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, 1997
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, 1997, was:
Class Shares Outstanding
----- -----------------------
Common Stock, $.01 Par Value 5,761,024
1 of 15
<PAGE>
ABRAXAS PETROLEUM CORPORATION AND SUBSIDIARIES
FORM 10 - Q
INDEX
PART I
FINANCIAL INFORMATION
ITEM 1 - Financial Statements(Unaudited)
Consolidated Balance Sheets - March 31, 1997
and December 31,1996 ...................................3
Consolidated Statements of Operations -
Three Months Ended March 31, 1997 and 1996...................5
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1997 and 1996...................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........................................................14
2
<PAGE>
Abraxas Petroleum Corporation and Subsidiaries
Part I - Financial Information
Item 1 - Financial Statements
<TABLE>
<CAPTION>
Consolidated Balance Sheets
March 31 December 31
1997 1996
(Unaudited)
-----------------------
(In Thousands)
<S> <C> <C>
Assets
Current assets:
Cash .................................................. $ 18,688 $ 8,290
Accounts receivable, less allowance for doubtful
accounts:
Joint owners ..................................... 2,310 1,601
Oil and gas production sales ..................... 9,055 11,400
Affiliates ....................................... -- 94
Other ............................................ 714 1,289
-------- --------
12,079 14,384
Equipment inventory ................................... 627 451
Other currents assets ................................. 326 187
-------- --------
Total current assets ..................................... 31,720 23,312
Property and equipment ................................... 312,716 310,043
Less accumulated depreciation, depletion and
amortization: ....................................... 45,564 38,653
-------- --------
Net property and equipment based on the full
cost method of accounting for oil and gas
properties, of which $35,268 and $37,268
at March 31, 1997 and December 31, 1996,
respectively, were excluded from amortization . 267,152 271,390
Deferred financing fees, net of accumulated
amortization of $577 and $280 at March 31, 1997
and December 31, 1996, respectively ................. 9,142 9,335
Restricted cash .......................................... 90 90
Other assets ............................................. 716 715
-------- --------
Total assets ........................................... $308,820 $304,842
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
Abraxas Petroleum Corporation and Subsidiaries
Part I - Financial Information
Item 1 - Financial Statements
<TABLE>
<CAPTION>
Consolidated Balance Sheets (continued)
March 31 December 31
1997 1996
(Unaudited)
-----------------------
(In Thousands)
<S> <C> <C>
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable ....................................... $ 6,900 $ 9,96O
Oil and gas production payable ......................... 2,190 2,378
Accrued interest ....................................... 9,299 3,206
Income tax payable ..................................... 145 145
Other accrued expenses ................................. 1,931 1,132
Payable to affiliates .................................. -- 58
--------- --------
Total current liabilities ........................ 20,465 16,879
Long-term debt:
Senior notes ........................................... 215,000 215,000
Other .................................................. 153 32
--------- --------
215,153 215,032
Other long-term obligations ............................... 134 87
Deferred income taxes ..................................... 32,504 32,928
Minority interest in foreign subsidiary ................... 2,076 2,157
Future site restoration ................................... 2,099 2,103
Shareholders' equity:
Preferred stock 8%, 1,000,000 shares;
issued and outstanding, 45,741 shares
at March 31, 1997 and December 31, 1996 ............. -- --
Common stock, par value $.01 per share - authorized
50,000,000 shares; issued, 5,814,047
and 5,806,812 shares at March 31, 1997 and
December 31, 1996, respectively ....................... 58 58
Additional paid-in capital ............................. 51,064 50,926
Accumulated deficit .................................... (11,155) (12,517)
Treasury stock, at cost, 60,463 and 74,711 shares at
March 31, 1997 and December 31, 1996, respectively .... (319) (405)
Foreign currency translation adjustment ................ (3,259) (2,406)
--------- --------
Total shareholders' equity ................................ 36,389 35,656
--------- --------
Total liabilities and shareholders' equity ................ $308,820 $304,842
========= ========
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
Abraxas Petroleum Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Three Months Ended
March 31
------------------------
1997 1996
------------------------
(In thousands except
share and per share data)
Revenue:
Oil & gas production sales ....................... $ 17,910 $ 4,439
Processing revenue ............................... 996 --
Rig revenues ..................................... 53 37
