Clayton Williams Energy Announces Third Quarter 2009 Financial Results
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MIDLAND, Texas--(BUSINESS WIRE)-- Clayton Williams Energy, Inc. (NASDAQ: CWEI) reported a net loss attributable to Company stockholders for the third quarter of 2009 of $13.6 million, or $1.12 per share, as compared to net income of $94.6 million, or $7.79 per share, for the third quarter of 2008. Cash flow from operations for the third quarter of 2009 was $28.3 million as compared to $73.6 million during the same period in 2008.
For the nine months ended September 30, 2009, the Company reported a net loss attributable to Company stockholders of $74.5 million, or $6.14 per share, as compared to net income of $80.6 million, or $6.72 per share, for the same period in 2008. Cash flow from operations for the nine-month period in 2009 was $68.2 million as compared to $223.1 million during the same period in 2008.
The Company cited volatility in the commodity markets as the principal reason for the adverse change in operating results between the third quarter of 2009 and the comparable quarter in 2008. The Company reported a $4.7 million net gain on derivatives in the current quarter, consisting of a $10.6 million non-cash gain to mark the Company's derivative positions to their fair value on September 30, 2009 and a $5.9 million realized loss on settled contracts. For the same period in 2008, the Company reported a $132.7 million net gain on derivatives, consisting of a $169.5 million non-cash gain due to changes in mark-to-market valuations and a $36.8 million realized loss on settled contracts.
Lower commodity prices also had an adverse impact on revenues and cash flow from operations. Most of the 54% decrease in oil and gas sales from $128.3 million for the third quarter of 2008 to $59.4 million for the same quarter in 2009 was attributable to lower product prices. Average realized oil prices for the third quarter of 2009 decreased 44% to $64.60 per barrel from $116.01 per barrel in the 2008 period, while gas prices decreased 62% to $3.79 per Mcf from $9.88 per Mcf in the same quarter of 2008. Average realized prices for 2009 and 2008 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.
Oil and gas production (per barrel of oil equivalent) declined by 5% for the third quarter of 2009 as compared to the same quarter in 2008. Oil production decreased 12% to 662,000 barrels, or 7,196 barrels per day, as compared to 755,000 barrels, or 8,207 barrels per day, while gas production remained relatively flat at 3.9 Bcf, or 42,391 Mcf per day in 2009, as compared to 42,609 Mcf per day in 2008.
The Company recorded abandonment and impairment costs during the third quarter of 2009 of $24.1 million compared to $43 million for the third quarter of 2008. The 2009 quarter included a $17.5 million pre-tax charge for the previously announced abandonment of the Miami Corp wells in South Louisiana and $5.3 million of leasehold impairments relating primarily to North Louisiana and the East Texas Bossier area.
The Company will host a conference call to discuss these results and other forward-looking items today, November 4th at 1:30 pm CT (2:30 pm ET). The dial-in conference number is: 800-901-5213, passcode 91914656. The replay will be available for one week at 888-286-8010, passcode 70637212.
