W&T Offshore Reports Fourth Quarter and Full Year 2010 Financial and Operational Results
HOUSTON, March 2, 2011 /PRNewswire/ -- W&T Offshore, Inc. (NYSE: WTI) today announces financial and operational results for the fourth quarter and full year 2010. Some of the highlights include:
-- Total proved reserve replacement was 231%. Proved reserves increased 31%
from 371.0 Bcfe to 485.4 Bcfe. Oil and natural gas liquids comprise 47%
of total proved reserves. Year-end 2010 proved developed reserves
increased to 81% of total proved reserves from 76% in 2009. Our PV-10
increased 68% over year-end 2009.
-- During the fourth quarter, we acquired three deepwater properties from
Shell Offshore Inc. at a cost of $10.49 per barrel equivalent or $1.75
per Mcfe for proved reserves.
-- For the full year 2010, net income increased by $305.8 million to $117.9
million from a net loss of ($187.9) million in 2009. Earnings per share
increased $4.09 per share to $1.58 per share in 2010 from a loss in 2009
of ($2.51) per share. Earnings for the year 2010, adjusted to exclude
special items, were $1.57 per share compared to a loss of ($1.10) in
2009.
-- Cash flow from operating activities for the full year 2010 increased
$308.5 million, or 197%, to $464.8 million compared to $156.3 million in
2009. Adjusted EBITDA increased by $108.8 million to $450.2 million in
2010 compared to $341.4 million in 2009 and Adjusted EBITDA margin
increased to 64% in 2010 compared to 56% in 2009.
-- Earnings for the fourth quarter, adjusted to exclude special items, were
$0.40 per share compared to $0.35 in the fourth quarter of the prior
year. Fourth quarter net income was $20.5 million and earnings per share
were $0.27.
-- Drilled the successful Main Pass 108 E-3 well that found 300 feet of net
vertical pay in six sands. This is a conventional shelf exploration well
and we have a 100% working interest.
-- After the close of the fourth quarter, the Company drilled two wells.
One of the wells is an onshore well in Southeast Texas in which we own a
50% non-operated working interest. The well found 22 feet of gas
condensate pay, and we expect it to be online before the end of the
first quarter of 2011. The second well is the Main Pass 180 A-2 well in
which we own a 100% working interest. The well reached a total vertical
depth of 13,950 feet and found approximately 91 feet of high quality gas
sands in three separate zones.
Tracy W. Krohn, Chairman and Chief Executive Officer, commented, "We had another great quarter with solid production, high realized oil prices, good earnings and cash flow. We were able to increase reserves in 2010 with two different acquisitions, which we expect to lead to increased production in 2011 as a result. We funded our entire capital expenditure program, including both acquisitions, with internally generated cash flow. As a result, we did not have to increase our debt levels nor did we need to sell any equity to accomplish these transactions. As we have historically indicated, we manage for cash and constantly seek acquisition and joint venture opportunities. We believe there continue to be important growth opportunities in the market place that will make sense for us and allow us to grow reserves and production and increase shareholder value. Our liquidity continues to be very strong, allowing us the ability to complete acquisitions when the right opportunity comes along."
Revenues, Net Income and EPS: Net income for the fourth quarter of 2010 excluding special items was $29.6 million, or $0.40 per share. This compares to $26.7 million, or $0.35 per common share, reported for the fourth quarter of 2009, excluding special items. See the "Reconciliation of Net Income (Loss) to Net Income (Loss) Excluding Special Items" and related earnings per share, excluding special items table under "Non-GAAP Financial Information" at the back of this press release for a description of the special items.
Net income for the fourth quarter of 2010 was $20.5 million, or $0.27 per common share, on revenues of $187.0 million, compared to net income of $64.0 million and earnings per share of $0.84 on revenues of $176.1 million for the same period in 2009. Net income in the fourth quarter of 2009 benefitted from a one-time $38.4 million tax benefit due to tax legislation adopted in 2009. The Worker, Homeownership and Business Assistance Act of 2009, which extended the net operating loss carry-back period from two years to five years, resulted in additional tax benefits to us. Revenues were higher in the fourth quarter of 2010 due to higher realized oil prices and minimal changes in production.
