W&T OFFSHORE INC
For the period ended Mar 31, 2025. Filed May 7, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 7, 2025
WTI$3.09-1.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-08.
0001558370-24-014923
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-07.
0001558370-25-006597
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 95 previous paragraphs and 84 current paragraphs.
36 unchanged; 18 reworded; 29 added; 32 removed; 9 previous and 1 current paragraphs rearranged.
Tables are not compared: 17 previous and 10 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (29)
Current report
In January 2025, we received approximately $11.9 million for the sale of a non-core interest in our Garden Banks Blocks 385 and 386. In addition, we received $58.5 million related to the settlement of insurance claims from our Mobile Bay plant turnaround in February 2023. Because we use the full cost method of accounting, these amounts were included in our full cost pool at the time of receipt.
Current report
Debt Refinancing
Current report
Issuance of the 10.75% Notes
Current report
On January 28, 2025, we issued and sold $350.0 million in aggregate principal amounts of our 10.75% Notes. The 10.75% Notes mature on February 1, 2029 and interest is payable on each February 1 and August 1, commencing August 1, 2025. The 10.75% Notes are guaranteed by the Guarantors. The 10.75% Notes are secured by second priority liens (subject to permitted liens and certain other exceptions) on substantially all of our oil and natural gas properties, including those of the Guarantors.
Current report
We used the net proceeds from the issuance of the 10.75% Notes, along with cash on hand, to (i) purchase for cash such of our 11.75% Notes that were validly tendered pursuant to the terms of the Tender Offer; (ii) repay the $114.2 million of outstanding amounts under Term Loan; (iii) fund the full redemption amount for an August 1, 2025 redemption of the remaining 11.75% Notes not validly tendered and accepted for purchase in the Tender Offer; and (iv) pay any premiums, fees and expenses relating to these transactions.
Current report
Redemption of the 11.75% Notes
Current report
On January 13, 2025, we commenced the Tender Offer for any and all of our outstanding 11.75% Notes. On January 28, 2025, we accepted and purchased $269.7 million aggregate principal amount of the outstanding 11.75% Notes for a purchase price equal to $1,036.25 for each $1,000 principal amount of the Notes purchased. An additional $89,000 of Notes were tendered on February 12, 2025. We purchased these Notes for $89,905 plus accrued interest.
Current report
After giving effect to this purchase, an aggregate $5.2 million principal amount of the 11.75% Notes remained outstanding. We then effected a legal defeasance of the 11.75% Notes by purchasing $5.9 million of government securities to cover the principal and interest due for those remaining 11.75% Notes. This process released us from our remaining obligations under the indenture governing the 11.75% Notes.
Current report
Credit Agreement
Current report
On January 28, 2025, in conjunction with the issuance of the 10.75% Notes, we terminated our prior credit agreement and entered into a new credit agreement which provides us with a revolving credit and letter of credit facility with initial bank lending commitments of $50.0 million with a letter of credit sublimit of $10.0 million. The Credit Facility matures on July 28, 2028.
Current report
Regulatory Update
Current report
The change of Presidential administration in the early part of 2025 saw promising developments in the oil and natural gas regulatory environment. On January 20, 2025, President Trump issued Executive Order 14154,Unleashing American Energy. Section 3 of that Order directed heads of agencies to review existing regulations to identify agency actions that impose an undue burden on the identification, development, or use of domestic energy resources. The Trump administration also issued Executive Order 14156,Declaring a National Energy Emergency, stating that the United States’ insufficient energy production, transportation, refining and generation constituted an unusual and extraordinary threat to the nation’s economy, national security, and foreign policy. Furthermore, on February 3, 2025, Secretary Burgum issued Secretarial Order 3418,Unleashing American Energy. Section 4(b) of that Order directed agency officials to prepare an action plan that will include steps to suspend, revise, or rescind certain regulations.
Current report
As it pertains to us, on April 8, 2025, pursuant to the above directives from the Trump administration, the Department of Interior, through a joint filing in the U.S. District Court for the Western District of Louisiana (Case no. 2:24-cv-00820), indicated that it will not seek supplemental financial assurance in the Gulf of America except in the case of (a) sole liability properties and (b) certain non-sole liability properties that do not have a financially strong co-owner or predecessor in title and meet other conditions.