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,
2009 2008 2009 2008
REVENUES
Oil and gas sales $ 59,436 $ 128,335 $ 167,438 $ 381,545
Natural gas services 1,639 2,978 4,578 9,069
Drilling rig services - 12,515 6,681 40,050
Gain on sales of assets 1,351 3,157 2,014 44,447
Total revenues 62,426 146,985 180,711 475,111
COSTS AND EXPENSES
Production 19,258 22,861 56,617 65,365
Exploration:
Abandonments and 24,149 43,036 41,066 45,266
impairments
Seismic and other 898 5,993 6,556 11,230
Natural gas services 1,344 2,706 3,966 8,465
Drilling rig services 904 9,763 10,901 30,803
Depreciation, depletion 30,053 27,226 92,704 82,473
and amortization
Impairment of property and - 9,985 32,068 9,985
equipment (a)
Accretion of abandonment 824 654 2,290 1,669
obligations
General and administrative 4,012 6,501 14,796 17,893
Loss on sales of assets 555 134 4,400 420
and inventory write-downs
Total costs and expenses 81,997 128,859 265,364 273,569
Operating income (loss) (19,571 ) 18,126 (84,653 ) 201,542
OTHER INCOME (EXPENSE)
Interest expense (6,526 ) (5,406 ) (17,700 ) (18,929 )
Gain (loss) on derivatives 4,723 132,710 (14,537 ) (61,986 )
Other (76 ) 2,030 1,651 5,699
Total other income (1,879 ) 129,334 (30,586 ) (75,216 )
(expense)
Income (loss) before income (21,450 ) 147,460 (115,239 ) 126,326
taxes
Income tax benefit 7,850 (52,829 ) 42,171 (45,409 )
(expense)
NET INCOME (LOSS) (13,600 ) 94,631 (73,068 ) 80,917
Less income attributable
to noncontrolling - (2 ) (1,455 ) (280 )
interest, net of tax (a)
NET INCOME (LOSS)
attributable to Clayton $ (13,600 ) $ 94,629 $ (74,523 ) $ 80,637
Williams Energy, Inc.
Net income (loss) per
common share attributable
to Clayton Williams
Energy, Inc. stockholders:
Basic $ (1.12 ) $ 7.81 $ (6.14 ) $ 6.79
Diluted $ (1.12 ) $ 7.79 $ (6.14 ) $ 6.72
Weighted average common
shares outstanding:
Basic 12,144 12,114 12,136 11,874
Diluted 12,144 12,141 12,136 12,008
CLAYTON WILLIAMS ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
September 30, December 31,
2009 2008
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 22,407 $ 41,199
Accounts receivable:
Oil and gas sales 21,986 26,009
Joint interest and other, net 5,533 14,349
Affiliates 289 227
Inventory 41,918 20,052
Deferred income taxes 3,637 3,637
Assets held for sale (a) 18,750 -
Prepaids and other 1,796 20,011
116,316 125,484
PROPERTY AND EQUIPMENT
Oil and gas properties, successful efforts method 1,570,175 1,526,473
Natural gas gathering and processing systems 17,884 17,816
Contract drilling equipment (a) 27,800 91,151
Other 16,047 14,954
1,631,906 1,650,394
Less accumulated depreciation, depletion and (920,687 ) (840,366 )
amortization
Property and equipment, net 711,219 810,028
OTHER ASSETS
Debt issue costs, net 5,188 6,225
Other 1,920 1,672
7,108 7,897
$ 834,643 $ 943,409
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable:
Trade $ 32,653 $ 67,189
Oil and gas sales 17,721 24,702
Affiliates 1,738 1,627
Current maturities of long-term debt - 18,750
Fair value of derivatives 8,049 -
Accrued liabilities and other 7,699 10,609
67,860 122,877
NON-CURRENT LIABILITIES
Long-term debt (a) 395,000 347,225
Deferred income taxes 78,382 120,414
Fair value of derivatives 265 -
Other 37,993 32,617
511,640 500,256
EQUITY
Preferred stock, par value $.10 per share - -
Common stock, par value $.10 per share 1,214 1,212
Additional paid-in capital (a) 152,028 137,046
Retained earnings 101,901 176,424
Total Clayton Williams Energy, Inc. 255,143 314,682
stockholders' equity
Noncontrolling interest, net of tax (a) - 5,594
Total equity 255,143 320,276
$ 834,643 $ 943,409
