Clayton Williams Energy, Inc. (the “Company”) (NASDAQ: CWEI)
today reported its financial results for the three months ended
March 31, 2011.
Financial Results for the First Quarter of 2011
Net loss attributable to Company stockholders for the first
quarter of 2011 (“1Q11”) was $7.9 million, or $0.65 per share, as
compared to net income of $16.7 million, or $1.37 per share, for
the first quarter of 2010 (“1Q10”). Cash flow from operations for
1Q11 was $33.3 million as compared to $30.4 million for 1Q10.
The key factors affecting the comparability of the two quarters
were:
- Oil and gas sales increased $15.9
million in 1Q11 versus 1Q10. Price variances accounted for $10.7
million of the increase and production variances accounted for the
remaining $5.2 million. Average realized oil prices were $88.93 per
barrel in 1Q11 versus $76.00 per barrel in 1Q10, and average
realized gas prices were $5.24 per Mcf in 1Q11 versus $5.76 per Mcf
in 1Q10.
- Oil production increased 20% in 1Q11
versus 1Q10 while gas production declined 37%. Oil and gas
production per barrel of oil equivalent (“BOE”) declined by 2% in
1Q11 as compared to 1Q10. Oil production increased to 899,000
barrels, or 9,989 barrels per day, as compared to 752,000 barrels,
or 8,356 barrels per day, while gas production declined to 2.1 Bcf,
or 23,478 Mcf per day as compared to 3.3 Bcf or 36,978 Mcf per day
for 1Q10. On a comparable basis, after giving effect to the sale of
properties in North Louisiana in June 2010, oil and gas production
in 1Q11 on a BOE basis was 9% higher than 1Q10. Since the Company’s
current drilling emphasis is on the development of oil reserves,
normal declines in gas production from existing wells is not being
replaced with production from new drilling.
- Production costs increased 19% from
$20.9 million in 1Q10 to $24.8 million in 1Q11 due to a combination
of more producing wells, rising costs of field services and
increased production taxes on higher oil and gas sales.
- Loss on derivatives for 1Q11 was $46.3
million ($44.6 million non-cash mark-to-market loss and a $1.7
million realized loss on settled contracts) versus a gain in 1Q10
of $10.3 million ($8.6 million non-cash mark-to-market gain and a
$1.7 million realized gain on settled contracts). See accompanying
tables for additional information about the Company’s accounting
for derivatives.
- We recorded a gain of $13.2 million in
1Q11 on the sale our two 2,000 horsepower rigs and related
equipment for total consideration of $22 million, consisting of $11
million cash and a promissory note for $11 million.
- In March 2011, the Company repurchased
$143.2 million of Senior Notes due 2013. The repurchase of these
notes resulted in a loss on early extinguishment of long-term debt
during 1Q11 of $4.6 million.
Capitalization and Liquidity
As previously reported, in March 2011, we issued $300 million of
aggregate principal amount of 7.75% Senior Notes due 2019 at par in
a private placement to eligible purchasers. In April 2011, we
issued an additional $50 million of aggregate principal amount of
the same class of Senior Notes 2019 at 99% of par in a subsequent
private placement. The Company used the aggregate net proceeds from
these offerings of approximately $342 million to repurchase a
portion of the Company’s 7¾% Senior Notes due 2013 and to repay
outstanding indebtedness under the Company’s revolving credit
facility. On a pro forma basis, after giving effect to issuance of
the additional $50 million of Senior Notes in April 2011, the
Company had approximately $346 million available on its revolving
credit facility as of March 31, 2011.
Scheduled Conference Call
The Company will host a conference call to discuss these results
and other forward-looking items today, May 3rd at 1:30 pm CT (2:30
pm ET). The dial-in conference number is: 800-901-5213, passcode
67721726. The replay will be available for one week at
888-286-8010, passcode 83761127.
