<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One) FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 1996
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-19118
ABRAXAS PETROLEUM CORPORATION
- - --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Nevada 74-2584033
- - ------------------------- ----------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
500 N. Loop 1604 E, Suite 100, San Antonio, Texas 78232
- - --------------------------------------------------- -------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (210) 490-4788
--------------
Not Applicable
- - --------------------------------------------------------------------------------
(Former name, former address and former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X or No
--- ---
The number of shares of the issuer's common stock outstanding as of
May 1, 1996, was:
Class Shares Outstanding
----- ------------------
Common Stock, $.01 Par Value 5,804,812
1 of 15
<PAGE> 2
ABRAXAS PETROLEUM CORPORATION AND SUBSIDIARIES
FORM 10 - Q
INDEX
PART I
FINANCIAL INFORMATION
<TABLE>
<S> <C>
ITEM 1 - Financial Statements(Unaudited)
Consolidated Balance Sheets - March 31, 1996
and December 31,1995 . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations -
Three Months Ended March 31, 1996 and 1995 . . . . . . . . . . . 5
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1996 and 1995 . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . 8
ITEM 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . 10
PART II
OTHER INFORMATION
-----------------
ITEM 1 - Legal proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ITEM 2 - Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ITEM 3 - Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . 13
ITEM 4 - Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . 13
ITEM 5 - Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ITEM 6 - Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . 13
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
2
<PAGE> 3
ABRAXAS PETROLEUM CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1996 1995
---------------------------------------
(UNAUDITED)
<S> <C> <C>
Assets
Current assets:
Cash $ 5,440,276 $ 4,249,767
Accounts receivable, less allowance for doubtful
accounts of $35,900 at March 31, 1996 and
$44,369 at December 31, 1995:
Joint owners 1,061,313 1,334,873
Oil and gas production sales 2,938,279 2,945,681
Affiliates 86,682 53,224
Other 85,594 60,367
----------- -----------
4,171,868 4,394,145
Equipment inventory 95,200 80,070
Other currents assets 177,754 124,820
----------- -----------
Total current assets 9,885,098 8,848,802
Property and equipment:
Oil and gas properties (full cost method), less
accumulated depreciation, depletion and
amortization of $31,069,555 at March 31, 1996
and $29,651,521 at December 31, 1995 63,565,963 74,475,683
Other property and equipment:
Equipment 794,561 692,508
Land 194,694 176,896
Less accumulated depreciation (299,986) (266,686)
----------- -----------
64,255,232 75,078,401
Deferred financing fees, net of accumulated
amortization of $353,231 at March 31, 1996 333,208 353,514
and $289,231 at December 31, 1995
Restricted cash 99,912 134,419
Other assets 728,797 326,222
Marketable Securities 326,000 326,000
----------- -----------
Total assets $75,628,247 $85,067,358
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE> 4
ABRAXAS PETROLEUM CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
----------- -----------
1996 1995
-------------------------------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,438,100 $ 3,928,824
Oil and gas production payable 1,652,929 1,787,152
Accrued interest 321,450 362,750
Other accrued expenses 201,770 46,207
Dividends payable on preferred stock 91,482 91,482
----------- -----------
Total current liabilities 5,705,731 6,216,415
Long-term debt:
Financing agreements (Note 4) 29,598,660 41,556,651
Other long term obligations -- 44,737
Deferred income (Note 3) 600,000 --
Deferred income taxes 186,749 186,749
Minority interest in foreign subsidiary 2,031,000 --
Shareholders' equity:
Preferred stock 8%, 1,000,000 shares;
issued and outstanding 45,741 shares
at March 31, 1996 and December 31, 1995 457 457
Common stock, par value $.01 per share - authorized
50,000,000 shares; issued and outstanding
5,804,812 shares at March 31, 1996 and
5,799,762 shares at December 31, 1995, respectively 58,048 57,999
Additional paid-in capital 50,912,312 50,914,078
Unrealized loss on securities (244,000) (244,000)
Retained earnings (deficit) (13,156,442) (13,663,903)
Treasury stock, at cost, 12,211 shares at March 31, 1996
and 2,571 at December 31, 1995, respectively (64,479) (1,825)
Foreign currency translation 211 --
----------- -----------
Total shareholders' equity 37,506,107 37,062,806
----------- -----------
Total liabilities and shareholders' equity $75,628,247 $85,067,358
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE> 5
