SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ ] [ ] Confidential, for Use of the
Filed by a party other than the Registrant [ ] Commisson Only(as permitted
Check the appropriate box: by Rule 14a-6(e)(2))
[ ] Preliminary Proxy Statement
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
ABRAXAS PETROLEUM CORPORATION
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ]Fee paid previously with preliminary materials.
<PAGE>
[ ]Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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ABRAXAS PETROLEUM CORPORATION
April 18, 1997
Dear Stockholders:
You are cordially invited to attend the 1997 Annual Meeting of
Stockholders of Abraxas Petroleum Corporation to be held on Friday, May 23,
1997, at 9:00 a.m., at the Petroleum Club of San Antonio located at 8620 North
New Braunfels, San Antonio, Texas. We hope that you will be able to attend the
meeting. Matters on which action will be taken at the meeting are explained in
detail in the Notice and Proxy Statement following this letter.
Whether or not you expect to be present and regardless of the number of
shares you own, please mark, sign and mail the enclosed proxy in the envelope
provided.
Robert L. G. Watson
Chairman of the Board, President
and Chief Executive Officer
<PAGE>
ABRAXAS PETROLEUM CORPORATION
500 NORTH LOOP 1604 EAST, SUITE 100
SAN ANTONIO, TEXAS 78232
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 23, 1997
To the Stockholders of
Abraxas Petroleum Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Abraxas Petroleum Corporation (the "Company") will be held at the Petroleum Club
of San Antonio located at 8620 North New Braunfels, San Antonio, Texas 78217, on
Friday, May 23, 1997 at 9:00 A.M., local time, for the following purposes:
(1) To elect three directors;
(2) To approve the appointment of auditors for the 1997 fiscal year;
and
(3) To transact such other business as may properly come before the
meeting or any adjournment thereof.
In accordance with the Bylaws of the Company and a resolution of the
Board of Directors, the record date for the meeting has been fixed at April 11,
1997. Only stockholders of record at the close of business on that date will be
entitled to vote at the meeting or any adjournment thereof.
Stockholders who do not expect to attend the meeting in person are
urged to sign the enclosed proxy and return it promptly to the Company. A return
envelope is enclosed for that purpose.
By Order of the Board of Directors
Stephen T. Wendel
Secretary
Dated: April 18, 1997
2
<PAGE>
ABRAXAS PETROLEUM CORPORATION
500 NORTH LOOP 1604 EAST, SUITE 100
San Antonio, Texas 78232
PROXY STATEMENT
-----------------------
The accompanying Proxy is solicited by the Board of Directors of
Abraxas Petroleum Corporation, a Nevada corporation (the "Company" or
"Abraxas"), to be voted at the 1997 Annual Meeting of Stockholders to be held on
May 23, 1997, and at any adjournments thereof, at the Petroleum Club of San
Antonio located at 8620 North New Braunfels, San Antonio, Texas 78217. This
Proxy Statement and the accompanying Proxy are being mailed to stockholders on
or about April 18, 1997.
VOTING AND PROXIES
Only holders of record of common stock, par value $.01 per share
("Common Stock"), and Series 1995-B 8% Cumulative Convertible Preferred Stock,
par value $100 per share ("Series 1995-B Preferred Stock"), of the Company at
the close of business on April 11, 1997 shall be entitled to vote at the
meeting. There were 5,761,024 shares of Common Stock and 45,741 shares of Series
1995-B Preferred Stock issued and outstanding on the record date. Stockholders
are entitled to one vote for each share of Common Stock and 11.11 votes for each
share of Series 1995-B Preferred Stock held as of the record date. Any
stockholder giving a proxy has the power to revoke the same at any time prior to
its use by giving notice in person or in writing to the Secretary of the
Company.
