EX-99.1 2 a5539513-ex991.txt EXHIBIT 99.1 EXHIBIT 99.1 Clayton Williams Energy Announces Third Quarter 2007 Financial Results and Operations Update MIDLAND, Texas--(BUSINESS WIRE)--Nov. 7, 2007--Clayton Williams Energy, Inc. (NASDAQ:CWEI) reported net income for the third quarter of 2007 of $986,000, or $.09 per share, as compared to net income of $5.3 million, or $.48 per share, for the third quarter of 2006. Cash flow from operations for the third quarter of 2007 was $72.4 million, as compared to $39.4 million during the same period in 2006. For the nine months ended September 30, 2007, the Company reported a net loss of $2.5 million, or $.22 per share, as compared to net income of $26.7 million, or $2.38 per share, for the same period in 2006. Cash flow from operations for the nine-month period in 2007 was $162.3 million, as compared to $116.5 million during the same period in 2006. Oil and gas sales increased 38% from $61.5 million for the third quarter of 2006 to $84.6 million for the same quarter in 2007 due primarily to higher production volumes. Gas production increased 54% to 5.8 Bcf, or 62,500 Mcf per day, from 3.7 Bcf, or 40,630 Mcf per day, in the 2006 quarter. Oil production for the third quarter of 2007 increased 9% to 582,000 barrels, or 6,326 barrels per day, compared to 532,000 barrels, or 5,783 barrels per day, in the 2006 quarter. The increase in gas production was attributable primarily to recent drilling activity in North and South Louisiana. For the third quarter of 2007, average realized gas prices increased 8% to $6.77 per Mcf from $6.26 per Mcf in the same quarter of 2006, while oil prices increased 7% to $72.10 per barrel from $67.27 per barrel in the 2006 period. Average realized prices for 2007 and 2006 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 third quarter of 2007, the Company reported a $2.3 million net loss on derivatives, consisting of a $1.6 million realized gain on settled contracts and a $3.9 million non-cash loss to mark the Company's derivative positions to their fair value on September 30, 2007. For the same period in 2006, the Company reported a $26.7 million net gain on derivatives, consisting of a $1.7 million realized loss on settled contracts and a $28.4 million non-cash gain due to changes in mark-to-market valuations. Exploration costs related to abandonments and impairments were $18.8 million during the third quarter of 2007 compared to $19.7 million in the third quarter of 2006. The 2007 costs included $3.8 million for the abandonment of the CL&F #1 (Vanessa) in South Louisiana, $2.6 million for the partial abandonment of the Margarita No. 1 in our East Texas Bossier exploration program and leasehold impairments of $11 million in North and South Louisiana. The Company reported that it incurred expenditures for exploration and development activities of $184.3 million during the nine months ended September 30, 2007 and has increased its estimates for capital expenditures in fiscal 2007 from $235.1 million to $251.4 million. Most of the $16.3 million increase relates to developmental drilling in the oil-prone regions of the Austin Chalk (Trend) and the Permian Basin. Based on these revised estimates, developmental drilling for fiscal 2007 will account for approximately 48% of the Company's capital spending, as compared to 16% in fiscal 2006. The Company recorded a non-cash charge during the third quarter of 2007 of $8 million for impairments pursuant to Statement of Financial Accounting Standards No. 144 "Accounting for Impairment or Disposal of Long-Lived Assets," of which $5.1 million related to the write-down of two 2,000 horsepower drilling rigs and related components to their estimated fair market value. The remaining $2.9 million impairment related to producing properties in West Texas. Operationally, the Company reported that it