Clayton Williams Energy Provides Financial Guidance for 2010

MIDLAND, Texas--(BUSINESS WIRE)--Clayton Williams Energy, Inc. (NASDAQ: CWEI) today filed a Form 8-K with the Securities and Exchange Commission to provide financial guidance disclosures for the year ending December 31, 2010. This guidance was furnished to provide public disclosure of the estimates being used by the Company to model its anticipated results of operations for the periods presented.

“Accounting for Derivative Instruments and Hedging Activities”

A copy of these disclosures accompanies this release or may be obtained electronically by accessing the Company’s website at www.claytonwilliams.com.

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

This release contains 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. All statements, other than statements of historical or current facts, that address activities, events, outcomes and other matters that we plan, expect, intend, assume, believe, budget, predict, forecast, project, estimate or anticipate (and other similar expressions) will, should or may occur in the future are forward-looking statements. These forward-looking statements are based on management’s current belief, based on currently available information, as to the outcome and timing of future events. The Company cautions that its future oil and natural gas production, revenues, cash flows, liquidity, plans for future operations, expenses, outlook for oil and natural gas prices, timing of capital expenditures and other forward-looking statements are subject to all of the risks and uncertainties, many of which are beyond our control, incident to the exploration for and development, production and marketing of oil and gas.

These risks include, but are not limited to, the possibility of unsuccessful exploration and development drilling activities, our ability to replace and sustain production, commodity price volatility, domestic and worldwide economic conditions, the availability of capital on economic terms to fund our capital expenditures and acquisitions, our level of indebtedness, the impact of the current economic environment on our business operations, financial condition and ability to raise capital, declines in the value of our oil and gas properties resulting in a decrease in our borrowing base under our credit facility and impairments, the ability of financial counterparties to perform or fulfill their obligations under existing agreements, the uncertainty inherent in estimating proved oil and gas reserves and in projecting future rates of production and timing of development expenditures, drilling and other operating risks, lack of availability of goods and services, regulatory and environmental risks associated with drilling and production activities, the adverse effects of changes in applicable tax, environmental and other regulatory legislation, and other 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.

Financial Guidance Disclosures Follow

CLAYTON WILLIAMS ENERGY, INC.

FINANCIAL GUIDANCE DISCLOSURES FOR 2010

Overview

Clayton Williams Energy, Inc. and its subsidiaries have prepared this document to provide public disclosure of certain financial and operating estimates in order to permit the preparation of models to forecast our operating results for each quarter during the year ending December 31, 2010. These estimates are based on information available to us as of the date of this filing, and actual results may vary materially from these estimates. We do not undertake any obligation to update these estimates as conditions change or as additional information becomes available.

The estimates provided in this document are based on assumptions that we believe are reasonable. Until our actual results of operations for these periods have been compiled and released, all of the estimates and assumptions set forth herein constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included in this document that address activities, events or developments that we expect, project, believe or anticipate will or may occur in the future, or may have occurred through the date of this filing, including such matters as production of oil and gas, product prices, oil and gas reserves, drilling and completion results, capital expenditures and other such matters, are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from the results, performance, or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: the volatility of oil and gas prices; the unpredictable nature of our exploratory drilling results; the reliance upon estimates of proved reserves; operating hazards and uninsured risks; competition; government regulation; and other factors referenced in filings made by us with the Securities and Exchange Commission.

As a matter of policy, we generally do not attempt to provide guidance on:

(a)	production which may be obtained through future exploratory drilling;
(b)	dry hole and abandonment costs that may result from future exploratory drilling;
(c)	the effects of Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” superseded by topic 815-10-05 of the Financial Accounting Standards Board Accounting Standards Codification;
(d)	gains or losses from sales of property and equipment unless the sale has been consummated prior to the filing of financial guidance;
(e)	capital expenditures related to completion activities on exploratory wells or acquisitions of proved properties until the expenditures are estimable and likely to occur; and
(f)	revenues and expenses related to Desta Drilling, L.P., a wholly-owned subsidiary of the Company which provides contract drilling services for the Company.

Summary of Estimates

The following table sets forth certain estimates being used by us to model our anticipated results of operations for each quarter during the fiscal year ending December 31, 2010. When a single value is provided, such value represents the mid-point of the approximate range of estimates. Otherwise, each range of values provided represents the expected low and high estimates for such financial or operating factor. See “Supplementary Information.”