The presence, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock and Series 1995-B Preferred Stock is
necessary to constitute a quorum at the 1997 Annual Meeting of Stockholders and
any adjournment thereof. Assuming the presence of a quorum, the affirmative vote
of the holders of a majority of the outstanding shares of Common Stock and
Series 1995-B Preferred Stock present at the meeting, in person or by proxy,
voting together as a single class is necessary for the approval of the election
of directors and/or ratification of the Company's independent auditors. Under
Nevada law and the Company's Bylaws, abstentions and broker non-votes are
tabulated in determining the number of shares present at the meeting.
Consequently, an abstention or a broker non-vote has the same effect as a vote
against a proposal or a director nominee, as each abstention or broker non-vote
would be one less vote in favor of a proposal or for a director nominee.
3
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
The Articles of Incorporation of the Company divide the Board of
Directors into three classes of Directors serving staggered three-year terms,
with one class to be elected at each Annual Meeting. At this year's meeting,
three Directors are to be elected for terms of three years, each to hold office
until the expiration of his term in 2000 or until a successor shall have been
elected and shall have qualified. The terms of the remaining Directors will
continue as indicated below.
The shares represented by proxies returned duly executed will be voted,
unless otherwise specified, in favor of the three nominees for the Board of
Directors named below. Each of the nominees is now serving as a Director and
each was elected at the Annual Meeting in 1995.
Information Regarding Nominees for Election as Directors
Richard M. Kleberg, III, age 54, a director of the Company since
December 1983, has held the position of managing partner of SFD Enterprises,
Ltd., a private investment partnership, since 1980. Mr. Kleberg has served on
the boards of directors of Cullen Frost Bankers, Inc., a bank holding company,
since 1992; 1776 Restaurants, Inc., a restaurant concern, since 1983; The Frost
National Bank of San Antonio, a national banking association, since 1984; and
Kleberg & Co. Bankers, Inc., a bank holding company, since 1980. Mr. Kleberg
holds a Bachelor of Science degree in Political Science from Trinity University.
Paul A. Powell, Jr., age 51, a director of the Company since 1987, is
currently Trustee of the Paul A. Powell Trust and has served as Vice President
and Director of Mechanical Development Co., Inc., a tool and die and production
machine company, since 1984. He also serves as trustee of sixteen investment
trusts. Mr. Powell is a director and officer of Frameco, Inc., a tool and die
and production machine company, Somerset Investments, Ltd., an investment
company, and Powell Lake Properties, a real estate investment and management
company. He attended Emory and Henry College and graduated from National
Business College with a degree in Accounting.
Richard M. Riggs, age 76, a director of the Company since 1985, is a
self-employed geological consultant. He served as Vice President of Petro
Consultants Energy Corporation, a crude oil and natural gas exploration and
production company, from June 1978 to December 1984. Mr. Riggs has served as a
director of Cascade Oil and Gas, Ltd., an indirect subsidiary of the Company
("Cascade"), since May 1996. He has previously been employed by Tesoro Petroleum
Corporation, a crude oil and natural gas exploration and production company, as
Exploration Vice President for North America, and prior to that time was Manager
of Domestic Exploration for Ashland Oil, Inc., a crude oil and natural gas
exploration and production company. Mr. Riggs graduated with a Bachelors degree
in Geology from Dartmouth College and a Masters degree in Geology from Columbia
University.
4
<PAGE>
Terms Expiring in 1998
James C. Phelps, age 74, a director of Abraxas since December 1983, has
been a consultant to crude oil and natural gas exploration and production
companies such as Panhandle Producing Company and Tesoro Petroleum Corporation
since April 1981. Mr. Phelps has served as a director of Grey Wolf Exploration
Ltd., a subsidiary of the Company ("Grey Wolf"), since April 1995 and of Cascade
since January 1996. From April 1995 to May 1996, Mr. Phelps served as Chairman
of the Board and Chief Executive Officer of Grey Wolf, and from January 1996 to
May 1996, he served as President of Cascade. From March 1983 to September 1984,
he served as President of Osborn Heirs Company, a privately owned crude oil
exploration and production company based in San Antonio. Mr. Phelps was
President and Chief Operating Officer of Tesoro Petroleum Corporation from 1971
to 1981 and prior to that was Senior Vice President and Assistant to the
President of Continental Oil Company. He received a Bachelor of Science degree
in Industrial Engineering and a Master of Science degree in Industrial
Engineering from Oklahoma State University.
