Ladies and gentlemen, thank you for standing by, and welcome to the W&T Offshore Fourth Quarter and Full Year 2023 Conference Call. During today's call, all parties will be in a listen-only mode. Following the company's prepared remarks, the call will be opened 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. I would now like to turn the conference over to Al Petrie, Investor Relations Coordinator. Please go ahead.

Thank you, MJ, 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 Fourth Quarter and Full Year 2023 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, Al. Good day all and thanks for joining us for our year-end 2023 conference call. With me today are William Williford, our Executive Vice President and Chief Operating Officer; Sameer Parasnis, our Executive Vice President and Chief Financial Officer; and Trey Hartman, our Vice President and Chief Accounting Officer. They are all available to answer questions later during the call. So in 2023, we continued to deliver strong results while executing on our strategic vision. Our proven strategy is simple and effective. We focus on generating free cash flow, maintaining and optimizing our high-quality conventional assets and opportunistically capitalizing on accretive opportunities to build shareholder value. We have a strong balance sheet and continue to build cash on hand. We have generated positive free cash flow every quarter for the past six years because we know that cash flow is paramount to our success. We prioritized operational excellence, cost controlling initiatives, prudent capital spending and maximizing the value of our prolific asset base to deliver strong production and meaningful EBITDA. In addition, it's our ability to successfully and seamlessly integrate producing property acquisitions that has helped W&T grow during our 40-plus year history. For the past year, we've accomplished many things that I'd like to highlight now. So we began 2023 by redeeming all of our outstanding 2023 second lien notes and issuing new 2026 second lien notes, significantly reducing our debt and interest payments moving forward while strengthening our balance sheet. So we have the ability to pay off all that debt, but we believe that liquidity would be extremely important strategically, hence the issuance. We have a low average -- a low leverage profile of 1.2 times net debt to trailing 12 months adjusted EBITDA, coupled with the significant cash we have on hand, that provides us…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Today's first question comes from John White with ROTH Capital. Please go ahead.

Good morning and congratulations on the nice results.

Hi, John.

Good to see the positive reserve revisions also. You mentioned you're contemplating a deepwater joint venture similar to your previous Monza joint venture? Do you want to offer any additional comments on that?

Sure, John. We are, of course, going to continue those efforts. I'd like to put a multiple well package together to go forward with that, that would start with Holy Grail. That's a proved undeveloped location with, believe it or not, a little bit of upside to it. So we have some other exploratory projects. We have another one at what we call our Cayman field that is more towards the developed side of the equation. We are, of course, mindful of our balance sheet and what we think are very good acquisition opportunities going forward. As always, that's a little bit hard to predict. But so far, we've been having good success with buying properties and those are opportunities that we would always like to pursue. But yes, the program for '24 and beyond for drilling wells will depend on putting together this joint venture as well.

Okay. Thanks. And would they be oil industry partners or more financial-type partners?

Yes. I think that you would see both. We put together a drilling joint venture years ago with more financial types in the amount of $361 million, and that's proven to be quite successful. So you could see a little bit of both. This will probably be a multi-hundred million dollar drilling program. So we will investigate both and see -- check the temperature on everybody and see what their tolerance is like.

Okay. Thanks for the additional detail. I'll pass it back to the operator.

Thank you, sir.

Thank you. The next question comes from Derrick Whitfield with Stifel. Please go ahead.

Good morning, all, and thanks for taking my questions. Also, certainly congrats on the Cox acquisition as well. Tracy, I wanted to focus on guidance with my first question. Could you speak to the amount of shut-ins you're expecting in Q1 and perhaps provide color on where volumes could exit the year? Certainly, it sounds like a lot of things are coming into your favor towards the end of the year. But any color you could offer would be greatly appreciated.

Well, as you can -- as you picked up, Derrick, from the statements earlier, there's a bit of flux here. We have Virgo still shut in as a result of the Main Pass oil and gas pipeline leak that's got to show in that several million cubic feet a day. We're looking at production later on in the year exiting around 38,100 barrels of oil equivalent per day. That's kind of how we're looking at it as a function of that number that I gave you on production increase. I personally think it will be a little bit better as we get a little bit more into these assets. The bankruptcy left a lot of these fields in flux with the rapid departure of personnel and the change from Chapter 11 to Chapter 7, which Chapter 7 is forced liquidation. So some upset, we had a temporary service agreement in place that now is no longer valid because their personnel have had to depart rapidly. We've picked up a few of their employees as well. So we're catching up. I think that this is a little more chaotic than normal, but certainly not anything that we can't and won't -- and will resolve, of course. We think that it's going to be a lot better than what it looks like now, for sure. And even now, the production is still picking up. So with that, I'll just tell you to give me a few more weeks so we can get a little better handle on them and we'll be able to give you more accuracy.

