Clayton Williams Energy Announces Second Quarter 2016 Financial Results

MIDLAND, Texas--()--Clayton Williams Energy, Inc. (the “Company”) (NYSE:CWEI) today reported its financial results for the second quarter of 2016.

Summary

  • Oil and Gas Production of 13.6 MBOE/d
  • Net Loss of $73.8 million; Adjusted Net Loss1 (non-GAAP) of $34.3 million
  • Cash Flow from Operations of $(16.6) million; EBITDAX2 (non-GAAP) of $13.4 million
  • Liquidity of $255.7 million
  • Recent Actions to Improve Balance Sheet

Financial Results for the Second Quarter of 2016

The Company reported a net loss for the second quarter of 2016 (“2Q16”) of $73.8 million, or $6.06 per share, as compared to a net loss of $23.3 million, or $1.92 per share, for the second quarter of 2015 (“2Q15”). Adjusted net loss1 (non-GAAP) for 2Q16 was $34.3 million, or $2.82 per share, as compared to adjusted net loss1 (non-GAAP) of $13.1 million, or $1.08 per share, for 2Q15. Cash flow from operations for 2Q16 was $(16.6) million as compared to $8.5 million for 2Q15. EBITDAX2 (non-GAAP) for 2Q16 was $13.4 million as compared to $36.5 million for 2Q15.

For the six months ended June 30, 2016, net loss attributable to Company stockholders was $109 million, or $8.96 per share, as compared to net loss of $41.6 million, or $3.42 per share, for the same period in 2015. Adjusted net loss1 (non-GAAP) for the six-month period in 2016 was $65 million, or $5.34 per share, as compared to adjusted net loss1 (non-GAAP) of $33.6 million, or $2.76 per share, for the same period in 2015. Cash flow from operations for the six-month period in 2016 was $(16.1) million as compared to $28.6 million during the same period in 2015. EBITDAX2 (non-GAAP) for the six-month period in 2016 was $22.9 million as compared to $62.6 million for the same period in 2015.

The key factors affecting the comparability of financial results for 2Q16 versus 2Q15 were:

  • Oil and gas sales for 2Q16, excluding amortized deferred revenues, decreased $26.3 million compared to 2Q15. Production variances accounted for a $13.8 million decrease and price variances accounted for a $12.5 million decrease. Average realized oil prices were $40.51 per barrel in 2Q16 versus $53.32 per barrel in 2Q15, average realized gas prices were $1.87 per Mcf in 2Q16 versus $2.58 per Mcf in 2Q15, and average realized natural gas liquids (“NGL”) prices were $14.09 per barrel in 2Q16 versus $15.30 per barrel in 2Q15. Amortized deferred revenue in 2Q16 totaled $0.4 million as compared to $1.7 million in 2Q15.
  • Oil, gas and NGL production per barrel of oil equivalent (“BOE”) decreased 18% in 2Q16 as compared to 2Q15, with oil production decreasing 20% to 9,835 barrels per day, gas production decreasing 20% to 12,890 Mcf per day, and NGL production increasing 2% to 1,593 barrels per day. Oil and NGL production accounted for approximately 84% of the Company’s total BOE production in 2Q16 and 2Q15. After giving effect to the sale of selected leases and wells in South Louisiana in September 2015, oil, gas and NGL production per BOE decreased 16% in 2Q16 as compared to 2Q15. See accompanying tables for additional information about the Company’s oil and gas production.
  • Production costs in 2Q16 were $19.2 million versus $23.1 million in 2Q15 due to lower oilfield service costs and reductions in production taxes associated with a decrease in commodity prices. Production costs on a BOE basis, excluding production taxes, increased 6% to $13.81 per BOE in 2Q16 versus $13.02 per BOE in 2Q15.
  • Interest expense for 2Q16 was $26.6 million versus $13.6 million for 2Q15. The increase was due primarily to $13.3 million of incremental interest expense on funded indebtedness incurred under a second lien term loan credit facility issued in connection with a refinancing in March 2016 (the “Refinancing”). The Company elected to pay interest on the term loan facility in-kind and resulted in an increase in the principal amount of the term loan to $363.3 million.
  • The Company accounts for the warrants issued in connection with the Refinancing as derivative instruments and carries the warrants as a non-current liability at their fair value. The Company recorded a $37.9 million loss on change in fair value in 2Q16.
  • Loss on commodity derivatives for 2Q16 was $15.9 million (including a $2.9 million loss on settled contracts) versus a loss on commodity derivatives in 2Q15 of $12.3 million (including a $1.8 million loss on settled contracts). See accompanying tables for additional information about the Company’s accounting for derivatives.
  • General and administrative expenses for 2Q16 were $13.6 million versus $11.3 million for 2Q15. The increase was attributable to a $2.6 million net change in compensation expense related to the Company’s APO reward plans ($9.1 million in 2Q16 versus $6.5 million in 2Q15).
 
