Clayton Williams Energy, Inc. (NASDAQ-NMS: CWEI)
today filed a Form 8-K with the Securities and Exchange Commission
to provide financial guidance disclosures for the year ending
December 31, 2011. 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.
CLAYTON WILLIAMS ENERGY, INC.
FINANCIAL GUIDANCE DISCLOSURES FOR
2011
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, 2011. 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, outcomes and other matters that we
plan, expect, intend, assume, believe, budget, predict, forecast,
project, estimate or anticipate (and other similar expressions)
will, should, could or may occur in the future, including such
matters as production of oil and gas, product prices, oil and gas
reserves, drilling and completion results, capital expenditures,
operating costs 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, 2011. 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, 2011 Actual
Actual Actual
Estimated First Quarter Second Quarter
Third Quarter Fourth Quarter (Dollars in
thousands, except per unit data) Average Daily
Production: Oil (Bbls) 9,989 9,736 10,272 10,500 to 10,700 Gas
(Mcf) 23,478 24,846 23,859 21,500 to 25,500 Natural gas liquids
(Bbls) 922 802 663 700 to 800 Total oil equivalents (BOE) 14,824
14,679 14,912 14,783 to 15,750
Differentials: Oil
(Bbls) $ (5.17 ) $ (2.49 ) $ (.40 ) $(2.50) to $(3.50) Gas (Mcf) $
1.04 $ 1.18 $ 1.40 $0.50 to $1.00 Natural gas liquids (Bbls) $
(45.76 ) $ (45.40 ) $ (32.60 ) $(42.00) to $(48.00)
Costs
Variable by Production ($/BOE):
Production expenses (excluding production
taxes) (a)
$ 14.67 $ 15.61 $ 13.84 $13.75 to $14.75 DD&A – Oil and gas
properties $ 17.46 $ 18.31 $ 18.25 $18.00 to $19.00
Other
Revenues (Expenses): Natural gas services: Revenues $ 409 $ 365
$ 334 $450 to $550 Operating costs $ (263 ) $ (285 ) $ (233 )
$(300) to $(500) Exploration costs: Abandonments and impairments $
(877 ) $ (174 ) $ (1,256 ) $(250) to $(750) Seismic and other $
(1,278 ) $ (2,167 ) $ (1,842 ) $(500) to $(2,500) DD&A – Other
(b) $ (193 ) $ (153 ) $ (190 ) $(250) to $(350)
General and administrative (b) (c)
$ (5,025 ) $ (5,405 ) $ (5,939 ) $(9,600) to $(9,800) Interest
expense $ (6,412 ) $ (9,175 ) $ (8,717 ) $(8,400) to $(8,600) Other
income (expense) $ 1,087 $ 1,900 $ 527 $450 to $550 Gain (loss) on
sales of assets, net $ 13,376 $ 842 $ (65 ) -
Effective Federal and State Income Tax Rate: Current
0 % 0 % 0 % 0% Deferred 36 % 36 % 36 % 36%
Weighted
Average Shares Outstanding (In thousands): Basic 12,156
12,162 12,163 12,163 Diluted 12,156 12,163 12,163 12,163
_____________
(a) Our current guidance for production
expenses excludes production taxes. Historically, production taxes
have ranged from 5% to 6% of oil and gas sales.
(b) Excludes amounts derived from Desta Drilling, L.P.
(c) Excludes non-cash employee
compensation. Fourth quarter estimates include approximately $3.7
million of discretionary cash bonuses paid or payable during the
quarter.
Capital Expenditures
The following table sets forth, by area, our actual expenditures
for exploration and development activities for the first nine
months of 2011 and our planned expenditures for the year ending
December 31, 2011.
Actual Planned
Expenditures Expenditures 2011 Nine Months
Ended Year Ended Percentage September 30,
2011 December 31, 2011 of Total (In
thousands) Permian Basin Area: West Texas - Reeves $ 117,000 $
188,100 46 % West Texas - Andrews 98,600 111,900 27 % West Texas -
Other 23,800 25,100 6 % Giddings Area: Austin Chalk/Eagle Ford
Shale 43,000 54,600 13 % Deep Bossier 4,600 14,500 4 % South
Louisiana 5,300 6,800 2 % Other 5,100 6,700 2 % $
297,400 $ 407,700 100 %
We currently plan to spend approximately $407.7 million on
exploration and development activities in fiscal 2011. Our actual
expenditures during fiscal 2011 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 2011. Based on these current estimates,
approximately 94% of our planned expenditures for exploration and
development activities for fiscal 2011 will relate to developmental
prospects, as compared to approximately 95% in fiscal 2010.
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, 2011. These estimates represent the approximate
mid-point of the estimated production range.
Daily Net Production for 2011 Actual
Actual Actual
Estimated First Quarter Second Quarter
Third Quarter Fourth Quarter Oil (Bbls):
Permian Basin Area: West Texas - Andrews 2,607 2,585 2,768 2,826
West Texas - Reeves - 11 170 750 West Texas - Other 3,570 3,095
3,384 3,174 Austin Chalk/Eagle Ford Shale 3,329 3,335 3,458 3,404
South Louisiana 414 493 413 413 Other 69 217 79 33 Total 9,989
9,736 10,272 10,600
Gas (Mcf): Permian Basin Area:
West Texas - Andrews 1,588 1,719 1,116 1,635 West Texas - Reeves 7
25 27 - West Texas - Other 12,333 10,457 11,769 11,017 Giddings
Area: Austin Chalk/Eagle Ford Shale 1,940 2,177 1,958 2,054 Cotton
Valley Reef Complex 2,953 2,931 2,955 2,250 South Louisiana 3,149
6,134 5,257 5,598 Other 1,508 1,403 777 946 Total 23,478 24,846
23,859 23,500
Natural Gas Liquids (Bbls): Permian
Basin Area: West Texas - Andrews 364 368 124 217 West Texas - Other
255 151 242 272 Austin Chalk/Eagle Ford Shale 226 183 215 196 Other
77 100 82 65 Total 922 802 663 750
Accounting for Derivatives
The following summarizes information concerning our net
positions in open commodity derivatives applicable to periods
subsequent to September 30, 2011. The settlement prices of
commodity derivatives are based on NYMEX futures prices.
Swaps:
Oil Bbls
(a)
Price Production Period:
4th Quarter 2011 482,949 $ 87.42
2012
907,506 $ 95.51
2013
95,996 $ 91.15
2014
85,772 $ 91.15
2015
76,309 $ 91.15
2016
28,280 $ 91.15 1,676,812
_____________
(a) In September 2011, we 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 in connection with the acquisition by
our wholly owned subsidiary, Southwest Royalties, Inc., of the 24
limited partnerships of which it is the general partner.
In October 2011, we terminated substantially all of our 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. In addition, we terminated
a hedge contract covering 490,000 MMBtu of gas production for
December 2011 for cash proceeds of $1.6 million. In November 2011,
we entered into additional hedge contracts covering 800,000 barrels
of oil production for 2012.
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.
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