Clayton Williams Energy Provides Financial Guidance For 2013

Clayton Williams Energy, Inc. (NASDAQ-NMS: CWEI) today filed a Form 8-K with the Securities and Exchange Commission to provide financial guidance disclosures for the year ending December 31, 2013.

A copy of these disclosures accompanies this release or may be obtained electronically by accessing the Company’s website at

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 oil and natural gas 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 environment 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. and its subsidiaries have prepared this document to provide public disclosure of certain financial and operating estimates in order to permit the preparation of models to forecast our operating results for the year ending December 31, 2013. These estimates are based on information available to us as of the date of this filing, and actual results may vary materially from these estimates. We do not undertake any obligation to update these estimates as conditions change or as additional information becomes available.

The estimates provided in this document are based on assumptions that we believe are reasonable. Until our actual results of operations for this period have been compiled and released, all of the estimates and assumptions set forth herein constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included in this document 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, could or may occur in the future, including such matters as production of oil and gas, product prices, oil and gas reserves, drilling and completion results, capital expenditures, operating costs and other such matters, are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from the results, performance, or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: the volatility of oil and gas prices; the unpredictable nature of our exploratory drilling results; the reliance upon estimates of proved reserves; operating hazards and uninsured risks; competition; government regulation; and other factors referenced in filings made by us with the Securities and Exchange Commission.

As a matter of policy, we generally do not attempt to provide guidance on:

(a)   production which may be obtained through future exploratory drilling;
(b) dry hole and abandonment costs that may result from future exploratory drilling;
(c) the effects of Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” superseded by topic 815-10 of the Financial Accounting Standards Board Accounting Standards Codification;
(d) gains or losses from sales of property and equipment unless the sale has been consummated prior to the filing of financial guidance;
(e) capital expenditures related to completion activities on exploratory wells or acquisitions of proved properties until the expenditures are estimable and likely to occur; and
(f) revenues and operating expenses related to Drilling rig or Midstream services.

The accompanying guidance does not include any divestitures, joint venture arrangements or similar structures that have not been consummated.

Summary of Estimates

The following table sets forth certain estimates being used to model our anticipated results of operations for the fiscal year ending December 31, 2013. Each range of values provided represents the expected low and high estimates for such financial or operating factor.
Actual Estimated Ranges Estimated Ranges
Nine Months Ended Three Months Ending Fiscal Year Ending
September 30, 2013 (c) December 31, 2013 December 31, 2013
(Dollars in thousands, except per unit data)
Average Daily Production:
Oil (Bbls) 9,872 10,100 to 10,300 9,900 to 10,000
Gas (Mcf) (a) 17,410 15,000 to 17,000 17,000 to 18,000
Natural gas liquids (Bbls) (a) 1,462 1,300 to 1,400 1,400 to 1,450
Total oil equivalents (BOE) 14,236 13,900 to 14,533 14,133 to 14,450
Price Differentials to NYMEX:
Oil (b) 98 % 97% to 99% 97% to 99%
Gas 95 %

 90% to 100%
90% to 100%
Natural gas liquids (based on oil) 33 % 30% to 40% 30% to 40%
Other Costs and Expenses:
Production expenses:
Direct costs ($/BOE) $ 17.57 $ 17.50 to 18.50 $ 17.50 to 18.00
Production taxes (% of sales) 5 % 5% to 6% 5% to 6%
General and Administrative:
Excluding non-cash compensation $ 26,298 $ 9,000 to 11,000 $ 35,000 to 37,000
Non-cash compensation $ (5,897 ) $

   0 to 1,000
$ (5,000) to (6,000)
Oil and gas ($/BOE) $ 25.55 $ 25.00 to 26.00 $ 25.25 to 25.75
Other $ 10,593 $ 3,000 to 4,000 $ 13,500 to 14,500
Exploration costs:
Abandonments and impairments $ 2,980 $ 1,000 to 3,000 $ 4,000 to 6,000
Seismic and other $ 3,541 $

