Clayton Williams Energy (CWEI) 8-K Clayton Williams Energy Announces 2009 Financial Results and Year-End Reserves

Exhibit 99.1

Clayton Williams Energy Announces 2009 Financial Results and Year-End Reserves

MIDLAND, Texas--(BUSINESS WIRE)--March 10, 2010--Clayton Williams Energy, Inc. (the “Company”) (NASDAQ: CWEI) today reported its financial results for the quarter and year ended December 31, 2009, along with information about its proved oil and gas reserves as of December 31, 2009.

Financial Results for the Fiscal Year 2009

Net loss attributable to Company stockholders for fiscal 2009 was $117.4 million, or $9.67 per share, as compared to net income of $140.5 million, or $11.67 per share, for fiscal 2008. Cash flow from operations for 2009 was $104.7 million as compared to $382 million for 2008. The key factors affecting the comparability of the two years were:

• Oil and gas sales declined $221.6 million in 2009 versus 2008. Price variances accounted for $195.4 million of the decrease and production variances accounted for a decrease of $26.2 million. Average realized commodity prices in 2009 were significantly lower than the record-high prices realized by the Company in 2008. Average realized oil prices were $57.37 per barrel in 2009 versus $97.35 per barrel in 2008, and average realized gas prices were $4.35 per Mcf in 2009 versus $9.02 per Mcf in 2008. Most of the 7% decline in oil and gas production on barrel of oil equivalent (“BOE”) basis resulted from the sale of certain South Louisiana properties in April 2008.
• Loss on derivatives for 2009 was $17.4 million ($15.9 million realized loss on settled contracts and $1.5 million non-cash mark-to-market loss) versus a gain in 2008 of $74.7 million ($25 million realized gain on settled contracts and $49.7 million non-cash mark-to-market gain). Sharp declines in commodity prices late in 2008 caused the fair value of the Company’s derivative positions to escalate significantly. In December 2008, the Company elected to terminate all of its then-existing derivative positions for cash proceeds of $99.3 million. See accompanying tables for additional information about the Company’s accounting for derivatives.

• Non-cash impairments of property and equipment were $59.1 million in 2009 versus $12.9 million in 2008. The 2009 impairment included $32.1 million related to drilling rigs classified as assets held for sale in April 2009 and $27 million related to oil and gas properties that were impaired due to downgrades in proved reserves. See “Reserves.”

Financial Results for the Fourth Quarter of 2009

Net loss attributable to Company stockholders for the fourth quarter of 2009 (“4Q09”) was $42.9 million, or $3.53 per share, as compared to net income of $59.9 million, or $4.93 per share, for the fourth quarter of 2008 (“4Q08”). Cash flow from operations for 4Q09 was $35.6 million as compared to $158.9 million for 4Q08. The key factors affecting the comparability of the two quarters were:

• Oil and gas sales declined $7.5 million in 4Q09 versus 4Q08. Production variances accounted for a $12.3 million decrease, and price variances accounted for a $4.8 million increase. Oil production declined 9% and gas production declined 27% in 4Q09 versus 4Q08. The Company significantly reduced capital spending during the first half of fiscal 2009 in response to low operating margins caused by the recession that began in 2008. As a result, production from new wells was not sufficient to offset normal declines in existing production. Average realized oil prices were $72.78 per barrel in 4Q09 versus $59.63 per barrel in 4Q08, and average realized gas prices were $5.20 per Mcf in 4Q09 versus $6.75 per Mcf in 4Q08.
• Loss on derivatives for 4Q09 was $2.9 million ($9.7 million realized loss on settled contracts net of $6.8 million non-cash mark-to-market gain) versus a gain in 2008 of $136.7 million ($110.9 million realized gain on settled contracts and $25.8 million non-cash mark-to-market gain). The gains reported in 4Q08 resulted from sharp declines in commodity prices late in 2008 which caused the fair value of the Company’s derivative positions to escalate significantly. See accompanying tables for additional information about the Company’s accounting for derivatives.
• Non-cash impairments of proved properties were $27 million in 4Q09 versus $2.9 million in 4Q08. The 4Q09 impairment related to oil and gas properties that were impaired due to downgrades in proved reserves. See “Reserves.”

