Q2 2025 W & T Offshore Inc Earnings Call

Speaker 3: Ladies and gentlemen, thank you for standing by. Welcome to the W&T Offshore second quarter 2025 conference call. During today's call, all parties will be in listen-only mode. Following the company's prepared comments, the call will be open for questions and answers. During the question and answer session, we ask that you limit your questions to one and a follow-up. You can always rejoin the queue. This conference call is being recorded, and a replay will be available on the company's website following the call. I would now like to turn the conference over to Al Petrie, investor relations coordinator.

Ladies and gentlemen, thank you for standing by. Welcome to the w&t. Offshore second quarter 2025 conference call. During today's call all parties, will be in listen-only mode.

Following the company's prepared, comments the call will be open for questions and answers.

During the question and answer session, we ask that you limit your questions to 1 and a follow-up. You can always rejoin the queue.

This conference call is being recorded and a replay will be available on the company's website. Following the call.

Al Petrie: Thank you, Jaylene. And on behalf of the management team, I would like to welcome all of you to today's conference call to review W&T Offshore's second quarter 2025 financial and operational results. Before we begin, I would like to remind you that our comments may include forward-looking statements. It should be noted that a variety of factors could cause W&T's actual results to differ materially from the anticipated results or expectations expressed in these forward-looking statements. Today's call may also contain certain non-GAAP financial measures. Please refer to the earnings release that we issued yesterday for disclosures on forward-looking statements and reconciliations of non-GAAP measures. With that, I'd like to turn the call over to Tracy Krohn, our chairman and CEO.

I would now like to turn the conference over to Al Petri investor relations coordinator.

Thank you Kayla. And I'd be happy to team. I'd like to welcome all of you to today's conference call to review WT offshores, second quarter, 2025 financial and operational results.

Before we begin, I would like to remind you that our comments may include forward-looking statements. It should be noted that a variety of factors could cause wt's actual results to differ materially from the anticipated results or expectations expressed in these forward-looking statements.

Tracy Krohn: Thanks, Al. Morning, everyone, and welcome to our second quarter conference call for 2025. With me today are William Wilford, our executive vice president and chief operating officer; Amir Paraskos, our executive vice president and chief financial officer; and Trey Hartman, our vice president and chief accounting officer. They're all available to answer questions later during the call. So before we discuss the second quarter results, I would like to say how proud I am of all the people who've helped make W&T a success since we founded the company in 1983. We've been an active operator in the Gulf of America and a staunch advocate for the offshore industry for over 40 years. Yesterday, I was honored to celebrate the 20th anniversary of W&T going public by ringing the closing bell at the New York Stock Exchange.

Also contains certain non-GAAP financial measures. Please refer to the earnings release that we issued just today for disclosures on forward-looking statements and reconciliations of non-GAAP measures with that. I'd like to turn the call over to Tracy Krohn, our chairman and CEO. Thanks, Al. Morning everyone. Welcome to our second quarter conference call for 2025.

With me today are William, Wilfred our Executive Vice President and Chief Operating Officer Samir parasmus, our Executive Vice President, and Chief Financial Officer and Trey Hartman, our vice president and chief accounting officer.

They're all available to answer questions later during the call.

Tracy Krohn: We're conducting today's earnings call from the New York Stock Exchange, where I have several media interviews scheduled that will give us a chance to discuss the company. As you will hear throughout the call today, we're continuing to enhance shareholder value through operational excellence and maximizing production across our impressive portfolio of assets. Across the first half of 2025, we've delivered strong operational and financial results. Quite simply, we're executing on a proven and successful strategy that's committed to profitability, operational execution, returning value to our stockholders, and ensuring the safety of our employees and contractors. Our ability to deliver production and EBITDA growth while seamlessly integrating accredited producing property acquisitions has helped W&T grow during our 40-year history. Some of our second quarter highlights include we increased production by 10% quarter over quarter to 33,500 barrels of oil equivalent per day. That's within our guidance range.

So before we discuss the second quarter results, I would like to say how proud I am of all the people who've met helped make WT a success. Since we founded. The company, in 1983, we've been an active operator in the Gulf of America, and a staunch advocate for the, uh, offshore industry for over 40 years. Yesterday I was honored to celebrate the 20th anniversary of wnt going public by ringing. The closing bell at the at the uh, New York Stock Exchange.

We're conducting today's earnings call from New York Stock Exchange where I have several uh media interviews. Scheduled that will give us a chance to discuss the company.

As you will hear throughout the call today, we're continuing to enhance shareholder value through operational excellence and maximizing production across. Our impressive, portfolio of assets.

Across the first half of 2025, we've delivered strong operational and financial results. Quite simply we're executing on our proven and successful strategy, that's committed to profitability operational execution,

Returning value to our stockholders.

And ensuring the safety of our employees and contractors our ability to deliver production needed today. Eva growth

While seamlessly integrating a creative producing property, acquisitions have helped W&T growth during our 40-year history.

