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W&T (WTI) Up 24.1% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for W&T Offshore (WTI - Free Report) . Shares have added about 24.1% in that time frame, outperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.

W&T Offshore Q1 Earnings Beat Estimates

W&T Offshore reported first-quarter adjusted earnings (excluding one-time items) of 11 cents per share, beating the Zacks Consensus Estimate of 5 cents. Moreover, the bottom line improved from the year-ago quarter’s 4 cents per share.

Total quarterly revenues of $125.6 million surpassed the Zacks Consensus Estimate of $114 million. Also, the top line increased from $124.1 million in the prior-year quarter.

The strong quarterly results can be attributed to the higher realization of commodity prices.

Production Stats

Total production averaged 39,657 barrels of oil equivalent per day (Boe/d), down from the year-ago quarter’s 53,553 Boe/d.

Oil production was recorded at 1,377 thousand barrels (MBbls), down from the year-ago level of 1,827 MBbls. Natural gas production of 10,799 million cubic feet (MMcf) for the reported quarter was lower than 15,307 MMcf in the year-earlier period. Also, natural gas liquids’ output totaled 392 MBbls, lower than 495 MBbls a year ago. Of the total production for the reported quarter, almost 50% comprised liquids.

Realized Commodity Prices

The average realized price for oil for the first quarter was $56.73 a barrel, higher than the year-ago level of $46.33. The average realized price of NGL increased to $23.88 from $13.03 per barrel in the prior year. The average realized price of natural gas for the March-end quarter was $3.35 per thousand cubic feet, up from $1.91 in the last year’s comparable period. Average realized price for oil equivalent output increased to $34.66 per barrel from $24.71 a year ago.

Operating Expenses

Lease operating expenses marginally rose to $11.87 per Boe for the first quarter from $11.24 a year ago. Moreover, general and administrative expenses increased to $3.00 per Boe from $2.87 in the year-ago period.

Overall, total costs and expenses increased to $110.6 million from the year-ago level of $52.3 million.

Cash Flow

Net cash used in operations for the first quarter was $45 million against $84.3 million provided by operations in the year-ago period.

Free cash flow for the reported quarter increased to $40 million from $35.1 million in the year-ago quarter.

Capital Spending & Balance Sheet

W&T Offshore spent $1.6 million in capital through the March-end quarter (excluding acquisitions) on oil and gas resources.

As of Mar 31, 2021, the company’s cash and cash equivalents were $53.4 million, up from the fourth-quarter 2020 level of $43.7 million. The upstream firm had $137.6 million of availability under the revolving bank credit facility. Its long-term debt as of the March-end quarter was recorded at $593.8 million, down from the previous-quarter level of $625.3 million.

Guidance

For 2021, W&T Offshore maintains its total production at 38,000-42,000 Boe/d. Oil production is expected to be 4.97-5.57 MMBbls.

Moreover, the upstream company expects lease operating expenses of $158-$174 million, reflecting an increase from the previously mentioned $153-$169 million. General and administrative expenses are expected to be $49-$54 million. Also, capital expenditure is pegged at $30-$60 million for 2021.

For second-quarter 2021, the company projects a total production of 38,500-42,500 Boe/d. Notably, oil production is expected to be 1.26-1.39 MMBbls.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -22.58% due to these changes.

VGM Scores

At this time, W&T has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front 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 A. 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. It's no surprise W&T has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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