  500 to 2,500
$ 4,000 to 6,000
Interest expense (cash rates):
$600 million Senior Notes due 2019 (d)



Bank credit facility LIBOR plus (175 to 275 bps) LIBOR plus (175 to 275 bps) LIBOR plus (175 to 275 bps)
Effective Federal and State Income
Tax Rate:







(a)   Prior to 2013, certain purchasers of our casing head gas accounted for the value of extracted NGL in the price paid for gas production at the wellhead. During the quarter ended March 31, 2013, we began separating these products for a portion of our gas production.
(b) Through multiple marketing arrangements, we have effectively limited our exposure to the Midland-Cushing differential to less than $2 per barrel on more than 75% of our Permian Basin oil production.
(c) In April 2013, we sold 95% of our interest in certain properties in Andrews County, Texas. Average daily production related to those properties for the nine months ended September 30, 2013 were as follows: Oil - 538 Bbls; Natural gas - 597 Mcf; NGL - 117 Bbls; and 755 BOE.
(d) Effective October 1, 2013, we issued an additional $250 million of aggregate principal amount of 7.75% Senior Notes due 2019.

Capital Expenditures

The following table sets forth, by area, our actual capital expenditures for the first nine months of 2013 and our planned capital expenditures for the year ending December 31, 2013.
Actual Planned
Expenditures Expenditures 2013
Nine Months Ended Year Ending Percentage
September 30, 2013 December 31, 2013 of Total
(In thousands)
Drilling and Completion:
Permian Basin Area:
Delaware Basin $ 67,800 $ 106,900 39 %
Other 32,400 37,800 14 %
Austin Chalk/Eagle Ford Shale 50,300 67,000 24 %
Other 8,200   9,900  

158,700 221,600

Leasing and seismic 38,900   48,400  

Exploration and development 197,600 270,000 98 %
Facilities and other 4,900   5,500   2 %
Total capital expenditures $ 202,500   $ 275,500   100 %

We currently plan to spend approximately $270 million on exploration and development activities during fiscal 2013. Our actual expenditures during 2013 may vary significantly from these estimates since our plans for exploration and development activities may change during the remainder of the year. Factors, such as changes in operating margins and the availability of capital resources could increase or decrease our actual expenditures during the remainder of fiscal 2013.

Accounting for Derivatives

The following summarizes information concerning our net positions in open commodity derivatives applicable to periods subsequent to September 30, 2013. The settlement prices of commodity derivatives are based on NYMEX futures prices.

Oil Gas
Bbls     Price MMBtu (a)     Price
Production Period:
4 th Quarter 2013 300,000 $ 104.60 330,000 $ 3.34

1,600,000   $




(a)   One MMBtu equals one Mcf at a Btu factor of 1,000.

In October 2013, we entered into swap agreements with a counterparty covering 1 million barrels of our 2014 oil production at a price of $96.10 per barrel.

We did not designate any of the derivatives shown in the preceding table as cash flow hedges; therefore, all changes in the fair value of these contracts prior to maturity, plus any realized gains or losses at maturity, will be recorded as other income (expense) in our statement of operations and comprehensive income (loss).

Volumetric production payment

In March 2012, we entered into a volumetric production payment (“VPP”) with a third party. Under the terms of the VPP, we conveyed a term overriding royalty interest covering approximately 725,000 barrels of oil equivalents (“BOE”) of estimated future oil and gas production from certain properties related to production months from March 2012 through December 2019. The scheduled remaining volumes for production months from October 2013 through December 2019 are shown below.
        Oil     Gas
Bbls Mcf
Production Period:
4 th Quarter 2013 28,045 10,030
2014 102,011 45,392
2015 88,954 60,218
2016 64,808 112,928
2017 56,785 96,792
2018 49,455 84,734
2019 43,820   72,874
433,878   482,968

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