Some of our second quarter highlights include.

Tracy Krohn: Also, we performed nine low-cost, low-risk workovers that exceeded expectations and positively impacted production and revenue for the quarter. I'd like to point out that five of the workovers were performed in Mobile Bay, helping to increase production at this low-decline long-life asset, which is also our largest natural gas field and the largest natural gas field in the Gulf of America. Total lease operating expenses were $77 million, again within guidance. We grew adjusted EBITDA by 9% to 35 million compared to the first quarter of 2025. We've also grown our unrestricted cash to over $120 million while lowering our net debt by about $15 million to under $230 million.

We increase production by 10% quarter over quarter to 33500 barrels oil equivalent per day. That's within our guidance range.

Also perform 9, low cost low risk work overs that exceeded expectations and positively impacted production of revenue for the quarter. I'd like to point out that 5 of the work overs were performed in Mobile Bay, helping to increase production at this low decline, long, life assets, which is also our net, our largest natural gas field, and the largest natural gas field in the Gulf of America.

Total lease operating expenses were 77 million again within guidance.

We grew adjusted, even even the a by 9% to 35 million.

Uh, compared to the first quarter of 2025.

Tracy Krohn: Our 2025 mid-year reserve report generated by Nell and Sewell Associates showed net positive revisions of 1.8 million barrels of oil equivalent, which continues to demonstrate the strength of our asset base and our ability to maximize value from our fields. None of this included any drilling activity. We accomplished all of this while also returning value to our shareholders through our quarterly dividends. We've paid seven quarterly cash dividends since initiating the dividend policy in late 2023 and announced the third quarter 2025 payment that will occur later this month. Additionally, in the first quarter of this year, we had several transactions that strengthened and simplified our balance sheet, adding material cash to the bottom line and improving our credit ratings from S&P and Moody's.

We've also grown our unrestricted cash to over 120 million dollars while lowering our net debt by about 15 million to, under 230 million.

Our 2025 mid year Reserve report generated by uh Netherlands and Associates showed net positive revisions of 1.8 million, barrels of oil equivalent which continues to demonstrate the strength of our asset base and our ability to to maximize value from our Fields. None of this included, any drilling activity.

We accomplished all of this while also returning value to our shareholders through our quarterly dividend. We've paid seven quarterly cash dividends since initiating the dividend policy in late 2023, and we have announced the third quarter 2025 payment that will occur later this month.

Tracy Krohn: So in January, we successfully closed a $350 million offering of new second lien notes that increased our interest rate by 100 basis points, excuse me, decreased our interest rate by 100 basis points, and together with other transactions, reduced our total debt by $39 million. We also entered into a new credit agreement for a $50 million revolving credit facility, which matures in July of 2028. That's undrawn and replaces the previous 50 million credit facility provided by Calculus Lending. We also sold a non-core interest at Garden Banks, which included about 200 barrels of oil equivalent per day for $12 million, and we received $58 million in cash for an insurance settlement related to the Mobile Bay 78-1 well. All of these actions have allowed us to enhance liquidity, improve, and improve our financial flexibility.

Additionally, in the first quarter of this year, we had several transactions that strengthened and simplified our balance sheet, adding material cash to the bottom line and and improving our credit ratings from S&P and Moody's.

So in January, we successfully closed 350 million offering of new second year. Second lean notes that increased our interest rate by 100 basis points.

Excuse me, decreased our interest rate by 100 basis points and together with other transactions reduce our total debt by 39 million.

We also entered into a new credit agreement for a fifty million dollar revolving credit facility, which returns in June, in July of 2028, that's undrawn and replaces the previous 50 million credit facility provided by calculus Lending.

We also sold a non-core interest at Garden Banks, which included about 200 barrels of equipment per day for 12 million dollars and we received 58 million in cash for an insurance settlement related to the mobile base having 8-1. Well,

Tracy Krohn: Lastly, in the first half of 2025, we've opportunistically taken advantage of commodity price volatility to increase our hedge position. So we added costless collars for both oil and natural gas, including 2,000 barrels per day of oil for July through December 2025, with a floor price of $63 per barrel and a ceiling price of $77.25 per barrel. For natural gas, we have costless collars for 70 million cubic feet per day from July to December 2025. This has helped lock in a very favorable price range for a portion of our oil and natural gas for the remainder of 2025. So our ability to execute our strategy has delivered very positive results thus far in 2025, including an improved balance sheet, enhanced liquidity, lowering production, and EBITDA, all of which has positioned us for success in the second half of 2025 and beyond.

Is to enhance the crediting improve and improve our financial flexibility.

Lastly, in the first half of 2025 we've opportunist opportunistically taken, advantage of commodity price, volatility, to increase our hedge position. So we added Costless collars for both oil and natural gas including 2,000 barrels per day of oil for July through December 2025 with a 40 parts of 63 dollars per barrel and a seating price of 77 and 25 cents per barrel.

