Abraxas Announces Third Quarter Results

  Abraxas Announces Third Quarter Results

Business Wire

SAN ANTONIO -- November 09, 2012

Abraxas Petroleum Corporation (NASDAQ:AXAS) today reported financial and
operating results for the three and nine months ended September 30, 2012 and
provided an operational update.

Financial and Operating Results

Including Abraxas’ equity interest in the Blue Eagle joint venture (which was
dissolved on August 31, 2012), the three months ended September 30, 2012
resulted in:

  *Production of 384.3 MBoe (4,177 Boepd), up 3% over Q3 2011, of which 53%
    was oil or natural gas liquids.

The three months ended September 30, 2012 resulted in:

  *Production of 370.5 MBoe (4,027 Boepd), excluding Abraxas’ equity interest
    in Blue Eagle’s production, a 3% increase over Q2 2012;
  *Revenue of $17.2 million;
  *EBITDA^(a) of $5.8 million;
  *Discretionary cash flow^(a) of $5.2 million;
  *Net loss of $18.6 million, or $0.20 per share; and
  *Adjusted net loss^(a) of $547,000, or $0.01 per share.
  *Debt Covenant Metrics:
    Working Capital 1.49:1.0 (min 1.0:1.0)
    Debt to EBITDA 3.31:1.0 (max 4.0:1.0)
    Interest Coverage 7.96:1.0 (min 2.5:1.0)
    ^(a) See reconciliation of non-GAAP financial measures below.

Net loss for the quarter ended September 30, 2012 was $18.6 million, or $0.20
per share, compared to a net income of $20.1 million, or $0.22 per share, for
the same period in 2011.

Adjusted net loss, excluding certain non-cash items, for the quarter ended
September 30, 2012 was $547,000 or $0.01 per share, compared to adjusted net
income, excluding certain non-cash items, of $3.6 million or $0.04 per share
for the same period in 2011. For the quarters ended September 30, 2012 and
2011, adjusted net income (loss) excludes the unrealized loss on derivative
contracts of $5.3 million and an unrealized gain of $16.5 million
respectively. Also excluded is a full cost impairment on Canadian assets of
$11.8 million for the quarter ended September 30, 2012. Included in adjusted
net loss for the quarter ended September 30, 2012 is the net income from our
subsidiary, Raven Drilling, LLC of $1.1 million.

Unrealized gains or losses on derivative contracts are based on mark-to-market
valuations which are non-cash in nature and may fluctuate drastically period
to period. As commodity prices fluctuate, these derivative contracts are
valued against current market prices at the end of each reporting period in
accordance with Accounting Standards Codification 815, “Derivatives and
Hedging,” as amended and interpreted, and require Abraxas to record an
unrealized gain or loss based on the calculated value difference from the
previous period-end valuation. For example, NYMEX oil prices on September 28,
2012 were $92.19 per barrel compared to $84.96 on June 30, 2012.

Conference Call

Abraxas invites you to participate in a conference call on Monday, November
12, 2012 at 10:30 a.m. CT (11:30 a.m. ET) to discuss the contents of this
release and respond to questions. Please dial 1.888.679.8033 passcode 90153817
#, 10 minutes before the scheduled start time, if you would like to
participate in the call. The conference call will also be webcast live on the
Internet and can be accessed directly on the Company’s website at
www.abraxaspetroleum.com under Investor Relations. In addition to the audio
webcast replay, a transcript of the conference call will be posted on the
Investor Relations section of the Company’s website approximately 24 hours
after the conclusion of the call and will be accessible for at least 60 days.

Abraxas Petroleum Corporation is a San Antonio-based oil and gas exploration
and production company with operations across the Rocky Mountain,
Mid-Continent, Permian Basin and onshore Gulf Coast regions of the United
States and in the province of Alberta, Canada.

Safe Harbor for forward-looking statements: Statements in this release looking
forward in time involve known and unknown risks and uncertainties, which may
cause Abraxas’ actual results in future periods to be materially different
from any future performance suggested in this release. Such factors may
include, but may not be necessarily limited to, changes in the prices received
by Abraxas for its oil and gas. In addition, Abraxas’ future oil and gas
production is highly dependent upon Abraxas’ level of success in acquiring or
finding additional reserves. Further, Abraxas operates in an industry where
the value of securities is highly volatile and may be influenced by economic
and other factors beyond Abraxas’ control. In the context of forward-looking
information provided in this release, reference is made to the discussion of
risk factors detailed in Abraxas’ filings with the Securities and Exchange
Commission (“SEC”) during the past 12 months.

