Exhibit 99.1
Clayton Williams Energy Announces 2006 Third Quarter Results
MIDLAND, Texas--(BUSINESS WIRE)--Nov. 9, 2006--Clayton Williams Energy,
Inc. (NASDAQ:CWEI) reported net income for the third quarter of 2006 of $5.3
million, or $.48 per share, as compared to a net loss of $2 million, or $.19 per
share, for the third quarter of 2005. Cash flow from operations for the third
quarter of 2006 was $39.4 million, as compared to $50.4 million during the same
period in 2005.
For the nine months ended September 30, 2006, the Company reported net
income of $26.7 million, or $2.38 per share, as compared to a net loss of $1.1
million, or $.10 per share, for the same period in 2005. Cash flow from
operations for the nine-month period in 2006 was $116.5 million, as compared to
$126.6 million during the same period in 2005.
Oil and gas sales for the third quarter of 2006 totaled $61.5 million
compared to $65.7 million for the same quarter in 2005. Of the $4.2 million
decrease in oil and gas sales, lower oil and gas prices accounted for a decrease
of $2.2 million and lower oil and gas production volumes accounted for the
remaining $2 million decrease. Oil production for the third quarter of 2006
dropped slightly to 532,000 barrels, or 5,783 barrels per day, from 537,000
barrels, or 5,837 barrels per day in the 2005 quarter. Gas production decreased
4% to 3.7 Bcf, or 40,630 Mcf per day, from 3.9 Bcf, or 42,359 Mcf per day in the
2005 quarter. Average realized oil prices in the third quarter of 2006 increased
12% from $59.95 to $67.27 per barrel, while gas prices decreased 22% from $7.98
to $6.26 per Mcf. Average realized prices for 2006 and 2005 exclude the effects
of any gains or losses realized on commodity hedging transactions since those
derivatives were not designated as cash flow hedges and have been reported in
the Company's statements of operations as gain/loss on derivatives under
applicable accounting standards.
For the third quarter of 2006, the Company reported a $26.7 million net
gain on derivatives, consisting of a $28.4 million non-cash gain to mark the
Company's derivative positions to their fair value on September 30, 2006 and a
$1.7 million charge for cash settlements during the quarter. For the same period
in 2005, the Company reported a $28.8 million net loss on derivatives,
consisting of a $20.8 million non-cash mark-to-market loss and an $8 million
charge for cash settlements.
Exploration costs related to abandonments and impairments were $19.7
million during the third quarter of 2006, of which $8.1 million was attributable
to the Apache Louisiana Minerals 73-1 (Abigail) in South Louisiana, $5.9 million
was attributable to two exploratory wells on the Focus Ranch unit in Colorado,
$2.9 million was primarily due to acreage impairments in West Texas and $2.1
million was attributable to the Weyerhaeuser #1 (Frazier Creek) in North
Louisiana. The Company's exploration costs were $13.9 million in the third
quarter of 2005.
The Company recorded a non-cash charge during the third quarter of 2006 of
$12.9 million for an impairment of proved properties pursuant to Statement of
Financial Accounting Standards No. 144 "Accounting for Impairment or Disposal of
Long-Lived Assets." The impairment, which applied to two areas in West Texas and
one area in South Louisiana, was required to reduce the carrying value of these
proved properties to their estimated fair market value.
The Company will host a conference call to discuss these results and other
forward-looking items today, November 9th at 1:30 pm CT (2:30 pm ET). The
dial-in conference number is: 800-901-5213, passcode 59083952. The replay will
be available for one week at 888-286-8010, passcode 12038883.
To access the conference call via Internet webcast, please go to the
Investor Relations section of the Company's website at www.claytonwilliams.com
and click on "Live Webcast." Following the live webcast, the call will be
archived for a period of 90 days on the Company's website.
Clayton Williams Energy, Inc. is an independent energy company located in
Midland, Texas.
Except for historical information, statements made in this release are
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. These
statements are based on assumptions and estimates that management believes are
reasonable based on currently available information; however, management's
assumptions and the Company's future performance are subject to a wide range of
business risks and uncertainties, and there is no assurance that these goals and
projections can or will be met. Any number of factors could cause actual results
to differ materially from those in the forward-looking statements, including,
but not limited to, production variance from expectations, volatility of oil and
gas prices, the need to develop and replace reserves, the substantial capital
expenditures required to fund operations, exploration risks, uncertainties about
estimates of reserves, competition, government regulation, costs and results of
drilling new projects, and mechanical and other inherent risks associated with
oil and gas production. These 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.
