Clayton Williams Energy, Inc. (the “Company”) (NASDAQ: CWEI)
today reported its financial results for the second quarter of 2010
and revised its capital spending estimates for the remainder of
2010.
Financial Results
Net income attributable to Company stockholders for the second
quarter of 2010 was $14 million, or $1.15 per share, as compared to
a net loss of $38.6 million, or $3.18 per share, for the second
quarter of 2009. Cash flow from operations for the second quarter
of 2010 was $66.3 million as compared to $26.6 million during the
same period in 2009.
For the six months ended June 30, 2010, net income attributable
to Company stockholders was $30.6 million, or $2.52 per share, as
compared to a net loss of $60.9 million, or $5.02 per share, for
the same period in 2009. Cash flow from operations for the
six-month period in 2010 was $96.7 million as compared to $39.9
million during the same period in 2009.
The key factors affecting the comparability of financial results
for the second quarter of 2010 (“2Q10”) versus the second quarter
of 2009 (“2Q09”) were:
- Oil and gas sales increased
$19.7 million in 2Q10 versus 2Q09. Price variances accounted for an
$18.9 million increase, and production variances accounted for the
remaining $800,000 increase. Oil production increased 13% compared
to 2Q09 while gas production declined 27% in 2Q10 versus 2Q09.
Average realized oil prices were $74.27 per barrel in 2Q10 versus
$56.55 per barrel in 2Q09, and average realized gas prices were
$5.14 per Mcf in 2Q10 versus $3.84 per Mcf in 2Q09.
- Oil and gas production (per
barrel of oil equivalent) declined by 6% in 2Q10 as compared to
2Q09. Oil production for 2Q10 increased to 808,000 barrels, or
8,879 barrels per day, as compared to 716,000 barrels, or 7,868
barrels per day, for 2Q09 due primarily to added production from
the Company’s oil-prone drilling programs in the Permian Basin and
the Austin Chalk. Gas production for 2Q10 declined to 2.8 Bcf, or
30,846 Mcf per day, as compared to 3.9 Bcf, or 42,374 Mcf per day,
for 2Q09 due primarily to a combination of normal production
declines from existing wells and the loss of production related to
the sale of certain properties in North Louisiana in June
2010.
- Gain on derivatives for 2Q10 was
$21 million ($17.3 million non-cash mark-to-market gain and a $3.7
million realized gain on settled contracts) versus a loss in 2Q09
of $21.8 million ($20.3 million non-cash mark-to-market loss and a
$1.5 million realized loss on settled contracts). See accompanying
tables for additional information about the Company’s accounting
for derivatives.
- 2Q10 included an impairment of
proved properties of $11.1 million for certain non-core assets in
the Permian Basin to reduce the carrying value of those properties
to their estimated fair value at June 30, 2010.
- Exploration charges decreased $2
million in 2Q10 to $3.9 million compared to $5.9 million in 2Q09
due primarily to the Company’s current emphasis on developmental
drilling.
- In June 2010, the Company sold
its interest in 22 operated and 76 non-operated producing wells in
North Louisiana for net proceeds of $73.1 million, after giving
effect to customary closing adjustments and the allocation of
approximately $2 million of proceeds to applicable after-payout
incentive plans, resulting in a loss on sale of assets of
approximately $1.4 million during 2Q10. Proceeds from the sale were
used to repay indebtedness on the Company’s revolving credit
facility.
Revised Plans for Capital Spending in 2010
The Company has updated its estimates for capital spending for
the remainder of 2010. The Company now plans to spend approximately
$315.4 million on exploration and development activities in 2010,
as compared to the previous estimate of approximately $281.9
million. A significant portion of the increase is attributable to
the Company’s previously announced acquisition of certain leases in
its Wolfberry play in Andrews County, Texas for $9.6 million, after
giving effect to customary closing adjustments. This acquisition
increased the Company’s working interest in wells to be drilled on
the acquired acreage from 86% to 100%.
Scheduled Conference Call
The Company will host a conference call to discuss these results
and other forward-looking items, August 9th at 2:00 pm CT (3:00 pm
ET). The dial-in conference number is: 800-901-5213, passcode
87930359. The replay will be available for one week at
888-286-8010, passcode 72561822.
