Clayton Williams Energy, Inc. (the “Company”) (NASDAQ:CWEI)
today reported its financial results for the third quarter of
2011.
Financial Results for the Third Quarter of 2011
Net income attributable to Company stockholders for the third
quarter of 2011 (“3Q11”) was $74.5 million, or $6.13 per share, as
compared to net income of $11.6 million, or $.96 per share, for the
third quarter of 2010 (“3Q10”). Cash flow from operations for 3Q11
was $55.6 million as compared to $57.5 million for 3Q10.
For the nine months ended September 30, 2011, net income
attributable to Company stockholders was $109.3 million, or $8.99
per share, as compared to net income of $42.3 million, or $3.48 per
share, for the same period in 2010. Cash flow from operations for
the nine-month period in 2011 was $175.3 million as compared to
$154.2 million during the same period in 2010.
The key factors affecting the comparability of financial results
for 3Q11 versus 3Q10 were:
- Gain on derivatives for 3Q11 was $92.3
million ($91.1 million non-cash mark-to-market gain and a $1.2
million realized gain on settled contracts) versus a loss in 3Q10
of $4 million ($8 million non-cash mark-to-market loss and a $4
million realized gain on settled contracts). See accompanying
tables for additional information about the Company’s accounting
for derivatives.
- Oil and gas sales increased $17.8
million in 3Q11 versus 3Q10. Price variances accounted for an $18.3
million increase, offset in part by a $500,000 decrease due to
production variances. Average realized oil prices were $89.36 per
barrel in 3Q11 versus $73.18 per barrel in 3Q10, and average
realized gas prices were $5.46 per Mcf in 3Q11 versus $4.56 per Mcf
in 3Q10.
- Oil production increased 3% in 3Q11
versus 3Q10 while gas production declined 13%. Oil and gas
production per barrel of oil equivalent (“BOE”) decreased 4% in
3Q11 as compared to 3Q10. Oil production increased to 945,000
barrels, or 10,272 barrels per day, as compared to 915,000 barrels,
or 9,946 barrels per day, while gas production declined to 2.2 Bcf,
or 23,859 Mcf per day as compared to 2.5 Bcf or 27,500 Mcf per day
for 3Q10. The increase in oil production and the decline in gas
production are indicative of the Company’s current emphasis on the
development of oil reserves in the Permian Basin.
- Production costs increased 18% from
$20.5 million in 3Q10 to $24.3 million in 3Q11 due to a combination
of more producing wells, rising costs of field services and
increased production taxes on higher oil and gas sales.
- Interest expense increased to $8.7
million in 3Q11 compared to $6 million in 3Q10 due in part to the
increase in the total aggregate principal amount of the Company’s
Senior Notes.
- G&A expenses were $7.1 million in
3Q11 versus $8.7 million in 3Q10. Non-cash employee compensation
expense from incentive compensation plans accounted for $1.1
million in 3Q11 versus $3 million in 3Q10. Excluding non-cash
employee compensation expense, G&A expenses increased 4% in
3Q11 compared to 3Q10.
- Non-cash impairments of property and
equipment were $5 million in 3Q11 versus $794,000 in 3Q10. The 3Q11
impairment related to certain non-core oil and gas properties.
Comparisons to Guidance
Oil and gas production for 3Q11 was 14,912 BOE per day, 6% above
the mid-point of the Company’s guidance range of 14,075 BOE per
day. More than half of the variance was attributable to higher than
forecasted oil production from the Company’s Austin Chalk drilling
program.
Monetization of Oil Hedges
In October 2011, the Company terminated substantially all of its
existing 2012 and 2013 oil hedges for cash proceeds of $50 million.
The terminated contracts covered 2,649,000 barrels of oil
production for 2012 and 1,189,000 barrels for 2013. Proceeds from
the termination of these contracts were used to repay a portion of
the Company’s outstanding bank indebtedness.
Scheduled Conference Call
The Company will host a conference call to discuss these results
and other forward-looking items today, October 27th at 1:30 p.m. CT
(2:30 p.m. ET). The dial-in conference number is: 800-901-5213,
passcode 28983054. The replay will be available for one week at
888-286-8010, passcode 79342999.
