axas20190331

axas20190331_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED March 31, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO ______

COMMISSION FILE NUMBER: 001-16071

ABRAXAS PETROLEUM CORPORATION

(Exact name of registrant as specified in its charter)

Nevada		74-2584033
(State of Incorporation)		(I.R.S. Employer Identification No.)

18803 Meisner Drive, San Antonio, TX 78258

(Address of principal executive offices) (Zip Code)

210-490-4788

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered:
Common Stock, par value $.01 per share	AXAS	The NASDAQ Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check One)

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Sec 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the issuer’s common stock outstanding as of May 17, 2021 was 8,421,910.

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The terms “Abraxas,” “Abraxas Petroleum,” “we,” “us,” “our” or the “Company” refer to Abraxas Petroleum Corporation and all of its subsidiaries, including Raven Drilling, LLC.

All share and per share data has been retroactively adjusted to reflect the 1-for-20 reverse stock split effective October 19, 2020, as described in Note 2 to our consolidated financial statements.

Forward-Looking Information

We make forward-looking statements throughout this report. Whenever you read a statement that is not simply a statement of historical fact (such as statements including words like “believe,” “expect,” “anticipate,” “intend,” “will,” “plan,” “seek,” “may,” “estimate,” “could,” “potentially” or similar expressions), you must remember that these are forward-looking statements, and that our expectations may not be correct, even though we believe they are reasonable. The forward-looking information contained in this report is generally located in the material set forth under the headings “Management’s Discussion and Analysis of Financial Condition and Results of Operations” but may be found in other locations as well. These forward-looking statements generally relate to our plans and objectives for future operations and are based upon our management’s reasonable estimates of future results or trends. The factors that may affect our expectations regarding our operations include, among others, the following:

•

the prices we receive for our production and the effectiveness of our hedging activities;

•

the availability of capital including under our credit facility;

•

our success in development, exploitation and exploration activities;

•

declines in our production of oil and gas;

	•	our indebtedness and the significant amount of cash required to service our indebtedness;

	•	the proximity, capacity, cost and availability of pipelines and other transportation facilities;

•

limits on our growth and our ability to finance our operations, fund our capital needs and respond to changing conditions imposed by our bank credit facility and restrictive debt covenants;

•

our ability to make planned capital expenditures;

•

ceiling test write-downs resulting, and that could result in the future, from lower oil and natural gas prices;

•

global or national health concerns, including the outbreak of pandemic or contagious disease, such as the coronavirus (COVID-19);

•

political and economic conditions in oil producing countries, especially those in the Middle East;

•

price and availability of alternative fuels;

•

our ability to procure services and equipment for our drilling and completion activities;

•

our acquisition and divestiture activities;

•

weather conditions and events; and

•

other factors discussed elsewhere in this report.

Initial production, or IP rates, for both our wells and for those wells that are located near our properties, are limited data points in each well’s productive history. These rates are sometimes actual rates and sometimes extrapolated or normalized rates. As such, the rates for a particular well may change as additional data become available. Peak production rates are not necessarily indicative or predictive of future production rates, expected ultimate recovery (EUR), or economic rates of return from such wells and should not be relied upon for such purpose. Equally, the way we calculate and report peak IP rates and the methodologies employed by others may not be consistent, and thus the values reported may not be directly and meaningfully comparable. Lateral lengths described are indicative only. Actual completed lateral lengths depend on various considerations such as lease-line offsets. Abraxas standard length laterals, sometimes referred to as 5,000 foot laterals, are laterals with completed length generally between 4,000 feet and 5,500 feet. Mid-length laterals, sometimes referred to as 7,500 foot laterals, are laterals with completed length generally between 6,500 feet and 8,000 feet. Long laterals, sometimes referred to as 10,000 foot laterals, are laterals with completed length generally longer than 8,000 feet.

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GLOSSARY OF TERMS

Unless otherwise indicated in this report, gas volumes are stated at the legal pressure base of the State or area in which the reserves are located at 60 degrees Fahrenheit. Oil and gas equivalents are determined using the ratio of six Mcf of gas to one barrel of oil, condensate or natural gas liquids.

The following definitions apply to the technical terms used in this report.

Terms used to describe quantities of oil and gas:

“Bbl” – barrel or barrels.

