Abraxas Announces First Quarter 2013 Results

  Abraxas Announces First Quarter 2013 Results

Business Wire

SAN ANTONIO -- May 10, 2013

Abraxas Petroleum Corporation (NASDAQ:AXAS) today reported financial and
operating results for the three months ended March 31, 2013.

Financial and Operating Results for the Three Months ended March 31, 2013

The three months ended March 31, 2013 resulted in:

  *Production of 379 MBoe (4,216 Boepd)
  *Revenue of $21.2 million
  *Adjusted EBITDA^(a) of $11.5 million inclusive of Raven Drilling
  *Adjusted Discretionary cash flow^(a) of $10.4 million inclusive of Raven
    Drilling
  *Net Income of $0.6 million, or $0.01 per share
  *Adjusted net income, excluding certain non-cash items and inclusive of
    Raven Drilling^(a) of $2.3 million, or $0.03 per share

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

Net income for the three months ended March 31, 2013 was $0.6 million, or
$0.01 per share, compared to a net income of $0.8 million, or $0.01 per share,
for the three months ended March 31, 2012.

Adjusted net income, excluding certain non-cash items, for the three months
ended March 31, 2013 was $2.3 million, or $0.03 per share, compared to
adjusted net income, excluding certain non-cash items, of $1.7 million or
$0.02 per share for the three months ended March 31, 2012. For the three
months ended March 31, 2013 and 2012, adjusted net income excludes the
unrealized loss on derivative contracts of $0.6 million and $0.9 million,
respectively. Included in adjusted net income for the quarters ended March 31,
2013 and March 31, 2012 is the net income from our subsidiary, Raven Drilling,
LLC of $1.1 million and $0.04 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 March 31, 2012
were $103.02 per barrel compared to $97.23 on March 31, 2013; therefore, the
mark-to-market valuation changed considerably period to period.

Divestiture Update

Abraxas recently sold its remaining Oklahoma properties at the May Oil and Gas
Clearinghouse Auction for gross proceeds of $470,700. The largely non-operated
assets produce 507 mcfe/day (506 mcf of natural gas per day and .11 barrels of
oil per day).

The Company also recently learned that Insignia Energy Ltd. (TSX: ISN), a
Canadian company in which Abraxas holds a legacy position of 100,366 shares
from a merger with a former Abraxas subsidiary, received a non-binding
proposal from its largest shareholder to be taken private at an all cash offer
of $1.35/share.

Comments

Bob Watson, Abraxas’ President and CEO, commented, “Abraxas embarked on a new
strategic plan in September 2012 with three stated goals: focus the portfolio,
delever the balance sheet and grow production. Eight months later, the
benefits and results of this strategic shift are beginning to flow through our
financial statements. We reduced our borrowings after monetizing over $25
million in non-core assets without drastically altering our production or
reserve profile. These proceeds, and any additional proceeds from future asset
sales, are subsequently being redeployed into our core Bakken and Eagle Ford
assets. The replacement of the lower margin barrels Abraxas disposed of, with
higher margin barrels in the Eagle Ford and Bakken, enhances the Company’s
cash flow and profitability. Furthermore, heading forward this capital focus
should provide more stable and predictable production growth. With the
previously reported strong March production continuing into the second
quarter, we feel well positioned to execute on our final goal of substantially
growing production on an absolute basis.”

Conference Call

Abraxas Petroleum Corporation (NASDAQ:AXAS) will host its first quarter 2013
earnings conference call at 11 AM ET on May 10, 2013. To participate in the
conference call, please dial 888.713.4205 and enter the passcode 41659005.
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 June 7, 2013 by dialing 888.286.8010 and entering the passcode 76684456
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
                                                     March 31,
                                                     2013         2012
Financial Results (In thousands except per share  
data):
Revenues                                             $ 21,196       $ 16,393
                                                                             
Adjusted EBITDA^(a)                                  11,474         8,119
Adjusted Discretionary cash flow^(a)                 10,364         18,828
Net income                                           595            817
Net income per share – basic                         $ 0.01         $ 0.01
Adjusted net income, excluding certain               2,331          1,737
non-cash items^(a)
Adjusted net income, excluding certain               $ 0.03         $ 0.02
non-cash items^(a), per share – basic
Weighted average shares outstanding – basic          92,290         91,745
                                                                    
Production:
Crude oil per day (Bopd)                             2,107          1,610
Natural gas per day (Mcfpd)                          10,502         10,484
Natural gas liquids (Bblpd)                          359            232
Crude oil equivalent per day (Boepd)                 4,216          3,589
Crude oil equivalent (MBoe)                          379            327
Crude oil equivalent per day (Boepd) ^ (b)          4,216          3,815
Crude oil equivalent (MBoe) ^ (b)                    379            347
                                                                    
Realized Prices, net of realized hedging
activity:
Crude oil ($ per Bbl)                                $ 85.74        $ 72.54
Natural gas ($ per Mcf)                              3.02           5.61
Natural gas liquids ($ per Bbl)                      34.88          43.89
Crude oil equivalent ($ per Boe)                     53.33          51.77
                                                                    
Expenses:
Lease operating ($ per Boe)                          $ 17.03        $ 18.17
Production taxes (% of oil and gas revenue)          9.1      %     9.1      %
General and administrative, excluding                5.42           4.36
stock-based compensation ($ per Boe)
Cash interest ($ per Boe)                            2.73           3.30
Depreciation, depletion and amortization ($          17.15          14.82
per Boe)
                                                                    

(a)  See reconciliation of non-GAAP financial measures below.
(b)   Includes Abraxas’ equity interest in Blue Eagle’s production which
      was dissolved effective August 31, 2012.
      


