![](https://capedge.com/proxy/8-K/0000867665-08-000110/axasq309earnings1.jpg)
ABRAXAS PETROLEUM CORPORATION
www.abraxaspetroleum.com
NEWS RELEASE
Abraxas Reports Third Quarter 2008 Results
SAN ANTONIO (November 10, 2008) – Abraxas Petroleum Corporation (NASDAQ:AXAS) today reported financial and operating results for the three and nine months ended September 30, 2008 and provided an operational update.
Herein, we refer to Abraxas Petroleum Corporation and its subsidiaries as “Abraxas Petroleum” or “AXAS” and Abraxas Energy Partners, L.P. and its subsidiaries as “Abraxas Energy”, “AXLP” or the “Partnership.”
On a stand-alone basis for Abraxas Petroleum (which exclude the results of Abraxas Energy), the three months ended September 30, 2008 resulted in:
· | Production of 60.6 MBoe (658 Boepd); |
· | Revenue of $4.9 million ($7.3 million including cash distributions); |
· | EBITDA(a) of $2.7 million ($5.1 million including cash distributions); |
· | Cash flow(a) of $2.7 million ($5.0 million including cash distributions); and |
· | Net income of $1.5 million, or $0.03 per share ($3.9 million including cash distributions, or $0.08 per share). |
For financial reporting purposes, results are consolidated and include Abraxas Petroleum and Abraxas Energy. Abraxas Petroleum owns 47% of the Partnership and records minority interest for the portion that it does not own. On a consolidated basis, the three months ended September 30, 2008 resulted in:
· | Production of 417.0 MBoe (4,532 Boepd); |
· | Revenue of $29.2 million; |
· | EBITDA(a) of $20.1 million; |
· | Cash flow(a) of $17.6 million; |
· | Net income of $70.8 million, or $1.44 per share; and |
· | Adjusted net income of $2.8 million, or $0.06 per share, excluding the non-minority interest share of the non-cash change in derivative fair value in the amount of $39.7 million and the gain attributable to the minority interest loss that exceeded the minority interest equity capital in the Partnership in Q2 2008 the amount of $28.2 million. |
(a) | See reconciliation of non-GAAP financial measures below. |
18803 Meisner Drive
San Antonio, Texas 78258
Phone: 210.490.4788 Fax: 210.918.6675
On a consolidated basis, adjusted net income, excluding the non-cash change in derivative fair value and the gain associated with the minority interest loss in Q2 2008, for the quarter ended September 30, 2008 was $2.8 million, or $0.06 per share, compared to adjusted net income, excluding the non-cash change in derivative fair value, of $2.7 million or $0.05 per share during the same quarter of 2007. Adjusted net income excluding the non-cash change in derivative fair value excludes the unrealized gains or losses on derivative contracts that are based on mark-to-market valuations which are non-cash in nature. The unrealized gain on derivative contracts for the quarter ended September 30, 2008 is attributable to the hedging activity of the Partnership and does not impact Abraxas Petroleum on a stand-alone basis. These unrealized gains or losses on derivative contracts are non-cash items and may fluctuate drastically period to period. During the third quarter of 2008, Abraxas Energy recorded a non-cash change in derivative fair value of $84.1 million.
Cash Distribution from Affiliate
Abraxas Energy Partners, L.P., the master limited partnership formed by Abraxas Petroleum in May 2007, declared a cash distribution of $0.44 per unit for the third quarter of 2008. The distribution was approximately 1% higher than the Partnership’s distribution for the second quarter of 2008 of $0.4375 per unit. The distribution will be made on or about November 14, 2008 to unitholders of record at the close of business on November 7, 2008. Abraxas Petroleum owns approximately 47% of the outstanding units and will receive $2.4 million in cash distributions from its ownership interest in Abraxas Energy for the third quarter of 2008.
