Q3 2026 W&T Offshore Inc Earnings Call

October 30, 2026

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the W&T Offshore Q3 2026 Conference Call. During today's call, all parties will be in a listen-only mode. Following the company's prepared comments, the call will be opened 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 is being recorded, and a replay will be made available on the company's website following the call. I would now like to turn the conference over to Al Petrie, Investor Relations Coordinator.

Speaker #1: Ladies and gentlemen, thank you for standing by. Welcome to the W&T OFFSHORE Q3 2026 conference call. During today's call, all parties will be in a listen-only mode.

Speaker #1: 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.

Speaker #1: You can always rejoin the queue. This conference is being recorded, and a replay will be made available on the company's website following the call.

Speaker #1: I would now like to turn the conference over to Al Petrie investor relations coordinator.

Al Petrie: Thank you, Betsy. On behalf of the management team, I'd like to welcome all of you to today's conference call to review W&T Offshore's Q3 2026 Financial and Operational Results. Before we begin, I'd 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.

Speaker #2: Thank you, Betsy. And on behalf of the management team, I'd like to welcome all of you to today's conference call to review W&T OFFSHORE's Q3 2026 financial and operational results.

Speaker #2: Before we begin, I'd 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.

Speaker #2: Today's call may also contain 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.

Speaker #2: With that, I'd like to turn the call over to Tracy Krohn, our chairman and CEO.

Tracy Krohn: Thanks, Al. Good morning, everyone, and welcome to our conference call. With me today are William Williford, our Executive VP and Chief Operating Officer, Sameer Parasnis, our Executive VP and Chief Financial Officer, and Trey Hartman, our Vice President and Chief Accounting Officer. They will all be available to answer questions after our prepared remarks. We have delivered consistently strong operational and financial results over the past several quarters that have met or exceeded our guidance across multiple metrics. Very happy to report that our Q3 results continued this positive trend, and we are in a much stronger financial position heading into 2027. In Q3, our production was 38,200 BOE per day, which was 4% above the high end of our guidance, despite no new drilling and no new acquisitions.

Speaker #3: Thanks, Al. Good morning, everyone, and welcome to our conference call. With me today are William Wilford, our executive VP, and Chief Operating Officer; Sameer Parasnis, our executive VP and Chief Financial Officer; and Trey Hartman, our Vice President and Chief Accounting Officer.

Speaker #3: They'll all be available to answer questions after our prepared remarks. So we've delivered consistently strong operational and financial results over the past several quarters that have met or exceeded our guidance across multiple metrics.

Speaker #3: I'm very happy to report that our Q3 results continued this positive trend, and we are in a much stronger financial position heading into 2027.

Speaker #3: In Q3, our production was 38,200 barrels of oil equivalent per day, which was 4% above the high end of our guidance despite no new drilling, and no new acquisitions.

Tracy Krohn: While we reported a Q3 GAAP net loss of $13.6 million or $0.09 per share, this included almost $16 million in hedging losses. More importantly, we generated over $51 million in adjusted EBITDA, and we have now generated $164 million of adjusted EBITDA in the first nine months of 2026. That is an increase of 50% compared to the prior year. In Q3, we also reported strong free cash flow of $33 million. We have now amassed $89 million in free cash flow in the first nine months of 2026. This has contributed to increasing our cash on hand to over $190 million and driving our net debt down 20% since last quarter to $160 million. On a trailing 12-month basis, our net debt to adjusted EBITDA is down from 1.6 times a year ago to 0.9 times currently.

Speaker #3: While we reported a third-quarter GAAP net loss of 13.6 million, or $0.09 per share, this included almost $16 million in hedging losses, more importantly, we generated over $51 million in adjusted EBITDA, and we have now generated $164 million of adjusted EBITDA in the first nine months of 2026.

Speaker #3: That's an increase of 50% compared to the. In the third quarter, we also reported strong free cash flow of $33 million. We have now amassed $89 million in free cash flow in the first nine months of 2026.

Speaker #3: So this is contributed to increasing our cash on hand to over $190 million. And driving our net down our net debt down 20% since last quarter to $160 million.

Speaker #3: So on a trailing 12-month basis, our net debt to adjusted EBITDA is down from $1.6 times a year ago to $0.9 times currently. These strong financial results are driven by our operational focus, with a particular emphasis on optimizing and maintaining solid production while continuing to manage costs prudently.

Tracy Krohn: These strong financial results are driven by our operational focus, with a particular emphasis on optimizing and maintaining solid production while continuing to manage costs prudently. The solid quarterly results start with our ability to maintain strong production, extract value through well optimization projects, and are enhanced by our low decline rate fields in the Gulf of America. As an example, in Q3, we spent a little over $3 million on seven workover projects and one recomplete that resulted in an uplift of over 2,000 BOE per day. Our production in Q3 benefited from the production uplift from these wells, lower overall downtime, and the delayed planned one-week turnaround at Mobile Bay that is now scheduled for this quarter.