ABRAXAS PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
------------------------------
1996 1995
<S> <C> <C>
Revenue:
Oil & gas production sales $ 4,493,815 $3,204,053
Rig revenues 37,450 25,800
Other 1,153 7,053
----------- ----------
4,532,418 3,236,906
Operating costs and expenses:
Lease operating and production taxes 1,164,432 1,059,033
Depreciation, depletion, and amortization 1,451,334 1,151,300
General and administrative 339,252 229,206
Rig Operations 36,461 34,304
Hedging loss 54,650
----------- ----------
3,046,129 2,473,843
----------- ----------
1,486,289 763,063
Other (income) expense:
Interest income (57,209) (3,014)
Interest expense 850,914 951,266
Amortization of deferred financing fees 64,000 40,000
----------- ----------
857,705 988,252
Income (loss) before minority interest 628,584 (225,189)
Minority interest in income
of consolidated foreign subsidiary 29,641 --
----------- ----------
Net income (loss) 598,943 (225,189)
Less dividend requirement on cumulative
preferred stock ( 91,482) (91,482)
----------- ----------
Net income (loss) applicable to common stock $ 507,461 $ (316,671)
=========== ==========
Net income (loss) per share:
Net income (loss) per common and dilutive
common equivalent share $ .08 $ (.07)
Net income (loss) per common and common
equivalent share - assuming full dilution $ .08 $ (.07)
=========== ==========
</TABLE>
See accompanying notes ot consolidated financial statements
5
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ABRAXAS PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
--------------------------
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES
Net income $598,943 $ (316,671)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Minority interest in income of foreign subsidiary 29,641 --
Depreciation, depletion, and amortization 1,451,334 1,151,300
Amortization of deferred financing fees 64,000 40,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 222,277 797,978
(Increase) decrease in other assets (88,713) (125,272)
(Increase) decrease in equipment inventory (15,130) 12,200
(Decrease) increase in accounts payable and accrued expenses (376,461) 536,189
(Decrease) increase in oil & gas production payable (134,223) 431,023
------------ ------------
Net cash provided by operating activities 1,751,668 2,526,747
INVESTING ACTIVITIES
Development of oil and gas properties (4,338,714) (2,495,921)
Proceeds from sale of oil and gas producing properties 14,049,845 --
Purchase of oil and gas producing properties (186,324) --
Purchase of equipment (119,851) (6,676)
Development of gas processing plants (60,290) (19,014)
Increase in Minority interest in equity of foreign subsidiary 2,001,359 --
Deferred income 600,000 --
Increase in other assets (366,346)
------------ ------------
Net cash provided (used) in investing activities 11,579,679 (2,521,611)
</TABLE>
See accompanying notes to consolidated financial statements
6
<PAGE> 7
ABRAXAS PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
---------------------
1996 1995
<S> <C> <C>
FINANCING ACTIVITIES
Issuance of common stock $ 25,213 $ 18,504
Purchase of treasury stock (62,654) --
Dividends paid on preferred stock (91,482) --
Payments on long-term borrowings (12,002,728) --
Loan origination fees (43,694) (25,177)
------------ -----------
Net cash used for financing activities (12,175,345) (6,673)
------------ -----------
Increase (decrease) in cash 1,156,002 (1,537)
Cash at beginning of period 4,384,186 135,297
------------ --------
Cash at end of period, including restricted cash 5,540,188 133,760
============ ===========
Supplemental disclosures of cash flow information:
Interest paid $ 868,577 $ 951,279
============ ===========
Supplemental schedule of non-cash investing
and financing activity:
Accrual of preferred dividends 91,482 --
Exchange of treasury stock for non-compete
agreement $ -- $ 70,625
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements
7
<PAGE> 8
ABRAXAS PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1996
NOTE 1. BASIS OF PRESENTATION
The accounting policies followed by Abraxas Petroleum Corporation and its
subsidiaries (the "Company") are set forth in the notes to the Company's
audited financial statements in the Annual Report on Form 10-K filed for the
year ended December 31, 1995 which is incorporated herein by reference. Such
policies have been continued without change. Also, refer to the notes to those
financial statements for additional details of the Company's financial
condition, results of operations, and cash flows. All the material items
included in those notes have not changed except as a result of normal
transactions in the interim, or as disclosed within this report. The
consolidated financial statements have not been audited by independent
accountants, but in the opinion of management, reflect all adjustments
necessary for a fair presentation of the financial position and results of
operations. Any and all adjustments are of a normal and recurring nature.
