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W&T (WTI) Up 0.3% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for W&T Offshore (WTI - Free Report) . Shares have added about 0.3% in that time frame, underperforming the S&P 500.

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

W&T Offshore Beats Q4 Earnings & Revenue Estimates

W&T Offshore reported fourth-quarter 2020 adjusted loss (excluding one-time items) of 5 cents per share, narrower than the Zacks Consensus Estimate of a loss of 13 cents. However, in the year-ago period, the company reported earnings of 17 cents per share.

Meanwhile, quarterly revenues plunged to $94.7 million from $151.9 million a year ago. The top line, however, beat the Zacks Consensus Estimate of $82 million.

The better-than-expected results were supported by lower total costs and expenses, as well as higher natural gas prices. This was partially offset by a decline in average realized prices of liquids and oil equivalent production volumes.

Production Stats

Total oil equivalent production averaged 38,261 barrels of oil equivalent per day (Boe/d), down from the year-ago quarter’s 52,773 Boe/d.

Oil production was recorded at 1,273 thousand barrels (MBbls), down from the year-ago level of 1,778 MBbls. Natural gas production of 11,174 million cubic feet (MMcf) for the reported quarter was lower than 15,966 MMcf in the year-earlier period. Also, natural gas liquids output totaled 385 MBbls, lower than 415 MBbls a year ago. Of the total production for the quarter, almost 47% comprised liquids.

Realized Commodity Prices

The average realized price for oil for the fourth quarter was $42.84 a barrel, lower than the year-ago level of $56.84. The average realized price of NGL dropped to $16.30 from $16.64 per barrel in the prior year. The average realized price of natural gas for the December quarter was $2.63 per thousand cubic feet, up from $2.58 in the comparable period last year. Average realized price for oil equivalent output declined to $25.63 per barrel from $30.75 a year ago.

Operating Expenses

Lease operating expenses rose to $12.31 per Boe for the fourth quarter from $10.98 a year ago. However, general and administrative expenses declined to $2.18 per Boe from $3.62 in the year-ago period.

Overall, total costs and expenses fell to $94.4 million from the year-ago level of $135 million.

Cash Flow

Net cash used in operations for the fourth quarter was $6.2 million against $45.6 million provided by operations in the year-ago period.

Free cash flow for the quarter declined to $14.2 million from $26.8 million in the year-ago quarter.

Capital Spending & Balance Sheet

W&T Offshore spent $3 million capital through the December quarter (excluding acquisitions) on oil and gas resources.

As of Dec 31, 2020, the company’s cash and cash equivalents were $43.7 million, down from the third-quarter level of $56.5 million. The upstream firm had $130.6 million of availability under the revolving bank credit facility. Its long-term debt as of the December quarter was recorded at $625.3 million, marginally up from the third-quarter level of $624.7 million.

Proved Reserves

As of Dec 31, 2020, the company reported proved reserves of 144.4MMBoe, down from the 2019-end level of 157.4 MMBoe. Total proved reserves of the firm comprise roughly 34% liquid.

Guidance

For 2021, W&T Offshore expects production in the range of 38,000-42,000 Boe/d, indicating a decline from 42,046 Boe/d in 2020. Oil production is expected in the range of 4.97-5.57 MMBbls for 2021. For the January quarter of 2021, production is expected within 37,300-41,300 Boe/d.

For 2021, the upstream company expects lease operating expenses in the band of $153-$169 million. General and administrative expenses are expected within $51-$56 million. Capital expenditure for 2021 is expected in the range of $30-$60 million, indicating a significant increase from $17.6 million a year ago.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month. The consensus estimate has shifted 43.59% 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 a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

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

Outlook

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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