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Clayton Williams Energy Inc. (CWEI), an independent energy company based in Midland, TX, has entered into an agreement with Chesapeake Exploration LLC in the Delaware Basin oil play. Under the terms of the agreement, CWEI can earn 75% interest in leases held by Chesapeake on about 75,000 net acres in southern Reeves County, TX. CWEI will drill at least 20 earning wells in the first year and have an option to drill an additional 20 wells per year during the next four years to earn all of Chesapeake's acreage. CWEI will also carry Chesapeake for one-quarter of the costs in earning wells, which will earn CWEI a 75% interest in 640 net acres. Subsequent wells in an earned area will be drilled on a heads-up basis. CWEI will receive credit towards its annual drilling obligations for drilling more than 20 earning wells in any year.

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