Mar 4, 2021
Operator
Ladies and gentlemen, thank you for standing by. Welcome to the W&T Offshore Fourth Quarter and Full Year 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 opened 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.
Please go ahead.
Al Petrie
Thank you Kate 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 fourth quarter and full year 2020 financial and operational results. Before we begin I'd 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 fourth quarter 2020 earnings release that we released yesterday for disclosures on forward-looking statements and reconciliations of non-GAAP measures. At this time I would like to turn the call over to Tracy Krohn, our Chairman and CEO.
Tracy Krohn
Thanks Al, good day to everyone and thanks for joining us for our 2020 year-end conference call. So with me today are Janet Yang, our Executive VP and Chief Financial Officer.
William Williford, our Executive VP and General Manager of Gulf of Mexico. Stu Obkirchner, our Director of Geosciences.
Jim Hersch actually new title for him Vice President New Ventures they're all available to answer questions today later during the call. So 2020 was an extraordinary difficult year for energy companies to say the least.
We saw oil prices and production impacted by the global COVID-19 pandemic. Supply and demand imbalances and one of the most active tropical storm seasons that the Gulf of Mexico has ever seen.
Nonetheless in the interim every quarter of 2020 we produced positive free cash flow including 14.2 million in the fourth quarter. Our operations team did an excellent job returning these properties to production in the fourth quarter ahead of schedule which helped us succeed our guidance.
In addition we were able to keep our operating and overhead costs low despite the additional work required to restore production. 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 past year was no different. We also continued to take steps throughout the last year and into 2021 to protect our employees and contractors during the pandemic.
Turning to our operational and financial results. Despite the multiple challenges we faced last year we generated significant adjusted EBITDA and continued to generate free cash flow by adjusting quickly to the changing environment early in 2020 and reducing our planned capital expenditures.
We generated $76 million in free cash flow for the full year 2020 which was actually higher than the 74 million we generated in 2019. We reported $159 million in adjusted EBITDA in 2020 and our cash capital expenditures were held to only 17.6 million for the full year at the low end of our reduced 2020 budget of 15 million to 25 million.
This is very important because on cash basis we continue to create significant value by generating substantially higher adjust EBITDA compared to our CapEx. So the lower decline profile of our conventional asset base allows for reductions in CapEx to align with changes in the pricing environment without significantly impacting near-term production levels.
We also capitalize on opportunities in 2020 by utilizing a portion of our 2020 free cash flow to retire $72.5 million of our senior notes for total cost of $23.9 million thereby saving over $7.1 million in annualized interest and preserving long-term capital. From January 1, 2020 through yesterday we have reduced net debt by $135.3 million this year and have a stronger balance excuse me 2020 and this year and have a stronger balance sheet now in 2019.
Our revolver balance is now $48 million and the balance on our senior notes has been reduced to $552.5 million. I can't emphasize enough that one of the keys of our ongoing success has been our ability to generate positive free cash flow and you use that free cash flow wisely to fund creative acquisitions and pay down debt.
And we continue to look for ways to reduce costs to improve to increase our cash flow. We recently completed the consolidation of our two natural gas treatment facilities that serve the Mobile Bay area into a single facility with more than enough capacity for our current operations as well as production from future natural gas drilling projects in the area.
Consolidation of these facilities is expected to reduce a result rather in approximately $5 million per year in savings. Beginning this year has the adequate the added benefit of reducing our carbon footprint by lowering our Scope 1 emissions.
Now that's primarily Co2, methane and nitrous oxide. So turning to the largest factor impacting third and fourth quarter production there was an unusually large number of named storms in the Gulf of Mexico in 2020 which caused significant production shut-ins by W&T and other operators.
We're very pleased that they resulted in minimal physical damage to our facilities and we only incurred about $4.7 million in additional fourth quarter LOE restore production. I'm proud of our operations team who met those challenges from the storms which included multiple evacuations from our platforms and they did so with no injuries or adverse impact our people while remaining COVID or rather while maintaining COVID-19 protocols.
So production for the fourth quarter 2020 was 38,261 barrels oil equivalent per day or 3.5 million barrels of oil equivalent that's an increase of 11% compared to 34,459 barrels oil equivalent per day in the third quarter. So production for the fourth quarter was above the high end of our gains due to faster than expected recovery from hurricane downtime and that's primarily due to the tireless efforts of our operational personnel that did a great job.
