Ladies and gentlemen, thank you for standing by. Welcome to the W&T Offshore Second Quarter 2020 Conference Call. During today's call, all parties will be in a listen-only mode. Following the company's prepared comments, the call will be open 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.

Thank you, Brandon. And on behalf of the management team, I would like to welcome all of you to today's conference call to review W&T Offshore's second quarter 2020 financial and operational results. Before we begin, I would 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 second quarter 2020 earnings release that we issued yesterday for a disclosure on forward-looking statements and reconciliations of non-GAAP measures. At this time, I would like to now turn the call over to Tracy Krohn, our Chairman and CEO.

Thank you, Al., And good day to everyone, and thanks for joining us for our second quarter 2020 conference call. With me today are Janet Yang, our Executive VP and Chief Financial Officer; William Williford, our Executive VP and General Manager Gulf of Mexico; Steve Schroeder, our Chief Technical Officer; and Jim Hersch, our Vice President of Geosciences. They are all available to answer questions later during the call. So the global COVID-19 pandemic coupled with supply and demand imbalances, have created an environment of uncertainty and temporarily reduced oil prices to unprecedented low levels in the second quarter. This isn't the first downtime -- downturn that we’ve weathered in the last 40 years. We all know this is a cyclical business. Our success has always been based on maximizing free cash flow generation, operating efficiently and striving to constantly improve the profitability of our assets at any commodity price, this time has been no different. So we've reacted decisively by suspending all drilling activities in significantly reducing our CapEx, proactively curtailing production and selected oil weighted fields operated by W&T, and lowering our lease operating expenses meaningfully, without compromising safety or operational capabilities. And we reduced G&A expense as well. Most of the reductions we've seen on the expense side is sustainable. And we believe that our lease operating cost run rate will be about 20% to 25% lower than Q1 for the remainder of 2020. And our G&A costs run rate will be about 10% to 15% lower than Q1 due to reduced incentive compensation in 2020. So as always, we remain committed to the health and safety of our employees and contractors. For our field operations, we instituted screening of all personnel prior to enter to help ensure [ph] bases, as well as our two gas plants…

[Operator Instructions] Our first question comes from John White with Roth Capital. Please go ahead.

Good morning.

Good morning, John.

Hi. Yes, I wanted to say the results on LOE, I thought were remarkable. And my congratulations. You know how to manage in this environment. As you've changed out a lot of contractors and using full time employees as part of the LOE reduction, is there a planned transition back to contractors or is that dependent on commodity prices?

No, I believe that we would prefer to have the full-time employees. Sometimes in different markets, people like to go to work as consultants or working for large consulting companies. And that's an added burden to the company and cost, sometimes as a consultant to look at what is in your best interest. Of course. But I think that given the situation that we have in markets and global virus pandemics, I think that people move towards conservancy and going work for a company that has a good track record. And it gives them more flexibility in their in their own personal planning to have a little more solid base on the platform.

Yes, of course. Well, as you know, a lot of companies have made the same move of using full time employees and cutting back on the contractors going on across the industry. I don't have another question, but I wanted to say I found the midyear reserve report reassuring such a strong -- must have been some pretty strong PDP performance to keep reserves flat in this price environment.

I appreciate you’re recognizing that. We're very pleased with the acquisitions we've made Mobile Bay and Magnolia, that have had a good bit to do with that.

All right, I'll pass it on.

Thank you, sir.

Our next question comes from Michael Scialla with Stifel. Please go ahead.

Good morning. Tracy, you said on last quarter's call, you'd like to see an oil price around 50 before you really considered going back to drilling. Just want to see if anything's changed there in terms of your cost structure that would change that number at all.

Yes, it's a little bit finding both, I'd still like to see it around 50. But I -- since we've been able to cut costs a little better than we had hoped for originally, that will have an effect on it. So I think that's a positive move in that direction.

Good. And you mentioned Mobile Bay, you're at least on the PDP side seeing some good performance there that contributed to some positive revisions. I want to see if there's still thoughts next year on drilling wells there, given where current gas prices are or do you need to see an improvement there before you contemplate well?

We are -- I mean, we're examining data. We're -- these are deep, high pressure wells, high-high pressure wells that require a lot of care. They're over 20,000 feet. We're going through the permitting process right now. We don't -- we haven't nailed down a precise location yet, but we're working on that. So I still anticipate 2021 drill wells. But we do have more data to look at. So precise location hasn't been nailed down yet.

Okay, and then last one for me. I just want to ask on the first quarter East Cameron, Cota discovery. Can you say how that [indiscernible] compared maybe relative to your predrill expectations? And do you anticipate any more drilling opportunities around that discovery? And maybe what kind of infrastructure spend would be required to get that on line next year?

Yes, well, that's price dependent. As a matter of how we looked at it, we felt like one of the stands would have a little bit more in it. As we -- and that we wouldn't necessarily see a second span. We saw a second span. And the primary span was wasn't quite as big as we thought, but together it was enough to be about what we thought it was going to be.

Very good. Thanks, Tracy.

Thank you.

Our next question comes from Richard Tullis with Capital One Securities. Please go ahead.

Thanks. Good morning. Good morning, Tracy and the team. I know you gave the updated outlook for 2020. And of course, capital spending was significantly scaled back given the circumstances that we saw in Q1 and beginning of Q2. How do you see 2021 and maybe even a little bit of 2022 production profile kind of playing out based on where you are now and expectations toward yearend?

No, Richard, we're just starting to get some visibility on that. I'm a little bit of hesitation -- a little bit hesitant to give you clues about what we think is going to happen in 21 and 22. Right now, we have adjusted for the aggravated insult from the Russians and the Saudis and the Chinese with regard to COVID-19. We believe we've made those adjustments, very quick adjustments based on present. And we reserved the -- we have preserved ability going forward to increase production due to the mix of production that we have right now that's been shut in or curtailed. I hope I did a good enough job of explaining that we have got more production capacity going forward. And some of it has been curtailed. Economics do mean the different to the future. And we expect that the prices will be higher in the future. That's the expectation. We've hedged potentially to manage whatever downturn we think is coming so that we can continue to function as a public E&P company. And the idea is always to increase reserves and increase cash flow and increase production. Sometimes you have to make adjustments like this time. This was a very interesting downturn, and I've been through seven of them now, since the early 80s. It's been quite remarkable. I'm very impressed with our team and how they've responded. I'm really, really happy with where the company is right now as opposed to what it might have been.

Yes, totally understand Tracy. And is it fair to say that without getting too specific that you probably can show production growth next year, compared to 4Q20 from your organic asset base?

Well, the goal was always to increase it, right. So I think that's a fair statement.

All right, Tracy. Thank you.

All right. Thanks.

[Operator Instructions]

With that, I really appreciate everybody listening today. We look forward to talking to you in the near future. And hopefully we'll have more good news. Thanks so much. Bye-bye.

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