EX-99.1 2 a5355533ex991.txt EXHIBIT 99.1 Exhibit 99.1 Clayton Williams Energy Announces 2006 Financial Results and Reserves MIDLAND, Texas--(BUSINESS WIRE)--March 15, 2007--Clayton Williams Energy, Inc. (NASDAQ:CWEI) reported a net loss for the fourth quarter of 2006 of $8.9 million, or $.81 per share, as compared to net income of $1.3 million, or $.12 per share, for the fourth quarter of 2005. Cash flow from operations for the fourth quarter of 2006 was $29.5 million, as compared to $36.8 million during the same period in 2005. For the year ended December 31, 2006, the Company reported net income of $17.8 million, or $1.58 per share, as compared to net income of $257,000, or $.02 per share, for 2005. Cash flow from operations for the year 2006 was $146 million, as compared to $163.5 million for 2005. Oil and gas sales for the fourth quarter of 2006 totaled $57.8 million compared to $62.1 million for the same quarter in 2005. Of the $4.2 million decrease in oil and gas sales, product prices accounted for a decrease of $14.1 million and higher production volumes accounted for a $9.9 million increase. Oil production for the fourth quarter of 2006 increased to 529,000 barrels, or 5,750 barrels per day, up from 487,000 barrels, or 5,293 barrels per day in the 2005 quarter. Gas production increased 24% to 4 Bcf, or 43,272 Mcf per day, from 3.2 Bcf, or 34,815 Mcf per day in the 2005 quarter. Average realized oil prices in the fourth quarter of 2006 remained relatively flat at $57.41 compared to $56.99 per barrel in the 2005 period, while gas prices decreased 35% from $10.02 to $6.49 per Mcf. Average realized prices for 2006 and 2005 exclude the effects of any gains or losses realized on commodity hedging transactions since those derivatives were not designated as cash flow hedges and have been reported in the Company's statements of operations as gain/loss on derivatives under applicable accounting standards. For the fourth quarter of 2006, the Company reported an $11.9 million net gain on derivatives, consisting of a $14.9 million non-cash gain to mark the Company's derivative positions to their fair value on December 31, 2006 and a $3 million charge for cash settlements during the quarter. For the same period in 2005, the Company reported a $3.6 million net loss on derivatives, consisting of a $15.6 million non-cash mark-to-market loss and a $12 million charge for cash settlements. Exploration costs related to abandonments and impairments were $29.4 million during the fourth quarter of 2006, which included $5.7 million for the abandonment of the Roberson et al #1 (Terryville) in North Louisiana, $4.1 million for acreage impairments in Montana, $1.8 million for the abandonment of the Rose Chouest #1 (South Empire) in South Louisiana, and $17.1 million for previously announced dry holes in Louisiana and Colorado. The Company's exploration costs were $8.4 million in the fourth quarter of 2005. The Company recorded a non-cash charge during the fourth quarter of 2006 of $8.9 million for an impairment of proved properties pursuant to Statement of Financial Accounting Standards No. 144 "Accounting for Impairment or Disposal of Long-Lived Assets." The impairment, which applied to one area in West Texas and one area in New Mexico, was required to reduce the carrying value of these proved properties to their estimated fair market value. The Company also announced today that its total proved oil and gas reserves as of December 31, 2006 were 271.5 Bcfe, consisting of 25.4 million barrels of oil and NGL and 119.2 Bcf of natural gas. By comparison, the Company reported proved reserves of 293.8 Bcfe as of December 31, 2005, consisting of 27.8 million barrels of oil and NGL and 126.8 Bcf of natural gas. The pre-tax present value of estimated future net revenues from these reserves, discounted at 10% and computed in accordance with SEC guidelines, totaled $712.4 million at December 31, 2006, as compared to $1.1 billion at December 31, 2005. The estimates were based on weighted average oil and NGL prices of $57.18 per Bbl in 2006, as compared to $57.85 in 2005, and gas prices of $5.24 per Mcf in 2006, as compared to $10.65 per Mcf in 2005. During 2006, the Company replaced 100% of the 29.4 Bcfe produced in 2006 through extensions and discoveries, excluding