| UNITED STATES |
| SECURITIES AND EXCHANGE COMMISSION |
| WASHINGTON, D.C. 20549 |
| CURRENT REPORT |
| Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Date of Report (Date of earliest event reported): February 5, 2009 |
| 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: |
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ Pre-commencement communications pursuant to Rule 14d-2 (b) under the Exchange Act (17 CFR 240.14d-2 (b)) |
¨ Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.13e-4 (c)) |
Item 7.01 - - Regulation FD Disclosure
The Company hereby incorporates by reference into this Item 7.01 of Form 8-K the Financial Guidance Disclosures for 2009 attached as Exhibit 99.1. This Exhibit 99.1 is being furnished to provide public disclosure of the Company’s estimates to permit preparation of financial models of the Company’s operating results for each quarter during the Company’s fiscal year ending December 31, 2009. The Company cautions users of this information that the estimates provided in this Exhibit 99.1 are based on information available to the Company as of the date of this filing, and actual results may vary materially from these estimates. The Company does not undertake any obligation to update these estimates as conditions change or as additional information becomes available.
Item 9.01 - Financial Statements and Exhibits
(d) Exhibits
The following exhibit is provided as part of the information furnished under Item 7.01 of this report.
| Exhibit | | |
| Number | | Description |
| | | |
| 99.1 | | Clayton Williams Energy, Inc. Financial Guidance Disclosures for 2009 |
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: | February 5, 2009 | By: | /s/ L. Paul Latham |
| | | | L. Paul Latham |
| | | | Executive Vice President and Chief |
| | | | Operating Officer |
| Date: | February 5, 2009 | By: | /s/ Mel G. Riggs |
| | | | Mel G. Riggs |
| | | | Senior Vice President and Chief Financial |
| | | | Officer |
EXHIBIT 99.1
CLAYTON WILLIAMS ENERGY, INC.
FINANCIAL GUIDANCE DISCLOSURES FOR 2009
Overview
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 each quarter during the year ending December 31, 2009. 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 these periods 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 or developments that we expect, project, believe or anticipate will or may occur in the future, or may have occurred through the date of this filing, including such matters as production of oil and gas, product prices, oil and gas reserves, drilling and completion results, capital expenditures 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”; |
| | (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, expenses and minority interest related to our investment in Larclay JV. |
As discussed in “Capital Expenditures”, approximately 70% of our planned 2009 exploration and development expenditures relate to exploratory prospects. Exploratory prospects involve a higher degree of risk than development prospects. To offset the higher risk, we generally strive to achieve a higher reserve potential and rate of return on investments in exploratory prospects. Actual results from our exploratory drilling activities, when ultimately reported, may have a material impact on the estimates of oil and gas production and exploration costs stated in this guidance.
Summary of Estimates
The following table sets forth certain estimates being used by us to model our anticipated results of operations for each quarter during the fiscal year ending December 31, 2009. When a single value is provided, such value represents the mid-point of the approximate range of estimates. Otherwise, each range of values provided represents the expected low and high estimates for such financial or operating factor. See “Supplementary Information.”
