Business Overview Decades of Gulf of America Expertise
WT Offshore, Inc. (WTI) is an independent oil and natural gas producer with a strong focus on the Gulf of America region. With over four decades of experience, the company has established itself as a resilient player, weathering industry cycles and capitalizing on strategic acquisitions to drive growth.
WT Offshore was founded in 1983 by its current Chairman and CEO, Tracy Krohn, who has led the company's expansion and development over the past four decades. Since its founding, the company has developed significant technical expertise in finding and developing properties in the Gulf of Mexico with existing production. WT Offshore has successfully discovered and produced properties on the conventional shelf and in the deepwater regions of the Gulf of Mexico.
Over the years, the company has continually grown its footprint in the Gulf of Mexico through acquisitions, exploration, and development. As of December 31, 2024, WT Offshore held working interests in 52 offshore producing fields in federal and state waters. The company's producing fields are located in water depths ranging from less than 10 feet up to 7,300 feet.
Throughout its history, WT Offshore has faced several challenges. The company's operations in the Gulf of Mexico made it particularly vulnerable to the effects of hurricanes on production and operations. Significant hurricane impacts included reductions and/or deferrals of future oil and natural gas production and revenues, increased lease operating expenses for evacuations and repairs, and possible acceleration of plugging and abandonment costs.
Additionally, WT Offshore has had to navigate changes in the regulatory environment, including new deepwater drilling laws, regulations, and other restrictions imposed by the government. Compliance with these added or more stringent regulatory requirements, together with uncertainties or inconsistencies in decisions by governmental agencies, has at times led to delays in the processing and approval of drilling permits and exploration, development, oil spill response, and decommissioning plans. The company has worked to manage these challenges through its operational expertise and financial discipline.
Navigating Industry Challenges Resilience and Adaptability
Over the years, WT Offshore has demonstrated its ability to navigate industry challenges, including fluctuating commodity prices, regulatory changes, and operational disruptions. The company's financial and operational discipline has been instrumental in weathering these storms.
In 2024, WT Offshore generated $154 million in adjusted EBITDA and $45 million in free cash flow, despite the impact of hurricanes and other operational downtime. The company's production for the year averaged 33,300 barrels of oil equivalent per day, reflecting its ability to maintain a stable production profile.
Financials and Liquidity
WT Offshore's financial performance in 2024 showed resilience despite challenging market conditions. The company reported total revenues of $525.26 million for the year, a slight decrease from $532.66 million in 2023. This decline was primarily due to a $19.28 million reduction in natural gas revenues, partially offset by increases of $14.23 million in oil revenues and $2.12 million in other revenues.
The company's oil production volumes increased to 5.25 million barrels (MBbls) in 2024 from 5.05 MBbls in 2023, while NGL production declined to 1.21 MBbls from 1.42 MBbls, and natural gas production decreased to 34.30 million cubic feet (MMcf) from 37.59 MMcf. On a total oil equivalent basis, production decreased to 12.18 million barrels of oil equivalent (MBoe) in 2024 from 12.73 MBoe in 2023.
Despite the slight revenue decline, WT Offshore's net loss narrowed to $87.14 million in 2024 from a net loss of $15.60 million in 2023, primarily due to a decrease in derivative gains and an increase in operating expenses, including higher lease operating, depreciation, depletion and amortization, and general and administrative costs.
For the most recent quarter (Q4 2024), WT Offshore reported revenue of $120.35 million and a net loss of $23.36 million. Compared to Q4 2023, revenue decreased by 9.04% due to lower realized commodity prices.
The company's capital expenditures increased to $176.91 million in 2024 from $110.01 million in 2023, with the majority of the spending on the acquisition of proved oil and natural gas properties ($98.28 million) and development costs ($71.88 million). WT Offshore funded these investments primarily through operating cash flows and cash on hand.
To further strengthen its balance sheet and financial flexibility, WT Offshore took several strategic actions in early 2025. The company issued $350 million in new senior second lien notes, which allowed it to redeem its outstanding $275 million of second lien notes and pay off a $114 million term loan. Additionally, WT Offshore entered into a new $50 million revolving credit facility, providing ample liquidity to fund its operations and pursue growth opportunities.
As of December 31, 2024, WT Offshore had $109 million in cash and cash equivalents and $50 million in available borrowing capacity under its credit facility. The company's debt-to-equity ratio stood at -5.19, while its current ratio and quick ratio were both 0.89. These metrics highlight WT Offshore's proactive approach to managing its debt and maintaining a strong financial position, enabling the company to weather industry downturns and position itself for long-term success.
Reserves Growth and Operational Execution
WT Offshore's focus on optimizing its existing asset base and selectively acquiring complementary properties has driven consistent growth in its proven reserves. As of December 31, 2024, the company's total proved reserves stood at 127 million barrels of oil equivalent, a 3% increase from the prior year.
Notably, WT Offshore's oil reserves increased by 39% in 2024, driven by the oil-weighted Cox acquisition and positive performance revisions. This growth in higher-value oil reserves enhances the company's overall asset quality and cash flow generation potential.
The company's operational execution has also been a hallmark of its success. WT Offshore's lease operating expenses for 2024 came in at the low end of its guidance range, reflecting the company's focus on cost control and operational efficiency. Furthermore, the company's safety performance in 2024 was exemplary, with the offshore team achieving zero accidents during the year.
Looking Ahead Positioning for Growth and Shareholder Returns
As WT Offshore enters 2025, the company is well-positioned to capitalize on its strong asset base and financial flexibility. The company's production guidance for the full year 2025 points to a midpoint of 34,000 barrels of oil equivalent per day, a 6% increase over the fourth quarter of 2024.
For the first quarter of 2025, WT Offshore is predicting the midpoint of production to be around 29,000 barrels of oil equivalent per day, due to planned facility and pipeline maintenance projects as well as unplanned downtime at several fields.
WT Offshore's capital expenditure budget for 2025 is expected to be in the range of $34 million to $42 million, a relatively modest figure that reflects the company's disciplined approach to investing. Despite this lower level of capital spending, the company anticipates being able to offset natural production declines and grow output, underscoring the quality and resilience of its asset portfolio.
The company's guidance for 2025 lease operating expense (LOE), gathering, transportation, and production taxes, and G&A costs are in line with 2024 levels. Specifically, WT Offshore's first quarter 2025 LOE is expected to be between $72.5 million and $80.5 million, and first quarter cash G&A costs are expected to be between $17.8 million and $19.8 million.
In addition to its operational focus, WT Offshore has demonstrated a commitment to returning capital to shareholders. In late 2023, the company reinstated a quarterly cash dividend program, which it has continued to pay. The company's ability to generate steady free cash flow and maintain a strong balance sheet has enabled it to pursue this shareholder-friendly initiative.
Conclusion A Proven Gulf of America Player Poised for the Future
WT Offshore's long history of navigating industry challenges, executing strategic acquisitions, and maintaining operational excellence has positioned the company as a resilient player in the Gulf of America. With a high-quality asset base, financial discipline, and a focus on shareholder returns, WT Offshore is well-equipped to capitalize on future opportunities and continue delivering value to its investors.
The company's single-segment focus on offshore oil and gas exploration and production in the Gulf of America continues to be the primary driver of its financial results. WT Offshore leverages advanced seismic and geoscience tools to execute successful drilling projects across its diverse portfolio of operations in the shelf, deep shelf, and deepwater areas of the Gulf.
WT Offshore (WTI) has demonstrated its ability to adapt and thrive in the dynamic energy landscape, making it a compelling investment opportunity for those seeking exposure to the Gulf of America's offshore oil and gas production.