Ladies and gentlemen, thank you for standing by. Welcome to the W&T Offshore Third Quarter 2022 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 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, Gary. 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 third quarter 2022 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. Additional information concerning these factors are contained in our earnings release that we issued yesterday as well as our public filings on Form 10-K, 10-Q and 8-K with the SEC. Today's call may also contain certain non-GAAP financial measures. Please refer to the earnings release that we issued yesterday for reconciliations of non-GAAP financial measures to our GAAP results. With that, I would like to turn the call over to Tracy Krohn, our Chairman and CEO.

Thanks, Al, and good day to everyone, and thank you for joining us for our third quarter 2022 conference call. So with me today are Janet Yang, our Executive VP and Chief Financial Officer; and William Williford, another Executive VP and Chief Operating Officer. They're both going to be available to answer questions later during the call. So we maintained our strong financial results in the third quarter and 2022 is on track to be one of the best years in our long and profitable history. Our strategy has always been very simple, generate free cash flow; maintain high-quality conventional production and opportunistically capitalize on accretive opportunities to build shareholder value. Our ability to execute and maintain strong operational excellence has been a significant driver in our outstanding financial results in 2022 and have continued in the third quarter. So these are the key accomplishments we delivered in the quarter. We maintained solid production at 41,500 barrels of oil equivalent per day at the midpoint of guidance. We reported net income of $68.2 million or $0.47 per share and generated adjusted EBITDA of $113.9 million in the third quarter. For the 19th consecutive quarter that includes throughout the COVID and supply chain disruptions and everything, we had positive free cash flow. And in the third quarter, we produced $71.1 million of free cash flow. Our both adjusted EBITDA and free cash flow have grown considerably in 2022. Year-to-date, we've totaled $497.6 million in adjusted EBITDA and $351.5 million in free cash flow. We increased cash and cash equivalents to $447.1 million, up 74% from a year ago. So hand-in-hand with our growth in cash has been a reduction in net debt. Our net debt is down almost 50% year-over-year to $254.3 million as of September 30, 2022. And our net…

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

Good morning and congratulations on a very fine quarter.

Thanks, John.

On the CapEx reduction, the minor CapEx reduction is – is that related to the lack of availability of oilfield service equipment, you had mentioned the riser for the Holy Grail?

No, it’s really more associated with permitting. We’ve made a pretty good effort to acquire long-lead items. The riser itself is where we wanted to focus and had some concerns and Betsy in examining it took a very methodical approach to it. And I can’t disagree with the way they’ve worked to make this as safe as possible. And of course, we have the same goal. I think that we have a very in-depth understanding of what we need to do and we’re talking about dry hole trees on a floating facility and single barrier – what are called single-barrier risers that were already in place before new regulations. So we want to make sure they’re right, and Betsy wants to make sure they’re right as well. But we’re doing relatively well on the longer-lead items. There have been some delays, but not really more delays in that, that would have affected – being able to put a rig on location. We’re in that phase now working with Betsy to have the permits completely buttoned up and start putting a rig on location.

Thanks for that detail. Back to Holy Grail. What’s your working interest there?

100%.

Fantastic. And then to the Northeast, you’ve got another one, ST 320 SS #1, your slides show that’s scheduled for fourth quarter 2023. How is that coming?

We’re going to compare that with our available set of opportunities as we go to the year and see where that ends up at the end of the program with regard to the other commitment we made for drilling.

Okay. I’ve followed the company or covered the company for a number of years. I’ve never seen you in a stronger financial position. So congratulations again.

Thanks, John. Thank you very much.

I’ll pass it back.

The next question is Derrick Whitfield with Stifel. Please go ahead.

Good morning, all and thanks for taking my questions.

Thank you, sir.

With respect to Q4 guidance, could you offer some color on the unplanned downtime at the Neptune Field and temporary maintenance downtime at Mobile Bay field and if that is – could be reasonable before Q1?

Yes, sure. We’re down about 1,500 barrels of oil per day at the midpoint. And again, this is planned downtime – excuse me, unplanned downtime at the outside operated Neptune Field. There’s a blockage in one of the risers there. They’re trying to generate a work plan to overcome that, and they’re having some success at doing that. It’s just taking longer than anybody would want to – would want it to take. Temporary maintenance downtime at Mobile Bay was pipeline related. That’s been resolved and the leak repaired and clamped off. So we didn’t see that as a continuing type of operation. So that’s really primarily the causes there.