Reserves

The Company reported that its total estimated proved oil and gas reserves as of December 31, 2009 were 33.6 million barrels of oil equivalent (MMBOE), consisting of 21 million barrels of oil and NGL and 76.1 Bcf of natural gas. Proved developed reserves were 28.6 MMBOE, or 85% of total proved reserves. The present value of estimated future net cash flows from total proved reserves, before deductions for estimated future income taxes and asset retirement obligations, discounted at 10%, (referred to as “PV-10”) totaled $460.4 million. For a reconciliation of PV-10 (a non-GAAP measure) to standardized measure of discounted future net cash flows, see accompanying tables.

The following table summarizes the changes in proved reserves during 2009 on an MMBOE basis.

	MMBOE
Total proved reserves, December 31, 2008	38.1
Extensions and discoveries	3.7
Revisions	(2.4	)
Production	(5.8	)
Total proved reserves, December 31, 2009	33.6

The Company replaced 63% of the 5.8 MMBOE produced in 2009 through extensions and discoveries, most of which were derived from drilling activities in the Permian Basin and Austin Chalk (Trend) despite curtailments of spending during the first half of 2009 due to unfavorable operating margins caused by the 2008 recession. Net downward revisions of 2.4 MMBOE were primarily due to the reclassification of certain Permian Basin reserves from proved undeveloped to probable based on changes required by the SEC modernization rule.

The above reserve estimates were computed in accordance with the SEC’s final rule on the modernization of oil and gas reporting, which the Company adopted effective December 31, 2009. The commodity prices used to estimate the Company’s proved reserves and their related present value of future net cash flows were based on the 12-month unweighted average of the first-day-of-the-month price received by the Company in 2009, resulting in average oil and NGL prices of $54.81 per Bbl and average gas prices of $3.71 per Mcf.

Commodity prices have a significant impact on proved oil and gas reserves and their related PV-10. In addition to the reserve estimates based on the SEC pricing guidelines, the Company has reported its proved reserves under two alternative pricing cases. The year-end pricing case is based on spot prices in effect at December 31, 2009 and is comparable to pricing guidelines under the old SEC rules. The futures pricing case is based on the five-year futures curve as of December 31, 2009.

	Average Prices				Proved Reserves
	Oil		Gas			Natural	Total Oil
Pricing	Price		Price		Oil	Gas	Equivalents
Cases	($ per Bbl)		($ per Mcf)		(MBbls)	(MMcf)	(MBOE)	PV-10 Value
								(In thousands)
SEC	$	54.81	$	3.71	20,953	76,103	33,637	$	460,386
Year-end	$	70.98	$	5.61	23,117	84,389	37,182	$	741,427
Futures	$	79.99	$	6.38	22,040	82,019	35,710	$	832,292

Scheduled Conference Call

The Company will host a conference call to discuss these results and other forward-looking items today, March 10th at 1:30 pm CT (2:30 pm ET). The dial-in conference number is: 800-901-5213, passcode 98404354. The replay will be available for one week at 888-286-8010, passcode 35170722.

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.

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 natural gas and liquids 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 recession 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.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share)
		Three Months Ended						Year Ended
		December 31,						December 31,
		2009			2008			2009			2008
REVENUES
	Oil and gas sales	$	74,900		$	82,419		$	242,338		$	463,964
	Natural gas services		1,568			1,857			6,146			10,926
	Drilling rig services		-			6,074			6,681			46,124
	Gain on sales of assets		48			56			796			44,503
	Total revenues		76,516			90,406			255,961			565,517
COSTS AND EXPENSES
	Production		19,671			23,689			76,288			89,054
	Exploration:
	Abandonments and impairments		37,732			34,846			78,798			80,112
	Seismic and other		1,633			11,455			8,189			22,685
	Natural gas services		1,382			1,595			5,348			10,060
	Drilling rig services		(53	)		6,986			10,848			37,789
	Depreciation, depletion and amortization		36,954			38,069			129,658			120,542
	Impairment of property and equipment		27,072			2,897			59,140			12,882
	Accretion of abandonment obligations		830			686			3,120			2,355
	General and administrative		5,919			7,742			20,715			25,635
	Loss on sales of assets and impairment of inventory		2,148			1,702			5,282			2,122
	Total costs and expenses		133,288			129,667			397,386			403,236
	Operating income (loss)		(56,772	)		(39,261	)		(141,425	)		162,281
OTHER INCOME (EXPENSE)
	Interest expense		(6,058	)		(6,065	)		(23,758	)		(24,994	)
	Gain (loss) on derivatives		(2,879	)		136,729			(17,416	)		74,743
	Other		892			840			2,543			6,539
	Total other income (expense)		(8,045	)		131,504			(38,631	)		56,288
Income (loss) before income taxes			(64,817	)		92,243			(180,056	)		218,569
Income tax benefit (expense)			21,925			(31,918	)		64,096			(77,327	)
NET INCOME (LOSS)			(42,892	)		60,325			(115,960	)		141,242
	Less income attributable to noncontrolling interest, net of tax		-			(428	)		(1,455	)		(708	)
NET INCOME (LOSS) attributable to Clayton Williams Energy, Inc.		$	(42,892	)	$	59,897		$	(117,415	)	$	140,534
Net income (loss) per common share attributable to
Clayton Williams Energy, Inc. stockholders:
	Basic	$	(3.53	)	$	4.94		$	(9.67	)	$	11.78
	Diluted	$	(3.53	)	$	4.93		$	(9.67	)	$	11.67
Weighted average common shares outstanding:
	Basic		12,144			12,114			12,138			11,932
	Diluted		12,144			12,148			12,138			12,039