Other ............................................ 257 1
-------- --------
19,216 4,477
Operating costs and expenses:
Lease operating and production taxes ............. 3,349 1,164
Gas processing costs ............................. 412 --
Depreciation, depletion, and amortization ........ 6,674 1,451
General and administrative ....................... 938 339
Rig Operations ................................... 52 36
-------- --------
11,425 2,990
-------- --------
Operating Income ..................................... 7,791 1,487
Other (income) expense:
Interest income .................................. (96) (57)
Interest expense ................................. 6,084 851
Amortization of deferred financing fees .......... 297 64
Other ............................................ 32 --
-------- --------
6,317 858
Income from operations before taxes .................. 1,474 629
Income tax expense ................................... 20 --
Minority interest in income
of consolidated foreign subsidiary ............. -- 30
-------- --------
Net income ........................................... 1,454 599
Less dividend requirement on cumulative
preferred stock ................................ 91 91
-------- --------
Net income applicable to common stock ................ $ 1,363 $ 508
======== ========
Net income per share:
Net income per common and dilutive
common equivalent share ........................ $ .22 $ .08
======== ========
Net income per common and common
equivalent share - assuming full dilution ...... $ .22 $ .08
======== ========
See accompanying notes to consolidated financial statements
5
<PAGE>
<TABLE>
<CAPTION>
Abraxas Petroleum Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
March 31
------------------------
1997 1996
------------------------
(In thousands)
<S> <C> <C>
Operating Activities
Net income .................................................. $ 1,454 $ 599
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Minority interest in income of foreign subsidiary ....... -- 30
Depreciation, depletion, and amortization ............... 6,674 1,451
Amortization of deferred financing fees ................. 297 64
Issuance of common stock for compensation ............... 139 --
Changes in operating assets and liabilities:
Accounts receivable ................................... 2,305 222
Equipment inventory ................................... (176) (15)
Other assets .......................................... (139) (89)
Accounts payable and accrued expenses ................. 3,774 (376)
Oil & gas production payable .......................... (188) (134)
-------- -------
Net cash provided by operating activities ................ 14,140 1,752
Investing Activities
Capital expenditures, including purchases and
development of properties ............................... (12,284) (4,105)
Increase in minority interest in equity of foreign subsidiary -- 2,000
Proceeds from sale of oil and gas producing properties ...... 9,008 16,050
Purchase of investment in partnership ....................... -- (2,000)
Increase in other assets .................................... -- (366)
-------- -------
Net cash provided (used) in investing activities ............ $ (3,276) $ 11,579
</TABLE>
See accompanying notes to consolidated financial statements
6
<PAGE>
<TABLE>
<CAPTION>
Abraxas Petroleum Corporation and Subsidiaries
Consolidated Statements of Cash Flows (continued)
(Unaudited)
Three Months Ended
March 31
------------------------
1997 1996
------------------------
(In thousands)
<S> <C> <C>
Financing Activities
Issuance of common stock .................................... $ -- $ 25
Issuance of treasury stock .................................. -- (63)
Dividends paid on preferred stock ........................... (91) (91)
Proceeds from long term borrowings .......................... 168 --
Payments on long-term borrowings ............................ -- (12,003)
Deferred financing fees ..................................... (119) --
Decrease in deferred income tax ............................. (424) --
Loan origination fees ....................................... -- (43)
-------- --------
Net cash used for financing activities ..................... (466) (12,175)
-------- --------
Increase (decrease) in cash ................................. 10,398 1,156
Cash at beginning of period ................................. 8,380 4,384
-------- --------
Cash at end of period, including restricted cash ............ $ 18,778 $ 5,540
======== ========
Supplemental disclosures of cash flow information:
Interest paid ............................................... $ 44 $ 869
======== ========
Supplemental schedule of non-cash investing
and financing activity:
Accrual of preferred dividends .............................. $ -- $ 91
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
7
<PAGE>
Abraxas Petroleum Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
March 31, 1997
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, 1996 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 wholly owned foreign subsidiary Canadian Abraxas Petroleum Ltd.
