AXAS Abraxas Petroleum Corporation (CE)

Abraxas Petroleum Corporation (NASDAQ:AXAS) today reported financial and operating results for the three and twelve months ended December 31, 2016.

Financial and Operating Results for the Three Months Ended December 31, 2016

The three months ended December 31, 2016 resulted in:

• Production of 732 MBoe (7,955 Boepd)
• Revenue of $22.0 million
• Net loss of $5.3 million, or $0.04 per share
• Adjusted net income(a), excluding certain non-cash items of $1.0 million, or $0.01 per share
• EBITDA(a) of $9.5 million
• Adjusted EBITDA per bank loan covenants of $9.5 million(a)

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

Net loss for the three months ended December 31, 2016 was $5.3 million, or $0.04 per share, compared to a net loss of $67.4 million, or $0.64 per share, for the three months ended December 31, 2015.

Financial and Operating Results for the Twelve Months Ended December 31, 2016

The twelve months ended December 31, 2016 resulted in:

• Production of 2.3 MMBoe (6,181 Boepd)
• Revenue of $56.6 million
• Net loss of $96.4 million, or $0.79 per share
• Adjusted net loss(a), excluding certain non-cash items of $9.0 million, or $0.07 per share
• EBITDA(a) of $24.0 million
• Adjusted EBITDA per bank loan covenants of $40.1 million(a)

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

Net loss for the twelve months ended December 31, 2016 was $96.4 million, or $0.79 per share, compared to a net loss of $127.1 million, or $1.21 per share, for the twelve months ended December 31, 2015.

Operational Update

Permian/Delaware Basin

In Ward County, Texas, Abraxas is currently drilling a two well pad in the Caprito 98-201H and Caprito 98-301HR. The Caprito 98-301HR will target the Wolfcamp A2 zone and replaces the Caprito 98-301H, which was abandoned due to a surface issue. The Caprito 98-201H will target an additional prospective zone in the Wolfcamp A1. Abraxas owns a working interest of approximately 88% in the Caprito 98-201H and 98-301HR, respectively.

Following the drilling of the Caprito 98-201H and 301HR, Abraxas will drill a second two well pad targeting the Wolfcamp A2 and the Wolfcamp B. Following these two completions, Abraxas will drill a third two well pad targeting the Wolfcamp A1 and Third Bone Spring. Following the results of these wells, we believe that we will have potentially derisked four prospective horizons allowing for an efficient development of the Company’s Caprito acreage in the Delaware Basin.

Williston Basin

At Abraxas’ North Fork prospect, in McKenzie County, North Dakota, we have drilled the lateral sections of the Stenehjem 6H, 8H and 9H. Abraxas is currently drilling the lateral of the Stenehjem 7H. Abraxas' working interest in the Stenehjem 6H-9H is approximately 75%.

Following the completion of these wells, Abraxas plans to mobilize the rig to the Company’s Yellowstone unit to spud a three well pad. Abraxas anticipates having a 52% working interest in these wells.

Eagle Ford/Austin Chalk

In Atascosa County, Texas, Abraxas plans to combine the Company’s Shut Eye and Red Eye units. The new combined unit will be the Shut Eye unit where Abraxas plans to drill the Shut Eye 1H targeting the Eagle Ford with a 100% working interest. Abraxas is currently sourcing a rig to drill this well.

Comments

Bob Watson, President and CEO of Abraxas, commented, “Abraxas achieved superb financial results despite a difficult operating environment in 2016. We are quite pleased our 2016 cash operating expenses all came in toward the lower end of our guidance range. January 2017 financial results continue to reflect this improvement with cash expenses coming in at the low end of our 2017 guidance range. We have also seen a tremendous improvement in natural gas and NGL realizations in January 2017.

“Operationally, our execution in 2016 was also on point. Despite approximately 175 Boepd of divestitures over the course of 2016, our production guidance also came in at the approximate midpoint of guidance. This was achieved on a capital expenditure budget that came in 21% and 9% below original and revised guidance for the year.

“Post our recent equity offering we now boast a best-in-class balance sheet. As of March 10, 2017, we are $18 million drawn on our $115 million borrowing base. Our balance sheet and robust cash flow position will allow us to execute on our current program to run one full-time rig in the Bakken and one full-time rig in the Permian. Both those rigs are currently drilling and all operations remain on schedule. Abraxas also continues to pursue several cost-effective bolt-on acquisition opportunities in the Delaware Basin. Importantly, we look forward to accomplishing all of this without compromising our balance sheet.”

Conference Call

Abraxas Petroleum Corporation (NASDAQ:AXAS) will host its fourth quarter and full year 2016 earnings conference call at 11 AM ET on March 15, 2017. To participate in the conference call, please dial 844.778.4143 and enter the passcode 56250056. 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 through April 12, 2017 by dialing 855.859.2056 and entering the passcode 56250056 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 Permian Basin, Rocky Mountain, and South Texas regions of the United States.

