CWEI Clayton Williams Energy, Inc.

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, 2010. 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.

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 oil and natural gas 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 environment 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.

Financial Guidance Disclosures Follow

CLAYTON WILLIAMS ENERGY, INC.FINANCIAL GUIDANCE DISCLOSURES FOR 2010

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, 2010. 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” superseded by topic 815-10 of the Financial Accounting Standards Board Accounting Standards Codification; (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 and expenses related to Desta Drilling, L.P., a wholly-owned subsidiary of the Company which provides contract drilling services for the Company.  

Summary of Estimates

The following table sets forth actual and certain estimates being used by us to model our anticipated results of operations for each quarter during the fiscal year ending December 31, 2010. 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, 2010 Actual   Actual   Estimated   Estimated First Quarter Second Quarter Third Quarter Fourth Quarter (Dollars in thousands, except per unit data) Average Daily Production: Oil (Bbls) 8,356 8,879 9,425 to 9,625 10,000 to 10,200 Gas (Mcf) 36,978 30,846 25,000 to 29,000 24,500 to 28,500 Natural gas liquids (Bbls) 633 659 800 to 850 750 to 800 Total oil equivalents (BOE) 15,152 14,679 14,392 to 15,308 14,833 to 15,750   Differentials: Oil (Bbls) $ (2.72 ) $ (3.77 ) $(2.75) to $(3.25) $(2.75) to $(3.25) Gas (Mcf) $ 0.72 $ 0.80 $0.05 to $0.35 $0.05 to $0.35 Natural gas liquids (Bbls) $ (32.54 ) $ (37.91 ) $(32.00) to $(38.00) $(32.00) to $(38.00)   Costs Variable by Production ($/BOE): Production expenses (including production taxes) $ 15.34 $ 15.39 $14.75 to $15.75 $14.50 to $15.50 DD&A – Oil and gas properties $ 18.03 $ 18.57 $18.00 to $19.00 $18.00 to $19.00   Other Revenues (Expenses): Natural gas services: Revenues $ 503 $ 452 $450 to $550 $450 to $550 Operating costs $ (348 ) $ (306 ) $(300) to $(500) $(300) to $(500) Exploration costs: Abandonments and impairments $ (2,878 ) $ (2,891 ) $(1,500) to $(3,500) $(1,500) to $(3,500) Seismic and other $ (1,660 ) $ (974 ) $(250) to $(750) $(250) to $(750) DD&A – Other (a) $ (171 ) $ (170 ) $(250) to $(350) $(250) to $(350) General and administrative (a) $ (6,166 ) $ (7,783 ) $(6,100) to $(6,300) $(6,000) to $(6,200) Interest expense (a) $ (6,108 ) $ (6,242 ) $(5,700) to $(5,900) $(5,900) to $(6,100) Other income (expense) $ 828 $ 1,016 $250 to $350 $250 to $350 Gain (loss) on sales of assets, net $ 286 $ (1,330 ) $3,000 to $3,200

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  Effective Federal and State Income Tax Rate: Current 0 % 0 % 0 % 0 % Deferred 36 % 35 % 36 % 36 %   Weighted Average Shares Outstanding (In thousands): Basic 12,146 12,146 12,146 12,146 Diluted 12,146 12,146 12,146 12,146

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(a) Excludes amounts derived from Desta Drilling, L.P.  

Capital Expenditures

The following table sets forth, by area, our actual expenditures for exploration and development activities for the first half of 2010 and our planned expenditures for the year ending December 31, 2010.

      Actual Planned Expenditures Expenditures 2010 Six Months Ended Year Ended Percentage June 30, 2010 December 31, 2010 of Total (In thousands) Permian Basin $ 98,800 $ 224,900 71 % Austin Chalk (Trend)/Eagle Ford Shale 32,100 74,200 24 % South Louisiana 5,000 8,700 3 % California 700 2,000 1 % Other   3,800   5,600 1 % $ 140,400 $ 315,400 100 %  

We currently plan to spend approximately $315.4 million on exploration and development activities in fiscal 2010 compared to our prior estimate of $281.9 million. A significant portion of the increase is attributable to our acquisition of certain leases in our Wolfberry play in Andrews County, Texas for $9.6 million, after giving effect to customary closing adjustments. Our actual expenditures during fiscal 2010 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 2010.

Based on these current estimates, approximately 96% of our planned expenditures for exploration and development activities for fiscal 2010 will relate to developmental prospects, as compared to approximately 60% in fiscal 2009.

Supplementary Information

Oil and Gas Production

The following table summarizes, by area, our actual and estimated daily net production for each quarter during the year ending December 31, 2010. These estimates represent the approximate mid-point of the estimated production range.

  Daily Net Production for 2010 Actual   Actual   Estimated   Estimated First Quarter Second Quarter Third Quarter Fourth Quarter Oil (Bbls): Permian Basin 4,909 5,390 5,884 6,272 Austin Chalk (Trend)/Eagle Ford Shale 2,595 2,835 2,946 3,197 North Louisiana 148 137 - - South Louisiana 627 435 641 598 Other 77 82 54 33 Total 8,356 8,879 9,525 10,100   Gas (Mcf): Permian Basin 13,911 13,263 14,185 14,054 Austin Chalk (Trend)/Eagle Ford Shale 2,531 1,810 2,033 2,022 North Louisiana 8,718 5,747 - 391 South Louisiana 7,513 4,930 6,359 5,848 Cotton Valley Reef Complex 3,529 4,072 3,380 3,239 Other 776 1,024 1,043 946 Total 36,978 30,846 27,000 26,500   Natural Gas Liquids (Bbls): Permian Basin 272 356 434 384 Austin Chalk (Trend)/Eagle Ford Shale 271 185 228 228 Other 90 118 163 163 Total 633 659 825 775  

Accounting for Derivatives

The following summarizes information concerning our net positions in open commodity derivatives applicable to periods subsequent to June 30, 2010. The settlement prices of commodity derivatives are based on NYMEX futures prices.

                         

Swaps:

  Oil Gas 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

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(a) One MMBtu equals one Mcf at a Btu factor of 1,000.

 

In March 2009, we terminated certain fixed-priced oil swaps covering 157,000 barrels at a price of $57.35 from July 2010 through December 2010, resulting in an aggregate loss of approximately $636,000, which will be paid to the counterparty monthly as the applicable contracts are settled.

We did not designate any of the derivatives shown in the preceding table as cash flow hedges; therefore, all changes in the fair value of these contracts prior to maturity, plus any realized gains or losses at maturity, will be recorded as other income (expense) in our statement of operations.