----

| (Mark One) |                                             |   |
|------------|--------------------------------------------------|--------|
| x          | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) |   |
|       | OF THE SECURITIES EXCHANGE ACT OF 1934           |   |
|       | For the quarterly period ended March 31, 2010    |   |

|  ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)                                                                                                                                                                       |   |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   | OF THE SECURITIES EXCHANGE ACT OF 1934                                                                                                                                                                                  |   |
|   | For the transition period from                 to                 |   |
|   | Commission File Number 001-10924                                                                                                                                                                                        |   |

| CLAYTON WILLIAMS ENERGY, INC.                          |
|--------------------------------------------------------|
| (Exact name of registrant as specified in its charter) |

| Delaware                                                       |   | 75-2396863                           |
|----------------------------------------------------------------|--------|--------------------------------------|
| (State or other jurisdiction of incorporation or organization) |   | (I.R.S. Employer Identification No.) |
| Six Desta Drive - Suite 6500                                   |   |                                 |
| Midland, Texas                                                 |   | 79705-5510                           |
| (Address of principal executive offices)                       |   | (Zip code)                           |
| Registrant’s telephone number, including area code:      |   | (432) 682-6324                       |

| Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                     | x Yes |   |  ̈ No |   |

| Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                        |  ̈ Yes |   |  ̈ No |   |

| Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                           |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                           | Large accelerated filer   ̈ |   | Accelerated filer  x |   |
|                                                                                                                                                                                                                                                                                                                                           | Non-accelerated filer   ̈ |   | Smaller reporting company  ̈ |   |

| Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). |
|------------------------------------------------------------------------------------------------------------------|
|                                                                                                             |  ̈ Yes |   | x No |   |

| There were 12,145,536 shares of Common Stock, $.10 par value, of the registrant outstanding as of May 7, 2010. |
|---------------------------------------------------------------------------------------------------------------------|

----

| PART I.  FINANCIAL INFORMATION |
|------------------------------------------|
|                                     |   | Page |
|                                     |   |   |   |
| Item 1.                                  | Financial Statements |   |   |
|                                     |   |   |   |
|                                     | Consolidated Balance Sheets as of March 31, 2010 |   |   |
|                                     | and December 31, 2009                                                                                                 | 3 |   |
|                                     |   |   |   |
|                                     | Consolidated Statements of Operations for the three months |   |   |
|                                     | ended March 31, 2010 and 2009                                                                                                 | 5 |   |
|                                     |   |   |   |
|                                     | Consolidated Statement of Stockholders’ Equity for the three months |   |   |
|                                     | ended March 31, 2010                                                                                                 | 6 |   |
|                                     |   |   |   |
|                                     | Consolidated Statements of Cash Flows for the three months |   |   |
|                                     | ended March 31, 2010 and 2009                                                                                                 | 7 |   |
|                                     |   |   |   |
|                                     | Notes to Consolidated Financial Statements | 8 |   |
|                                     |   |   |   |
| Item 2.                                  | Management’s Discussion and Analysis of Financial |   |   |
|                                     | Condition and Results of Operations                                                                                                 | 21 |   |
|                                     |   |   |   |
| Item 3.                                  | Quantitative and Qualitative Disclosures About Market Risks | 34 |   |
|                                     |   |   |   |
| Item 4.                                  | Controls and Procedures | 36 |   |
|                                     |   |   |   |
|                                     |   |   |   |
| PART II.  OTHER INFORMATION    |
| Item 1A.                                 | Risk Factors | 37 |   |
|                                     |   |   |   |
| Item 6.                                  | Exhibits | 37 |   |
|                                     |   |   |   |
|                                     | Signatures | 39 |   |

----

Item 

CLAYTON 

| ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | March 31, |   |   | December 31, |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 2010 |   |   | 2009 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | (Unaudited) |   |   |   |   |
| CURRENT ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |   |   |   |   |   |
| Cash and cash equivalents                                                                                                              |   | $ | 14,949 |   |   | $ | 14,013 |   |
| Accounts receivable:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |
| Oil and gas sales                                                                                                                                               |   |   | 31,736 |   |   |   | 28,721 |   |
| Joint interest and other, net                                                                                                                                   |   |   | 5,397 |   |   |   | 6,669 |   |
| Affiliates                                                                                                                                                      |   |   | 349 |   |   |   | 624 |   |
| Inventory                                                                                                                              |   |   | 39,972 |   |   |   | 43,068 |   |
| Deferred income taxes                                                                                                                  |   |   | 915 |   |   |   | 1,362 |   |
| Fair value of derivatives                                                                                                              |   |   | 16,245 |   |   |   | - |   |
| Assets held for sale                                                                                                                   |   |   | 7,411 |   |   |   | 7,411 |   |
| Prepaids and other                                                                                                                     |   |   | 5,766 |   |   |   | 1,729 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   | 122,740 |   |   |   | 103,597 |   |
| PROPERTY AND EQUIPMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| Oil and gas properties, successful efforts method                                                                                      |   |   | 1,631,207 |   |   |   | 1,579,664 |   |
| Natural gas gathering and processing systems                                                                                           |   |   | 17,891 |   |   |   | 17,816 |   |
| Contract drilling equipment                                                                                                            |   |   | 44,186 |   |   |   | 41,533 |   |
| Other                                                                                                                                  |   |   | 17,703 |   |   |   | 16,550 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   | 1,710,987 |   |   |   | 1,655,563 |   |
| Less accumulated depreciation, depletion and amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   | (1,012,613 | ) |   |   | (985,517 | ) |
| Property and equipment, net                                                                                                                                     |   |   | 698,374 |   |   |   | 670,046 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |
| OTHER ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |
| Debt issue costs, net                                                                                                                  |   |   | 4,539 |   |   |   | 4,874 |   |
| Fair value of derivatives                                                                                                              |   |   | 8,049 |   |   |   | 4,427 |   |
| Other                                                                                                                                  |   |   | 1,774 |   |   |   | 1,660 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   | 14,362 |   |   |   | 10,961 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | $ | 835,476 |   |   | $ | 784,604 |   |

----

| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | March 31, |   |   | December 31, |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | 2010 |   |   | 2009 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | (Unaudited) |   |   |   |   |
| CURRENT LIABILITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |   |   |   |   |
| Accounts payable:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   |   |   |   |   |
| Trade                                                                                                                                       |   | $ | 38,047 |   |   | $ | 47,211 |   |
| Oil and gas sales                                                                                                                           |   |   | 16,281 |   |   |   | 18,063 |   |
| Affiliates                                                                                                                                  |   |   | 1,377 |   |   |   | 1,097 |   |
| Fair value of derivatives                                                                                          |   |   | 14,915 |   |   |   | 5,907 |   |
| Accrued liabilities and other                                                                                      |   |   | 9,649 |   |   |   | 11,995 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   | 80,269 |   |   |   | 84,273 |   |
| NON-CURRENT LIABILITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |
| Long-term debt                                                                                                     |   |   | 421,000 |   |   |   | 395,000 |   |
| Deferred income taxes                                                                                              |   |   | 62,797 |   |   |   | 54,065 |   |
| Fair value of derivatives                                                                                          |   |   | 2,257 |   |   |   | - |   |
| Other                                                                                                              |   |   | 40,203 |   |   |   | 38,991 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   | 526,257 |   |   |   | 488,056 |   |
| COMMITMENTS AND CONTINGENCIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
| STOCKHOLDERS’ EQUITY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |   |   |   |   |   |   |   |
| Preferred stock, par value $.10 per share, authorized – 3,000,000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |
|  shares; none issued                                                                                          |   |   | - |   |   |   | - |   |
| Common stock, par value $.10 per share, authorized – 30,000,000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |   |   |   |   |   |   |
|  shares; issued and outstanding – 12,145,536 shares in 2010                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |
|  and 2009                                                                                                     |   |   | 1,215 |   |   |   | 1,215 |   |
| Additional paid-in capital                                                                                         |   |   | 152,051 |   |   |   | 152,051 |   |
| Retained earnings                                                                                                  |   |   | 75,684 |   |   |   | 59,009 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |   | 228,950 |   |   |   | 212,275 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | $ | 835,476 |   |   | $ | 784,604 |   |