Operations
Wyoming:
· | In Brooks Draw, the Lakeside #1H, a horizontal well targeting the Turner sandstone was drilled to a total measured depth of approximately 12,500’, including a 3,800’ lateral. A liner with eight isolation packers has been set in the lateral section after oil and gas were encountered while drilling and a multi-stage fracture stimulation will be scheduled in the fourth quarter of 2008 after fluid sensitivity study results are received and evaluated. Abraxas Petroleum owns a 100% working interest in this well. |
South Texas:
· | In DeWitt County, the Nordheim #2H, a horizontal development well targeting the Edwards formation was drilled to a total measured depth of approximately 17,100’, including a 3,000’ lateral. A liner with seven isolation packers has been set in the lateral section after encouraging indications of gas were encountered while drilling and a multi-stage fracture stimulation will be scheduled in the fourth quarter of 2008 pending availability of frac sand and completion of pipeline hookup. Abraxas Petroleum owns a 75% working interest in this well. |
· | In Lavaca County, the Henson #2H, a horizontal Edwards well, was recently re-completed with a multi-stage fracture stimulation and is currently recovering frac fluid. Abraxas Energy owns a 75% working interest in this well. |
· | In Bee County, the Muckleroy #1, a re-entry well was successfully cleaned out to 9,500’, completed in the Wilcox sand, and is currently producing nominal amounts of gas. Abraxas Petroleum owns a 100% working interest in this well. |
West Texas:
· | In Midland County, the Beulah Coleman #13, a development well targeting the Devonian and Spraberry formations was fracture stimulated in the Devonian and is currently making commercial quantities of oil and gas. Abraxas Petroleum owns a 100% working interest in this well. |
· | In Scurry County, three wells of the four-well program on our Huddleston lease have been drilled to total depths of approximately 3,500’, completed in the Clearfork / Glorietta formations and each well is currently producing 10 – 25 barrels of oil per day while recovering frac fluid. The fourth well is expected to reach total depth this week. Abraxas Petroleum owns a 100% working interest in each of these wells. |
· | In Coke County, a three-well program in our Millican Reef Unit targeting the Strawn formation commenced drilling last week. Abraxas Petroleum owns a 92% working interest in each of these wells. |
Drilling and re-completion activity continues on numerous non-operated wells on the properties acquired from St. Mary Land & Exploration Company in January 2008. These properties are principally located in the Rockies and Mid-Continent regions of the U.S. On average, Abraxas Energy owns a relatively small working interest in these wells.
“Although our third quarter production was negatively impacted by shut-ins associated with Hurricane Gustav and Ike, we were very active from an operational stand-point and the impact from those projects will be partially reflected in the fourth quarter with the full impact coming in the first quarter of 2009, as we experienced unexpected delays in certain services, such as frac sand, which delayed completions on several key wells drilled during the third quarter. We look forward to sharing the results of these projects as they are known together with the issuance of guidance after the more impactful wells have been brought on-line. While we cannot ignore what has occurred in the markets over the past few months, including a staggering decline in commodity prices and unprecedented turmoil in the equity and credit markets, these events have caused us to re-evaluate our future capital spending and we have chosen to be conservative and reduce our capital spending. For 2009, we are in the process of prioritizing our inventory of projects and formulating a budget based on our assumptions about future commodity prices and service costs. We remain committed to our long-term business strategy and are very pleased to have a large inventory of projects to choose from. As promised, we continue to provide a transparent presentation of our financial and operating results detailing the results of the consolidated entity as well as on a stand-alone basis for both Abraxas Petroleum and Abraxas Energy – please read “Basis of Presentation” for a detailed explanation,” commented Bob Watson, Abraxas’ President and CEO.
Conference Call
Abraxas invites you to participate in a conference call on Wednesday, November 12, 2008, at 3:00 p.m. CT (4:00 p.m. ET) to discuss the contents of this release and respond to questions. Please dial 1.888.679.8018, passcode 63089596, 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 exploration and production company with operations principally in Texas and Wyoming. Abraxas Petroleum Corporation also owns a 47% interest in an upstream master limited partnership, Abraxas Energy Partners, L.P., which entitles Abraxas Petroleum Corporation to receive its proportionate share of cash distributions made by Abraxas Energy Partners, L.P.
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.
FOR MORE INFORMATION CONTACT:
Barbara M. Stuckey/Vice President - Corporate Development
Telephone 210.490.4788
bstuckey@abraxaspetroleum.com
www.abraxaspetroleum.com
ABRAXAS PETROLEUM CORPORATION
BASIS OF PRESENTATION
For financial reporting purposes, accounting principles generally accepted in the United States of America (GAAP) require Abraxas Petroleum to consolidate (and incorporate) the financial results of Abraxas Energy and its subsidiaries into Abraxas Petroleum’s financial results because Abraxas Petroleum owns a significant percentage of the Partnership and controls its general partner. While this presentation may be proper under GAAP, it can be confusing to the investment community. As a result, all operating and financial results are presented herein on a consolidated basis and on a stand-alone basis for the current period. The stand-alone results include AXAS without AXLP, which reflect operating and financial results of Abraxas Petroleum and its subsidiaries on a stand-alone basis and AXLP, which reflect operating and financial results of Abraxas Energy and its subsidiaries on a stand-alone basis. The consolidating entries column reflects adjustments to the stand-alone presentations in the consolidation treatment under GAAP.
