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Clayton Williams Energy Announces Third Quarter 2011 Financial Results

Stocks in this article: CWEI

Clayton Williams Energy, Inc. (the “Company”) (NASDAQ:CWEI) today reported its financial results for the third quarter of 2011.

Financial Results for the Third Quarter of 2011

Net income attributable to Company stockholders for the third quarter of 2011 (“3Q11”) was $74.5 million, or $6.13 per share, as compared to net income of $11.6 million, or $.96 per share, for the third quarter of 2010 (“3Q10”). Cash flow from operations for 3Q11 was $55.6 million as compared to $57.5 million for 3Q10.

For the nine months ended September 30, 2011, net income attributable to Company stockholders was $109.3 million, or $8.99 per share, as compared to net income of $42.3 million, or $3.48 per share, for the same period in 2010. Cash flow from operations for the nine-month period in 2011 was $175.3 million as compared to $154.2 million during the same period in 2010.

The key factors affecting the comparability of financial results for 3Q11 versus 3Q10 were:

  • Gain on derivatives for 3Q11 was $92.3 million ($91.1 million non-cash mark-to-market gain and a $1.2 million realized gain on settled contracts) versus a loss in 3Q10 of $4 million ($8 million non-cash mark-to-market loss and a $4 million realized gain on settled contracts). See accompanying tables for additional information about the Company’s accounting for derivatives.
  • Oil and gas sales increased $17.8 million in 3Q11 versus 3Q10. Price variances accounted for an $18.3 million increase, offset in part by a $500,000 decrease due to production variances. Average realized oil prices were $89.36 per barrel in 3Q11 versus $73.18 per barrel in 3Q10, and average realized gas prices were $5.46 per Mcf in 3Q11 versus $4.56 per Mcf in 3Q10.
  • Oil production increased 3% in 3Q11 versus 3Q10 while gas production declined 13%. Oil and gas production per barrel of oil equivalent (“BOE”) decreased 4% in 3Q11 as compared to 3Q10. Oil production increased to 945,000 barrels, or 10,272 barrels per day, as compared to 915,000 barrels, or 9,946 barrels per day, while gas production declined to 2.2 Bcf, or 23,859 Mcf per day as compared to 2.5 Bcf or 27,500 Mcf per day for 3Q10. The increase in oil production and the decline in gas production are indicative of the Company’s current emphasis on the development of oil reserves in the Permian Basin.
  • Production costs increased 18% from $20.5 million in 3Q10 to $24.3 million in 3Q11 due to a combination of more producing wells, rising costs of field services and increased production taxes on higher oil and gas sales.
  • Interest expense increased to $8.7 million in 3Q11 compared to $6 million in 3Q10 due in part to the increase in the total aggregate principal amount of the Company’s Senior Notes.
  • G&A expenses were $7.1 million in 3Q11 versus $8.7 million in 3Q10. Non-cash employee compensation expense from incentive compensation plans accounted for $1.1 million in 3Q11 versus $3 million in 3Q10. Excluding non-cash employee compensation expense, G&A expenses increased 4% in 3Q11 compared to 3Q10.
  • Non-cash impairments of property and equipment were $5 million in 3Q11 versus $794,000 in 3Q10. The 3Q11 impairment related to certain non-core oil and gas properties.

Comparisons to Guidance

Oil and gas production for 3Q11 was 14,912 BOE per day, 6% above the mid-point of the Company’s guidance range of 14,075 BOE per day. More than half of the variance was attributable to higher than forecasted oil production from the Company’s Austin Chalk drilling program.

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