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 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.

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.

CLAYTON WILLIAMS ENERGY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2012

2011

2012

2011

REVENUES

Oil and gas sales

$

101,638

$

99,752

$

308,116

$

300,488

Natural gas services

671

334

1,305

1,108

Drilling rig services

5,348

929

11,478

3,614

Gain on sales of assets

106

49

543

14,570

Total revenues

107,763

101,064

321,442

319,780

COSTS AND EXPENSES

Production

32,564

24,284

93,937

75,237

Exploration:

Abandonments and impairments

306

1,256

2,292

2,307

Seismic and other

2,710

1,842

5,445

5,287

Natural gas services

508

233

956

781

Drilling rig services

5,335

1,673

12,164

4,378

Depreciation, depletion and amortization

37,661

25,901

103,486

74,987

Impairment of property and equipment

-

5,035

5,711

9,459

Accretion of asset retirement obligations

1,069

706

2,628

2,077

General and administrative

5,830

7,142

25,133

22,678

Loss on sales of assets and impairment of inventory

207

114

485

417

Total costs and expenses

86,190

68,186

252,237

197,608

Operating income

21,573

32,878

69,205

122,172

OTHER INCOME (EXPENSE)

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

)

92,286

9,856

74,128

Other

(559

)

527

739

3,514

Total other income (expense)

(32,246

)

83,189

(17,222

)

47,837

Income (loss) before income taxes

(10,673

)

116,067

51,983

170,009

Income tax (expense) benefit

3,497

(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

CLAYTON WILLIAMS ENERGY, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

ASSETS

September 30,

December 31,

2012

2011

(Unaudited)

CURRENT ASSETS

Cash and cash equivalents

$

22,694

$

17,525

Accounts receivable:

Oil and gas sales

36,770

41,282

Joint interest and other, net

12,357

14,517

Affiliates

513

990

Inventory

44,272

44,868

Deferred income taxes

8,202

8,948

Fair value of derivatives

945

-

Prepaids and other

5,730

14,813

131,483

142,943

PROPERTY AND EQUIPMENT

Oil and gas properties, successful efforts method

2,497,466

2,103,085

Natural gas gathering and processing systems

45,477

26,040

Contract drilling equipment

88,570

75,956

Other

20,970

19,134

2,652,483

2,224,215

Less accumulated depreciation, depletion and amortization

(1,271,601

)

(1,156,664

)

Property and equipment, net

1,380,882

1,067,551

OTHER ASSETS

Debt issue costs, net

10,898

11,644

Fair value of derivatives

7,745

-

Investments and other

15,531

4,133

34,174

15,777

$

1,546,539

$

1,226,271

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable:

Trade

$

76,426

$

98,645

Oil and gas sales

36,129

37,409

Affiliates

123

1,501

Fair value of derivatives

-

5,633

Accrued liabilities and other

21,088

13,042

133,766

156,230

NON-CURRENT LIABILITIES

Long-term debt

769,572

529,535

Deferred income taxes

152,022

134,209

Fair value of derivatives

-

494

Asset retirement obligations

51,547

40,794

Deferred revenue from volumetric production payment

39,170

-

Accrued compensation under non-equity award plans

22,675

20,757

Other

861

751

1,035,847

726,540

STOCKHOLDERS' EQUITY

Preferred stock, par value $.10 per share

-

-

Common stock, par value $.10 per share

1,216

1,216

Additional paid-in capital

152,515

152,515

Retained earnings

223,195

189,770

Total stockholders' equity

376,926

343,501

$

1,546,539

$

1,226,271