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

Exhibit 99.1

Clayton Williams Energy Announces Third Quarter 2008 Financial Results

MIDLAND, Texas--(BUSINESS WIRE)--November 5, 2008--Clayton Williams Energy, Inc. (NASDAQ:CWEI) reported net income for the third quarter of 2008 of $94.6 million, or $7.79 per share, as compared to net income of $986,000, or $.09 per share, for the third quarter of 2007. Cash flow from operations for the third quarter of 2008 was $73.6 million, as compared to $72.4 million during the same period in 2007.

For the nine months ended September 30, 2008, the Company reported net income of $80.6 million, or $6.48 per share, as compared to a net loss of $2.5 million, or $.22 per share, for the same period in 2007. Cash flow from operations for the nine-month period in 2008 was $223.1 million, as compared to $162.3 million during the same period in 2007.

Oil and gas sales increased 52% from $84.6 million for the third quarter of 2007 to $128.3 million for the same quarter in 2008. Oil production for the third quarter of 2008 increased 30% to 755,000 barrels, or 8,207 barrels per day, compared to 582,000 barrels, or 6,326 barrels per day, in the third quarter of 2007. Gas production for the third quarter 2008 decreased 32% to 3.9 Bcf, or 42,609 Mcf per day, from 5.8 Bcf, or 62,500 Mcf per day, in the 2007 quarter. The comparability of production between the third quarter of 2007 and the third quarter of 2008 was affected by two primary factors. Certain South Louisiana properties that were sold during the second quarter of 2008 produced a daily average of 750 barrels of oil and 12,000 Mcf of gas in 2007. In addition, South Louisiana production was curtailed during the third quarter of 2008 due to Hurricanes Gustav and Ike.

For the third quarter of 2008, average realized oil prices increased 61% to $116.01 per barrel from $72.10 per barrel in the 2007 period, while gas prices increased 46% to $9.88 per Mcf from $6.77 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 third quarter of 2008, the Company reported a $132.7 million net gain on derivatives, consisting of a $169.5 million non-cash gain to mark the Company’s derivative positions to their fair value on September 30, 2008 and a $36.8 million realized loss on settled contracts. For the same period in 2007, the Company reported a $2.3 million net loss on derivatives, consisting of a $1.6 million realized gain on settled contracts and a $3.9 million non-cash loss due to changes in mark-to-market valuations.

The Company recorded abandonment and impairment costs during the third quarter of 2008 of $43 million compared to $18.8 million for the third quarter of 2007. The 2008 quarter included a pre-tax charge of $12.5 million of drilling costs for the abandonment of the Big Bill Simpson #1 and $27.6 million for leasehold impairments on the Company’s East Texas Bossier prospect.

The Company also recorded a non-cash charge during the third quarter of 2008 of $10 million for impairments pursuant to Statement of Financial Accounting Standards No. 144 "Accounting for Impairment or Disposal of Long-Lived Assets", related to the Margarita #1 on the Company’s East Texas Bossier prospect to reduce the carrying value of this well to its estimated fair market value at September 30, 2008.

The Company will host a conference call to discuss these results and other forward-looking items today, November 5th at 1:00 pm CT (2:00 pm ET). The dial-in conference number is: 800-901-5213, passcode 45791735. The replay will be available for one week at 888-286-8010, passcode 33159483.