Net income for 2010 was $117.9 million, or $1.58 per share, on revenues of $705.8 million. This compares to a net loss in 2009 of ($187.9) million, or ($2.51) loss per share, on revenues of $611.0 million. Net income for the year 2010, excluding special items, was $116.7 million, or $1.57 per share. For 2009, the net loss, excluding special items, was ($82.3) million, or ($1.10) loss per common share. The dramatic increase in earnings between periods is primarily due to an increase in our average realized sales prices, mainly due to oil price increases, and a reduction in most of our expenses. In addition, the 2009 period included a ceiling test impairment of $218.9 million. For 2010, lease operating expenses ("LOE"), depreciation, depletion, amortization and accretion ("DD&A") and the derivative loss were all lower, the reasons for which are explained below.
Cash Flow from Operating Activities and Adjusted EBITDA: EBITDA and Adjusted EBITDA, and Adjusted EBITDA margin are non-GAAP financial measures and are defined and reconciled in "Non-GAAP Financial Information" later in this press release. Adjusted EBITDA for the fourth quarter of 2010 was $121.6 million compared to $115.1 million during the fourth quarter of the prior year. Adjusted EBITDA for the fourth quarter of 2010 benefitted from higher averaged realized sales prices.
For 2010, Adjusted EBITDA was $450.2 million, an increase of 32% compared to $341.4 million for the year 2009. Net cash provided by operating activities for the full year of 2010 was $464.8 million, a significant increase over the $156.3 million reported for the prior year. The dramatic increase in cash flow was due to higher prices, lower operating expenses, a federal income tax refund of $99.8 million and insurance reimbursements of $65.5 million.
Production and Prices: During the fourth quarter of 2010, we sold 1.8 million barrels of oil and natural gas liquids at an average realized sales price of $77.27 per barrel and 11.9 Bcf of natural gas at an average realized sales price of $4.01 per Mcfe. In total we sold 22.6 Bcfe at an average realized sales price of $8.23 per Mcfe compared to 22.9 Bcfe sold at an average price of $7.67 per Mcfe, in the fourth quarter of the prior year. Production volumes were negatively affected in 2010 because of production shut in at our MP 108 field due to a third party pipeline outage that has continued since early June 2010.
For the year 2010, we sold 7.1 million barrels of oil and natural gas liquids at an average realized sales price of $71.65 per barrel and 44.7 Bcf of natural gas at an average realized sales price of $4.55 per Mcf. In total we sold 87.0 Bcfe at an average realized sales price of $8.15 per Mcfe, compared to 94.8 Bcfe sold at an average price of $6.39 per Mcfe in 2009. The 8% decline in production is largely attributable to divestitures completed in 2009, the production shut in at our MP 108 field, as well as natural reservoir declines, somewhat offset by partial year production from the newly acquired properties from Shell and Total.
Lease Operating Expenses: For the fourth quarter of 2010, total LOE was $47.5 million, up slightly from $45.8 million reported in the prior year's fourth quarter. Despite adding the Shell deepwater properties, most of the components of LOE were lower in 2010 compared to 2009 with the exception of one notable item. Facilities costs, which is a component of LOE, increased $6.8 million, about 40% of which can be attributed to repairs to newly acquired properties, while the remainder relates to pipeline and compressor repairs and blast and paint work. Also of note, for both the fourth quarter of 2010 and the fourth quarter of 2009, insurance reimbursements exceeded hurricane remediation costs that are included in LOE. The reduction in LOE as a result of these items was greater in the fourth quarter of 2009 than the comparable 2010 amount. Insurance premiums that are included in LOE decreased $3.4 million in the fourth quarter of 2010 compared to the fourth quarter of 2009 due to a policy renewal effective June 1, 2010 covering well control and hurricane damage.