Terrific. And with regard to the slight delay with the Holy Grail well, it sounds as though that’s primarily attributed to the regulatory side. With that, do you guys – do you guys have any – sorry about that. Do you guys have any concerns in advancing the permit? Or is it simply just taking longer to process?

No. We’re not thinking that we have concerns with advancing it. The process is taking longer. We’ve actually got a permit approval subject to certain conditions, which we need to satisfy before we start drilling a well. So I’m not concerned about the efficacy of the permitting. At this point, I’m really – we’re ready to get started. There’s not too much that we need to do to prep the platform and to be putting the rig on site.

That’s helpful. Thanks for your time.

Sure. Thank you.

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

Thank you. Tracy, from a conceptual standpoint, can you talk about how you think about liquidity in 2023 with respect to refinancing the second lien notes. You added $70 million in cash to the balance sheet in the third quarter. W&T is positioned to generate a lot of free cash flow in 2023. But as you look at those notes and the balance sheet and opportunities in the capital program and also perhaps in the acquisition market, just how do you think about positioning the company to with enough dry powder to take advantage of opportunities next year?

That's a great question, Jeff. Thank you. We're fortunate to be or not necessarily fortunate. We've planned pretty hard to make sure that we were able to repay these notes. We've been fortunate in that we made some good choices with regard to how to hedge this and give us protection. We picked up another $150 million or so as a result of that. And what was arguably a trade for protective purposes, but it just turned out to be very successful on the long gas calls. With regard to the refi, we're in the enviable position of knowing that we can refi. It's not a matter of whether we can refi. We certainly can. Markets have been in flux here lately with increases in interest rates and bondholders being somewhat hesitant and the stock market being affected by the Fed speak, if you will. So we're being patient here and thinking that we know we can refi or worse – not a worst case, but one potential is that we just hang tight and we repay the debt over time. And then the next one is we reload somewhat to handle any acquisitions that might come up. And so we're fortunately blessed with the optionality. And that's the best I can say about that. That is not a simple feat. And my kudos to our team for making that possible. It's good to be in a position where you can do something and you'll have to do it.

Yes. I think the balance sheet appears to give you all better terms to dictate what happens as opposed to being subject to the market forces. At Mahogany – at Holy Grail, can you share an estimate of what that well will cost?

Yes. The current estimates are around 80 drilling complete.

And if it spuds in the second quarter, I think you said you should – you would expect it to be on in the second half of 2023. Is that correct?

Yes, sir. Probably the fourth quarter – yes, probably fourth quarter.

Okay, thank you.

Yes, sir. Thank you.

The next question is a follow-up from Derrick Whitfield of Stifel. Please go ahead.

Yes, guys. Just one quick follow-up question and really more of a build on Jeff's question, I wanted to ask if you could speak to the A&D environment in the GOM at present? And similar to onshore, are you guys seeing greater deal flow as a result of relatively strong commodity prices and a less certain economic backdrop?

Yes. I can say that. I think what we have seen is greater volatility in pricing in markets. I think that affects everybody's thought process about how they're going to proceed with these things. I've always told everyone that we make acquisitions in high pricing environments and low pricing environments. Very often, we see higher pricing environments lead to better execution on the acquisitions. Fortunately, since nearly 25, 30 years now, we've had the availability of being able to do hedging to help protect some of those acquisitions. Normally, when we make a larger acquisition, we have some debt, but we also attach a little piece of equity to it. So with that, we're very cognizant of acquisitions and making sure that they are accretive. So anything that we would do would be certainly accretive to our balance sheet in that we would also seek to protect our leverage ratios.

Terrific, thanks for the color.

Yes, sir. Thank you.

Showing no further questions, this concludes our question-and-answer session. I would like to turn the conference back over to Tracy Krohn for any closing remarks.

I think it's been a very good quarter for us. I'm looking forward to the rest of the year and the years after that. I like the way the company looks right now with our balance sheet and it feels good to be in a position where you can pay off all the debt as well or carry it further into the future with a modest amount of debt and leverage by making accretive acquisitions. We're very pleased to be where we are. Again, this is reflective of our operational and financial teams to make this happen. So I'm just very delighted to be still here in making this company stronger and nobody does it by themselves. So my sincere appreciation to our teams for getting that done. So with that, we'll talk to you again soon.

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