For natural gas. We have Costless colors for 70 million cubic feet per day from July, to December 2025.

This has helped lock in a very favorable price range for portion of our oil and natural gas for the remainder of 2025.

So, our ability.

Tracy Krohn: At year-end 2024, the company had total debt of $393 million and net debt of $284 million. At the end of the second quarter of 2025, our total debt and net debt were significantly reduced to $350 million and $229 million, respectively. Our liquidity at June 30, 2025, increased to $171 million. So CAPEX in the second quarter of 2025 was $10 million, and asset retirement settlement costs totaled $12 million. For the first half of 2025, our CAPEX has totaled $19 million, and asset retirement costs were $16 million. We continue to expect our full-year capital expenditures to be between $34 million and $42 million. This does not include potential acquisition opportunities. We will remain focused on accredited low-risk acquisitions of producing properties rather than high-risk drilling in the current uncertain commodity price environment.

To execute our strategy has delivered very positive results, this thus far in 2025, including an improved balance sheet. Enhanced liquidity growing production and even de all of, which has positioned us for success in the second half of 2025 and Beyond. At year in 2024, the company had total debt of 393 million and net debt of 284 million. At the end of the second quarter of 2025, our total debt and net debt were significantly reduced to 350 million and 229 million respectively.

Are are liquidity at June 3025, increased to 171 million.

so capex in the second quarter of 2025 was 10 million and asset retirement settlement costs, total 12 million for the first half of 2025, our capex is totaled, 19 million, and asked that retirement costs were 16 million

We continue to expect our full year, Capital expenditures to be between 34 million and 42 million. This does not include potential acquisition opportunities.

Tracy Krohn: These acquisitions must meet our stringent criteria of generating free cash flow, providing a solid base of free reserves with upside potential, and offer the ability for our experienced team to reduce costs. Over the years, we've consistently created significant value by methodically integrating producing property acquisitions. The assets we acquired last year added meaningful reserves at an attractive price, and we are now seeing additional production from two fields that were previously shut in. The West Delta 73 and Main Pass 108/98 fields were placed into production towards the end of March and into early April. The fields began ramping up production over the course of the second quarter of 2025, and we expect production to continue to increase in the second half of this year on these fields. That'll be seen in our third quarter guidance as well.

We will remain focused on a creative low-risk acquisition to producing properties rather than high-risk Drilling in the current uncertain commodity price environment.

These acquisitions must meet our stringent criteria of generating free cash flow, providing a solid base of approved reserves with upside potential, and offering the ability for our experienced team to reduce costs.

Over the years, we've consistently created significant value on methodically integrated producing property acquisitions.

The assets we acquired last year, added meaningful Reserves at an attractive price. And we are now seeing additional production from 2 fields that were previously shut in the west. Delta. 73 and Main pass 10898 Fields were placed in the production towards the end of March. And into early April. The fields began ramping up production over the course of the second quarter of 2020.

Tracy Krohn: There was a temporary shut-in of production in Mobile Bay during the second quarter due to a pipeline issue that was resolved by June 30th that reduced second quarter production by about 1,000 barrels of oil equivalent per day. So yesterday, we provided our detailed guidance for third quarter 2025 and reiterated our full-year guidance. In the third quarter of 2025, with new fields continuing to ramp up, coupled with the strong work over and recompletion program performance, we are predicting the midpoint of Q3 2025 production to be around 35,000 barrels of oil equivalent per day. This is an increase of almost 5% compared to the second quarter of 2025. This is quite remarkable considering we currently do not have any drilling operations. Thus, we are spending minimal capital, and our LOE costs are remaining flat.

5. We expect production to continue to increase in the second half of this year from these fields. That will be seen in our third quarter guidance as well. There was a temporary shut-in in production in Mobile Bay during the second quarter due to a pipeline issue that was resolved by June 30.

That reduced second quarter production by about a thousand barrels oil equivalent per day.

So yesterday, we provided our detailed guidance for for a third quarter 2025 and reiterated, our full year guidance.

Tracy Krohn: So the third quarter guidance for our cash operating costs, which includes LOE, gathering, transportation, and production taxes, and cash G&A costs, is in line with the second quarter of 2025. With absolute costs remaining flat and production expected to increase, we believe that on a per BOE basis, we will see decreases. We also believe that there are more opportunities to reduce our operating costs and find synergies to drive costs lower in the long term. We're always working hard to reduce costs without impacting safety or deferring asset integrity work. So I'd now like to talk to you about our mid-year 2025 reserve report. In our release yesterday, we reported SEC approved reserves of 123 million barrels of oil equivalent, which was slightly lower than the 127 million barrels equivalent at year-end 2024.

