How W&T Offshore Turned Losses into Profits in 2Q17
W&T Offshore’s 2Q17 adjusted net income
W&T Offshore (WTI) announced its 2Q17 earnings on August 3, 2017, after the market closed. According to its earnings press release, it reported a better-than-expected profit of ~$31.0 million in 2Q17. Wall Street analysts were expecting a loss of ~$1.0 million. On a year-over-year basis, WTI turned profitable after the loss in 2Q16 of ~$36.0 million. Excluding one-time items, WTI’s profits rose ~35.0% sequentially compared to a profit of ~$23.0 million in 1Q17.
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W&T Offshore’s 2Q17 reported net income
W&T Offshore’s 2Q17 adjusted net income excludes one-time benefits and charges of $2.0 million, the majority of which are related to non-cash gains on derivatives, gains on exchanges of debt, and charges related to the Apache (APA) lawsuit. Adding back these one-time items, WTI’s reported net income on a GAAP (generally accepted accounting principles) basis was $33.0 million, or $0.23 per share, in 2Q17. WTI’s reported net income was -$121.0 million, or -$1.58 per share, in 2Q16.
WTI’s net income turnaround from a loss in 2Q16 to a profit in 2Q17 can be attributed to the steep increase in revenues from upstream operations, coupled with lower operating expenses during the same period. Its operating expenses decreased from ~$227.0 million in 2Q16 to ~$90.0 million in 2Q17, a fall of ~60.0%. This year-over-year decrease in operating expenses is due to lower production expenses and the absence of impairment charges in 2Q17. We’ll look at WTI’s revenues in the next part.
W&T Offshore’s quarterly net income trend
In 1Q17, WTI reported a profit of ~$23.0 million, which was ~666.0% more than the Wall Street analyst consensus for a profit of ~$3.0 million. On a year-over-year basis, WTI turned the year-ago loss into profits. A year ago, W&T Offshore reported a loss of ~$73.0 million in 1Q16. On a sequential basis and excluding one-time items, it reported a higher profit in 1Q17 than its profit of ~$8.0 million in 4Q16.
WTI’s peers ConocoPhillips (COP) and Pioneer Natural Resources (PXD), which are also part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), reported adjusted net incomes of ~$178.0 million and ~$38.0 million, respectively, in 2Q17. Like WTI, COP and PXD also turned their year-ago losses into profits in 2Q17.
In the next part, we’ll look at WTI’s revenues.