LOE for the year 2010 was $169.7 million, or $1.95 per Mcfe, down considerably from the $203.9 million, or $2.15 per Mcfe, reported for the prior year. LOE decreased for the year 2010 due to the 2009 property divestitures and the significant reduction in hurricane repairs, net of insurance reimbursements in 2010 compared to 2009. Included in lease operating expenses for 2010 is a net reduction to LOE of $11.7 million (insurance reimbursements exceeded hurricane remediation costs). This compares to an increase to LOE of $18.4 million for hurricane remediation costs in excess of insurance reimbursements in the prior year. Increases to LOE for the year were the costs to operate the new properties, higher workover expenditures associated with rig activity to perform certain workovers and greater facilities work associated with the new properties.
Depreciation, depletion, amortization and accretion: DD&A decreased to $73.6 million, or $3.25 per Mcfe, in the fourth quarter of 2010 compared to $78.3 million, or $3.42 per Mcfe, in the fourth quarter of the prior year. DD&A for the year 2010 was $294.1 million, or $3.38 per Mcfe, compared to $342.5 million, or $3.61 per Mcfe, for the year 2009. DD&A is lower due to lower production volumes and an increase in proved reserves.
Capital Expenditures, Acquisitions and Operations Update: For 2010, our capital expenditures excluding acquisitions were $178.7 million and our expenditures for acquisitions were $236.9 million. Acquisitions included $115.0 million to acquire the Total properties and $121.9 million to acquire the Shell properties. Other capital expenditures were made up of $60.2 million for exploration activities, $77.2 million for development activities and $41.4 million for seismic, leasehold and other costs. Capital expenditures and acquisitions for 2010 were funded from cash flow from operating activities and cash on hand. Capital expenditures in 2009 were $276.1 million, and no significant acquisitions were completed in 2009.
During 2010, we participated in the drilling of six offshore and two onshore wells. Five of the six offshore wells were successful, but neither of the onshore wells, which were both high risk but high potential exploration opportunities, were commercial. All five of the successful wells were on the conventional shelf and four were exploration wells and one was a development well. We operate three of the five successful wells.
Drilling Highlights: In the fourth quarter of 2010, the Company drilled the Main Pass 108 E-3 well. This well logged over 300 feet of net vertical pay in six sands. This is a conventional shelf exploration well in which we own a 100% working interest.
After the close of the fourth quarter, the Company drilled two wells. One of the wells is an onshore well in Southeast Texas in which we own a 50% non-operated working interest. The well found 22 feet of gas condensate pay, and we expect it to be online before the end of the first quarter of 2011. The second well is the Main Pass 180 A-2 well in which we own a 100% working interest. The well reached a total vertical depth of 13,950 feet and found approximately 91 feet of high quality gas sands in three separate zones.
Reserves: At December 31, 2010, total proved reserves were 485.4 Bcfe, compared to proved reserves of 371.0 Bcfe at the end of 2009. The 31% increase in proved reserves is primarily due to the newly acquired properties from Shell and Total, success with the drill bit and positive revisions, which are partially offset by production. Year-end 2010 proved reserves are comprised of 53% natural gas and 47% oil and natural gas liquids based on a ratio of six Mcf to one barrel equivalent. In accordance with guidelines established by the SEC, our proved reserves as of December 31, 2010 were determined to be economically producible under existing economic conditions, which requires the use of the 12-month average price for each product, calculated as the unweighted arithmetic average of the first-day-of-the-month price for the period January 2010 through December 2010. The present value of our total proved reserves only, discounted at 10% (referred to as "PV-10"*) was $1.9 billion at December 31, 2010 excluding the effect of estimated asset retirement obligations. PV-10, including estimated asset retirement obligations, was $1.5 billion. This is based on average prices of $4.38 per Mcf for natural gas and $75.96 per Bbl for oil and natural gas liquids, adjusted for quality, transportation fees and regional price differentials. The estimate of proved reserves is based on a reserve report prepared by Netherland, Sewell & Associates, Inc., the Company's independent petroleum consultant.
