Clayton Williams Energy Provides Financial Guidance for 2016

MIDLAND, Texas--()--Clayton Williams Energy, Inc. (NYSE: CWEI) today filed a Form 8-K with the Securities and Exchange Commission to provide financial guidance disclosures for the year ending December 31, 2016.

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

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.

FINANCIAL GUIDANCE DISCLOSURES FOR 2016

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 the year ending December 31, 2016. 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 Financial Accounting Standards Board Accounting Standards Codification (ASC 815 – Derivatives and Hedging);
(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, 2016. Each range of values provided represents the expected low and high estimates for such financial or operating factor.

       
Actual Actual Estimated Ranges Estimated Ranges
Three Months Ended Three Months Ended Six Months Ending Fiscal Year Ending
March 31, 2016 June 30, 2016 December 31, 2016 December 31, 2016
(Dollars in thousands, except per unit data)
Average Daily Production:
Oil (Bbls) 9,868 9,835 9,700 to 10,000 9,800 to 10,100
Gas (Mcf) 14,242 12,890 12,000 to 13,000 12,500 to 13,500
Natural gas liquids (Bbls) 1,396 1,593 1,450 to 1,550 1,450 to 1,550
Total oil equivalents (BOE) 13,638 13,576 13,150 to 13,717 13,333 to 13,900
 
Price Differentials to NYMEX:
Oil 84% 89% 85% to 95% 85% to 95%
Gas 87% 83% 80% to 90% 80% to 90%
Natural gas liquids (based on oil) 27% 31% 25% to 35% 25% to 35%
 
Other Costs and Expenses:
Production expenses:
Direct costs ($/BOE) $ 12.97 $ 13.81 $ 13.00 to 14.00 $ 13.00 to 14.00
Production taxes (% of sales) 5% 5% 5% to 6% 5% to 6%
 
General and administrative:
Excluding non-cash compensation $ 4,959 $ 4,629 $ 10,000 to 13,500 $ 20,000 to 23,000
 
DD&A:
Oil and gas ($/BOE) $ 28.03 $ 27.79 $ 27.00 to 29.00 $ 27.00 to 29.00
Other $ 3,829 $ 3,831 $ 6,000 to 8,000 $ 13,600 to 15,600
 
Exploration costs:
Abandonments and impairments $ 990 $ 34 $ 1,000 to 2,000 $ 2,000 to 3,000
Seismic and other $ 111 $ 318 $ 0 to 500 $ 400 to 900
 
Interest expense (cash rates):
$600 million Senior Notes due 2019 7.75% 7.75% 7.75% 7.75%
Bank credit facility (1) LIBOR plus

250 to 350 bps

LIBOR plus

250 to 350 bps

LIBOR plus

250 to 350 bps

LIBOR plus

250 to 350 bps

 
$350 million Second Lien Credit Agreement (2) 12.5%

15%

12.5% / 15% 12.5% / 15%

Effective Federal and State Income

Tax Rate:
Current 0% 0% 0% 0%
Deferred 35.1% 35.1% 33% to 37% 33% to 37%
 
(1)  

We currently do not expect to have any amount drawn on the Bank Credit Facility at December 31, 2016.

(2)

Interest on loans under the Second Lien Credit Agreement are payable quarterly in cash at 12.5% per annum, or we may elect to pay interest each quarter in-kind at 15% per annum. We elected to pay interest in kind for the third quarter of 2016. Future quarterly elections must be made at least 30 days prior to the beginning of each calendar quarter.

 

Capital Expenditures

The following table sets forth, by area, our planned capital expenditures for the year ending December 31, 2016.

     
Actual Planned
Expenditures Expenditures 2016
Six Months Ended Year Ending Percentage
June 30, 2016 December 31, 2016 of Total
(In thousands)
Drilling and Completion:
Delaware Basin $ 16,800 $ 71,300 68 %
Austin Chalk/Eagle Ford Shale 1,400 2,600 2 %
Other   700   2,000 2 %
18,900 75,900 72 %
Leasing and seismic   15,600   29,600 28 %
Exploration and development $ 34,500 $ 105,500 100 %
 

We currently plan to spend approximately $105.5 million on exploration and development activities in 2016, an increase of $36 million over our prior estimate. We plan to continue utilizing one rig in Reeves County for the remainder of 2016. With recent improvements in drill times, we now expect to have drilled ten wells by the end of the year, with seven wells on production and three wells in various stages of completion. Our actual expenditures during 2016 may vary significantly from these estimates since our plans for exploration and development activities may change during the year. Changes in operating margins could increase our actual expenditures during fiscal 2016.

Accounting for Derivatives

The following summarizes information concerning our net positions in open commodity derivatives applicable to periods subsequent to June 30, 2016. In May 2016, we 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, we 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
 

We did not designate any of our commodity derivatives 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, were recorded as other income (expense) in our consolidated statements of operations and comprehensive income (loss).

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