In the third quarter of 2025 with new Fields continuing to ramp up coupled with the strong work over and recomp completion program performance. We are predicting the midpoint of Q3 2025 Productions to be around 35,000 barrels. Oil equivalent per day, this is an increase of almost 5% compared to the second quarter of 2025. This is quite remarkable, considering it. We currently do not have any drilling operations. Thus, we are spending minimal capital and our Eloise costs are remaining flat.

So, the third quarter of guidance for our cash operating costs which includes eloe Gathering transportation and production, cashes, taxes, and cash GNA costs is in in line with the second quarter of 2025

With absolute cost, remaining flat and production expected to increase. We believe that on a per Boe basis, we will see decreases

We also believe that there are more opportunities to reduce our operating costs and find synergies to drive costs lower in the long term.

Tracy Krohn: This reduction was primarily driven by production of 5.8 million barrels of oil equivalent in the first half of 2025, which was partially offset by 1.8 million barrels of net positive revisions. We're pleased with another report that has positive revisions despite drilling no new wells and spending minimal capital in 2025. This highlights the strength of our prolific asset base and our operational capabilities to economically extract reserves from long-life assets. We operate about 94% of our mid-year approved reserves, which gives us maximum flexibility in controlling our operations during periods of volatile commodity prices. So approximately 44% of mid-year 2025 SEC approved reserves were liquids with 34% crude oil and 10% NGLs, and we had 56% natural gas.

Uh, equivalent at year-end 2024, this reduction was primarily driven by production of 548 million barrels of oil equivalent in the first half of 2025 and was partially offset by 1.8 million barrels of net positive revisions. We're pleased with another report that has positive revisions despite drilling no new wells and spending minimal capital in 2025. This highlights the strength of our prolific asset base and our operational capabilities to economically extract reserves from the long-life assets we operate. We operate about 94% of our mid-year approved reserves, which gives us maximum flexibility in controlling our operations during periods of volatile commodity prices.

Tracy Krohn: With the continued strengthening of natural gas pricing and the recent European LNG deals, we believe having a strong natural gas position located in close proximity to LNG facilities will position W&T very well in the future. We have long enjoyed a premium over Henry Hub pricing and see that continuing in the future with the increased demand in our operating region. The pre-tax PV10 of the mid-year 2025 approved reserves using SEC pricing was flat at $1.2 billion compared with year-end 2024. Mid-year 2025 approved reserves in PV10 were based on average SEC 12-month crude oil and natural gas prices of $71.20 per barrel and $2.86 per MMBTU, while year-end 2024 prices were $76.32 per barrel of oil and $2.13 per MMBTU of natural gas.

So approximately 44% of mid year 2025 SEC, proved reserves were liquids with 34% crude oil and 10% ngls, and we had 56%, natural gas with a continued strengthening of natural gas pricing, and the recent European LNG deals. We Believe having a strong natural gas position. Located in close, proximity to LNG, facilities will pres will position WT very well in the future. We have long enjoyed a premium over Henry Hub pricing and see that continuing in the future with the increased demand in our operating region.

Tracy Krohn: We believe we've built a sustainable group of high-performing Gulf of America assets that will continue to provide meaningful cash flow to our shareholders for many years. So before closing, I'd like to address surety and regulatory updates. In June 2025, we were pleased with the settlement agreement that we reached with two of our largest surety providers, which called for the dismissal of a previously filed lawsuit. This outcome is very positive for W&T overall, as we will not actly ask to unjustify collateral demands made by the applicable surety, and we've locked in our historical premium rates through the end of 2026. We believe the entry into this settlement agreement vindicates our resolve to stand up to our surety providers' unjustified demands on independent oil and gas operators such as W&T.

The pre-tax PV chance of the mid-year 2025 approved reserves using SEC pricing was flat at 1.2 billion dollars compared with year-end 2024, mid-year. 2025 proved reserves, and pv10 were based on average SEC, 12-month crude oil and natural, gas prices of 71.220 cents per barrel and 286 per mmbtu. While you're in 24, 2024 prices were 76.32 per barrel of oil and 2013 cents per MMB to you of Natural Gas. We believe We built the sustainable group of high-performing Gulf of America assets that will continue to provide meaningful, cash flow, to our shareholders for many years.

so, before closing I'd like to address shy in regulatory updates,

In June 2025, we were pleased with the settlement agreement that we reached for 2 of our largest security providers which called for the dismissal of a previously filed lawsuit.

This outcome is very positive for WT overall, as we will not acquiesced to unjustified, collateral demands made by the applicable assurity and we've locked in our historical premium rates through the end of 2026.

Tracy Krohn: So additionally, at the end of June 2025, US Magistrate Judge Dina Palermo recommended denying two other surety companies' motions for preliminary injunction, through which they were collectively asked for asking for full cash collateralization of over $100 million. We couldn't be more pleased with the court's decision to prevent unnecessary and unjustified collateral demands by surety providers. For the past 40-plus years, W&T has met its plugging and abandonment obligations, paid its negotiated premiums, and operated responsibly in the Gulf of America. In fact, we've done more plugging and abandonment work than anybody in the Gulf of Mexico. We demand fairness and transparency for all oil and natural gas producers in the Gulf of America, and we'll continue to pursue the pending litigation against our other surety providers that have decided not to deal fairly with W&T and other independent oil and gas producers.

