Abraxas Announces 2012 Results

  Abraxas Announces 2012 Results

Business Wire

SAN ANTONIO -- March 15, 2013

Abraxas Petroleum Corporation (NASDAQ:AXAS) today reported financial and
operating results for the three and twelve months ended December 31, 2012.

Financial and Operating Results for the Three Months ended December 31, 2012

The three months ended December 31, 2012 resulted in:

  *Production of 382 MBoe (4,147 Boepd)
  *Revenue of $19.1 million
  *Adjusted EBITDA^(a) of $6.6 million inclusive of Raven Drilling
  *Adjusted Discretionary cash flow^(a) of $5.2 million inclusive of Raven
    Drilling
  *Net loss of $11.9 million, or $0.13 per share
  *Adjusted net loss, excluding certain non-cash items and inclusive of Raven
    Drilling^(a) of $3.2 million, or $0.03 per share

(a) See reconciliation of non-GAAP financial measures below.

Net loss for the three months ended December 31, 2012 was $11.9 million, or
$0.13 per share, compared to a net loss of $5.3 million, or $0.06 per share,
for the three months ended December 31, 2011.

Adjusted net loss, excluding certain non-cash items, for the three months
ended December 31, 2012 was $3.2 million, or $0.03 per share, compared to
adjusted net income, excluding certain non-cash items, of $0.7 million or
$0.01 per share for the year ended December 31, 2011. For the three months
ended December 31, 2012 and 2011, adjusted net income excludes the unrealized
loss on derivative contracts of $1.5 million and $6.0 million, respectively.
Also excluded is a full cost impairment on Canadian assets of $6.7 million for
the three months ended December 31, 2012. Included in adjusted net income for
the quarter ended December 31, 2012 is the net income from our subsidiary,
Raven Drilling, LLC of $0.5 million.

Financial and Operating Results for the Twelve Months ended December 31, 2012

The twelve months ended December 31, 2012 resulted in:

  *Production of 1.4 MMBoe (3,926 Boepd), excluding Abraxas’ equity interest
    in Blue Eagle’s production (which was dissolved on August 31, 2012)
  *Production of 1.5 MMBoe (4,103 Boepd), inclusive of Abraxas’ equity
    interest in Blue Eagle’s production (which was dissolved on August 31,
    2012)
  *Revenue of $68.6 million
  *Adjusted EBITDA^(a) of $32.0 million inclusive of Raven Drilling

  *Adjusted Discretionary cash flow^(a) of $38.9 million inclusive of Raven
    Drilling
  *Net loss of $18.8 million, or $0.20 per share
  *Adjusted net income, excluding certain non-cash items and inclusive of
    Raven Drilling^(a) of $0.4 million, or $0.01 per share

(a) See reconciliation of non-GAAP financial measures below.

Net loss for the year ended December 31, 2012 was $18.8 million, or $0.20 per
share, compared to a net income of $13.7 million, or $0.15 per share, for the
year ended December 31, 2011.

Adjusted net income, excluding certain non-cash items, for the year ended
December 31, 2012 was $0.4 million, or $0.01 per share, compared to adjusted
net income, excluding certain non-cash items, of $6.3 million or $0.07 per
share for the year ended December 31, 2011. For the years ended December 31,
2012 and 2011, adjusted net income excludes the unrealized gain on derivative
contracts of $2.7 million and $7.5 million, respectively. Also excluded is a
full cost impairment on Canadian assets of $19.8 million for the year ended
December 31, 2012. Included in adjusted net income for the year ended December
31, 2012 is the net income from our subsidiary, Raven Drilling, LLC of $2.1
million.

Pursuant to SEC regulation S-X, no income is recognized for Raven Drilling,
LLC. Contractual drilling services performed in connection with properties in
which Abraxas holds an ownership interest cannot be recognized as income,
rather it is credited to the full cost pool and recognized through lower
amortization as reserves are produced.

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 either record an
unrealized gain or loss based on the calculated value difference from the
previous period-end valuation. For example, NYMEX oil prices on December 31,
2011 were $98.83 per barrel compared to $91.82 on December 31, 2012;
therefore, the mark-to-market valuation changed considerably period to period.

