# To my fellow
Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/energy-oil-gas-e-p/NYSE_WTI_2022/NYSE_WTI_2022.mmd` · pages 3-9_

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To my fellow
Shareholders,

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Tracy W. Krohn
Founder, Chairman, Chief Executive
Officer and President

We are very pleased with our strong financial and operating results in 2022, which was one of the best years in our long and profitable history. Our most valuable asset, our people, have done an excellent job adapting to changing market conditions while maintaining the highest levels of safety and operational excellence. We are committed to a simple and successful strategy that has guided our success for the past four decades, which is focused on: 1) maximizing cash flow generation; 2) operating efficiently; 3) improving the profitability of our assets; and 4) opportunistically capitalizing on accretive acquisition opportunities. These are the operating principles that have enabled us to build value for our shareholders, while developing and producing oil and gas resources in a safe and environmentally responsible manner. These core values have provided the foundation for W&T to profitably grow over the past forty years through a combination of accretive property acquisitions, methodical integration and exploitation of those acquisitions, and successful development and exploratory drilling on our legacy fields, all while generating strong free cash flow to fund our growth.

We are in a much stronger position today compared to a year ago, both operationally and financially. Because it is such an integral part of our strategy, I would like to point out that in every quarter of 2022, we produced positive free cash flow and we have done so for 20 consecutive quarters. We saw a 5% year-over-year increase in production to 40,100 barrels of oil equivalent per day in 2022, with about 49% being liquids. This increased production, coupled with strong commodity pricing, enabled W&T to report full year 2022 net income of \(231.1 million or \)1.59 cents per share and produce a record $376.4 million

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401
Average Production (MBoe/d)

$921.0

Total Revenue ($mm)

in free cash flow for 2022, which was more than four times what we generated in 2021. We completed two attractive producing property acquisitions in early 2022 and have successfully integrated them into our operations, which further strengthened our asset portfolio.

Over the past year, we took several steps to enhance our liquidity, lower our net debt, and improve our financial flexibility for the future. In mid-2022, we monetized a portion of our natural gas hedge position, which resulted in a net gain from the transaction of \(151.4 million. Taking into account the cost of acquiring additional natural gas calls with higher strike prices, total net proceeds were \)105.3 million. We took advantage of the spike in natural gas prices and restructured the strike prices on a portion of our purchased natural gas calls to monetize some of the value of the call options while maintaining the ability to participate in future increases in natural gas prices.

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"We are well-positioned for success in 2023 with a meaningful cash position and significant liquidity in the current pricing environment."
We grew cash and cash equivalents to \(461.4 million at year-end 2022. Our net debt was down by \)253 million or more than 50% lower compared to year-end 2021. We reduced net debt by \(455 million over the past three years, while our liquidity improved by 73% year-over-year to \)511 million at year-end 2022. In January and February 2023, we issued new 2026 second lien notes and paid off all of our 2023 second lien notes, significantly reducing our gross debt levels and our interest payments moving forward. The combination of all these successful financial initiatives further strengthened our balance sheet. Additionally, in the fourth quarter of 2022, the Company entered into an amendment to its Credit Facility, which, among other things, extended the maturity date and Calculus' commitment by up to one year to January 3, 2024. This provides W&T with significant financial flexibility, no near-term debt and further enhances our ability to

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"In total, we added 22.3 MMBoe of new reserves which replaced 153% of our 2022 production of 14.6 MMBoe."

165.3

Proved Reserves (MMBoe)

utilize our strong balance sheet to move quickly on accretive acquisitions that meet our requirements.

In February 2022, W&T closed an accretive acquisition for about \(34 million in cash. Having a strong cash position on our balance sheet allowed W&T to close the transaction quickly. This accretive acquisition consisted of approximately 80% of the working interests in oil and gas producing properties in Federal shallow waters in the central region of the GOM over 50 gross producing wells, all of which W&T now operates, at Ship Shoal 230, South Marsh Island/Vermilion 191, and South Marsh Island 73. These assets provide a solid base of proved reserves and produce strong free cash flow. In April 2022, W&T purchased the remaining working interests in those properties from an undisclosed private seller for approximately \)17.5 million, solidifying our position as 100% working interest operator of these assets. These properties are very complementary to our existing assets and there are a number of opportunities, both near-term and long-term, that will allow us to maximize the value of these assets. Acquisitions continue to be a core pillar of how we create value here at W&T and this is a great example of what we look for when we are evaluating an acquisition.

