W&T OFFSHORE INC — Call Transcript 2026

Ladies and gentlemen, thank you for standing by. Welcome to the W&T Offshore First Quarter 2026 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. During the question and answer session, we ask that you limit yourselves to one question and a follow-up. You can always rejoin the queue. 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, Michael, 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 First Quarter 2026 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 earnings release that we issued yesterday for disclosures on forward-looking statements and reconciliations of non-GAAP measures. With that, I'd like to turn the call over to Tracy Krohn, our Chairman and CEO. Thank you, Al. Good morning, everyone, welcome to our First Quarter Conference Call for 2026. With me today are William Williford, our Executive Vice President and Chief Operating Officer, Sameer Parasnis, our Executive Vice President and Chief Financial Officer, and Trey Hartman, our Vice President and Chief Accounting Officer, who are all available to answer questions later during the call. Good news in that we started 2026 on a positive note with strong operational and financial results that either met or exceeded our guidance across multiple metrics. Our production was 36,200 barrels oil equivalent per day. That's toward the higher end of guidance and flat with the fourth quarter of 2025, despite some adverse weather impacts in early 2026. The solid quarterly results start with our ability to maintain strong production, we're aided by our realized prices of $45.08 per barrel oil equivalent, an increase of 26% from the fourth quarter. In March, our realized oil price was $88.61 per barrel. Additionally, our lease operating expense, LOE, was down 11% to $66 million below the midpoint of guidance. Reductions in our LOE costs were mainly driven by lower base LOE spend. That's reflecting fourth quarter 2025 cost-saving initiatives that began to materialize in the first quarter of 2026. All these positives helped us generate $55 million in adjusted EBITDA, our highest quarterly number since the third quarter of 2023. We're also very pleased to have generated $21 million in free cash flow. That's a significant improvement from the fourth quarter of last year. Our ability to execute our strategy has delivered very positive results to start off 2026, including a healthy balance sheet and enhanced liquidity. At the end of the first quarter of 2026, our total debt and net debt were $351 million and $220 million, respectively, and our liquidity was $175 million. We built W&T using a proven and successful strategy that is committed to profitability, operational execution, returning value to our stakeholders, and ensuring the safety of our employees and contractors. We've consistently delivered operationally and financially with low decline production, meaningful EBITDA, and seamlessly integrating accretive producing property acquisitions during our nearly 45-year history. Capital expenditures in the first quarter of 2026 were $7 million, and asset retirement settlement costs totaled $17 million. We continue to expect our full-year capital expenditures to be between $20 million and $25 million, which excludes potential acquisition opportunities. Our budget for ARO remains the same at $34 million-$42 million. Yesterday, we provided our detailed guidance for second quarter 2026 and reiterated our unchanged full-year production and cost guidance. In the second quarter of 2026, we have a planned third-party Mobile Bay natural gas processing facility turnaround that will impact our NGL volumes and temporarily increase our LOE. However, our full-year LOE guidance has not changed. We are forecasting the midpoint of Q2 2026 production to be around 34,300 barrels of oil equivalent per day. This is a decrease of 5% compared to the first quarter of 2026, driven primarily by the turnaround, but the key is that we haven't changed full-year guidance. Second quarter LOE is expected to be $71 million-$79 million, up from first quarter actual of $66 million. This is due to the planned Mobile Bay turnaround as well as higher planned workover and facility maintenance work that is expected to benefit production in the second half of 2026. It's important to note that the LOE expenses tend to increase and decrease seasonally with much of the work being accomplished during warmer weather months that also produce less wind. Second quarter transportation and production taxes are expected to be between $7 million and $8 million, compared with $9 million in the first quarter, which reflects some of the benefit of the new pipeline we installed for the West Delta 73 field. Second quarter cash G&A, those costs are expected to remain comparable to our Q1 results. I want to point out that we tend to spend significantly less than our peers in capital expenditures and choose to instead spend more dollars on low risk, high rate of return workovers and facility optimization. We believe this is a more economic way to invest our operational cash flow back into our business, and it's a lower risk option. We can then build cash flow to help us make accretive acquisitions of producing properties. Over the years, we have consistently created significant value by methodically integrating producing property acquisitions. We look for strong producing assets with meaningful reserves and an affordable price that we can integrate into our vast infrastructure. We primarily spend LOE dollars to work over, recomplete, and upgrade these assets. As a result, we often see additional production uplift from these acquisitions above the rates they were producing when purchased. This strategy makes W&T unique, but it's our ability to execute over and over throughout the years that allows us to add value. With our low decline production, increasing realized pricing, and continued cost control, we believe that we are well-positioned operationally and financially to deliver robust results in 2026 while we examine accretive acquisition opportunities. Before closing, I would like to discuss some regulatory updates in more detail. As we mentioned in yesterday's earnings release, the Department of the Interior has proposed some positive regulatory changes that would roll back obligations from a 2024 rule that would require companies to set aside about $6.9 billion in supplemental financial assurance. This all occurred in the prior administration. About $6 billion would have applied to small businesses that make up most of the operators in the Gulf. The proposed changes will better align financial assurance requirements with actual decommissioning risk and reduce industry-wide bonding costs by at least $0.5 billion annually. These proposed revisions have been published in the Federal Register with a 60-day public comment period, which is expected to end May 15th. We welcome these changes proposed by the Trump administration that can further encourage U.S. offshore production growth and increase America's energy independence. Regarding the surety litigation, I'm able to report that the district court has rejected the surety's attempt to require W&T to immediately pay their demands, I would call them ridiculous demands, for collateral. The sureties are appealing that ruling, and W&T will continue to vigorously defend our position that the surety's demands for collateral were neither appropriate nor lawful. Moreover, W&T prevailed in virtually every respect as it relates to the surety's attempt to dismiss the claims W&T has asserted in lawsuit. Yesterday, the court granted W&T's request to file an amended lawsuit, which sets forth broad antitrust and other claims against the sureties. This case will go on. As can be reviewed in our court filings, the surety's conduct caused W&T to incur substantial damages. We intend to seek to remedy the conduct and obtain damages to the fullest extent of the law. In closing, I'd like to thank our team at W&T for all their efforts. We are ready and able to add significant value in 2026. W&T has been an active, responsible, and profitable operator in the Gulf of Mexico for over 40 years. We have a long track record of successfully integrating assets into our portfolio. We know that the Gulf of Mexico is a world-class basin, being the second-largest basin by production and the largest basin in the U.S.A. by area. We have a solid cash position and strong liquidity that enables us to continue to evaluate growth opportunities while continuing to generate strong operational cash flow and adjusted EBITDA. We will maintain our focus on operational excellence and maximizing the cash flow potential of our asset base in 2026 and beyond. Operator, we can now open the lines for questions. We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. Your first question today comes from Derrick Whitfield with Texas Capital. Please go ahead. Good morning, Tracy and team, and thanks for your time. Good morning, Derrick. Starting with your guidance, while I understand you are reiterating production guidance for the full year, how would you characterize your desire to further lean into workovers in this favorable environment? Well, that's always a key factor for us. We've always got a good inventory of things to do. As we've acquired assets over the years, we take the time to study them and restudy them. That allows us to continue doing these workovers. Do expect to see some more of that. You know, we'll ramp up a little bit during the summer because the weather is better. You know, late spring, summer, which is about now. In fact, we're moving some things around in the Gulf now