4.  Joint Venture Drilling Program

On March 12, 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 up to 14 identified drilling projects (the “JV Drilling Program”) in the Gulf of Mexico.  The projects are expected to be completed during the years 2018 through 2020, but some projects may possibly extend into years beyond 2020.  W&T initially contributed 88.94% of its working interest in 14 identified undeveloped drilling projects to Monza and retained 11.06% of its working interest.  Subsequent to the initial closing, additional investors joined as members of Monza during 2018 and total commitments by all members, including W&T, are $361.4 million.  The JV 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 working interest in the 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 are approved by the Monza board.  W&T is or will be the operator of each well in the JV Drilling Program unless there is a designated third-party operator.

The members of Monza are made up of 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 has made a capital commitment to Monza of $14.5 million.  

  As of March 31, 2019, members of Monza made partner capital contribution payments to Monza totaling $184.9 million, of which $70.2 million was contributed during the three months ended March 31, 2019.  Our net contribution to Monza, reduced by distributions received, as of March 31, 2019 was $58.9 million.  W&T may be obligated to fund certain cost overruns, subject to certain exceptions, for the JV Drilling Program wells above budgeted and contingency amounts, of which the total exposure cannot be estimated at this time.

Consolidation and Carrying Amounts.  Our interest in Monza is considered to be a variable interest that we account for using proportional consolidation.  We do not fully consolidate Monza because we are not considered the primary beneficiary and we utilize proportional consolidation to account for our interests in the Monza properties.  As of March 31, 2019, in the Condensed Consolidated Balance Sheet, we recorded $11.0 million, net, in Oil and natural gas properties and other, net, $3.3 million in Other assets and $5.0 million, net, increase in working capital in connection with our proportional interest in Monza’s assets and liabilities.  As of December 31, 2018, in the Condensed Consolidated Balance Sheet, we recorded $8.8 million, net, in Oil and natural gas properties and other, net, $3.3 million in Other assets and $0.7 million, net, increase in working capital in connection with our proportional interest in Monza’s assets and liabilities.  For the three months ended March 31, 2019, we recorded $1.6 million in Total revenues and $0.9 million in Operating costs and expenses in connection with our proportional interest in Monza’s operations.  No revenues or expenses were recorded in the three months ended March 31, 2018 in connection with our proportional interest in Monza’s operations.

Additionally, during the three-months ended March 31, 2019, we received cash calls from Monza of $66.3 million, of which $65.2 million is included in the Condensed Consolidated Balance Sheet in Advances from joint interest partners as of March 31, 2019.