Abraxas Reports Third Quarter 2009 Results

• Press Release
• Source: Abraxas Petroleum Corporation
• On 5:08 pm EST, Monday November 9, 2009

SAN ANTONIO--(BUSINESS WIRE)--Abraxas Petroleum Corporation (NASDAQ:AXAS - News) (“Abraxas Petroleum”) today reported financial and operating results for the three and nine months ended September 30, 2009.

Related Quotes

Symbol	Price	Change
AXAS	1.99	0.00

{"s" : "axas","k" : "c10,l10,p20,t10","o" : "","j" : ""}

As previously announced on October 5, 2009, the merger of Abraxas Energy Partners, L.P. (“Abraxas Energy”) with and into a wholly-owned subsidiary of Abraxas Petroleum has closed. In accordance with generally accepted accounting principles, Abraxas Petroleum has reported its results herein on a consolidated basis, which includes the results of Abraxas Energy and its subsidiaries. The share of net income (loss) of Abraxas Energy that Abraxas Petroleum did not own during the periods ended September 30, 2009 and 2008 is recorded as non-controlling interest. As a result of the merger, the non-controlling interest allocation will be eliminated in future periods.

On a consolidated basis, the three months ended September 30, 2009 resulted in:

• Production of 407.6 MBoe (4,430 Boepd);
• Revenue of $13.4 million;
• EBITDA^(a) of $8.6 million;
• Cash flow^(a) of $5.7 million;
• Net loss attributable to Abraxas Petroleum of $4.4 million, or $0.09 per share; and
• Adjusted net income, excluding certain items^(a), of $747,000, or $0.02 per share.

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

On a consolidated basis, net loss attributable to Abraxas Petroleum for the three months ended September 30, 2009 was $4.4 million, or $0.09 per share, compares to net income of $70.8 million or $1.44 per share during the same period of 2008. Net income for the three months ended September 30, 2008 was driven by a sharp decrease in commodity prices from the prior period end of June 30, 2008 and reflected in a $83.8 million unrealized (non-cash) gain on derivative contracts for the period. Adjusted net income, excluding certain items, of $747,000, or $0.02 per share for the three months ended September 30, 2009 compares to adjusted net income, excluding certain items, of $4.5 million, or $0.09 per share during the same period of 2008. Adjusted net income, excluding certain items, does not include the non-controlling interest which will be eliminated in future periods as a result of the merger and the unrealized loss or gain on derivative contracts which is a non-cash item. As commodity prices fluctuate, these derivative contracts are valued against current market prices at the end of each reporting period in accordance with ASC 815, “Derivatives and Hedging,” as amended and interpreted, and require us to either record an unrealized gain or loss based on the calculated value difference from the previous period end valuation.

Operational Update

Rocky Mountain

In Converse County, Wyoming, the Peregrine 5H was drilled to a total measured depth of 11,500’, including a 3,300’ lateral in the Turner formation. This well was completed with a ten stage fracture stimulation and after recovering all of the frac fluid and significant formation oil, the well was recently placed on pump. Abraxas owns a 100% working interest in this well.

In Sheridan County, Montana, the State 2-16 is drilling below 10,500’ towards a target total depth of 11,000’ to test the Red River formation. Abraxas owns a 100% working interest in this well.

In Divide County, North Dakota, a non-operated well is drilling below a total measured depth of 10,000’ while building the curve for a 10,000’ lateral in the Bakken formation. Abraxas owns a 10% working interest in this well.

Permian Basin

In Nolan County, Texas, the Spires Ranch 202-1 was drilled to a total depth of 7,300’ to test the Ellenburger, Strawn and Caddo formations. The Ellenburger formation was acid stimulated and tested oil, and will be fracture stimulated later this month.

“Now that the merger is behind us and all of our properties are back under one umbrella, we can focus our efforts on exploiting our asset base which stretches from the Williston Basin in North Dakota and Montana down to the onshore Gulf Coast of Texas. Even though natural gas prices remained weak during the third quarter of 2009, oil prices continued to firm up during the quarter. As a result, we postponed all of our gas projects but started several oil development projects in the Rocky Mountain and Permian Basin regions which we anticipate having definitive results on in the near future. Our activity was slowed earlier than usual this year by winter weather and blizzard conditions in the Rockies. We expect to announce our 2010 capital budget later this month which will be largely focused on oil projects as we endeavor to meet our stated goal of being 50% oil by year-end 2010,” commented Bob Watson, Abraxas’ President and CEO.

Conference Call

Abraxas invites you to participate in a conference call on Tuesday, November 10, 2009, at 10:00 a.m. CT (11:00 a.m. ET) to discuss the contents of this release and respond to questions. Please dial 1-888-679-8018, passcode 36902070, 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 podcast and 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 crude oil and natural gas exploitation and production company with operations across the Rocky Mountain, Mid-Continent, Permian Basin and Gulf Coast regions of the United States.

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 natural gas and crude oil. In addition, Abraxas’ future natural gas and crude oil 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.

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

^(a) Excludes current maturities of long-term debt of approximately $8 million under the new credit facility and current derivative assets and liabilities.

^(b) Represents Abraxas’ stockholders’ equity (deficit) which excludes non-controlling interest equity (deficit).

⁽¹⁾ As adjusted for “Non-controlling Interest in Consolidated Financial Statements” in accordance with ASC 810.

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. Cash flow and EBITDA are non-GAAP financial measures as defined under SEC rules. Abraxas' 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 cash flow and EBITDA exclude some, but not all items that affect net income and may vary among companies, the 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 cash flow and EBITDA; therefore, operating income (loss) is utilized as the starting point for these reconciliations.

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) and cash interest. The following table provides a reconciliation of cash flow to operating income (loss) for the periods presented.

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 operating income (loss) for the periods presented – see consolidated statements of operations for a reconciliation of net income (loss) to operating income (loss).

This release also includes a discussion of “adjusted net income, excluding certain items,” which is a non-GAAP financial measure as defined under SEC rules. The following table provides a reconciliation of adjusted net income, excluding certain items, 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, excluding certain items.

^(a) Net income (loss) excludes the net income (loss) attributable to the non-controlling interest which will be eliminated in future periods as a result of the merger which closed on October 5, 2009.

Abraxas Petroleum Corporation
Barbara M. Stuckey, 210-490-4788
Vice President - Corporate Finance
bstuckey@abraxaspetroleum.com
www.abraxaspetroleum.com