Abraxas Petroleum Corporation Announces 2019 Guidance; Provides Operations and Corporate Updates
Abraxas Petroleum Corporation (“Abraxas” or the “Company”) (NASDAQ:
AXAS) today provided 2019 Guidance, Operations and Corporate Updates.
GUIDANCE
In light of the current commodity price environment and the Company’s
focus on capital efficiency, Abraxas has revised its 2019 capital budget
to $95 million, down from the previously announced $108 million. This
budget is designed to produce free cash flow in the current commodity
price environment, with limited impact on future production growth. The
free cash flow will be used to pay down debt.
This revised budget will entail the drilling and completion of 6 gross
(4.3 net) wells and the completion of 4 gross (1.0) net wells in the
Bakken, and the drilling and completion of 5 gross (4.75 net) wells and
the completion of 2 gross (1.9 net) wells in the Delaware Basin of West
Texas. The budget includes $10 million for additional leasing and
infrastructure in the Delaware.
Using preliminary numbers, 2018 daily sales averaged 9,811 barrels of
oil equivalent per day (BOEPD), with the 4th quarter sales
averaging 10,498 BOEPD and December sales averaging 11,427 BOEPD. The
yearly average, which was up 33% over 2017, was slightly below the low
end of our guidance of 10,000 BOEPD. As previously announced, production
was negatively impacted by shut ins for offset frac protection,
continuing issues of gas flaring, and the purposeful restriction of
Bakken production during December due to a temporary increase in basis
differential to over $20 per barrel and a more favorable differential of
approximately $9 per barrel in January 2019. Capital expenditures for
2018 were approximately $171 million, which is above our original
guidance of $140 million, due to several reasons. We were successful in
acquiring more net acres in the Delaware than originally anticipated,
which subsequently led to higher working interests and costs, in several
wells drilled and/or completed. In addition, the planned sale of our
Eagleford assets did not close in 2018, the anticipated proceeds from
which were included as a credit in our original net $140 million budget.
In anticipation of future offset frac operations, we have incorporated
into our 2019 production guidance an estimate of production shut ins, as
well as an estimate for future gas flaring. Our production guidance for
2019 is an average daily production between 10,500 and 11,500 BOEPD, the
midpoint of which would result in a year over year production growth of
approximately 12%. These production numbers are generated using our type
curves on the various formations we are developing in our program. We
encourage the reader to consult our website, www.abraxaspetroleum.com
to see how our wells are performing versus the type curves currently in
use.
OPERATIONS
Williston Basin, North Dakota
In North Dakota, other than normal operational occurrences, all wells
are on production except for one recently completed well that is waiting
on equipment and weather to retrieve a piece of coil tubing from the
cased wellbore before completing operations for production. The newer
wells are still producing under voluntary choke restriction as
differentials continue to improve from over $21 in December to under $9
for January to under $6 for February. Despite our choke management
regime, we are encouraged with the performance of our newest Bakken
wells incorporating our 5th generation completion design.
Specifically, our four well Ravin NE Pad recently reached a peak rate
average of 2,155 BOEPD per well (84% oil), with the Ravin 13H achieving
an IP 24 of 2,925 BOEPD (81% oil) on an 18/64” choke, a new production
record for the Company. During the fourth quarter production was down
approximately 1,085 BOEPD due to frac protection early in the quarter
and gas flaring throughout the quarter. The frac protect protocol is
behind us, but the flaring is unacceptable. We have begun a high
priority project to find an alternative to conserve this currently
flared gas. We have shut down the Raven drilling rig until spring to not
only conserve our budget, but also to give us time to resolve the
flaring issue. We have 19 gross (11.5 net) Middle Bakken and First Bench
Three Forks proved undeveloped wells yet to drill, and a currently
unknown number of Second Bench Three Forks wells where offset activity
has been encouraging.
Delaware Basin, West Texas
In the Delaware Basin, West Texas and specifically Ward and Winkler
Counties, operations are running smoothly. We are currently drilling in
the lateral on the initial well on our Hackberry Pad where Abraxas has a
75% working interest. The rig will move next to the two-well Woodberry
Pad where we have a 100% interest. Frac operations are scheduled to
commence the second week of February on the two well Creosote Pad where
we have a 95.5% working interest. We continue to close on small bolt-on
lease acquisitions. Our net acreage is now approximately 11,130 acres,
essentially all of which is held by production. This number excludes
approximately 2,389 acres of perpetual mineral acres near the Alpine
High area in Pecos County.
CORPORATE
As part of our efforts to crystalize the value of our Bakken assets for
our shareholders, Abraxas has engaged Petrie Partners LLC to assist the
Company with identifying and assessing options for our Bakken holdings.
This process may lead to a sale, a securitization, some other
transaction, or it may lead us to continue to develop the asset and
retain it as a source of cash flow.
Abraxas CEO, Bob Watson, stated, “Operations are running very well
despite challenging weather this time of year. As I have mentioned on
multiple occasions in the past, including on our third quarter 2018
call, one of my highest priorities is to crystalize the value of our
Bakken assets in our share price. Hiring a highly regarded firm like
Petrie Partners is the next logical step in this process. We are willing
to consider a wide range of options for this asset. If the process
results in an outright sale for cash, the proceeds would be used to
significantly pay down or fully retire our debt, to fund our Raven rig
in the Delaware until it reaches free cash flow status, and to possibly
buy back shares.”
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.
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