TABLES AND SUPPLEMENTAL INFORMATION FOLLOW . . .
CLAYTON WILLIAMS ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -------------------
2006 2005 2006 2005
--------- -------- --------- ---------
REVENUES
Oil and gas sales $61,519 $65,739 $188,143 $190,536
Natural gas services 2,905 2,572 8,890 7,703
Drilling rig services 1,801 -- 2,175 --
Gain on sales of property and
equipment 164 16,832 916 18,911
--------- -------- --------- ---------
Total revenues 66,389 85,143 200,124 217,150
--------- -------- --------- ---------
COSTS AND EXPENSES
Production 16,467 16,981 47,363 43,408
Exploration:
Abandonments and impairments 19,650 13,863 35,822 31,563
Seismic and other 3,678 5,123 9,366 7,576
Natural gas services 2,730 2,450 7,820 7,241
Drilling rig services 1,157 -- 1,373 --
Depreciation, depletion and
amortization 17,686 11,568 48,378 36,148
Impairment of proved
properties 12,914 -- 12,914 --
Accretion of abandonment
obligations 428 291 1,224 858
General and administrative 3,086 5,483 11,405 11,135
Loss on sales of property and
equipment 69 100 82 132
--------- -------- --------- ---------
Total costs and expenses 77,865 55,859 175,747 138,061
--------- -------- --------- ---------
Operating income (loss) (11,476) 29,284 24,377 79,089
--------- -------- --------- ---------
OTHER INCOME (EXPENSE)
Interest expense (5,328) (5,503) (14,628) (10,435)
Gain (loss) on derivatives 26,734 (28,766) 25,407 (73,692)
Other (1,583) 1,317 (515) 2,413
--------- -------- --------- ---------
Total other income (expense) 19,823 (32,952) 10,264 (81,714)
--------- -------- --------- ---------
Income (loss) before income
taxes 8,347 (3,668) 34,641 (2,625)
Income tax (expense) benefit (2,842) 1,628 (7,754) 1,543
Minority interest, net of tax (156) -- (196) --
--------- -------- --------- ---------
NET INCOME (LOSS) $5,349 $(2,040) $26,691 $(1,082)
========= ======== ========= =========
Net income (loss) per common
share:
Basic $0.49 $(0.19) $2.46 $(0.10)
========= ======== ========= =========
Diluted $0.48 $(0.19) $2.38 $(0.10)
========= ======== ========= =========
Weighted average common shares
outstanding:
Basic 10,850 10,810 10,847 10,800
========= ======== ========= =========
Diluted 11,205 10,810 11,220 10,800
========= ======== ========= =========
CLAYTON WILLIAMS ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
September 30, December 31,
2006 2005
------------- ------------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $8,746 $5,935
Accounts receivable:
Oil and gas sales, net 24,616 28,317
Joint interest and other, net 9,359 6,972
Affiliates 1,452 254
Inventory 41,308 43,753
Deferred income taxes 426 439
Fair value of derivatives 16,314 191
Prepaids and other 1,840 2,581
------------- ------------
104,061 88,442
------------- ------------
PROPERTY AND EQUIPMENT
Oil and gas properties, successful efforts
method 1,188,416 1,037,862
Natural gas gathering and processing
systems 18,049 18,034
Contract drilling equipment 47,855 --
Other 15,369 12,396
------------- ------------
1,269,689 1,068,292
Less accumulated depreciation, depletion
and amortization (655,726) (594,225)
------------- ------------
Property and equipment, net 613,963 474,067
------------- ------------
OTHER ASSETS
Debt issue costs 7,992 8,557
Advances to drilling rig joint venture -- 10,329
Fair value of derivatives 2,673 127