Total liquids production remains steady at 47% of production in the fourth quarter of 2020. Now for the full year 2020 production was 42,046 barrels oil equipment per day or 15.4 million barrels of oil equipment.
Production declined throughout the year due to several factors including the large number of named storms in the Gulf in the second half of the year, capital expenditure reductions due to the decline in oil prices and both operated and non-operated production that was shut in due to low prices as well as natural decline. Now for the fourth quarter of 2020 our average realized sales price per BOE increased about 16% compared to the third quarter with increases in pricing for oil, NGLs and natural gas.
Our average realized crude oil sales price was $42.84 per barrel compared with average WTI prices during the quarter of $42.52 per barrel slightly higher. So our NGL sales price was up almost 50% from the third quarter 2020 to $16.36 per barrel and our natural gas price was up 36% to $2.63 per MCF.
So excluding the effects of hedges revenues for the fourth quarter increased quarter-over-quarter by 31% to $94.7 driven by higher realized pricing increased production. For the full year 2020 realized pricing per BOE was lower by about 39% from 2019.
However, we've seen a strong recovery pricing since the low in the second quarter of 2020 and pricing continues to trend higher actually up about a $100 since the low of 2020. Despite this improved pricing environment our focus will remain steadfast on capital discipline, operational excellence and most importantly free cash flow generation.
Alternative costs with the sharp downturn in prices in the first half of 2020 we've quickly implemented several successful initiatives to reduce our LOE costs. We swapped out higher cost contract personnel with full-time employees, reduced transportation cost by lowering the number of boats and helicopters needed through operational efficiencies, cutting work over facilities costs through vendor and supplier cost reductions and increasing our focus on projects that maintain and optimize production.
We've not reduced our commitment to safety, operational compliance or environmental protection with any of these actions. So as a result of these cost savings initiatives and shut into certain fields as a result of downtime events our full year 2020 LOE was $162.9 million compared to 184.3 million in 2019.
For the fourth quarter LOE was at the low end of guidance at $43.3 million despite an additional 4.7 million that was spent on hurricane repairs. So as I mentioned earlier we recently consolidated our facilities on shore Mobile Bay that's expected to result in annual savings of $5 million beginning in 2021 and will help to reduce our carbon footprint by lowering our Scope 1 emissions.
Now for the full year 2020 G&A was $41.7 million that's down 24% compared with full-year 2019 G&A of about $55.1 million. The decrease year-over-year is primarily due to lower employee benefits and salary cost resulting from payroll protection program funds received in April 2020 and lower incentive comp ports.
The G&A per barrel oil equivalent was $2.71 in 2020 down 27% from $3.72 in 2019. G&A was $7.7 million for the fourth quarter of 2020 well below our guidance range of $11.7 million to $12.9 million.
Fourth quarter of 2020 benefited from a $2.7 million credit related to a settlement with the Bureau of Safety and Environmental Enforcement referred to as the BSEE that resolved some pending civil penalties issued by that agency. In the fourth quarter we moved our headquarters just up the road in Houston where we will have about the same amount of space but we'll reduce our cost by more than half and save about $1.72 million per year annually beginning in 2021.
On a full year basis for 2020 we reported net income of $37.8 million or $0.26 per share adjusted net loss of $22.9 million or $0.16 per share. For the fourth quarter of 2020 W&T reported a net loss of $8.9 million or $0.06 per share excluding primarily in $11.5 million unrealized commodity derivative loss, the $6.9 million non-cash tax benefit and a $2.7 million credit related to the BSEE settlement our adjusted net loss was $6.7 million or $0.05 per share.
So at December 31, 2020 our total liquidity stood at $174.3 million comprised of about $43.7 million in cash, 130.6 million in availability under our revolving credit facility. Our long-term debt remaining on our senior notes declined in 2020 to $552.5 million in December 31 from $625 million at year end 2019.
Total long-term debt including 80 million revolving credit facility borrowings was 625.3 million net of unadvertised debt issuance costs. So in January 2021 W&T bank group completed its regularly scheduled semi-annual following base redetermination and the borrowing base was set at $190 million.