CLAYTON WILLIAMS ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
	December 31,			December 31,
	2009			2008
	(Unaudited)
CURRENT ASSETS
Cash and cash equivalents	$	14,013		$	41,199
Accounts receivable:
Oil and gas sales		28,721			26,009
Joint interest and other, net		6,669			14,349
Affiliates		624			227
Inventory		43,068			20,052
Deferred income taxes		1,362			3,637
Assets held for sale		7,411			-
Prepaids and other		1,729			20,011
		103,597			125,484
PROPERTY AND EQUIPMENT
Oil and gas properties, successful efforts method		1,579,664			1,526,473
Natural gas gathering and processing systems		17,816			17,816
Contract drilling equipment		41,533			91,151
Other		16,550			14,954
		1,655,563			1,650,394
Less accumulated depreciation, depletion and amortization		(985,517	)		(840,366	)
Property and equipment, net		670,046			810,028
OTHER ASSETS
Debt issue costs, net		4,874			6,225
Fair value of derivatives		4,427			-
Other		1,660			1,672
		10,961			7,897
	$	784,604		$	943,409
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable:
Trade	$	47,211		$	67,189
Oil and gas sales		18,063			24,702
Affiliates		1,097			1,627
Current maturities of long-term debt		-			18,750
Fair value of derivatives		5,907			-
Accrued liabilities and other		11,995			10,609
		84,273			122,877
NON-CURRENT LIABILITIES
Long-term debt		395,000			347,225
Deferred income taxes		54,065			120,414
Other		38,991			32,617
		488,056			500,256
EQUITY
Preferred stock, par value $.10 per share		-			-
Common stock, par value $.10 per share		1,215			1,212
Additional paid-in capital		152,051			137,046
Retained earnings		59,009			176,424
Total Clayton Williams Energy, Inc. stockholders' equity		212,275			314,682
Noncontrolling interest, net of tax		-			5,594
Total equity		212,275			320,276
	$	784,604		$	943,409

