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W&T Offshore (WTI) Up 8.6% Since Q3 Earnings Beat on Lower Costs

Zacks Equity Research
·5 min read

W&T Offshore, Inc. WTI stock jumped 8.6% since it reported better-than-expected results on Nov 4. The company expects to consolidate Mobile Bay natural gas treatment plants by fourth quarter-end, which will likely result in significant cost savings.

It reported third-quarter 2020 adjusted loss (excluding one-time items) of 14 cents per share, narrower than the Zacks Consensus Estimate of a loss of 24 cents. However, in the year-ago period, the company reported earnings of 13 cents per share.

Meanwhile, quarterly revenues plunged to $72.5 million from $132.2 million a year ago. The top line, however, beat the Zacks Consensus Estimate of $69 million.

The better-than-expected results was supported by lower costs and expenses. This was partially offset by a decline in average realized prices of commodities and lower oil equivalent production volumes.

W&T Offshore, Inc. Price, Consensus and EPS Surprise

W&T Offshore, Inc. Price, Consensus and EPS Surprise
W&T Offshore, Inc. Price, Consensus and EPS Surprise

W&T Offshore, Inc. price-consensus-eps-surprise-chart | W&T Offshore, Inc. Quote

Production Stats

Total oil equivalent production averaged 34,459 barrels of oil equivalent per day (Boe/d), down from the year-ago quarter’s 41,149 Boe/d. Production was affected by the hurricane season in the Gulf of Mexico.

Oil production was recorded at 1,115 thousand barrels (MBbls), down 35.7% from the year-ago level of 1,735 MBbls. Natural gas production of 9,897 million cubic feet (MMcf) for the reported quarter was 6.7% lower than 10,606 MMcf in the year-earlier period. However, natural gas liquids output totaled 407 MBbls, 43.8% higher than 283 MBbls a year ago. Of the total production in the quarter, almost 48% comprised liquids.

Realized Commodity Prices

The average realized price for oil for the third quarter was $41.81 a barrel, lower than the year-ago level of $59.24. The average realized price of NGL dropped to $10.99 from $15.45 per barrel in the prior year. The average realized price of natural gas for the June quarter was $1.94 per thousand cubic feet, down from $2.23 in the comparable period last year. Average realized price for oil equivalent output declined to $22.16 per barrel from $34.56 a year ago.

Operating Expenses

Lease operating expenses contracted to $11.49 per Boe for the third quarter from $12.46 a year ago. However, general and administrative expenses rose to $4.57 per Boe from $2.67 in the year-ago period.

Overall, total costs and expenses fell to $92 million from the year-ago level of $96.8 million.

Cash Flow

Net cash provided by operations in the third quarter was $21.3 million, down from $80.3 million in the year-ago period.

Free cash flow for the quarter declined to $5.9 million from $13.3 million in the year-ago quarter.

Capital Spending & Balance Sheet

W&T Offshore spent $1.2 million capital through the September quarter (excluding acquisitions) on oil and gas resources.

As of Sep 30, 2020, the company’s cash and cash equivalents were $56.5 million. The upstream firm had $130.6 million of availability under the revolving bank credit facility. Its long-term debt as of the September quarter was recorded at $624.7 million.

Guidance

For the December quarter, the company expects production in the range of 31,500-35,000 Boe/d. Oil production is expected in the range of 1-1.1 MMBbls for the fourth quarter.

For fourth-quarter 2020, the upstream company expects lease operating expenses in the band of $43-$48 million. General and administrative expenses are expected within $11.7-$12.9 million.

W&T Offshore expects to consolidate Mobile Bay natural gas treatment plants by fourth quarter-end, which will decrease costs by $5 million per annum. It has suspended drilling activities and reduced capex budget for 2020 to $15-$25 million.

Zacks Rank & Stocks to Consider

The company currently has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space include Matador Resources Company MTDR, Antero Resources Corporation AR and Global Partners LP GLP, each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Matador Resources’ bottom line for 2021 is expected to surge 187% year over year.

Antero Resources’ bottom line for 2021 is expected to rise 30.5% year over year.

Global Partners’ bottom line for 2020 is expected to rise 150.5% year over year.

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W&T Offshore, Inc. (WTI) : Free Stock Analysis Report
 
Global Partners LP (GLP) : Free Stock Analysis Report
 
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