ABRAXAS PETROLEUM CORPORATION
www.abraxaspetroleum.com
500 N. Loop 1604 East, Suite 100, San Antonio, Texas 78232
Office: 210.490.4788 Exec/Acctg Fax: 210.490.8816
NEWS RELEASE
Abraxas Reports Fourth Quarter and Full Year 2005 Results with
Three Consecutive Quarters of Production and Revenue Growth
SAN ANTONIO (March 6, 2006) - Abraxas Petroleum Corporation (AMEX:ABP) today
reported financial and operating results for the quarter and twelve months ended
December 31, 2005 and provided an operational update.
Production of 1.8 Bcfe for the fourth quarter of 2005 generated:
o Revenue of $17.0 million, a 20% increase over Q3 2005;
o EBITDA (a) of $11.0 million, a 10% increase over Q3 2005; and
o Cash flow (a) of $7.2 million, a 14% increase over Q3 2005.
Production of 6.1 Bcfe for the year generated:
o Revenue of $48.6 million, a 44% increase over 2004;
o EBITDA (a) of $31.3 million, a 60% increase over 2004; and
o Cash flow (a) of $17.3 million, a 71% increase over 2004.
(a) see reconciliation of non-GAAP financial measures below.
Net income in 2005, from continuing operations, of $6.3 million (or $0.16 per
share) compares to a net loss in 2004 of $9.6 million (or $0.26 per share), from
continuing operations, excluding the income tax benefit in 2004 of $6.1 million
related to the Grey Wolf IPO and the $12.6 million gain on debt redemption
booked as a result of the refinancing completed in October of 2004. Net income
in 2005, including discontinued operations, of $16.9 million (or $0.43 per
share) compares to net income in 2004 of $12.4 million (or $0.34 per share),
including discontinued operations.
Continuing operations represent financial and operating results from operations
in the U.S. only as all of Grey Wolf Exploration Inc.'s ("Grey Wolf") historical
performance and results from the sale of Grey Wolf shares owned by Abraxas in
its initial public offering ("IPO") that closed on February 28, 2005, are
treated as discontinued operations. Abraxas currently owns less than 1% of the
outstanding capital stock of Grey Wolf.
As previously announced, the Company adopted the fair value method of accounting
for stock-based compensation under Statement of Financial Accounting Standards
No. 123, as revised ("SFAS 123R"), during the fourth quarter of 2005. This
adoption resulted in the reversal of $9.7 million of previously booked
stock-based compensation expense under historical accounting methods and the
incurrence of an expense of $587,000 to account for the adoption of SFAS 123R
for the years 2003, 2004 and 2005. The positive impact to net income is, $7.1
million in the fourth quarter of 2005 (which offset a $7.3 million expense
incurred during the first three quarters of 2005), $1.2 million in 2004 and
$878,000 in 2003. As SFAS 123R permits for comparative purposes, the Company has
retrospectively presented the financial statements for 2003 and 2004.
"As 2004 was a year of preparation for an expanded capital expenditure budget
and a stronger balance sheet, 2005 was a year of increasing production and
revenue. For three consecutive quarters, we have increased production and
combined with higher commodity prices, increased revenue over 115% since the
first quarter of 2005. These consecutive production increases are a testament to
the quality of our asset base and the ability of our technical team to execute
when given the capability to spend capital dollars," commented Bob Watson,
Abraxas' President and CEO.
The Company has adjusted its previously issued 2006 guidance for depreciation,
depletion and amortization (D/D/A) from $1.30 per Mcfe to $1.50 per Mcfe as a
result of the December 31, 2005 reserve report prepared by DeGolyer and
MacNaughton, which reflects the increase in future estimated drilling costs for
proved undeveloped reserves that has occurred across the industry during the
past year.
Operations
In the Oates SW Field of West Texas, the Company's workover rig continues to
clean out the vertical section on a Devonian re-entry well, which after reaching
approximately 12,500', the Company plans to drill horizontally. The Company
plans to continue development of the Oates SW Field throughout 2006, targeting
the shallower Wolfcamp, Atoka and Woodford formations in addition to the deeper
Devonian.
In the multi-well re-completion program elsewhere in the Delaware Basin of West
Texas, the Company is currently recovering completion fluid from two wells that
were fracture stimulated in the Atoka formation while a third well, which was
re-completed to the Wolfcamp formation, is flowing significant amounts of oil
and gas. The Company plans to re-complete or fracture stimulate four to six
additional wells in this program during 2006.
In the Sharon Ridge Field located in Scurry County, Texas, the Company has begun
drilling a shallow well targeting the Clear Fork formation at a depth of 3,500'.
The Company plans to drill one additional in-fill well in this field in 2006.