to begin that process. Yeah, I mean, this has always been a key strong point for us, along with not only workovers but recompletions. Great, Tracy. Maybe just shifting over to the M&A environment. Wanted to get your thoughts on the competitive landscape at present. Is it safe to assume we're in a pencils down environment for larger packages, or are you seeing reasonable action in the market at present? You know, the company's got a very strong liquidity position right now. There's been a dearth of significant transactions for the last several years in the Gulf. We feel pretty good about where we are. We're in different data rooms, you know, almost continuously over the years. I think that there's real good possibility that things are gonna start moving around. We certainly have aspirations in that direction and intend to continue to pursue things that will fit our normal financial criteria. That criteria usually starts with cash flow and then also what is the reserve base and what are the things that we can do to increase cash flow near term, such as workovers and recompletions and facilities upgrades that will generate those numbers near term. Great update. Thanks for your time. Thank you, sir. Your next question comes from Bert Donnes with William Blair. Please go ahead. Hey, Tracy, this is actually Neil. Just have two quick ones for you. All right. How you doing? Nice to be back on the call. Good, Neil. My first question, Tracy, just I know part of the upside for you all is converting a lot of the 2P to primary reserves. Again, I'm just wondering, again, seems like with the plan you've laid out, I still feel like there's a lot of that going on. Could you just tell us, you know, what do you think the timing of that would be? Well, the really cool part about our 2P reserves is that a lot of that, a lot of those reserves come to us in the form of cash and then later on booked reserves. As time moves forward, we see that first as cash flow. That's cash flow and reserves that we don't have to spend any CapEx on. That's been a real focal point of the company over many years. It's why we have traditionally very low decline rates. That shows itself up as massive amounts of cash and reserves over time. It seems to have always been that way for the company since, well, since we started. I try to reiterate that to investors in just about every presentation that we do. There are additional reserves that are probables that we do have to spend some CapEx on it. We look forward to doing that in the near future. We haven't been doing a lot of drilling lately 'cause we haven't needed to. One of the hallmarks of the company is making sure that, you know, we try to continue the cash flow stream. If any time that I can acquire reserves as opposed to going and drilling for them at approximately the same price, that's what we're gonna do. We're gonna take the risk out of and do that. That's one of the reasons why we're still here after 40 something years. That's a great question, Neil. I appreciate it. No, I love that upside. Secondly, as you said, not that you're gonna have to go drill much, but, you know, kind of you have a very low CapEx guide. I'm just wondering, does that factor in, you know, around the workovers that Derrick talked about? Just service costs in all, Tracy, are they holding in right now, or what are you seeing for service costs? Part of that is exactly what you suggested, holding on and, you know, making judicious decisions about workovers and recompletions. Part of it's to make sure that we maintain really good liquidity. I think there will be opportunities going forward in the market for us to make additional acquisitions. Again, it's not that we don't have wells to drill, we do. We have a pretty good inventory of exploration opportunities and in fact, even proven reserve opportunities that are substantial. It's not because we don't have inventory, it's because management, including myself, believes that opportunities to do additional acquisitions are good. We like the way that we're positioned in this market, and we have good liquidity. Perfect. Thank you much, sir. Congrats. Thank you. Again, if you have a question, please press star then one. Your next question comes from Jeff Robertson with Water Tower Research. Please go ahead. Thank you. Tracy, just to follow up on your previous comments. W&T has a pretty low reinvestment rate when you think about cash flow from operations in 2026, and yet production is expected to stay relatively flat for the year from where you were in the first quarter based on your midpoint guidance. To your point about capital light business model, is a lot of that production performance just related to, as Neil talked about, moving 2P reserves into PDP without any capital? Is that something that goes on for 2026, 2027 and beyond just based on your reserve profile and performance of your assets? Yeah, the short answer to that is yes. We again, with probable reserves, because of the quirks around the booking of those, via the SEC, we have to wait a while before we can put them back in as proved reserves. Often, those are just additions to proved producing. We get a dual effect there of not only do we increase the reserves, but we increase our borrowing capacity as well. That's a double plus for us. This is normal. This is the actions of corporation. I've done this illustration in just about every investor meeting we've ever had. I have an illustration in the deck that shows you the effects of the probable reserves and how they get to be proved producing reserves over time. We generally book them again as cash flow and reserves over time. Then again, it's not that we don't have inventory to drill, we do, but it's nice to have that additional bit of reserves. You know, in Europe, they look at this as Companies are valued more on the 2P basis than they are just 1P. Our regulators have been a little bit slow to do that. That's always been a complaint. I don't understand the rationale behind it. It seems ridiculous to me because we've proven it over and over and over again that we definitely increase the reserves and the cash flow over time without additional CapEx. When you think about acquisitions, two-part question. One is, are you able to buy on a 1P basis? Secondly, you spoke about the regulatory environment and some of the things that are coming down the road. Will that have an impact on M&A activity in the Gulf of Mexico, do you think? Yeah. That's a pretty good two-part question, Jeff. To answer your question on 1P, it really, it's a bunch of different factors. It's not just necessarily 1P. We do look at the entire reserve stack, and again, we like to see acquisitions that have cash flow and a reserve base that we can forecast. Also, you know, we like to see some upside too, where we can do some work or drill some wells, that sort of thing. They're all a little bit different. Of course, in the Gulf, you have to take into consideration what are the asset retirement obligations. That's a very important part of what we do. We manage that very well. The company has done more plug and abandonment decommissioning on those AROs than anyone. We've spent over $1 billion doing that decommissioning work over the years. We think that we are the expert in that market. We understand it very, very well. That's one of the things that we always look at closely in determining value. As far as the other things that we're looking for, yeah, I mean, we're in a mode where we're looking around for things that are gonna fit our financial criteria. We have been in data rooms, you know, for quite a while. Thank you. Thank you, sir. Seeing no further questions, this concludes our question-and-answer session. I would like to turn the conference back over to Tracy Krohn, Chairman and CEO, for any closing remarks. Thank you, operator. We appreciate everybody listening. You know, I look forward to every day. I never know what's going to happen with regards to the markets and it seems that with the war in Iran, it's been a little bit more difficult to think about it in terms of going forward. On the other hand, we're very pleased that, you know, the company is doing well and in position to do even better. Thank you for listening, and we look forward to talking to you again soon. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker 4: Ladies and gentlemen, thank you for standing by. Welcome to the W&T Offshore First Quarter 2026 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. During the question and answer session, we ask that you limit yourselves to one question and a follow-up. You can always rejoin the queue. 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. Ladies and gentlemen, thank you for standing by. ladies and gentlemen thank you for standing by Welcome to the W&T Offshore First Quarter 2026 Conference Call. welcome to the w&t offshore first quarter 2026 conference call During today's call, all parties will be in a listen-only mode. 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. following the company's prepared comments the call will be opened for questions- and- answers During the question and answer session, we ask that you limit yourselves to one question and a follow-up. during the question and answer session we ask that you limit yourselves to one question and a follow-up You can always rejoin the queue. you can always rejoin the queue This conference is being recorded and a replay will be made available on the company's website following the call. 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. i would now like to turn the conference over to al petrie investor relations coordinator