Speaker #3: The solid quarterly results start with our ability to maintain strong production extract value through well-optimization projects and our enhanced by our low decline rate fields in the Gulf of America.

Speaker #3: As an example, in the third quarter, we spent a little over $3 million on seven workover projects of one recomplete that resulted in an uplift of over $2,000 barrels of oil equivalent per day.

Speaker #3: Our production in the third quarter benefited from the production uplift from these wells, lower overall downtime, and the delay plan one week turnaround mobile bay that is now scheduled for this quarter.

Tracy Krohn: We do a commendable job consistently offsetting our production decline by spending only a fraction of the capital that other E&P companies spend, sans drilling. This is a testament to our experienced technical staff, our vast resource base, and the strong geological properties of the Gulf. We choose to spend more dollars on low-risk, high rate of return workovers and facility work rather than drilling new wells. We believe this is a more economic way to invest our operational cash flow back into our business, and it is a low-risk option. We can then build more cash and make accretive acquisitions of producing properties. CapEx in Q3 2026 were $3 million, and asset retirement settlement costs totaled $6 million.

Speaker #3: We do a commendable job consistently offsetting our production decline by spending only a fraction of the capital that other E&P companies spend, assigns drilling.

Speaker #3: This is a testament to our experienced technical staff, our vast resource base, and the strong geological properties of the Gulf. We choose to spend more dollars on low-risk, high-rated return workovers and facility work rather than drilling new wells.

Speaker #3: We believe this is a more economic way to invest our operational cash flow back into our business, and it's a low-risk option. We can then build more cash and make accretive acquisitions of producing properties.

Speaker #3: So capital expenditures in the third quarter of 2026 were $3 million. And asset retirement settlement costs totaled $6 million. In the current strong pricing environment, we are accelerating some projects and have decided to increase our full-year capital spend in 2026 to between $35 and $38 million.

Tracy Krohn: In the current strong pricing environment, we are accelerating some projects and have decided to increase our full-year capital spend in 2026 to between $35 million and $38 million. We believe this will have a positive impact on our production in the H1 of 2027. We've not changed our full-year ARO guidance. It remains between $34 million and $42 million. I'd like to point out again that this is a fraction of what others spend to maintain their production base, providing W&T with this competitive advantage. Over the years, we have consistently created value by methodically integrating producing property acquisitions. We look for strong producing assets with meaningful reserves at an attractive price that we can integrate into our vast infrastructure. We spend primarily LOE dollars to maintain our infrastructure and maximize the extraction on our footprint.

Speaker #3: We believe this will have a positive impact on our production in the first half of 2027. We've not changed our full-year ARO guidance, and it remains between $34 million and $42 million.

Speaker #3: I'd like to point out again that this is a fraction of what others spend to maintain their production base providing W&T with this competitive advantage.

Speaker #3: So over the years, we have consistently created value by methodically integrating producing property acquisitions. We look for strong producing assets with meaningful reserves at an attractive price that we can integrate into our vast infrastructure.

Speaker #3: We spend primarily LOE dollars to maintain our infrastructure and maximize the extraction on our footprint. This is complemented by workovers, recompletes, and upgrades that result in additional production uplift from our acquisitions above the rates they were producing when purchased.

Tracy Krohn: This is complemented by workovers, recompletes, and upgrades that result in additional production uplift from our acquisitions above the rates they were producing when purchased. This strategy makes W&T unique, but it's our ability to execute repeatedly throughout the years that allows us to add value. Turning to costs, our LOE for the Q3 was $77 million, slightly below the midpoint of guidance, despite higher oil prices and production being above guidance. We made strides to lower our base LOE spend through cost-saving initiatives in late 2025 that we have seen materialize in 2026. In the Q3, we saw gathering, transportation, and production taxes increase compared to the Q2. The Williams Mobile Bay gas processing facility was offline in April for planned maintenance. This drove lower overall costs in the Q2 as we bypassed the processing facility.

Speaker #3: This strategy makes W&T unique, but it's our ability to execute repeatedly throughout the years that allows us to add value. Now, turning to costs, our LOE for the third quarter was $77 million.

Speaker #3: Slightly below the midpoint of guidance despite higher oil prices and production being above guidance. We made strides to lower our base LOE spend through cost-saving initiatives in late 2025 that we have seen materialize in 2026.

Speaker #3: In the third quarter, we saw gathering, transportation, and production taxes increase compared to the second quarter. The Williams mobile bay gas processing facility was offline in April for planned maintenance.

Speaker #3: This drove lower overall costs in the second quarter as we bypassed the processing facility but with the facility running for the entire third quarter, we did have increased costs but also increased NGLs.

Tracy Krohn: But with the facility running for the entire Q3, we did have increased costs, but also increased NGLs. Our ability to execute our strategy has delivered very positive results in 2026, including a healthy balance sheet and enhanced liquidity. At the end of the Q3 of 2026, our total debt and net debt were $352 million and $160 million respectively, and our liquidity has increased to $235 million. During Q3 2026, we utilized our at-the-market agreement to issue 3.6 million common shares with net proceeds of $15 million to further enhance liquidity and support near-term strategic growth objectives. In addition, on 1 October 2026, we converted our credit facility to a reserve-based lending structure that provides greater financial flexibility and the potential to expand commitments from $50 million to $100 million.