Abraxas Energy has approximately 85% of its projected oil and gas production from its net proved developed producing reserves hedged with NYMEX-based fixed priced swaps through December 2011 at volume weighted average prices of $84.54 per barrel of oil and $8.32 per Mcf of gas. As commodity prices fluctuate, these derivative contracts are valued against current market prices at the end of each reporting period in accordance with Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended and interpreted, and require Abraxas Energy to either record an unrealized gain or loss based on the calculated value difference from the previous period end valuation.
ABRAXAS PETROLEUM CORPORATION
CONSOLIDATED
FINANCIAL HIGHLIGHTS
(UNAUDITED)
(In thousands except per share data): | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Financial Results: | ||||||||||||||||
Revenues | $ | 29,246 | $ | 11,404 | $ | 85,839 | $ | 36,238 | ||||||||
EBITDA (a) �� | 20,131 | 7,463 | 61,174 | 23,860 | ||||||||||||
Cash flow (a) | 17,583 | 6,960 | 53,877 | 16,544 | ||||||||||||
Net income | 70,755 | 2,998 | 4,076 | 59,495 | ||||||||||||
Net income per share – basic | $ | 1.44 | $ | 0.06 | $ | 0.08 | $ | 1.31 | ||||||||
Adjusted net income, excluding non-cash change in derivative fair value and gain associated with minority interest | 2,812 | 2,672 | 11,854 | 58,312 | ||||||||||||
Adjusted net income, excluding non-cash change in derivative fair value and gain associated with minority interest, per share – basic | $ | .06 | $ | 0.05 | $ | 0.24 | $ | 1.28 | ||||||||
Weighted average shares outstanding – basic | 49,043 | 48,814 | 48,955 | 45,524 | ||||||||||||
Production: | ||||||||||||||||
Crude oil per day (Bopd) | 1,519 | 522 | 1,472 | 540 | ||||||||||||
Natural gas per day (Mcfpd) | 18,077 | 15,317 | 17,756 | 15,876 | ||||||||||||
Crude oil equivalent per day (Boepd) | 4,532 | 3,075 | 4,432 | 3,186 | ||||||||||||
Crude oil equivalent (MBoe) | 417.0 | 282.9 | 1,214.2 | 869.7 | ||||||||||||
Realized Prices, net of realized hedging activity: | ||||||||||||||||
Crude oil ($ per Bbl) | $ | 84.02 | $ | 67.98 | $ | 86.43 | $ | 61.05 | ||||||||
Natural gas ($ per Mcf) | 6.69 | 6.58 | 7.49 | 6.37 | ||||||||||||
Crude oil equivalent ($ per Boe) | 54.84 | 44.30 | 58.73 | 42.08 | ||||||||||||
Expenses: | ||||||||||||||||
Lease operating ($ per Boe) | $ | 11.60 | $ | 6.97 | $ | 10.36 | $ | 6.66 | ||||||||
Production taxes (% of oil and gas revenue) | 9.2 | % | 7.5 | % | 8.6 | % | 8.6 | % | ||||||||
General and administrative, excluding stock-based compensation ($ per Boe) | 3.28 | 3.37 | 3.41 | 3.44 | ||||||||||||
Cash interest ($ per Boe) | 6.11 | 1.78 | 6.01 | 8.41 | ||||||||||||
Depreciation, depletion and amortization ($ per Boe) | 13.92 | 12.77 | 13.92 | 12.50 |
(a) | See reconciliation of non-GAAP financial measures below. |
BALANCE SHEET DATA
(In thousands) | September 30, 2008 | December 31, 2007 | ||||||
Cash | $ | 6,073 | $ | 18,936 | ||||
Working capital | 1,728 | (a) | 11,348 | |||||
Property and equipment – net | 272,938 | 117,027 | ||||||
Total assets | 300,152 | 147,119 | ||||||
Long-term debt | 130,545 | 45,900 | ||||||
Stockholders’ equity | 61,026 | 55,847 | ||||||
Common shares outstanding | 49,258 | 49,021 |
(a) | Excludes current maturities of long-term debt, including $40.0 million of debt outstanding under the Partnership’s Subordinated Credit Facility due January 31, 2009, and current derivative assets and liabilities. |
ABRAXAS PETROLEUM CORPORATION
CONSOLIDATING
FINANCIAL HIGHLIGHTS
(UNAUDITED)
(In thousands except per share data): | Three Months Ended September 30, 2008 | |||||||||||||||
AXAS without AXLP | AXLP | Consolidating Entries | Consolidated | |||||||||||||
Financial Results: | ||||||||||||||||
Revenues | $ | 4,913 | $ | 24,333 | $ | — | $ | 29,246 | ||||||||
EBITDA(a) | 2,714 | 17,417 | — | 20,131 | ||||||||||||
Cash flow(a) | 2,652 | 14,931 | — | 17,583 | ||||||||||||
Net income (loss) | 1,518 | 86,859 | (17,622 | ) (b) | 70,755 | |||||||||||
Net income per share – basic | 1.44 | |||||||||||||||
Adjusted net income (loss), excluding non-cash change in derivative fair value and gain associated with minority interest | 1,518 | 2,745 | (1,451 | ) (c) | 2,812 | |||||||||||
Adjusted net income, excluding non-cash change in derivative fair value and gain associated with minority interest, per share – basic | $ | 0.06 | ||||||||||||||