Speaker 1: Thank you, Michael, 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 First Quarter 2026 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 earnings release that we issued yesterday for disclosures on forward-looking statements and reconciliations of non-GAAP measures. With that, I'd like to turn the call over to Tracy Krohn, our Chairman and CEO. Thank you, Michael, 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 First Quarter 2026 Financial and Operational Results. thank you michael 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 first quarter 2026 financial and operational results Before we begin, I'd like to remind you that our comments may include forward-looking statements. 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. 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. today's call may also contain certain non-gaap financial measures Please refer to the earnings release that we issued yesterday for disclosures on forward-looking statements and reconciliations of non-GAAP measures. please refer to the earnings release that we issued yesterday for disclosures on forward-looking statements and reconciliations of non-gaap measures With that, I'd like to turn the call over to Tracy Krohn, our Chairman and CEO. with that i'd like to turn the call over to tracy krohn our chairman and ceo

Speaker 5: Thank you, Al. Good morning, everyone, welcome to our First Quarter Conference Call for 2026. With me today are William Williford, our Executive Vice President and Chief Operating Officer, Sameer Parasnis, our Executive Vice President and Chief Financial Officer, and Trey Hartman, our Vice President and Chief Accounting Officer, who are all available to answer questions later during the call. Good news in that we started 2026 on a positive note with strong operational and financial results that either met or exceeded our guidance across multiple metrics. Our production was 36,200 barrels oil equivalent per day. That's toward the higher end of guidance and flat with the fourth quarter of 2025, despite some adverse weather impacts in early 2026. Thank you, Al. thank you al Good morning, everyone, welcome to our First Quarter Conference Call for 2026. good morning everyone welcome to our first quarter conference call for 2026 With me today are William Williford, our Executive Vice President and Chief Operating Officer, Sameer Parasnis, our Executive Vice President and Chief Financial Officer, and Trey Hartman, our Vice President and Chief Accounting Officer, who are all available to answer questions later during the call. with me today are william williford our executive vice president and chief operating officer sameer parasnis our executive vice president and chief financial officer and trey hartman our vice president and chief accounting officer who are all available to answer questions later during the call Good news in that we started 2026 on a positive note with strong operational and financial results that either met or exceeded our guidance across multiple metrics. good news in that we started 2026 on a positive note with strong operational and financial results that either met or exceeded our guidance across multiple metrics Our production was 36,200 barrels oil equivalent per day. our production was 36,200 barrels oil equivalent per day That's toward the higher end of guidance and flat with the fourth quarter of 2025, despite some adverse weather impacts in early 2026. that's toward the higher end of guidance and flat with the fourth quarter of 2025 despite some adverse weather impacts in early 2026 The solid quarterly results start with our ability to maintain strong production, we're aided by our realized prices of $45.08 per barrel oil equivalent, an increase of 26% from the fourth quarter. In March, our realized oil price was $88.61 per barrel. Additionally, our lease operating expense, LOE, was down 11% to $66 million below the midpoint of guidance. Reductions in our LOE costs were mainly driven by lower base LOE spend. That's reflecting fourth quarter 2025 cost-saving initiatives that began to materialize in the first quarter of 2026. All these positives helped us generate $55 million in adjusted EBITDA, our highest quarterly number since the third quarter of 2023. We're also very pleased to have generated $21 million in free cash flow. The solid quarterly results start with our ability to maintain strong production, we're aided by our realized prices of $45.08 per barrel oil equivalent, an increase of 26% from the fourth quarter. the solid quarterly results start with our ability to maintain strong production we're aided by our realized prices of $45.08 per barrel oil equivalent an increase of 26% from the fourth quarter In March, our realized oil price was $88.61 per barrel. in march our realized oil price was $88.61 per barrel Additionally, our lease operating expense, LOE, was down 11% to $66 million below the midpoint of guidance. additionally our lease operating expense loe was down 11% to $66 million below the midpoint of guidance Reductions in our LOE costs were mainly driven by lower base LOE spend. reductions in our loe costs were mainly driven by lower base loe spend That's reflecting fourth quarter 2025 cost-saving initiatives that began to materialize in the first quarter of 2026. that's reflecting fourth quarter 2025 cost-saving initiatives that began to materialize in the first quarter of 2026 All these positives helped us generate $55 million in adjusted EBITDA, our highest quarterly number since the third quarter of 2023. all these positives helped us generate $55 million in adjusted ebitda our highest quarterly number since the third quarter of 2023 We're also very pleased to have generated $21 million in free cash flow. we're also very pleased to have generated $21 million in free cash flow That's a significant improvement from the fourth quarter of last year. Our ability to execute our strategy has delivered very positive results to start off 2026, including a healthy balance sheet and enhanced liquidity. At the end of the first quarter of 2026, our total debt and net debt were $351 million and $220 million, respectively, and our liquidity was $175 million. We built W&T using a proven and successful strategy that is committed to profitability, operational execution, returning value to our stakeholders, and ensuring the safety of our employees and contractors. We've consistently delivered operationally and financially with low decline production, meaningful EBITDA, and seamlessly integrating accretive producing property acquisitions during our nearly 45-year history. That's a significant improvement from the fourth quarter of last year. that's a significant improvement from the fourth quarter of last year Our ability to execute our strategy has delivered very positive results to start off 2026, including a healthy balance sheet and enhanced liquidity. our ability to execute our strategy has delivered very positive results to start off 2026 including a healthy balance sheet and enhanced liquidity At the end of the first quarter of 2026, our total debt and net debt were $351 million and $220 million, respectively, and our liquidity was $175 million. at the end of the first quarter of 2026 our total debt and net debt were $351 million and $220 million respectively and our liquidity was $175 million We built W&T using a proven and successful strategy that is committed to profitability, operational execution, returning value to our stakeholders, and ensuring the safety of our employees and contractors. we built w&t using a proven and successful strategy that is committed to profitability operational execution returning value to our stakeholders and ensuring the safety of our employees and contractors We've consistently delivered operationally and financially with low decline production, meaningful EBITDA, and seamlessly integrating accretive producing property acquisitions during our nearly 45-year history. we've consistently delivered operationally and financially with low decline production meaningful ebitda and seamlessly integrating accretive producing property acquisitions during our nearly 45-year history Capital expenditures in the first quarter of 2026 were $7 million, and asset retirement settlement costs totaled $17 million. We continue to expect our full-year capital expenditures to be between $20 million and $25 million, which excludes potential acquisition