CLAYTON WILLIAMS ENERGY INC /DE - FORM 8-K - EX-99.1 - FINANCIAL GUIDANCE DISCLOSURES FOR 2011 - February 24, 2011

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EXHIBIT 99.1
CLAYTON WILLIAMS ENERGY, INC.

FINANCIAL GUIDANCE DISCLOSURES FOR 2011

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, 2011.  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, 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 expenses related to Desta Drilling, L.P., a wholly-owned subsidiary of the Company which provides contract drilling services for the Company.




 
 
 

Summary of Estimates

The following table sets forth actual and certain estimates being used by us to model our anticipated results of operations for each quarter during the fiscal year ending December 31, 2011.  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, 2011
 
Estimated
  
Estimated
  
Estimated
  
Estimated
 
First Quarter
  
Second Quarter
  
Third Quarter
  
Fourth Quarter
 
(Dollars in thousands, except per unit data)
Average Daily Production:
                
Oil (Bbls)                                    
  
10,300 to 10,500
  
10,725 to 10,925
  
12,050 to 12,250
  
13,075 to 13,275
Gas (Mcf)                                    
  
20,400 to 24,400
  
21,000 to 25,000
  
20,750 to 24,750
  
20,500 to 24,500
Natural gas liquids (Bbls)
  
   925 to 1,025
  
825 to 925
  
800 to 900
  
775 to 875
Total oil equivalents (BOE)
  
14,625 to 15,592
  
15,050 to 16,017
  
16,308 to 17,275
  
17,267 to 18,233
                 
Differentials:
                
Oil (Bbls)                                    
  
$(2.75) to $(3.25)
  
$(2.75) to $(3.25)
  
$(2.75) to $(3.25)
  
$(2.75) to $(3.25)
Gas (Mcf)                                    
  
$0.05 to $0.35
  
$0.05 to $0.35
  
$0.05 to $0.35
  
$0.05 to $0.35
Natural gas liquids (Bbls)
  
$(35.00) to $(41.00)
  
$(35.00) to $(41.00)
  
$(35.00) to $(41.00)
  
$(35.00) to $(41.00)
                 
Costs Variable by Production ($/BOE):
                
Production expenses (including
                
  production taxes)                                    
  
$14.70 to $15.70
  
$14.70 to $15.70
  
$14.70 to $15.70
  
$14.70 to $15.70
DD&A – Oil and gas properties
  
$17.25 to $18.25
  
$17.25 to $18.25
  
$17.25 to $18.25
  
$17.25 to $18.25
                 
Other Revenues (Expenses):
                
Natural gas services:
                
Revenues                                
  
$450 to $550
  
$450 to $550
  
$450 to $550
  
$450 to $550
Operating costs                                
  
$(300) to $(500)
  
$(300) to $(500)
  
$(300) to $(500)
  
$(300) to $(500)
Exploration costs:
                
Abandonments and impairments
  
   $(500) to $(2,500)
  
   $(500) to $(2,500)
  
   $(500) to $(2,500)
  
   $(500) to $(2,500)
Seismic and other                                 
  
   $(750) to $(1,250)
  
   $(750) to $(1,250)
  
   $(750) to $(1,250)
  
   $(750) to $(1,250)
DD&A – Other (a)                                    
  
$(250) to $(350)
  
$(250) to $(350)
  
$(250) to $(350)
  
$(250) to $(350)
General and administrative (a) (b)
  
$(6,900) to $(7,100)
  
$(7,800) to $(8,000)
  
$(7,300) to $(7,500)
  
$(7,400) to $(7,500)
Interest expense (a)                                    
  
$(6,900) to $(7,100)
  
$(7,400) to $(7,600)
  
$(7,700) to $(7,900)
  
$(8,000) to $(8,200)
Other income (expense)
  
$450 to $550
  
$450 to $550
  
$450 to $550
  
$450 to $550
Gain (loss) on sales of assets, net(c)
  
$13,200
  
-
  
-
  
-
                 
Effective Federal and State Income
                
  Tax Rate:
                
