W&T Offshore, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Supplemental Guarantor Information

Supplemental Guarantor Information

9 Months Ended

Sep. 30, 2017

Supplemental Guarantor Information [Abstract]

10. Supplemental Guarantor Information

Our payment obligations under the Credit Agreement, the 1.5 Lien Term Loan, the Second Lien Term Loan, the Second Lien PIK Toggle Notes, the Third Lien PIK Toggle Notes and the Unsecured Senior Notes (see Note 2) are fully and unconditionally guaranteed by certain of our 100%-owned subsidiaries, including Energy VI and W & T Energy VII, LLC (together, the “Guarantor Subsidiaries”). W & T Energy VII, LLC does not currently have any active operations or contain any assets. Guarantees will be released under certain circumstances, including:

(1)

in connection with any sale or other disposition of all or substantially all of the assets of a Guarantor Subsidiary (including by way of merger or consolidation) to a person that is not (either before or after giving effect to such transaction) the Company or a Restricted Subsidiary, if the sale or other disposition does not violate the Asset Sale provisions (as such capitalized terms are defined in the applicable indenture);

(2)

in connection with any sale or other disposition of the capital stock of such Guarantor Subsidiary to a person that is not (either before or after giving effect to such transaction) the Company or a Restricted Subsidiary of the Company, if the sale or other disposition does not violate the Asset Sale provisions of the indenture and the Guarantor Subsidiary ceases to be a subsidiary of the Company as a result of such sales or disposition;

(3)

if such Guarantor Subsidiary is a Restricted Subsidiary and the Company designates such Guarantor Subsidiary as an Unrestricted Subsidiary in accordance with the applicable provisions of certain debt documents;

(4)

upon Legal Defeasance or Covenant Defeasance (as such terms are defined in the applicable indenture) or upon satisfaction and discharge of the certain debt documents;

(5)

upon the liquidation or dissolution of such Guarantor Subsidiary, provided no event of default has occurred and is continuing; or

(6)

at such time as such Guarantor Subsidiary is no longer required to be a Guarantor Subsidiary as described in certain debt documents, provided no event of default has occurred and is continuing.

The following condensed consolidating financial information presents the financial condition, results of operations and cash flows of the Parent Company and the Guarantor Subsidiaries, together with consolidating adjustments necessary to present the Company’s results on a consolidated basis. As to the ceiling test write-down recorded in 2016, the computation is performed for each subsidiary on a stand-alone basis and also for the consolidated Company. Due to this methodology, consolidating adjustments are required to present the consolidated results appropriately.

Condensed Consolidating Balance Sheet as of September 30, 2017

										Consolidated
	Parent			Guarantor						W&T
	Company			Subsidiaries			Eliminations			Offshore, Inc.
	(In thousands)
Assets
Current assets:
Cash and cash equivalents	$	106,164		$	—		$	—		$	106,164
Receivables:
Oil and natural gas sales		4,866			34,299			—			39,165
Joint interest		21,877			—			—			21,877
Income taxes		120,402			—			(108,779	)		11,623
Total receivables		147,145			34,299			(108,779	)		72,665
Prepaid expenses and other assets		13,884			1,189			—			15,073
Total current assets		267,193			35,488			(108,779	)		193,902

Oil and natural gas properties and other, net		402,385			156,172			(3,303	)		555,254

Restricted deposits for asset retirement obligations		25,339			—			—			25,339
Income tax receivables		52,097			—			—			52,097
Other assets		493,965			441,133			(874,319	)		60,779
Total assets	$	1,240,979		$	632,793		$	(986,401	)	$	887,371
Liabilities and Shareholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	65,581		$	6,616		$	—		$	72,197
Undistributed oil and natural gas proceeds		18,582			1,502			—			20,084
Asset retirement obligations		27,613			1,843			—			29,456
Long-term debt		11,147			—			—			11,147
Accrued liabilities		26,572			108,757			(108,779	)		26,550
Total current liabilities		149,495			118,718			(108,779	)		159,434
Long-term debt:
Principal		873,733			—			—			873,733
Carrying value adjustments		108,884			—			—			108,884
Long term debt, less current portion - carrying value		982,617			—			—			982,617