* The PV-10 value is a non-GAAP measure and is defined in the "Non-GAAP Financial Information" later in this press release.
The Company's proved reserves are summarized in the table below:
As of December 31, 2010
Total Equivalent Reserves
Oil and Natural Gas Barrel
NGLs Natural Gas Equivalent Equivalent % of Total
Classification
of Reserves (MMBbls) (Bcf) (Bcfe) (MMBoe) Proved
Proved
developed
producing 14.8 147.7 236.6 39.4 49%
Proved
developed
non-producing
(1) 12.2 81.4 154.7 25.8 32%
Total proved
developed 27.0 229.1 391.3 65.2 81%
Proved
undeveloped 11.2 27.2 94.1 15.7 19%
Total proved 38.2 256.3 485.4 80.9 100%
(1) Includes approximately 29.6 Bcfe of reserves that were shut in at December 31, 2010 due to two pipeline outages impacting several fields including our Main Pass 108 field. We expect these reserves to be reclassified to producing in the first half of 2011.
2010 Reserve Reconciliation:
Total Equivalent Reserves
Natural Gas
Oil and NGLs Natural Gas Equivalent Barrel Equivalent
(MMBbls) (Bcf) (Bcfe) (MMBoe)
Proved reserves as of
December 31, 2009 34.2 165.8 371.0 61.8
Revisions of previous
estimates 1.0 14.6 20.2 3.4
Extensions and
discoveries 1.7 19.1 29.2 4.9
Purchases of minerals
in place 8.4 101.5 152.0 25.3
Production (7.1) (44.7) (87.0) (14.5)
Proved reserves as of
December 31, 2010 38.2 256.3 485.4 80.9
As stated above, proved reserve replacement for 2010 was 231%. Proved reserve replacement is a non-GAAP measure and is defined as the sum of revisions of previous estimates, extensions and recoveries, and purchases of mineral in place, divided by production.
2011 Capital Expenditures Budget: Our capital expenditure budget for 2011 is $310 million excluding acquisitions. The budget includes $161 million to drill and evaluate 14 wells, including 10 exploration and four development wells. The 14 wells are comprised of five on the conventional shelf, one in the deepwater, two on the deep shelf and six onshore. Three of the 14 wells are in progress. The remainder of the budget is allocated to well completions, facilities capital, such as compressor projects at Tahoe (VK 783) and MP 108, recompletions, seismic and leasehold items.
Outlook: The guidance for first quarter and full year 2011 represents the Company's best estimate of likely future results, and is affected by the factors described below in "Forward-Looking Statements."
Guidance for the first quarter and full year 2011 are shown in the table below. Production guidance includes the planned build up from our capital budget.
2011 Production and Cost Guidance:
First Quarter Full-Year
Estimated Production 2011 2011
Oil and NGLs (MMBbls) 1.5 – 1.6 5.5 – 6.3
Natural gas (Bcf) 12.0 – 12.6 50.2 – 58.9
Total (Bcfe) 20.8 – 21.9 83.2 – 96.7
Total (MMBoe) 3.5 – 3.7 13.9 – 16.1
First Quarter Full-Year
Operating Expenses($ in millions, except as noted) 2011 2011
Lease operating expenses $51– $57 $188 – $218
Gathering, transportation & production taxes $5 – $7 $22– $25
General and administrative $19 – $21 $67 – $78
Income tax rate 35% 35%
Conference Call Information: W&T will hold a conference call to discuss financial and operational results on Wednesday, March 2, 2011 at 10:00 a.m. Eastern Time. To participate, dial (480) 629-9692 a few minutes before the call begins. The call will also be broadcast live over the Internet from the Company's website at www.wtoffshore.com. A replay of the conference call will be available approximately two hours after the end of the call until March 9, 2011, and may be accessed by calling (303) 590-3030 and using the pass code 4400979#.