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 March 31, 2011 2010 REVENUES Oil and
gas sales $ 94,932 $ 79,042 Natural gas services 409 503 Drilling
rig services 260 - Gain on sales of assets 13,572
286 Total revenues 109,173
79,831 COSTS AND EXPENSES Production 24,820 20,927
Exploration: Abandonments and impairments 877 2,878 Seismic and
other 1,278 1,660 Natural gas services 263 348 Drilling rig
services 786 662 Depreciation, depletion and amortization 23,744
25,612 Accretion of abandonment obligations 674 647 General and
administrative 12,499 6,224 Loss on sales of assets and impairment
of inventory 196 - Total costs and
expenses 65,137 58,958 Operating income
44,036 20,873 OTHER INCOME
(EXPENSE) Interest expense (6,412 ) (6,109 ) Loss on early
extinguishment of long-term debt (4,594 ) - Gain (loss) on
derivatives (46,345 ) 10,301 Other 1,087 828 Total
other income (expense) (56,264 ) 5,020
Income (loss) before income taxes (12,228 ) 25,893 Income
tax (expense) benefit 4,353 (9,218 ) NET INCOME
(LOSS) $ (7,875 ) $ 16,675 Net income (loss) per
common share attributable to Clayton Williams Energy, Inc.
stockholders: Basic $ (0.65 ) $ 1.37 Diluted $ (0.65 ) $
1.37 Weighted average common shares outstanding:
Basic 12,156 12,146 Diluted
12,156 12,146
CLAYTON
WILLIAMS ENERGY, INC. CONSOLIDATED BALANCE SHEETS (In
thousands) ASSETS March 31,
December 31, 2011 2010 (Unaudited)
CURRENT ASSETS Cash and cash equivalents $ 14,512 $ 8,720 Accounts
receivable: Oil and gas sales 37,245 35,361 Joint interest and
other, net 12,772 9,893 Affiliates 1,754 796 Inventory 30,707
39,218 Deferred income taxes 2,813 5,074 Assets held for sale -
8,762 Prepaids and other 15,048 5,997
114,851 113,821 PROPERTY AND EQUIPMENT
Oil and gas properties, successful efforts method 1,792,867
1,707,252 Natural gas gathering and processing systems 18,153
18,153 Contract drilling equipment 60,019 58,486 Other
17,637 17,425 1,888,676 1,801,316 Less
accumulated depreciation, depletion and amortization
(1,060,567 ) (1,034,227 ) Property and equipment, net
828,109 767,089 OTHER ASSETS Debt issue
costs, net 12,945 8,323 Other 1,918 1,684
14,863 10,007 $ 957,823
$ 890,917
LIABILITIES AND STOCKHOLDERS'
EQUITY CURRENT LIABILITIES Accounts payable: Trade $
63,339 $ 74,123 Oil and gas sales 31,905 28,920 Affiliates 946
1,251 Fair value of derivatives 36,175 7,224 Accrued liabilities
and other 23,728 22,202 156,093
133,720 NON-CURRENT LIABILITIES
Long-term debt 428,835 385,000 Deferred income taxes 71,515 78,035
Fair value of derivatives 19,085 3,409 Other 40,692
41,301 560,127 507,745
STOCKHOLDERS' EQUITY Preferred stock, par value $.10 per
share - - Common stock, par value $.10 per share 1,215 1,215
Additional paid-in capital 152,316 152,290 Retained earnings
88,072 95,947 Total stockholders' equity
241,603 249,452 $ 957,823
$ 890,917
CLAYTON WILLIAMS ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In thousands)
Three Months Ended March 31, 2011 2010
CASH FLOWS FROM OPERATING ACTIVITIES Net income
(loss) $ (7,875 ) $ 16,675 Adjustments to reconcile net income
(loss) to cash
provided by operating activities:
Depreciation, depletion and amortization 23,744 25,612 Exploration
costs 877 2,878 Gain on sales of assets and impairment of
inventory, net (13,376 ) (286 ) Deferred income tax expense
(benefit) (4,353 ) 9,218 Non-cash employee compensation 7,401 2,010
Unrealized (gain) loss on derivatives 44,627 (8,602 ) Accretion of
abandonment obligations 674 647 Amortization of debt issue costs
568 335 Loss on early extinguishment of long-term debt 4,594 -
Changes in operating working capital: Accounts receivable
(5,721 ) (1,468 ) Accounts payable (11,954 ) (8,989 ) Other
(5,915 ) (7,654 ) Net cash provided by operating activities
33,291 30,376 CASH FLOWS FROM