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.

            ABRAXAS PETROLEUM CORPORATION CONSOLIDATED   FINANCIAL HIGHLIGHTS   (In thousands except per share data)

Three Months EndedDecember 31,

Twelve Months EndedDecember 31,

2016     2015 2016     2015   Financial Results: Revenues $ 22,007 $ 13,348 $ 56,555 $ 67,030 Net loss (5,301 ) (67,419 ) (96,378 ) (127,110 ) Net loss per share – basic $ (0.04 ) $ (0.64 ) $ (0.79 ) $ (1.21 ) Net loss per share – diluted $ (0.04 ) $ (0.64 ) $ (0.79 ) $ (1.21 ) Capital expenditures 7,031 16,777 31,663 69,391 EBITDA(a) 9,493 7,162 24,028 38,558 Adjusted net income (loss), excluding certain non-cash items(a) 984 (2,345 ) (8,959 ) (7,876 ) Adjusted net income (loss), excluding certain non-cash items(a) , per share – basic $ 0.01 $ (0.02 ) $ (0.07 ) $ (0.08 ) Adjusted net income (loss), excluding certain non-cash items(a), per share – diluted $ 0.01 $ (0.02 ) $ (0.07 ) $ (0.08 ) Weighted average shares outstanding – basic 133,597 104,703 122,132 104,605 Weighted average shares outstanding – diluted 133,597 104,703 122,132 104,605   Production from Continuing Operations: Crude oil per day (Bblpd) 4,923 3,696 3,750 3,946 Natural gas per day (Mcfpd) 10,087 8,352 8,633 8,260 Natural gas liquids per day (Bblpd) 1,350 753 993 652 Crude oil equivalent per day (Boepd) 7,955 5,841 6,181 5,975 Crude oil equivalent (MBoe) 732 537 2,262 2,181   Realized Prices, net of realized hedging activity: Crude oil ($ per Bbl) $ 40.16 $ 42.32 $ 38.70 $ 47.54 Natural gas ($ per Mcf) 1.65 1.62 1.26 2.19 Natural gas liquids ($ per Bbl) 6.90 4.39 4.27 7.89 Crude oil equivalent ($ per Boe) 28.12 29.66 25.92 35.28   Expenses: Lease operating ($ per Boe) $ 6.28 $ 9.80 $ 8.05 $ 10.58 Production taxes (% of oil and gas revenue) 8.4 % 10.7 % 9.7 % 10.0 % General and administrative, excluding stock-based compensation ($ per Boe) $ 6.20 $ 3.30 $ 4.58 $ 3.61 Cash interest ($ per Boe) 1.17 1.83 1.69 1.53

Depreciation, depletion and amortization ($ per Boe)

8.88 14.28 10.80 17.76  

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

         

BALANCE SHEET DATA

  (In thousands) December 31, 2016 December 31, 2015   Cash $ — $ 3,540 Working capital (7,178 ) (2,395 ) Property and equipment – net 136,311 224,838 Total assets 161,648 267,872   Long-term debt 96,616 138,402 Stockholders’ equity 18,505 84,465 Common shares outstanding 135,094 106,346   Working capital per bank loan covenants (a) (4,064 ) (18,967 )  

(a) Excludes current maturities of long-term debt and current derivative assets and liabilities in accordance with our bank loan covenants.

      ABRAXAS PETROLEUM CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS   (In thousands except per share data) Twelve Months Ended December 31, 2016     2015     2014   Revenues: Oil and gas production $ 56,493 $ 67,002 $ 133,701 Other   62     28     75   56,555 67,030 133,776 Operating costs and expenses: Lease operating 18,205 23,074 25,875 Production and ad valorem taxes 5,454 6,679 11,462 Rig expense 664 — Depreciation, depletion, and amortization 24,431 38,721 43,139 Impairment 67,626 128,573 — General and administrative (including stock-based compensation of $3,194, $3,912, and $2,703, respectively)   13,562     11,788     13,378     129,942     208,835     93,854   Operating (loss) income (73,387 ) (141,805 ) 39,922   Other (income) expense: Interest income (1 ) (2 ) (2 ) Interest expense 4,319 3,906 2,570 Amortization of deferred financing fees 1,019 643 934 Loss (gain) on derivative contracts 18,028 (19,301 ) (25,237 ) (Gain) on sale of properties (374 ) — Other   —     318     (7 )   22,991     (14,436 )   (21,742 ) (Loss) income from continuing operations before income tax (96,378 ) (127,369 ) 61,664 Income tax benefit   —     279     287   Net (loss) income from continuing operations (96,378 ) (127,090 ) 61,951 Net (loss) income from discontinued operations - net of tax   —     (20 )   1,318   Net loss $ (96,378 ) $ (127,110 ) $ 63,269       Net (loss) income per common share - basic $ (0.79 ) $ (1.21 ) $ 0.64   Net (loss) income per common share - diluted $ (0.79 ) $ (1.21 ) $ 0.62   Weighted average shares outstanding: Basic 122,132 104,605 98,835 Diluted 122,132 104,605 101,468    

