Form 8-K CLAYTON WILLIAMS ENERGY For: Nov 02

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November 3, 2016 8:07 AM EDT


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8‑K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  November 2, 2016

    
CLAYTON WILLIAMS ENERGY, INC.
(Exact name of Registrant as specified in its charter)



Delaware
 
001-10924
 
75-2396863
(State or other jurisdiction of
 
(Commission File
 
(I.R.S. Employer
incorporation or organization)
 
Number)
 
Identification Number)



6 Desta Drive, Suite 6500, Midland, Texas
 
79705-5510
(Address of principal executive offices)
 
(Zip code)


Registrant's Telephone Number, including area code:   (432) 682-6324


Not applicable
(Former name, former address and former fiscal year, if changed since last report)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2 (b) under the Exchange Act (17 CFR 240.14d-2 (b))
o Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.13e-4 (c))




In accordance with General Instruction B.2. of Form 8-K, all of the information furnished in Items 2.02 of this report and the accompanying exhibit shall not be deemed to be “filed” for the purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, is not subject to the liabilities of that section and shall not be incorporated by reference in any filing under the Securities Act of 1933, as amended.

Item 2.02 -    Results of Operations and Financial Condition
On November 2, 2016, the Company issued the news release attached hereto as Exhibit 99.1 reporting the financial results of the Company for the quarter ended September 30, 2016.

Item 9.01 -    Financial Statements and Exhibits
The following exhibit is provided as part of the information furnished under Item 2.02 of this report.

Exhibit
Number
 
Description
 
 
 
99.1
 
News release dated November 2, 2016 by Clayton Williams Energy, Inc. announcing third quarter 2016 results.







SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized.



 
 
CLAYTON WILLIAMS ENERGY, INC.



Date:
November 3, 2016
By:
/s/ Mel G. Riggs
 
 
 
Mel G. Riggs
 
 
 
President
 
 
 
 



Date:
November 3, 2016
By:
/s/ Jaime R. Casas
 
 
 
Jaime R. Casas
 
 
 
Senior Vice President and Chief Financial
 
 
 
  Officer





Exhibit 99.1


CLAYTON WILLIAMS ENERGY ANNOUNCES THIRD QUARTER 2016
FINANCIAL RESULTS


Midland, Texas, November 2, 2016 (BUSINESS WIRE) - Clayton Williams Energy, Inc. (the “Company”) (NYSE-CWEI) today reported its financial results for the third quarter of 2016.

Summary

•
Oil and Gas Production of 14 MBOE/d
•
Cash Flow from Operations of $24.1 million; EBITDAX2 (non-GAAP) of $18.4 million
•
Liquidity of $321.1 million, including cash and short-term investments
•
Sold Glasscock County, Texas assets for $19.4 million
•
Announced sale of Giddings Area assets for $400 million
•
Recent Actions to Improve Balance Sheet

Financial Results for the Third Quarter of 2016

The Company reported a net loss for the third quarter of 2016 (“3Q16”) of $148.8 million, or $10.62 per share, as compared to a net loss of $9.4 million, or $0.77 per share, for the third quarter of 2015 (“3Q15”). Adjusted net loss1 (non-GAAP) for 3Q16 was $35.1 million, or $2.50 per share, as compared to adjusted net loss1 (non-GAAP) of $14.9 million, or $1.23 per share, for 3Q15. Cash flow from operations for 3Q16 was $24.1 million as compared to $26.4 million for 3Q15. EBITDAX2 (non-GAAP) for 3Q16 was $18.4 million as compared to $28.7 million for 3Q15.

For the nine months ended September 30, 2016, net loss attributable to Company stockholders was $265 million, or $20.72 per share, as compared to net loss of $51 million, or $4.19 per share, for the same period in 2015. Adjusted net loss1 (non-GAAP) for the nine-month period in 2016 was $96.1 million, or $7.52 per share, as compared to adjusted net loss1 (non-GAAP) of $48.5 million, or $3.99 per share, for the same period in 2015. Cash flow from operations for the nine-month period in 2016 was $8 million as compared to $55 million during the same period in 2015. EBITDAX2 (non-GAAP) for the nine-month period in 2016 was $41.3 million as compared to $91.4 million for the same period in 2015.

