Ladies and gentlemen, thank you for standing by. Welcome to the W&T Offshore First Quarter 2020 Conference Call. During today's call, all parties will be in a listen-only mode. Following the company's prepared comments, the call will be open for questions and answers. [Operator Instructions] This conference is being recorded and a replay will be made available on the company's website following the call. At this time I would like to turn the conference call over to Al Petrie, Investor Relations Coordinator. Sir, you may begin.

Thank you, operator. On behalf of the management team, I would like to welcome all of you to today's conference call to review W&T Offshore's first 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 first quarter 2020 earnings release that we released yesterday for a disclosure on forward-looking statements and reconciliations of non-GAAP measures. At this time, I would like to turn the call over to Tracy Krohn, W&T's Chairman and CEO.

Thanks Al. Good morning everyone, and thank you for joining us for our first quarter 2020 conference call. With me today are Janet Yang, our Executive Vice President and Chief Financial Officer; William Williford, our Executive Vice President and General Manager Gulf of Mexico; Steve Schroeder, our Chief Technical Officer; and Jim Hersch, our Vice President Geosciences. They are all available to answer questions later during the call. Over the last several months the global COVID-19 pandemic coupled with supply and demand imbalances, have certainly created an environment of uncertainty across the oil sector. We've reacted decisively to those conditions by significantly reducing our capital expenditure budget for the remainder of 2020, lowering our lease operating expenses without compromising safety or operational capabilities, and temporarily shutting in some lower margin operated and non-operated oil weighted properties. As always, we remain committed to the health and safety of our employees and contractors. At our corporate offices, we implemented a mandatory work from home policy in March, and only recently reopened our corporate office. Despite being back in the office, we continue to monitor the situation and will follow the advice of government and health leaders. For our field operations, we instituted screening of all personnel prior to entry to heliports and shorebases, as well as our two gas plants in Alabama. We're conducting daily temperature screenings and implemented procedures for distancing and hygiene at our field locations. We're very pleased that thus far none of our onshore or offshore employees have tested positive for COVID-19. For nearly 40 years, we've been able to persevere through multiple pricing cycles because our focus and strategy has always been to maximize cash flow and constantly improve the profitability of our assets at any commodity price. We expect to continue to find value in acquisitions,…

[Operator Instructions] And our first question today comes from John White from ROTH Capital. Please go ahead with your question.

Good morning and thank you. Congratulations on the good results, Tracy. You certainly know the playbook during a downturn.

Thanks, John.

I thought buying back Second Lien was very opportunistic and a very good move. You mentioned, I believe you said, with regard to further 2020 activity, no new wells are planning to be [indiscernible] but just wanted to confirm that. And so I take it that means most activity is going to be continued re-completions and workovers?

Yeah, I think that's the way we see it right now. Of course, if prices creep on up, and then we'll open up the pocketbook a little bit and be able to get some more work done with the drill bit.

And you mentioned more, to expect more acquisitions in the future, how would you describe [indiscernible] landscape in the gulf given the current environment?

Well, I think there's a lot of opportunity there. Most of the companies that have had problems are going to get eliminated or absorbed. The ones that don't are going to continue to succeed.

Okay, well, thanks very much. I'll pass it along.

Thank you, sir.

Our next question comes from Richard Tullis from Capital One Securities. Please go ahead with your question.

Hey, thanks. Good morning, everyone.

Hi, Richard.

Tracy, I know you withdrew guidance for the full-year and just had a couple of comments with the last caller on activity, but what do you think it takes to kind of get back to even, you know, moderate growth mode, say in the second half of the year and into 2021, which sort of oil price would you be looking at in combination of service costs reductions?

Well that’s a fairly complex question, Richard. It's got many moving parts to it. If I was going to guess a price, I’d tell you something around 50, it would make us feel pretty comfortable. We recognize that service companies have had their issues as well. Everybody is struggling with personnel and the pandemic of course, but I do think that the futures is pretty good long-term. And that's what we're looking at. We realize that there's some things that need to happen in this basin to make it better for everyone. So, we're waiting to see what pricing is going to do. That's the biggest driver. I wish I could tell you that it isn't, but it is. I think we're adequately hedged at this point or close to it. So, I'm confident that we can withstand just about anything. Of course every time I say that something else nasty happens. So, I guess I probably ought to stop saying that, but I think we're pretty well protected at this point.