Speaker #3: Our ability to execute our strategy has delivered very positive results in 2026, including a healthy balance sheet and enhanced liquidity. At the end of the third quarter of 2026, our total debt and net debt were $352 million, and $160 million respectively, and our liquidity has increased to $235 million.

Speaker #3: So during Q3 2026, we utilized our at-the-market agreement to issue $3.6 million common shares with net proceeds of $15 million. To further enhance liquidity and support near-term strategic growth objectives, in addition, on October 1, 2026, we converted our credit facility to a reserve-based lending structure that provides greater financial flexibility and the potential to expand commitments from $50 million to $100 million.

Tracy Krohn: The agreement eliminates restrictive cash flow and repayment requirements while increasing annual shareholder distribution capacity. Also, there were no changes to pricing or financial covenants or amendment fees. In short, we've materially strengthened our balance sheet and added financial flexibility with the support of our bank group led by Texas Capital Bank. Our strong balance sheet and growing cash position allow us to evaluate and potentially execute accretive acquisitions in line with our strategy. We're very pleased with our debt-to-EBITDA ratio of under one times, which we believe compares very well with our peer group. As everyone knows, we're in a very volatile pricing environment due to multiple global factors. Thus far in 2026, we have seen rising prices, and our realized prices of $46.13 per BOE in the Q3 was a decrease of 8% from the Q2, but up about 20% from Q3 2025.

Speaker #3: The agreement eliminates restrictive cash flow and repayment requirements, while increasing annual shareholder distribution capacity. Also, there were no changes to pricing or financial covenants or amendment fees, in short, we've materially strengthened our balance sheet and added financial flexibility with the support of our bank group led by Texas Capital Bank.

Speaker #3: Our strong balance sheet and growing cash position allow us to evaluate and potentially execute accretive acquisitions in line with our strategy. We're very pleased with our debt-to-EBITDA ratio of under one times, which we believe compares very well with our peer group.

Speaker #3: So as everyone knows, we're in a very volatile pricing environment due to multiple global factors. Thus far, in 2026, we have seen rising prices and are realized prices of $46.13 per BOE in the third quarter was a decrease of 8% from the second quarter, but up about 20% from third quarter 2025.

Tracy Krohn: While Q3 pricing was slightly lower quarter-over-quarter, we have seen very strong pricing throughout 2026. In Q4, we have also seen improved pricing in October that may carry into the final 2 months of the year. We have consistently replaced and expanded our reserve base through operational spend, uplift projects, and acquisitions. Pricing also benefits our reserves, especially our oil reserves, enhancing economic viability, increasing field lives, and driving higher PV-10 valuation. I believe our growing cash position, strong PDP reserve valuation, and a rising price environment position us well to continue creating long-term value for our shareholders, including through our consistent dividend. Yesterday, we provided detailed production and cost guidance for Q3 and full year 2026.

Speaker #3: While third quarter pricing was slightly lower quarter over quarter, we have seen very strong pricing throughout 2026. In the fourth quarter, we've also seen improved pricing in October that may carry into the final two months of the year.

Speaker #3: We have consistently replaced and expanded our reserve base through operational spend, uplift projects, and acquisitions. Pricing also benefits our reserves, especially our oil reserves, enhancing economic viability, increasing fuel lives, and driving higher PB10 valuation.

Speaker #3: I believe our growing cash positions strong PDP reserve valuation and a rising price environment position as well to continue creating long-term value for our shareholders, including through our consistent dividend.

Speaker #3: Yesterday, we provided detailed production cost guidance for the third quarter and full-year 2026. In the fourth quarter of 2026, we have a one-week shutdown planned at our mobile bay field to perform equipment repairs that will temporarily reduce our gas sales volumes.

Tracy Krohn: In Q4 2026, we have a one-week shutdown planned at our Mobile Bay field to perform equipment repairs that will temporarily reduce our gas sales volumes. We experienced some downtime from Hurricane Isaias a few weeks ago. Taking into account these 2 short-term reductions in production that total about 2,600 BOE per day, we are forecasting the midpoint of Q4 2026 production to be around 33,700 barrels of oil equivalent per day. Aligning with our production guidance, our Q4 LOE is expected to be lower than Q3, with a range of $65 million to $72 million. Additionally, Q4 transportation and production taxes are also expected to be lower to between $8.4 million and $9.3 million. Adjusted for surety litigation costs, Q4 cash G&A costs are expected to decline and to range from $16.9 million to $18.6 million.

Speaker #3: We experienced some downtime from Hurricane Isaiah a few weeks ago. Taking into account these two short-term reductions in production that total about $2,600 BOE per day, we're forecasting the midpoint of Q4 2026 production to be around $33,700 barrels of oil equivalent per day.