Robert L. G. Watson, age 46, has served as Chairman of the Board,
President, Chief Executive Officer and a director of Abraxas since 1977. Since
May 1996, Mr. Watson has also served as Chairman of the Board, Chief Executive
Officer and a director of Grey Wolf and Chairman of the Board and a director of
Cascade. In November 1996, Mr. Watson was elected Chairman of the Board,
President and as a director of Canadian Abraxas. Prior to joining Abraxas, Mr.
Watson was employed in various petroleum engineering positions with Tesoro
Petroleum Corporation, a crude oil and natural gas exploration and production
company, from 1972 through 1977, and DeGolyer & McNaughton, an independent
petroleum engineering firm, from 1970 to 1972. Mr. Watson received a Bachelor of
Science degree in Mechanical Engineering from Southern Methodist University in
1972 and a Master of Business Administration degree from the University of Texas
at San Antonio in 1974.
Chris E. Williford, age 46, was elected Vice President, Treasurer and
Chief Financial Officer of the Company in January 1993, and as Executive Vice
President and a director of the Company in May 1993. Prior to joining the
Company, Mr. Williford was Chief Financial Officer of American Natural Energy
Corporation, a crude oil and natural gas exploration and production company,
from July 1989 to December 1992 and President of Clark Resources Corp., a crude
oil and natural gas exploration and production company, from January 1987 to May
1989. Mr. Williford received a Bachelor of Science degree in Business
Administration from Pittsburg State University in 1973.
Terms Expiring in 1999
Franklin A. Burke, age 63, a director of the Company since June 1992,
has served as President and Treasurer of Venture Securities Corporation since
1971, where he is in charge of research and portfolio management. He has also
been a general partner and director of Burke, Lawton, Brewer & Burke, a
securities brokerage firm, since 1964, where he is responsible for research and
portfolio management. Mr. Burke also serves as a director of Suburban Community
Bank, a commercial bank, JER Ventures, a retail furniture company, Omega
Institute, a job training entity, and Starkey Chemical Process Co., a chemical
5
<PAGE>
processing company. Mr. Burke received a Bachelor of Science degree in Finance
from Kansas State University in 1955, a Master's degree in Finance from
University of Colorado in 1960 and studied at the graduate level at the London
School of Economics from 1962 to 1963.
Harold D. Carter, age 58, a director of the Company since May 1996, has
served as a director of and consultant to Brigham Exploration Company, a
three-dimensional seismic exploration company, since May 1992. Mr. Carter has
also served as a consultant to Associated Energy Managers, Inc., an investment
manager specializing in structuring and managing private investments in the
energy industry, since October 1994. From 1991 to 1992, Mr. Carter was a
consultant to various companies and investors involved in the crude oil and
natural gas industry. Prior to 1991, Mr. Carter was employed by Pacific
Enterprises Oil Company, where he was an Executive Vice President until
September 1990 and a consultant from September 1990 until December 1990.
Robert D. Gershen, age 43, a director of the Company since May 1995,
has served as President of Associated Energy Managers, Inc., an investment
manager specializing in structuring and managing private investments in the
energy industry, since July 1989. Mr. Gershen has served as an investment
advisor to Endowment Energy Partners, L.P. and Endowment Energy Partners II,
Limited Partnership, limited partnerships formed to make loans to companies in
the crude oil and natural gas business, since October 1989 and January 1993,
respectively. Mr. Gershen is also a managing director of EIF General Partner,
L.L.C., which serves as the general partner of Energy Income Fund, L.P. which
invests in reserve-backed energy loans and related securities of small
independent crude oil and natural gas exploration and production companies.
