W&T OFFSHORE INC

Previous wording

The following discussion and analysis of our financial condition and results of operations is based on, and should be read in conjunction with Part I, Item 1.Business, Item 2.Properties, Item 1A.Risk Factors and Item 7A.Quantitative and Qualitative Disclosures About Market Risk and with Part 1I, Item 8.Financial Statements and Supplementary Data and other financial information appearing elsewhere in this 2023 Form 10-K. The following discussion and analysis includes forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those anticipated in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this Form 10-K, particularly in Part I, Item 1A.Risk Factors.

Current wording

The following discussion and analysis of our financial condition and results of operations is based on, and should be read in conjunction with Part I, Item 1.Business, Item 1A.Risk Factors, Item 2.Properties and Item 7A.Quantitative and Qualitative Disclosures About Market Risk and with Part 1I, Item 8.Financial Statements and Supplementary Data and other financial information appearing elsewhere in this 2024 Form 10-K. The following discussion and analysis includes forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those anticipated in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this Form 10-K, particularly in Part I, Item 1A.Risk Factors.

Previous wording

This section primarily discusses 2023 and 2022 items and comparisons between 2023 and 2022. Discussions of 2021 items and comparisons between 2022 and 2021 that are not included in the Form 10-K are incorporated by reference to Part II, Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operationsof our Annual Report on Form 10-K for the year ended December 31, 2022.

Current wording

This section primarily discusses 2024 and 2023 items and comparisons between 2024 and 2023. Discussions of 2023 items and comparisons between 2023 and 2022 that are not included in this Form 10-K are incorporated by reference to Part II, Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operationsof our Annual Report on Form 10-K for the year ended December 31, 2023.

Previous wording

We are an independent oil and natural gas producer, active in the exploration, development and acquisition of oil and natural gas properties in the Gulf of Mexico. As of December 31, 2023, we held working interests in 53 offshore producing fields in federal and state waters (which include 44 fields in federal waters and nine in state waters). We currently have under lease approximately 597,100 gross acres (440,000 net acres) spanning across the outer continental shelf off the coasts of Louisiana, Texas, Mississippi and Alabama, with approximately 8,000 gross acres in Alabama state waters, 435,600 gross acres on the conventional shelf and approximately 153,500 gross acres in the deepwater. A majority of our daily production is derived from wells we operate. Our interests in fields, leases, structures and equipment are primarily owned by our wholly-owned subsidiaries and through our proportionately consolidated interest in Monza.

Current wording

We are an independent oil and natural gas producer, active in the exploration, development and acquisition of oil and natural gas properties in the Gulf of America. As of December 31, 2024, we held working interests in 52 offshore producing fields in federal and state waters (which include 45 fields in federal waters and seven in state waters). We currently have under lease approximately 646,200 gross acres (502,300 net acres) spanning across the outer continental shelf off the coasts of Louisiana, Texas, Mississippi and Alabama, with approximately 5,500 gross acres in Alabama state waters, 493,000 gross acres on the conventional shelf and approximately 147,700 gross acres in the deepwater. A majority of our daily production is derived from wells we operate. Our interests in fields, leases, structures and equipment are primarily owned by our wholly-owned subsidiaries and through our proportionately consolidated interest in Monza Energy LLC.

Previous wording

On December 13, 2023, we entered into a purchase and sale agreement to acquire rights, titles and interest in and to certain leases, wells and personal property in the central shelf region of the Gulf of Mexico, among other assets, for a gross purchase price of $72.0 million, subject to customary purchase price adjustments. The transaction closed on January 16, 2024 and was funded using cash on hand. The Company also assumed the related AROs associated with these assets.

Current wording

On January 16, 2024, we closed on our acquisition of rights, titles and interest in and to certain leases, wells and personal property in the central shelf region of the Gulf of America, among other assets, for $77.3 million (including closing fees and other transaction costs). The acquisition was funded using cash on hand. We also assumed the related

Previous wording

In September 2023, we acquired working interests in certain oil and natural gas producing assets in the central and eastern shelf region of the Gulf of Mexico for $27.4 million. This transaction is described in more detail underFinancial Statements and Supplementary Data –Note 7 – Acquisitions, under Part II, Item 8 of this Annual Report.