Speaker #3: Aligning with our production guidance, our fourth quarter LOE is expected to be lower than Q3, with a range of $65 million to $72 million.

Speaker #3: Additionally, fourth quarter transportation and production taxes are also expected to be lower to between $8.4 million and $9.3 million. So adjusted for surety litigation costs, fourth quarter cash G&A costs are expected to decline and to range from $16.9 million to $18.6 million.

Tracy Krohn: Before closing, I would like to address surety and regulatory updates. W&T has continued to pursue discovery materials in the surety lawsuits, and we have made significant progress in obtaining agreements from opposing counsel and a court order requiring defendants to review and produce communications relevant to our claims. W&T is also continuing to seek additional material from third parties. Depositions of the surety and broker defendants are expected to take place over the coming months. We expect the documents and deposition testimony obtained in discovery will help our retained experts quantify our damages. While the outcome of the litigation remains uncertain and there can be no assurance of a successful result, we continue to believe that, assuming W&T prevails in litigation, our damages claims could be substantial.

Speaker #3: So before closing, I'd like to address surety and regulatory updates. W&T has continued to pursue discovery materials in the surety lawsuits and we have made significant progress in obtaining agreements from opposing counsel and a court order requiring defendants to review and produce communications relevant to our claims.

Speaker #3: W&T is also continuing to seek additional material from third parties. Depositions of the surety and broker defendants are expected to take place over the coming months.

Speaker #3: We expect that the documents and deposition testimony obtained in discovery will help our retained experts quantify our damages. While the outcome of the litigation remains uncertain and there can be no assurance of the successful result, we continue to believe that assuming W&T prevails in litigation, our damages claims could be substantial.

Tracy Krohn: Further, any damages awarded on the antitrust claims would be subject to automatic trebling, as well as recovery of reasonable attorney's fees under applicable statutes. Of course, this view reflects our current assessment, and it may change as the litigation proceeds. In closing, I would like to thank our team at W&T for all their efforts. We have demonstrated our success with the meaningfully improved results we have delivered in 2026. W&T has been an active, responsible, and profitable operator in the Gulf of America since 1983. We have a long track record of successfully integrating assets into our portfolio and remain staunch proponents of the Gulf of America. We have a solid cash position and strong liquidity that enables us to maintain our focus on evaluating accretive opportunities while continuing to generate strong free cash flow and EBITDA.

Speaker #3: Further, any damages awarded on the antitrust claims would be subject to automatic trebling. As well as recovery of reasonable attorneys' fees under applicable statutes.

Speaker #3: Of course, this view reflects our current assessment and it may change as the litigation proceeds. So in closing, I'd like to thank our team at W&T for all their efforts.

Speaker #3: We've demonstrated our success through the meaningfully improved results we have delivered in 2026. W&T has been an active responsible and profitable operating in the Gulf of Mexico Gulf of America since 1983.

Speaker #3: We have a long track record of successfully integrating assets into our portfolio and remain staunch proponents of the Gulf of America. We have a solid cash position and strong liquidity that enables us to maintain our focus on evaluating accretive opportunities while continuing to generate strong free cash flow and EBITDA.

Tracy Krohn: With consistent production, increased realized pricing, and ongoing cost control, we believe we are well-positioned operationally and financially to deliver robust results in 2027 and beyond. We are focused on operational excellence and maximizing the cash flow potential of our asset base, which should allow us to add and return value to our shareholders as we have done for over 40 years. Operator, we can now open the lines for questions. Operator, we can now open the lines for questions, please.

Speaker #3: With consistent production increased realized pricing and ongoing cost control, we believe we are well positioned operationally and financially to deliver robust results in 2027 and beyond.

Speaker #3: We are focused on operational excellence and maximizing the cash flow potential of our asset base which should allow us to add and return value to our shareholders as we have done for over 40 years.

Speaker #3: To operate a week and now open the lines for questions. Operator, we can now open the lines for questions, please.

Operator: We will now begin the question-and-answer session. To ask a question, you may press star, then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. We ask that you limit your questions to 1 and a follow-up. You can always rejoin the queue. At this time, we will pause momentarily to assemble our roster. The first question today comes from Neal Dingmann with William Blair. Please go ahead.

Speaker #1: We will now begin the question and answer session. To ask a question, you may press star then one on your touchstone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.

Speaker #1: If at any time your question has been addressed and you would like to withdraw your question, please press star then two. We ask that you limit your questions to one and a follow-up.

Speaker #1: You can always rejoin the queue. At this time, we will pause momentarily to assemble our roster. The first question today comes from Neil Dingman with Wellman Blick.

Speaker #1: Please go ahead.

Neal Dingmann: Hello, Tracy. Congrats on another nice quarter. I will just jump into my first question on capital allocation for you or Sameer. Specifically, now that the balance sheet is so pristine, has that changed the way you all are thinking about capital allocation here into 2027? Maybe just give us the thoughts.

