Greetings and welcome to the W&T Offshore Fourth Quarter Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Lisa Elliott with Dennard Lascar, Investor Relations. Thank you, Ms. Elliott. You may now begin.

Thank you, operator and good morning everyone. We are glad to have you join us on W&T Offshore’s conference call to review financial and operational results for the fourth quarter of 2017. Before I turn the call over to Company, I would like to remind you that information reported on this call speaks only as of today, March 1, 2018 and therefore, time-sensitive information may no longer be accurate as of the date of any replay. Also, please refer to the fourth quarter 2017 financial and operational results announcement that W&T 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 Mr. Tracy Krohn, W&T’s Chairman and CEO.

Thanks, Lisa. Good morning, everyone and thanks for joining us today. With me this morning as usual is Tom Murphy, our Chief Operations Officer; Danny Gibbons, our Chief Financial Officer; and Steve Schroeder, our Chief Technical Officer. They are going to be available to answer questions later during this call. So, yesterday, after the market closed, we announced solid results for fourth quarter and full-year 2017 and provided our year-end proved reserves showing that we replaced slightly more than 100% of our production. We think this is a pretty good feat on a modest capital expenditure program. We also reported positive earnings and strong cash flow. Production averaged 37,526 barrels of oil equivalent per day, which was within our guidance range. It was up about 3% sequentially from the prior quarter. We estimate that production would have far exceeded the guidance this quarter and then above fourth quarter last year if we hadn’t been impacted by substantial downtime and deferrals associated primarily with weather, pipeline outrages and unplanned platform maintenance by third parties that collectively resulted in deferred production of almost 6,100 barrels of oil equivalent per day. You may recall with the beginning of the fourth quarter, we experienced production deferrals as a result of Hurricane Nate. This, deferred production quite a number of days while many of these downstream pipelines and platforms were enabled to resume normal operations and that was like a few days to few weeks. It’s not at all unusual for us to experience downtime but fourth quarter may have set record for outrages. Fortunately, the production was deferred and not lost. So, if not produced in the fourth quarter, we will produce in next, the following quarters. So, oil and liquids represented about 58% of fourth quarter production, which is up from 55% a…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question is from Richard Tullis with Capital One Securities. Please proceed.

Hey, thanks. Good morning, Tracy. It seems like you gave good bit of detail where you could on the JV that’s coming together. So, just to get a total understanding of it. So, it sounds like the list of projects that are provided in today’s or yesterday’s release, would still be the same ones that you would plan to drill when that JV structure is announced. So, no expansion there, it would just change your ownership interest in those same projects, Tracy?

That’s correct.

And then, the proceeds would mostly go toward paying down debt this year?

Well, that and/or acquisitions or both also subject to refiing the entire facility. What it does is it gives us a lot more options.

So, I know you talked in the release about the 2019 maturities. How are you looking at the 2020 maturities as well, Tracy. I guess, it comes up in May of 2020.

Right.

How are you looking those? Would you try to expand a JV or other type of vehicles like that to help with that effort as well?

Well, with the ability now to have this flexibility with this joint venture program, we see that as less problematic as it was before. We expect to pay down some debt. We expect to drill more wells, we expect to have pretty good success based on this. I mean, I’ve taken the rare and unusual situation of also investing in this personally to help attract some of our capital in this joint venture solution that we have. So, I believe in it. The Company is going to put its own money into it; I’m going to put my own money into it. We see this is a positive development for the Company. Going forward, we think that it gives us several more options as far as managing the debt going forward. We recognize that we need to lower the debt. I mean that’s what we’re going to do. I’m perfectly confident that we can actually take care of the short-term maturities with cash if need be. This just gives us some more opportunities to do things that might come up in a way of acquisitions and/or additional wells we might want to drill.

Thank you, Tracy. That’s helpful. Second question, you talked a little bit about the acquisition potential. What is the landscape looking like right now? And is the -- how is the impact in commodity price impacting the kind of the asking price by the sellers? What’s the total landscape looking like right now?

Clearly, price is going up, going up helps to everybody. It makes it easier to pay a price that others might accept, makes it easier to do financing where it’s necessary. So, it’s all positive from that stand point. I mean, most of what we’re looking at right now are going to be cash purchases. So, that’s important to us and it’s important to the sellers.

Our next question is from Patrick Fitzgerald with Robert W. Baird & Company. Please proceed.

I have a couple on capital structure as well. Would you draw or can you draw on the revolver to pay down the 2019 notes?

That’s a double sided question actually, Patrick. Under certain conditions we would. That’s not our intent. I think, what we would rather do is just pay down debt rather than exchange -- essentially exchange debt for debt. We think that there is a combination factor for both paying down debt and refiing the rest of it.

So, you have the notes due ‘19 and also the 1.5 lien due ‘19, right?

Correct.

So, you are saying you would use cash to pay down 2019 notes and then refi the 1.5 lien?

