EX-99.1 2 a5748005_ex991.htm EXHIBIT 99.1

Exhibit 99.1

Clayton Williams Energy Announces Second Quarter 2008 Financial Results

MIDLAND, Texas--(BUSINESS WIRE)--Clayton Williams Energy, Inc. (NASDAQ: CWEI) reported a net loss for the second quarter of 2008 of $21.2 million, or $1.75 per share, as compared to net income of $8.8 million, or $.77 per share, for the second quarter of 2007. Cash flow from operations for the second quarter of 2008 was $71.4 million, as compared to $53.7 million during the same period in 2007.

For the six months ended June 30, 2008, the Company reported a net loss of $14 million, or $1.19 per share, as compared to a net loss of $3.5 million, or $.31 per share, for the same period in 2007. Cash flow from operations for the six-month period in 2008 was $149.4 million, as compared to $89.9 million during the same period in 2007.

Oil and gas sales increased 79% from $74.9 million for the second quarter of 2007 to $134.3 million for the same quarter in 2008. On an Mcf equivalent basis, oil and gas production declined 4%, despite significant additions from the Company’s on-going developmental drilling programs, due to the loss of production from a previously-reported sale of South Louisiana assets. Oil production for the second quarter of 2008 increased 22% to 703,000 barrels, or 7,725 barrels per day, compared to 577,000 barrels, or 6,341 barrels per day, in the second quarter of 2007. Gas production decreased 19% to 4.2 Bcf, or 45,901 Mcf per day, from 5.2 Bcf, or 56,604 Mcf per day, in the 2007 quarter. The growth in oil production was attributed to in-fill drilling in the Austin Chalk (Trend) and increased drilling activities in the Permian Basin. As adjusted for the South Louisiana asset sale, gas production was favorably impacted by incremental production from the Company’s drilling activities in North Louisiana.

For the second quarter of 2008, average realized oil prices increased 94% to $121.51 per barrel from $62.51 per barrel in the 2007 period, while gas prices increased 54% to $11.07 per Mcf from $7.20 per Mcf in the same quarter of 2007. Average realized prices for 2008 and 2007 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 second quarter of 2008, the Company reported a $148.6 million net loss on derivatives, consisting of a $113.6 million non-cash loss to mark the Company’s derivative positions to their fair value on June 30, 2008 and a $35 million realized loss on settled contracts. For the same period in 2007, the Company reported a $6.1 million net gain on derivatives, consisting of a $7.6 million non-cash gain due to changes in mark-to-market valuations and a $1.5 million realized loss on settled contracts.

In the second quarter of 2008, the Company recorded a net gain of $40.4 million for the sale of property and equipment which included a gain of $33.1 million from the South Louisiana sale and $5.7 million from the sale of the two 2,000 horsepower drilling rigs.

The Company recorded exploration costs during the second quarter of 2008 of $3.5 million compared to $25.1 million for the second quarter of 2007. The 2008 quarter included a charge of $1.8 million for the abandonment of the Wynn 35 #1 in North Louisiana and $1.6 million for seismic expense. The Company is continuing to monitor and evaluate its two exploratory wells in the Company’s East Texas Bossier prospect, the Big Bill Simpson #1 and the Margarita #1. If the Company is unable to establish sufficient production levels from either or both of these wells, results of operations in subsequent quarters may be adversely affected by the outcome of those wells.

The Company has increased its estimates for planned exploration and development expenditures for fiscal 2008 by $56.2 million from $344.5 million to $400.7 million. Most of the planned increase in capital spending relates to developmental drilling activities in the Permian Basin and North Louisiana and exploratory drilling activities in South Louisiana.

The Company will host a conference call to discuss these results and other forward-looking items today, August 6th at 1:30 pm CT (2:30 pm ET). The dial-in conference number is: 800-901-5213, passcode 69706053. The replay will be available for one week at 888-286-8010, passcode 97137420.

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 Six Months Ended
June 30, June 30,
  2008     2007     2008     2007  
REVENUES
Oil and gas sales $ 134,291 $ 74,893 $ 253,210 $ 136,073
Natural gas services 3,553 2,909 6,091 5,563
Drilling rig services 12,703 14,228 27,535 22,645
Gain on sales of property and equipment   40,721     534     41,290     784  
Total revenues   191,268     92,564     328,126     165,065  
 
COSTS AND EXPENSES
Production 21,925 17,840 42,504 35,118
Exploration:
Abandonments and impairments 1,933 23,519 2,230 34,624
Seismic and other 1,562 1,580 5,237 2,470
Natural gas services 3,244 2,904 5,759 5,317
Drilling rig services 9,923 8,506 21,040 13,439
Depreciation, depletion and amortization 24,974 18,487 55,247 33,718
Impairment of property and equipment - 479 - 1,044
Accretion of abandonment obligations 485 619 1,015 1,237
General and administrative 7,944 4,932 11,392 8,835
Loss on sales of property and equipment   277     -     286     9,323  
Total costs and expenses   72,267     78,866     144,710     145,125  
Operating income   119,001     13,698     183,416     19,940  
 
