Abraxas Petroleum Corporation (NASDAQ:AXAS) today reported
financial and operating results for the three months ended
March 31, 2019.
Financial Highlights for the
Three Months Ended March 31, 2019
The three months ended March 31, 2019 resulted in:
- Production of 979 MBoe
(10,874 Boepd)
- Revenue of $34.5 million
- Net loss of $25.5 million,
or $0.15 per share
- Adjusted net income (excluding certain
non-cash items)(a) of $2.6 million, or $0.02 per share
- EBITDA(a) of $19.7 million
- Adjusted EBITDA per bank loan
covenants(a) of $19.7 million
(a) See reconciliation of non-GAAP financial
measures below.
Operational Highlights for the Three
Months Ended March 31, 2019:
Production (sales) for the quarter ended March 31, 2019 averaged
10,874 barrels of oil equivalent per day (BOEPD) up 4 percent from
the average for the quarter ended December 31, 2018. Approximately
67 percent was crude oil compared to 69 percent in the fourth
quarter. No new wells were placed on production during the first
quarter. Negatively impacting sales were weather conditions in both
North Dakota and West Texas, periodic electrical outages in West
Texas, and continuing issues with third party gas processing
constraints which led to higher than anticipated natural gas
flaring. During the quarter, the Company flared an average of 5.5
million cubic feet per day (MMCFPD) or an equivalent 910 net BOEPD.
Third party midstream projects are under way in both basins to help
alleviate this unfortunate situation by the end of 2019.
As previously disclosed, the capital budget for 2019 is balanced
to both grow production and generate free cash flow, which will be
used predominantly to pay down debt. The budget is heavily front
end loaded. First quarter capex was approximately $29 million.
Abraxas expects the second quarter capex to be approximately $26
million, then tapering off to $21 million in the third quarter, and
$10 million in the fourth quarter, totaling a newly revised capex
amount of approximately $86 million for the year.
Williston Basin, North Dakota
In North Dakota, the four well Ravin NE Pad, which is still
under production restriction due to a gas pipeline installation,
has produced over 715 MBOE (73 percent oil) in its first 160 days
and is currently producing approximately 900 BOEPD per well.
Abraxas is extremely pleased with the performance of the Ravin NE
Pad as these are all child wells that have now produced an average
of 75 percent of the cumulative production of the legacy parent
wells on the same pad, which have been on production for over seven
years. The Company believes this is a testimony to the advances
we’ve incorporated over the years into our frac designs, where
we’re now on our fifth generation. Weather is improving and the
four well Lillibridge NW pad (in which Abraxas owns an
approximately 33 percent working interest) is scheduled to start
frac operations this week, which should allow first production in
June. During the quarter, Abraxas was successful in recovering the
coil tubing stuck in the Ravin 12H and is currently drilling out
bridge plugs in advance of flowing the well.
Raven Rig #1 has commenced drilling operations on the Abraxas
six-well Jore Fed Ext pad, in which Abraxas owns an approximate 75
percent working interest. Timing of first production from this pad
will depend on weather, oil prices, and gas takeaway capacity.
Delaware Basin, West Texas
Natural gas production in West Texas exceeds the area’s ability
to process and transport gas out of the basin. This has caused
natural gas prices at the Waha trading hub to trade into negative
territory. The average price for April was negative $.20 per mcf.
In response to this situation, Abraxas has shut in substantially
all its dry gas production in West Texas. This translates into
approximately 500 net BOEPD of reduced production but has little
impact on cash flow. We plan to keep these wells shut in until
prices improve. This shut in does not impact our current Wolfcamp
and Bone Spring drilling program.
Operations in the Delaware Basin of West Texas are proceeding
smoothly. The two-well Creosote pad (5000-foot laterals in the
Wolfcamp A-1 and A-2) has been on flowback for approximately 44
days and is currently producing approximately 1840 barrels of oil
and 3.7 MMCFPD for a total of 2456 BOEPD (67 percent oil). The gas
is currently not being sold due to extended maintenance on our
third-party sour gas processing plant. Because of the “slowback”
protocol, where production is constrained to conserve reservoir
pressure and increase well performance, this production rate could
continue to escalate over the next month or so. Abraxas owns
an approximate 96 percent working interest in this two-well
pad.
On the Woodberry pad, in which Abraxas owns a 100 percent
working interest, two 5000-foot laterals in the Third Bone Spring
and the Wolfcamp A-1 have been drilled and cased with frac
operations scheduled to commence in June. The rig is moving to a
two-well Greasewood pad, in which Abraxas owns a 100 percent
working interest, to drill two 5000-foot laterals. Upon completion,
the rig will be released giving the Company time to work on
production optimization on the twenty plus producing wells in the
area.
