Clayton Williams Energy, Inc. (the “Company”) (NASDAQ:CWEI)
today provided a review of its ongoing developmental drilling
programs in the Permian Basin and Austin Chalk (Trend), two of its
core oil-producing areas, for 2009 and its outlook for 2010.
Developmental Drilling
The Company began a program in 2008 to exploit its large
inventory of developmental drilling locations, primarily in the
Permian Basin and the Austin Chalk areas of Texas, but sharp
declines in oil and gas prices late in 2008 caused the Company to
temporarily suspend most of this program. By mid-year 2009, oil
prices had rebounded to acceptable levels and the costs of drilling
services had receded due to lower demand for those services. These
economic improvements, coupled with strategic actions by the
Company to create drilling efficiencies and control drilling and
completion costs, allowed the Company to resume and even escalate
its developmental drilling program. As previously reported, the
Company has taken steps to:
- Lock-in unit costs for
approximately 90% of the estimated services to be provided by third
party vendors for two years;
- Significantly improve drilling
times by operating and managing its own drilling rigs through the
acquisition of the noncontrolling interest in Desta Drilling, LP in
April 2009;
- Purchase pipe for more than 175
wells at discounts to current market prices; and
- Hedge most of its existing 2010
oil production at an average price of $76.50 per barrel, and about
half of its 2011 oil production at an average price of $83.80 per
barrel.
Andrews County Wolfberry
The Company has a large acreage block in Andrews County, Texas
on which the Company has identified more than 200 potential
locations for Wolfberry wells. A Wolfberry well is a well that
commingles production from the Spraberry and Wolfcamp formations.
The Company resumed continuous drilling operations in this area in
June 2009 with a single drilling rig, and added a second rig in
July and a third rig in October. During 2009, the Company drilled
and completed 13 gross (11.7 net) wells in this area at an average
gross cost of approximately $1.8 million. An additional 6 gross
(5.2 net) wells were in progress at the end of 2009, of which 5
gross (4.3 net) have been completed to date. In 2010, the Company
plans to use up to six of Desta Drilling’s rigs to drill and
complete approximately 104 additional wells at an estimated cost of
$173.9 million, net to the Company’s working interest.
Fuhrman-Mascho Field
The Company also resumed a drilling program in the
Fuhrman-Mascho Field in Andrews County, Texas beginning in July
2009. During 2009, the Company drilled and completed 20 gross (18.2
net) wells in this area at an average gross cost of approximately
$400,000. An additional 4 gross (3.6 net) wells were in progress at
the end of 2009, all of which have been completed to date. In 2010,
the Company plans to drill and complete approximately 14 additional
wells at an estimated cost of $4.1 million, net to the Company’s
working interest.
Austin Chalk (Trend)
The Company has extensive holdings of more than 200,000 net
acres in the Austin Chalk area of Burleson, Lee, and Robertson
Counties, Texas. In certain parts of this acreage, the Company has
been able to tap additional oil and gas production and reserves by
drilling new horizontal wells between existing producing units, a
practice known as in-fill drilling. The Company resumed in-fill
drilling operations in the Austin Chalk area in July 2009 with a
single drilling rig and added a second rig in October. During 2009,
the Company drilled and completed 3 gross (2.9 net) wells in this
area at an average gross cost of approximately $2.1 million. An
additional 2 gross (2 net) wells were in progress at the end of
2009, both of which have been completed to date. In 2010, the
Company plans to use two of Desta Drilling’s rigs to drill and
complete approximately 20 wells at an estimated cost of $39.3
million, net to the Company’s working interest.
Eagle Ford Shale
The Eagle Ford Shale is a formation immediately beneath the
Austin Chalk formation. The Company has drilled a horizontal well
in Burleson County, Texas to test the Eagle Ford Shale underlying
its existing Austin Chalk acreage. The well is currently producing,
and the Company is evaluating the data to determine if an Eagle
Ford Shale drilling program is economically viable. Depending on
the results of this well, the Company may decide to drill
additional wells in the future to further evaluate its Eagle Ford
Shale potential.
Revised Plans for Capital Spending in 2010
The Company also updated its estimates for capital spending for
the remainder of the year. The Company now plans to spend
approximately $274.4 million on exploration and development
activities in 2010, as compared to the previous estimate of
approximately $237.4 million. The table below provides an overview
of the estimated capital spending by area:
Total
Planned
Expenditures
Year Ending
Percentage
December 31, 2010
of Total
(In thousands) Permian Basin $ 210,500 77 % Austin
Chalk (Trend) 49,800 18 % South Louisiana 8,800 3 % California
2,500 1 % Other 2,800 1 % $ 274,400 100 %
Comments
Clayton W. Williams, Jr., President and Chief Executive Officer
of the Company, commented, “I am very pleased with the progress of
our developmental drilling program. The wells we have drilled to
date are meeting our production and reserves expectations. As a
result, we believe we have some very attractive opportunities for
organic growth in the Permian Basin and in the Austin Chalk
relative to our current acreage positions. I remain convinced that
the steps we have taken to control drilling and completion costs
and to stabilize product prices through effective hedge
transactions will have a positive impact on the ultimate success of
this program.”
Clayton Williams Energy, Inc. is an independent energy company
located in Midland, Texas.
This release contains 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. All statements, other
than statements of historical or current facts, that address
activities, events, outcomes and other matters that we plan,
expect, intend, assume, believe, budget, predict, forecast,
project, estimate or anticipate (and other similar expressions)
will, should or may occur in the future are forward-looking
statements. These forward-looking statements are based on
management’s current belief, based on currently available
information, as to the outcome and timing of future events. The
Company cautions that its future natural gas and liquids
production, revenues, cash flows, liquidity, plans for future
operations, expenses, outlook for oil and natural gas prices,
timing of capital expenditures and other forward-looking statements
are subject to all of the risks and uncertainties, many of which
are beyond our control, incident to the exploration for and
development, production and marketing of oil and gas.
These risks include, but are not limited to, the possibility of
unsuccessful exploration and development drilling activities, our
ability to replace and sustain production, commodity price
volatility, domestic and worldwide economic conditions, the
availability of capital on economic terms to fund our capital
expenditures and acquisitions, our level of indebtedness, the
impact of the current economic recession on our business
operations, financial condition and ability to raise capital,
declines in the value of our oil and gas properties resulting in a
decrease in our borrowing base under our credit facility and
impairments, the ability of financial counterparties to perform or
fulfill their obligations under existing agreements, the
uncertainty inherent in estimating proved oil and gas reserves and
in projecting future rates of production and timing of development
expenditures, drilling and other operating risks, lack of
availability of goods and services, regulatory and environmental
risks associated with drilling and production activities, the
adverse effects of changes in applicable tax, environmental and
other regulatory legislation, and other 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.
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