Clayton Williams Energy, Inc. (NASDAQ: CWEI)
reported net income for the fourth quarter of 2008 of $59.9
million, or $4.93 per share, as compared to net income of $8.5
million, or $.74 per share, for the fourth quarter of 2007. Cash
flow from operations for the fourth quarter of 2008 was
$158.9�million, as compared to $72.6 million during the same period
in 2007.
For the year ended December 31, 2008, the Company reported net
income of $140.5 million, or $11.67 per share, as compared to net
income of $6 million, or $.52 per share, for the same period in
2007. Cash flow from operations for fiscal 2008 was $382 million,
as compared to $234.9 million during fiscal 2007.
Gains on derivative contracts resulting from declines in oil and
gas prices during the fourth quarter of 2008 had a significant
impact on reported net income and cash flow from operations.
Oil and gas sales decreased 14% from $96.3 million for the
fourth quarter of 2007 to $82.4 million for the same quarter in
2008 despite a 6% increase in oil and gas production on an
equivalent Mcf basis. Oil production for the fourth quarter of 2008
increased 31% to 810,000 barrels, or 8,804 barrels per day,
compared to 616,000 barrels, or 6,696 barrels per day, in the
fourth quarter of 2007. Gas production for the fourth quarter 2008
decreased 9% to 4.9 Bcf, or 53,348 Mcf per day, from 5.4 Bcf, or
58,924 Mcf per day, in the 2007 quarter. The comparability of
production between the two quarters was affected by the sale of
certain South Louisiana properties during the second quarter of
2008 which produced a daily average of approximately 740 barrels of
oil and 13,000 Mcf of gas during the fourth quarter of 2007.
Average realized oil prices for the fourth quarter of 2008
decreased 33% to $59.63 per barrel from $89.55 per barrel in the
2007 period, while gas prices decreased 4% to $6.75 per Mcf from
$7.06 per Mcf in the same quarter of 2007. Average realized prices
for 2008 and 2007 exclude the effects of any gains or losses
realized on commodity hedging transactions since those derivatives
were not designated as cash flow hedges and have been reported in
the Company�s statements of operations as gain/loss on derivatives
under applicable accounting standards.
For the fourth quarter of 2008, the Company reported a $136.7
million net gain on derivatives, consisting of a $110.9 million
realized gain on settled contracts and a $25.8 million non-cash
gain to mark the Company�s derivative positions to their fair value
on December 31, 2008. For the same period in 2007, the Company
reported an $18.9 million net loss on derivatives, consisting of a
$9.8 million realized loss on settled contracts and a $9.1 million
non-cash loss due to changes in mark-to-market valuations. In
December 2008, the Company terminated substantially all of its
then-existing derivative contracts for cash proceeds of $99.3
million. The terminated contracts covered 2.6 million barrels of
oil production and 15.2 million MMBtu of gas production for 2009
and 2010. Subsequent to December 31, 2008, the Company entered into
other derivative contracts covering 1,470,000 barrels of oil and 20
million MMBtu of gas production from 2009 through 2011 at fixed
prices ranging from $44.80 to $53.25 per barrel and from $5.47 to
$7.07 per MMBtu.
The Company recorded abandonment and impairment costs during the
fourth quarter of 2008 of $34.8 million compared to $15.4 million
for the fourth quarter of 2007. The 2008 quarter included a
previously announced pre-tax charge of $20.2 million for the
abandonment of the Claudia�s Education Trust 33-1 #1 (Winnsboro
prospect), $6.4 million of drilling and impairment charges related
to the Ron Lamb #1 in the Overthrust area in Sanpete County, Utah
and $4.5 million for other leasehold impairments in North
Louisiana.
The Company also announced today that its total proved oil and
gas reserves as of December 31, 2008 were 228.6 Bcfe, consisting of
20.8 million barrels of oil and NGL and 103.9 Bcf of natural gas.
By comparison, the Company reported proved reserves of 290.8 Bcfe
as of December 31, 2007, consisting of 27.9 million barrels of oil
and NGL and 123.2 Bcf of natural gas. The pre-tax present value of
estimated future net revenues from these reserves, discounted at
10% and computed in accordance with SEC guidelines, totaled $511.7
million at December 31, 2008, as compared to $1.3 billion at
December 31, 2007. The estimates were based on weighted average oil
and NGL prices of $42.03 per Bbl in 2008, as compared to $91.30 per
Bbl in 2007, and gas prices of $5.90 per Mcf in 2008, as compared
to $7.37 per Mcf in 2007.