About W&T Offshore
W&T Offshore is an independent oil and natural gas company focused primarily in the Gulf of Mexico, including exploration in the deepwater and deep shelf regions, where it has developed significant technical expertise. W&T has grown through acquisition, exploitation and exploration and holds working interests in approximately 67 fields in federal and state waters and a majority of its daily production is derived from wells it operates. For more information on W&T Offshore, please visit its Web site at www.wtoffshore.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements reflect our current views with respect to future events, based on what we believe are reasonable assumptions. No assurance can be given, however, that these events will occur. These statements are subject to risks and uncertainties that could cause actual results to differ materially including, among other things, market conditions, oil and gas price volatility, uncertainties inherent in oil and gas production operations and estimating reserves, unexpected future capital expenditures, competition, the success of our risk management activities, governmental regulations, uncertainties and other factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2009 and subsequent Form 10-Q reports found at (www.sec.gov).
Contacts: Janet Yang, Finance Manager investorrelations@wtoffshore.com 713-297-8024 Danny Gibbons, SVP & CFO jgibbons@wtoffshore.com 713-624-7326
W&T OFFSHORE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income (Loss)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2010 2009 2010 2009
(In thousands, except per share data)
Revenues $ 186,956 $ 176,100 $ 705,783 $ 610,996
Operating costs and expenses:
Lease operating expenses 47,476 45,792 169,670 203,922
Gathering, transportation costs
and production taxes 3,970 3,299 17,678 15,163
Depreciation, depletion and
amortization 66,545 72,634 268,415 308,076
Asset retirement obligation
accretion 7,009 5,700 25,685 34,461
Impairment of oil and natural gas
properties (1) - - - 218,871
General and administrative
expenses 15,147 11,065 53,290 42,990
Derivative loss 12,756 2,675 4,256 7,372
Total costs and expenses 152,903 141,165 538,994 830,855
Operating income (loss) 34,053 34,935 166,789 (219,859)
Interest expense:
Incurred 10,782 11,404 43,101 46,749
Capitalized (1,305) (1,284) (5,395) (6,662)
Loss on extinguishment of debt - - - 2,926
Interest income 78 80 710 842
Income (loss) before income tax
expense (benefit) 24,654 24,895 129,793 (262,030)
Income tax expense (benefit) 4,135 (39,059) 11,901 (74,111)
Net income (loss) $ 20,519 $ 63,954 $ 117,892 $ (187,919)
Basic and diluted earnings (loss)
per common share $ 0.27 $ 0.84 $ 1.58 $ (2.51)
Weighted average common shares
outstanding 73,736 74,148 73,685 74,852
Consolidated Cash Flow
Information
Net cash provided by operating
activities $ 71,895 $ 64,395 $ 464,772 $ 156,266
Investment in oil and natural gas
properties 171,637 169 415,653 276,134
Other Financial Information
EBITDA $ 107,607 $ 113,269 $ 460,889 $ 338,623
Adjusted EBITDA 121,647 115,084 450,206 341,361
(1) The carrying amount of our oil and natural gas properties was written down by $218.9 million as of March 31, 2009 through application of the full cost ceiling limitation as prescribed by the SEC, primarily as a result of lower natural gas prices at March 31, 2009, as compared to December 31, 2008.