The consolidated financial statements include the accounts of the Company
and its 78% owned foreign subsidiary Grey Wolf Exploration, Ltd., ("Grey
Wolf"). Grey Wolf has consolidated its 67% owned interest in Cascade Oil and
Gas, Ltd. ("Cascade"). Minority interest represents the minority shareholders'
proportionate share of the equity and income of both Grey Wolf and Cascade.
Grey Wolf and Cascade assets and liabilities are translated to U.S. dollars
at period-end exchange rates. Income and expense items are translated at
average rates of exchange prevailing during the period. Translation
adjustments are accumulated as a separate component of shareholders' equity.
NOTE 2. NET INCOME (LOSS) PER SHARE
Net income (loss) per common share is computed by dividing net income (loss)
(adjusted for dividends on preferred stock) by the weighted average number of
shares of common stock outstanding during the period, options and warrants that
are dilutive and the shares that would be issued in conjunction with the
Contingent Value Rights. Income (loss) per common and common equivalent share
assuming full dilution was determined on the assumption that the preferred
stock was converted into common stock at the beginning of the period. Common
stock equivalents are not considered in the computation of net income per
common share for periods with a loss, as their effect is anti-dilutive.
NOTE 3. ACQUISITION AND DIVESTITURE
In January 1996, the Company made a $3,000,000 investment in Grey Wolf, a
privately held Canadian Corporation, which in turn, invested these proceeds in
newly issued shares of Cascade, an Alberta-based corporation whose shares are
traded on the Alberta Stock Exchange. The Company owns 78% of the outstanding
capital stock of Grey Wolf, and, through Grey Wolf, the Company owns
approximately 52% of the outstanding capital stock of Cascade.
On March 21, 1996 the Company sold all of its interests in its Portilla and
Happy Fields (Properties) to an unrelated purchaser (Purchaser or Limited
Partner). The Purchaser contributed the Properties to Portilla-1996, L.P., a
Texas limited partnership (Partnership). A subsidiary of the Company,
Portilla-Happy Corporation (Portilla-Happy), is the general partner of the
Partnership. The aggregate net purchase price received by the Company was
$17,600,000, of which a portion was used to purchase a minority interest in the
Partnership. The Limited Partner acquired the 50% overriding royalty interest
in the Portilla Field
8
<PAGE> 9
owned by the Commingled Pension Trust Fund, the trustee of which is Morgan
Guaranty Trust Company of New York, for approximately $11,900,000. The
Company, through Happy-Portilla will receive approximately 8% of the
Partnership's Available Cash, as defined in the Partnership Agreement, until
the limited partner's loan (Bank Loan) in the original principal amount of
$21,750,000 has been repaid and the Limited Partner has received distributions
of Available Cash equal to 110% of its initial investment, at which time
Portilla-Happy's share of distributions will increase to 25%. The Limited
Partner's Bank Loan is nonrecourse to Portilla-Happy and is secured by the
Properties. The Partnership also received loans in the aggregate principal
amount of approximately $5,920,000 from three pension trust funds (Pension Fund
Loans) and the pension trust funds were granted an option to purchase a 74%
overriding royalty interest in the Properties. The overriding royalty interest
options may be exercised by the payment from the Partnership of $5,920,000
either in cash or in exchange for the outstanding principal amount of the
Pension Fund Loans. The overriding royalty interests will decrease to 55.25%
when the pension trust funds have received the sum of $8,880,000 plus 10% of
the option price per annum, compounded annually. Portilla-Happy's distributive
share of the Partnership's Available Cash will remain at 25% until the pension
trust funds' overriding royalty interests decrease to 55.25% or, if the royalty
option is not exercised, until April 30, 2004. Thereafter, Portilla-Happy's
distributive share of the Partnership's Available Cash will increase to 43.75%.
The Company continues to manage and operate the properties after the sale.
Terms of the sale dictate that no overhead will be charged to the partnership
by the Company going forward. A discounted valuation of that future overhead,
if it were to be charged, was calculated at $600,000 and that portion of the
sales price was allocated to deferred income. This income will be utilized to
offset continuing servicing costs related to the Company's responsibilities as
operator.
NOTE 4. LONG TERM DEBT
In June, 1994, the Company entered into a revolving credit facility with
First Union National Bank of North Carolina ("First Union"). The facility
calls for monthly interest payments at prime plus one quarter percent, or LIBOR
plus two and one half percent, a maturity date of June 1997, semi-annual review
of the borrowing base amount and requires a first lien mortgage on all of the
Company's oil and gas properties and a security interest in the Company's
receivables and general intangibles. In April of 1996 the First Union facility
was amended, decreasing the total borrowing base to $31,000,000 with a maturity
date of June 1999, and adjusted the interest rate to LIBOR plus two percent.