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						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007
REVENUES
Oil and gas sales	$	128,335		$	84,639		$	381,545		$	220,712
Natural gas services		2,978			2,268			9,069			7,831
Drilling rig services		12,515			14,806			40,050			37,451
Gain on sales of property and equipment		3,157			126			44,447			910
Total revenues		146,985			101,839			475,111			266,904
COSTS AND EXPENSES
Production		22,861			20,851			65,365			55,969
Exploration:
Abandonments and impairments		43,036			18,802			45,266			53,426
Seismic and other		5,993			1,236			11,230			3,706
Natural gas services		2,706			2,121			8,465			7,438
Drilling rig services		9,763			9,075			30,803			22,514
Depreciation, depletion and amortization		27,226			23,018			82,473			56,736
Impairment of property and equipment		9,985			7,979			9,985			9,023
Accretion of abandonment obligations		654			627			1,669			1,864
General and administrative		6,501			4,289			17,893			13,124
Loss on sales of property and equipment		134			92			420			9,415
Total costs and expenses		128,859			88,090			273,569			233,215
Operating income		18,126			13,749			201,542			33,689
OTHER INCOME (EXPENSE)
Interest expense		(5,406	)		(8,448	)		(18,929	)		(24,063	)
Gain (loss) on derivatives		132,710			(2,284	)		(61,986	)		(13,023	)
Other		2,030			366			5,699			4,693
Total other income (expense)		129,334			(10,366	)		(75,216	)		(32,393	)
Income before income taxes and minority interest		147,460			3,383			126,326			1,296
Income tax expense		(52,829	)		(1,173	)		(45,409	)		(450	)
Minority interest, net of tax		(2	)		(1,224	)		(280	)		(3,360	)
NET INCOME (LOSS)	$	94,629		$	986		$	80,637		$	(2,514	)
Net income (loss) per common share:
Basic	$	7.81		$	0.09		$	6.79		$	(0.22	)
Diluted	$	7.79		$	0.09		$	6.48		$	(0.22	)
Weighted average common shares outstanding:
Basic		12,114			11,352			11,874			11,286
Diluted		12,141			11,521			12,437			11,286

CLAYTON WILLIAMS ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
ASSETS
	September 30,			December 31,
	2008			2007
CURRENT ASSETS
Cash and cash equivalents	$	34,532		$	12,344
Accounts receivable:
Oil and gas sales, net		40,617			36,698
Joint interest and other, net		17,507			16,666
Affiliates		549			308
Inventory		24,908			14,348
Deferred income taxes		3,581			3,581
Fair value of derivatives		3,461			7,191
Assets held for sale		-			17,281
Prepaids and other		2,642			3,962
		127,797			112,379
PROPERTY AND EQUIPMENT
Oil and gas properties, successful efforts method		1,486,443			1,374,090
Natural gas gathering and processing systems		17,946			18,404
Contract drilling equipment		91,639			89,956
Other		14,757			14,505
		1,610,785			1,496,955
Less accumulated depreciation, depletion and amortization		(798,732	)		(765,877	)
Property and equipment, net		812,053			731,078
OTHER ASSETS
Debt issue costs, net		6,533			6,963
Fair value of derivatives		626			-
Other		1,795			10,676
		8,954			17,639
	$	948,804		$	861,096
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable:
Trade	$	105,913		$	72,477
Oil and gas sales		26,514			24,806
Affiliates		2,574			1,747
Current maturities of long-term debt		18,750			22,500
Fair value of derivatives		21,378			56,929
Accrued liabilities and other		6,874			10,308
		182,003			188,767
NON-CURRENT LIABILITIES
Long-term debt		379,113			430,175
Deferred income taxes		87,719			44,302
Fair value of derivatives		8,517			-
Other		36,720			37,046
		512,069			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		136,994			121,063
Retained earnings		116,527			35,890
Accumulated other comprehensive income, net of tax		-			2,718
		254,732			160,806
	$	948,804		$	861,096

CLAYTON WILLIAMS ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	94,629		$	986		$	80,637		$	(2,514	)
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Depreciation, depletion and amortization		27,226			23,018			82,473			56,736
Impairment of proved properties		9,985			7,979			9,985			9,023
Exploration costs		43,036			18,802			45,266			53,426
(Gain) loss on sales of property and equipment, net		(3,023	)		(34	)		(44,027	)		8,505
Deferred income taxes		52,633			1,173			44,881			450
Non-cash employee compensation		2,032			500			3,942			1,610
Unrealized (gain) loss on derivatives		(169,551	)		3,927			(23,930	)		15,163
Settlements on derivatives with financing elements		15,471			6,945			40,260			18,950
Amortization of debt issue costs		264			328			1,049			953
Accretion of abandonment obligations		654			627			1,669			1,864
Minority interest, net of tax		2			1,224			280			3,360
Changes in operating working capital:
Accounts receivable		14,661			(4,432	)		(5,001	)		(15,089	)
Accounts payable		(10,772	)		16,881			(10,374	)		15,876
Other		(3,612	)		(5,549	)		(4,054	)		(6,002	)
Net cash provided by operating activities		73,635			72,375			223,056			162,311
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment		(111,142	)		(59,677	)		(229,633	)		(180,112	)
Additions to equipment of Larclay JV		(1,674	)		(3,988	)		(1,683	)		(27,403	)
Proceeds from sales of property and equipment		3,060			51			117,109			1,653
Change in equipment inventory		(4,607	)		4,430			(11,384	)		16,265
Other		3,095			(5,948	)		3,880			(14,217	)
Net cash used in investing activities		(111,268	)		(65,132	)		(121,711	)		(203,814	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt		73,300			7,500			-			48,000
Proceeds from long-term debt of Larclay JV		1,500			-			5,500			8,727
Repayments of long-term debt		-			-			(42,500	)		-
Repayments of long-term debt of Larclay JV		(4,687	)		(6,562	)		(17,812	)		(6,562	)
Proceeds from sale of common stock		31			-			15,915			5,970
Settlements on derivatives with financing elements		(15,471	)		(6,945	)		(40,260	)		(18,950	)
Net cash provided by (used in) financing activities		54,673			(6,007	)		(79,157	)		37,185
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS		17,040			1,236			22,188			(4,318	)
CASH AND CASH EQUIVALENTS
Beginning of period		17,492			8,286			12,344			13,840
End of period	$	34,532		$	9,522		$	34,532		$	9,522

