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 period 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 or 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 25% 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 �
ActualThird Quarter � EstimatedFourth Quarter (Dollars in
thousands, except per unit data) Average Daily Production: Gas
(Mcf) 60,967 45,901 42,609 43,500 to 47,500 Oil (Bbls) 7,516 7,725
8,207 8,700 to 8,900 Natural gas liquids (Bbls) 637 451 424 400 to
450 Total gas equivalents (Mcfe) 109,885 94,957 94,395 �98,100 to
103,600 � Differentials: Gas (Mcf) (a) $ 0.99 $ 0.71 $ (0.94)
$(0.35) to $(0.65) Oil (Bbls) $ (1.53) $ (2.47) $ (1.97) $(2.80) to
$(3.40) Natural gas liquids (Bbls) $ (37.90) $ (60.35) $ (48.08)
$(32.00) to $(38.00) � Costs Variable by Production ($/Mcfe):
Production expenses (including production taxes) $ 2.06 $ 2.54 $
2.63 $2.35 to $2.55 DD&A � Oil and gas properties $ 2.77 $ 2.62
$ 2.87 $2.65 to $3.05 � Other Revenues (Expenses): Natural gas
services: Revenues $ 2,538 $ 3,553 $ 2,978 $2,875 to $3,075
Operating costs $ (2,515) $ (3,244) $ (2,706) $(2,600) to $(2,800)
Exploration costs: Abandonments and impairments $ (297) $ (1,933) $
(43,036) $(1,000) to $(3,000) Seismic and other $ (3,675) $ (1,562)
$ (5,993) $(5,500) to $(7,500) DD&A � Other (b) $ (247) $ (261)
$ (212) $(250) to $(350) General and administrative (b) $ (3,211) $
(7,872) $ (6,405) $(7,150) to $(7,350) Interest expense (b) $
(6,352) $ (5,136) $ (4,515) $(5,700) to $(5,900) Other income $ 655
$ 3,014 $ 2,030 $250 to $350 Gain on sales of property and
equipment, net $ 560 $ 40,444 $ 3,023 - � Effective Federal and
State Income Tax Rate: Current 1% 1% 1% 1% Deferred 36% 35% 35% 36%
� Weighted Average Shares Outstanding (In thousands): Basic 11,387
12,111 12,114 12,100 to 12,200 Diluted 11,643 12,111 12,141 12,000
to 12,250 � (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. � ActualExpendituresNine
Months EndedSeptember 30, 2008 � PlannedExpendituresYear
EndingDecember 31, 2008 � Year 2008Percentageof Total (In
thousands) Permian Basin $ 120,000 $ 147,500 42 % North Louisiana
59,800 70,200 20 % Austin Chalk (Trend) 48,100 50,300 15 % South
Louisiana 31,400 36,900 11 % East Texas Bossier 22,400 38,700 11 %
Utah/California 2,200 4,700 1 % Other � 200 � 200 - � $ 284,100 $
348,500 100 % In response to recent declines in oil and gas prices,
we plan to reduce our capital spending for the remainder of 2008
and, accordingly have decreased our estimates for capital
expenditures in fiscal 2008 from $400.7�million to $348.5�million.
Most of the planned decrease in capital spending relates to
developmental drilling activities in the Permian Basin and North
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
remainder of 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. Based on these current estimates, approximately 75% 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 � ActualThird
Quarter � EstimatedFourth Quarter Gas (Mcf): Permian Basin 15,562
14,284 13,536 14,054 North Louisiana 13,596 15,233 16,273 17,304
South Louisiana 23,552 7,347 4,320 6,707 Austin Chalk (Trend) 2,460
2,133 2,271 2,239 Cotton Valley Reef Complex 5,270 6,277 5,832
4,837 Other 527 627 377 359 Total 60,967 45,901 42,609 45,500 � Oil
(Bbls): Permian Basin 3,494 3,568 3,983 4,536 North Louisiana 343
386 392 370 South Louisiana 985 105 90 402 Austin Chalk (Trend)
2,635 3,575 3,659 3,427 Other 59 91 83 65 Total 7,516 7,725 8,207
8,800 � Natural Gas Liquids (Bbls): Permian Basin 215 153 174 163
Austin Chalk (Trend) 272 241 233 229 Other 150 57 17 33 Total 637
451 424 425 Accounting for Derivatives The following summarizes
information concerning our net positions in open commodity
derivatives applicable to periods subsequent to September 30, 2008.
The settlement prices of commodity derivatives are based on NYMEX
futures prices. Swaps: � � Gas � Oil MMBtu (a) � Price Bbls � Price
Production Period: 4th Quarter 2008 4,100,000 $ 9.17 400,000 $
82.21 1st Quarter 2009 2,800,000 $ 8.46 440,000 $ 88.90 2nd Quarter
2009 2,700,000 $ 8.47 420,000 $ 88.12 3rd Quarter 2009 2,600,000 $
8.48 440,000 $ 87.89 4th Quarter 2009 2,450,000 $ 8.49 425,000 $
87.29 2010 4,640,000 $ 8.51 840,000 $ 97.75 19,290,000 2,965,000 �
(a) One MMBtu equals one Mcf at a Btu factor of 1,000. In July
2008, we terminated certain fixed-priced gas swaps covering 100,000
MMBtu at a price of $10.32 per MMBtu in October 2008, resulting in
an aggregate loss of $195,000, 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 30,000 barrels at a price of $76.65 from October 2008
through December 2008, resulting in an aggregate loss of
approximately $332,000, 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 September 30, 2008. Interest
Rate Swap: � PrincipalBalance � FixedLiborRate Period: October 1,
2008 to November 3, 2008 $ 45,000,000 5.73% 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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