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DATE
Friday, May 8, 2026 at 10 a.m. ET
CALL PARTICIPANTS
- Chairman and Chief Executive Officer — Tracy W. Krohn
- Executive Vice President and Chief Operating Officer — William J. Williford
- Executive Vice President and Chief Financial Officer — Sameer Parasnis
- Vice President and Chief Accounting Officer — Trey Hartman
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TAKEAWAYS
- Production Volume -- 36,200 barrels oil equivalent per day, consistent with the prior year and at the higher end of guidance despite adverse weather.
- Realized Pricing -- $45.08 per barrel oil equivalent, reflecting a 26% increase versus the previous quarter; March realized oil price reached $88.61 per barrel.
- Lease Operating Expense (LOE) -- $66 million, down 11% from the previous quarter and below midpoint of company guidance, attributed to base LOE reductions from prior cost-saving actions.
- Adjusted EBITDA -- $55 million, marking the highest quarterly figure since 2023.
- Free Cash Flow -- $21 million, a significant improvement from the previous quarter.
- Debt Position -- Total debt of $351 million and net debt of $220 million at quarter-end.
- Liquidity -- $175 million as of quarter-end.
- Capital Expenditures -- $7 million for the quarter, with full-year capital spending guidance maintained between $20 million and $25 million, excluding acquisitions.
- Asset Retirement Obligation (ARO) Settlements -- $17 million in the period; full-year ARO spending guidance unchanged at $34 million to $42 million.
- Q2 Production Guidance -- Midpoint forecast at around 34,300 barrels oil equivalent per day, representing a 5% sequential decrease primarily due to a third-party Mobile Bay facility turnaround.
- Q2 Lease Operating Expense Guidance -- Anticipated at $71 million to $79 million, an increase driven by the Mobile Bay turnaround and elevated maintenance activity.
- Q2 Transportation and Production Taxes -- Projected between $7 million and $8 million, down from $9 million in Q1, due to benefits from a new pipeline for West Delta 73.
- Cash G&A Guidance -- Expected to remain comparable to the first quarter.
- Regulatory Developments -- The Department of Interior has proposed regulatory changes that could reduce industry-wide bonding costs by at least $500 million annually, rolling back portions of a 2024 rule.
- Surety Litigation Update -- The company reported that the district court rejected demands for immediate collateral payments by sureties; W&T Offshore, Inc. prevailed in nearly all aspects regarding a motion to dismiss its own claims and has been allowed to file an amended lawsuit seeking broader claims and damages.
SUMMARY
Management reaffirmed full-year production and cost guidance despite anticipating a temporary Q2 production dip from scheduled facility maintenance. The company highlighted that its low reinvestment rates and capital-light strategy are expected to sustain production levels with minimal capital outlay due to conversion of probable reserves to producing reserves. Leadership emphasized an ongoing focus on accretive acquisitions, citing strong liquidity and experience in integrating producing assets as a core differentiator. Discussions also addressed positive regulatory developments and company-specific legal victories, noting their potential to improve industry economics and financial positioning for future growth.
- Krohn stated, "We are in different data rooms almost continuously over the years," indicating continued pursuit of acquisitions despite a recent lack of large transactions in the Gulf.
- W&T Offshore, Inc. leadership highlighted a track record of extracting production and cash flow gains from acquired assets through workovers and facility upgrades, making the business distinct in its operational approach.
- Management confirmed that, "About $6 billion would have applied to small businesses that make up most of the operators in the Gulf," emphasizing the significance of the proposed regulatory rollback for the entire region.
- Krohn said, "If any time I can acquire reserves as opposed to drilling for them at approximately the same price, then that is what we are going to do," reinforcing acquisition as a preferred growth engine.
- Executives underlined the unique ability to convert 2P reserves to cash flow and proved reserves without additional CapEx, supporting stable output and reinforced borrowing capacity.
INDUSTRY GLOSSARY
- Lease Operating Expense (LOE): Ongoing costs related to operating and maintaining oil and gas production properties, excluding capital expenditures.
- 2P reserves: Proven plus probable reserves—estimated quantities of oil and gas with at least a 50% probability of recovery, used for future production forecasts.
- Asset Retirement Obligation (ARO): The expected future costs associated with decommissioning, dismantling, and cleaning up oil and gas production assets at end of life.