opportunities. Our budget for ARO remains the same at $34 million-$42 million. Yesterday, we provided our detailed guidance for second quarter 2026 and reiterated our unchanged full-year production and cost guidance. In the second quarter of 2026, we have a planned third-party Mobile Bay natural gas processing facility turnaround that will impact our NGL volumes and temporarily increase our LOE. However, our full-year LOE guidance has not changed. We are forecasting the midpoint of Q2 2026 production to be around 34,300 barrels of oil equivalent per day. Capital expenditures in the first quarter of 2026 were $7 million, and asset retirement settlement costs totaled $17 million. capital expenditures in the first quarter of 2026 were $7 million and asset retirement settlement costs totaled $17 million We continue to expect our full-year capital expenditures to be between $20 million and $25 million, which excludes potential acquisition opportunities. we continue to expect our full-year capital expenditures to be between $20 million and $25 million which excludes potential acquisition opportunities Our budget for ARO remains the same at $34 million-$42 million. our budget for aro remains the same at $34 million-$42 million Yesterday, we provided our detailed guidance for second quarter 2026 and reiterated our unchanged full-year production and cost guidance. yesterday we provided our detailed guidance for second quarter 2026 and reiterated our unchanged full-year production and cost guidance In the second quarter of 2026, we have a planned third-party Mobile Bay natural gas processing facility turnaround that will impact our NGL volumes and temporarily increase our LOE. in the second quarter of 2026 we have a planned third-party mobile bay natural gas processing facility turnaround that will impact our ngl volumes and temporarily increase our loe However, our full-year LOE guidance has not changed. however our full-year loe guidance has not changed We are forecasting the midpoint of Q2 2026 production to be around 34,300 barrels of oil equivalent per day. we are forecasting the midpoint of q2 2026 production to be around 34,300 barrels of oil equivalent per day This is a decrease of 5% compared to the first quarter of 2026, driven primarily by the turnaround, but the key is that we haven't changed full-year guidance. Second quarter LOE is expected to be $71 million-$79 million, up from first quarter actual of $66 million. This is due to the planned Mobile Bay turnaround as well as higher planned workover and facility maintenance work that is expected to benefit production in the second half of 2026. It's important to note that the LOE expenses tend to increase and decrease seasonally with much of the work being accomplished during warmer weather months that also produce less wind. This is a decrease of 5% compared to the first quarter of 2026, driven primarily by the turnaround, but the key is that we haven't changed full-year guidance. this is a decrease of 5% compared to the first quarter of 2026 driven primarily by the turnaround but the key is that we haven't changed full-year guidance Second quarter LOE is expected to be $71 million-$79 million, up from first quarter actual of $66 million. second quarter loe is expected to be $71 million-$79 million up from first quarter actual of $66 million This is due to the planned Mobile Bay turnaround as well as higher planned workover and facility maintenance work that is expected to benefit production in the second half of 2026. this is due to the planned mobile bay turnaround as well as higher planned workover and facility maintenance work that is expected to benefit production in the second half of 2026 It's important to note that the LOE expenses tend to increase and decrease seasonally with much of the work being accomplished during warmer weather months that also produce less wind. it's important to note that the loe expenses tend to increase and decrease seasonally with much of the work being accomplished during warmer weather months that also produce less wind Second quarter transportation and production taxes are expected to be between $7 million and $8 million, compared with $9 million in the first quarter, which reflects some of the benefit of the new pipeline we installed for the West Delta 73 field. Second quarter cash G&A, those costs are expected to remain comparable to our Q1 results. I want to point out that we tend to spend significantly less than our peers in capital expenditures and choose to instead spend more dollars on low risk, high rate of return workovers and facility optimization. We believe this is a more economic way to invest our operational cash flow back into our business, and it's a lower risk option. We can then build cash flow to help us make accretive acquisitions of producing properties. Second quarter transportation and production taxes are expected to be between $7 million and $8 million, compared with $9 million in the first quarter, which reflects some of the benefit of the new pipeline we installed for the West Delta 73 field. second quarter transportation and production taxes are expected to be between $7 million and $8 million compared with $9 million in the first quarter which reflects some of the benefit of the new pipeline we installed for the west delta 73 field Second quarter cash G&A, those costs are expected to remain comparable to our Q1 results. I want to point out that we tend to spend significantly less than our peers in capital expenditures and choose to instead spend more dollars on low risk, high rate of return workovers and facility optimization. second quarter cash g&a those costs are expected to remain comparable to our q1 results. i want to point out that we tend to spend significantly less than our peers in capital expenditures and choose to instead spend more dollars on low risk high rate of return workovers and facility optimization We believe this is a more economic way to invest our operational cash flow back into our business, and it's a lower risk option. we believe this is a more economic way to invest our operational cash flow back into our business and it's a lower risk option We can then build cash flow to help us make accretive acquisitions of producing properties. we can then build cash flow to help us make accretive acquisitions of producing properties Over the years, we have consistently created significant value by methodically integrating producing property acquisitions. We look for strong producing assets with meaningful reserves and an affordable price that we can integrate into our vast infrastructure. We primarily spend LOE dollars to work over, recomplete, and upgrade these assets. As a result, we often see additional production uplift from these acquisitions above the rates they were producing when purchased. This strategy makes W&T unique, but it's our ability to execute over and over throughout the years that allows us to add value. With our low decline production, increasing realized pricing, and continued cost control, we believe that we are well-positioned operationally and financially to deliver robust results in 2026 while we examine accretive acquisition opportunities. Before closing, I would like to discuss some regulatory updates in more detail. Over the years, we have consistently created significant value by methodically integrating producing property acquisitions. over the years we have consistently created significant value by methodically integrating producing property acquisitions We look for strong producing assets with meaningful reserves and an affordable price that we can integrate into our vast infrastructure. we look for strong producing assets with meaningful reserves and an affordable price that we can integrate into our vast infrastructure We primarily spend LOE dollars to work over, recomplete, and upgrade these assets. we primarily spend loe dollars to work over recomplete and upgrade these assets As a result, we often see additional production uplift from these acquisitions above the rates they were producing when purchased. as a result we often see additional production uplift from these acquisitions above the rates they were producing when purchased This strategy makes W&T unique, but it's our ability to execute over and over throughout the years that allows us to add value. this strategy makes w&t unique but it's our ability to execute over and over throughout the years that allows us to