----

CLAYTON 

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | Three Months Ended |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | March 31,          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | 2010               |   |   | 2009 |   |
| REVENUES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |               |   |   |   |   |
| Oil and gas sales                                                                                                                                            |   | $                  | 79,042 |   |   | $ | 50,796 |   |
| Natural gas services                                                                                                                                         |   |               | 503    |   |   |   | 1,584 |   |
| Drilling rig services                                                                                                                                        |   |               | -      |   |   |   | 5,219 |   |
| Gain on sales of assets                                                                                                                                      |   |               | 286    |   |   |   | 183 |   |
| Total revenues                                                                                                                                                                        |   |               | 79,831 |   |   |   | 57,782 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |               |   |   |   |   |   |   |
| COSTS AND EXPENSES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |               |   |   |   |   |   |   |
| Production                                                                                                                                                   |   |               | 20,927 |   |   |   | 19,063 |   |
| Exploration:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |               |   |   |   |   |   |   |
| Abandonments and impairments                                                                                                                                                          |   |               | 2,878  |   |   |   | 12,412 |   |
| Seismic and other                                                                                                                                                                     |   |               | 1,660  |   |   |   | 4,270 |   |
| Natural gas services                                                                                                                                         |   |               | 348    |   |   |   | 1,411 |   |
| Drilling rig services                                                                                                                                        |   |               | 662    |   |   |   | 7,086 |   |
| Depreciation, depletion and amortization                                                                                                                     |   |               | 25,612 |   |   |   | 36,465 |   |
| Accretion of abandonment obligations                                                                                                                         |   |               | 647    |   |   |   | 718 |   |
| General and administrative                                                                                                                                   |   |               | 6,224  |   |   |   | 4,528 |   |
| Loss on sales of assets and impairment of inventory                                                                                                          |   |               | -      |   |   |   | 3,449 |   |
| Total costs and expenses                                                                                                                                                              |   |               | 58,958 |   |   |   | 89,402 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |               |   |   |   |   |   |   |
| Operating income (loss)                                                                                                                                                               |   |               | 20,873 |   |   |   | (31,620 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |               |   |   |   |   |   |   |
| OTHER INCOME (EXPENSE)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |               |   |   |   |   |   |   |
| Interest expense                                                                                                                                             |   |               | (6,109 | ) |   |   | (5,438 | ) |
| Gain on derivatives                                                                                                                                          |   |               | 10,301 |   |   |   | 2,510 |   |
| Other                                                                                                                                                        |   |               | 828    |   |   |   | 901 |   |
| Total other income (expense)                                                                                                                                                          |   |               | 5,020  |   |   |   | (2,027 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |               |   |   |   |   |   |   |
| Income (loss) before income taxes                                                                                                   |   |               | 25,893 |   |   |   | (33,647 | ) |
| Income tax (expense) benefit                                                                                                        |   |               | (9,218 | ) |   |   | 12,378 |   |
| NET INCOME (LOSS)                                                                                                                   |   |               | 16,675 |   |   |   | (21,269 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |               |   |   |   |   |   |   |
| Less income attributable to noncontrolling interest, net of tax                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |               | -      |   |   |   | (1,046 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |               |   |   |   |   |   |   |
| NET INCOME (LOSS) attributable to Clayton Williams Energy, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | $                  | 16,675 |   |   | $ | (22,315 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |               |   |   |   |   |   |   |
| Net income (loss) per common share attributable to                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |               |   |   |   |   |   |   |
|   Clayton Williams Energy, Inc. stockholders:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |               |   |   |   |   |   |   |
| Basic                                                                                                                                                        |   | $                  | 1.37   |   |   | $ | (1.84 | ) |
| Diluted                                                                                                                                                      |   | $                  | 1.37   |   |   | $ | (1.84 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |               |   |   |   |   |   |   |
| Weighted average common shares outstanding:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |               |   |   |   |   |   |   |
| Basic                                                                                                                                                        |   |               | 12,146 |   |   |   | 12,122 |   |
| Diluted                                                                                                                                                      |   |               | 12,146 |   |   |   | 12,122 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |               |   |   |   |   |   |   |

----

CLAYTON 

|              |   | Common Stock |   |   | Additional |   |   |    |   |
|-------------------|--------|--------------|--------|--------|------------|--------|--------|---------|--------|
|              |   | No. of       |   |   | Par        |   |   | Paid-In |   |   | Retained |   |
|              |   | Shares       |   |   | Value      |   |   | Capital |   |   | Earnings |   |
| BALANCE,          |   |         |   |   |       |   |   |    |   |   |   |   |
| December 31, 2009 |   |         | 12,146 |   |       | $      | 1,215  |    |   | $ | 152,051 |   |   | $ | 59,009 |   |
| Net income        |   |         | -      |   |       |   | -      |    |   |   | - |   |   |   | 16,675 |   |
| BALANCE,          |   |         |   |   |       |   |   |    |   |   |   |   |   |   |   |   |
| March 31, 2010    |   |         | 12,146 |   |       | $      | 1,215  |    |   | $ | 152,051 |   |   | $ | 75,684 |   |

----

CLAYTON 

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | Three Months Ended |    |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | March 31,          |    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | 2010               |    |   | 2009 |   |
| CASH FLOWS FROM OPERATING ACTIVITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |               |    |   |   |   |
| Net income (loss)                                                                                                                         |   | $                  | 16,675  |   |   | $ | (21,269 | ) |
| Adjustments to reconcile net income (loss) to cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |               |    |   |   |   |   |   |
| provided by operating activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |               |    |   |   |   |   |   |
| Depreciation, depletion and amortization                                                                                                                                |   |               | 25,612  |   |   |   | 36,465 |   |
| Exploration costs                                                                                                                                                       |   |               | 2,878   |   |   |   | 12,412 |   |
| (Gain) loss on sales of assets and impairment of inventory, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |               | (286    | ) |   |   | 3,266 |   |
| Deferred income tax expense (benefit)                                                                                                                                   |   |               | 9,218   |   |   |   | (12,382 | ) |
| Non-cash employee compensation                                                                                                                                          |   |               | 2,010   |   |   |   | 383 |   |
| Unrealized gain on derivatives                                                                                                                                          |   |               | (8,602  | ) |   |   | (1,379 | ) |
| Amortization of debt issue costs                                                                                                                                        |   |               | 335     |   |   |   | 308 |   |
| Accretion of abandonment obligations                                                                                                                                    |   |               | 647     |   |   |   | 718 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |               |    |   |   |   |   |   |
| Changes in operating working capital:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |               |    |   |   |   |   |   |
| Accounts receivable                                                                                                                                                     |   |               | (1,468  | ) |   |   | 10,104 |   |
| Accounts payable                                                                                                                                                        |   |               | (8,989  | ) |   |   | (13,407 | ) |
| Other                                                                                                                                                                   |   |               | (7,654  | ) |   |   | (1,928 | ) |
| Net cash provided by operating activities                                                                                                                                                             |   |               | 30,376  |   |   |   | 13,291 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |               |    |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |               |    |   |   |   |   |   |
| Additions to property and equipment                                                                                                       |   |               | (58,276 | ) |   |   | (42,626 | ) |
| Proceeds from sales of assets                                                                                                             |   |               | 479     |   |   |   | 259 |   |
| Change in equipment inventory                                                                                                             |   |               | 2,452   |   |   |   | (6,017 | ) |
| Other                                                                                                                                     |   |               | (95     | ) |   |   | (110 | ) |
| Net cash used in investing activities                                                                                                                                                                 |   |               | (55,440 | ) |   |   | (48,494 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |               |    |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |               |    |   |   |   |   |   |
| Proceeds from long-term debt                                                                                                              |   |               | 26,000  |   |   |   | 14,400 |   |
| Repayments of long-term debt of Desta Drilling                                                                                            |   |               | -       |   |   |   | (4,687 | ) |
| Proceeds from exercise of stock options                                                                                                   |   |               | -       |   |   |   | 107 |   |
| Net cash provided by financing activities                                                                                                                                                             |   |               | 26,000  |   |   |   | 9,820 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |               |    |   |   |   |   |   |
| NET INCREASE (DECREASE) IN CASH AND                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |               |    |   |   |   |   |   |
| CASH EQUIVALENTS                                                                                                                |   |               | 936     |   |   |   | (25,383 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |               |    |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |               |    |   |   |   |   |   |
| Beginning of period                                                                                                                       |   |               | 14,013  |   |   |   | 41,199 |   |
| End of period                                                                                                                             |   | $                  | 14,949  |   |   | $ | 15,816 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |               |    |   |   |   |   |   |
| SUPPLEMENTAL DISCLOSURES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |               |    |   |   |   |   |   |
| Cash paid for interest, net of amounts capitalized                                                                                        |   | $                  | 10,134  |   |   | $ | 9,565 |   |

----

CLAYTON 

| 1. | Nature of Operations |
|----|----------------------|

| 2. | Presentation |
|----|--------------|

----

| 3. | Long-Term Debt |
|----|----------------|

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | March 31,      |    |   | December 31, |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------|---------|--------|--------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | 2010           |    |   | 2009         |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | (In thousands) |    |
| 73⁄4% Senior Notes due 2013                                                                                   |   | $              | 225,000 |   |         | $      | 225,000 |   |
| Secured bank credit facility, due May 2012                                                                       |   |           | 196,000 |   |         |   | 170,000 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | $              | 421,000 |   |         | $      | 395,000 |   |