Asset retirement obligations, less current portion		148,468			127,092			—			275,560
Other liabilities		554,366			—			(487,335	)		67,031
Shareholders’ deficit:
Common stock		1			—			—			1
Additional paid-in capital		545,422			704,885			(704,885	)		545,422
Retained earnings (deficit)		(1,115,223	)		(317,902	)		314,598			(1,118,527	)
Treasury stock, at cost		(24,167	)		—			—			(24,167	)
Total shareholders’ equity (deficit)		(593,967	)		386,983			(390,287	)		(597,271	)
Total liabilities and shareholders’ equity (deficit)	$	1,240,979		$	632,793		$	(986,401	)	$	887,371

Condensed Consolidating Balance Sheet as of December 31, 2016

										Consolidated
	Parent			Guarantor						W&T
	Company			Subsidiaries			Eliminations			Offshore, Inc.
	(In thousands)
Assets
Current assets:
Cash and cash equivalents	$	70,236		$	—		$	—		$	70,236
Receivables:
Oil and natural gas sales		2,173			40,900			—			43,073
Joint interest		21,885			—			—			21,885
Insurance reimbursement		30,100			—			—			30,100
Income taxes		111,215			—			(99,272	)		11,943
Total receivables		165,373			40,900			(99,272	)		107,001
Prepaid expenses and other assets		12,448			2,056			—			14,504
Total current assets		248,057			42,956			(99,272	)		191,741

Oil and natural gas properties and other, net		360,966			187,040			(953	)		547,053

Restricted deposits for asset retirement obligations		27,371			—			—			27,371
Income tax receivables		52,097			—			—			52,097
Other assets		394,931			344,742			(728,209	)		11,464
Total assets	$	1,083,422		$	574,738		$	(828,434	)	$	829,726
Liabilities and Shareholders’ Deficit
Current liabilities:
Accounts payable	$	74,306		$	6,733		$	—		$	81,039
Undistributed oil and natural gas proceeds		24,493			1,761			—			26,254
Asset retirement obligations		62,261			16,003			—			78,264
Long-term debt		8,272			—			—			8,272
Accrued liabilities		9,293			99,179			(99,272	)		9,200
Total current liabilities		178,625			123,676			(99,272	)		203,029
Long-term debt:
Principal		873,733			—			—			873,733
Carrying value adjustments		138,722			—			—			138,722
Long term debt, less current portion - carrying value		1,012,455			—			—			1,012,455

Asset retirement obligations, less current portion		142,376			113,798			—			256,174
Other liabilities		408,050			—			(390,945	)		17,105
Shareholders’ deficit:
Common stock		1			—			—			1
Additional paid-in capital		539,973			704,885			(704,885	)		539,973
Retained earnings (deficit)		(1,173,891	)		(367,621	)		366,668			(1,174,844	)
Treasury stock, at cost		(24,167	)		—			—			(24,167	)
Total shareholders’ deficit		(658,084	)		337,264			(338,217	)		(659,037	)
Total liabilities and shareholders’ deficit	$	1,083,422		$	574,738		$	(828,434	)	$	829,726

Condensed Consolidating Statement of Operations for the Three Months Ended September 30, 2017

									Consolidated
	Parent			Guarantor					W&T
	Company			Subsidiaries		Eliminations			Offshore, Inc.
	(In thousands)
Revenues	$	51,981		$	58,300	$	—		$	110,281
Operating costs and expenses:
Lease operating expenses		18,796			16,338		—			35,134
Production taxes		340			—		—			340
Gathering and transportation		1,804			2,304		—			4,108
Depreciation, depletion, amortization and accretion		18,804			16,855		830			36,489
General and administrative expenses		7,131			8,500		—			15,631
Derivative gain		2,879			—		—			2,879
Total costs and expenses		49,754			43,997		830			94,581
Operating income		2,227			14,303		(830	)		15,700
Earnings of affiliates		13,251			—		(13,251	)		—
Interest expense incurred		11,554			—		—			11,554
Gain on exchange of debt		—			—		—			—
Other expense, net		(41	)		—		—			(41	)
Income before income tax expense		3,965			14,303		(14,081	)		4,187
Income tax expense		4,432			1,052		—			5,484
Net income (loss)	$	(467	)	$	13,251	$	(14,081	)	$	(1,297	)

Condensed Consolidating Statement of Operations for the Nine Months Ended September 30, 2017

