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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: Buzz Mills who wrote (319)1/23/1997 12:05:00 PM
From: Buzz Mills   of 1017
 
CWEI's Reasoning On Their Decision To Buyback Shares

>>>>Lajuanda Holder wrote:

Hi!

I know why the release is being viewed as negative. I've had a couple of more calls and an email. They don't understand why roughly 2 months ago we did an offering and sold 1.25 million shares at $13 and now plan to buy back $2 million over the year. I have the answer --when we did the offering the price of oil was good, but not $25 a barrel. The result of $25 oil is increased cash flow of about $2 million. We could :

1) Pay down debt
2) Increase capital expenditure budget
3) Buy CWEI stock

(three main options from Management's stand point)

1) Paying down debt is always good! Debt is lower than Management
expected so they looked at the next option.
2) We just added a third rig in the Giddings Field (Austin Chalk), no sense in adding a fourth -- three rigs is a good number of rigs running for the amount of acreage we have in Giddings. Why not shoot a larger section of acerage (3-D) looking for Cotton Valley pinnacle reefs? That doesn't make sense either. Cotton Valley is still considered speculative and a 20,000 acre 3-D shoot is reasonable. This data would need to be interpreted and then further proved by drilling before it would make sense to shoot more.
3) Managament, Mr. Williams in particular, believes the stock is cheap even based on just the Chalk. Mr. Williams is very excited about the Cotton Valley potential also.<<<<<<<
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