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 Nine Months Ended
September 30, September 30, 2011
2010 2011
2010 REVENUES Oil and gas sales $ 99,752 $ 81,978 $
300,488 $ 237,938 Natural gas services 334 397 1,108 1,352 Drilling
rig services 929 - 3,614 - Gain on sales of assets 49
2,857 14,570 3,256 Total
revenues 101,064 85,232 319,780
242,546 COSTS AND EXPENSES Production
24,284 20,518 75,237 62,012 Exploration: Abandonments and
impairments 1,256 364 2,307 6,133 Seismic and other 1,842 1,361
5,287 3,995 Natural gas services 233 297 781 951 Drilling rig
services 1,673 123 4,378 1,204 Depreciation, depletion and
amortization 25,901 25,223 74,987 76,272 Impairment of property and
equipment 5,035 794 9,459 11,908 Accretion of abandonment
obligations 706 659 2,077 1,953 General and administrative 7,142
8,730 22,678 22,786 Loss on sales of assets and impairment of
inventory 114 80 417
1,523 Total costs and expenses 68,186
58,149 197,608 188,737
Operating income 32,878 27,083
122,172 53,809 OTHER INCOME (EXPENSE)
Interest expense (8,717 ) (6,040 ) (24,304 ) (18,393 ) Loss
on early extinguishment of long-term debt (907 ) - (5,501 ) - Gain
(loss) on derivatives 92,286 (3,995 ) 74,128 27,289 Other 527 972
3,514 2,816 Total other income
(expense) 83,189 (9,063 ) 47,837
11,712 Income before income taxes 116,067
18,020 170,009 65,521 Income tax expense (41,544 ) (6,397 )
(60,693 ) (23,260 ) NET INCOME $ 74,523
$ 11,623 $ 109,316 $ 42,261
Net income per common share: Basic $ 6.13 $ 0.96
$ 8.99 $ 3.48 Diluted $ 6.13 $ 0.96
$ 8.99 $ 3.48 Weighted average common
shares outstanding: Basic 12,163 12,146
12,160 12,146 Diluted 12,163
12,146 12,161 12,146
CLAYTON WILLIAMS ENERGY, INC.
CONSOLIDATED BALANCE SHEETS (In thousands)
ASSETS September 30, December 31,
2011 2010
(Unaudited) CURRENT ASSETS Cash and cash equivalents $
36,024 $ 8,720 Accounts receivable: Oil and gas sales 34,399 35,361
Joint interest and other, net 10,155 9,893 Affiliates 728 796
Inventory 37,309 39,218 Deferred income taxes 3,439 5,074 Fair
value of derivatives 42,642 - Assets held for sale - 8,762 Prepaids
and other 16,970 5,997 181,666
113,821 PROPERTY AND EQUIPMENT Oil and gas
properties, successful efforts method 2,001,354 1,707,252 Natural
gas gathering and processing systems 23,619 18,153 Contract
drilling equipment 71,851 58,486 Other 18,574
17,425 2,115,398 1,801,316 Less accumulated depreciation,
depletion and amortization (1,126,137 ) (1,034,227 )
Property and equipment, net 989,261 767,089
OTHER ASSETS Debt issue costs, net 11,683 8,323 Fair
value of derivatives 28,754 - Other 3,958
1,684 44,395 10,007 $
1,215,322 $ 890,917
LIABILITIES AND
STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts
payable: Trade $ 89,551 $ 74,123 Oil and gas sales 35,612 28,920
Affiliates 2,048 1,251 Fair value of derivatives - 7,224 Accrued
liabilities and other 35,125 22,202
162,336 133,720 NON-CURRENT
LIABILITIES Long-term debt 514,523 385,000 Deferred income taxes
137,374 78,035 Fair value of derivatives - 3,409 Other
42,108 41,301 694,005
507,745 STOCKHOLDERS' EQUITY Preferred stock, par
value $.10 per share - - Common stock, par value $.10 per share
1,216 1,215 Additional paid-in capital 152,502 152,290 Retained
