Clayton Williams Reports 3Q Financial Results

Clayton Williams reported a net loss attributable to Company stockholders for the third quarter of 2009 of $13.6 million, or $1.12 per share, as compared to net income of $94.6 million, or $7.79 per share, for the third quarter of 2008. Cash flow from operations for the third quarter of 2009 was $28.3 million as compared to $73.6 million during the same period in 2008.

For the nine months ended September 30, 2009, the Company reported a net loss attributable to Company stockholders of $74.5 million, or $6.14 per share, as compared to net income of $80.6 million, or $6.72 per share, for the same period in 2008. Cash flow from operations for the nine-month period in 2009 was $68.2 million as compared to $223.1 million during the same period in 2008.

The Company cited volatility in the commodity markets as the principal reason for the adverse change in operating results between the third quarter of 2009 and the comparable quarter in 2008. The Company reported a $4.7 million net gain on derivatives in the current quarter, consisting of a $10.6 million non-cash gain to mark the Company’s derivative positions to their fair value on September 30, 2009 and a $5.9 million realized loss on settled contracts. For the same period in 2008, the Company reported a $132.7 million net gain on derivatives, consisting of a $169.5 million non-cash gain due to changes in mark-to-market valuations and a $36.8 million realized loss on settled contracts.

Lower commodity prices also had an adverse impact on revenues and cash flow from operations. Most of the 54% decrease in oil and gas sales from $128.3 million for the third quarter of 2008 to $59.4 million for the same quarter in 2009 was attributable to lower product prices. Average realized oil prices for the third quarter of 2009 decreased 44% to $64.60 per barrel from $116.01 per barrel in the 2008 period, while gas prices decreased 62% to $3.79 per Mcf from $9.88 per Mcf in the same quarter of 2008. Average realized prices for 2009 and 2008 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.

Oil and gas production (per barrel of oil equivalent) declined by 5% for the third quarter of 2009 as compared to the same quarter in 2008. Oil production decreased 12% to 662,000 barrels, or 7,196 barrels per day, as compared to 755,000 barrels, or 8,207 barrels per day, while gas production remained relatively flat at 3.9 Bcf, or 42,391 Mcf per day in 2009, as compared to 42,609 Mcf per day in 2008.

The Company recorded abandonment and impairment costs during the third quarter of 2009 of $24.1 million compared to $43 million for the third quarter of 2008. The 2009 quarter included a $17.5 million pre-tax charge for the previously announced abandonment of the Miami Corp wells in South Louisiana and $5.3 million of leasehold impairments relating primarily to North Louisiana and the East Texas Bossier area.
 

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