UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
August 6, 2014

Date of Report (Date of earliest event reported)
ABRAXAS PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
Nevada
0-16071
74-2584033
(State or other jurisdiction of incorporation)
(Commission File Number)
(I.R.S. Employer Identification Number)
18803 Meisner Drive
San Antonio, Texas 78258
(210) 490-4788
(Address of principal executive offices and Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





Item 2.02 Results of Operations and Financial Condition
On August 6, 2014 Abraxas issued a press release announcing its Second Quarter 2014 results. The full text of the news release is attached hereto.

The information in this Report (including Exhibit 99.1) is furnished pursuant to Item 7.01 and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of the Section. The information in this Report will not be deemed an admission as to the materiality of any information required to be disclosed solely to satisfy the requirements of Regulation FD.

Item 9.01 Financial Statements and Exhibits.
(d)    Exhibits.
99.1
News Release



2


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
ABRAXAS PETROLEUM CORPORATION
By: /s/ Geoffrey R. KIng    
Geoffrey R. King
Vice President - CFO

Dated: August 6, 2014




3



ABRAXAS PETROLEUM CORPORATION
www.abraxaspetroleum.com



Exhibit 99.1
NEWS RELEASE

Abraxas Announces Second Quarter 2014 Results

SAN ANTONIO (August 6, 2014) – Abraxas Petroleum Corporation (NASDAQ:AXAS) today reported financial and operating results for the three months ended June 30, 2014.

Financial and Operating Results for the Three Months Ended June 30, 2014
The three months ended June 30, 2014 resulted in:
•
Production of 454 MBoe (4,987 Boepd)
•
Revenue of $33.6 million
•
Adjusted EBITDA(a) of $22.9 million inclusive of Raven Drilling
•
Adjusted discretionary cash flow(a) of $22.2 million inclusive of Raven Drilling
•
Net income of $3.0 million, or $0.03 per share
•
Adjusted net income(a), excluding certain non-cash items and inclusive of Raven Drilling of $11.0 million, or $0.11 per share

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

Net income for the three months ended June 30, 2014 was $3.0 million, or $0.03 per share, compared to a net income of $7.9 million, or $0.08 per share, for the three months ended June 30, 2013.

Adjusted net income, excluding certain non-cash items, for the three months ended June 30, 2014 was $11.0 million, or $0.11 per share, compared to an adjusted net income, excluding certain non-cash items, of $3.0 million or $0.03 per share for the three months ended June 30, 2013. For the three months ended June 30, 2014 and 2013, adjusted net income excludes the unrealized gain (loss) on derivative contracts of $(7.1) million and $7.5 million, respectively. Included in adjusted net income for the quarters ended June 30, 2014 and June 30, 2013 is the net income from our subsidiary, Raven Drilling, LLC of $0.8 million and $0.7 million, respectively.

Pursuant to SEC Regulation S-X, no income is recognized for Raven Drilling, LLC. Contractual drilling services performed in connection with properties in which Abraxas holds an ownership interest cannot be recognized as income, rather it is credited to the full cost pool and recognized through lower amortization as reserves are produced.

Unrealized gains or losses on derivative contracts are based on mark-to-market valuations which are non-cash in nature and may fluctuate drastically from period to period. As commodity prices fluctuate, these derivative contracts are valued against current market prices at the end of each reporting period in accordance with Accounting Standards Codification 815, “Derivatives and Hedging,” as amended and interpreted, and require Abraxas to either record an unrealized gain or loss based on the calculated value difference from the previous period-end valuation. For example, NYMEX oil prices on June 30, 2013 were $96.56 per barrel compared to $105.37 on June 30, 2014; therefore, the mark-to-market valuation changed considerably period to period.













Comments
Bob Watson, Abraxas’ President and CEO commented, “Our financials continue to benefit from robust oil weighted production growth and lower expenses on a per Boe basis.  Together with the strong commodity price environment we have been experiencing, we expect our margins to continue to improve. Although we cannot control the volatility in the markets, we continue to focus on what we can control - executing operationally, growing production and maintaining a pristine balance sheet."