The key factors affecting the comparability of financial results for 3Q16 versus 3Q15 were:

•
Oil and gas sales for 3Q16, excluding amortized deferred revenues, decreased $7.5 million compared to 3Q15. Production variances accounted for a $5.7 million decrease and price variances accounted for a $1.8 million decrease. Average realized oil prices were $40.62 per barrel in 3Q16 versus $43.26 per barrel in 3Q15, average realized gas prices were $2.94 per Mcf in 3Q16 versus $2.71 per Mcf in 3Q15, and average realized natural gas liquids (“NGL”) prices were $13.14 per barrel in 3Q16 versus $11.01 per barrel in 3Q15. Amortized deferred revenue in 3Q16 totaled $0.4 million as compared to $0.8 million in 3Q15.


•
Oil, gas and NGL production per barrel of oil equivalent (“BOE”) decreased 10% in 3Q16 as compared to 3Q15, with oil production decreasing 11% to 9,935 barrels per day, gas production decreasing 19% to 13,989 Mcf per day, and NGL production increasing 9% to 1,685 barrels per day. Oil and NGL production accounted for approximately 83% of the Company’s total BOE production in 3Q16 versus 82% in 3Q15. After giving effect to the sale of interests in certain wells in Glasscock County, Texas in July 2016 and the sale of selected leases and wells in South Louisiana in September 2015, oil, gas and NGL production per BOE decreased 7% in 3Q16 as compared to 3Q15. See accompanying tables for additional information about the Company’s oil and gas production.

•
Production costs in 3Q16 were $17.8 million versus $20.7 million in 3Q15 due to lower oilfield service costs. Production costs on a BOE basis, excluding production taxes, decreased 3% to $12.25 per BOE in 3Q16 versus $12.68 per BOE in 3Q15.

•
Interest expense for 3Q16 was $26.6 million versus $13.6 million for 3Q15. The increase was due primarily to $13.9 million of incremental interest expense on funded indebtedness incurred under a second lien term loan credit facility issued in connection with a refinancing in March 2016 (the “Refinancing”). For 3Q16, the Company elected to pay interest on the term loan facility in-kind and resulted in an increase in the principal amount of the term loan to $377.2 million.

•
The Company accounts for the warrants issued in connection with the Refinancing as derivative instruments and carries the warrants as a non-current liability at their fair value. The Company recorded a $123.4 million loss on change in fair value in 3Q16 due primarily to the impact on the valuation model of a 211% increase in the market price of the Company’s common stock from $27.46 at June 30, 2016 to $85.44 at September 30, 2016.

•
Gain on commodity derivatives for 3Q16 was $1.3 million (net of a $2.4 million loss on settled contracts) versus a gain on commodity derivatives in 3Q15 of $18.1 million (including a $6.4 million gain on settled contracts). See accompanying tables for additional information about the Company’s accounting for derivatives.

•
Lower commodity prices negatively impacted our results of operations due to asset impairments. We recorded an impairment of proved properties of $1.1 million in 3Q16 related primarily to non-core prospects in California and the Cotton Valley area of Texas versus $3.1 million in 3Q15 related to non-core prospects in the Permian Basin and California.

•
General and administrative expenses for 3Q16 were $5.6 million versus $4.6 million for 3Q15. Changes in compensation expense related to the Company’s APO reward plans accounted for $0.9 million of the increase ($1.1 million credit in 3Q16 versus $2 million credit in 3Q15), and additional expense related to issuances of restricted stock and stock options under the Company’s recent long-term incentive plan accounted for a $0.8 million increase. These increases were partially offset by reductions in salary and personnel expense.

•
The Company redeemed $100 million of 7.75% Senior Notes due 2019 in a tender offer in August 2016 and recorded a gain on early extinguishment of long-term debt during 3Q16 of $4 million.

1 See “Computation of Adjusted Net Loss (non-GAAP)” below for an explanation of how the Company calculates and uses adjusted net loss (non-GAAP) and for a reconciliation of net loss (GAAP) to adjusted net loss (non-GAAP).


