Clayton Williams Energy (CWEI) 8-K Clayton Williams Energy Announces Second Quarter 2008 Financial Results

Exhibit 99.1

Clayton Williams Energy Announces Second Quarter 2008 Financial Results

MIDLAND, Texas--(BUSINESS WIRE)--Clayton Williams Energy, Inc. (NASDAQ: CWEI) reported a net loss for the second quarter of 2008 of $21.2 million, or $1.75 per share, as compared to net income of $8.8 million, or $.77 per share, for the second quarter of 2007. Cash flow from operations for the second quarter of 2008 was $71.4 million, as compared to $53.7 million during the same period in 2007.

For the six months ended June 30, 2008, the Company reported a net loss of $14 million, or $1.19 per share, as compared to a net loss of $3.5 million, or $.31 per share, for the same period in 2007. Cash flow from operations for the six-month period in 2008 was $149.4 million, as compared to $89.9 million during the same period in 2007.

Oil and gas sales increased 79% from $74.9 million for the second quarter of 2007 to $134.3 million for the same quarter in 2008. On an Mcf equivalent basis, oil and gas production declined 4%, despite significant additions from the Company’s on-going developmental drilling programs, due to the loss of production from a previously-reported sale of South Louisiana assets. Oil production for the second quarter of 2008 increased 22% to 703,000 barrels, or 7,725 barrels per day, compared to 577,000 barrels, or 6,341 barrels per day, in the second quarter of 2007. Gas production decreased 19% to 4.2 Bcf, or 45,901 Mcf per day, from 5.2 Bcf, or 56,604 Mcf per day, in the 2007 quarter. The growth in oil production was attributed to in-fill drilling in the Austin Chalk (Trend) and increased drilling activities in the Permian Basin. As adjusted for the South Louisiana asset sale, gas production was favorably impacted by incremental production from the Company’s drilling activities in North Louisiana.

For the second quarter of 2008, average realized oil prices increased 94% to $121.51 per barrel from $62.51 per barrel in the 2007 period, while gas prices increased 54% to $11.07 per Mcf from $7.20 per Mcf in the same quarter of 2007. 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 second quarter of 2008, the Company reported a $148.6 million net loss on derivatives, consisting of a $113.6 million non-cash loss to mark the Company’s derivative positions to their fair value on June 30, 2008 and a $35 million realized loss on settled contracts. For the same period in 2007, the Company reported a $6.1 million net gain on derivatives, consisting of a $7.6 million non-cash gain due to changes in mark-to-market valuations and a $1.5 million realized loss on settled contracts.

In the second quarter of 2008, the Company recorded a net gain of $40.4 million for the sale of property and equipment which included a gain of $33.1 million from the South Louisiana sale and $5.7 million from the sale of the two 2,000 horsepower drilling rigs.

The Company recorded exploration costs during the second quarter of 2008 of $3.5 million compared to $25.1 million for the second quarter of 2007. The 2008 quarter included a charge of $1.8 million for the abandonment of the Wynn 35 #1 in North Louisiana and $1.6 million for seismic expense. The Company is continuing to monitor and evaluate its 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 $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.

The Company will host a conference call to discuss these results and other forward-looking items today, August 6th at 1:30 pm CT (2:30 pm ET). The dial-in conference number is: 800-901-5213, passcode 69706053. The replay will be available for one week at 888-286-8010, passcode 97137420.

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.

TABLES AND SUPPLEMENTAL INFORMATION FOLLOW . . .

CLAYTON WILLIAMS ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share)
			Three Months Ended						Six Months Ended
			June 30,						June 30,
				2008			2007			2008			2007
REVENUES
	Oil and gas sales		$	134,291		$	74,893		$	253,210		$	136,073
	Natural gas services			3,553			2,909			6,091			5,563
	Drilling rig services			12,703			14,228			27,535			22,645
	Gain on sales of property and equipment			40,721			534			41,290			784
		Total revenues		191,268			92,564			328,126			165,065
COSTS AND EXPENSES
	Production			21,925			17,840			42,504			35,118
	Exploration:
		Abandonments and impairments		1,933			23,519			2,230			34,624
		Seismic and other		1,562			1,580			5,237			2,470
	Natural gas services			3,244			2,904			5,759			5,317
	Drilling rig services			9,923			8,506			21,040			13,439
	Depreciation, depletion and amortization			24,974			18,487			55,247			33,718
	Impairment of property and equipment			-			479			-			1,044
	Accretion of abandonment obligations			485			619			1,015			1,237
	General and administrative			7,944			4,932			11,392			8,835
	Loss on sales of property and equipment			277			-			286			9,323
		Total costs and expenses		72,267			78,866			144,710			145,125
		Operating income		119,001			13,698			183,416			19,940
OTHER INCOME (EXPENSE)
	Interest expense			(6,077	)		(7,986	)		(13,523	)		(15,615	)
	Gain (loss) on derivatives			(148,587	)		6,110			(194,696	)		(10,739	)
	Other			3,014			3,614			3,669			4,327
		Total other income (expense)		(151,650	)		1,738			(204,550	)		(22,027	)
Income (loss) before income taxes and minority interest				(32,649	)		15,436			(21,134	)		(2,087	)
Income tax (expense) benefit				11,642			(5,357	)		7,420			723
Minority interest, net of tax				(164	)		(1,269	)		(278	)		(2,136	)
NET INCOME (LOSS)			$	(21,171	)	$	8,810		$	(13,992	)	$	(3,500	)
Net income (loss) per common share:
	Basic		$	(1.75	)	$	0.78		$	(1.19	)	$	(0.31	)
	Diluted		$	(1.75	)	$	0.77		$	(1.19	)	$	(0.31	)
Weighted average common shares outstanding:
	Basic			12,111			11,352			11,749			11,236
	Diluted			12,111			11,507			11,749			11,236

