W&T Offshore (WTI) Q2 Revenue Falls 14%

W&T Offshore (WTI -2.60%), an independent oil and natural gas producer primarily operating in the Gulf of America, reported earnings for Q2 2025 on August 4, 2025. The company posted a non-GAAP loss per share of $(0.08), outperforming the analyst consensus of $(0.17). However, GAAP revenue was $122.4 million, falling short of Wall Street estimates by $11.463 million, a decrease of 14% from the prior year. Production stood at 33.5 thousand barrels of oil equivalent per day, while net loss remained a factor and Free cash flow (non-GAAP) narrowed substantially compared to Q2 2024. The quarter reflected strong operational execution in line with guidance, with ongoing cost control and legal and regulatory improvements, but also highlighted the company’s exposure to lower commodity prices and cost inflation.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

About the Business and Strategy

W&T Offshore is a Houston-based energy company focused on the exploration and production of oil and natural gas in the Gulf of America, a region known for high-quality hydrocarbon deposits. Its operations tap both shallow and deepwater assets, leveraging technical experience to enhance output while minimizing operational risk. The company's core business relies on acquiring and optimizing producing assets, rather than engaging in high-risk drilling projects.

In recent years, W&T Offshore has focused on building scale through operational excellence, disciplined capital spending, and strategic acquisitions. The ability to generate positive free cash flow, efficiently manage costs, and maintain lower natural decline rates in existing fields are considered critical to its long-term performance. Managing regulatory compliance and environmental responsibilities also remains a central consideration in the company's business model.

Second Quarter Performance: A Closer Look

In Q2 2025, production rose to 33.5 thousand barrels of oil equivalent per day, an increase of 10% from Q1 2025, even as volumes declined by 4% compared with Q2 2024. This uptick stemmed from restored output at assets acquired through the Cox transaction as well as the resolution of weather-related shutdowns that hampered Q1 2025. The company described these production gains as 'within guidance,' pointing to effective execution on recent asset integrations.

Despite stronger production, realized prices for oil and natural gas fell sharply. Oil fetched an average price of $63.55 per barrel, down from $80.29 in Q2 2024 and $71.31 in Q1 2025. Natural gas prices averaged $3.75 per thousand cubic feet, up from $2.50 in Q2 2024 but below the $4.45 seen in Q1 2025. The average realized price for all products (measured as dollars per barrel of oil equivalent) was $39.16, down 16% from the prior quarter and 12% below the same period last year. The company noted, "The potential revenue benefit from higher volumes versus Q1 2025 was offset by lower prices, which reduced quarter-over-quarter revenues" With commodity prices slipping, the revenue figure (GAAP) dropped year over year and quarter over quarter, missing analyst expectations by 8.6% on a GAAP basis.

Lease operating expense, which tracks the direct costs of running oil and gas properties, rose 3.9% from Q2 2024 to $76.9 million (GAAP). On a per-barrel basis, this expense was $25.20, reflecting higher base operating, insurance, and workover costs. The company executed nine workover projects—targeted repairs and maintenance to sustain production without new drilling—with five taking place in Mobile Bay, its largest gas operation. These low-risk activities helped boost output at a lower drilling cost, supporting operational stability but also contributing to cost pressures. General and administrative costs improved, falling to $17.7 million.

Adjusted EBITDA, which excludes items like taxes, interest, and some non-cash charges, fell 23% from Q2 2024 to $35.2 million. Free cash flow (non-GAAP) dropped to $3.6 million, representing a substantial decline from $18.7 million in Q2 2024. The reduction was driven by the combined effect of rising operating costs and lower revenue. On the balance sheet, the company ended Q2 2025 with $120.7 million in cash and $229.4 million in net debt (non-GAAP), a $14.7 million sequential reduction supported by positive cash contributions.

Key Success Drivers and Recent Focus

The company's performance continues to depend on its ability to optimize legacy Gulf of America assets. Its field expertise and technical operations in both conventional and deepwater environments provide a foundation for growth. The recent focus has been on maximizing production from existing fields, especially assets obtained in the Cox acquisition. Notably, workovers in Mobile Bay have increased production rates without incurring the risks of new drilling, which management views as key to its "low decline, long life" approach.

Net positive revisions to mid-year proved reserves, amounting to 1.8 million barrels of oil equivalent, provided some offset to the usual depletion that occurs as oil and gas are extracted. At June 30, 2025, the company reported 123.0 million barrels in proved reserves with a $1.2 billion present value (PV-10, non-GAAP). This stability in reserves, despite ongoing production, points to disciplined asset management and a continued search for incremental efficiency gains, as evidenced by W&T Offshore's mid-year SEC proved reserves of 123.0 MMBoe, which remained stable compared to 127.0 MMBoe at year-end 2024, with reserve value preserved at $1.2 billion PV-10 for both periods.

Acquisitions remain a central strategy, with management re-emphasizing the importance of integrating new fields swiftly into the existing portfolio. The Cox assets are now fully online, and integration progress is expected to support production ramp-up in the back half of the year. The quarter also saw positive legal and regulatory developments, with favorable settlements regarding surety bonds and a more lenient regulatory climate reducing the risk of further collateral demands on the company's finances.

The company remains focused on oil and natural gas production as its core areas. Both financial assurance settlements and the ongoing dividend program helped stabilize share value and maintain access to credit, both important given the company's ongoing commitment to capital discipline.

Looking Ahead

For Q3 2025, management projects production in the range of 33.1 to 36.6 thousand barrels of oil equivalent per day. Full-year 2025 guidance stands at 32.8 to 36.3 thousand barrels of oil equivalent per day. Lease operating expense is expected to be between $71.5 million and $79.3 million for Q3 2025, with full-year 2025 estimates at $280 to $310 million. Depreciation, depletion, and amortization costs per barrel of oil equivalent are guided higher for full-year 2025, at $13.40 to $14.90, up from $8.67 per barrel of oil equivalent in Q2 2025, suggesting expected shifts in production mix or potential asset impairments.

Management maintains its commitment to further acquisitions, cash discipline, and operational improvements. The company paid a $0.01 per share quarterly dividend for Q2 2025, its seventh consecutive payment at this rate. Investors may want to monitor any changes to the company's cost structure, success in integrating acquired assets, outcomes from new hedging strategies, and sustained progress on legal and regulatory issues. Commodity price trends will remain the overarching variable for financial performance in the quarters ahead.

WTI pays a $0.01 per share quarterly dividend.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.