Clayton Williams Energy, Inc. (the “Company”) (NASDAQ:CWEI) today reported its financial results for the second quarter of 2012.
Financial Results for the Second Quarter of 2012
Net income attributable to Company stockholders for the second quarter of 2012 (“2Q12”) was $32.8 million, or $2.70 per share, as compared to net income of $42.7 million, or $3.51 per share, for the second quarter of 2011 (“2Q11”). Cash flow from operations for 2Q12 was $44.9 million as compared to $86.4 million for 2Q11.
For the six-months ended June 30, 2012, net income attributable to Company stockholders was $40.6 million, or $3.34 per share, as compared to net income of $34.8 million, or $2.86 per share, for the same period in 2011. Cash flow from operations for the six-month period in 2012 was $97.3 million as compared to $119.7 million during the same period in 2011.The key factors affecting the comparability of financial results for 2Q12 versus 2Q11 were:
- Oil and gas sales decreased $6.4 million in 2Q12 versus 2Q11. Price variances accounted for a $17.8 million decrease, and production variances accounted for an $8.9 million increase. Average realized oil prices were $88.06 per barrel in 2Q12 versus $100.07 per barrel in 2Q11, and average realized gas prices were $3.25 per Mcf in 2Q12 versus $5.56 per Mcf in 2Q11. In addition, oil and gas sales in 2Q12 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 6% in 2Q12 as compared to 2Q11, with oil production increasing 9% and gas production declining 6%. Oil production increased to 967,000 barrels, or 10,626 barrels per day, as compared to 886,000 barrels, or 9,736 barrels per day, while gas production declined to 2.1 Bcf, or 23,418 Mcf per day as compared to 2.3 Bcf or 24,846 Mcf per day for 2Q11. Oil and natural gas liquids comprised 75% of the Company’s BOE production in 2Q12.
- Production costs increased 24% from $26.1 million in 2Q11 to $32.3 million in 2Q12 due to a combination of more producing wells and rising costs of field services, including salt water disposal costs.
- Gain on derivatives for 2Q12 was $38.7 million ($37.8 million non-cash mark-to-market gain and $845,000 realized gain on settled contracts) versus a gain in 2Q11 of $28.2 million ($35.6 million non-cash mark-to-market gain and $7.4 million realized loss on settled contracts). See accompanying tables for additional information about the Company’s accounting for derivatives.
- Depreciation, depletion and amortization expense increased 37% to $34.6 million in 2Q12 versus $25.3 million in 2Q11 due primarily to a 27% 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 $4.3 million in 2Q12 versus $3 million in 2Q11. Non-cash employee compensation expense from incentive compensation plans accounted for a $1.9 million credit to expense in 2Q12 versus a $2.4 million credit to expense in 2Q11. Cash G&A expenses, excluding non-cash employee compensation expense, increased to $6.2 million in 2Q12 from $5.5 million in 2Q11 due primarily to higher personnel costs.
- Non-cash impairments of property and equipment were $5.7 million in 2Q12 versus $4.4 million in 2Q11. The 2Q12 impairments resulted primarily from declines in commodity prices and related to non-core oil and gas properties in the Permian Basin.