axas20220930

axas20220930_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 September 30, 2022

☐	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	OTCQX

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 November 8, 2022 was 100,701,430

Table of Contents

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.

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, if any;

•

the availability of capital including under any applicable credit facilities;

•

our success in development, exploitation and exploration activities;

•

declines in our production of oil and gas;

•

volatility in oil, gas and natural gas liquids prices;

•

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;

•

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);

•

compliance with government regulations, including environmental, health, and safety regulations and liabilities thereunder;

•

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

•

general instability of economic and political conditions in the United States, including inflationary pressures, increased interest rates, economic slowdown or recession, and escalating geopolitical tensions;

•

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.

Many of the foregoing risks and uncertainties, as well as risks and uncertainties that are currently unknown to us, are, and may be, exacerbated by factors such as the ongoing conflict between Ukraine and Russia, escalating tensions between China and Taiwan, increasing economic uncertainty and inflationary pressures, the evolving nature of the COVID-19 pandemic and the emergence of new viral variants, and any consequent worsening of the global business and economic environment. New factors emerge from time to time, and it is not possible for us to predict all such factors. Should one or more of the risks or uncertainties described in this quarterly report, our annual report on Form 10-K for the year ended December 31, 2021, or other filings with the SEC occur or should our underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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.

Table of Contents

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.

Table of Contents

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.

Table of Contents

ABRAXAS PETROLEUM CORPORATION

FORM 10 – Q

INDEX

PART I


ITEM 1 -	Financial Statements
	Condensed Consolidated Balance Sheets - September 30, 2022 (unaudited) and December 31, 2021	6
	Condensed Consolidated Statements of Operations – (unaudited) Three and Nine Months Ended September 30, 2022 and 2021	8
	Condensed Consolidated Statements of Stockholders' Equity (unaudited) Three and Nine Months Ended September 30, 2022 and 2021	9
	Condensed Consolidated Statements of Cash Flows – (unaudited) Nine Months Ended September 30, 2022 and 2021	10
	Notes to Condensed Consolidated Financial Statements - (unaudited)	11

ITEM 2 -	Management's Discussion and Analysis of Financial Condition and Results of Operations	24

ITEM 3 -	Quantitative and Qualitative Disclosures about Market Risk	35

ITEM 4 -	Controls and Procedures	35

PART II
OTHER INFORMATION

ITEM 1 -	Legal Proceedings	36
ITEM 1A -	Risk Factors	36
ITEM 2 -	Unregistered Sales of Equity Securities and Use of Proceeds	37
ITEM 3 -	Defaults Upon Senior Securities	37
ITEM 4 -	Mine Safety Disclosure	37
ITEM 5 -	Other Information	37
ITEM 6 -	Exhibits	37
	Signatures	38

Table of Contents

Part I

FINANCIAL STATEMENTS

Item 1. Financial Statements

ABRAXAS PETROLEUM CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

	*September 30,*			*December 31,*
	*2022*			*2021*
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	25,101		$	10,034
Accounts receivable:
Joint owners, net		128			1,117
Oil and gas production sales		5,244			12,280
Other		30			150
Total accounts receivable		5,402			13,547

Assets held for sale		3,082			—
Other current assets		861			498
Total current assets		34,446			24,079

Property and equipment:
Proved oil and gas properties, full cost method		1,122,317			1,165,707
Other property and equipment		24,688			39,337
Total		1,147,005			1,205,044
Less accumulated depreciation, depletion, amortization and impairment		(1,093,557	)		(1,099,075	)
Total property and equipment, net		53,448			105,969

Operating lease right-of-use assets		2			173
Other assets		255			255
Total assets	$	88,151		$	130,476

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

Table of Contents

ABRAXAS PETROLEUM CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

(in thousands, except share and per share data)

	*September 30,*			*December 31,*
	*2022*			*2021*
	(Unaudited)
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	8,265		$	4,678
Joint interest oil and gas production payable		3,011			13,347
Accrued interest		-			477
Accrued expenses		761			347
Right of use liability		2			40
Derivative liabilities - short-term		-			442
Termination of derivative contracts		-			8,022
Current maturities of long-term debt		-			212,688
Total current liabilities		12,039			240,041

