NOTE 6 — JOINT VENTURE DRILLING PROGRAM

​

In March 2018, W&T and two other initial members formed and initially funded Monza, which jointly participates with us in the exploration, drilling and development of certain drilling projects (the “Joint Venture Drilling Program”) in the Gulf of Mexico. Subsequent to the initial closing, additional investors joined as members of Monza during 2018 and total commitments by all members, including W&T’s commitment to fund its retained interest in Monza projects held outside of Monza, was $361.4 million. W&T contributed 88.94% of its working interest in certain identified undeveloped drilling projects to Monza and retained 11.06% of its working interest. The Joint Venture Drilling Program is structured so that we initially receive an aggregate of 30.0% of the revenues less expenses, through both our direct ownership of our retained working interest in the Monza projects and our indirect interest through our interest in Monza, for contributing 20.0% of the estimated total well costs plus associated leases and providing access to available infrastructure at agreed-upon rates. Any exceptions to this structure are approved by the Monza board.

The members of Monza are third-party investors, W&T and an entity owned and controlled by Mr. Tracy W. Krohn, our Chairman and Chief Executive Officer. The Krohn entity invested as a minority investor on the same terms and conditions as the third-party investors, and its investment is limited to 4.5% of total invested capital within Monza. The entity affiliated with Mr. Krohn made a capital commitment to Monza of $14.5 million.

Monza is an entity separate from any other entity with its own separate creditors who will be entitled, upon its liquidation, to be satisfied out of Monza’s assets prior to any value in Monza becoming available to holders of its equity. The assets of Monza are not available to pay creditors of the Company and its affiliates.

Through March 31, 2022, ten wells have been completed since the inception of the Joint Venture Drilling Program. W&T is the operator for eight of the ten wells completed through March 31, 2022.

Through March 31, 2022, members of Monza made partner capital contributions, including our contributions of working interest in the drilling projects, to Monza totaling $302.4 million and received cash distributions totaling $95.8 million. W&T’s net contribution to Monza, reduced by distributions received, as of March 31, 2022 was $47.8 million.

Consolidation and Carrying Amounts

W&T’s interest in Monza is considered to be a variable interest that we account for using proportional consolidation. Through March 31, 2022, there have been no events or changes that would cause a redetermination of the variable interest status. W&T does not fully consolidate Monza because the Company is not considered the primary beneficiary of Monza.

​

As of March 31, 2022, W&T recorded $2.1 million, net, in Oil and natural gas properties and other, net, $(0.5) million in Other assets, $0.3 million in Asset retirement obligations and $11.0 million, net, increase in working capital in the Condensed Consolidated Balance Sheet in connection with the proportional interest in Monza’s assets and liabilities. As of December 31, 2021, W&T recorded $3.5 million in Oil and natural gas properties and other, net, $2.5 million in Other assets, $0.3 million in ARO and $4.6 million, net, increase in working capital in the Condensed Consolidated Balance Sheet in connection with the proportional interest in Monza’s assets and liabilities. Additionally, during the year ended December 31, 2021, W&T called on Monza to provide cash to fund its portion of certain Joint Venture Drilling Program projects in advance of capital expenditure spending, and the unused balances as of March 31, 2022 and December 31, 2021 were $6.5 million and $14.8 million, respectively, which are included in the Condensed Consolidated Balance Sheet in Advances from joint interest partners.

​

For the three months ended March 31, 2022, W&T recorded $6.5 million in Total revenues and $3.3 million in Operating costs and expenses in the Condensed Consolidated Statement of Operations in connection with the proportional interest in Monza’s operations. For three months ended March 31, 2021, W&T recorded $2.5 million in Total revenues and, $3.4 million in Operating costs and expenses in the Condensed Consolidated Statement of Operations in connection with the proportional interest in Monza’s operations.