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Gold/Mining/Energy : Clayton Williams Energy (CWEI) OIL
CWEI 131.900.0%Apr 25 4:00 PM EDT

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To: David Alan Cook who wrote (1008)11/4/2000 9:32:10 PM
From: Heretic   of 1017
The following post is from Valueconscious on Yahoo msg-brd:

1) The company was virtually unhedged at June 30, 2000

2) Gas Prices increased markedly, During July the Henry Hub averaged at least $3.75, August at least $4.10, and September at least $4.70 for a weighted average of $4.18 (my own rough calculation) lets say the company nets $4.00 this is $.70 better than what they realized in Q2 or an increase in gross revenues of $1.6 million

3) Oil prices improved as well albeit not as well as gas. Lets say they added $.50 per barrel taking the average price to $28.50. Add $ 314 thousand in gross revenue

4) The company has been actively drilling this year, production increased approximately 50% from Q1 to Q2. Should we see an increase in Q3? I would think so, unless depletion is very strong, they do have some chalk properties, but it would be my guess that production should be at least flat to up.

5) Last quarter was a barn burner. $1 million gain in asset sales was largely offset by an $800 thousand write off for unwinding some hedges. In addition there was somewhere around $1.5 to $2.0 million in acreage write-offs and dry hole costs.

6) Pinnacle reef processing plant was processing 21 mmcf day (net), which if my math is correct would translate to 1,890 mmcf per quarter (compared to Q2 total gas production of 2,259). I would think that Q3 should come in pretty strong

7) OK, energy prices have retreated recently and maybe we won't hit $6 gas (maybe we will, winter has not begun yet). $4.00 is still a ways a way, and even at $3.50 cash flow would be strong.

8) Fundamentals for Gas are still bright, new construction is principally gas, new power plants are gas, and by the way we have a critical shortage of electrical generation

9) Debt is minuscule in relation to cash flow

10) I believe we are oversold here.
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