Abraxas Announces Third Quarter 2014 Results

Abraxas Petroleum Corporation (AXAS) today reported financial and operating results for the three months ended September 30, 2014.

Financial and Operating Results for the Three Months Ended September 30, 2014

The three months ended September 30, 2014 resulted in:

• Production of 651 MBoe (7,076 Boepd)
• Revenue of $44.2 million
• Adjusted EBITDA^(a) of $31.8 million inclusive of Raven Drilling
• Adjusted discretionary cash flow^(a) of $31.3 million inclusive of Raven Drilling
• Net income of $25.4 million, or $0.24 per share
• Adjusted net income^(a), excluding certain non-cash items and inclusive of Raven Drilling of $16.0 million, or $0.15 per share

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

Net income for the three months ended September 30, 2014 was $25.4 million, or $0.24 per share, compared to net income of $3.2 million, or $0.03 per share, for the three months ended September 30, 2013.

Adjusted net income, excluding certain non-cash items, for the three months ended September 30, 2014 was $16.0 million, or $0.15 per share, compared to an adjusted net income, excluding certain non-cash items, of $8.4 million or $0.09 per share for the three months ended September 30, 2013. For the three months ended September 30, 2014 and 2013, adjusted net income excludes the unrealized gain on derivative contracts of $10.0 million and an unrealized loss of $4.5 million, respectively. Included in adjusted net income is the net income from our subsidiary, Raven Drilling, LLC of $0.6 million for the quarters ended September 30, 2014 and September 30, 2013.

Pursuant to SEC Regulation S-X, no income is recognized for Raven Drilling, LLC. Contractual drilling services performed in connection with properties in which Abraxas holds an ownership interest cannot be recognized as income, rather it is credited to the full cost pool and recognized through lower amortization as reserves are produced.

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, and require Abraxas to either record an unrealized gain or loss based on the calculated value difference from the previous period-end valuation. For example, NYMEX oil prices on September 30, 2013 were $102.33 per barrel compared to $91.16 on September 30, 2014; therefore, the mark-to-market valuation changed considerably period to period.

Conference Call

Abraxas Petroleum Corporation (AXAS) will host its third quarter 2014 earnings conference call at 11 AM ET on November 5, 2014. To participate in the conference call, please dial 888.679.8034 and enter the passcode 75191902. Additionally, a live listen only webcast of the conference call can be accessed under the investor relations section of the Abraxas website atwww.abraxaspetroleum.com. A replay of the conference call will be available until December 5, 2014 by dialing 888.286.8010 and entering the passcode 27581843 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 Rocky Mountain, Permian Basin and onshore Gulf Coast 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) See reconciliation of non-GAAP financial measures below.

(a) Excludes current maturities of long-term debt and current derivative assets and liabilities in accordance with our loan covenants.

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”), discretionary cash flow and EBITDA are appropriate measures of Abraxas’ ability to satisfy capital expenditure obligations and working capital requirements. Discretionary cash flow and EBITDA are non-GAAP financial measures as defined under SEC rules. Abraxas’ discretionary cash flow and 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. As discretionary cash flow and EBITDA exclude some, but not all items that affect net income and may vary among companies, the discretionary cash flow and EBITDA presented below may not be comparable to similarly titled measures of other companies. Management believes that operating income calculated in accordance with GAAP is the most directly comparable measure to discretionary cash flow; therefore, operating income is utilized as the starting point for the discretionary cash flow reconciliation.

Discretionary cash flow is defined as operating income plus depreciation, depletion and amortization expenses, non-cash expenses and impairments, cash portion of other income (expense) less cash interest. Adjusted discretionary cash flow is defined as discretionary cash flow, plus cash flow from Raven Drilling’s operations. Accounting rules do not permit the inclusion of the net income and other components of Raven Drilling’s operations to be included in our consolidated results of operations and cash flow; instead, the results of Raven Drilling’s operations are credited to the full cost pool. Accordingly, for purposes of adjusted discretionary cash flow, Raven Drilling’s cash flow is added back. The following table provides a reconciliation of discretionary cash flow and adjusted discretionary cash flow to operating income for the periods presented.

EBITDA is defined as net income plus interest expense, depreciation, depletion and amortization expenses, deferred income taxes and other non-cash items. Adjusted EBITDA includes all of the components of EBITDA plus Raven Drilling’s EBITDA. Accounting rules do not permit the inclusion of the net income and other components of Raven Drilling’s operations to be included in our consolidated results of operations; instead, the results of Raven Drilling’s operations are credited to the full cost pool. Accordingly, for purposes of Adjusted EBITDA, Raven Drilling’s EBITDA is added back. The following table provides a reconciliation of EBITDA and Adjusted EBITDA to net income for the periods presented.

This release also includes a discussion of “adjusted net income, excluding certain non-cash items,” which is a non-GAAP financial measure as defined under SEC rules. The following table provides a reconciliation of adjusted net income, excluding ceiling test impairment and unrealized changes in derivative contracts and net income related to Raven Drilling, LLC capitalized to the full cost pool, to net income for the periods presented. Management believes that net income calculated in accordance with GAAP is the most directly comparable measure to adjusted net income, excluding certain non-cash items.