CWEI Clayton Williams Energy, Inc.

Clayton Williams Energy, Inc. (NASDAQ-NMS: CWEI) today filed a Form 8-K with the Securities and Exchange Commission to provide financial guidance disclosures for the year ending December 31, 2011. 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.

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.

CLAYTON WILLIAMS ENERGY, INC.

FINANCIAL GUIDANCE DISCLOSURES FOR 2011

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, 2011. 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, outcomes and other matters that we plan, expect, intend, assume, believe, budget, predict, forecast, project, estimate or anticipate (and other similar expressions) will, should, could or may occur in the future, including such matters as production of oil and gas, product prices, oil and gas reserves, drilling and completion results, capital expenditures, operating costs 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 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 actual and certain estimates being used by us to model our anticipated results of operations for each quarter during the fiscal year ending December 31, 2011. 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, 2011 Actual     Actual     Actual     Estimated First Quarter Second Quarter Third Quarter Fourth Quarter (Dollars in thousands, except per unit data) Average Daily Production: Oil (Bbls) 9,989 9,736 10,272 10,500 to 10,700 Gas (Mcf) 23,478 24,846 23,859 21,500 to 25,500 Natural gas liquids (Bbls) 922 802 663 700 to 800 Total oil equivalents (BOE) 14,824 14,679 14,912 14,783 to 15,750   Differentials: Oil (Bbls) $ (5.17 ) $ (2.49 ) $ (.40 ) $(2.50) to $(3.50) Gas (Mcf) $ 1.04 $ 1.18 $ 1.40 $0.50 to $1.00 Natural gas liquids (Bbls) $ (45.76 ) $ (45.40 ) $ (32.60 ) $(42.00) to $(48.00)   Costs Variable by Production ($/BOE):

Production expenses (excluding production taxes) (a)

$ 14.67 $ 15.61 $ 13.84 $13.75 to $14.75 DD&A – Oil and gas properties $ 17.46 $ 18.31 $ 18.25 $18.00 to $19.00   Other Revenues (Expenses): Natural gas services: Revenues $ 409 $ 365 $ 334 $450 to $550 Operating costs $ (263 ) $ (285 ) $ (233 ) $(300) to $(500) Exploration costs: Abandonments and impairments $ (877 ) $ (174 ) $ (1,256 ) $(250) to $(750) Seismic and other $ (1,278 ) $ (2,167 ) $ (1,842 ) $(500) to $(2,500) DD&A – Other (b) $ (193 ) $ (153 ) $ (190 ) $(250) to $(350)

General and administrative (b) (c)

$ (5,025 ) $ (5,405 ) $ (5,939 ) $(9,600) to $(9,800) Interest expense $ (6,412 ) $ (9,175 ) $ (8,717 ) $(8,400) to $(8,600) Other income (expense) $ 1,087 $ 1,900 $ 527 $450 to $550 Gain (loss) on sales of assets, net $ 13,376 $ 842 $ (65 ) -     Effective Federal and State Income Tax Rate: Current 0 % 0 % 0 % 0% Deferred 36 % 36 % 36 % 36%   Weighted Average Shares Outstanding (In thousands): Basic 12,156 12,162 12,163 12,163 Diluted 12,156 12,163 12,163 12,163

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(a) Our current guidance for production expenses excludes production taxes. Historically, production taxes have ranged from 5% to 6% of oil and gas sales.

(b) Excludes amounts derived from Desta Drilling, L.P.

(c) Excludes non-cash employee compensation. Fourth quarter estimates include approximately $3.7 million of discretionary cash bonuses paid or payable during the quarter.

 

Capital Expenditures

The following table sets forth, by area, our actual expenditures for exploration and development activities for the first nine months of 2011 and our planned expenditures for the year ending December 31, 2011.

  Actual     Planned     Expenditures Expenditures 2011 Nine Months Ended Year Ended Percentage September 30, 2011 December 31, 2011 of Total (In thousands) Permian Basin Area: West Texas - Reeves $ 117,000 $ 188,100 46 % West Texas - Andrews 98,600 111,900 27 % West Texas - Other 23,800 25,100 6 % Giddings Area: Austin Chalk/Eagle Ford Shale 43,000 54,600 13 % Deep Bossier 4,600 14,500 4 % South Louisiana 5,300 6,800 2 % Other   5,100   6,700 2 % $ 297,400 $ 407,700 100 %  

We currently plan to spend approximately $407.7 million on exploration and development activities in fiscal 2011. Our actual expenditures during fiscal 2011 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 2011. Based on these current estimates, approximately 94% of our planned expenditures for exploration and development activities for fiscal 2011 will relate to developmental prospects, as compared to approximately 95% in fiscal 2010.

Supplementary Information

Oil and Gas Production

The following table summarizes, by area, our actual and estimated daily net production for each quarter during the year ending December 31, 2011. These estimates represent the approximate mid-point of the estimated production range.

  Daily Net Production for 2011 Actual     Actual     Actual     Estimated First Quarter Second Quarter Third Quarter Fourth Quarter Oil (Bbls): Permian Basin Area: West Texas - Andrews 2,607 2,585 2,768 2,826 West Texas - Reeves - 11 170 750 West Texas - Other 3,570 3,095 3,384 3,174 Austin Chalk/Eagle Ford Shale 3,329 3,335 3,458 3,404 South Louisiana 414 493 413 413 Other 69 217 79 33 Total 9,989 9,736 10,272 10,600   Gas (Mcf): Permian Basin Area: West Texas - Andrews 1,588 1,719 1,116 1,635 West Texas - Reeves 7 25 27 - West Texas - Other 12,333 10,457 11,769 11,017 Giddings Area: Austin Chalk/Eagle Ford Shale 1,940 2,177 1,958 2,054 Cotton Valley Reef Complex 2,953 2,931 2,955 2,250 South Louisiana 3,149 6,134 5,257 5,598 Other 1,508 1,403 777 946 Total 23,478 24,846 23,859 23,500   Natural Gas Liquids (Bbls): Permian Basin Area: West Texas - Andrews 364 368 124 217 West Texas - Other 255 151 242 272 Austin Chalk/Eagle Ford Shale 226 183 215 196 Other 77 100 82 65 Total 922 802 663 750  

Accounting for Derivatives

The following summarizes information concerning our net positions in open commodity derivatives applicable to periods subsequent to September 30, 2011. The settlement prices of commodity derivatives are based on NYMEX futures prices.

Swaps:

                      Oil         Bbls (a)               Price     Production Period:               4th Quarter 2011 482,949 $ 87.42

2012

907,506 $ 95.51

2013

95,996 $ 91.15

2014

85,772 $ 91.15

2015

76,309 $ 91.15

2016

    28,280     $ 91.15     1,676,812    

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(a) In September 2011, we entered into oil hedges covering 398,812 barrels of oil for production months from December 2011 through May 2016. These hedges cover production related to a volumetric production payment in connection with the acquisition by our wholly owned subsidiary, Southwest Royalties, Inc., of the 24 limited partnerships of which it is the general partner.

In October 2011, we terminated substantially all of our existing 2012 and 2013 oil hedges for cash proceeds of $50 million. The terminated contracts covered 2,649,000 barrels of oil production for 2012 and 1,189,000 barrels for 2013. In addition, we terminated a hedge contract covering 490,000 MMBtu of gas production for December 2011 for cash proceeds of $1.6 million. In November 2011, we entered into additional hedge contracts covering 800,000 barrels of oil production for 2012.

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.