Clayton Williams Energy Announces Strategic Farmout Agreement Covering the Western Portion of Its Reeves County Wolfcamp Position
Clayton Williams Energy, Inc. (NYSE: CWEI) today announced that it had entered into a farmout and exploration agreement with Caza Oil and Gas, Inc. (“Caza”) (TSX:CAZ) (AIM:CAZA) covering a portion of the Company’s 71,000 net acre resource play in Reeves County, Texas. All of the approximate 15,000 net undeveloped acres covered by this agreement are located along the western flank of the Company’s acreage block. The Company has drilled no horizontal Wolfcamp wells within the farmout area.
Under the terms of the agreement, Caza will pay 75% of the costs of the initial horizontal Wolfcamp well to earn 50% of the acreage associated with that well (either 640 or 1,280 gross acres, depending on lateral length). After the initial well, Caza will pay 100% of the costs of all other Carried Wells (as defined in the agreement) to earn 75% of the associated acreage. The Company will pay its 25% of the cost to drill and complete all density wells drilled on previously earned acreage.
In addition to the initial well, Caza is obligated to drill and complete two additional horizontal Wolfcamp wells in the farmout area by December 31, 2015. Caza is subject to a penalty of $1.6 million per well for any obligation well not drilled. Caza must also drill a minimum of two carried wells per year in order to continue participation in the agreement beyond December 31, 2015.
“We are very pleased with the terms of this strategic farmout arrangement,” stated Clayton W. Williams, Jr., President and CEO of the Company. “We have been impressed with Caza’s operating results in the Delaware Basin and look forward to a mutually beneficial exchange of knowledge through this venture. Through this drill-to-earn structure with Caza, we have effectively sold up to 75% of our interest in fringe acreage at an attractive price per acre. And more importantly, we have sharpened our focus on developing the remaining 56,000 net acres in the heart of our Reeves County position where we have effectively delineated the Wolfcamp A and are moving toward delineating the Wolfcamp C.”
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.
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