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Why Is W&T (WTI) Down 24.7% Since Last Earnings Report?

It has been about a month since the last earnings report for W&T Offshore (WTI). Shares have lost about 24.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is W&T due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

W&T Offshore Q4 Earnings Beat Estimates, Reserves Grow

W&T Offshore reported fourth-quarter 2019 adjusted earnings (excluding one-time items) of 17 cents per share, beating the Zacks Consensus Estimate of a cent but declining from the year-ago 24 cents.

Meanwhile, quarterly revenues increased to $152 million from $143 million a year ago. Moreover, the top line beat the Zacks Consensus Estimate of $151 million.

The better-than-expected results were supported by higher oil equivalent production volumes and lower lease operating expenses, partially offset by a decline in average realized prices of commodities. Along with the quarterly results announcement, the offshore producer announced plans of buying the remaining 25% working interest in the Magnolia field by early 2020.

Overall Production Rises

Total oil equivalent production averaged 52,773 barrels of oil equivalent per day (Boe/d), up 51% from 35,000 Boe/d in the year-ago quarter. Oil production was recorded at 1.8 million barrels (MMBbls), up 6.1% year over year. Natural gas liquids output totaled 415 MBbls, higher than 322 MBbls a year ago. Natural gas production of 15,966 million cubic feet (MMcf) in the reported quarter was considerably higher than 7,343 MMcf in the year-earlier period. Of the total production in the quarter, 45.2% comprised liquids.

The rise in production was supported by the company’s Mobile Bay area assets acquisition from Exxon Mobil Corporation (XOM).

Realized Prices Decline

The average realized price for oil during the fourth quarter was $56.84 a barrel, lower than the year-ago level of $62.94. The average realized price of NGL dropped to $16.64 from $26.84 per barrel in the prior year. The average realized price of natural gas during the December quarter was $2.58 per thousand cubic feet, down from $3.83 per thousand cubic feet in the comparable period last year. Average realized price for oil equivalent output declined to $30.75 per barrel from $44.15 a year ago.

Operating Expenses

Lease operating expenses contracted to $10.98 per Boe in the fourth quarter from $13.48 a year ago.

Capital Spending & Balance Sheet

W&T Offshore spent $32.2 million capital through the December quarter on oil and gas resources.

As of Dec 31, 2019, the company had approximately $32.4 million in cash and cash equivalents. It also had $139.2 million remaining under its revolving bank credit facility. The company had $719.5 million in long-term debt.

Proved Reserves Grow

As of Dec 31, 2019, the company reported proved reserves at 157.4 MMBoE, up 87% from 2019-end reserves of 84 MMBoE.

Guidance

W&T Offshore expects production for first-quarter 2020 within 49,600-54,800 Boe/d. For the full year, its production view is pegged at 47,100-52,100 Boe/d, compared with last year’s 40,600 Boe/d.

Full-year 2020 capital expenditures, excluding acquisitions, are projected in the range of $50-$100 million, lower than last year’s $125.7 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted -700% due to these changes.

VGM Scores

At this time, W&T has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile 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.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. 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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