During 2008, the Company replaced 97% of the 37.4 Bcfe produced
in 2008 through extensions and discoveries. The following table
summarizes the changes in proved reserves during 2008 on a Bcfe
basis and as a percentage of 2008 production.
�
Bcfe �
% of 2008
Production
Total proved reserves, 12/31/07 290.8 Extensions and discoveries
36.2 97% Revisions (49.7) (133)% Sales of minerals-in-place (11.3)
(30)% Production (37.4) Total proved reserves, 12/31/08 228.6
Net downward revisions of 49.7 Bcfe consisted of approximately
57.1 Bcfe of downward revisions attributable to the effects of
lower oil and gas prices on the estimated quantities of proved
reserves and approximately 7.4 Bcfe of upward revisions
attributable to well performance.
In December�2008, the SEC issued release 33-8995, Modernization
of Oil and Gas Reporting. This release changes the accounting and
disclosure requirements surrounding oil and gas reserves, and is
intended to modernize and update oil and gas disclosure
requirements, to align them with current industry practices and to
adapt to changes in technology. Under the new rules, which will be
effective for financial statements filed with the SEC after
December 31, 2009, companies will report oil and gas reserves using
a 12-month historical average price based upon closing NYMEX prices
on the first day of each calendar month rather than using year-end
prices. Using the new guidelines, benchmark oil and gas prices for
the 2008 proved reserves would have been $101.65 per barrel and
$9.04 per Mcf compared to year-end 2008 benchmark prices of $44.60
per barrel and $5.62 per Mcf.
The Company will host a conference call to discuss these results
and other forward-looking items today, March 10th at 10:00 am CT
(11:00 am ET). The dial-in conference number is: 800-901-5213,
passcode 69141930. The replay will be available for one week at
888-286-8010, passcode 47137893.
To access the conference call via Internet webcast, please go to
the Investor Relations section of the Company�s website at
www.claytonwilliams.com and click on �Live Webcast.� Following the
live webcast, the call will be archived for a period of 90 days on
the Company�s website.
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 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.
CLAYTON WILLIAMS ENERGY, INC. CONSOLIDATED STATEMENTS OF
OPERATIONS (Unaudited) (In thousands, except per
share) � � � � � � �
Three Months Ended Year
Ended December 31, December 31, 2008
2007 2008 2007 REVENUES Oil and gas sales $
82,419 $ 96,280 $463,964 $316,992 Natural gas services 1,857 2,399
10,926 10,230 Drilling rig services 6,074 15,198 46,124 52,649 Gain
on sales of property and equipment 56 13,114 44,503 14,024 Total
revenues 90,406 126,991 565,517 393,895 � COSTS AND EXPENSES
Production 23,689 19,350 89,054 75,319 Exploration: Abandonments
and impairments 34,846 15,444 80,112 68,870 Seismic and other
11,455 1,059 22,685 4,765 Natural gas services 1,595 2,307 10,060
9,745 Drilling rig services 6,986 10,450 37,789 32,964
Depreciation, depletion and amortization 38,069 27,740 120,542
84,476 Impairment of property and equipment 2,897 3,114 12,882
12,137 Accretion of abandonment obligations 686 644 2,355 2,508
General and administrative 7,742 6,142 25,635 19,266 Loss on sales
of property and equipment 1,702 400 2,122 9,815 Total costs and
expenses 129,667 86,650 403,236 319,865 Operating income (loss)
(39,261) 40,341 162,281 74,030 � OTHER INCOME (EXPENSE) Interest
expense (6,065) (8,055) (24,994) (32,118) Gain (loss) on
derivatives 136,729 (18,945) 74,743 (31,968) Other 840 662 6,539
5,355 Total other income (expense) 131,504 (26,338) 56,288 (58,731)
� Income before income taxes and minority interest 92,243 14,003
218,569 15,299 � Income tax expense (31,918) (5,047) (77,327)
(5,497) � Minority interest, net of tax (428) (452) (708) (3,812) �
� � � NET INCOME $ 59,897 $ 8,504 $140,534 $ 5,990 � � Net income