Weighted average shares outstanding – basic | 49,043 | |||||||||||||||
Production: | ||||||||||||||||
Crude oil per day (Bopd) | 255 | 1,264 | — | 1,519 | ||||||||||||
Natural gas per day (Mcfpd) | 2,417 | 15,660 | — | 18,077 | ||||||||||||
Crude oil equivalent per day (Boepd) | 658 | 3,874 | — | 4,532 | ||||||||||||
Crude oil equivalent (MBoe) | 60.6 | 356.4 | — | 417.0 | ||||||||||||
Realized Prices, net of realized hedging activity: | ||||||||||||||||
Crude oil ($ per Bbl) | $ | 111.82 | $ | 78.40 | $ | — | $ | 84.02 | ||||||||
Natural gas ($ per Mcf) | 8.76 | 6.37 | — | 6.69 | ||||||||||||
Crude oil equivalent ($ per Boe) | 75.57 | 51.31 | — | 54.84 | ||||||||||||
Expenses: | ||||||||||||||||
Lease operating ($ per Boe) | $ | 15.44 | $ | 10.95 | $ | — | $ | 11.60 | ||||||||
Production taxes (% of oil and gas revenue) | 7.6 | % | 9.6 | % | — | 9.2 | % | |||||||||
General and administrative, excluding stock-based compensation ($ per Boe) | 11.20 | 1.93 | — | 3.28 | ||||||||||||
Cash interest ($ per Boe) | 1.02 | 6.98 | — | 6.11 | ||||||||||||
Depreciation, depletion and amortization ($ per Boe) | 14.08 | 13.90 | — | 13.92 |
(a) | See reconciliation of non-GAAP financial measures below. |
(b) | Minority interest (53% of the Partnership’s net income for the period) and the gains attributable to the minority interest loss that exceeded the minority interest equity capital in the Partnership in Q2 2008. |
(c) | Minority interest (53% of the Partnership’s net income for the period excluding the non-cash change in derivative fair value). |
Note: The financial results presented above of AXAS without AXLP for the three months ended September 30, 2008 do not include cash distributions received from the Partnership in the amount of $2.4 million attributable to the third quarter of 2008.
ABRAXAS PETROLEUM CORPORATION
CONSOLIDATING
FINANCIAL HIGHLIGHTS
(UNAUDITED)
(In thousands except per share data): | ||||||||||||||||
Nine Months Ended September 30, 2008 | ||||||||||||||||
AXAS without AXLP | AXLP | Consolidating Entries | Consolidated | |||||||||||||
Financial Results: | ||||||||||||||||
Revenues | $ | 14,246 | $ | 71,593 | $ | — | $ | 85,839 | ||||||||
EBITDA(a) | 8,319 | 52,855 | — | 61,174 | ||||||||||||
Cash flow(a) | 8,337 | 45,540 | — | 53,877 | ||||||||||||
Net income (loss) | 4,931 | (1,811 | ) | 956 | (b) | 4,076 | ||||||||||
Net income per share – basic | $ | 0.08 | ||||||||||||||
Adjusted net income (loss), excluding non-cash change in derivative fair value | 4,931 | 14,667 | (7,744 | ) (c) | 11,854 | |||||||||||
Adjusted net income, excluding non-cash change in derivative fair value, per share – basic | $ | 0.24 | ||||||||||||||
Weighted average shares outstanding – basic | 48,955 | |||||||||||||||
Production: | ||||||||||||||||
Crude oil per day (Bopd) | 252 | 1,220 | — | 1,472 | ||||||||||||
Natural gas per day (Mcfpd) | 2,342 | 15,414 | — | 17,756 | ||||||||||||
Crude oil equivalent per day (Boepd) | 643 | 3,789 | — | 4,432 | ||||||||||||
Crude oil equivalent (Mboe) | 176.1 | 1,038.1 | — | 1,214.2 | ||||||||||||
Realized Prices, net of realized hedging activity: | ||||||||||||||||
Crude oil ($ per Bbl) | $ | 108.38 | $ | 81.89 | $ | — | $ | 86.43 | ||||||||
Natural gas ($ per Mcf) | 8.99 | 7.26 | — | 7.49 | ||||||||||||
Crude oil equivalent ($ per Boe) | 75.33 | 55.91 | — | 58.73 | ||||||||||||
Expenses: | ||||||||||||||||
Lease operating ($ per Boe) | $ | 11.71 | $ | 10.13 | $ | — | $ | 10.36 | ||||||||
Production taxes (% of oil and gas revenue) | 6.3 | % | 9.0 | % | — | 8.6 | % | |||||||||
General and administrative, excluding stock-based compensation ($ per Boe) | 13.55 | 1.69 | — | 3.41 | ||||||||||||
Cash interest (income) ($ per Boe) | (0.10 | ) | 7.05 | — | 6.01 | |||||||||||
Depreciation, depletion and amortization ($ per Boe) | 13.45 | 14.00 | — | 13.92 |
(a) | See reconciliation of non-GAAP financial measures below. |
(b) | Minority interest (53% of the Partnership’s net loss for the period). |
(c) | Minority interest (53% of the Partnership’s net income for the period excluding the non-cash change in derivative fair value). |
Note: The financial results presented above of AXAS without AXLP for the nine months ended September 30, 2008 do not include cash distributions received from the Partnership in the amount of $6.8 million attributable to the first, second and third quarters of 2008.
