Abraxas Provides Operational, Financial and Divestiture Update; Addresses 2016 and 2017 Guidance and Capital Budget
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.
Divestiture Update
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.
Williston Basin
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.
Austin Chalk
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.
Permian
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 Update
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.
Borrowing Base
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:
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Q4 2016
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2017
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2018
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2019
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Oil Swaps (bbls/day)
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2500
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2401
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1796
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1200
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NYMEX WTI (1)
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$43.25
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$54.53
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$47.48
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$54.54
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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 $5.49/boe for the
month of September, 2016. The 2017 capital expenditure budget is subject
to change depending upon a number of factors, including the availability
of drilling equipment and personnel, economic and industry conditions at
the time of drilling, prevailing and anticipated prices for oil and gas,
the availability of sufficient capital resources for drilling prospects,
our financial results, the availability of leases on reasonable terms
and our ability to obtain permits for drilling locations.
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2016E
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2017E
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Low
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High
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Low
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High
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Production
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Total (Boepd)
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6,100
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6,300
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7,000
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7,400
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% Oil
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63%
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66%
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% NGL
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14%
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12%
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% Natural Gas
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23%
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22%
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Operating Costs
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LOE ($/Boe)
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$8.00
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$9.00
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$6.00
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$8.00
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Production Tax (% Rev)
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9.0%
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11.0%
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9.0%
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11.0%
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Cash G&A ($mm)
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$8.0
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$12.5
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$9.0
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$11.0
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CAPEX ($mm)
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$35
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$60
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2017E Net CAPEX
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($mm)
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Basin/Region
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Bakken
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$36.8
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Permian
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11.0
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Austin Chalk
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10.5
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Leasing/acquisitions/other
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1.7
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Total
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$60.0
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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.
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