W&T Offshore Inc. CEO Tracy W. Krohn called the April 20 explosion and sinking of Deepwater Horizon and the resulting oil spill in the Gulf of Mexico (GOM) a terrible accident and said W&T is willing to help in any way “as most companies would be in our industry.”
Krohn said W&T operations in the GOM have not been affected by the spill (see related story). “We have quite a bit of production out in the Gulf of Mexico and we’ve not been asked to shut anything down at this point,” he said. Over the weekend it was reported that two rigs had been shut in due to the oil spill (see Daily GPI, May 4).
Asked by an analyst what the fallout from the spill might mean for exploration and production activities in the GOM, Krohn refused to speculate. “You’re asking me to speculate on something I can’t possibly know,” he said.
Krohn — who has said numerous times that he’s as willing to grow the company with its checkbook as with the drillbit (see Daily GPI, Feb. 26) — said W&T continues to look at prospects for acquisition onshore and has been in a number of data rooms. “We’re seeing onshore pricing really, in our opinion, very high in comparison to where we think they should be,” he said. “The reserves aren’t a big mystery to us; people are just paying a lot for the reserves.”
Krohn added that he hasn’t been particularly impressed by the economics of onshore unconventional plays and the company’s onshore focus will be mainly on the Gulf Coast region.
Net income for the first quarter was $42.3 million (57 cents/share) on revenues of $169.6 million, compared to a net loss for the same quarter of 2009 of $244.6 million (minus $3.22/share) on revenues of $117.4 million. Net income increased in the first quarter largely due to a $218.9 million ceiling test impairment in the first quarter of 2009 and an increase in average realized unhedged commodity price to $8.50/Mcfe during the first quarter from $5.48/Mcfe during the same period in 2009.
Net income for the first quarter excluding special items was approximately $36.9 million (49 cents/share). The net loss excluding special items for the corresponding quarter of 2009 was approximately $102.0 million (minus $1.34/share).
On a Bcfe basis the company sold 20 Bcfe at an average price of $8.50/Mcfe in the first quarter, of which 50% was from oil and natural gas liquids, compared to 21.4 Bcfe sold at an average price of $5.48/Mcfe in the first quarter of 2009, of which 41% was from oil and natural gas liquids. The sales volume decrease for natural gas is primarily attributable to natural reservoir declines and the sale of a field in Louisiana state waters in the second quarter of 2009 and the sale of other noncore assets in the fourth quarter of 2009, W&T said.
In the first quarter W&T drilled or participated in the drilling of three conventional shelf wells, two of which were commercially successful.
The company’s current drilling program calls for 10 wells, nine of which are exploration and one development. W&T is currently drilling five of the exploration wells and the one development well. The remaining exploration wells are to be on the conventional Outer Continental Shelf, onshore in Louisiana, and one is to be in the deepwater GOM.
On April 30 W&T completed the acquisition of all of the interests of Total E&P USA Inc. in three federal offshore lease blocks in the Gulf of Mexico (see Daily GPI, April 9). The properties acquired are producing interests with future development potential and include a 100% working interest in Mississippi Canyon block 243 (Matterhorn) and a 64% working interest in Viosca Knoll blocks 822 and 823 (Virgo). The estimated proved oil and natural gas reserves on the effective date were 11.6 million boe.
“The Total assets meet all of our acquisition criteria, which include producing properties and upside, and provide us with strategic ownership of deepwater structures within close proximity of our existing assets,” Krohn said. “In addition, the Total assets were 64% oil and natural gas liquids in terms of proved reserves at year-end 2009 and producing 67% oil and natural gas liquids during March 2010.”
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