ABRAXAS PETROLEUM CORPORATION
CONSOLIDATING
BALANCE SHEET DATA
(UNAUDITED)
(In thousands) | September 30, 2008 | |||||||||||||||||||
AXAS without AXLP | AXLP | Consolidating Entries | Consolidated | |||||||||||||||||
Cash | $ | 5,056 | $ | 1,017 | $ | $ | — | $ | 6,073 | |||||||||||
Working capital (a) | (7,643 | ) | 9,371 | — | 1,728 | |||||||||||||||
Property and equipment – net | 54,900 | 218,038 | — | 272,938 | ||||||||||||||||
Total assets | 100,709 | 233,477 | (34,034 | ) (b) | 300,152 | |||||||||||||||
Long-term debt | 4,945 | 125,600 | — | 130,545 | ||||||||||||||||
Stockholders’ equity (deficit) | 63,528 | 33,757 | (36,259 | ) (b) | 61,026 | |||||||||||||||
Common shares outstanding | 49,258 | |||||||||||||||||||
(a) | Excludes current maturities of long-term debt, including $40.0 million of debt outstanding under the Partnership’s Subordinated Credit Facility due January 31, 2009, and current derivative assets and liabilities. |
(b) | Includes the minority interest share of basis in the Partnership. |
ABRAXAS PETROLEUM CORPORATION
CONSOLIDATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands except per share data) | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Revenues: | ||||||||||||||||
Oil and gas production revenues | $ | 28,910 | $ | 10,959 | $ | 84,856 | $ | 35,151 | ||||||||
Rig revenues | 333 | 443 | 968 | 1,082 | ||||||||||||
Other | 3 | 2 | 15 | 5 | ||||||||||||
29,246 | 11,404 | 85,839 | 36,238 | |||||||||||||
Operating costs and expenses: | ||||||||||||||||
Lease operating | 4,837 | 1,971 | 12,580 | 5,792 | ||||||||||||
Production taxes | 2,670 | 819 | 7,299 | 3,023 | ||||||||||||
Depreciation, depletion, and amortization | 5,806 | 3,611 | 16,904 | 10,867 | ||||||||||||
Rig operations | 241 | 199 | 644 | 572 | ||||||||||||
General and administrative (including stock-based compensation of $400, $204 , $1,297 and $748) | 1,767 | 1,156 | 5,439 | 3,739 | ||||||||||||
15,321 | 7,756 | 42,866 | 23,993 | |||||||||||||
Operating income | 13,925 | 3,648 | 42,973 | 12,245 | ||||||||||||
Other (income) expense: | ||||||||||||||||
Interest income | (47 | ) | (167 | ) | (174 | ) | (234 | ) | ||||||||
Interest expense | 3,033 | 699 | 8,171 | 7,634 | ||||||||||||
Amortization of deferred financing fees | 281 | 62 | 748 | 609 | ||||||||||||
Loss (gain) on derivative contracts (unrealized of $(84,114), $(690), $16,478 and $(2,506)) | (78,069 | ) | (2,263 | ) | 30,024 | (3,953 | ) | |||||||||
Loss on debt extinguishment | — | — | — | 6,455 | ||||||||||||
Gain on sale of assets | — | — | — | (59,335 | ) | |||||||||||
Other | 350 | — | 1,084 | — | ||||||||||||
(74,452 | ) | (1,669 | ) | 39,853 | (48,824 | ) | ||||||||||
Income before income tax and minority interest | 88,377 | 5,317 | 3,120 | 61,069 | ||||||||||||
Income tax expense | — | — | — | 715 | ||||||||||||
Income before minority interest | 88,377 | 5,317 | 3,120 | 60,354 | ||||||||||||
Minority interest (a) | (17,622 | ) | (2,319 | ) | 956 | (859 | ) | |||||||||
Net income | $ | 70,755 | $ | 2,998 | $ | 4,076 | $ | 59,495 | ||||||||
