W&T Offshore expects 2021 production slightly lower than full-year 2020 average
W&T Offshore Inc. set a preliminary 2021 capital expenditure budget of $30-60 million weighted to late 2021, potentially benefitting production in 2022 and resulting in 2021 production guidance of 38,000-42,000 boe/d—slightly lower than full-year 2020 average, but higher than the fourth-quarter 2020 rate, the company said in a Mar. 3 release. First quarter production is expected to come in at 37,300-41,300 boe/d.
Under current commodity pricing conditions, W&T intends to focus on generating free cash flow which can be used toward debt reduction and additional accretive acquisitions.
The 2021 capital program will be focused on lower-risk, high-return projects. For the year, the company expects to spend $17-21 million on asset retirement obligations (ARO) compared to $3.3 million spent on ARO in 2020.
In fourth-quarter 2020, the company produced 38,261 boe/d (47% liquids), reflecting an 11% increase from third-quarter 2020 as production was brought back online from hurricanes and other unplanned downtime.
Production for 2020 was 42,046 boe/d, or 15.4 MMboe, comprised of 5.6 million bbl of oil, 1.7 million bbl of NGLs, and 48.4 bcf of natural gas. Full year 2019 production averaged 40,634 boe/d, or 14.8 MMboe, and included 6.7 million bbl of oil, 1.3 million bbl of NGLs, and 41.3 bcf of natural gas.
While production increased year-over-year primarily due to the full year impact of additional production from the Mobile Bay and Magnolia acquisitions, 2020 production was negatively impacted by the eight named storms that entered the Gulf of Mexico. In addition, and to a lesser extent, the company experienced unplanned downtime at Mobile Bay, planned downtime at Magnolia field, and a combination of operated and non-operated production shut-in due to the decline in oil prices, and natural decline.
In March 2020, due to the uncertain commodity outlook considering the COVID-19 pandemic, W&T suspended drilling and completion activities and reduced its 2020 capital expenditure budget to $15-25 million from its prior level of $50-100 million. Capital expenditures in the fourth quarter (excluding acquisitions) were $3 million. Capital expenditures for full-year 2020 were $17.6 million.
W&T reported net income for full-year 2020 of $37.8 million and adjusted net loss of $22.9 million compared to full-year 2019 net income of $74.1 million and adjusted net income of $85.9 million.
Operations
W&T drilled one well in first-quarter 2020 at East Cameron 338/349, the Cota well, but suspended all other drilling activity in 2020 due to the uncertain pricing environment.
The well is in over 290 ft of water and was drilled to over 6,000 ft TD and encountered 100 ft of net oil pay. The well is in the development phase and initial production is expected in the latter part of 2021. W&T holds an initial 30% working interest in the well but the interest will increase to 38.4% once the well is brought online and certain performance thresholds are met.
The company participated in two federal GoM lease sales in 2020 and was awarded four blocks including Eugene Island Block 345, Eugene Island South Addition Block 389, and Ewing Banks Block 979, all in shallow water, and Garden Banks Block 782 in deepwater. About $1.2 million was invested in the leases.
During fourth-quarter 2020, two workovers were performed adding 800 net boe/d total production.
In January 2021, the company completed consolidation of its two onshore natural gas treatment plants that service the Mobile Bay area into the Onshore Treating Facility acquired in 2019 from ExxonMobil and closed its Yellowhammer treatment plant. The consolidation is expected save the company $5 million/year beginning in 2021.