2 See “Computation of EBITDAX (non-GAAP)” below for an explanation of how the Company calculates and uses EBITDAX (non-GAAP) and for a reconciliation of net loss (GAAP) to EBITDAX (non-GAAP).
Balance Sheet and Liquidity

As of September 30, 2016, total long-term debt was $846.5 million, consisting of $351.5 million (net of $25.7 million of original issue discount and debt issuance costs) under the second lien term loan credit facility and $495 million, net of costs, of 7.75% Senior Notes due 2019 (the “Notes”). The borrowing base established by the banks under the revolving credit facility and the aggregate lender commitment was $100 million at September 30, 2016. The Company had $98.1 million of availability under the revolving credit facility after allowing for outstanding letters of credit of $1.9 million. Liquidity, consisting of cash, short-term investments and funds available on the revolving credit facility, totaled $321.1 million.

In July 2016, the Company entered into an agreement to sell 5,051,100 shares of common stock to funds managed by Ares Management, L.P. for cash proceeds of $150 million or approximately $29.70 per share, which transaction closed on August 29, 2016. In connection with the transaction, lenders under the Company’s term loan credit facility waived certain restrictions to enable the Company to use proceeds from equity issuances and specified asset sales for debt reduction and capital expenditures.

In July 2016, the Company commenced a modified “Dutch Auction” cash tender offer to purchase up to $100 million aggregate principal amount of Notes, which offer expired on August 29, 2016. The Company accepted for purchase $100 million in aggregate principal amount of Notes at a purchase price of $947.50 per $1,000 principal amount, which included an early tender premium of $30.00 for each $1,000 principal amount of Notes so purchased.

Operational Update

During 3Q16, the Company drilled and completed two wells in Reeves County, Texas. For the remainder of the year, the Company plans to drill four more wells in Reeves County, Texas targeting the Wolfcamp A and Wolfcamp C benches. For 2016, the Company expects to have eight wells drilled by year end, with five on production and three in various stages of completion.

The Collier 34-51 #1H, the Company’s first slick water completion, that had an initial seven day flow-back of just over 2,100 BOE per day continues to perform above our expectations. The peak 30-day production from this well averaged 2,089 BOE per day (82% Oil, 9% NGL). This well has been on production since mid-July and is currently producing at a daily rate of 1,312 BOE.

We plan to announce our 2017 capital program and annual public guidance during the first quarter of 2017.

Subsequent Events

On October 24, 2016, the Company announced that it had entered into a definitive purchase and sale agreement with a third party to sell substantially all of the Company’s assets in the Giddings Area in East Central Texas for a sale price of $400 million. The sale is subject to customary closing conditions and adjustments. The Company expects to close the sale in December 2016 and use the proceeds from the sale to fund development in the Delaware Basin and repay a portion of its outstanding indebtedness.


Scheduled Conference Call

The Company will host a conference call to discuss these results and other forward-looking items Thursday, November 2rd at 9:30 a.m. CT (10:30 a.m. ET).

A live webcast for investors and analysts will be available on the Company’s website at www.claytonwilliams.com under the “Investors” section. The webcast will be archived on the site for 30 days following the call.

Participants should call (877) 868-1835 and indicate 4131903 as the conference passcode. A replay will be available from 12:30 p.m. CT (1:30 p.m. ET) on November 2rd until November 10th. To listen to the replay dial (855) 859-2056 and enter passcode 4131903.

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.

Contact:

Patti Hollums                    Jaime R. Casas
Director of Investor Relations            Chief Financial Officer
(432) 688-3419                    (432) 688-3224
website: www.claytonwilliams.com


TABLES AND SUPPLEMENTAL INFORMATION FOLLOW


CLAYTON WILLIAMS ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
REVENUES
 
 
 
 
 
 
 
    Oil and gas sales
$
43,470

 
$
51,307

 
$
113,351

 
$
178,539

    Midstream services
1,538

 
1,500

 
3,897

 
4,714

    Drilling rig services
—

 
—

 
—

 
23

    Other operating revenues
10,430

 
1,774

 
10,699

 
8,678

        Total revenues
55,438

 
54,581

 
127,947

 
191,954

 
 
 
 
 
 
 
 
COSTS AND EXPENSES
 

 
 
 
 
 
 
    Production
17,776

 
20,665

 
54,160

 
67,188

    Exploration:
 
 
 
 
 
 
 
      Abandonments and impairments
2,483

 
874

 
3,507

 
5,005

      Seismic and other
(8
)
 