----

| 4. | Other Non-Current Liabilities |
|----|-------------------------------|

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | March 31,      |   |   | December 31, |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------|--------|--------|--------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | 2010           |   |   | 2009         |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | (In thousands) |   |
| Abandonment obligations                                                                                    |   | $              | 39,532 |   |         | $      | 38,412 |   |
| Other                                                                                                      |   |           | 671    |   |         |   | 579 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | $              | 40,203 |   |         | $      | 38,991 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | Three Months Ended |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | March 31,          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | 2010               |   |   | 2009 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | (In thousands)     |   |
| Beginning of period                                                                                    |   | $                  | 38,412 |   |   | $ | 31,737 |   |
| Additional abandonment obligations from new properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |               | 646    |   |   |   | 573 |   |
| Sales or abandonments of properties                                                                                        |   |               | (173   | ) |   |   | (18 | ) |
| Accretion expense                                                                                                          |   |               | 647    |   |   |   | 718 |   |
| End of period                                                                                          |   | $                  | 39,532 |   |   | $ | 33,010 |   |

----

| 5. | Compensation Plans |
|----|--------------------|

----

| 6. | Derivatives |
|----|-------------|

|                                                                                                                                                                   |   | Oil    |      |   | Gas    |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
|                                                                                                                                                                   |   | Bbls   |      |   | Price  |   |   | MMBtu (a) |   |   | Price |   |
| Production Period:                                                                                                                                                     |   |   |      |   |   |   |   |   |   |   |   |   |
| 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                            |   |   | 1,656,000 |   |   | $      | 84.38 |   |   |   | 6,420,000 |   |   | $ | 7.07 |   |
|                                                                                                                                                                   |   |   | 3,232,000 |   |   |   |   |   |   |   | 11,680,000 |   |   |   |   |   |
|                                                |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (a)     One MMBtu equals one Mcf at a Btu factor of 1,000.                                                                                    |   |

|                          | Fair Value of Derivative Instruments as of March 31, 2010 |   |
|-------------------------------|-----------------------------------------------------------|--------|
|                          | Asset Derivatives                                         |   | Liability Derivatives |   |
|                          | Balance Sheet                                             |   |   |   | Balance Sheet |   |   |   |
|                          | Location                                                  |   | Fair Value |   | Location |   | Fair Value |   |
|                          |                                                      |   | (In thousands) |   |   |   | (In thousands) |   |
| Derivatives not designated as |                                                      |   |   |   |   |   |   |
| hedging instruments:          |                                                      |   |   |   |   |   |   |   |
|                          |                                                      |   |   |   |   |   |   |   |
| Commodity derivatives         | Fair value of derivatives:                                |   |   |   | Fair value of derivatives: |   |   |   |
|                          | Current                                                   |   | $ | 16,245 |   | Current |   | $ | 14,915 |   |
|                          | Non-current                                               |   |   | 8,049 |   | Non-current |   |   | 2,257 |   |
| Total                         |                                                      |   | $ | 24,294 |   |   |   | $ | 17,172 |   |

----

|                          | Fair Value of Derivative Instruments as of December 31, 2009 |   |
|-------------------------------|--------------------------------------------------------------|--------|
|                          | Asset Derivatives                                            |   | Liability Derivatives |   |
|                          | Balance Sheet                                                |   |   |   | Balance Sheet |   |   |   |
|                          | Location                                                     |   | Fair Value |   | Location |   | Fair Value |   |
|                          |                                                         |   | (In thousands) |   |   |   | (In thousands) |   |
| Derivatives not designated as |                                                         |   |   |   |   |   |   |
| hedging instruments:          |                                                         |   |   |   |   |   |   |   |
|                          |                                                         |   |   |   |   |   |   |   |
| Commodity derivatives         | Fair value of derivatives:                                   |   |   |   | Fair value of derivatives: |   |   |   |
|                          | Current                                                      |   | $ | - |   | Current |   | $ | 5,907 |   |
|                          | Non-current                                                  |   |   | 4,427 |   | Non-current |   |   | - |   |
| Total                         |                                                         |   | $ | 4,427 |   |   |   | $ | 5,907 |   |

|                                                 |   | March 31, 2010 |   |
|------------------------------------------------------|--------|----------------|--------|
|                                                 |   | Assets         |   |   | Liabilities |   |
|                                                 |   | (In thousands) |   |
| Fair value of derivatives – gross presentation |   | $              | 30,932 |   |   | $ | 23,810 |   |
| Effects of netting arrangements                      |   |           | (6,638 | ) |   |   | (6,638 | ) |
| Fair value of derivatives – net presentation   |   | $              | 24,294 |   |   | $ | 17,172 |   |

|                                                 |   | December 31, 2009 |    |
|------------------------------------------------------|--------|-------------------|---------|
|                                                 |   | Assets            |    |   | Liabilities |   |
|                                                 |   | (In thousands)    |    |
| Fair value of derivatives – gross presentation |   | $                 | 20,105  |   |   | $ | 21,585 |   |
| Effects of netting arrangements                      |   |              | (15,678 | ) |   |   | (15,678 | ) |
| Fair value of derivatives – net presentation   |   | $                 | 4,427   |   |   | $ | 5,907 |   |

|                          |   | Amount of Gain or (Loss) Recognized in Earnings |
|-------------------------------|--------|-------------------------------------------------|
|                          |   |                                            |   | Three Months Ended |
|                          |   | Location of Gain or (Loss)                      |   | March 31, |
|                          |   | Recognized in Earnings                          |   | 2010 |   | 2009 |
|                          |   |                                            |   | (In thousands) |
| Derivatives not designated as |   |                                            |   |   |   |   |
| hedging instruments:          |   |                                            |   |   |   |   |
|                          |   |                                            |   |   |   |   |
| Commodity derivatives         |   | Other income (expense) -                        |   |   |   |   |
|                          |   | Gain on derivatives                             |   | $          10,301 |   | $              2,510 |
| Total                         |   |                                            |   | $          10,301 |   | $              2,510 |

| 7. | Financial Instruments |
|----|-----------------------|

----

|           Level 1 - | Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. |
|-----------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------|

|           Level 2 - | Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life. |
|-----------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|           Level 3 - | Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. |
|-----------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                                                                                                                                                                                                                                                                                                                    |   | March 31,         |   |   | December 31,      |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|--------|--------|-------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                    |   | 2010              |   |   | 2009              |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                    |   | Significant Other |   |   | Significant Other |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                    |   | Observable Inputs |   |   | Observable Inputs |   |
| Description                                                                                                                                                                                                                                                                                                                                                                                                             |   | (Level 2)         |   |   | (Level 2)         |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                    |   | (In thousands)    |   |
| Assets:                                                                                                                                                                                                                                                                                                                                                                                                                 |   |              |   |   |              |   |
| Fair value of commodity derivatives                                                               |   | $                 | 24,294 |   |              | $      | 4,427 |   |
| Total assets                                                                            |   | $                 | 24,294 |   |              | $      | 4,427 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                    |   |              |   |   |              |   |   |   |
| Liabilities:                                                                                                                                                                                                                                                                                                                                                                                                            |   |              |   |   |              |   |   |   |
| Fair value of commodity derivatives                                                               |   | $                 | 17,172 |   |              | $      | 5,907 |   |
| Total liabilities                                                                       |   | $                 | 17,172 |   |              | $      | 5,907 |   |

| 8. | Income Taxes |
|----|--------------|

| 9. | Desta Drilling |
|----|----------------|

----

| 10. | Impairment of Property and Equipment |
|-----|--------------------------------------|

----

| 11. | Oil and Gas Properties |
|-----|------------------------|

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | March 31,      |      |   | December 31, |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------|-----------|--------|--------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | 2010           |      |   | 2009         |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | (In thousands) |      |
| Proved properties                                                                                       |   | $              | 1,588,538 |   |         | $      | 1,532,508 |   |
| Unproved properties                                                                                     |   |           | 42,669    |   |         |   | 47,156 |   |
| Total capitalized costs                                                                                 |   |           | 1,631,207 |   |         |   | 1,579,664 |   |
| Accumulated depreciation, depletion and amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |           | (969,635  | )      |         |   | (945,047 | ) |
| Net capitalized costs                                                                                                            |   | $              | 661,572   |   |         | $      | 634,617 |   |

| 12. | Sales of Assets and Impairments of Inventory |
|-----|----------------------------------------------|

|                                                                                                                                                                                                                                                                                                                    |   | Three Months Ended   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------|--------|
|                                                                                                                                                                                                                                                                                                                    |   | March 31,            |   |
|                                                                                                                                                                                                                                                                                                                    |   | 2010                 |   |   | 2009 |   |
|                                                                                                                                                                                                                                                                                                                    |   |  (In thousands) |   |
|                                                                                                                                                                                                                                                                                                                    |   |                 |   |   |   |   |
| Gain on sales of assets                                                 |   | $                    | 286    |   |   | $ | 183 |   |
|                                                                                                                                                                                                                                                                                                                    |   |                 |   |   |   |   |   |   |
| Loss on sales of assets and impairment                                                                                                                                                                                                                                                                                  |   |                 |   |   |   |   |   |   |
| of inventory:                                                                                                                                                                                                                                                                                                           |   |                 |   |   |   |   |   |   |
| Loss on sales of assets                                                                     |   |                 | -      |   |   |   | (183 | ) |
| Impairment of inventory                                                                     |   |                 | -      |   |   |   | (3,266 | ) |
|                                                                                                                                                                                                                                                                                                                    |   |                 | -      |   |   |   | (3,449 | ) |
|                                                                                                                                                                                                                                                                                                                    |   |                 |   |   |   |   |   |   |
| Net gain (loss)                                                         |   | $                    | 286    |   |   | $ | (3,266 | ) |

