SEC Filings


10-Q
W&T OFFSHORE INC filed this Form 10-Q on 05/04/2017
Entire Document
 

W&T OFFSHORE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

9.  Contingencies  

Supplemental Bonding Requirements by the BOEM.  The BOEM requires that lessees demonstrate financial strength and reliability according to its regulations or provide acceptable financial assurances to assure satisfaction of lease obligations, including decommissioning activities on the OCS.  In July 2016, the BOEM issued NTL #2016-N01 to clarify the procedures and guidelines that BOEM Regional Directors use to determine if and when additional financial assurances may be required for OCS leases, ROWs or RUEs.  This NTL became effective in September 2016 and supersedes and replaces NTL #2008-N07.

 

In the first quarter of 2016, we received several orders from the BOEM pursuant to NTL #2008-N07 demanding the Company to secure financial assurances in the aggregate of $260.8 million, with amounts specified with respect to certain designated leases, ROWs and RUEs.  We filed various appeals to the Interior Board of Land Appeals (the “IBLA”) concerning these orders.  The IBLA, acknowledging the BOEM and the Company were seeking to resolve the BOEM demands through settlement discussions, stayed the effectiveness of these orders several times, with the current stay effective to May 31, 2017.  On April 12, 2017, a joint request was filed by the Company and the BOEM to extend the current stay from May 31, 2017 until August 31, 2017.  The joint request is pending.  We are in final stages of resolving a matter with the BOEM that began over a year ago with its demand that we secure financial assurances (such as supplemental bonding) in the aggregate of $260.8 million.  We recently received a letter from the BOEM that indicated that in order for the BOEM to rescind the order, we must first satisfy our financial assurance requirement related to “sole liability properties”, as described below.  We believe that we can satisfy our obligation under the most recent BOEM request for financial assurance of sole liability properties and we will request that the previous orders pertaining to the $260.8 million of financial assurances be rescinded.

 

In September 2016, we received notice from the BOEM confirming that we do not qualify to self-insure a portion of any additional financial assurance under NTL #2016-N01.

 

In January 2017, the BOEM, in a notice to stakeholders, extended the implementation timeline for NTL #2016-N01 by an additional six months with respect to non-sole liability properties, except in circumstances in which the BOEM determines there is a substantial risk of nonperformance of the interest holder’s decommissioning liabilities.  The extension did not affect the demand to provide financial assurance for leases, ROWs and RUEs constituting sole liability properties.  

 

In February 2017, the BOEM withdrew the orders it issued in December 2016 affecting so called “sole liability properties” to allow time for the new President’s administration to review the complex financial assurance program.  Sole liability properties are leases, ROWs or RUEs for which the holder is the only liable party, i.e., there are no co-lessees, operating rights owners and/or other grant holders, and no prior interest holders liable to meet the lease and/or grant obligations.  This withdrawal rescinded the Order to Provide Additional Security issued to us in December 2016.  However, the BOEM may re-issue sole liability orders before the end of the six-month period if it determines there is a substantial risk of nonperformance of the interest holder’s decommissioning liabilities.

As suggested by the BOEM in its January and February 2017 notices, we intend to use the six month extension granted by the BOEM as an opportunity to propose and negotiate acceptable plans dealing with both sole and non-sole liability properties.

Surety Bond Collateral.  The issuers of surety bonds in some cases have requested and received additional collateral related to surety bonds for plugging and abandonment activities.  We may be required to post collateral at any time pursuant to the terms of our agreement with various sureties under our existing bonds, if they so demand at their discretion.  We did not receive any additional collateral demands from surety bond providers during the three months ended March 31, 2017.

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