add value With our low decline production, increasing realized pricing, and continued cost control, we believe that we are well-positioned operationally and financially to deliver robust results in 2026 while we examine accretive acquisition opportunities. with our low decline production increasing realized pricing and continued cost control we believe that we are well-positioned operationally and financially to deliver robust results in 2026 while we examine accretive acquisition opportunities Before closing, I would like to discuss some regulatory updates in more detail. before closing i would like to discuss some regulatory updates in more detail As we mentioned in yesterday's earnings release, the Department of the Interior has proposed some positive regulatory changes that would roll back obligations from a 2024 rule that would require companies to set aside about $6.9 billion in supplemental financial assurance. This all occurred in the prior administration. About $6 billion would have applied to small businesses that make up most of the operators in the Gulf. The proposed changes will better align financial assurance requirements with actual decommissioning risk and reduce industry-wide bonding costs by at least $0.5 billion annually. These proposed revisions have been published in the Federal Register with a 60-day public comment period, which is expected to end May 15th. We welcome these changes proposed by the Trump administration that can further encourage U.S. offshore production growth and increase America's energy independence. As we mentioned in yesterday's earnings release, the Department of the Interior has proposed some positive regulatory changes that would roll back obligations from a 2024 rule that would require companies to set aside about $6.9 billion in supplemental financial assurance. as we mentioned in yesterday's earnings release the department of the interior has proposed some positive regulatory changes that would roll back obligations from a 2024 rule that would require companies to set aside about $6.9 billion in supplemental financial assurance This all occurred in the prior administration. this all occurred in the prior administration About $6 billion would have applied to small businesses that make up most of the operators in the Gulf. about $6 billion would have applied to small businesses that make up most of the operators in the gulf The proposed changes will better align financial assurance requirements with actual decommissioning risk and reduce industry-wide bonding costs by at least $0.5 billion annually. the proposed changes will better align financial assurance requirements with actual decommissioning risk and reduce industry-wide bonding costs by at least $0.5 billion annually These proposed revisions have been published in the Federal Register with a 60-day public comment period, which is expected to end May 15th. these proposed revisions have been published in the federal register with a 60-day public comment period which is expected to end may 15th We welcome these changes proposed by the Trump administration that can further encourage U.S. offshore production growth and increase America's energy independence. we welcome these changes proposed by the trump administration that can further encourage u.s offshore production growth and increase america's energy independence Regarding the surety litigation, I'm able to report that the district court has rejected the surety's attempt to require W&T to immediately pay their demands, I would call them ridiculous demands, for collateral. The sureties are appealing that ruling, and W&T will continue to vigorously defend our position that the surety's demands for collateral were neither appropriate nor lawful. Moreover, W&T prevailed in virtually every respect as it relates to the surety's attempt to dismiss the claims W&T has asserted in lawsuit. Yesterday, the court granted W&T's request to file an amended lawsuit, which sets forth broad antitrust and other claims against the sureties. This case will go on. Regarding the surety litigation, I'm able to report that the district court has rejected the surety's attempt to require W&T to immediately pay their demands, I would call them ridiculous demands, for collateral. regarding the surety litigation i'm able to report that the district court has rejected the surety's attempt to require w&t to immediately pay their demands i would call them ridiculous demands for collateral The sureties are appealing that ruling, and W&T will continue to vigorously defend our position that the surety's demands for collateral were neither appropriate nor lawful. the sureties are appealing that ruling and w&t will continue to vigorously defend our position that the surety's demands for collateral were neither appropriate nor lawful Moreover, W&T prevailed in virtually every respect as it relates to the surety's attempt to dismiss the claims W&T has asserted in lawsuit. moreover w&t prevailed in virtually every respect as it relates to the surety's attempt to dismiss the claims w&t has asserted in lawsuit Yesterday, the court granted W&T's request to file an amended lawsuit, which sets forth broad antitrust and other claims against the sureties. yesterday the court granted w&t's request to file an amended lawsuit which sets forth broad antitrust and other claims against the sureties This case will go on. this case will go on As can be reviewed in our court filings, the surety's conduct caused W&T to incur substantial damages. We intend to seek to remedy the conduct and obtain damages to the fullest extent of the law. In closing, I'd like to thank our team at W&T for all their efforts. We are ready and able to add significant value in 2026. W&T has been an active, responsible, and profitable operator in the Gulf of Mexico for over 40 years. We have a long track record of successfully integrating assets into our portfolio. We know that the Gulf of Mexico is a world-class basin, being the second-largest basin by production and the largest basin in the U.S.A. by area. As can be reviewed in our court filings, the surety's conduct caused W&T to incur substantial damages. as can be reviewed in our court filings the surety's conduct caused w&t to incur substantial damages We intend to seek to remedy the conduct and obtain damages to the fullest extent of the law. we intend to seek to remedy the conduct and obtain damages to the fullest extent of the law In closing, I'd like to thank our team at W&T for all their efforts. in closing i'd like to thank our team at w&t for all their efforts We are ready and able to add significant value in 2026. we are ready and able to add significant value in 2026 W&T has been an active, responsible, and profitable operator in the Gulf of Mexico for over 40 years. w&t has been an active responsible and profitable operator in the gulf of mexico for over 40 years We have a long track record of successfully integrating assets into our portfolio. we have a long track record of successfully integrating assets into our portfolio We know that the Gulf of Mexico is a world-class basin, being the second-largest basin by production and the largest basin in the U.S.A. by area. we know that the gulf of mexico is a world-class basin being the second-largest basin by production and the largest basin in the u.s.a by area We have a solid cash position and strong liquidity that enables us to continue to evaluate growth opportunities while continuing to generate strong operational cash flow and adjusted EBITDA. We will maintain our focus on operational excellence and maximizing the cash flow potential of our asset base in 2026 and beyond. Operator, we can now open the lines for questions. We have a solid cash position and strong liquidity that enables us to continue to evaluate growth opportunities while continuing to generate strong operational cash flow and adjusted EBITDA. we have a solid cash position and strong liquidity that enables us to continue to evaluate growth opportunities while continuing to generate strong operational cash flow and adjusted ebitda We will maintain our focus on operational excellence and maximizing the cash flow potential of our asset base in 2026 and beyond. we will maintain our focus on operational excellence and maximizing the cash flow potential of our asset base in 2026 and beyond Operator, we can now open the lines for questions. operator we can now open the lines for questions