INFORMATION CONCERNING DIRECTORS
During the fiscal year ended December 31, 1996, the Board of Directors
held nine meetings. All directors attended each of these meetings except Messrs.
Phelps, Powell, Riggs and Watson who each missed one meeting, Mr. Burke who
missed three meetings and Mr. Kleberg who missed five meetings. During 1996, the
Company's directors other than Messrs. Watson and Williford received
compensation for service to the Company as a director under the Company's
Restricted Share Plan For Directors (the "Director Share Plan") and under the
Company's Director Stock Option Plan (the "Director Option Plan"). See
"Executive Compensation -- Compensation of Directors." Directors also received
reimbursement of travel expenses to attend meetings of the Board of Directors.
None of the nominees for director or the executive officers of the
Company has a family relationship with any of the other executive officers or
other nominees for director. Except for Richard M. Kleberg, III, who is a
director of Cullen Frost Bankers, Inc., none of the nominees or continuing
directors is a director of any other company which has a class of securities
registered under, or is required to file reports under, the Securities Exchange
Act of 1934 or of any company registered under the Investment Company Act of
1940.
6
<PAGE>
The Company believes, based solely on its review of the copies of
Section 16(a) forms furnished to the Company and written representations from
executive officers and directors, that all Section 16(a) filing requirements
have been fulfilled except that Robert L. G. Watson reported on his Form 5 for
1996 in April 1997 140,000 shares of Common Stock acquired by him during 1996
which should have been reported on a Form 5 due in February 1997 and Chris E.
Williford reported on his Form 5 for 1996 in April 1997 40,000 shares of Common
Stock acquired by him during 1996 which should have been reported on a Form 5
due February 1997. In making this disclosure, the Company has relied solely on
written representations of its directors and executive officers (and its ten
percent stockholders) and copies of the reports that they have filed with the
Securities and Exchange Commission.
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee of the Board of Directors, which consists of
Messrs. Kleberg, Phelps and Riggs, met two times during 1996. The functions of
the Audit Committee are to recommend the appointment of the Company's
independent auditors, to review the arrangements for and the scope of the annual
audit and to review internal accounting controls.
The Compensation Committee of the Board of Directors, which consists of
Messrs. Kleberg, Phelps and Riggs, met two times during 1996. The functions of
the Compensation Committee are to review and make recommendations concerning the
compensation of the Company's executive and non-executive officers. The
Compensation Committee also administers the Company's 1984 Incentive Stock
Option Plan, 1984 Nonqualified Stock Option Plan, 1993 Key Contributor Stock
Option Plan and 1994 Long Term Incentive Plan.
The Nominating Committee, which consists of Messrs. Phelps, Powell and
Riggs, met one time during 1996. The function of the Nominating Committee is to
seek out, evaluate and recommend to the Board qualified nominees for election as
directors of the Company and to consider other matters pertaining to the size
and composition of the Board. The Nominating Committee will give appropriate
consideration to qualified persons recommended by stockholders for nomination as
directors of the Company provided that such recommendations are accompanied by
information sufficient to enable the Nominating Committee to evaluate the
qualifications of the nominee.