----

| 13. | Segment Information |
|-----|---------------------|

| For the Three Months Ended                   |   |        |    |   |     |   |   |         |   |   |         |   |
|----------------------------------------------|--------|-------------|---------|--------|----------|--------|--------|--------------|--------|--------|--------------|--------|
| March 31, 2010                               |   |        |    |   |     |   |   |         |   |   |         |   |
| (Unaudited)                                  |   |        |    |   | Contract |   |   | Intercompany |   |   | Consolidated |   |
| (In thousands)                               |   | Oil and Gas |    |   | Drilling |   |   | Eliminations |   |   | Total        |   |
|                                         |   |        |    |   |     |   |   |         |   |   |         |   |
| Revenues                                     |   | $           | 79,831  |   |     | $      | 5,973  |         |   | $      | (5,973       | )      |   | $ | 79,831 |   |
| Depreciation, depletion and amortization (a) |   |        | 24,760  |   |     |   | 2,338  |         |   |   | (1,486       | )      |   |   | 25,612 |   |
| Other operating expenses (b)                 |   |        | 32,863  |   |     |   | 4,606  |         |   |   | (4,123       | )      |   |   | 33,346 |   |
| Interest expense                             |   |        | 6,109   |   |     |   | -      |         |   |   | -            |   |   |   | 6,109 |   |
| Other (income) expense                       |   |        | (11,129 | )      |     |   | -      |         |   |   | -            |   |   |   | (11,129 | ) |
| Income (loss) before income taxes            |   |        | 27,228  |   |     |   | (971   | )            |   |   | (364         | )      |   |   | 25,893 |   |
|                                         |   |        |    |   |     |   |   |         |   |   |         |   |   |   |   |   |
| Income tax (expense) benefit                 |   |        | (9,558  | )      |     |   | 340    |         |   |   | -            |   |   |   | (9,218 | ) |
|                                         |   |        |    |   |     |   |   |         |   |   |         |   |   |   |   |   |
| Net income (loss)                            |   |        | 17,670  |   |     |   | (631   | )            |   |   | (364         | )      |   |   | 16,675 |   |
|                                         |   |        |    |   |     |   |   |         |   |   |         |   |   |   |   |   |
| Net income (loss) attributable to            |   |        |    |   |     |   |   |         |   |   |         |   |   |   |   |   |
|   Clayton Williams Energy, Inc     |   | $           | 17,670  |   |     | $      | (631   | )            |   | $      | (364         | )      |   | $ | 16,675 |   |
|                                         |   |        |    |   |     |   |   |         |   |   |         |   |   |   |   |   |
| Total assets                                 |   | $           | 798,012 |   |     | $      | 37,464 |         |   | $      | -            |   |   | $ | 835,476 |   |
| Additions to property and equipment          |   | $           | 55,094  |   |     | $      | 3,558  |         |   | $      | -            |   |   | $ | 58,652 |   |
|                                         |   |        |    |   |     |   |   |         |   |   |         |   |   |   |   |   |

| For the Three Months Ended                                                                                                     |   |        |    |   |     |   |   |         |   |   |         |   |
|--------------------------------------------------------------------------------------------------------------------------------|--------|-------------|---------|--------|----------|--------|--------|--------------|--------|--------|--------------|--------|
| March 31, 2009                                                                                                                 |   |        |    |   |     |   |   |         |   |   |         |   |
| (Unaudited)                                                                                                                    |   |        |    |   | Contract |   |   | Intercompany |   |   | Consolidated |   |
| (In thousands)                                                                                                                 |   | Oil and Gas |    |   | Drilling |   |   | Eliminations |   |   | Total        |   |
|                                                                                                                           |   |        |    |   |     |   |   |         |   |   |         |   |
| Revenues                                                                                                                       |   | $           | 52,562  |   |     | $      | 9,186  |         |   | $      | (3,966       | )      |   | $ | 57,782 |   |
| Depreciation, depletion and amortization (a)                                                                                   |   |        | 34,991  |   |     |   | 2,738  |         |   |   | (1,264       | )      |   |   | 36,465 |   |
| Other operating expenses (b)                                                                                                   |   |        | 52,883  |   |     |   | 2,693  |         |   |   | (2,639       | )      |   |   | 52,937 |   |
| Interest expense                                                                                                               |   |        | 4,905   |   |     |   | 533    |         |   |   | -            |   |   |   | 5,438 |   |
| Other (income) expense                                                                                                         |   |        | (3,411  | )      |     |   | -      |         |   |   | -            |   |   |   | (3,411 | ) |
| Income (loss) before income taxes                                                                                              |   |        | (36,806 | )      |     |   | 3,222  |         |   |   | (63          | )      |   |   | (33,647 | ) |
|                                                                                                                           |   |        |    |   |     |   |   |         |   |   |         |   |   |   |   |   |
| Income tax (expense) benefit                                                                                                   |   |        | 13,510  |   |     |   | (1,132 | )            |   |   | -            |   |   |   | 12,378 |   |
| Net income (loss)                                                                                                              |   |        | (23,296 | )      |     |   | 2,090  |         |   |   | (63          | )      |   |   | (21,269 | ) |
| Less income attributable to                                                                                                    |   |        |    |   |     |   |   |         |   |   |         |   |   |   |   |   |
|   noncontrolling interest, net of tax                                                                                |   |        | 563     |   |     |   | (1,609 | )            |   |   | -            |   |   |   | (1,046 | ) |
|                                                                                                                           |   |        |    |   |     |   |   |         |   |   |         |   |   |   |   |   |
| Net income (loss) attributable to                                                                                              |   |        |    |   |     |   |   |         |   |   |         |   |   |   |   |   |
|   Clayton Williams Energy, Inc                                                                                       |   | $           | (22,733 | )      |     | $      | 481    |         |   | $      | (63          | )      |   | $ | (22,315 | ) |
|                                                                                                                           |   |        |    |   |     |   |   |         |   |   |         |   |   |   |   |   |
| Total assets                                                                                                                   |   | $           | 820,547 |   |     | $      | 76,058 |         |   | $      | (500         | )      |   | $ | 896,105 |   |
| Additions to property and equipment                                                                                            |   | $           | 34,689  |   |     | $      | -      |         |   | $      | -            |   |   | $ | 34,689 |   |
|                       |   |        |    |   |     |   |   |         |   |   |         |   |   |   |   |   |

----

| 14. | Guarantor Financial Information |
|-----|---------------------------------|

| (Unaudited)                                                                                                                                                                                                                            |   |   |    |   |         |   |    | Non-       |   |   |         |   |   |         |     |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------------|--------|---------|------------|--------|--------|--------------|--------|--------|--------------|----------|
| (Dollars in thousands)                                                                                                                                                                                                                 |   |   |    |   | Guarantor    |   |    | Guarantor  |   |   | Adjustments/ |   |   |         |     |
|                                                                                                                                                                                                                                   |   | Issuer |    |   | Subsidiaries |   |    | Subsidiary |   |   | Eliminations |   |   | Consolidated |     |
|                                                                                                                                                                                                                                   |   |   |    |   |         |   |    |       |   |   |         |   |   |         |     |
| Current assets                                               |   | $      | 217,230 |   |         | $      | 147,076 |       |   | $      | 1,000        |   |   | $            | (242,566 | ) |   | $ | 122,740 |   |
| Property and equipment, net                                                                                                                                                                                                            |   |   | 358,537 |   |         |   | 333,560 |       |   |   | 6,277        |   |   |         | -        |   |   |   | 698,374 |   |
| Investments in subsidiaries                                                                                                                                                                                                            |   |   | 111,683 |   |         |   | -       |       |   |   | -            |   |   |         | (111,683 | ) |   |   | - |   |
| Other assets                                                 |   |   | 13,750  |   |         |   | 612     |       |   |   | -            |   |   |         | -        |   |   |   | 14,362 |   |
| Total assets                                                                     |   | $      | 701,200 |   |         | $      | 481,248 |       |   | $      | 7,277        |   |   | $            | (354,249 | ) |   | $ | 835,476 |   |
|                                                                                                                                                                                                                                   |   |   |    |   |         |   |    |       |   |   |         |   |   |         |     |   |   |   |   |   |
| Current liabilities                                          |   | $      | 154,941 |   |         | $      | 167,777 |       |   | $      | 117          |   |   | $            | (242,566 | ) |   | $ | 80,269 |   |
| Non-current liabilities:                                                                                                                                                                                                               |   |   |    |   |         |   |    |       |   |   |         |   |   |         |     |   |   |   |   |   |
| Long-term debt                                                                   |   |   | 421,000 |   |         |   | -       |       |   |   | -            |   |   |         | -        |   |   |   | 421,000 |   |
| Other                                                                            |   |   | 42,872  |   |         |   | 62,250  |       |   |   | 138          |   |   |         | (3       | ) |   |   | 105,257 |   |
|                                                                                                                                                                                                                                   |   |   | 463,872 |   |         |   | 62,250  |       |   |   | 138          |   |   |         | (3       | ) |   |   | 526,257 |   |
|                                                                                                                                                                                                                                   |   |   |    |   |         |   |    |       |   |   |         |   |   |         |     |   |   |   |   |   |
| Stockholders’ equity                                   |   |   | 82,387  |   |         |   | 251,221 |       |   |   | 7,022        |   |   |         | (111,680 | ) |   |   | 228,950 |   |
| Total liabilities and                                                                                                                                                                                                                  |   |   |    |   |         |   |    |       |   |   |         |   |   |         |     |   |   |   |   |   |
|   stockholders’ equity                                                                                                                                                                                                 |   | $      | 701,200 |   |         | $      | 481,248 |       |   | $      | 7,277        |   |   | $            | (354,249 | ) |   | $ | 835,476 |   |

