Clayton Williams Energy Announces First Quarter 2014 Financial Results and Operations Update

Clayton Williams Energy, Inc. (the “Company”) (NYSE:CWEI) today reported its financial results for the first quarter 2014.

Highlights

• Oil and Gas Production of 15,474 BOE/d, up 3% (25% PF for Asset Sales)
• Cash Flow from Operations of $79.3 million, up 79%
• Peak 30-Day Production Rates Continue to Improve
• New Five-Year Credit Facility In Place

Financial Results for the First Quarter of 2014

Net income attributable to Company stockholders for the first quarter of 2014 (“1Q14”) was $11.4 million, or $0.94 per share, as compared to a net loss of $41.2 million, or $3.39 per share, for the first quarter of 2013 (“1Q13”). Cash flow from operations for 1Q14 was $79.3 million as compared to $44.3 million for 1Q13.

The key factors affecting the comparability of financial results for 1Q14 versus 1Q13 were:

• The Company sold 95% of its Andrews County Wolfberry assets in April 2013 and sold all of its interests in certain non-core Austin Chalk/Eagle Ford assets in March 2014. As a result, reported oil and gas production, revenues and operating costs for the quarter ended March 31, 2014 are not comparable to reported amounts for the quarter ended March 31, 2013. See accompanying tables for additional information about the Company’s oil and gas production related to these sold assets.
• Oil and gas sales, excluding amortized deferred revenues, increased $12.5 million in 1Q14 versus 1Q13. Price variances accounted for a $5.8 million increase, and production variances accounted for a $6.7 million increase. Average realized oil prices were $93.60 per barrel in 1Q14 versus $91.26 per barrel in 1Q13, and average realized gas prices were $4.97 per Mcf in 1Q14 versus $3.31 per Mcf in 1Q13. Oil and gas sales in 1Q14 also include $2 million of amortized deferred revenue versus $2.3 million in 1Q13 attributable to a volumetric production payment ("VPP"). Reported production and related average realized sales prices exclude volumes associated with the VPP.
• Before giving effect to the asset sales discussed above, oil, gas and natural gas liquids ("NGL") production per barrel of oil equivalent ("BOE") increased 3% in 1Q14 as compared to 1Q13, with oil production increasing 8% to 11,233 barrels per day, gas production decreasing 13% to 15,711 Mcf per day, and NGL production increasing 1% to 1,622 barrels per day. Oil and NGL production accounted for approximately 83% of the Company's total BOE production in 1Q14 versus 80% in 1Q13. See accompanying tables for additional information about the Company's oil and gas production.
• After giving effect to asset sales, total production per BOE increased 25% in 1Q14 as compared to 1Q13, with oil production increasing 2,756 barrels per day, gas production decreasing 455 Mcf per day and NGL production increasing 378 barrels per day.
• Production costs decreased 16% to $26.4 million in 1Q14 from $31.5 million in 1Q13 due primarily to a reduction in costs associated with the Andrews sale in April 2013.
• Loss on derivatives for 1Q14 was $5 million (including a $1.1 million loss on settled contracts) versus a loss in 1Q13 of $6.5 million (including a $0.4 million loss on settled contracts). See accompanying tables for additional information about the Company's accounting for derivatives.
• General and administrative expenses were $11.8 million in 1Q14 versus $7.6 million in 1Q13. The increase was due primarily to higher personnel and professional costs in 1Q14. Compensation expense attributable to the Company's APO Reward Plans accounted for $2.8 million of the increase in personnel costs.
• Other operating revenues in 1Q14 include a $2.9 million gain on sale of certain of the Austin Chalk assets sold in March 2014. The gain excludes $6.8 million of sales proceeds held in escrow pending resolution of certain title requirements.

Total reported production for 1Q14 was approximately 250 BOE per day below analyst consensus estimates due primarily to the loss of projected production applicable to the sale of certain Austin Chalk/Eagle Ford assets in March 2014. In addition, drilling and completion complications on two wells, one in Reeves County and one in Burleson County, accounted for production delays of approximately 400 BOE per day.

Operations Update

Presently, the Company has 14 Wolfcamp A horizontal wells in Reeves County, Texas that have been on production for 30 or more days. The peak 30-day production rate for all 14 of these wells has averaged 756 BOE per day (78% oil; 10% NGL), with the last 10 wells averaging 889 BOE per day. The Company’s first Wolfcamp C well has been on production for less than 30 days, but early production results suggest that its peak 30-day rate may compare favorably to the Company’s Wolfcamp A average.

