(W&T Offshore, 22.Jan.2024) — W&T Offshore, Inc. (NYSE: WTI) has completed the accretive acquisition of six fields in shallow waters of the Gulf of Mexico. W&T was the successful bidder for certain synergistic assets in the Gulf of Mexico offered by MLCJR LLC, Cox Oil Offshore, L.L.C., Cox Operating, L.L.C., Energy XXI GOM, LLC, Energy XXI Gulf Coast, LLC, EPL Oil & Gas, LLC and M21K, LLC (collectively, the “Debtors”), as described in the Order Approving the Purchase And Sale Agreement With W&T Offshore, Inc. issued on 16 Jan. 2024, the closing and effective date of the transaction. The final purchase price for the assets was $72mn, excluding certain closing costs, which was funded from the company’s cash on hand. Key highlights of the transaction are as follows:
- Provides strong producing properties, all of which are 100% working interest (average 82% net revenue interest) and are located adjacent to W&T existing area of operations;
- The six fields acquired include Eugene Island 064, Main Pass 061, Mobile 904, Mobile 916, South Pass 049 and West Delta 073;
- Includes estimated production that has ranged from approximately 3,700 to 5,700 barrels of oil equivalent per day (“BOEPD”) (around 68% liquids) during the period month-to-date 19 Jan. 2024. The Company believes that it can meaningfully increase production on these properties through workovers, recompletions and facility repairs;
- The six fields acquired produced approximately 8,300 BOEPD (48% liquids) on average in Apr. 2023, the month prior to the bankruptcy filing by the Debtors in May 2023;
- Adds significant proved reserves (“1P”) of 18.7 million barrels of oil equivalent (“MMBOE”) (62% liquids) as of 1 Jan. 2024 at year-end 2023 SEC pricing with a present value discounted at 10% (“PV-10”) value of $250.4mn1 based on an independent engineering report prepared by Netherland Sewell and Associates (“NSAI”);
- Provides material upside with proved plus probable reserves (“2P”) of 60.6 MMBOE (78% liquids) as of 1 Jan. 2024 at year-end 2023 SEC pricing with a PV-10 value of $629.2 million1 based on an independent engineering report prepared by NSAI; and
- Accretive cash multiple of approximately 1.0x last twelve months asset cash flows as of 31 Oct. 20232, and production multiple of approximately $16,950 per BOEPD based on average estimated production range for the period month-to-date January 19, 2024.
Tracy W. Krohn, Chairman, President and CEO, commented, “We are very pleased to announce our second accretive acquisition of GOM producing properties in the last four months. As was the case with the purchase announced in Sep. 2023, the producing properties included in the acquisition announced today meet the time-tested investment criteria we have used for all acquisitions. These assets have attractive production rates, are generating positive free cash flow, and have a solid base of proved developed reserves and identified upside potential with strong 2P reserves. We plan to increase production in the near-term with capital-efficient, low-cost workover, recompletion and maintenance projects. We expect to realize synergies on these new assets due to their close proximity to our existing fields, which can reduce operating costs and further increase free cash flow. Combined with our acquisition last fall, we have added almost 22 million barrels of oil equivalent of proved reserves for about $104mn, or around $4.75 per BOE, which we believe is a very attractive price for properties with significant upside. We plan to continue to utilize our strong balance sheet and expertise in acquiring complementary GOM assets to further enhance the scale of W&T. Acquisitions continue to be a key component of how we build and grow value, reserves and production at W&T, and we are well positioned to continue to execute on our successful strategy.”
The six fields acquired include Eugene Island 064, Main Pass 061, Mobile 904, Mobile 916, South Pass 049 and West Delta 073, all of which include a 100% working interest and an average 82% net revenue interest. They are located in water depths ranging between approximately 15 and 400 feet. Their proximity to W&T’s areas of existing operations provide the ability for W&T to capture synergies. Recent estimated production for the fields has ranged from approximately 3,700 to 5,700 BOEPD (around 68% liquids) during the period month-to-date January 19, 2024. W&T plans to implement a series of workovers, recompletions and general maintenance work that the company expects will increase total production from the fields.
As a result of this additional accretive acquisition, W&T plans to invest additional funds for increasing production and reducing costs in these assets long term. The company now plans to defer the drilling of Holy Grail, which is a proven undeveloped well in our Magnolia field. The company will be exploring a Drilling Joint Venture, similar to what it did with investors in 2018 through Monza Energy LLC, that may include certain of the company’s 100% owned and operated deepwater wells, including Holy Grail (approximately 3,900 feet of water), Thunderbolt (approximately 500 feet of water), Zeus (approximately 500 feet of water) and Redbolt (approximately 500 feet of water). Additionally, the company plans to drill at least one shelf exploratory well in the Drilling Joint Venture. We believe that such a structure aligns investor interests and provides ongoing liquidity through cash distributions. Additional information and expectations from the acquisitions will be incorporated into W&T’s 2024 guidance that will be discussed during the company’s year-end 2023 conference call in early March.
About W&T Offshore
W&T Offshore, Inc. is an independent oil and natural gas producer with operations offshore in the Gulf of Mexico and has grown through acquisitions, exploration and development. As of 30 Sep. 2023, the company had working interests in 54 fields in federal and state waters (which include 45 fields in federal waters and nine in state waters). The company has under lease approximately 602,100 gross acres (446,800 net acres) spanning across the outer continental shelf off the coasts of Louisiana, Texas, Mississippi and Alabama, with approximately 440,600 gross acres on the conventional shelf, approximately 153,500 gross acres in the deepwater and 8,000 gross acres in Alabama onshore. A majority of the Company’s daily production is derived from wells it operates. For more information on W&T, please visit the company’s website at www.wtoffshore.com.
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