Clayton Williams Energy Inc. (CWEI, Financial) filed Annual Report for the period ended 2011-12-31.
Williams(c)engy has a market cap of $1.01 billion; its shares were traded at around $81.48 with a P/E ratio of 12.4 and P/S ratio of 2.4.
In October 2011, our wholly owned subsidiary, Southwest Royalties, Inc. (SWR), entered into merger agreements with 24 limited partnerships of which SWR is the general partner (the SWR Partnerships) pursuant to which each of the SWR Partnerships that approves the merger will merge into SWR, and the partnership interests of the SWR Partnerships, other than those interests owned by SWR, will be converted into the right to receive cash. SWR will not receive any cash payment for its partnership interests in the SWR Partnerships; however, as a result of each merger, SWR will acquire 100% of the assets and liabilities of each SWR Partnership that approves the merger. Each of the mergers is subject to customary closing conditions, including approval by the limited partners of each of the SWR Partnerships. The merger consideration will be 100% cash, and is expected to be approximately $40.2 million in the aggregate. We expect to obtain the funds to finance the aggregate merger consideration by conveying a volumetric production payment (VPP) on certain properties acquired in the proposed mergers to a third party. The final terms of the VPP will not be determined until immediately prior to the closing of the mergers. The closing of the mergers is not conditioned on our receiving proceeds from the VPP or any other financing condition.
We spent $299.1 million in the Permian Basin during 2011 on drilling and completion activities and $46.6 million on leasing and seismic activities. We drilled and completed 100 gross (88.5 net) operated wells in the Permian Basin and conducted various remedial operations on other wells during 2011. We currently plan to spend approximately $319.5 million on drilling, completion and leasing activities during 2012. Following is a discussion of our principal assets in the Permian Basin.
We are actively growing our acreage position in the Wolfbone play located in the Delaware Basin on the western edge of the Permian Basin. A Wolfbone well is a well that commingles production from the Bone Springs and Wolfcamp formations which are typically encountered at depths of 8,000 to 13,000 feet. These Permian aged formations in the Delaware Basin are comprised of limestone and sandstone. In March 2011, we entered into a farm-in agreement with Chesapeake Exploration, L.L.C. (Chesapeake) in southern Reeves County, Texas with a term of five years. For each well that we drill in the farm-in area that meets certain specified requirements (each, a carried well), Chesapeake will retain a 25% carried interest, bearing none of the costs to drill and complete a carried well, and we will earn an undivided 75% interest in 640 net acres within the farm-in area. If we drill 100 wells in the farm-in area, we will earn an undivided 75% interest in the entire farm-in area that has not otherwise been assigned to us during the term. Under the farm-in agreement, we are obligated to drill or commence drilling operations on at least 20 carried wells prior to March 1, 2012. We have currently drilled enough wells to meet this obligation. Following satisfaction of our initial drilling obligations, we have the right, but not the obligation, to drill at least 20 additional carried wells each year during the remainder of the term. If we fail to drill at least 20 carried wells during any year after expiration of the initial drilling period, the farm-in agreement will terminate without any liability to us. Excess wells drilled during any year may be applied towards our drilling obligations in the next year. As of December 31, 2011, we have drilled 33 carried wells under this agreement.
We spent approximately $156.6 million on drilling and completion activities and $43.2 million for leasing activities in the Wolfbone play during 2011. We plan to spend approximately $219.5 million on drilling and completion activities and $50 million on leasing activities in the Wolfbone play during 2012. To date, we have
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Williams(c)engy has a market cap of $1.01 billion; its shares were traded at around $81.48 with a P/E ratio of 12.4 and P/S ratio of 2.4.