1 See “Computation of Adjusted Net Loss (non-GAAP)” below for an explanation of how the Company calculates and uses adjusted net loss (non-GAAP) and for a reconciliation of net loss (GAAP) to adjusted net loss (non-GAAP).
 
2 See “Computation of EBITDAX (non-GAAP)” below for an explanation of how the Company calculates and uses EBITDAX (non-GAAP) and for a reconciliation of net loss (GAAP) to EBITDAX (non-GAAP).
 

Balance Sheet and Liquidity

As of June 30, 2016, total long-term debt was $930.1 million, consisting of $336.6 million (net of $26.6 million of original issue discount and debt issuance costs) under the second lien term loan credit facility and $593.5 million of 7.75% Senior Notes due 2019. The borrowing base established by the banks under the revolving credit facility and the aggregate lender commitment was $100 million at June 30, 2016. The Company had $98.1 million of availability under the revolving credit facility after allowing for outstanding letters of credit of $1.9 million. Liquidity, consisting of cash, certificates of deposit and commercial paper and funds available on the revolving credit facility, totaled $255.7 million.

As announced on July 25, 2016, the Company has agreed to sell 5,051,100 shares of common stock to funds managed by Ares Management, L.P. for cash proceeds of $150 million or approximately $29.70 per share. When closed, proceeds from this sale will provide additional liquidity for potential debt reduction transactions related to its 7.75% Senior Notes due 2019 (“Notes”) and for developmental drilling on its 65,000 net acre position in the core of the southern Delaware Basin. In connection with the transaction, lenders under the Company’s term loan credit facility waived certain restrictions to enable the Company to use proceeds from equity issuances and specified asset sales for debt reduction and capital expenditures.

On July 28, 2016, the Company commenced a modified “Dutch Auction” cash tender offer to purchase up to $100 million aggregate principal amount of its Notes with a bid range from $880 to $950 per each $1,000 aggregate principal amount of Notes. The tender offer will expire on August 29, 2016.

Scheduled Conference Call

The Company will host a conference call to discuss these results and other forward-looking items Wednesday, August 3rd at 9:30 a.m. CT (10:30 a.m. ET).

A live webcast for investors and analysts will be available on the Company’s website at www.claytonwilliams.com under the “Investors” section. The webcast will be archived on the site for 30 days following the call.

Participants should call (877) 868-1835 and indicate 54104739 as the conference passcode. A replay will be available from 1:30 p.m. CT (2:30 p.m. ET) on August 3rd until August 10th. To listen to the replay dial (855) 859-2056 and enter passcode 54104739.

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 natural gas and liquids 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 recession 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.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share)
 
   

Three Months Ended
June 30,

     

Six Months Ended
June 30,

2016     2015 2016     2015
REVENUES
Oil and gas sales $ 41,055 $ 68,662 $ 69,881 $ 127,232
Midstream services 1,072 1,603 2,359 3,214
Drilling rig services 23
Other operating revenues   68     2,966     269     6,904  
Total revenues   42,195     73,231     72,509     137,373  
 
COSTS AND EXPENSES
Production 19,230 23,093 36,384 46,523
Exploration:
Abandonments and impairments 34 2,508 1,024 4,131
Seismic and other 318 105 429 971
Midstream services 833 534 1,169 933
Drilling rig services 1,197 1,620 2,466 3,496
Depreciation, depletion and amortization 38,178 42,121 76,791 84,775
Impairment of property and equipment 2,347 2,531
Accretion of asset retirement obligations 1,041 977 2,070 1,935
General and administrative 13,565 11,328 17,456 20,471
Other operating expenses   1,364     2,003     2,515     2,847  
Total costs and expenses   75,760     84,289     142,651     168,613  
Operating loss   (33,565 )   (11,058 )   (70,142 )   (31,240 )
 