The Company continues to see consistent results from its horizontal Eagle Ford Shale play in the northern portion of its legacy Austin Chalk acreage block in Robertson, Burleson and Lee Counties, Texas. Presently, the Company has nine horizontal Eagle Ford wells in this area that have been on production for 30 or more days. The peak 30-day production rate for these wells has averaged 574 BOE per day (96% oil).

New Credit Facility/Liquidity

In April 2014, the Company entered into a new five-year revolving credit facility with a group of 16 banks led by JPMorgan as administrative agent. The initial borrowing base under the facility remained at $415 million. The new facility, which matures in April 2019, will require an accelerated maturity of October 1, 2018 unless the Company’s existing 7.75% Senior Notes due April 2019 are refinanced or extended in accordance with the terms of the new facility prior to October 1, 2018. Among other enhancements, the new facility provides for a 25 basis point reduction in interest rates.

At March 31, 2014, the Company had no outstanding advances under the bank credit facility, resulting in availability under the credit facility of $409.9 million, net of outstanding letters of credit. With cash on hand of $39.2 million, total liquidity at March 31, 2014 was $449.1 million.

Scheduled Conference Call

The Company will host a conference call to discuss these results and other forward-looking items today, April 24th at 10:00 a.m. CT (11:00 a.m. ET). The dial-in conference number is: 877-868-1835, passcode 31964164. The replay will be available for one week at 855-859-2056, passcode 31964164.

To access the conference call via Internet webcast, please go to the Investor Relations section of the Company's website at www.claytonwilliams.com and click on “Live Webcast.” Following the live webcast, the call will be archived for a period of 30 days on the Company's website.

Clayton Williams Energy, Inc. is an independent energy company located in Midland, Texas.

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical or current facts, that address activities, events, outcomes and other matters that we plan, expect, intend, assume, believe, budget, predict, forecast, project, estimate or anticipate (and other similar expressions) will, should or may occur in the future are forward-looking statements. These forward-looking statements are based on management's current belief, based on currently available information, as to the outcome and timing of future events. The Company cautions that its future natural gas and liquids production, revenues, cash flows, liquidity, plans for future operations, expenses, outlook for oil and natural gas prices, timing of capital expenditures and other forward-looking statements are subject to all of the risks and uncertainties, many of which are beyond our control, incident to the exploration for and development, production and marketing of oil and gas.

These risks include, but are not limited to, the possibility of unsuccessful exploration and development drilling activities, our ability to replace and sustain production, commodity price volatility, domestic and worldwide economic conditions, the availability of capital on economic terms to fund our capital expenditures and acquisitions, our level of indebtedness, the impact of the current economic recession on our business operations, financial condition and ability to raise capital, declines in the value of our oil and gas properties resulting in a decrease in our borrowing base under our credit facility and impairments, the ability of financial counterparties to perform or fulfill their obligations under existing agreements, the uncertainty inherent in estimating proved oil and gas reserves and in projecting future rates of production and timing of development expenditures, drilling and other operating risks, lack of availability of goods and services, regulatory and environmental risks associated with drilling and production activities, the adverse effects of changes in applicable tax, environmental and other regulatory legislation, and other risks and uncertainties are described in the Company's filings with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise any forward-looking statements.

EBITDAX is presented as a supplemental non-GAAP financial measure because of its wide acceptance by financial analysts, investors, debt holders, banks, rating agencies and other financial statement users as an indication of an entity's ability to meet its debt service obligations and to internally fund its exploration and development activities.

The Company defines EBITDAX as net income (loss) before interest expense, income taxes, exploration costs, net (gain) loss on sales of assets and impairment of inventory, and all non-cash items in the Company's statements of operations, including depreciation, depletion and amortization, impairment of property and equipment, accretion of asset retirement obligations, amortization of deferred revenue from volumetric production payment, certain employee compensation and changes in fair value of derivatives. EBITDAX is not an alternative to net income (loss) or cash flow from operating activities, or any other measure of financial performance presented in conformity with GAAP.

The following summarizes information concerning the Company’s net positions in open commodity derivatives applicable to periods subsequent to March 31, 2014.