W&T Offshore - A Complete Review Of Q4 2016 Results

| About: W&T Offshore, (WTI)

Summary

W&T Offshore released its Fourth quarter 2016 results on February 27, 2017. Revenues for Q4'16 were $115.21 million, up 7.5% quarter over quarter.

One positive about WTI is that many of the company fields have reservoirs with multiple stacked pays.

I recommend to take some profit off the table at $3-$3.25 (resistance), and wait until a more defined rising wedge pattern can be seen.

Source: Offshore Energy Today - Gulf of Mexico

W&T Offshore, Inc. (NYSE:WTI)

W&T's growth in the deepwater Gulf of Mexico has been significant in recent years. Between 2009 and 2015, average deepwater production has grown nearly 700% and SEC proved reserves are up over 850%. Gross Acres have increased ~200% from 2009 to 2015. We define a deepwater property as one in over 500 feet of water.

From the company [website]

To access the WTI 4Q'16 conference call transcript, please [click here]

Q4 2016 Financial Snapshot (Nine Consecutive Quarters).

Q4 2016 Q3 2016 Q2 2016 Q1 2016 Q4 2015 Q3 2015 Q2 2015 Q1 2015 Q4 2014

Total revenues

in $ million

115.21 107.40 99.66 77.72 104.06 126.23 149.07 127.91 196.68

Total production per day

In kBoe/d

40.300 41.508 42.864 43.317 44.790 46.757 46.5 48.8 49.9

Total production for the Q

in MMBoe

3.703 3.819 3.901 3.942 4.121 4.302 4.231 4.395 4.587

Average price oil eq.

$/Boe

30.83 27.97 25.28 19.33 24.84 28.92 34.83 28.70 42.86

Lease Operating Expenses ("LOE")

in $ million

33.8 37.5 36.6 44.5 49.3 45.0 45.1 53.3 75.6

Net income/loss

in $ million

16.5

45.93

(120.92) (190.51) (51.61) (477.57) (260.45) (255.10) (33.37)

G&A

in million

14.37 12.7 16.24 16.44 16.07 16.52 19.76 20.77 22.722

Operating loss/gain

in $ million

21.32 (58.28) (127.00) (166.61) (60.82) (468.57) (278.81) (337.51) (30.54)

Cash and cash equivalent

in $ million

70.24 73.35 171.82 370.62 85.41 7.46 5.67 8.37 23.67

Total debt (long-term + current portion)

in $ million

1,012 1,023 1,345 1,485 1,197 1,473 1,469 1,426 1,360

Net Debt estimated

in $ million

942 950 1,173 1,295 1,112 1,466 1,463 1,418 1,337

EPS in $/s

(Excluding special item/with) in $/s

0.12

0.06

0.48

(0.24)

(1.58)

(0.47)

(2.49)

(0.95)

(0.68)

(0.44)

(6.29)

(0.82)

(3.43)

(0.54)

(3.36)

(0.96)

(0.44)

(0.54)

Shares outstanding

in million

137.031 92.245 76.635 76.428 76.024 75.932 75.910 75.857 75.658

Adjusted EBITDA (excluding special item)

in $ million

69.6

60%

52.48

49%

40.81

41%

16.55

21%

36.53

35%

59.20

47%

79.67

53%

48.35

38%

89.60

Reserves:

The Company's year-end 2016 SEC proved reserves were 74.0 million Boe.

Liquidity:

At December 31, 2016, our total liquidity was $219.7 million consisting of cash balances of $70.2 million and $149.5 million of availability under our $150 million revolving bank credit facility.

Capital expenditures for 2017:

Are currently estimated at $125 million. Plug and abandonment activities for 2017 are currently estimated to total $78.3 million and are expected to be funded with cash on hand and cash flow from operating activities.

Commentary

W&T Offshore released its fourth quarter 2016 results on February 27, 2017. Revenues for Q4'16 were $115.21 million, up 7.5% quarter over quarter. The net Profit was $16.5 million or $0.12 per share.

Comparative data for the last nine Quarters (click graph to enlarge).

M. Tracy Krohn, CEO, said:

We are as enthusiastic as ever about the opportunities in the Gulf of Mexico and believe we are in a good position to take advantage of this prolific basin. We are entering 2017 with a lower cost structure and a capital program of profitable projects that should allow us to build cash. We expect to benefit from improved seismic technologies, lower operating costs and less competition in the Gulf. Assuming commodity prices continue to remain steady, our 2017 capital plan allocates approximately $125 million to projects that we believe provide a low-risk and high return in producing fields. These projects should yield moderate production growth in 2017 over 2016.

Three important topics:

1 - Production decline in the GOM well in the early years is much shallower than the unconventional shale plays. M. Krohn said in the conference call:

This shallow decline curve of many of our projects contributed to our ability to maintain steady production on a small capital program. It's one of the things we've always liked about the Gulf of Mexico and which obviously contributed to our value.

The Permian well has a depletion of nearly 70% the first year, while WTI well depletion is only 10% for the first year and 20% for the 5.5 years.

2 - According to SEC rules, the assumed oil price in this year's reserve report is set at $39.25 per barrel for the life of all reserves.

The company believes that the reserves are significantly under-booked on initial production due to the strict SEC guidelines, and therefore, WTI assumed asset value can be considerably understated and not indicative of our true underlying real asset value.

3 - The BOEM withdrew certain orders related to sole liability properties.

4 - Production in 2017 will be 4% above 2016 or approximately 16 MMBOE.

Conclusion:

W&T has improved significantly its balance sheet due to better oil prices. The recent positive momentum of the oil prices should help the stock in 2017 as well, and bring additional revenues that are indispensable for the survival of the business, as it is.

Oil prices are really the name of the game here, and it is still hard to see how they can really trade above $60 per barrel anytime soon with the US Shale booming again? Risk of a downside back to $45 per barrel cannot be brushed away.

Yet, one positive about WTI is that many of the company fields have reservoirs with multiple stacked pays, such as the Mahogany, UM Bank 9-10, Virgo and other stacked pay fields.

On January 6, 2017, I commented about the Ship Shoal 359 A-18 well has logged 149 feet of net oil pay in five zones and extended the size and depth of the Mahogany field.

Please click here to read my article.

I was pleased to learn in the last conference call that the well is still producing over 5,000 barrels of oil equivalent per day.

Technically, WTI is forming a new rising wedge pattern, as indicated above.

The rising wedge is generally a bearish pattern that begins wide at the bottom and contracts as prices move higher and the trading range contracts. This pattern ends often with a negative breakout which happens approximately 65% of the time.

I'm assuming a potential breakout on the downside. Thus, I recommend to take some profit off the table at $3 to $3.25 (resistance), and wait until a more defined rising wedge pattern can be seen again. A potential of a re-test of the $2 support is possible in a short to medium term.

Important note: Do not forget to follow me on W&T Offshore, Inc. and other oil producers. Thank you for your support.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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