Clayton Williams Energy, Inc. (NASDAQ:CWEI) today filed a
Form 8-K with the Securities and Exchange Commission to provide
financial guidance disclosures for the year ending December 31, 2008.
This guidance was furnished to provide public disclosure of the
estimates being used by the Company to model its anticipated results of
operations for the periods presented.
A copy of these disclosures accompanies this release or may be obtained
electronically by accessing the Company’s
website at www.claytonwilliams.com.
Clayton Williams Energy, Inc. is an independent energy company located
in Midland, Texas.
Except for historical information, statements made in this release
are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. These statements are based on assumptions and estimates
that management believes are reasonable based on currently available
information; however, management's assumptions and the Company's future
performance are subject to a wide range of business risks and
uncertainties, and there is no assurance that these goals and
projections can or will be met. Any number of factors could cause
actual results to differ materially from those in the forward-looking
statements, including, but not limited to, production variance from
expectations, volatility of oil and gas prices, the need to develop and
replace reserves, the substantial capital expenditures required to fund
operations, exploration risks, uncertainties about estimates of
reserves, competition, government regulation, costs and results of
drilling new projects, and mechanical and other inherent risks
associated with oil and gas production. These risks and
uncertainties are described in the Company's filings with the Securities
and Exchange Commission. The Company undertakes no obligation to
publicly update or revise any forward-looking statements.
Financial Guidance Disclosures Follow
CLAYTON WILLIAMS ENERGY, INC.
FINANCIAL GUIDANCE DISCLOSURES FOR 2008
Overview
Clayton Williams Energy, Inc. and its subsidiaries have prepared this
document to provide public disclosure of certain financial and operating
estimates in order to permit the preparation of models to forecast our
operating results for each quarter during the year ending December 31,
2008. These estimates are based on information available to us as of the
date of this filing, and actual results may vary materially from these
estimates. We do not undertake any obligation to update these estimates
as conditions change or as additional information becomes available.
The estimates provided in this document are based on assumptions that we
believe are reasonable. Until our actual results of operations for these
periods have been compiled and released, all of the estimates and
assumptions set forth herein constitute “forward-looking
statements” within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical facts, included in this document that address
activities, events or developments that we expect, project, believe or
anticipate will or may occur in the future, or may have occurred through
the date of this filing, including such matters as production of oil and
gas, product prices, oil and gas reserves, drilling and completion
results, capital expenditures and other such matters, are
forward-looking statements. Such forward-looking statements involve
known and unknown risks, uncertainties, and other factors that may cause
our actual results, performance, or achievements to be materially
different from the results, performance, or achievements expressed or
implied by such forward-looking statements. Such factors include, among
others, the following: the volatility of oil and gas prices; the
unpredictable nature of our exploratory drilling results; the reliance
upon estimates of proved reserves; operating hazards and uninsured
risks; competition; government regulation; and other factors referenced
in filings made by us with the Securities and Exchange Commission.
As a matter of policy, we generally do not attempt to provide guidance
on:
(a) production which may be obtained through future exploratory drilling;
(b) dry hole and abandonment costs that may result from future
exploratory drilling;
(c) the effects of Statement of Financial Accounting Standards No. 133, “Accounting
for Derivative Instruments and Hedging Activities”;
(d) gains or losses from sales of property and equipment unless the sale
has been consummated prior to the filing of financial guidance;
(e) capital expenditures related to completion activities on exploratory
wells or acquisitions of proved properties until the expenditures are
estimable and likely to occur; and
(f) revenues, expenses and minority interest related to our investment
in Larclay JV.
As discussed in “Capital Expenditures,”
approximately 27% of our planned 2008 exploration and development
expenditures relate to exploratory prospects. Exploratory prospects
involve a higher degree of risk than development prospects. To offset
the higher risk, we generally strive to achieve a higher reserve
potential and rate of return on investments in exploratory prospects.
Actual results from our exploratory drilling activities, when ultimately
reported, may have a material impact on the estimates of oil and gas
production and exploration costs stated in this guidance.