OTHER INCOME (EXPENSE)
Interest expense (26,557 ) (13,609 ) (43,644 ) (26,886 )
Loss on change in fair value of common stock warrants (37,910 ) (31,605 )
Loss on commodity derivatives (15,953 ) (12,300 ) (15,327 ) (7,668 )
Impairment of investment and other   372     871     (7,199 )   1,564  
Total other income (expense)   (80,048 )   (25,038 )   (97,775 )   (32,990 )
Loss before income taxes (113,613 ) (36,096 ) (167,917 ) (64,230 )
Income tax benefit   39,826     12,764     58,869     22,666  
NET LOSS $ (73,787 ) $ (23,332 ) $ (109,048 ) $ (41,564 )
 
Net loss per common share:
Basic $ (6.06 ) $ (1.92 ) $ (8.96 ) $ (3.42 )
Diluted $ (6.06 ) $ (1.92 ) $ (8.96 ) $ (3.42 )
Weighted average common shares outstanding:
Basic   12,170     12,170     12,170     12,170  
Diluted   12,170     12,170     12,170     12,170  
 
 
CLAYTON WILLIAMS ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
 
ASSETS
    June 30,     December 31,
2016 2015
CURRENT ASSETS (Unaudited)
 
Cash and cash equivalents $ 63,627 $ 7,780
Investments - certificates of deposit and commercial paper 93,951
Accounts receivable:
Oil and gas sales 16,804 16,660
Joint interest and other, net 3,112 3,661
Affiliates 238 260
Inventory 27,735 31,455
Deferred income taxes 9,280 6,526
Fair value of commodity derivatives 218
Prepaids and other   2,574     2,463  
  217,539     68,805  
PROPERTY AND EQUIPMENT
Oil and gas properties, successful efforts method 2,615,105 2,585,502
Pipelines and other midstream facilities 61,323 60,120
Contract drilling equipment 123,917 123,876
Other   19,176     19,371  
2,819,521 2,788,869
Less accumulated depreciation, depletion and amortization   (1,656,134 )   (1,587,585 )
Property and equipment, net   1,163,387     1,201,284  
 
OTHER ASSETS
Fair value of commodity derivatives 324
Investments and other   7,041     17,331  
  7,365     17,331  
$ 1,388,291   $ 1,287,420  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable:
Trade $ 25,537 $ 29,197
Oil and gas sales 17,816 19,490
Affiliates 195 383
Fair value of commodity derivatives 13,387
Accrued liabilities and other   16,635     16,669  
  73,570     65,739  
NON-CURRENT LIABILITIES
Long-term debt 930,129 742,410
Deferred income taxes 52,881 108,996
Fair value of commodity derivatives 2,458
Fair value of common stock warrants 48,368
Asset retirement obligations 61,482 48,728
Accrued compensation under non-equity award plans 23,870 16,254
Deferred revenue from volumetric production payment and other   4,983     5,695  
  1,124,171     922,083  
STOCKHOLDERS’ EQUITY
Preferred stock, par value $.10 per share
Common stock, par value $.10 per share 1,216 1,216
Additional paid-in capital 152,686 152,686
Retained earnings   36,648     145,696  
Total stockholders' equity   190,550     299,598  
$ 1,388,291   $ 1,287,420  
 