was currently fishing for a downhole motor in the wellbore of the Big Bill Simpson No. 1, a Bossier wildcat test in Leon County, Texas. Once the motor is removed from the wellbore, the Company plans to continue with completion operations. To date, the Company has incurred approximately $10.7 million of drilling and completion costs, net to its 70% working interest. The Company is currently waiting on a rig to begin completion operations on the Margarita No. 1 in Robertson County, Texas in the upper Bossier formation. As previously announced, the targeted middle Bossier formation was not productive in this well. To date, the Company has incurred $11.9 million in drilling costs, net of $2.6 million of costs which were charged to expense in the third quarter related to the abandonment of the middle Bossier formation. The Company owns 100% of the working interest in this well. The Company is continuing to negotiate with prospective buyers for the sale of some or all of its assets in South Louisiana. If no acceptable offers are received, the Company plans to retain the assets and continue selling the related production in the ordinary course of business. The Company will host a conference call to discuss these results and other forward-looking items today, November 7th at 12:00 p.m. CT (1:00 p.m. ET). The dial-in conference number is: 800-901-5213, passcode 59844895. The replay will be available for one week at 888-286-8010, passcode 82383961. 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 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. TABLES AND SUPPLEMENTAL INFORMATION FOLLOW . . . CLAYTON WILLIAMS ENERGY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share) Three Months Ended Nine Months Ended September 30, September 30, ------------------ ------------------- 2007 2006 2007 2006 --------- -------- --------- --------- REVENUES Oil and gas sales $84,639 $61,519 $220,712 $188,143 Natural gas services 2,268 2,905 7,831 8,890 Drilling rig services 14,806 1,801 37,451 2,175 Gain on sales of assets 126 164 910 916 --------- -------- --------- --------- Total revenues 101,839 66,389 266,904 200,124 --------- -------- --------- --------- COSTS AND EXPENSES Production 20,851 16,467 55,969 47,363 Exploration: Abandonments and impairments 18,802 19,650 53,426 35,822 Seismic and other 1,236 3,678 3,706 9,366 Natural gas services 2,121 2,730 7,438 7,820 Drilling rig services 9,075 1,157 22,514 1,373 Depreciation, depletion and amortization 23,018 17,686 56,736 48,378 Impairment of property and equipment 7,979 12,914 9,023 12,914 Accretion of abandonment obligations 627 428 1,864 1,224 General and administrative 4,289 3,086 13,124 11,405 Loss on sales of assets 92 69 9,415 82 --------- -------- --------- --------- Total costs and expenses 88,090 77,865 233,215 175,747 --------- -------- --------- --------- Operating income (loss) 13,749 (11,476) 33,689 24,377 --------- -------- --------- --------- OTHER INCOME (EXPENSE) Interest expense (8,448) (5,328) (24,063) (14,628) Gain (loss) on derivatives (2,284) 26,734 (13,023) 25,407 Other 366 (1,583) 4,693 (515) --------- -------- --------- --------- Total other income (expense) (10,366) 19,823 (32,393) 10,264 --------- -------- --------- --------- Income before income taxes 3,383 8,347 1,296 34,641 Income tax expense (1,173) (2,842) (450) (7,754) Minority interest, net of tax (1,224) (156) (3,360) (196) --------- -------- --------- --------- NET INCOME (LOSS) $986 $5,349 $(2,514) $26,691 ========= ======== ========= ========= Net income (loss) per common share: Basic $0.09 $0.49 $(0.22) $2.46 ========= ======== ========= ========= Diluted $0.09 $0.48 $(0.22) $2.38 ========= ======== ========= ========= Weighted average common shares outstanding: Basic 11,352 10,850 11,286 10,847 ========= ======== ========= ========= Diluted 11,521 11,205 11,286 