“Bcf” – billion cubic feet of gas.

“Bcfe” – billion cubic feet of gas equivalent.

“Boe” – barrels of oil equivalent.

“Boed or Boepd” – barrels of oil equivalent per day.

“MBbl” – thousand barrels.

“MBoe” – thousand barrels of oil equivalent.

“Mcf” – thousand cubic feet of gas.

“Mcfe” – thousand cubic feet of gas equivalent.

“MMBbl” – million barrels.

“MMBoe” – million barrels of oil equivalent.

“MMBtu” – million British Thermal Units of gas.

“MMcf” – million cubic feet of gas.

“MMcfe” – million cubic feet of gas equivalent.

“NGL” – natural gas liquids measured in barrels.

Terms used to describe our interests in wells and acreage:

“Developed acreage” means acreage which consists of leased acres spaced or assignable to productive wells.

“Development well” is a well drilled within the proved area of an oil or gas reservoir to the depth or stratigraphic horizon (rock layer or formation) noted to be productive for the purpose of extracting reserves.

“Dry hole” is an exploratory or development well found to be incapable of producing either oil or gas in sufficient quantities to justify completion.

“Exploratory well” is a well drilled to find and produce oil and or gas in an unproved area, to find a new reservoir in a field previously found to be producing in another reservoir, or to extend a known reservoir.

“Gross acres” are the number of acres in which we own a working interest.

“Gross well” is a well in which we own a working interest.

“Net acres” are the sum of fractional ownership working interests in gross acres (e.g., a 50% working interest in a lease covering 320 gross acres is equivalent to 160 net acres).

“Net well” is the sum of fractional ownership working interests in gross wells.

“Productive well” is an exploratory or a development well that is not a dry hole.

“Undeveloped acreage” means those leased acres on which wells have not been drilled or completed to a point that would permit the production of economic quantities of oil and gas, regardless of whether such acreage contains proved reserves.

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Terms used to assign a present value to or to classify our reserves:

“Developed oil and gas reserves*” Developed oil and gas reserves are reserves of any category that can be expected to be recovered:

(i) Through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well; and

(ii) Through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well.

“Proved developed non-producing reserves*” are those quantities of oil and gas reserves that are developed behind pipe in an existing well bore, from a shut-in well bore or that can be recovered through improved recovery only after the necessary equipment has been installed, or when the costs to do so are relatively minor. Shut-in reserves are expected to be recovered from (1) completion intervals which are open at the time of the estimate but which have not started producing, (2) wells that were shut-in for market conditions or pipeline connections, or (3) wells not capable of production for mechanical reasons. Behind-pipe reserves are expected to be recovered from zones in existing wells that will require additional completion work or future recompletion prior to the start of production.

“Proved developed reserves*” Reserves that can be expected to be recovered through existing wells with existing equipment and operating methods.

“Proved reserves*” Reserves that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions.

“Proved undeveloped reserves” or “PUDs*” Reserves that are expected to be recovered from new wells on undrilled acreage or from existing wells, in each case where a relatively major expenditure is required.

“PV-10” means estimated future net revenue, discounted at a rate of 10% per annum, before income taxes and with no price or cost escalation or de-escalation, calculated in accordance with guidelines promulgated by the Securities and Exchange Commission (“SEC”). PV-10 is considered a non-GAAP financial measure under SEC regulations because it does not include the effects of future income taxes, as is required in computing the standardized measure of discounted future net cash flows. We believe that PV-10 is an important measure that can be used to evaluate the relative significance of our oil and gas properties and that PV-10 is widely used by securities analysts and investors when evaluating oil and gas companies. Because many factors that are unique to each individual company impact the amount of future income taxes to be paid, the use of a pre-tax measure provides greater comparability of assets when evaluating companies. We believe that most other companies in the oil and gas industry calculate PV-10 on the same basis. PV-10 is computed on the same basis as the standardized measure of discounted future net cash flows but without deducting income taxes.

“Standardized Measure” means estimated future net revenue, discounted at a rate of 10% per annum, after income taxes and with no price or cost escalation or de-escalation, calculated in accordance with Accounting Standards Codification (“ASC”) 932, “Disclosures About Oil and Gas Producing Activities.”

“Undeveloped oil and gas reserves*” Undeveloped oil and gas reserves are reserves of any category that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion.