Comments

Bob Watson, Abraxas’ President and CEO commented, “Abraxas made great strides
in 2012 improving its financial position. We reduced our outstanding
borrowings by approximately $22 million by divesting our Alberta Basin
properties and Nordheim Eagle Ford holdings. Although we are comfortable with
our current liquidity and leverage position, we endeavor to monetize
additional non-core assets and redeploy those proceeds into our core operated
positions, primarily in the Bakken/Three Forks and Eagle Ford. Moreover, we
are successfully executing on our plans to refocus our portfolio and drive
visible growth, as evidenced by approximately 95% of our 2013 estimated
capital expenditures being dedicated to our core oil development areas in the
Eagle Ford and Bakken/Three Forks plays. We look forward to updating the
market as we continue to deliver on our stated goals.”

Conference Call

Abraxas Petroleum Corporation (NASDAQ:AXAS) will host its fourth quarter and
full year 2012 earnings conference call at 11 AM ET on March 15, 2013. To
participate in the conference call, please dial 888.680.0869 and enter the
passcode 76135921. Additionally, a live listen only webcast of the conference
call can be accessed under the investor relations section of the Abraxas
website at www.abraxaspetroleum.com. A replay of the conference call will be
available until April 12, 2013 by dialing 888.286.8010 and entering the
passcode 16895316 or can be accessed under the investor relations section of
the Abraxas website.

Abraxas Petroleum Corporation is a San Antonio based crude oil and natural 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 crude oil and natural gas. In addition, Abraxas’ future crude
oil and natural gas production is highly dependent upon Abraxas’ level of
success in acquiring or finding additional reserves. Further, Abraxas operates
in an industry sector 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 for in this release, reference
is made to the discussion of risk factors detailed in Abraxas’ filings with
the Securities and Exchange Commission during the past 12 months.

                                                               
ABRAXAS PETROLEUM CORPORATION

CONSOLIDATED



FINANCIAL HIGHLIGHTS
                                                                   
                           Three Months Ended        Twelve Months Ended
                           December 31,              December 31,
                           2012        2011         2012          2011
Financial Results (In
thousands except per     
share data):
Revenues                   $ 19,069     $ 16,453     $  68,573     $  64,622
Adjusted EBITDA^(a)        6,617        7,742        44,381        31,504
Adjusted Discretionary     5,207        6,298        38,902        24,714
cash flow^(a)
Net income (loss)          (11,867  )   (5,260   )   (18,791   )   13,743
Net income (loss) per      $ (0.13  )   $ (0.06  )   $  (0.20  )   $  0.15
share – basic
Adjusted net income
(loss), excluding          (3,174   )   695          448           6,267
certain non-cash
items^(a)
Adjusted net income
(loss), excluding
certain non-cash           $ (0.03  )   $ 0.01       $ 0.01        $ 0.07
items^(a), per share –
basic
Weighted average shares    92,148       91,590       91,914        90,151
outstanding – basic
                                                                   
Production:
Crude oil per day (Bopd)   1,910        1,564        1,758         1,479
Natural gas per day        11,410       11,248       11,194        11,567
(Mcfpd)
Natural gas liquids        335          111          303           77
(Bblpd)
Crude oil equivalent per   4,147        3,549        3,926         3,484
day (Boepd)
Crude oil equivalent       382          327          1,437         1,272
(MBoe)
Crude oil equivalent per   4,147        3,749        4,103         3,762
day (Boepd) ^ (b)
Crude oil equivalent       382          345          1,502         1,373
(MBoe) ^ (b)
                                                                   
Realized Prices, net of
realized hedging
activity:
Crude oil ($ per Bbl)      $ 77.74      $ 77.23      $  73.51      $  76.11
Natural gas ($ per Mcf)    2.90         5.58         4.13          5.64
Natural gas liquids ($     35.35        49.77        36.57         50.07
per Bbl)
Crude oil equivalent ($    46.66        53.28        47.50         52.13
per Boe)
                                                                   