239

 
421

 
1,210

    Midstream services
195

 
406

 
1,364

 
1,339

    Drilling rig services
1,125

 
922

 
3,591

 
4,418

    Depreciation, depletion and amortization
38,349

 
36,861

 
115,140

 
121,636

    Impairment of property and equipment
1,091

 
3,089

 
3,438

 
5,620

    Accretion of asset retirement obligations
1,290

 
1,001

 
3,360

 
2,936

    General and administrative
5,571

 
4,631

 
23,027

 
25,102

    Other operating expenses
579

 
5,632

 
3,094

 
8,479

        Total costs and expenses
68,451

 
74,320

 
211,102

 
242,933

        Operating loss
(13,013
)
 
(19,739
)
 
(83,155
)
 
(50,979
)
 
 
 
 
 
 
 
 
OTHER INCOME (EXPENSE)
 

 
 

 
 
 
 
    Interest expense
(26,580
)
 
(13,565
)
 
(70,224
)
 
(40,451
)
    Gain on early extinguishment of long-term debt
3,967

 
—

 
3,967

 
—

    Loss on change in fair value of common stock warrants
(123,351
)
 
—

 
(154,956
)
 
—

    Gain (loss) on commodity derivatives
1,330

 
18,099

 
(13,997
)
 
10,431

    Impairment of investment and other
1,367

 
743

 
(5,832
)
 
2,307

        Total other income (expense)
(143,267
)
 
5,277

 
(241,042
)
 
(27,713
)
Loss before income taxes
(156,280
)
 
(14,462
)
 
(324,197
)
 
(78,692
)
Income tax benefit
7,504

 
5,039

 
59,223

 
27,705

NET LOSS
$
(148,776
)
 
$
(9,423
)
 
$
(264,974
)
 
$
(50,987
)
 
 
 
 
 
 
 
 
Net loss per common share:
 

 
 

 
 
 
 
  Basic
$
(10.62
)
 
$
(0.77
)
 
$
(20.72
)
 
$
(4.19
)
  Diluted
$
(10.62
)
 
$
(0.77
)
 
$
(20.72
)
 
$
(4.19
)
Weighted average common shares outstanding:
 

 
 

 
 

 
 

  Basic
14,013

 
12,170

 
12,789

 
12,170

  Diluted
14,013

 
12,170

 
12,789

 
12,170





CLAYTON WILLIAMS ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
 
ASSETS
 
September 30,
 
December 31,
 
2016
 
2015
CURRENT ASSETS
(Unaudited)
 
 
 
 

 
 

Cash and cash equivalents
$
182,993

 
$
7,780

Short-term investments
40,041

 
—

Accounts receivable:
 
 
 
Oil and gas sales
16,529

 
16,660

Joint interest and other, net
4,764

 
3,661

Affiliates
187

 
260

Inventory
26,648

 
31,455

Deferred income taxes
8,778

 
6,526

Prepaids and other
2,031

 
2,463

 
281,971

 
68,805

PROPERTY AND EQUIPMENT
 

 
 

Oil and gas properties, successful efforts method
2,622,942

 
2,585,502

Pipelines and other midstream facilities
62,609

 
60,120

Contract drilling equipment
123,931

 
123,876

Other
22,268

 
19,371

 
2,831,750

 
2,788,869

Less accumulated depreciation, depletion and amortization
(1,684,423
)
 
(1,587,585
)
Property and equipment, net
1,147,327

 
1,201,284

 
 
 
 
OTHER ASSETS
 

 
 

Investments and other
7,654

 
17,331

 
$
1,436,952

 
$
1,287,420

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
 

 
 

Accounts payable:
 

 
 

Trade
$
37,438

 
$
29,197

Oil and gas sales
19,750

 
19,490

Affiliates
1,209

 
383

Fair value of commodity derivatives
10,136

 
—

Accrued liabilities and other
24,262

 
16,669

 
92,795

 
65,739

NON-CURRENT LIABILITIES
 

 
 

Long-term debt
846,507

 
742,410

Deferred income taxes
52,025

 
108,996

Fair value of commodity derivatives
1,490

 
—

Fair value of common stock warrants
171,720

 
—

Asset retirement obligations
62,478

 
48,728

Accrued compensation under non-equity award plans
22,585

 
16,254

Deferred revenue from volumetric production payment and other
4,572

 
5,695

 
1,161,377

 
922,083

STOCKHOLDERS’ EQUITY
 

 
 

Preferred stock, par value $.10 per share
—

 
—

Common stock, par value $.10 per share
1,749

 
1,216

Additional paid-in capital
300,309

 
152,686

Retained earnings (accumulated deficit)
(119,278
)
 
