Third Quarter 2026 Earnings Conference Call - W&T OFFSHORE INC

Financial Performance:

• Reported Q3 2026 net loss of $13.6 million ($0.09/share), impacted by $16 million in hedging losses; adjusted for hedging, the company generated $51 million in adjusted EBITDA for the quarter and $164 million for the first nine months (a 50% YoY increase).
• Generated $33 million in free cash flow for Q3 and $89 million year-to-date, boosting cash on hand to over $190 million.
• Net debt reduced by 20% to $160 million; total debt stands at $352 million, resulting in a net debt-to-adjusted EBITDA ratio of 0.9x (down from 1.6x).
• Liquidity increased to $235 million following the issuance of 3.6 million shares for $15 million in proceeds via the at-the-market agreement.
• Operating expenses (LOE) were $77 million, slightly below guidance despite higher realized prices ($46.13/BOE) and production outperformance.

Guidance and Future Outlook:

• Increased full-year 2026 capital expenditures guidance to $35–$38 million (previously lower) to accelerate projects expected to boost production in H1 2027.
• Maintained Asset Retirement Obligation (ARO) guidance at $34–$42 million for the year.
• Forecasted Q4 2026 production at ~33,700 BOE/day, reflecting a 1-week Mobile Bay shutdown and Hurricane Isaias impacts; Q4 LOE guided at $65–$72 million.
• Expressed strong confidence in 2027 performance, driven by a robust balance sheet, rising oil prices, and a strategic focus on value accretive acquisitions over new drilling.
• Converted credit facility to a reserve-based lending structure on Oct 1, 2026, increasing potential commitments from $50M to $100M and removing restrictive cash flow covenants.

Business Segments and Product Lines:

• Achieved Q3 production of 38,200 BOE/day, 4% above the high-end of guidance, driven by the low-decline nature of Gulf of America assets.
• Executed seven workover projects and one recompletion for $3M, yielding a production uplift of over 2,000 BOE/day.
• Prioritizes low-risk, high-return workovers and facility upgrades over new drilling; management confirmed no drilling is currently planned for 2027.
• Acquired new liquidity and flexibility to pursue acquisitions, noting a specific interest in assets synergistic with existing infrastructure and operational expertise in managing older properties.

Market and Competitive Landscape:

• Operates in a volatile pricing environment; Q3 pricing was down 8% QoQ but up ~20% YoY to $46.13/BOE.
• Management highlighted strong pricing momentum in October 2026, anticipating continued improvement into year-end.
• Leverages 40+ years of Gulf of America operational experience and a vast resource base to maintain competitive cost structures and reserve valuations.
• Aims to acquire assets at a discount to PDP, with a focus on integrating producing properties into their existing infrastructure to maximize extraction.

Risks and Challenges:

• Surry litigation (antitrust claims): Discovery is ongoing with expected depositions in coming months; management anticipates legal costs will increase in 2027, though no significant spike is expected in Q4 2026.
• Production disruptions: Q4 guidance includes reductions due to the Mobile Bay equipment shutdown and temporary hurricane impacts (no significant asset damage reported).
• Pricing volatility: Global factors remain a primary risk to realized pricing and reserve economics.
• Service availability: Potential competition for lift boats and service providers may impact the timing of workover and recompletion execution.

Management Commentary and Tone:

• Tone was highly confident and optimistic, emphasizing a "pristine" balance sheet and a shift in capital allocation toward M&A.
• Management stressed operational excellence, low decline rates, and the strategic advantage of maintaining a lean capital program relative to peers.
• Executive leadership (CEO and COO) consistently highlighted the ability to generate significant production uplift at a fraction of the capital cost of other E&P companies.

Analyst Questions and Answers:

• Capital Allocation: Management confirmed an increased cash position prioritizes M&A over new drilling; the goal is to deploy capital into accretive acquisitions first.
• Inventory & Strategy: COO confirmed a robust inventory of workover/recompletion opportunities extending into 2027, which will increase the oil mix of the portfolio.
• Litigation Costs: General Counsel indicated surety litigation G&A will rise in 2027, though Q4 2026 costs remain contained as they navigate discovery.
• Service Constraints: COO acknowledged the need for advanced planning to secure lift boats and other services, with 2027 budgets currently being finalized.
• Storm Impact: Clarified that Hurricane Isaias caused only temporary shut-ins with no significant equipment damage, as facilities are well-equipped for such events.

Other Key Points:

• No new drilling or acquisitions were completed in Q3, yet production exceeded guidance purely through optimization.
• The company has a 40-year track record of consistently outperforming 1P reserve predictions by recognizing 2P reserves over time.
• Management reiterated commitment to the Gulf of America and the dividend strategy, viewing the current financial strength as a platform for long-term shareholder value.
• The company expects to remain a responsible, profitable operator despite market volatility.