Good day, and welcome to W&T Offshore First Quarter 2022 Earnings Conference Call. [Operator Instructions] At this time, I'd like to turn the conference over to Brent Collins, Director of Investor Relations. Please go ahead.

Thank you, operator. 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 first quarter 2022 financial and operational results. Before we begin, I’d 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 earnings release that we issued yesterday for disclosures on forward-looking statements and reconciliations of non-GAAP measures. With that, I'd like to turn the call over to Tracy Krohn, our Chairman and CEO.

Thanks, Brett. Good day to everyone. And thanks for joining us for our first quarter 2022 conference call. So with me today are Janet Yang, our Executive Vice President and Chief Financial Officer; William Williford, our Executive Vice President and Chief Operating Officer; and Steve Schroeder, our Senior Vice President and Chief Technical Officer. We are all available to answer questions later on during the call. So I'm pleased with the very strong operational financial results in the first quarter which provided a solid foundation for an exciting year. Our strategy is simple, generate free cash flow, maintain high quality conventional production and capitalize on the creative opportunities to build shareholder value. So here are all the things we delivered in the quarter. One, our production was provided guidance. Two, our LOE costs were below the low end of guidance. Three, we grew adjusted EBITDA by 37% to $89.7 million and more than doubled our free cash flow to $46.9 million compared to the fourth quarter. So I would note that this marks the 17th consecutive quarter that W&T has generated free cash flow. And fourth, we paid down $10.6 million in debt. Thus we brought the Cota well at East Cameron online to the gross production rate of 2,600 barrels oil equivalent per day. And last, we closed to the creative acquisition of producing properties in February, and then bought the remaining interest in those properties very shortly after the end of the first quarter. So as you can see our operations and finance team executed at an exceptionally high level, and we believe the rest of the year can be even better. In the first quarter we also experienced sustain higher pricing for all three commodities on a sequential basis. Our production was up 2% over the prior…

Thank you, Tracy, and good morning everyone. Capital expenditures excluding changes in working capital associated with investing activities were $17.4 million in the first quarter of 2022. This is primarily attributed to completion costs for the Cota well, drilling costs for the exploratory well that we discussed last quarter and seismic costs. Even with that capital spending, we generated $46.9 million in free cash flow and pay down $10.6 million of debt in the first quarter. Net debt which is total debt less cash and cash equivalents was $504.8 million at the end of the first quarter. Our net debt to trailing 12 months adjusted EBITDA is about two times, which is a dramatic improvement compared to 3.4 times a year ago. Our current forecast which assumes recent strict futures prices, no additional acquisitions this year, and no equity issuances under our ATM program shows us exiting 2022 with net debt to TTM adjusted EBITDA to below one time. With a strong balance sheet and a meaningful amount of cash on hand, we will continue to evaluate the creative opportunities that meet our criteria, while systematically paying down debt,. Our revolving credit facility which was extended until January 3, 2023, during the quarter, and our ATM program, which was filed during the quarter and has not been used, provides us additional financial flexibility if we need it. As of March 31, 2022, we had available liquidity of $265.5 million comprised of $215.5 million in cash and cash equivalents and $50 million of borrowing availability under our revolving credit facility. As many of you on the call are aware, our senior second lien notes mature in November 2023. And we intend to commence discussions with potential lenders and institutional investors soon regarding the refinancing of all of our portion of those…

Thanks, Janet. So before I close out the call, we'd like to talk to you about our ongoing ESG efforts. We're continuing to demonstrate strong commitment to our high quality ESG effort with the current report, environmental stewardship, sound corporate governments and contributing positively to our employees and the communities where we work and operate our cornerstones of our culture. We believe that ESG is not just the responsibility of the Board, and our executive leadership, but also extends to our employees. So as such, we have ESG metrics incorporated into our incentive plan. And we intend to continue with that practice moving forward. So in closing, we're very pleased with how well we started 2022 both operationally and financially. Everything is well positioned with a meaningful cash position and strong liquidity in the current price environment, which presents many opportunities for W&T. We've generated significant cash flow and EBITDA in quarter one, and expect that to continue throughout 2022. We have a number of organic drilling opportunities like the Cota well, that we plan to drill in 2022 and beyond. Additionally, we are constantly evaluating with Gulf of Mexico's vast pool of assets for the creative acquisitions within our focus area. So quickly evaluating and executing on opportunities like ANKOR is a pillar of our success. We are a well-established operator with a premier portfolio of both shallow water and deepwater properties in the Gulf of Mexico that have low decline rates and significant upside. Our success is made possible by executing on our long-term strategy which is centered on maximizing shareholder value. So our management team's interests are highly aligned with those of our shareholders given our 34% stake in W&T’s equity which is one of the highest of any public E&P company. As a shareholder, I see a bright future for W&T and look forward to continued success in 2022. And with that operator, we can open the lines for questions.

