W&T Offshore Inc Valuation Report, June 2010 - Strategic and Operational Analysis
W&T Offshore Inc Valuation Report, June 2010 - Strategic and Operational Analysis
Report Reserve announces inclusion of a new market research report to its premium store.
W&T Offshore Inc Valuation Report, June 2010 - Strategic and Operational Analysis
Less Dependence on External Funds; Utilizing Operating Cash Flows to Meet Its Capex Requirements
W&T has been primarily relying on internal cash flows to meet its capital expenditure (capex) requirements. The company typically uses around 75% of its operating cash flow to support its capex program. However, most of the Oil and Gas (O&G) companies reduced their drilling activities and thus their capex programs in 2009 due to uncertainties in the global market. Similarly, W&T's capex decreased significantly from $658m in 2008 to $276.1m in 2009. The company has increased its capex program for 2010 to $450m with the expectation of improved global market conditions and thus increased drilling activities.
Figure 1: W&T Offshore Inc, CAPEX Percentage With Operating Cash Flows, 20022009
Source: Energy eTrack From GlobalData
W&T plans to use its 2010 capex to support its acquisition/joint venture activities and enhance its drilling activities in its prospect inventory. The company plans to invest around $300m in these activities and the rest will be allocated to well recompletions, facilities capital, and seismic and leasehold items. Figure 1 shows W&T's capex to operating cash flow ratio from 2002 to 2009, which indicates its ability to fund its capex program from operating cash flows. W&T's high dependence on internal funds shows its conservative approach towards its capital structure. The company can leverage this attribute to fuel its growth by accessing additional funds to support its acquisition activities from secondary markets easily and at competitive rates.
W&T Continues to Build Reserves through Acquisitions in Outer Continental Shelf (OCS) Region
W&T has been actively focusing on increasing its reserve base in order to boost its production portfolio. W&T has been focusing on the Outer Continental Shelf (OCS), the area of the company's historical success, as well as areas outside of the Gulf of Mexico region where the company has operational and technical expertise. The company will be focusing on the offshore Gulf of Mexico (deep water and deep shelf) while continuing to operate in the conventional shelf. The acquisition opportunities are continuing to evolve in this region as large integrated and independent oil and gas companies continue to divest their assets to focus on other larger capital-intensive projects that fit their strategic and financial goals. In line with this, W&T plans to continue to acquire and exploit reserves in the Gulf of Mexico.
During 20072008, W&T participated in the bidding process for leases in the OCS region conducted through Minerals Management Services (MMS). The company won leases covering four OCS blocks located on the conventional shelf in the central Gulf of Mexico in 2008 and one lease in 2007.
W&T Offshore Inc, Exploration and Development Overview
W&T was actively involved in exploration and development activities during 2009. In 2009, W&T drilled 10 exploratory wells and three development wells, of which 12 were on the conventional shelf and one was on the deep shelf. As a result, W&T drilled eight successful wells out of 10 exploratory wells and two successful wells out of three development wells. W&T operates five of the eight successful exploratory wells.
In 2009, W&T's capex for exploration and development activities were around $90.6m and $162.1m, respectively. W&T's exploration and development capex consisted of $45.9m in the deepwater, $4.6m on the deep shelf and $202.2m on the conventional shelf and other projects. In 2010, W&T has increased its capex program to $450m. The company has been planning to invest in seven conventional shelf exploration wells and other capital items such as well recompletions, facilities capital, seismic and leasehold items. The anticipated budget for these activities is around $150m. The balance of the budget will be invested in acquisitions, additional drilling opportunities from the company's prospect inventory and/or new joint ventures offshore and onshore.
Figure 2: W&T Offshore, Comparison of Exploration Cost and Reserve Addition Through Drill bit, 20052009
Source: GlobalData/ Company Source
The company has been adding reserves through organic and inorganic means to expand its reserve base. Figure 2 indicates W&T's exploration costs in comparison with its reserve additions through drill bit during 20052009. GlobalData has used reserve additions through extensions and discoveries as a proxy for reserve additions through organic activities. During 20052007, the company's exploration costs and additions of organic reserves were moving in same direction indicating that greater amounts of organic reserves were being added with increasing exploration expenses. In 2008, the company's exploration costs increased considerably whereas its organic reserve additions decreased, indicating that a large part of its exploration costs were incurred on unsuccessful drilling activities. In 2009, W&T reduced its exploration costs significantly as a result of a reduction in its exploratory activities For more details, please vist http://www.reportreserve.com/reportdet.php?company=GlobalData&reportid=10345 What Is a Commodity Trading Currency Option Trading Wholesale White Bobby Socks Limiting Costs Through Strategic Procurement Making Use of a Day Trading Guide Find Out How Payday Loan Retailers Approve Borrowers For Cash Tips on how to develop a successful joint venture by generating strategic alliance? Frugal Mom's Guide Rapidshare Combat The Fat Program - Combat The Fat Rapidshare Find the Bed Style You Really Want at the Right Retailer Wholesale Dollar Merchandise Suppliers Just Waiting to Meet your Needs Do you Have the Right Dollar Store Merchandise Wholesale Suppliers? Fap Turbo Expert Guide Rapidshare - Fap Turbo Expert Guide Results