W&T Offshore, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the W&T Offshore's fourth quarter and full year 2025 conference call. During today's call, all parties will be in a listen-only mode. Following the company's prepared remarks, the call will be open for questions and answers. During the question and answer session, we will ask that you limit yourself to one question and one follow-up. You can always rejoin the queue. This conference is being recorded, and a replay will be made 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, Dave. And on behalf of the management team, I'd like to welcome all of you to today's conference call to review W&T Offshore's fourth quarter and full year 2025 financial and operational results. Before we begin, I'd 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 these 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 year-end 2025 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. We're all available to answer questions later during the calls. So we delivered solid operational and financial results in 2025 by remaining focused on our strategic vision. Our proven strategy is simple and effective. We focus on cash flow generation, maintaining and optimizing our high-quality conventional assets, and opportunistically capitalizing on accretive opportunities to build shareholder value. We're successful at executing our strategy and remain committed to that operational performance, returning value to our stakeholders and ensuring the safety of our employees and contractors. Our ability to deliver consistent production and EBITDA results while integrating producing property acquisitions has helped W&T grow during our 40-plus year history. In 2025, we accomplished many things, so here's the bullet points. One, we increased production every quarter in 2025 from 30,500 barrels of oil equivalent per day in the first quarter to 36,200 barrels of oil equivalent per day in the fourth quarter by focusing on production enhancement projects. Two, while we did not drill any new wells, we did invest $55 million in 2025 CAPEX and performed 34 workovers and four recompletions. We also generated adjusted EBITDA of $130 million for full year 2025. And four, we continued to focus on enhancing our liquidity and reducing debt. And at year end 25, we grew cash by $31 million year over year to almost $141 million and reduced our net debt by $74 million to $210 million, further strengthening that balance sheet. And five, we reported year-end 2025 approved reserves of 121 million barrels of oil equivalent with a PV 10 of $1.1 billion. So, obviously, those numbers have gotten better since the beginning of March due to geopolitics. Six, we accomplished all of this while also returning value to our shareholders through our quarterly dividend. We've paid nine consecutive quarterly cash dividends since March. initiating the dividend policy in late 2023, and announced the first quarter 2026 payment that will occur later this month. So, going into a little more detail about the positive production numbers we were able to deliver in 2025, normally in the first quarter of every year, we have some temporary downtime associated with the impact in cold weather and freezes. We experienced some in 2025, and again in 2026 as well. But through our focus, production uplift projects and continued focus on ramping up recently acquired fields, we were able to achieve quarter over quarter growth and year over year growth. In the fourth quarter, production was up 2% over Q3 2025 and up 13% over the same quarter in 2024. So, over the years, we've consistently created value are very methodically integrating producing property acquisitions, enhancing their capabilities, and thus extracting greater value. After we close any acquisition, we take time to assess and more fully evaluate the newly acquired assets. We have a large footprint across the Gulf of America, so we look for ways to optimize operations, increase production, and utilize that large footprint where we can. That reduces costs and maximizes value. We work really hard on logistics. The assets we acquired in 2024 added meaningful reserves at an attractive price, and they required some additional capital and expense spending to maximize that production capability in all those fields. By the fourth quarter of 2025, we'd also completed all the major projects on the acquired assets. and the production and cash flow benefits from the diligent work of this team to get all those properties online and up to our operating standards as reflected in our results. Moving into 2026, we remain focused on enhancing production and minimizing decline across our asset base through low-cost, low-risk workovers and re-completions. We remain focused on cost control and capturing synergies associated with those asset projects Acquisitions, we reduced our fourth quarter LOE to $22.40 per barrel oil equivalent, which was 4% lower compared with the third quarter of 2025. And our absolute costs were below the midpoint of our guidance. Looking ahead, we're expecting our 2026 costs to be lower compared to 2025, which I will discuss later in the talk. So for the full year 2025, our capital expenditures were $55 million coming in below the low end of our capital guidance. In the fourth quarter, we finished a $20 million pipeline facility project at West Delta 73 that will help support production growth, improve operational performance, and increase our net realized prices. We expect to see the benefit of that project in the first quarter of 2026. Overall, our capital expense was back half loaded in 2025, driven by re-completion and facility capital work to bring online and increase production multiple fields related to the 2024 acquisition. In addition, our asset retirement settlement costs totaled $37 million for 2025 as we continue to responsibly decommission assets. So, as you can see, our operational performance in 2025 allowed us to focus on improving our balance sheet. At the beginning of 2025, 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 rates interest rates 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 of 2028, that replaced 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 equipment 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. These financial actions, coupled with strong operational performance, allowed us to increase cash by $31 million and reduce our net debt by $74 million at year-end 2025. All of this was accomplished in what I consider to be to have been a much lower-priced environment for oil and gas. For our ability to execute our strategy delivered positive results in 2025, including an improved balance sheet, enhanced liquidity, growing production, and adjusted EBITDA, all of which has positioned us for success as we move into 2026. We are well positioned