Expenses:
Lease operating ($ per     $ 17.49      $ 19.38      $  17.26      $  16.97
Boe)
Production taxes (% of     10.1     %   9.3      %   9.7       %   8.9       %
oil and gas revenue)
General and
administrative,            9.59         5.49         6.00          5.85
excluding stock-based
compensation ($ per Boe)
Cash interest ($ per       3.50         2.62         3.51          3.49
Boe)
Depreciation, depletion
and amortization ($ per    17.90        14.77        16.02         12.73
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)                    December 31, 2012         December 31, 2011
                                                            
Cash                              $     2,061               $       —
Working capital ^(a)              (27,391         )         (14,404       )
Property and equipment – net      212,832                   179,552
Total assets                      240,607                   241,150
                                                            
Long-term debt                    124,101                   126,258
Stockholders’ equity              46,700                    62,651
(deficit)
Common shares outstanding         92,733                    92,261
                                                            
(a) Excludes current maturities of long-term debt and current derivative
assets and liabilities.
                                                            

                                       
ABRAXAS PETROLEUM CORPORATION

CONSOLIDATED



STATEMENTS OF OPERATIONS
                                         
(In thousands except per share data)     Year Ended December 31,
                                         2012         2011        2010
                                                                    
Revenues:
Oil and gas production                   $ 68,499      $ 64,615     $ 58,050
Other                                    74           7           10       
                                         68,573        64,622       58,060
Operating costs and expenses:
Lease operating                          24,806        21,581       19,475
Production and ad valorem taxes          6,613         5,766        5,910
Depreciation, depletion, and             23,016        16,194       16,212
amortization
Ceiling test impairment                  19,774        —            4,787
General and administrative (including
stock-based compensation of $2,091,      10,712       9,433       8,869    
$1,987, and $1,560)
                                         84,921       52,974      55,253   
Operating income (loss)                  (16,348   )   11,648       2,807
                                                                    
Other (income) expense:
Interest income                          (4        )   (7       )   (8       )
Interest expense                         5,520         4,898        9,106
Amortization of deferred financing       937           1,762        2,479
fees
Loss (gain) on derivative contracts -    459           676          (526     )
realized
(Gain) loss on derivative contracts -    (2,669    )   (7,476   )   (10,285  )
unrealized
Equity in (income) loss of joint         (2,207    )   (2,187   )   473
venture
Other                                    97           316         (119     )
                                         2,133        (2,018   )   1,120    
Income (loss) before income tax          (18,481   )   13,666       1,687
Income tax benefit (expense)             (310      )   77          79       
Net income (loss)                        $ (18,791 )   $ 13,743    $ 1,766  
                                                                  
Net income (loss) per common share -     $ (0.20   )   $ 0.15      $ 0.02   
basic
Net income (loss) per common share -     $ (0.20   )   $ 0.15      $ 0.02   
diluted
                                                                      
Weighted average shares outstanding:
Basic                                      91,914        90,151       75,923
Diluted                                    91,914        92,244       77,224
                                                                      

                        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 (loss) calculated in accordance with GAAP is
the most directly comparable measure to discretionary cash flow; therefore,
operating income (loss) is utilized as the starting point for the
discretionary cash flow reconciliation.

Discretionary cash flow is defined as operating income (loss) plus
depreciation, depletion and amortization expenses, non-cash expenses and
impairments, cash portion of other income (expense) less cash interest.
Adjusted discretionary cash flow is defined as discretionary cash flow, plus
gas derivative monetization and cash flow from Raven Drilling operations.
Accounting rules do not permit the inclusion of the net income and other
components of Raven Drillings operations to be included in our consolidated
results of operations and cash flow, instead, the results of Raven Drillings
operations are credited to the full cost pool. Accordingly, for purposes of
Adjusted Discretionary cash flow, Raven Drilling’s cash flow is added back.
The following table provides a reconciliation of discretionary cash flow and
adjusted discretionary cash flow to operating income (loss) for the periods
presented.