Current report
While we view this as a positive development, the substance and timing of future legal and regulatory actions cannot be predicted at this time. Additionally, regardless of any changes that may come as a result of the Secretarial Order, the BOEM has the right to issue liability orders in the future, including if it determines there is a substantial risk of nonperformance of the interest holder’s decommissioning liabilities. For more information on the BOEM and financial assurance obligations to that agency, seeBusiness – Environmental, Health and Safety Matters and Government Regulations – Other Regulation of the Oil and Natural Gas Industry under Part I, Item 1 of our 2024 Annual Report.
Current report
In addition, the Trump administration has issued a number of executive orders aimed at streamlining regulations and reducing the regulatory burden on oil and natural gas companies, increasing federal oil and natural gas leasing, including in the Gulf of America, and expediting U.S. natural resource development.
Current report
The Energy Information Administration (“EIA”) published its latest Short Term Energy Outlook in April 2025. Oil prices fell sharply in the first week of April 2025 as oil market participants assessed announcements that the United States would impose new tariffs and OPEC+ would accelerate production increases. These announcements increase the likelihood that global oil inventories will rise in the coming month and have the potential to put further downward pressure on oil prices. As a result, the EIA is forecasting that the spot price for WTI oil will fall from an average of $71.84 per barrel for the first quarter of 2025 to an average of $61.33 per barrel for the remainder of 2025 and then continue to fall to an average of $57.50 per barrel in 2026.
Current report
The EIA is forecasting that Henry Hub spot prices are expected to average more than $3.93 per MMBtu in the second quarter of 2025, an 88% increase compared with the second quarter of 2024. The EIA is also forecasting that
Current report
Henry Hub spot prices will average $4.27 per MMBtu in 2025 and $4.60 in 2026. The EIA is expecting natural gas prices to rise in 2025 as natural gas demand (consumption plus exports) in the United States will grow by 4% in 2025 compared with 2024, led by an 18% increase in exports of natural gas by pipeline and as liquified natural gas (“LNG”) and a 9% increase in residential and commercial consumption for space heating. The increase in natural gas exports is driven primarily by an increase in LNG exports as two new LNG export facilities ramp up operations.
Current report
Production volumes decreased by 0.5 MMBoe to 2.7 MMBoe during the three months ended March 31, 2025 compared to the same period in 2024 primarily related to deferred production ofapproximately 0.2 MMBoe at our Mobile Bay properties related to freezing weather and compressor issues and approximately 0.2 MMBoe from the shut-ins of our West Delta 73 field and our Main Pass 98 and 108 fields.
Current report
Lease operating expenses* –*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, were relatively flat during the three months ended March 31, 2025 compared to the same period in 2024. On a per Boe basis, lease operating expenses increased to $25.88 per Boe during the three months ended March 31, 2025 compared to $22.14 per Boe during the three months ended March 31, 2024. On a component basis, base lease operating expenses decreased $3.4 million, workover expenses decreased $1.0 million and facilities maintenance expense increased $4.5 million.
Current report
General and administrative expenses* –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. *G&A expenses decreased $0.4 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The decrease is primarily due to decreases of (i) $0.9 million in share-based compensation costs and (ii) $0.9 million in employee benefit costs due to lower medical claims costs, partially offset by a $1.6 million increase in legal fees related to various litigation issues, such as our sureties litigation.
Current report
Loss on extinguishment of debt* –During the three months ended March 31, 2025,*we recorded a loss on extinguishment of debt related to our January 2025 refinancing. The loss consisted of (i) $9.8 million of premiums paid on the redemption of the tendered 11.75% Notes; (ii) $4.6 million related to the write-off of unamortized debt issuance costs; (iii) $0.5 million of fees related to the refinancing; and (iv) $0.2 million related to the legal defeasance of the untendered 11.75% Notes.
Current report
Operating Activities
Current report
Our largest source of operating cash is collecting cash from customers and joint interest partners from sales of our products. The primary use of operating cash is to pay our suppliers, employees and others for a wide range of goods and services.