| (Dollars in thousands)                                                                                                                                                                                                                 |   |   |    |   |         |   |    | Non-       |   |   |         |   |   |         |     |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------------|--------|---------|------------|--------|--------|--------------|--------|--------|--------------|----------|
|                                                                                                                                                                                                                                   |   |   |    |   | Guarantor    |   |    | Guarantor  |   |   | Adjustments/ |   |   |         |     |
|                                                                                                                                                                                                                                   |   | Issuer |    |   | Subsidiaries |   |    | Subsidiary |   |   | Eliminations |   |   | Consolidated |     |
|                                                                                                                                                                                                                                   |   |   |    |   |         |   |    |       |   |   |         |   |   |         |     |
| Current assets                                               |   | $      | 205,950 |   |         | $      | 146,443 |       |   | $      | 920          |   |   | $            | (249,716 | ) |   | $ | 103,597 |   |
| Property and equipment, net                                                                                                                                                                                                            |   |   | 326,149 |   |         |   | 337,566 |       |   |   | 6,331        |   |   |         | -        |   |   |   | 670,046 |   |
| Investments in subsidiaries                                                                                                                                                                                                            |   |   | 112,018 |   |         |   | -       |       |   |   | -            |   |   |         | (112,018 | ) |   |   | - |   |
| Other assets                                                 |   |   | 10,348  |   |         |   | 613     |       |   |   | -            |   |   |         | -        |   |   |   | 10,961 |   |
| Total assets                                                                     |   | $      | 654,465 |   |         | $      | 484,622 |       |   | $      | 7,251        |   |   | $            | (361,734 | ) |   | $ | 784,604 |   |
|                                                                                                                                                                                                                                   |   |   |    |   |         |   |    |       |   |   |         |   |   |         |     |   |   |   |   |   |
| Current liabilities                                          |   | $      | 153,505 |   |         | $      | 180,357 |       |   | $      | 127          |   |   | $            | (249,716 | ) |   | $ | 84,273 |   |
| Non-current liabilities:                                                                                                                                                                                                               |   |   |    |   |         |   |    |       |   |   |         |   |   |         |     |   |   |   |   |   |
| Long-term debt                                                                   |   |   | 395,000 |   |         |   | -       |       |   |   | -            |   |   |         | -        |   |   |   | 395,000 |   |
| Other                                                                            |   |   | 31,039  |   |         |   | 61,883  |       |   |   | 136          |   |   |         | (2       | ) |   |   | 93,056 |   |
|                                                                                                                                                                                                                                   |   |   | 426,039 |   |         |   | 61,883  |       |   |   | 136          |   |   |         | (2       | ) |   |   | 488,056 |   |
|                                                                                                                                                                                                                                   |   |   |    |   |         |   |    |       |   |   |         |   |   |         |     |   |   |   |   |   |
| Stockholders’ equity                                   |   |   | 74,921  |   |         |   | 242,382 |       |   |   | 6,988        |   |   |         | (112,016 | ) |   |   | 212,275 |   |
|                                                                                                                                                                                                                                   |   |   |    |   |         |   |    |       |   |   |         |   |   |         |     |   |   |   |   |   |
| Total liabilities and                                                                                                                                                                                                                  |   |   |    |   |         |   |    |       |   |   |         |   |   |         |     |   |   |   |   |   |
|   stockholders' equity                                                                                                                                                                                                       |   | $      | 654,465 |   |         | $      | 484,622 |       |   | $      | 7,251        |   |   | $            | (361,734 | ) |   | $ | 784,604 |   |

----

| (Unaudited)                                                                                                                                                                                                                    |   |   |   |   |         |   |   | Non-       |   |   |         |   |   |         |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------------|--------|--------|------------|--------|--------|--------------|--------|--------|--------------|--------|
| (In thousands)                                                                                                                                                                                                                 |   |   |   |   | Guarantor    |   |   | Guarantor  |   |   | Adjustments/ |   |   |         |   |
|                                                                                                                                                                                                                           |   | Issuer |   |   | Subsidiaries |   |   | Subsidiary |   |   | Eliminations |   |   | Consolidated |   |
| Total revenue                                        |   | $      | 48,016 |   |         | $      | 31,800 |       |   | $      | 179          |   |   | $            | (164   | ) |   | $ | 79,831 |   |
| Costs and expenses                                   |   |   | 38,057 |   |         |   | 20,883 |       |   |   | 182          |   |   |         | (164   | ) |   |   | 58,958 |   |
| Operating income (loss)                                                                                                                                                                                                        |   |   | 9,959  |   |         |   | 10,917 |       |   |   | (3           | )      |   |         | -      |   |   |   | 20,873 |   |
| Other income (expense)                                                                                                                                                                                                         |   |   | 3,563  |   |         |   | 1,421  |       |   |   | 36           |   |   |         | -      |   |   |   | 5,020 |   |
| Income tax (expense) benefit                                                                                                                                                                                                   |   |   | (9,218 | )      |         |   | -      |       |   |   | -            |   |   |         | -      |   |   |   | (9,218 | ) |
|                                                                                                                                                                                                                           |   |   |   |   |         |   |   |       |   |   |         |   |   |         |   |   |   |   |   |   |
| Net income (loss)                                                        |   | $      | 4,304  |   |         | $      | 12,338 |       |   | $      | 33           |   |   | $            | -      |   |   | $ | 16,675 |   |

| (Unaudited)                                                                                                                                                                                                                        |   |   |    |   |         |   |   | Non-       |   |   |         |   |   |         |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------------|--------|--------|------------|--------|--------|--------------|--------|--------|--------------|--------|
| (In thousands)                                                                                                                                                                                                                     |   |   |    |   | Guarantor    |   |   | Guarantor  |   |   | Adjustments/ |   |   |         |   |
|                                                                                                                                                                                                                               |   | Issuer |    |   | Subsidiaries |   |   | Subsidiary |   |   | Eliminations |   |   | Consolidated |   |
| Total revenue                                            |   | $      | 33,539  |   |         | $      | 28,365 |       |   | $      | 120          |   |   | $            | (4,242 | ) |   | $ | 57,782 |   |
| Costs and expenses                                       |   |   | 63,819  |   |         |   | 29,542 |       |   |   | 219          |   |   |         | (4,178 | ) |   |   | 89,402 |   |
| Operating income (loss)                                                                                                                                                                                                            |   |   | (30,280 | )      |         |   | (1,177 | )          |   |   | (99          | )      |   |         | (64    | ) |   |   | (31,620 | ) |
| Other income (expense)                                                                                                                                                                                                             |   |   | (2,899  | )      |         |   | 836    |       |   |   | 36           |   |   |         | -      |   |   |   | (2,027 | ) |
| Income tax (expense) benefit                                                                                                                                                                                                       |   |   | 12,378  |   |         |   | 4      |       |   |   | (4           | )      |   |         | -      |   |   |   | 12,378 |   |
| Noncontrolling interest,                                                                                                                                                                                                           |   |   |    |   |         |   |   |       |   |   |         |   |   |         |   |   |   |   |   |   |
|   net of tax                                   |   |   | (1,046  | )      |         |   | -      |       |   |   | -            |   |   |         | -      |   |   |   | (1,046 | ) |
|                                                                                                                                                                                                                               |   |   |    |   |         |   |   |       |   |   |         |   |   |         |   |   |   |   |   |   |
| Net income (loss)                                                            |   | $      | (21,847 | )      |         | $      | (337   | )          |   | $      | (67          | )      |   | $            | (64    | ) |   | $ | (22,315 | ) |

