W&T Offshore Q2 Earnings Call Highlights

Key Points

• W&T Offshore reported solid second-quarter results, including $12.6 million in net income, more than $54 million in adjusted EBITDA and $31 million in free cash flow. Cash rose above $150 million, while net debt fell to $200 million and leverage stood at 1.2 times adjusted EBITDA.
• Production averaged 34,700 barrels of oil equivalent per day, with realized prices up 11% sequentially to $50.23 per barrel of oil equivalent. W&T expects third-quarter production to exceed 35,000 barrels per day and maintained its full-year production and cost outlook.
• The company continues to prioritize acquisitions of profitable producing assets and could favor dividends over share repurchases, depending on acquisition and drilling needs. W&T is also pursuing surety litigation that management says could involve claims worth hundreds of millions of dollars, though outcomes remain uncertain.

W&T Offshore NYSE: WTI reported second-quarter 2026 net income of $12.6 million, or $0.08 per share, alongside adjusted EBITDA of more than $54 million, Chairman and CEO Tracy Krohn said during the company’s earnings call. The adjusted EBITDA result was in line with the first quarter, bringing the first-half total to nearly $110 million.

The offshore producer generated $31 million of free cash flow during the second quarter, a 50% increase from the first quarter, and more than $52 million for the first half of 2026. Krohn said the cash generation increased the company’s cash balance to more than $150 million and reduced net debt to $200 million.

At quarter-end, W&T reported total debt of $351 million, liquidity of $194 million and net debt-to-adjusted EBITDA of 1.2 times on a trailing 12-month basis. Krohn said that, assuming margins remain at current levels through the second half, the leverage ratio could fall below 1.0 times by year-end.

Production Holds Steady as Prices Improve

Second-quarter production averaged 34,700 barrels of oil equivalent per day at the midpoint of the company’s guidance range, up 3% from the same period in 2025. Krohn said the result was achieved without new drilling or acquisitions, citing well optimization work, low-decline Gulf of America fields and the company’s existing infrastructure.

W&T’s strategy emphasizes workovers, recompletions and facility upgrades rather than higher-risk new drilling, according to Krohn. He said the company seeks to use operational cash flow for lower-risk projects and acquisitions of producing properties that can be integrated into its infrastructure.

Realized prices reached $50.23 per barrel of oil equivalent during the second quarter, up 11% from the first quarter and approximately 40% from year-end 2025, Krohn said. He said higher commodity prices can improve the economic viability and life of oil fields while increasing reserve valuations.

For the third quarter, W&T forecast production above 35,000 barrels of oil equivalent per day at the midpoint of its guidance. The company reiterated its full-year production and cost outlook.

Costs and Capital Spending

Lease operating expense, or LOE, totaled $72 million in the second quarter, below the low end of guidance. Krohn said the lower expense was partly due to the timing of facility and workover projects, as well as cost-saving initiatives implemented in late 2025 that began to materialize in the first half of 2026.

Gathering, transportation and production taxes also came in below the low end of the company’s guidance range. Second-quarter capital expenditures were $10.4 million, while asset retirement obligation settlement costs totaled $3.4 million.

W&T maintained full-year 2026 capital guidance of $20 million to $25 million, excluding possible acquisitions, and projected annual asset retirement spending of $34 million to $42 million. Krohn said stronger pricing has prompted the company to accelerate certain projects, which could move capital spending toward the high end of its annual range.

Third-quarter LOE is expected to range from $73 million to $81 million as W&T performs workover and facility maintenance projects deferred from the second quarter. The company expects those projects to support production in the second half. It forecast third-quarter transportation and production taxes of $8.8 million to $9.7 million and cash general and administrative expense of $17.2 million to $19 million.

Acquisition Focus and Capital Allocation

Krohn said W&T continues to prioritize acquisitions, although it also has wells it could drill. In response to questions about potential targets, he said the company evaluates properties based on whether they can generate profits, rather than whether assets are in shallow or deep water.

The company considers reserve volumes, cash flow and plugging and abandonment obligations when valuing acquisition opportunities, he said. Krohn added that W&T is reviewing multiple potential opportunities and that the bid-ask spread for offshore assets has not changed significantly.

Regarding funding, Krohn said W&T first evaluates the value of an asset and how it could be structured within the company. He said more capital providers have become interested in the Gulf basin as they recognize its cash-flow potential.

When asked whether W&T could repurchase shares given its cash flow and Krohn’s view that the stock is undervalued, Krohn said the company has conducted buybacks in the past. However, he said dividends currently appear more likely, subject to acquisitions, drilling activity and other considerations.

Surety Litigation Update

Krohn also discussed ongoing litigation involving surety providers. He noted that W&T reached a settlement agreement in June 2025 with two of its largest surety providers, resulting in the dismissal of a previously filed lawsuit and locking in historical premium rates through the end of 2026.

For the remaining litigation, Krohn said W&T is working with damages experts and pursuing additional information from sureties. Management believes that if W&T prevails, claims against the sureties could potentially reach hundreds of millions of dollars, based partly on a preliminary damages-expert report. Krohn said that any damages from successful antitrust claims would be statutorily trebled.

He cautioned that litigation outcomes remain uncertain and estimates may change as the analysis and cases proceed. In response to an analyst question, Krohn said he expects the process could play out within the next two years.

W&T also addressed asset retirement obligations and decommissioning. Krohn said the company generally expects annual decommissioning spending of roughly $35 million to $45 million and seeks to manage those costs by coordinating personnel, equipment and supply routes. He said the company has performed more than $1 billion of abandonment work in the Gulf and still has additional work planned at its Matterhorn facility.

About W&T Offshore (NYSE:WTI)

W&T Offshore, Inc is an independent oil and gas exploration and production company focused primarily on offshore operations in the Gulf of Mexico. The company acquires, develops and produces crude oil and natural gas reserves, operating a portfolio of producing properties that encompasses both shallow-water and deepwater assets. W&T Offshore leverages its technical expertise and asset management capabilities to optimize field development and production efficiency across its portfolio.

Founded in 1983 and headquartered in Covington, Louisiana, W&T Offshore has built a track record of disciplined growth through strategic acquisitions and targeted exploration activities.

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