W&T Offshore has successfully finalised the accretive acquisition of six fields situated in the shallow waters of the Gulf of Mexico. The acquisition involved W&T emerging as the winning bidder for specific synergistic assets in the Gulf of Mexico, previously offered by entities including MLCJR, Cox Oil Offshore, Cox Operating, Energy XXI GOM, Energy XXI Gulf Coast, EPL Oil & Gas, and M21K (collectively referred to as the ‘Debtors’).
The total purchase price for the assets amounted to $72m, exclusive of specific closing costs, and was financed through the utilization of the Company’s available cash reserves.
The acquired properties boast robust production, all with a 100% working interest (average 82% net revenue interest). They strategically complement W&T’s existing operational area.
The portfolio encompasses six fields, namely Eugene Island 064, Main Pass 061, Mobile 904, Mobile 916, South Pass 049, and West Delta 073.
The estimated production for these fields has ranged from approximately 3,700 to 5,700 barrels of oil equivalent per day (BOEPD) as of 19 January 2024, with around 68% being liquids. W&T is optimistic about enhancing production through initiatives such as workovers, recompletions, and facility repairs.
The transaction adds significant proved reserves of 18.7 million MMBOE (62% liquids), based on year-end 2023 SEC pricing. There is substantial upside potential with proved plus probable reserves of 60.6 MMBOE (78% liquids)
Positioned in water depths spanning approximately 15 to 400ft, these fields strategically align with W&T’s existing operational areas, facilitating the capture of synergies. Recent estimates indicate a production range of approximately 3,700 to 5,700 barrels of oil equivalent per day (BOEPD), with around 68% comprising liquid components, during the period month-to-date 19 January 2024. W&T has outlined plans to conduct a series of workovers, recompletions, and general maintenance work, anticipating a substantial increase in total production from these fields.
Following this accretive acquisition, W&T has strategic plans to allocate additional funds towards augmenting production and optimising costs for these assets over the long term. As part of this strategy, the Company has decided to defer the drilling of Holy Grail, a proven undeveloped well in the Magnolia field.
W&T intends to explore a Drilling Joint Venture, akin to the successful initiative undertaken with investors in 2018 through Monza Energy LLC. This venture may involve some of the Company’s 100% owned and operated deepwater wells, including Holy Grail (approximately 3,900ft of water), Thunderbolt (approximately 500ft of water), Zeus (approximately 500ft of water), and Redbolt (approximately 500ft of water). Additionally, the Company has outlined plans to undertake the drilling of at least one shelf exploratory well within this joint venture.
W&T Offshore chairman, president and CEO Tracy W. Krohn said: “These assets have attractive production rates, are generating positive free cash flow, and have a solid base of proved developed reserves and identified upside potential with strong 2P reserves. We plan to increase production in the near-term with capital-efficient, low-cost workover, recompletion and maintenance projects.
“We expect to realise synergies on these new assets due to their close proximity to our existing fields, which can reduce operating costs and further increase free cash flow. Combined with our acquisition last fall, we have added almost 22 million barrels of oil equivalent of proved reserves for about $104m, or around $4.75 per BOE, which we believe is a very attractive price for properties with significant upside. We plan to continue to utilise our strong balance sheet and expertise in acquiring complementary GOM assets to further enhance the scale of W&T.”