In Brooks Draw, Wyoming, production testing continues on the four wells drilled
in late 2005. Since the beginning of 2006, one additional formation has been
perforated and awaits fracture stimulation and a previously completed formation
has been re-stimulated. The Company plans to complete additional zones as
service equipment becomes available. As previously announced, once all of the
formations are completed and tested individually, they will be commingled and an
ultimate sustained rate of production can be obtained. The Company plans to
drill several more wells in Wyoming during the second half of 2006.
The Company's current net production is approximately 22 MMcfepd.
"Operationally, we are very optimistic as the multi-well re-completion program
in West Texas has begun to bear some results. Given that we have a workover rig
under contract, this program should provide us with steady production growth at
an attractive finding cost. Initial results in Wyoming continue to be
encouraging even though we have been hampered by adverse weather conditions and
limited by the availability of service equipment. As we have stated before, rig
(and other service equipment) availability will largely dictate where we will
focus our drilling efforts in 2006. Nonetheless, we have numerous projects that
can be completed utilizing the workover rigs we currently have under contract or
our own workover rigs," commented Bob Watson, Abraxas' President and CEO.
Abraxas invites you to participate in a conference call on Monday, March 6th, at
2:00 p.m. CT to discuss the contents of this release and respond to questions.
Please dial 1.866.761.0749, passcode 36919804, 10 minutes before the scheduled
start time, if you would like to participate in the call. There will be a replay
of the conference call available by dialing 1.888.286.8010, passcode 66286182,
beginning approximately 4:00 p.m. CT, March 6th, through March 20th. A
transcript of the call will also be available on the Company's website,
www.abraxaspetroleum.com, at the Event Calendar for this event, approximately 24
hours after the conclusion of the call.
Abraxas Petroleum Corporation is a San Antonio based crude oil and natural gas
exploitation and production company with operations in Texas and Wyoming.
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/Director of Corporate Development
Direct Telephone 210.757.9835
Main Telephone 210.490.4788
bstuckey@abraxaspetroleum.com
www.abraxaspetroleum.com
ABRAXAS PETROLEUM CORPORATION
QUARTER AND YEAR-END RESULTS
Three Months Ended Twelve Months Ended
(In thousands except per share data) December 31, December 31,
---------------------------------- ------------------------------
2005 2004 2005 2004
-------------- -------------- -------------- -------------
Financial Results:
- -----------------------------------------------
Revenues $ 17,012 $ 9,153 $ 48,625 $ 33,854
EBITDA (a) 11,017 5,706 31,265 19,490
Cash Flow (Before Working Capital Changes) (a)
7,223 2,147 17,275 10,099
Net Income from continuing operations 10,734 (b) 17,198 (c) 6,271 9,037 (c)
Income Per Share from continuing operations -
Basic $ 0.26 $ 0.47 $ 0.16 $ 0.25
Weighted Average Shares Outstanding 42.0 36.3 39.4 36.2
(Millions)
Production Per Day:
- -----------------------------------------------
Crude Oil (Bbl/d) 534 595 533 602
NGL (Bbl/d) - 24 - 24
Natural Gas (Mcf/d) 16,469 11,100 13,541 12,030
Mcfe/d 19,676 14,815 16,736 15,789
Realized Prices (net of hedge impact):
- -----------------------------------------------
Crude Oil ($/Bbl) $ 57.18 $ 46.81 $ 53.27 $ 40.12
NGL ($/Bbl) - 31.27 - 26.32
Natural Gas ($/Mcf) 9.12 6.14 7.48 5.45
Price per Mcfe 9.18 6.53 7.75 5.72
Expenses:
- -----------------------------------------------
Lease Operating ($/Mcfe) $ 1.82 $ 1.36 $ 1.82 $ 1.48
General & Administrative ($/Mcfe) 1.39 1.00 0.90 0.89
Interest ($/Mcfe) 2.07 3.26 2.29 3.09
D/D/A ($/Mcfe) 1.82 1.33 1.46 1.25
- -----------------------------------------------
(a) See reconciliation of non-GAAP financial measures below
(b) Includes $7.1 million in positive net income related to the adoption of
SFAS 123R
(c) Includes $6.1 million non-cash tax benefit related to the Grey Wolf IPO
completed in 2005 and $12.6 million gain on debt redemption booked as a
result of the refinancing completed in October of 2004
Note: The above results exclude impact from Grey Wolf Exploration Inc.