 
CLAYTON WILLIAMS ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
         

Three Months Ended
June 30,

Six Months Ended
June 30,

2016     2015 2016     2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (73,787 ) $ (23,332 ) $ (109,048 ) $ (41,564 )
Adjustments to reconcile net loss to cash provided by (used in) operating activities:
Depreciation, depletion and amortization 38,178 42,121 76,791 84,775
Impairment of property and equipment 2,347 2,531
Abandonments and impairments 34 2,508 1,024 4,131
(Gain) loss on sales of assets and impairment of inventory, net 1,255 (1,178 ) 1,963 (4,249 )
Deferred income tax benefit (39,826 ) (12,764 ) (58,869 ) (22,666 )
Non-cash employee compensation 8,936 5,770 7,868 7,084
Loss on commodity derivatives 15,953 12,300 15,327 7,668
Cash settlements of commodity derivatives (2,906 ) (1,767 ) (24 ) (1,767 )
Accretion of asset retirement obligations 1,041 977 2,070 1,935
Amortization of debt issue costs and original issue discount 1,572 748 3,953 1,495
Loss on change in fair value of common stock warrants 37,910 31,605
Amortization of deferred revenue from volumetric production payment (437 ) (1,723 ) (639 ) (3,501 )
Paid in-kind interest expense 13,271 13,271
Impairment of investment and other 149 (94 ) 8,381 404
Changes in operating working capital:
Accounts receivable (4,176 ) (1,528 ) 427 21,027
Accounts payable (704 ) (33 ) (11,356 ) (26,211 )
Other   (13,091 )   (13,469 )   (1,197 )   (2,472 )
Net cash provided by (used in) operating activities   (16,628 )   8,536     (16,106 )   28,620  
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (14,734 ) (35,730 ) (28,974 ) (125,267 )
Purchase of certificates of deposit and commercial paper (93,951 ) (93,951 )
Proceeds from sales of assets 3,796 27,745 5,176 32,740
Decrease (increase) in equipment inventory 263 (680 ) 477 1,027
Proceeds from volumetric production payment and other   (6 )   232     132     498  
Net cash used in investing activities   (104,632 )   (8,433 )   (117,140 )   (91,002 )
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 343,237 42,000
Proceeds from issuance of common stock warrants 16,763
Repayments of long-term debt (160,000 )
Payment of debt issuance costs   (4 )       (10,907 )    
Net cash provided by (used in) financing activities   (4 )       189,093     42,000  
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (121,264 ) 103 55,847 (20,382 )
CASH AND CASH EQUIVALENTS
Beginning of period   184,891     7,531     7,780     28,016  
End of period $ 63,627   $ 7,634   $ 63,627   $ 7,634  
 
 

CLAYTON WILLIAMS ENERGY, INC.

COMPUTATION OF ADJUSTED NET LOSS (NON-GAAP)

(Unaudited)

(In thousands, except per share)

 

Adjusted net loss is presented as a supplemental non-GAAP financial measure because of its wide acceptance by financial analysts, investors, debt holders, banks, rating agencies and other financial statement users as a tool for operating trends analysis and industry comparisons. Adjusted net loss is not an alternative to net loss presented in conformity with GAAP.

The Company defines adjusted net loss as net loss before changes in fair value of commodity derivatives and common stock warrants, abandonments and impairments, impairments of property and equipment, net (gain) loss on sales of assets and impairment of inventory, amortization of deferred revenue from volumetric production payment, impairment of investments, certain non-cash and unusual items and the impact on taxes of the adjustments for each period presented.

The following table is a reconciliation of net loss (GAAP) to adjusted net loss (non-GAAP):

    Three Months Ended       Six Months Ended
June 30, June 30,
2016     2015 2016     2015
Net loss $ (73,787 ) $ (23,332 ) $ (109,048 ) $ (41,564 )
Loss on commodity derivatives 15,953 12,300 15,327 7,668
Cash settlements of commodity derivatives (2,906 ) (1,767 ) (24 ) (1,767 )
Loss on change in fair value of common stock warrants 37,910 31,605
Abandonments and impairments 34 2,508 1,024 4,131
Impairment of property and equipment 2,347 2,531
Net (gain) loss on sales of assets and impairment of inventory 1,255 (1,178 ) 1,963 (4,249 )
Amortization of deferred revenue from volumetric production payment (437 ) (1,723 ) (639 ) (3,501 )
Non-cash employee compensation 8,936 5,770 7,868 7,084
Impairment of investment and other 149 (94 ) 8,381 404
Tax impact (a)   (21,374 )   (5,599 )   (23,816 )   (4,342 )
Adjusted net loss $ (34,267 ) $ (13,115 ) $ (65,012 ) $ (33,605 )
 
Adjusted earnings per share:
Diluted $ (2.82 ) $ (1.08 ) $ (5.34 ) $ (2.76 )
 
Weighted average common shares outstanding:
Diluted 12,170 12,170 12,170 12,170
 
Effective tax rates 35.1 % 35.4 % 35.1 % 35.3 %

_______

(a)   The tax impact is computed utilizing the Company’s effective tax rate on the adjustments for each period presented.
 
 

CLAYTON WILLIAMS ENERGY, INC.

COMPUTATION OF EBITDAX (NON-GAAP)

(Unaudited)

(In thousands)

 

EBITDAX is presented as a supplemental non-GAAP financial measure because of its wide acceptance by financial analysts, investors, debt holders, banks, rating agencies and other financial statement users as an indication of an entity's ability to meet its debt service obligations and to internally fund its exploration and development activities. EBITDAX is not an alternative to net loss or cash flow from operating activities, or any other measure of financial performance presented in conformity with GAAP.