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") in the United States of America, EBITDA is an appropriate measure of Abraxas' ability to satisfy capital expenditure obligations and working capital requirements. EBITDA is a non-GAAP financial measure as defined under SEC rules. 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. EBITDA excludes some, but not all items that affect net income and may vary among companies. The EBITDA presented below may not be comparable to similarly titled measures of other companies.

EBITDA is defined as net income (loss) plus interest expense, deferred income taxes, depreciation, depletion and amortization expenses, impairments, unrealized gains and losses on derivative contracts, and stock-based compensation. The following table provides a reconciliation of EBITDA to net loss for the periods presented.

We have also disclosed Adjusted EBITDA per bank loan covenants. Adjusted EBITDA per bank loan covenants is a non-GAAP financial measure as defined under SEC rules. Our management believes that information regarding Adjusted EBITDA per bank loan covenants is material to an understanding of our financial condition and liquidity. Adjusted EBITDA per bank loan covenants 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. Adjusted EBITDA per bank loan covenants presented below may not be comparable to similarly titled measures of other companies.

(In thousands)    

Three Months EndedDecember 31,

     

Twelve Months EndedDecember 31,

2016     2015 2016     2015 Net loss $ (5,301 ) $ (67,419 ) $ (96,378 ) $ (127,110 ) Net interest expense 969 1,121 4,318 3,904 Income tax (benefit) — (279 ) — (279 ) Depreciation, depletion and amortization 6,500 7,677 24,431 38,721 Amortization of deferred financing fees 256 162 1,019 643 Impairment — 68,682 67,626 128,573 Stock-based compensation 784 826 3,194 3,912 Unrealized loss (gain) on derivative contracts       6,285         (3,608 )   19,818         (9,806 ) EBITDA     $ 9,493       $ 7,162   $ 24,028       $ 38,558     EBITDA $ 9,493 $ 7,162 $ 24,028 $ 38,558 (Gain) on sale of properties — — (374 ) — Realized loss on derivative monetization — — 349 447 Loss from discontinued operations — — — 20 Other non cash items — 318 — 318 Monetized derivative contracts — — 14,370 4,610 Expenses related to equity offering/loan amendments       29         —     1,776         —   Adjusted EBITDA per bank loan covenants     $ 9,522       $ 7,480   $ 40,149       $ 43,953      

This release also includes a discussion of “adjusted net loss, excluding certain non-cash items,” which is also a non-GAAP financial measure as defined under SEC rules. The following table provides a reconciliation of adjusted net loss, excluding ceiling test impairment and unrealized changes in derivative contracts. Management believes that net loss calculated in accordance with GAAP is the most directly comparable measure to adjusted net income (loss), excluding certain non-cash items. The calculation of adjusted net income (loss), excluding certain non cash items presented below may not be comparable to similarly titled measures of other companies.

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, which requires 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 December 31, 2015 were $37.04 per barrel compared to $53.72 on December 31, 2016; therefore, the mark-to-market valuation changed considerably from period to period.

(In thousands)    

Three Months EndedDecember 31,

     

Twelve Months EndedDecember 31,

2016     2015 2016     2015 Net loss $ (5,301 ) $ (67,419 ) $ (96,378 ) $ (127,110 ) Impairment — 68,682 67,626 128,573 Unrealized loss (gain) on derivative contracts 6,285 (3,608 ) 19,818 (9,806 ) Realized loss on derivative monetization — — 349 447 Loss from discontinued operations — — — 20 (Gain) on sale of properties       —         —     (374 )       —   Adjusted net income (loss), excluding certain non-cash items     $ 984       $ (2,345 ) $ (8,959 )     $ (7,876 ) Net loss per share – basic     $ (0.04 )     $ (0.64 ) $ (0.79 )     $ (1.21 ) Net loss per share – diluted     $ (0.04 )     $ (0.64 ) $ (0.79 )     $ (1.21 ) Adjusted net income (loss), excluding certain non-cash items, per share – basic     $ 0.01       $ (0.02 ) $ (0.07 )     $ (0.08 ) Adjusted net income (loss), excluding certain non-cash items, per share – diluted     $ 0.01       $ (0.02 ) $ (0.07 )     $ (0.08 )  

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Abraxas Petroleum CorporationGeoffrey King, 210-490-4788Vice President – Chief Financial Officergking@abraxaspetroleum.comwww.abraxaspetroleum.com