Current report
Investing Activities
Current report
Our principal recurring investing activity is the funding of acquisitions and investments in oil and natural gas properties to support and generate revenues from operations. Cash flows provided by (used in) investing activities were $63.3 million and $(87.6) million, respectively. During the three months ended March 31, 2024, we paid $80.5 million related to our January 2024 acquisition and our September 2023 acquisition. Investments in oil and natural gas properties were $6.7 million and $7.1 million during the three months ended March 31, 2025 and 2024, respectively. During the three months ended March 31, 2025, we also received $58.5 million in insurance proceeds and $11.9 million in proceeds from the sale of oil and natural gas properties. As we use the full cost method of accounting for our oil and natural gas properties, these proceeds were recorded in our full cost pool.
Current report
Financing Activities
Current report
Cash flows used in financing activities were $63.1 million and $2.5 million for three months ended March 31, 2025 and 2024, respectively. In connection with our debt refinancing in January 2025, we received $350.0 million in proceeds from the issuance of our 10.75% Notes and used these proceeds, along with cash on hand, to (i) purchase for cash, pursuant to the Tender Offer, $269.8 million of our 11.75% Notes; (ii) repay $114.2 million of amount outstanding under our Term Loan; (iii) purchase $5.9 million of government securities to be used in the legal defeasance of the remaining principal of our 11.75% Notes not validly tendered and accepted for purchase in the Tender Offer; and (iv) pay $21.3 million in premiums, fees and debt issuance costs.
Current report
We also paid dividends of $1.5 million in both the three months ended March 31, 2025 and 2024.
Removed paragraphs (32)
Previous report
Since our operations are in the Gulf of Mexico, we are particularly vulnerable to the effects of hurricanes on production and operations. Significant hurricane impacts include reductions and/or deferrals of future oil and natural gas production and revenues, increased lease operating expenses for evacuations and repairs and possible acceleration of plugging and abandonment costs.
Previous report
In its latest Short-Term Energy Outlook published in October 2024, the U.S. Energy Information Administration (“EIA”) estimated that Hurricane Francine, which made landfall on the Louisiana coast on September 11, 2024, resulted in the shut-in of up to 42% of oil production and 53% of natural gas production in the Gulf of Mexico (“GOM”). Production capacity in the GOM was unable to return to full capacity because Hurricane Helene, a Category 4 storm, went through a nearby area two weeks later, extensively disrupting energy systems.
Previous report
Our production was impacted due to precautionary shut-ins of facilities and evacuations associated with both Hurricane Francine and Hurricane Helene. For the three months ended September 30, 2024, we estimate deferred production related to Hurricane Francine was approximately 132.8 MBoe and affected 35 fields, and deferred production related to Hurricane Helene was approximately 16.0 MBoe and affected five fields. Production downtime following these hurricanes was extended as a result of damage and power loss at third party downstream facilities, including oil terminals, natural gas processing plants and refineries, causing them to remain offline for several weeks. While our assets and infrastructure did not suffer significant damage during the storm, unplanned costs for minor repairs and restoring production, as well as evacuating employees and contractors, were incurred as a result of the hurricane and are reflected in lease operating expense.
Previous report
Spot prices for West Texas Intermediate (“WTI”) oil averaged $70.24 per barrel in September 2024, down 8% from August 2024. Prices fell in September 2024 as concerns about global oil demand growth outweighed declines in oil inventories and OPEC+ members’ decisions to delay production increases until December 2024. However, after recent military actions involving Israel, Lebanon and Iran, the spot price for WTI rose to $77.76 per barrel on October 7, 2024, up 13% from a week earlier. In its latest STEO, the EIA is forecasting that WTI spot prices are expected to average $73.13 per barrel in 2025, reflecting a reduction for global oil demand in 2025. However, the conflict between Israel,
Previous report
Lebanon and Iran has escalated in recent weeks with no timeline for potential resolution, increasing the possibility for supply disruptions and price volatility.