As of March 3, 2021 the borrowings against the facility have been reduced by $32 million in the ordinary course of business this year 2021 to $48 million. The next regularly scheduled redetermination is in the spring of 2021.
We remain in compliance with all that covenants of our credit agreement and the senior second lien notes indenture. We believe we continue to have a strong balance sheet and have more than sufficient liquidity to meet our needs going forward and we continue to look at good opportunities that may arise.
Turning out operations during the fourth quarter of 2020 we've performed two work-overs that in total added approximately 800 net barrels oil equivalent per day to production. We believe that work-overs and re-completions are good near-term projects that help to abate natural decline and we plan to continue to perform as long as they meet economic thresholds in the current pricing environment.
The successful Cota well that we drilled last year is currently in the development phase of the project and is expected to be on production in the latter part of 2021. So looking at our 2020 year end reserve report W&T SEC approved reserves were down modestly from 2019 primarily due to lower commodity prices.
About 34% of year end 2020 reserves were liquids and the balance was natural gas. At year end approximately 83% of 2020 approved reserves were classified as approved developed producing, 8% as approved developed non-producing and 9% as approved and developed.
A&T's reserved life ratio at year end 2020 based on year end 2020 SEC approved reserves in 2020 production was 9.4 years. Well the PV-10 value of W&T's SEC approved reserves at year end in 2019 was $741 million down about 43% from year end 2019.
This was driven by reduced pricing with 2020 SEC PV-10 using an average realized crude oil price of $37.78 per barrel and an average realized natural gas price of $2.05 per MCF. They're utilizing realized NYMEX strip pricing as of December 31, 2020 of $44.43 per barrel oil and $2.66 per MCF natural gas.
The PV-10 would have been $1.1 billion. Now for the three year period 2018 through 2020 W&T's all in reserve replacement cost was $4.62 per barrel oil equivalent.
We think that's very competitive cost for any U.S. EMP and reinforces the value of both the acquisitions and drilling prospects that W&T has developed.
So we continue to look at acquisitions that meet our criteria especially those that provide a solid foundation for our ability to generate free cash flow. We've integrated two strong acquisitions over the past 18 months and we look for those types of opportunities going forward.
We have built W&T through the right combination of attractive property acquisitions, methodical integration and exploitation of those acquisitions and the successful development and exploratory drilling on our legacy fields. Now looking forward to 2021 under this strengthening commodity pricing condition that we're experiencing now we are forecasting strong free cash flow generation and we will continue to evaluate additional accretive acquisitions and opportunistically pay down debt.
This means that we will take a measured approach to drilling while continuing to fund our capital expenditures excluding acquisitions with available cash and cash generated from operations. Our preliminary capital expenditure budget for 2021 is expected to be in the range of $30 million to $60 million and we will be focused on lower risk high return projects.
This preliminary budget excludes opportunistic acquisitions of oil and gas properties from third parties. Additionally, we're forecasting 2021 spending of between $17 million to $21 million on asset retirement obligations.
We have significant flexibility to adjust our capital spending up or down at any time since we know we have no long-term rig contract commitments or drilling obligations. Our lower production decline profile allows for reductions in CapEx without significantly impacting our near-term production levels.
The 2021 capital program will also be weighted toward the second half of the year. That's the production that uplift from same and will be more impactful in 2022.
Now our full year 2021 production guidance range is 38,500 barrels to 42,000 barrels oil equivalent per day which is only modestly lower than 2020 with the midpoint above our fourth quarter production rate. We also expect our LOE to be in line with or decrease slightly on an absolute basis compared to 2020.
We’ll continue to control the cost that we can to minimize our margins and generate significant cash flow from our operations. Our release issued yesterday has more details on our 2021 first quarter and four-year guidance.
But before I close out this call I'd like to discuss our upcoming inaugural EDG report. We founded W&T nearly 40 years ago and from day one we've been committed to developing and producing oil and gas resources in a safe and environmentally responsible manner while meeting or exceeding all regulatory requirements.
These core values have guided our success and provided the foundation for W&T to grow into a trusted operator of the Gulf of Mexico, a generous partner to communities where we operate and good stewards to the environment. We believe that every employee has a responsibility to ensure that we operate with the highest regards toward ESG and we've empowered our management to allocate resources and tools necessary to create a working environment focused on accomplishing our ESG objectives.