INVESTING ACTIVITIES Additions to property and equipment (82,993 )
(58,276 ) Proceeds from sales of assets 11,002 479 Change in
equipment inventory 10,516 2,452 Other (120 ) (95 )
Net cash used in investing activities (61,595 )
(55,440 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from
long-term debt 293,000 26,000 Repayments of long-term debt (256,165
) - Premium on early extinguishment of long-term debt (2,765 ) -
Proceeds from exercise of stock options 26 -
Net cash provided by financing activities 34,096
26,000 NET INCREASE IN CASH AND CASH
EQUIVALENTS 5,792 936 CASH AND CASH EQUIVALENTS Beginning of
period 8,720
14,013
End of period $ 14,512 $
14,949
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 on sales of assets
and impairment of inventory, loss on early extinguishment of
long-term debt 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 March
31, 2011 2010 Net income (loss) $ (7,875 )
$ 16,675 Interest expense 6,412 6,109 Income tax (benefit) expense
(4,353 ) 9,218 Exploration: Abandonments and impairments 877 2,878
Seismic and other 1,278 1,660 Net gain on sales of assets and
impairment of inventory (13,376 ) (286 )
Loss on early extinguishment of long-term
debt
4,594 - Depreciation, depletion and amortization 23,744 25,612
Accretion of abandonment obligations 674 647 Non-cash employee
compensation 7,401 2,010 Non-cash changes in fair value of
derivatives 44,627 (8,602 ) $ 64,003 $ 55,921
Clayton Williams Energy, Inc.
Summary Production and Price Data (Unaudited)
Three Months Ended March 31,
2011 2010 Oil and Gas Production Data:
Oil (MBbls) 899 752 Gas (MMcf) 2,113 3,328 Natural gas liquids
(MBbls) 83 57 Total (MBOE) 1,334 1,364
Average Realized
Prices (a): Oil ($/Bbl) $ 88.93 $ 76.00 Gas
($/Mcf) $ 5.24 $ 5.76 Natural gas liquids ($/Bbl) $
48.34 $ 46.18
Gain (Loss) on settled derivative
contracts (a):
($ in thousands, except per unit) Oil: Net realized loss $ (6,778 )
$ (1,621 ) Per unit produced ($/Bbl) $ (7.54 ) $ (2.16 )
Gas: Net realized gain $ 5,060 $ 3,320 Per unit produced ($/Mcf) $
2.39 $ 1.00
Average Daily Production: Oil (Bbls):
Permian Basin 6,177 4,909 Austin Chalk/ Eagle Ford Shale 3,329
2,595 South Louisiana 414 627 Other 69 225
(b) Total 9,989 8,356
Natural Gas (Mcf): Permian Basin 13,920 13,911 Giddings Area:
Austin Chalk/ Eagle Ford Shale 1,940 2,531 Cotton Valley Reef
Complex 2,953 3,529 South Louisiana 3,149 7,513 Other 1,516
9,494 (b) Total 23,478
36,978 Natural gas liquids (Bbls): Permian Basin 618
272 Austin Chalk/ Eagle Ford Shale 226 271 South Louisiana 44 79
Other 34 11 (b) Total 922
633
Oil and Gas Costs ($/BOE
Produced): Production costs $ 18.61 $ 15.34 Production costs
(excluding production taxes) $ 14.67 $ 12.18 Oil and gas depletion
$ 17.46 $ 18.03
General and Administrative Expenses:
Excluding non-cash employee compensation $ 5,098 $ 4,214 Non-cash
employee compensation (c) 7,401 2,010
Total
$ 12,499 $ 6,224
(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 2011 or 2010 derivative contracts as cash
flow hedges. This means that the Company's derivatives
for 2011 and 2010 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)
Other for 2010 includes production
attributable to sold properties in North Louisiana as follows: Oil
148, Gas 8,718, NGL 5.
(c)
Non-cash employee compensation relates to
the Company's non-equity award plans.
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 March 31, 2011.
Oil Gas
Swaps:
Bbls Price MMBtu (a) Price
Production Period: 2nd Quarter 2011 632,000 $ 83.71 1,650,000 $
7.07 3rd Quarter 2011 547,000 $ 83.78 1,560,000 $ 7.07 4th Quarter
2011 540,000 $ 83.78 1,500,000 $ 7.07 2012 1,864,000 $ 93.65 - $ -
2013 480,000 $ 96.70 - $ - 4,063,000 4,710,000 (a)
One MMBtu equals one Mcf at a Btu factor of 1,000.
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