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May 22, 2023, ST. PETERSBURG, FL – Water Tower Research (www.watertowerresearch.com) has published an Initiation of Coverage Report on WTI Offshore, Inc. (NYSE: WTI) titled, “Cash Provides Flexibility”. The report can be accessed here.
W&T Offshore is an independent oil and natural gas exploration and production company focused on extracting value from producing assets in the US Gulf of Mexico. The company has plied the Gulf since its founding 40 years ago. High-quality reservoir rock properties and the tendency for reservoirs in the Gulf of Mexico to outperform original reserve estimates are key drivers of management’s affinity for the basin.
The company’s asset base has been built through a series of producing property acquisitions over the decades. Management seeks properties that generate significant excess cash flow from a proved developed reserve base that has quantifiable upside. Upside can take many forms, including well performance, recompletions and step-out development, and facility improvements to lower costs. 1P total reserves totaled 165 MMBOE under SEC pricing guidelines as of December 31, 2022. Management estimates 81 MMBOE of incremental probable reserves related to existing proved reserves could ultimately be recovered for minimal capital.
W&T generated $42 million of adjusted EBITDA in 1Q23. At the end of 1Q23, the company had a cash balance of $182 million and total liquidity of $227 million. Net debt was $232 million. Our FY23 and FY24 adjusted EBITDA estimates are $247 million and $300 million. The company is trading at adjusted EBITDA multiples of 3.1x and 2.2x our FY23 and FY24 estimates.
Management’s interests are highly aligned with common shareholders. Tracy Krohn, W&T’s Founder, Chairman, and Chief Executive Officer, owns ~33% of the outstanding shares.
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