CLAYTON WILLIAMS ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) $ (13,600 ) $ 94,631 $ (73,068 ) $ 80,917
Adjustments to reconcile
net income (loss) to
cash
provided by operating
activities:
Depreciation,
depletion and 30,053 27,226 92,704 82,473
amortization
Impairment of property - 9,985 32,068 9,985
and equipment
Exploration costs 24,149 43,036 41,066 45,266
(Gain) loss on sales
of assets and (796 ) (3,023 ) 2,386 (44,027 )
inventory write-downs,
net
Deferred income tax (7,850 ) 52,633 (42,171 ) 44,881
(benefit) expense
Non-cash employee 326 2,032 953 3,942
compensation
Unrealized (gain) loss (10,593 ) (169,551 ) 8,314 (23,930 )
on derivatives
Settlements on
derivatives with - 15,471 - 40,260
financing elements
Amortization of debt 539 264 1,163 1,049
issue costs
Accretion of
abandonment 824 654 2,290 1,669
obligations
Changes in operating
working capital:
Accounts receivable 2,198 14,661 12,777 (5,001 )
Accounts payable (9,449 ) (10,772 ) (26,075 ) (10,374 )
Other 12,536 (3,612 ) 15,800 (4,054 )
Net cash provided by 28,337 73,635 68,207 223,056
operating activities
CASH FLOWS FROM INVESTING
ACTIVITIES
Additions to property (30,726 ) (112,816 ) (99,808 ) (231,316 )
and equipment
Proceeds from sales of 1,439 3,060 2,109 117,109
assets
Change in equipment (13,274 ) (4,607 ) (25,868 ) (11,384 )
inventory
Other (12 ) 3,095 (109 ) 3,880
Net cash used in (42,573 ) (111,268 ) (123,676 ) (121,711 )
investing activities
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from long-term 50,700 74,800 75,900 5,500
debt
Repayments of long-term (30,000 ) (4,687 ) (39,375 ) (60,312 )
debt
Proceeds from exercise - 31 152 15,915
of stock options
Settlements on
derivatives with - (15,471 ) - (40,260 )
financing elements
Net cash provided by
(used in) financing 20,700 54,673 36,677 (79,157 )
activities
NET INCREASE (DECREASE)
IN CASH
AND CASH EQUIVALENTS 6,464 17,040 (18,792 ) 22,188
CASH AND CASH EQUIVALENTS
Beginning of period 15,943 17,492 41,199 12,344
End of period $ 22,407 $ 34,532 $ 22,407 $ 34,532
Clayton Williams Energy, Inc.
Summary Production and Price Data
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Average Daily Production:
Natural Gas (Mcf):
Permian Basin 14,374 13,536 15,157 14,287
North Louisiana 10,076 16,273 12,007 15,169
South Louisiana 10,755 4,320 10,342 11,682
Austin Chalk (Trend) 2,306 2,271 2,580 2,313
Cotton Valley Reef Complex 3,916 5,832 3,989 5,848
Other 964 377 1,233 500
Total 42,391 42,609 45,308 49,799
Oil (Bbls):
Permian Basin 3,526 3,983 4,010 3,683
North Louisiana 230 392 257 363
South Louisiana 773 90 624 393
Austin Chalk (Trend) 2,585 3,659 2,821 3,291
Other 82 83 87 88
Total 7,196 8,207 7,799 7,818
Natural gas liquids (Bbls):
Permian Basin 246 174 241 181
North Louisiana 26 3 21 3
South Louisiana 116 6 73 62
Austin Chalk (Trend) 288 233 296 249
Other 9 8 10 9
Total 685 424 641 504
Total Production:
Natural Gas (MMcf) 3,900 3,920 12,369 13,645
Oil (MBbls) 662 755 2,129 2,142
Natural gas liquids (MBbls) 63 39 175 138
Total (MBOE) 1,375 1,447 4,366 4,554
Average Realized Prices (b):
Gas ($/Mcf) $ 3.79 $ 9.88 $ 4.11 $ 9.83
Oil ($/Bbl) $ 64.60 $ 116.01 $ 52.10 $ 111.48
Natural gas liquids ($/Bbl) $ 31.89 $ 69.90 $ 26.70 $ 61.70
Gains (Losses) on settled derivative contracts (b):
($ in thousands, except per
unit)
Gas:
Net realized gain (loss) $ 2,992 $ (7,190 ) $ 7,478 $ (18,361 )
Per unit produced ($/Mcf) $ .77 $ (1.83 ) $ .60 $ (1.35 )
Oil:
Net realized loss $ (8,861 ) $ (29,324 ) $ (13,701 ) $ (65,578 )
Per unit produced ($/Bbl) $ (13.39 ) $ (38.84 ) $ (6.44 ) $ (30.62 )
Clayton Williams Energy, Inc.
