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Gold/Mining/Energy : Clayton Williams Energy (CWEI) OIL
CWEI 131.900.0%Apr 25 5:00 PM EST
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To: David Helms who wrote (117)12/5/1996 7:38:00 PM
From: Buzz Mills   of 1017
 
David,

I started rolling the numbers around in my head and I don't know
how R&R came up with $1.13. Walk through the numbers with me.

If R&R thinks CWEI is going to earn 0.60 this quarter, then they
think there is going to be $4.98M on the bottom line because if
you divide $4.98M by the weighted average number of shares for
the fourth quarter (8.3M) you end up with 0.60/share.

In addition, that $4.98M had to be after they expensed the third
rig which came on in December and started drilling. That "extra
expense" should be $1.0M, so that would mean CWEI really earned
$5.98M for the quarter before that "extra expense."

If we figure that oil and gas prices will be the same on average
between the fourth quarter 1996 and the first quarter of 1997, and
that production is somewhat dependent on the number of rigs; then
having that third rig producing wells should add--I am only going
to say $0.5M to the bottom line. $5.98M + $0.5M = $6.48M for the
first quarter of 1997.

Now subtracting out the $3.1M cost of the seismic survey from
$6.48M leaves $3.38M on the bottom line. $3.38M divided by the
present number of shares (8.9M) comes out to 0.38/share for the
first quarter of 1997.

0.38/share for the first quarter 1997 versus 0.19/share for
the first quarter of 1996 sounds really good to me. The second
quarter should be even better because they won't be expensing the
seismic survey. I am looking for CWEI to have a very good year,
in spite of the incurred espenses of surveying and drilling for
Pinnacle reef wells.

Buzz
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