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W&T Offshore (WTI) to Acquire Gulf of Mexico Assets for $47M

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W&T Offshore, Inc. WTI signed an agreement to acquire interests in producing properties in the federal waters of the Gulf of Mexico for $47 million.

W&T Offshore will acquire oil and gas producing shallow water assets at Ship Shoal 230, South Marsh Island 27/Vermilion 191, and South Marsh Island 73 fields from Ankor E&P Holdings Corporation and KOA Energy LP.

The to-be-acquired properties in the central region of shallow Gulf of Mexico waters include 53 producing wells and 16 structures. The properties currently produce 2,500 barrels of oil per day and 5.4 million cubic feet of natural gas per day.

The acquisition is expected to increase W&T Offshore’s acreage by 57,500 gross acres in the Gulf of Mexico. With the agreement, the company will add internally-estimated proved reserves of 5.5 million barrels of oil equivalent (Boe), and proved and probable reserves of 7.6 million Boe.

W&T Offshore currently holds working interests in 41 offshore producing fields in the federal and state waters. Beside this, WTI has 611,000 gross acres under lease, including 424,000 gross acres on the Gulf of Mexico shelf and 187,000 gross acres in the deepwater Gulf of Mexico.

The acquisition adds to the company’s existing high-quality portfolio in the Gulf of Mexico. Since W&T Offshore operates other properties in the Gulf of Mexico, it will be able to leverage its scale and expertise to gain synergies and maximize the value of the to-be-acquired assets.

Acquisitions are crucial components of W&T Offshore’s growth strategies. The latest acquisition will enable WTI to increase free cash flow, while optimizing the value of its nearby operated assets. The transaction is expected to close by the end of first-quarter 2022.

Company Profile & Price Performance

Headquartered in Houston, TX, W&T Offshore is a leading oil and natural gas exploration and production company.

Shares of WTI have underperformed the industry in the past six months. The stock has lost 14.5% against the industry’s 20.7% growth.

Zacks Investment Research
Zacks Investment Research

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Zacks Rank & Stocks to Consider

W&T Offshore currently carries a Zack Rank #5 (Strong Sell).

Investors interested in the energy sector might look at the following companies that presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

MPLX LP MPLX is a master limited partnership that provides a wide range of midstream energy services, including fuel distribution solutions. In 2020, the partnership generated $4.3 billion in distributable cash flow (“DCF”), higher than the year-ago level of $4.1 billion. Moreover, DCF attributable to MPLX in third-quarter 2021 was $1,191 million, providing 1.61X distribution coverage, up from $1,067 million in the year-ago quarter. The overall picture of DCF and cash distribution is impressive, as reflected in the handsome distribution coverage ratio.

MPLX is least exposed to commodity price fluctuations since the partnership generates stable fee-based revenues from diverse midstream energy assets via long-term contracts. The partnership is well-positioned to capitalize on the growing demand for fresh midstream assets like pipeline networks, and processing and fractionation units.

The Williams Companies, Inc. WMB, based in Oklahoma, is a premier energy infrastructure provider in North America. The company’s core operations include finding, producing, gathering, processing, and transporting natural gas and natural gas liquids.

Williams Companies' debt maturity profile is in good shape, with its $4.5-billion revolver maturing in 2023. WMB is also paying its shareholders an attractive dividend, yielding nearly 6%. Beside these, the company's board recently approved a share repurchase program worth $1.5 billion, highlighting its commitment to shareholders.

Patterson-UTI Energy, Inc. PTEN is one of the largest North American land drilling contractors, having a large, high-quality fleet of drilling rigs. The company’s technologically advanced ‘Apex’ rigs are the key to its success. Patterson-UTI’s proprietary design makes the rigs move faster than conventional ones, drill quicker and more efficiently than conventional ones, and allows for a safer operating environment.

Patterson-UTI’s long-term debt is around $902 million. Importantly, the company's debt-to-capitalization at the end of the third quarter was 34.3%, quite conservative versus 39.4% for the sub-industry to which it belongs. Apart from low leverage for its industry, Patterson-UTI has ample liquidity, with cash and cash equivalents of $956 million, and $600 million available under the revolving credit facility. Also, the company has a comfortable debt maturity profile with no major debt outstanding until 2028.


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