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

Explicit Guidance:

• Q4 2026 Production: Forecasted midpoint of ~33,700 BOE/d, reflecting a temporary 2,600 BOE/d reduction due to a one-week Mobile Bay shutdown and Hurricane Isaias downtime.
• Q4 2026 Operating Costs:
  • LOE: Expected to range between $65 million and $72 million (lower than Q3).
  • Transportation & Production Taxes: Expected to range between $8.4 million and $9.3 million.
  • Cash G&A (adjusted for surety): Expected to range between $16.9 million and $18.6 million.
• Full Year 2026 Capital Expenditures: Increased to a range of $35 million–$38 million (previously guided lower), with acceleration of projects expected to positively impact production in H1 2027.
• Full Year 2026 Asset Retirement Costs: Guidance remains unchanged between $34 million and $42 million.
• Q1 2027 Production Impact: The accelerated Q4 2026 capital spend is explicitly projected to drive positive production impacts during the first half of 2027.
• 2027 Litigation Costs: Management anticipates increased costs related to surety litigation in 2027 compared to the remainder of 2026.

Business-Segment Outlook:

• Production Strategy: Continued focus on low-risk, high-rate-of-return workovers and recompletions to offset natural decline, rather than new drilling, with a significant inventory of optimization opportunities remaining through 2027.
• Well Portfolio Mix: Upcoming recompletion projects are predominantly on the oil side, expected to increase the company's overall oil percentage.
• Reserve Base: Management expects to continue replacing and expanding reserves through operational spend and acquisitions; rising pricing is noted to enhance the economic viability and PV10 valuation of existing reserves, particularly oil.
• Acquisition Pipeline: Active evaluation of accretive acquisitions, with data room access described as "encouraging" and a preference for "meaningful reserves at an attractive price" to integrate into existing infrastructure.

Market and Competitive Outlook:

• Pricing Environment: Operating in a volatile environment; while Q3 pricing ($46.13/BOE) was down 8% sequentially, it was up ~20% year-over-year. Management notes improved pricing in October 2026 expected to carry into late Q4.
• Capital Allocation Priority: Preference for capital deployment toward M&A and operational optimization (workovers/recompletions) over new drilling inventory; no drilling planned for 2027.
• Competitive Advantage: Leverages vast operational experience (40+ years) to manage older assets and execute recompletions efficiently, distinguishing the company from peers who spend significantly more to maintain production.

Macro / Industry Outlook:

• Geographic Focus: Continued "staunch" support of the Gulf of America (both shallow and deep water), leveraging the region's unique geological properties (e.g., water support reservoirs) to outperform 1P reserve predictions.
• Financial Flexibility: Conversion of credit facility to a reserve-based lending structure (Oct 1, 2026) eliminates restrictive cash flow requirements, increases commitment potential from $50M to $100M, and enhances annual shareholder distribution capacity.
• Hurricane Exposure: While storms cause temporary shut-ins (as seen with Isaias), assets are equipped to handle storms with minimal significant damage or downtime, relying on "modest aggravation" rather than physical destruction.

Strategic Initiatives:

• 2027 Planning: Currently in the heart of 2027 budgeting; planning for workover and recompletion activities for execution in H1 2027, contingent on service provider (lift boat) availability.
• Balance Sheet Strengthening: Maintained net debt to adjusted EBITDA under 1.0x (down from 1.6x YoY) and liquidity of $235M; utilizing at-the-market equity issuance ($15M net proceeds in Q3) to fund near-term growth.
• Service Logistics: Planning to coordinate closely with service providers to mitigate lift boat market competition and ensure timely mobilization for planned 2027 activities.

Risks and Headwinds to Outlook:

• Litigation Uncertainty: Outcome of surety/antitrust litigation remains uncertain; costs expected to rise in 2027. Potential damages (if won) could be subject to trebling and attorney fees, but the company cannot guarantee a successful result.
• Operational Disruptions: Production is subject to volatility from weather events (hurricanes) and planned maintenance (e.g., Mobile Bay facility turnaround), which can cause temporary volume reductions.
• Market Volatility: Pricing fluctuations in the "very volatile" global environment could impact realized revenue, though management focuses on maintaining margins.
• Service Availability: Execution of workover/recompletion plans is dependent on the availability of specialized assets (lift boats) in a potentially constrained market.

Management Tone on the Future:

• Confidence: High confidence in the "pristine" balance sheet and strong liquidity, describing the financial position as "much stronger heading into 2027."
• Strategic Outlook: Optimistic about M&A opportunities and the ability to generate "robust results in 2027 and beyond" through operational excellence and cost discipline.
• Approach: Expresses a "bias to pursue more... acquisitions" over drilling, viewing the current environment as favorable for buying producing assets at a discount.

Miscellaneous:

• Regulatory/Discovery Update: Progress made in surety litigation discovery with court orders obtained; depositions expected in coming months to quantify damages.
• Shareholder Returns: Increased liquidity and strong free cash flow ($89M in first 9 months) support a focus on maintaining consistent dividends and enabling accretive capital allocation.