Speaker #2: Hi Tracy, congrats on another nice quarter. I'll just jump into it. My first question on capital allocation, for you or Sameer, specifically now with the balance sheet so pristine, have you has that changed the way you all are thinking about capital allocation here into 27?

Speaker #2: Maybe just give us some thoughts.

Tracy Krohn: Sure. Thanks, Neal. Yeah, we have acquired a good bit more cash, and I look at that as more something that we would utilize toward acquisitions first, and then other activities after that. So yeah, that is a big jump in cash, and it looks like it is going to continue for a while. So yeah, we are excited about that too.

Speaker #3: Sure. Thanks, Neil. Yeah, we've acquired a good bit more cash and I look at that as more something that we would utilize toward acquisitions first.

Speaker #3: And then other activities after that. So yeah, that's a big jump in cash and it looks like it's going to continue for a while.

Speaker #3: So yeah, we're excited about that too.

Neal Dingmann: Got it. Last, if I could, come almost in that same vein. You continue to have very active recompletion activity, and I think the uplift on that sort of speaks for itself. Could you talk about kind of what inventory, I mean, how many more of those opportunities do you have, and would you slow down those recompletions if you saw some really attractive M&A in the near term?

Speaker #2: Got it. And then last, if I could come almost in that same vein, you continue to have very active recompletion activity and I think the uplift on that sort of speaks for itself.

Speaker #2: Could you talk about kind of what inventory I mean, do you have how many more of those opportunities do you have and would you slow down though as those recompletions if you saw some really attractive M&A in the near term?

Tracy Krohn: Well, I just happen to have our Chief Operating Officer, William, with us this morning, and he will answer that question for you.

Speaker #3: Well, I just happen to have our chief operating officer waiting with us this morning and he'll answer that question for you.

William Williford: Yeah. The answer to the question is yes, but I want to make clarification. The majority of the uplift projects that we mentioned was part of our workover portfolio, not necessarily on the capital side. So, we have plenty of opportunities to do additional optimization, as Tracy has mentioned on the call, to be able to uplift or help maintain our overall production through 2027. We are focused on additional projects as far as recompletes, from a capital standpoint, 2027 as well, that we have a nice little inventory there as well.

Speaker #2: Yeah, the answer to the question is yes, but I want to make clarification though. Majority of the uplift projects that we mentioned was part of our work over portfolio, not necessarily on capital side.

Speaker #2: So we have plenty of opportunities to do additional optimization as Tracy has mentioned on the call to be able to uplift to help maintain our overall production through 2027.

Speaker #2: We are focused on additional projects as far as recompletes from a capital standpoint 2027 as well that we have a nice little inventory there as well.

Neal Dingmann: Very good. Thank you all.

Speaker #2: Very good. Thank you all.

Tracy Krohn: Thanks, Neal.

Speaker #3: Thanks, Neil.

Operator: The next question comes from Derrick Whitfield with Texas Capital. Please go ahead.

Speaker #1: The next question comes from Derek Whitfield with Texas Capital. Please go ahead.

Derrick Whitfield: Good morning, guys, and thanks for your time.

Speaker #4: Yeah, good morning guys. And thanks for your time.

Tracy Krohn: Thank you, sir.

Speaker #3: Thank you, sir.

Derrick Whitfield: I'd like to circle back on 2027. While I realize you are not providing guidance at this point, you have accelerated some of your 2027 activity into 2026. With that said, just how are you broadly thinking about the macro environment for 2027? Are you biased to pursue more of a maintenance program through workovers or kind of modest growth through new development?

Speaker #4: I'd like to circle back on 2027. While I realize we aren't providing guidance at this point, you have accelerated some of your 2027 activity into 2026.

Speaker #4: With that said, just how are you broadly thinking about the macro environment for 2027? Are you biased to pursue more of a maintenance program through workovers or kind of modest growth through new development?

Tracy Krohn: Yeah. That's a really good question, Derrick. I mean, we have a pretty good inventory of things to do. We have a very good inventory of things to drill as well. We are looking more toward acquisitions going forward. We are constantly in data rooms, and that's encouraging to us as well. Drilling is something we can certainly do. I would prefer to chase acquisitions at this point in time. That's kind of the way that the company has evolved over the years, and it feels pretty good. There are lots of properties out there that are for sale and that will be for sale in 2027 as well. So, that's kind of how we see it.

Speaker #3: Yeah, that's a really good question, Derek. I mean, we have a pretty good inventory of things to do. We have a very good inventory of things to drill as well.

Speaker #3: We have we're looking more toward acquisitions going forward. We're constantly in data rooms and so that's encouraging to us as well. Drilling is something we can certainly do.

Speaker #3: I would prefer to chase acquisitions at this point in time. That's kind of the way that the company has evolved over the years. And it feels pretty good.

Speaker #3: There's lots of properties out there that are for sale and that will be for sale. In 27 as well. So that's kind of how we see it.

Derrick Whitfield: Tracy, maybe just following up on your comments. As I understand, there are new assets that are being brought to market right now. I think Chevron was in the press earlier this week. When you look at the assets that are being brought to market today, are there some that are really synergistic and true opportunities for you guys? I know you guys buy to discount the PDP, but are there some assets out there that can really move the needle for you?