Current wording

AROs associated with these assets. This transaction is described in more detail underFinancial Statements and Supplementary Data –Note 2 – Acquisitions, under Part II, Item 8 of this Annual Report.

Previous wording

The United States has experienced a rise in inflation since October 2021. Inflation peaked during mid-2022 at 9.1% but the rate of inflation has been gradually declining since the second half of 2022 according to the Consumer Price Index (the “CPI”). The annual inflation rate for December 2023 was 3.4%. These inflationary pressures have caused the Federal Reserve to tighten monetary policy by approving a series of increases to the Federal Funds Rate. As of December 31, 2023, the Federal Reserve benchmark rate ranged from 5.25% to 5.50%. Although the Federal Reserve has stated that they will begin reducing the benchmark rate in 2024, if inflation were to continue to rise, it is possible the Federal Reserve would continue to take action they deem necessary to bring inflation down and to ensure price stability, including further rate increases, which could have the effects of raising the cost of capital and depressing economic growth, either or both of which could negatively impact our business.

Current wording

In addition to the impact of volatile commodity prices on our operations, continuing inflation could also impact our sales margins and profitability. The United States has experienced a rise in inflation since October 2021. Inflation peaked during mid-2022 at 9.1% but the rate of inflation has been gradually declining since the second half of 2022 according to the Consumer Price Index (the “CPI”). The annual inflation rate for December 2024 was 2.9%, a decrease from the 3.4% rate for December 2023. However, the annual inflation rate of January 2025 was 3.0%, an increase from the 2.9% rate for December 2024. Beginning in September 2024, the Federal Reserve made three cuts to the target federal funds rate, bringing the target federal funds range down to 4.25% to 4.50%, easing monetary policy for the first time in four years due to progress in inflation moving sustainably toward 2%. The Summary of Economic Projections published by the Federal Reserve in December 2024 points to another 50 basis points of cuts in 2025. However, if inflation were to continue to rise again, it is possible the Federal Reserve would continue to take action they deem necessary to bring inflation down and to ensure price stability, including targeted federal funds rate increases, which could have the effects of raising the cost of capital and depressing economic growth, either or both of which could negatively impact our business.

Previous wording

Deferred Production*–*Our oil, NGLs and natural gas production is significantly affected by both planned and unplanned production downtime caused by events such as planned repairs and upgrades, third-party downtime associated with non-operated properties, the transportation, gathering or processing of production and weather events. For 2023, we estimate deferred production was approximately 2,541 MBoe.

Current wording

In addition, our oil, NGLs and natural gas production can also be significantly affected by both planned and unplanned production downtime caused by events such as planned repairs and upgrades, third-party downtime associated with non-operated properties and the transportation, gathering or processing of production and weather events. For 2024, we estimate deferred production was approximately 2.6 MMBoe, excluding the deferred production from the hurricanes.

Previous wording

Surety Bond Collateral*–*In prior years, some of the sureties that provide us surety bonds used for supplemental financial assurance purposes have requested and received collateral from us and may request additional collateral from us in the future, which could be significant and could impact our liquidity. In addition, pursuant to the terms of our agreements with various sureties under our existing bonds or under any additional bonds we may obtain, we are required to post collateral at any time, on demand, at the surety’s discretion. In both 2023 and 2022, we have not had to post collateral for sureties, and we currently do not have any collateral posted for surety bonds. The issuance of any additional surety bonds or other security to satisfy future BOEM orders, collateral requests from surety bond providers and collateral requests from other third-parties may require the posting of cash collateral, which may be significant, and may require the creation of escrow accounts.

Current wording

In prior years, some of the sureties, which provided us surety bonds that we use for supplemental financial assurance purposes, requested and received collateral from us. Pursuant to the terms of our agreement with various sureties under out existing bonding arrangements, we may be required to post collateral. These sureties may request additional collateral from us in the future, which could be significant and could materially impact our liquidity.

Previous wording

Our revenues are derived from the sale of our oil and natural gas production, as well as the sale of NGLs. Our oil, NGL and natural gas revenues do not include the effects of derivatives, which are reported inDerivative (gain) loss, net in our Consolidated Statements of Operations. The following table presents our sources of revenue as a percentage of total revenue:

Current wording

Our revenues are derived from the sale of our oil and natural gas production, as well as the sale of NGLs. Our oil, NGL and natural gas revenues do not include the effects of derivatives, which are reported inDerivative (gain) loss, net in our Consolidated Statements of Operations.

