EXHIBIT 99.1
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 First Quarter 2006 Results with
Four Consecutive Quarters of Production Growth including a
44% Increase in Daily Production over First Quarter 2005
SAN ANTONIO (May 8, 2006) - Abraxas Petroleum Corporation (AMEX:ABP) today
reported financial and operating results for the quarter ended March 31, 2006
and provided an operational update.
The fourth consecutive quarter of production growth resulted in:
o Production of 1.8 Bcfe, a 44% increase over Q1 2005;
o Revenue of $13.3 million, a 70% increase over Q1 2005;
o EBITDA (a) of $9.2 million, a 109% increase over Q1 2005;
o Cash flow (a) of $5.2 million, a 314% increase over Q1 2005;
and
o Net income of $1.2 million, a 230% increase over Q1 2005 (b).
(a) see reconciliation of non-GAAP financial measures below.
(b) from continuing operations.
Net income in the first quarter of 2006, from continuing operations, of $1.2
million, or $0.03 per share, compares to a net loss in the same quarter of 2005
of $936,000, or ($0.02) per share, from continuing operations. Continuing
operations represent financial and operating results from operations in the U.S.
only as all of Grey Wolf Exploration Inc.'s historical performance and results
from the sale of Grey Wolf shares owned by Abraxas in its initial public
offering 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.
Even though the Company anticipates that the basis differentials for oil and gas
may return to historical ranges during the remainder of 2006, the Company's
financial results for the quarter were negatively impacted by abnormally high
basis differentials, namely 33% for natural gas in West Texas and $25 per barrel
of oil in Wyoming. Consequently, our adjusted guidance for 2006 differentials to
NYMEX (L3D) is as follows:
Gas 15%
Oil $2.00
In addition, the Company has further adjusted its previously issued 2006
guidance for depreciation, depletion and amortization (D/D/A) from $1.50 per
Mcfe to $1.80 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. The Company previously did not adjust
the guidance sufficiently to reflect the full impact of the increase in future
estimated drilling costs.
OPERATIONS
In South Texas, a drilling rig has been secured to drill two wells. The rig is
scheduled to move onto the first location later this month, after which the rig
will be released to drill a well for another operator in the region, and then
return to Abraxas for the second well. The first well, located in DeWitt County,
will be vertically drilled to test the Wilcox formation at an approximate depth
of 8,900'. The second well, located in Karnes County, will be vertically drilled
to test the deeper Wilcox formation at an approximate depth of 13,000'. Abraxas
owns a 100% working interest in the first well and an approximate 50% working
interest in the second well.
In West Texas, a drilling rig has been secured to drill at least one well in the
Oates SW Field. The rig is currently drilling below 2,000' on a vertical well to
test the Lower Wolfcamp formation at approximately 12,500'. Elsewhere in the
Oates SW Field, the horizontal segment of a Devonian re-entry is currently
drilling through 800' of the planned 1,600' lateral, with a third-party workover
rig. Abraxas owns a 100% working interest in both of these wells.
In Brooks Draw, Wyoming, production testing is nearly complete on the four wells
drilled in late 2005. The wells are currently producing from eight commingled
zones at a combined rate of 80-100 barrels of oil per day. One zone, which has
been perforated and fracture stimulated, remains to be tested and commingled.
The Company plans to produce these four wells in the current configuration and
analyze the different fracture treatments employed before completing additional
zones, of which four remain.
The Company's current net production is approximately 22 MMcfepd.
"We feel quite fortunate to have been able to secure the two drilling rigs in
Texas given the current environment of the service industry, which remains
unable to meet the increased demands of E&P companies. Our continued increase in
production (44% since Q1 2005) is an ongoing 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, just as the procurement of the drilling
rigs further provides us the opportunity to increase production as we continue
through 2006. Even though the production rates from the Wyoming wells are not as
high as we had initially hoped, we are encouraged that the production remains
fairly stable. We continue to be very intrigued by the potential of this oil
resource play and believe in time, it will prove to be an economic venture.
Meanwhile, in the Oates SW Field of West Texas, we have seen encouraging gas
shows in the horizontal lateral of the Devonian re-entry and while we have just
begun drilling the Lower Wolfcamp test well, we feel confident in the amplitude
anomalies interpreted from the 3-D seismic," commented Bob Watson, Abraxas'
President and CEO.
Abraxas invites you to participate in a conference call on Monday, May 8th, at
10:30 a.m. CT to discuss the contents of this release and respond to questions.
