Following is Hanifen's latest report on CWEI:
Clayton Williams Energy (CWEI-Nasdaq)
Company Reports record fourth quarter results
Company raises 1997 capital expenditures 17% to $54 million
Fourth quarter results: EPS $0.77 vs. ($0.07): CFPS $1.64 vs. $0.76
On Tuesday March 18, Clayton Williams reported record fourth quarter earnings of $6.4 million, or $0.77 per share, versus an operating loss of $0.5 million, $0.07 per share in the year ago quarter. Earnings were 28% above our estimate of $0.60 per share and 43% above the street estimate consensus of $0.54. Cash flow during the quarter was $13.7 million, or $1.64 per share, versus operating cash flow of $5.6 million, $0.76 per share in the year ago quarter, and 20% above our estimate of $1.37. These strong year-to-year comparisons were promarily due to a 32% increase in oil production, a 39% increase in oil prices and a 56% increase in gas prices. Sequentially from the third , oil and gas volumes were up 12%, and were above our forecast, mainly due to successful drilling results on the company's Austin Chalk acreage. Also, Clayton Williams replaced 162% of its production in 1996, including 131% through the drill bit.
Outlook for earnings and cash flow
To account for higher than expected oil prices and lower than expected DD&A expenses, we are raising our 1997 earnings and cash flow estimates 12% and 3% respectively, to $1.34 and $4.93 per share. Our 1997production forecast of 9,250 equivalent barrels per day represents an 8% increase over 1996 production, mainly due to the addition of a third drilling rig in the company's North Giddings Block in the Austin Chalk trend. Our 1998 estimates are unchanged.
Capital Budget increases $8 million in 1997; Cotton Valley exploration update
Clayton Williams announced an $8 million increase to its 1997 capital budget, or 17%, to $54 million from $46 million. The components of this budget are now: 1) $42 million for horizontal drilling in the Austin Chalk trend; 2)$4 million for seismic acquisition in the Cotton Valley reef play; and 3) $8 million for other exploration activities in South Texas and and northwester, Louisiana. Also, the company has entered into two farm-in agreements covering up to 50,000 acres of shallow rights in Robertson County, immediately north of its North Giddings block.
The company's Cotton Valley 3-D seismic survey, which was recently expanded to 50,000 acres from 20,000 acres, is about two months behind schedule due to poor weather conditions and a late crew arrival. Management expects to conclude this survey in August, and to spud its first pinnacle reef well in the 4th quarter. As shown in our Cotton Valley Status Report on page 2, key wells to watch include the Zackson's Rachui 1R and Marathon's Savell 2, each about 9 miles north of CWEI's acreage. Results from the Rachui 1R should be announced soon.
The announced expansion of Clayton William's exploration program into areas outside the North Giddings block is intended to diversify its portfolio of growth opportunities. The company is focusing on technology driven Gulf Coast plays (3-D seismic) where it has existing geological expertise, and we agree with this strategy. The additional capital will raise the company's leverage ratio to about 37% by year-end 1997, from 21% currently. |