No. What I’m saying is that we have the ability to do both. And that as a result of all this it leaves us with the opportunity to refi in different ways. So, now, we have a little bit more flexible financial ability and we have a possibility of making some debt pay down and refiing and also doing acquisitions.

So, the JV, in theory I think kind of understand that it would allow you to spend a lot less on CapEx. But wouldn’t it also hinder your operating cash flow from the new wells that you are drilling with the partner?

Well, there’s a whole lot more that I need to give you in detail that I’ll be able to give you in just a few more days. So, rather than go into more details this time, I’d like to defer on that. But, the short answer is, Matt, I think you’ve seen what we’ve posted as guidance for 2018. And I don’t expect that to go down anymore. So, I think, we’re okay from that aspect of it. Actually, I think we are being pretty conservative on our guidance and that you will see some pretty good answer by the end of the year.

So that guidance takes in to some extent a JV or it doesn’t take that into account?

It does.

Our next question is from Jon Evans with SG Capital Management. Pleased proceed.

This maybe redundant. So, I’m just trying to understand. But, I wanted to unpack the production guide that you gave. So, you basically went into the Q4 that you had a little over 6,000 a day from shut-ins and you did 3.5, but you guided 3.1 to 3.5, so the midpoint would be down again. So, were there more issues with pipelines in Q1 or is this just you are building in the JV which…

Yes. There were more issues with pipelines in Q1, also there was another couple of extraordinary items. There was a fire at one of the structures where we send product across -- well actually downstream. So, yes, all these things are what I would call one-off occurrences, unfortunately just happened at a not very good time for us.

And so, the question I have for you is just you mentioned before that it’s not lost production, it just kind of gets moved to the right. So, should we think about that production from Q4, Q1, just showing up in Q2, or how should we think about that?

It’s a little bit hard for me to project right now, because of the nature of the third-party structures that we are having to deal with. So, yes, it will. I just can’t give you an exact timing on the guidance. Like I said, we try to be as conservative as we can. I am tired of telling people that there is things that are going to happen that I can’t control. So, we’ve taken a very what I think is a very conservative stance here. And I realize that market is probably going to beat us up a little bit for, but there’s -- it’s better to under-promise and over-deliver.

So, I guess a better question is, can you give us a sense of kind of where you are running then? You may not be selling at that rate, because the pipelines et cetera. But, where’s kind of production on a daily basis, is it 40,000 a day, 41,000, what’s kind of that number, rough number?

Well, currently, right now, we are at 220 million cubic feet equivalent per day.

Our next question is from John Aschenbeck with Seaport Global Securities. Please proceed.

First one is just a follow-up on 2018 guidance. And thinking of the potential production contribution from, call it, your higher risk exploration type project scheduled for this year, I suppose this is a two-part question. First, if those projects are successful, you mentioned you could get those on pretty quickly. Could you get some of those on during the year? And then secondly, how risked is that expected production from those higher risked projects? I suppose, I am trying to get a feel just generally for the potential upside to 2018 production in regard to those higher risk projects?

So, the answer to your first question is yes, we do expect to get these things on production fairly quickly. As a function of how risked it is, I don’t really have an answer for that. And what we try to do is build in a kind of a worst case scenario, and some acknowledgement in fact that yes, we have taken a lower percentage in some of these wells, but we’ve taken a promote. And it’s kind of hard for me to give you these answers until such time that I really report all the details of it.

And then, lastly, hate to belabor the JV topic, but I suppose I am going to try a few more questions. And I apologize if I missed this detail too. But, just thinking about of the promote, how substantial could that be just thinking of the capital, would your partners effectively carry all the capital there for you, or…

Once again, John, I would ask you to defer for a just a little while longer until we can disseminate that to all the market and have everything buttoned up. I think, you will be quite pleased with what we’ve done here. I think, everybody is happy with it. Recognize that I’m on both sides of this transaction, personally. So, I think it’s a very fair deal for everyone. We spent longer trying to get this done that I thought that we would. For all the people listening that are in the business of raising funds, I have a newfound respect for what you do. Having said that really the timing on this for closing was just unfortunately right at the time where we needed to report everything. We deferred as long we could on fourth quarter but we just got caught up in little bit of time bind here. But I think when you get the rest of it, you will have a pretty good about it.

Understood, we will just wait and see. That’s it for me.

I appreciate. I’m sorry to be so nebulous. But, I don’t really have any choice at this point.

Our next question is from Vance Shaw with Credit Suisse. Please proceed.

Yes. This is Vance Shaw with Credit Suisse asset management. Tracy I just want to get a quick question on -- you could see what’s going on at Fieldwood and their kind of odd financial situation they’re in where they are going bankrupt and making acquisitions at the same time. This seems to be a lot going on in the offshore Gulf of Mexico, consolidation, a lot of people are interested in buying companies. Can you just like give us your thoughts on sort of what you think is going on and how W&T is going to sort of address that environment?