Current                                    
  
0%
  
0%
  
0%
  
0%
Deferred                                    
  
36%
  
36%
  
36%
  
36%
                 
Weighted Average Shares Outstanding
                
  (In thousands):
                
Basic                                    
  
12,146
  
12,146
  
12,146
  
12,146
Diluted                                    
  
12,146
  
12,146
  
12,146
  
12,146
                         
(a)           Excludes amounts derived from Desta Drilling, L.P.
(b)           Excludes non-cash employee compensation.
(c)   In February 2011, we sold two 2,000 horsepower drilling rigs and related equipment for $22 million of total consideration, and expect to record a gain on the sale of approximately $13.2 million during the first quarter of 2011.  Proceeds from the sale consisted of $11 million cash and an $11 million note receivable due in August 2011.


 
 
 

Capital Expenditures

The following table sets forth, by area, our planned expenditures for the year ending December 31, 2011.

   
Planned
        
   
Expenditures
    
2011
  
   
Year Ended
    
Percentage
  
   
December 31, 2011
    
of Total
  
   
(In thousands)
        
       
Permian Basin                                             
   $ 295,300       77 %
Giddings Area:
                
Austin Chalk/Eagle Ford Shale
     66,100       17 %
Deep Bossier                                         
     13,900       4 %
South Louisiana                                             
     3,900       1 %
Other                                             
     2,600       1 %
    $ 381,800       100 %

We currently plan to spend approximately $381.8 million on exploration and development activities in fiscal 2011.  Our actual expenditures during fiscal 2011 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 2011.

Based on these current estimates, approximately 95% of our planned expenditures for exploration and development activities for fiscal 2011 will relate to developmental prospects, as compared to approximately 97% in fiscal 2010.

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, 2011.  These estimates represent the approximate mid-point of the estimated production range.

   
Daily Net Production for 2011
  
   
Estimated
    
Estimated
    
Estimated
    
Estimated
  
   
First Quarter
    
Second Quarter
    
Third Quarter
    
Fourth Quarter
  
Oil (Bbls):
                        
Permian Basin                                             
     6,267       6,901       8,335       9,577  
Austin Chalk/Eagle Ford Shale
     3,589       3,440       3,380       3,391  
South Louisiana                                             
     522       484       435       207  
Other                                             
     22       -       -       -  
Total                                           
     10,400       10,825       12,150       13,175  
                                 
Gas (Mcf):
                                
Permian Basin                                             
     13,088       12,934       13,750       14,293  
Giddings Area:
                                
Austin Chalk/Eagle Ford Shale
     2,056       1,934       1,837       1,783  
Cotton Valley Reef Complex
     2,756       2,593       2,446       2,315  
South Louisiana                                             
     1,922       3,363       2,804       2,380  
Other                                             
     2,578       2,176       1,913       1,729  
Total                                           
     22,400       23,000       22,750       22,500  
                                 
Natural Gas Liquids (Bbls):
                                
Permian Basin                                             
     653       611       589       564  
Austin Chalk/Eagle Ford Shale
     233       198       196       196  
Other                                             
     89       66       65       65  
Total                                           
     975       875       850       825  


 
 
 


Accounting for Derivatives
The following summarizes information concerning our net positions in open commodity derivatives applicable to periods subsequent to December 31, 2010.  The settlement prices of commodity derivatives are based on NYMEX futures prices.

Swaps:
 
   
Oil
    
Gas
  
   
Bbls
    
Price
    
MMBtu (a)
    
Price
  
Production Period:
                        
1st Quarter 2011                              
     657,000     $ 83.74       1,710,000     $ 7.07  
2nd Quarter 2011                              
     632,000     $ 83.71       1,650,000     $ 7.07  
3rd Quarter 2011                              
     547,000     $ 83.78       1,560,000     $ 7.07  
4th Quarter 2011                              
     540,000     $ 83.78       1,500,000     $ 7.07  
2012                              
     1,170,000     $ 90.65       -     $ -  
      3,546,000               6,420,000          
                                       
(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 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.

CLAYTON WILLIAMS ENERGY INC /DE Reports