Previous report
Spot prices for Henry Hub natural gas averaged $2.28 per MMBtu in September, 15% higher than the August 2024 average of $1.98 per MMBtu, as natural gas production fell slightly from August 2024. The decline in production was partly due to an 11% drop in natural gas production from the Gulf of Mexico primarily as a result of Hurricanes Francine and Helene. The EIA is forecasting that Henry Hub spot prices are expected to average $2.81 per MMBtu in the fourth quarter of 2024 and $3.06 in 2025. The EIA is expecting natural gas prices to rise in 2025 as liquid natural gas exports increase while domestic consumption and production is expected to remain relatively flat.
Previous report
In addition to the impact of volatile commodity prices on our operations, continuing inflation could also impact our sales margins and profitability. The annual inflation rate for September 2024 was 2.4%, a slight decrease from the 2.5% rate for August 2024. In September 2024, the Federal Reserve lowered the target federal funds range by 50 basis points to 4.75% to 5.00%, 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 September 2024 points to another 50 basis points of cuts in 2024 and another 100 basis points of cuts in 2025. However, if inflation were to begin 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 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 report
Production volumes decreased by 448 MBoe to 2,854 MBoe during the three months ended September 30, 2024 compared to the same period in 2023 primarily related toapproximately 3.5 MBoe per day of downtime mainly due to hurricanes and third-party downtime. These decreases were partially offset by increased production from wells acquired in January 2024.
Previous report
Lease operating expenses* –*Lease operating expenses, which include base lease operating expenses, workovers, and facilities maintenance expense, increased $10.6 million to $72.4 million during the three months ended September 30, 2024 compared to the same period in 2023. On a component basis, base lease operating expenses increased $7.2 million, workover expenses decreased $0.9 million, facilities maintenance expense increased $3.9 million and hurricane expenses increased $0.4 million.
Previous report
General and administrative (“G&A”) expenses* –*G&A expenses for the three months ended September 30, 2024 were relatively flat compared to the three months ended September 30, 2023.
Previous report
Interest expense, net* –*Interest expense, net, was relatively flat for the three months ended September 30, 2024 compared to the same period in 2023 primarily due to a decrease in interest expense on the lower outstanding principal balance of the Term Loan, partially offset by a decrease in interest income.
Previous report
Unrealized gains or losses on open derivative contracts are recorded as a gain or loss on our Condensed Consolidated Statements of Operations at the end of each month. As a result of the derivative contracts we have on our anticipated production volumes through April 2028, we expect these activities to continue to impact net income (loss) based on fluctuations in market prices for natural gas. See Part I, Item 1.Financial Statements – Note 4 – Financial Instruments of this Quarterly Report for additional information.
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Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023
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Revenues
Previous report
Production volumes decreased by 363 Mboe to 9,230 Mboe during the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to the effects of Hurricanes Francine and Helene, third-party downtime andour Mobile Bay production that had to be re-routed to a different processing plant. These decreases were partially offset by increased production from wells acquired in both the January 2024 and the September 2023 acquisitions.
Previous report
Operating Expenses
Previous report
Lease operating expenses* –*Lease operating expenses, which include base lease operating expenses, workovers, and facilities maintenance expense, increased $24.2 million to $217.2 million during the nine months ended September 30, 2024 compared to the same period in 2023. On a component basis, base lease operating expenses increased $29.3 million, workover expenses decreased $9.6 million, facilities maintenance expense increased $4.1 million and hurricane expenses increased $0.4 million.
Previous report
Base lease operating expenses increased primarily due to nine months of expenses at the fields acquired in January 2024 and September 2023, as well as higher repair, maintenance and labor costs at other fields.
Previous report
*DD&A –*DD&Aincreased $23.8 million for the nine months ended September 30, 2024 as compared to the same period in 2023. The DD&A rate increased to $11.36 per Boe for the nine months ended September 30, 2024 from $8.45 per Boe for the nine months ended September 30, 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 report
G&A expenses* –*G&A expenses increased $4.3 million to $61.6 million for the nine months ended September 30, 2024 as compared to $57.3 million for the nine months ended September 30, 2023. The increase is primarily due to non-recurring professional and legal services and higher medical claims.