| (Unaudited)                                                                                                                                                                                                                |   |   |    |   |         |   |   | Non-       |   |   |         |   |   |         |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------------|--------|--------|------------|--------|--------|--------------|--------|--------|--------------|--------|
| (In thousands)                                                                                                                                                                                                             |   |   |    |   | Guarantor    |   |   | Guarantor  |   |   | Adjustments/ |   |   |         |   |
|                                                                                                                                                                                                                       |   | Issuer |    |   | Subsidiaries |   |   | Subsidiary |   |   | Eliminations |   |   | Consolidated |   |
| Operating activities                                  |   | $      | 13,018  |   |         | $      | 15,747 |       |   | $      | 126          |   |   | $            | 1,485  |   |   | $ | 30,376 |   |
| Investing activities                                  |   |   | (47,359 | )      |         |   | (6,566 | )          |   |   | (30          | )      |   |         | (1,485 | ) |   |   | (55,440 | ) |
| Financing activities                                  |   |   | 35,072  |   |         |   | (9,061 | )          |   |   | (11          | )      |   |         | -      |   |   |   | 26,000 |   |
| Net increase in cash and                                                                                                                                                                                                   |   |   |    |   |         |   |   |       |   |   |         |   |   |         |   |   |   |   |   |   |
| cash equivalents                                           |   |   | 731     |   |         |   | 120    |       |   |   | 85           |   |   |         | -      |   |   |   | 936 |   |
|                                                                                                                                                                                                                       |   |   |    |   |         |   |   |       |   |   |         |   |   |         |   |   |   |   |   |   |
| Cash at the beginning of                                                                                                                                                                                                   |   |   |    |   |         |   |   |       |   |   |         |   |   |         |   |   |   |   |   |   |
| the period                                                 |   |   | 11,839  |   |         |   | 1,344  |       |   |   | 830          |   |   |         | -      |   |   |   | 14,013 |   |
|                                                                                                                                                                                                                       |   |   |    |   |         |   |   |       |   |   |         |   |   |         |   |   |   |   |   |   |
| Cash at end of the period                                                                                                                                                                                                  |   | $      | 12,570  |   |         | $      | 1,464  |       |   | $      | 915          |   |   | $            | -      |   |   | $ | 14,949 |   |

| (Unaudited)                                                                                                                                                                                                                |   |   |    |   |         |   |   | Non-       |   |   |         |   |   |         |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------------|--------|--------|------------|--------|--------|--------------|--------|--------|--------------|--------|
| (In thousands)                                                                                                                                                                                                             |   |   |    |   | Guarantor    |   |   | Guarantor  |   |   | Adjustments/ |   |   |         |   |
|                                                                                                                                                                                                                       |   | Issuer |    |   | Subsidiaries |   |   | Subsidiary |   |   | Eliminations |   |   | Consolidated |   |
| Operating activities                                  |   | $      | 15,176  |   |         | $      | (3,179 | )          |   | $      | 55           |   |   | $            | 1,239  |   |   | $ | 13,291 |   |
| Investing activities                                  |   |   | (43,738 | )      |         |   | (3,488 | )          |   |   | (29          | )      |   |         | (1,239 | ) |   |   | (48,494 | ) |
| Financing activities                                  |   |   | 3,226   |   |         |   | 6,594  |       |   |   | -            |   |   |         | -      |   |   |   | 9,820 |   |
| Net increase (decrease) in                                                                                                                                                                                                 |   |   |    |   |         |   |   |       |   |   |         |   |   |         |   |   |   |   |   |   |
| cash and cash equivalents                                                                                                                                                                                                  |   |   | (25,336 | )      |         |   | (73    | )          |   |   | 26           |   |   |         | -      |   |   |   | (25,383 | ) |
|                                                                                                                                                                                                                       |   |   |    |   |         |   |   |       |   |   |         |   |   |         |   |   |   |   |   |   |
| Cash at the beginning of                                                                                                                                                                                                   |   |   |    |   |         |   |   |       |   |   |         |   |   |         |   |   |   |   |   |   |
| the period                                                 |   |   | 35,381  |   |         |   | 5,054  |       |   |   | 764          |   |   |         | -      |   |   |   | 41,199 |   |
|                                                                                                                                                                                                                       |   |   |    |   |         |   |   |       |   |   |         |   |   |         |   |   |   |   |   |   |
| Cash at end of the period                                                                                                                                                                                                  |   | $      | 10,045  |   |         | $      | 4,981  |       |   | $      | 790          |   |   | $            | -      |   |   | $ | 15,816 |   |

----

| 15. | Subsequent Events |
|-----|-------------------|

----

Item 

|   | • | 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; |
|--------|---------|-------------------------------------|

|   | • | hurricanes and other weather conditions; |
|--------|---------|------------------------------------------|

|   | • | 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 |
|--------|---------|-------------------------------------------------------------------------------------------------------|

|   | • | the other risks described in our Form 10-K for the year ended December 31, 2009 and in this Form 10-Q. |
|--------|---------|--------------------------------------------------------------------------------------------------------|

----

| •   | Entered into agreements with selected service providers to fix unit costs covering approximately 90% of the drilling and completion services provided by third parties through the second quarter of 2011; |
|---------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| •   | Improved drilling efficiencies by acquiring the noncontrolling interest in Desta Drilling, giving us full control over the management and operation of drilling services; |
|---------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| •   | Purchased casing and tubing for more than 175 wells at discounts to current market prices; and |
|---------------------|------------------------------------------------------------------------------------------------|