Previous wording

Changes in average sales prices and sales volumes caused the following changes to our oil, NGL and natural gas revenues between 2023 and 2022 (in thousands):

Current wording

Changes in average sales prices and production volumes caused the following changes to our oil, NGL and natural gas revenues between 2024 and 2023 (in thousands):

Previous wording

Lease operating expenses*–Lease operating expenses include the expense of operating and maintaining our wells, platforms and other infrastructure primarily in the Gulf of Mexico. These operating costs are comprised of several components including direct or base lease operating expenses, insurance premiums, workover costs and facility maintenance expenses. Our lease operating costs, which depend in part on the type of commodity produced, the level of workover activity and the geographical location of the properties, *increased $33.3 million to $257.7 million in 2023 compared to $224.4 million in 2022. On a per Boe basis, lease operating expenses increased to $20.24 per Boe during 2023 compared to $15.35 per Boe during 2022. On a component basis, base lease operating expenses increased $15.2 million, workover expenses increased $9.7 million and facility maintenance expenses increased $8.7 million. These increases were partially offset by a decrease of $0.3 million in hurricane repairs.

Current wording

Lease operating expenses include the expense of operating and maintaining our wells, platforms and other infrastructure primarily in the Gulf of America. These operating costs are comprised of several components including direct or base lease operating expenses, insurance premiums, workover costs and facility maintenance expenses. Our lease operating costs, which depend in part on the type of commodity produced, the level of workover activity and the geographical location of the properties,* *increased $23.8 million to $281.5 million in 2024 compared to $257.7 million in 2023. On a per Boe basis, lease operating expenses increased to $23.10 per Boe during 2024 compared to $20.24 per Boe during 2023. On a component basis, base lease operating expenses increased $30.2 million, facility maintenance expenses increased $7.9 million and hurricane repairs increased $1.0 million, These increases were partially offset by a decrease of $15.3 million in workover expenses.

Previous wording

Expenses for direct labor, materials, supplies, repair, third-party costs and insurance comprise the most significant portion of our base lease operating expense. Base lease operating expenses increased primarily due to a full year of expenses at the fields acquired in February 2022 and three months of expenses at the fields acquired in September 2023, as well as higher repair, maintenance and labor costs at other fields. In addition, expenses related to our insurance coverage also increased due to higher premiums on our policies that were renewed in June 2023.

Current wording

Expenses for direct labor, materials, supplies, repair, third-party costs and insurance comprise the most significant portion of our base lease operating expense. Base lease operating expenses increased primarily due to increases of $37.5 million of expenses at the fields acquired in January 2024 and September 2023 partially offset by $6.1 million of reduced expenses from the abandonment work to shutdown certain of our fields.

Previous wording

Workover and facility maintenance expenses consist of costs associated with major remedial operations on completed wells to restore, maintain or improve the well’s production. Since these remedial operations are not regularly scheduled, workover and maintenance expense are not necessarily comparable from period to period. During 2023, we incurred $12.0 million in workover expenses primarily at our Mobile Bay Properties due to numerous workover projects including well cleanout, recovering of fishing tools and stimulating to return the wells back to production.

Current wording

Workover and facilities maintenance expenses consist of costs associated with major remedial operations on completed wells to restore, maintain or improve the well’s production. Since these remedial operations are not regularly scheduled, workover and maintenance expense are not necessarily comparable from period to period. The decrease in workover expenses and the increase in facilities maintenance expenses were due to the timing and mix of projects undertaken.

Previous wording

Gathering, transportation and production taxes*–Gathering and transportation consist of costs incurred in the post-production shipping of oil, NGLs, and natural gas to the point of sale. *Production taxes consist of severance taxes levied by the Alabama Department of Revenue and the Texas Department of Revenue on production of oil and natural gas from land or water bottoms within the boundaries of each state, respectively. Gathering, transportation and production taxes decreased to $26.3 million in 2023 compared to $35.1 million in 2022, primarily due to lower production volumes and realized prices partially offset by the transportation contract related to the properties acquired in 2022.

