Clayton Williams Jumps as Share Sale Boosts Drilling Optimism

Clayton Williams Energy Inc. jumped to a seven-month high Tuesday, a day after the oil explorer said it had sold $150 million in new stock to Ares Management LP.

The driller leaped 18 percent to $39.32 in New York trading at 12:21 p.m., after earlier climbing to $40.28, its highest level since Dec. 17. The Midland, Texas-based company announced on Monday that it had sold 5.05 million shares to funds managed by Ares, making the Los Angeles asset manager its second-biggest stockholder after Chief Executive Officer Clayton Williams Jr.

“There’s some operational optimism here," said Neal Dingmann, a Houston-based analyst at SunTrust Robinson Humphrey Inc., in a telephone interview. Three million company shares were held by short-sellers betting the stock would fall, setting it up for a rebound on good news, he said. 

Clayton Williams shares had fallen 27 percent in the year before this week’s equity raise, stung by the global slump in oil prices that has slammed U.S. producers. Along with the equity raise, the company said it would give Ares a seat on an expanded board of directors. It also said Chief Financial Officer Michael Pollard would be leaving the company.

The share sale shows “our confidence in the company and the strength of its high-quality assets," Nate Walton, an Ares partner, said in the statement.

Clayton Williams, which had suspended drilling in Texas and New Mexico’s Permian basin, is now talking about resuming operations, Dingmann said.

Proceeds from the share sale would be available for “potential debt reduction" as well as drilling in the Permian’s Delaware basin, according to Monday’s statement.

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