("Canadian Abraxas"), 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.
Canadian Abraxas , 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 Per Share
Net income per common share is computed by dividing net income (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 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 if dilutive. 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.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128 "Earnings per Share", which is required to be adopted on December 31, 1997.
Under the statement, primary earnings per share will be replaced with basic
earnings per share and fully diluted earnings per share will be replaced with
diluted earnings per share. The new requirements for calculating basic earnings
per share exclude the dilutive effect of stock options, warrants and Contingent
Value Rights. If the new requirements had been implemented basic earnings per
share would have been $.23 and $.08 as of March 31, 1997 and 1996 respectively,
fully diluted earnings per share remains the same under both methods.
Note 3. Acquisition and Divestiture
In January 1997, Canadian Abraxas sold its interest in the Hoole Area for
approximately $9.3 million. The Hoole area consists of 9,728 gross acres (3,311
net acres) and 6.0 gross wells (3.2 net wells), none of which were operated by
Canadian Abraxas, and a natural gas processing plant.
8
<PAGE>
Note 4. Long Term Debt
In November 1996, the Company entered into a credit facility with Bankers
Trust Company, ING Capital and Union Bank of California (the "Credit Facility").
The Credit Facility provides for a revolving line of credit and had an initial
availability of $20.0 million, subject to a borrowing base condition. Interest
rate charged on the outstanding balance of the Credit Facility is based on a
facility usage grid that ranges from LIBOR plus 1.25% to LIBOR plus 2.0%, or
prime plus .50%. In February 1997, the availability under the Credit Facility
was increased to $40.0 million.
Note 5. Summary Financial Information of Canadian Abraxas Petroleum Ltd.
The following is summary financial information of Canadian Abraxas, a wholly
owned subsidiary of the Company. Canadian Abraxas is jointly and severally
liable with the Company for the entire balance of the Company's and Canadian
Abraxas' 11.5% Senior Notes (the "Notes") ($215,000,000), of which $84,612,000
was utilized by Canadian Abraxas in connection with the acquisition of Canadian
Gas Gathering Systems, Inc. The Company has not presented separate financial
statements and other disclosures concerning Canadian Abraxas because management
has determined that such information is not material to the holders of the Notes
and the Company's Common Stock.
- ----------------------------------------------------------------------------
Assets Liabilities and Shareholders Equity
(In Thousands)
Total current assets... $ 19,140 Total current liabilities .... $ 6,817
Oil and gas properties. 104,395 11.5% Senior Notes due 2004... 84,612
Other assets........... 3,182 Other liabilities............. 34,536
--------- Shareholder's equity.......... 752
$126,717 --------
========= $126,717
========
Revenues .......................................................... $ 5,951
Operating costs & expenses......................................... (3,929)
Interest expense................................................... (2,568)
Other Income (expense)............................................. 65
Income tax......................................................... (17)
--------
Net loss....................................................... $ (498)
========
Note 6. Reclassifications
Certain balances for 1996 have been reclassified for comparative purposes.
9
<PAGE>
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 and the
notes thereto, included in the Company's Annual report on Form 10-K filed for
the year ended December 31, 1996, 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.