									Consolidated
	Parent			Guarantor					W&T
	Company			Subsidiaries		Eliminations			Offshore, Inc.
	(In thousands)
Revenues	$	163,105		$	194,892	$	—		$	357,997
Operating costs and expenses:
Lease operating expenses		59,823			46,994		—			106,817
Production taxes		1,304			—		—			1,304
Gathering and transportation		6,948			8,687		—			15,635
Depreciation, depletion, amortization and accretion		59,391			55,103		2,349			116,843
General and administrative expenses		20,569			24,810		—			45,379
Derivative gain		(4,765	)		—		—			(4,765	)
Total costs and expenses		143,270			135,594		2,349			281,213
Operating income		19,835			59,298		(2,349	)		76,784
Earnings of affiliates		49,719			—		(49,719	)		—
Interest expense incurred		34,284			—		—			34,284
Gain on exchange of debt		7,811			—		—			7,811
Other expense, net		5,073			—		—			5,073
Income before income tax expense (benefit)		38,008			59,298		(52,068	)		45,238
Income tax expense (benefit)		(20,658	)		9,579		—			(11,079	)
Net income	$	58,666		$	49,719	$	(52,068	)	$	56,317

Condensed Consolidating Statement of Operations for the Three Months Ended September 30, 2016

										Consolidated
	Parent			Guarantor						W&T
	Company			Subsidiaries			Eliminations			Offshore, Inc.
	(In thousands)
Revenues	$	44,585		$	62,818		$	—		$	107,403
Operating costs and expenses:
Lease operating expenses		22,624			14,896			—			37,520
Production taxes		482			—			—			482
Gathering and transportation		2,103			3,058			—			5,161
Depreciation, depletion, amortization and accretion		21,959			29,861			(320	)		51,500
Ceiling test write-down of oil and natural gas properties		28,305			25,317			4,290			57,912
General and administrative expenses		5,417			7,275			—			12,692
Derivative loss		412			—			—			412
Total costs and expenses		81,302			80,407			3,970			165,679
Operating loss		(36,717	)		(17,589	)		(3,970	)		(58,276	)
Loss of affiliates		(16,925	)		—			16,925			—
Interest expense:
Incurred		23,666			27			—			23,693
Capitalized		(48	)		(27	)		—			(75	)
Gain on exchange of debt		123,960			—			—			123,960
Other expense, net		(73	)		—			—			(73	)
Loss before income tax benefit		46,773			(17,589	)		12,955			42,139
Income tax benefit		(3,125	)		(664	)		—			(3,789	)
Net income (loss)	$	49,898		$	(16,925	)	$	12,955		$	45,928

Condensed Consolidating Statement of Operations for the Nine Months Ended September 30, 2016

										Consolidated
	Parent			Guarantor						W&T
	Company			Subsidiaries			Eliminations			Offshore, Inc.
	(In thousands)
Revenues	$	119,011		$	165,762		$	—		$	284,773
Operating costs and expenses:
Lease operating expenses		66,823			51,788			—			118,611
Production taxes		1,378			—			—			1,378
Gathering and transportation		6,125			10,526			—			16,651
Depreciation, depletion, amortization and accretion		65,230			99,956			7,540			172,726
Ceiling test write-down of oil and natural gas properties		28,305			110,709			140,049			279,063
General and administrative expenses		19,390			25,980			—			45,370
Derivative loss		2,861			—			—			2,861
Total costs and expenses		190,112			298,959			147,589			636,660
Operating loss		(71,101	)		(133,197	)		(147,589	)		(351,887	)
Loss of affiliates		(130,719	)		—			130,719			—
Interest expense:
Incurred		81,096			184			—			81,280
Capitalized		(336	)		(184	)		—			(520	)
Gain on exchange of debt		123,960			—			—			123,960
Other expense, net		1,209			—			—			1,209
Loss before income tax benefit		(159,829	)		(133,197	)		(16,870	)		(309,896	)
Income tax benefit		(41,915	)		(2,478	)		—			(44,393	)
Net loss	$	(117,914	)	$	(130,719	)	$	(16,870	)	$	(265,503	)

Condensed Consolidating Statement of Cash Flows for the Nine Months Ended September 30, 2017

