W&T Offshore shares fell 9 percent Friday on news that U.S. regulators may bar the Houston producer from federal lease sales in the Gulf of Mexico, where it pumps most of its oil.
In a statement earlier this week, the company said that the Environmental Protection Agency’s proposed 3-year ban arose from two criminal convictions related to a 2009 offshore oil spill from one of its Gulf production platforms.
The EPA’s notice arrived nearly a year after the company agreed to plead guilty and pay $1 million in penalties for altering water samples and failing to report the spill. It also comes as the company ramps up operations in the Gulf: W&T Offshore snapped up 8,700 net acres in federal lease sales and another 3,400 net acres in acquisitions this year, regulatory filings show.
Last month, the company agreed to pay $100 million for working interests in more Gulf of Mexico fields, and has said it aims to spend 65 percent of its $550 million capital budget to explore and develop offshore properties this year.
The company plans to contest the lease-sale ban and other regulatory actions that it said are “undeserved” given last year’s plea agreement and its efforts since 2009 to “ensure environmental and regulatory compliance.”
W&T Offshore CEO Tracy Krohn said in a written statement that EPA’s actions stem from incidents five years ago on one platform out of more than 100 facilities W&T operates in the Gulf.
“We have enhanced our environmental and safety compliance program which remains subject to close scrutiny,” Krohn said.
W&T Offshore offices in Houston were closed Friday.
Even if the EPA’s ban is upheld, W&T Offshore could still take part in lease sales as a working-interest partner with another operator, Curtis Trimble, an analyst with Global Hunter Securities, wrote in a note to investors Friday.
That and the company’s recent acquisitions “should enable W&T to endure a three-year Gulf of Mexico lease sale ban should the regulatory action be upheld,” which is not likely given the company’s plea agreement and compliance history, Trimble wrote.
The volume of W&T Offshore shares trading hands doubled its three-month average in holiday-shortened trading Friday as investors sent the stock down $1.72 to $17.20 per share. Markets closed at noon.