Net income per common share - basic | $ | 1.44 | $ | 0.06 | $ | 0.08 | $ | 1.31 | ||||||||
Net income per common share - diluted | $ | 1.43 | $ | 0.06 | $ | 0.08 | $ | 1.30 | ||||||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 49,043 | 48,814 | 48,955 | 45,524 | ||||||||||||
Diluted | 49,398 | 48,941 | 49,424 | 45,870 |
(a) | Includes the minority interest share (53%) of the net income (loss) of the Partnership and includes any gains attributable to the minority interest loss that exceeded the minority interest equity capital in the Partnership in Q2 2008. |
ABRAXAS PETROLEUM CORPORATION
CONSOLIDATING
STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands except per share data) | Three Months Ended September 30, 2008 | |||||||||||||||
AXAS without AXLP | AXLP | Consolidating Entries | Consolidated | |||||||||||||
Revenues: | ||||||||||||||||
Oil and gas production revenues | $ | 4,577 | $ | 24,333 | $ | — | $ | 28,910 | ||||||||
Rig revenues | 333 | — | — | 333 | ||||||||||||
Other | 3 | — | — | 3 | ||||||||||||
4,913 | 24,333 | — | 29,246 | |||||||||||||
Operating costs and expenses: | ||||||||||||||||
Lease operating | 935 | 3,902 | — | 4,837 | ||||||||||||
Production taxes | 345 | 2,325 | — | 2,670 | ||||||||||||
Depreciation, depletion, and amortization | 853 | 4,953 | — | 5,806 | ||||||||||||
Rig operations | 241 | — | — | 241 | ||||||||||||
General and administrative (including stock-based compensation of $250 and $150) | 928 | 839 | — | 1,767 | ||||||||||||
3,302 | 12,019 | — | 15,321 | |||||||||||||
Operating income | 1,611 | 12,314 | — | 13,925 | ||||||||||||
Other (income) expense: | ||||||||||||||||
Interest income | (45 | ) | (2 | ) | — | (47 | ) | |||||||||
Interest expense | 119 | 2,914 | — | 3,033 | ||||||||||||
Amortization of deferred financing fees | 10 | 271 | — | 281 | ||||||||||||
Loss (gain) on derivative contracts (unrealized of $0 and $(84,114)) | — | (78,069 | ) | — | (78,069 | ) | ||||||||||
Other | 9 | 341 | — | 350 | ||||||||||||
93 | (74,545 | ) | — | (74,452 | ) | |||||||||||
Income before minority interest | 1,518 | 86,859 | — | 88,377 | ||||||||||||
Minority interest (a) | — | — | (17,622 | ) | (17,622 | ) | ||||||||||
Net income (loss) | $ | 1,518 | $ | 86,859 | $ | (17,622 | ) | $ | 70,755 | |||||||
Net income per common share – basic | $ | 1.44 | ||||||||||||||
Net income per common share – diluted | $ | 1.43 | ||||||||||||||
Weighted average shares outstanding | ||||||||||||||||
Basic | 49,043 | |||||||||||||||
Diluted | 49,398 |
(a) | Includes the minority interest share (53%) of the net income of the Partnership and includes any gains attributable to the minority interest loss that exceeded the minority interest equity capital in the Partnership in Q2 2008. |
Note: The financial results presented above of AXAS without AXLP for the three months ended September 30, 2008 do not include cash distributions received from the Partnership in the amount of $2.4 million attributable to the third quarter of 2008.