| •   | Entered into derivative contracts for most of our estimated proved developed oil production for 2010 and 2011 at average prices of $76.50 and $84.38 per barrel, respectively. |
|---------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| •   | Our oil and gas sales for the first quarter increased $28.2 million, or 56%, from 2009 due substantially to increases in prices for both oil and gas. |
|---------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| •   | Our oil and gas production for the first quarter of 2010 was 13% lower on a barrel of oil equivalent (“BOE”) basis than in the comparable period in 2009.  Our oil production was relatively constant compared to the first quarter of 2009, and gas production was 28% lower than the first quarter of 2009. |
|---------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| •   | We recorded a $10.3 million net gain on derivatives in the first quarter of 2010, consisting of an $8.6 million non-cash gain for changes in mark-to-market valuations and a $1.7 million realized gain on settled contracts.  For the same period in 2009, we reported a $2.5 million net gain on derivatives, consisting of a $1.4 million non-cash gain due to changes in mark-to-market valuations and a $1.1 million realized gain on settled contracts.  Since we do not presently designate our derivatives as cash flow hedges under applicable accounting standards, we recognize the full effect of changing prices on mark-to-market valuations as a current charge or credit to our results of operations. |
|---------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| •   | During the first quarter of 2010, we increased borrowings under our revolving credit facility by $26 million from $170 million at December 31, 2009 to $196 million at March 31, 2010. |
|---------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| •   | At March 31, 2010, our capitalized unproved oil and gas properties totaled $42.7 million, of which approximately $19.2 million was attributable to unproved acreage.  Therefore, our results of operations in future periods may be adversely affected by abandonments and impairments related to unproved oil and gas properties. |
|---------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | Three Months Ended |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | March 31,          |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | 2010               |   |   | 2009 |   |
| Oil and Gas Production Data:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |               |   |   |   |   |
| Oil (MBbls)                                                                                                        |   |               | 752    |   |   |   | 751 |   |
| Gas (MMcf)                                                                                                         |   |               | 3,328  |   |   |   | 4,613 |   |
| Natural gas liquids (MBbls)                                                                                        |   |               | 57     |   |   |   | 53 |   |
| Total (MBOE)                                                                                                       |   |               | 1,364  |   |   |   | 1,573 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |               |   |   |   |   |   |   |
| Average Realized Prices (a):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |               |   |   |   |   |   |   |
| Oil ($/Bbl)                                                                                                        |   | $                  | 76.00  |   |   | $ | 37.09 |   |
| Gas ($/Mcf)                                                                                                        |   | $                  | 5.76   |   |   | $ | 4.60 |   |
| Natural gas liquids ($/Bbl)                                                                                        |   | $                  | 46.18  |   |   | $ | 22.94 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |               |   |   |   |   |   |   |
| Gain (Loss) on Settled Derivative Contracts (a):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |               |   |   |   |   |   |   |
| ($ in thousands, except per unit)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |               |   |   |   |   |   |   |
| Oil:    Net realized loss                                                                                                         |   | $                  | (1,621 | ) |   | $ | (267 | ) |
| Per unit produced ($/Bbl)                                                                                                                             |   | $                  | (2.16  | ) |   | $ | (.36 | ) |
| Gas:  Net realized gain                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | $                  | 3,320  |   |   | $ | 1,398 |   |
| Per unit produced ($/Mcf)                                                                                                                             |   | $                  | 1.00   |   |   | $ | .30 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |               |   |   |   |   |   |   |
| Average Daily Production:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |               |   |   |   |   |   |   |
| Oil (Bbls):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |               |   |   |   |   |   |   |
| Permian Basin                                                                                                                                         |   |               | 4,909  |   |   |   | 4,456 |   |
| Austin Chalk (Trend)                                                                                                                                  |   |               | 2,595  |   |   |   | 3,142 |   |
| North Louisiana                                                                                                                                       |   |               | 148    |   |   |   | 270 |   |
| South Louisiana                                                                                                                                       |   |               | 627    |   |   |   | 391 |   |
| Other                                                                                                                                                 |   |               | 77     |   |   |   | 85 |   |
| Total                                                                                                                                                                               |   |               | 8,356  |   |   |   | 8,344 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |               |   |   |   |   |   |   |
| Gas (Mcf):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |               |   |   |   |   |   |   |
| Permian Basin                                                                                                                                         |   |               | 13,911 |   |   |   | 15,674 |   |
| Austin Chalk (Trend)                                                                                                                                  |   |               | 2,531  |   |   |   | 3,030 |   |
| North Louisiana                                                                                                                                       |   |               | 8,718  |   |   |   | 14,550 |   |
| South Louisiana                                                                                                                                       |   |               | 7,513  |   |   |   | 12,592 |   |
| Cotton Valley Reef Complex                                                                                                                            |   |               | 3,529  |   |   |   | 4,274 |   |
| Other                                                                                                                                                 |   |               | 776    |   |   |   | 1,136 |   |
| Total                                                                                                                                                                               |   |               | 36,978 |   |   |   | 51,256 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |               |   |   |   |   |   |   |
| Natural Gas Liquids (Bbls):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |               |   |   |   |   |   |   |
| Permian Basin                                                                                                                                         |   |               | 272    |   |   |   | 225 |   |
| Austin Chalk (Trend)                                                                                                                                  |   |               | 271    |   |   |   | 307 |   |
| North Louisiana                                                                                                                                       |   |               | 5      |   |   |   | 1 |   |
| South Louisiana                                                                                                                                       |   |               | 79     |   |   |   | 45 |   |
| Other                                                                                                                                                 |   |               | 6      |   |   |   | 11 |   |
| Total                                                                                                                                                                               |   |               | 633    |   |   |   | 589 |   |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | Three Months Ended |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | March 31,          |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | 2010               |   |   | 2009 |
| Exploration Costs (in thousands):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |               |   |   |   |
| Abandonment and impairment costs:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |               |   |   |   |
| North Louisiana                                                                                                                                           |   | $                  | 1,009 |   |   | $ | 260 |   |
| South Louisiana                                                                                                                                           |   |               | - |   |   |   | 728 |   |
| Permian Basin                                                                                                                                             |   |               | 13 |   |   |   | 455 |   |
| East Texas Bossier                                                                                                                                        |   |               | 1,513 |   |   |   | 8,867 |   |
| Utah                                                                                                                                                      |   |               | 20 |   |   |   | 1,774 |   |
| Mississippi                                                                                                                                               |   |               | 323 |   |   |   | 311 |   |
| Other                                                                                                                                                     |   |               | - |   |   |   | 17 |   |
| Total                                                                                                                                                                                   |   |               | 2,878 |   |   |   | 12,412 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |               |   |   |   |   |   |   |   |
| Seismic and other                                                                                                      |   |               | 1,660 |   |   |   | 4,270 |   |
| Total exploration costs                                                                                                                                                                 |   | $                  | 4,538 |   |   | $ | 16,682 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |               |   |   |   |   |   |   |   |
| Depreciation, Depletion and Amortization (in thousands):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |               |   |   |   |   |   |   |   |
| Oil and gas depletion                                                                                                  |   | $                  | 24,589 |   |   | $ | 34,762 |   |   |
| Contract drilling depreciation                                                                                         |   |               | 852 |   |   |   | 1,474 |   |   |
| Other depreciation                                                                                                     |   |               | 171 |   |   |   | 229 |   |   |
| Total DD&A                                                                                                                                                                          |   | $                  | 25,612 |   |   | $ | 36,465 |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |               |   |   |   |   |   |   |   |
| Oil and Gas Costs ($/BOE Produced):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |               |   |   |   |   |   |   |   |
| Production costs                                                                                                       |   | $                  | 15.34 |   |   | $ | 12.12 |   |   |
|     Production costs (excluding production taxes)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | $             | 12.18 |   |   | $  |  10.69 |   |   |
| Oil and gas depletion                                                                                                  |   | $                  | 18.03 |   |   | $ | 22.10 |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |               |   |   |   |   |   |   |   |
| Net Wells Drilled (b):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |               |   |   |   |   |   |   |   |
| Exploratory Wells                                                                                                      |   |               | 1.1 |   |   |   | 0.2 |   |   |
| Developmental Wells                                                                                                    |   |               | 26.3 |   |   |   | 6.0 |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |               |   |   |   |   |   |   |   |
| (a)    No derivatives were designated as cash flow hedges in 2010 or 2009. All gains or losses on settled derivatives were included in other income (expense) - gain (loss) on derivatives.                                                                                                                                                                                                                                                                                                                                                           |   |               |
| (b)    Excludes wells being drilled or completed at the end of each period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |               |

----

----

----

|                 |   | Actual             |   |   | Planned           |   |    |       |   |
|----------------------|--------|--------------------|--------|--------|-------------------|--------|---------|------------|--------|
|                 |   | Expenditures       |   |   | Expenditures      |   |    | 2010       |   |
|                 |   | Three Months Ended |   |   | Year Ended        |   |    | Percentage |   |
|                 |   | March 31, 2010     |   |   | December 31, 2010 |   |    | of Total   |   |
|                 |   | (In thousands)     |   |   |              |   |
| Permian Basin        |   | $                  | 36,700 |   |              | $      | 210,900 |       |   |   | 75 | % |
| Austin Chalk (Trend) |   |               | 12,400 |   |              |   | 55,800  |       |   |   | 20 | % |
| South Louisiana      |   |               | 3,200  |   |              |   | 7,600   |       |   |   | 3 | % |
| California           |   |               | 300    |   |              |   | 2,300   |       |   |   | 1 | % |
| Other                |   |               | 2,800  |   |              |   | 5,300   |       |   |   | 1 | % |
|                 |   | $                  | 55,400 |   |              | $      | 281,900 |       |   |   | 100 | % |

----

----

|                                                                                  |   | March 31,      |   |   | December 31, |   |
|---------------------------------------------------------------------------------------|--------|----------------|--------|--------|--------------|--------|
|                                                                                  |   | 2010           |   |   | 2009         |   |
|                                                                                  |   | (In thousands) |   |
| Working capital per GAAP                                                              |   | $              | 42,471 |   |         | $      | 19,324 |   |
| Add funds available under the revolving credit facility                               |   |           | 53,196 |   |         |   | 79,196 |   |
| Exclude fair value of derivatives classified as current assets or current liabilities |   |           | (1,330 | )      |         |   | 5,907 |   |
| Working capital per loan covenant                                                     |   | $              | 94,337 |   |         | $      | 104,427 |   |
|                                                                                  |   |           |   |   |         |   |   |   |

----

----

Item 

----

|                                                                                                                                                                   |   | Oil    |      |   | Gas    |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
|                                                                                                                                                                   |   | Bbls   |      |   | Price  |   |   | MMBtu (a) |   |   | Price |   |
| Production Period:                                                                                                                                                     |   |   |      |   |   |   |   |   |   |   |   |   |
| 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                            |   |   | 1,656,000 |   |   | $      | 84.38 |   |   |   | 6,420,000 |   |   | $ | 7.07 |   |
|                                                                                                                                                                   |   |   | 3,232,000 |   |   |   |   |   |   |   | 11,680,000 |   |   |   |   |   |
|                                           |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (a)     One MMBtu equals one Mcf at a Btu factor of 1,000.                                                                                    |   |

----

Item 

| •   | Management has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report; |
|---------------------|------------------------------------------------------------------------------------------------------------------------------------------|

| •   | This evaluation was conducted under the supervision and with the participation of our management, including our chief executive and chief financial officers; and |
|---------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| •   | It is the conclusion of our chief executive officer and our chief financial officer that these disclosure controls and procedures are effective in ensuring that information that is required to be disclosed by the Company in reports filed or submitted with the SEC is recorded, processed, summarized and reported within the time periods specified in the rules and forms established by the SEC. |
|---------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Item 