                                                   
(In thousands)              Three Months Ended        Twelve Months Ended
                            December 31,              December 31,
                            2012        2011         2012         2011
Operating income (loss)     $ (7,190 )   $  1,482     $ (16,348 )   $ 11,648
Depreciation, depletion     6,828        4,823        23,016        16,194
and amortization
Ceiling test impairment     6,707        —            19,774        —
Stock-based compensation    479          488          2,091         1,987
Realized gain (loss) on     (1,241   )   361          (459      )   (676     )
derivative contracts
Cash interest              (1,336   )  (856     )  (5,041    )  (4,439   )
Discretionary Cash flow    $ 4,247    $ 6,298    $ 23,033    $ 24,714 
Gas derivative              —            —            12,364        —
monetization
Cash flow from Raven       960        —          3,505       —        
Drilling operations
Adjusted Discretionary     $ 5,207    $  6,298   $ 38,902    $ 24,714 
cash flow
                                                                             

EBITDA is defined as net income (loss) plus interest expense, depreciation,
depletion and amortization expenses, deferred income taxes and other non-cash
items. Adjusted EBITDA includes all of the components of EBITDA plus Raven
Drilling EBITDA. Accounting rules do not permit the inclusion of the net
income and other components of Raven Drillings operations to be included in
our consolidated results of operations, instead, the results of Raven
Drillings operations are credited to the full cost pool. Accordingly, for
purposes of Adjusted EBITDA, Raven Drilling’s EBITDA is added back. Adjusted
EBITDA does not include approximately $12.4 million from the monetization of
our gas hedges, which is allowed in EDITDA for purposes of our credit facility
covenants. The following table provides a reconciliation of EBITDA and
Adjusted EBITDA to net income (loss) for the periods presented.

                                                   
(In thousands)             Three Months Ended         Twelve Months Ended
                           December 31,               December 31,
                           2012         2011         2012         2011
Net income (loss)          $ (11,867 )   $ (5,260 )   $ (18,791 )   $ 13,743
Net interest expense       1,457         973          5,516         4,891
Income tax expense         —             —            310           (77      )
(benefit)
Depreciation, depletion    6,828         4,823        23,016        16,194
and amortization
Ceiling-test impairment    6,707         —            19,774        —
Amortization of deferred   330           247          937           1,762
financing fees
Stock-based compensation   479           488          2,091         1,987
Unrealized (gain) loss     1,484         5,955        (2,669    )   (7,476   )
on derivative contracts
Realized (gain) loss on
interest derivative        —             588          214           2,351
contract
Equity in (income) of      110           (124     )   (2,207    )   (2,187   )
joint venture
Other non-cash items      55          52         97          316      
EBITDA                    $ 5,583     $  7,742   $ 28,288    $ 31,504 
Raven Drilling EBITDA     1,034       —          3,729       —        
Adjusted EBITDA           $ 6,617     $ 7,742    $ 32,017    $ 31,504 
                                                                             

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. The following table provides a reconciliation of
adjusted net income (loss), excluding ceiling test impairment and unrealized
changes in derivative contracts and net income related to Raven Drilling, LLC
capitalized to the full cost pool, 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.

                                                   
(In thousands)             Three Months Ended         Twelve Months Ended
                           December 31,               December 31,
                           2012         2011         2012         2011
                                                                    
Net income (loss)          $ (11,867 )   $ (5,260 )   $ (18,791 )   $ 13,743
Ceiling test impairment    6,707         —            19,774        —
Net income related to      502           —            2,134         —
Raven Drilling
Unrealized (gain) loss     1,484      5,955     (2,669  )   (7,476 )
on derivative contracts
Adjusted net income
(loss), excluding         $ (3,174  )  $ 695      $ 448       $ 6,267  
certain non-cash items
Net income (loss) per     $ (0.13   )   (0.06  )  $ (0.20   )  $ 0.15   
share – basic
Adjusted net income
(loss), excluding         $ (0.03   )  $ 0.01     $ 0.01      $ 0.07   
certain non-cash items,
per share – basic
                                                                      

Contact:

Abraxas Petroleum Corporation
Geoffrey King, 210-490-4788
Vice President – Chief Financial Officer
gking@abraxaspetroleum.com
www.abraxaspetroleum.com