W&T Offshore Inc. (NYSE:WTI) Q2 2020 Earnings Conference Call - Final Transcript

Aug 06, 2020 • 12:00 pm ET


W&T Offshore Inc. (NYSE:WTI) Q2 2020 Earnings Conference Call - Final Transcript


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Ladies and gentlemen, thank you for standing by. Welcome to the W&T Offshore Second Quarter 2020 Conference Call. [Operator Instructions] Following the company's prepared remarks the call will be open for question-and-answers. [Operator Instructions].

I would now like to turn the conference over to Al Petrie, Investor Relations Coordinator.

Al Petrie

Thank you, Brandon. And on behalf of the management team, I'd like to welcome all of you to today's conference call to review W&T Offshore's second quarter 2020 financial and operational results.

Before we begin, I would like to remind you that our comments may include forward-looking statements. It should be noted that a variety of factors could cause W&T's actual results to differ materially from the anticipated results or expectations expressed in these forward-looking statements.

Today's call may also contain certain non-GAAP financial measures. Please refer to the second quarter 2020 earnings release that we issued yesterday for a disclosure on forward-looking statements and reconciliations of non-GAAP measures.

At this time, I would like to now turn the call over to Tracy Krohn, our Chairman and CEO.

Tracy W. Krohn

Thank you, Al, and good day to everyone, and thanks for joining us for our second quarter 2020 conference call. With me today are Janet Yang, our Executive VP and Chief Financial Officer; William Williford, our Executive VP and General Manager, Gulf of Mexico; Steve Schroeder, our Chief Technical Officer; and Jim Hersch, our Vice President of Geosciences. They're all available to answer questions later during the call.

So the global COVID-19 pandemic, coupled with supply and demand imbalances have created an environment of uncertainty and temporarily reduced oil prices to unprecedented low levels in the second quarter. This isn't the first downturn that we've weathered in the last 40 years. We all know this is a cyclical business. Our success has always been based on maximizing free cash flow generation, operating efficiently and striving to constantly improve the profitability of our assets at any commodity price. This time has been no different.

So we've reacted decisively by suspending all drilling activities and significantly reducing our capex proactively curtailing production on selected oil-weighted fields operated by W&T and lowering our lease operating expenses meaningfully without compromising safety or operational capabilities. And we reduced G&A expense as well.

Most of the reductions we've seen on the expense side are sustainable. And we believe that our lease operating cost run rate will be about 20% to 25% lower than Q1 for the remainder of 2020, and our G&A cost run rate will be about 10% to 15% lower than Q1 due to reduced incentive compensation in 2020.

So as always, we remain committed to the health and safety of our employees and contractors. For our field operations, we instituted screening of all personnel prior to entry to heliports and shore bases as well as our two gas plants in Alabama. We're conducting daily temperature screenings and implemented procedures for distancing and hygiene at our fuel locations and in our corporate offices. The pandemic remains fluid and