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Abraxas Petroleum Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 15, 2010 04:46PM
Abraxas Petroleum Corp. (AXAS) filed Quarterly Report for the period ended 2010-09-30. Abraxas Petroleum Corp. has a market cap of $318.46 million; its shares were traded at around $4.17 with a P/E ratio of 417 and P/S ratio of 6.04.AXAS is in the portfolios of Daniel Loeb of Third Point, LLC, Arnold Schneider of Schneider Capital Management, George Soros of Soros Fund Management LLC.
Highlight of Business Operations:
During the first nine months of 2010, the price of oil increased significantly from the levels experienced during the first nine months of 2009. During the first nine months of 2010, the New York Mercantile (NYMEX) price for West Texas Intermediate crude oil (WTI) averaged $77.69 per barrel as compared to $57.18 per barrel during the first nine months of 2009. During the first nine months of 2010, the average price of gas increased from the levels experienced during the first nine months of 2009. NYMEX Henry Hub spot prices for gas averaged $4.57 per MMBtu for the first nine months of 2010 compared to $3.80 for the same period of 2009. Prices closed on September 30, 2010 at $79.97 per Bbl of oil and $3.83 per MMBtu of gas. The realized prices that we receive for our production differ from NYMEX futures and spot market prices, principally due to:
During the first nine months of 2010, differentials averaged $7.77 per Bbl of oil and $0.43 per Mcf of gas as compared to $7.55 per Bbl of oil and $0.78 per Mcf of gas during the first nine months of 2009. In the first nine months of 2010, we experienced lower gas differentials compared to the same period of 2009 due to an increased percentage of our gas production coming from higher BTU gas wells in addition to an overall decline in basis differentials for gas. Oil differentials increased due to overall increases in basis differentials for oil across all of our operating areas. Increases in the differential between the benchmark prices for oil and gas and the wellhead price we receive could significantly reduce our revenues and our cash flow from operations.
By removing a significant portion of price volatility on our future oil and gas production, we believe we will mitigate, but not eliminate, the potential effects of changing commodity prices on our cash flow from operations for those periods. However, when prevailing market prices are higher than our contract prices, we will not realize increased cash flow on the portion of the production that has been hedged. We have sustained and in the future will sustain realized and unrealized losses on our derivative contracts when market prices are higher than our contract prices. Conversely, when prevailing market prices are lower than our contract prices, we will sustain realized and unrealized gains on our commodity derivative contracts. In the first nine months of 2010, we incurred a realized gain of $2.1 million and an unrealized gain of $19.6 million. In the first nine months of 2009, we incurred a realized gain of $18.4 million and an unrealized loss of $23.3 million. We have not designated any of these derivative contracts as a hedge as prescribed by applicable accounting rules.
We initiated a divestiture program, principally aimed at non-operated, non-core assets, to generate cash for debt repayment and to accelerate our drilling program. During the fourth quarter of 2009 and the first nine months of 2010, we sold certain non-core assets for total net proceeds of approximately $20.5 million ($2.4 million in 2009 and $18.1 million in 2010). In total, these properties produced approximately 366 Boepd, and had approximately 1,320 MBoe of proved reserves, which equates to $57,308 per producing Boepd and $15.90 per proved Boe in sales proceeds. The first $10 million of net proceeds was used to repay the term loan portion of our credit facility and an additional $3.5 million was used to repay outstanding indebtedness under the revolving portion of the credit facility. We have identified an additional $12 to $16 million of similar non-core assets that we will attempt to divest on similar terms over the next several months. We anticipate that approximately 50% of any future net proceeds from such sales will be allocated to further debt reduction and 50% to accelerate our capital program.
General and Administrative (“G&A”) Expenses. G&A expenses, excluding stock-based compensation, increased to $1.7 million for the quarter ended September 30, 2010 from $1.5 million for the same period of 2009. The increase in G&A was primarily related to the opening of our Canadian office in September 2009. G&A on a per Boe basis was $4.87 for the quarter ended September 30, 2010 compared to $3.64 for the same period of 2009. The increase in G&A expense on a per Boe basis was primarily due to increased cost and lower production volumes in the third quarter of 2010 compared to the same period in 2009.
Depreciation, Depletion and Amortization (“DD&A”) Expenses. Depreciation, depletion and amortization expense decreased to $3.8 million for the three months ended September 30, 2010 from $4.1 million for same period of 2009. The decrease in DD&A was primarily the result of decreased production volumes for the third quarter of 2010 as compared to the same period of 2009, and the contribution of properties to the Blue Eagle JV offset by an increase to the depletion base from an increase in future development costs as determined by the December 31, 2009 reserve report. DD&A on a per Boe basis for the three months ended September 30, 2010 was $10.72 per Boe compared to $10.12 per Boe in 2009. The increase in DD&A per Boe was due to the higher depletion base for the period offset by lower production volumes.
Stocks Discussed: AXAS,