Current wording

Gathering and transportation consist of costs incurred in the post-production shipping of oil, NGLs, and natural gas to the point of sale.* *Production taxes consist of severance taxes levied by the Alabama Department of Revenue , the Louisiana Department of Revenue and the Texas Department of Revenue on production of oil and natural gas from land or water bottoms within the boundaries of each state. Gathering, transportation and production taxes increased to $28.2 million in 2024 compared to $26.3 million in 2023, primarily due to increase of $1.5 million in gathering and transportation fees and $0.4 million in production taxes. Gathering and transportation fees increased during the first half of 2024 compared with the first half of 2023 primarily related to higher production volumes in the first quarter of 2024 and higher processing fees for our Mobile Bay production that had to be re-routed to a different processing plant due to the shut-in of our primary Mobile Bay processing plant. These fees decreased in the second half of 2024 as our production volumes decreased compared with the same period in 2023. The increase in production taxes is primarily related to the start of payments to the state of Louisiana from our acquisition of oil and natural gas properties in September 2023.

Previous wording

Depreciation, depletion and amortization*–*Depreciation, depletion and amortization expense (“DD&A”) is the expensing of the capitalized costs incurred to acquire, explore and develop oil and natural gas reserves. We use the full cost method of accounting for oil and natural gas activities. See Part II, Item 8.Financial Statements and Supplementary Data — Note 1 — Summary of Significant Accounting Policies for further discussion. DD&A increased to $114.7 million in 2023 from $107.1 million in 2022. The DD&A rate increased to $9.01 per Boe in 2023 from $7.33 per Boe in 2022. The DD&A rate per Boe increased primarily as a result of a higher depreciable base due to increases in capital expenditures, future development costs and capitalized ARO and lower proved reserves.

Current wording

*Depreciation, depletion and amortization expense (“DD&A”) is the expensing of the capitalized costs incurred to acquire, explore and develop oil and natural gas reserves. We use the full cost method of accounting for oil and natural gas activities. DD&A increased $28.3 million for 2024 compared to 2023 primarily due to increases of $33.3 million from an increase in the depletion rate per Mcfe and $1.3 million for depreciation of other property and the corporate airplane acquired in May 2023, partially offset by $6.3 million from the decrease in production for 2024 compared with 2023. The DD&A rate increased to $11.74 per Boe in 2024 from $9.01 per Boe in 2023. The DD&A rate per Boe increased primarily as a result of a higher depreciable base due to our January 2024 acquisition, increases in capital expenditures, future development costs and capitalized ARO and lower proved reserves.

Previous wording

Asset retirement obligations accretion expense *–*Accretion expense is the expensing of the changes in value of our ARO as a result of the passage of time over the estimated productive life of the related assets as the discounted liabilities are accreted to their expected settlement values. Accretion expense increased to $29.0 million in 2023 compared to $26.5 million in 2022 primarily due to the increase in our ARO liability (see Part II, Item 8.Financial Statements and Supplementary Data — Note 8 — Asset Retirement Obligations).

Current wording

Accretion expense is the expensing of the changes in value of our ARO as a result of the passage of time over the estimated productive life of the related assets as the discounted liabilities are accreted to their expected settlement values. Accretion expense increased to $32.4 million in 2024 compared to $29.0 million in 2023 primarily due to our acquisition in January 2024 and revisions to the estimates used in calculating the liability.

Previous wording

*General and administrative expenses (“G&A”)**–G&A expense generally consists of costs incurred for overhead, including payroll and benefits for our corporate staff, costs of maintaining our headquarters, costs of managing our production operations, bad debt expense, share-based compensation costs, audit and other fees for professional services and legal compliance. *For 2023, G&A expenses were $75.5 million compared to $73.7 million in 2022. The increase is primarily due to increased payroll costs, share-based compensation costs and professional fees, partially offset by a decrease in legal expenses and a $2.2 million employee retention credit recorded in 2023. Share-based compensation costs were higher due to the higher grant date fair values of share-based compensation awards outstanding during 2023 as compared to the value of awards outstanding during 2022. Legal expenses decreased primarily due to non-recurring legal fees incurred during 2022 related to a review of processes and controls within our information technology department.