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Other Income and Expense Items
Previous report
Other expense, net* –*Other expense, net increased $20.3 million for the nine months ended September 30, 2024 compared to the same period in 2023 primarily related to the accrual of additional expenses for net abandonment obligations pertaining to a number of legacy Gulf of Mexico properties, partially offset by fees paid by producers to tie into our subsea equipment at one of our wells.
Previous report
As of September 30, 2024, we had outstanding $275.0 million principal amount of the 11.75% Notes. We have commenced discussions with potential lenders and institutional investors regarding a potential refinancing of all or a portion of the 11.75% Notes prior to maturity, although there is no assurance as to the terms of any such refinancing or whether or when such refinancing will occur. We also may seek financings with longer tenors and market-based covenants to continue to provide working and potential acquisition capital. The terms of such financings, which may replace or augment our Credit Agreement, the Term Loan and refinance all or a portion of the 11.75% Notes, may vary significantly from those under the Credit Agreement, the Term Loan and the 11.75% Notes. We may also consider using a portion of our cash balances to reduce the amount required to be refinanced. While the nearing maturity of the 11.75% Notes creates risk with respect to our future liquidity, management believes that the actions being taken to fully repay the 11.75% Notes, including from cash on hand, cash to be generated through operations, a refinancing transaction and from the proceeds of a potential equity sale of up to $83.0 million available under the ATM program, would allow us to repay the 11.75% Notes prior to their maturity. However, there is no guarantee we will be successful in achieving these objectives.
Previous report
Investing Activities* –*Net cash used in investing activities increased $24.6 million for the nine months ended September 30, 2024 compared to the corresponding period in 2023. This was primarily due to an increase of $51.8 million in the acquisition of property interests costs, partially offset by a decrease of $6.4 million in investment in oil and natural gas properties and equipment.
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*Financing Activities –*Net cash used in financing activities decreased by $306.0 million for the nine months ended September 30, 2024 compared to the corresponding period in 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 report
Contractual Obligations and Commitments
Previous report
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. Except as disclosed herein, contractual obligations as of September 30, 2024 did not change materially from the disclosures in Part II, Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our 2023 Annual Report.
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THE SUBSIDIARY BORROWERS
Previous report
Aquasition LLC and Aquasition II LLC are both indirect wholly-owned subsidiaries of us through their parent, Aquasition Energy LLC (collectively, the “Aquasition Entities”). We designated the Aquasition Entities as unrestricted subsidiaries under the indenture governing the 11.75% Notes. Having been so designated, the Aquasition Entities do not guarantee the 11.75% Notes, and the liens on the assets sold to the Aquasition entities have been released under the Credit Agreement. The Aquasition Entities are not bound by the covenants contained in the Credit Agreement or the indenture governing the 11.75% Notes. Under the Term Loan and related instruments, assets of the Aquasition Entities may not be available to mortgage or pledge as security to secure new indebtedness of us and our other subsidiaries.
Previous report
Below is consolidating balance sheet information reflecting the elimination of the accounts of the Aquasition Entities from our Condensed Consolidated Balance Sheet as of September 30, 2024 (in thousands):
Previous report
Below is consolidating statement of operations information reflecting the elimination of the accounts of the Aquasition Entities from our Condensed Consolidated Statement of Operations for the nine months ended September 30, 2024 (in thousands):
Previous report
Our produced oil, NGLs and natural gas volumes (net to our interests) from the Aquasition Entities are as follows:
Reworded paragraphs (18)
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 September 30, 2024, we hold working interests in 53 producing offshore fields in federal and state waters (which include 46 fields in federal waters and seven in state waters). We currently have under lease approximately 673,100 gross acres (515,400 net acres) spanning across the outer continental shelf off the coasts of Louisiana, Texas, Mississippi and Alabama, with approximately 5,600 gross acres in Alabama state waters, 514,000 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.
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 March 31, 2025, we hold working interests in 52 producing offshore fields in federal and state waters (which include 45 fields in federal waters and seven in state waters). We currently have under lease approximately 634,700 gross acres (496,900 net acres) spanning across the outer continental shelf off the coasts of Louisiana, Texas, Mississippi and Alabama, with approximately 5,600 gross acres in Alabama state waters, 487,200 gross acres on the conventional shelf and approximately 141,900 gross acres in the deepwater. A majority of our daily production is derived from wells we operate.
