Clayton Williams Energy Announces First Quarter 2009 Financial Results

Clayton Williams Energy, Inc. (NASDAQ: CWEI) reported a consolidated net loss for the first quarter of 2009 of $21.3 million as compared to net income of $7.3 million for the first quarter of 2008. Excluding noncontrolling interest in a consolidated subsidiary, the Company reported a net loss attributable to Company stockholders of $22.3 million, or $1.84 per share, as compared to net income of $7.2 million, or $.62 per share. Consolidated cash flow from operations for the first quarter of 2009 was $13.3 million, as compared to $78.1 million during the same period in 2008.

The current global recession had a significant adverse affect on the Company’s operating results for the first quarter of 2009. Oil and gas sales decreased 57% from $118.9 million for the first quarter of 2008 to $50.8 million for the same quarter in 2009. Substantially all of the reduction in oil and gas sales was attributable to lower product prices. Average realized oil prices for the first quarter of 2009 decreased 62% to $37.09 per barrel from $96.37 per barrel in the 2008 period, while gas prices decreased 48% to $4.60 per Mcf from $8.86 per Mcf in the same quarter of 2008. Average realized prices for 2009 and 2008 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.

Oil production for the first quarter of 2009 increased 10% to 751,000 barrels, or 8,344 barrels per day, compared to 684,000 barrels, or 7,516 barrels per day, in the first quarter of 2008. Gas production for the first quarter 2009 decreased 17% to 4.6 Bcf, or 51,256 Mcf per day, from 5.5 Bcf, or 60,967 Mcf per day, in the 2008 quarter. The comparability of production between the two quarters was affected by the sale of certain South Louisiana properties which produced a daily average of approximately 900 barrels of oil and 13,000 Mcf of gas in the 2008 quarter. After excluding the sold production from the 2008 reported volumes, oil production increased 26% during the 2009 quarter while gas production increased 7%.

For the first quarter of 2009, the Company reported a $2.5 million net gain on derivatives, consisting of a $1.1 million realized gain on settled contracts and a $1.4 million non-cash gain to mark the Company’s derivative positions to their fair value on March 31, 2009. For the same period in 2008, the Company reported a $46.1 million net loss on derivatives, consisting of a $14.1 million realized loss on settled contracts and a $32 million non-cash loss due to changes in mark-to-market valuations.

The Company recorded abandonment and impairment costs during the first quarter of 2009 of $12.4 million compared to $300,000 for the first quarter of 2008. The 2009 quarter included $10.9 million for leasehold impairments, of which $8.8 million related to our East Texas Bossier area.

Loss on sale of assets and inventory write-downs for the quarter ended March 31, 2009 includes a $3.3 million non-cash loss on inventory due primarily to a write-down of certain tubular equipment to its estimated fair market value at March 31, 2009.

The Company also reported that it had incurred expenditures for exploration and development activities of $37.9 million during the first three months of 2009 and had increased its estimates for capital expenditures in fiscal 2009 from $56 million to $78.5 million. The change in estimated expenditures for 2009 reflects higher expected levels of exploration and development activities in the Permian Basin, East Texas Bossier and South Louisiana.

The Company will host a conference call to discuss these results and other forward-looking items today, May 5th at 2:30 pm CT (3:30 pm ET). The dial-in conference number is: 800-901-5213, passcode 70520967. The replay will be available for one week at 888-286-8010, passcode 36005074.

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.