We believe the entry into this settlement agreement vindicates, our resolve to stand up to our shy providers. On justify demands on Independent oil and gas operators, such as WT.

Additionally, at the end of June 2025 us, Magistrate Judge Dena, polermo recommended denying 2. Other shy companies motions for preliminary injunction through which they were they were collectively asked for asking for full cash collateralization of over a hundred million dollars. We couldn't be more pleased with the Court's decisions to prevent unnecessary and unjustified collateral demands by sure you providers.

For the past. 40 plus years wnt has met its plugging and abandonment obligations paid its negotiated premiums and operated responsibly in the Gulf of America.

Tracy Krohn: We have done well over a billion dollars of decommissioning work in the Gulf of America, again, more than any other operator who's done on his own nickel, and we've done so safely and reliably. These are very positive results for W&T and should alleviate some of the uncertainty that has negatively impacted our stock price, despite some positive operational and financial results in 2025. So as we've mentioned during our last call in early 2025, pursuant to directives from the Trump administration, the Department of Interior indicated it will not seek supplemental financial assurance in the Gulf of America, except in the case of sole liability properties and certain non-sole liability properties that do not have a financially strong co-owner or predecessor entitlement.

In fact we've done more plug in abandonment work than anybody in the Gulf of Mexico. We demand fairness and transparency for all oil and natural gas producers in the Gulf of America and we will continue to pursue the potent. Depending litigation against our other assured providers that have decided not to deal, fairly with WT and other independent oil and gas producers.

We have done well, over a billion dollars of decommissioning work, in Gulf of America again, more than any other operators down on its own nickel. And we've done so safely and reliably. These are very positive results for WT and should alleviate some of the uncertainty that is negatively impacted our stock price, despite some positive operational. Financial results in 2025,

So as we've mentioned during our last call in early 2025 percentage of directives from the Trump Administration, the department of interior indicated, it will not seek.

Tracy Krohn: Since his inauguration, President Trump has issued a number of executive orders aimed at streamlining regulations and reducing the regulatory burden on oil and natural gas companies, increasing federal oil and natural gas leasing, including in the Gulf of Mexico, and expediting US natural gas, excuse me, natural resource development. We're very pleased with these actions. We expect these will positively impact W&T and the offshore energy industry. So in closing, I'd like to again thank our team at W&T for 20 years as an NYSE listed company. As the largest shareholder, I believe we're well positioned to continue to grow and add value in the second half of 2025. We generated solid EBITDA and raised our cash position to over $120 million. This allows us to continue to evaluate growth opportunities, both organically and inorganically.

Supplemental Financial Insurance in the Gulf of America except in the case of sole liability properties and certain non-s sole liability properties. That do not have a financially strong co-owner or predecessor entitled.

Natural gas companies are increasing federal oil and natural gas leasing, including in the Gulf of Mexico, and expediting U.S. natural gas and natural resource development.

We're very pleased with these actions. We expect these will positively impact WT and the offshore energy industry.

Closing. I'd like to again, thank our team at WT for 20 years is an NYSE listed company.

Tracy Krohn: We have a long track record of successfully integrating assets into our portfolio, and we continue to believe that the Gulf of America is a world-class basin that supports value creation. We will maintain our focus on operational excellence and maximizing the cash flow potential of our asset base. So with that, operator, we can now open lines for questions.

At the largest shareholder. I believe, we're well positioned to continue to grow and add value in the second half of 2025. We generated solidity but de and raise our cash position to over 120 million dollars. This allows us to continue to evaluate growth opportunities, both organically and inorganically. We have a long track record of successfully integrating assets into our portfolio and we continue to believe that the Gulf of America is a world class based in that supports value creation. We will maintain our focus on operational, excellence and maximizing, the cash flow potential of our asset base.

Speaker 6: Thank you. We'll now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad. You'll hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. Our first question is from Nate Pendleton with Texas Capitals. Please go ahead.

So with that operator, we can now open the lines for questions.

Thank you. We'll now begin the question and answer session to join the question queue. You may press star then 1 on your telephone keypad. You'll hear a tone acknowledging your request. If you're using a speaker-phone, please pick up your handset before pressing any keys to withdraw your question. Please press star then to

Our first question is from Nate Pendleton with Texas Capitol. Please go ahead.

Nate Pendleton: Good morning. For my first question, I wanted to start on policy. With the administration looking for ways to support the industry further, can you share your thoughts on what actions the administration may be looking at in order to incentivize production in the Gulf of America?

Good morning for my first question, I wanted to start on policy.

