EX-99.1 2 exhibit99_1cwei.htm CWEI FINANCIAL GUIDANCE DISCLOSURES exhibit99_1cwei.htm

EXHIBIT 99.1
CLAYTON WILLIAMS ENERGY, INC.

FINANCIAL GUIDANCE DISCLOSURES FOR 2008

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, 2008.  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 or developments that we expect, project, believe or anticipate will or may occur in the future, or may have occurred through the date of this filing, including such matters as production of oil and gas, product prices, oil and gas reserves, drilling and completion results, capital expenditures 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”;
 
(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, expenses and minority interest related to our investment in Larclay JV.

As discussed in “Capital Expenditures”, approximately 32% of our planned 2008 exploration and development expenditures relate to exploratory prospects.  Exploratory prospects involve a higher degree of risk than development prospects.  To offset the higher risk, we generally strive to achieve a higher reserve potential and rate of return on investments in exploratory prospects.  Actual results from our exploratory drilling activities, when ultimately reported, may have a material impact on the estimates of oil and gas production and exploration costs stated in this guidance.


 
 
 

Summary of Estimates

The following table sets forth certain estimates being used by us to model our anticipated results of operations for each quarter during the fiscal year ending December 31, 2008.  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, 2008
 
Actual
  
Estimated
  
Estimated
  
Estimated
 
First Quarter
  
Second Quarter
  
Third Quarter
  
Fourth Quarter
 
(Dollars in thousands, except per unit data)
Average Daily Production (a):
              
Gas (Mcf)                                                
            60,967
  
43,000 to 47,000
  
43,000 to 47,000
  
42,000 to 46,000
Oil (Bbls)                                                
                                      7,516
  
7,900 to 8,100
  
9,450 to 9,650
  
10,550 to 10,750
Natural gas liquids (Bbls)                                                
                                         637
  
575 to 625
  
550 to 600
  
525 to 575
Total gas equivalents (Mcfe)                                                
                                  109,885
  
93,850 to 99,350
  
103,000 to 108,500
  
108,450 to 113,950
               
Differentials:
              
Gas (Mcf) (b)                                                
$                              0.99
  
$(0.25) to $(0.50)
  
$(0.25) to $(0.50)
  
$(0.25) to $(0.50)
Oil (Bbls)                                                
$            (1.53)
  
$(1.50) to $(2.00)
  
$(1.50) to $(2.00)
  
$(1.50) to $(2.00)
Natural gas liquids (Bbls)                                                
$                                  (37.90)
  
$(32.00) to $(38.00)
  
$(32.00) to $(38.00)
  
$(32.00) to $(38.00)
               
Costs Variable by Production ($/Mcfe):
              
Production expenses (including
              
  production taxes)                                                
$                                     2.06
  
$2.10 to $2.40
  
$2.10 to $2.30
  
$2.00 to $2.20
DD&A – Oil and gas properties                                                
$                                     2.77
  
$2.40 to $2.80
  
$2.50 to $2.90
  
$2.50 to $2.90
               
Other Revenues (Expenses):
              
Natural gas services:
              
Revenues                                           
$                                    2,538
  
$2,500 to $2,700
  
$2,500 to $2,700
  
$2,500 to $2,700
Operating costs                                           
$                                   (2,515)
  
$(2,400) to $(2,600)
  
$(2,400) to $(2,600)
  
$(2,400) to $(2,600)
Exploration costs:
              
Abandonments and impairments
$             (297)
  
$(1,000) to $(3,000)
  
$(1,000) to $(3,000)
  
$(1,000) to $(3,000)
Seismic and other                                           
$                                  (3,675)
  
$(1,500) to $(3,500)
  
$(5,500) to $(7,500)
  
$(5,500) to $(7,500)
DD&A – Other (c)                                                
$                                     (247)
  
$(250) to $(350)
  
$(250) to $(350)
  
$(250) to $(350)
General and administrative (c)                                                
$                                  (3,211)
  
$(5,500) to $(5,700)
  
$(4,600) to $(4,800)
  
$(5,200) to $(5,400)
Interest expense (c)                                                
$                                  (6,352)
  
$(5,000) to $(5,200)
  
$(5,000) to $(5,200)
  
$(5,450) to $(5,650)
Other income                                                
$                                       655
  
$250 to $350
  
$250 to $350
  
$250 to $350
Gain on sales of property and equipment, net (d)
$                                       560
  
$33,300
  
-
  
-
Effective Federal and State Income
              
  Tax Rate:
              
Current                                                
                                          1%
  
1%
  
1%
  
1%
Deferred                                                
                                        36%
  
36%
  
36%
  
36%
               
Weighted Average Shares Outstanding
              
  (In thousands):
              
Basic                                                
                                    11,387
  
11,400 to 12,000
  
11,400 to 12,000
  
11,400 to 12,000
Diluted                                                
                                    11,643
  
11,400 to 12,600
  
11,400 to 12,600
  
11,400 to 12,600
                       
(a)   Production estimates for the quarters subsequent to March 31, 2008 have been reduced to give effect to the sale of certain properties in South Louisiana that was consummated in April 2008.
(b)  Our actual realized gas price for the first quarter of 2008 was $.99 per Mcf higher than the average NYMEX price for the same period due primarily to abnormal variances between NYMEX and daily spot prices for natural gas.  Since we cannot predict the likelihood that this condition will continue throughout the remainder of 2008, we are estimating differentials to be more in line with historical averages.
(c)   Excludes amounts derived from Larclay JV.
(d)  We expect to record a gain of approximately $33 million in connection with the sale described in note (a).  In addition, we sold a surplus well servicing unit in April 2008 and expect to record a gain of approximately $300,000.

