HOUSTON, Aug. 3, 2011 /PRNewswire/ -- W&T Offshore, Inc. (NYSE: WTI) today provides financial results for the second quarter 2011 and year-to-date operational results.  Some of the highlights include:

• Oil sales increased 3.3% or 48,000 barrels to 1.5 million barrels, natural gas sales volumes increased 7.5% or .9 Bcf to 13.2 Bcf and natural gas liquids volumes increased 49.6% or 139,300 barrels to 420,300 barrels, each when comparing second quarter of 2011 to the second quarter of 2010.  
• Averaged realized oil sales price increased $34.73 per barrel to $111.00 per barrel and our NGLs sales price increased $15.68 per barrel to $58.81 per barrel compared to the second quarter of 2010.  Average natural gas sales prices were $4.45 per Mcf in the second quarter of 2011 compared to $4.47 per Mcf in the second quarter of 2010.
• Mid-year estimated proved reserves increased by 41% to 686.1 Bcfe or 114.3 MMBoe.  Oil and liquids now represent 60% of total proved reserves.
• On May 11, 2011, we closed on the acquisition of 30 million barrels of oil equivalent of proved reserves on 21,900 gross acres in the West Texas Permian Basin, referred to herein as the Permian Basin Properties.
• Adjusted EBITDA increased 93% to $175.6 million from the second quarter of 2010.  Sequentially, adjusted EBITDA increased $42.3 million or 32%.
• Net income for the second quarter of 2011 increased 98% to $55.2 million and earnings per share increased 97% to $.73 per share, compared to the second quarter of 2010.  Excluding special items, net income was $53.4 million, or $0.71 per common share, up from $0.22 per common share, excluding special items, in the second quarter of 2010.  Sequentially, net income, excluding special items, increased $20.7 million or 63% and earnings per share, excluding special items, increased $.28 per share or 65%.
• Revenues increased 41% or $73.3 million, to $252.9 million from $179.7 million in the corresponding period of 2010.  The increase in revenues is comprised of 81% higher prices and 19% higher production volumes.  Sequentially, revenues increased $42.1 million or 20%.
• Closed on a private offering of $600 million of 8.5% Senior Notes due 2019.
• Entered into a new four-year revolving bank credit facility.  The size of the revolver is $487.5 million following the Senior Notes offering, increasing to $537.5 million upon closing of the fourth Shell property expected in August 2011.
• During the first half of 2011, we participated in the drilling of ten onshore wells and three offshore wells, all of which were successful.  One onshore well was an exploration well in south Texas and the other nine onshore wells were development wells on the Permian Basin Properties.  All of the offshore wells were on the conventional shelf with one being an exploration well and the other two being development wells.

Tracy W. Krohn, Chairman and Chief Executive Officer, commented, "We had another great quarter both financially and operationally as we began the next growth phase of the company.  We expanded meaningfully onshore into the Permian Basin via a significant acquisition, improved our liquidity position by successfully refinancing our senior notes, and entered into a new four-year revolving bank credit facility with a larger borrowing base.  The acquisition of the Permian Basin Properties, which is 91% oil and liquids, helps our reserve profile by increasing our reserve life, increasing the ratio of oil and natural gas liquids to total proved reserves and providing substantial long-term growth with more predictable, repeatable drilling opportunities.  We increased production in a rising crude oil price environment allowing for strong earnings and cash flow."      

Revenues, Net Income and EPS:  Net income for the second quarter of 2011 was $55.2 million, or $0.73 per common share, on revenues of $252.9 million, compared to net income for the second quarter of 2010 of $27.9 million, or $0.37 per common share, on revenues of $179.7 million.  For the six months ended June 30, 2011 net income totaled $73.8 million, or $0.98 per common share, on revenues of $463.8 million, compared to the first six months of 2010 of $70.2 million, or $0.94 per common share, on revenues of $349.3 million.  Net income increased in the second quarter of 2011 from the comparable 2010 period largely due to higher sales volumes of oil and natural gas, higher average oil prices, larger derivative gains on commodity derivative contracts and lower lease operating expenses.  The factors that contributed to the increase in net income were partially offset by a higher effective tax rate, a loss on the early extinguishment of debt, increased general and administrative expenses, and higher DD&A.  The effective tax rate for the second quarter was approximately 35.1%, compared to 9.9% during the second quarter of 2010.  The effective tax rate in the second quarter of last year differed from the statutory rate of 35% primarily because of the reversal of a portion of a previously established valuation allowance.  The derivative gain for the second quarter of 2011 was $17.3 million, $23.4 million of which was unrealized, compared to a derivative gain of $7.4 million during the same period last year.  The loss on the early extinguishment of debt was due to the early redemption of $406.2 million of our $450 million of 8.25% senior notes described later in this press release.

