W&T Offshore to Acquire Offshore Fields From Shell Offshore Inc.

abarrelfullabarrelfull wrote on 11 Sep 2012 14:36

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Nov. 4, 2010

W&T Offshore, Inc. (NYSE: WTI) announced today that it has acquired or intends to acquire (through its wholly-owned subsidiary, W&T Energy VI, LLC) interests in six offshore producing fields located in the Gulf of Mexico from Shell Offshore Inc. with an effective date of September 1, 2010. W&T will pay or anticipates paying $450 million in cash, subject to customary post-effective date adjustments, and assume approximately $50 million for the asset retirement obligations associated with these properties. Both amounts are subject to change based on the number of properties ultimately acquired, all as described below. The acquisition is being funded with W&T's available cash on hand and from borrowings on its revolving credit facility.

The acquired interests are in the Tahoe, SE Tahoe, Marlin, Dorado and Droshky fields located in the deepwater of the Gulf of Mexico. The sixth field, which is subject to a letter of intent with Shell, is a Gulf of Mexico producing shelf property along with associated assets. Combined production, net to Shell's interest, in the six fields is currently approximately 6,840 barrels of oil per day and 68.8 MMcf of natural gas per day or approximately 18,000 barrels of oil equivalent per day. Proved reserves associated with the acquisition and letter of intent are 7.0 million barrels of oil or natural gas liquids and 112.2 billion cubic feet of natural gas, or 154.3 billion cubic feet of natural gas equivalent. These reserves, substantially all of which are proved developed producing, were determined by Netherland, Sewell and Associates Inc. as of September 1, 2010, based on SEC reserves definitions and pricing.

Tracy W. Krohn, Chairman and Chief Executive Officer, stated, "Our acquisition of Shell's interest in these fields helps us meet our objective of increasing our production and reserves in 2010, as well as lowering our costs per Mcfe and improving our EBITDA margins going forward. Additionally, we believe that the high level of cash flow generated by these properties, partially due to lease operating expenses that are low relative to volumes produced, will provide an attractive return on investment based on full cycle economics. With the production from these assets currently weighted about 37% towards oil on a volume equivalent basis, we can benefit from today's high oil prices, while the reserves are predominately natural gas which should provide longer term upside."

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