Speaker #4: And Tracy, maybe just following up on your comments. As I understand, there are new assets that are being brought to market right now. I think Chevron was in the press earlier this week.

Speaker #4: When you look at the assets that are being brought to market today, are there some that are really synergistic and true opportunities for you guys?

Speaker #4: I know you guys buy at a discounted PDP, but are there some assets out there that can really move the needle for you?

Tracy Krohn: Yeah. I mean, that's always the case. Fortunately, we are well-suited and are operating in shallow water and deep water. So, the larger opportunities are attractive to us. Some of the other smaller opportunities are attractive to us, and one of the reasons is we are very operationally adept. So, some of the things that may have a little bit more, let's call it momentum toward managing older properties, we excel at, and we always have. So, with 40-something years of operating experience in the Gulf, that is something that always keeps our attention. So yeah, we are feeling good about everything that we are seeing, really.

Speaker #3: Yeah, I mean, that's always the case. Fortunately, we're well suited and our operating and shallow water and deep water and so the larger opportunities are attractive to us.

Speaker #3: Some of the other smaller opportunities are attractive to us. And one of the reasons is we are very operationally adept. So some of the things that may have a little bit more let's call it momentum toward managing older properties, we excel at and we always have.

Speaker #3: So with 40 something years of operating experience in the Gulf, that is something that always keeps our attention. So yeah, we're feeling good about everything that we're seeing really.

Derrick Whitfield: Terrific. Thanks, guys.

Speaker #4: Terrific. Thanks, guys.

Tracy Krohn: Thank you, sir.

Speaker #3: Thank you, sir.

Operator: The next question comes from Jeff Robertson with Water Tower Research. Please go ahead.

Speaker #1: The next question comes from Jeff Robertson with Water Tower Research. Please go ahead.

Jeff Robertson: Thank you. Good morning. Tracy, you talked about-

Speaker #5: Thank you. Good morning. Tracy, you talked about third quarter production being well above the high end of guidance. And I'm just curious, is some part of that outperformance related just to the natural production profile of your assets and how they perform versus estimates that you might have used as you constructed your guidance?

Tracy Krohn: Morning, Jeff.

Jeff Robertson: third quarter production being well above the high end of guidance, I am just curious, is some part of that outperformance related just to the natural production profile of your assets and how they perform versus estimates that you might have used as you constructed your guidance?

Tracy Krohn: Well, yeah, to a certain extent, Jeff. I mean, we have really good production over on Mobile Bay Field, gas field, so that always helps. Beside that, most of what we look at, we always talk in our presentations about proved reserves and 2P, 1P and 2P, and we get a lot of help in our reserve predictions and going forward from the way that the Gulf produces, particularly with some of the higher volume water support reservoirs that we have. So, we pick up the probable and producing reserves that are not usually included in the way we do business in the US with only 1P reserves in our reports. So, we do pick up 2P reserves over time. That comes to us in the form of cash and additional reserves over time. So, we traditionally outperform our estimated reserves on 1P very consistently over the last 40 years.

Speaker #3: Well, yeah, to a certain extent, Jeff. I mean, we've got really good production over on mobile Bayfield, gas field. So that always helps. But beside that, most of what we look at, we always talk in our presentations about proof reserves and 2P.

Speaker #3: 1P and 2P. And we get a lot of help in our reserve predictions and going forward from the way that the Gulf produces, particularly with some of the higher volume water support reservoirs that we have.

Speaker #3: So we pick up the probable than producing reserves that aren't usually included in the way we do business in the US with only 1P reserves in our reports.

Speaker #3: So we do pick up 2P reserves over time. That comes to us in the form of cash and additional reserves over time. So we traditionally outperform our estimated reserves on 1P very consistently over the last 40 years.

Jeff Robertson: The recompletion activity that you have planned in Q4, if it carries into 2027, would that be expected to have any real impact on the company's overall production mix?

Speaker #5: And the recompletion activity that you have planned in the fourth quarter and if it carries into 2027, would that be expected to have any real impact on the company's overall production mix?

Tracy Krohn: Well, I will turn that over to our Chief Operating Officer.

Speaker #3: Well, I will turn that over to our chief operating officer.

William Williford: Yeah. From a mix standpoint, majority of the projects we have from recompletion seem to be on the oily side, so that would help increase our oil percentage as we move forward.

Speaker #2: Yeah, from a mix standpoint, majority of the projects we have from a recompletion seem to be on the oily side. So that would help increase our oil percentage as we move forward.

Jeff Robertson: Thank you. If I could ask one more, just on the surety, Tracy, can you talk at all about the timeline of the discovery process? Is the G&A number that you referenced in the press release of roughly $3 million, is that kind of a good quarterly number for 2027? Or do you see the G&A costs increasing from where you are in Q4 2026?

Speaker #5: Thank you. If I could ask one more, just on the surety, Tracy, can you talk at all about the timeline of the discovery process and is the G&A number that you referenced in the press release roughly $3 million?

