Clayton Williams Says Net Income for 4Q05 Up
Clayton Williams Energy reported net income for the fourth quarter of 2005 of $1.3 million, or $.12 per share, as compared to a net loss of $12.5 million, or $1.16 per share, for the fourth quarter of 2004. Cash flow from operations for the current quarter was $36.8 million, compared to $43.8 million during the same period in 2004.
For the year ended December 31, 2005, the Company reported net income of $257,000, or $.02 per share, as compared to a net loss of $14 million, or $1.37 per share, in 2004. Cash flow from operations for the year 2005 was $163.5 million, as compared to $127 million in 2004.
Oil and gas sales for the fourth quarter of 2005 amounted to $62.1 million compared to $63.2 million in the 2004 quarter. Of the $1.1 million decrease in oil and gas sales, lower oil and gas production accounted for a decrease of $19.1 million, which was mostly offset by an $18 million increase related to higher oil and gas prices. Oil production for the fourth quarter of 2005 decreased 23% to 487,000 barrels, or 5,293 barrels per day (bpd), from 630,000 barrels, or 6,848 bpd. Gas production decreased 38% to 3.2 billion cubic ft (Bcf), or 34,815 million cubic feet (Mcf) per day, from 5.1 Bcf, or 55,717 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. Average realized oil prices in the fourth quarter of 2005 increased 23% from $46.19 to $56.99 per barrel, while gas prices increased 63% from $6.14 to $10.02 per Mcf. Average realized prices for 2005 and 2004 exclude the effects of any losses realized on commodity hedging transactions because the derivatives were not designated as cash flow hedges and have been reported in the company's statements of operations as change in fair value of derivatives under applicable accounting standards.
Exploration costs for the fourth quarter of 2005 were $11.6 million, as compared to $40.7 million for the same period in 2004. The current quarter exploration costs include amounts related primarily to the abandonment of the Leoncita 122 #1 in Pecos County, Texas, and to the two previously announced dry holes in south Louisiana, the State Lease 17636 #1 (Natalie) and the LL&E #1 (Andrea).
Production costs for the fourth quarter of 2005 increased slightly to $14 million from $13.7 million in the 2004 quarter. Lower volumes of oil and gas production in the current quarter caused production costs per Mcfe to increase 47% from $1.47 per Mcfe for the 2004 quarter to $2.16 per Mcfe for the current quarter.
The company recorded a non-cash charge during the current quarter of $18.3 million for an impairment of proved properties pursuant to Statement of Financial Accounting Standards No. 144 "Accounting for Impairment or Disposal of Long-Lived Assets." The Company's Wolfcamp exploration program in West Texas failed to find oil and gas reserves in sufficient quantities to recover its capitalized costs. As a result, the company recorded an impairment of proved properties in an amount required to reduce the carrying value of this program to its estimated fair market value.
For the fourth quarter of 2005, the company reported a $3.6 million net gain on the change in fair value of derivatives, consisting of a $15.6 million non-cash gain to mark the company's derivative positions to their fair value on December 31, 2005 and a $12 million charge for cash settlements during the quarter. For the same period in 2004, the net gain on the change in fair value of derivatives was $2.6 million, consisting of a $10.6 million non-cash mark-to-market gain and an $8 million charge for cash settlements.
The company also announced today that its total proved oil and gas reserves as of December 31, 2005, were 293.8 Bcfe, consisting of 27.8 million barrels of oil and NGL and 126.8 Bcf of natural gas, as estimated by independent petroleum engineers. By comparison, the company reported proved reserves of 299 Bcfe as of December 31, 2004, consisting of 26.8 million barrels of oil and NGL and 138.3 Bcf of natural gas. The pre-tax present value of estimated future net revenues from these reserves, discounted at 10% and computed in accordance with SEC guidelines, totaled $1.1 billion at December 31, 2005, as compared to $705.3 million at December 31, 2004. The estimates were based on weighted average oil and NGL prices of $57.85 per Bbl in 2005, as compared to $41.48 in 2004, and gas prices of $10.65 per Mcf in 2005, as compared to $5.59 per Mcf in 2004.
During 2005, the Company replaced 94% of the 31.4 Bcfe produced in 2005 through purchases, extensions and discoveries and revisions to previous estimates. The following table summarizes the changes in proved reserves during 2005 on a Bcfe basis and as a percentage of 2005 production.
% of 2005 Bcfe Production ---------------- --------------- Total proved reserves, 12/31/04 299.0 Purchases of minerals-in-place 4.2 13% Extensions and discoveries 17.7 56% Net revisions 7.8 25% Sales of minerals-in-place (3.5) Production (31.4) ---------------- Total proved reserves, 12/31/05 293.8 ================
More than half of the extensions and discoveries for 2005 were attributable to the Company's exploration program in south Louisiana. Net revisions of 7.8 Bcfe consisted of approximately 17.5 Bcfe of upward revisions attributable to the effects of higher product prices on the estimated quantities of proved reserves, net of downward revisions of approximately 9.7 Bcfe attributable to well performance primarily from properties in west Texas.
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