Clayton Williams Closes Sale of Interests in Breton Sound Area

Clayton Williams has closed the sale of leasehold interests in two leases in the Breton Sound area in the Gulf of Mexico (offshore Louisiana) to an undisclosed buyer on August 24, 2005. The Company received net proceeds of approximately $21 million, after post-effective closing adjustments.

The assets sold include a 10% non-operated working interest in four wells and a production platform. The Company's net daily production from these wells for the six months ended June 30, 2005 averaged approximately 72 barrels of oil and 2.8 MMcf of gas. The Company will record a gain on this sale of approximately $16 million during the third quarter of 2005.

The Company also reported that about 95% of its Louisiana production has been suspended due to the area evacuation brought on by Hurricane Katrina. Daily production, net to the Company's interest, of approximately 10,000 Mcf of gas and 1,100 barrels of oil is being affected by this shut-in. Louisiana production accounts for approximately 25% of the Company's oil and gas production.

"We are very concerned about the potential disruption to our business due to Hurricane Katrina," said Clayton W. Williams, President and CEO of Clayton Williams Energy, Inc. "Many of our production facilities in this region were in the path of Katrina and may have sustained damage. A storm of this magnitude can cause a lot of damage to production platforms and pipeline infrastructures. And as we learned with Hurricane Ivan last year, the availability of field services and equipment will very likely be limited. Any significant delays in restoring production could adversely affect our results of operations." Mr. Williams added that the Company will report on the extent of damage and the impact on the Company's production and drilling activities as soon as a comprehensive assessment can be made.