Summary of Estimates
The following table sets forth certain estimates being used by us to
model our anticipated results of operations for each quarter during the
fiscal year ending December 31, 2008. When a single value is provided,
such value represents the mid-point of the approximate range of
estimates. Otherwise, each range of values provided represents the
expected low and high estimates for such financial or operating factor.
See “Supplementary Information.”
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Year Ending December 31, 2008
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|
|
Actual
First Quarter
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|
Actual
Second Quarter
|
|
Estimated
Third Quarter
|
|
Estimated
Fourth Quarter
|
|
|
|
|
|
|
|
(Dollars in thousands, except per unit data)
|
|
Average Daily Production:
|
|
|
|
|
|
|
|
|
|
|
Gas (Mcf)
|
|
60,967
|
|
|
45,901
|
|
45,800 to 49,800
|
|
49,000 to 53,000
|
|
Oil (Bbls)
|
|
7,516
|
|
|
7,725
|
|
8,725 to 8,925
|
|
9,850 to 10,050
|
|
Natural gas liquids (Bbls)
|
|
637
|
|
|
451
|
|
400 to 450
|
|
400 to 450
|
|
Total gas equivalents (Mcfe)
|
|
109,885
|
|
|
94,957
|
|
100,550 to 106,050
|
|
110,500 to 116,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Differentials:
|
|
|
|
|
|
|
|
|
|
|
Gas (Mcf) (a)
|
$
|
0.99
|
|
$
|
0.71
|
|
$(0.35) to $(0.65)
|
|
$(0.35) to $(0.65)
|
|
Oil (Bbls)
|
$
|
(1.53)
|
|
$
|
(2.47)
|
|
$(2.75) to $(3.35)
|
|
$(2.75) to $(3.35)
|
|
Natural gas liquids (Bbls)
|
$
|
(37.90)
|
|
$
|
(60.35)
|
|
$(32.00) to $(38.00)
|
|
$(32.00) to $(38.00)
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs Variable by Production ($/Mcfe):
|
|
|
|
|
|
|
|
|
|
|
Production expenses (including
|
|
|
|
|
|
|
|
|
|
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production taxes)
|
$
|
2.06
|
|
$
|
2.54
|
|
$2.40 to $2.60
|
|
$2.35 to $2.55
|
|
DD&A – Oil and gas properties
|
$
|
2.77
|
|
$
|
2.62
|
|
$2.45 to $2.85
|
|
$2.45 to $2.85
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Revenues (Expenses):
|
|
|
|
|
|
|
|
|
|
|
Natural gas services:
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
2,538
|
|
$
|
3,553
|
|
$3,450 to $3,650
|
|
$3,450 to $3,650
|
|
Operating costs
|
$
|
(2,515)
|
|
$
|
(3,244)
|
|
$(3,150) to $(3,350)
|
|
$(3,150) to $(3,350)
|
|
Exploration costs:
|
|
|
|
|
|
|
|
|
|
|
Abandonments and impairments
|
$
|
(297)
|
|
$
|
(1,933)
|
|
$(1,000) to $(3,000)
|
|
$(1,000) to $(3,000)
|
|
Seismic and other
|
$
|
(3,675)
|
|
$
|
(1,562)
|
|
$(5,500) to $(7,500)
|
|
$(5,500) to $(7,500)
|
|
DD&A – Other (b)
|
$
|
(247)
|
|
$
|
(261)
|
|
$(250) to $(350)
|
|
$(250) to $(350)
|
|
General and administrative (b)
|
$
|
(3,211)
|
|
$
|
(7,872)
|
|
$(6,550) to $(6,750)
|
|
$(7,150) to $(7,350)
|
|
Interest expense (b)
|
$
|
(6,352)
|
|
$
|
(5,136)
|
|
$(4,700) to $(4,900)
|
|
$(5,500) to $(5,700)
|
|
Other income
|
$
|
655
|
|
$
|
3,014
|
|
$250 to $350
|
|
$250 to $350
|
|
Gain on sales of property and equipment, net
|
$
|
560
|
|
$
|
40,444
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
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Effective Federal and State Income
|
|
|
|
|
|
|
|
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|
Tax Rate:
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
1%
|
|
|
1%
|
|
1%
|
|
1%
|
|
Deferred
|
|
36%
|
|
|
35%
|
|
36%
|
|
36%
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding
|
|
|
|
|
|
|
|
|
|
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(In thousands):
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
11,387
|
|
|
12,111
|
|
12,100 to 12,200
|
|
12,100 to 12,200
|
|
Diluted
|
|
11,643
|
|
|
12,111
|
|
12,100 to 12,300
|
|
12,100 to 12,300
|
|
|
|
|
|
|
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|
|
|
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|
(a) Our actual realized gas price for the first and second quarter
of 2008 was higher than the average NYMEX price for the same
period due primarily to abnormal variances between NYMEX and daily
spot prices for natural gas. Since we cannot predict the
likelihood that this condition will continue throughout the
remainder of 2008, we are estimating differentials to be more in
line with historical averages.