In 2020 we created an ESG task force that is comprised of management representatives from operations, HSME legal, human resources, investor relations and finance that is charged with the responsibility to monitor our adherence to our ESG standards and formally communicate their findings on an ongoing basis to me and our board. Our inaugural report will be released later this month and posted to our website along with our annual report and include key metrics for the past three years.
We remain committed to sustainability and we hope to continue powering America safely and in a more sustainable manner for another 40 years. So in closing a rising price environment presents many opportunities for W&T.
We have a premier portfolio of both shallow water and deepwater properties in the Gulf of Mexico with low decline rates and significant upside. There are many opportunities for acquisitions in our focus area and we constantly look at any that can meet our streaming criteria.
We will continue to proactively manage our capacity, LOE with the current pricing environment to ensure that we're generating free cash flow. Our disciplined approach to growth has allowed us to navigate many cycles in the past.
We remain opportunistic and we look for ways that we can add value to W&T as we did in 2020 by controlling least operating expense and overhead costs and closely managing our capital spending. We do remain focused on generating free cash flow by operating efficiently and executing our long-term strategy to maximize shareholder value.
We acknowledge the uncertainty that we and many other EMP companies face regarding limitations on future drilling on federal lands and in federal work. We're working closely with our industry group to provide feedback to our elected officials on the impact those actions could have on our energy independence and on the people who work and live in and along the Gulf of Mexico that have a strong commitment to the energy industry.
As we await any further clarification its business as usual for us. Our management team's interests are likely aligned with those of our shareholders given our 35% stake in W&T equity.
That's one of the highest of any public EMP company. This alignment of interest ensures that we are truly and always incentivized to maximize shareholder value and mitigate risk.
With that operator we can open the lines for questions.
Operator
We will now begin the question and answer session. [Operator Instructions] The first question comes from Michael Scialla of Stifel.
Please go ahead.
Michael Scialla
Morning Tracy.
Tracy Krohn
Hi, good morning Michael.
Michael Scialla
Just wanted to ask on the 21 budget. You got a pretty wide range there at least on a percentage basis.
Can you talk a little bit about the gating factors on what would cause you to spend toward the low end versus the high end? Is it oil price or timing of getting permits or something else?
Tracy Krohn
It's primarily pricing. Permits could take a bit longer but that's not really going to be the driver.
It's primarily going to be pricing.
Michael Scialla
And in terms of a number of wells any color you could add there? Any new wells other than the Cota well you mentioned you'd be bringing on the second half but any other wells you could be potentially bringing on this year?
Tracy Krohn
Yes possibly up to four more.
Michael Scialla
Okay. And if I could just sneak one more in.
Anything inside the JV this year planned or and where do you kind of stand with the number of wells that are left within the JV?
Tracy Krohn
Yes the Cota well is one of the wells in the JV and we may drill one or two more with that JV as well.
Michael Scialla
Great. Thank you.
Tracy Krohn
Yes. Sure.
Operator
The next question is from Richard Tullis of Capital One.
Richard Tullis
Hey thanks. Good morning everyone.
Tracy going with the M&A theme perhaps provide an update on the current landscape there and any impact on property offerings that you're seeing following the recent oil price rebound? Is it impact and what the deal flow or at least what's offered or what do you see in there?
Tracy Krohn
Well as usual Richard you asked very good questions and valid questions. With the new administration comes uncertainty.
Business hates uncertainty. I do see that that there's going to be some struggle with regard to leasing going forward on new leases.
Apparently the existing leases are just going to take a little bit longer to get things done and I don't really worry about that very much. I think that as we go through the year and succeeding years we'll resolve all those issues and the process will get streamlined but with regard to M&A yes I mean clearly we're going to see more M&A in the Gulf of Mexico and I think that's not just a function of pricing I think it's more because everybody was kind of holding their breath in 2020 to see what was going to happen and now there is a little bit more confidence and clarity with pricing.
So companies are able to plan a little bit better. 2020 was a particularly difficult year to plan in the Gulf of Mexico I mean COVID-19, drastic reduction in price, the Saudis and the Russians raising hell with one another and eight storms I mean that was a lot to take in one year.
So it's very difficult to plan around that and then a rather shocking day in April of $-37 oil kind of kind of shakes your confidence and makes it hard to plan, but we got through all that as did just about everyone else but I will tell you that it made it difficult to plan going forward. So yes I do see more M&A activity in 2021 and beyond just for those reasons.