145,696

Total stockholders' equity
182,780

 
299,598

 
$
1,436,952

 
$
1,287,420




CLAYTON WILLIAMS ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
CASH FLOWS FROM OPERATING ACTIVITIES
 

 
 

 
 

 
 

Net loss
$
(148,776
)
 
$
(9,423
)
 
$
(264,974
)
 
$
(50,987
)
Adjustments to reconcile net loss to cash provided by operating activities:
 
 
 

 
 

 
 

Depreciation, depletion and amortization
38,349

 
36,861

 
115,140

 
121,636

Impairment of property and equipment
1,091

 
3,089

 
3,438

 
5,620

Abandonments and impairments
2,483

 
874

 
3,507

 
5,005

(Gain) loss on sales of assets and impairment of inventory, net
(9,901
)
 
3,414

 
(7,938
)
 
(835
)
Deferred income tax benefit
(7,504
)
 
(5,039
)
 
(59,223
)
 
(27,705
)
Non-cash employee compensation
(623
)
 
(2,679
)
 
7,245

 
4,405

(Gain) loss on commodity derivatives
(1,330
)
 
(18,099
)
 
13,997

 
(10,431
)
Cash settlements of commodity derivatives
(2,347
)
 
6,352

 
(2,371
)
 
4,585

Loss on change in fair value of common stock warrants
123,351

 
—

 
154,956

 
—

Accretion of asset retirement obligations
1,290

 
1,001

 
3,360

 
2,936

Amortization of debt issue costs and original issue discount
1,564

 
746

 
5,517

 
2,241

Gain on early extinguishment of long-term debt
(3,967
)
 
—

 
(3,967
)
 
—

Paid in-kind interest expense
13,925

 
—

 
27,196

 
—

Amortization of deferred revenue from volumetric production payment
(427
)
 
(1,680
)
 
(1,066
)
 
(5,181
)
Impairment of investment and other
149

 
265

 
8,530

 
669

Changes in operating working capital:
 
 
 

 
 
 
 
Accounts receivable
(1,325
)
 
4,280

 
(898
)
 
25,307

Accounts payable
9,654

 
(5,846
)
 
(1,702
)
 
(32,057
)
Other
8,416

 
12,260

 
7,219

 
9,788

Net cash provided by operating activities
24,072

 
26,376

 
7,966

 
54,996

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 

 
 

 
 

Additions to property and equipment
(33,357
)
 
(30,413
)
 
(62,331
)
 
(155,680
)
Termination of volumetric production payment
—

 
(13,703
)
 
—

 
(13,703
)
Net (purchase) redemption of short-term investments
53,910

 
—

 
(40,041
)
 
—

Proceeds from sales of assets
22,193

 
14,744

 
27,369

 
47,484

Decrease in equipment inventory
1,075

 
103

 
1,552

 
1,130

Proceeds from volumetric production payment and other
(821
)
 
1,001

 
(689
)
 
1,499

Net cash provided by (used in) investing activities
43,000

 
(28,268
)
 
(74,140
)
 
(119,270
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 

 
 

 
 

Proceeds from long-term debt
—

 
3,000

 
343,237

 
45,000

Net repayments of Senior Notes
(95,001
)
 
—

 
(95,001
)
 
—

Repayments of long-term debt
—

 
—

 
(160,000
)
 
—

Payment of debt issuance costs
(51
)
 
—

 
(10,958
)
 
—

Proceeds from sale of common stock
147,346

 
—

 
147,346

 
—

Proceeds from issuance of common stock warrants
—

 
—

 
16,763

 
—

Net cash provided by financing activities
52,294

 
3,000

 
241,387

 
45,000

 
 
 
 
 
 
 
 
(Continued)



CLAYTON WILLIAMS ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(Unaudited)
(In thousands)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
119,366

 
1,108

 
175,213

 
(19,274
)
CASH AND CASH EQUIVALENTS
 

 
 

 
 

 
 

Beginning of period
63,627

 
7,634

 
7,780

 
28,016

End of period
$
182,993

 
$
8,742

 
$
182,993

 
$
8,742




CLAYTON WILLIAMS ENERGY, INC.
COMPUTATION OF ADJUSTED NET LOSS (NON-GAAP)
(Unaudited)
(In thousands, except per share)
Adjusted net loss is presented as a supplemental non-GAAP financial measure because of its wide acceptance by financial analysts, investors, debt holders, banks, rating agencies and other financial statement users as a tool for operating trends analysis and industry comparisons. Adjusted net loss is not an alternative to net loss presented in conformity with GAAP.
 
