W&T Offshore cut Q4 debt with asset-sale proceeds, used revolver draw to enhance cash position

By Paul Deckelman

New York, March 9 – W&T Offshore, Inc., faced with the continued challenging conditions in the energy markets, turned to the credit markets during the fourth quarter of 2015 and at the beginning of this year to attempt to shore up its financial position and ride out the current downturn.

“Balance sheet preservation is essential,” the Houston-based oil and natural gas exploration and production company’s chairman and chief executive officer, Tracy W. Krohn, said Wednesday, “and we accomplished a lot in 2015 to enhance our financial flexibility.”

A busy year

During the company’s conference call following the release of its results for the fourth quarter and full year ended Dec. 31, Krohn ticked off a laundry list of actions the company had taken to that end, including suspending its common stock dividend in April and again in October, and in May, obtaining a $300 million five-year second-lien term loan to boost liquidity. The loan allowed W&T to reduce its outstanding borrowings under its existing revolving credit facility.

“The timing couldn’t have been better for that transaction,” Krohn said.

Then in the fall, the company was doubly busy on the financial front.

W&T Offshore amended its bank credit facility effective Oct. 30, modifying or completely eliminating certain financial covenants.

Also in October, the company closed on the sale of its Yellow Rose Field in western Texas, generating $372.9 million in net proceeds.

The company used a portion of that money to pay off the balance of credit facility borrowings, with the rest going to swell the company’s cash balance by some $100 million.

At year-end, the company had $85.41 million of cash in its coffers, as well as its revolver, which has total commitments of $1.2 billion and a $350 million borrowing base and which matures in November of 2018.

Revolver draw maximizes cash

However, in February, Krohn said “we drew $340 million on our revolving bank credit facility to maximize our liquidity and assure that we navigate through these industry headwinds.”

Subsequent to that draw, the company’s cash balance, subsequent to the draw, was $447 million.

WTI also “hired both legal and financial advisors to assist the board and management as we work through challenging market conditions.”

In the current commodity price environment, “we believe that maximizing our liquidity and adjusting our capital structure to remain in compliance with our financial covenants is essential,” the CEO said.

W&T is meanwhile “maintaining an active dialog with our lenders and evaluating our options.”

He noted that the spring borrowing base redetermination process for the revolver “is currently in progress – and we expect the borrowing base to go down.”

However, during the question-and-answer portion of the conference call following his formal presentation, Krohn declined to speculate where he thought the number would ultimately wind up.

As of the end of the fiscal year, the company’s books showed some $1.2 billion of long-term debt – down from $1.47 billion at June 30 and from $1.35 billion a year earlier, with the reduction attributable to the paydown of the revolver borrowings with the Yellow Rose sale proceeds.

Besides the term loan, the company also had $900 million of 8˝% senior notes due 2019 outstanding.

© 2015 Prospect News.
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