earnings 205,263 95,947 Total
stockholders' equity 358,981 249,452
$ 1,215,322 $ 890,917
CLAYTON
WILLIAMS ENERGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (Unaudited) (In thousands)
Three Months Ended
Nine Months Ended September 30, September 30,
2011 2010
2011 2010 CASH
FLOWS FROM OPERATING ACTIVITIES Net income $ 74,523 $ 11,623 $
109,316 $ 42,261 Adjustments to reconcile net income to cash
provided by operating activities: Depreciation, depletion and
amortization 25,901 25,223 74,987 76,272 Impairment of property and
equipment 5,035 794 9,459 11,908 Exploration costs 1,256 364 2,307
6,133 (Gain) loss on sales of assets and impairment of inventory,
net 65 (2,777 ) (14,153 ) (1,733 ) Deferred income tax expense
41,544 6,397 60,693 23,260 Non-cash employee compensation 1,141
2,987 6,104 8,066 Unrealized (gain) loss on derivatives (91,098 )
7,997 (82,029 ) (17,874 ) Accretion of abandonment obligations 706
659 2,077 1,953 Amortization of debt issue costs 493 400 1,623
1,174 Loss on early extinguishment of long-term debt 907 - 5,501 -
Changes in operating working capital: Accounts receivable
(1,299 ) (3,491 ) 768 1,743 Accounts payable (5,430 ) 8,650 (4,456
) 5,247 Other 1,819 (1,335 ) 3,090
(4,242 ) Net cash provided by operating activities
55,563 57,491 175,287
154,168 CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (102,193 ) (73,113 ) (282,474 )
(208,641 ) Proceeds from sales of assets 361 2,659 12,466 75,670
Change in equipment inventory (1,939 ) (4,375 ) 2,844 (3,075 )
Other (23 ) (33 ) (133 ) (131 ) Net
cash used in investing activities (103,794 ) (74,862
) (267,297 ) (136,177 ) CASH FLOWS FROM
FINANCING ACTIVITIES Proceeds from long-term debt 161,500 29,000
445,366 - Repayments of long-term debt (95,324 ) - (323,500 )
(10,000 ) Premium on early extinguishment of long-term debt - -
(2,765 ) - Proceeds from exercise of stock options -
- 213 - Net cash provided
by (used in) financing activities 66,176
29,000 119,314 (10,000 ) NET
INCREASE IN CASH AND CASH EQUIVALENTS 17,945 11,629 27,304 7,991
CASH AND CASH EQUIVALENTS Beginning of period 18,079 10,375
8,720 14,013 End of period $ 36,024
$ 22,004 $ 36,024 $ 22,004
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, loss on early extinguishment of
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 to EBITDAX:
Three Months Ended Nine Months Ended September
30, September 30, 2011
2010 2011 2010
Net income $ 74,523 $ 11,623 $ 109,316 $ 42,261
Interest expense 8,717 6,040 24,304 18,393 Income tax expense
41,544 6,397 60,693 23,260 Exploration: Abandonments and
impairments 1,256 364 2,307 6,133 Seismic and other 1,842 1,361
5,287 3,995 Net (gain) loss on sales of assets and impairment of
inventory 65 (2,777 ) (14,153 ) (1,733 ) Loss on early
extinguishment of debt 907 - 5,501 - Depreciation, depletion and
amortization 25,901 25,223 74,987 76,272 Impairment of property and
equipment 5,035 794 9,459 11,908 Accretion of abandonment
obligations 706 659 2,077 1,953 Non-cash employee compensation
1,141 2,987 6,104 8,066 Non-cash changes in fair value of
derivatives (91,098 ) 7,997 (82,029 ) (17,874 )
$ 70,539 $ 60,668 $ 203,853 $
172,634
Clayton Williams Energy, Inc.
