Deepwater Portfolio Expansion and Upside Potential
NON-GAAP RECONCILIATIONS
Adjusted EBITDA/ Free Cash Flow Reconciliations
The Company defines Adjusted EBITDA as net (loss) income plus income tax (benefit) expense, net interest expense, and depreciation, depletion,
amortization and accretion, excluding the unrealized commodity derivative gain or loss, amortization of derivative premium, bad debt reserve,
gain on debt transactions, non-recurring IT transition costs, release of restricted funds, non-ARO P&A costs, and litigation and other. The
Company defines Net Debt as current and long-term debt, net of unamortized debt discounts, less cash and cash equivalents. The Company
defines Net Leverage as Net Debt divided by the last 12 month's Adjusted EBITDA. Company management believes this presentation is relevant
and useful because it helps investors understand W&T's operating performance and makes it easier to compare its results with those of other
companies that have different financing, capital and tax structures. Adjusted EBITDA should not be considered in isolation from or as a substitute
for net income, as an indication of operating performance or cash flows from operating activities or as a measure of liquidity. Adjusted EBITDA, as
W&T calculates it, may not be comparable to Adjusted EBITDA measures reported by other companies. In addition, Adjusted EBITDA does not
represent funds available for discretionary use.
The Company defines Free Cash Flow as Adjusted EBITDA (defined above), less capital expenditures, asset retirement obligations and interest
expense (all on an accrual basis). For this purpose, the Company's definition of capital expenditures includes costs incurred related to oil and
natural gas properties (such as drilling and infrastructure costs and the lease maintenance costs) and equipment, furniture and fixtures, but
excludes acquisition costs of oil and gas properties from third parties that are not included in the Company's capital expenditures guidance
provided to investors. Company management believes that Free Cash Flow is an important financial performance measure for use in evaluating
the performance and efficiency of its current operating activities after the impact of accrued capital expenditures, asset retirement obligations and
interest expense and without being impacted by items such as changes associated with working capital, which can vary substantially from one
period to another. There is no commonly accepted definition of Free Cash Flow within the industry. Accordingly, Free Cash Flow, as defined and
calculated by the Company, may not be comparable to Free Cash Flow or other similarly named non-GAAP measures reported by other
companies. While the Company includes interest expense in the calculation of Free Cash Flow, other mandatory debt service requirements of
future payments of principal at maturity (if such debt is not refinanced) are excluded from the calculation of Free Cash Flow. These and other non-
discretionary expenditures that are not deducted from Free Cash Flow would reduce cash available for other uses.
The following tables present (i) a reconciliation of Total Debt to Net Debt and Net Leverage (ii) a reconciliation of the Company's net (loss)
income, a GAAP measure, to Adjusted EBITDA and Free Cash Flow (iii) a reconciliation of cash flow from operating activities, a GAAP measure, to
Free Cash Flow, as such terms are defined by the Company.
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W&T OFFSHORE | NYSE:WTI
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