Full Conference Call Transcript
Tracy W. Krohn: Thank you, Al. Good morning, everyone, and welcome to our first quarter conference call for 2026. With me today are William J. Williford, our Executive Vice President and Chief Operating Officer; Sameer Parasnis, our Executive Vice President and Chief Financial Officer; and Trey Hartman, our Vice President and Chief Accounting Officer. They are all available to answer questions later during the call. We started 2026 on a positive note with strong operational and financial results that either met or exceeded our guidance across multiple metrics. Our production was 36 thousand 200 barrels oil equivalent per day, toward the higher end of guidance and flat with 2025 despite some adverse weather impacts in early 2026.
The solid quarterly results start with our ability to maintain strong production, and we were aided by our realized prices of $45.08 per barrel oil equivalent, an increase of 26% from the fourth quarter. In March, our realized oil price was $88.61 per barrel. Additionally, our lease operating expense, LOE, was down 11% to $66 million, below the midpoint of guidance. Reductions in our LOE costs were mainly driven by lower base LOE spend, reflecting fourth quarter 2025 cost-saving initiatives that began to materialize in 2026. All these positives helped us generate $55 million in adjusted EBITDA, our highest quarterly number since 2023.
We are also very pleased to have generated $21 million in free cash flow, a significant improvement from the fourth quarter of last year. Our ability to execute our strategy has delivered very strong results to start off 2026, including a healthy balance sheet and enhanced liquidity. At the end of 2026, our total debt and net debt were $351 million and $220 million, respectively. Our liquidity was $175 million. We built W&T Offshore, Inc. using a proven and successful strategy that is committed to profitability, operational execution, returning value to our stakeholders, and ensuring the safety of our employees and contractors.
We have consistently delivered operationally and financially with low-decline production, meaningful EBITDA, and seamlessly integrating accretive producing property acquisitions during our nearly 45-year history. Capital expenditures in 2026 were $7 million and asset retirement settlement costs totaled $17 million. We continue to expect our full-year capital expenditures to be between $20 million and $25 million, which excludes potential acquisition opportunities. Our budget for ARO remains the same at $34 million to $42 million. Yesterday, we provided our detailed guidance for second quarter 2026 and reiterated our unchanged full-year production and cost guidance. In 2026, we have a planned third-party Mobile Bay natural gas processing facility turnaround that will impact our NGL volumes and temporarily increase our LOE.
However, our full-year LOE guidance has not changed. We are forecasting the midpoint of Q2 2026 production to be around 34 thousand 300 barrels oil equivalent per day. This is a decrease of 5% compared to 2026, driven primarily by the turnaround, but the key is that we have not changed full-year guidance. Second quarter LOE is expected to be $71 million to $79 million, up from first quarter actual of $66 million, and this is due to the planned Mobile Bay turnaround as well as higher planned workover and facility maintenance work that is expected to benefit production in 2026.
It is important to note that LOE expenses tend to increase and decrease seasonally, with much of the work being accomplished during warmer weather months that also produce less wind. Second quarter transportation and production taxes are expected to be between $7 million and $8 million compared with $9 million in the first quarter, which reflects some of the benefit of the new pipeline we installed for the West Delta 73 field. Second quarter cash G&A costs are expected to remain comparable to our Q1 results. I want to point out that we tend to spend significantly less than our peers in capital expenditures and choose to instead spend more dollars on low-risk, high-rate-of-return workovers and facility optimization.
We believe this is a more economic way to invest our operational cash flow back into our business and it is a lower-risk option. We can then build cash flow to help us make accretive acquisitions of producing properties. Over the years, we have consistently created significant value by methodically integrating producing property acquisitions. We look for strong producing assets with meaningful reserves at an affordable price that we can integrate into our vast infrastructure. We primarily spend LOE dollars to work over, recomplete, and upgrade these assets. As a result, we often see additional production uplift from these acquisitions above the rates they were producing when purchased.
This strategy makes W&T Offshore, Inc. unique, but it is our ability to execute over and over throughout the years that allows us to add value. With our low-decline production, increasing realized pricing, and continued cost control, we believe that we are well positioned operationally and financially to deliver robust results in 2026 while we examine accretive acquisition opportunities. Before closing, I would like to discuss some regulatory updates in more detail. As we mentioned in yesterday's earnings release, the Department of Interior has proposed some positive regulatory changes that would roll back obligations from a 2024 rule that would require companies to set aside about $6.9 billion in supplemental financial assurance.
