W&T Offshore Beefs Up Shallow Water GoM Holdings
W&T Offshore Inc. reported Jan. 22 that its accretive acquisition of six shallow water Gulf of Mexico blocks adds 18.7 MMboe of proved reserves and 60.6 MMboe of proved and probable reserves to its books.
W&T paid $72 million, excluding closing costs, for assets on offer from MLCJR LLC, Cox Oil Offshore LLC, Cox Operating LLC, Energy XXI GOM LLC, Energy XXI Gulf Coast LLC, EPL Oil & Gas LLC and M21K LLC—all companies that declared bankruptcy last year.
The deals for the six blocks closed Jan. 16, and W&T funded the purchase with cash on hand.
W&T now holds 100% working interest in Eugene Island Block 64, Main Pass Block 61, Mobile Block 904, Mobile Block 916, South Pass Block 49 and West Delta Block 73. All six are in 15 ft to 400 ft water depths and are located adjacent to W&T’s existing operations.
Estimated production from those blocks ranged from 3,700 boe/d to 5,700 boe/d, with around 68% of that being liquids, during the period month-to-date Jan. 19. In April 2023, which was the month before the six companies declared bankruptcy, they produced about 8,300 boe/d with 48% liquids on average.
The proved reserves are valued at $250 million, based on an independent engineering report prepared by Netherland Sewell and Associates (NSAI) and year-end 2023 SEC pricing with a present value discounted at 10%, the company said. The material upside of the proved plus probable (2P) reserves is valued at $296 million based on the same parameters.
Tracy W. Krohn, W&T’s chairman, president and CEO, said in a press release that the assets acquired 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.”
The company aims to use low-cost workover, recompletion and maintenance projects to drive up production, he said.
“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,” he said.
Second recent accretive acquisition
This deal is W&T’s second accretive acquisition in the GoM in the last four months. In September, the company purchased working interests in eight shallow water GoM fields for $32 million from undisclosed sellers.
“Combined with our acquisition last fall, we have added almost 22 million barrels of oil equivalent of proved reserves for about $104 million, or around $4.75 per boe,” he said.
The company aims to purchase other complementary GoM assets.
“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,” Krohn said.
W&T now plans to defer drilling at Holy Grail, which is a proven undeveloped well in its Magnolia Field in the Garden Banks area of the GoM. The company will explore a drilling joint venture, similar to what it did with investors in 2018 through Monza Energy LLC, that may include Holy Grail in 3,900 ft of water, Thunderbolt in 500 ft of water, Zeus in 500 ft of water and Redbolt in 500 ft of water.
The company plans to drill at least one shelf exploratory well in the drilling joint venture.
W&T’s year-end 2023 results conference call is slated for early March.