Richard Tullis
All right Tracy. That's helpful.
Thank you. And us as a follow-up I mean as you mentioned the big storm impact in the second half of last year, production rebounded nicely in the fourth quarter.
Are you able to say what you exited 2020 oil production rate or maybe what the oil production rate is currently?
Tracy Krohn
Yes. We exited around 38,000 to 40,000 barrels per day.
I don't remember the exact number on December 31 but that's about where it was.
Richard Tullis
Okay. All right.
Thanks very much.
Tracy Krohn
Sure.
Operator
[Operator Instructions] The next question is from Ray Deacon of Petro Lotus Analytics. Please go ahead.
Ray Deacon
Yes. Hey.
Good morning Tracy. Can you can you give a little bit of color around the guidance relative to your production?
There was about a 20% beat versus your guidance was that just getting wells turned on sooner or was there anything caught in the quarter.
Tracy Krohn
I am sorry, are you just referring to production is that right Ray?
Ray Deacon
Exactly right. On the production side which was there anything tied in?
Tracy Krohn
Yes. We did have to do a little bit of planning around the storms and stuff and things that we needed to clear up as is follow-up.
We did have a little bit of damage and a little bit of loss production as a result of that but we were able to clean that up fairly quickly and I do think that most of our production is on well. I don't think I know that most of our production is back online.
We have one pipeline issue that we're still dealing with its primarily onshore that's ready to come on now. We're probably working on as we speak its coming on literally.
Ray Deacon
Okay. Great.
And your G&guidance for next year looks kind of roughly double the 4Q level. Is there anything next year that is it sounded as though your cost would be down year-over-year on G&A but I guess the 4Q was unusually low?
Tracy Krohn
Yes it was but it's somewhat caused by PPP and bonuses. Okay.
Ray Deacon
Okay. Great.
Got it. And just the last thing I saw there was a small acquisition.
Was that of producing properties or?
Tracy Krohn
Yes. It was a bolt-on on producing property you're right.
Ray Deacon
Okay. Got it.
Well thank you.
Tracy Krohn
Thank you sir.
Operator
There are no additional questions at this time. This concludes our question-and-answer session.
I would like to turn the conference back over, I'm sorry we do have a follow-up. Would you like me to take that?
Tracy Krohn
Yes please.
Operator
Okay. We have a follow-up from Michael Scialla of Stifel.
Please go ahead.
Michael Scialla
Yes. Thanks.
I just had a couple more. I was curious on Magnolia.
Do you see any drilling opportunities there or is that going to be more of work-overs and kind of looking for operational improvements?
Tracy Krohn
Yes. And yes.
Michael Scialla
Okay.
Tracy Krohn
Yes. We do see more activity out there and, Michael and we will give some more color on that later on as we get more prepared.
Michael Scialla
Got you. Okay.
And this one it probably sounded like a total softball question, I apologize up front but I know a lot of companies we follow didn't replace production with pre-reserve editions last year and I don't think you even completed any wells. You managed to more than offset production with upward revisions.
Is that just conservative bookings on your part or was there anything more specific to the positive revisions you had last year?
Tracy Krohn
No it's just magic. No it really has a lot to do with how we manage our properties and how we spend our money and how we lower costs.
So a lot of that addition came out of the Mobile Bay and we were like we did with Fairway when we bought that in Mobile Bay we increased reserves without ever drilling well. We were able to manage costs and we also of course were working on consolidating the two gas plants and we've accomplished that now and that'll save some more money going forward and 21 and beyond.
Michael Scialla
Very good. Thanks Tracy.
Tracy Krohn
Thank you sir.
Operator
This concludes our question-and-answer session. I would like to turn the conference back over to Tracy Krohn for closing remarks.
Tracy Krohn
Thank you operator. We appreciate you listening to us today.
We were very pleased with the performance that we did in 2020 as regarding all the difficulties that us and everyone else faced. We continue to seek opportunities in the Gulf of Mexico this year and going forward and we see it as a very robust basin and we'll continue to do that.
So with that I'll turn it over. Thank you very much.
Operator
The conference has now concluded. Thank you for attending today's presentation.
You may now disconnect.