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Why Is W&T (WTI) Down 12.6% Since Last Earnings Report?

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A month has gone by since the last earnings report for W&T Offshore (WTI - Free Report) . Shares have lost about 12.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is W&T due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

W&T Offshore Beats Q2 Earnings Estimates on Higher Production

W&T Offshore reported second-quarter 2020 adjusted loss (excluding one-time items) of 2 cents per share, narrower than the Zacks Consensus Estimate of loss of 21 cents. However, in the year-ago period, the company reported earnings of 25 cents per share.

Meanwhile, quarterly revenues plunged to $55 million from $135 million a year ago. Moreover, the top line missed the Zacks Consensus Estimate of $73 million.

The narrower-than-expected loss was supported by higher oil equivalent production volumes and lower lease operating expenses, partially offset by a decline in average realized prices of commodities.

Overall Production Rises

Total oil equivalent production averaged 42 thousand barrels of oil equivalent per day (MBoe/D), up from the year-ago quarter’s 35 MBoe/D.

Oil production was recorded at 1.4 million barrels (MMBbls), down from the year-ago level of 1.7 MMBbls. Natural gas liquids output totaled 410 MBbls, higher than 264 MBbls a year ago. Natural gas production of 12,006 million cubic feet (MMcf) in the reported quarter was considerably higher than 7,450 MMcf in the year-earlier period. Of the total production in the quarter, almost 48% comprised liquids.

Realized Prices Decline

The average realized price for oil during the second quarter was $21.67 a barrel, lower than the year-ago level of $64.86. The average realized price of NGL dropped to $4.67 from $17.59 per barrel in the prior year. The average realized price of natural gas during the June quarter was $1.78 per thousand cubic feet, down from $2.63 in the comparable period last year. Average realized price for oil equivalent output declined to $14.10 per barrel from $41.83 a year ago.

Operating Expenses

Lease operating expenses contracted to $7.40 per Boe in the second quarter from $12.65 a year ago. General and administrative expenses fell to $1.47 per Boe from $4.18 in the year-ago period.

Overall, total costs and expenses significantly fell to $83.3 million from the year-ago level of $97.3 million.

Capital Spending & Balance Sheet

W&T Offshore spent $6.4 million capital through the June quarter (excluding acquisitions) on oil and gas resources.

As of Jun 30, 2020, the company’s cash and cash equivalents were $36.5 million. The upstream firm has $128.9 million of availability under revolving bank credit facility. The company’s long-term debt as of the June quarter was recorded at $624.2 million.

Guidance

W&T Offshore projects 2020 production at 43.8-46.5 MBoE/D, suggesting a rise from 40.6 MBoE/D in 2019. For the September quarter, the company expects production in the range of 40.9-45.1 MBoE/D.

For 2020, the upstream company expects lease operating expenses in the band of $158 to $165 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -55.88% due to these changes.

VGM Scores

Currently, W&T has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, W&T has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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