W&T Offshore, Inc.

Ladies and gentlemen, thank you for standing by and welcome to W&T Offshore's third quarter 2025 conference call. During today's call, all parties will be in a listen-only mode. Following the company's prepared comments, the call will be open for questions and answers. During the question and answer session, we ask that you limit your questions to one and one follow-up. You can always rejoin the queue afterwards. This conference is being recorded, and a replay will be available on the company's website following the call. I would now like to turn the conference over to Al Petrie, Investor Relations Coordinator. Please go ahead.

Thank you, Alan. And on behalf of the management team, I would like to welcome all of you to today's conference call to review W&T Offshore's third quarter 2025 financial and operational results. Before we begin, I would like to remind you that our comments may include forward-looking statements. It should be noted that a variety of factors could cause W&T's actual results to differ materially from the anticipated results or expectations expressed in the forward-looking statements. Today's call may also contain certain non-GAAP financial measures. Please refer to the earnings release that we issued yesterday for disclosures on forward-looking statements and reconciliations of non-GAAP measures. With that, I'd like to turn the call over to Tracy Crone, our Chairman and CEO.

Thanks, Al. Good morning, everyone, and welcome to our third quarter conference call. With me today are William Williford, our Executive Vice President and Chief Operating Officer, Samir Parasnas, our Executive Vice President and Chief Financial Officer, and Trey Hartman, our Vice President and Chief Accounting Officer. They're all available to answer questions later during the call. So throughout the first nine months of 2025, we've delivered strong operational and financial results. As you'll hear throughout the call today, we are continuing to enhance shareholder value through operational excellence and maximizing production across our portfolio of assets. We've been able to increase production in every quarter in 2025, all while only spending about $42 million in capital and maintaining our LOE costs within guidance. Additionally, we've paid a consistent quarterly dividend for the past two years. So quite simply, we're executing on our proven and successful strategy that is committed to profitability, operational execution, returning value to our stakeholders, and ensuring the safety of our employees and contractors. Our ability to deliver production and EBITDA growth while seamlessly integrating accretive producing property acquisitions has helped W&T grow during our 40-year history. Some of our third quarter highlights include the following. We increased production by 6% quarter over quarter to 35,600 barrels of oil equivalent per day near the high end of our guidance range. driven by the successful integration of former Cox assets and high return workovers and recompletions. Compared to Q2 2025, LOE was reduced by 8% to around $23 per barrel oil equivalent, with an absolute cost of $76.2 million, which was near the midpoint of guidance and reflects disciplined cost management and operational efficiencies. We grew adjusted EBITDA by 11% quarter over quarter to $39 million despite commodity prices being lower over the same period. We also generated $26.5 million of cash from operating activities and grew our unrestricted cash to approximately $125 million while lowering our net debt to under $226 million. Thus far in 2025, we've lowered our net debt by about $60 million further strengthening our balance sheet. Our GAAP reported net loss this quarter primarily reflects a non-cash increase to our valuation allowance on deferred tax assets. This is not a deterioration in our underlying business performance. The valuation allowance can be reversed in the future, which will allow W&T to regain the potential tax benefits of the deferred tax assets. We expect substantially all income taxes in 2025 to be deferred. We ended the quarter with around $125 million in unrestricted cash, an undrawn $50 million revolver, and $83 million available on our ATM program, positioning us for future growth. So about a quarter of a billion dollars in liquidity. We accomplished all of this while returning value to our shareholders through our quarterly dividends. We've paid eight quarterly cash dividends since initiating the dividend policy in late 2023 and announced the fourth quarter 2025 payment that will occur later this month. So I'd like to go into a little more detail about the production results we've been able to deliver in 2025. Third quarter production is up 6% over quarter two in 2025 and up 15% over the same quarter in 2024. We've worked hard to increase the production associated with the former Cox assets we acquired in early 2024. By spending on high return workovers and recompletes, we are efficiently increasing production of these assets as well as at Mobile Bay. In quarter three 2025, we performed three recompletions on former Cox assets that contributed to higher production during the quarter. Over the life of the company, we've consistently created significant value by methodically integrating producing property acquisitions, enhancing their capabilities, and extracting additional value. The assets we acquired last year added meaningful reserves at a very attractive price. We are now seeing the production and cash flow benefits from the work executed by our team to get all those properties online and up to our operating standards and also identify additional production opportunities We remain