Clayton Williams Energy, Inc. (CWEI) has been surging since early September, recently hitting a new multi-year high at $84.76 as crude crosses the $90 mark. With a bullish next-year estimate calling for 65% earnings growth and a compelling valuation, this Zacks #1 stock is providing plenty of fuel for its upward momentum.
Company Description
Clayton Williams Energy, Inc is an independent oil and gas exploration company with its properties concentrated in Texas, Louisiana and New Mexico. The company was founded in 1991 and has a market cap of $1 billion.
With crude prices rising on the back of a stronger global economy, exploration companies have been on the upswing. That dynamic was on display in early November when CWEI reported strong Q3 results that handily beat expectations.
Third-Quarter Results
Revenue for the period was up 37% from last year to $85 million. Earnings also looked good, coming in at $1.17, 5 cents ahead of the Zacks Consensus Estimate, where the company has surprised in each of the last three quarters.
Clayton is in the process of divesting away from regular natural gas and increasing its exposure to crude and natural gas. That showed up in the company’s production profile, where crude production was up 38% from last year while gas production fell 35%. But on a net basis, total oil and has production (BOE-barrel of oil equivalent) was up 4%.
The company is also strategically shifting away from exploration activities in order to focus on the development of existing wells, driving a sharp reduction in exploration costs to $1.7 million from $25 million last year.
Financial Profile
The company also continues to strengthen its balance sheet, with its total debt falling $36 million from two quarters ago to $385 million while cash and equivalents up $7 million to $22 million.
Estimates
We saw some decent movement in estimates off the good quarter, with the current year up 37 cents to $4.19 and the next year adding 27 cents to $6.93, a bullish 66% growth projection.
Valuation
But in spite of the gains, the valuation picture still looks reasonable, with a forward P/E of 20X against the industry average of 25X.
6-Month Chart
On the chart, CWEI has been rallying with higher crude prices for the last few months, recently hitting a new multi-year high at $84.76. The MACD below the chart is looking bullish too, with the short-term average advancing ahead of the long-term average. Look for support from the trend line on any weakness, take a look below.
Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the new Zacks Momentum Trader Service.
WILLIAMS(C)ENGY (CWEI): Free Stock Analysis Report
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