Speaker 4: We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. Your first question today comes from Derrick Whitfield with Texas Capital. Please go ahead. We will now begin the question-and-answer session. we will now begin the question-and-answer session To ask a question, you may press star then one on your telephone keypad. to ask a question you may press star then one on your telephone keypad If you are using a speakerphone, please pick up your handset before pressing the keys. if you are using a speakerphone please pick up your handset before pressing the keys If at any time your question has been addressed and you would like to withdraw your question, please press star then two. if at any time your question has been addressed and you would like to withdraw your question please press star then two At this time, we'll pause momentarily to assemble our roster. at this time we'll pause momentarily to assemble our roster Your first question today comes from Derrick Whitfield with Texas Capital. your first question today comes from derrick whitfield with texas capital Please go ahead. please go ahead

Speaker 2: Good morning, Tracy and team, and thanks for your time. Good morning, Tracy and team, and thanks for your time. good morning tracy and team and thanks for your time

Speaker 5: Good morning, Derrick. Good morning, Derrick. good morning derrick

Speaker 2: Starting with your guidance, while I understand you are reiterating production guidance for the full year, how would you characterize your desire to further lean into workovers in this favorable environment? Starting with your guidance, while I understand you are reiterating production guidance for the full year, how would you characterize your desire to further lean into workovers in this favorable environment? starting with your guidance while i understand you are reiterating production guidance for the full year how would you characterize your desire to further lean into workovers in this favorable environment

Speaker 5: Well, that's always a key factor for us. We've always got a good inventory of things to do. As we've acquired assets over the years, we take the time to study them and restudy them. That allows us to continue doing these workovers. Do expect to see some more of that. You know, we'll ramp up a little bit during the summer because the weather is better. You know, late spring, summer, which is about now. In fact, we're moving some things around in the Gulf now to begin that process. Yeah, I mean, this has always been a key strong point for us, along with not only workovers but recompletions. Well, that's always a key factor for us. well that's always a key factor for us We've always got a good inventory of things to do. we've always got a good inventory of things to do As we've acquired assets over the years, we take the time to study them and restudy them. as we've acquired assets over the years we take the time to study them and restudy them That allows us to continue doing these workovers. that allows us to continue doing these workovers Do expect to see some more of that. do expect to see some more of that You know, we'll ramp up a little bit during the summer because the weather is better. you know we'll ramp up a little bit during the summer because the weather is better You know, late spring, summer, which is about now. you know late spring summer which is about now In fact, we're moving some things around in the Gulf now to begin that process. in fact we're moving some things around in the gulf now to begin that process Yeah, I mean, this has always been a key strong point for us, along with not only workovers but recompletions. yeah i mean this has always been a key strong point for us along with not only workovers but recompletions

Speaker 2: Great, Tracy. Maybe just shifting over to the M&A environment. Wanted to get your thoughts on the competitive landscape at present. Is it safe to assume we're in a pencils down environment for larger packages, or are you seeing reasonable action in the market at present? Great, Tracy. great tracy Maybe just shifting over to the M&A environment. maybe just shifting over to the m&a environment Wanted to get your thoughts on the competitive landscape at present. wanted to get your thoughts on the competitive landscape at present Is it safe to assume we're in a pencils down environment for larger packages, or are you seeing reasonable action in the market at present? is it safe to assume we're in a pencils down environment for larger packages or are you seeing reasonable action in the market at present

Speaker 5: You know, the company's got a very strong liquidity position right now. There's been a dearth of significant transactions for the last several years in the Gulf. We feel pretty good about where we are. We're in different data rooms, you know, almost continuously over the years. I think that there's real good possibility that things are gonna start moving around. We certainly have aspirations in that direction and intend to continue to pursue things that will fit our normal financial criteria. You know, the company's got a very strong liquidity position right now. you know the company's got a very strong liquidity position right now There's been a dearth of significant transactions for the last several years in the Gulf. there's been a dearth of significant transactions for the last several years in the gulf We feel pretty good about where we are. we feel pretty good about where we are We're in different data rooms, you know, almost continuously over the years. we're in different data rooms you know almost continuously over the years I think that there's real good possibility that things are gonna start moving around. i think that there's real good possibility that things are gonna start moving around We certainly have aspirations in that direction and intend to continue to pursue things that will fit our normal financial criteria. we certainly have aspirations in that direction and intend to continue to pursue things that will fit our normal financial criteria That criteria usually starts with cash flow and then also what is the reserve base and what are the things that we can do to increase cash flow near term, such as workovers and recompletions and facilities upgrades that will generate those numbers near term. That criteria usually starts with cash flow and then also what is the reserve base and what are the things that we can do to increase cash flow near term, such as workovers and recompletions and facilities upgrades that will generate those numbers near term. that criteria usually starts with cash flow and then also what is the reserve base and what are the things that we can do to increase cash flow near term such as workovers and recompletions and facilities upgrades that will generate those numbers near term

Speaker 2: Great update. Thanks for your time. Great update. great update Thanks for your time. thanks for your time

Speaker 5: Thank you, sir. Thank you, sir. thank you sir

Speaker 4: Your next question comes from Bert Donnes with William Blair. Please go ahead. Your next question comes from Bert Donnes with William Blair. your next question comes from bert donnes with william blair Please go ahead. please go ahead

Speaker 6: Hey, Tracy, this is actually Neil. Just have two quick ones for you. Hey, Tracy, this is actually Neil. hey tracy this is actually neil Just have two quick ones for you. just have two quick ones for you

Speaker 5: All right. All right. all right

Speaker 6: How you doing? Nice to be back on the call. How you doing? how you doing Nice to be back on the call. nice to be back on the call

Speaker 5: Good, Neil. Good, Neil. good neil

Speaker 6: My first question, Tracy, just I know part of the upside for you all is converting a lot of the 2P to primary reserves. Again, I'm just wondering, again, seems like with the plan you've laid out, I still feel like there's a lot of that going on. Could you just tell us, you know, what do you think the timing of that would be? My first question, Tracy, just I know part of the upside for you all is converting a lot of the 2P to primary reserves. my first question tracy just i know part of the upside for you all is converting a lot of the 2p to primary reserves Again, I'm just wondering, again, seems like with the plan you've laid out, I still feel like there's a lot of that going on. again i'm just wondering again seems like with the plan you've laid out i still feel like there's a lot of that going on Could you just tell us, you know, what do you think the timing of that would be? could you just tell us you know what do you think the timing of that would be