Please dial 1.866.825.1692, passcode 10785664, 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 the section entitled "Event
Calendar". In addition to the audio webcast replay, a podcast and transcript of
the conference call will be posted on the "Event Calendar" 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 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-END RESULTS
(UNAUDITED)
Three Months Ended
(In thousands except per share data) March 31,
-------------------------------------
2006 2005
----------------- ----------------
Financial Results:
----------------------------------------------------------
Revenues $ 13,305 $ 7,822
EBITDA (a) 9,157 4,380
Cash Flow (Before Working Capital Changes) (a) 5,210 1,257
Net Income (loss) from continuing operations 1,220 (936)
Income (loss) Per Share from continuing operations -
Basic $ 0.03 $ (0.02)
Weighted Average Shares Outstanding (Millions) 42.5 36.6
Production Per Day:
----------------------------------------------------------
Crude Oil (Bbl/d) 519 575
Natural Gas (Mcf/d) 17,284 10,745
Mcfe/d 20,399 14,192
Realized Prices (net of hedge impact):
----------------------------------------------------------
Crude Oil ($/Bbl) $ 59.57 $ 47.13
Natural Gas ($/Mcf) 6.52 5.26
Price per Mcfe 7.04 5.89
Expenses:
----------------------------------------------------------
Lease Operating ($/Mcfe) $ 1.54 $ 1.78
General & Administrative ($/Mcfe) 0.61 0.74
Interest ($/Mcfe) 2.16 2.45
D/D/A ($/Mcfe) 1.85 1.33
----------------------------------------------------------
(a) See reconciliation of non-GAAP financial measures below
Note: The above results exclude impact from Grey Wolf Exploration Inc.
BALANCE SHEET DATA
(In thousands) March 31, 2006 December 31, 2005
------------------------ -----------------------
Cash $ 43 $ 42
Working Capital (Deficit) (6,062) (4,880)
Plant/Property/Equipment, Net 108,982 105,248
Total Assets 124,852 121,866
Long-Term Debt 129,798 129,527
Stockholders' Equity (Deficit) (21,842) (23,701)
Common Shares Outstanding (Millions) 42.6 42.0
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands except per share data) Three Months Ended
March 31,
------------------------------------------
2006 2005 (a)
-------------------- ---------------------
Revenues:
Oil and gas production revenues ................. $ 12,926 $ 7,525
Rig revenues .................................... 376 296
Other .......................................... 3 1
-------------------- ---------------------
13,305 7,822
Operating costs and expenses:
Lease operating and production taxes ............ 2,822 2,278
Depreciation, depletion, and amortization ....... 3,399 1,698
Rig operations .................................. 211 218
General and administrative (including
stock-based compensation of $171 and $25)...... 1,286 971
-------------------- ---------------------
7,718 5,165
-------------------- ---------------------
Operating income ................................... 5,587 2,657
Other (income) expense:
Interest income ................................. (1) (1)
Interest expense ................................ 3,971 3,134
Amortization of deferred financing fees ......... 397 451
Other ........................................... - 9
-------------------- ---------------------
4,367 3,593
-------------------- ---------------------
Income (loss) from continuing operations ........... 1,220 (936)
Net income from discontinued operations (net of
$6,060 income tax expense in 2005)............... - 12,921
-------------------- ---------------------
Net income ...................................... $ 1,220 $ 11,985
==================== =====================
Basic earnings (loss) per common share:
Net earnings (loss) from continuing operations $ 0.03 $ (0.02)
Discontinued operations ..................... - 0.35
-------------------- ---------------------
Net income per common share - basic ............. $ 0.03 $ 0.33
==================== =====================
Diluted earnings (loss) per common share:
Net earnings (loss) from continuing operations $ 0.03 $ (0.02)
Discontinued operations ..................... - 0.35
-------------------- ---------------------
Net income per common share - diluted........... $ 0.03 $ 0.33
==================== =====================
(a) Reflects retrospective adoption of SFAS 123R.
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
March 31,
----------------------------------
2006 2005
---------------- --------------
Operating income $ 5,587 $ 2,657
Depletion, depreciation and amortization 3,399 1,698
Stock-based compensation 171 25
Cash portion of other expense (0) (9)
Cash interest (3,947) (3,114)
- --------------------------------------------------------------------------------
Cash Flow $ 5,210 $ 1,257
- --------------------------------------------------------------------------------
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
March 31,
----------------------------------
2006 2005
----------------- ---------------
Operating income $ 5,587 $ 2,657
Depletion, depreciation and amortization 3,399 1,698
Stock-based compensation 171 25
- --------------------------------------------------------------------------------
EBITDA $ 9,157 $ 4,380
- --------------------------------------------------------------------------------
Note: The above cash flow and EBITDA reconciliations exclude impact from
Grey Wolf Exploration Inc.