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.
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.
CLAYTON WILLIAMS ENERGY, INC. CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited) (In thousands,
except per share)
Three Months Ended Six Months Ended June 30,
June 30, 2010 2009 2010 2009
REVENUES Oil and gas sales $ 76,918 $ 57,206 $ 155,960 $ 108,002
Natural gas services 452 1,355 955 2,939 Drilling rig services -
1,462 - 6,681 Gain on sales of assets 113 480
399 663
Total revenues
77,483 60,503 157,314
118,285 COSTS AND EXPENSES Production 20,567
18,296 41,494 37,359 Exploration: Abandonments and impairments
2,891 4,505 5,769 16,917 Seismic and other 974 1,388 2,634 5,658
Natural gas services 306 1,211 654 2,622 Drilling rig services 419
2,911 1,081 9,997 Depreciation, depletion and amortization 25,437
26,186 51,049 62,651 Impairment of property and equipment 11,114
32,068 11,114 32,068 Accretion of abandonment obligations 647 748
1,294 1,466 General and administrative 7,832 6,256 14,056 10,784
Loss on sales of assets and impairment of inventory 1,443
396 1,443 3,845
Total costs and expenses 71,630 93,965
130,588 183,367 Operating income (loss)
5,853 (33,462 ) 26,726
(65,082 ) OTHER INCOME (EXPENSE) Interest expense
(6,244 ) (5,736 ) (12,353 ) (11,174 ) Gain (loss) on derivatives
20,983 (21,770 ) 31,284 (19,260 ) Other 1,016 826 1,844 1,727
Total other income (expense)
15,755 (26,680 ) 20,775
(28,707 ) Income (loss) before income taxes 21,608 (60,142 )
47,501 (93,789 ) Income tax (expense) benefit (7,645 )
21,943 (16,863 ) 34,321 NET INCOME
(LOSS) 13,963 (38,199 ) 30,638 (59,468 ) Less income attributable
to noncontrolling interest, net of tax - (409
) - (1,455 ) NET INCOME (LOSS) attributable to
Clayton Williams Energy, Inc. $ 13,963 $ (38,608 ) $ 30,638
$ (60,923 ) Net income (loss) per common share
attributable to Clayton Williams Energy, Inc. stockholders: Basic $
1.15 $ (3.18 ) $ 2.52 $ (5.02 ) Diluted $ 1.15
$ (3.18 ) $ 2.52 $ (5.02 ) Weighted average common
shares outstanding: Basic 12,146 12,142
12,146 12,132 Diluted 12,146
12,142 12,146 12,132
CLAYTON WILLIAMS ENERGY,
INC.
CONSOLIDATED BALANCE SHEETS (In thousands)
ASSETS June 30, December 31,
2010 2009 (Unaudited) CURRENT ASSETS Cash and
cash equivalents $ 10,375 $ 14,013 Accounts receivable: Oil and gas
sales 25,861 28,721 Joint interest and other, net 4,281 6,669
Affiliates 638 624 Inventory 40,488 43,068 Deferred income taxes
817 1,362 Fair value of derivatives 16,264 - Assets held for sale
7,411 7,411 Prepaids and other 4,555 1,729
110,690 103,597 PROPERTY AND
EQUIPMENT Oil and gas properties, successful efforts method
1,565,365 1,579,664 Natural gas gathering and processing systems
18,399 17,816 Contract drilling equipment 48,348 41,533 Other
17,761 16,550 1,649,873 1,655,563 Less
accumulated depreciation, depletion and amortization
(979,985 ) (985,517 ) Property and equipment, net
669,888 670,046 OTHER ASSETS Debt issue costs,
net 4,592 4,874 Fair value of derivatives 8,128 4,427 Other
1,768 1,660 14,488 10,961
$ 795,066 $ 784,604
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES
Accounts payable: Trade $ 53,415 $ 47,211 Oil and gas sales 15,746
18,063 Affiliates 1,055 1,097 Fair value of derivatives - 5,907
Accrued liabilities and other 15,629 11,995
85,845 84,273 NON-CURRENT
LIABILITIES Long-term debt 356,000 395,000 Deferred income taxes
