SAN ANTONIO–(BUSINESS WIRE)–Abraxas Petroleum Corporation (“Abraxas” or the “Company”) (NASDAQ:AXAS) today provided the following operational, financial and divestiture update and addressed the Company’s 2016 and 2017 guidance and capital budget.
Abraxas recently signed a definitive agreement to divest the Company’s Brooks Draw assets in the Powder River Basin assets for approximately $11.3 million subject to standard closing conditions and purchase price adjustments. The assets sold consist of approximately 14,229 net acres and produced approximately 28 barrels of oil per day on average for the quarter ended September 30, 2016. The effective date of this transaction is October 1, 2016. Closing is scheduled for December 15, 2016. Upon closing, proceeds will be used to further reduce borrowings on the Company’s credit facility. Abraxas continues to market the Company’s remaining assets in the Powder River Basin.
In the Permian Basin, Abraxas now expects to close the previously announced sale of Hudgins Ranch (Pecos County, Texas) in December, 2016.
At Abraxas’ North Fork prospect, in McKenzie County, North Dakota, the Stenehjem 10H, 12H and 14H wells targeting the Three Forks averaged 1,059 boepd (786 barrels of oil per day, 1,642 mcf of natural gas per day) (1) over their first 30 days of production. The Stenehjem 11H, 13H and 15H wells targeting the Middle Bakken averaged 1,226 boepd (915 barrels of oil per day, 1,864 mcf of natural gas per day) (1) over their first 30 days of production. Abraxas owns a working interest of approximately 78% in Stenehjem 10H-15H.
At Abraxas’ Jourdanton prospect in Atascosa County, Texas, the Bulls Eye 101H is currently on production. Although the well has not achieved the anticipated initial production rate to date, it did achieve reasonable production rates and has shown a very stable production profile. The well continues to clean up having recovered approximately 40% of its load water and over 15,000 boe to date. Abraxas will update the market with more specific numbers once volumes stabilize. Abraxas owns a 100% working interest in the Bulls Eye 101H.
In Ward County, Texas, Abraxas successfully drilled the Caprito 99-101H to a total depth of 15,665 feet. The completion of the Caprito 99-101H has been delayed due to completion issues on a third party’s well, which has delayed the arrival of the frac fleet. Abraxas has been advised by the third party frac company that the rig up date for Abraxas’ planned 25 stage completion of the Caprito 99-101H is now November 9th. Abraxas owns a 100% working interest in the Caprito 99-101H.
Production for the third quarter of 2016 averaged 5,955 boepd (3,629 barrels of oil per day, 8,321 mcf of natural gas per day, 939 barrels of NGLs per day). Production for the months of September and October, 2016 are estimated to have averaged 8,157 boepd and 8,086 boepd, respectively.
Abraxas’ Borrowing Base was recently redetermined to $115 million. This Borrowing Base is fully conforming and represents a $5 million reduction from the Company’s previously fully conforming Borrowing Base of $120 million, and compensates for all announced asset sales to date. Abraxas exited the quarter ended September 30, 2016 $90 million drawn on this line of credit. As mentioned above, asset sale proceeds from the anticipated Hudgins Ranch and Brooks Draw sales will be used to further reduce borrowings on this line.
In connection with the redetermination, Abraxas layered on additional crude oil swaps consisting of 1200 bopd in 2019 at $54.54/bbl. Abraxas hedging schedule is as follows:
|Oil Swaps (bbls/day)||2500||2401||1796||1200|
|NYMEX WTI (1)||$43.25||$54.53||$47.48||$54.54|
Guidance and Capital Budget
Given current service costs and attractive economics, Abraxas plans to restart the Company’s Bakken rig in December, 2016. The rig will begin drilling a four well pad on the Stenehjem 6H-9H and will continually drill through 2017. Despite the resumption of Bakken drilling, Abraxas is lowering the Company’s 2016 capital budget from $40 million to $35 million largely due to service cost savings. The midpoint of 2016 production guidance remains unchanged at 6,200 boepd. Abraxas is also lowering lease operating expense (“LOE”) guidance by $0.75/boe following the divestiture of several higher cost properties and solid cost control over the course of 2016.
For 2017, Abraxas anticipates drilling expenditures to approximate cash flow. The current capital expenditure budget plans for drilling and completing eight gross, five net wells in the Bakken. Also in the Bakken, Abraxas anticipates drilling an additional three gross, two net wells that will be completed in 2018. At Jourdanton, Abraxas anticipates drilling two gross, net wells targeting the Austin Chalk. In the Permian, Abraxas anticipates drilling two gross, net wells targeting the Wolfcamp. Abraxas forecasts this will lead to 7,200 boepd or approximately 16% growth at the midpoint of guidance. Importantly, Abraxas expects a material decrease in LOE due to the divestiture of several higher cost properties and continued cost control. As evidence of this anticipated improvement, LOE expenses averaged $5.49/boe for the month of September, 2016. The 2017 capital expenditure budget is subject to change depending upon a number of factors, including the availability of drilling equipment and personnel, economic and industry conditions at the time of drilling, prevailing and anticipated prices for oil and gas, the availability of sufficient capital resources for drilling prospects, our financial results, the availability of leases on reasonable terms and our ability to obtain permits for drilling locations.
|% Natural Gas||23%||22%|
|Production Tax (% Rev)||9.0%||11.0%||9.0%||11.0%|
|Cash G&A ($mm)||$8.0||$12.5||$9.0||$11.0|
Third Quarter 2016 Earnings Release and Conference Call
Abraxas is issuing the Company’s third quarter 2016 earnings and operational release today to coordinate with the required filing of Abraxas’ third quarter 2016 10-Q as mandated by the Securities and Exchange Commission on or before November 9, 2016. Due to scheduling conflicts, Abraxas management will not be available to host the Company’s third quarter 2016 earnings conference call until the originally scheduled date of November 14, 2016. As previously provided, the conference call can be accessed by dialing 844.778.4143 and entering conference code 94561017. A live webcast of the conference call can be accessed under the “Investor Relations” portion of the Company’s website at www.abraxaspetroleum.com. If you are unable to participate in the live conference call, a replay will be available through December 12, 2016 and can be accessed by dialing 855.859.2056 and entering conference code 94561017.
Bob Watson, President and CEO of Abraxas commented, “Oil production for the months of September and October, 2016 represents the highest monthly oil production levels in our corporate history. We are quite pleased with our recent completions, which displayed attractive IP rates, but more importantly more attractive decline rates than originally anticipated.
“We continue to execute on our divestiture plan as evidenced by the partial sale of our Powder River Basin assets. We continue to market the remainder of our assets in the Powder River Basin and will update the market as to their status when appropriate.
“We now enter 2017 with higher margin and more productive asset base than we entered 2016 due to our operational execution and divestiture of lower margin assets. This will enable us to increase our capital expenditures by approximately 71% year over year with spending approximating forecasted cash flow. Importantly, we expect volumes to grow approximately 16% at the midpoint of guidance. Our solid leverage metrics and liquidity position on our revised line further enable us to accelerate growth when appropriate. We look forward to updating the market shortly on additional results from our active drilling program.”
(1) The 30-day average rates represent the highest 30 days of production and do not include the impact of natural gas liquids and shrinkage at the processing plant and include flared gas.
Abraxas Petroleum Corporation is a San Antonio based crude oil and natural gas exploration and production company with operations across the Rocky Mountains, Permian Basin and South Texas in 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.