Speaker #5: Is that kind of the right a good quarterly number for 2027, or do you see the G&A cost increasing from where you are in the fourth quarter of '26?

Tracy Krohn: Yeah. Well, I just happen to have our GC in the room here right now. Maybe I will let him answer that.

Speaker #3: Yeah, well, I just happen to have our GC in the room here right now. Maybe I'll let him answer that.

[Company Representative] (W&T Offshore): Sure. We certainly expect that the cost of the surety litigation will increase in 2027. But for the remainder of 2026, we are getting through just the discovery that we recently received and preparing for deposition. I do not expect a huge spike between now and the end of the year, but we are anticipating increased costs in that litigation in 2027.

Speaker #4: Sure. We certainly expect that the cost of the surety litigation will increase in 2027. But for the remainder of 2026, we're getting through just the discovery that we recently received.

Speaker #4: And preparing for deposition. So I don't expect a huge spike between now and the end of the year, but we are anticipating increased costs in that litigation in 2027.

Jeff Robertson: Thank you.

Speaker #3: Thank you.

Tracy Krohn: Thank you, sir.

Speaker #5: Thank you, sir.

Operator: As a reminder, if you would like to ask a question, please press star then 1 to join the question queue. The next question comes from Nicholas Pope with Roth Capital. Please go ahead.

Speaker #1: As a reminder, if you would like to ask a question, please press star, then one to join the question queue. The next question comes from Nicholas Pope with Roth Capital.

Speaker #1: Please go ahead.

Nicholas Pope: Good morning, everyone.

Speaker #5: Good morning, everyone.

Tracy Krohn: Good morning, Mr. Pope.

Speaker #3: Good morning, Mr. Pope.

Nicholas Pope: Couple quick questions. I just wanted to clarify, the additional spending that you're bringing forward into 2027, is that related to the recompletions, or is there some additional drilling activity that's a part of that additional CapEx that y'all are talking about for 2026 in Q4?

Speaker #5: A couple of quick questions. I just wanted to clarify the additional spending that you're bringing forward into 2027. Is that related to the recompletions or is there some additional drilling activity that's a part of that additional capex that y'all are talking about for 2026 in the fourth quarter?

Tracy Krohn: Well, let me make this real simple. We don't have any drilling planned for 2027 at this point. I'd rather save our dollars for potential acquisitions. I feel like that's a better place to think about spending it at this time.

Speaker #3: Well, let me make this real simple. We don't have any drilling planned for 2027 at this point. I'd rather save our dollars for potential acquisitions.

Speaker #3: I feel like that's a better place to think about spending it at this time.

Nicholas Pope: Got it. So the bulk of that additional spend for 2026 is related to the recompletions?

Speaker #5: Got it. So the bulk of that additional spend for 2026 is related to the recompletions.

Tracy Krohn: Oh, yeah. Recompletions, workovers, that sort of thing. Easier, less expensive things to do that we can use to increase production.

Speaker #3: Oh, yeah. Recompletions workovers, that sort of thing. These are less expensive things to do that we can use to increase production.

Nicholas Pope: Got it. And you mentioned the work that y'all did to kind of bring LOE costs down, and the success y'all had from the work that was done in 2025. You've seen kind of a lot of positive movement there, I think, year-over-year on base LOE coming down. I am curious, like, if there is a broader opportunity set on kind of what y'all have done on bringing some of those costs down for base LOE, or if that is an ongoing thing. It seems like you've seen a nice kind of improvement year-over-year on a unit basis and on an absolute basis.

Speaker #5: Got it. And you mentioned the work that y'all did to kind of bring LOE costs down and the success y'all had from the work that was done in 2025.

Speaker #5: You've seen kind of a lot of positive movement there. I think year over year on base LOE coming down. I'm curious, if there's a broader opportunity set on kind of what y'all have done on bringing some of those costs down for base LOE or if that's an ongoing thing.

Speaker #5: This seems like it's a you've seen a nice kind of improvement over the year over year on a unit basis and on an absolute basis.

Tracy Krohn: Well, with prices where they are, naturally you expect costs will go up some. But, for us, it has always been about maintaining the margins. So, that is really what we work on, is maintaining those margins in such a way that we make more money from the price going up. But we expect to spend a little bit more money when we have better prices. And trying to keep those margins is very important for us, and that has always been the way we have been able to run our business.

Speaker #3: Yeah. With prices where they are, naturally, you expect costs will go up some. But for us, it's always been about maintaining the margins. So that's really what we work on is maintaining those margins and in such a way that we make more money from the price going up.

Speaker #3: But we expect to spend a little bit more money when we're when we have better prices and trying to keep those margins is very important for us.

Speaker #3: And that's always been the way we've been able to run our business.

Nicholas Pope: That is great. Just real quick, with the hurricanes that came through during the quarter, was there any significant equipment damage, or was it really just shut-in production that was impacted with those storms?