Terrific. And Tracy I know you're still very early in your assessment, but really leaning in on the Cox acquisition. Could you offer any additional color on the measures you're taking to optimize production and cost and place any broad parameters around the degree of production and cost improvement we could see?

Yes. I'd really like to give you more guidance on that. Some of it has to do with old contracts that need to be resolved and -- or that were rejected rather. Well, a lot of people lost a lot of money here, and it didn't really help them very much. We've got to manage some transportation issues that we'll need to get resolved. The former owners left us rather rapidly and didn't really do a whole lot in the way of managing some of the corrosion issues. So we've been dealing with that. Nothing that I would consider to be hazardous just something that needs to be repaired, routine to repair some of these upgrades. Some of them are just valves on production vessels, and we put one clamp on a pipeline that had been shut in by the former operator and increased production 400 barrels a day, it was a $20,000 clamp. So some of this is pretty simple, but it takes a little bit of time. We have to get personnel coordinated around these fields from existing fields and managed transportation and logistics.

Great. And then maybe as one nonrelated follow-up. Wanted to see if you could speak to the A&D environment in the GOM at present as you're clearly taking a conservative cash building position for 2024.

Yes, sure. Well, you're seeing a lot of mergers, not just with smaller players, but with larger players, too, notably Chevron and Hess. Hess has a lot of production in the Gulf of Mexico, too. So I see that as positive for the industry. I see this positive for this company. It's certainly indicative of investor interest in this basin as it should be. This is the second largest producing basin in the country and certainly the largest by area. We've always appreciated our ability to function in this basin. There's always another drill -- another well to drill. There's always another property to acquire. We haven't run out of enthusiasm for it. And we've been in a lot of different places. We've operated in nine different states in the US in the past, and we still keep wanting to focus in the Gulf of Mexico.

Thanks, Tracey. Thanks for the color.

Thank you, sir.

Thank you. [Operator Instructions] The next question comes from Jeff Robertson with Water Tower Research. Please go ahead.

Thank you. Good morning. Tracy, a question just philosophically on returns. When you think about what you see with the costs to drill and complete new wells in the Gulf of Mexico across your asset base and the types of opportunities you see in the acquisition environment. Can you compare maybe the risk profile and the types of returns you think you can generate in given what appears to be your preference for acquisitions with what it might be on development drilling or greenfield drilling?

Sure. I think the decision for us is always risk reward based on the amount of cash we have on hand and the amount of leverage that we can apply prudently. We tend to make property acquisitions where it's available. And we'd prefer to do that. I mean if the -- if our ability to make an acquisition is at or equal to our ability to finance and drill wells organically. And clearly, it's a risk profile that we would prefer to make the acquisitions because there's certainly a lot less risk. We know we've got a cash flow and a proven reserve base, so that's a no-brainer. Where it gets a little more difficult is when you start talking about what's exponential growth going to apply. That's more where the risk profile kind of provokes the question, do I want to roll the dice, or do I want to spend an amount and I know I can get a certain amount of cash flow on and return. Drilling is always more risky, of course. And I've seen companies come and go and fail deciding that they were going to roll the dice and drill more wells. We certainly have the technical capability to drill in shallow water or deepwater and operate in shallow water or deepwater. We have an inventory of good drilling prospects, good exploratory prospects that would certainly attract more attention, and that's what we're going to focus on. But I don't want to do any of these things myself 100%. So we try to restrict that to around 20% to 25% participation. So that's a little bit problematic. I think part of the world is starting to wake up to our basin and understand that we have a rule of law and we have reasonable pricing parameters that we can predict. And so in regulatory, although it can appear somewhat harsh at times. We're pretty sure we're not going to get a windfall profit tax overnight that we weren't expecting. So it makes it -- takes a lot of the risk out of it when we can predict some of the more regulatory actions that could occur elsewhere in the world.

If we think about the joint venture, Tracy, just to follow up on your comments around risk and reward. If you were able to structure a joint venture with a drilling partner, would -- I'm sorry, with another operator in the Gulf of Mexico. Would a goal of that be for W&T to contribute prospects and the partner to contribute prospects and have lessened exposure but over a broader portfolio drilling prospects over the next couple of years?

Yes, I mean that's an admirable goal, sometimes that happens, sometimes it doesn't. The more immediate thought process for us is to optimize that and make that occur, if that makes sense. On the other hand, we believe that the prospects that we have are pretty superior and that we have a lot of data. We've got processing, reprocessing. And I guess everybody could say, yes, our prospects are better. But our success rate in the Gulf over the last decade and almost 1.5 decades has been over 90%. So that's pretty hard to argue with.

Thank you.

Thank you, sir.

At this time, we are showing no more questions in the queue. I'd like to turn the call back over to Mr. Tracy Krohn for any closing remarks.

Thank you, everyone. Stay tuned. There will be more to come in the next several weeks and we look forward to presenting to you again soon. Thanks so much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.