Previous wording
On November 7, 2024, we declared a regular quarterly dividend of $0.01 per share for the fourth quarter of 2024. We expect to pay the dividend on November 29, 2024, to stockholders of record as of the close of business on November 21, 2024.
Current wording
On May 6, 2025, we declared a regular quarterly dividend of $0.01 per share for the second quarter of 2025. We expect to pay the dividend on May 27, 2025 to stockholders of record as of the close of business on May 20, 2025.
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 the fields acquired in January 2024 and September 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 decreased primarily due to higher contract processing credits at Heidelberg due to a new platform processor and reduced operating expenses related to the decrease in production volumes.
Previous 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. Hurricane expenses consist of costs forminor repairs and restoring production, as well as evacuating employees and contractors incurred as a result of the hurricanes. These types of expenses are not necessarily comparable from period to period and can changedue to the timing and mix of projects undertaken.
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, transportation and production taxes decreased $0.5 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 primarilydue to the decrease in production volumes.
Current 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 , 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 decreased $1.9 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarilydue to decreases of $1.7 million in gathering and transportation expenses and $0.2 million in production taxes. Gathering and transportation expenses decreased primarily due to lower production volumes in the three months ended March 31, 2025 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 Mobile Bay processing plant in the three months ended March 31, 2024.
Previous wording
Depreciation, depletion and amortization (“DD&A”) –*DD&Aincreased $4.0 million for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. The DD&A rate increased to $11.99 per Boe for the three months ended September 30, 2024 from $9.15 per Boe for the three months ended September 30, 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.
Current 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. DD&Adecreased $1.0 million for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 primarily due to $5.3 million from the decrease in production partially offset by $4.2 million from an increase in the depletion rate per Mcfe. The DD&A rate increased to $11.99 per Boe for the three months ended March 31, 2025 from $10.61 per Boe for the three months ended March 31, 2024. The DD&A rate per Boe increased primarily as a result of increases in future development costs and capitalized ARO, partially offset by a lower depreciable base and decreased proved reserves. The lower depreciable base is due to the $58.5 million in insurance proceeds and $11.9 million of proceeds from the sale of oil and natural gas properties that were included in our full cost pool.
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 $1.4 million in the three months ended September 30, 2024 compared to the same period in 2023 primarily due to the increase in our ARO liability as a result of our January 2024 acquisition and revisions to the estimates used in calculating the liability.
Current 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 $0.4 million in the three months ended March 31, 2025 compared to the same period in 2024 primarily due to the increase in our ARO liability as a result of revisions to the estimates used in calculating the liability.
Previous wording
Interest expense, net* –*Interest expense, net, decreased $4.7 million for the nine months ended September 30, 2024 compared to the same period in 2023 due to the redemption of our 9.75% Senior Second Lien Notes due 2023 (the “9.75% Notes”) in February 2023 and a decrease in interest expense on the lower outstanding principal balance of the Term Loan, partially offset by interest expense incurred on the 11.75% Senior Second Lien Notes due 2026 (the “11.75% Notes”) issued in late January 2023 and a decrease in interest income.
Current wording
Interest expense, net* –*Interest expense, net, decreased $0.6 million for the three months ended March 31,2025 compared to the same period in 2024 primarily due to a decrease of $7.6 million from the redemption of the 11.75% Notes and the repayment of the Term Loan in late January 2025, partially offset by $6.6 million incurred on the 10.75% Notes issued in late January 2025.
Previous wording
Derivative gain, net* –*During the three months ended September 30, 2024, we recorded a $3.2 million derivative gain for our natural gas derivative contracts consisting of $1.8 million of unrealized gain from the increase in the fair value of our open natural gas contracts and $1.4 million of realized gains. During the three months ended September 30, 2023, we recorded a $1.5 million derivative gainfor our natural gas derivative contracts consisting of $2.0 million in realized losses and a $3.5 million unrealized gain from the increase in the fair value of our open natural gas contracts.