Current wording

General and administrative (“G&A”) expenses generally consist of costs incurred for overhead, including payroll and benefits for our corporate staff, costs of maintaining our headquarters, costs of managing our production operations, bad debt expense, share-based compensation costs, audit and other fees for professional services and legal compliance.* *For 2024, G&A expenses were $82.4 million compared to $75.5 million in 2023. The increase is primarily due to increases of (i) $4.0 million in payroll costs consisting of $1.8 million related to merit and headcount increases and a $2.2 million employee retention credit recorded in 2023, (ii) $2.8 million in non-recurring legal fees and (iii) $1.9 million in medical claims cost, partially offset by a $2.1 million decrease in short-term incentive compensation costs.

Previous wording

Interest expense, net*–Interest expense, net of interest income, was $44.7 million during 2023, decreasing $24.8 million from $69.4 million during 2022. The decrease is primarily due to the redemption of the 9.75% Notes in February 2023, decreased interest expense on the lower outstanding principal balance of the Term Loan and an increase in interest income, partially offset by interest expense incurred on the 11.75% Notes issued in late January 2023. SeeFinancial Statements and Supplementary Data – Note 2 – Debt* under Part II, Item 8 in this Form 10-K for additional information on our debt.

Current wording

Interest expense, net of interest income, decreased $4.2 million for 2024 compared with 2023 primarily due to decreases of $7.9 million from the redemption in February 2023 of our 9.75% Senior Second Lien Notes due 2023 and $1.9 million from the lower outstanding principal balance of the Term Loan, partially offset by $2.8 million incurred on the 11.75% Notes issued in late January 2023 and a $2.6 million decrease in interest income. *

Previous wording

Derivative (gain) loss*–*During 2023, the $54.8 million derivative gain consisted of $4.1 million of realized losses on settled contracts and $58.9 million of unrealized gain, net, from the increase in the fair value of the open contracts. During 2022, the $85.5 million derivative loss recorded for oil and natural gas derivative contracts consisted of $125.1 million of premium payments and realized losses on settled contracts and $39.6 million of unrealized gain, net from the increase in fair value of open contracts. During the second quarter of 2022, the Company monetized a portion of existing hedge positions through restructuring of strike prices on certain outstanding purchased calls covering the second half of 2022 through the first quarter of 2025. This transaction resulted in net cash proceeds of $105.3 million, which are included as an offset to realized losses for 2022.

Current wording

Unrealized gains or losses on open derivative contracts relate to production for future periods; however, changes in the fair value of all of our open derivative contracts are recorded as a gain or loss on our Consolidated Statements of Operations at the end of each month. During 2024, the $3.6 million derivative gain consisted of $2.9 million of realized gains on settled contracts and $0.7 million of unrealized gain, net, from the increase in the fair value of the open contracts. During 2023, the $54.8 million derivative gain consisted of $4.1 million of realized losses on settled contracts and $58.9 million of unrealized gain, net, from the increase in the fair value of the open contracts.

Previous wording

Unrealized gains or losses on open derivative contracts relate to production for future periods; however, changes in the fair value of all of our open derivative contracts are recorded as a gain or loss on our Consolidated Statements of Operations at the end of each month. As a result of the derivative contracts we have on our anticipated natural gas production volumes through April 2028, we expect these activities to continue to impact net income based on fluctuations in market prices for natural gas. As of December 31, 2023, we do not have any open oil contracts. SeeFinancial Statements and Supplementary Data – Note 4 – Derivative Financial Instruments under Part II, Item 8 in this Form 10-K for additional information.

Current wording

As a result of the derivative contracts we have on our anticipated natural gas production volumes through April 2028, we expect these activities to continue to impact net income based on fluctuations in market prices for natural gas.

Previous wording

Other expense, net*–*During 2023, other expense, net, was $5.6 million, compared to $14.3 million for 2022. During both 2023 and 2022, other expense primarily consisted of additional expenses for net abandonment obligations pertaining to a number of legacy Gulf of Mexico properties.

Current wording

During 2024, other expense, net, was $18.1 million, compared to $5.6 million for 2023. During 2024 and 2023, other expense primarily consisted of $20.9 million and $6.2 million, respectively, of additional expenses for net abandonment obligations pertaining to a number of legacy Gulf of America properties, partially offset by fees paid by producers to tie into our subsea equipment at one of our wells.