CLAYTON WILLIAMS ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
ASSETS
			June 30,			December 31,
				2008			2007
CURRENT ASSETS
	Cash and cash equivalents		$	17,492		$	12,344
	Accounts receivable:
		Oil and gas sales, net		55,904			36,698
		Joint interest and other, net		16,829			16,666
		Affiliates		601			308
	Inventory			19,770			14,348
	Deferred income taxes			3,581			3,581
	Fair value of derivatives			-			7,191
	Assets held for sale			-			17,281
	Prepaids and other			10,346			3,962
				124,523			112,379
PROPERTY AND EQUIPMENT
	Oil and gas properties, successful efforts method			1,404,221			1,374,090
	Natural gas gathering and processing systems			17,808			18,404
	Contract drilling equipment			90,573			89,956
	Other			14,619			14,505
				1,527,221			1,496,955
	Less accumulated depreciation, depletion and amortization			(760,957	)		(765,877	)
		Property and equipment, net		766,264			731,078
OTHER ASSETS
	Debt issue costs, net			6,840			6,963
	Other			14,814			10,676
				21,654			17,639
			$	912,441		$	861,096
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
	Accounts payable:
		Trade	$	106,961		$	72,477
		Oil and gas sales		28,350			24,806
		Affiliates		2,930			1,747
	Current maturities of long-term debt			18,750			22,500
	Fair value of derivatives			147,506			56,929
	Accrued liabilities and other			10,610			10,308
				315,107			188,767
NON-CURRENT LIABILITIES
	Long-term debt			309,000			430,175
	Deferred income taxes			38,565			44,302
	Fair value of derivatives			47,853			-
	Other			35,383			37,046
				430,801			511,523
STOCKHOLDERS' EQUITY:
	Preferred stock, par value $.10 per share			-			-
	Common stock, par value $.10 per share			1,211			1,135
	Additional paid-in capital			136,963			121,063
	Retained earnings			21,898			35,890
	Accumulated other comprehensive income, net of tax			6,461			2,718
				166,533			160,806
			$	912,441		$	861,096

	CLAYTON WILLIAMS ENERGY, INC.
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
	(Unaudited)
	(In thousands)
		Three Months Ended						Six Months Ended
		June 30,						June 30,
			2008			2007			2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES
	Net income (loss)	$	(21,171	)	$	8,810		$	(13,992	)	$	(3,500	)
	Adjustments to reconcile net income (loss) to cash provided by operating activities:
	Depreciation, depletion and amortization		24,974			18,487			55,247			33,718
	Impairment of proved properties		-			479			-			1,044
	Exploration costs		1,933			23,519			2,230			34,624
	(Gain) loss on sales of property and equipment, net		(40,444	)		(534)			(41,004	)		8,539
	Deferred income taxes		(11,852	)		5,357			(7,752	)		(723	)
	Non-cash employee compensation		1,568			500			1,910			1,110
	Unrealized loss on derivatives		113,593			(7,586	)		145,621			11,236
	Settlements on derivatives with financing elements		14,374			6,412			24,789			12,005
	Amortization of debt issue costs		439			316			785			625
	Accretion of abandonment obligations		485			619			1,015			1,237
	Minority interest, net of tax		164			1,269			278			2,136
	Changes in operating working capital:
	Accounts receivable		(5,793	)		(10,371	)		(19,662	)		(10,657	)
	Accounts payable		(11,587	)		2,698			398			(1,005	)
	Other		4,688			3,732			(442	)		(453	)
	Net cash provided by operating activities		71,371			53,707			149,421			89,936
CASH FLOWS FROM INVESTING ACTIVITIES
	Additions to property and equipment		(68,881	)		(64,686	)		(118,491	)		(120,435	)
	Additions to equipment of Larclay JV		-			(4,099	)		(9	)		(23,415	)
	Proceeds from sales of property and equipment		113,425			957			114,049			1,602
	Change in equipment inventory		(5,157	)		7,939			(6,777	)		11,835
	Other		716			(5,299	)		785			(8,269	)
	Net cash provided by (used in) investing activities		40,103			(65,188	)		(10,443	)		(138,682	)
CASH FLOWS FROM FINANCING ACTIVITIES
	Proceeds from long-term debt		-			15,500			-			40,500
	Proceeds from long-term debt of Larclay JV		4,000			-			4,000			8,727
	Repayments of long-term debt		(105,000	)		-			(115,800	)		-
	Repayments of long-term debt of Larclay JV		(6,563	)		-			(13,125	)		-
	Proceeds from sale of common stock		9,432			8			15,884			5,970
	Settlements on derivatives with financing elements		(14,374	)		(6,412	)		(24,789	)		(12,005	)
	Net cash provided by (used in) financing activities		(112,505	)		9,096			(133,830	)		43,192
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
			(1,031	)		(2,385	)		5,148			(5,554	)
CASH AND CASH EQUIVALENTS
	Beginning of period		18,523			10,671			12,344			13,840
	End of period	$	17,492		$	8,286		$	17,492		$	8,286