 
 
 
 
 
 
 
The Company defines adjusted net loss as net loss before changes in fair value of commodity derivatives and common stock warrants, abandonments and impairments, impairments of property and equipment, net (gain) loss on sales of assets and impairment of inventory, gain on early extinguishment of long-term debt, amortization of deferred revenue from volumetric production payment, impairment of investments, certain non-cash and unusual items and the impact on taxes of the adjustments for each period presented.
 
 
 
 
 
 
 
 
The following table is a reconciliation of net loss (GAAP) to adjusted net loss (non-GAAP):
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2016
 
2015
 
2016
 
2015
Net loss
$
(148,776
)
 
$
(9,423
)
 
$
(264,974
)
 
$
(50,987
)
(Gain) loss on commodity derivatives
(1,330
)
 
(18,099
)
 
13,997

 
(10,431
)
Cash settlements of commodity derivatives
(2,347
)
 
6,352

 
(2,371
)
 
4,585

Loss on change in fair value of common stock warrants
123,351

 
—

 
154,956

 
—

Abandonments and impairments
2,483

 
874

 
3,507

 
5,005

Impairment of property and equipment
1,091

 
3,089

 
3,438

 
5,620

Net (gain) loss on sales of assets and impairment of inventory
(9,901
)
 
3,414

 
(7,938
)
 
(835
)
Gain on early extinguishment of long-term debt
(3,967
)
 
—

 
(3,967
)
 
—

Amortization of deferred revenue from volumetric production payment
(427
)
 
(1,680
)
 
(1,066
)
 
(5,181
)
Non-cash employee compensation
(623
)
 
(2,679
)
 
7,245

 
4,405

Impairment of investment and other
149

 
265

 
8,530

 
669

Tax impact (a)
5,205

 
2,945

 
(7,481
)
 
(1,351
)
Adjusted net loss
$
(35,092
)
 
$
(14,942
)
 
$
(96,124
)
 
$
(48,501
)
 
 
 
 
 
 
 
 
Adjusted earnings per share:
 
 
 
 
 
 
 
Diluted
$
(2.50
)
 
$
(1.23
)
 
$
(7.52
)
 
$
(3.99
)
 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
 
 
 
Diluted
14,013

 
12,170

 
12,789

 
12,170

 
 
 
 
 
 
 
 
Effective tax rates
35.0
%
 
34.8
%
 
35.0
%
 
35.2
%
_______
 
 
 
 
 
 
 
(a)
The tax impact is computed utilizing the Company’s effective tax rate on the adjustments for each period presented, giving effect to the loss on change in fair value of common stock warrants being non-deductible for income tax purposes.



CLAYTON WILLIAMS ENERGY, INC.
COMPUTATION OF EBITDAX (NON-GAAP)
(Unaudited)
(In thousands)
EBITDAX is presented as a supplemental non-GAAP financial measure because of its wide acceptance by financial analysts, investors, debt holders, banks, rating agencies and other financial statement users as an indication of an entity's ability to meet its debt service obligations and to internally fund its exploration and development activities. EBITDAX is not an alternative to net loss or cash flow from operating activities, or any other measure of financial performance presented in conformity with GAAP.
 
 
 
 
 
 
 
 
The Company defines EBITDAX as net loss before interest expense, income taxes, exploration costs, net (gain) loss on sales of assets and impairment of inventory, gain on early extinguishment of long-term debt and all non-cash items in the Company's statements of operations, including depreciation, depletion and amortization, impairment of property and equipment, accretion of asset retirement obligations, amortization of deferred revenue from volumetric production payment, certain employee compensation, changes in fair value of commodity derivatives and common stock warrants, impairment of investments and certain non-cash and unusual items.
 