Conference Call
Abraxas Petroleum Corporation (NASDAQ:AXAS) will host its second quarter 2014 earnings conference call at 11 AM ET on August 6, 2014. To participate in the conference call, please dial 888.680.0890 and enter the passcode 54244106. Additionally, a live listen only webcast of the conference call can be accessed under the investor relations section of the Abraxas website at www.abraxaspetroleum.com. A replay of the conference call will be available until September 6, 2014 by dialing 888.286.8010 and entering the passcode 67689280 or can be accessed under the investor relations section of the Abraxas website.

Abraxas Petroleum Corporation is a San Antonio based crude oil and natural gas exploration and production company with operations across the Rocky Mountain, Permian Basin and onshore Gulf Coast regions of the United States and in the province of Alberta, 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 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 crude oil and natural gas. In addition, Abraxas’ future crude oil and natural gas 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:
Geoffrey King/Vice President – Chief Financial Officer
Telephone 210.490.4788
gking@abraxaspetroleum.com
www.abraxaspetroleum.com





















ABRAXAS PETROLEUM CORPORATION
CONSOLIDATED

FINANCIAL HIGHLIGHTS

(In thousands except per share data)
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
 
Financial Results:
 
 
 
 
 
 
 
 
Revenues
 
$
33,559

 
$
21,494

 
$
59,452

 
$
42,690

Adjusted EBITDA(a)    
 
22,850

 
11,723

 
38,961

 
23,197

Adjusted discretionary cash flow(a)    
 
22,153

 
10,553

 
37,733

 
20,916

Net income
 
3,034

 
7,866

 
7,738

 
8,461

Net income per share – diluted
 
$
0.03

 
$
0.08

 
$
0.08

 
$
0.09

Adjusted net income, excluding certain non-cash items(a)
 
10,952

 
3,039

 
17,243

 
5,370

Adjusted net income, excluding certain non-cash items(a), per share – diluted
 
$
0.11

 
$
0.03

 
$
0.18

 
$
0.06

Weighted average shares outstanding – diluted
 
97,322

 
93,361

 
95,844

 
93,311

 
 
 
 
 
 
 
 
 
Production:
 
 
 
 
 
 
 
 
Crude oil per day (Bblpd)
 
3,438

 
2,094

 
3,011

 
2,100

Natural gas per day (Mcfpd)
 
6,957

 
9,825

 
7,069

 
10,162

Natural gas liquids per day (Bblpd)
 
390

 
377

 
401

 
368

Crude oil equivalent per day (Boepd)
 
4,987

 
4,109

 
4,590

 
4,162

Crude oil equivalent (MBoe)
 
453.8

 
373.9

 
830.8

 
753.3

 
 
 
 
 
 
 
 
 
Realized Prices, net of realized hedging activity:
 
 
 
 
 
 
 
 
Crude oil ($ per Bbl)
 
$
90.59

 
$
86.48

 
$
89.34

 
$
86.11

Natural gas ($ per Mcf)
 
4.06

 
3.51

 
4.43

 
3.26

Natural gas liquids ($ per Bbl)
 
36.16

 
31.46

 
40.61

 
33.12

Crude oil equivalent ($ per Boe)
 
70.94

 
55.35

 
68.98

 
54.34

 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
Lease operating ($ per Boe)
 
$
12.72

 
$
16.49

 
$
14.04

 
$
16.76

Production taxes (% of oil and gas revenue)
 
8.5%
 
8.9%
 
8.5%
 
9.0%
General and administrative, excluding stock-based compensation ($ per Boe)
 
4.60

 
5.69

 
5.38

 
5.56

Cash interest ($ per Boe)
 
1.40

 
2.93

 
1.32

 
2.83

Depreciation, depletion and amortization
($ per Boe)
 
