What happened

Shares of W&T Offshore, Inc. (WTI 0.78%) sank 11% by 3 p.m. EDT on Thursday after the Gulf of Mexico-focused oil producer reported lackluster first-quarter results.

So what

W&T Offshore produced $6.7 million, or $0.05 per share, of adjusted net income during the first quarter. That was $0.05 per share below the consensus estimate. The main issue is that production, which averaged 33,350 barrels of oil equivalent per day (BOE/D) during the first quarter, was a bit below the midpoint of its guidance range. The company encountered several problems, including substantial production curtailments due to pipeline repairs and facility maintenance at three of its largest fields.

An offshore oil platform at sunset.

Image source: Getty Images.

Production has since bounced back during the second quarter, rising to an average of 37,000 BOE/D by mid-April as it completed repairs on pipelines and facilities, as well as brought new wells online. Because of that, the company estimates that production will average 36,400 BOE/D during the quarter, which is up 9% from the first quarter.

Now what

W&T Offshore is optimistic about what lies ahead. Not only has the company's production recovered from the issues it faced during the first quarter, but oil prices have continued improving, which should enable it to generate significant free cash flow. The oil stock, however, is a much higher risk compared to others in the sector due to its small size and weaker balance sheet. As a result, it will likely be extremely volatile on any hint of bad news.