| | Year Ending December 31, 2009 |
| | Estimated | | Estimated | | Estimated | | Estimated |
| | First Quarter | | Second Quarter | | Third Quarter | | Fourth Quarter |
| | (Dollars in thousands, except per unit data) |
| Average Daily Production: | | | | | | | |
| Gas (Mcf) | 52,000 to 56,000 | | 47,500 to 51,500 | | 44,000 to 48,000 | | 42,000 to 46,000 |
| Oil (Bbls) | 8,400 to 8,600 | | 7,375 to 7,575 | | 6,775 to 6,975 | | 6,375 to 6,575 |
| Natural gas liquids (Bbls) | 400 to 450 | | 400 to 450 | | 350 to 400 | | 325 to 375 |
| Total gas equivalents (Mcfe) | 104,800 to 110,300 | | 94,150 to 99,650 | | 86,750 to 92,250 | | 82,200 to 87,700 |
| | | | | | | | |
| Differentials: | | | | | | | |
| Gas (Mcf) | $(0.35) to $(0.65) | | $(0.35) to $(0.65) | | $(0.35) to $(0.65) | | $(0.35) to $(0.65) |
| Oil (Bbls) | $(2.80) to $(3.40) | | $(2.80) to $(3.40) | | $(2.80) to $(3.40) | | $(2.80) to $(3.40) |
| Natural gas liquids (Bbls) | $(21.00) to $(27.00) | | $(21.00) to $(27.00) | | $(21.00) to $(27.00) | | $(21.00) to $(27.00) |
| | | | | | | | |
| Costs Variable by Production ($/Mcfe): | | | | | | | |
| Production expenses (including | | | | | | | |
| production taxes) | $1.80 to $2.00 | | $1.90 to $2.10 | | $2.05 to $2.25 | | $2.15 to $2.35 |
| DD&A – Oil and gas properties | $2.75 to $3.15 | | $2.75 to $3.15 | | $2.75 to $3.15 | | $2.75 to $3.15 |
| | | | | | | | |
| Other Revenues (Expenses): | | | | | | | |
| Natural gas services: | | | | | | | |
| Revenues | $2,600 to $2,800 | | $2,600 to $2,800 | | $2,600 to $2,800 | | $2,600 to $2,800 |
| Operating costs | $(2,300) to $(2,500) | | $(2,300) to $(2,500) | | $(2,300) to $(2,500) | | $(2,300) to $(2,500) |
| Exploration costs: | | | | | | | |
| Abandonments and impairments | $(1,000) to $(3,000) | | $(1,000) to $(3,000) | | $(1,000) to $(3,000) | | $(1,000) to $(3,000) |
| Seismic and other | $(250) to $(750) | | $(250) to $(750) | | $(250) to $(750) | | $(250) to $(750) |
DD&A – Other (a) | $(250) to $(350) | | $(250) to $(350) | | $(250) to $(350) | | $(250) to $(350) |
General and administrative (a) | $(3,850) to $(4,050) | | $(3,850) to $(4,050) | | $(3,350) to $(3,550) | | $(3,950) to $(4,150) |
Interest expense (a) | $(4,575) to $(4,775) | | $(4,650) to $(4,850) | | $(4,700) to $(4,900) | | $(4,600) to $(4,800) |
| Other income (expense) | $250 to $350 | | $250 to $350 | | $250 to $350 | | $250 to $350 |
| | | | | | | | |
| Effective Federal and State Income | | | | | | | |
| Tax Rate: | | | | | | | |
| Current | 0% | | 0% | | 0% | | 0% |
| Deferred | 35% | | 35% | | 35% | | 35% |
| | | | | | | | |
| Weighted Average Shares Outstanding | | | | | | | |
| (In thousands): | | | | | | | |
| Basic and Diluted | 12,100 | | 12,100 | | 12,100 | | 12,100 |
| | | | | | | | |
(a) Excludes amounts derived from Larclay JV.
Capital Expenditures
The following table sets forth, by area, certain information about our planned exploration and development activities for 2009.
| | | Total | | | | |
| | | Planned | | | | |
| | | Expenditures | | | | |
| | | Year Ending | | | Percentage | |
| | | December 31, 2009 | | | of Total | |
| | | (In thousands) | | | | |
| | | | | | | |
| South Louisiana | | $ | 17,700 | | | | 32 | % |
| Permian Basin | | | 14,600 | | | | 26 | % |
| East Texas Bossier | | | 11,800 | | | | 21 | % |
| Utah/California | | | 7,400 | | | | 13 | % |
| Austin Chalk (Trend) | | | 2,100 | | | | 4 | % |
| North Louisiana �� | | | 1,900 | | | | 3 | % |
| Other | | | 500 | | | | 1 | % |
| | | $ | 56,000 | | | | 100 | % |
Our planned exploration and development activities for 2009 are substantially lower than our fiscal 2008 expenditures. Sharp declines in oil and gas prices during the past six months have reduced our cash flow from operations and have diminished the present value of our oil and gas reserves. Both of these factors have an adverse affect on our ability to access the capital resources we need to sustain prior levels of capital spending. Lower product prices also offer us less incentive to assume the drilling risks that are inherent in our business. As a result, we currently plan in 2009 to defer most of our developmental drilling activities in the Permian Basin, the Austin Chalk (Trend) and North Louisiana, and to significantly reduce our exploration activities in the East Texas Bossier and South Louisiana.
