Clayton Williams says that it had entered into a contractual arrangement with Lariat Services, Inc. ("Lariat"), a
privately-held contract drilling company, that calls for the formation
of a joint venture to acquire at least 12 drilling rigs. Lariat, which
presently owns and operates 18 drilling rigs, will be the operations
manager of the joint venture. The Company will be responsible for
financing the purchase of the rigs by the joint venture. The total
acquisition cost of the rigs is expected to be approximately $55
million. If the rigs cannot be 100% financed, the Company will be
required to contribute equity or make loans to the joint venture, as
needed. The joint venture will be owned 50% by Lariat and 50% by the
Company. After initial construction and equipping, all costs to
maintain the equipment will be borne proportionately between Lariat
and the Company.
It is anticipated that the rigs will be utilized primarily by CWEI
in the conduct of its exploration and development drilling program.
The Company initially expects to use up to four rigs in North
Louisiana and up to eight rigs in the Permian Basin. These are areas
where the Company has significant acreage positions and, depending on
results, may engage in long-term drilling programs. The Company
expects the rigs to be available at various times from March 2006 to
"I expect drilling rigs to continue to be in short supply and high
demand at least for the next several years," stated Clayton W.
Williams, CEO of Clayton Williams Energy, Inc. "We need to be assured
of rig availability in order to continue our search for oil and gas
reserves, and in my opinion, this joint venture is a much better
alternative to executing long-term drilling contracts with third party
drilling contractors. We are excited about forming this alliance with
an experienced and respected contractor like Lariat."