W&T Offshore Inc, Company Intelligence Report

Wednesday 11 July 2012, Amsterdam

Blending Organic and Inorganic Growth to Improve its Operational Performance
W&T’s production has been declining consistently during the period 2007–2010 at a compounded average rate of -11.6%. However, the company managed to increase the production by increasing its organic and inorganic activities during 2011. W&T has primarily been present in offshore projects; however, it started focusing on onshore projects after the shut-down in the GoM due to the Deepwater Horizon oil spill. W&T possesses technical expertise in offshore operations, but was compelled to focus on onshore projects due to this event.

Shifting Towards Onshore Assets to Offset Production Decline
W&T has been involved in seeking growth opportunities to drive its future production. In line with this, the company has acquired interest in two major projects, namely the Yellow Rose Project and Terry County in the Permian basin. W&T acquired 21,400 net acres in the Texan counties of Martin, Dawson, Andrews and Gaines in the Permian basin in May 2011. The acquired acreage consists of 91% oil and liquids, currently producing 2,920boe/d. In addition, the transaction agreement includes proved reserves of around 30 MMboe and probable reserves of 25 MMboe. W&T is currently involved in drilling development wells, primarily targeting Wolfberry Trend in Yellow Rose Project. It drilled between 27 and 30 vertical wells in 2011, each costing about $2.1m to drill and complete. W&T also acquired 9,100 net acres in the Terry County project during 2011. The company has raised its working interest in Terry County from 35.6% to 80%. W&T managed to drill 10 wells as of September 30, 2011, and the company has drilled three more wells durimg the end of 2011. Additionally, the company’s 80 acres in the Terry County project added around 11 MMboe of reserves by 2011.

Apart from the West Texas Permian basin projects undergoing development, the company also has other successful prospects, including the Star Project in East Texas. W&T has a 97% working interest in the Star Project, which is expected to hold 300bcfe of resource potential. Recently, the company completed one horizontal exploration well which targets the conventional reservoir.

Still Mapping Offshore Opportunities; Equipped with Experience and Expertise
The company has historically been involved in exploring and developing various offshore projects, but recently shifted its focus towards developing onshore projects in order to offset a production decline. W&T currently owns a working interest in 67 fields in the GoM, of which 80% were operating during 2011. The company holds 553,212 net acres of net developed and undeveloped land in the GoM, which is producing around 300 MMcfe/d during 2010–2011. W&T made several acquisitions in the GoM in order to enhance its production and profitability in 2011, and the integration of the recently obtained Matterhorn field and Tahoe field is expected to lead to an increase in reserves and production. In August 2011, W&T also acquired interest in Fairway field in offshore Alabama, and the Yellowhammer gas plant, which resulted in the addition of around 54.5bcfe of proved reserves, 92% of which are developed. The company has been actively involved in drilling offshore wells in Fairway field in the GoM, having successfully drilled five offshore wells as of September 2011, with a further four wells completed at the end of 2011. Moreover, the company’s active workover and recompletion program adds to overall production, and is expected to enhance returns.

The report expects that the combination of organic and inorganic activities will diminish the production decline from existing matured assets. The company has started exploring new avenues of onshore projects which will improve their upstream portfolio.