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W&T Offshore forms JV to initiate $419m drilling program in Gulf of Mexico

EBR Staff Writer Published 13 March 2018

W&T Offshore has announced a $419.6m drilling program in the Gulf of Mexico to be carried out by a joint venture (JV) investment entity it has formed with a group of investors.

The joint exploration and development agreements signed by W&T Offshore with the investors will see drilling of up to 14 specified projects on the company’s leased and producing acreage in the next three years or so.

W&T has given the joint venture entity 88.94% of its working interest in the 14 projects while retaining 11.06%.

The Texas-based oil and gas company said that the agreements will enable it to develop its drilling inventory at a quicker pace and with a largely reduced capital outlay.

The group of investors is led by an entity owned and controlled by funds managed by HarbourVest Partners. An initial capital commitment of $230.5m has been agreed by the parties involved in the partnership, which will cover costs for drilling, completion and tie-in of various project wells.

As per the terms, W&T will get 30% of the revenue from the drilling program wells. This will be for its contribution of 20% towards the total well costs and associated leases and for giving access to existing infrastructure.

W&T's portion of well net revenue will be increased to 38.4% subject to the investor group achieving certain return thresholds.

W&T Offshore chairman and CEO Tracy Krohn said: “The Drilling Program will allow us to accelerate the development of our high return inventory to bring significant cash back to the corporate entity, while maintaining the flexibility to manage our balance sheet and pursue additional accretive acquisition opportunities in the Gulf of Mexico as other operators exit. 

“Plus, by contributing inventory and our operating expertise, W&T will receive both a front-end and back-end promote that should compensate us for the leases that we are contributing and also substantially enhance our return on investment.”

In another development, W&T said that it had successfully bid $31.1m to take a stake in three blocks in the Heidelberg Field in the Gulf of Mexico.

Image: W&T Offshore will partner with a group of investors for a drilling program in the Gulf of Mexico. Photo: courtesy of num_skyman/Freedigitalphotos.net.