W&T Offshore will defer drilling of its Holy Grail Gulf of Mexico asset until 2025 and expects the move to reduce the operator’s capital expenditures budget for 2024 to $35-45 million as the company works to integrate recent acquisitions.
In January, the company noted plans to defer drilling the proven, undeveloped Holy Grail well at Garden Banks 783 in Magnolia field following completion of six fields in shallow waters of the Gulf of Mexico for $72 million, but a timeframe had not been disclosed (OGJ Online, Jan. 22, 2024).
In its fourth-quarter 2023 earnings release Mar. 5, chairman, president, and chief executive officer Tracy Krohn said the company is focused on integrating the new Gulf of Mexico assets and building cash in 2024, “which will allow us to act quickly should we see additional accretive acquisition opportunities arise.”
Over the past 7 months, he said, the company has closed on two producing property acquisitions that added over 20 MMboe of proved reserves at a purchase price of about $4.75/boe (OGJ Online, Sept. 22, 2023).
W&T Offshore is currently assessing the capabilities of the newly acquired fields, “inspecting their needs and current condition and plan to optimize production with capital-efficient, low-cost workovers, recompletions and facility upgrades during 2024.” In the near-term, he said, the work will result in shutting in some of the fields.
By year's end, Krohn said, the company should be able to show “meaningful growth in production.” The company expects to average production of 33,900-39,900 boe/d for full year 2024, including 32,400-36,200 boe/d expected in this year’s first quarter.
“Looking at 2024 and beyond, we are integrating our recent acquisitions and believe that we can materially increase production and reduce costs at the 14 additional fields that we now operate. We are deferring some of our drilling plans while we complete the integration of those assets and are exploring a drilling joint venture, similar to the Monza Energy LLC joint venture, which closed in 2018. The new drilling joint venture may include certain of the company’s 100% owned and operated deepwater wells, including the Holy Grail well,” Krohn said.
W&T’s capital expenditure budget for 2024 includes expenditures related to integrations as well as ongoing costs related to the new Gulf of Mexico acquisitions for infrastructure, leasehold, seismic, and recompletions. The budget excludes potential acquisition opportunities.
Plugging and abandonment expenditures are expected to be $30-40 million. The operator spent about $34 million on plugging and abandonment in 2023.
For the full year 2023, the company delivered production of 34,900 boe/d (51% liquids), or 12.7 MMboe, at the midpoint of its latest guidance. For fourth-quarter 2023, production was 34,100 boe/d (49% liquids), at the low end of guidance, and down from the 35,900 boe/d produced in third-quarter 2023.
