Replies to post #6 on Clayton Williams Energy, Inc. (CWEI)

[OilStockReport]

Thanks for the feedback :)

[OilStockReport]

Clayton is a very simple company; it's just blocking and tackling. Historically, Clayton was in the penalty box because it had a number of dry holes. That's changed in the last couple of years. It's been doing what I call 'just singles and doubles' — mostly just premium drilling and Austin Chalk drilling. These types of things have no exploration risk, in my mind.

If you look at where the stock is trading right now and go back to my old adage about a pure multiple, the stock would actually be closer to a $80 target. The discount is there because Clayton Williams and his family own more than 60% of the shares and the stock is pretty illiquid. Without the illiquidity, I would clearly say the stock is worth more than $85.

[OilStockReport]

Thoughts on this prediction?

Clayton Williams Energy (CWEI) is my favorite company outside the Bakken. This company has 166400 net acres in the Eagle Ford. Clayton purchased these acres in 1996, and purchased the acres cheap. The Eagle Ford is a low risk shale play with moderate return. Wells can be completed here for less than half the price of a Bakken well. Although Eagle Ford wells have a lower estimated ultimate recovery, lower costs allow the operator to make a profit more quickly. Management has done a very good job. Clayton has beaten quarterly estimates for four straight quarters. Clayton Williams Energy: Significant Growth Aimed at Oil Production is a more in depth article on this stock. Clayton's valuation metrics are:

P/E Ratio-31.55

2011 Annual EPS Growth-68.9%

PEG Ratio-.458

[OilStockReport]

Continued upside!

Clayton Williams (CWEI) is a stock I currently own. Clayton has quietly grown 140% over the past year. Clayton breaks down into two areas. The first is the Permian Basin, where Clayton has 198000 net acres. Clayton had an average daily net production in 2010 of 8319 Boe. Proved reserves in the Permian are 38 MMboe as of the end of 2010. Clayton has 254000 net acres in the Giddings area. Giddings proved reserves as of the end of 2010 were 11 MMBoe. Average daily net production in 2010 was 4144 Boe. Clayton also owns 12 drilling rigs, currently drilling in the Permian and Giddings areas. In 2010 this company's product mix was 74% oil and natural gas liquids. This was an increase from 62% in 2009. Clayton will be spending $381.8 million on exploration and development in 2011. In all, $295.3 million will be spent on the Permian while $80 million will be spent on Giddings. Overall, Clayton has two very large and lucrative areas to drill in Texas. Its access to drilling rigs is also helpful in increasing production. The majority of its production is oil, but the company has a large portion of its natural gas hedged.