Long-term debt – less current maturities		-			2,205
Operating lease right-of-use liabilities		-			110
Future site restoration		2,995			4,708
Total liabilities		15,034			247,064

Commitments and contingencies (Note 9)

Stockholders’ Equity:
Preferred stock, par value $0.01 per share – authorized 1,000,000 shares; 685,505 and -0- shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		7			-
Common stock, par value $0.01 per share, authorized 20,000,000 shares; 10,070,143 and 8,421,910 issued and outstanding at September 30, 2022 and December 31, 2021, respectively		101			84
Additional paid-in capital		576,993			430,422
Accumulated deficit		(503,984	)		(547,094	)
Total stockholders' equity (deficit)		73,117			(116,588	)
Total liabilities and stockholders’ equity (deficit)	$	88,151		$	130,476

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

Table of Contents

ABRAXAS PETROLEUM CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands except per share data)

	*Three Months Ended September 30,*						*Nine Months Ended September 30,*
	*2022*			*2021*			*2022*			*2021*
Revenues:
Oil and gas production revenues
Oil	$	9,733		$	15,506		$	31,307		$	45,199
Gas		2,434			2,415			5,733			5,344
Natural gas liquids		1,077			2,933			2,913			5,416
Other		8			11			20			19
Total revenue		13,252			20,865			39,973			55,978
Operating costs and expenses:
Lease operating		2,609			4,612			7,700			13,059
Production and ad valorem taxes		1,115			1,551			3,410			4,624
Rig expense		114			119			338			363
Depreciation, depletion, amortization and accretion		1,660			3,812			4,807			11,951
General and administrative (including stock-based compensation of $2,971 $273, $3,296 and $780, respectively)		5,231			1,942			9,049			6,253
Total operating cost and expenses		10,729			12,036			25,304			36,250
Operating income		2,523			8,829			14,669			19,728

Other (income) expense:
Interest income		(14	)		(4	)		(15	)		(13	)
Interest expense		11			8,057			111			21,742
Gain on sale of oil and gas assets		—			—			(29,359	)		—
Loss (gain) on sale of non-oil and gas assets		—			—			669			(29	)
Amortization of deferred financing fees		—			1,201			—			3,603
Financing fees		—			568			—			1,852
Debt forgiveness		—			—			(6,645	)		(1,384	)
Loss on debt extinguishment					—
Other		100			—			600			—
Loss on derivative contracts		—			252			—			32,897
Total other expense (income)		97			10,074			(34,639	)		58,668

Income (loss) before income tax		2,426			(1,245	)		49,308			(38,940	)
Income tax expense (benefit)		—			—			—			—
Net income (loss)		2,426			(1,245	)		49,308			(38,940	)
Accretion of preferred stock		2,134			—		$	6,198		$	-
Net income (loss) attributable to common stock	$	292		$	(1,245	)	$	43,110		$	(38,940	)

Net income (loss) per common share - basic	$	0.03		$	(0.15	)	$	4.64		$	(4.63	)
Net income (loss) per common share - diluted	$	0.03		$	(0.15	)	$	4.64		$	(4.63	)

Weighted average shares outstanding:
Basic		9,705			8,406			9,281			8,406
Diluted		9,705			8,406			9,281			8,406

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

Table of Contents

ABRAXAS PETROLEUM CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

(Unaudited)

(in thousands, except share data)

									*Additional*
	*Common Stock*				*Preferred Stock*				*Paid in*			*Accumulated*
	*Shares*		*Amount*		*Shares*		*Amount*		*Capital*			*Deficit*			*Total*
Balance at December 31, 2021		8,421,910	$	84	$	-	$	-	$	430,422		$	(547,094	)	$	(116,588	)
Net income		-		-		-		-		-			43,110			43,110
Issuance of Restricted Stock, net of cancellations		1,648,233		17		-				(17	)		-			-
Issuance of Preferred Stock		-		-		685,505		7		137,094			-			137,101
Accretion of Preferred Stock		-		-		-		-		6,198			-			6,198
Stock-based compensation		-		-		-		-		3,296			-			3,296
Balance at September 30, 2022		10,070,143	$	101

SEC Form 10-Q filed by Abraxas Petroleum Corporation