Previous wording

Income tax expense*–*Our effective tax rates for 2023 and 2022 were 54.0% and 18.8%, respectively. In 2023, the rate differed from the federal statutory rate of 21% primarily due to adjustments in the valuation allowance, compensation adjustments and the impact of state income taxes. In 2022, the rate differed from the federal statutory rate primarily due to adjustments in the valuation allowance and the impact of state income taxes.

Current wording

Our effective tax rates for 2024 and 2023 were 10.3% and 54.0%, respectively. These rates differed from the federal statutory rate of 21% primarily due to the impact of state income taxes, non-deductible compensation and adjustments to the valuation allowance on our deferred tax assets.

Previous wording

We expect to support our business requirements primarily with cash on hand and cash generated from operations. As of December 31, 2023, we had $173.3 million of available cash on handand $50.0 million available under our Credit Agreement, based on a borrowing base of $50.0 million. We also have up to approximately $83.0 million of availability through our “at-the-market” equity offering program, pursuant to which we may offer and sell shares of our common stock from time to time. Based on our current financial condition and current expectations of future market conditions, we believe our cash on hand, cash flows from operating activities and access to the equity markets from our “at-the-market” equity offering program will provide us with additional liquidity to continue our growth to take advantage of the current commodity environment and will allow us to meet our cash requirements for at least the next 12 months.

Current wording

We expect to support our business requirements primarily with cash on hand and cash generated from operations. As of December 31, 2024, we had $109.0 million of available cash on handand $50.0 million available under our Credit Agreement, based on a borrowing base of $50.0 million. We also have up to approximately $83.0 million of availability through our “at-the-market” equity offering program, pursuant to which we may offer and sell shares of our common stock from time to time. Based on our current financial condition and current expectations of future market conditions, we believe our cash on hand, cash flows from operating activities and access to the equity markets from our “at-the-market” equity offering program will provide us with additional liquidity to continue our growth to take advantage of the current commodity environment and will allow us to meet our cash requirements for at least the next 12 months and beyond.

Previous wording

Operating activities* –*Net cash provided by operating activities for 2023 was $115.3 million, decreasing $224.2 million from 2022. The change between periods is primarily due to (i) a $388.3 million decrease in revenues and (ii) a $36.2 million increase in operating expenses, partially offset by (iii) a $79.1 million decrease in derivative cash settlements, including premium payments, and (iv) a $29.0 million decrease in interest paid. These decreases in operating cash flow were partially offset by the changes in operating assets and liabilities which increased operating cash flows by $25.1 million primarily related to (i) lower accounts receivable balance due to decreased realized prices, (ii) and lower accounts payable and accrued liabilities balances in the current period and (iii) a $42.3 million decrease in ARO settlements.

Current wording

Operating activities* –*Net cash provided by operating activities for 2024 was $59.5 million, decreasing $55.8 million from 2023. This was primarily due to decreases of $37.6 million in net (loss) income adjusted for certain non-cash items and $18.2 million from changes in operating assets and liabilities. The decrease in net (loss) income adjusted for certain non-cash items was primarily related to a $7.4 million decrease in revenues andincreases in cash operating expenses, partially offset by a $13.5 million increase in derivative cash receipts. The decrease in operating assets and liabilitiesis primarily related to lower accounts receivable balances due to decreased revenues partially offset by higher accounts payable and accrued liabilities balances in the current period.

Previous wording

Investing activities*–*Net cash used in investing activities for 2023 decreased $13.5 million compared to 2022. This was primarily due to decreases of $24.1 million in acquisition of property interests and $1.7 million in investment in oil and natural gas properties, partially offset by the purchase of the corporate aircraft and furniture, fixtures and other.

Current wording

Investing activities*–*Net cash used in investing activities for 2024 increased $36.6 million compared to 2023. This was primarily due to an increase of $53.3 million in acquisition of property interests, partially offset by a decrease of $4.5 million in investment in oil and natural gas properties and the purchase of the corporate aircraft during 2023.

Previous wording

Financing activities* –*Net cash used in financing activities during 2023 increased by $292.8 million compared to 2022. This was primarily due to long-term debt repayments of $544.0 million, primarily due to the redemption of the $552.5 million principal amount outstanding 9.75% Notes and the $16.5 million of net proceeds received from the sales of equity securities under our at-the-market equity offering program in 2022, partially offset by the $275.0 million in proceeds from the issuance of the 11.75% Notes.