Yeah, thank you for that. That's helpful. And then from a follow up, Tracy or Janet, what is the corporate decline rate at this point given the, you know, the reduction in CapEx?

Corporate decline rate, I'm not sure I understand that term. Do you mean the production decline rate or the corporate – I don't know what the corporate decline rate is.

Yeah. For the [higher company's] production base.

The [RP is about] 10.

Okay. Okay, Tracy, thank you.

Yes, sir.

Our next question comes from Mike Scialla from Stifel. Please go ahead with your question.

Hi, good morning, everybody. Tracy you mentioned, you'd like to see something [around 15] before you got active with dealing with a drill bit, wondering kind of along the same lines, what kind of price or can you put in a price on what you'd need to see before you bring the shut-in volumes back online?

Well actually we're starting to bring those shut-in volumes back online now. So, that should give you some encouragement. Some of them, a couple of these fields that were near end of life anyway, and we're just kind of hanging on. Those probably won't be coming back online. So, I think we'll get up fairly quickly with the production of the stuff that was brought online that is not just anemic.

Okay, good. And want to get your thoughts on, you use free cash flow, obviously very opportunistic, as was pointed out on paying down the Second Lien, looking forward, would that be the preference or how do you balance that between paying down the revolver since now you have the covenant is just focused on First Lien debt, and also any restrictions on paying down either of those two?

Well actually the latter part of your questions there is more conducive to what we're likely to do. We don't have the First Lien capability of going out and spending more money to buy debt. Apparently the RBL’s don't like you buying debt from other people and putting theirs at risk. So, that is the covenant with regard to buying more Second Lien debt.

Very good, thank you.

Yes sir. Thank you.

Our next question comes from Patrick Fitzgerald from Baird. Please go ahead with your question.

Hi guys. I echo the sentiment on the debt repurchase. Well done. So, a lot of my questions have been asked, but I wanted to ask, I guess, Janet, working capital for the remainder of the year you – that was a nice source of cash this quarter. How do you expect that to unfold for the remainder of 2020?

I think with activity going down, I don't expect it to be – we don’t expect, I mean, generally speaking, we’re forecasting out, we're not – we're not forecast – we take a conservative stance on it, but yeah, but I think working capital should be okay, be relatively flat for the rest of the year. I think lot of pressure is on the [indiscernible] first, kind of second quarters.

Okay. And then on your [plug-in abandonment], the current portion of that on the balance sheet declined from [22 to 3], is that just a timing issue? And if you could talk about how you see that unfolding in 2020 and I guess, any further than that would be helpful? Thank you.

It is a timing issue. You know, I think Tracy can comment on that a little bit more as well.

Yeah, there's no overwhelming obligation to do the ARO work as we've forecasted it so far for the rest of the year.

Okay. Alright. Thanks a lot.

Thank you, sir.

Our next question comes from Ray Deacon from Petro Lotus Analytics. Please go ahead with your question.

Yeah. Hey, good morning, Tracy.

Hey, Ray. How are you?

Good, good. Thanks. I was wondering how the three and a half years roughly payout on re-purchasing debt compares to the re-completions that you're planning to do this year in terms of what kind of return you're getting?

Ah, you finally asked the right question. How does it compare to other things that we might want to do? Very good, Ray. Yeah, yeah, now you got it. Yeah, do we buy more debt back or do we go out and try to make more money doing acquisitions and drilling wells? That's really the, the eternal question for us, right. So that's exactly how we're looking at it. You got it. What makes more sense and it's a pretty perfunctory function when you get to the bottom of it, what is more profitable. So, it's really, it's really fairly, it was a fairly easy give to say, all right, well,, we're not going to buy back any more debt. We're going to go ahead and do more work. So, we're approaching that kind of marginality with that decision, which way do you go. So, you know, as the price goes up the decision gets real easy.

