Shares of Clayton Williams Energy (NYSE:CWEI) shot up 26% higher on Tuesday.
Clayton Williams Energy, Inc., announced that it has entered into a definitive purchase and sale agreement with a third party to sell substantially all of the Company’s assets in the Giddings Area in East Central Texas for a sale price of $400 million, thus creating another pure play Permian Basin company. The company holds 170,000 net acres in the Permian and had one rig drilling in Reeves County as of Sept. 22.
The sale is subject to customary closing conditions and adjustments. The Company expects to close the sale in December 2016 and use the proceeds from the sale to fund development in the Delaware Basin and repay a portion of its outstanding indebtedness.
The company recently strengthened its position in the Southern Delaware Basin by swapping acreage with Concho Resources (NYSE:CXO). Under the terms of that deal, Clayton Williams traded all of its acreage for additional working interests in leases owned by Concho. The net result was that Clayton Williams increased its working interest in its core acreage, providing more operational control.
The properties being sold produced an average of approximately 3,900 barrels of oil equivalent (BOE) per day (80% oil) for the quarter ended September 30, 2016, and accounted for approximately 9.7 million BOE of proved reserves as of September 30, 2016. The company owned about 160,000 net acres in the field.
The sale transaction is another major step in the Company’s dramatic transformation since the beginning of 2016 and provides the following benefits:
- Strengthens the Company’s balance sheet and liquidity
- Transitions the Company into a pure play Permian Basin development company
- Enhances the Company’s ability to focus on the efficient development of approximately 70,000 net acres in the southern Delaware Basin
- Enables the Company to deploy capital to higher returning projects
- Increases the Company’s flexibility to accelerate capital investment and create incremental shareholder value
In other news, the company announced it has hired Patrick Cooke as COO. He moved from Noble Energy, where his position gave him direct management responsibility for the development of Noble’s emerging Delaware Basin position. Before Noble, Mr. Cooke served in various capacities with BP America, including that as Operations Manager for the Thunder Horse platform in the Gulf of Mexico.
Clayton Williams – A Humble Beginning.
Clayton Wheat “Claytie” Williams, Jr. (born October 8, 1931) – A Texas A&M graduate, he followed in the business of his father, beginning in the oil fields of West Texas as a lease broker, he parlayed $2,000 in savings into an energy, real estate, banking, and telecommunications conglomerate with $1 billion in revenues, landing him on the Forbes magazine’s list of the wealthiest Americans in 1984. After successfully lobbying against a deregulation bill sought by AT&T, he decided to run for governor in 1990 against Ann Richards, where he ended up spending $8 million of his own money on an unsuccessful campaign, even though Williams initially led in opinion polls by twenty points.
After the election, he began focusing on a new technology called horizontal drilling. By 1991, Clayton Williams Energy had become one of the most active horizontal drillers in the country, with 91 producing wells. Williams then capitalized on that success by taking the company public in 1993. The rest they say is history.