Shares of offshore focused energy producer W&T Offshore (NYSE:WTI) rose as much as 12.5% in early trading on March 4. Although crude oil prices were higher, likely helping to boost the Gulf of Mexico player’s stock price, the big news was really earnings.
In the fourth quarter of 2020 W&T Offshore reported an adjusted loss of $0.05 per share, capping off a year in which it posted a loss of $0.16 per share. Revenue for the quarter came in just shy of $95 million, with the full-year tally at roughly $347 million. The company’s fourth quarter beat analyst expectations on both the top and bottom lines. Investors tend to like that type of news. That quarter was also an improvement over the third quarter’s showing, which was nice to see, as well, as it shows the company is benefiting from the broader oil market upturn.
Looking forward, W&T Offshore is looking to keep spending in check in 2021 and production roughly flat (it’s expected to be a little lower year over year). The main goal is to generate free cash so it can keep paying down debt and, if it can find opportunities, make accretive acquisitions. Investors in the energy space today appreciate conservative approaches that don’t risk upending the delicate supply/demand balance in the world today, so the restrained outlook here was likely welcome by investors, too.
Although it would have been better if W&T Offshore had positive earnings in the fourth quarter, it’s understandable why investors were still pleased with the company’s update. In fact, given the difficult backdrop in 2020 and still tenuous energy market conditions in early 2021, the company’s conservative positioning makes a lot of sense. Notably, management is weighting its capital spending toward the end of the year. That suggests that 2021 will be pedestrian, which is not shocking and pretty much what the company has telegraphed, but that 2022 could be comparatively more exciting.
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