NEW YORK (TheStreet) -- Shares of W&T Offshore (WTI) are up 6.43% to $6.20 in afternoon trading today as the company expects this year's production will remain "steady" or increase slightly over last year's levels, despite a significant reduction in capital spending and the fall in crude prices.
In its fourth quarter financial results released after the market close yesterday, the Houston-based company said it expects total production to be between 16.6 to 18.4 MMBoe in 2015, compared to 17.6 MMboe in 2014.
The company also expects total production for the first quarter of 2015 to be between 4.2 and 4.7 MMboe, compared to 4.6 MMboe in the fourth quarter.
"While we wait for the cost of goods and services to adjust to a lower commodity price environment and for margins to improve, we plan to conserve capital and preserve liquidity. As in previous industry downturns, we will work to reduce costs and expenses and cautiously manage our balance sheet, which includes suspending our quarterly common stock dividend. We have a high-quality asset base, a substantial portion of which is held by production, giving us the flexibility to postpone spending until operating margins return to more normal levels," CEO Tracy Krohn said.
A fourth quarter loss of 53 cents on revenue of $196.68 million missed the average of analysts' estimates that had expected a loss of 40 cents on revenue of $211.13 million, according to data compiled by Reuters.
Earnings excluding special items were down primarily due to a $48.3 million decrease in revenues driven by a 10% decline in the company's realized prices, lower production volumes, and a $3.7 million increase in operating expenses [$2.2 million increase in gathering, transportation cost and production taxes, $1.8 million in G&A, offset by a $0.3 million decrease in LOE], the company said.
One interesting factor to consider when looking at this stock is that it has "large insider ownership," as explained by TheStreet's Realmoney.com contributor Tim Melvin in 'Look for Stocks the Insiders Own.'
Here's a snippet of what he had to say:
I met a friend [and] among other things we talked about some of my favorite factors when picking stocks. We discussed at length the overvaluation that most individual investors place on liquidity. One of the biggest advantages individuals have is the ability to buy smaller, less-liquid stocks. They are not pushed around by short-term traders, they are not in any of the heavily day-traded ETFs and very few institutions invest in the less-liquid stocks. It is a huge advantage, but almost no one uses it to pile up profits in the stock market.
We also chatted about most investors' inability to buy in a crash. There is a huge psychological inability on the part of institutional and individual investors alike to buy when prices are plunging. It is far easier to buy when the outlook is rosy and prices are climbing, but in reality that's usually a better time to be selling. Part of the conversation was about investing in companies where management has a lot of skin in the game and has the same interest in rising dividends and stock prices that we do as an outside investor.
When I got back to the office, it occurred to me that we could take advantage of these two factors to find some energy stocks worth consideration. With prices down 50% since last year, we can certainly say oil prices have crashed. Finding those energy stocks that are cheap and have large insider ownership could help us gain an edge when prices begin a sustained rebound. With a significant position in their own shares, executives of these companies will go to far greater lengths to make sure they survive the difficult environment and preserve their own wealth. As always, I want to buy those that trade at a discount to the underlying value of the assets the company owns.
W&T Offshore (WTI) has oil and gas operation in the Gulf of Mexico off the coasts of Louisiana, Texas, Mississippi and Alabama. They also have some land-based leaseholds in Texas. The stock is down over 50% in the past year and 30% in the last three months as oil and gas prices have fallen. Analysts have been lowering their earnings expectations and ranking for the stock in the past several months.
While the near-term outlook for U.S. exploration and production companies is bleak, it is worth noting that the managers and directors of this company own more than 50% of the shares. They stand to lose a combined $235 million if this company doesn't survive and recover. Several officers and directors exercised options in December and kept the bulk of the shares, increasing their stake in the stock. WTI shares trade at just 70% of book value right now, so they are cheap on an asset basis.
-Tim Melvin, 'Look for Stocks the Insiders Own' originally published 2/6/2015 on RealMoney.com.
Want more information like this from Tim Melvin BEFORE your stock moves? Learn more about RealMoney.com now.
TheStreet Ratings team rates W&T OFFSHORE INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate W&T OFFSHORE INC (WTI) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. Among the primary strengths of the company is its expanding profit margins over time. At the same time, however, we also find weaknesses including a generally disappointing performance in the stock itself, feeble growth in the company's earnings per share and deteriorating net income."
You can view the full analysis from the report here: WTI Ratings Report