Item 

| **3.1         |   | Second Restated Certificate of Incorporation of the Company, filed as Exhibit 3.1 to our Form S-2 Registration Statement, Commission File No. 333-13441                                                                                                                          |
|---------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |   |                                                                                                                                                                                                                                                                             |
| **3.2         |   | Certificate of Amendment of Second Restated Certificate of Incorporation of Clayton Williams Energy, Inc., filed as Exhibit 3.1 to our Form 10-Q for the period ended September 30, 2000††                                                                           |
|          |   |                                                                                                                                                                                                                                                                             |
| **3.3         |   | Corporate Bylaws of Clayton Williams Energy, Inc., as amended, filed as Exhibit 3.1 to our Current Report on Form 8-K filed with the Commission on March 14, 2008††                                                                                        |
|          |   |                                                                                                                                                                                                                                                                             |
| **4.1         |   | Indenture, dated July 20, 2005, among Clayton Williams Energy, Inc., the Subsidiary Guarantors and Wells Fargo Bank, National Association, as Trustee, filed as Exhibit 4.1 to our Current Report on Form 8-K filed with the Commission on July 22, 2005†† |
|          |   |                                                                                                                                                                                                                                                                             |
| **10.1† |   | Employment Agreement between Clayton Williams Energy, Inc. and Clayton W. Williams, Jr., filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Commission on March 18, 2010††                                                                       |
|          |   |                                                                                                                                                                                                                                                                             |
| **10.2† |   | Employment Agreement between Clayton Williams Energy, Inc. and L. Paul Latham, filed as Exhibit 10.2 to our Current Report on Form 8-K filed with the Commission on March 18, 2010††                                                                                 |
|          |   |                                                                                                                                                                                                                                                                             |
| **10.3† |   | Employment Agreement between Clayton Williams Energy, Inc. and Mel G. Riggs, filed as Exhibit 10.3 to our Current Report on Form 8-K filed with the Commission on March 18, 2010††                                                                                   |
|          |   |                                                                                                                                                                                                                                                                             |
| **10.4† |   | Employment Agreement between Clayton Williams Energy, Inc. and Patrick C. Reesby, filed as Exhibit 10.4 to our Current Report on Form 8-K filed with the Commission on March 18, 2010††                                                                              |
|          |   |                                                                                                                                                                                                                                                                             |
| **10.5† |   | Employment Agreement between Clayton Williams Energy, Inc. and Michael L. Pollard, filed as Exhibit 10.5 to our Current Report on Form 8-K filed with the Commission on March 18, 2010††                                                                             |
|          |   |                                                                                                                                                                                                                                                                             |
| **10.6† |   | Employment Agreement between Clayton Williams Energy, Inc. and Greg S. Welborn, filed as Exhibit 10.6 to our Current Report on Form 8-K filed with the Commission on March 18, 2010††                                                                                |
|          |   |                                                                                                                                                                                                                                                                             |
| **10.7† |   | Employment Agreement between Clayton Williams Energy, Inc. and T. Mark Tisdale, filed as Exhibit 10.7 to our Current Report on Form 8-K filed with the Commission on March 18, 2010††                                                                                |

----

|    |   |                                                                                                                                                    |
|---------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|
| *31.1   |   | Certification by the President and Chief Executive Officer of the Company pursuant to Rule 13a - 14(a) of the Securities Exchange Act of 1934 |
|    |   |                                                                                                                                                    |
| *31.2   |   | Certification by the Chief Financial Officer of the Company pursuant to Rule 13a - 14(a) of the Securities Exchange Act of 1934               |
|    |   |                                                                                                                                                    |
| ***32.1 |   | Certifications by the Chief Executive Officer and Chief Financial Officer of the Company pursuant to 18 U.S.C. § 1350               |

|   | * | Filed herewith |
|--------|---|----------------|

|   | ** | Incorporated by reference to the filing indicated |
|--------|----|---------------------------------------------------|

|   | *** | Furnished herewith |
|--------|-----|--------------------|

|   | † | Identifies an Exhibit that consists of or includes a management contract or compensatory plan or arrangement |
|--------|---------|--------------------------------------------------------------------------------------------------------------|

|   | †† | Filed under our Commission File No. 001-10924 |
|--------|----------------|----------------------------------------------------|

----

CLAYTON 

|   |   | CLAYTON WILLIAMS ENERGY, INC. |
|--------|--------|-------------------------------|

| Date:  | May 7, 2010 | By:    | /s/ L. Paul Latham                 |
|--------|-------------|--------|------------------------------------|
|   |        |   | L. Paul Latham                     |
|   |        |   | Executive Vice President and Chief |
|   |        |   |   Operating Officer      |

| Date:  | May 7, 2010 | By:    | /s/ Mel G. Riggs                          |
|--------|-------------|--------|-------------------------------------------|
|   |        |   | Mel G. Riggs                              |
|   |        |   | Senior Vice President and Chief Financial |
|   |        |   |   Officer                       |

----

| Exhibits No.  |   | Description                                                                                                                                                                                                                                                                      |
|---------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **3.1         |   | Second Restated Certificate of Incorporation of the Company, filed as Exhibit 3.1 to our Form S-2 Registration Statement, Commission File No. 333-13441                                                                                                                          |
|          |   |                                                                                                                                                                                                                                                                             |
| **3.2         |   | Certificate of Amendment of Second Restated Certificate of Incorporation of Clayton Williams Energy, Inc., filed as Exhibit 3.1 to our Form 10-Q for the period ended September 30, 2000††                                                                           |
|          |   |                                                                                                                                                                                                                                                                             |
| **3.3         |   | Corporate Bylaws of Clayton Williams Energy, Inc., as amended, filed as Exhibit 3.1 to our Current Report on Form 8-K filed with the Commission on March 14, 2008††                                                                                        |
|          |   |                                                                                                                                                                                                                                                                             |
| **4.1         |   | Indenture, dated July 20, 2005, among Clayton Williams Energy, Inc., the Subsidiary Guarantors and Wells Fargo Bank, National Association, as Trustee, filed as Exhibit 4.1 to our Current Report on Form 8-K filed with the Commission on July 22, 2005†† |
|          |   |                                                                                                                                                                                                                                                                             |
| **10.1† |   | Employment Agreement between Clayton Williams Energy, Inc. and Clayton W. Williams, Jr., filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the Commission on March 18, 2010††                                                                       |
|          |   |                                                                                                                                                                                                                                                                             |
| **10.2† |   | Employment Agreement between Clayton Williams Energy, Inc. and L. Paul Latham, filed as Exhibit 10.2 to our Current Report on Form 8-K filed with the Commission on March 18, 2010††                                                                                 |
|          |   |                                                                                                                                                                                                                                                                             |
| **10.3† |   | Employment Agreement between Clayton Williams Energy, Inc. and Mel G. Riggs, filed as Exhibit 10.3 to our Current Report on Form 8-K filed with the Commission on March 18, 2010††                                                                                   |
|          |   |                                                                                                                                                                                                                                                                             |
| **10.4† |   | Employment Agreement between Clayton Williams Energy, Inc. and Patrick C. Reesby, filed as Exhibit 10.4 to our Current Report on Form 8-K filed with the Commission on March 18, 2010††                                                                              |
| **10.5† |   | Employment Agreement between Clayton Williams Energy, Inc. and Michael L. Pollard, filed as Exhibit 10.5 to our Current Report on Form 8-K filed with the Commission on March 18, 2010††                                                                             |
|          |   |                                                                                                                                                                                                                                                                             |
| **10.6† |   | Employment Agreement between Clayton Williams Energy, Inc. and Greg S. Welborn, filed as Exhibit 10.6 to our Current Report on Form 8-K filed with the Commission on March 18, 2010††                                                                                |
|          |   |                                                                                                                                                                                                                                                                             |
| **10.7† |   | Employment Agreement between Clayton Williams Energy, Inc. and T. Mark Tisdale, filed as Exhibit 10.7 to our Current Report on Form 8-K filed with the Commission on March 18, 2010††                                                                                |

----

|    |   |                                                                                                                                                    |
|---------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|
| *31.1   |   | Certification by the President and Chief Executive Officer of the Company pursuant to Rule 13a - 14(a) of the Securities Exchange Act of 1934 |
|    |   |                                                                                                                                                    |
| *31.2   |   | Certification by the Chief Financial Officer of the Company pursuant to Rule 13a - 14(a) of the Securities Exchange Act of 1934               |
|    |   |                                                                                                                                                    |
| ***32.1 |   | Certifications by the Chief Executive Officer and Chief Financial Officer of the Company pursuant to 18 U.S.C. § 1350               |

|   | * | Filed herewith |
|--------|---|----------------|

|   | ** | Incorporated by reference to the filing indicated |
|--------|----|---------------------------------------------------|

|   | *** | Furnished herewith |
|--------|-----|--------------------|

|   | † | Identifies an Exhibit that consists of or includes a management contract or compensatory plan or arrangement |
|--------|---------|--------------------------------------------------------------------------------------------------------------|

|   | †† | Filed under our Commission File No. 001-10924 |
|--------|----------------|----------------------------------------------------|