per common share: Basic $ 4.94 $ 0.75 $ 11.78 $ 0.53 Diluted $ 4.93
$ 0.74 $ 11.67 $ 0.52 � Weighted average common shares outstanding:
Basic 12,114 11,352 11,932 11,337 Diluted 12,148 11,529 12,039
11,494
CLAYTON WILLIAMS ENERGY, INC. CONSOLIDATED BALANCE
SHEETS (Unaudited) (In thousands) � � �
ASSETS
December 31, December 31, 2008 2007 �
CURRENT ASSETS Cash and cash equivalents $ 41,199 $ 12,344 Accounts
receivable: Oil and gas sales, net 26,009 36,698 Joint interest and
other, net 14,349 16,666 Affiliates 227 308 Inventory 20,052 14,348
Deferred income taxes 3,637 3,581 Fair value of derivatives - 7,191
Assets held for sale - 17,281 Prepaids and other 20,011 3,962
125,484 112,379 PROPERTY AND EQUIPMENT Oil and gas properties,
successful efforts method 1,526,473 1,374,090 Natural gas gathering
and processing systems 17,816 18,404 Contract drilling equipment
91,151 89,956 Other 14,954 14,505 1,650,394 1,496,955 Less
accumulated depreciation, depletion and amortization (840,366)
(765,877) Property and equipment, net 810,028 731,078 � OTHER
ASSETS Debt issue costs, net 6,225 6,963 Other 1,672 10,676 7,897
17,639 � $ 943,409 $ 861,096 �
LIABILITIES AND STOCKHOLDERS'
EQUITY � CURRENT LIABILITIES Accounts payable: Trade $ 67,189 $
72,477 Oil and gas sales 24,702 24,806 Affiliates 1,627 1,747
Current maturities of long-term debt 18,750 22,500 Fair value of
derivatives - 56,929 Accrued liabilities and other 10,609 10,308
122,877 188,767 � NON-CURRENT LIABILITIES Long-term debt 347,225
430,175 Deferred income taxes 120,414 44,302 Other 38,211 37,046
505,850 511,523 � STOCKHOLDERS' EQUITY: Preferred stock, par value
$.10 per share - - Common stock, par value $.10 per share 1,212
1,135 Additional paid-in capital 137,046 121,063 Retained earnings
176,424 35,890 Accumulated other comprehensive income, net of tax -
2,718 314,682 160,806 � $ 943,409 $ 861,096
CLAYTON WILLIAMS
ENERGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (Unaudited) (In thousands) � � � � � � �
Three Months Ended Year Ended December 31,
December 31, 2008 2007 2008 2007
� � CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 59,897 $
8,504 $ 140,534 $ 5,990
Adjustments to reconcile net
income (loss) to cash provided by operating activities:
Depreciation, depletion and amortization 38,069 27,740 120,542
84,476 Impairment of proved properties 2,897 3,114 12,882 12,137
Exploration costs 34,846 15,444 80,112 68,870 (Gain) loss on sales
of property and equipment, net 1,646 (12,714) (42,381) (4,209)
Deferred income taxes 32,434 3,318 77,315 3,768 Non-cash employee
compensation 1,892 255 5,834 1,865 Unrealized (gain) loss on
derivatives (25,808) 9,086 (49,738) 24,249 Settlements on
derivatives with financing elements 3,226 9,518 43,486 28,468
Amortization of debt issue costs 305 328 1,354 1,281 Accretion of
abandonment obligations 686 644 2,355 2,508 Excess tax benefit on
exercise of stock options - (963) - (963) Minority interest, net of
tax 428 452 708 3,812 �
�
Changes in operating working capital: Accounts receivable 18,088
5,061 13,087 (10,028) Accounts payable 5,428 (4,884) (4,946) 10,992
Other (15,110) 7,652 (19,164) 1,650 Net cash provided by operating
activities 158,924 72,555 381,980 234,866 � CASH FLOWS FROM
INVESTING ACTIVITIES Additions to property and equipment (120,473)
(53,341) (350,106) (233,453) Additions to equipment of Larclay JV -
(1,899) (1,683) (29,302) Proceeds from sales of property and
equipment 117 21,120 117,226 22,773 Change in equipment inventory
3,137 1,901 (8,247) 18,166 Other 55 (226) 3,935 (14,443) Net cash
used in investing activities (117,164) (32,445) (238,875) (236,259)
� CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from long-term debt
- - - 25,800 Proceeds from long-term debt of Larclay JV 2,000 -
7,500 8,727 Repayments of long-term debt (29,200) (22,200) (71,700)
- Repayments of long-term debt of Larclay JV (4,688) (6,563)