And then just, look, what's the update on the JV? I think you've drilled nine out of 14 wells was the last number I'd seen. Is that kind of the first thing you go after once you get back to drilling?

Yes.

Great. Thank you.

Our next question comes from Neal Dingmann from SunTrust. Please go ahead with your question.

Good morning Mr. Krohn and team.

Hi Neal, how are you?

Good, good. My first question that, just build it on what Ray was saying, Tracy, I like the acquisition that you, I guess you closed in early March where you did the purchase sale agreement to acquire that 25% remaining work in interest, to me that always seems to be the most economical when you can continue to do that. You know, again, do you have other opportunities to add work and interests like that? I mean, to me, obviously, you don't have to use any more, you know, expenses to do so and always seem to be the most economic. So, just wondering if you have more opportunities like that in the portfolio?

Let me see if I can explain this very concisely. You can bet your [indiscernible] on it. Okay.

Could be concise.

Okay.

Very, very good, and then just my follow up to that would be just, you know, given what we see now in this environment, you know, we've certainly seen onshore prices on services come down. Could you just talk color on you know, now when you go back to work, what you're seeing in prices today versus even six or 12 months ago?

Yeah. You know, I commented on this last year when people were telling me that the prices were going up, oil was [$60 something a barrel] and service costs were going up. And I always thought that was seasonal. And sure enough, it was not only seasonal. Unfortunately, prices began to drop as well. So, activity went down. So, there's certainly a point at which you can't go any lower because your suppliers just can't get their costs down any further. So, we don't want to see that happen. We want people to be able to operate at a profit. On the other hand, the hard part for us is, is making sure that we have access to quality personnel and equipment and I think we're pretty close to that margin right now. So, it's got to be some sort of rebalancing going along and it really has more. The biggest impact is transportation, boats and helicopters. And you know insurance and then personnel.

Got it. Got it. Very good. Thanks and nice cash flow.

Sure. Thank you.

[Operator Instructions] Our next question comes from Dustin Tillman from Wells Fargo. Please go ahead with your question.

Hi, thanks for taking the call. I wanted to ask about the surety market. We've seen in some instances, some of your competitors where sureties are asking for collateral, including one scenario where the company is suing – the surety is suing the company. What do you see as the health of the surety market? Any changes that are happening there as some of your competitors are under pressure?

Well, again, without knowing the specifics, it's hard for me to answer that. We haven't experienced any issues with our sureties. In fact, the experience has been quite the opposite. The company is in good shape. We're meeting all of our obligations, and we'll be able to do so, hopefully, for the rest of my lifetime. So, I don't really see any angst among the sureties. Markets go up and down, rates go up and down a little bit depending upon how the markets are, but other than that we're not experiencing any anxiety at all.

So, they're not asking. There's no calls for collateral from the sureties?

No sir.

Okay, great. And I wanted to follow up on one of the previous questions that was asked about P&A obligations and maybe for, you could just help us better understand, usually thinking about shutting in wells, and having – you talked about some production that won't come back online. Most people would expect that that would result in more near-term P&A spend. And it sounds like you're saying that you have the ability to push some of that off. So can you just explain or help us understand the timeframe of when that P&A work would have to be done?

Now, generally, after you cease production, you're required to plug in abandonment within a year. So, I'm sorry, excuse me, 18 months. So yeah, so there are at least 18 months down the line. Clearly, if you go out and you put a field back online, you got to go out and make these visits every once a while anyway. So, if prices get up high enough, you put them back online, and then you defer it for yet another 18 months, but we're at least 18 months or close to that away from having to do any of those abandonments on those marginal fields.

Okay, and that's why the current P&A liability was reduced, because the view is that can be delayed.

That's correct.

Thank you very much.

Yes, sir. Thank you.

And ladies and gentlemen, at this time I’m showing no additional questions. We'll end today's question-and-answer session. I'd like to turn the conference call back over to Tracy Krohn for any closing remarks.

Well, thanks for listening everyone. We appreciate it and we'll have another conversation next quarter, if not soon. Thanks so much. Goodbye.

Ladies and gentlemen, the conference has now concluded. We do thank you for attending today's presentation. You may now disconnect your lines.