W&T Offshore Forms Gulf of Mexico Joint Exploration With Invest Group

W&T Offshore, Inc., an independent oil and natural gas producer based in Texas, announced a joint exploration and development agreements with a group of investors to drill up to 14 specified projects in the Gulf of Mexico over the next three plus years.

Mr. Tracy Krohn, W&T Offshore's Chairman and Chief Executive Officer, stated: "We are extremely pleased to form this multi-year joint exploration and development program that will allow us to continue unlocking the value of our significant drilling opportunities while drastically reducing our capital expenditures. The Drilling Program will allow us to accelerate the development of our high return inventory to bring significant cash back to the corporate entity, while maintaining the flexibility to manage our balance sheet and pursue additional accretive acquisition opportunities in the Gulf of Mexico as other operators exit. Plus, by contributing inventory and our operating expertise, W&T will receive both a front-end and back-end promote that should compensate us for the leases that we are contributing and also substantially enhance our return on investment."

Key Highlights of the Drilling Program include:

  • Anticipated project level commitment of up to $419.6 million, including W&T Offshore's commitment, for development of 14 identified projects in the Gulf of Mexico with potential to upsize over time with additional projects
  • W&T initially receives 30.0% of the net revenues from the drilling program wells for contributing 20.0% of the total well costs plus associated leases and providing access to available infrastructure
  • Upon the Investor Group achieving certain return thresholds, W&T's share of well net revenue increases to 38.4%
  • Allows W&T to develop its drilling inventory at a faster pace and with a greatly reduced capital outlay
  • W&T receives an initial cash reimbursement of approximately $20 million for costs already incurred in relation to the drilling of some of the initial wells that had already commenced drilling or where some work activity had commenced on wells that are included in the drilling program

W&T and the initial Investor Group have formed a joint venture investment entity that will jointly participate in the drilling and development of a specified group of wells on W&T-held leases and producing acreage in the Gulf of Mexico

The initial Investor Group and W&T have agreed to an aggregate initial capital commitment of $230.5 million which is sufficient to fund the drilling, completion and tie-in of a number of the project wells.  

W&T is contributing 88.94% of its working interest in the 14 projects to the joint venture entity and retaining an 11.06% working interest.  The total initial W&T cash commitment to the Drilling Program, including its commitment with respect to its retained working interest, is $46.1 million.