CWEI Clayton Williams Energy, Inc.

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, 2008. 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. 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. 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 those in the forward-looking statements, including, but not limited to, production variance 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. Financial Guidance Disclosures Follow CLAYTON WILLIAMS ENERGY, INC. FINANCIAL GUIDANCE DISCLOSURES FOR 2008 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, 2008. 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�; (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, expenses and minority interest related to our investment in Larclay JV. As discussed in �Capital Expenditures,� approximately 27% of our planned 2008 exploration and development expenditures relate to exploratory prospects. Exploratory prospects involve a higher degree of risk than development prospects. To offset the higher risk, we generally strive to achieve a higher reserve potential and rate of return on investments in exploratory prospects. Actual results from our exploratory drilling activities, when ultimately reported, may have a material impact on the estimates of oil and gas production and exploration costs stated in this guidance. 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, 2008. 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, 2008 ActualFirst Quarter � ActualSecond Quarter � EstimatedThird Quarter � EstimatedFourth Quarter (Dollars in thousands, except per unit data) Average Daily Production: Gas (Mcf) 60,967 45,901 ��45,800 to 49,800 49,000 to 53,000 Oil (Bbls) 7,516 7,725 ��8,725 to 8,925 �9,850 to 10,050 Natural gas liquids (Bbls) 637 451 ��400 to 450 400 to 450 Total gas equivalents (Mcfe) 109,885 94,957 �100,550 to 106,050 110,500 to 116,000 � Differentials: Gas (Mcf) (a) $ 0.99 $ 0.71 $(0.35) to $(0.65) $(0.35) to $(0.65) Oil (Bbls) $ (1.53) $ (2.47) $(2.75) to $(3.35) $(2.75) to $(3.35) Natural gas liquids (Bbls) $ (37.90) $ (60.35) $(32.00) to $(38.00) $(32.00) to $(38.00) � Costs Variable by Production ($/Mcfe): Production expenses (including production taxes) $ 2.06 $ 2.54 $2.40 to $2.60 $2.35 to $2.55 DD&A � Oil and gas properties $ 2.77 $ 2.62 $2.45 to $2.85 $2.45 to $2.85 � Other Revenues (Expenses): Natural gas services: Revenues $ 2,538 $ 3,553 $3,450 to $3,650 $3,450 to $3,650 Operating costs $ (2,515) $ (3,244) $(3,150) to $(3,350) $(3,150) to $(3,350) Exploration costs: Abandonments and impairments $ (297) $ (1,933) $(1,000) to $(3,000) $(1,000) to $(3,000) Seismic and other $ (3,675) $ (1,562) $(5,500) to $(7,500) $(5,500) to $(7,500) DD&A � Other (b) $ (247) $ (261) $(250) to $(350) $(250) to $(350) General and administrative (b) $ (3,211) $ (7,872) $(6,550) to $(6,750) $(7,150) to $(7,350) Interest expense (b) $ (6,352) $ (5,136) $(4,700) to $(4,900) $(5,500) to $(5,700) Other income $ 655 $ 3,014 $250 to $350 $250 to $350 Gain on sales of property and equipment, net $ 560 $ 40,444 - - � Effective Federal and State Income Tax Rate: Current 1% 1% 1% 1% Deferred 36% 35% 36% 36% � Weighted Average Shares Outstanding (In thousands): Basic 11,387 12,111 12,100 to 12,200 12,100 to 12,200 Diluted 11,643 12,111 12,100 to 12,300 12,100 to 12,300 � � (a) Our actual realized gas price for the first and second quarter of 2008 was higher than the average NYMEX price for the same period due primarily to abnormal variances between NYMEX and daily spot prices for natural gas. Since we cannot predict the likelihood that this condition will continue throughout the remainder of 2008, we are estimating differentials to be more in line with historical averages. � (b) Excludes amounts derived from Larclay JV. Capital Expenditures The following table sets forth, by area, certain information about our actual and planned exploration and development activities for 2008. � ActualExpendituresSix Months EndedJune 30, 2008 � PlannedExpendituresYear EndingDecember 31, 2008 � Year 2008Percentageof Total (In thousands) Permian Basin $ 60,400 $ 184,100 46% North Louisiana 34,600 