Other 14,229 5,813
------------- ------------
24,894 24,826
------------- ------------
$742,918 $587,335
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable:
Trade $69,935 $59,861
Oil and gas sales 14,528 18,236
Affiliates 3,319 2,857
Current maturities of long-term debt 8,011 19
Fair value of derivatives 29,630 33,670
Accrued liabilities and other 5,650 9,611
------------- ------------
131,073 124,254
------------- ------------
NON-CURRENT LIABILITIES
Long-term debt 367,157 235,700
Deferred income taxes 44,782 37,042
Fair value of derivatives 29,730 49,705
Other 22,868 20,343
------------- ------------
464,537 342,790
------------- ------------
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.10 per share -- --
Common stock, par value $.10 per share 1,085 1,082
Additional paid-in capital 107,431 107,108
Retained earnings 38,792 12,101
------------- ------------
147,308 120,291
------------- ------------
$742,918 $587,335
============= ============
CLAYTON WILLIAMS ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) $5,349 $(2,040) $26,691 $(1,082)
Adjustments to reconcile net
income (loss) to cash
provided by operating
activities:
Depreciation, depletion
and amortization 17,686 11,568 48,378 36,148
Impairment of proved
properties 12,914 -- 12,914 --
Exploration costs 19,650 13,863 35,822 31,563
Accretion of abandonment
obligations 428 291 1,224 858
Gain on sales of
property and equipment,
net (95) (16,732) (834) (18,779)
Deferred income taxes 2,842 (1,421) 7,754 (1,465)
Non-cash employee
compensation 500 1,748 1,651 2,468
Unrealized (gain) loss
on derivatives (28,401) 20,846 (42,684) 56,067
Settlements on
derivatives with
financing elements 7,803 7,632 23,311 17,428
Amortization of debt
issue costs 287 1,961 1,022 2,631
Minority interest, net
of tax 156 -- 196 --
Changes in operating working
capital:
Accounts receivable 30 (2,337) 116 (3,474)
Accounts payable 2,930 13,462 3,073 3,301
Other (2,645) 1,562 (2,152) 967
--------- --------- --------- ---------
Net cash provided by
operating activities 39,434 50,403 116,482 126,631
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES
Additions to property and
equipment (53,749) (47,787) (188,606) (126,788)
Additions to equipment of
Larclay JV (14,519) -- (46,126) --
Proceeds from sales of
property and equipment 399 21,101 1,083 23,252
Other 4,551 (3,972) 3,665 (11,336)
--------- --------- --------- ---------
Net cash used in
investing activities (63,318) (30,658) (229,984) (114,872)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from long-term
debt 14,000 212,900 93,700 225,000
Proceeds from long-term
debt of Larclay JV 9,564 -- 45,761 --
Repayments of other long-
term debt -- (177,500) (12) (177,500)
Proceeds from sale of
common stock -- 288 175 288
Payment of debt issue
costs -- (7,964) -- (7,964)
Settlements on derivatives
with financing elements (7,803) (7,632) (23,311) (17,428)
--------- --------- --------- ---------
Net cash provided by
financing activities 15,761 20,092 116,313 22,396
--------- --------- --------- ---------
NET INCREASE (DECREASE) IN
CASH
AND CASH EQUIVALENTS (8,123) 39,837 2,811 34,155
CASH AND CASH EQUIVALENTS
Beginning of period 16,869 10,677 5,935 16,359
--------- --------- --------- ---------
End of period $8,746 $50,514 $8,746 $50,514
========= ========= ========= =========
Clayton Williams Energy, Inc.
