Clayton Williams Energy Announces First Quarter 2008 Financial Results

Business Wire, May 6, 2008

MIDLAND, Texas -- Clayton Williams Energy, Inc. (NASDAQ:CWEI) reported net income for the first quarter of 2008 of $7.2 million, or $.62 per share, as compared to a net loss of $12.3 million, or $1.09 per share, for the first quarter of 2007. Cash flow from operations for the first quarter of 2008 was $78 million, as compared to $36.2 million during the same period in 2007.

Oil and gas sales increased 94% from $61.2 million for the first quarter of 2007 to $118.9 million for the same quarter in 2008 due to a combination of higher prices and incremental production volumes. Gas production increased 28% to 5.5 Bcf, or 60,967 Mcf per day, from 4.3 Bcf, or 48,078 Mcf per day, in the 2007 quarter. Oil production for the first quarter of 2008 increased 26% to 684,000 barrels, or 7,516 barrels per day, compared to 543,000 barrels, or 6,033 barrels per day, in the 2007 quarter. The increase in gas production was attributable primarily to recent drilling activity in North and South Louisiana. The increase in oil production was due primarily to in-fill drilling and secondary water frac operations on existing wells in the Austin Chalk (Trend) and increased drilling activities in the Permian Basin. For the first quarter of 2008, average realized gas prices increased 28% to $8.86 per Mcf from $6.91 per Mcf in the same quarter of 2007, while oil prices increased 75% to $96.37 per barrel from $55.21 per barrel in the 2007 period. Average realized prices for 2008 and 2007 exclude the effects of any gains or losses realized on commodity hedging transactions since those derivatives were not designated as cash flow hedges and have been reported in the Company's statements of operations as gain/loss on derivatives under applicable accounting standards.

For the first quarter of 2008, the Company reported a $46.1 million net loss on derivatives, consisting of a $32 million non-cash loss to mark the Company's derivative positions to their fair value on March 31, 2008 and a $14.1 million realized loss on settled contracts. For the same period in 2007, the Company reported a $16.8 million net loss on derivatives, consisting of a $18.8 million non-cash loss due to changes in mark-to-market valuations and a $2 million realized gain on settled contracts.

The Company recorded exploration costs during the first quarter of 2008 of $4 million compared to $12 million for the first quarter of 2007. The 2008 quarter related primarily to seismic expense. Although write-offs related to abandonments and impairments were minimal during the current quarter, completion operations remain in-progress on two exploratory wells in the Company's East Texas Bossier prospect, the Big Bill Simpson #1 and the Margarita #1. If the Company is unable to establish sufficient production levels from either or both of these wells, results of operations in subsequent quarters may be adversely affected by the outcome of those wells.

The Company has increased its estimates for planned exploration and development expenditures for fiscal 2008 by $88 million from $256.5 million to $344.5 million. Strong cash flow from operations resulting from higher commodity prices and rising oil and gas production have afforded the Company the opportunity to make this upward change. The increase in capital spending relates primarily to activities in the Permian Basin and North Louisiana, including an exploratory well on the Winnsboro prospect to test the pressured Bossier interval in this area.

The Company will host a conference call to discuss these results and other forward-looking items today, May 6th at 1:30 pm CT (2:30 pm ET). The dial-in conference number is: 800-901-5213, passcode 26036272. The replay will be available for one week at 888-286-8010, passcode 33611138.

To access the conference call via Internet webcast, please go to the Investor Relations section of the Company's website at www.claytonwilliams.com and click on "Live Webcast." Following the live webcast, the call will be archived for a period of 90 days on the Company's website.

Clayton Williams Energy, Inc. is an independent energy company located in Midland, Texas.

Except for historical information, statements made in this release are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are based on assumptions and estimates that management believes are reasonable based on currently available information; however, management's assumptions and the Company's future performance are subject to a wide range of business risks and uncertainties, and there is no assurance that these goals and projections can or will be met. Any number of factors could cause actual results to differ materially from expectations, volatility of oil and gas prices, the need to develop and replace reserves, the substantial capital expenditures required to fund operations, exploration risks, uncertainties about estimates of reserves, competition, government regulation, costs and results of drilling new projects, and mechanical and other inherent risks associated with oil and gas production. These risks and uncertainties are described in the Company's filings with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise any forward-looking statements.