[Operator Instructions] Our first question today will come from Michael Scialla with Stifel. Please go ahead.

Hey good morning, everybody. Interesting even though it is just a memorandum of understanding at this point, just wanted to ask about, Tracy what do you think it is that motivated KNOC to enter an agreement with you? Are they looking to partner with you on acquisitions in the Gulf of Mexico? Are they looking to partner with you on drilling inventory or anything more you can say as to what motivated them to enter this deal?

Yes, we've been talking to them and we've talked to them in the past, we met some of their executive management. We had a very good experience with them with regard to the properties that we purchased through ANKOR which is a sub of KNOC and it gradually developed into a good relationship. And I think it's good to have a relationship with an international oil company. And the fact that we've been around for a long time in the Gulf of Mexico in this basin, we've been around for a long time period. And I think the fact that you have a management team that is highly vested in the shares of the company. And moving forward, I think it gives us a different perspective that we can deliver. And - in talking to them about technical aspects of things we might do. They are an international oil company, and they have assets and in other countries and that has some interest for us as well. So, you know, I just see a lot of synergy here with this company and the relationships have been very good. Like, we're very fortunate to have this relationship.

I look forward to seeing how that unfolds. Janet, you mentioned the potential to refinance the second lien notes. And you also mentioned some reference to that in the release. Maybe just any update on how you see that opportunity. And anything else you might want to do with the balance sheet, given the looks like you're going to go, as you mentioned below one times debt leverage this year. Anything else you see as an opportunity to do things with the balance sheet this year?

Sure yes, we certainly are looking at refinancing our debt. We do have some time in 2023, but not until November of 2023. But you know we - prices are up our financials are strong. And so, you know, we're out there, we are definitely looking at opportunities to refinance those notes opportunistically again we're not, under the gun. And so, we want to make sure we do it right. And yes, we're very excited about net leverage going down based on recent pricing without kind of any additional acquisitions or just based on our current assumptions going forward without the ATM or anything like that going under one-time. So, our goal is to be lever. But you know, we also realized that there's, a lot of good opportunities of low risk like this ANKOR acquisition, and many others like that, that are low risks and a lot of cash flow. So we want to also have the dry powder to be able to go out there and take advantage so to build the company and grow in a very risk adjusted way. So we're kind of balancing both right now.

Very good one more in related if I could just take on to it. Is there any option to repay the term loan early or is that not part of the not being considered?

We can yes, we certainly can do that as well. I think yes its good interest rate. We don't - we're not necessarily thinking that we will do that, but we certainly can.

[Operator Instructions] The next question comes from John White of ROTH Capital. Please go ahead.

Congratulations on the very strong results. It looks like you're firing on all cylinders. ANKOR looks strong and the production guide looks very favorable. The onshore companies are talking about shortage in the oil service sector, talking about shortages in the equipment and personnel. Are you experiencing that in the Gulf of Mexico?

Well, first, thanks, John. Yes, the short answer is yes, we're seeing it more in transportation than just about anything at this point. And we see it in personnel so, personnel has been a little bit problematic in different areas. Mainly with our boats and, and crews for specialty work. So you know, you had COVID you had some supply chain issues, but really, it's I think more that people have adjusted and they're doing other things. And may not necessarily be coming back to our business, this is this is not an unusual problem. We've certainly had this problem before although, for different reasons, mainly related to recessionary issues. But I think that we'll motor on through it. And generally we see about a nine month lag when prices are going down. And about the same when prices go up for the market to adjust to personnel and materials. We've got some drilling to do later on this year that we've had to put some long -- we're fortunately we've done a lot of work on long lead items. So I think we'll still be good in that particular instance with a well we plan to drill in deepwater later on starting -- later on this year already next year. So LOE and P&A and CapEx and G&A, all going to be affected by this. So the idea is to control the margins, not just the cost, but the margins, EBITDA margins.