purchases and downward revisions to previous estimates. The following table summarizes the changes in proved reserves during 2006 on a Bcfe basis and as a percentage of 2006 production. % of 2006 Bcfe Production ------ ----------- Total proved reserves, 12/31/05 293.8 Extensions and discoveries 29.4 100% Purchases of minerals-in-place 6.4 22% Revisions (28.7) (98)% Production (29.4) ------ Total proved reserves, 12/31/06 271.5 ====== Net downward revisions of 28.7 Bcfe consisted of approximately 22 Bcfe of downward revisions attributable to the effects of lower natural gas prices on the estimated quantities of proved reserves and approximately 6.7 Bcfe of downward revisions attributable to well performance primarily from properties in the Permian Basin. The Company will host a conference call to discuss these results and other forward-looking items today, March 15th at 1:30 p.m. CT (2:30 p.m. ET). The dial-in conference number is: 800-901-5213, passcode 59083952. The replay will be available for one week at 888-286-8010, passcode 41942892. 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. Except for historical information, statements made in this release are 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. These statements are based on assumptions and estimates that management believes are reasonable based on currently available information; however, management's assumptions and the Company's future performance are subject to a wide range of business risks and uncertainties, and there is no assurance that these goals and projections can or will be met. Any number of factors could cause actual results to differ materially from those in the forward-looking statements, including, but not limited to, production variance from expectations, volatility of oil and gas prices, the need to develop and replace reserves, the substantial capital expenditures required to fund operations, exploration risks, uncertainties about estimates of reserves, competition, government regulation, costs and results of drilling new projects, and mechanical and other inherent risks associated with oil and gas production. These 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 Year Ended December 31, December 31, ------------------ ------------------- 2006 2005 2006 2005 --------- -------- --------- --------- REVENUES Oil and gas sales $57,824 $62,063 $245,967 $252,599 Natural gas services 2,437 4,377 11,327 12,080 Drilling rig services 4,762 - 6,937 - Gain on sales of property and equipment 851 9 1,767 18,920 --------- -------- --------- --------- Total revenues 65,874 66,449 265,998 283,599 --------- -------- --------- --------- COSTS AND EXPENSES Production 15,935 13,996 63,298 57,404 Exploration: Abandonments and impairments 29,351 8,394 65,173 39,957 Seismic and other 1,933 3,204 11,299 10,780 Natural gas services 2,185 3,971 10,005 11,212 Drilling rig services 3,165 - 4,538 - Depreciation, depletion and amortization 17,785 11,361 66,163 47,509 Impairment of proved properties 8,934 18,266 21,848 18,266 Accretion of abandonment obligations 429 300 1,653 1,158 General and administrative 5,271 4,275 16,676 15,410 Loss on sales of property and equipment 17 77 99 209 Other - 1,353 - 1,353 --------- -------- --------- --------- Total costs and expenses 85,005 65,197 260,752 203,258 --------- -------- --------- --------- Operating income (loss) (19,131) 1,252 5,246 80,341 --------- -------- --------- --------- OTHER INCOME (EXPENSE) Interest expense (6,267) (4,063) (20,895) (14,498) Gain (loss) on derivatives 11,933 3,633 37,340 (70,059) Other (824) 1,609 (1,339) 4,022 --------- -------- --------- --------- Total other income (expense) 4,842 1,179 15,106 (80,535) --------- -------- --------- --------- Income (loss) before income taxes (14,289) 2,431 20,352 (194) Income tax (expense) benefit (a) 5,775 (1,092) (1,979) 451 Minority interest, net of tax (378) - (574) - --------- -------- --------- --------- NET INCOME (LOSS) $(8,892) $1,339 $17,799 $257 ========= ======== ========= ========= Net income (loss) per common share: Basic $(0.81) $0.12 $1.64 $0.02 ========= ======== ========= ========= Diluted $(0.81) $0.12 $1.58 $0.02 ========= ======== ========= ========= Weighted average common shares outstanding: Basic 11,000 10,814 10,885 10,804 ========= ======== ========= ========= Diluted 11,000 11,254 11,244 11,241 ========= ======== ========= ========= CLAYTON WILLIAMS ENERGY, INC. CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands) ASSETS December 31, December 31, 2006 2005 ------------ ------------- CURRENT ASSETS Cash and cash equivalents $13,840 $5,935 Accounts receivable: Oil and gas sales, net 23,398 28,317 Joint interest and other, net 17,810 6,972 Affiliates 2,436 254 Inventory 40,392 43,753 Deferred income taxes 505 439 Fair value of derivatives 23,729 191 Prepaids and other 3,888 2,581 ------------ ------------- 125,998 88,442 ------------ ------------- PROPERTY AND EQUIPMENT Oil and gas properties, successful efforts method 1,226,761 1,037,862 Natural gas gathering and processing systems 18,068 18,034 Contract drilling equipment 66,418 - Other 15,848 12,396 ------------ ------------- 1,327,095 1,068,292 Less accumulated depreciation, depletion and amortization (682,286) (594,225) ------------ ------------- Property and equipment, net 644,809 474,067 ------------ ------------- OTHER ASSETS Debt issue costs 8,104 8,557 Advances to drilling rig joint venture - 10,329 Fair value of derivatives 1,785 127 Other 14,737 5,813 ------------ ------------- 24,626 24,826 ------------ ------------- $795,433 $587,335 ============ ============= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable: Trade $75,815 $59,861 Oil and gas sales 14,222 18,236 Affiliates 1,407 2,857 Current maturities of long-term debt 17,397 19 Fair value of derivatives 29,722 33,670 Accrued liabilities and other 10,503 9,611 ------------ ------------- 149,066 124,254 ------------ ------------- NON-CURRENT LIABILITIES Long-term debt 413,876 235,700 Deferred income taxes 36,409 37,042 Fair value of derivatives 21,281 49,705 Other 29,821 20,343 ------------ ------------- 501,387 342,790 ------------ ------------- STOCKHOLDERS' EQUITY: Preferred stock, par value $.10 per share - - Common stock, par value $.10 per share 1,115 1,082 Additional paid-in capital 113,965 107,108 Retained earnings 29,900 12,101 ------------ ------------- 144,980 120,291 ------------ ------------- $795,433 $587,335 ============ ============= CLAYTON WILLIAMS ENERGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Three Months Ended Year Ended December 31, December 31, ------------------ ------------------- 2006 2005 2006 2005 --------- -------- --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $(8,892) $1,339 $17,799 $257 Adjustments to reconcile net income (loss) to cash provided by operating activities: Depreciation, depletion and amortization 17,785 11,361 66,163 47,509 Impairment of proved properties 8,934 18,266 21,848 18,266 Exploration costs 29,351 8,394 65,173 39,957 (Gain) loss on sales of property and equipment, net (834) 68 (1,668) (18,711) Deferred income taxes (5,775) 939 1,979 (526) Non-cash employee compensation 628 530 2,279 2,998 Unrealized (gain) loss on derivatives (14,884) (15,661) (57,568) 40,406 Settlements on derivatives with financing elements 6,096 10,303 29,407 27,731 Amortization of debt issue costs 286 - 1,308 2,631 Accretion of abandonment obligations 429 300 1,653 1,158 Excess tax benefit on exercise of stock options (1,807) - (1,807) - Minority interest, net of tax 378 - 574 - Changes in operating working capital: Accounts receivable (8,217) (1,290) (8,101) (4,764) Accounts payable 470 (1,594) 3,543 1,707 Other 5,560 3,889 3,408 4,856 --------- -------- --------- --------- Net cash provided by operating activities 29,508 36,844 145,990 163,475 --------- -------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Additions to property and equipment (66,234) (46,199) (254,840) (172,987) Additions to equipment of Larclay JV (14,529) - (60,655) - Proceeds from sales of property and equipment 3,368 - 4,451 23,252 Change in equipment inventory (1,701) (36,519) (662) (36,519) Other (873) 925 1,753 (10,411) --------- -------- --------- --------- Net cash used in investing activities (79,969) (81,793) (309,953) (196,665) --------- -------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from long-term debt 35,600 10,700 129,300 235,700 Proceeds from long-term debt of Larclay JV 20,493 - 66,254 - Repayments of other long- term debt 12 (31) - (177,531) Proceeds from sale of common stock 3,739 4 3,914 292 