With the administration looking for ways to support the industry further, can you share your thoughts on what actions? The administration may be looking at in order to incentivize production in the Gulf of America?

Tracy Krohn: Thanks, Nate, and good morning. Yeah, there's a lot of things that the Department of Interior is looking at there. They've already weighed in with regard to lower royalties, and I expect, and I hope that they will weigh in on further reductions on those royalties. There's the so-called Idle Iron Act, which is kind of nonsensical to me and our company. Why do you need to prematurely abandon these wells when none of the rest of the wells on the platform have been abandoned? This was a policy brought on by the Obama administration to create havoc and essentially make it cost more deliberately. And the idea was, of course, to get rid of oil and gas companies in the Gulf of America. We've looked at some other things that we discussed with them.

Thanks, uh, Nate. Good morning. Uh, yeah, there's a lot of things that, uh, that the Department of Interior is looking at. I've already, uh, weighed in with regard to lower royalties, and I expect, uh, and I hope that they will weigh in on further reductions on those royalties. Uh, there's the so-called Idol Iron Act.

Uh, which is kind of nonsensical to me, uh, and our company, uh, why why do you need to prematurely abandon these Wells? Uh, when none of the rest of the wells are on a platform have been abandoned. Uh, this was a, a policy brought on by the Obama Administration to create havoc and and and uh um uh

Tracy Krohn: I think it's important to recognize that this administration has taken a very strong position in the fact that, yeah, we want to maximize and utilize our abilities to conserve the natural resource in the Gulf of America. President Trump and DOI have made that pledge that they're going to deal with all these things, some of the regulations getting rolled back. There will hopefully be another decision with regard to surety here. Put solidly into writing, and we're looking forward to that. Of course, you're aware that we're suing surety providers. Those are just a few. We're very hopeful that this administration gets back to the idea that oil and gas from this very important basin, by the way, the second largest producing basin and the largest by area in the United States.

essentially make it cost more deliberately. Uh and the idea was of course to get rid of oil and gas companies in the Gulf of America. Um, we we've, uh, We've looked at at, at some other things that that we discussed with them. Um, I I think it it's important, uh, to recognize that this Administration has, uh, taken a very

Taking a very strong position in the fact that, yeah, we we we want to maximize and, and, and utilize our abilities to conserve the natural resource in, in the Gulf of of America, um, president Trump, uh, and and DOI have have made that pledge that they're going to do it. We're already seeing, uh, some of the regulations getting rolled back. Um, uh, there will, hopefully be another decision with regard to shy here. Uh,

Uh, put solidly in into writing. And, and we're, we're, we're looking forward to that. Uh, of course. You're, you're aware that we're, we're showing surely providers. Uh, those are just a few. Um,

Uh, we're we're very hopeful that uh uh, this Administration gets back to the to the idea that that, uh, oil and gas from this very important Basin. By the way, the second largest producing Basin and the largest by area uh in in the United States.

Nate Pendleton: Thanks, Tracy. That's really encouraging. I'm shifting over to your operations. Implied 4Q production guidance seems very strong at the midpoint. In your prepared remarks, you talked about the increase you expected in Q3. Can you share maybe what's driving that further production ramp that you're expecting at the back half of the year?

Tracy Krohn: Yeah, I'm going to turn that over to our chief operating officer, William Wilker. He's got responsibility for that basin.

Thanks, Tracy. That's really encouraging. I'm shifting over to your operations implied 4q production guidance. It seems very strong at the midpoint and you're prepared to remarks. You talked about the increase you expected in, Q3, can you share? I mean, what's driving that further production? Ramp that, you're expecting at the back end of the year.

William Williford: Yeah. Good morning, Nate. As Tracy mentioned in the call this morning, we have a lot of low-cost workovers that we're continually doing in the third quarter, as well as a couple of recompletions to add to that production. So we also plan on ramping up one of the Cox fields we acquired last year as well to see significant production through the last part of the year.

See production through the last part of the year.

Nate Pendleton: Got it. Thanks for taking my questions.

Tracy Krohn: Thanks, Nate.

Got it. Thanks for taking my questions.

William Williford: You're welcome.

Thanks mate. You're welcome.

Speaker 6: The next, pardon me, if you have a question, please press star then one. The next question is from Jeff Robertson with Water Tower Research. Please go ahead.

Next.

If you have a question, please press star then 1.

William Williford: Thank you. Good morning. Tracy, does resolution of some of these surety and bonding issues for W&T have an impact on how you approach acquisitions? And then secondly, do they have an impact on anywhere on the balance sheet with respect to liquidity?

The next question is from Jeff Robertson. With water tower research, please go ahead.

Thank you. Good morning. Uh, Tracy do does resolution of some of these shity and bonding issues.