                                                 
ABRAXAS PETROLEUM CORPORATION
                                                                             
FINANCIAL HIGHLIGHTS
(UNAUDITED)
                                                                             
(In thousands except     Three Months Ended         Nine Months Ended
per share data)                                     September 30,
                         September 30,
                          2012       2011       2012       2011   
Financial Results:
Revenues                 $ 17,170      $ 17,666     $ 49,501      $ 48,170
EBITDA^(a)                 5,756         9,607        22,706        23,762
Discretionary cash         5,226         8,140        18,787        18,417
flow^(a)
Net income (loss)          (18,644 )     20,085       (6,924  )     19,003
Net income (loss) per    $ (0.20   )   $ 0.22       $ (0.08   )   $ 0.21
share – basic
Adjusted net income        (547    )     3,635        3,622         5,572
(loss)^(a)
Adjusted net income
(loss) per share^(a) –   $ (0.01   )   $ 0.04       $ 0.04        $ 0.06
basic
Weighted average
shares outstanding –       91,898        91,509       91,866        89,663
basic
                                                                             
Production:
Crude oil per day          1,775         1,663        1,707         1,451
(Bopd)
Natural gas per day        11,569        11,826       11,122        11,674
(Mcfpd)
Natural gas liquids        323           95           292           66
per day (Bblpd)
Crude oil equivalent       4,027         3,729        3,853         3,462
per day (Boepd)
Crude oil equivalent       370.5         343.1        1,055.6       945.1
(MBoe)
Crude oil equivalent       4,177         4,055        4,088         3,858
per day (Boepd)^(b)
Crude oil equivalent       384.3         373.1        1,120.2       1053.3
(MBoe)^(b)
                                                                             
Realized Prices, net
of realized hedging
activity:
Crude oil ($ per Bbl)    $ 73.88       $ 77.87      $ 71.92       $ 75.70
Natural gas ($ per         2.92          5.61         4.55          5.65
Mcf)
Natural gas liquids ($     31.69         50.20        37.04         50.24
per Bbl)
Crude oil equivalent       43.51         53.80        47.80         51.73
($ per Boe)
                                                                             
Expenses:
Lease operating ($ per   $ 18.40       $ 16.53      $ 17.18       $ 16.14
Boe)
Production taxes (% of     10.0    %     8.8    %     9.5     %     8.8    %
oil and gas revenue)
General and
administrative,
excluding stock-based      5.00          4.75         4.70          5.98
compensation ($ per
Boe)
Cash interest ($ per       3.98          2.53         3.51          3.79
Boe)
Depreciation,
depletion and              16.12         12.13        15.34         12.03
amortization ($ per
Boe)

(a) See reconciliation of non-GAAP financial measures below.
(b) Includes Abraxas’ equity interest in Blue Eagle’s production.

                                                 
BALANCE SHEET DATA
                                                    
(In thousands)                 September 30, 2012   December 31, 2011
                                                    
Cash                           $      2,615         $   —
Working capital ^(a)                  9,127             (14,404   )
Property and equipment – net          204,625           179,552
Total assets                          250,128           241,150
                                                    
Long-term debt                        145,616           126,258
Stockholders’ equity                  57,905            62,651
Common shares outstanding             92,389            92,261

(a) Excludes current maturities of long-term debt and current derivative
assets and liabilities.

                                                  
ABRAXAS PETROLEUM CORPORATION

STATEMENTS OF OPERATIONS
(UNAUDITED)
                                                     
(In thousands                                        Nine Months Ended
except per        Three Months Ended September 30,   September 30,
share data)
                    2012           2011           2012      2011    
                                                                   
Revenues:
Oil and gas
production        $  17,146         $  17,665        $  49,459     $ 48,165
revenues
Other               24              1              42         5       
                     17,170            17,666           49,501       48,170
Operating costs
and expenses:
Lease operating      6,816             5,670            18,132       15,251
Production           1,714             1,549            4,699        4,229
taxes
Depreciation,
depletion, and       5,971             4,161            16,189       11,371
amortization
Impairment           11,761            —                13,067       —
General and
administrative
(including
stock-based         2,267           2,061          6,572      7,153   
compensation of
$413, $430,
$1,612 and
$1,499)
                    28,529          13,441         58,659     38,004  
Operating            (11,359  )        4,225            (9,158 )     10,166
income (loss)
                                                                   
Other (income)
expense:
Interest income      (1       )        (2       )       (3     )     (6      )
Interest             1,596             983              4,061        3,924
expense
Amortization of
deferred             311               245              607          1,515
financing fees
Loss (gain) on
derivative
contracts
(unrealized of       5,351             (16,641  )       (4,935 )     (12,394 )
$5,267,
$(16,450),
$(4,153),
$(13,431))
Equity in
(income) loss        (282     )        (546     )       (2,316 )     (2,064  )
of joint
venture
Other               —               101            42         188     
                    6,975           (15,860  )      (2,544 )    (8,837  )
Net income
(loss) before        (18,334  )        20,085           (6,614 )     19,003
income tax
Income tax          310             —              310        —       
expense
Net income        $  (18,644  )     $  20,085       $  (6,924 )   $ 19,003  
(loss)
                                                                   
Net income
(loss) per        $  (0.20    )     $  0.22         $  (0.08  )   $ 0.21    
common share -
basic
Net income
(loss) per        $  (0.20    )     $  0.21         $  (0.08  )   $ 0.21    
common share -
diluted
                                                                   