[Operator Instructions] Our next question is a follow-up from Michael Scialla of Stifel. Please go ahead.

Yes, Tracy, you mentioned the well at Magnolia around the end of the year, are you still finding the three shelf wells this year? And given the tightness that you mentioned, in any sense on timing of those?

So Michael, this is William, I'll answer that question for you. Essentially, we are doing some self-work mostly on that is associated with long lead items. We are doing platform rigs so it's things that we have to do in order to prepare to get those rig on those platforms in order to drill between 23.

Okay. And William, any sense on time? Do you think though, you'll get them all done this year?

Now, as far as the long lead items, yes, we'll get that stuff moving. We actually get it started already. We are spending dollars to pair those platforms. And we feel pretty confident that we'll be able to get those rigs in 2023 [indiscernible].

Got it. Okay. And in terms of the capital spend for this year, is that still anticipated to be fairly, equally weighted across the year?

That's great. We said we will see a little ramp up once we start drilling on the Holy Grail well, that'd be water well later in the year.

Great. And you'd mentioned you would initiate some recompletion opportunities with the ANKOR assets. Can you give any sense of the size of the opportunity set there. Is that just a couple of wells or that's something that can keep you busy for a while -- go ahead.

Well, yes, we started out with a couple of wells. And actually we got a few more that we're looking at right now as you -- is everyone noticed in industry as prices go up, which should give us a quick opportunity to spin capital and see a return in an investment right away. So we're looking not only at ANKOR but other opportunities as well with our portfolio.

Good. And Tracy mentioned the LOE came in at low of guidance. I assume that you said those ANKOR assets had a higher LOE, is that something you've been able to attack P&A with those assets or was that just on your legacy assets for you are able to lower the LOE?

Yes, we are able to reduce that LOE, we just took over operations officially on May 1. So there was a transition period for those operations. Effective date of course was different. But now that we have our own boats and helicopters in the area, we should see positive results on -- with regard to LOE now of course, the restraint on that is inflationary and supply chains and personnel and all that stuff. But, again that's why I always try to focus people on margins. What we try to do is maintain the margins as opposed to a specific cost. But right now we're taking because of our footprint in the area that we should be able to hold the line on our LOE.

I guess with those assets too, as relates to margins, I think he had mentioned when you looked at the assets that you saw an opportunity to maybe improve on some of the contracts there anything you can say about any work you've done there?

Yes, we've done quite, here William again, we've basically took that head on, as soon as we got it. Some of the things that we're looking at right now is definitely on the transportation costs, less market and transportation costs. With the pipelines, we're looking at opportunities to lower that we think to do that in a fairly short period of time. We're also going out and looking at additional bids on selling our hydrocarbons. And we've seen opportunities to add value there as well. So those are things that we're looking at as far as quick hits, along with what Tracy mentioned before as far as looking at some of the lower costs with the LOE side of things.

Got it. And then just one last one from me. I know you have it in kind of your long term plan for a deepwater well at Magnolia. Is there any opportunity? And I guess it would be have to be in conjunction with I think, if you were to, as Janet said you're currently not looking to repay that term loan early. But is there a with $7 or $8 gas prices now? Any thoughts on maybe accelerating well in that field?

I'm sorry, would you repeat the question sir? I got distracted for a moment.

Yes, given the higher gas prices, I know it looks like you know, I think you had put in the plan to drill a well there and 2028 kind of when the term loan expired, but is there any thought about what given the high gas prices maybe trying to accelerate that?

Oh, yes, absolutely. Every $1 gas makes a big difference. We had a cost prior to this, it is pretty high cost. And certainly that makes this a lot more doable. With $8 gas and the issue is, of course, we own all the interests there. And this is a very expensive, well, albeit shallow water. This is this is a deep high pressure. A high pressure and high temperature. And so we will have to get some pretty high pressure equipment as well. So that's -- those are the restraints on that. It's not at this point, it's not price.

Okay. And would be -- would you need to repay the term loan before you would want to do that or could that be separate?

Not at all.

And ladies and gentlemen, at this time, we will conclude our question-and-answer session. I'd like to turn the conference back over to Tracy Krohn, Chairman and CEO for closing remarks.

Thank you, operator. Well, again, a very good quarter. We're happy to see a little bit better pricing regime and we look forward to talking to you in the near future. Thank you very much.

The conference has now concluded. We thank you for attending today's presentation. And you may now disconnect your lines.