uploads/2017/11/WTI-3Q17-Post-Net-Income-1.png

How W&T Offshore Turned Losses into Profits in 3Q17

By

Updated

W&T Offshore’s 3Q17 adjusted net income

W&T Offshore (WTI) announced its 3Q17 earnings on November 1 after the market closed. Per its earnings press release, WTI reported a much better than expected profit of ~$6 million in 3Q17. Wall Street analysts were expecting a lower profit of ~$4 million. On a year-over-year basis, WTI turned profitable after 3Q16’s loss of ~$23 million. However, excluding one-time items, WTI’s profits rose ~35% sequentially compared with a profit of ~$23 million in 1Q17.

W&T Offshore’s 3Q17 reported net income

W&T Offshore’s 3Q17 adjusted net income excludes one-time benefits and charges totaling about -$7 million, the majority of which relates to non-cash gains on derivatives and income tax adjustments. Adding back these one-time items, WTI’s reported net income on a GAAP (generally accepted accounting principles) basis was at about -$1 million, or -$0.01 per share in 3Q17. WTI’s reported net income was ~$46 million, or $0.48 per share in 3Q16.

WTI’s net income turnaround from a loss in 3Q16 to a profit in 3Q17 could be due to an increase in revenues from upstream operations coupled with lower operating expenses during the period. WTI’s operating expenses fell from ~$166 million in 3Q16 to ~$95 million in 3Q17— a fall of ~57%. This year-over-year fall in WTI’s operating expenses is due to the lower production expenses and absence of impairment charges in 3Q17. We’ll look at WTI’s revenues in the next part of this series.

W&T Offshore’s quarterly net income trend

In 1Q17, WTI reported a profit of ~$23 million, ~666% more than the Wall Street analyst consensus profit of ~$3 million. On a year-over-year basis, WTI turned its loss last year into profits. A year ago, W&T Offshore reported a loss of ~$73 million in 1Q16. On a sequential basis, and excluding one-time items, WTI reported a higher profit in 1Q17 compared with a profit of ~$8 million in 4Q16.

In 2Q17, WTI reported a much better than expected profit of ~$31 million in 2Q17. Wall Street analysts were expecting a loss of ~$1 million. On a year-over-year basis, WTI turned profitable after 2Q16’s loss of ~$36 million. Even excluding one-time items, WTI’s profits rose ~35% sequentially compared with a profit of ~$23 million in 1Q17.

WTI’s peers ConocoPhillips (COP) and Occidental Petroleum (OXY), which are also part of the SPDR S&P500 ETF (SPY), reported adjusted net incomes of ~$198 million and ~$137 million, respectively, in 3Q17. Just like WTI, COP and OXY also turned their losses last year into profits in 3Q17.

In the next part of this series, we’ll look at WTI’s revenues.

More From Market Realist