Three Months Ended
March 31,
----------------------
1997 1996
-------- --------
Operating Revenue (in thousands):
Crude Oil Sales ................................... $ 4,500 $ 2,225
Natural Gas Sales ................................. 10,332 1,717
Natural Gas Liquids Sales ......................... 3,078 497
Processing Revenue ................................ 996 --
Rig Operations .................................... 53 37
Other ............................................. 257 1
$19,216 $ 4,477
Operating Income (in thousands) .................... $ 7,791 $ 1,487
Crude Oil Production (MBBLS) ....................... 218.0 118.4
Natural Gas Production (MMCFS) ..................... 4,938.0 954.2
Natural Gas Liquids Production (MBBLS) ............. 238.1 39.1
Average Crude Oil Sales Price ($/BBL) .............. $ 20.64 $ 18.78
Average Natural Gas Sales Price ($/MCF) ............ $ 2.09 $ 1.86
Average Liquids Sales Price ($/BBL) ................ $ 12.93 $ 12.75
OPERATING REVENUE. During the three months ended March 31, 1997, operating
revenue from crude oil, natural gas and natural gas liquid sales increased 303%
to $17.9 million compared to $4.4 million in the three months ended March 31,
1996. The increase in revenue is due to an increase in crude oil, natural gas
and natural gas liquids production during the period. The increase in volumes is
primarily attributable to increased production from properties acquired during
the fourth quarter of 1996 as well as increased production attributable to the
Company's ongoing development program on its existing properties. Oil and
natural gas liquids volumes increased 190% to 456.1 Mbbls from 157.5 Mbbls for
the same period in 1996. Oil and natural gas liquids production attributable to
the properties acquired in the fourth quarter 1996 contributed 242 MBbls while
production from existing properties increased by 57 MBbls. Natural gas sales
volumes increased from 1,000 MMcf to 4,900 MMcf for the three months ended March
31, 1997, of which production from properties acquired in the fourth quarter of
1996 contributed 3,701 MMcf. Production from existing properties increased 199
MMcf over the same period of 1996. Average sales prices were $20.64 per Bbl of
crude oil, $12.93 per Bbl of natural gas liquid and $2.09 per Mcf of natural gas
for the quarter ended March 31, 1997 compared with $18.78 per Bbl of crude oil,
$12.75 per Bbl of natural gas liquid and $1.86 per Mcf of natural gas in the
same period of 1996.
10
<PAGE>
LEASE OPERATING EXPENSES. Lease operating expenses and natural gas
processing costs ("LOE") for the three months ended March 31, 1997 increased to
$3.8 million compared to $1.2 million for the same period in 1996. The increase
in LOE was due primarily to an increase in the number of wells the Company owns
for the quarter ended March 31, 1997 compared to the same period of 1996. The
Company's LOE on a per BOE basis for the three months ended March 31, 1997 was
$2.62 compared to $3.68 for the same period of 1996.
G&A EXPENSES. G&A expenses increased from $339,000 for the first three
months of 1996 to $938,000 for the same period of 1997. The increase is
primarily due to the hiring of additional staff, including an increase in
personnel at the Company's Canadian administrative office, to manage and develop
properties acquired in the fourth quarter of 1996. G&A expense on a per BOE
basis decreased from $1.07 for the quarter ended March 31, 1996 to $.73 for the
same period of 1997.
DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSES. Depreciation, depletion
and amortization ("DD&A") expense increased by $5.2 million to $6.7 million for
the three months ended March 31, 1997, from $1.5 million in the same period of
1996. The Company's DD&A on a per BOE basis for the three months ended March 31,
1997 was $5.22 per BOE compared to $4.59 in 1996.
INTEREST EXPENSE AND PREFERRED DIVIDENDS. Interest expense and preferred
dividends ("Interest and Dividends") increased to $6.1 million for the first
three months of 1997 from $900,000 for the same period of 1996. This increase is
attributable to increased borrowings by the Company to finance acquisitions
consummated during 1996. Long-term debt increased from $30 million at March 31,
1996 to $215.2 million at March 31, 1997.
GENERAL . 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 1997, 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 1997 were $3.3 million compared to $(9.6) million during the same
period of 1996. The table below sets forth the components of these capital
expenditures on a historical basis for the three months ended March 31, 1997 and
1996.
Three Months Ended
March 31
1997 1996
Expenditure category (in thousands):
Property acquisitions ........................ $ -- $ 2,186
Development .................................. 11,851 3,738
Divestitures ................................. (9,008) (16,050)
Facilities and other ......................... 433 546
-------- --------
Total ............................................ $ 3,276 $ (9,580)
======== ========
At March 31, 1997, the Company had current assets of $31.7 million and
current liabilities of $20.5 million resulting in working capital of $11.2
million. This compares to working capital of $6.4 million at December 31, 1996
and $4.2 million at March 31, 1996. The material components of the Company's
current liabilities at March 31, 1997 include trade accounts payable of $6.9
million, revenues due third parties of $2.2 million and accrued interest of $9.3
million.
The Company's current budget for capital expenditures for the last nine
months of 1997 is $29.9 million. Such expenditures will be made primarily for
the development of existing properties other than acquisition expenditures.