Speaker 5: Well, the really cool part about our 2P reserves is that a lot of that, a lot of those reserves come to us in the form of cash and then later on booked reserves. As time moves forward, we see that first as cash flow. That's cash flow and reserves that we don't have to spend any CapEx on. That's been a real focal point of the company over many years. It's why we have traditionally very low decline rates. That shows itself up as massive amounts of cash and reserves over time. It seems to have always been that way for the company since, well, since we started. Well, the really cool part about our 2P reserves is that a lot of that, a lot of those reserves come to us in the form of cash and then later on booked reserves. well the really cool part about our 2p reserves is that a lot of that a lot of those reserves come to us in the form of cash and then later on booked reserves As time moves forward, we see that first as cash flow. as time moves forward we see that first as cash flow That's cash flow and reserves that we don't have to spend any CapEx on. that's cash flow and reserves that we don't have to spend any capex on That's been a real focal point of the company over many years. that's been a real focal point of the company over many years It's why we have traditionally very low decline rates. it's why we have traditionally very low decline rates That shows itself up as massive amounts of cash and reserves over time. that shows itself up as massive amounts of cash and reserves over time It seems to have always been that way for the company since, well, since we started. it seems to have always been that way for the company since well since we started I try to reiterate that to investors in just about every presentation that we do. There are additional reserves that are probables that we do have to spend some CapEx on it. We look forward to doing that in the near future. We haven't been doing a lot of drilling lately 'cause we haven't needed to. One of the hallmarks of the company is making sure that, you know, we try to continue the cash flow stream. If any time that I can acquire reserves as opposed to going and drilling for them at approximately the same price, that's what we're gonna do. We're gonna take the risk out of and do that. I try to reiterate that to investors in just about every presentation that we do. i try to reiterate that to investors in just about every presentation that we do There are additional reserves that are probables that we do have to spend some CapEx on it. there are additional reserves that are probables that we do have to spend some capex on it We look forward to doing that in the near future. we look forward to doing that in the near future We haven't been doing a lot of drilling lately 'cause we haven't needed to. we haven't been doing a lot of drilling lately 'cause we haven't needed to One of the hallmarks of the company is making sure that, you know, we try to continue the cash flow stream. one of the hallmarks of the company is making sure that you know we try to continue the cash flow stream If any time that I can acquire reserves as opposed to going and drilling for them at approximately the same price, that's what we're gonna do. if any time that i can acquire reserves as opposed to going and drilling for them at approximately the same price that's what we're gonna do We're gonna take the risk out of and do that. we're gonna take the risk out of and do that That's one of the reasons why we're still here after 40 something years. That's a great question, Neil. I appreciate it. That's one of the reasons why we're still here after 40 something years. that's one of the reasons why we're still here after 40 something years That's a great question, Neil. that's a great question neil I appreciate it. i appreciate it

Speaker 6: No, I love that upside. Secondly, as you said, not that you're gonna have to go drill much, but, you know, kind of you have a very low CapEx guide. I'm just wondering, does that factor in, you know, around the workovers that Derrick talked about? Just service costs in all, Tracy, are they holding in right now, or what are you seeing for service costs? No, I love that upside. no i love that upside Secondly, as you said, not that you're gonna have to go drill much, but, you know, kind of you have a very low CapEx guide. secondly as you said not that you're gonna have to go drill much but you know kind of you have a very low capex guide I'm just wondering, does that factor in, you know, around the workovers that Derrick talked about? i'm just wondering does that factor in you know around the workovers that derrick talked about Just service costs in all, Tracy, are they holding in right now, or what are you seeing for service costs? just service costs in all tracy are they holding in right now or what are you seeing for service costs

Speaker 5: Part of that is exactly what you suggested, holding on and, you know, making judicious decisions about workovers and recompletions. Part of it's to make sure that we maintain really good liquidity. I think there will be opportunities going forward in the market for us to make additional acquisitions. Again, it's not that we don't have wells to drill, we do. We have a pretty good inventory of exploration opportunities and in fact, even proven reserve opportunities that are substantial. It's not because we don't have inventory, it's because management, including myself, believes that opportunities to do additional acquisitions are good. We like the way that we're positioned in this market, and we have good liquidity. Part of that is exactly what you suggested, holding on and, you know, making judicious decisions about workovers and recompletions. part of that is exactly what you suggested holding on and you know making judicious decisions about workovers and recompletions Part of it's to make sure that we maintain really good liquidity. part of it's to make sure that we maintain really good liquidity I think there will be opportunities going forward in the market for us to make additional acquisitions. i think there will be opportunities going forward in the market for us to make additional acquisitions Again, it's not that we don't have wells to drill, we do. again it's not that we don't have wells to drill we do We have a pretty good inventory of exploration opportunities and in fact, even proven reserve opportunities that are substantial. we have a pretty good inventory of exploration opportunities and in fact even proven reserve opportunities that are substantial It's not because we don't have inventory, it's because management, including myself, believes that opportunities to do additional acquisitions are good. it's not because we don't have inventory it's because management including myself believes that opportunities to do additional acquisitions are good We like the way that we're positioned in this market, and we have good liquidity. we like the way that we're positioned in this market and we have good liquidity

Speaker 6: Perfect. Thank you much, sir. Congrats. Perfect. perfect Thank you much, sir. thank you much sir Congrats. congrats

Speaker 5: Thank you. Thank you. thank you

Speaker 4: Again, if you have a question, please press star then one. Your next question comes from Jeff Robertson with Water Tower Research. Please go ahead. Again, if you have a question, please press star then one. again if you have a question please press star then one Your next question comes from Jeff Robertson with Water Tower Research. your next question comes from jeff robertson with water tower research Please go ahead. please go ahead

Speaker 3: Thank you. Tracy, just to follow up on your previous comments. W&T has a pretty low reinvestment rate when you think about cash flow from operations in 2026, and yet production is expected to stay relatively flat for the year from where you were in the first quarter based on your midpoint guidance. To your point about capital light business model, is a lot of that production performance just related to, as Neil talked about, moving 2P reserves into PDP without any capital? Is that something that goes on for 2026, 2027 and beyond just based on your reserve profile and performance of your assets? Thank you. thank you Tracy, just to follow up on your previous comments. tracy just to follow up on your previous comments W&T has a pretty low reinvestment rate when you think about cash flow from operations in 2026, and yet production is expected to stay relatively flat for the year from where you were in the first quarter based on your midpoint guidance. w&t has a pretty low reinvestment rate when you think about cash flow from operations in 2026 and yet production is expected to stay relatively flat for the year from where you were in the first quarter based on your midpoint guidance To your point about capital light business model, is a lot of that production performance just related to, as Neil talked about, moving 2P reserves into PDP without any capital? to your point about capital light business model is a lot of that production performance just related to as neil talked about moving 2p reserves into pdp without any capital Is that something that goes on for 2026, 2027 and beyond just based on your reserve profile and performance of your assets? is that something that goes on for 2026 2027 and beyond just based on your reserve profile and performance of your assets