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(b) Excludes amounts derived from Larclay JV.
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Capital Expenditures
The following table sets forth, by area, certain information about our
actual and planned exploration and development activities for 2008.
|
|
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Actual
Expenditures
Six Months Ended
June
30, 2008
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|
Planned
Expenditures
Year Ending
December
31, 2008
|
|
Year 2008
Percentage
of Total
|
|
|
|
(In thousands)
|
|
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Permian Basin
|
|
$
|
60,400
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|
$
|
184,100
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|
46%
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North Louisiana
|
|
|
34,600
|
|
|
83,400
|
|
21%
|
|
Austin Chalk (Trend)
|
|
|
28,600
|
|
|
57,500
|
|
14%
|
|
South Louisiana
|
|
|
17,000
|
|
|
35,700
|
|
9%
|
|
East Texas Bossier
|
|
|
11,800
|
|
|
30,300
|
|
8%
|
|
Utah/California
|
|
|
1,900
|
|
|
8,700
|
|
2%
|
|
Other
|
|
|
400
|
|
|
1,000
|
|
-
|
|
|
|
$
|
154,700
|
|
$
|
400,700
|
|
100%
|
We have increased our estimates for planned exploration and development
expenditures for fiscal 2008 by $56.2 million from $344.5 million to
$400.7 million. Most of the planned increase in capital spending relates
to developmental drilling activities in the Permian Basin and North
Louisiana and exploratory drilling activities in South Louisiana.
Our actual expenditures during fiscal 2008 may be substantially higher
or lower than these estimates since our plans for exploration and
development activities may change during the year. Other factors, such
as prevailing product prices and the availability of capital resources,
could also increase or decrease the ultimate level of expenditures
during fiscal 2008.
In 2008, we plan to allocate a majority of our capital resources to
developmental drilling activities in oil-prone areas such as the Permian
Basin and the Austin Chalk (Trend). In addition, we plan to continue
drilling developmental gas wells in North Louisiana, primarily on our
Terryville prospect. Based on these current estimates, approximately 73%
of our expenditures for exploration and development activities for
fiscal 2008 will relate to developmental prospects, as compared to
approximately 49% in fiscal 2007.
Supplementary Information
Oil and Gas Production
The following table summarizes, by area, our actual or estimated daily
net production for each quarter during the year ending December 31,
2008. These estimates represent the approximate mid-point of the
estimated production range.
