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Try Seeking Alpha for free by creating an account Create Free Account W&amp;T Offshore: It's Underpriced With Some Bullish Signals ======================================================== Jun. 12, 2025 2:26 PM ET 218 Followers Follow Play(11min) Summary * W&amp;T Offshore, Inc. remains resilient amid mixed Q1 2025 results, with natural gas as a core growth driver and a robust Balance Sheet supporting operational stability. * Despite weak oil prices, prudent management and rebounding natural gas prices position WTI for continued improvement and margin stabilization in upcoming quarters. * Valuation remains attractive, with the stock trading well below historical averages and offering significant upside potential based on P/S and P/CPS metrics. * Technicals indicate a bullish breakout tendency, and I reiterate my strong buy rating given the company's fundamentals and improving market sentiment. Kwarkot/iStock via Getty Images Three months since my first coverage of W&amp;T Offshore, Inc. (NYSE:), we have seen mixed market conditions that impacted its performance during Q1 2025. Yet, its diverse business portfolio and healthy Balance Sheet still promise resilience amid macroeconomic headwinds. The oil segment faces challenges, but natural gas remains its cornerstone. In addition, the stock remains cheap, which must warrant an increase to become fairly valued. Technicals are improving and show new buying opportunities. WTI Q1 2025 W&amp;T Offshore, Inc. experienced mixed market conditions, leading to mixed results during the first quarter. Its Q1 2025 operating revenue amounted to , down by -7.8% YoY from $140.8M. Its oil business faced challenges amid the decreasing oil prices in Q1 2025. As you can remember in my previous coverage, oil prices have moved in a downtrend, following tariff woes and the announcement of an OPEC oil hike. At the end of the quarter, Brent was per barrel, while WTI Crude was per barrel. Both were about 20% lower from their value exactly a year before. Considering the lower pricing, production became quite unappetizing. This led to a -12% YoY decrease in volume from 1,400 to 1,230 MBbls or a thousand barrels per day. The same was observed in its NGL production, as pricing remained weak. On a lighter note, natural gas stayed strong as the core growth driver. Its revenue amounted to $35.1M, up by 62% YoY from $21.6M. Increased demand for natural gas during the winter season coupled with shortages pushed its price up. At the end of the quarter, it exceeded $4.00. Volume (WTI Q1 2025 Release) Moreover, WTI performed much better than in Q4 2024, which was primarily due to more stable pricing both in oil and natural gas. As a result, the operating revenue increased by 7.8% QoQ. What's more interesting is that the company remained efficient. And I believe this is mainly due to its prudent management of production volume relative to energy prices and inflation. So, its operating leverage improved from 55.7% to 55.3% and showed lower cost sensitivity. In addition, its gross profit margin remained flat at 41% from my previous coverage. And even if it incurred an operating loss, we saw a notable improvement from -14.0% in my previous coverage to -6.2% today. Income Statement (WTI Q1 2025 Release) This Q2, I believe WTI can sustain its improvement with its planned increase in production volume across all its products. From its average daily equivalent sales of 30.5 MBoe/d in Q1, it increased its guidance to 32.7-36.2 MBoe/d. It may increase further in the second half, considering its guidance of 32.8-36.3. Also, the price of natural gas is rebounding after its weaker performance in the past two months. Guidance (WTI Q1 2025 Release) Oil Prices Will Remain A Double-Edged Sword For WTI Oil prices stay weak today. With Brent sold at $66.7 and WTI Crude at $64.8 per barrel, both are already about 10% lower than Q1-end prices. They may stay within the $60-70 range in Q3, considering the planned OPEC hike in July. As a result, WTI may also receive lower pricing and revenue from its oil production. On the other hand, lower oil prices may help it lower its oil and fuel expenses used for exploration and production. The continued price downtrend can help stabilize its operating expenses and margin. As we can see, its margin remained weaker YoY. But there were improvements on a quarterly basis. Now, the question is how much the OPEC oil hike can affect WTI's oil revenue and expenses. Growth Cornerstones External headwinds amid tariff woes, stubborn inflation, and weak oil prices are still evident today. Yet, WTI may remain a solid company for its operational resilience and prudent asset management. One of the core strengths of this company is its excellent Balance Sheet. Its cash level remains high and adequate at $106M, despite the notable decrease since 2022. It has also remained stable in the past quarters. With its current performance and cash reserves, WTI can sustain its operations and dividend payments. Meanwhile, its borrowings have also decreased by nearly half the original amount in the past 11 quarters. This justifies the decrease in cash. In addition, its Net