Clayton Williams Energy Announces Third Quarter 2012 Financial Results

Clayton Williams Energy Announces Third Quarter 2012 Financial Results

MIDLAND, Texas--(BUSINESS WIRE)-- Clayton Williams Energy, Inc. (the "Company") (NAS: CWEI) today reported its financial results for the third quarter of 2012.

Financial Results for the Third Quarter of 2012

Net loss attributable to Company stockholders for the third quarter of 2012 ("3Q12") was $7.2 million, or $0.59 per share, as compared to net income of $74.5 million, or $6.13 per share, for the third quarter of 2011 ("3Q11"). Cash flow from operations for 3Q12 was $60.6 million as compared to $55.6 million for 3Q11.

For the nine-months ended September 30, 2012, net income attributable to Company stockholders was $33.4 million, or $2.75 per share, as compared to net income of $109.3 million, or $8.99 per share, for the same period in 2011. Cash flow from operations for the nine-month period in 2012 was $157.9 million as compared to $175.3 million during the same period in 2011.

The key factors affecting the comparability of financial results for 3Q12 versus 3Q11 were:

  • Oil and gas sales increased $1.9 million in 3Q12 versus 3Q11. Production variances accounted for a $6.3 million increase, and price variances accounted for a $6.9 million decrease. Average realized oil prices were $89.48 per barrel in 3Q12 versus $89.36 per barrel in 3Q11, and average realized gas prices were $3.29 per Mcf in 3Q12 versus $5.46 per Mcf in 3Q11. In addition, oil and gas sales in 3Q12 includes $2.5 million of amortized deferred revenue attributable to a volumetric production payment ("VPP") granted effective March 1, 2012 in connection with the mergers of 24 Southwest Royalties, Inc. limited partnerships. Reported production and related average realized sales prices exclude volumes associated with the VPP.
  • Oil and gas production per barrel of oil equivalent ("BOE") increased 5% in 3Q12 as compared to 3Q11, with oil production increasing 5% and gas production declining 8%. Oil production increased to 993,000 barrels, or 10,793 barrels per day, as compared to 945,000 barrels, or 10,272 barrels per day, while gas production declined to 2 Bcf, or 21,848 Mcf per day as compared to 2.2 Bcf or 23,859 Mcf per day for 3Q11. Oil and natural gas liquids comprised 77% of the Company's BOE production in 3Q12.
  • Production costs increased 34% from $24.3 million in 3Q11 to $32.6 million in 3Q12 due to a combination of more producing wells and rising costs of field services including salt water disposal costs.
  • Loss on derivatives for 3Q12 was $21.9 million ($20.5 million non-cash mark-to-market loss and $1.4 million realized loss on settled contracts) versus a gain in 3Q11 of $92.3 million ($91.1 million non-cash mark-to-market gain and $1.2 million realized gain on settled contracts). See accompanying tables for additional information about the Company's accounting for derivatives.
  • Depreciation, depletion and amortization expense increased 45% to $37.7 million in 3Q12 versus $25.9 million in 3Q11 due primarily to a 33% increase in the average depletion rate per BOE of production. Most of the increase related to the Company's Wolfbone play in Reeves County, Texas.
  • General and administrative ("G&A") expenses were $5.8 million in 3Q12 versus $7.1 million in 3Q11. Non-cash employee compensation expense from incentive compensation plans accounted for a $2.2 million credit to expense in 3Q12 versus $1.1 million expense in 3Q11. Cash G&A expenses, excluding non-cash employee compensation expense, increased to $8 million in 3Q12 from $6 million in 3Q11 due primarily to higher personnel costs and a $1 million contribution to a 527 organization.
  • No provision for non-cash impairments of property and equipment was made in 3Q12 as compared to $5 million in 3Q11.

Scheduled Conference Call

The Company will host a conference call to discuss these results and other forward-looking items today, October 25th at 1:30 p.m. CT (2:30 p.m. ET). The dial-in conference number is: 877-868-1835, passcode 47041399. The replay will be available for one week at 855-859-2056, passcode 47041399.

To access the conference call via Internet webcast, please go to the Investor Relations section of the Company's website at 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.

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 natural gas and liquids 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 recession 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.

(In thousands, except per share)
Three Months EndedNine Months Ended
September 30,September 30,
Oil and gas sales$101,638$99,752$308,116$300,488
Natural gas services6713341,3051,108
Drilling rig services5,34892911,4783,614
Gain on sales of assets 106  49  543  14,570 
Total revenues 107,763  101,064  321,442  319,780 
Abandonments and impairments3061,2562,2922,307
Seismic and other2,7101,8425,4455,287
Natural gas services508233956781
Drilling rig services5,3351,67312,1644,378
Depreciation, depletion and amortization37,66125,901103,48674,987
Impairment of property and equipment-5,0355,7119,459
Accretion of asset retirement obligations1,0697062,6282,077
General and administrative5,8307,14225,13322,678

Loss on sales of assets and impairment of inventory









Total costs and expenses 86,190  68,186  252,237  197,608 
Operating income 21,573  32,878  69,205  122,172 
Interest expense(9,786)(8,717)(27,817)(24,304)
Loss on early extinguishment of long-term debt-(907)-(5,501)
Gain (loss) on derivatives(21,901)92,2869,85674,128
Total other income (expense) (32,246) 83,189  (17,222) 47,837 
Income (loss) before income taxes(10,673)116,06751,983170,009
Income tax (expense) benefit3,497(41,544)(18,558)(60,693)
NET INCOME (LOSS)$(7,176)$74,523 $33,425 $109,316 
Net income (loss) per common share:
Basic$(0.59)$6.13 $2.75 $8.99 
Diluted$(0.59)$6.13 $2.75 $8.99 
Weighted average common shares outstanding:
Basic 12,164  12,163  12,164  12,160 
Diluted 12,164  12,163  12,164  12,161 
(In thousands)
September 30,December 31,
Cash and cash equivalents$22,694$17,525
Accounts receivable:
Oil and gas sales36,77041,282
Joint interest and other, net12,35714,517
Deferred income taxes8,2028,948
Fair value of derivatives945-
Prepaids and other 5,730  14,813 
 131,483  142,943 
Oil and gas properties, successful efforts method2,497,4662,103,085
Natural gas gathering and processing systems45,47726,040
Contract drilling equipment88,57075,956
Other 20,970  19,134 
Less accumulated depreciation, depletion and amortization (1,271,601) (1,156,664)
Property and equipment, net 1,380,882  1,067,551 
Debt issue costs, net10,89811,644
Fair value of derivatives7,745-
Investments and other 15,531  4,133 
 34,174  15,777 
$1,546,539 $1,226,271 
Accounts payable:
Oil and gas sales36,12937,409
Fair value of derivatives-5,633
Accrued liabilities and other 21,088  13,042 
 133,766  156,230 
Long-term debt769,572529,535
Deferred income taxes152,022134,209
Fair value of derivatives-494
Asset retirement obligations51,54740,794
Deferred revenue from volumetric production payment39,170-
Accrued compensation under non-equity award plans22,67520,757
Other 861  751 
 1,035,847  726,540 
Preferred stock, par value $.10 per share--
Common stock, par value $.10 per share1,2161,216
Additional paid-in capital152,515152,515
Retained earnings 223,195  189,770 
Total stockholders' equity 376,926  343,501 
$1,546,539 $1,226,271