to take advantage of growth opportunities like we've done in the past, focusing on accretive, low-risk acquisitions of producing properties rather than high-risk drilling in the uncertain commodity price environment. These acquisitions must meet our stringent criteria of, one, generating free cash flow, two, providing a solid base of approved reserves with upside potential, and three, providing for the ability of our operations team to reduce costs. With our experience, strong balance sheet over the year, over our four-year track history. We've successfully integrated acquisitions. We believe we are well positioned to add to those impressive portfolios of assets. So turning to our year-end reserve results, we have a portfolio of conventional Gulf America assets that have established a record value over time. Over the past two years, our overall year-end reserves have remained virtually flat, including the volume and PV10. We've produced 24.6 million barrels of oil equivalent of production, but we've also made an accretive acquisition of several fields that's helped to offset this production. Since closing the latest acquisition in January 2024, we've generated almost $285 million in adjusted EBITDA, while only spending about $167 million in capital expenditures, including acquisitions. We believe that our strategy of acquiring and enhancing producing properties continues to add value to our shareholders as reflected in our reserve amounts and value. So for year-end 2025, our SEC approved reserves for 121 million barrels of oil equipment, with a PB10 of $1.12 billion in a reduced price environment. Notably, we recorded an increase to PDP PB10 of $279 million, that's approved developed producing reserve, compared to year-end 2024, as we had reserves reclassified to approved developed producing. The reserves were classified as 71% approved developed producing, 24% approved developed non-producing, and only 5% proved undeveloped. At year-end 2024, only 52% were proved developed producing and 17% were proved undeveloped. W&T's reserve-loss ratio at year-end 2025, based on year-end 2025 approved reserves and 2025 production, was 9.8 years, about 10 years. Approximately 42% of year-end 2025 SEC crude reserves were liquids with 32% crude oil and 10% NGLs, and we had 58% natural gas. So yesterday we provided detailed guidance for first quarter and full year 2026 in our earnings release. In the first quarter of 2026, as I previously mentioned, we incurred unplanned downtime at several fields due to winter freezes that temporarily reduced our production volumes. we're predicting the midpoint of Q1 2026 production to be around 35,000 barrels of oil equivalent per day. We are continuing to focus on production enhancement projects throughout 2026, and we expect the full 2026 production midpoint to also be around 35,000 barrels of oil equivalent per day. This is assuming no additional acquisitions or drilling. Our ability to maintain low-decline production is a testament to our quality and our culture of operational excellence and the strength of our reserves. So with several capital projects completed in 2025, we're finding much lower capital expenditures for 2026 due to a substantial reduction in capital projects associated with pipelines and about $22 million at the midpoint, or less than half the amount invested in 2025. This does not include acquisitions. We're also forecasting about $38 million in plugging and abandonment expenses for 2026. That's in line with the $37 million we spent in 2025. We have a reliable asset base of low-defying wells, and we've focused more on acquisitions over the past several years rather than on drilling many new wells, which has kept our capital spending much lower. So turning to costs, our guidance for 2026 LOE is projected to be lower than 2025. despite higher production in 2026. So similar to the capital projects, we spent operating expenses on recently acquired fields to bring them in line with our operational standards. Additionally, some of the capital projects that we undertook in 2025 should lead to lower expenses and higher price realizations. With that said, I believe that there are more opportunities to reduce our operating costs and find synergies to drive costs lower in the long term. Safety is paramount, and we are always working hard to reduce costs without impacting safety or deferring asset integrity work. So our first quarter 2026 LOE is expected to be between $63 million and $70 million, and full year 2026 LOE of $265 million to $295 million, which reflects the savings I mentioned earlier. Our first quarter gathering transportation production taxes are expected to range between $8 million and $9 million. First quarter cash G&A costs are expected to be between $15 and $17 million. So, as we mentioned in yesterday's earnings release, the DOI, Department of Interior, has proposed some positive regulatory changes that would roll back obligations from the 2024 rule that would have required companies to set aside about $6.9 billion in supplemental financial assurance. About $6 billion would apply to small businesses that make up most of the operators in the Gulf. The proposed changes will better align financial assurance requirements with actual decommissioning risk and could reduce industry-wide bonding by approximately $484 million annually. These proposed revisions have been published in the Federal Register in the 60-day public comment series. That's expected in on May 8, 2026. We welcome these changes proposed by the Trump administration that can further encourage U.S. offshore production growth and further increase America's energy independence. So before we wrap up the call, I'd like to say how proud I am of all the people who've helped banked W&T's success since we funded the company in 1983. Throughout that time, we've been an active, responsible, and profitable operator in the Gulf of America. We're staunch advocates for the offshore industry, and we believe that our outstanding long-life assets will continue to provide value for our shareholders and our country for many more years. As the largest shareholder, I believe we are well-positioned to continue to grow and add value as we move into 2026. Our guidance forecasts that we can modestly grow production and reduce costs, which should lead to a continued buildup of our cash position. This allows us to remain active in evaluating growth opportunities, both organically and inorganically. We have a long track record of successfully integrating those assets into our portfolio, and we continue to believe that the Gulf of America is a world-class basin that supports value creation. We remain focused on operational excellence and maximizing the cash flow potential of our asset base. With that operator, we can now open the lines for questions.