About $6 billion would have applied to small businesses that make up most of the operators in the Gulf. The proposed changes will better align financial assurance requirements with actual decommissioning risk and reduce industry-wide bonding costs by at least $500 million annually. These proposed revisions have been published in the Federal Register with a 60-day public comment period, which is expected to end May 15. We welcome these changes proposed by the Trump [inaudible] that can further encourage U.S. offshore production growth and increase America's energy independence.
Regarding the surety litigation, I am able to report that the district court has rejected the surety's attempt to require W&T Offshore, Inc. to immediately pay their demands—I would call them ridiculous demands—for collateral. The sureties are appealing that ruling and W&T Offshore, Inc. will continue to vigorously defend our position that the surety's demands for collateral were neither appropriate nor lawful. Moreover, W&T Offshore, Inc. prevailed in virtually every respect as it relates to the surety's attempt to dismiss the claims W&T Offshore, Inc. has asserted in the lawsuit. Yesterday, the court granted W&T Offshore, Inc.'s request to file an amended lawsuit, which sets forth broader and other claims against the sureties. This case will go on.
As can be reviewed in our court filings, the sureties' conduct caused W&T Offshore, Inc. to incur substantial damages and we intend to seek to remedy the conduct and obtain damages to the fullest extent of the law. In closing, I would like to thank our team at W&T Offshore, Inc. for all their efforts. We are ready and able to add significant value in 2026. W&T Offshore, Inc. has been an active, responsible, and profitable operator in the Gulf of America for over 40 years.
We have a long track record of successfully integrating assets into our portfolio and we know that the Gulf of America is a world-class basin, being the second largest basin by production and the largest basin in the USA by area. We have a solid cash position and strong liquidity that enables us to continue to evaluate growth opportunities while continuing to generate strong operational cash flow and adjusted EBITDA. We will maintain our focus on operational excellence and maximizing the cash flow potential of our asset base in 2026 and beyond. Operator, we can now open the lines for questions.
Operator: We will now begin the question and answer session. Your first question today comes from Derrick Whitfield with Texas Capital. Please go ahead.
Derrick Whitfield: Good morning, Tracy and team, and thanks for your time.
Tracy W. Krohn: Good morning, Derrick.
Derrick Whitfield: Starting with your guidance, while I understand you are reiterating production guidance for the full year, how would you characterize your desire to further lean into workovers in the favorable environment?
Tracy W. Krohn: Yes. Well, that is always a key factor for us. We have always got a good inventory of things to do. As we have acquired assets over the years, we take the time to study them and restudy them, and that allows us to continue doing these workovers. Do expect to see some more of that. We will ramp up a little bit during the summer because the weather is better—late spring and summer, which is about now. In fact, we are moving some things around in the Gulf now to begin that process. Workovers have always been a key strong point for us, along with not only workovers but recompletions.
Analyst: Great, Tracy. And then maybe shifting over to the M&A environment, I wanted to get your thoughts on the competitive landscape at present. Is it safe to assume we are in a pencils-down environment for larger packages, or are you seeing reasonable action in the market at present?
Tracy W. Krohn: The company has got a very strong liquidity position right now. There has been a dearth of significant transactions for the last several years in the Gulf. We feel pretty good about where we are. We are in different data rooms almost continuously over the years. I think that there is a real good possibility that things are going to start moving around. We certainly have aspirations in that direction and intend to continue to pursue things that will fit our normal financial criteria. That criteria usually starts with cash flow, and then also what is the reserve base.
What are the things that we can do to increase cash flow near term, such as workovers and recompletions and facilities upgrades, that will generate those numbers near term.
Analyst: Great update. Thanks for your time.
Tracy W. Krohn: Thank you, sir.
Operator: And your next question comes from William Blair. Please go ahead.
Analyst: Hey Tracy, this is actually Neil. Just had two quick ones for you. How are you doing? And nice to be back on the call.
Tracy W. Krohn: Good, Neil.
Analyst: My first question, Tracy, I know part of the upside for you all is converting a lot of the 2P to primary reserves. It seems like with the plan you have laid out, there is still a lot of that going on. Could you tell us what you think the timing of that would be?
Tracy W. Krohn: The really cool part about our 2P reserves is that a lot of those reserves come to us in the form of cash and then later on booked reserves. As time moves forward, we see that first as cash flow. That is cash flow and reserves that we do not have to spend any CapEx on, and that has been a real focal point of the company over many years. It is why we have traditionally very low decline rates, and that shows up as massive amounts of cash and reserves over time.