BALANCE SHEET DATA
                                                   
(In thousands)                         March 31, 2013     December 31, 2012
                                                          
Cash                                   $      154         $      2,061
Working capital ^(a)                   (28,116)           (27,391)
Property and equipment – net           221,190            212,832
Total assets                           258,161            240,607
                                                          
Long-term debt                         129,556            124,101
Stockholders’ equity (deficit)         47,631             46,700
Common shares outstanding              92,734             92,733
                                                          

(a)  Excludes current maturities of long-term debt and current derivative
      assets and liabilities in accordance with our loan covenants
      

                                            
ABRAXAS PETROLEUM CORPORATION
CONSOLIDATED

STATEMENTS OF OPERATIONS

                                                  
(In thousands except per share data)              Three Months Ended March 31,
                                                  2013            2012
                                                                 
Revenues:
Oil and gas production                            $  21,163         $ 16,379
Other                                             33               14       
                                                  21,196            16,393
Operating costs and expenses:
Lease operating                                   6,462             5,934
Production and ad valorem taxes                   1,927             1,496
Depreciation, depletion, and                      6,509             4,838
amortization
General and administrative (including
stock-based compensation of $474 and              2,530            1,901    
$477)
                                                  17,428           14,169   
Operating income                                  3,768             2,224
                                                                    
Other (income) expense:
Interest income                                   (1         )      (1       )
Interest expense                                  1,208             1,195
Amortization of deferred financing fees           333               30
Loss on derivative contracts - realized           925               48
Loss on derivative contracts -                    621               876
unrealized
Earnings from equity method investment            —                 (783     )
Other                                             87               42       
                                                  3,173            1,407    
Net income                                        $  595           $ 817    
                                                                   
Net income per common share - basic               $  0.01          $ 0.01   
Net income per common share - diluted             $  0.01          $ 0.01   
                                                                      
Weighted average shares outstanding:
Basic                                                92,290           91,745
Diluted                                              93,264           93,605
                                                                      
                                                                      

                        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. 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 for the periods presented.

                                                
(In thousands)                                       Three Months Ended
                                                     March 31,
                                                     2013         2012
Operating income                                     $ 3,768        $ 2,224
Depreciation, depletion and amortization             6,509          4,838
Stock-based compensation                             474            477
Realized gain (loss) on derivative contracts         (925     )     (48      )
Cash interest                                    (1,036   )   (1,078   )
Discretionary cash flow                          $ 8,790     $ 6,413  
Gas derivative monetization                          —              12,364
Cash flow from Raven Drilling operations         1,574       51       
Adjusted Discretionary cash flow                 $ 10,364    $ 18,828 
                                                                             

EBITDA is defined as net income 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 EBITDA for purposes of our credit facility
covenants. The following table provides a reconciliation of EBITDA and
Adjusted EBITDA to net income for the periods presented.

                                                 
(In thousands)                                        Three Months Ended
                                                      March 31,
                                                      2013        2012
Net income                                            $ 595        $ 817
Net interest expense                                  1,207        1,194
Depreciation, depletion and amortization              6,509        4,838
Amortization of deferred financing fees               333          30
Stock-based compensation                              474          477
Unrealized loss on derivative contracts               621          876
Realized loss on interest derivative contract         —            577
Earnings from equity method investment                —            (783    )
Other non-cash items                              87         42      
EBITDA                                            $ 9,826    $ 8,068 
Raven Drilling EBITDA                             1,648      51      
Adjusted EBITDA                                   $ 11,474   $ 8,119 
                                                                     

This release also includes a discussion of “adjusted net income, 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, 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 for the periods presented. Management believes
that net income calculated in accordance with GAAP is the most directly
comparable measure to adjusted net income, excluding certain non-cash items.

                                                      
(In thousands)                                             Three Months Ended
                                                           March 31,
                                                           2013       2012
                                                                       
Net income                                                 $ 595       $ 817
Net income related to Raven Drilling                       1,115       44
Unrealized (gain) loss on derivative contracts          621      876
Adjusted net income, excluding certain non-cash        $ 2,331   $ 1,737
items
Net income per share – basic                           $ 0.01    $ 0.01
Adjusted net income, excluding certain non-cash        $ 0.03    $ 0.02
items, per share – basic

Contact:

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