OTHER INCOME (EXPENSE)
Interest expense (6,077 ) (7,986 ) (13,523 ) (15,615 )
Gain (loss) on derivatives (148,587 ) 6,110 (194,696 ) (10,739 )
Other   3,014     3,614     3,669     4,327  
Total other income (expense)   (151,650 )   1,738     (204,550 )   (22,027 )
 
Income (loss) before income taxes and minority interest (32,649 ) 15,436 (21,134 ) (2,087 )
 
Income tax (expense) benefit 11,642 (5,357 ) 7,420 723
 
Minority interest, net of tax (164 ) (1,269 ) (278 ) (2,136 )
       
NET INCOME (LOSS) $ (21,171 ) $ 8,810   $ (13,992 ) $ (3,500 )
 
 
Net income (loss) per common share:
Basic $ (1.75 ) $ 0.78   $ (1.19 ) $ (0.31 )
Diluted $ (1.75 ) $ 0.77   $ (1.19 ) $ (0.31 )
 
Weighted average common shares outstanding:
Basic   12,111     11,352     11,749     11,236  
Diluted   12,111     11,507     11,749     11,236  
CLAYTON WILLIAMS ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
     
ASSETS
June 30, December 31,
  2008     2007  
 
CURRENT ASSETS
Cash and cash equivalents $ 17,492 $ 12,344
Accounts receivable:
Oil and gas sales, net 55,904 36,698
Joint interest and other, net 16,829 16,666
Affiliates 601 308
Inventory 19,770 14,348
Deferred income taxes 3,581 3,581
Fair value of derivatives - 7,191
Assets held for sale - 17,281
Prepaids and other   10,346     3,962  
  124,523     112,379  
PROPERTY AND EQUIPMENT
Oil and gas properties, successful efforts method 1,404,221 1,374,090
Natural gas gathering and processing systems 17,808 18,404
Contract drilling equipment 90,573 89,956
Other   14,619     14,505  
1,527,221 1,496,955
Less accumulated depreciation, depletion and amortization   (760,957 )   (765,877 )
Property and equipment, net   766,264     731,078  
 
OTHER ASSETS
Debt issue costs, net 6,840 6,963
Other   14,814     10,676  
  21,654     17,639  
 
$ 912,441   $ 861,096  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
CURRENT LIABILITIES
Accounts payable:
Trade $ 106,961 $ 72,477
Oil and gas sales 28,350 24,806
Affiliates 2,930 1,747
Current maturities of long-term debt 18,750 22,500
Fair value of derivatives 147,506 56,929
Accrued liabilities and other   10,610     10,308  
  315,107     188,767  
 
NON-CURRENT LIABILITIES
Long-term debt 309,000 430,175
Deferred income taxes 38,565 44,302
Fair value of derivatives 47,853 -
Other   35,383     37,046  
  430,801     511,523  
 
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.10 per share - -
Common stock, par value $.10 per share 1,211 1,135
Additional paid-in capital 136,963 121,063
Retained earnings 21,898 35,890
Accumulated other comprehensive income, net of tax   6,461     2,718  
  166,533     160,806  
 
$ 912,441   $ 861,096  
  CLAYTON WILLIAMS ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
       
 
Three Months Ended Six Months Ended
June 30, June 30,
  2008     2007     2008     2007  
 
 
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (21,171 ) $ 8,810 $ (13,992 ) $ (3,500 )
Adjustments to reconcile net income (loss) to cash provided by operating activities:
 
Depreciation, depletion and amortization 24,974 18,487 55,247 33,718
Impairment of proved properties - 479 - 1,044
Exploration costs 1,933 23,519 2,230 34,624
(Gain) loss on sales of property and equipment, net (40,444 )

(534)

(41,004 ) 8,539
Deferred income taxes (11,852 ) 5,357 (7,752 ) (723 )
Non-cash employee compensation 1,568 500 1,910 1,110
Unrealized loss on derivatives 113,593 (7,586 ) 145,621 11,236
Settlements on derivatives with financing elements 14,374 6,412 24,789 12,005
Amortization of debt issue costs 439

316

785 625
Accretion of abandonment obligations 485

619

1,015 1,237
Minority interest, net of tax 164 1,269 278 2,136
 
Changes in operating working capital:
Accounts receivable (5,793 ) (10,371 ) (19,662 ) (10,657 )
Accounts payable (11,587 ) 2,698 398 (1,005 )
Other   4,688    

3,732

 