SECURITIES HOLDINGS OF PRINCIPAL STOCKHOLDERS,
DIRECTORS, NOMINEES AND OFFICERS
Based upon information received from the persons concerned, each person
known to the Company to be the beneficial owner of more than five percent of the
outstanding shares of Common Stock and Preferred Stock of the Company, each
director and nominee for director, and all directors and officers of the Company
as a group, owned beneficially as of April 15, 1997 the number and percentage of
outstanding shares of Common Stock and Preferred Stock of the Company indicated
in the following table:
7
<PAGE>
<TABLE>
<CAPTION>
Beneficial Ownership
---------------------------------------------------------------------------------------
Number of Shares (1) Percentage
-------------------------------- --------------------------------------------------
Name and Address of
Beneficial Owner Common Stock Preferred Common Stock (2) Preferred Voting Stock
- ---------------- ------------- ---------- ---------------- ---------- ------------
(2) Stock Stock (2)(3)
--- ----- ----- ------
<S> <C> <C> <C> <C> <C>
Robert L. G. Watson 284,505 (4) 4.93 4.53
Endowment Advisors, Inc. 864,790 (5) 45,741(5) 6.19 100 13.79
450 Post Road East
Westport, CT 06881
Wellington Management 640,000 (6) 11.11 10.21
Company
75 State Street
19th Floor
Boston, MA 02109
First Union National Bank 424,000 (7) 6.86 6.34
of North Carolina
230 South Tryon
Charlotte, NC 28202
Metropolitan Life Insurance 455,000 (8) 7.90 7.26
Company Separate
Account EN
One Madison Avenue
New York, NY 10010
Dimensional Fund Advisors, 330,000 (9) 5.73 5.26
Inc.
1299 Ocean Avenue
11th Floor
Santa Monica, CA
90401
Franklin A. Burke 116,642 (10) 2.02 1.86
Paul A. Powell, Jr. 39,280 (11) * *
James C. Phelps 35,807 (12) * *
Richard M. Kleberg, III 33,714 (13) * *
Robert D. Gershen 25,689 (14) * *
Chris E. Williford 35,908 (15) * *
Richard M. Riggs 16,013 (16) * *
Harold D. Carter 7,493 (17) * *
Robert E. Patterson 14,723 (18) * *
Stephen T. Wendel 27,301 (19) * *
All Officers and Directors 637,075 (4)(10) 10.80 9.94
as a Group (9 persons) (11)(12)
(13)(14)
(15)(16)
(17)(18)
(19)
</TABLE>
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<PAGE>
- ---------
* Less than 1%
(1) Unless otherwise indicated, all shares are held directly with sole voting
and investment power.
(2) Does not include an aggregate of 1,995,000 shares of Common Stock which may
be issued in exchange for the Company's Contingent Value Rights.
(3) Includes Common Stock and Preferred Stock. The holder of each share of
Preferred Stock has 11.11 votes on all matters voted on by the holders of
Common Stock.
(4) Includes 20,316 shares owned by Wind River Resources Corporation, a
corporation owned by Mr. Watson, as to which Mr. Watson has sole voting and
investment power, 13,545 shares issuable upon exercise of options granted
pursuant to Abraxas Petroleum Corporation 1993 Key Contributor Stock Option
Plan and 26,455 shares issuable upon exercise of options granted pursuant to
the Abraxas Petroleum Corporation 1994 Long Term Incentive Plan. Does not
include a total of 75,880 shares owned by the Robert L. G. Watson, Jr. Trust
and the Carey B. Watson Trust, the trustees of which are Mr. Watson's
brothers and the beneficiaries of which are Mr. Watson's children. Mr.
Watson disclaims beneficial ownership of the shares owned by these trusts.
(5) Includes 34,288 shares of Series 1995-B Preferred Stock convertible into
380,940 shares of Common Stock and 262,645 shares of Common Stock owned by
Endowment Energy Partners, L.P. ("EEP") and 11,453 shares of Series 1995-B
Preferred Stock convertible into 127,243 shares of Common Stock and 93,962
shares of Common Stock owned by Endowment Energy Partners II, Limited
Partnership ("EEP II"). EEP and EEP II are limited partnerships whose
investors are educational institutions and which were formed to make loans
to companies in the crude oil and natural gas business. The general partner
of both EEP and EEP II is Fairfield Partners, Inc. (Del.) ("Fairfield")
which is a wholly-owned subsidiary of Endowment Advisers, Inc. ("EAI"), a
Delaware nonstock corporation controlled by its trustees and management.
Voting and investment power over the shares held by EEP and EEP II is
exercised by the Board of Trustees of EAI, and by Susan J. Carter, the
Senior Vice President and Chief Operating Officer of both EAI and Fairfield.