focused on enhancing and offsetting decline at our other properties, and in Q3 2025, we performed three workovers in Mobile Bay. This brings the total number of workovers performed in 2025 in Mobile Bay to eight, which has helped to increase production at this low-decline, long-life asset, which is also our largest natural gas fields. Overall, our production has continued this positive trajectory and averaged above 36,000 barrels of oil equivalent per day in October. In the third quarter of 2025, our capital expenditures were $22.5 million, which was an increase over the first two quarters of 2025. This increase was driven by a recompletion in facility CapEx work to bring online an increased production of multiple fields related to the 2024 COTS acquisitions. In addition, our asset retirement settlement costs total approximately $9 million for the quarter. For the full year 2025, we now expect our CapEx to be around $60 million, not including acquisitions. The forecasted increase in full-year capital expenditures reflects our strategic investments in owned midstream infrastructure to lower third-party transportation costs and enhance production and value for three fields from Cox Acquisition. This is accretive and will be accretive to cash flow, earnings, and reserves. As you can see, operationally, we are performing well, which has allowed us to also focus on improving our balance sheet. Earlier this year, we had several transactions that strengthened and simplified our balance sheet, adding material cash to the bottom line and improving our credit ratings from S&P and Moody's. In January, we successfully closed a $350 million offering of new second lien notes that decreased our interest rate by 100 basis points and, together with other transactions, reduced our total debt by $39 million. We also entered into a new credit agreement for a $50 million revolving credit facility, which matures in July 2028, is undrawn, and replaces the previous $50 million credit facility provided by Calculus Lending. We also sold a non-core interest at Garden Banks, which included about 200 barrels of oil equivalent per day for $12 million. And we received $58 million in cash for an insurance settlement related to the Mobile Bay 78-1 well. All of these actions have allowed us to enhance liquidity and improve our financial flexibility. So thus far in 2025, we've increased cash by $15 million and reduced our net debt by $60 million. So our ability to execute our strategy has delivered favorable results thus far in 2025, including an improved balance sheet, enhanced liquidity, growing production, and EBITDA, all of which has positioned us for success as we move into 2026. We believe we're well-positioned to take advantage of opportunities like we have done in the past, focusing on accretive, low-risk acquisitions of producing properties, rather than higher risk drilling in the current uncertain commodity price environment. These acquisitions must meet our stringent criteria of generating free cash flow, providing a solid base of approved reserves with upside potential, and offer the ability for our experienced team to reduce costs. With our experience, strong balance sheet, and track record of successfully maximizing acquisitions, we're ready to add to our portfolio of assets. So yesterday we provided our detailed guidance with the fourth quarter of 2025 and for the full year. In the fourth quarter of 2025, we're expecting the midpoint of production to be around 36,000 barrels of oil equivalent per day. This is another increase in quarterly production, which is especially noteworthy considering that currently we don't have any drilling operations. The fourth quarter guidance for our cash operating costs, which includes LOE, gathering, transportation, and production taxes, and cash G&A costs, is in line with the third quarter of 2025. With absolute costs remaining flat and production expected to increase, we believe that on a per BOE basis, we will see additional decreases. We also believe that there are more opportunities to reduce our operating costs and find synergies to drive costs lower in the long term. We're always working hard to reduce costs without impacting safety or deferring asset integrity work. So in conjunction with the pipeline-related increase in 2025 capital expenditures, we lowered our gathering transportation production taxes guidance for full year 2025 to $24 to $26 million. primarily due to less reliance on third-party midstream infrastructure. Also, we reduced full-year DD&A guidance to $11.50 to $12.50 per barrel oil equivalent, and that represents a 15% decrease from prior guidance. So before we wrap up the call, I'd like to say how proud I am of all the people who helped make W&T a success since we founded the company in 1983. We've been an active operator in the Gulf of America and a staunch advocate for the offshore industry for over 40 years. Through drilling completions and acquisitions, we've built a strong company with outstanding long life assets. As the largest shareholder, I believe we're well positioned to continue to grow and add value in the remainder of 2025. We continue to grow production, EBITDA generation, and increase our cash positions. This allows us to continue to evaluate growth opportunities, both organically and inorganically. We have a long track record of successfully integrating assets into our portfolio, and we continue to believe that the Gulf of America is a world-class basin that supports value creation. We will maintain our focus on operational excellence and maximizing the cashflow potential of our asset base. So with that operated, we can now open the lines for questions.