|W&T OFFSHORE INC filed this Form 10-Q on 05/04/2017|
General and administrative expenses (“G&A”). G&A decreased to $13.3 million, (19.3%), for the first quarter of 2017 from $16.4 million for the first quarter of 2016 primarily due to reductions in legal expense, salaries expenses, professional fees and benefits costs, partially offset by increases in surety bond costs. G&A on a per BOE basis was $3.45 per Boe for the first quarter of 2017 compared to $4.17 per Boe for the first quarter of 2016.
Derivative gain. For the first quarter of 2017, there was a $4.0 million derivative gain recorded for both crude oil and natural gas derivative contracts, which includes settled contracts and open contracts recorded at fair value as of March 31, 2017. We entered into derivative contracts for crude oil and natural gas during the first quarter of 2017, relating to a portion of our 2017 estimated production. For the first quarter of 2016, there was a $2.5 million derivative gain recorded for derivative contracts for crude oil and natural gas.
Interest expense. Interest expense incurred was $11.3 million in the first quarter of 2017, compared to $27.8 million in the first quarter of 2016. The decrease was primarily attributable to the Exchange Transaction that was completed on September 7, 2016, when we exchanged $710.2 million of our Unsecured Senior Notes for $301.8 million of new secured notes and 60.4 million shares of common stock, and at the same time, closed on a new $75.0 million secured loan. The Exchange Transaction and the related accounting are more fully described in the Liquidity and Capital Resource section below. In addition, interest expense was lower as we had no borrowings on the revolving bank credit facility during the first quarter of 2017 compared to borrowings averaging over $100 million during the first quarter of 2016.
Other expense, net. During the first quarter of 2017 and 2016, other expense, net, was $0.2 million and $1.3 million, respectively. For the first quarter of 2016, the amount was primarily due to write-down of debt issuance costs related to a reduction in the borrowing base of the revolving bank credit facility.
Income tax benefit. Our income tax benefit for the first quarter of 2017 and 2016 was $7.6 million and $4.9 million, respectively. Our annualized effective tax rate using book pre-tax income was not meaningful for either period. The income tax benefit for both periods relates to NOL carryback claims made pursuant to IRC Section 172(f) (related to rules for “specified liability losses”), which permit certain platform dismantlement, well abandonment and site clearance costs to be carried back 10 years. For both periods, adjustments in the valuation allowance offset changes in net deferred tax assets. See Financial Statements – Note 7 –Income Taxes under Part I, Item 1 of this Form 10-Q for additional information.