W&T OFFSHORE, INC. AND SUBSIDIARIES
Condensed Operating Data
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2010 2009 2010 2009
Net sales:
Natural gas (MMcf) 11,856 11,696 44,713 51,621
Oil (MBbls) 1,796 1,871 7,053 7,197
Total natural gas and oil (MBoe) (1) 3,772 3,820 14,505 15,801
Total natural gas and oil (MMcfe) (2) 22,634 22,922 87,032 94,806
Average daily equivalent sales (MBoe/d) 41.0 41.5 39.7 43.3
Average daily equivalent sales
(MMcfe/d) 246.0 249.2 238.4 259.7
Average realized sales prices
(Unhedged):
Natural gas ($/Mcf) $ 4.01 $ 3.92 $ 4.55 $ 3.97
Oil ($/Bbl) 77.27 69.47 71.65 55.67
Barrel of oil equivalent ($/Boe) 49.39 46.02 48.87 38.32
Natural gas equivalent ($/Mcfe) 8.23 7.67 8.15 6.39
Average realized sales prices (Hedged):
(3)
Natural gas ($/Mcf) $ 4.18 $ 3.90 $ 4.71 $ 3.96
Oil ($/Bbl) 76.87 69.47 71.42 55.67
Barrel of oil equivalent ($/Boe) 49.73 45.96 49.25 38.30
Natural gas equivalent ($/Mcfe) 8.29 7.66 8.21 6.38
Average per Boe ($/Boe):
Lease operating expenses $ 12.59 $ 11.99 $ 11.70 $ 12.91
Gathering and transportation costs and
production taxes 1.05 0.86 1.22 0.96
Depreciation, depletion, amortization
and accretion 19.50 20.50 20.28 21.68
General and administrative expenses 4.02 2.90 3.67 2.72
Net cash provided by operating
activities 19.06 16.86 32.04 9.89
Adjusted EBITDA 32.25 30.12 31.04 21.60
Average per Mcfe ($/Mcfe):
Lease operating expenses $ 2.10 $ 2.00 $ 1.95 $ 2.15
Gathering and transportation costs and
production taxes 0.18 0.14 0.20 0.16
Depreciation, depletion, amortization
and accretion 3.25 3.42 3.38 3.61
General and administrative expenses 0.67 0.48 0.61 0.45
Net cash provided by operating
activities 3.18 2.81 5.34 1.65
Adjusted EBITDA 5.37 5.02 5.17 3.60
(1) One million barrels of oil equivalent (MMBoe), one thousand barrels of oil equivalent (Mboe) and one barrel of oil equivalent (Boe) are determined using the ratio of one Bbl of crude oil, condensate or natural gas liquids to six Mcf of natural gas (totals may not add due to rounding). (2) One billion cubic feet equivalent (Bcfe), one million cubic feet equivalent (MMcfe) and one thousand cubic feet equivalent (Mcfe) are determined using the ratio of six Mcf of natural gas to one Bbl of crude oil, condensate or natural gas liquids (totals may not add due to rounding). The conversion ratios do not assume price equivalency, and the price per Mcfe for oil and natural gas liquids may differ significantly from the price per Mcf for natural gas. (3) Data for 2010 and 2009 includes the effects of our commodity derivative contracts that did not qualify for hedge accounting.