Divestiture Activities
Abraxas has signed a definitive agreement to sell its interest
in certain non-operated properties located in the Williston Basin
in North Dakota to an undisclosed buyer for $15.5 million plus the
assumption of an estimated $5.4 million in outstanding
AFEs, subject to closing adjustments. The estimated net proceeds
from the sale are expected to reduce outstanding debt. The
divestiture represents approximately 5 percent of our current
Bakken daily production. The Company is continuing discussions with
parties interested in acquiring operated properties and with
parties interested in acquiring a non-operated position on a
portion of the Company’s leases in the Williston Basin. No
assurances can be provided regarding the outcome of these
discussions.
Comments
Bob Watson, CEO, commented, “With respect to the marketing
efforts for our North Dakota assets with Petrie Partners, we are
pleased to announce the divestiture of certain non-core and
non-operated properties around our operated McKenzie County
position. In addition to what we believe is a fair realization of
$15.5 million for the assets, this transaction also removes the
obligation to fund roughly $5.4 million in upcoming wells with a
large independent operator. This capital obligation was not
accounted for in the 2019 budget, and the disposition affords us
continued flexibility with our operated program. Although we were
pleased with the level of interest in our Bakken assets in the
aggregate, we were surprised by the higher level of interest in the
non-operated portion of the package relative to offers for the
entire package. We are still engaged in discussions with interested
parties, but it’s uncertain whether we’ll arrive at a mutually
agreeable transaction on any of the remaining leases.”
Conference Call
Abraxas Petroleum Corporation (NASDAQ:AXAS) will host its first
quarter 2019 earnings conference call at 3 PM ET on Tuesday,
May 7, 2019. To participate in the conference call, please
dial 844.347.1028 and enter the passcode 2458147. 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 June 7, 2019 by dialing 855.859.2056 and entering
the passcode 2458147 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 Three
Months Ended March 31, (In thousands except per share data) 2019
2018 Financial Results: Revenue $ 34,514 $ 40,630 Net
(loss) income (25,455 ) 10,779 Net (loss) income per share - basic
$ (0.15 ) $ 0.07 Net (loss) income per share - diluted $ (0.15 ) $
0.06 Capital expenditures - acquisitions - 14,293 Capital
expenditures - drilling and completion 29,975 17,062 Total capital
expenditures 29,975 31,355 EBITDA(a) 19,682 27,014 Adjusted net
income, excluding certain non-cash items(a) 2,647 14,873 Adjusted
net income, excluding certain non-cash items, per share - basic(a)
$ 0.02 $ 0.09 Adjusted net income, excluding certain non-cash
items, per share - diluted(a) $ 0.02 $ 0.09 Liquidity(a) 39,575
76,395 Weighted average shares outstanding - basic 166,041 165,133
Weighted average shares outstanding - diluted 166,041 167,243
Production from Continuing Operations: Crude oil per day
(Bblpd) 7,252 6,715 Natural gas per day (Mcfpd) 12,790 13,180
Natural gas liquids per day (Bblpd) 1,490 1,573 Crude oil
equivalent per day (Boepd) 10,874 10,485 Crude oil equivalent
(Mboe) 979 944 Realized Prices, net of realized hedging
activity: Crude oil ($ per Bbl) $ 47.51 $ 53.29 Natural gas ($ per
Mcf) 1.28 2.00 Natural gas liquids ($ per Bbl) 7.87 15.70 Crude oil
equivalent ($ per Boe) 34.27 39.00 Expenses: Lease operating
($ per Boe) $ 7.90 $ 4.84 Production taxes (% of oil and gas
revenue) 9.0 % 7.7 % General and administrative, excluding
stock-based compensation ($ per Boe) $ 2.41 $ 2.27 Cash interest ($
per Boe) 3.03 1.27 Depreciation, depletion and amortization ($ per
Boe) 13.76 10.74
(a) See reconciliation of non-GAAP
financial measures below.
ABRAXAS PETROLEUM
CORPORATION CONSOLIDATED BALANCE SHEET
DATA
(In
thousands)
March 31, 2019 December 31, 2018 Cash $ 1,325 $ 867
Working capital (44,676) (13,632) Property and equipment - net
378,678 363,218 Total assets 415,197 425,890 Long-term debt
- less current maturities 182,022 183,091 Stockholders' equity
141,829 166,510 Common shares outstanding 167,136 166,714
Working capital per bank loan covenants(a) (34,283) (22,351) (a)
Excludes current maturities of long-term debt and current
derivative assets and liabilities in accordance with our bank loan
covenants. This working capital calculation excludes the unused
commitment amount which is included for our current ratio
calculation.