										Consolidated
										W&T
	Parent			Guarantor						Offshore,
	Company			Subsidiaries			Eliminations			Inc.
	(In thousands)
Operating activities:
Net income	$	58,666		$	49,719		$	(52,068	)	$	56,317
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, amortization and accretion		59,391			55,103			2,349			116,843
Gain on exchange of debt		(7,811	)		—			—			(7,811	)
Amortization of debt items		1,271			—			—			1,271
Share-based compensation		5,449			—			—			5,449
Derivative gain		(4,765	)		—			—			(4,765	)
Cash receipts on derivative settlements, net		3,924			—			—			3,924
Deferred income taxes		321			—			—			321
Earnings of affiliates		(49,719	)		—			49,719			—
Changes in operating assets and liabilities:
Oil and natural gas receivables		(2,694	)		6,600			—			3,906
Joint interest receivables		8			—			—			8
Insurance reimbursements		31,740			—			—			31,740
Income taxes		(9,259	)		9,579			—			320
Prepaid expenses and other assets		1,326			(95,523	)		96,391			2,194
Escrow deposit - Apache lawsuit		(49,500	)		—			—			(49,500	)
Asset retirement obligation settlements		(41,381	)		(14,845	)		—			(56,226	)
Accounts payable, accrued liabilities and other		126,601			(3,881	)		(96,391	)		26,329
Net cash provided by operating activities		123,568			6,752			—			130,320
Investing activities:
Investment in oil and natural gas properties and equipment		(68,831	)		(10,257	)		—			(79,088	)
Changes in operating assets and liabilities associated with investing activities		2,174			3,505			—			5,679
Purchases of furniture, fixtures and other		(905	)		—			—			(905	)
Net cash used in investing activities		(67,562	)		(6,752	)		—			(74,314	)
Financing activities:
Payment of interest on 1.5 Lien Term Loan		(6,170	)		—			—			(6,170	)
Payment of interest on 2nd Lien PIK Toggle Notes		(7,335	)		—			—			(7,335	)
Payment of interest on 3rd Lien PIK Toggle Notes		(6,201	)		—			—			(6,201	)
Debt exchange costs		(421	)		—			—			(421	)
Other		49			—			—			49
Net cash used in financing activities		(20,078	)		—			—			(20,078	)
Increase in cash and cash equivalents		35,928			—			—			35,928
Cash and cash equivalents, beginning of period		70,236			—			—			70,236
Cash and cash equivalents, end of period	$	106,164		$	—		$	—		$	106,164

Condensed Consolidating Statement of Cash Flows for the Nine Months Ended September 30, 2016

										Consolidated
										W&T
	Parent			Guarantor						Offshore,
	Company			Subsidiaries			Eliminations			Inc.
	(In thousands)
Operating activities:
Net loss	$	(117,914	)	$	(130,719	)	$	(16,870	)	$	(265,503	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation, depletion, amortization and accretion		65,230			99,956			7,540			172,726
Ceiling test write-down of oil and natural gas properties		28,305			110,709			140,049			279,063
Gain on exchange of debt		(123,960	)		—			—			(123,960	)
Debt issuance costs write-off/ amortization of debt items		2,135			—			—			2,135
Share-based compensation		7,642			—			—			7,642
Derivative gain		2,861			—			—			2,861
Cash receipts on derivative settlements		4,746			—			—			4,746
Deferred income taxes		17,962			(2,478	)		—			15,484
Loss of affiliates		130,719			—			(130,719	)		—
Changes in operating assets and liabilities:
Oil and natural gas receivables		4,335			(4,041	)		—			294
Joint interest receivables		4,281			—			—			4,281
Income taxes		(52,392	)		—			—			(52,392	)
Prepaid expenses and other assets		(14,535	)		(46,758	)		45,165			(16,128	)
Asset retirement obligations		(37,925	)		(18,242	)		—			(56,167	)
Accounts payable, accrued liabilities and other		23,584			37,331			(45,165	)		15,750
Net cash provided by (used in) operating activities		(54,926	)		45,758			—			(9,168	)
Investing activities:
Investment in oil and natural gas properties and equipment		(17,473	)		(6,589	)		—			(24,062	)
Changes in operating assets and liabilities associated with investing activities		2,269			(39,669	)		—			(37,400	)
Proceeds from sales of assets		1,000			500			—			1,500
Purchases of furniture, fixtures and other		(96	)		—			—			(96	)
Net cash used in investing activities		(14,300	)		(45,758	)		—			(60,058	)
Financing activities:
Borrowings of long-term debt – revolving bank credit facility		340,000			—			—			340,000
Repayments of long-term debt – revolving bank credit facility		(340,000	)		—			—			(340,000	)
Issuance of 1.5 Lien Term Loan		75,000			—			—			75,000
Debt exchange costs		(17,920	)		—			—			(17,920	)
Other		83			—			—			83
Net cash provided by financing activities		57,163			—			—			57,163
Decrease in cash and cash equivalents		(12,063	)		—			—			(12,063	)
Cash and cash equivalents, beginning of period		85,414			—			—			85,414
Cash and cash equivalents, end of period	$	73,351		$	—		$	—		$	73,351