W&T Offshore to reduce 2020 capital budget

Tracy W. Krohn, W&T’s Chairman and CEO commented: “During our recent earnings conference call, we discussed the significant flexibility we have to adjust our capital spending up or down at any time since we have no long-term rig contract commitments or drilling obligations. Due to the sudden decline in oil prices caused by supply and demand pressures since that call, we have decided to move forward with reducing our 2020 CAPEX to the range of US$15 million to US$25 million. Because of the low decline profile of our conventional asset portfolio in the Gulf of Mexico, the reduction in our budget has minimal impact on our expected production in 2020 and we are maintaining our prior production guidance.”

Krohn continued: “In addition, we are reducing our asset retirement expenditures and we are evaluating ways to reduce operating and G&A expenses that will not compromise safety or our operational capabilities. We also recently enhanced our hedge book by adding natural gas costless collars to help us protect more of our cash flow from future downward pressure while providing the potential to capture upside gains. These actions provide us with maximum financial flexibility and allow us to remain cash flow positive in a lower price environment. At the midpoint of our updated 2020 capital budget, we expect to remain cash flow positive at or above US$25/bbl of oil and US$1.50 per thousand cubic feet of natural gas. While our 2020 drilling program will now proceed at a slower pace, we remain confident in our strong drilling inventory.”

Capital budget update and guidance

Due to the recent sharp decline in oil prices, W&T has reduced its estimate of 2020 capital expenditures to US$15 million to US$25 million from its prior level of US$50 million to US$100 million. It also reduced its planned asset retirement expenditures to US$10 million to US$20 million from US$15 million to US$25 million. The company did not change its 2020 annual production guidance of 47 100 to 52 100 boe/d nor any of the other components of its guidance that it provided on 4 March 2020. At the midpoint of its updated 2020 capital expenditures estimate, W&T expects to remain cash flow positive at or above US$25/bbl and US$1.50/1000 ft³ of natural gas.

Hedging update

W&T recently added natural gas Henry Hub costless collars on 40 000 Mcf per day of production for the period 1 April 2020 through 31 December 2022 with a floor of US$1.83 per Mcf and a ceiling of US$3.00 per Mcf.

Read the article online at: https://www.oilfieldtechnology.com/offshore-and-subsea/18032020/wt-offshore-to-reduce-2020-capital-budget/