 
 
 
 
 
 
 
The following table reconciles net loss to EBITDAX:
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2016
 
2015
 
2016
 
2015
Net loss
$
(148,776
)
 
$
(9,423
)
 
$
(264,974
)
 
$
(50,987
)
Interest expense
26,580

 
13,565

 
70,224

 
40,451

Income tax benefit
(7,504
)
 
(5,039
)
 
(59,223
)
 
(27,705
)
Exploration:
 
 
 
 
 
 
 
Abandonments and impairments
2,483

 
874

 
3,507

 
5,005

Seismic and other
(8
)
 
239

 
421

 
1,210

Net (gain) loss on sales of assets and impairment of inventory
(9,901
)
 
3,414

 
(7,938
)
 
(835
)
Gain on early extinguishment of long-term debt
(3,967
)
 
—

 
(3,967
)
 
—

Depreciation, depletion and amortization
38,349

 
36,861

 
115,140

 
121,636

Impairment of property and equipment
1,091

 
3,089

 
3,438

 
5,620

Accretion of asset retirement obligations
1,290

 
1,001

 
3,360

 
2,936

Amortization of deferred revenue from volumetric production payment
(427
)
 
(1,680
)
 
(1,066
)
 
(5,181
)
Non-cash employee compensation
(623
)
 
(2,679
)
 
7,245

 
4,405

(Gain) loss on commodity derivatives
(1,330
)
 
(18,099
)
 
13,997

 
(10,431
)
Cash settlements of commodity derivatives
(2,347
)
 
6,352

 
(2,371
)
 
4,585

Loss on change in fair value of common stock warrants
123,351

 
—

 
154,956

 
—

Impairment of investment and other
149

 
265

 
8,530

 
669

EBITDAX
$
18,410

 
$
28,740

 
$
41,279

 
$
91,378

 
 
 
 
 
 
 
 
The following table reconciles net cash provided by operating activities to EBITDAX:
 
 
 
 
 
 
 
 
Net cash provided by operating activities
$
24,072

 
$
26,376

 
$
7,966

 
$
54,996

Changes in operating working capital
(16,745
)
 
(10,694
)
 
(4,619
)
 
(3,038
)
Seismic and other
(8
)
 
239

 
421

 
1,210

Cash interest expense
11,091

 
12,819

 
37,511

 
38,210

EBITDAX
$
18,410

 
$
28,740

 
$
41,279

 
$
91,378




CLAYTON WILLIAMS ENERGY, INC.
SUMMARY PRODUCTION AND PRICE DATA
(Unaudited)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Oil and Gas Production Data:
 

 
 

 
 
 
 
Oil (MBbls)
914

 
1,026

 
2,707

 
3,330

Gas (MMcf)
1,287

 
1,590

 
3,756

 
4,458

Natural gas liquids (MBbls)
155

 
142

 
427

 
418

Total (MBOE)(a)
1,284

 
1,433

 
3,760

 
4,491

Total (BOE/d)
13,952

 
15,576

 
13,723

 
16,451

Average Realized Prices (b) (c):
 

 
 

 
 
 
 
Oil ($/Bbl)
$
40.62

 
$
43.26

 
$
36.44

 
$
46.93

Gas ($/Mcf)
$
2.94

 
$
2.71

 
$
2.19

 
$
2.65

Natural gas liquids ($/Bbl)
$
13.14

 
$
11.01

 
$
12.21

 
$
13.09

Gain (Loss) on Settled Commodity Derivative Contracts (c):
 

 
 

 
 
 
 
($ in thousands, except per unit)
 

 
 

 
 
 
 
Oil:
 
 
 
 
 
 
 
Cash settlements received (paid)
$
(2,347
)
 
$
6,352

 
$
(2,371
)
 
$
4,585

Per unit produced ($/Bbl)
$
(2.57
)
 
$
6.19

 
$
(0.88
)
 
$
1.38

Average Daily Production (d):
 

 
 

 
 
 
 
Oil (Bbls):
 

 
 

 
 
 
 
Permian Basin Area:
 

 
 

 
 
 
 
Delaware Basin
3,749

 
3,175

 
3,161

 
3,561

Other (e)
2,789

 
3,221

 
2,856

 
3,141

Austin Chalk
1,635

 
1,806

 
1,705

 
1,884

Eagle Ford Shale
1,518

 
2,634

 
1,721

 
3,269

Other (f)
244

 
316

 
437

 
343

Total
9,935

 
11,152

 
9,880

 
12,198

Natural Gas (Mcf):
 

 
 

 
 
 
 
Permian Basin Area:
 

 
 

 
 
 
 
