Clayton Williams Energy, Inc. has reported plans to reduce capital spending for the fourth quarter of 2008 in response to recent adverse changes in market conditions. While product prices have dropped significantly during the past few months, drilling, completion and operating expenses have remained high, resulting in lower than desired profit margins on most of the Company’s previously planned drilling activities. Although the Company has not finalized its plans for capital spending in 2009, spending levels could be significantly lower than 2008, depending on economic conditions.

For the year ended December 31, 2008, the Company now plans to spend approximately $348 million on exploration and development activities, as compared to the previous estimate of approximately $401 million. Most of the spending cuts in 2008 relate to drilling in the Permian Basin and North Louisiana.

The Company also provided an update on its exploration and development activities by area.

The Company is currently drilling the Sunny Unit #1, a 20,000-foot exploratory well in Burleson County, Texas targeting the deep Bossier formation. The Sunny Unit #1 is being drilled on a 3D-defined prospect that is on trend to and 20 miles southwest of the Company’s Lee Fazzino #2 well which has produced 34.6 Bcf of natural gas since first production in 2001. The well is currently drilling at a vertical depth of 10,500 feet. To date, the Company has incurred drilling costs of approximately $5.4 million on this well (100% working interest).

Prior to drilling the Sunny Unit #1, the Company had drilled two other wells targeting the deep Bossier sands in East Texas: the Big Bill Simpson #1, a 19,500-foot exploratory well in Leon County (70% working interest), and the Margarita #1, an 18,300-foot exploratory well in Robertson County (100% working interest). The Big Bill Simpson #1 is currently producing at minimal rates, and the Margarita #1 is currently producing at a rate of approximately 400 Mcf of gas per day from an upper Bossier sand. Based on geological and engineering evaluations, the Company will record provisions for dry hole costs and impairment expense totaling approximately $50 million during the third quarter of 2008 in connection with these wells and other acreage impairments in this area.

The Company is currently drilling the Claudia’s Education Trust 33-1, an 18,000-foot exploratory well on its Winnsboro prospect in Richland Parish targeting the deep Bossier formation. This well is a 1,200-foot offset to the previously drilled David Barton #1 which had to be abandoned due to adverse drilling conditions. The well is currently drilling at a vertical depth of 11,900 feet. To date, the Company has incurred drilling costs of approximately $9.8 million on this well (100% working interest).

As previously reported, the Company has entered into an exploration agreement with Brigham Exploration Company (NASDAQ:BEXP) covering six of the Company’s exploratory prospects in South Louisiana. Under the agreement, Brigham bears 85% of all drilling costs incurred to casing point and 50% of all subsequent costs to earn a 50% working interest in the wells. To date, Brigham has drilled four wells, three of which are productive. Brigham will begin drilling the fifth obligation well in the fourth quarter of 2008 and a sixth and final well in the first half of 2009.

The Company plans to participate in the drilling of a 12,000-foot exploratory well in Sanpete County targeting the oil-prone Navajo sandstone formation in the central Overthrust play. Drilling operations are expected to begin in the fourth quarter of 2008.

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