Tracy Krohn: Oh, absolutely. Jeff, I mean, the sureties were in collusion with one another to artificially suppress the company by virtue of demanding full collateral. It's kind of like your car insurance. If you have a car, your agent calls you up and says, "Gee, Jeff, you have a $50,000 insurance policy on your car. Would you please send me $15,000? In fact, I demand that you send me $50,000 so we can cash collateralize your account. And by the way, I'm going to increase your premiums as a result." That was the alternative that was given to us, except it was a lot better, a lot bigger nominal dollars. For us, it was around $250 million of collateral demands. And we had to sign this indemnity agreement with these companies.

Uh, for WT. You have an impact on how you approach, uh, Acquisitions and then, secondly, do they have an impact on anywhere on the balance sheet, with respect to liquidity?

Oh absolutely. Uh, do you have?

Uh uh, I mean the Shorties uh, were in collusion.

with the with 1 another, uh, to artificially um,

Uh, suppress the company by virtue of demanding full collateral.

Uh, it's kind of like your your, uh, your car insurance. We have a car, your agent calls you up and says, uh, gee, um,

Uh, Jeff, uh, you have a $50,000 insurance policy on your car, would you, please send me 15,000 dollars? In fact, I demand that. You send me $50,000. Uh, so we can cache collateralize your account. And by the way, I'm going to increase your premiums as a result.

Tracy Krohn: They all read virtually identically that you had to provide cash demand within a very, very short period of time, maybe 10 days to two weeks, and that if you didn't do so, that you were in violation of their policy. Well, several of them got together, and they all called it at about the same time for $250 million, which, by the way, just happened to be the market cap of the company at the time. I thought that that was pretty unfair. Obviously, they were all doing it at the same time. Seemed collusional to me, so we sued them. And as a result, you know, it threw the surety market into quite a bit of disarray. The idea, the very idea that you need surety is kind of preposterous to us.

Um that's that was the alternative that was given it given to us except it it was it was uh a lot better A lot, bigger nominal dollars uh for us it was around 250 million dollars of collateral demands and and we had to sign this Indemnity agreement with these companies. They all read virtually identically that you had to provide cash demand within a very, very short period of time, maybe 10 days to 2 weeks.

Uh, and that if you you didn't do so that, uh, uh, you were in violation of their policy.

Um, well, that several of them got together and they all called in about the same time for 250 million dollars, which, by the way, I just happened to be the market cap of the company at the time. Uh, I I thought that, that was pretty unfair. Obviously, they, they were all doing at the same time, uh, seemed delusional to me, so we sued them.

And, and as a result, um, you know, it it through the shy Market into, uh, uh, quite quite a bit of disarray. Um,

Tracy Krohn: The government, in spite of all the bankruptcies that have taken place in the Gulf of Mexico, the government has never, ever called a bond, even though they demand it. They demand that surety, but they've never called it. Well, the reason that they've never called it is because the lease form itself calls for joint and several liability. That means that anybody who was ever on the that ever held a record title interest is jointly and severally liable up to 100% of the obligations. So the government never had that situation. They would just go back to the predecessor title and demand that they take care of those obligations. We've had to do that ourselves. Others have had to do that. It's always been the case. That is what the lease form says.

the, uh, the idea of the very idea that that you need shy is kind of preposterous to us, the government, in spite, of all the bankruptcies that have taken place in the Gulf of Mexico, the government has never ever called a bond, even though they demanded, they demand that shy, but they've never called it. Well, the reason that they've never called it is,

because,

uh, the lease form itself calls for, uh, joint and several liability, that means that anybody that was ever on the, that ever held a record title interest is jointly and severally liable up to 100% of the obligations.

Tracy Krohn: So the government's idea that, "Gee, we need more surety," is obviously preposterous because they've never called one single damn surety demand, not once. So it's got to be a farce. It was put in by the Obama administration, further exasperated by the Biden administration. It was wholly designed to put oil and gas companies out of business.

So, the government never had that situation. They would just go back to the predecessor title and demand that they take care of those obligations. We've had to do that ourselves. Others have had to do that. It's always been the case that is what the lease form says.

so, the government's idea that you we, we need more shy is obviously Preposterous because they've never they've never

Called 1 single damn shorty.

Demand, not once. So it's got to be a farce. It was put in by the Obama Administration further exasperated by the Biden Administration. It was wholly designed to put oil and gas companies out of business.

Nate Pendleton: Tracy, do you think that resolving those issues will have an impact on M&A activity in the Gulf?

Tracy Krohn: Oh, you bet. Yeah. People will have to figure out a different way to do that assurance for other companies that'll be part of the sales price. People aren't going to, companies aren't going to stop selling properties. They use those proceeds to put into different projects that will, in fact, create more value for them. We will take those properties or the ones that we get and make them more valuable because we'll lightning focus on that. So yeah, the surety part of it will definitely undergo a great deal of change. But I think it's for the better. The obligation, the joint and several obligations are never going to go away. Even though there's been a lot of talk about that, that needs to be the case.

Tracy. Do you think that resolving those issues will um have an impact on m&a activity in the Gulf?