 
 
 

Capital Expenditures

The following table sets forth, by area, certain information about our actual and planned exploration and development activities for 2008.
   
Actual
    
Planned
        
   
Expenditures
    
Expenditures
    
Year 2008
  
   
Three Months Ended
    
Year Ending
    
Percentage
  
   
March 31, 2008
    
December 31, 2008
    
of Total
  
   
(In thousands)
        
Permian Basin                                            
   $ 21,500     $ 168,000       49 %
North Louisiana                                            
     14,800       62,600       18 %
Austin Chalk (Trend)                                            
     10,800       55,400       16 %
East Texas Bossier                                            
     6,900       28,600       8 %
South Louisiana                                            
     2,700       18,700       6 %
Utah/California                                            
     900       10,900       3 %
Other                                            
     100       300       -  
    $ 57,700     $ 344,500       100 %

We have increased our estimates for planned exploration and development expenditures for fiscal 2008 by $88 million from $256.5 million to $344.5 million.  Strong cash flow from operations resulting from higher commodity prices and rising oil and gas production have afforded us the opportunity to make this upward change.  The increase in capital spending relates primarily to activities in the Permian Basin and North Louisiana, including an exploratory well on the Winnsboro prospect to test the pressured Bossier interval in this area.

Our actual expenditures during fiscal 2008 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 2008.

In 2008, we plan to allocate a majority of our capital resources to developmental drilling activities in oil-prone areas such as the Permian Basin and the Austin Chalk (Trend).  In addition, we plan to continue drilling developmental gas wells in North Louisiana, primarily on our Terryville prospect.  Based on these current estimates, approximately 68% of our expenditures for exploration and development activities for fiscal 2008 will relate to developmental prospects, as compared to approximately 49% in fiscal 2007.


 
 
 

Supplementary Information

Oil and Gas Production
The following table summarizes, by area, our estimated daily net production for each quarter during the year ending December 31, 2008.  These estimates represent the approximate mid-point of the estimated production range.

   
Daily Net Production for 2008
  
   
Actual
    
Estimated
    
Estimated
    
Estimated
  
   
First Quarter
    
Second Quarter
    
Third Quarter
    
Fourth Quarter
  
Gas (Mcf):
                        
Permian Basin                                             
     15,562       15,297       15,771       16,348  
North Louisiana                                             
     13,596       13,769       14,391       14,011  
South Louisiana                                             
     23,552       8,527       7,826       6,989  
Austin Chalk (Trend)                                             
     2,460       2,132       2,175       2,184  
Cotton Valley Reef Complex                                             
     5,270       4,813       4,380       4,011  
Other                                             
     527       462       457       457  
Total                                           
     60,967       45,000       45,000       44,000  
                                 
Oil (Bbls):
                                
Permian Basin                                             
     3,494       4,231       5,217       5,913  
North Louisiana                                             
     343       330       337       315  
South Louisiana                                             
     985       132       272       315  
Austin Chalk (Trend)                                             
     2,635       3,241       3,659       4,042  
Other                                             
     59       66       65       65  
Total                                           
     7,516       8,000       9,550       10,650  
                                 
Natural Gas Liquids (Bbls):
                                
Permian Basin                                             
     215       165       163       163  
Austin Chalk (Trend)                                             
     272       226       227       191  
Other                                             
     150       209       185       196  
Total                                           
     637       600       575       550  



 
 
 

Accounting for Derivatives
The following summarizes information concerning our net positions in open commodity derivatives applicable to periods subsequent to March 31, 2008.  The settlement prices of commodity derivatives are based on NYMEX futures prices.

Collars:
   
Gas
    
Oil
  
   
MMBtu (a)
    
Floor
    
Ceiling
    
Bbls
    
Floor
    
Ceiling
  
Production Period:
                                    
2nd Quarter 2008
     426,000     $ 4.00     $ 5.15       132,000     $ 23.00     $ 25.07  
3rd Quarter 2008
     419,000     $ 4.00     $ 5.15       128,000     $ 23.00     $ 25.07  
      845,000                       260,000                  

Swaps:
   
Gas
    
Oil
  
   
MMBtu (a)
    
Price
    
Bbls
    
Price
  
Production Period:
                        
2nd Quarter 2008
     4,650,000     $ 9.20       330,000     $ 79.84  
3rd Quarter 2008
     4,200,000     $ 9.15       310,000     $ 78.96  
4th Quarter 2008                           
     4,200,000     $ 9.15       400,000     $ 82.21  
2009                           
     3,600,000     $ 9.33       1,440,000     $ 85.30  
      16,650,000               2,480,000          
                                         
(a)   One MMBtu equals one Mcf at a Btu factor of 1,000.
  

In September 2007, the Company terminated certain fixed-priced oil swaps covering 90,000 barrels at a price of $76.65 from April 2008 through December 2008, resulting in an aggregate loss of approximately $995,000, which will be paid to the counterparty monthly during 2008.

Interest Rates

The following summarizes information concerning our net positions in open interest rate swaps applicable to periods subsequent to March 31, 2008.

Interest Rate Swaps:
         
Fixed
  
   
Principal
    
Libor
  
   
Balance
    
Rates
  
Period:
            
April 1, 2008 to September 24, 2008(a)                                                                                    
   $ 100,000,000       4.73 %
April 1, 2008 to November 3, 2008                                                                                    
   $ 45,000,000       5.73 %
                         
(a)   In April 2008, the Company terminated this $100 million interest rate swap for a cash payment of $899,000.
  

We did not designate any of the derivatives shown in the preceding tables as cash flow hedges under SFAS 133; therefore, all changes in the fair value of these contracts prior to maturity, plus any realized gains or losses at maturity, are recorded as other income (expense).