Sure. This is fairly typical late market change. And I have been through about six of these downcycles now. Unfortunately I’m afraid that dates me a little bit. But, what I see is very typical of what we see in these late market turnarounds where the market begins to turn around and investors start to pay a great deal of attention to things that have high cash flow. And so, that’s why I think you’re seeing some -- a little bit of increased interest in the Gulf of Mexico because the high cash flow characteristics of the properties.

Got you. Do you see big oil continuing to sort of sell, especially in the deeper water and for the independents to be buying in and the private equity guys to be more aggressive, is that one of the things you’re seeing?

I’m not sure quite how to evaluate it. I will tell you that managers are tasked with the idea of replacing reserves and increasing production. So, where can you do that reliably is kind of leads you to the shale resource basins and what not. So, but when you’re faced with the idea that you’re going to making cash flow, it kind of makes you think about the Gulf of Mexico as well.

Our next question is from Hassan Ahmad with Serengeti Asset Management. Please proceed.

Just thinking about the priorities in terms of -- you mentioned acquisitions, you mentioned some debt reduction, obviously, there is a production decline as well. So, how do you kind of balance those three concepts, and what is sort of the path toward one, two and three in terms of priorities?

Well, we have our priorities in making sure that we meet our obligations. We also have a priority in try and to grow the company. Sometimes, you need to shrink a little bit to grow it. And that’s kind of what we’ve looked at here with regard to this joint venture project. We also wanted to develop something that we thought was repeatable. So, that’s an encouragement as well. I think that you will see a much stronger company in W&T in the future. I’m pretty sure that we’ve put ourselves in a good position to make sure that that occurs. We’re still making great cash flow. I mean even though the production is down, you need to figure out are we making more money than we were before, and of course we are. We had a great deal of deferred production. And there are several other things that occurred along with that. And I don’t want to create a list of excuses because at the end of the day, production was down, it’s just a fact. So, it doesn’t matter really why. What matters is what you are going to do going forward. So, part of what we are doing is making sure we protect the Company and meet all of our obligations and have flexibility. And that requires us to look at it slightly different way. We are very confident of our ability to pay our debt down and also refi whatever stubs may exist. Similarly, we’ve created a path forward and also given us flexibility to make acquisitions as well. We also have a goal of creating a larger entity or larger fund to make acquisitions, and we’ve announced that in the past. So, that’s where we are going.

I’ll take a stab at the JV. Most JVs we’ve seen in energy space, it’s either cash and carry, so you get some cash, upfront, and someone carries you on CapEx, or there’s assets contributed into there and there’s some sort of promote that the partner receives and then the Company starts to receive better economics on the backend. So, what is the structure? Is it the first or is it the second type of structure?

Let me tell you this. We’re going to give you all the details in the next 10 days or so. I think, you’ll be very pleased what you see. It will be different from what you’ve been looking at.

We now have a follow-up question from Richard Tullis with Capital One Securities. Pleased proceed.

I knew, you were going to come back and ask another question, Richard. Go ahead.

Maybe even two, Tracy. When you look at some of the big offshore deepwater projects you are involved in, are there any requirements that you foresee, say for 2019 for drilling that Big Bend and Dantzler?

No not at this time.

Okay. And then, second, you’ve mentioned in the release about the upcoming substantial tax refund. What’s the current status of the judgment from last summer, somewhere up, if I remember correctly, around $40 million? How is that working on the opposite end of the spectrum, money -- potential money going out the door?

That judgment’s being appealed right now. So, that’s just in due course. But, we’ve already made approvals for that and everything. So, anything that happened on the other side, would be [indiscernible]

We also have a follow-up question from Jon Evans of SG Capital Management. Please proceed.

This might be for Danny. But, I am just curious, I know it’s the government, but do you have any kind of timing of when you think you’ll get the tax refund? And then, just the other question with that is, do you think -- could you just help us understand, if you do some of this plugging amendment work, how much it would lessen potentially the tax refund, and it would be pushed out to ‘19?

The tax refund, Jon, is supposed to be -- we’ll get some of it probably in the second quarter, some of it in the fourth quarter. And that should be the end of it, because of the change in the tax law.

And then, the last question I have just for you, Tracy, the A-17 well, you said it’s going to start producing in March. Can you give us any kind of sense of what you think it’ll do per day or do you have any kind of range you can give us?

I think, what we are going to do is we are going to take it on very gently at first. We have had some issues in the past with regard to fines migration in some of these wells. And we treated them and they come back, but it’s a continuing source of aggravation for us. But, we believe we would come up with different theories. So, yes, it will come on at a predetermined rate. And I am not going to give you that just yet because I haven’t fully vetted it with everybody. But, what we would expect to do is gradually increase it over time as we stabilize the wellbore, for newer wellbore fines migration.

Mr. Krohn, there are no further questions at this time. I would like to turn the floor back over to you for closing comments.

Very good. Thank you, operator. And we appreciate everybody’s participation this morning. Stay tuned. We will have more for you in a few days.

Ladies and gentlemen, thank you for your participation. This does conclude today’s teleconference. You may disconnect your lines and have a wonderful day.