Clayton Williams Updates on Drilling in Permian Basin, Austin Chalk

Clayton Williams has provided an update on its ongoing developmental drilling programs in the Permian Basin and Austin Chalk, two of its core oil-producing areas.

The Company reported it has taken significant steps to create drilling efficiencies and control drilling and completion costs. The Company has:

  • Locked-in unit costs for approximately 90% of the estimated services to be provided by third party vendors for two years;
  • Significantly improved drilling times by operating and managing its own drilling rigs;
  • Purchased pipe for more than 120 wells at major discounts; and
  • Hedged most of its existing 2010 oil production at an average price of $76.50 per barrel.

The Company plans to move one of the Andrews County rigs to Ward County to begin a multi-well Bone Springs drilling program and plans to add a third Desta drilling rig to the Austin Chalk area in early 2010.

The Company recently entered into a derivative contract with JPMorgan Chase Bank, N.A. covering approximately 1.2 million barrels of oil production for the calendar year of 2010 at a fixed price of $81.75 per barrel. This transaction raises the combined total of hedged oil production for 2010 to approximately 2.2 million barrels at an average price of $76.50 per barrel.

Clayton W. Williams, Jr., President said, "I am very encouraged with the results of our developmental drilling programs in the Permian Basin and the Austin Chalk areas. I am convinced that the steps we have taken to control drilling and completion costs and to stabilize product prices through effective hedge transactions will contribute favorably to the ultimate success of these programs."

The Company also updated its estimates for capital spending for the remainder of 2009. The Company now plans to spend approximately $131.1 million on exploration and development activities for fiscal 2009, as compared to the June 2009 estimate of approximately $113.8 million. The table below summarizes, by area, the Company’s actual expenditures for exploration and development activities for the first nine months of 2009 and its planned expenditures for the year ending December 31, 2009.