11
<PAGE>
Additional capital expenditures may be made for acquisitions of producing
properties if such opportunities arise, the Company currently has no agreements,
arrangements of undertakings regarding any material acquisitions. 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 Company's Credit Facility contains a number of covenants that, among
other things, restricts the ability of the Company to (I) incur certain
indebtedness or guarantee obligations, (ii) prepay other indebtedness including
the Notes, (iii) make investments, loans or advances, (iv) create certain liens,
(v) make certain payments, dividends and distributions, (vi) merge with or sell
assets to another person or liquidate, (vii) sell or discount receivables,
(viii) engage in certain intercompany transactions and transactions with
affiliates, (ix) change its business, (x) experience a change of control and
(xi) make amendments to its charter, by-laws and other debt instruments. In
addition, under the Credit Facility, the Company is required to comply with
specified financial ratios and tests, including minimum debt service coverage
ratios, maximum funded debt to EBITDA tests, minimum net worth tests and minimum
working capital tests.
On November 14, 1996, the Company and Canadian Abraxas completed the sale of
$215.0 million aggregate principal amount of Senior Notes due November 1, 2004
(the "Notes"). The notes are joint and several obligations of Abraxas and
Canadian Abraxas and were issued under the terms off an Indenture dated November
14, 1996. The Indenture provides, among other things, that the Company may not,
and may not cause or permit certain of its subsidiaries, including Canadian
Abraxas, to, directly or indirectly, create or otherwise cause to permit to
exist or become effective any encumbrance or restriction on the ability of such
subsidiary to pay dividends or make distributions on or in respect of its
capital stock, make loans or advances or pay debts owed to Abraxas, guarantee
any indebtedness of Abraxas or transfer any of its assets to Abraxas except for
such encumbrances or restrictions existing under or by reason of: (I) applicable
law; (ii) the Indenture; (iii) the Credit Facility; (iv) customary
non-assignment provisions of any contract or any lease governing leasehold
interests of such subsidiaries; (v) any instrument governing indebtedness
assumed by the Company in an acquisition, which encumbrance or restriction is
not applicable to such subsidiaries or the properties or assets of such
subsidiaries other than the entity or the properties or assets of the entity so
acquired; (vi) customary restrictions with respect to subsidiaries of the
Company pursuant to an agreement that has been entered in to for the sale or
disposition of capital stock or assets of such subsidiaries to be consummated in
accordance with the terms of the Indenture solely in respect of the assets or
capital stock to be sold or disposed of; (vii) any instrument governing certain
liens permitted by the Indenture, to the extent and only to the extent such
instrument restricts the transfer or other disposition of assets subject to such
lien; or (viii) an agreement governing indebtedness incurred to refinance the
indebtedness issued, assumed or incurred pursuant to an agreement referred to in
clause (ii), (iii) or (v) above; provided, however, that the provisions relating
to such encumbrance or restriction contained in any such refinancing
indebtedness are no less favorable to the holders of the Notes in any material
respect as determined by the Board of Directors of the Company in their
reasonable and good faith judgement than the provisions relating to such
encumbrance or restriction contained in the applicable agreement referred to in
such clause (ii), (iii) or (v).
In August 1995, the Company entered into a rate swap agreement with a
previous lender relating to $25.0 million of principal amount of outstanding
indebtedness. This agreement was assumed by the Banks in connection with a
Bridge Facility that was subsequently paid off. Under the agreement, the Company
pays a fixed rate of 6.15% while the Banks will pay a floating rate equal to the
USD-LIBOR-BBA rate for one month maturities, quoted on the eighteenth day of
each month, to the Company. Settlements are due monthly. The agreement
terminates in August 1998. At March 31, 1997, the fair value of this swap, as
determined by BT CO was approximately $66,000.
Operating activities during the three months ended March 31, 1997 provided
$14.1 million cash to the Company compared to $1.8 million in the same period in
1996. Net income plus non-cash expense items during 1997 and net changes in
operating assets and liabilities accounted for most of these funds. Investing
activities required $3.3 million net during the first three months of 1997,
$12.3 million was utilized for the development of crude oil and natural gas
properties and other facilities, divestiture of gas processing facilities
provided $9.0 million. This compares to $11.6 million provided during the same
period of 1996, primarily from divestitures of crude oil and natural gas
properties. Financing activities required $466,000 for the first three months of
1997 compared to requiring $12.2 million for the same period of 1996.