Our actual expenditures during fiscal 2009 may be substantially higher or lower than these estimates since our plans for exploration and development activities may change during the year. Other factors, such as prevailing product prices and the availability of capital resources, could also increase or decrease the ultimate level of expenditures during fiscal 2009.
Based on these current estimates, approximately 70% of our planned expenditures for exploration and development activities for fiscal 2009 will relate to exploratory prospects, as compared to approximately 30% in fiscal 2008.
Supplementary Information
Oil and Gas Production
The following table summarizes, by area, our estimated daily net production for each quarter during the year ending December 31, 2009. These estimates represent the approximate mid-point of the estimated production range.
| | | Daily Net Production for 2009 | |
| | | Estimated | | | Estimated | | | Estimated | | | Estimated | |
| | | First Quarter | | | Second Quarter | | | Third Quarter | | | Fourth Quarter | |
| Gas (Mcf): | | | | | | | | | | | | |
Permian Basin | | | 14,677 | | | | 13,319 | | | | 12,326 | | | | 11,457 | |
North Louisiana | | | 19,644 | | | | 16,077 | | | | 13,565 | | | | 11,457 | |
South Louisiana | | | 11,378 | | | | 12,451 | | | | 12,957 | | | | 14,435 | |
Austin Chalk (Trend) | | | 2,145 | | | | 1,961 | | | | 1,858 | | | | 1,727 | |
Cotton Valley Reef Complex | | | 5,000 | | | | 4,571 | | | | 4,207 | | | | 3,902 | |
Other | | | 1,156 | | | | 1,121 | | | | 1,087 | | | | 1,022 | |
Total | | | 54,000 | | | | 49,500 | | | | 46,000 | | | | 44,000 | |
| | | | | | | | | | | | | | | | | |
| Oil (Bbls): | | | | | | | | | | | | | | | | |
Permian Basin | | | 4,489 | | | | 4,000 | | | | 3,695 | | | | 3,403 | |
North Louisiana | | | 422 | | | | 341 | | | | 272 | | | | 217 | |
South Louisiana | | | 456 | | | | 429 | | | | 500 | | | | 663 | |
Austin Chalk (Trend) | | | 3,055 | | | | 2,639 | | | | 2,343 | | | | 2,127 | |
Other | | | 78 | | | | 66 | | | | 65 | | | | 65 | |
Total | | | 8,500 | | | | 7,475 | | | | 6,875 | | | | 6,475 | |
| | | | | | | | | | | | | | | | | |
| Natural Gas Liquids (Bbls): | | | | | | | | | | | | | | | | |
Permian Basin | | | 166 | | | | 165 | | | | 153 | | | | 131 | |
Austin Chalk (Trend) | | | 226 | | | | 227 | | | | 189 | | | | 186 | |
Other | | | 33 | | | | 33 | | | | 33 | | | | 33 | |
Total | | | 425 | | | | 425 | | | | 375 | | | | 350 | |
Accounting for Derivatives
The following summarizes information concerning our net positions in open commodity derivatives applicable to periods subsequent to December 31, 2008. The settlement prices of commodity derivatives are based on NYMEX futures prices.
Swaps:
| | | Gas | | | Oil | |
| | | MMBtu (a) | | | Price | | | Bbls | | | Price | |
| Production Period: | | | | | | | | | | | | |
1st Quarter 2009 | | | 1,180,000 | | | $ | 5.47 | | | | 100,000 | | | $ | 47.35 | |
2nd Quarter 2009 | | | 1,570,000 | | | $ | 5.47 | | | | 290,000 | | | $ | 50.74 | |
3rd Quarter 2009 | | | 1,450,000 | | | $ | 5.47 | | | | 90,000 | | | $ | 53.25 | |
4th Quarter 2009 | | | 1,350,000 | | | $ | 5.47 | | | | - | | | $ | - | |
2010 | | | 7,540,000 | | | $ | 6.80 | | | | - | | | $ | - | |
2011 | | | 6,420,000 | | | $ | 7.07 | | | | - | | | $ | - | |
| | | | 19,510,000 | | | | | | | | 480,000 | | | | | |
| | | | | | | | | | | | | | | | | |
(a) One MMBtu equals one Mcf at a Btu factor of 1,000.
We did not designate any of the derivatives shown in the preceding tables as cash flow hedges under SFAS 133; 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.