Summary of Open Commodity Derivatives
(Unaudited)
The following summarizes information concerning the Company's net
positions in open commodity
derivatives applicable to periods subsequent to September 30, 2009.
Swaps: Gas Oil
MMBtu(a) Price Bbls Price
Production Period:
4thQuarter 2009 1,850,000 $ 5.47 400,000 $ 46.15
2010 7,540,000 $ 6.80 2,204,000 $ 76.50
2011 6,420,000 $ 7.07 - $ -
15,810,000 2,604,000
(a) One MMBtu equals one Mcf at a Btu factor of 1,000.
CLAYTON WILLIAMS ENERGY, INC.
Notes to tables and supplemental information
Effective April 15, 2009, the Company acquired the remaining 50% equity
interest in Desta Drilling, LP, a contract drilling limited partnership
formerly referred to as Larclay JV (the "Partnership"), pursuant to an
agreement with Lariat Services, Inc. ("Lariat") dated March 13, 2009 (the
"Assignment"). The Assignment from Lariat to the Company also included all
(a) of Lariat's right, title and interest in subordinated loans previously made
by Lariat to the Partnership. As consideration for the Assignment, the
Company assumed all of the obligations and liabilities of Lariat relating
to the Partnership from and after the effective date, including Lariat's
obligations as operator of the Partnership's drilling rigs. Upon
consummation of the Assignment, the Company contributed the subordinated
loans to the Partnership's capital.
Prior to the effective date of the Assignment, the Company met the
definition of the primary beneficiary of the Partnership's expected cash
flows under FIN 46R. Accordingly, the Company fully consolidated the
accounts of the Partnership in its consolidated financial statements and
accounted for the equity interest owned by Lariat as a noncontrolling
interest. Upon consummation of the Assignment, the Company accounted for
the related transactions by recording an increase in additional paid-in
capital of $14.8 million, consisting of the contribution to equity of $7.8
million of principal and accrued interest on subordinated loans obtained
from Lariat and the conversion to equity of $7 million of cumulative
balance in the noncontrolling interest account attributable to the equity
interests acquired from Lariat.
Upon consummation of the Assignment, the Company adopted a plan of
disposition whereby it would commit to sell eight of the Partnership's 12
drilling rigs. The plan of disposition meets the criteria under SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets (as
amended)" ("SFAS 144"), for the designated assets to be classified as held
for sale. SFAS 144 requires the Company to value the designated assets at
the lower of their carrying value or fair value, less cost to sell, as of
the date the plan of disposition was adopted. The Company estimates the
fair value of the designated assets to be approximately $18.8 million. As a
result, the Company has reclassified the estimated fair value of the
designated assets to "Assets Held for Sale" in its consolidated balance
sheet, and has recorded a related charge for impairment of property and
equipment of approximately $32.1 million in its consolidated statement of
operations for the second quarter of 2009.
In August 2009, the Company repaid in full all amounts outstanding under
the secured term loan of Desta Drilling with borrowings of approximately
$27.2 million under the revolving credit facility. All of the assets of
Desta Drilling were pledged as collateral under the revolving credit
facility.
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 2009 or 2008 derivative contracts
(b) as cash flow hedges. This means that the Company's derivatives for 2009 and
2008 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.
Source: Clayton Williams Energy, Inc.
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