* This definition is an abbreviated version of the complete definition set forth in Rule 4-10(a) of Regulation S-X. For the complete definition, see:http://www.ecfr.gov/cgibin/retrieveECFR?gp=1&SID=aa25d3cede06103c0ecec861362497d&ty=HTML&h=L&n=pt17.3.210&r=PART#se17.3.210_14_610

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ABRAXAS PETROLEUM CORPORATION

FORM 10 – Q

INDEX

PART I


ITEM 1 -	Financial Statements
	Condensed Consolidated Balance Sheets - March 31, 2021 (unaudited) and December 31, 2020	6
	Condensed Consolidated Statements of Operations – (unaudited) Three Months Ended March 31, 2021 and 2020	8
	Condensed Consolidated Statements of Stockholders' Equity (unaudited) Three Months Ended March 31, 2021 and 2020	9
	Condensed Consolidated Statements of Cash Flows – (unaudited) Three Months Ended March 31, 2021 and 2020	10
	Notes to Condensed Consolidated Financial Statements - (unaudited)	11

ITEM 2 -	Management's Discussion and Analysis of Financial Condition and Results of Operations	26

ITEM 3 -	Quantitative and Qualitative Disclosures about Market Risk	37

ITEM 4 -	Controls and Procedures	37

PART II
OTHER INFORMATION

ITEM 1 -	Legal Proceedings	38
ITEM 1A -	Risk Factors	38
ITEM 2 -	Unregistered Sales of Equity Securities and Use of Proceeds	38
ITEM 3 -	Defaults Upon Senior Securities	38
ITEM 4 -	Mine Safety Disclosure	38
ITEM 5 -	Other Information	38
ITEM 6 -	Exhibits	38
	Signatures	39

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Part I

FINANCIAL STATEMENTS

Item 1. Financial Statements

ABRAXAS PETROLEUM CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

	*March 31,*			*December 31,*
	*2021*			*2020*
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	4,273		$	2,775
Accounts receivable:
Joint owners, net		1,126			1,255
Oil and gas production sales		10,042			8,794
Other		26			-
Total accounts receivable		11,194			10,049

Derivative asset - short-term		1,126			9,639
Other current assets		1,308			1,588
Total current assets		17,901			24,051

Property and equipment:
Proved oil and gas properties, full cost method		1,167,418			1,167,333
Other property and equipment		39,434			39,456
Total		1,206,852			1,206,789
Less accumulated depreciation, depletion, amortization and impairment		(1,087,637	)		(1,083,843	)
Total property and equipment, net		119,215			122,946

Operating lease right-of-use assets		205			228
Derivative asset - long-term		473			10,281
Other assets		505			255
Total assets	$	138,299		$	157,761

All share and per share data has been retroactively adjusted to reflect the 1-for-20 reverse stock split effective October 19, 2020, as described in Note 2 to our condensed consolidated financial statements.

See accompanying notes to condensed consolidated financial statements (unaudited).

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ABRAXAS PETROLEUM CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

(in thousands, except share and per share data)

	*March 31,*			*December 31,*
	*2021*			*2020*
	(Unaudited)
Liabilities and Stockholders Equity
Current liabilities:
Accounts payable	$	3,509		$	6,074
Joint interest oil and gas production payable		9,289			8,795
Accrued interest		157			86
Accrued expenses		588			230
Operating lease liabilities - current		41			53
Derivative liabilities - short-term		2,606			480
Current maturities of long-term debt		203,556			202,751
Other current liabilities		511			850
Total current liabilities		220,257			219,319

Long-term debt – less current maturities		2,439			2,515
Operating lease liabilities		140			150
Other long-term liabilities		1,336			1,384
Derivative liabilities - long-term		2,965			—
Future site restoration		7,508			7,360
Total liabilities		234,645			230,728

Commitments and contingencies (Note 11)

Stockholders’ Equity:
Preferred stock, par value $0.01 per share – authorized 1,000,000 shares; -0- shares issued and outstanding		—			—
Common stock, par value $0.01 per share, authorized 20,000,000 shares; 8,421,910 issued and outstanding at March 31, 2021 and December 31, 2020		84			84
Additional paid-in capital		429,787			429,476
Accumulated deficit		(526,217	)		(502,527	)
Total stockholders equity (deficit)		(96,346	)		(72,967	)
Total liabilities and stockholders’ equity	$	138,299		$	157,761

See accompanying notes to condensed consolidated financial statements (unaudited).

