Note 4 - Joint Venture Drilling Program

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Joint Venture Drilling Program [Text Block]

4.

Joint Venture Drilling Program

In

March 

2018,

W&T and

two

other initial members formed and initially funded Monza, which jointly participates with us in the exploration, drilling and development of certain drilling projects (the “Joint Venture Drilling Program”) in the Gulf of Mexico.  Subsequent to the initial closing, additional investors joined as members of Monza during

2018

and total commitments by all members, including W&T's commitment outside of Monza, are

$361.4

million.  Through

December 31, 2019,

nine

wells have been completed of which

eight

were producing as of

December 31, 2019. 

W&T contributed

88.94%

of its working interest in certain identified undeveloped drilling projects to Monza and retained

11.06%

of its working interest.  The Joint Venture Drilling Program is structured so that we initially receive an aggregate of

30.0%

of the revenues less expenses, through both our direct ownership of our working interest in the projects and our indirect interest through our interest in Monza, for contributing

20.0%

of the estimated total well costs plus associated leases and providing access to available infrastructure at agreed-upon rates.  Any exceptions to this structure are approved by the Monza board.  W&T is the operator for

seven

of the

nine

wells completed through

December 31, 2019.  

The members of Monza are made up of

third

-party investors, W&T and an entity owned and controlled by Mr. Tracy W. Krohn, our Chairman and Chief Executive Officer.  The Krohn entity invested as a minority investor on the same terms and conditions as the

third

-party investors, and its investment is limited to

4.5%

of total invested capital within Monza.  The entity affiliated with Mr. Krohn has made a capital commitment to Monza of

$14.5

million.

Monza is an entity separate from any other entity with its own separate creditors who will be entitled, upon its liquidation, to be satisfied out of Monza’s assets prior to any value in Monza becoming available to holders of its equity.  The assets of Monza are

not

available to pay creditors of the Company and its affiliates.

Through

December 31, 2019,

members of Monza made partner capital contributions, including our contributions of working interest in the drilling projects, to Monza totaling

$273.3

 million and received cash distributions totaling

$30.2

million.  Our net contribution to Monza, reduced by distributions received, as of

December 31, 2019 

was

$59.7

 million.  W&T is obligated to fund certain cost overruns to the extent they occur, subject to certain exceptions, for the Joint Venture Drilling Program wells above budgeted and contingency amounts, of which the total exposure cannot be estimated at this time.

Consolidation and Carrying Amounts

Our interest in Monza is considered to be a variable interest that we account for using proportional consolidation. 

Through

December 31, 2019,

there have been

no

 events or changes that would cause a redetermination of the variable interest status.  We do

not

fully consolidate Monza because we are

not

considered the primary beneficiary.  As of

December 31, 2019,

in the Consolidated Balance Sheet, we recorded

$16.1

 million, net, in

Oil and natural gas properties and other, net

,

$5.3

 million in

Other assets,

$0.1

million in ARO and

$2.7

 million, net, increase in working capital in connection with our proportional interest in Monza’s assets and liabilities.  As of

December 31, 2018,

in the Consolidated Balance Sheet, we recorded

$8.8

million, net, in

Oil and natural gas properties and other, net

,

$3.3

 million in

Other assets

and

$0.7

 million, net, increase in working capital in connection with our proportional interest in Monza’s assets and liabilities. 

Additionally, during

2019

and

2018,

we called on Monza to provide cash to fund its portion of certain Joint Venture Drilling Program projects in advance of capital expenditure spending, and the unused balances as of

December 31, 2019

and

2018

were

$5.3

 million and

$20.6

million, respectively, which are included in the Consolidated Balance Sheet in

Advances from joint interest partners

.  

For

2019,

in the Consolidated Statement of Operations, we recorded

$11.9

 million in

Total revenues

and

$7.4

 million in

Operating costs and expenses

in connection with our proportional interest in Monza’s operations.  For

2018,

in the Consolidated Statement of Operations, we recorded

$4.3

 million in

Total revenues, 

$2.3

 million in

Operating costs and expenses

 and

$0.2

 million, net, in

Other expense (income), net

in connection with our proportional interest in Monza’s operations.