9
<PAGE> 10
ABRAXAS PETROLEUM CORPORATION AND SUBSIDIARIES
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is a discussion of the Company's financial condition, results
of operations, liquidity and capital resources. This discussion should be read
in conjunction with the consolidated financial statements of the Company. See
Form 10-K filed for the year ended December 31, 1995, which is incorporated
herein by reference.
RESULTS OF OPERATIONS
The factors which most significantly affect the Company's results of
operations are (1) the sales prices of crude oil and natural gas, (2) the level
of total sales volumes of crude oil and natural gas, (3) the level of and
interest rates on borrowings and (4) the level and success of exploration and
development activity.
Selected operating data. The following table sets forth certain operating
data of the Company for the periods presented.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
----------------------
1996 1995
<S> <C> <C>
Operating Revenue (in thousands):
Crude Oil Sales $2,225 $1,592
Natural Gas Sales 1,771 1,235
Natural Gas Liquid Sales 498 376
Rig Operations 37 26
Other 1 7
------ ------
Total Operating Revenue 4,532 3,236
====== ======
Operating Income (in thousands): 1,486 763
Natural Gas Production (MMCFS) 954 835
Crude Oil Production (MBbls) 118 93
Natural Gas Liquids Production(MBbls) 39 34
Average Natural Gas Sales Price ($/MCF) $1.86 $ 1.48
Average Crude Oil Sales Price ($/Bbl) $18.78 $17.03
Average Liquids Sale Price($/Bbl) $12.75 $11.13
</TABLE>
Operating Revenue. During the three months ended March 31, 1996, operating
revenue from crude oil, natural gas and natural gas liquid sales increased from
$3.2 million in the first quarter of 1995 to $4.5 million primarily due to
higher prices received by the Company for its crude oil and natural gas
production. Also, crude oil production increased by 27% from the first quarter
of 1995 due to continuing development drilling of the Company's West Texas
acreage and a contribution of Canadian production, resulting from the Company's
1996 acquisition of Grey Wolf. Average sales prices were $18.78 per Bbl of
crude oil, $1.86 per Mcf of natural gas and $12.75 per Bbl of natural gas
liquids in the first three months of 1996 compared with $17.03 per Bbl of crude
oil, $1.48 per Mcf of natural gas and $11.13 per Bbl of natural gas liquids in
the same period of 1995. Of the $4.5 million of operating revenue in the
current period, $1.2 million related to the properties sold at the end of the
period. These properties contributed 117,000 MCF of natural gas (12% of
Company total), 43,600 Bbls of crude oil (37% of Company total) and 10,600 BBLs
of natural gas liquids (27% of Company total) during the first quarter of 1996.
10
<PAGE> 11
Costs and Expenses. Operating costs and expenses for the quarter ended
March 31, 1996 increased to $3.1 million compared to $2.5 million in 1995.
Contributing to this increase was depreciation, depletion and amortization
expense increasing from $1.2 million in 1995 to $1.5 million in 1996. Higher
production levels during the first quarter of 1996 compared to the same period
of 1995 rendered higher depletion costs. General and administrative expenses
increased from $229,000 for the first quarter of 1995 to $339,000 for the same
period of 1996 as a result of hiring additional staff to manage the Company's
growing asset base, including establishing a Canadian administrative office to
manage its Canadian assets. Of the costs incurred during the first quarter of
1996, $588,000 was attributable to the Properties including depreciation,
depletion and amortization of $353,000 compared to $503,000 and $290,000,
respectively during the first quarter of 1996.
In December 1995, the Company entered into a commodity swap agreement with
First Union Bank. Under the commodity swap agreement, the Company receives or
makes payments to First Union based on the differential between a fixed and
variable price for natural gas. At December 31, 1995, the Company had agreed
to exchange payments monthly on 5,000 MMBTU of natural gas per day beginning in
March 1996 and extending through November 1996. Under the swap agreement, as
in effect during the first quarter of 1996, the Company received fixed prices
averaging $1.747 per MMBTU and paid a variable price based on the arithmetic
average of the last three trading days' settlement price of the first nearby
contract for natural gas as quoted by the New York Merchantile Exchange. For
the quarter ended March 31, 1996, there was a $55,000 negative effect on income
from continuing operations related to this swap agreement. This agreement was
amended, effective June 1, 1996, to reduce the fixed price by $ .255 per MMBTU
and the variable price to the Inside FERC, El Paso price, eliminating any basis
differential for the remainder of the agreement.
