Abraxas Announces Second Quarter 2013 Results

  Abraxas Announces Second Quarter 2013 Results

Business Wire

SAN ANTONIO -- August 8, 2013

Abraxas Petroleum Corporation (NASDAQ:AXAS) today reported financial and
operating results for the three and six months ended June 30, 2013.

Financial and Operating Results for the Three Months Ended June 30, 2013

The three months ended June 30, 2013 resulted in:

  *Production of 374 MBoe (4,109 Boepd)
  *Revenue of $21.5 million
  *Adjusted EBITDA^(a) of $11.7 million inclusive of Raven Drilling
  *Adjusted discretionary cash flow^(a) of $10.6 million inclusive of Raven
    Drilling
  *Net income of $7.9 million, or $0.08 per share
  *Adjusted net income, excluding certain non-cash items and inclusive of
    Raven Drilling^(a) of $3.0 million, or $0.03 per share

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

Net income for the three months ended June 30, 2013 was $7.9 million, or $0.08
per share, compared to a net income of $10.9 million, or $0.12 per share, for
the three months ended June 30, 2012.

Adjusted net income, excluding certain non-cash items, for the three months
ended June 30, 2013 was $3.0 million, or $0.03 per share, compared to adjusted
net income, excluding certain non-cash items, of $2.4 million or $0.03 per
share for the three months ended June 30, 2012. For the three months ended
June 30, 2013 and 2012, adjusted net income excludes the unrealized gain on
derivative contracts of $7.5 million and $10.3 million, respectively. Also
excluded is a full cost impairment on Canadian assets of $2.0 million and $1.3
million for the quarters ended June 30, 2013 and June 30, 2012, respectively.
Included in adjusted net income for the quarters ended June 30, 2013 and June
30, 2012 is the net income from our subsidiary, Raven Drilling, LLC of $0.7
million and $0.5 million, respectively.

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 from
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 June 30, 2012
were $84.96 per barrel compared to $96.56 on June 30, 2013; therefore, the
mark-to-market valuation changed considerably period to period.

Comments

Bob Watson, Abraxas’ President and CEO commented, “During the first half of
2013 Abraxas successfully executed on numerous asset sales in an effort to
refocus our portfolio and true up our balance sheet. With those efforts now
behind us, and those barrels removed from our production base, we now endeavor
to deliver visible and profitable absolute production growth.”

Conference Call

Abraxas Petroleum Corporation (NASDAQ:AXAS) will host its second quarter 2013
earnings conference call at 11 AM ET on August 8, 2013. To participate in the
conference call, please dial 888.680.0865 and enter the passcode 91202357.
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 September 8, 2013 by dialing 888.286.8010 and entering the passcode
28158543 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,
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        Six Months Ended
                             June 30,                  June 30,
                             2013        2012        2013        2012
Financial Results (In
thousands except per share
data):
Revenues                     $ 21,494     $ 15,938     $ 42,690     $ 32,331
Adjusted EBITDA^(a)            11,723       9,926        23,197       18,044
Adjusted Discretionary         10,553       8,117        20,916       26,945
cash flow^(a)
Net income                     7,866        10,903       8,461        11,720
Net income per share –       $ 0.08       $ 0.12       $ 0.09       $ 0.13
diluted
Adjusted net income,
excluding certain non-cash     3,039        2,432        5,370        4,169
items^(a)
Adjusted net income,
excluding certain non-cash   $ 0.03       $ 0.03       $ 0.06       $ 0.05
items^(a), per share –
diluted
Weighted average shares        93,361       93,263       93,311       93,448
outstanding – diluted
                                                                    
Production:
Crude oil per day (Bopd)       2,094        1,735        2,100        1,673
Natural gas per day            9,825        11,307       10,162       10,895
(Mcfpd)
Natural gas liquids            377          320          368          276
(Bblpd)
Crude oil equivalent per       4,109        3,940        4,162        3,764
day (Boepd)
Crude oil equivalent           373.9        358.5        753.3        685.1
(MBoe)
Crude oil equivalent per       4,109        4,272        4,162        4,044
day (Boepd) ^ (b)
Crude oil equivalent           373.9        388.7        753.3        735.9
(MBoe) ^ (b)
                                                                    
Realized Prices, net of
realized hedging activity:
Crude oil ($ per Bbl)        $ 86.48      $ 69.31      $ 86.11      $ 70.86
Natural gas ($ per Mcf)        3.51         5.24         3.26         5.42
Natural gas liquids ($ per     31.46        37.53        33.12        40.20
Bbl)
Crude oil equivalent ($        55.35        48.61        54.34        50.12
per Boe)
                                                                    
Expenses:
Lease operating ($ per       $ 16.49      $ 15.01      $ 16.76      $ 16.52
Boe)
Production taxes (% of oil     8.9    %     9.3    %     9.0    %     9.2    %
and gas revenue)
General and
administrative, excluding      5.69         4.69         5.56         4.53
stock-based compensation
($ per Boe)
Cash interest ($ per Boe)      2.93         3.21         2.83         3.25
Depreciation, depletion
and amortization ($ per        15.45        15.00        16.31        14.91
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)                 June 30, 2013   December 31, 2012
                                               
Cash                           $   2,432       $   2,061
Working capital ^(a)               6,547           (27,391   )
Property and equipment – net       188,347         212,832
Total assets                       260,093         240,607
                                               