Net income for the second quarter of 2011, excluding special items, was approximately $53.4 million, or $0.71 per common share.  Net income, excluding special items, for the corresponding quarter of 2010 was approximately $16.1 million, or $0.22 per common share.  Net income for the six months ended June 30, 2011 excluding special items was approximately $86.1 million, or $1.14 per common share, compared to net income excluding special items of $55.1 million, or $0.74 per common share, in the corresponding period of 2010.  See the "Non-GAAP Financial Measures - Reconciliation of Net Income to Net Income Excluding Special Items" table at the back of this press release for a description of the special items.

Cash Flow from Operating Activities and Adjusted EBITDA:  EBITDA and Adjusted EBITDA are non-GAAP measures and are defined in the "Non-GAAP Financial Measures" section later in this press release. Net cash provided by operating activities for the six months ended June 30, 2011 was $229.8 million that represents a decrease from the $244.3 million for the six months ended June 30, 2010.  The 2010 period benefitted from a $99.8 million tax refund related to the Worker, Homeowner and Business Assistance Act of 2009 that allowed the Company to carry back losses to previously closed years, while 2011 reflects a tax payment of $19.1 million.  Otherwise, net cash provided by operating activities would have increased over $100 million due to the significant improvement in operating results.  

Adjusted EBITDA for the second quarter of 2011 increased 93% to $175.6 million compared to $90.8 million reported in the second quarter of 2010.  For the six months ended June 30, 2011, Adjusted EBITDA increased 47% to $308.8 million from $210.7 million during the six months ended June 30, 2010.  

Production and Prices:  Our oil sales for the quarter were 1.5 million barrels and our averaged realized sales price was $111.00 per barrel, which represents a $34.73 per barrel increase over second quarter last year.  Natural gas liquids ("NGL") sales were up 5.9 million gallons to 17.7 million gallons and the price increased $.37 a gallon to $1.40 per gallon.  Natural gas sales for the quarter were 13.2 billion cubic feet ("Bcf") sold at an average price of $4.45 per Mcf, which is essentially flat with the second quarter of 2010.  On a natural gas equivalent ("Bcfe") basis, we sold 24.8 Bcfe at an average price of $10.17 per Mcfe in the second quarter of 2011, 47% of which was oil and NGLs.  This compares to 22.8 Bcfe sold at an average price of $7.87 per Mcfe in the second quarter of 2010, 46% of which was oil and NGLs.  Sales volumes were higher primarily due to the acquisitions of the Total properties during the second quarter of 2010, the Shell properties in the fourth quarter of 2010, and the Permian Basin Properties during the second quarter of this year.  Sales volumes also benefitted from the return to production of various fields that were shut-in by the pipeline outage in the Main Pass 108 field.  Those fields returned to service on March 31, 2011 when the pipeline that connects the Main Pass 108 field became operational.  Production from that area is now at over 41 MMcfe per day.

Lease Operating Expenses ("LOE"): In the second quarter of 2011, LOE decreased to $48.6 million or $1.96 per Mcfe from $52.5 million or $2.30 per Mcfe in the second quarter of last year.  On a component basis, all costs declined with the exception of facilities expenses that increased due to work on the tendon tension monitoring system and other mechanical repairs at Matterhorn.  Base LOE was down $2.0 million, insurance premiums were lower by $1.8 million, hurricane remediation costs, net of insurance reimbursements, were down $2.6 million and workover expenditures were down $1.5 million.    

For the six months ended June 30, 2011, LOE increased to $101.0 million, or $2.12 per Mcfe, compared to $87.8 million, or $2.05 per Mcfe, for the comparable 2010 period.  LOE for the first half of 2011 included $13.5 million in facilities expense, which were up from $3.9 million a year ago, due to pipeline repairs to remove a paraffin plug at our Ship Shoal 300 field and work on the newly acquired deepwater properties including the repair work at Matterhorn referred to above.  Base LOE is up $5.3 million due to the addition of the deepwater properties in 2010.  The 2010 period also included insurance reimbursements and the reversal of hurricane remediation accruals.  Partially offsetting these items was a decrease in insurance premiums and a decrease in workover costs.