Summary Production and Price Data
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -------------------
2006 2005 2006 2005
--------- -------- --------- ---------
Average Daily Production:
Natural Gas (Mcf):
Permian Basin 13,804 17,300 14,455 16,512
Louisiana 15,059 8,528 13,339 12,777
Austin Chalk (Trend) 2,102 2,672 2,704 2,443
Cotton Valley Reef Complex 9,083 13,336 10,073 15,972
Other 582 523 517 666
--------- -------- --------- ---------
Total 40,630 42,359 41,088 48,370
========= ======== ========= =========
Oil (Bbls):
Permian Basin 3,102 3,131 3,196 3,248
Louisiana 899 809 975 1,258
Austin Chalk (Trend) 1,719 1,839 1,789 1,927
Other 63 58 55 54
--------- -------- --------- ---------
Total 5,783 5,837 6,015 6,487
========= ======== ========= =========
Natural gas liquids (Bbls):
Permian Basin 230 261 238 238
Austin Chalk (Trend) 260 220 271 316
Other 64 84 44 124
--------- -------- --------- ---------
Total 554 565 553 678
========= ======== ========= =========
Total Production:
Natural Gas (MMcf) 3,738 3,897 11,217 13,205
Oil (MBbls) 532 537 1,642 1,771
Natural gas liquids (MBbls) 51 52 151 185
--------- -------- --------- ---------
Gas Equivalents (MMcfe) 7,236 7,431 21,975 24,941
Average Realized Prices (a):
Gas ($/Mcf): $6.26 $7.98 $6.74 $6.88
========= ======== ========= =========
Oil ($/Bbl): $67.27 $59.95 $64.70 $52.39
========= ======== ========= =========
Natural gas liquids ($/Bbl) $43.79 $37.00 $40.15 $31.70
========= ======== ========= =========
Gains (Losses) on settled
derivative contracts (a):
($ in thousands, except per
unit)
Gas:
Net realized gain (loss) $5,543 $(2,023) $2,478 $(2,585)
Per unit produced ($/Mcf) $1.48 $(0.52) $0.22 $(0.20)
Oil:
Net realized loss $(7,328) $(5,935) $(19,923) $(14,918)
Per unit produced ($/Bbl) $(13.77) $(11.05) $(12.13) $(8.42)
CLAYTON WILLIAMS ENERGY, INC.
Notes to tables and supplemental information
(a) Hedging gains (losses) are only included in the determination of the
Company's average realized prices if the underlying derivative contracts are
designated as cash flow hedges under applicable accounting standards. The
Company did not designate any of its 2006 or 2005 derivative contracts as cash
flow hedges. This means that the Company's derivatives for 2006 and 2005 have
been marked-to-market through its statement of operations as other
income/expense instead of through accumulated other comprehensive income on the
Company's balance sheet. This also means that all realized gains/losses on these
derivatives are reported in other income/loss instead of as a component of oil
and gas sales.
(b) The accompanying consolidated financial statements include the accounts of
Larclay JV, a drilling rig joint venture formed with Lariat Services, Inc.
("Lariat") in April 2006 to own and operate twelve new drilling rigs. Although
the Company and Lariat own equal interests in Larclay JV, the Company meets the
definition of the primary beneficiary of Larclay JV's expected cash flows under
Financial Interpretation No. 46R, "Consolidation of Variable Interest Entities -
an interpretation of ARB No. 51 (as amended)" ("FIN 46R"). Accordingly, the
Company is required to include the accounts of Larclay JV in the Company's
consolidated financial statements. Lariat's net equity in the assets,
liabilities and operations of Larclay JV are reflected as minority interest
accounts in the Company's consolidated financial statements. The Company's
intercompany accounts with Larclay JV have been eliminated in consolidation.
(c) In May 2006, the State of Texas adopted House Bill 3, which modified the
state's franchise tax structure, replacing the previous tax based on capital or
earned surplus with a margin tax (the "Texas Margin Tax") effective with
franchise tax reports filed on or after January 1, 2008. The Texas Margin Tax is
computed by applying the applicable tax rate (1% for the Company's business
sector) to the profit margin, which is generally determined by total revenue
less either cost of goods sold or compensation, as applicable. Although House
Bill 3 states that the Texas Margin Tax is not an income tax, the Company
believes that Statement of Financial Accounting Standards No. 109 "Accounting
for Income Taxes ("SFAS 109") applies to the Texas Margin Tax. Accordingly, the
Company has computed its consolidated deferred tax liability based on its
current interpretation of the Texas Margin Tax, resulting in a reduction of
deferred tax expense during the nine months ended September 30, 2006 of $4.1
million.
The Company's effective federal and state income tax rate for the nine months
ended September 30, 2006 of 22.4% differed from the statutory federal rate of
35% due to reductions in the tax provision related to the adoption of the Texas
Margin Tax and statutory depletion, offset in part by certain non-deductible
expenses.
CONTACT: Clayton Williams Energy, Inc., Midland
Patti Hollums, 432-688-3419
Director of Investor Relations
cwei@claytonwilliams.com
www.claytonwilliams.com
or
Mel G. Riggs, 432-688-3431
Chief Financial Officer