83,400 21% Austin Chalk (Trend) 28,600 57,500 14% South Louisiana 17,000 35,700 9% East Texas Bossier 11,800 30,300 8% Utah/California 1,900 8,700 2% Other � 400 � 1,000 - $ 154,700 $ 400,700 100% We have increased our estimates for planned exploration and development expenditures for fiscal 2008 by $56.2�million from $344.5�million to $400.7�million. Most of the planned increase in capital spending relates to developmental drilling activities in the Permian Basin and North Louisiana and exploratory drilling activities in South Louisiana. Our actual expenditures during fiscal 2008 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 2008. In 2008, we plan to allocate a majority of our capital resources to developmental drilling activities in oil-prone areas such as the Permian Basin and the Austin Chalk (Trend). In addition, we plan to continue drilling developmental gas wells in North Louisiana, primarily on our Terryville prospect. Based on these current estimates, approximately 73% of our expenditures for exploration and development activities for fiscal 2008 will relate to developmental prospects, as compared to approximately 49% in fiscal 2007. Supplementary Information Oil and Gas Production The following table summarizes, by area, our actual or estimated daily net production for each quarter during the year ending December 31, 2008. These estimates represent the approximate mid-point of the estimated production range. � Daily Net Production for 2008 ActualFirst Quarter � ActualSecond Quarter � EstimatedThird Quarter � EstimatedFourth Quarter Gas (Mcf): Permian Basin 15,562 14,284 14,272 14,712 North Louisiana 13,596 15,233 18,038 17,114 South Louisiana 23,552 7,347 7,685 11,739 Austin Chalk (Trend) 2,460 2,133 2,261 2,239 Cotton Valley Reef Complex 5,270 6,277 5,185 4,837 Other 527 627 359 359 Total 60,967 45,901 47,800 51,000 � Oil (Bbls): Permian Basin 3,494 3,568 4,141 4,946 North Louisiana 343 386 413 391 South Louisiana 985 105 398 446 Austin Chalk (Trend) 2,635 3,575 3,847 4,102 Other 59 91 76 65 Total 7,516 7,725 8,825 9,950 � Natural Gas Liquids (Bbls): Permian Basin 215 153 163 163 Austin Chalk (Trend) 272 241 229 229 Other 150 57 33 33 Total 637 451 425 425 Accounting for Derivatives The following summarizes information concerning our net positions in open commodity derivatives applicable to periods subsequent to June 30, 2008. The settlement prices of commodity derivatives are based on NYMEX futures prices. Collar: � � � Gas Oil MMBtu (a) � Floor � Ceiling Bbls � Floor � Ceiling Production Period: 3rd Quarter 2008 419,000 $ 4.00 $ 5.15 128,000 $ 23.00 $ 25.07 � � Swaps: � Gas Oil MMBtu (a) Price Bbls Price Production Period: 3rd Quarter 2008 4,000,000 $ 9.19 310,000 $ 78.96 4th Quarter 2008 4,100,000 $ 9.17 400,000 $ 82.21 2009 3,600,000 $ 9.33 1,440,000 $ 85.30 11,700,000 2,150,000 � (a) One MMBtu equals one Mcf at a Btu factor of 1,000. In July 2008, we terminated certain fixed-priced gas swaps covering 300,000 MMBtu at a price of $10.32 per MMBtu from August 2008 through October 2008, resulting in an aggregate loss of $585,000, which will be paid to the counterparty monthly as the applicable contracts are settled. In September 2007, we terminated certain fixed-priced oil swaps covering 60,000 barrels at a price of $76.65 from July 2008 through December 2008, resulting in an aggregate loss of approximately $663,000, which will be paid to the counterparty monthly as the applicable contracts are settled. Interest Rate The following summarizes information concerning our interest rate swap applicable to periods subsequent to June 30, 2008. Interest Rate Swap: � PrincipalBalance � FixedLiborRate Period: �July 1, 2008 to November 3, 2008 $ 45,000,000 5.73% In April 2008, we terminated our $100 million interest rate swap for a cash payment of $899,000. We did not designate any of the derivatives shown in the preceding tables as cash flow hedges under SFAS�133; therefore, all changes in the fair value of these contracts prior to maturity, plus any realized gains or losses at maturity, are recorded as other income (expense) in our statement of operations.