Current wording
Derivative loss (gain), net* –*During the three months ended March 31, 2025, we recorded a $2.7 million derivative loss for our natural gas derivative contracts consisting of $0.9 million of unrealized gain from the increase in the fair value of our open natural gas contracts offset by $3.6 million of realized losses. During the three months ended March 31, 2024, we recorded a $4.9 million derivative gainfor our natural gas derivative contracts consisting of $1.1 million of unrealized gains from the increase in the fair value of our open natural gas contracts and $3.8 million of realized gains.
Previous wording
Other expense (income), net* –*Other expense, net increased $13.8 million for the three months ended September 30, 2024 compared to the same period in 2023 primarily related to the accrual of additional expenses for net abandonment obligations pertaining to a number of legacy Gulf of Mexico properties, partially offset by fees paid by producers to tie into our subsea equipment at one of our wells.
Current wording
Other (income) expense, net* –*Other (income) expense, net increased $5.5 million for the three months ended March 31, 2025 compared to the same period in 2024 primarily related to a decrease in the accrual of additional expenses for net abandonment obligations pertaining to a number of legacy Gulf of America properties.
Previous wording
Income tax (benefit) expense* –*Our effective tax rates for the nine months ended September 30, 2024 and 2023 were 11.3% and 50.6%, respectively. The effective tax rates differed from the statutory federal tax rate primarily due to the impact of state income taxes, nondeductible compensation, and adjustments to the Company’s valuation allowance.
Current wording
Income tax (benefit) expense* –*Our effective tax rates for the three months ended March 31, 2025 and 2024 was 13.1% and (10.0)%, respectively. The difference between the effective tax rate and the federal statutory rate was primarily due to the impact of nondeductible compensation and adjustments to the valuation allowance.
Previous wording
We expect to support our business requirements primarily with cash on hand and cash generated from operations. As of September 30, 2024, we had $126.5 million of unrestricted cash on hand and $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 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 March 31, 2025, we had $105.9 million of unrestricted cash on hand and $50.0 million available under our New Credit Agreement. 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 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 decreased $15.8 million for the nine months ended September 30, 2024 compared to the corresponding period in 2023. This was primarily due to a $31.3 million decrease in net (loss) income adjusted for certain noncash items offset by a $15.5 million increase in operating cash flows from changes in operating assets and liabilities. The decrease in net (loss) income adjusted for certain noncash items was primarily related to a $4.6 million increase in revenues anda $12.3 million increase in derivative cash receipts, partially offset by increases in cash operating expenses. 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.
Current wording
Net cash provided by operating activities decreased $14.8 million in the three months ended March 31, 2025 compared to the corresponding period in 2024. This was primarily due to decreases of $12.4 million in net loss adjusted for certain noncash items and $2.4 million in operating cash flows from changes in operating assets and liabilities. The decrease in net loss adjusted for certain noncash items was primarily related to a $10.9 million decrease in revenues and a $7.9 million unfavorable change in derivative settlements and receipts, partially offset by decreases in cash operating expenses. The decrease in operating assets and liabilitiesis primarily related to higher accounts receivable offset by lower accounts payable and accrued liabilities balances in the current period.
Previous wording
As of September 30, 2024, we expect to incur an additional $8.0 million to $10.0 million of capital expenditures in the remainder of 2024, which excludes acquisitions. In our view of the outlook for the remainder of 2024, we believe this level of capital expenditure will leave us with sufficient liquidity to operate our business, 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
As of March 31, 2025, we expect to incur an additional $25.0 million to $33.0 million of capital expenditures in the remainder of 2025, which excludes acquisitions. In our view of the outlook for the remainder of 2025, we believe this level of capital expenditure will leave us with sufficient liquidity to operate our business, 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 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 Mexico, 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 Mexico and recorded an additional $3.3 million of oil and natural gas properties.
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.