BALANCE SHEET DATA
(In thousands) December 31, 2005 December 31, 2004
------------------------ -----------------------
Cash $ 42 $ 1,284
Working Capital (Deficit) (c) (4,880) (4,592)
Plant/Property/Equipment, Net 105,248 78,812
Total Assets 121,866 152,685
Long-Term Debt 129,527 126,425
Stockholders' Equity (Deficit) (23,701) (53,464)
Common Shares Outstanding (Millions) 42.0 36.5
(c) Continuing operations only
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data) Year Ended December 31,
------------------------------------------------------------
2005 2004 2003
--------------------- ------------------- ------------------
Revenues:
Oil and gas production revenues ................ $ 47,314 $ 33,073 $ 29,710
Rig revenues ................................... 1,295 771 663
Other ......................................... 16 10 7
--------------------- ------------------- ------------------
48,625 33,854 30,380
Operating costs and expenses:
Lease operating and production taxes ........... 11,094 8,567 8,342
Depreciation, depletion, and amortization ...... 8,914 7,213 7,608
Rig operations ................................. 756 671 609
General and administrative ..................... 5,510 5,126 3,995
Stock-based compensation........................ 247 112 228
--------------------- ------------------- ------------------
26,521 21,689 20,782
--------------------- ------------------- ------------------
Operating income .................................. 22,104 12,165 9,598
Other (income) expense:
Interest income ................................ (19) (10) (30)
Amortization of deferred financing fees ........ 1,589 1,848 1,630
Interest expense ............................... 13,989 17,867 16,323
Financing costs ................................ - 1,657 4,406
Gain on debt redemption ........................ - (12,561) -
Other .......................................... 274 387 100
--------------------- ------------------- ------------------
15,833 9,188 22,429
--------------------- ------------------- ------------------
Income (loss) from continuing operations before
cumulative effect of accounting change ......... 6,271 2,977 (12,831)
Cumulative effect of accounting change ............ - - 395
--------------------- ------------------- ------------------
Net income (loss) from continuing operations
before income tax ............................ 6,271 2,977 (13,226)
--------------------- ------------------- ------------------
Deferred income tax benefit ....................... - (6,060) -
--------------------- ------------------- ------------------
Income (loss) from continuing operations .......... 6,271 9,037 (13,226)
Net income from discontinued operations ........... 10,656 3,323 70,024
--------------------- ------------------- ------------------
Net income ..................................... $ 16,927 $ 12,360 $ 56,798
===================== =================== ==================
Basic earnings (loss) per common share:
Net earnings (loss) from continuing $ 0.16 $ 0.25 $ (0.36)
operations...................................
Discontinued operations ..................... 0.27 0.09 1.98
Cumulative effect of accounting change ...... - - (0.01)
--------------------- ------------------- ------------------
Net income (loss) per common share - basic ..... $ 0.43 $ 0.34 $ 1.61
===================== =================== ==================
Diluted earnings (loss) per common share:
Net earnings (loss) from continuing $ 0.15 $ 0.23 $ (0.36)
operations...................................
Discontinued operations ..................... 0.26 0.09 1.98
Cumulative effect of accounting change ...... - - (0.01)
--------------------- ------------------- ------------------
Net income (loss) per common share - diluted... $ 0.41 $ 0.32 $ 1.61
===================== =================== ==================
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 depletion, depreciation and
amortization expenses, non-cash expenses, cash gains (losses) on the settlement
of non-hedge derivatives and 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.
(In thousands) Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------------------- --------------------------------
2005 2004 2005 2004
---------------- -------------- ------------- ---------------
Operating income (loss) $ 14,809 $ 3,885 $ 22,104 $ 12,165
Depletion, depreciation and amortization 3,292 1,811 8,914 7,213
Stock-based compensation (7,084) 10 247 112
Financing costs - (16) - (1,657)
Cash portion of other expense - (126) (39) (126)
Cash interest (3,794) (3,417) (13,951) (7,608)
- -----------------------------------------------------------------------------------------------------------------
Cash Flow $ 7,223 $ 2,147 $ 17,275 $ 10,099
- -----------------------------------------------------------------------------------------------------------------
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 (loss) for the periods presented - see consolidated statements of
operations for a reconciliation of net income (loss) to operating income (loss).
(In thousands) Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------------------- --------------------------------
2005 2004 2005 2004
----------------- ------------- ------------- ---------------
Operating income (loss) $ 14,809 $ 3,885 $ 22,104 $ 12,165
Depletion, depreciation and amortization 3,292 1,811 8,914 7,213
Stock-based compensation (7,084) 10 247 112
- -----------------------------------------------------------------------------------------------------------------
EBITDA $ 11,017 $ 5,706 $ 31,265 $ 19,490
- -----------------------------------------------------------------------------------------------------------------
Note: The above cash flow and EBITDA reconciliations exclude impact from
Grey Wolf Exploration Inc.