Abraxas Announces 2017 Results

SAN ANTONIO–(BUSINESS WIRE)–Abraxas Petroleum Corporation (NASDAQ:AXAS) today reported financial and
operating results for the three and twelve months ended December 31,
2017.

Financial and Operating Results for the Three
Months Ended December 31, 2017

The three months ended December 31, 2017 resulted in:

• Production of 808 MBoe (8,788 Boepd)
• Revenue of $29.6 million
• Net loss of $4.1 million, or $0.02 per share
• Adjusted net income(a) (excluding certain non-cash items)
  of $7.1 million, or $0.04 per share
• EBITDA(a) of $17.6 million
• Adjusted EBITDA per bank loan covenants of $17.8 million(a)

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

Financial and Operating Results for the Twelve
Months Ended December 31, 2017

The twelve months ended December 31, 2017 resulted in:

• Production of 2.7 MMBoe (7,391 Boepd)
• Revenue of $86.3 million
• Net income of $16.0 million, or $0.10 per share
• Adjusted net income(a) (excluding certain non-cash items)
  of $20.3 million, or $0.13 per share
• EBITDA(a) of $53.1 million
• Adjusted EBITDA per bank loan covenants of $58.0 million(a)

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

Operational Update

Delaware Basin

In Ward County, Texas, Abraxas recently drilled and cased three wells
and is drilling the fourth well on the Company’s 660’ downspacing test
at Caprito. The four-well downspacing test consists of two Wolfcamp A2
wells, the Caprito 99-301H and Caprito 99-311H, and two Wolfcamp A1
wells, the Caprito 99-202H and Caprito 99-211H. With success, Abraxas'
assumed well spacing will move from 1320’ spacing to the apparent
industry norm 660’ spacing in the Wolfcamp A1 and A2. These wells are
scheduled for an April completion date. Abraxas owns a 57.8% working
interest in the Caprito 99-301H, Caprito 99-311H, Caprito 99-202H and
Caprito 99-211H.

Abraxas' next pad will be the Greasewood 201H and 301H. These locations
are four sections north of our Caprito acreage and will test the
Wolfcamp A1 and A2. Abraxas owns a 100% working interest in these wells.

On February 28, 2018, Abraxas closed on the acquisition of 944 net acres
in Winkler County for $14.3 million. Abraxas' combined net Bone
Spring/Wolfcamp acreage position now consists of 9,211 net acres.

Williston Basin

At Abraxas' North Fork prospect, in McKenzie County, North Dakota, the
Company recently drilled and cased the Yellowstone 5H-7H wells in which
the Company owns a 52% working interest. These wells are scheduled for a
June completion date. Abraxas also recently drilled and cased the
Lillibridge 9H-12H wells in which the Company owns a 25-29% working
interest. These wells are scheduled for a July completion date. Abraxas'
next pad will be the Ravin 9H-12H in which we estimate we will own a 50%
working interest.

Comments

Bob Watson, President and CEO of Abraxas, commented, “2017 was a year of
tremendous accomplishments for Abraxas. In early 2017, Abraxas commenced
and executed a successful equity offering with four distinct goals:
de-risk four zones on our Ward County assets, add Bone Spring/Wolfcamp
acres in the Delaware Basin at a reasonable cost, grow our production
base to critical mass and maintain our balance sheet. We are happy to
report that we successfully de-risked the Wolfcamp A1, Wolfcamp A2,
Wolfcamp B and Third Bone Spring on our acreage position in Ward County.
Since January 2017, we added approximately 4,000 net Bone
Spring/Wolfcamp acres to our Delaware Basin position. We reached
critical mass with our production base as evidenced by our 11,480 Boepd
production average during the month of January 2018. Finally, we ended
the year with a solid balance sheet that will enable us to continue our
two rig program and remain acquisitive in the Delaware Basin.

“Our goals for 2018 remain largely unchanged. We will look to continue
to expand our acreage position in the Delaware Basin at a reasonable
cost while protecting our balance sheet, streamline our portfolio by
continuing to divest non-core assets, further delineate our acreage
position by drilling outside of Caprito and test downspacing to the
industry norm 660 feet between wells in the same zone. Ultimately,
success on these fronts will position Abraxas for an optimal multi-year,
high return and focused development program in the Delaware Basin. We
look forward to updating the street on the results of these efforts in
the near future."

Conference Call

Abraxas Petroleum Corporation (NASDAQ:AXAS) will host its fourth quarter
and year end 2017 earnings conference call at 11 AM ET on March 14,
2018. To participate in the conference call, please dial 844.347.1028
and enter the passcode 7399815. 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 11, 2018
by dialing 855.859.2056 and entering the passcode 7399815 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.

(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.

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 (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 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 to net income (loss) for the periods presented.

This release also includes a discussion of “adjusted net income (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 income (loss), excluding ceiling test
impairment and unrealized changes in derivative contracts. Management
believes that net income (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 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, 2016 were
$53.72 per barrel compared to $60.42 on December 29, 2017; therefore,
the mark-to-market valuation changed considerably from period to period.

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.

Contacts

Abraxas Petroleum Corporation
Geoffrey King, 210-490-4788
Vice
President – Chief Financial Officer
[email protected]
www.abraxaspetroleum.com