there but in cookie a XX all banks. approach to this, different undrawn

Dustin Tillman

flow and maybe question, goes you generate that effectively on into reasonable the question the more of free using the IRR saw what a selling into joint more what what decide cash now JV One venture? flow. balance you high of starting doesn’t about cash strategic large amount how free to down you’re and part venture, of did that opportunities joint and a a When is of interest versus the

Tracy Krohn

a transaction. answer the simple, all to both look concern, that a that at sit going best and for to not I parties taking it’s of It’s determine it's be complex sides since pretty question, on what’s portfolio our

very fair investors all investment think as and I it structured a W&T well. type for the as for is of

operator, involved company the I lot and as a promotes of major will them. the program. capital part I got own in think the my does that’s of have and of be attractions well

Operator

question comes question. Please with another from go have that do Hassan with your Ahmad and We ahead Serengeti.

Hassan Ahmad

figure is that guidance, Quick guidance, or just guidance is I On from at question acquisitions that, separate am does include for Heidelberg your the trying looking that? the production out, to you.

Tracy Krohn

include it yes. No, Heidelberg, does

Hassan Ahmad

second question, still little a is And I guiding have know I so year-over-year. JVs maybe you if am production was year-over-year is that we the sort kind of, looking to of that offer to, guidance guess, bit down

couple to in this So wall your next I as the the kind you do of coming going take you of production refi guess get way sort what think to in is years. backup work up the of

back You as to know but then imagine. helped you out, to low obviously, get I the would production has try oil need

about how production your loans So that? the year next something two or that given sort do think over you of terminal

Tracy Krohn

That’s a great question.

the in Some conference really offline explain as morning various for release explain, think to call but generally reasons that’s that, integrity There I to and with production in they of with to ensure issue companies, transport earning we of as as try has these is have this this I maintenance the the the try far control. do to system. we to that can course, pipeline that of do this schedule

some And last pretty six which completely probably over to unexpected. unscheduled the a this, had was weather cycle which than we seven tough worsened months, But other. anything of

winter supplies sometimes So, big hard now and talked we weather talk about about we and locations, of activities, equipment the we normal type get back in hurricanes, it's to a seas over capital. to lot winds get even

So late go we that December that’s months. a the this of and good bit spring. early slower spring, And start a then little winter pickup Normally winter they bit early had activities thing. of to sort toward

as how some have always compensation part we So, have that’s our as we goes. that far going what of of to incentive production, replace well we’re is experienced

of one the activity. that that’s surge the things So

of acquisition. with approach, We have to a by lot that is done and do reasonable

is more is we and acquisitions, predict drilling expect the pretty So good. with budget We I because doesn’t year. live fully program. but to We market just bit. it, have the we fully think our drill don’t that success Mahogany this by JV this expect excluded have how make to don’t company die drill good we’re to from I bit. pretty way - acquisitions by know

member in specified our portfolio. of prospects a have We

going that’s We’re first, debt well, that as make manage issues eminent sure XX our next because to within the months. we

we wanted we off will and pay to flow to be million the cash. enough able with to as manage where we be that to we’re debt to the first now, have will that $XXX So do cash point able well of

gives pleases period replace it to we a net acquisitions our up in lowering able more us capital a to just And we’re wanted paid I off be production. and immediately do It off So that actually also whether to time paid options. reasonable lot debt. refi. do through we

So not I only to debt. grow solid up production to a we’ll business think but doing reduce continue come of to company, the pretty way with grow our

Operator

Our next question. comes SG Please state Jon question with Capital. from Evans your

Jon Evans

from jumped in In from pretty up dollars venture big expenses have an this a guys deal on SG&A the a and the quarter transaction your have just pretty Heidelberg did that? joint on tight it absolute it you big Boe increase you been or was

Tracy Krohn

The in also up result that answer to much the Drilling that regard field the minimal facility. on Heidelberg a operate, no, for pretty expenses revenue but size more is of to JV program, expensive increase. jump The to pretty expenses as will good of

So, we’re up keeping those because jumping eye on well. of figures both revenues as

Jon Evans

opportunities producing there it just just any to the over? Heidelberg, just, assets with wells or you keep overtime to or see increase then And that is any or flows do like offset it production we’re that is going

Tracy Krohn

whatever buy that do look we upgrades and we flow, we rig look can at we We workovers facilities Whenever, our fields completes at three at upside throughput. we can for drilling, look look things. increase and at cash

not have, We’re the continuing examine from field. operator do look all we data take however, we serious to a the we’re pretty still the the data at there,

afraid in facility. will that future the we’re times work up capture So, all to be

Jon Evans

that’s no? the or environment. and today kind the you call Nobel inflation you market on about positive seeing see really general, in harsh you any Gulf to of in where but not then, the you there. comments Gulf what are of process just has And just kind the pretty know are expenses can I your started give some jack-up their us Are thought in on

Tracy Krohn

no of we we adjustment. get Yes, because a is short And seasonal end less the - get good. some isn’t lot. generally answer the the this weather then weather of not and the little We because it’s better. We busier is pretty the generally toward time a year, see busy year

am So, goods predictable but and not really cost long-term any services. I seeing to

Operator

there no to time. the you. I’ll at for you. back call Thank this Krohn And closing turn remarks. are Tracy Thank questions further

Tracy Krohn

again will good [June]. hopefully so will next we this in and We Thanks have and Operator. do other appreciate much. some quarter Thank we news you

Operator

a parties Thank can great you. today's All concludes This Have conference. disconnect. day.

Lisa Elliott	Dennard Lascar, IR
Tom Murphy	Chief Operations Officer
Tracy Krohn	Chairman and CEO
Danny Gibbons	CFO
Steve Schroeder	Chief Technical Officer
Janet Yang	Vice President of Business and Corporate Development
John White	ROTH Capital
Jon Evans	SG Capital Management
Dustin Tillman	Wells Fargo
Hassan Ahmad	Serengeti

W&T Offshore (WTI) 3 May 182018 Q1 Earnings call transcript