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W&T Offshore: Very High Leverage With An Ominous Filing Delay

Jun. 14, 2020 4:23 PM ETW&T Offshore, Inc. (WTI)9 Comments
DT Analysis profile picture
DT Analysis


  • W&T Offshore has delayed filing their routine SEC filings for the first quarter of 2020, which is rather ominous and leaves shareholders largely in the dark.
  • They entered this downturn producing ample free cash flow, which set the scene well, and their forecast massive capital expenditure reductions will also help in the short-term.
  • Unfortunately, this positive was completely negated by their very high leverage.
  • Since their liquidity is also rather lacking, they are vulnerable to any missteps or an extended recovery timeline.
  • When all of these factors are combined, I believe that a neutral rating is appropriate.


It is seldom a positive development when a company delays their routine SEC filings during a severe downturn, such as W&T Offshore (NYSE:WTI). Whilst they have attributed this to the impacts of the coronavirus, it still remains rather ominous since this has not stopped the majority of other oil and gas companies from completing their filings on time. This has left investors largely in the dark for the last month, which further increases the associated investment risks and thus it seems worthwhile to analyze how well prepared they were heading into this downturn.

Cash Flows & Debt

Thankfully the graphs largely speak for themselves, with the first two graphs included below summarizing their cash flows and debt from the last quarter and previous seven years.

W&T Offshore cash flowsW&T Offshore notes 1

Image Source: Author

The first aspect to consider is their historical cash flow performance, and whilst this downturn has created immense uncertainties regarding this going forward, analyzing their performance during normal operating conditions allows for judgments of whether they are fundamentally viable. If this were not the case outside of a downturn, then their ability to survive a downturn is very questionable. If an established oil and gas company has displayed no ability to generate free cash flow, then I deem them unlikely to be fundamentally viable since continuous negative free cash flow will eventually result in bankruptcy due to their very high capital intensity and field decline.

Thankfully they were able to produce free cash flow each year during 2017-2019 that averaged $119m, which set the scene well heading into this downturn. When looking ahead, it seems likely that they can at least remain cash flow neutral during 2020, given their guidance for massive capital expenditure reductions to only $20m at the midpoint, which compares to $126m from 2019. Even though this helps in the short-term, they cannot

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I am no longer active, as I am taking a hiatus from finance to pursue business ventures in other sectors.  I hope that my analysis was helpful to investors across the years, thank you.

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Comments (9)

rrb1981 profile picture
Strong insider ownership, holdings in quality GoM mature PDP production.

Leverage is indeed too high....but they can essentially go into “blow-out” mode and stack cash for the next 6 months.

I doubt any bankers are losing sleep over W&T. Plus, it’s very likely we see a decent uptick in gas pricing in the next 6-12 months.

These guys will middle through this.
This is one of the most poorly researched articles on SA
prudent 576 profile picture
I own WTI in 2 accounts, getting in during the crash at $1.54 & $1.71. Very good quality and highly recommended stock, even by conservative analysts. Insider activity doesn't reflect much concern of even a short-term down turn. Short float doesn't seem alarming either. I'm staying long.
johnny..cage profile picture
While I don’t own W&T currently it’s 1 of only 3 in the E&P space I would consider. Tracy runs a high quality operation conservatively hedges and not a scumbag shale guy. They backup on capex and keep moving. I feel compelled to say this given how many scams there are in the E&P space perpetuated by Wall Street now investing in bk Hertz.
shaner1 profile picture
@johnny..cage - A reasonable bet on a recovery over next 12 months IMO.

sjs2896 profile picture
Very poorly researched piece.
How about the filing delay allows W&T the opportunity to buy in the debt at less than.50 utilizing cash from the hedge book profit and the huge production increase. You would have extreme difficulty finding any other E&P that has been able to curtail capex like WTI.

Liquidity lacking you say, hedge book profit and Q1 cash flow allows debt retirement I say.

"Reports Q1 production increase 61% Y/Y of 53,553 Boe/day (48% liquids), near the high end of W&T’s guidance range"
simply_learning profile picture
I bought some in March and will see what it does
Sounds like you have a big position. Otherwise why would you write so much about a $2 stock. I own it and considering the current situation it is not worth worrying about. Maybe they forgot to send it out.
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