The Company defines EBITDAX as net loss before interest expense, income taxes, exploration costs, net (gain) loss on sales of assets and impairment of inventory, and all non-cash items in the Company's statements of operations, including depreciation, depletion and amortization, impairment of property and equipment, accretion of asset retirement obligations, amortization of deferred revenue from volumetric production payment, certain employee compensation, changes in fair value of commodity derivatives and common stock warrants, impairment of investments and certain non-cash and unusual items.

The following table reconciles net loss to EBITDAX:

    Three Months Ended       Six Months Ended
June 30, June 30,
2016     2015 2016     2015
Net loss $ (73,787 ) $ (23,332 ) $ (109,048 ) $ (41,564 )
Interest expense 26,557 13,609 43,644 26,886
Income tax benefit (39,826 ) (12,764 ) (58,869 ) (22,666 )
Exploration:
Abandonments and impairments 34 2,508 1,024 4,131
Seismic and other 318 105 429 971
Net (gain) loss on sales of assets and impairment of inventory 1,255 (1,178 ) 1,963 (4,249 )
Depreciation, depletion and amortization 38,178 42,121 76,791 84,775
Impairment of property and equipment 2,347 2,531
Accretion of asset retirement obligations 1,041 977 2,070 1,935
Amortization of deferred revenue from volumetric production payment (437 ) (1,723 ) (639 ) (3,501 )
Non-cash employee compensation 8,936 5,770 7,868 7,084
Loss on commodity derivatives 15,953 12,300 15,327 7,668
Cash settlements of commodity derivatives (2,906 ) (1,767 ) (24 ) (1,767 )
Loss on change in fair value of common stock warrants 37,910 31,605
Impairment of investment and other   149     (94 )   8,381     404  
EBITDAX $ 13,375   $ 36,532   $ 22,869   $ 62,638  
 
The following table reconciles net cash provided by (used in) operating activities to EBITDAX:
 
Net cash provided by (used in) operating activities $ (16,628 ) $ 8,536 $ (16,106 ) $ 28,620
Changes in operating working capital 17,971 15,030 12,126 7,656
Seismic and other 318 105 429 971
Cash interest expense   11,714     12,861     26,420     25,391  
$ 13,375   $ 36,532   $ 22,869   $ 62,638  
 
         
CLAYTON WILLIAMS ENERGY, INC.
SUMMARY PRODUCTION AND PRICE DATA
(Unaudited)
 

Three Months Ended
June 30,

Six Months Ended
June 30,

2016     2015 2016     2015
Oil and Gas Production Data:
Oil (MBbls) 895 1,125 1,793 2,304
Gas (MMcf) 1,173 1,462 2,469 2,868
Natural gas liquids (MBbls) 145 142 272 276
Total (MBOE) 1,236 1,511 2,477 3,058
Total (BOE/d) 13,576 16,601 13,608 16,895
Average Realized Prices (a) (b):
Oil ($/Bbl) $ 40.51   $ 53.32   $ 34.31   $ 48.56  
Gas ($/Mcf) $ 1.87   $ 2.58   $ 1.80   $ 2.61  
Natural gas liquids ($/Bbl) $ 14.09   $ 15.30   $ 11.67   $ 14.20  
Loss on Settled Commodity Derivative Contracts (b):
($ in thousands, except per unit)
Oil:
Cash settlements paid $ (2,906 ) $ (1,767 ) $ (24 ) $ (1,767 )
Per unit produced ($/Bbl) $ (3.25 ) $ (1.57 ) $ (0.01 ) $ (0.77 )
Average Daily Production (c):
Oil (Bbls):
Permian Basin Area:
Delaware Basin 2,789 3,735 2,864 3,757
Other 2,850 2,909 2,888 2,854
Austin Chalk 1,707 1,929 1,740 1,924
Eagle Ford Shale 1,661 3,238 1,824 3,592
Other (d)   828     552     536     602  
Total   9,835     12,363     9,852     12,729  
Natural Gas (Mcf):
Permian Basin Area:
Delaware Basin 2,629 3,305 2,600 3,172
Other 5,405 5,802 5,684 5,832
Austin Chalk 1,711 1,783 1,699 1,750
Eagle Ford Shale 308 566 359 585
Other (d)   2,837     4,610     3,224     4,506  
Total   12,890     16,066     13,566     15,845  
Natural Gas Liquids (Bbls):
Permian Basin Area:
Delaware Basin 448 451 415 422
Other 737 794 733 769
Austin Chalk 187 164 179 167
Eagle Ford Shale 86 119 86 129
Other (d)   135     32     82     38  
Total   1,593     1,560     1,495     1,525  
BOE:
Permian Basin Area:
Delaware Basin 3,675 4,738 3,712 4,707
Other 4,488 4,670 4,568 4,595
Austin Chalk 2,179 2,390 2,202 2,383
Eagle Ford Shale 1,798 3,451 1,970 3,819
Other (d)   1,436     1,352     1,156     1,391  
Total   13,576     16,601     13,608     16,895  
 