ABRAXAS PETROLEUM CORPORATION
CONSOLIDATING
STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands except per share data) | Nine Months Ended September 30, 2008 | |||||||||||||||
AXAS without AXLP | AXLP | Consolidating Entries | Consolidated | |||||||||||||
Revenues: | ||||||||||||||||
Oil and gas production revenues | $ | 12,263 | $ | 71,593 | $ | — | $ | 84,856 | ||||||||
Rig revenues | 968 | — | — | 333 | ||||||||||||
Other | 15 | — | — | 3 | ||||||||||||
14,246 | 71,593 | — | 85,839 | |||||||||||||
Operating costs and expenses: | ||||||||||||||||
Lease operating | 2,062 | 10,518 | — | 12,580 | ||||||||||||
Production taxes | 835 | 6,464 | — | 7,299 | ||||||||||||
Depreciation, depletion, and amortization | 2,368 | 14,536 | — | 16,904 | ||||||||||||
Rig operations | 644 | — | — | 644 | ||||||||||||
General and administrative (including stock-based compensation of $924 and $373) | 3,310 | 2,129 | — | 5,439 | ||||||||||||
9,219 | 33,647 | — | 43,866 | |||||||||||||
Operating income | 5,027 | 37,946 | — | 42,973 | ||||||||||||
Other (income) expense: | ||||||||||||||||
Interest income | (156 | ) | (18 | ) | — | (174 | ) | |||||||||
Interest expense | 190 | 7,971 | — | 8,181 | ||||||||||||
Amortization of deferred financing fees | 30 | 718 | — | 748 | ||||||||||||
Loss (gain) on derivative contracts (unrealized of $0 and $(16,478)) | — | 30,024 | — | 30,024 | ||||||||||||
Other | 32 | 1,052 | — | 1,084 | ||||||||||||
96 | 39,757 | — | 39,853 | |||||||||||||
Income before minority interest | 4,931 | (1,811 | ) | — | 3,120 | |||||||||||
Minority interest (a) | — | — | 956 | 956 | ||||||||||||
Net income (loss) | $ | 4,931 | $ | (1,811 | ) | $ | 956 | $ | 4,076 | |||||||
Net income per common share – basic | $ | 0.08 | ||||||||||||||
Net income per common share – diluted | $ | 0.08 | ||||||||||||||
Weighted average shares outstanding | ||||||||||||||||
Basic | 49,955 | |||||||||||||||
Diluted | 49,424 |
(a) | Includes the minority interest share (53%) of the net loss of the Partnership. |
Note: The financial results presented above of AXAS without AXLP for the nine months ended September 30, 2008 do not include cash distributions received from the Partnership in the amount of $6.8 million attributable to the first, second and third quarters of 2008.
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 calculated in accordance with GAAP is the most directly comparable measure to cash flow and EBITDA; therefore, operating income is utilized as the starting point for these reconciliations.
Cash flow is defined as operating income (loss) plus depletion, depreciation and amortization expenses, non-cash expenses and cash portion of other income (expense) and cash interest. The following table provides a reconciliation of cash flow to operating income for the periods presented.
CONSOLIDATED | ||||||||||||||||
(In thousands) | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Operating income | $ | 13,925 | $ | 3,648 | $ | 42,973 | $ | 12,245 | ||||||||
Depreciation, depletion and amortization | 5,806 | 3,611 | 16,904 | 10,867 | ||||||||||||
Stock-based compensation | 400 | 204 | 1,297 | 748 | ||||||||||||
Cash interest | (2,548 | ) | (503 | ) | (7,297 | ) | (7,316 | ) | ||||||||
Cash flow | $ | 17,583 | $ | 6,960 | $ | 53,877 | $ | 16,544 |
CONSOLIDATING | ||||||||||||
(In thousands) | Three Months Ended September 30, 2008 | |||||||||||
AXAS without AXLP | AXLP | Consolidated | ||||||||||
Operating income | $ | 1,611 | $ | 12,314 | $ | 13,925 | ||||||
Depreciation, depletion, and amortization | 853 | 4,953 | 5,806 | |||||||||
Stock-based compensation | 250 | 150 | 400 | |||||||||
Cash interest | (62 | ) | (2,486 | ) | (2,548 | ) | ||||||
Cash flow | $ | 2,652 | $ | 14,931 | $ | 17,583 |
(In thousands) | Nine Months Ended September 30, 2008 | |||||||||||
AXAS without AXLP | AXLP | Consolidated | ||||||||||
Operating income | $ | 5,027 | $ | 37,946 | $ | 42,973 | ||||||
Depreciation, depletion, and amortization | 2,368 | 14,536 | 16,904 | |||||||||
Stock-based compensation | 924 | 373 | 1,297 | |||||||||
Cash interest | 18 | (7,315 | ) | (7,297 | ) | |||||||
Cash flow | $ | 8,337 | $ | 45,540 | $ | 53,877 |
EBITDA is defined as net income (loss) plus interest expense, depletion, depreciation and amortization expenses, deferred income taxes and other non-cash items. The following table provides a reconciliation of EBITDA to operating income for the periods presented – see consolidated statements of operations for a reconciliation of net income (loss) to operating income.