Long-term debt                     131,023         124,101
Stockholders’ equity               55,999          46,700
Common shares outstanding          92,799          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   Three Months Ended June 30,  Six Months Ended June 30,
per share data)
                       2013           2012          2013           2012
                                                                    
Revenues:
Oil and gas            $  21,478       $ 15,934      $  42,641      $ 32,313
production
Other                    16           4            49          18     
                          21,494         15,938         42,690        32,331
Operating costs and
expenses:
Lease operating           6,166          5,382          12,628        11,316
Production and ad         1,911          1,489          3,838         2,985
valorem taxes
Depreciation,
depletion, and            5,776          5,380          12,285        10,218
amortization
Impairment                1,977          1,306          1,977         1,306
General and
administrative
(including
stock-based              2,797        2,404        5,327       4,305  
compensation of
$669, $722, $1,142
and $1,199)
                         18,627       15,961       36,055      30,130 
Operating income          2,867          (23     )      6,635         2,201
(loss)
                                                                    
Other (income)
expense:
Interest income           -              (1      )      (1      )     (2     )
Interest expense          1,259          1,270          2,467         2,465
Amortization of
deferred financing        343            266            676           296
fees
(Gain) Loss on
derivative contracts      783            (914    )      1,708         (866   )
- realized
(Gain) Loss on
derivative contracts      (7,485  )      (10,296 )      (6,864  )     (9,420 )
- unrealized
Earnings from equity      —              (1,251  )      —             (2,034 )
method investment
Other                    14           —            101         42     
                         (5,086  )     (10,926 )     (1,913  )    (9,519 )
Net income before      $  7,953        $ 10,903      $  8,548       $ 11,720
income tax
Income tax expense       87           —            87          —      
Net income             $  7,866       $ 10,903     $  8,461      $ 11,720 
                                                                    
Net income per         $  0.09        $ 0.12       $  0.09       $ 0.13   
common share - basic
Net income per
common share -         $  0.08        $ 0.12       $  0.09       $ 0.13   
diluted
                                                                    
Weighted average
shares outstanding:
Basic                     92,351         91,808         92,323        91,775
Diluted                   93,361         93,263         93,311        93,448
                                                                             
                                                                             
                                                                             

                        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’s operations.
Accounting rules do not permit the inclusion of the net income and other
components of Raven Drilling’s operations to be included in our consolidated
results of operations and cash flow; instead, the results of Raven Drilling’s
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.

                            Three Months Ended       Six Months Ended
(In thousands)               June 30,                  June 30,
                             2013        2012         2013        2012
Operating income (loss)      $ 2,867      $ (23    )   $ 6,635      $ 2,201
Depreciation, depletion        5,776        5,380        12,285       10,218
and amortization
Impairment                     1,977        1,306        1,977        1,306
Stock-based compensation       669          722          1,142        1,199
Realized gain (loss) on        (783   )     914          (1,708 )     866
derivative contracts
Cash interest                (1,095 )   (1,150 )   (2,131 )   (2,228 )
Discretionary cash flow     $ 9,411    $ 7,149    $ 18,200   $ 13,562 
Gas derivative                 —            —            —            12,364
monetization
Cash flow from Raven         1,142     968       2,716     1,019  
Drilling operations
Adjusted Discretionary      $ 10,553   $ 8,117    $ 20,916   $ 26,945 
cash flow
                                                                             

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’s
EBITDA. Accounting rules do not permit the inclusion of the net income and
other components of Raven Drilling’s operations to be included in our
consolidated results of operations; instead, the results of Raven Drilling’s
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 settled in the first quarter 2012, 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.

                           Three Months Ended        Six Months Ended
(In thousands)              June 30,                   June 30,
                            2013        2012          2013        2012
Net income                  $ 7,866      $ 10,903      $ 8,461      $ 11,720
Net interest expense          1,259        1,269         2,466        2,463
Income tax expense            87           —             87           —
Depreciation, depletion       5,776        5,380         12,285       10,218
and amortization
Amortization of deferred      343          266           676          296
financing fees
Stock-based compensation      669          722           1,142        1,199
Impairment                    1,977        1,306         1,977        1,306
Unrealized (gain) loss on     (7,485 )     (10,296 )     (6,864 )     (9,420 )
derivative contracts
Realized (gain) loss on
interest derivative           —            584           —            1,161
contract
Earnings from equity          —            (1,251  )     —            (2,034 )
method investment
Other non-cash items        14        —           101       42     
EBITDA                     $ 10,506   $ 8,883      $ 20,331   $ 16,951 
Raven Drilling EBITDA       1,217     1,043       2,866     1,093  
Adjusted EBITDA            $ 11,723   $ 9,926      $ 23,197   $ 18,044 
                                                                             

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.

                           Three Months Ended        Six Months Ended
(In thousands)              June 30,                   June 30,
                            2013        2012          2013        2012
                                                                    
Net income                  $ 7,866      $ 10,903      $ 8,461      $ 11,720
Impairment                    1,977        1,306         1,977        1,306
Net income related to         681          519           1,796        563
Raven Drilling
Unrealized (gain) loss on   (7,485 )   (10,296 )   (6,864 )   (9,420 )
derivative contracts
Adjusted net income,
excluding certain          $ 3,039    $ 2,432     $ 5,370    $ 4,169  
non-cash items
Net income per share –     $ 0.08     $ 0.12      $ 0.09     $ 0.13   
diluted
Adjusted net income,
excluding certain          $ 0.03     $ 0.03      $ 0.06     $ 0.05   
non-cash items, per share
– diluted

Contact:

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