20.36

 
15.45

 
20.31

 
16.31

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














BALANCE SHEET DATA


(In thousands)
June 30, 2014
 
December 31, 2013
 
 
 
 
Cash
$3,742
 
 
$5,205
 
Working capital (a)    
(34,742)
 
 
(38,401)
 
Property and equipment – net
251,049
 
 
180,645
 
Total assets
286,874
 
 
223,650
 
 
 
 
 
Long-term debt
44,850
 
 
41,790
 
Stockholders’ equity
150,239
 
 
86,906
 
Common shares outstanding
105,346
 
 
92,906
 
(a)
Excludes current maturities of long-term debt and current derivative assets and liabilities in accordance with our loan covenants.








































 


ABRAXAS PETROLEUM CORPORATION
CONSOLIDATED
STATEMENTS OF OPERATIONS


(In thousands except per share data)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
Oil and gas production
 
$
33,548

 
$
21,478

 
$
59,398

 
$
42,641

Other
 
11

 
16

 
54

 
49

 
 
33,559

 
21,494

 
59,452

 
42,690

Operating costs and expenses:
 
 
 
 
 
 
 
 
Lease operating
 
5,772

 
6,166

 
11,664

 
12,628

Production and ad valorem taxes
 
2,838

 
1,911

 
5,042

 
3,838

Depreciation, depletion, and amortization
 
9,242

 
5,776

 
16,877

 
12,285

Impairment
 
—

 
1,977

 
—

 
1,977

General and administrative (including stock-based compensation of $1,029, $669, $1,468 and $1,142, respectively)
 
3,117

 
2,797

 
5,940

 
5,327

 
 
20,969

 
18,627

 
39,523

 
36,055

Operating income
 
12,590

 
2,867

 
19,929

 
6,635

 
 
 
 
 
 
 
 
 
Other (income) expense:
 
 
 
 
 
 
 
 
Interest income
 
(1
)
 
—

 
(1
)
 
(1
)
Interest expense
 
783

 
1,259

 
1,391

 
2,467

Amortization of deferred financing fees
 
280

 
343

 
629

 
676

Loss on derivative contracts - realized
 
1,356

 
783

 
2,090

 
1,708

Loss (gain) on derivative contracts - unrealized
 
7,136

 
(7,485
)
 
8,080

 
(6,864
)
Other
 
2

 
14

 
2

 
101

 
 
9,556

 
(5,086
)
 
12,191

 
(1,913
)
Net income before income tax
 
3,034

 
7,953

 
7,738

 
8,548

Income tax expense
 
—

 
87

 
—

 
87

Net income
 
$
3,034

 
$
7,866

 
$
7,738

 
$
8,461

 
 
 
 
 
 
 
 
 
Net income per common share - basic
 
$
0.03

 
$
0.09

 
$
0.08

 
$
0.09

Net income per common share - diluted
 
$
0.03

 
$
0.08

 
$
0.08

 
$
0.09

 
 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
93,448

 
92,351

 
93,009

 
92,323

Diluted
 
97,322

 
93,361

 
95,844

 
93,311












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. Discretionary cash flow and EBITDA are non-GAAP financial measures as defined under SEC rules. Abraxas' discretionary 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 discretionary cash flow and EBITDA exclude some, but not all items that affect net income and may vary among companies, the discretionary 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 discretionary cash flow; therefore, operating income is utilized as the starting point for the discretionary cash flow reconciliation.
Discretionary cash flow is defined as operating income plus depreciation, depletion and amortization expenses, non-cash expenses and impairments, cash portion of other income (expense) less cash interest. Adjusted discretionary cash flow is defined as discretionary cash flow, plus cash flow from Raven Drilling’s operations. Accounting rules do not permit the inclusion of the net income and other components of Raven Drilling’s operations to be included in our consolidated results of operations and cash flow, instead, the results of Raven Drilling’s operations are credited to the full cost pool. Accordingly, for purposes of adjusted discretionary cash flow, Raven Drilling’s cash flow is added back. The following table provides a reconciliation of discretionary cash flow and adjusted discretionary cash flow to operating income for the periods presented.

