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.� Year Ending
December 31, 2008 ActualFirst Quarter � ActualSecond Quarter �
EstimatedThird Quarter � EstimatedFourth 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 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 - - � Effective Federal and State
Income Tax Rate: Current 1% 1% 1% 1% Deferred 36% 35% 36% 36% �
Weighted Average Shares Outstanding (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 � � (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. � (b)
Excludes amounts derived from Larclay JV. Capital Expenditures The
following table sets forth, by area, certain information about our
actual and planned exploration and development activities for 2008.
� ActualExpendituresSix Months EndedJune 30, 2008 �
PlannedExpendituresYear EndingDecember 31, 2008 � Year
2008Percentageof Total (In thousands) Permian Basin $ 60,400 $
184,100 46% 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
ActualFirst Quarter � ActualSecond Quarter � EstimatedThird Quarter
� EstimatedFourth 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
� (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: � PrincipalBalance � FixedLiborRate
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.
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