Six more Gulf of Mexico fields join US oil & gas firm’s portfolio

Houston-based oil and gas producer W&T Offshore has completed the acquisition of six shallow water fields in the Gulf of Mexico (GOM) for a final purchase price of $72 million.

The closing and effective date of the acquisition is January 16, 2024. The U.S. player got its hands on these assets, thanks to successful bids for certain synergistic assets in the Gulf of Mexico offered by MLCJR LLC, Cox Oil Offshore, Cox Operating, Energy XXI GOM, Energy XXI Gulf Coast, EPL Oil & Gas, and M21K. The final purchase price of $72 million excludes certain closing costs, which were funded from W&T’s cash on hand.

Moreover, the list of the acquired six fields encompasses Eugene Island 064, Main Pass 061, Mobile 904, Mobile 916, South Pass 049, and West Delta 073, all of which include a 100% working interest and an average of 82% net revenue interest. Located in water depths ranging between approximately 15 and 400 feet, the six fields’ proximity to W&T’s areas of existing operations provides the firm with the ability to capture synergies.

Recent estimated production for the fields has ranged from about 3,700 to 5,700 boepd, around 68% liquids, during the period month-to-date from January 19, 2024. W&T plans to implement a series of workovers, re-completions, and general maintenance work to ramp up total production from the fields.

Tracy W. Krohn, W&T’s Chairman, President, and CEO, commented: “We are very pleased to announce our second accretive acquisition of GOM-producing properties in the last four months. As was the case with the purchase announced in September 2023, the producing properties included in the acquisition announced today meet the time-tested investment criteria we have used for all acquisitions.

“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.”

According to the U.S. firm, this acquisition provides strong producing properties, all of which are 100% working interest, located adjacent to its existing area of operations, and includes estimated production that has ranged from approximately 3,700 to 5,700 boepd – around 68% liquids – during the period month-to-date January 19, 2024.

Furthermore, W&T believes that it can boost production from these assets through workovers, re-completions, and facility repairs. The six newly acquired fields produced around 8,300 boepd -48% liquids – on average in April 2023, the month before the bankruptcy filing by the Gulf of Mexico companies in May 2023.

The acquisition brings significant proved reserves (1P) of 18.7 million barrels of oil equivalent (mmboe) – 62% liquids – as of January 1, 2024, at year-end 2023 SEC pricing with a present value discounted at a 10% value of $250.4 million based on an independent engineering report prepared by Netherland Sewell and Associates (NSAI).

In addition, the assets provide material upside to W&T with proved plus probable reserves (2P) of 60.6 mmboe – 78% liquids – as of January 1, 2024, at year-end 2023 SEC pricing with a PV-10 value of $629.2 million based on an independent engineering report prepared by NSAI.

Krohn further elaborated: “We plan to increase production in the near-term with capital-efficient, low-cost workover, re-completion and maintenance projects. We expect to realize 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 $104 million, or around $4.75 per boe, which we believe is a very attractive price for properties with significant upside. We plan to continue to utilize our strong balance sheet and expertise in acquiring complementary GOM assets to further enhance the scale of W&T.”

W&T plans to invest additional funds to increase production and reduce costs in the long term. In the meantime, the firm intends to defer the drilling of Holy Grail, which is a proven undeveloped well in the Magnolia field. The U.S. player will be exploring a drilling joint venture, similar to what it did with investors in 2018 through Monza Energy LLC.

This may include some of the company’s 100% owned and operated deepwater wells, including Holy Grail (approximately 3,900 feet of water), Thunderbolt (around 500 feet of water), Zeus (about 500 feet of water), and Redbolt (approximately 500 feet of water).

In addition, W&T plans to drill at least one exploratory well in the drilling joint venture, as it believes that such a structure aligns investor interests and provides ongoing liquidity through cash distributions.