Previous 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. Through the nine months ended September 30, 2024, we have paid $20.3 million related to these obligations, and we expect to incur an additional $15.0 million to $25.0 million of payments during the remainder of 2024. Our ARO estimates as of September 30, 2024 and December 31, 2023 were $555.0 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, actual expenditures could be substantially different than our estimates. See Part I, Item 1A.Risk Factors, of our 2023 Annual Report for additional information.
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. Through the three months ended March 31, 2025, we have paid $3.8 million related to these obligations. Our ARO estimates as of March 31, 2025 and December 31, 2024 were $561.9 million and $548.8 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, actual expenditures could be substantially different than our estimates. See Part I, Item 1A.Risk Factors, of our 2024 Annual Report for additional information.
Previous wording
As of September 30, 2024, we have $399.4 million in aggregate principal amount of long-term debt outstanding, with $22.4 million in aggregate principal coming due over the next twelve months.
Current wording
As of March 31, 2025, we have $359.7 million in aggregate principal amount of long-term debt outstanding, with $1.1 million in aggregate principal coming due over the next twelve months.
Previous wording
In November 2023, our board of directors approved the implementation of a quarterly cash dividend payable to holders of common stock. During the nine months ended September 30, 2024, we have paid three cash dividends, totaling approximately $4.5 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.
Current wording
During the three months ended March 31, 2025, we paid a cash dividend of approximately $1.5 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.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
See Part I, Item 1.Financial Statements – Note 4 – Debt of this Quarterly Report and Part II, Item 8.Financial Statements and Supplementary Data, in our 2024 Annual Report for additional information about the above debt transactions.
Rearranged previous paragraphs (9)
Previous report — wording carried elsewhere
Income tax (benefit) expense* –*Our effective tax rate for the three months ended September 30, 2024 was 11.0%. The difference between the effective tax rate and the federal statutory rate was primarily due to the impact of nondeductible compensation and adjustments to the valuation allowance. Our effective tax rate for the three months ended September 30, 2023 was not meaningful primarily as a result of changes in the Company’s valuation allowance on our deferred tax assets.
Previous report — wording carried elsewhere
The following table presents information regarding our revenues, production volumes and average realized sales prices (which exclude the effect of hedging unless otherwise stated) for the nine months ended September 30, 2024 and 2023 (in thousands, except average realized sales prices data):
Previous report — wording carried elsewhere
Changes in average sales prices and production volumes caused the following changes to our oil, NGL and natural gas revenues between the nine months ended September 30, 2024 and 2023 (in thousands):
Previous report — wording carried elsewhere
The following table presents information regarding costs and expenses and selected average costs and expenses per Boe sold for the periods presented and corresponding changes (in thousands, except average data):
Previous report — wording carried elsewhere
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. Hurricane expenses consist of costs forminor repairs and restoring production, as well as evacuating employees and contractors incurred as a result of the hurricanes. These types of expenses are not necessarily comparable from period to period and can changedue to the timing and mix of projects undertaken.
Previous report — wording carried elsewhere
Gathering, transportation and production taxes* –*Gathering, transportation and production taxes increased $2.6 million for the nine months ended September 30, 2024 compared to the same period in 2023 primarilydue to higher processing fees for our Mobile Bay production that had to be re-routed to a different processing plant, partially offset by lower production volumes.
Previous report — wording carried elsewhere
Asset retirement obligations accretion expense *–*Accretion expense increased $2.6 million in the nine months ended September 30, 2024 compared to the same period in 2023 primarily due to the increase in our ARO liability related to our acquisitions in September 2023 and January 2024 and revisions to the estimates used in calculating the liability.
Previous report — wording carried elsewhere
The following table presents the components of other income and expense items for the periods presented and corresponding changes (in thousands):
Previous report — wording carried elsewhere
Derivative gain, net* –*During the nine months ended September 30, 2024, we recorded a $5.7 million derivative gain for our natural gas derivative contracts consisting of $5.5 million of realized gains and a $0.2 million unrealized gain from the increase in the fair value of our open natural gas contracts. During the nine months ended September 30, 2023, we recorded a $41.6 million derivative gainfor our natural gas derivative contracts consisting of an unrealized gain of $44.1 million from the increase in the fair value of our open derivative contracts offset by $2.5 million of realized losses.