CLAYTON WILLIAMS ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
	Three Months Ended						Year Ended
	December 31,						December 31,
	2009			2008			2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(42,892	)	$	60,325		$	(115,960	)	$	141,242
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation, depletion and amortization		36,954			38,069			129,658			120,542
Impairment of property and equipment		27,072			2,897			59,140			12,882
Exploration costs		37,732			34,846			78,798			80,112
(Gain) loss on sales of assets and impairment of inventory, net		2,100			1,646			4,486			(42,381	)
Deferred income tax expense (benefit)		(22,049	)		32,434			(64,220	)		77,315
Non-cash employee compensation		481			1,892			1,434			5,834
Unrealized (gain) loss on derivatives		(6,834	)		(25,808	)		1,480			(49,738	)
Settlements on derivatives with financing elements		-			3,226			-			43,486
Amortization of debt issue costs		295			305			1,458			1,354
Accretion of abandonment obligations		830			686			3,120			2,355
Changes in operating working capital:
Accounts receivable		(8,206	)		18,088			4,571			13,087
Accounts payable		6,485			5,428			(19,590	)		(4,946	)
Other		3,595			(15,110	)		20,336			(19,164	)
Net cash provided by operating activities		35,563			158,924			104,711			381,980
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment		(43,300	)		(120,473	)		(142,623	)		(351,789	)
Proceeds from sales of assets		46			117			729			117,226
Change in equipment inventory		(807	)		3,137			(26,675	)		(8,247	)
Other		80			55			(29	)		3,935
Net cash used in investing activities		(43,981	)		(117,164	)		(168,598	)		(238,875	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt		-			2,000			75,900			7,500
Repayments of long-term debt		-			(33,888	)		(39,375	)		(94,200	)
Proceeds from exercise of stock options		24			21			176			15,936
Settlements on derivatives with financing elements		-			(3,226	)		-			(43,486	)
Net cash provided by (used in) financing activities		24			(35,093	)		36,701			(114,250	)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS		(8,394	)		6,667			(27,186	)		28,855
CASH AND CASH EQUIVALENTS
Beginning of period		22,407			34,532			41,199			12,344
End of period	$	14,013		$	41,199		$	14,013		$	41,199

CLAYTON WILLIAMS ENERGY, INC.
COMPUTATION OF EBITDAX
EBITDAX is presented as a supplemental non-GAAP financial measure because of its wide acceptance by financial analysts, investors, debt holders, banks, rating agencies and other financial statement users as an indication of an entity's ability to meet its debt service obligations and to internally fund its exploration and development activities.
The Company defines EBITDAX as net income (loss) before interest expense, income taxes, exploration costs, (gain) loss on sales of assets and impairment of inventory and all non-cash items in the Company's statements of operations, including depreciation, depletion and amortization, impairment of property and equipment, accretion of abandonment obligations, certain employee compensation and changes in fair value of derivatives. EBITDAX is not an alternative to net income (loss) or cash flow from operating activities, or any other measure of financial performance presented in conformity with GAAP.
The following table reconciles net income (loss) to EBITDAX:
	Three Months Ended						Year Ended
	December 31,						December 31,
	2009			2008			2009			2008
	(Unaudited and in thousands)
Net income (loss)	$	(42,892	)	$	60,325		$	(115,960	)	$	141,242
Interest expense		6,058			6,065			23,758			24,994
Income tax (benefit) expense		(21,925	)		31,918			(64,096	)		77,327
Exploration:
Abandonments and impairments		37,732			34,846			78,798			80,112
Seismic and other		1,633			11,455			8,189			22,685
(Gain) loss on sales of assets and impairment of inventory		2,100			1,646			4,486			(42,381	)
Depreciation, depletion and amortization		36,954			38,069			129,658			120,542
Impairment of property and equipment		27,072			2,897			59,140			12,882
Accretion of abandonment obligations		830			686			3,120			2,355
Non-cash employee compensation		481			1,892			1,434			5,834
Non-cash changes in fair value of derivatives		(6,834	)		(25,808	)		1,480			(49,738	)
	$	41,209		$	163,991		$	130,007		$	395,854

Clayton Williams Energy, Inc.
Summary Production and Price Data
(Unaudited)
	Three Months Ended					Year Ended
	December 31,					December 31,
	2009			2008		2009			2008
Average Daily Production:
Oil (Bbls):
Permian Basin		4,534			4,184		4,142			3,821
Austin Chalk (Trend)		2,476			3,630		2,734			3,384
North Louisiana		182			565		238			415
South Louisiana		722			334		649			378
Other		86			91		86			90
Total		8,000			8,804		7,849			8,088
Natural Gas (Mcf):
Permian Basin		13,499			14,288		14,739			14,326
Austin Chalk (Trend)		2,204			2,496		2,485			2,367
North Louisiana		9,302			24,252		11,325			17,500
South Louisiana		8,398			6,477		9,851			10,402
Cotton Valley Reef Complex		3,872			5,376		3,960			5,745
Other		1,638			459		1,336			490
Total		38,913			53,348		43,696			50,830
Natural gas liquids (Bbls):
Permian Basin		237			190		241			183
Austin Chalk (Trend)		267			252		288			250
North Louisiana		23			18		22			7
South Louisiana		173			7		98			49
Other		7			11		9			10
Total		707			478		658			499
Total Production:
Oil (MBbls)		736			810		2,865			2,952
Natural Gas (MMcf)		3,580			4,908		15,949			18,553
Natural gas liquids (MBbls)		65			44		240			182
Total (MBOE)		1,398			1,672		5,763			6,226
Average Realized Prices (a):
Oil ($/Bbl)	$	72.78		$	59.63	$	57.37		$	97.35
Gas ($/Mcf)	$	5.20		$	6.75	$	4.35		$	9.02
Natural gas liquids ($/Bbl)	$	41.97		$	31.70	$	30.83		$	54.45
Gain (Loss) on settled derivative contracts (a):
($ in thousands, except per unit)
Oil:
Net realized gain (loss)	$	(12,013	)	$	81,139	$	(25,713	)	$	15,560
Per unit produced ($/Bbl)	$	(16.32	)	$	100.17	$	(8.97	)	$	5.27
Gas:
Net realized gain	$	2,299		$	30,124	$	9,777		$	11,764
Per unit produced ($/Mcf)	$	0.64		$	6.14	$	0.61		$	0.63