  (442 )   (453 )
Net cash provided by operating activities   71,371     53,707     149,421     89,936  
 
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (68,881 ) (64,686 ) (118,491 ) (120,435 )
Additions to equipment of Larclay JV - (4,099 ) (9 ) (23,415 )
Proceeds from sales of property and equipment 113,425 957 114,049 1,602
Change in equipment inventory (5,157 ) 7,939 (6,777 ) 11,835
Other   716     (5,299 )   785     (8,269 )
Net cash provided by (used in) investing activities   40,103     (65,188 )   (10,443 )   (138,682 )
 
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt - 15,500 - 40,500
Proceeds from long-term debt of Larclay JV 4,000 - 4,000 8,727
Repayments of long-term debt (105,000 ) - (115,800 ) -
Repayments of long-term debt of Larclay JV (6,563 ) - (13,125 ) -
Proceeds from sale of common stock 9,432 8 15,884 5,970
Settlements on derivatives with financing elements   (14,374 )   (6,412 )   (24,789 )   (12,005 )
Net cash provided by (used in) financing activities   (112,505 )   9,096     (133,830 )   43,192  
 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(1,031 ) (2,385 ) 5,148 (5,554 )
 
CASH AND CASH EQUIVALENTS
Beginning of period 18,523 10,671 12,344 13,840
       
End of period $ 17,492   $ 8,286   $ 17,492   $ 8,286  
Clayton Williams Energy, Inc.
Summary Production and Price Data
(Unaudited)
         
 
Three Months Ended Six Months Ended
June 30, June 30,
  2008     2007     2008     2007  
 
Average Daily Production:
Natural Gas (Mcf):
Permian Basin 14,284 13,724 14,665 14,552
North Louisiana 15,233 5,229 14,611 3,815
South Louisiana 7,347 27,206 15,405 23,695
Austin Chalk (Trend) 2,133 2,445 2,333 2,228
Cotton Valley Reef Complex 6,277 7,651 5,857 7,674
Other   627     349     563     401  
Total   45,901     56,604     53,434     52,365  
 
Oil (Bbls):
Permian Basin 3,568 3,135 3,532 3,117
North Louisiana 386 153 365 91
South Louisiana 105 1,333 545 1,256
Austin Chalk (Trend) 3,575 1,627 3,104 1,647
Other   91     93     75     77  
Total   7,725     6,341     7,621     6,188  
 
Natural gas liquids (Bbls):
Permian Basin 153 226 185 211
Austin Chalk (Trend) 241 251 258 259
Other   57     149     101     99  
Total   451     626     544     569  
 
 
 
Total Production:
Natural Gas (MMcf) 4,177 5,151 9,725 9,478
Oil (MBbls) 703 577 1,387 1,120
Natural gas liquids (MBbls)   41     57     99     103  
Gas Equivalents (MMcfe) 8,641 8,955 18,641 16,816
 
 
Average Realized Prices (a):
Gas ($/Mcf): $ 11.07   $ 7.20   $ 9.81   $ 7.06  
Oil ($/Bbl): $ 121.51   $ 62.51   $ 109.05   $ 58.95  
Natural gas liquids ($/Bbl) $ 63.63   $ 42.84   $ 58.47   $ 38.58  
 
Gains (Losses) on settled derivative contracts (a):
($ in thousands, except per unit)
Gas:
Net realized gain (loss) $ (10,287 ) $ 473 $ (11,171 ) $ 4,982
Per unit produced ($/Mcf) $ (2.46 ) $ 0.09 $ (1.15 ) $ 0.53
 
Oil:
Net realized loss $ (23,348 ) $ (1,971 ) $ (36,254 ) $ (4,530 )
Per unit produced ($/Bbl) $ (33.21 ) $ (3.42 ) $ (26.14 ) $ (4.04 )
Clayton Williams Energy, Inc.
Summary of Capital Expenditures
(Unaudited)
   
 
Planned
Expenditures
Year Ending Percentage

 

  12/31/2008 of Total
 
 
Permian Basin $ 184,100

46

%
North Louisiana 83,400

21

%
Austin Chalk (Trend) 57,500 14 %

South Louisiana

35,700

9

%

East Texas Bossier

30,300

8

%
Utah/California 8,700 2 %
Other  

1,000

-  
$

400,700

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 2008 or 2007 derivative contracts as cash flow hedges. This means that the Company's derivatives for 2008 and 2007 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.
 
Certain reclassifications of prior period financial statement amounts have been made to conform to current period presentations.

CONTACT:
Clayton Williams Energy, Inc.
Patti Hollums, 432-688-3419
Director of Investor Relations
cwei@claytonwilliams.com
www.claytonwilliams.com
or
Mel G. Riggs, 432-688-3431
Chief Financial Officer