W&T Offshore Inc

W&T Offshore, Inc. (NYSE: WTI) is an independent oil and natural gas producer. The Company is engaged in the exploration, development and acquisition of oil and natural gas properties in the Gulf of Mexico. It has a working interest in over 53 offshore producing fields in federal and state waters (which include 44 fields in federal waters and nine in state waters).

Recent Financial and Business Updates:

• Strategic Term Loan Modification Enhances W&T Offshore’s Liquidity and Stability: W&T Offshore, Inc. (NYSE: WTI) has strategically modified its first-lien non-recourse term loan with Munich Re Reserve Risk Financing, Inc. to boost liquidity throughout 2024 without increasing net leverage. Originally established on May 19, 2021, with a principal balance of USD 215 million, the term loan has been amortized to USD 114 million as of December 31, 2023. Key amendments include deferring around USD 30 million in principal payments due in 2024, effectively extending the weighted average maturity while maintaining the final maturity date of May 19, 2028. Principal repayments will recommence in the first quarter of 2025, with an option to catch up on deferred amortization via excess cash flow sweeps. The fixed interest rate remains at 7.00%, and the revised prepayment premiums decrease progressively over the loan term. An amendment fee of USD 200,000, payable in four quarterly installments starting in Q1 2024, has been instituted. Initially, W&T transferred its Mobile Bay Area assets to special purpose vehicles in exchange for the loan's net proceeds, preserving the upside value through 100% ownership of the SPVs.
• First Quarter 2024 Achievements: In January 2024, W&T Offshore, Inc. successfully completed the accretive acquisition of six shallow water Gulf of Mexico fields, known as the Cox acquisition, for USD 77.2 million. This acquisition grants W&T a 100% working interest in these fields, which are adjacent to existing operations. Additionally, select Cox offshore personnel were hired, and all necessary regulatory transfers were completed. Integration efforts included accounting, production reporting, cost tracking, and ensuring compliance with W&T’s health, safety, and environmental standards. An independent engineering report by Netherland Sewell and Associates (NSAI) reported year-end 2023 proved reserves of 21.8 million barrels of oil equivalent (MMBoe), surpassing the expected 18.7 MMBoe.
• Production and Revenue: W&T generated 35.1 thousand barrels of oil equivalent per day (MBoe/d) in Q1 2024, a 3% increase over the previous quarter. Despite the shut-in of three Cox fields during the quarter, the company achieved Adjusted EBITDA of USD 49.4 million, marking a 10% increase from Q4 2023. Net cash from operating activities was USD 11.6 million, with Free Cash Flow at USD 32.4 million, continuing the company's streak of 25 consecutive quarters of positive Free Cash Flow. W&T’s Q1 2024 revenue was USD 140.8 million, up 6% from Q4 2023 due to increased production and slightly higher realized prices.
• Financial Performance: W&T reported a net loss of USD 11.5 million, or USD (0.08) per diluted share, and an Adjusted Net Loss of USD 7.6 million, or USD (0.05) per share. The company ended Q1 2024 with USD 94.8 million in cash and cash equivalents and a Net Debt of USD 296.4 million. The Net Debt to trailing twelve months (TTM) Adjusted EBITDA ratio was 1.6x, reflecting a low leverage profile. W&T paid quarterly dividends of USD 0.01 per share in December 2023 and March 2024, and declared a similar dividend for Q2 2024.
• Operational Expenses: Lease operating expenses (LOE) for Q1 2024 were USD 70.8 million, influenced by higher base lease operating costs due to the Cox acquisition. Gathering, transportation costs, and production taxes totaled USD 7.5 million, while depreciation, depletion, and amortization (DD&A) was USD 10.61 per Boe. General and administrative expenses (G&A) were USD 20.5 million, reflecting higher payroll and benefits-related costs. W&T also recorded a net gain of USD 4.9 million from commodity derivative contracts.
• Prospects: W&T's balance sheet remains robust, with total available liquidity of USD 144.8 million, including USD 50.0 million of borrowing capacity under its revolving facility. The company’s strategic initiatives and continued investment in high-performance connectivity solutions position it well for future growth, despite current industry challenges.
• Well Recompletions and Workovers: In the first quarter of 2024, W&T Offshore, Inc. undertook three workovers and three recompletions, significantly boosting production for the period. The Company remains committed to these low-cost, quick-return operations, which are instrumental in enhancing both production and revenue.
• Cash Dividend Policy: W&T paid its first-quarter 2024 dividend of USD 0.01 per share on March 25, 2024, to shareholders of record as of March 18, 2024. The Board of Directors has declared a second-quarter 2024 dividend of USD 0.01 per share, scheduled for payment on May 31, 2024, to shareholders of record on May 24, 2024.
• Addition to W&T’s Board of Directors: In April 2024, W&T's Board of Directors expanded its size to six members and appointed Mr. John D. Buchanan to fill the vacancy, effective April 8, 2024. Mr. Buchanan will stand for election at the upcoming annual shareholders' meeting. With over 30 years of experience as an oil and gas, commercial, and banking attorney, Mr. Buchanan brings valuable expertise to the Board. His previous roles include Assistant General Counsel at ExxonMobil and General Counsel and Corporate Secretary at the Federal Reserve Bank of Dallas.

Technical Observation (on the daily chart)

Presently, the stock has corrected by approximately 49.71% since reaching its highest point in the past 52 weeks, which occurred on September 05, 2023. The Relative Strength Index (RSI) over a 14-day period stands at 44.75, with expectations of bullish divergence, indicating a state of potential consolidation or a short-term upward momentum. Additionally, the stock's current positioning is below both the 21-day Simple Moving Average (SMA) and the 50-day SMA, which may serve as dynamic short-term resistance levels. Furthermore, the price is currently near an important support zone of USD 2.00 -USD 2.20.

As per the above-mentioned price action, recent key business and financial updates, momentum in the stock over the last month, and technical indicators analysis, a ‘Speculative Buy’ rating has been given to W&T Offshore, Inc. (NYSE: WTI) at the current market price of USD 2.29 as of May 28, 2024, at 08:05 am PDT. 

Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc. 

How to Read the Charts?

The yellow colour line reflects the 21-period simple moving average (SMA) while the blue line indicates the 50- period simple moving average (SMA). SMA helps to identify existing price trends. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The orange colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The red and green colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps with easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices. 

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

RSI: Relative Strength Index

USD: United States dollar 

Note: Trading decisions require a thorough analysis by individual. Technical reports in general chart out metrics that may be assessed by individuals before any stock evaluation. The above are illustrative analytical factors used for evaluating the stocks; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance. 

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is May 28, 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the New York Stock Exchange (NYSE), NASDAQ Capital Markets (NASDAQ), and or REFINITIV. Typically, all sources (NYSE, NASDAQ, or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’