Highlight of Business Operations:
Clayton Williams Energy, Inc., incorporated in Delaware in 1991, is an independent oil and gas company engaged in the exploration for and production of oil and natural gas primarily in Texas, Louisiana and New Mexico. Unless the context otherwise requires, references to the Company, CWEI, we, us or our mean Clayton Williams Energy, Inc. and its consolidated subsidiaries. On December 31, 2011, our estimated proved reserves were 64,349 MBOE, of which 61% were proved developed. Our portfolio of oil and natural gas reserves is weighted in favor of oil, with approximately 77% of our proved reserves at December 31, 2011 consisting of oil and natural gas liquids (NGLs) and approximately 23% consisting of natural gas. During 2011, we added proved reserves of 20,881 MBOE through extensions and discoveries, had downward revisions of 2,007 MBOE, and had sales of minerals-in-place of 156 MBOE. We also had average net production of 14.9 MBOE per day in 2011, which implies a reserve life of approximately 11.8 years. CWEI held interests in 6,830 gross (1,098.9 net) producing oil and gas wells and owned leasehold interests in approximately 775,000 gross (387,000 net) undeveloped acres at December 31, 2011.In October 2011, our wholly owned subsidiary, Southwest Royalties, Inc. (SWR), entered into merger agreements with 24 limited partnerships of which SWR is the general partner (the SWR Partnerships) pursuant to which each of the SWR Partnerships that approves the merger will merge into SWR, and the partnership interests of the SWR Partnerships, other than those interests owned by SWR, will be converted into the right to receive cash. SWR will not receive any cash payment for its partnership interests in the SWR Partnerships; however, as a result of each merger, SWR will acquire 100% of the assets and liabilities of each SWR Partnership that approves the merger. Each of the mergers is subject to customary closing conditions, including approval by the limited partners of each of the SWR Partnerships. The merger consideration will be 100% cash, and is expected to be approximately $40.2 million in the aggregate. We expect to obtain the funds to finance the aggregate merger consideration by conveying a volumetric production payment (VPP) on certain properties acquired in the proposed mergers to a third party. The final terms of the VPP will not be determined until immediately prior to the closing of the mergers. The closing of the mergers is not conditioned on our receiving proceeds from the VPP or any other financing condition.
We spent $299.1 million in the Permian Basin during 2011 on drilling and completion activities and $46.6 million on leasing and seismic activities. We drilled and completed 100 gross (88.5 net) operated wells in the Permian Basin and conducted various remedial operations on other wells during 2011. We currently plan to spend approximately $319.5 million on drilling, completion and leasing activities during 2012. Following is a discussion of our principal assets in the Permian Basin.
We are actively growing our acreage position in the Wolfbone play located in the Delaware Basin on the western edge of the Permian Basin. A Wolfbone well is a well that commingles production from the Bone Springs and Wolfcamp formations which are typically encountered at depths of 8,000 to 13,000 feet. These Permian aged formations in the Delaware Basin are comprised of limestone and sandstone. In March 2011, we entered into a farm-in agreement with Chesapeake Exploration, L.L.C. (Chesapeake) in southern Reeves County, Texas with a term of five years. For each well that we drill in the farm-in area that meets certain specified requirements (each, a carried well), Chesapeake will retain a 25% carried interest, bearing none of the costs to drill and complete a carried well, and we will earn an undivided 75% interest in 640 net acres within the farm-in area. If we drill 100 wells in the farm-in area, we will earn an undivided 75% interest in the entire farm-in area that has not otherwise been assigned to us during the term. Under the farm-in agreement, we are obligated to drill or commence drilling operations on at least 20 carried wells prior to March 1, 2012. We have currently drilled enough wells to meet this obligation. Following satisfaction of our initial drilling obligations, we have the right, but not the obligation, to drill at least 20 additional carried wells each year during the remainder of the term. If we fail to drill at least 20 carried wells during any year after expiration of the initial drilling period, the farm-in agreement will terminate without any liability to us. Excess wells drilled during any year may be applied towards our drilling obligations in the next year. As of December 31, 2011, we have drilled 33 carried wells under this agreement.
We spent approximately $156.6 million on drilling and completion activities and $43.2 million for leasing activities in the Wolfbone play during 2011. We plan to spend approximately $219.5 million on drilling and completion activities and $50 million on leasing activities in the Wolfbone play during 2012. To date, we have
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