Depreciation, depletion, amortization and accretion ("DD&A"): DD&A increased to $83.4 million, or $3.36 per Mcfe, for the second quarter of 2011 from $76.0 million, or $3.33 per Mcfe, in the second quarter of 2010 primarily due to higher production volumes.  The DD&A rate is based on proved reserves at the beginning of the period.  DD&A for the six months ended 2011 was $157.5 million, or $3.31 per Mcfe, compared to DD&A of $145.2 million, or $3.40 per Mcfe, for the same period in 2010.   DD&A on a per Mcfe basis decreased due to an increase in proved reserves while DD&A on a nominal basis increased due to higher production volumes.  

General and Administrative Expenses ("G&A"): G&A increased to $18.0 million for the second quarter of 2011 from $14.4 million for the same period in 2010, primarily due to higher incentive compensation as a result of improved financial and operational performance, reduced overhead charges billed to joint interest owners, and slightly higher salaries.   On a per Mcfe basis, G&A was $0.72 per Mcfe for the second quarter of 2011, compared to $0.63 per Mcfe for the same period in 2010.  No amounts for incentive compensation were paid in 2010 for 2009 results.  During 2010, we implemented a new incentive compensation plan.  Part of the incentive compensation amount in 2011 is related to grants made in 2010 that are amortized to compensation expense over the service period, while the other part is due to anticipated achievement of company performance targets.  

Bank Credit Facility: On May 5, 2011, we completed a new four-year revolving credit facility.  The borrowing base and revolver commitment is now $487.5 million (after the issuance of the new Senior Notes offering described below) representing an increase from its previous level of $405.5 million.  The new borrowing base does not reflect the reserves acquired in May through the acquisition of the Permian Basin Properties nor the reserves associated with the acquisition of the fourth Shell property expected to close in August 2011.   The borrowing base will increase automatically by $50 million upon the close of the fourth Shell property.

Senior Notes:  In June 2011, we issued and sold, via a private placement eligible for trading under Rule 144A of the Securities and Exchange Commission, $600 million aggregate principal amount of 8.5% Senior Notes due 2019.  We used those proceeds to retire $406.2 million of the $450 million aggregate principal amount of 8.25% senior notes due 2014.  The remainder of the proceeds was used to pay down borrowings drawn on the revolving credit facility that were incurred to help fund a portion of the purchase price of the newly acquired Permian Basin Properties.  In July, we redeemed the remainder of the 8.25% senior notes outstanding.  

Capital Expenditures and Operations Update:  For the six months ended June 30, 2011, capital expenditures for exploration and production, including seismic were $85.8 million and $397.0 million was spent on acquisitions of properties and prospects.

Drilling Highlights  

Offshore:  In the second quarter of 2011, the Company successfully drilled the Main Pass 108 D-3ST development well.  This well reached a total measured depth of 12,870 feet and found a net 30 feet total vertical depth of natural gas.  The well is now online.  We own a 100% working interest in this conventional shelf development well.  We also drilled the Main Pass 108 D-2 BP 1 well, which is a development well targeting the Tex W6 sand.  This well reached a total measured depth of 14,889 feet and found a net 38 feet of vertical pay of natural gas.  This well is currently being completed.  

Onshore:  During the second quarter of 2011, the Company drilled nine development wells on the Permian Basin Properties, all of which were successful.  

Outlook:  The guidance for third quarter and full year 2011 represents the Company's best estimate of future results, and is affected by the factors described below in "Forward-Looking Statements."

Guidance for the third quarter and full year 2011 is shown in the table below.  Production guidance includes the planned build up from our capital budget, but does not include any production associated with the shelf property anticipated to be acquired from Shell in August 2011.  

Conference Call Information:  W&T will hold a conference call to discuss financial and operational results on Thursday August 4, 2011 at 11:00 a.m. Eastern Time / 10:00 a.m. Central Time.  To participate, dial 480-629-9819 and ask for the W&T Offshore call at least ten 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 August 11, 2011, and may be accessed by calling 303-590-3030 and using the pass code 4454327#.

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 Offshore has recently diversified its operations by expanding onshore into the Permian Basin. W&T Offshore has grown through acquisitions, exploitation and exploration, holds working interests in approximately 67 fields in federal and state waters, and has approximately 30,000 net acres under lease onshore. 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 W&T Offshore's current views with respect to future events, based on what it believes 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 W&T Offshore's risk management activities, governmental regulations, uncertainties and other factors discussed in W&T Offshore's Annual Report on Form 10-K for the year ended December 31, 2010 and subsequent Form 10-Q reports found at www.sec.gov.

SOURCE W&T Offshore, Inc.