The trustees of EAI are principally individuals who are financial officers
of educational institutions that have invested in investment partnerships
sponsored by EAI, including EEP and EEP II.
(6) Wellington Management Company is an investment manager which has the power
to make investment decisions for unrelated clients.
(7) Includes warrants to purchase 424,000 shares of Common Stock at an exercise
price of $9.79 per share.
(8) State Street Research & Management, Inc. ("State Street") is an investment
manager which has the power to make investment decisions for the account
specified above. State Street disclaims beneficial ownership of all of the
shares of Common Stock listed above.
(9) Persons who are officers of Dimensional Fund Advisors Inc. also serve as
officers of DFA Investment Dimensions Group, Inc. (the "Fund") and The DFA
Investment Trust Company (the "Trust"), each an open-end management
investment company registered under the Investment Company Act of 1940. In
their capacities as officers of the Fund and the Trust, these persons vote
50,000 shares which are owned by the Fund and 57,200 shares which are owned
by the Trust.
(10)Includes 8,900 shares issuable upon exercise of options granted pursuant to
the Abraxas Petroleum Corporation 1984 Non-Qualified Stock Option Plan and
2,000 shares issuable upon exercise of options granted pursuant to the
Director Option Plan.
(11)Includes 4,228 shares owned by Mechanical Development Co., Inc., all of the
outstanding capital stock of which is owned by members of Mr. Powell's
family, 13,998 shares owned by the Paul A. Powell Trust of which Mr. Powell
is a trustee and his family members are the primary beneficiaries, 51 shares
owned by the Paul A. Powell Individual Trust of which Mr. Powell is a
trustee, 4,989 shares owned by West Point Associates of which Mr. Powell is
a general partner, and 63 shares owned by NAD Properties of which Mr. Powell
is a general partner. Mr. Powell shares voting and investment power as to
all of such shares. Also includes 2,000 shares issuable upon exercise of
options granted pursuant to the Director Option Plan.
(12)Includes 8,000 shares owned by Marie Phelps, Mr. Phelps' wife and 2,000
shares issuable upon exercise of options granted pursuant to the Director
Option Plan.
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<PAGE>
(13)Includes 16,688 shares owned by SFD Enterprises, Ltd., a private investment
partnership, and 2,000 shares issuable upon exercise of options granted
pursuant to the Director Option Plan. Mr. Kleberg shares voting and
investment power as to the shares owned by SFD Enterprises.
(14)Includes warrants to purchase 13,500 shares of Common Stock at a price of
$7.00 per share owned by Associated Energy Managers, Inc., the principal
shareholder and Chief Executive Officer of which is Mr. Gershen, and 2,000
shares issuable upon exercise of options granted pursuant to the Director
Option Plan.
(15)Includes 1,786 shares issuable upon exercise of options granted pursuant to
the Abraxas Petroleum Corporation 1984 Incentive Stock Option Plan, 14,777
shares issuable upon exercise of options granted pursuant to the Abraxas
Petroleum Corporation 1993 Key Contributor Stock Option Plan and 15,000
shares issuable upon exercise of options granted pursuant to the Abraxas
Petroleum Corporation 1994 Long Term Incentive Plan.
(16)Includes 700 shares owned by the Riggs Family Trust of which Mr. Riggs is
one of the trustees, 1,000 shares owned jointly by Mr. Riggs and his wife
and 2,000 shares issuable upon exercise of options granted pursuant to the
Director Option Plan.
(17)Includes 2,000 shares issuable upon exercise of options granted pursuant to
the Director Option Plan.
(18)Includes 12,500 shares issuable upon exercise of options granted pursuant
to the Abraxas Petroleum Corporation 1994 Long Term Incentive Plan.