70,306 54,065 Other 40,002 38,991
466,308 488,056 STOCKHOLDERS' EQUITY
Preferred stock, par value $.10 per share - - Common stock, par
value $.10 per share 1,215 1,215 Additional paid-in capital 152,051
152,051 Retained earnings 89,647 59,009
Total stockholders' equity 242,913 212,275
$ 795,066 $ 784,604
CLAYTON
WILLIAMS ENERGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (Unaudited) (In thousands)
Three Months Ended Six Months
Ended June 30, June 30, 2010 2009
2010 2009
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) $ 13,963 $ (38,199 ) $ 30,638 $ (59,468 )
Adjustments to reconcile net income (loss) to cash provided by
operating activities: Depreciation, depletion and amortization
25,437 26,186 51,049 62,651 Impairment of property and equipment
11,114 32,068 11,114 32,068 Exploration costs 2,891 4,505 5,769
16,917 (Gain) loss on sales of assets and impairment of inventory,
net 1,330 (84 ) 1,044 3,182 Deferred income tax expense (benefit)
7,645 (21,943 ) 16,863 (34,321 ) Non-cash employee compensation
3,069 244 5,079 627 Unrealized (gain) loss on derivatives (17,269 )
20,286 (25,871 ) 18,907 Amortization of debt issue costs 439 316
774 624 Accretion of abandonment obligations 647 748 1,294 1,466
Changes in operating working capital: Accounts receivable
6,702 475 5,234 10,579 Accounts payable 5,586 (3,219 ) (3,403 )
(16,626 ) Other 4,747 5,196
(2,907 ) 3,264 Net cash provided by operating
activities 66,301 26,579 96,677
39,870 CASH FLOWS FROM INVESTING
ACTIVITIES Additions to property and equipment (77,252 ) (26,456 )
(135,528 ) (69,082 ) Proceeds from sales of assets 72,532 411
73,011 670 Change in equipment inventory (1,152 ) (6,577 ) 1,300
(12,594 ) Other (3 ) 13 (98 )
(97 ) Net cash used in investing activities (5,875 )
(32,609 ) (61,315 ) (81,103 ) CASH FLOWS FROM
FINANCING ACTIVITIES Proceeds from long-term debt - 10,800 - 25,200
Repayments of long-term debt (65,000 ) (4,688 ) (39,000 ) (9,375 )
Proceeds from exercise of stock options - 45
- 152 Net cash provided by (used
in) financing activities (65,000 ) 6,157
(39,000 ) 15,977 NET INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS (4,574 ) 127 (3,638 )
(25,256 ) CASH AND CASH EQUIVALENTS Beginning of period
14,949 15,816 14,013 41,199 End of
period $ 10,375 $ 15,943 $ 10,375 $ 15,943
CLAYTON WILLIAMS ENERGY, INC. COMPUTATION
OF EBITDAX (Unaudited) (In thousands)
EBITDAX is presented as a supplemental non-GAAP financial
measure because of its wide acceptance by financial analysts,
investors, debt holders, banks, rating agencies and other financial
statement users as an indication of an entity's ability to meet its
debt service obligations and to internally fund its exploration and
development activities.
The Company defines EBITDAX as net income (loss) before interest
expense, income taxes, exploration costs, (gain)/loss on sales of
assets and impairment of inventory and all non-cash items in the
Company's statements of operations, including depreciation,
depletion and amortization, impairment of property and equipment,
accretion of abandonment obligations, certain employee compensation
and changes in fair value of derivatives. EBITDAX is not an
alternative to net income (loss) or cash flow from operating
activities, or any other measure of financial performance presented
in conformity with GAAP.