W&T OFFSHORE, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
December 31, December 31,
2010 2009
(In thousands, except
share data)
Assets
Current assets:
Cash and cash equivalents $ 28,655 $ 38,187
Receivables:
Oil and natural gas sales 79,911 54,978
Joint interest and other 25,415 51,312
Insurance 1,014 30,543
Income taxes - 85,457
Total receivables 106,340 222,290
Deferred income taxes 5,784 -
Prepaid expenses and other assets 23,426 28,777
Total current assets 164,205 289,254
Property and equipment – at cost:
Oil and natural gas properties and equipment (full
cost method, of which $65,419 at
December 31, 2010 and $77,301 at December 31, 2009
were excluded from
amortization) 5,225,582 4,732,696
Furniture, fixtures and other 15,841 15,080
Total property and equipment 5,241,423 4,747,776
Less accumulated depreciation, depletion and
amortization 4,021,395 3,752,980
Net property and equipment 1,220,028 994,796
Restricted deposits for asset retirement obligations 30,636 30,614
Deferred income taxes 2,819 5,117
Other assets 6,406 7,052
Total assets $ 1,424,094 $ 1,326,833
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable $ 80,442 $ 115,683
Undistributed oil and natural gas proceeds 25,240 32,216
Asset retirement obligations 92,575 117,421
Accrued liabilities 25,827 13,509
Income taxes 17,552 -
Deferred income taxes - 5,117
Total current liabilities 241,636 283,946
Long-term debt 450,000 450,000
Asset retirement obligations, less current portion 298,741 231,379
Other liabilities 11,974 2,558
Commitments and contingencies
Shareholders’ equity:
Common stock, $0.00001 par value; 118,330,000 shares
authorized; 77,343,520
issued and 74,474,347 outstanding at December 31,
2010; 77,579,968 issued and
74,710,795 outstanding at December 31, 2009 1 1
Additional paid-in capital 377,529 373,050
Retained earnings 68,380 10,066
Treasury stock, at cost (24,167) (24,167)
Total shareholders’ equity 421,743 358,950
Total liabilities and shareholders’ equity $ 1,424,094 $ 1,326,833
W&T OFFSHORE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Twelve Months Ended
December 31,
2010 2009
(In thousands)
Operating activities:
Net income (loss) $ 117,892 $ (187,919)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation, depletion, amortization and accretion 294,100 345,637
Impairment of oil and natural gas properties - 218,871
Amortization of debt issuance costs and discount on
indebtedness 1,338 1,838
Loss on extinguishment of debt - 2,817
Share-based compensation 5,533 6,380
Derivative loss 4,256 7,372
Cash payments on derivative settlements 874 (6,679)
Deferred income taxes (8,266) (346)
Changes in operating assets and liabilities 49,045 (232,703)
Other - 998
Net cash provided by operating activities 464,772 156,266
Investing activities:
Acquisition of property interests (236,944) (2,421)
Investment in oil and natural gas properties and
equipment (178,709) (273,713)
Proceeds from sales of oil and natural gas properties
and equipment 1,420 32,226
Proceeds from insurance - 6,916
Purchases of furniture, fixtures and other (760) (705)
Net cash used in investing activities (414,993) (237,697)
Financing activities:
Borrowings of long-term debt 627,500 205,441
Repayments of long-term debt (627,500) (410,941)
Dividends to shareholders (59,609) (9,158)
Repurchases of common stock - (24,167)
Other 298 891
Net cash used in financing activities (59,311) (237,934)
Decrease in cash and cash equivalents (9,532) (319,365)
Cash and cash equivalents, beginning of period 38,187 357,552
Cash and cash equivalents, end of period $ 28,655 $ 38,187
W&T OFFSHORE, INC. AND SUBSIDIARIES Non-GAAP Financial Information Certain financial information included in our financial results are not measures of financial performance recognized by accounting principles generally accepted in the United States, or GAAP. These non-GAAP financial measures are "Adjusted Net Income," "EBITDA," "Adjusted EBITDA," "Adjusted EBITDA Margin," and "PV-10." Our management uses these non-GAAP financial measures in its analysis of our performance. These disclosures may not be viewed as a substitute for results determined in accordance with GAAP and are not necessarily comparable to non-GAAP performance measures, which may be reported by other companies. We calculate Adjusted EBITDA margin by dividing Adjusted EBITDA for the period presented by total revenues for the same period. PV-10 is a term used in the industry that is not a defined term in generally accepted accounting principles. We define PV-10 as the present value of estimated future net revenues of estimated proved reserves as calculated by our independent petroleum consultant using a discount rate of 10%. This amount includes projected revenues, estimated production costs and estimated future development costs. PV-10 excludes cash flows for asset retirement obligations, general and administrative expenses, derivatives, debt service and income taxes. PV-10 including estimated asset retirement obligations uses a discount factor of 10% to compute the present value of the estimated asset retirement obligations. Reconciliation of Net Income (Loss) to Net Income (Loss) Excluding Special Items "Net Income (Loss) Excluding Special Items" does not include the unrealized derivative (gain) loss, the loss on extinguishment of debt, the impairment of oil and gas properties and associated tax effects and tax impact of the new tax legislation. Net Income (Loss) excluding special items is presented because the timing and amount of these items cannot be reasonably estimated and affect the comparability of operating results from period to period, and current periods to prior periods.