11,220 ========= ======== ========= ========= CLAYTON WILLIAMS ENERGY, INC. CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands) ASSETS September 30, December 31, 2007 2006 ------------- ------------ CURRENT ASSETS Cash and cash equivalents $9,522 $13,840 Accounts receivable: Oil and gas sales, net 37,691 23,398 Joint interest and other, net 20,219 17,810 Affiliates 823 2,436 Inventory 15,578 40,392 Deferred income taxes 505 505 Fair value of derivatives 4,872 23,729 Assets held for sale 25,484 - Prepaids and other 6,829 3,888 ------------- ------------ 121,523 125,998 ------------- ------------ PROPERTY AND EQUIPMENT Oil and gas properties, successful efforts method 1,342,377 1,226,761 Natural gas gathering and processing systems 18,140 18,068 Contract drilling equipment 88,742 66,418 Other 16,919 15,848 ------------- ------------ 1,466,178 1,327,095 Less accumulated depreciation, depletion and amortization (738,146) (682,286) ------------- ------------ Property and equipment, net 728,032 644,809 ------------- ------------ OTHER ASSETS Debt issue costs 7,312 8,104 Fair value of derivatives 51 1,785 Other 6,483 14,737 ------------- ------------ 13,846 24,626 ------------- ------------ $863,401 $795,433 ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable: Trade $82,435 $75,815 Oil and gas sales 26,969 14,222 Affiliates 2,218 1,407 Current maturities of long-term debt 24,375 17,397 Fair value of derivatives 41,205 29,722 Accrued liabilities and other 5,299 10,503 ------------- ------------ 182,501 149,066 ------------- ------------ NON-CURRENT LIABILITIES Long-term debt 457,063 413,876 Deferred income taxes 35,274 36,409 Fair value of derivatives 4,370 21,281 Other 35,647 29,821 ------------- ------------ 532,354 501,387 ------------- ------------ STOCKHOLDERS' EQUITY: Preferred stock, par value $.10 per share - - Common stock, par value $.10 per share 1,135 1,115 Additional paid-in capital 120,025 113,965 Retained earnings 27,386 29,900 ------------- ------------ 148,546 144,980 ------------- ------------ $863,401 $795,433 ============= ============ CLAYTON WILLIAMS ENERGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Three Months Ended Nine Months Ended September 30, September 30, ------------------ ------------------- 2007 2006 2007 2006 --------- -------- --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $986 $5,349 $(2,514) $26,691 Adjustments to reconcile net income (loss) to cash provided by operating activities: Depreciation, depletion and amortization 23,018 17,686 56,736 48,378 Impairment of proved properties 7,979 12,914 9,023 12,914 Exploration costs 18,802 19,650 53,426 35,822 (Gain) loss on sales of assets, net (34) (95) 8,505 (834) Deferred income taxes 1,173 2,842 450 7,754 Non-cash employee compensation 500 500 1,610 1,651 Unrealized (gain) loss on derivatives 3,927 (28,401) 15,163 (42,684) Settlements on derivatives with financing elements 6,945 7,803 18,950 23,311 Amortization of debt issue costs 328 287 953 1,022 Accretion of abandonment obligations 627 428 1,864 1,224 Minority interest, net of tax 1,224 156 3,360 196 Changes in operating working capital: Accounts receivable (4,432) 30 (15,089) 116 Accounts payable 16,881 2,930 15,876 3,073 Other (5,549) (2,645) (6,002) (2,152) --------- -------- --------- --------- Net cash provided by operating activities 72,375 39,434 162,311 116,482 --------- -------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Additions to property and equipment (59,677) (53,749) (180,112) (188,606) Additions to equipment of Larclay JV (3,988) (14,519) (27,403) (46,126) Proceeds from sales of assets 51 399 1,653 1,083 Change in equipment inventory 4,430 2,740 16,265 1,039 Other (5,948) 1,811 (14,217) 2,626 --------- -------- --------- --------- Net cash used in investing activities (65,132) (63,318) (203,814) (229,984) --------- -------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from long-term debt 7,500 14,000 48,000 93,700 Proceeds from long-term debt of Larclay JV - 9,564 8,727 45,761 Repayments of long-term debt - - - (12) Repayments of long-term debt of Larclay JV (6,562) - (6,562) - Proceeds from sale of common stock - - 5,970 175 Settlements on derivatives with financing elements (6,945) (7,803) (18,950) (23,311) --------- -------- --------- --------- Net cash provided by (used in) financing activities (6,007) 15,761 37,185 116,313 --------- -------- --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,236 (8,123) (4,318) 2,811 CASH AND CASH EQUIVALENTS Beginning of period 8,286 16,869 13,840 5,935 --------- -------- --------- --------- End of period $9,522 $8,746 $9,522 $8,746 ========= ======== ========= ========= Clayton Williams Energy, Inc. Summary Production and Price Data (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ------------------ ------------------ 2007 2006 2007 2006 --------- -------- -------- --------- Average Daily Production: Natural Gas (Mcf): Permian Basin 15,469 13,804 14,861 14,455 Louisiana 37,523 15,059 30,884 13,339 Austin Chalk (Trend) 2,176 2,102 2,211 2,704 Cotton Valley Reef Complex 6,811 9,083 7,383 10,073 Other 521 582 441 517 --------- -------- -------- --------- Total 62,500 40,630 55,780 41,088 ========= ======== ======== ========= Oil (Bbls): Permian Basin 3,291 3,102 3,174 3,196 Louisiana 1,357 899 1,350 975 Austin Chalk (Trend) 1,589 1,719 1,628 1,789 Other 89 63 82 55 --------- -------- -------- --------- Total 6,326 5,783 6,234 6,015 ========= ======== ======== ========= Natural gas liquids (Bbls): Permian Basin 200 230 207 238 Austin Chalk (Trend) 229 260 250 271 Other 201 64 133 44 --------- -------- -------- --------- Total 630 554 590 553 ========= ======== ======== ========= Total Production: Natural Gas (MMcf) 5,750 3,738 15,228 11,217 Oil (MBbls) 582 532 1,702 1,642 Natural gas liquids (MBbls) 58 51 161 151 --------- -------- -------- --------- Gas Equivalents (MMcfe) 9,590 7,236 26,406 21,975 Average Realized Prices (a): Gas ($/Mcf): $6.77 $6.26 $6.96 $6.74 ========= ======== ======== ========= Oil ($/Bbl): $72.10 $67.27 $63.56 $64.70 ========= ======== ======== ========= Natural gas liquids ($/Bbl) $45.64 $43.79 $41.12 $40.15 ========= ======== ======== ========= Gains (Losses) on settled derivative contracts (a): ($ in thousands, except per unit) Gas: Net realized gain $4,802 $5,543 $9,784 $2,478 Per unit produced ($/Mcf) $0.84 $1.48 $0.64 $0.22 Oil: Net realized loss $(3,180) $(7,328) $(7,710) $(19,923) Per unit produced ($/Bbl) $(5.46) $(13.77) $(4.53) $(12.13) Clayton Williams Energy, Inc. Summary of Capital Expenditures (Unaudited) Actual Planned Expenditures Expenditures Year 2007 Nine Months Year Ending Percentage 9/30/2007 12/31/2007 of Total ------------ ------------ ---------- (In thousands) North Louisiana $60,700 $81,200 32% South Louisiana 61,900 64,800 26% East Texas Bossier 27,200 39,900 16% Permian Basin 21,700 35,000 14% Austin Chalk (Trend) 8,000 22,900 9% Utah/California 4,200 7,000 3% Other 600 600 0 ------------ ------------ ---------- $184,300 $251,400 100% ============ ============ ========== CLAYTON WILLIAMS ENERGY, INC. Notes to tables and supplemental information (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 2007 or 2006 derivative contracts as cash flow hedges. This means that the Company's derivatives for 2007 and 2006 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. Certain reclassifications of prior period financial statement amounts have been made to conform to current period presentations. CONTACT: Clayton Williams Energy, Inc., Midland Patti Hollums, 432-688-3419 Director of Investor Relations or Mel G. Riggs, 432-688-3431 Chief Financial Officer cwei@claytonwilliams.com www.claytonwilliams.com