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A month has gone by since the last earnings report for W&T Offshore (WTI). Shares have added about 47.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is W&T due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
W&T Offshore Beats Q3 Earnings & Revenue Estimates
W&T Offshore 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.
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.
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.
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.
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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -42.86% due to these changes.
At this time, W&T has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, W&T has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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