The following table reconciles net income (loss) to EBITDAX:
Three Months Ended Six Months
Ended June 30, June 30, 2010 2009
2010 2009 Net income (loss) $ 13,963 $ (38,199
) $ 30,638 $ (59,468 ) Interest expense 6,244 5,736 12,353 11,174
Income tax (benefit) expense 7,645 (21,943 ) 16,863 (34,321 )
Exploration: Abandonments and impairments 2,891 4,505 5,769 16,917
Seismic and other 974 1,388 2,634 5,658 (Gain) loss on sales of
assets and impairment of inventory 1,330 (84 ) 1,044 3,182
Depreciation, depletion and amortization 25,437 26,186 51,049
62,651 Impairment of property and equipment 11,114 32,068 11,114
32,068 Accretion of abandonment obligations 647 748 1,294 1,466
Non-cash employee compensation 3,069 244 5,079 627 Non-cash changes
in fair value of derivatives (17,269 ) 20,286 (25,871 ) 18,907
$ 56,045 $ 30,935 $
111,966 $ 58,861
Clayton Williams Energy,
Inc. Summary Production and Price Data
(Unaudited) Three Months
Ended Six Months Ended June 30, June
30, 2010 2009 2010
2009 Average Daily Production: Oil (Bbls): Permian
Basin 5,390 4,058 5,151 4,256 Austin Chalk (Trend) 2,835 2,742
2,717 2,942 North Louisiana 137 273 142 271 South Louisiana 435 701
530 548 Other 82 94 79
88 Total 8,879 7,868
8,619 8,105 Natural Gas (Mcf): Permian
Basin 13,263 15,432 13,586 15,553 Austin Chalk (Trend) 1,810 2,412
2,169 2,718 North Louisiana 5,747 11,445 7,225 12,989 South
Louisiana 4,930 7,699 6,213 10,132 Cotton Valley Reef Complex 4,072
3,781 3,802 4,026 Other 1,024 1,605
900 1,372 Total 30,846
42,374 33,895 46,790
Natural gas liquids (Bbls): Permian Basin 356 248 314 238 Austin
Chalk (Trend) 185 290 228 299 North Louisiana 26 37 15 19 South
Louisiana 86 60 83 52 Other 6 13
6 11 Total 659 648
646 619
Total Production: Oil
(MBbls) 808 716 1,560 1,467 Natural Gas (MMcf) 2,807 3,856 6,135
8,469 Natural gas liquids (MBbls) 60 59
117 112 Total (MBOE) 1,336 1,418 2,700
2,991
Average Realized Prices (a): Oil ($/Bbl) $
74.27 $ 56.55 $ 75.10 $ 46.55 Gas
($/Mcf) $ 5.14 $ 3.84 $ 5.48 $ 4.25
Natural gas liquids ($/Bbl) $ 40.13 $ 24.53 $ 43.08
$ 23.78
Gain (Loss) on settled derivative
contracts (a): ($ in thousands, except per unit) Oil: Net
realized loss $ (1,249 ) $ (4,572 ) $ (2,871 ) $ (4,839 ) Per unit
produced ($/Bbl) $ (1.55 ) $ (6.39 ) $ (1.84 ) $ (3.30 )
Gas: Net realized gain $ 4,964 $ 3,088 $ 8,283 $ 4,486 Per unit
produced ($/Mcf) $ 1.77 $ 0.80 $ 1.35 $ 0.53 (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 2010 or 2009 derivative contracts as
cash flow hedges. This means that the Company's derivatives for
2010 and 2009 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.
Clayton Williams Energy, Inc. Summary of Capital
Expenditures (Unaudited) Planned
Expenditures Year Ending Percentage
12/31/2010 of Total (In thousands) Permian
Basin $ 224,900 71 % Austin Chalk (Trend)/ Eagle Ford Shale 74,200
24 % South Louisiana 8,700 3 % California 2,000 1 % Other
5,600 1 % $ 315,400 100 %
Clayton Williams Energy,
Inc.
Summary of Open Commodity Derivatives (Unaudited)
The following summarizes information concerning the
Company’s net positions in open commodity derivatives applicable to
periods subsequent to June 30, 2010.
Oil Gas
Swaps: Bbls Price MMBtu (a)
Price Production Period:
3rd Quarter 2010
522,000 $ 76.40 1,750,000 $ 6.80 4th Quarter 2010 480,000 $ 76.24
1,680,000 $ 6.80 2011 1,656,000 $ 84.38 6,420,000 $ 7.07 2,658,000
9,850,000 (a) One MMBtu equals one Mcf at a Btu
factor of 1,000.
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