Debt/EBITDA remains attractive at 1.98x, so the company only needs about two years to pay all borrowings singlehandedly even if it doesn't have to. Note that most of these borrowings have longer maturities, . This means that WTI has enough time and capital buffer to prepare for repayments. More interestingly, its high liquidity justifies the sustainability of its production volume guidance for the remainder of the year. Cash (Seeking Alpha) Liabilities (Seeking Alpha) Moreover, natural gas remains promising. After hitting below $3.00 per barrel, its price has already rebounded to . This recent increase is in line with the EIA's estimation of per barrel for the whole year. With the planned production volume increase along with the price rebound, WTI's natural gas business may remain the core driver of its growth. This may be sustained by the increased electricity demand. Last 2024, 43% of the total electricity consumption in the U.S. came from natural gas. This year, it is expected to decrease to 40%. Yet, the actual consumption may increase. In 2024, it increased by 2% to its all-time high of or terawatt-hour. This 2025 and 2026, consumption is expected to increase again by 1.7% per year on average. This may be driven by the 2.6% usage increase in the commercial and industrial sector. Another factor to consider is the continued emergence and expansion of data centers, which will increase the energy demand by 34% in 2025 and 18% in 2026. This is to accommodate the increased internet usage and the digital revolution, as I explained in my previous coverage. The mining of cryptocurrencies is also an important aspect to consider. These things will drive the demand for natural gas. U.S. Energy Indicators (EIA) Valuation Since my previous coverage, WTI has already increased by about 31 cents or 20% per share, which justifies my strong buy rating before. After all, it appears cheap for its valuation. In today's coverage, the stock remains cheap considering the key metrics, such as sales per share or SPS and cash per share or CPS. Using the P/S Ratio, the price trades at only 0.52x its SPS, which is very cheap compared to the standard of 1.00x. It is also lower than the five-year average of 0.94x. If we use this to derive its fair value, the TP will be $3.28 or an 81% upside. The same goes for the P/CPS, which gives a TP of $2.72 and a 51% upside potential. P/S And P/CPS Ratio (Author's Computation) Technicals WTI continues to rebound from its recent correction. Yet, more confirmations are needed for bullish signals. Currently, the price keeps increasing and has just surpassed the 200-day SMA. Meanwhile, both the 50-day SMA and the 200-day SMA have flattened after their downtrend. This shows a potential shift in sentiments as buying pressures increase. Again, we still need more confirmations to verify bullish continuation. One is that the 50-day should also cross above the 200-day SMA. Another is that both SMAs should increase. Technical Analysis (Yahoo Finance) Meanwhile, both MACD and RSI mirror the price trend. So, we cannot detect any potential bearish reversal. It is safe to assume that the uptrend may continue. After all, the MACD histogram is regaining its momentum after the recent price dip. The challenge is that the RSI shows limited buying opportunities as it reaches the overbought region. But what's more interesting is how the price reacts today. The price dip low last May 12-23 did not break below the December 20 low. In addition, it has already surpassed the first resistance of $1.64 last March 25. For the bullish breakout to continue, it must reach or exceed $1.87 and should not cross below $1.44. With respect to the Fibonacci Retracement, I think the upward momentum may continue. During its first rebound to $1.60, it exceeded the 0.236 Retracement point. When the stock dipped, it did not go back to the 0.000 point at $1.15. Now, it has already exceeded the 0.382 point at $1.77, which shows that the bullish momentum is sustained. Considering this, it may reach higher points at 0.382 or $1.97 and 0.500 or $2.16, respectively. Hence, buying at its current price is still reasonable. Technical Analysis (TradingView) Conclusion W&amp;T Offshore, Inc. is still a solid company, driven by its strong natural gas segment. Its impressive Balance Sheet and the potential increase in natural gas demand justifies my bullish view. In addition, the stock is still cheap and promises an upside potential. Technicals are optimistic with a bullish breakout tendency, although the stock appears overbought. Considering all these aspects, I am reiterating my strong buy rating.

W&T Offshore: It's Underpriced With Some Bullish Signals (NYSE:WTI)

W&T Offshore, Inc. remains resilient amid mixed Q1 2025 results, with natural gas as a core growth driver and a robust balance sheet supporting operational stability. Despite weak oil prices, prudent management and rebounding natural gas prices position WTI for continued improvement. Valuation remains attractive, with the stock trading well below historical averages and offering significant upside potential. Technicals indicate a bullish breakout tendency, and the author reiterates a strong buy rating.