Speaker #5: That's great. And just real quick, with the hurricanes that came through during the quarter, was there any significant equipment damage or was it really just shut in production that was impacted with those storms?

Tracy Krohn: Well, no. It is more just shut-in production. I mean, the storm came right over us, so there was not any doubt about what happened. But there was no significant damage at all. This particular area around Mobile Bay was not the first rodeo for us with regard to storms. So, very modest aggravation, some stairwells and that sort of thing. But other than that, no real downtime. It just takes a while to get everything back online because the well shut in, the pipeline shut in, so we have to wait for everybody else to get lined up before we can get lined up too.

Speaker #3: Well, no, it's more just shut in production. I mean, the storm came right over us. So it wasn't any doubt about what happened. But there was no significant damage at all.

Speaker #3: This particular area around Mobile Bay was not the first rodeo for us with regard to storms. So very modest aggravation, some stairwells and that sort of thing.

Speaker #3: But other than that, no real downtime. It just takes a while to get everything back online because the well shut in, the pipeline shut in, and so we have to wait for everybody else to get lined up before we can get lined up too.

Nicholas Pope: Got it. I have spent a hurricane storm at that Mobile plant before, so I understand how close it is to the water.

Speaker #5: Got it. I have spent a hurricane storm at that Mobile plant before. So I understand how close it is to the water.

Tracy Krohn: Oh, well, good for you. You know how it works then. Yeah. Well, you know, that field is actually equipped to do a lot of things.

Speaker #3: Oh, wow. Well, good for you. You know how it works then. Yeah. Well, you know that feels actually equipped to do a lot of things, so.

Nicholas Pope: Yeah, absolutely. All right. I will let you go to other questions. Thank you.

Speaker #5: Yeah, absolutely. All right. I'll let you go to other questions. Thank you.

Tracy Krohn: Thank you, sir.

Speaker #3: Thank you, sir.

Operator: The next question comes from Jeff Robertson with Water Tower Research. Please go ahead.

Speaker #1: The next question comes from Jeff Robertson with Water Tower Research. Please go ahead.

Jeff Robertson: Thanks, Tracy. I am just curious, can you talk at all about the time to mobilize if you decide to execute a workover or execute a recompletion? Is there any competition for the services that you might need?

Speaker #5: Thanks, Tracy. I'm just curious, could you talk at all about the time to mobilize if you decide to execute a workover or execute a recompletion and is there any competition for the services that you might need?

Tracy Krohn: I am going to turn that over to William Williford. He will have better answers for you, but yeah.

Speaker #3: I'm going to turn that over to William Wilford. He'll have better answers for you, but yeah.

William Williford: Yeah. The quick answer is yes, it is. We have to plan accordingly with what we have available, especially in the lift boat market, to be able to plan our work accordingly. That does go into our plan, and we just cannot say we want to go tomorrow and get out there. Everything has to be planned accordingly as well with the assets we need to do the work.

Speaker #2: Yeah. You've been answered to quick answer is yes, it is. We have to plan accordingly with what we have available, especially in the lift boat market, to be able to plan our work accordingly.

Speaker #2: So that does go into our plan. And we just can't say we want to go tomorrow and get out there and everything has to be planned accordingly as well with the assets we need to do the work.

Jeff Robertson: William, are you laying out what you would expect to do in the H1 of 2027 then now, so you can work with the providers to execute on those things?

Speaker #5: So William, are you laying out what you would expect to do in the first half of 2027 then now so you can work with the providers to execute on?

William Williford: Yeah. Yes, we are, and we are right in the heart of our 2027 budget, which we have not gotten approved yet. But yes, we are planning all that action right now, which we have to, but we have to get everything through our budgeting process as well.

Speaker #2: Yeah, yes. Yes, we are. And we're right in the heart of our 2027 budget, which we haven't gotten approved yet. But yes, we're planning all that action right now, which we have to.

Speaker #2: But we have to get everything through our budgeting process as well.

Jeff Robertson: Thank you.

Speaker #5: Thank you.

Tracy Krohn: Thank you, sir.

Speaker #3: Thank you, sir.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Tracy Krohn for any closing remarks.

Speaker #1: This concludes our question and answer session. I would like to turn the conference back over to Tracy Krohn for any closing remarks.

Tracy Krohn: Thank you, operators. Well, look, thanks everybody for listening. We've got a lot of work going on that will be coming up in 2027, and we've had a pretty good year. Prices have been good, and we've managed to keep our costs down accordingly. But we'll see what happens in the next few months, and I expect that we'll make all the adjustments we need to make, like we always have. So thank you for listening to this, and we look forward to talking to you again soon.

Speaker #3: Thank you all for it. Well, look, thanks everybody for listening. We've got a lot of work going on that will be coming up in 2027, and we've had a pretty good year.

Speaker #3: Prices have been good, and we've managed to keep our costs down accordingly. But we'll see what happens in the next few months. And I expect that we'll make all the adjustments we need to make like we always have.

Speaker #3: So thank you for listening to this, and we look forward to talking to you again soon.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.