SEC Filings


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

 

Net cash used in investing activities during the three months ended March 31, 2017 and 2016 was $23.0 million and $32.6 million, respectively, which represents our investments in oil and gas properties and equipment.  There were no acquisitions of properties during either period.  Investments in oil and natural gas properties on an accrual basis in the three months ended March 31, 2017 were $23.3 million compared to $12.9 million for the same period in 2016.  The capital expenditures during the three months ended March 31, 2017 related primarily to investments on the conventional shelf.  In addition, adjustments from working capital changes associated with investing activities increased net cash by $1.2 million in the three months ended March 31, 2017 compared to net cash usage of $20.7 million for the same period in 2016.  These amounts represent timing differences between when the work was performed and the payment.      

Net cash used by financing activities for the three months ended March 31, 2017 was $2.3 million and net cash provided by financing activities for the three months ended March 31, 2016 was $288.1 million.  The net cash used for the three months ended March 31, 2017 was primarily attributable to the interest payment on the 1.5 Lien Term Loan, which is reported as a financing activities under ASC 470-60.  The net cash provided for the three months ended March 31, 2016 was attributable to the net borrowings on the revolving bank credit facility.  

Derivative Financial Instruments.  From time to time, we use various derivative instruments to manage a portion of our exposure to commodity price risk from sales of oil and natural gas and interest rate risk from floating interest rates on our revolving bank credit facility.  As of March 31, 2017, we had outstanding open derivatives for crude oil and natural gas.  These derivatives provide downside protection against a portion of our remaining 2017 production.  The oil swap contract provides cash inflows when the oil price is below $55.25.  The “two-way collar” contracts will provide cash inflows when crude oil or natural gas prices average are below $50.00 per barrel and $3.07 per MMBtu, respectively, in a month.  Conversely, these contracts may require cash payments and limit upside potential if prices exceed certain amounts.  See Financial Statements - Note 5 - Derivative Financial Instruments under Part I, Item 1 of this Form 10-Q for additional information.

Insurance Coverage.  We currently carry multiple layers of insurance coverage in our Energy Package (defined as certain insurance policies relating to our oil and gas properties which include named windstorm coverage) covering our operating activities, with higher limits of coverage for higher valued properties and wells.  The current policy limits for well control range from $30.0 million to $500.0 million depending on the risk profile and contractual requirements.  We carry named windstorm coverage of $150.0 million for a total loss only (“TLO”) on our Mahogany platform (Ship Shoal 349) and do not have named windstorm coverage on any other of our properties.  The operational and named windstorm coverages are effective until June 1, 2017.  Coverage for pollution causing a negative environmental impact is provided under the well control and named windstorm sections of the policy.

Our general and excess liability policies are effective until May 1, 2018 and provide for $300.0 million of coverage for bodily injury and property damage liability, including coverage for liability claims resulting from seepage, pollution or contamination.  With respect to the Oil Spill Financial Responsibility requirement under the Oil Pollution Act of 1990, we are required to evidence $150.0 million of financial responsibility to the BSEE and we have insurance coverage of such amount.  

Although we were able to renew our general and excess liability policies on May 1, 2017, and we expect to contract an Energy Package for the June 2017 – May 2018 timeframe, our insurers may not continue to offer this type and level of coverage to us in the future, or our costs may increase substantially as a result of increased premiums and there could be an increased risk of uninsured losses that may have been previously insured, all of which could have a material adverse effect on our financial condition and results of operations.  We are also exposed to the possibility that in the future we will be unable to buy insurance at any price or that if we do have claims, the insurers will not pay our claims.  However, we are not aware of any financial issues related to any of our insurance underwriters that would affect their ability to pay claims.  We do not carry business interruption insurance.

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