Summary Production and Price Data (Unaudited)
Three Months Ended
Nine Months Ended September 30, September 30,
2011 2010
2011 2010 Oil and Gas
Production Data: Oil (MBbls) 945 915 2,730 2,475 Gas (MMcf)
2,195 2,530 6,569 8,665 Natural gas liquids (MBbls) 61 90 217 207
Total (MBOE) 1,372 1,427 4,042 4,126
Average Realized Prices (a):
Oil ($/Bbl) $ 89.36 $ 73.18 $ 92.70 $ 74.39
Gas ($/Mcf) $ 5.46 $ 4.56 $ 5.42 $ 5.21
Natural gas liquids ($/Bbl) $ 54.36 $ 36.88 $
53.00 $ 40.38
Gain (Loss) on settled derivative
contracts (a):
($ in thousands, except per unit) Oil: Net realized loss $ (3,292 )
$ (227 ) $ (21,989 ) $ (3,098 ) Per unit produced ($/Bbl) $ (3.48 )
$ (0.25 ) $ (8.05 ) $ (1.25 ) Gas: Net realized gain $ 4,481
$ 4,230 $ 14,088 $ 12,514 Per unit produced ($/Mcf) $ 2.04 $ 1.67 $
2.14 $ 1.44
Average Daily Production: Oil (Bbls):
Permian Basin Area: West Texas Andrews 2,768 2,246 2,625 1,609 West
Texas Reeves 170 - 61 - West Texas Other 3,384 3,846 3,378 3,860
Austin Chalk/ Eagle Ford Shale 3,458 3,044 3,418 2,827 South
Louisiana 413 727 440 596 Other 79 83
78 174 (b) Total 10,272
9,946 10,000 9,066
Natural Gas (Mcf): Permian Basin Area: West Texas Andrews 1,116 962
1,237 690 West Texas Reeves 27 - 20 - West Texas Other 11,769
12,969 11,754 13,012 Giddings Area: Austin Chalk/ Eagle Ford Shale
1,958 2,325 2,029 2,222 Cotton Valley Reef Complex 2,955 3,708
2,946 3,770 South Louisiana 5,257 5,650 4,854 6,024 Other
777 1,886 1,222 6,022
(b) Total 23,859 27,500
24,062 31,740 Natural gas liquids
(Bbls): Permian Basin Area: West Texas Andrews 124 310 277 184 West
Texas Other 242 225 223 204 Austin Chalk/ Eagle Ford Shale 215 258
208 238 South Louisiana 56 119 54 95 Other 26
66 33 37 (b) Total 663
978 795 758
Three Months Ended Nine Months Ended September
30, September 30, 2011
2010 2011 2010
Oil and Gas Costs ($/BOE Produced): Production
costs $ 17.70 $ 14.38 $ 18.61 $ 15.03 Production costs (excluding
production taxes) $ 13.84 $ 11.37 $ 14.77 $ 11.97 Oil and gas
depletion $ 18.25 $ 17.27 $ 18.01 $ 17.95
General and
Administrative Expenses (in thousands): Excluding non-cash
employee compensation $ 6,001 $ 5,743 $ 16,574 $ 14,720 Non-cash
employee compensation (c) 1,141 2,987
6,104 8,066 Total $ 7,142 $
8,730 $ 22,678 $ 22,786 (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: Nine months: Oil 94, Gas
4,790, NGL 10. (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
September 30, 2011.
Oil Gas Swaps:
Bbls (a)
Price
MMBtu (b) Price Production Period: 4th Quarter
2011 733,949 $ 87.58 1,500,000 $ 7.07 2012 107,506 $ 91.15 - $ -
2013 95,996 $ 91.15 - $ - 2014 85,772 $ 91.15 - $ - 2015 76,309 $
91.15 - $ - 2016 28,280 $ 91.15 - $ - 1,127,812 1,500,000
(a) In September 2011, the Company entered into oil hedges
covering 398,812 barrels of oil for production months from December
2011 through May 2016. These hedges cover production related to a
volumetric production payment expected to be granted to finance the
proposed merger with 24 affiliated partnerships. (b) One MMBtu
equals one Mcf at a Btu factor of 1,000.
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