The Company has incurred operating losses and net losses for a number of
years. The Company's revenues, profitability and future rate of growth are
substantially dependent upon prevailing prices for crude oil and natural gas
and the volumes of crude oil, natural gas and natural gas liquids produced by
the Company. The price of natural gas received by the Company increased during
the first quarter of 1996, but there can be no assurance that operating income
and net earnings will be achieved in future periods. In addition, the
Company's proved reserves will decline as crude oil, natural gas and natural
gas liquids are produced unless the Company is successful in acquiring
properties containing proved reserves or conducts successful exploration and
development activities. In the event natural gas prices return to depressed
levels or if crude oil prices begin to decrease, or if the Company's production
levels decrease, the Company's revenues, cash flow from operations and
profitability will be materially adversely affected.
LIQUIDITY AND CAPITAL RESOURCES
Capital expenditures including property divestitures during the first three
months of 1996 amounted to $(9.4) million compared to $2.5 million during the
same period of 1995. The table below sets forth the components of these
capital expenditures on a historical basis for the three months ended March 31,
1995 and 1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
-----------------------
1996 1995
--------- ------
<S> <C> <C>
Expenditure category (in thousands):
Development $ 4,633 $2,500
Divestitures (14,108) --
Facilities and other 72 7
--------- ------
Total $ (9,403) $2,507
========= ======
</TABLE>
11
<PAGE> 12
At March 31, 1996, the Company had current assets of $9.9 million and
current liabilities of $5.7 million resulting in working capital of $4.2
million. This compares to working capital of $2.6 million at December 31, 1995
and a deficiency of $3.0 million at March 31, 1995. The material components of
the Company's current liabilities at March 31, 1996 include trade accounts
payable of $3.4 million and revenues due third parties of $1.6 million.
The Company's current budget for capital expenditures for the last nine
months of 1996 is $10.0 million. Such expenditures will be made primarily for
the development of existing properties. Additional capital expenditures may be
made for acquisitions of producing properties as such opportunities arise.
The Company has no material long-term capital commitments and is consequently
able to adjust the level of its expenditures as circumstances dictate.
Additionally, the level of capital expenditures will vary during future periods
depending on market conditions and other related economic factors.
The First Union Financing Agreement contains two financial covenants: (1)
the ratio of current assets to current liabilities (exclusive of any part of
the loan which is current) shall not be less than 1:1 with any unborrowed
dollars available under the Company's credit facility being computed as a
current asset; and (2) the cash flow coverage ratio shall not be greater than
5:1 with cash flow coverage ratio defined as the ratio of (i) indebtedness plus
any other funded long-term debt to (ii) annualized consolidated net income for
each quarter, plus non-cash charges, less non-cash revenues. The First Union
Financing Agreement also contains covenants relating to maintaining corporate
existence, maintaining title to all of the collateral free and clear of all
liens except for First Union's liens and those permitted by First Union,
maintaining all mineral interests in good repair, and in compliance with all
laws, maintaining insurance, paying all taxes, not paying dividends except as
required on the Series B Preferred Stock and not selling any of the collateral
securing the loans. The Company was in compliance with these covenants at
March 31, 1996. Total availability under the First Union agreement was $31
million at March 31, with $29.5 million currently borrowed.
Operating activities during the three months ended March 31, 1996 provided
$1.8 million cash to the Company compared to $2.5 million in the same period in
1995. Net income plus non-cash expense items during 1996 and net changes in
operating assets and liabilities accounted for most of these funds. Investing
activities provided $11.6 million during the first three months of 1996
primarily from the divestiture of crude oil and natural gas properties. This
compares to $2.5 million required during the same period of 1995 primarily
utilized for the development of crude oil and natural gas properties.
Financing activities required $12.2 million for the first three months of 1996
compared to requiring $7,000 for the same period of 1995.
As a result of the acquisition of certain partnership interests and crude
oil and natural gas properties in 1990 and 1991, an ownership change under
Section 382 of the Internal Revenue Code of 1986, as amended (Section 382),
occurred in December 1991. Accordingly, it is expected that the use of net
operating loss carryforwards generated prior to December 31, 1991 of $6.9
million will be limited to approximately $235,000 per year. During 1992, the
Company acquired 100% of the common stock of an unrelated corporation. The use
of net operating loss carryforwards of $3,607,000 acquired in the acquisition
are limited to approximately $115,000 per year. As a result of the issuance of
additional shares of Common Stock for acquisitions and sales of Common Stock,
an additional ownership change under Section 382 occurred in October 1993.