(22,500) (13,125) Proceeds from sale of common stock 21 30 15,936
6,000 Settlements on derivatives with financing elements (3,226)
(9,518) (43,486) (28,468) Excess tax benefit on exercise of stock
options - 963 - 963 Net cash used in financing activities (35,093)
(37,288) (114,250) (103) � NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 6,667 2,822 28,855 (1,496) � CASH AND CASH EQUIVALENTS
Beginning of period 34,532 9,522 12,344 13,840 � � � � End of
period $ 41,199 $ 12,344 $ 41,199 $ 12,344
Clayton Williams
Energy, Inc. Summary Production and Price Data
(Unaudited) � � � � � � �
Three Months Ended Year
Ended December 31, December 31, 2008
2007 2008 2007 �
Average Daily
Production: Natural Gas (Mcf): Permian Basin 14,288 14,024
14,326 14,649 North Louisiana 24,252 12,524 17,500 8,096 South
Louisiana 6,477 23,262 10,402 24,025 Austin Chalk (Trend) 2,496
2,249 2,367 2,220 Cotton Valley Reef Complex 5,376 6,390 5,745
7,133 Other 459 475 490 450 Total 53,348 58,924 50,830 56,573 � Oil
(Bbls): Permian Basin 4,184 3,319 3,821 3,212 North Louisiana 565
317 415 182 South Louisiana 334 922 378 1,139 Austin Chalk (Trend)
3,630 2,057 3,384 1,737 Other 91 81 90 81 Total 8,804 6,696 8,088
6,351 � Natural gas liquids (Bbls): Permian Basin 190 171 183 198
Austin Chalk (Trend) 252 279 250 259 Other 36 213 66 151 Total 478
663 499 608 � � �
Total Production: Natural Gas (MMcf) 4,908
5,421 18,553 20,649 Oil (MBbls) 810 616 2,952 2,318 Natural gas
liquids (MBbls) 44 61 182 222 Gas Equivalents (MMcfe) 10,032 9,483
37,357 35,889 � �
Average Realized Prices (a): Gas ($/Mcf):
$ 6.75 $ 7.06 $ 9.02 $ 7.01 Oil ($/Bbl): $ 59.63 $ 89.55 $ 97.35 $
70.36 Natural gas liquids ($/Bbl) $ 31.70 $ 60.21 $ 54.45 $ 43.74 �
Gains (Losses) on settled derivative contracts (a): ($ in
thousands, except per unit) Gas: Net realized gain (loss) (b) $
30,124 $ 2,445 $ 11,764 $ 12,229 Per unit produced ($/Mcf) $ 6.14 $
0.45 $ 0.63 $ 0.59 � Oil: Net realized gain (loss) (b) $ 81,139 $
(12,376) $ 15,560 $ (20,086) Per unit produced ($/Bbl) $ 100.17 $
(20.09) $ 5.27 $ (8.67)
Clayton Williams Energy, Inc.
Summary of Open Commodity Derivatives (Unaudited) � �
� � � �
The following summarizes
information concerning the Company�s net positions in open
commodityderivatives applicable to periods subsequent to December
31, 2008, all of which were enteredinto after December 31,
2008.
�
Swaps: Gas Oil MMBtu (a)
Price Bbls Price Production Period: � 1st
Quarter 2009 1,180,000 $ 5.47 160,000 $ 46.39 2nd Quarter 2009
1,570,000 $ 5.47 470,000 $ 49.68 3rd Quarter 2009 1,450,000 $ 5.47
440,000 $ 48.13 4th Quarter 2009 1,850,000 $ 5.47 400,000 $ 46.15
2010 7,540,000 $ 6.80 - $ - 2011 6,420,000 $ 7.07 - $ - 20,010,000
1,470,000 � � (a) One MMBtu equals one Mcf at a Btu factor of
1,000.
CLAYTON WILLIAMS ENERGY, INC. Notes to tables and
supplemental information � � (a) Hedging gains/losses are only
included in the determination of the Company's average realized
prices if the underlying derivative contracts are designated as
cash flow hedges under applicable accounting standards. The Company
did not designate any of its 2008 or 2007 derivative contracts as
cash flow hedges. This means that the Company's derivatives for
2008 and 2007 have been marked-to-market through its statement of
operations as other income/expense instead of through accumulated
other comprehensive income on the Company's balance sheet. This
also means that all realized gains/losses on these derivatives are
reported in other income/expense instead of as a component of oil
and gas sales. � (b) In December 2008, the Company terminated
substantially all of its then-existing oil and gas derivative
contracts for cash proceeds of $99.3 million. The terminated
contracts covered approximately 2.6 million barrels of oil and 15.2
million MMBtu of gas production for the months of January 2009
through December 2010.
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