Current wording

Financing activities* –*Net cash used in financing activities during 2024 decreased by $313.2 million compared to 2023. This was primarily due to the redemption of the $552.5 million principal amount outstanding of the 9.75% Notes in February 2023 partially offset by the net cash proceeds of $275.0 million received from the issuance of the 11.75% Notes in January 2023.

Previous wording

The level of our investment in oil and natural gas properties changes from time to time depending on numerous factors including the prices of oil, NGLs and natural gas, acquisition opportunities, liquidity and financing options and the results of our exploration and development activities. The following table presents our investments in oil and gas properties and equipment for exploration, development, acquisitions and other leasehold costs (in thousands):

Current wording

The level of our investment in oil and natural gas properties changes from time to time depending on numerous factors including the prices of oil, NGLs and natural gas, acquisition opportunities, liquidity and financing options and the results of our exploration and development activities.

Previous wording

Our preliminary capital expenditure budget for 2024 has been established in the range of $35.0 million to $45.0 million, which excludes acquisitions. In our view of the outlook for 2024, we believe this level of capital expenditure will enhance our liquidity capacity throughout 2024 and beyond while providing liquidity to make strategic acquisitions. At current pricing levels, we expect our cash flows to cover our liquidity requirements, and we expect additional financing sources to be available if needed. If our liquidity becomes stressed from significant or prolonged reductions in realized prices, we have flexibility in our capital expenditure budget to reduce investments. We strive to maintain flexibility in our capital expenditure projects and if commodity prices improve, we may increase our investments.

Current wording

Our preliminary capital expenditure budget for 2025 has been established in the range of $34.0 million to $42.0 million, which excludes acquisitions. In our view of the outlook for 2025, we believe this level of capital expenditure will enhance our liquidity capacity throughout 2025 and beyond while providing liquidity to make strategic acquisitions. At current pricing levels, we expect our cash flows to cover our liquidity requirements, and we expect additional financing sources to be available if needed. If our liquidity becomes stressed from significant or prolonged reductions in realized prices, we have flexibility in our capital expenditure budget to reduce investments. We strive to maintain flexibility in our capital expenditure projects and if commodity prices improve, we may increase our investments.

Previous wording

We have grown by making strategic acquisitions of producing properties in the Gulf of Mexico. We seek opportunities where we can exploit additional drilling projects and reduce costs. In September 2023, we acquired eight shallow water oil and natural gas producing assets in the central and eastern shelf region of the Gulf of Mexico for $27.4 million, after normal and customary post-effective date adjustments (including net operating cash flow attributable to the properties from the effective date to the respective closing date). The transaction was funded with cash on hand.

Current wording

We have grown by making strategic acquisitions of producing properties in the Gulf of America. We seek opportunities where we can exploit additional drilling projects and reduce costs. In January 2024, we closed on the acquisition of rights, titles and interest in and to certain leases, wells and personal property in the central shelf region of the Gulf of America, among other assets, for $77.3 million, subject to customary purchase price adjustments. The transaction was funded with cash on hand. We also received a final settlement statement for our September 2023 acquisition of certain oil and natural gas producing assets in the central and eastern shelf region of the Gulf of America and recorded an additional $3.3 million of oil and natural gas properties.

Previous wording

Annually, we review and revise our ARO estimates. Our ARO at December 31, 2023 and 2022 were $498.8 million and $466.4 million, respectively. The increase is primarily due to revisions in expected timing and amount of costs to be incurred. These increases were partially offset by $34.0 million related to liabilities settled during 2023. Ourestimate of ARO spending in 2024 is approximately $35.0 to $45.0 million. During 2023 and 2022, we revised our estimates of costs anticipated to be charged by service providers for plugging and abandonment projects and revised our estimates to actual spending as invoices were processed and projects were completed. As these estimates are for work to be performed in the future, and in many cases, several years in the future, actual expenditures could be substantially different than our estimates. Additionally, we revise our estimates to account for the cost to comply with any new or revised regulations, including increases in work scope and cost changes from interpretation of work scope. See Part I, Item 1A.Risk Factors andFinancial Statements and Supplementary Data – Note 8 – Asset Retirement Obligations under Part II, Item 8 in this Form 10-K for additional information regarding our ARO.

