W&T Offshore has reported operational and financial results for the fourth quarter and full year 2020 including the Company’s year-end 2020 reserves report and 2021 guidance.
Key highlights included:
1 A non-GAAP financial measure; see “Non-GAAP Information” attached to this release for more information including reconciliations to most comparable GAAP measures.
“I am quite pleased with our response to the extraordinary challenges that 2020 presented. We managed through a global pandemic, commodity price declines and a record number of named storms in the Gulf of Mexico. We have continued to take steps to protect our employees and contractors during the pandemic and, to-date, our people and our operations have not been materially impacted by COVID-19. In the fourth quarter, our operations team did an excellent job of returning our properties to production ahead of schedule which helped us exceed our guidance.
In addition, we were able to keep our operating and overhead costs low despite the additional operational work required to restore production,” Tracy W. Krohn, W&T’s Chairman and Chief Executive Officer, stated.
“Despite the difficulties we faced in 2020, we continued our focus on delivering free cash flow. By adjusting quickly to the changing environment early in 2020 and reducing our planned capital expenditures, we were able to generate $76.0 million in Free Cash Flow in 2020 compared with $74.0 million in 2019. We utilized a portion of our 2020 Free Cash Flow to retire $72.5 million of our senior notes for $23.9 million, with the added benefit of saving over $7.1 million in annualized interest and preserving long-term capital. Additionally, we recently completed the consolidation of our two natural gas treatment facilities that serve the Mobile Bay area into a single facility with more than enough capacity for our current operations as well as production from future natural gas drilling projects in the area. The consolidation of these facilities is expected to result in approximately $5 million per year in savings, beginning in 2021, as well as lower our Scope 1 emissions.”
“It is my pleasure to announce that W&T Offshore’s inaugural Environment, Social and Governance (“ESG”) report will be coming out shortly with our annual report and include key metrics for the past three years. We founded W&T nearly 40 years ago with the same core values we have today that have guided our success and provided the foundation for W&T to grow into a trusted operator. We believe that every employee has a responsibility to ensure that we operate with the highest regards toward ESG and we have empowered our management to allocate resources and tools necessary to create a working environment focused on accomplishing our ESG objectives,” Tracy W. Krohn, W&T’s Chairman and Chief Executive Officer, added.
“Entering 2021, while market and pricing conditions are improving, our strategy remains unchanged. We have assembled a premier portfolio of conventional, low-declining producing properties that generate a solid foundation of cash flow with significant upside. While we have a substantial inventory of drilling opportunities with potentially high rates of return, we are not devoting all of our free cash flow to drilling, rather we are maximizing financial flexibility.
The current price environment should allow us to generate meaningful free cash flow which we can use to reduce debt or potentially fund additional opportunities. Accordingly, our capital spending in 2021 is expected to be in the range of $30 to $60 million.
The timing of our capital spending will be weighted to late 2021, which should benefit production in 2022. As a result, our 2021 production guidance of 38,000 to 42,000 Boe/d is modestly lower than our full year 2020 average, but higher than the fourth quarter of 2020. The lower decline profile of our conventional asset base allows for reductions in capital expenditures without significantly impacting near-term production levels. The energy industry is cyclical and we have faced adversity many times in the past, but our success over nearly 40 years has been because of our unwavering strategic focus that has positioned W&T to create value,” concluded Mr. Krohn.
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