Clayton Williams Energy, Inc.
Summary Production and Price Data
(Unaudited)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007
Average Daily Production:
Natural Gas (Mcf):
Permian Basin		13,536			15,469			14,287			14,861
North Louisiana		16,273			12,117			15,169			6,629
South Louisiana		4,320			25,406			11,682			24,255
Austin Chalk (Trend)		2,271			2,176			2,313			2,211
Cotton Valley Reef Complex		5,832			6,811			5,848			7,383
Other		377			521			500			441
Total		42,609			62,500			49,799			55,780
Oil (Bbls):
Permian Basin		3,983			3,291			3,683			3,174
North Louisiana		392			228			363			137
South Louisiana		90			1,129			393			1,213
Austin Chalk (Trend)		3,659			1,589			3,291			1,628
Other		83			89			88			82
Total		8,207			6,326			7,818			6,234
Natural gas liquids (Bbls):
Permian Basin		174			200			181			207
Austin Chalk (Trend)		233			229			249			250
Other		17			201			74			133
Total		424			630			504			590
Total Production:
Natural Gas (MMcf)		3,920			5,750			13,645			15,228
Oil (MBbls)		755			582			2,142			1,702
Natural gas liquids (MBbls)		39			58			138			161
Gas Equivalents (MMcfe)		8,684			9,590			27,325			26,406
Average Realized Prices (a):
Gas ($/Mcf):	$	9.88		$	6.77		$	9.83		$	6.96
Oil ($/Bbl):	$	116.01		$	72.10		$	111.48		$	63.56
Natural gas liquids ($/Bbl)	$	69.90		$	45.64		$	61.70		$	41.12
Gains (Losses) on settled derivative contracts (a):
($ in thousands, except per unit)
Gas:
Net realized gain (loss)	$	(7,190	)	$	4,802		$	(18,361	)	$	9,784
Per unit produced ($/Mcf)	$	(1.83	)	$	0.84		$	(1.35	)	$	0.64
Oil:
Net realized loss	$	(29,324	)	$	(3,180	)	$	(65,578	)	$	(7,710	)
Per unit produced ($/Bbl)	$	(38.84	)	$	(5.46	)	$	(30.62	)	$	(4.53	)

Clayton Williams Energy, Inc.
Summary of Open Commodity Derivatives
(Unaudited)
The following summarizes information concerning the Company’s net positions in open commodity derivatives applicable to periods subsequent to September 30, 2008.
Swaps:	Gas		Oil
	MMBtu (a)	Price	Bbls	Price
Production Period:
4th Quarter 2008	4,100,000	$ 9.17	400,000	$ 82.21
1st Quarter 2009	2,800,000	$ 8.46	440,000	$ 88.90
2nd Quarter 2009	2,700,000	$ 8.47	420,000	$ 88.12
3rd Quarter 2009	2,600,000	$ 8.48	440,000	$ 87.89
4th Quarter 2009	2,450,000	$ 8.49	425,000	$ 87.29
2010	4,640,000	$ 8.51	840,000	$ 97.75
	19,290,000		2,965,000
(a) One MMBtu equals one Mcf at a Btu factor of 1,000.

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.

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