Clayton Williams Energy Sees Third Quarter Loss
Clayton Williams Energy, Inc. (NASDAQ: CWEI) reports a net loss for the third quarter of 2005 of $2 million, or $.19 per share, as compared to a net loss of $9.2 million, or $.85 per share, for the third quarter of 2004. Cash flow from operations for the quarter was $50.4 million, as compared to $32.5 million during the same period in 2004.
For the nine months ended September 30, 2005, the Company reported a net loss of $1.1 million, or $.10 per share, as compared to a net loss of $1.5 million, or $.16 per share, for the same period in 2004. Cash flow from operations for the nine-month period in 2005 was $126.6 million, as compared to $83.2 million during the same period in 2004.
Although cash flow from operations for the third quarter of 2005 was the highest in the Company's history, results of operations were adversely affected by large non-cash charges related to derivatives and dry hole costs. These charges more than offset a $16.8 million gain on sale of property related primarily to the previously announced sale of the Company's interests in two leases in the Breton Sound area in the Gulf of Mexico (offshore Louisiana).
For the third quarter of 2005, the Company reported a $28.8 million expense for the change in fair value of derivatives, $20.8 million of which was a non-cash charge to mark the Company's derivative positions to their fair value on September 30, 2005. For the same period in 2004, the total expense for the change in fair value of derivatives was $24.6 million, of which $17.3 million was non-cash. Rising oil and gas prices in both periods negatively impacted the fair value of the Company's commodity derivatives, most of which were assumed in connection with the acquisition of Southwest Royalties, Inc. in May 2004.
Exploration costs for the third quarter of 2005 were $19 million, as compared to $12.5 million for the same period in 2004. The current quarter exploration costs include amounts related to the previously announced abandonment of the Deer-Hamilton #1 in Nueces County, Texas, the LL&E #1 (Andrea) in Terrebonne Parish, Louisiana and the State Lease 17636 #1 (Natalie) in Cameron Parish, Louisiana.
Oil and gas sales for the third quarter of 2005 increased $13.2 million (25%) to $65.7 million from $52.5 million in the 2004 quarter. Higher oil and gas prices resulted in an increase of $20.7 million, and lower oil and gas production accounted for a decrease of $7.5 million. Average realized oil prices in the third quarter of 2005 increased 44% from $41.71 to $59.95 per barrel, while gas prices increased 50% from $5.32 to $7.98 per Mcf. Oil production for the third quarter of 2005 decreased 14% to 537,000 barrels, or 5,837 barrels per day, from 624,000 barrels, or 6,783 barrels per day. Gas production also decreased 14% to 3.9 Bcf, or 42,359 Mcf per day, from 4.5 Bcf, or 49,250 Mcf per day in 2004. The Company attributed approximately half of the decrease in production to the loss of production in Louisiana as a result of Hurricane Katrina in late August.
Production costs for the third quarter of 2005 increased $4.6 million (37%) to $17 million from $12.4 million in the 2004 quarter. The Company cited higher service costs and increased well workovers as the primary reasons for the large increase. Higher oil and gas prices appear to be driving the current high demand for oilfield services, and the cost of those services is naturally rising as well. Production costs per Mcfe increased 61% from $1.42 per Mcfe for the 2004 quarter to $2.29 per Mcfe for the current quarter.
General and administrative expenses for the third quarter of 2005
increased $3 million to $5.5 million from $2.5 million in the 2004
quarter due primarily to a $2 million increase in a non-cash charge
for stock-based compensation that is based on changes in the market
value of the Company's common stock.
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