	Year Ending December 31, 2010
	Estimated	Estimated	Estimated	Estimated
	First Quarter	Second Quarter	Third Quarter	Fourth Quarter
	(Dollars in thousands, except per unit data)
Average Daily Production:
Oil (Bbls)	8,150 to 8,350	8,450 to 8,650	9,225 to 9,425	9,625 to 9,825
Gas (Mcf)	36,000 to 40,000	33,700 to 37,700	32,000 to 36,000	30,750 to 34,750
Natural gas liquids (Bbls)	650 to 700	625 to 675	550 to 600	550 to 600
Total oil equivalents (BOE)	14,800 to 15,717	14,692 to 15,608	15,108 to 16,025	15,300 to 16,217
Differentials:
Oil (Bbls)	$(2.75) to $(3.25)	$(2.75) to $(3.25)	$(2.75) to $(3.25)	$(2.75) to $(3.25)
Gas (Mcf)	$(0.05) to $0.25	$(0.05) to $0.25	$(0.05) to $0.25	$(0.05) to $0.25
Natural gas liquids (Bbls)	$(27.00) to $(33.00)	$(27.00) to $(33.00)	$(27.00) to $(33.00)	$(27.00) to $(33.00)
Costs Variable by Production ($/BOE):
Production expenses (including
production taxes)	$13.75 to $14.75	$13.75 to $14.75	$13.50 to $14.50	$13.60 to $14.60
DD&A – Oil and gas properties	$20.40 to $22.40	$20.45 to $22.45	$20.45 to $22.45	$20.45 to $22.45
Other Revenues (Expenses):
Natural gas services:
Revenues	$1,700 to $1,900	$1,700 to $1,900	$1,700 to $1,900	$1,700 to $1,900
Operating costs	$(1,600) to $(1,800)	$(1,600) to $(1,800)	$(1,600) to $(1,800)	$(1,600) to $(1,800)
Exploration costs:
Abandonments and impairments	$(1,000) to $(3,000)	$(1,000) to $(3,000)	$(1,000) to $(3,000)	$(1,000) to $(3,000)
Seismic and other	$(250) to $(750)	$(250) to $(750)	$(250) to $(750)	$(250) to $(750)
DD&A – Other ^(a)	$(250) to $(350)	$(250) to $(350)	$(250) to $(350)	$(250) to $(350)
General and administrative ^(a)	$(4,050) to $(4,250)	$(5,550) to $(5,750)	$(4,050) to $(4,250)	$(5,550) to $(5,750)
Interest expense	$(6,500) to $(6,700)	$(6,700) to $(6,900)	$(6,800) to $(7,000)	$(6,800) to $(7,000)
Other income (expense)	$250 to $350	$250 to $350	$250 to $350	$250 to $350
Effective Federal and State Income
Tax Rate:
Current	0%	0%	0%	0%
Deferred	37%	37%	37%	37%
Weighted Average Shares Outstanding
(In thousands):
Basic	12,100	12,100	12,100	12,100
Diluted	12,150	12,150	12,150	12,150
(a) Excludes amounts derived from Desta Drilling.

Capital Expenditures

The following table sets forth, by area, certain information about our planned exploration and development activities for 2010.

	Planned
	Expenditures		Year 2010
	Year Ending		Percentage
	December 31, 2010		of Total
	(In thousands)
Permian Basin	$	154,500	65	%
Austin Chalk (Trend)		68,800	29	%
South Louisiana		8,800	4	%
Utah/California		2,600	1	%
Other		2,700	1	%
	$	237,400	100	%

We currently plan to spend approximately $237.4 million on exploration and development activities in fiscal 2010. Our actual expenditures during fiscal 2010 may be substantially higher or lower than these estimates since our plans for exploration and development activities may change during the year. Other factors, such as prevailing product prices and the availability of capital resources, could also increase or decrease the ultimate level of expenditures during fiscal 2010.

Based on these current estimates, approximately 95% of our planned expenditures for exploration and development activities for fiscal 2010 will relate to developmental prospects, as compared to approximately 75% in fiscal 2009.

Supplementary Information

Oil and Gas Production

The following table summarizes, by area, our estimated daily net production for each quarter during the year ending December 31, 2010. These estimates represent the approximate mid-point of the estimated production range.

	Daily Net Production for 2010
	Estimated	Estimated	Estimated	Estimated
	First Quarter	Second Quarter	Third Quarter	Fourth Quarter
Oil (Bbls):
Permian Basin	4,759	5,076	5,793	6,211
Austin Chalk (Trend)	2,646	2,858	3,076	3,111
North Louisiana	156	132	130	98
South Louisiana	633	418	293	272
Other	56	66	33	33
Total	8,250	8,550	9,325	9,725
Gas (Mcf):
Permian Basin	13,012	12,601	12,631	12,560
Austin Chalk (Trend)	2,344	2,385	2,446	2,424
North Louisiana	8,578	7,758	7,130	6,650
South Louisiana	7,700	6,780	6,109	5,487
Cotton Valley Reef Complex	3,944	3,692	3,467	3,281
Other	2,422	2,484	2,217	2,348
Total	38,000	35,700	34,000	32,750
Natural Gas Liquids (Bbls):
Permian Basin	200	198	195	194
Austin Chalk (Trend)	254	265	228	218
Other	221	187	152	163
Total	675	650	575	575

Accounting for Derivatives

The following summarizes information concerning our net positions in open commodity derivatives applicable to periods subsequent to December 31, 2009. The settlement prices of commodity derivatives are based on NYMEX futures prices.

Swaps:
		Oil			Gas
		Bbls	Price		MMBtu ^(a)	Price
Production Period:
	1^st Quarter 2010	628,000	$	76.70	2,280,000	$	6.80
	2^nd Quarter 2010	574,000	$	76.60	1,830,000	$	6.80
	3^rd Quarter 2010	522,000	$	76.40	1,750,000	$	6.80
	4^th Quarter 2010	480,000	$	76.24	1,680,000	$	6.80
	2011	-	$	-	6,420,000	$	7.07
		2,204,000			13,960,000
	(a) One MMBtu equals one Mcf at a Btu factor of 1,000.

In March 2009, we terminated certain fixed-priced oil swaps covering 332,000 barrels at a price of $57.35 from January 2010 through December 2010, resulting in an aggregate loss of approximately $1.3 million, which will be paid to the counterparty monthly as the applicable contracts are settled.

We did not designate any of the derivatives shown in the preceding table as cash flow hedges; therefore, all changes in the fair value of these contracts prior to maturity, plus any realized gains or losses at maturity, will be recorded as other income (expense) in our statement of operations.