|
|
|
Daily Net Production for 2008
|
|
|
|
Actual
First Quarter
|
|
Actual
Second Quarter
|
|
Estimated
Third Quarter
|
|
Estimated
Fourth Quarter
|
|
Gas (Mcf):
|
|
|
|
|
|
|
|
|
|
Permian Basin
|
|
15,562
|
|
14,284
|
|
14,272
|
|
14,712
|
|
North Louisiana
|
|
13,596
|
|
15,233
|
|
18,038
|
|
17,114
|
|
South Louisiana
|
|
23,552
|
|
7,347
|
|
7,685
|
|
11,739
|
|
Austin Chalk (Trend)
|
|
2,460
|
|
2,133
|
|
2,261
|
|
2,239
|
|
Cotton Valley Reef Complex
|
|
5,270
|
|
6,277
|
|
5,185
|
|
4,837
|
|
Other
|
|
527
|
|
627
|
|
359
|
|
359
|
|
Total
|
|
60,967
|
|
45,901
|
|
47,800
|
|
51,000
|
|
|
|
|
|
|
|
|
|
|
|
Oil (Bbls):
|
|
|
|
|
|
|
|
|
|
Permian Basin
|
|
3,494
|
|
3,568
|
|
4,141
|
|
4,946
|
|
North Louisiana
|
|
343
|
|
386
|
|
413
|
|
391
|
|
South Louisiana
|
|
985
|
|
105
|
|
398
|
|
446
|
|
Austin Chalk (Trend)
|
|
2,635
|
|
3,575
|
|
3,847
|
|
4,102
|
|
Other
|
|
59
|
|
91
|
|
76
|
|
65
|
|
Total
|
|
7,516
|
|
7,725
|
|
8,825
|
|
9,950
|
|
|
|
|
|
|
|
|
|
|
|
Natural Gas Liquids (Bbls):
|
|
|
|
|
|
|
|
|
|
Permian Basin
|
|
215
|
|
153
|
|
163
|
|
163
|
|
Austin Chalk (Trend)
|
|
272
|
|
241
|
|
229
|
|
229
|
|
Other
|
|
150
|
|
57
|
|
33
|
|
33
|
|
Total
|
|
637
|
|
451
|
|
425
|
|
425
|
Accounting for Derivatives
The following summarizes information concerning our net positions in
open commodity derivatives applicable to periods subsequent to June 30,
2008. The settlement prices of commodity derivatives are based on NYMEX
futures prices.
|
Collar:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas
|
|
Oil
|
|
|
|
|
|
MMBtu (a)
|
|
Floor
|
|
Ceiling
|
|
Bbls
|
|
Floor
|
|
Ceiling
|
|
Production Period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3rd Quarter 2008
|
|
419,000
|
|
$ 4.00
|
|
$ 5.15
|
|
128,000
|
|
$ 23.00
|
|
$ 25.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swaps:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas
|
|
Oil
|
|
|
|
|
|
MMBtu (a)
|
|
Price
|
|
Bbls
|
|
Price
|
|
Production Period:
|
|
|
|
|
|
|
|
|
|
|
3rd Quarter 2008
|
|
4,000,000
|
|
$ 9.19
|
|
310,000
|
|
$ 78.96
|
|
|
4th Quarter 2008
|
|
4,100,000
|
|
$ 9.17
|
|
400,000
|
|
$ 82.21
|
|
|
2009
|
|
|
3,600,000
|
|
$ 9.33
|
|
1,440,000
|
|
$ 85.30
|
|
|
|
|
|
11,700,000
|
|
|
|
2,150,000
|
|
|
|
|
|
|
|
|
|
|
|
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|
(a) One MMBtu equals one Mcf at a Btu factor of 1,000.
|
In July 2008, we terminated certain fixed-priced gas swaps covering
300,000 MMBtu at a price of $10.32 per MMBtu from August 2008 through
October 2008, resulting in an aggregate loss of $585,000, which will be
paid to the counterparty monthly as the applicable contracts are settled.
In September 2007, we terminated certain fixed-priced oil swaps covering
60,000 barrels at a price of $76.65 from July 2008 through December
2008, resulting in an aggregate loss of approximately $663,000, which
will be paid to the counterparty monthly as the applicable contracts are
settled.
Interest Rate
The following summarizes information concerning our interest rate swap
applicable to periods subsequent to June 30, 2008.
Interest Rate Swap:
|
|
|
Principal
Balance
|
|
Fixed
Libor
Rate
|
|
Period:
|
|
|
|
|
|
July 1, 2008 to November 3, 2008
|
|
$ 45,000,000
|
|
5.73%
|
In April 2008, we terminated our $100 million interest rate swap for a
cash payment of $899,000.
We did not designate any of the derivatives shown in the preceding
tables as cash flow hedges under SFAS 133; therefore, all changes in the
fair value of these contracts prior to maturity, plus any realized gains
or losses at maturity, are recorded as other income (expense) in our
statement of operations.
Clayton Williams Energy, Inc.
Patti Hollums, 432-688-3419
Director
of Investor Relations
cwei@claytonwilliams.com
www.claytonwilliams.com
or
Mel
G. Riggs, 432-688-3431
Chief Financial Officer