NEWS RELEASE


     Abraxas' wholly-owned Canadian Subsidiary, Grey Wolf Exploration Inc.,
                               Files IPO in Canada


SAN ANTONIO (Jan. 18, 2005) - Abraxas Petroleum Corporation (AMEX:ABP) announced
today that Grey Wolf Exploration Inc. ("Grey Wolf"), its wholly-owned subsidiary
in  Canada,  filed a  preliminary  prospectus  with  the  securities  regulatory
authorities  in each of the  provinces of Canada in  connection  with an initial
public offering of its common shares.

The initial  public  offering is expected to consist of an offering by Grey Wolf
of its common  shares from treasury  together with a secondary  offering of Grey
Wolf common shares owned by Abraxas.

The net  proceeds  realized  by Grey Wolf will be used to repay its $35  million
term loan and for general corporate purposes.

Net proceeds of the secondary  offering,  if realized by Abraxas,  will be first
applied  to its $25  million  bridge  loan  facility  and in the event of excess
proceeds, for general corporate purposes,  which could include reducing debt and
accelerating its capital  development program in Texas and Wyoming. In the event
the over-allotment  option is exercised in full, Abraxas will not own any common
shares in Grey Wolf.

Grey  Wolf  intends  to apply to list the  common  shares on the  Toronto  Stock
Exchange  ("TSX").  Listing will be subject to Grey Wolf  fulfilling  all of the
listing requirements of the TSX.

The offering is expected to close in late February of 2005.

Abraxas Petroleum  Corporation is a San Antonio-based  crude oil and natural gas
exploitation and production company.  The Company operates in Texas, Wyoming and
western 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 the Company's 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 the
Company for crude oil and natural gas. In addition,  the Company's  future crude
oil and natural gas production is highly  dependent upon the Company's  level of
success in  acquiring  or finding  additional  reserves.  Further,  the  Company
operates in an industry  sector where the value of securities is highly volatile
and may be  influenced  by  economic  and other  factors  beyond  the  Company's
control.  In the context of  forward-looking  information  provided  for in this
release,  reference is made to the  discussion  of risk factors  detailed in the
Company's filing with the Securities and Exchange  Commission during the past 12
months.













THIS PRESS RELEASE DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION FOR AN
OFFER TO BUY, nor shall there be any sale of the SECURITIES  DESCRIBED HEREIN in
any  jurisdiction  in which such offer,  solicitation  or sale would be unlawful
prior to qualification  under the securities laws of any such jurisdiction.  The
SECURITIES DESCRIBED HEREIN have not been, and will not be, registered under the
United  States  Securities  Act of 1933  (the  "Securities  Act")  OR ANY  STATE
SECURITIES  LAWS and may not be  offered  or sold in the  United  States  except
pursuant to A REGISTRATION OR an exemption from the registration requirements of
the Securities Act and any applicable state securities laws.

FOR  MORE  INFORMATION  CONTACT:
Barbara  M.   Stuckey/Director  of  Corporate Development
Direct   Telephone   210.757.9835
Main  Telephone   210.490.4788
bstuckey@abraxaspetroleum.com
www.abraxaspetroleum.com