Weighted
average shares
outstanding:
Basic                91,898            91,509           91,866       89,663
Diluted              91,898            93,616           91,866       92,160
                                                                             

                        ABRAXAS PETROLEUM CORPORATION

                RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

To fully assess Abraxas’ operating results, management believes that, although
not prescribed under generally accepted accounting principles ("GAAP"),
discretionary cash flow and EBITDA are appropriate measures of Abraxas'
ability to satisfy capital expenditure obligations and working capital
requirements. Discretionary cash flow and EBITDA are non-GAAP financial
measures as defined under SEC rules. Abraxas' discretionary cash flow and
EBITDA should not be considered in isolation or as a substitute for other
financial measurements prepared in accordance with GAAP or as a measure of the
Company's profitability or liquidity. As discretionary cash flow and EBITDA
exclude some, but not all items that affect net income and may vary among
companies, the discretionary cash flow and EBITDA presented below may not be
comparable to similarly titled measures of other companies. Management
believes that operating income calculated in accordance with GAAP is the most
directly comparable measure to discretionary cash flow; therefore, operating
income is utilized as the starting point for the discretionary cash flow
reconciliation.

Discretionary cash flow is defined as operating income plus depreciation,
depletion and amortization expenses, non-cash expenses and impairments, cash
portion of other income (expense) less cash interest. The following table
provides a reconciliation of discretionary cash flow to operating income for
the periods presented.

                             Three Months Ended        Nine Months Ended
(In thousands)                                       September 30,
                             September 30,
                              2012       2011      2012      2011   
                                                                    
Operating (loss) income      $ (11,359 )   $ 4,225     $ (9,158 )   $ 10,166
Depreciation, depletion        5,971         4,161       16,189       11,371
and amortization
Impairment                     11,761        —           13,067       —
Stock-based compensation       413           430         1,612        1,499
Realized gain (loss) on        (84     )     191         782          (1,037 )
derivative contracts
Cash interest                (1,476  )   (867  )   (3,705 )   (3,582 )
Discretionary cash flow     $ 5,226     $ 8,140   $ 18,787   $ 18,417 
                                                                             

EBITDA is defined as net income (loss) plus interest expense, depreciation,
depletion and amortization expenses, deferred income taxes and other non-cash
items. The following table provides a reconciliation of EBITDA to Net income
for the periods presented.

                                                   
                          Three Months Ended          Nine Months Ended
(In thousands)                                        September 30,
                          September 30,
                           2012       2011        2012      2011    
                                                                   
Net (loss) income         $ (18,644 )   $ 20,085      $ (6,924 )   $ 19,003
Net interest expense        1,595         981           4,058        3,918
Income tax expense          310           —             310          —
Depreciation, depletion     5,971         4,161         16,189       11,371
and amortization
Impairment                  11,761        —             13,067       —
Amortization of             311           245           607          1,515
deferred financing fee
Stock-based                 413           430           1,612        1,499
compensation
Unrealized (gain) loss      5,267         (16,450 )     (4,153 )     (13,431 )
on derivative contracts
Realized (gain) loss on
interest derivative         (946    )     600           214          1,763
contract
Equity in (income) of       (282    )     (546    )     (2,316 )     (2,064  )
joint venture
Other non-cash items      —          101        42        188     
EBITDA                   $ 5,756     $ 9,607     $ 22,706   $ 23,762  
                                                                             

This release also includes a discussion of “adjusted net income (loss),
excluding certain non-cash items,” which is a non-GAAP financial measure as
defined under SEC rules. Furthermore, in accordance with SEC Regulations,
earnings (or losses) related to Raven Drilling, LLC are credited to full cost
pool rather than included in net income (loss) for the period presented. The
following table provides a reconciliation of adjusted net income (loss),
excluding ceiling test impairment, including net income from Raven Drilling,
LLC and change in unrealized derivative contracts, to net income (loss) for
the periods presented. Management believes that net income (loss) calculated
in accordance with GAAP is the most directly comparable measure to adjusted
net income (loss), excluding certain non-cash items.

                                                   
                          Three Months Ended          Nine Months Ended
(In thousands)                                        September 30,
                          September 30,
                           2012       2011        2012      2011    
                                                                   
Net income (loss)         $ (18,644 )   $ 20,085      $ (6,924 )   $ 19,003
Impairment                  11,761        —             13,067       —
Net income related to       1,069         —             1,632        —
Raven Drilling, LLC
Unrealized (gain) loss    5,267      (16,450 )   (4,153 )   (13,431 )
on derivative contracts
Adjusted net income
(loss), excluding        $ (547    )  $ 3,635     $ 3,622    $ 5,572   
certain non-cash items
Net income (loss) per    $ (0.20   )  $ 0.22      $ (0.08  )  $ 0.21    
share – basic
Adjusted net income
(loss), excluding        $ (0.01   )  $ 0.04       0.04      0.06    
certain non-cash items,
per share – basic

Contact:

Abraxas Petroleum Corporation
Geoffrey R. King, 210-490-4788
gking@abraxaspetroleum.com
www.abraxaspetroleum.com
 
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