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ABRAXAS PETROLEUM CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands except per share data)

	*Three Months Ended March 31,*
	*2021*			*2020*
Revenues:
Oil and gas production revenues
Oil	$	13,925		$	15,535
Gas		1,670			86
Natural gas liquids		1,069			97
Other		6			8
Total revenue		16,670			15,726
Operating costs and expenses:
Lease operating		4,380			5,286
Production and ad valorem taxes		1,385			1,537
Rig expense		116			299
Depreciation, depletion, amortization and accretion		3,897			9,279
Proved property impairment		—			26,659
General and administrative (including stock-based compensation of $311 and $230,)		2,049			2,447
Total operating cost and expenses		11,827			45,507
Operating income (loss)		4,843			(29,781	)

Other (income) expense:
Interest income		(5	)		(9	)
Interest expense		6,023			4,386
Amortization of deferred financing fees		1,201			129
Debt forgiveness		(1,384	)		—
Loss (gain) on derivative contracts		22,698			(75,730	)
Total other expense (income)		28,533			(71,224	)
( Loss) income before income tax		(23,690	)		41,443
Income tax (expense) benefit		—			—
Net (loss) income	$	(23,690	)	$	41,443

Net (loss) income per common share - basic	$	(2.83	)	$	4.98
Net (loss) income per common share - diluted	$	(2.83	)	$	4.98

Weighted average shares outstanding:
Basic		8,382			8,329
Diluted		8,382			8,329

See accompanying notes to condensed consolidated financial statements (unaudited).

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ABRAXAS PETROLEUM CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

(Unaudited)

(in thousands, except share data)

					*Additional*
	*Common Stock*				*Paid in*		*Accumulated*
	*Shares*		*Amount*		*Capital*		*Deficit*			*Total*
Balance at December 31, 2020		8,421,910	$	84	$	429,476	$	(502,527	)	$	(72,967	)
Net loss		-		-		-		(23,690	)		(23,690	)
Stock-based compensation		-		-		311		-			311
Balance at March 31, 2021		8,421,910	$	84	$	429,787	$	(526,217	)	$	(96,346	)

						*Additional*
	*Common Stock*					*Paid in*		*Accumulated*
	*Shares*			*Amount*		*Capital*		*Deficit*			*Total*
Balance at December 31, 2019		8,436,498		$	84	$	421,740	$	(318,005	)	$	103,819
Net income		-			-		-		41,443			41,443
Stock-based compensation		-			-		230					230
Restricted stock issued, net of forfeitures		(14,588	)		-				-			-
Balance at March 31, 2020		8,421,910		$	84	$	421,970	$	(276,562	)	$	145,492

See accompanying notes to condensed consolidated financial statements (unaudited).

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ABRAXAS PETROLEUM CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

	*Three Months Ended March 31,*
	*2021*			*2020*
Operating Activities
Net (loss) income	$	(23,690	)	$	41,443
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net loss (gain) on derivative contracts		22,698			(75,730	)
Net cash settlements paid on derivative contracts		(714	)		1,713
Depreciation, depletion and amortization		3,897			9,176
Accretion of future site restoration		103			103
Debt forgiveness PPP loan		(1,384	)		—
Proved property impairment		—			26,659
Amortization of deferred financing fees and issuance discount		1,806			470
Loss on debt extinguishment		0			-
Stock-based compensation		311			230
Non-cash interest expense		4,498			—
Changes in operating assets and liabilities:
Accounts receivable		(1,145	)		8,113
Other assets		1,471			(3,502	)
Accounts payable and accrued expenses		(2,026	)		(5,023	)
Net cash provided by operating activities		5,825			3,652

Investing Activities
Capital expenditures, including purchases and development of properties		(91	)		(9,549	)
Proceeds from the sale of oil and gas properties		—			—
Net cash used in investing activities		(91	)		(9,549	)

Financing Activities
Proceeds from long-term borrowings		—			8,000
Proceeds from PPP loan		1,336			—

SEC Form 10-Q filed by Abraxas Petroleum Corporation