Oil and Gas Costs ($/BOE Produced):
Production costs $ 15.56 $ 15.28 $ 14.69 $ 15.21
Production costs (excluding production taxes) $ 13.81 $ 13.02 $ 13.39 $ 13.14
Oil and gas depletion $ 27.79 $ 25.32 $ 27.91 $ 25.23

______

(a)   Oil and gas sales includes $0.4 million for the three months ended June 30, 2016, $1.7 million for the three months ended June 30, 2015, $0.6 million for the six months ended June 30, 2016 and $3.5 million for the six months ended June 30, 2015 of amortized deferred revenue attributable to a volumetric production payment (“VPP”) transaction effective March 1, 2012. In August 2015, we terminated the VPP covering 277 MBOE of oil and gas production from August 2015 through December 2019 for $13.7 million. The calculation of average realized sales prices excludes production of 22,503 barrels of oil and 14,750 Mcf of gas for the three months ended June 30, 2015 and 45,654 barrels of oil and 30,837 Mcf of gas for the six months ended June 30, 2015 associated with the VPP.
 
(b) Hedging gains/losses are only included in the determination of the Company’s average realized prices if the underlying commodity derivative contracts are designated as cash flow hedges under applicable accounting standards. The Company did not designate any of its 2016 or 2015 commodity derivative contracts as cash flow hedges. This means that the Company’s commodity derivatives for 2016 and 2015 have been marked-to-market through its statement of operations as other income/expense instead of through accumulated other comprehensive loss on the Company’s balance sheet. This also means that all realized gains/losses on these commodity derivatives are reported in other income/expense instead of as a component of oil and gas sales.
 
(c) Historical average daily production volumes have been reclassified to conform with current period presentation.
 
(d) The average daily production related to selected leases and wells in South Louisiana sold in September 2015 was 530 total BOE for the three months ended June 30, 2015 and 490 total BOE for the six months ended June 30, 2015.
 
 

CLAYTON WILLIAMS ENERGY, INC.

SUMMARY OF OPEN COMMODITY DERIVATIVES

(Unaudited)

 

The following summarizes information concerning the Company’s net positions in open commodity derivatives applicable to periods subsequent to June 30, 2016. In May 2016, the Company entered into costless collars covering 287 MBbls of oil production for the period from January 2017 through December 2017 at a floor price of $45.00 and a ceiling price of $55.00. In August 2016, the Company entered into a swap agreement covering 153 MBbls of oil production for the period from August 2016 through December 2016 at a price of $42.05. Settlement prices of commodity derivatives are based on NYMEX futures prices.

Swaps:

   
Oil
MBbls     Price
Production Period:
3rd Quarter 2016 615 $ 41.13
4th Quarter 2016 619 $ 41.18

2017

  316 $ 44.30
  1,550
   
 

Costless Collars:

Oil
Weighted Weighted
Average Average
MBbls

Floor Price

Ceiling Price
Production Period:

2017

1,415 $ 42.27 $ 51.66
1,415

Contacts

Clayton Williams Energy, Inc.
Patti Hollums, 432-688-3419
Director of Investor Relations
cwei@claytonwilliams.com
www.claytonwilliams.com
or
Michael L. Pollard, 432-688-3029
Chief Financial Officer

Contacts

Clayton Williams Energy, Inc.
Patti Hollums, 432-688-3419
Director of Investor Relations
cwei@claytonwilliams.com
www.claytonwilliams.com
or
Michael L. Pollard, 432-688-3029
Chief Financial Officer