Three Months Ended Twelve Months Ended
December 31, December 31,
2010 2009 2010 2009
(In thousands, except per share amounts)
(Unaudited)
Net income (loss) $ 20,519 $ 63,954 $ 117,892 $ (187,919)
Royalty relief recoupment, net
of DD&A expense - - (16,003) -
Transportation allowance for
deepwater production - (292) 4,687 (5,558)
Unrealized commodity derivative
loss 14,040 2,107 9,511 5,370
Loss on extinguishment of debt - - - 2,926
Impairment of oil and natural
gas properties - - - 218,871
Income tax adjustment for above
items at statutory rate (4,914) (635) 632 (77,563)
Income tax impact of new
legislation (1) - (38,407) - (38,407)
Net income (loss) excluding
special items $ 29,645 $ 26,727 $ 116,719 $ (82,280)
Basic and diluted earnings
(loss) per common share,
excluding special items $ 0.40 $ 0.35 $ 1.57 $ (1.10)
(1) The Worker, Homeownership and Business Assistance Act of 2009.
Reconciliation of Net Income to Adjusted EBITDA We define EBITDA as net income (loss) plus income tax expense (benefit), net interest expense, depreciation, depletion, amortization, accretion and impairment of oil and gas properties. We believe the presentation of EBITDA and Adjusted EBITDA provide useful information regarding our ability to service debt and to fund capital expenditures and help our investors understand our operating performance and make it easier to compare our results with those of other companies that have different financing, capital and tax structures. Adjusted EBITDA excludes the unrealized gain or loss related to our commodity derivative contracts, loss on extinguishment of debt, royalty relief recoupment and adjustments related to a transportation allowance for deepwater production. Although not prescribed under generally accepted accounting principles, we believe the presentation of EBITDA and Adjusted EBITDA are relevant and useful because they help our investors understand our operating performance and make it easier to compare our results with those of other companies that have different financing, capital and tax structures. EBITDA and Adjusted EBITDA should not be considered in isolation from or as a substitute for net income, as an indication of operating performance or cash flows from operating activities or as a measure of liquidity. EBITDA and Adjusted EBITDA, as we calculate them, may not be comparable to EBITDA and Adjusted EBITDA measures reported by other companies. In addition, EBITDA and Adjusted EBITDA do not represent funds available for discretionary use. The following table presents a reconciliation of our consolidated net income (loss) to consolidated EBITDA and Adjusted EBITDA.
Three Months Ended Twelve Months Ended
December 31, December 31,
2010 2009 2010 2009
(In thousands)
(Unaudited)
Net income (loss) $ 20,519 $ 63,954 $ 117,892 $ (187,919)
Income tax expense (benefit) 4,135 (39,059) 11,901 (74,111)
Net interest expense 9,399 10,040 36,996 39,245
Depreciation, depletion,
amortization and accretion 73,554 78,334 294,100 342,537
Impairment of oil and natural
gas properties - - - 218,871
EBITDA 107,607 113,269 460,889 338,623
Adjustments:
Unrealized commodity derivative
loss 14,040 2,107 9,511 5,370
Royalty relief recoupment - - (24,881) -
Transportation allowance for
deepwater production - (292) 4,687 (5,558)
Loss on extinguishment of debt - - - 2,926
Adjusted EBITDA $ 121,647 $ 115,084 $ 450,206 $ 341,361
SOURCE W&T Offshore, Inc.
Released March 2, 2011