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Abraxas Petroleum Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 9, 2011 09:24AM

Abraxas Petroleum Corp. (AXAS) filed Quarterly Report for the period ended 2011-03-31. Abraxas Petroleum Corp. has a market cap of $387.31 million; its shares were traded at around $4.23 with and P/S ratio of 6.56.



Highlight of Business 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. For the three months ended March 31, 2011, we incurred a realized gain of $457,000 and an unrealized loss of $11.4 million. For the three months ended March 31, 2011, we incurred a realized loss of $138,000 and an unrealized gain of $12.5 million. We have not designated any of these derivative contracts as a hedge as prescribed by applicable accounting rules.

Operating Revenue. During the three months ended March 31, 2011, operating revenue from oil gas and NGL sales decreased to $13.8 million compared to $15.9 million during the same period of 2010. The decrease in revenue was due to lower realized prices for gas, which offset higher realized prices for oil, as well as a decrease in sales volumes. Increased oil prices contributed $1.5 million to oil revenue, while decreased gas prices had a negative impact of $1.8 million to gas revenue. Decreased sales volumes had a negative impact of approximately $1.8 million on oil and gas revenue for the three months ended March 31, 2011.

Lease Operating Expenses (“LOE”). LOE for the three months ended March 31, 2011 decreased to $4.0 million from $4.6 million for the same period in 2010. LOE related to properties sold were $511,000 in the first quarter of 2010. LOE per Boe for the three months ended March 31, 2011 was $13.69 compared to $12.65 for the same period of 2010. The increase per Boe was primarily due to lower sales volumes for the three months ended March 31, 2011 as compared to the same period of 2010.

Depreciation, Depletion and Amortization (“DD&A”) Expenses. DD&A expense for the three months ended March 31, 2011 decreased to $3.4 million from $4.2 million for same period of 2010. The decrease in DD&A was primarily the result of decreased production volumes for the first quarter of 2011 as compared to the same period of 2010, the contribution of properties to Blue Eagle and the divestiture of non-core properties, offset by an increase to the depletion base from an increase in future development costs as determined by the December 31, 2010 reserve report. DD&A per Boe for the three months ended March 31, 2011 was $11.68 compared to $11.70 in 2010.

Loss (gain) on derivative contracts. We account for derivative contract gains and losses based on realized and unrealized amounts. The realized derivative gains or losses are determined by actual derivative settlements during the period. Unrealized gains and losses are based on the periodic mark to market valuation of derivative contracts in place. Our derivative contract transactions do not qualify for hedge accounting as prescribed by ASC 815; therefore, fluctuations in the market value of the derivative contracts are recognized in earnings during the current period. Our derivative contracts consist of commodity swaps and interest rate swaps. The estimated value of our derivative contracts was a liability of approximately $16.5 million as of March 31, 2011. When our derivative contract prices are higher than prevailing market prices, we incur realized and unrealized gains and conversely, when our derivative contract prices are lower than prevailing market prices, we incur realized and unrealized losses. For the three months ended March 31, 2011, we realized a loss on our derivative contracts of $115,000, which included a realized gain of $457,000 on our commodity swaps and a realized loss of $572,000 on our interest rate swap. For the three months ended March 31, 2011, we incurred an unrealized loss of $11.0 million on our derivative contracts, which included an unrealized loss of $11.4 million on our commodity swaps and an unrealized gain of $423,000 on our interest rate swap. For the three months ended March 31, 2010, we realized a loss on our derivative contracts of $718,000, which included a realized loss of $138,000 on our commodity swaps and a realized loss of $580,000 on our interest rate swap. For the three months ended March 31, 2010, we incurred an unrealized gain of $11.7 million, which included an unrealized gain of $12.5 million on our commodity swaps and an unrealized loss of $756,000 on our interest rate swap.

Working Capital (Deficit). At March 31, 2011, our current liabilities of approximately $33.5 million exceeded our current assets of $20.9 million resulting in a working capital deficit of $12.6 million. This compares to a working capital deficit of approximately $8.9 million at December 31, 2010. Current liabilities at March 31, 2011 primarily consisted of the current portion of derivative liabilities of $15.2 million, trade payables of $9.2 million, revenues due third parties of $7.7 million, and other accrued liabilities of $1.2 million.

Read the The complete Report



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