The same day that Clayton Williams Energy (ticker: CWEI) announced an increase to its capital budget we posted our concern that the company would probably have to raise money to support the increase. Well, later that afternoon CWEI released its intentions to sell $200 million in senior notes in a private placement. The company plans to use the proceeds to pay down its $183.7 million in bank debt and uses the rest of the proceeds ($16.3 million) to service general corporate purposes.
Yesterday, we posted that the company looked to be about $15 million short for its guided 2005 capital program. Well it seems like they now have close to $2 million to spare.
It seems like the bulk of the increase will go to operations in the south and east Texas region and the infrequently discussed operations of Utah and Montana. With the influx in cash maybe we will get to here a little more about that area. The south and east Texas region is a core area for the company. The company recently announced a $7 million dry hole in this region and that might have something to do with the increase in budget.