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W&T Becomes the Highest Bidder on 15 Blocks in GoM Auction

Zacks Equity Research
Bullish Supply Fundamentals to Boost Oil & Gas US E&P; Industry

W&T Offshore, Inc WTI became the highest bidder on 15 blocks in the auction held by the Bureau of Ocean Energy Management (“BOEM”) for U.S. Gulf of Mexico (“GoM”) Lease Sale 252 on Mar 20.

W&T won eight deepwater blocks that includes Garden Banks 173, Green Canyon blocks 3, 46, 47, 49, 91 and 92 and Mississippi Canyon 244. The company also received seven shallow water blocks comprising the Eugene Island blocks 357, 378, 393, 395, 396, Main Pass 286 and South Marsh 205.

These blocks are cumulatively spread on acreage of around 73,500. The company will have a 100% working interest in the acreage and will be required to make a payment of about $3.5 million. All the blocks have a lease term of five years. One deepwater block, has a seven-year lease term. Eight of the blocks have a royalty rate of 12.5%, while the same for the remaining seven is 18.75%.

However, BOEM reserves the right not to award some or all of the blocks based on their minimum bidding criteria. The final award results of the auction are expected over the next 90 days.

The latest auction received numerous high bids from several participants. W&T ranked fourth in the number of apparent high bids among the 30 companies that participated in the lease sale. This reflects the companies’ interest for offshore projects. Effective cost controls and recovering oil prices have made offshore operations attractive again. Other oil majors that made high bids in the auction are Royal Dutch Shell plc (RDS.A), Anadarko Petroleum Corporation (APC) and BP plc (BP) among others.

W&T Offshore is a leading oil and natural gas explorer with operations primarily focused on resources located off the GoM coast. The company’s production in the deep-water GoM fields have skyrocketed more than 500% and proved reserves have surged nearly 900% in the last eight years. In March 2018, the company acquired interests in prospective Heidelberg field in the deep-water GoM. It plans to drill up to 14 projects in the region over the next few years. Also, the deep-water discoveries made in the recent years have enhanced the company’s prospects.

Zacks Rank & Other Key Picks

Currently, W&T carries a Zacks Rank #2 (Buy).

Some other top-ranked players in the energy space are Antero Resources Corporation AR, CrossAmerica Partners L.P. CAPL and SEACOR Holdings, Inc CKH. While Antero Resources and CrossAmerica Partners sport a Zacks Rank #1 (Strong Buy), SEACOR Holdings carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Antero Resources is an independent explorer, primarily engaged in the acquisition and development of natural gas, natural gas liquids as well as oil resources in the Appalachian Basin. The company’s earnings beat the Zacks Consensus Estimate in two of the last four quarters.

CrossAmerica Partners is involved in the wholesale distribution of motor fuels, which comprises gasoline and diesel fuel. The partnership delivered an average positive earnings surprise of 452.2% in the last four quarters.

SEACOR Holdings is a diversified holding company, mainly focused on domestic and international transportation, logistics as well as risk management consultancy. The company’s bottom line for 2019 is expected to inch up 1.7% year over year. The company delivered an average positive earnings surprise of 20.5% in the trailing four quarters.

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