Settlements on derivatives with financing elements (6,096) (10,303) (29,407) (27,731) Excess tax benefit on exercise of stock options 1,807 - 1,807 - Payment of debt issue costs - - - (7,964) --------- -------- --------- --------- Net cash provided by financing activities 55,555 370 171,868 22,766 --------- -------- --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,094 (44,579) 7,905 (10,424) CASH AND CASH EQUIVALENTS Beginning of period 8,746 50,514 5,935 16,359 --------- -------- --------- --------- End of period $13,840 $5,935 $13,840 $5,935 ========= ======== ========= ========= Clayton Williams Energy, Inc. Summary Production and Price Data (Unaudited) Three Months Ended Year Ended December 31, December 31, ------------------ ------------------- 2006 2005 2006 2005 --------- -------- --------- --------- Average Daily Production: Natural Gas (Mcf): Permian Basin 13,668 14,067 14,260 15,893 Louisiana 18,452 5,197 14,626 10,865 Austin Chalk (Trend) 1,912 2,393 2,504 2,435 Cotton Valley Reef Complex 8,732 12,731 9,735 15,155 Other 508 427 513 605 --------- -------- --------- --------- Total 43,272 34,815 41,638 44,953 ========= ======== ========= ========= Oil (Bbls): Permian Basin 3,095 3,236 3,172 3,245 Louisiana 888 215 955 994 Austin Chalk (Trend) 1,731 1,785 1,770 1,892 Other 36 57 51 55 --------- -------- --------- --------- Total 5,750 5,293 5,948 6,186 ========= ======== ========= ========= Natural gas liquids (Bbls): Permian Basin 191 304 226 255 Austin Chalk (Trend) 261 339 269 322 Other 70 20 50 97 --------- -------- --------- --------- Total 522 663 545 674 ========= ======== ========= ========= Total Production: Natural Gas (MMcf) 3,981 3,203 15,198 16,408 Oil (MBbls) 529 487 2,171 2,258 Natural gas liquids (MBbls) 48 61 199 246 --------- -------- --------- --------- Gas Equivalents (MMcfe) 7,443 6,491 29,418 31,432 Average Realized Prices (b): Gas ($/Mcf): $6.49 $10.02 $6.68 $7.49 ========= ======== ========= ========= Oil ($/Bbl): $57.41 $56.99 $62.92 $53.37 ========= ======== ========= ========= Natural gas liquids ($/Bbl) $32.83 $39.25 $38.18 $33.57 ========= ======== ========= ========= Gains (Losses) on settled derivative contracts (b): ($ in thousands, except per unit) Gas: Net realized loss $(3,157) $(4,716) $(679) $(7,301) Per unit produced ($/Mcf) $(0.79) $(1.47) $(0.04) $(0.44) Oil: Net realized gain (loss) $37 $(7,058) $(19,886) $(21,976) Per unit produced ($/Bbl) $0.07 $(14.49) $(9.16) $(9.73) CLAYTON WILLIAMS ENERGY, INC. Notes to tables and supplemental information (a) In May 2006, the State of Texas adopted House Bill 3, which modified the state's franchise tax structure, replacing the previous tax based on capital or earned surplus with a margin tax (the "Texas Margin Tax") effective with franchise tax reports filed on or after January 1, 2008. The Texas Margin Tax is computed by applying the applicable tax rate (1% for the Company's business sector) to the profit margin, which is generally determined by total revenue less either cost of goods sold or compensation, as applicable. Although House Bill 3 states that the Texas Margin Tax is not an income tax, the Company believes that Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes ("SFAS 109") applies to the Texas Margin Tax. Accordingly, the Company has computed its consolidated deferred tax liability based on its current interpretation of the Texas Margin Tax, resulting in a reduction of deferred tax expense during the year ended December 31, 2006 of $4.4 million. The Company's effective federal and state income tax rate for the year ended December 31, 2006 of 9.7% differed from the statutory federal rate of 35% due to reductions in the tax provision related to the adoption of the Texas Margin Tax and statutory depletion, offset in part by certain non-deductible expenses. (b) 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 2006 or 2005 derivative contracts as cash flow hedges. This means that the Company's derivatives for 2006 and 2005 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/loss instead of as a component of oil and gas sales. CONTACT: Clayton Williams Energy, Inc., Midland Patti Hollums, 432-688-3419 Director of Investor Relations cwei@claytonwilliams.com www.claytonwilliams.com or Chief Financial Officer Mel G. Riggs, 432-688-3431