12
<PAGE>
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 carry forwards generated prior to December 31, 1991 of $4.9
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 carry forwards of $1.1 million 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 carry
forwards generated through October 1993 of $8.2 million will be limited to
approximately $1.0 million per year subject to the lower limitations described
above. Of the $8.2 million net operating loss carry forwards existing at October
1993, it is anticipated that the maximum net operating loss that may be utilized
before it expires is $5.7 million. Future changes in ownership may further limit
the use of the Company's carry forwards. In addition to Section 382 limitations,
uncertainties exist as to the future utilization of the operating loss carry
forwards under the criteria set forth under FASB Statement No. 109. Therefore,
the Company has established a valuation allowance of $5.6 million deferred tax
assets at December 31, 1996 and 1995, respectively.
Based upon the current level of operations, the Company believes that cash
flow from operations and the Company's credit facility, will be adequate to meet
its anticipated requirements for working capital, capital expenditures and
scheduled interest payments through 1997. 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.
Disclosure Regarding Forward-Looking Information
This report includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements other than statements of historical facts included in this report
regarding the Company's financial position, business strategy, budgets and plans
and objectives of management for future operations are forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct. Important factors that could
cause actual results to differ materially from the Company's expectations
("Cautionary Statements") are disclosed under "Risk Factors" in the Company's
Annual Report on Form 10-K which is incorporated by reference herein and this
report. All subsequent written and oral forward-looking statements attributable
to the Company, or persons acting on its behalf, are expressly qualified in
their entirety by the Cautionary Statements.
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: None
13
<PAGE>
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 14,1997 By:/s/
---------------
ROBERT L.G. WATSON,
President and Chief
Executive Officer
Date: May 14, 1997 By:/s/
---------------
CHRIS WILLIFORD,
Executive Vice President and
Principal Accounting Officer
14
Exhibit (11) - Statement Re:
Computation of Earnings Per Share
Three Months Ended
March 31
1997 1996
------------------------
Primary:
Average shares outstanding ..................... 5,739,134 5,800,779
Net effect of dilutive stock options-
based on the Treasury/Stock
method using average market price ........... 330,639 16,555
Assumed issuance under existing
Contingent Value Rights agreement ......... 106,400 916,622
---------- ----------
Totals ............................................. 6,176,173 6,733,956
Net income ......................................... $1,362,334 $ 507,461
Per share amount ................................... $ .22 $ .08
Fully diluted:
Average shares outstanding ..................... 5,739,134 5,800,779
Net effect of dilutive stock options-
based on the Treasury Stock Method
using qtr.-end market price ................. 274,857 16,555
Assumed conversion of 8%
convertible preferred stock ................. 508,233 508,233
Assumed issuance under existing
Contingent Value Rights agreement ........... 106,400 916,622
---------- ----------
Totals ............................................. 6,628,624 7,242,189
Net income ......................................... $1,453,816 $ 598,943
Per share amount ................................... $ .22 $ .08
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<MULTIPLIER> 1000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> MAR-31-1997
<CASH> 18688
<SECURITIES> 0
<RECEIVABLES> 12115
<ALLOWANCES> (36)
<INVENTORY> 627
<CURRENT-ASSETS> 31720
<PP&E> 312716
<DEPRECIATION> (45564)
<TOTAL-ASSETS> 308820
<CURRENT-LIABILITIES> 20465
<BONDS> 215000
0
0
<COMMON> 58
<OTHER-SE> 36331
<TOTAL-LIABILITY-AND-EQUITY> 308820
<SALES> 19216
<TOTAL-REVENUES> 19216
<CGS> 0
<TOTAL-COSTS> 11425
<OTHER-EXPENSES> 233
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6084
<INCOME-PRETAX> 1474
<INCOME-TAX> 20
<INCOME-CONTINUING> 1454
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1363
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
