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

Quarterly report pursuant to Section 13 or 15(d)

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies)

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2023

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim periods and the appropriate rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, the condensed consolidated financial statements do not include all of the information and footnote disclosures required by GAAP for complete financial statements for annual periods. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

Operating results for interim periods are not necessarily indicative of the results that may be expected for the entire year. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s 2022 Annual Report on Form 10-K (the “2022 Annual Report”).

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, the reported amounts of revenues and expenses during the reporting periods and the reported amounts of proved oil and natural gas reserves. Actual results could differ from those estimates.

Revenue and Accounts Receivable

Revenue and Accounts Receivable – The Company records revenues from the sale of oil, natural gas liquids (“NGLs”) and natural gas based on quantities of production sold to purchasers under short-term contracts (less than twelve months) at market prices when delivery to the customer has occurred, title has transferred, prices are fixed and determinable and collection is reasonably assured. Revenue from the sale of crude oil, NGLs and natural gas is recognized when performance obligations under the terms of the respective contracts are satisfied; this generally occurs with the delivery of oil, NGLs and natural gas to the customer. Each unit of product represents a separate performance obligation, therefore, future volumes are wholly unsatisfied and disclosure of the transaction price allocated to remaining performance obligations is not required.

The Company also has receivables related to joint interest arrangements primarily with mid-size oil and gas companies with a substantial majority of the net receivable balance concentrated in less than ten companies. A loss methodology is used to develop the allowance for credit losses on material receivables to estimate the net amount to be collected. The loss methodology uses historical data, current market conditions and forecasts of future economic conditions. The Company’s maximum exposure at any time would be the receivable balance. Joint interest receivables on the Condensed Consolidated Balance Sheets are presented net of allowance for credit losses of $11.3 million and $12.1 million as of June 30, 2023 and December 31, 2022, respectively.

Employee Retention Credit

Employee Retention Credit – Under the Consolidated Appropriations Act of 2021, the Company recognized a $2.2 million employee retention credit during the six months ended June 30, 2023, which is included as a credit to General and administrative expenses in the Condensed Consolidated Statement of Operations.

Prepaid Expenses and Other Assets

Prepaid Expenses and Other Assets – The amounts recorded are expected to be realized within one year and the major categories are presented in the following table (in thousands):


	June 30, 2023		December 31, 2022
Derivatives⁽¹⁾(Note 4)	$	1,778	$	4,954
Unamortized insurance/bond premiums		8,303		6,046
Prepaid deposits related to royalties		6,822		9,139
Prepayments to vendors		1,628		1,767
Prepayments to joint interest partners		2,319		1,717
Debt issue costs		427		687
Other		88		33
Prepaid expenses and other assets	$	21,365	$	24,343

⁽¹⁾

^{Includes closed contracts which have not yet settled.}

Oil and Natural Gas Properties and Other, Net

Oil and Natural Gas Properties and Other, Net – Oil and natural gas properties and equipment are recorded at cost using the full cost method. There were no amounts excluded from amortization as of the dates presented in the following table (in thousands):


	June 30, 2023		December 31, 2022
Oil and natural gas properties and equipment	$	8,847,421	$	8,813,404
Furniture, fixtures and other		40,224		20,915
Total property and equipment		8,887,645		8,834,319
Less: Accumulated depreciation, depletion, amortization and impairment		(8,149,905)		(8,099,104)
Oil and natural gas properties and other, net	$	737,740	$	735,215

Other Assets (long-term)

Other Assets (long-term) – The major categories are presented in the following table (in thousands):


	June 30, 2023		December 31, 2022
Right-of-Use assets	$	10,728	$	10,364
Investment in White Cap, LLC		2,721		2,453
Proportional consolidation of Monza (Note 6)		9,909		9,321
Derivatives⁽¹⁾ (Note 4)		17,184		23,236
Other		1,576		2,175
Total other assets (long-term)	$	42,118	$	47,549

⁽¹⁾

^{Includes open contracts.}

Accrued Liabilities

Accrued Liabilities – The major categories are presented in the following table (in thousands):


	June 30, 2023		December 31, 2022
Accrued interest	$	13,848	$	8,967
Accrued salaries/payroll taxes/benefits		4,808		15,097
Litigation accruals		56		396
Lease liability		1,045		1,628
Derivatives⁽¹⁾(Note 4)		18,518		46,595
Other		1,048		1,358
Total accrued liabilities	$	39,323	$	74,041

⁽¹⁾

^{Includes closed contracts which have not yet settled.}

Other Liabilities (long-term)

Other Liabilities (long-term) – The major categories are presented in the following table (in thousands):


	June 30, 2023		December 31, 2022
Dispute related to royalty deductions	$	5,250	$	4,937
Derivatives (Note 4)		17,417		43,061
Lease liability		11,709		10,527
Other		665		609
Total other liabilities (long-term)	$	35,041	$	59,134

At-the-Market Equity Offering

At-the-Market Equity Offering – On March 18, 2022, the Company filed a prospectus supplement related to the issuance and sale of up to $100,000,000 of shares of common stock under the Company’s “at-the-market” equity offering program (the “ATM Program”). The designated sales agents will be entitled to a placement fee of up to 3.0% of the gross sales price per share sold. During the six months ended June 30, 2023, the Company did not sell any shares in connection with the ATM Program. During the year ended December 31, 2022, the Company sold an aggregate of 2,971,413 shares for an average price of $5.72 per share in connection with the ATM Program and received proceeds, net of commissions and expenses, of $16.5 million