ABRAXAS PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31,
(In thousands except
per share data)
2019 2018 Revenues: Oil $ 31,981 $ 35,994 Gas 1,473
2,377 Natural gas liquids 1,056 2,223 Other 4
36 34,514 40,630 Operating costs and expenses: Lease operating
7,734 4,569 Production and ad valorem taxes 3,098 3,113 Rig expense
672 - Depreciation, depletion, amortization and accretion 13,574
10,260 General and administrative (including stock-based
compensation of $373, and $586 respectively) 2,728
2,728 27,806 20,670 Operating income
6,708 19,960 Other (income) expense: Interest expense 2,967
1,199 Amortization of deferred financing fees 121 96 Loss on
derivative contracts 29,075 7,883 Loss on sale of non-oil and gas
assets - 3 32,163 9,181
Loss (income) before income tax (25,455 ) 10,779 Income tax
(expense) benefit - - Net (loss) income $
(25,455 ) $ 10,779 Net (loss) income per common share -
basic $ (0.15 ) $ 0.07 Net (loss) income per common share -
diluted $ (0.15 ) $ 0.06 Weighted average shares
outstanding: Basic 166,041 165,133 Diluted 166,041 167,243
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
defined as net income or loss plus interest expense, deferred
income taxes, depreciation, depletion and amortization expenses,
impairments, unrealized gains and losses on derivative contracts,
and stock-based compensation. 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 or loss and may vary among companies. The
EBITDA presented below may not be comparable to similarly titled
measures of other companies.
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.
The following table provides a reconciliation of EBITDA and
Adjusted EBITDA per bank loan covenants to net income or loss for
the periods presented.
Three Months Ended March 31,
(In
thousands)
2019 2018 Net (loss) income $ (25,455 ) $ 10,779 Net
interest expense 2,967 1,199 Depreciation, depletion, amortization
and accretion 13,574 10,260 Amortization of deferred financing fees
121 96 Stock-based compensation 373 586 Unrealized loss on
derivative contracts 28,102 4,094 EBITDA $
19,682 $ 27,014 EBITDA $ 19,682 $ 27,014 Expenses
related to equity offering/loan amendments/permitted acquisitions
56 202 Adjusted EBITDA per bank loan covenants
$ 19,738 $ 27,216
This release also includes a discussion of “adjusted net income,
excluding certain non-cash items,” which is also a non-GAAP
financial measure as defined under SEC rules. Adjusted net income,
excluding certain non-cash items, is defined as net income or loss
plus ceiling test impairment (if any) and is adjusted for
unrealized changes in derivative contracts. The following table
provides a reconciliation of net income or loss to adjusted net
income, excluding certain non-cash items. Management believes that
net income or loss calculated in accordance with GAAP is the most
directly comparable measure to adjusted net income, excluding
certain non-cash items. The calculation of adjusted net income,
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 record a gain
or loss based on the calculated value difference from the previous
period-end valuation for open contracts. For example, NYMEX oil
prices on March 31, 2018 were $64.94 per barrel compared to $60.14
on March 31, 2019; therefore, the mark-to-market valuation changed
from period to period.
Three Months Ended March 31,
(In
thousands)
2019 2018 Net (loss) income $ (25,455 ) $ 10,779
Unrealized loss on derivative contracts 28,102
4,094 Adjusted net income, excluding certain non-cash items $ 2,647
$ 14,873 Net (loss) income per share - basic $ (0.15 ) $
0.07 Net (loss) income per share - diluted $ (0.15 ) $ 0.06
Adjusted net income, excluding certain non-cash items, per share -
basic $ 0.02 $ 0.09 Adjusted net income, excluding certain
non-cash items, per share - diluted $ 0.02 $ 0.09
Liquidity is calculated by adding the net funds available under
our revolving credit facility and cash and cash equivalents. We use
liquidity as an indicator of the Company's ability to fund
development and exploration activities. However, this measurement
has limitations. This measurement can vary from year-to-year for
the Company and can vary among companies based on what is or is not
included in the measurement on a company's financial statements.
This measurement is provided in addition to, and not as an
alternative for, and should be read in conjunction with, the
information contained in our financial statements prepared in
accordance with GAAP (including the notes), included in our SEC
filings and posted on our website.
(In
thousands)
March 31, 2019 March 31, 2018 Borrowing
base $ 217,500 $ 175,000 Cash and cash equivalents 1,325 5,645
Revolving credit facility- outstanding borrowings (179,000 )
(104,000 ) Outstanding letters of credit (250 ) (250
) Liquidity $ 39,575 $ 76,395
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version on businesswire.com: https://www.businesswire.com/news/home/20190506005787/en/
Steven P. HarrisVice President - Chief Financial
OfficerTelephone
210.490.4788sharris@abraxaspetroleum.comwww.abraxaspetroleum.com