Oh, you bet. Yeah. The, uh, people will have to figure out a different way to do that, uh, Assurance for other companies. That'll be part of the, uh, uh sales price.

Uh, people aren't going companies aren't going to stop selling properties. Uh, they use those proceeds to, uh, put into different projects that will, in fact, create more more value for them. Uh, we will take those properties of the ones that we get and, and make them more valuable, uh, because we'll we'll lightening focus on that. Uh, so yeah, the, the, the shy, uh, part of it will will definitely, uh,

Ation the, The Joint several obligations are never going to go away.

Tracy Krohn: The reality is that the government has no obligation to do that, and it's highly unlikely that they would ever change that. Why should they? There's no reason to change it. But it will have an effect on companies like W&T and others, and we'll just have to figure out different ways to do things.

Uh even though there's there's been a lot of talk about that that needs to be the case but the reality is that the the government has no obligation to do that and and it's highly unlikely that they would ever change that. Why why should that? There's no reason to change it. Um but it will have an effect on on on uh, companies like wnt and others. And we'll just have to figure out different ways to do things.

Nate Pendleton: Excuse me, a question on your reserves. Of the 1.8 million BOE of positive revisions, can you provide some color as to which properties contributed there, and was any of that related to performance on the Cox acquisitions versus how those properties had originally been booked?

Excuse me, that a question on your reserves. I think of the 1.8 million Dewey of positive revisions.

Can you provide some color as to

Tracy Krohn: Yeah, go ahead, William.

Which properties contributed their and was was any of that related to performance on the cops Acquisitions versus how those properties had originally been booked.

William Williford: Yeah. Thanks, Tracy. Yeah, it was some of the additional increase in the reserves was based on better performance of some of the Cox assets as well as some of our own assets. We did some optimization projects to further increase and increase the life of our Mobile Bay asset as well. So that added significant value as far as from a reserve standpoint.

Tracy Krohn: Yeah, Jeff, I'll add to that a little bit. I mean, we're still working some of these properties and finding different things that we can do with not only with the facilities themselves. Young Mr. Cox left them in terrible shape when we acquired them. They weren't doing the maintenance. They weren't maintaining properties in what we would have considered to be a safe manner. So we've had to spend a bit more money to bring them up to our standards. And I think that's certainly affected some of the cash flow near term. But long term, I have a lot of high expectations of these properties, and we're getting there. Production at West Delta 73 and Main Pass 108, they're all coming up as we speak.

Yeah. Go ahead wait. Yeah, thanks. Yeah. It was, it was some of the uh additional uh increase in the reserves was based on better performance of some of the cocks assets as well as some of our own assets. We did some optimization projects to further increase and increase the life of our Mobile Bay asset as well. So that I had a significant value as far as from a reserve standpoint.

Nate Pendleton: Thanks, Tracy.

Yeah, yeah. Also I, I'll add to that a little bit. I mean, we're still working some of these properties. Um, and and finding, uh, different things that we can do with not only with the fifth facilities themselves. Uh, young Mr. Cox left him in terrible, uh, shape. When we when we acquired them, they, they weren't doing the make. They weren't doing the maintenance. They weren't, uh, maintaining properties. And what we would have considered to be a safe manner. So, we've had to spend a bit more money to bring them up to our standards. Um, and, uh, I, I think that's, that's a certainly affected. Um, you know, some of the, some of the cash flow near-term but long term. I I have a lot of, uh, uh, high expectations of these properties and and we're we're getting there, uh, production at West of the 73 and and uh um, main pass, 1 of the way they're all coming up as we speak.

Thanks Tracy.

Tracy Krohn: Thank you, sir.

Thank you, sir.

Speaker 6: As there are no more questions, this concludes the question and answer session. I'd like to turn the conference back over to Tracy Krohn, chairman and CEO, for any closing remarks.

Tracy Krohn: Thanks, operator. Again, we celebrated 20 years as an NYSE listed company yesterday. I'm expecting another 20 years. I would certainly like to be around for that. So with that, you know, just all of our shareholders, watch what happens next. It's going to be fun. It's going to be exciting, and it's going to be profitable. Thanks so much.

Uh, there are no more questions. This concludes the question-and-answer session. I'd like to turn the conference back over to Tracy Krohn, Chairman and CEO, for any closing remarks.

Thanks operator. Uh, uh, again, we we celebrated, uh, 20 years as a, as an NYSC listed company yesterday, um, I'm expecting another 20 years. Um, I, I, I would certainly like to be around for that. So, uh, with that, uh, you know, just, uh, uh, all of our shareholders.

Uh, Watch What Happens Next. It's going to be, it's going to be fun. It's going to be exciting and it's going to be profitable. Thanks so much.

Speaker 6: This concludes today's conference call. You may disconnect your line. Thank you for participating and have a pleasant day.

Concludes today's conference call, you may disconnect your line, thank you for participating and have a pleasant day.