(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 2009 or 2008 derivative contracts as cash flow hedges. This means that the Company's derivatives for 2009 and 2008 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.

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 December 31, 2009.
	Oil		Gas
Swaps:	Bbls	Price	MMBtu (a)	Price
Production Period:
1st Quarter 2010	628,000	$ 76.70	2,280,000	$ 6.80
2nd Quarter 2010	574,000	$ 76.60	1,830,000	$ 6.80
3rd Quarter 2010	522,000	$ 76.40	1,750,000	$ 6.80
4th Quarter 2010	480,000	$ 76.24	1,680,000	$ 6.80
2011	891,000	$ 83.80	6,420,000	$ 7.07
	3,095,000		13,960,000
(a) One MMBtu equals one Mcf at a Btu factor of 1,000.

CLAYTON WILLIAMS ENERGY, INC.
PROVED RESERVES
(Unaudited)
The following table sets forth our estimated quantities of proved reserves as of December 31, 2009 and 2008, all of which are located in the United States.
	Proved Reserves
		Natural	Total Oil
	Oil (a)	Gas	Equivalents (b)
Reserve Category	(MBbls)	(MMcf)	(MBOE)
December 31, 2009:
Developed	16,779	70,840	28,586
Undeveloped	4,174	5,263	5,051
Total Proved	20,953	76,103	33,637
December 31, 2008:
Developed	16,815	87,340	31,372
Undeveloped	3,961	16,589	6,726
Total Proved	20,776	103,929	38,098
(a) Oil reserves include crude oil, condensate and natural gas liquids ("NGL").
(b) Natural gas reserves have been converted to oil equivalents at the rate of six Mcf to one barrel of oil.

The present value of future net cash flows from proved reserves, before deductions for estimated future income taxes and asset retirement obligations, discounted at 10% ("PV-10 Value"), totaled $460.4 million at December 31, 2009, as compared to $511.7 million at December 31, 2008. Commodity prices used at December 31, 2009 were based on the 12-month weighted average of the first-day-of-the-month prices from January 2009 through December 2009, which for the Company averaged $54.81 per barrel of oil and NGL and $3.71 per Mcf of natural gas. Commodity prices used for the 2008 estimates were based on year-end 2008 prices of $42.03 per barrel of oil and NGL and $5.90 per Mcf of natural gas.
PV-10 Value is a non-GAAP financial measure that we believe is useful as a supplemental disclosure to the standardized measure of discounted future net cash flows, a GAAP financial measure. While the standardized measure of discounted future net cash flows is dependent on the unique tax situation of each entity, PV-10 Value is based on prices and discount factors that are consistent for all entities and can be used within the industry and by securities analysts to evaluate proved reserves on a more comparable basis. The following table reconciles PV-10 Value to standardized measure of discounted future net cash flows.
	As of December 31,
	2009			2008
	(In thousands)
PV-10 Value, a non-GAAP financial measure	$	460,386		$	511,661
Less present value, discounted at 10%, of:
Estimated asset retirement obligations		(29,338	)		(24,263	)
Estimated future income taxes		(66,775	)		(82,232	)
Standardized measure of discounted future net cash flows, a GAAP financial measure	$	364,273		$	405,166

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