Accordingly, it is expected that the use of all net operating loss
carryforwards generated through October 1993 of $13,430,000 will be limited to
approximately $1,034,000 per year subject to the lower limitations described
above. Of the $13,430,000 net operating loss carryforwards existing at October
1993, it is anticipated that the maximum net operating loss that may be
utilized before it expires is $7,188,000. Future changes in ownership may
further limit the use of the Company's carryforwards. In addition to Section
382 limitations, uncertainties exist as to the future utilization of the
operating loss carryforwards under the criteria set forth under FASB Statement
No. 109. Therefore, the Company has established a valuation allowance of
$5,656,000 and $5,482,000 for deferred tax assets at December 31, 1995 and
1994, respectively.
12
<PAGE> 13
Based upon the current level of operations, the Company believes that cash
flow from operations and the Company's credit facility with First Union, will
be adequate to meet its anticipated requirements for working capital, capital
expenditures and scheduled interest payments through 1996. A depressed price
for natural gas or crude oil will have a material adverse effect on the
Company's cash flow from operations and anticipated levels of working capital,
and could force the Company to revise its planned capital expenditures.
ABRAXAS PETROLEUM CORPORATION AND SUBSIDIARIES
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: 11 Statement Re: Computation of earnings per share
Exhibit 27 Financial data schedule
(b) Reports on Form 8-K
1. Form 8-K filed on January 17, 1996 related to the purchase
of the Company's interest in Grey Wolf.
13
<PAGE> 14
ABRAXAS PETROLEUM CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ABRAXAS PETROLEUM CORPORATION
(Registrant)
DATE: May 14,1996 BY:/S/
------------- -------------------------------
ROBERT L.G. WATSON,
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
DATE: May 14, 1996 BY:/S/
-------------- -------------------------------
CHRIS WILLIFORD,
EXECUTIVE VICE PRESIDENT AND
PRINCIPAL ACCOUNTING OFFICER
15
<PAGE> 15
INDEX TO EXHIBITS
Exhibit No. Description
11 Statement Re: Computatin of earnings per share.
27 Financial data schedule.
<PAGE> 1
Exhibit (11) - Statement Re:
Computation of Earnings Per Share
<TABLE>
<CAPTION>
Three Months Ended
March 31
1996 1995
<S> <C> <C>
Primary:
Average shares outstanding 5,800,779 4,454,862
Net effect of dilutive stock options-
based on the Treasury/Stock
method using average market price 16,555 --
Assumed issuance under existing
Contingent Value Rights agreement 916,622 --
----------- -------------
Totals 6,733,956 4,454,862
Net income (loss) $ 507,461 $ (316,671)
Per share amount $.08 $ ( .07)
Fully diluted:
Average shares outstanding 4,454,862 5,800,779
Net effect of dilutive stock options-
based on the Treasury Stock Method
using average market price which is
greater than the qtr.-end market price 16,555 --
Assumed conversion of 8%
convertible preferred stock 508,233 --
Assumed issuance under existing Contingent
Value Rights agreement 916,622 --
----------- -------------
Totals 7,242,189 4,454,862
Net income (loss) $ 598,943 $ (316,671)
Per share amount $ .08 $ ( .07)
</TABLE>
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 5,440,276
<SECURITIES> 0
<RECEIVABLES> 4,207,768
<ALLOWANCES> (35,900)
<INVENTORY> 95,200
<CURRENT-ASSETS> 9,885,098
<PP&E> 95,624,773
<DEPRECIATION> (31,369,541)
<TOTAL-ASSETS> 75,628,247
<CURRENT-LIABILITIES> 5,705,731
<BONDS> 29,598,660
<COMMON> 58,048
0
457
<OTHER-SE> 37,447,602
<TOTAL-LIABILITY-AND-EQUITY> 75,628,247
<SALES> 0
<TOTAL-REVENUES> 4,532,418
<CGS> 0
<TOTAL-COSTS> 3,046,129
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 857,705
<INCOME-PRETAX> 628,584
<INCOME-TAX> 0
<INCOME-CONTINUING> 628,584
<DISCONTINUED> 0
<EXTRAORDINARY> 121,123
<CHANGES> 0
<NET-INCOME> 507,461
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
