Clayton Williams Unwinds (CWEI)

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Clayton Williams Energy (NASDAQ:CWEI) is a small-cap oil & gas E&P company that has seen its share price fall by more than 70% a 52-week high of $122.50 to close yesterday at $33.81. The company announced that it has terminated "substantially all" of its oil and gas derivative contracts for $99.3 million in cash.

The company had swaps out through 2010 on about 2.6 million barrels ofoil and 15.2 million cubic feet of natural gas. The natural gas swapswere priced around $8.50/thousand cubic feet, and about 1.6 millionbarrels of oil through 2009 was priced at around $88/b. The swaps onoil for 2010 were priced at $97.75/b. The buyer got a pretty good deal.

But Clayton Williams, like virtually every other producer, needs cash.The company has more than $387 million in long-term debt and less than$40 million in cash and short-term investments. The company’s earningsfor the third quarter were 60% lower than analysts’ estimates.

Estimates for the current quarter had dropped from $2.76/share to$1.97/share. That’s still more than three times third quarter actuals.The $99 million should help.

Paul Ausick
December 9, 2009