LETTER TO THE SHAREHOLDERS
Dear Shareholders,
The results of our operations for 1996 are now complete and I am pleased to report to you that Clayton Williams Energy, Inc. enjoyed its most successful year since its formation in 1993. Cash flow from operating activities increased to $40.3 million in 1996, up from $24.2 million in 1995. During 1996 we added approximately 5,000 MBOE of estimated proved reserves through drilling and acquisitions. These reserve additions replaced 159% of 1996 production.
Historically, we have focused our exploration and drilling activities in the Cretaceous Trend formations in South Texas. In an effort to expand our Cretaceous Trend drilling opportunities in 1997, we have entered into two farm-in agreements covering up to approximately 50,000 net acres, primarily in Robertson County, Texas. We anticipate commencing drilling activities in this area by May, 1997.
During 1997, we will continue the development of our 117,000 net acres in the North Giddings Block in East Central Texas by drilling up to 36 wells. We continue to evaluate drilling results in the southern portion of the North Giddings Block and are modifying our completion technique with respect to wells drilling in this area.
During 1996, we were able to expand the acreage covered by the Cotton Valley 3-D seismic survey from 20,000 net acres to approximately 50,000 net acres. This was accomplished while increasing the estimated cost of the survey by only $900,000, from $3.1 million to approximately $4.0 million. Due to the additional acreage included in the survey, we expect completion during the third quarter of 1997, with any drilling resulting from the survey beginning in the fourth quarter of 1997.
The Company anticipates expanding its 1997 exploration outside the Cretaceous Trend to include newly acquired areas in South and East Texas, Louisiana and Mississippi. The majority of these are areas where I have successfully explored for oil and gas in the past. The Company anticipates spending approximately $8 million on these projects, a substantial portion of which will be for seismic and leasing activities.
I believe that our efforts contributed to a stronger company in 1996. Stronger oil prices and continued hard work carry the promise of a bright future for the Company.
Clayton W. Williams
Chairman of the Board,
President and Chief Executive Officer |