CONSOLIDATED | ||||||||||||||||
(In thousands) | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Operating income | $ | 13,925 | $ | 3,648 | $ | 42,973 | $ | 12,245 | ||||||||
Depreciation, depletion and amortization | 5,806 | 3,611 | 16,904 | 10,867 | ||||||||||||
Stock-based compensation | 400 | 204 | 1,297 | 748 | ||||||||||||
EBITDA | $ | 20,131 | $ | 7,463 | $ | 61,174 | $ | 23,860 |
CONSOLIDATING | ||||||||||||
(In thousands) | Three Months Ended September 30, 2008 | |||||||||||
AXAS without AXLP | AXLP | Consolidated | ||||||||||
Operating income | $ | 1,611 | $ | 12,314 | $ | 13,925 | ||||||
Depreciation, depletion, and amortization | 853 | 4,953 | 5,806 | |||||||||
Stock-based compensation | 250 | 150 | 400 | |||||||||
EBITDA | $ | 2,714 | $ | 17,417 | $ | 20,131 |
(In thousands) | Nine Months Ended September 30, 2008 | |||||||||||
AXAS without AXLP | AXLP | Consolidated | ||||||||||
Operating income | $ | 5,027 | $ | 37,946 | $ | 42,973 | ||||||
Depreciation, depletion, and amortization | 2,368 | 14,536 | 16,904 | |||||||||
Stock-based compensation | 924 | 373 | 1,297 | |||||||||
EBITDA | $ | 8,319 | $ | 52,855 | $ | 61,174 |
This release also includes a discussion of “adjusted net income (loss), excluding non-cash change in derivative fair value and loss associated with minority interest”, which is a non-GAAP financial measure as defined under SEC rules. The following table provides a reconciliation of adjusted net income (loss), excluding non-cash change in derivative fair value and loss associated with minority interest, 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 non-cash change in derivative fair value and loss associated with minority interest.
CONSOLIDATED | ||||||||||||||||
(In thousands) | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Net income | $ | 70,755 | $ | 2,998 | $ | 4,076 | $ | 59,495 | ||||||||
Gain associated with minority interest | (28,241 | ) (a) | — | — | — | |||||||||||
Loss (gain) on unrealized derivative contracts | (39,702 | ) (b) | (326 | ) | 7,778 | (b) | (1,183 | ) | ||||||||
Adjusted net income, excluding non-cash change in derivative fair value and gain associated with minority interest | $ | 2,812 | $ | 2,672 | $ | 11,854 | $ | 58,312 | ||||||||
Net income per share – basic | 1.44 | 0.06 | 0.08 | 1.31 | ||||||||||||
Adjusted net income, excluding non-cash change in derivative fair value and gain associated with minority interest, per share – basic | $ | 0.06 | $ | 0.05 | $ | 0.24 | $ | 1.28 |
(a) | Gain attributable to the minority interest loss in Q2 2008 that exceeded the minority interest equity capital in the Partnership. |
(b) | Abraxas’ share (47%) of the Partnership’s unrealized loss (gain) on derivative contracts for the period. |
CONSOLIDATING | ||||||||||||||||
(In thousands) | Three Months Ended September 30, 2008 | |||||||||||||||
AXAS without AXLP | AXLP | Consolidating Entries | Consolidated | |||||||||||||
Net income (loss) | $ | 1,518 | $ | 86,859 | $ | (17,622 | ) (a) | $ | 70,755 | |||||||
Gain associated with minority interest | — | — | (28,241 | ) (b) | (28,241 | ) | ||||||||||
Loss (gain) on unrealized derivative contracts | — | (84,114 | ) | 44,412 | (c) | (39,702 | ) | |||||||||
Adjusted net income (loss), excluding non-cash change in derivative fair value and gain associated with minority interest | $ | 1,518 | $ | 2,745 | $ | (1,451 | ) | $ | 2,812 | |||||||
Net income per share – basic | $ | 1.44 | ||||||||||||||
Adjusted net income, excluding non-cash change in derivative fair value and gain associated with minority interest, per share – basic | $ | 0.06 |
(In thousands) | Nine Months Ended September 30, 2008 | |||||||||||||||
AXAS without AXLP | AXLP | Consolidating Entries | Consolidated | |||||||||||||
Net income (loss) | $ | 4,931 | $ | (1,811 | ) | $ | 956 | (a) | $ | 4,076 | ||||||
Loss (gain) on unrealized derivative contracts | — | 16,478 | (8,700 | ) (c) | 7,778 | |||||||||||
Adjusted net income (loss), excluding non-cash change in derivative fair value | $ | 4,931 | $ | 14,667 | $ | (7,744 | ) | $ | 11,854 | |||||||
Net income per share – basic | $ | 0.08 | ||||||||||||||
Adjusted net income, excluding non-cash change in derivative fair value, per share – basic | $ | 0.24 |
(a) | Minority interest (53% of the Partnership’s net income (loss) for the period). |
(b) | Gain attributable to the minority interest loss in Q2 2008 that exceeded the minority interest equity capital in the Partnership. |
(c) | Minority interest share (53%) of the Partnership’s unrealized loss (gain) on derivative contracts for the period. |