Speaker 5: Yeah, the short answer to that is yes. We again, with probable reserves, because of the quirks around the booking of those, via the SEC, we have to wait a while before we can put them back in as proved reserves. Often, those are just additions to proved producing. We get a dual effect there of not only do we increase the reserves, but we increase our borrowing capacity as well. That's a double plus for us. This is normal. This is the actions of corporation. I've done this illustration in just about every investor meeting we've ever had. Yeah, the short answer to that is yes. yeah the short answer to that is yes We again, with probable reserves, because of the quirks around the booking of those, via the SEC, we have to wait a while before we can put them back in as proved reserves. we again with probable reserves because of the quirks around the booking of those via the sec we have to wait a while before we can put them back in as proved reserves Often, those are just additions to proved producing. often those are just additions to proved producing We get a dual effect there of not only do we increase the reserves, but we increase our borrowing capacity as well. we get a dual effect there of not only do we increase the reserves but we increase our borrowing capacity as well That's a double plus for us. that's a double plus for us This is normal. this is normal This is the actions of corporation. this is the actions of corporation I've done this illustration in just about every investor meeting we've ever had. i've done this illustration in just about every investor meeting we've ever had I have an illustration in the deck that shows you the effects of the probable reserves and how they get to be proved producing reserves over time. We generally book them again as cash flow and reserves over time. Then again, it's not that we don't have inventory to drill, we do, but it's nice to have that additional bit of reserves. You know, in Europe, they look at this as Companies are valued more on the 2P basis than they are just 1P. Our regulators have been a little bit slow to do that. That's always been a complaint. I don't understand the rationale behind it. I have an illustration in the deck that shows you the effects of the probable reserves and how they get to be proved producing reserves over time. i have an illustration in the deck that shows you the effects of the probable reserves and how they get to be proved producing reserves over time We generally book them again as cash flow and reserves over time. we generally book them again as cash flow and reserves over time Then again, it's not that we don't have inventory to drill, we do, but it's nice to have that additional bit of reserves. then again it's not that we don't have inventory to drill we do but it's nice to have that additional bit of reserves You know, in Europe, they look at this as Companies are valued more on the 2P basis than they are just 1P. you know in europe they look at this as companies are valued more on the 2p basis than they are just 1p Our regulators have been a little bit slow to do that. our regulators have been a little bit slow to do that That's always been a complaint. that's always been a complaint I don't understand the rationale behind it. i don't understand the rationale behind it It seems ridiculous to me because we've proven it over and over and over again that we definitely increase the reserves and the cash flow over time without additional CapEx. It seems ridiculous to me because we've proven it over and over and over again that we definitely increase the reserves and the cash flow over time without additional CapEx. it seems ridiculous to me because we've proven it over and over and over again that we definitely increase the reserves and the cash flow over time without additional capex

Speaker 3: When you think about acquisitions, two-part question. One is, are you able to buy on a 1P basis? Secondly, you spoke about the regulatory environment and some of the things that are coming down the road. Will that have an impact on M&A activity in the Gulf of Mexico, do you think? When you think about acquisitions, two-part question. when you think about acquisitions two-part question One is, are you able to buy on a 1P basis? one is are you able to buy on a 1p basis Secondly, you spoke about the regulatory environment and some of the things that are coming down the road. secondly you spoke about the regulatory environment and some of the things that are coming down the road Will that have an impact on M&A activity in the Gulf of Mexico, do you think? will that have an impact on m&a activity in the gulf of mexico do you think

Speaker 5: Yeah. That's a pretty good two-part question, Jeff. To answer your question on 1P, it really, it's a bunch of different factors. It's not just necessarily 1P. We do look at the entire reserve stack, and again, we like to see acquisitions that have cash flow and a reserve base that we can forecast. Also, you know, we like to see some upside too, where we can do some work or drill some wells, that sort of thing. They're all a little bit different. Of course, in the Gulf, you have to take into consideration what are the asset retirement obligations. Yeah. yeah That's a pretty good two-part question, Jeff . that's a pretty good two-part question jeff To answer your question on 1P, it really, it's a bunch of different factors. to answer your question on 1p it really it's a bunch of different factors It's not just necessarily 1P. it's not just necessarily 1p We do look at the entire reserve stack, and again, we like to see acquisitions that have cash flow and a reserve base that we can forecast. we do look at the entire reserve stack and again we like to see acquisitions that have cash flow and a reserve base that we can forecast Also, you know, we like to see some upside too, where we can do some work or drill some wells, that sort of thing. also you know we like to see some upside too where we can do some work or drill some wells that sort of thing They're all a little bit different. they're all a little bit different Of course, in the Gulf, you have to take into consideration what are the asset retirement obligations. of course in the gulf you have to take into consideration what are the asset retirement obligations That's a very important part of what we do. We manage that very well. The company has done more plug and abandonment decommissioning on those AROs than anyone. We've spent over $1 billion doing that decommissioning work over the years. We think that we are the expert in that market. We understand it very, very well. That's one of the things that we always look at closely in determining value. As far as the other things that we're looking for, yeah, I mean, we're in a mode where we're looking around for things that are gonna fit our financial criteria. That's a very important part of what we do. that's a very important part of what we do We manage that very well. we manage that very well The company has done more plug and abandonment decommissioning on those AROs than anyone. the company has done more plug and abandonment decommissioning on those aros than anyone We've spent over $1 billion doing that decommissioning work over the years. we've spent over $1 billion doing that decommissioning work over the years We think that we are the expert in that market. we think that we are the expert in that market We understand it very, very well. we understand it very very well That's one of the things that we always look at closely in determining value. that's one of the things that we always look at closely in determining value As far as the other things that we're looking for, yeah, I mean, we're in a mode where we're looking around for things that are gonna fit our financial criteria. as far as the other things that we're looking for yeah i mean we're in a mode where we're looking around for things that are gonna fit our financial criteria We have been in data rooms, you know, for quite a while. We have been in data rooms, you know, for quite a while. we have been in data rooms you know for quite a while

Speaker 3: Thank you. Thank you. thank you

Speaker 5: Thank you, sir. Thank you, sir. thank you sir

Speaker 4: Seeing no further questions, this concludes our question-and-answer session. I would like to turn the conference back over to Tracy Krohn, Chairman and CEO, for any closing remarks. Seeing no further questions, this concludes our question- and- answer session. seeing no further questions this concludes our question- and- answer session I would like to turn the conference back over to Tracy Krohn, Chairman and CEO, for any closing remarks. i would like to turn the conference back over to tracy krohn chairman and ceo for any closing remarks

Speaker 5: Thank you, operator. We appreciate everybody listening. You know, I look forward to every day. I never know what's going to happen with regards to the markets and it seems that with the war in Iran, it's been a little bit more difficult to think about it in terms of going forward. On the other hand, we're very pleased that, you know, the company is doing well and in position to do even better. Thank you for listening, and we look forward to talking to you again soon. Thank you, operator. thank you operator We appreciate everybody listening. we appreciate everybody listening You know, I look forward to every day. you know i look forward to every day I never know what's going to happen with regards to the markets and it seems that with the war in Iran, it's been a little bit more difficult to think about it in terms of going forward. i never know what's going to happen with regards to the markets and it seems that with the war in iran it's been a little bit more difficult to think about it in terms of going forward On the other hand, we're very pleased that, you know, the company is doing well and in position to do even better. on the other hand we're very pleased that you know the company is doing well and in position to do even better Thank you for listening, and we look forward to talking to you again soon. thank you for listening and we look forward to talking to you again soon

Speaker 4: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. The conference has now concluded. the conference has now concluded Thank you for attending today's presentation. thank you for attending today's presentation You may now disconnect. you may now disconnect