Current wording

We have obligations to plug and abandon wells, remove platforms, pipelines, facilities and equipment and restore the land or seabed at the end of oil and natural gas production operations. During 2024, we paid $39.7 million related to these obligations. Our ARO estimates as of December 31, 2024 and 2023 were $548.8 million and $498.8 million, respectively. As our ARO estimates are for work to be performed in the future, and in the case of our non-current ARO, extend from one-to-many years in the future, the timing and amount of actual expenditures could be substantially different than our estimates. See Part I, Item 1A.Risk Factors andFinancial Statements and Supplementary Data – Note 4 – Asset Retirement Obligations under Part II, Item 8 in this Form 10-K for additional information regarding our ARO.

Previous wording

On November** **8, 2023, we announced that our board of directors approved the implementation of a quarterly cash dividend payable to holders of common stock. The initial cash dividend of $0.01 per share of common stock, or $1.5 million, was paid on December 22, 2023, to shareholders of record at the close of business on November 28, 2023. The amount and frequency of future dividends is subject to the discretion of our board of directors and primarily depends on earnings, capital expenditures, debt covenants, and various other factors.

Current wording

In November** **2023, we announced that our board of directors approved the implementation of a quarterly cash dividend payable to holders of common stock. During 2024, we have paid cash dividends totaling approximately $6.0 million to holders of our common stock. The amount and frequency of future dividends is subject to the discretion of our board of directors and primarily depends on earnings, capital expenditures, debt covenants and various other factors. For additional information about our dividends, see Part II, Item 8.Financial Statements and Supplementary Data – Note 7 – Stockholders’ Equity and Note 19 – Subsequent Eventsof this Annual Report.

Previous wording

Our material cash commitments from known contractual and other obligations consist primarily of obligations for long-term debt and related interest, operating leases, ARO and other obligations as part of normal operations. Certain amounts included in our contractual obligations as of December 31, 2023 are based on our estimates and assumptions about these obligations, including their duration, anticipated actions by third parties and other factors.

Current wording

Our material cash commitments from known contractual and other obligations consist primarily of obligations for debt and related interest, operating leases, ARO and other obligations as part of normal operations. Certain amounts included in our contractual obligations as of December 31, 2024 are based on our estimates and assumptions about these obligations, including their duration, anticipated actions by third parties and other factors.

Previous wording

We have obligations associated with the retirement of our oil and natural gas wells and related infrastructure. We have obligations to plug and abandon all wells, remove our platforms, pipelines, facilities and equipment and restore the land or seabed at the end of oil and natural gas production operations. Estimating the future restoration and removal cost requires us to make estimates and judgments because the removal obligations may be many years in the future and contracts and regulations often have vague descriptions of what constitutes removal. We accrue a liability with respect to these obligations based on our estimate of the timing and amount to replace, remove or retire the associated assets.

Current wording

We have significant obligations associated with the retirement of our oil and natural gas wells and related infrastructure. We have obligations to plug and abandon all wells, remove our platforms, pipelines, facilities and equipment and restore the land or seabed at the end of oil and natural gas production operations. Estimating the future restoration and removal cost requires us to make estimates and judgments because the removal obligations may be many years in the future and contracts and regulations often have vague descriptions of what constitutes removal. Asset removal technologies and costs are constantly changing, as are regulatory, political, environmental, safety and public relations considerations.

Previous wording

In estimating the liability associated with our asset retirement obligations, we utilize several assumptions, including a credit-adjusted risk-free interest rate, estimated costs of decommissioning services, estimated timing of when the work will be performed and a projected inflation rate. Revisions to these estimates impact the value of our abandonment liability, our oil and natural gas property balance and our DD&A rates. After initial recording, the liability is increased for the passage of time, with the increase being reflected as “Accretion expense” in the Consolidated Statements of Operations. If we incur an amount different from the amount accrued for decommissioning obligations, we recognize the difference as an adjustment to our oil and natural gas properties.

Current wording

In estimating the liability associated with our AROs, we utilize several assumptions, including a credit-adjusted risk-free interest rate, estimated costs of decommissioning services, estimated timing of when the work will be performed and a projected inflation rate. To the extent future revisions to these estimates impact the value of our abandonment liability, a corresponding adjustment is made to our oil and natural gas property balance.