Clayton Williams Energy, Inc.
Summary Production and Price Data
(Unaudited)
				Three Months Ended						Six Months Ended
				June 30,						June 30,
					2008			2007			2008			2007
Average Daily Production:
	Natural Gas (Mcf):
		Permian Basin			14,284			13,724			14,665			14,552
		North Louisiana			15,233			5,229			14,611			3,815
		South Louisiana			7,347			27,206			15,405			23,695
		Austin Chalk (Trend)			2,133			2,445			2,333			2,228
		Cotton Valley Reef Complex			6,277			7,651			5,857			7,674
		Other			627			349			563			401
			Total		45,901			56,604			53,434			52,365
	Oil (Bbls):
		Permian Basin			3,568			3,135			3,532			3,117
		North Louisiana			386			153			365			91
		South Louisiana			105			1,333			545			1,256
		Austin Chalk (Trend)			3,575			1,627			3,104			1,647
		Other			91			93			75			77
			Total		7,725			6,341			7,621			6,188
	Natural gas liquids (Bbls):
		Permian Basin			153			226			185			211
		Austin Chalk (Trend)			241			251			258			259
		Other			57			149			101			99
			Total		451			626			544			569
Total Production:
	Natural Gas (MMcf)				4,177			5,151			9,725			9,478
	Oil (MBbls)				703			577			1,387			1,120
	Natural gas liquids (MBbls)				41			57			99			103
	Gas Equivalents (MMcfe)				8,641			8,955			18,641			16,816
Average Realized Prices (a):
	Gas ($/Mcf):			$	11.07		$	7.20		$	9.81		$	7.06
	Oil ($/Bbl):			$	121.51		$	62.51		$	109.05		$	58.95
	Natural gas liquids ($/Bbl)			$	63.63		$	42.84		$	58.47		$	38.58
Gains (Losses) on settled derivative contracts (a):
	($ in thousands, except per unit)
	Gas:
	Net realized gain (loss)			$	(10,287	)	$	473		$	(11,171	)	$	4,982
	Per unit produced ($/Mcf)			$	(2.46	)	$	0.09		$	(1.15	)	$	0.53
	Oil:
	Net realized loss			$	(23,348	)	$	(1,971	)	$	(36,254	)	$	(4,530	)
	Per unit produced ($/Bbl)			$	(33.21	)	$	(3.42	)	$	(26.14	)	$	(4.04	)

Clayton Williams Energy, Inc.
Summary of Capital Expenditures
(Unaudited)
	Planned
	Expenditures
	Year Ending		Percentage
		12/31/2008	of Total
Permian Basin	$	184,100	46	%
North Louisiana		83,400	21	%
Austin Chalk (Trend)		57,500	14	%
South Louisiana		35,700	9	%
East Texas Bossier		30,300	8	%
Utah/California		8,700	2	%
Other		1,000	-
	$	400,700	100	%

CLAYTON WILLIAMS ENERGY, INC.
Notes to tables and supplemental information
(a)	Hedging gains/losses are only included in the determination of the Company's average realized prices if the underlying derivative contracts are designated as cash flow hedges under applicable accounting standards. The Company did not designate any of its 2008 or 2007 derivative contracts as cash flow hedges. This means that the Company's derivatives for 2008 and 2007 have been marked-to-market through its statement of operations as other income/expense instead of through accumulated other comprehensive income on the Company's balance sheet. This also means that all realized gains/losses on these derivatives are reported in other income/expense instead of as a component of oil and gas sales.
Certain reclassifications of prior period financial statement amounts have been made to conform to current period presentations.

CONTACT:
Clayton Williams Energy, Inc.
Patti Hollums, 432-688-3419
Director of Investor Relations
cwei@claytonwilliams.com
www.claytonwilliams.com
or
Mel G. Riggs, 432-688-3431
Chief Financial Officer