We've always highlighted our ability to generate strong free cash flow from our stable, long-life asset base and its importance to our long-term sustainability. That is particularly evident in our outstanding year-end reserve results. Proved reserves at year-end 2022 increased 5% to 165.3 MMBoe compared to 2021. While improved SEC pricing revisions of 9.0 MMBoe certainly contributed to the increase, we also had positive performance revisions of 7.3 MMBoe and an increase of 6.0 MMBoe due to acquisitions. In total, we added 22.3 MMBoe of new reserves which replaced 153% of our 2022 production of 14.6 MMBoe. Our all-in reserve replacement costs for 2022 were \(4.10 per Boe and have averaged a very competitive \)2.85 per Boe over the last three years. I would like to point out that the positive performance revisions are a testament to our reserve base, as it demonstrates our ability to maintain and even grow our world-class conventional Gulf of Mexico reserves without substantial capital investment. About 36% of year-end 2022 proved reserves were liquids with the balance being natural gas. In addition to increasing

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## $339.5 365

Cash Flow from Operations ($mm)

reserves, we also saw a dramatic increase in the present value of our proved reserves discounted at 10% ("PV-10"). The PV-10 value of W&T's SEC proved reserves at year-end 2022 was $3.1 billion, an increase of 93% from year-end 2021.

Looking ahead to 2023, we have the flexibility and dry powder to make additional acquisitions, drill our current inventory of prospects, continue to build cash, or pay down debt. Because we have no long-term rig commitments or near-term drilling obligations, we have flexibility to ramp up or defer capital spending. We are currently anticipating our capex range for 2023 to between \(90 and \)110 million. This does not include potential acquisitions but does include planned expenditures related to organic drilling opportunities, long-lead items, front-end engineering design, and capital costs for facilities, leasehold, seismic, and recompletions. As always, we will monitor commodity prices through the year and adjust our spending plans accordingly. With our modest capital range in 2023, we expect to generate meaningful free cash flow which provides us flexibility to execute on accretive acquisition opportunities quickly.

Environmental stewardship, sound corporate governance, and contributing positively to our employees and the communities where we work and operate are cornerstones of our culture. ESG metrics were first incorporated into our 2021 short-term incentive plan, and we are continuing with that practice moving forward. We have created a new board committee focused on ESG oversight and in 2023 we are releasing our third sustainability report. We are building on the solid foundation of our previous reports as W&T remains committed to its ESG priorities.

In closing, 2022 was an outstanding year thanks in no small part to the ability of both our operations and finance teams to execute at a high level. I want to thank our management team and all of our employees for their continued hard work and dedication, as well as our Board for their guidance and support. We are well-positioned for success in 2023 with a meaningful cash position and significant liquidity in the current pricing environment. Our strong financial position, which was enhanced with our significant net debt reduction over the last several years, provides us with optionality and flexibility moving forward. Our liquidity and cash position enables us to continue to evaluate growth opportunities, both organically and inorganically, and we are poised to execute on accretive opportunities that meet our long-standing and proven criteria. We believe the GOM is and will continue to be a world class basin with strong producing assets. It is good to see public markets starting to better appreciate offshore assets where we have always been focused. Quickly evaluating and executing on opportunities within our focus area is a pillar of our success. We have a premier portfolio of both shallow water and deepwater properties in the Gulf of Mexico that have low decline rates and significant upside. Our management team's approximately 34% stake in W&T's equity ensures that management's interests are highly aligned with those of our shareholders. We are excited about the opportunities in front of us to add value to the business and look forward to a successful 2023 and beyond.

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Tracy W. Krohn
Founder, Chairman, Chief Executive Officer and President