Delaware Basin
2,833

 
2,766

 
2,678

 
3,036

Other (e)
5,821

 
6,771

 
5,732

 
6,653

Austin Chalk
1,706

 
1,708

 
1,702

 
1,737

Eagle Ford Shale
299

 
451

 
339

 
540

Other (f)
3,330

 
5,587

 
3,257

 
4,364

Total
13,989

 
17,283

 
13,708

 
16,330

Natural Gas Liquids (Bbls):
 

 
 

 
 
 
 
Permian Basin Area:
 

 
 

 
 
 
 
Delaware Basin
543

 
408

 
458

 
417

Other (e)
823

 
814

 
764

 
794

Austin Chalk
196

 
179

 
184

 
169

Eagle Ford Shale
82

 
121

 
84

 
126

Other (f)
41

 
21

 
68

 
25

Total
1,685

 
1,543

 
1,558

 
1,531

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Continued)
 
 
 
 
 
 
 
 


CLAYTON WILLIAMS ENERGY, INC.
SUMMARY PRODUCTION AND PRICE DATA
(Unaudited)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
BOE/d:
 
 
 
 
 
 
 
Permian Basin Area:
 
 
 
 
 
 
 
Delaware Basin
4,764

 
4,044

 
4,065

 
4,484

Other (e)
4,583

 
5,164

 
4,575

 
5,044

Austin Chalk
2,115

 
2,270

 
2,173

 
2,343

Eagle Ford Shale
1,650

 
2,830

 
1,862

 
3,485

Other (f)
840

 
1,268

 
1,048

 
1,095

Total
13,952

 
15,576

 
13,723

 
16,451

 
 
 
 
 
 
 
 
Oil and Gas Costs ($/BOE Produced):
 

 
 

 
 
 
 
Production costs
$
13.84

 
$
14.42

 
$
14.40

 
$
14.96

Production costs (excluding production taxes)
$
12.25

 
$
12.68

 
$
13.00

 
$
12.99

Oil and gas depletion
$
27.09

 
$
23.26

 
$
27.64

 
$
24.60

______
 
 
 
 
 
 
 
(a)
Natural gas reserves have been converted to oil equivalents at the ratio of six Mcf of gas to one Bbl of oil.

(b)
Oil and gas sales includes $0.4 million for three months ended September 30, 2016, $0.8 million for the three months ended September 30, 2015, $1.1 million for the nine months ended September 30, 2016 and $4.3 million for the nine months ended September 30, 2015 of amortized deferred revenue attributable to a volumetric production payment (“VPP”) transaction effective March 1, 2012. In August 2015, we terminated the VPP covering 277 MBOE of oil and gas production from August 2015 through December 2019 for $13.7 million. The calculation of average realized sales prices excludes production of 7,371 barrels of oil and 4,898 Mcf of gas for the three months ended September 30, 2015 and 53,026 barrels of oil and 35,735 Mcf of gas for the nine months ended September 30, 2015 associated with the VPP.

(c)
No commodity derivatives were designated as cash flow hedges in the table above.  All gains or losses on settled commodity derivatives were included in other income (expense) - gain (loss) on commodity derivatives.

(d)
Historical average daily production volumes have been reclassified to conform with current period presentation.

(e)
The average daily production related to interests in certain wells in Glasscock County, Texas sold in July 2016 was 90 total BOE for the three months ended September 30, 2016, 90 total BOE for the three months ended September 30, 2015, 66 total BOE for the nine months ended September 30, 2016 and 119 total BOE for the nine months ended September 30, 2015.

(f)
The average daily production related to selected leases and wells in South Louisiana sold in September 2015 was 584 total BOE for the three months ended September 30, 2015 and 521 total BOE for the nine months ended September 30, 2015.




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, 2016. Settlement prices of commodity derivatives are based on NYMEX futures prices.
 

Swaps:
 
Oil
 
MBbls
 
Price
Production Period:
 

 
 

4th Quarter 2016
619

 
$
41.18

2017
407

 
$
45.58

 
1,026

 
 


Costless Collars:
 
Oil
 
 
 
Weighted
 
Weighted
 
 
 
Average
 
Average
 
MBbls
 
Floor Price
 
Ceiling Price
Production Period:
 

 
 

 
 
2017
1,415

 
$
42.27

 
$
51.66

 
1,415

 
 

 
 




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