(In thousands)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2014
 
2013
 
2014
 
2013
Operating income
 
$
12,590

 
$
2,867

 
$
19,929

 
$
6,635

Depreciation, depletion and amortization
 
9,242

 
5,776

 
16,877

 
12,285

Impairment
 
—

 
1,977

 
—

 
1,977

Stock-based compensation
 
1,029

 
669

 
1,468

 
1,142

Realized (loss) on derivative contracts
 
(1,356
)
 
(783
)
 
(2,090
)
 
(1,708
)
Cash interest
 
(636
)
 
(1,095
)
 
(1,100
)
 
(2,131
)
Discretionary cash flow
 
$
20,869

 
$
9,411

 
$
35,084

 
$
18,200

Cash flow from Raven Drilling operations
 
1,284

 
1,142

 
2,649

 
2,716

Adjusted discretionary cash flow
 
$
22,153

 
$
10,553

 
$
37,733

 
$
20,916




EBITDA is defined as net income plus interest expense, depreciation, depletion and amortization expenses, deferred income taxes and other non-cash items. Adjusted EBITDA includes all of the components of EBITDA plus Raven Drilling’s EBITDA. Accounting rules do not permit the inclusion of the net income and other components of Raven Drilling’s operations to be included in our consolidated results of operations, instead, the results of Raven Drilling’s operations are credited to the full cost pool. Accordingly, for purposes of Adjusted EBITDA, Raven Drilling’s EBITDA is added back. The following table provides a reconciliation of EBITDA and Adjusted EBITDA to net income for the periods presented.

(In thousands)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2014
 
2013
 
2014
 
2013
Net income
 
$
3,034

 
$
7,866

 
$
7,738

 
$
8,461

Net interest expense
 
782

 
1,259

 
1,390

 
2,466

Income tax expense
 
—

 
87

 
—

 
87

Depreciation, depletion and amortization
 
9,242

 
5,776

 
16,877

 
12,285

Amortization of deferred financing fees
 
280

 
343

 
629

 
676

Stock-based compensation
 
1,029

 
669

 
1,468

 
1,142

Impairment
 
—

 
1,977

 
—

 
1,977

Unrealized loss (gain) on derivative contracts
 
7,136

 
(7,485
)
 
8,080

 
(6,864
)
Other non-cash items
 
2

 
14

 
2

 
101

EBITDA
 
$
21,505

 
$
10,506

 
$
36,184

 
$
20,331

Raven Drilling EBITDA
 
1,345

 
1,217

 
2,777

 
2,866

Adjusted EBITDA
 
$
22,850

 
$
11,723

 
$
38,961

 
$
23,197


This release also includes a discussion of “adjusted net income, excluding certain non-cash items,” which is a non-GAAP financial measure as defined under SEC rules. The following table provides a reconciliation of adjusted net income, excluding ceiling test impairment and unrealized changes in derivative contracts and net income related to Raven Drilling, LLC capitalized to the full cost pool, to net income for the periods presented. Management believes that net income calculated in accordance with GAAP is the most directly comparable measure to adjusted net income, excluding certain non-cash items.

(In thousands)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
 
Net income
 
$
3,034

 
$
7,866

 
$
7,738

 
$
8,461

Impairment
 
—

 
1,977

 
—

 
1,977

Net income related to Raven Drilling
 
782

 
681

 
1,425

 
1,796

Unrealized loss (gain) on derivative contracts
 
7,136

 
(7,485
)
 
8,080

 
(6,864
)
Adjusted net income, excluding certain non-cash items
 
$
10,952

 
$
3,039

 
$
17,243

 
$
5,370

Adjusted net income, excluding certain non-cash items, per share – diluted
 
$
0.11

 
$
0.03

 
$
0.18

 
$
0.06

Net income per share – diluted
 
$
0.03

 
$
0.08

 
$
0.08

 
$
0.09


 

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