It has always seemed to have been that way for the company since we started, and I try to reiterate that to investors in just about every presentation that we do. There are additional reserves that are probables that we do have to spend some CapEx on. We look forward to doing that in the near future. We have not been doing a lot of drilling lately because we have not needed to. One of the hallmarks of the company is making sure that we try to continue the cash flow stream. If any time I can acquire reserves as opposed to drilling for them at approximately the same price, then that is what we are going to do.
We are going to take the risk out of it and do that, and that is one of the reasons why we are still here after 40-something years. That is a great question, Neil. I appreciate it.
Analyst: I love that upside. Secondly, as you said, not that you are going to have to go drill much, but you have a very low CapEx guide. Does that factor in the workovers that Derrick talked about? Are service costs holding in right now, or what are you seeing for service?
Tracy W. Krohn: Part of that is exactly what you suggested—holding on and making judicious decisions about workovers and recompletions. Part of it is to make sure that we maintain really good liquidity. I think there will be opportunities going forward in the market for us to make additional acquisitions. Again, it is not that we do not have wells to drill. We do. We have a pretty good inventory of exploration opportunities and, in fact, even proven reserve opportunities that are substantial.
It is not because we do not have inventory; it is because management, including myself, believes that opportunities to do additional acquisitions are good, and we like the way that we are positioned in this market and we have good liquidity.
Analyst: Perfect. Thank you much, sir.
Operator: Your next question comes from Jeff Robertson with Water Tower Research. Please go ahead.
Analyst: Thank you. Tracy, just to follow up on your previous comments. W&T Offshore, Inc. has a pretty low reinvestment rate when you think about cash flow from operations in 2026, and yet production is expected to stay relatively flat for the year from where you were in the first quarter based on your midpoint guidance. To your point about the capital-light business model, is a lot of that production performance just related to, as Neil talked about, moving 2P reserves into PDP without any capital? And is that something that goes on for 2026, 2027, and beyond just based on your reserve profile and performance of your assets?
Tracy W. Krohn: The short answer to that is yes. Again, with probable reserves, because of the quirks around the booking of those via the SEC, we have to wait a while before we can put them back in as proved reserves, and often those are just additions to proved producing. We get a dual effect of not only increasing the reserves, but also increasing our borrowing capacity as well. That is a double plus for us. This is normal. These are the actions of the corporation. I have done this illustration in just about every investor meeting we have ever had.
I have an illustration in the deck that shows you the effects of the probable reserves and how they get to be producing reserves over time. We generally book them again as cash flow and reserves over time. It is not that we do not have inventory to drill—we do—but it is nice to have that additional bit of reserves. In Europe, they look at this as companies are valued more on the 2P basis than they are just 1P, and our regulators have been a little bit slow to do that. That has always been a complaint and I do not understand the rationale behind it.
It seems ridiculous to me because we have proven it over and over again that we definitely increase reserves and cash flow over time without additional CapEx.
Analyst: When you think about acquisitions, two-part question. One, are you able to buy on a 1P basis? And then secondly, you spoke about the regulatory environment and some of the things that are coming down the road. Will that have an impact on M&A activity in the Gulf of Mexico, do you think?
Tracy W. Krohn: That is a pretty good two-part question, Jeff. To answer your question on 1P, it is really a bunch of different factors. It is not just necessarily 1P. We do look at the entire reserve stack, and again, we like to see acquisitions that have cash flow and a reserve base that we can forecast, but also we like to see some upside too, where we can do some work or drill some wells, that sort of thing. They are all a little bit different. In the Gulf, you have to take into consideration what are the retirement obligations. That is a very important part of what we do. We manage that very well.
The company has done more plug and abandonment decommissioning on those AROs than anyone. We have spent over a billion dollars doing that decommissioning work over the years. We think that we are the expert in that market. We understand it very, very well, and that is one of the things that we always look at closely in determining value. As far as the other things that we are looking for, yes, we are in a mode where we are looking around for things that are going to fit our financial criteria, and we have been in data rooms for quite a while.
Analyst: Thank you.
Tracy W. Krohn: Thank you, sir.
Operator: Seeing no further questions, this concludes our question and answer session. I would like to turn the conference back over to Tracy W. Krohn, Chairman and CEO, for any closing remarks.
Tracy W. Krohn: Thank you, operator. We appreciate everybody listening, and I look forward to every day. I never know what is going to happen with regards to the markets, and it seems that with the war in Iran, it has been a little bit more difficult to think about it in terms of going forward. On the other hand, we are very pleased that the company is doing well and positioned to do even better. Thank you for listening, and we look forward to talking to you again soon.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