(19)Includes 4,340 shares issuable upon exercise of options granted pursuant to
the Abraxas Petroleum Corporation 1984 Incentive Stock Option Plan, 7,500
shares issuable upon exercise of options granted pursuant to the Abraxas
Petroleum Corporation Key Contributor Stock Option Plan and 12,665 shares
issuable upon exercise of options granted pursuant to the Abraxas Petroleum
Corporation 1994 Long Term Incentive Plan.
10
<PAGE>
EXECUTIVE COMPENSATION
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors (the "Committee")
is composed entirely of directors who are not employees of the Company. The
Committee is responsible for establishing and administering the compensation
levels for the Company's executive and non-executive officers. The members of
the Committee believe that the ability to attract and retain qualified executive
and non-executive officers and provide appropriate incentives to the Company's
executive and non-executive officers is essential to the long-term success of
the Company.
In determining executive compensation, the Committee reviews the
compensation programs, pay levels and business results of the Company as
compared to those crude oil and natural gas exploration and production companies
included in the KPMG Peat Marwick LLP 1996 Energy Compensation Survey (the "KPMG
Survey").
Compensation Philosophy and Objectives. The philosophy underlying the
development and administration of the Company's annual and long-term
compensation plans is to align the interests of management with those of the
Company's stockholders. Key elements of this philosophy are:
*Establishing compensation plans that deliver base salaries which are
competitive with the companies included in the KPMG Survey, within the
Company's budgetary constraints and commensurate with the Company's
performance as measured by operating, financial and strategic
objectives.
*Providing equity-based incentives for executive and non-executive
officers to ensure that they are motivated over the long-term to
respond to the Company's business challenges and opportunities as
owners rather than just as employees.
*Rewarding executive and non-executive officers for outstanding
performance particularly where such performance is reflected by an
increase in the value of the Company's Common Stock.
The compensation currently paid to the Company's executive and non-executive
officers consists of base salary, various employee benefits (including medical
and life insurance and 401(k) plan benefits generally available to all employees
of the Company), annual cash bonuses and grants of stock options and awards
under the Company's 1994 Long Term Incentive Plan (the "LTIP").
11
<PAGE>
Elements of the Executive Compensation Program.
Base Salaries. The Committee believes that the Company's base salary
levels for executive officers are consistent with the practices of the companies
included in the KPMG Survey. Increases in base salary levels from time to time
are designed to reflect competitive practices in the industry, financial
performance of the Company and individual performance of the officer.
In the first quarter of each year, the Chief Executive Officer submits
to the Committee recommendations for salary adjustments based upon his
subjective evaluation of individual performance and his subjective judgment
regarding setting each executive and non-executive officer's salary within the
Company's salary range. This range is set by reference to the salaries paid by
the companies included in the KPMG Survey while remaining within the Company's
budgetary constraints. The companies included in the KPMG Survey are used to
compare the Company's salary structure to that of other companies that compete
with the Company for executives but without targeting salaries to be higher,
lower or approximately the same as those of the companies included in the KPMG
Survey. The Committee does not consider the performance of any of the companies
included in the KPMG Survey in setting the Company's salary structure.
Annual Cash Bonuses. In 1994, the Board of Directors adopted an annual
cash bonus plan which calls for the payment of annual cash bonuses to all
officers of the Company at or above the Vice President level. Under this plan,
each participant is given an annual bonus opportunity based on the achievement
of certain goals. For Messrs. Watson and Williford, the base bonus could be as
high as 35% of base salary. The amount of the bonuses to be paid to Messrs.
Watson and Williford, if any, will be based upon attaining goals set by the
Board of Directors after assessing the recommendations of management for
earnings per share, cash flow per share and share price, with each factor being
weighted equally in the calculation. With respect to officers responsible for
the Company's operations, including Messrs. Patterson and Wendel, the base bonus
could be as high as 25% of base salary. Earnings per share, cash flow per share
and share price will account for 50% of the calculation and performance factors
unique to the Company's operations will account for the remaining 50% of the
calculation. If all performance goals are met or exceeded, additional bonuses of
up to 25% of base salary can be earned by each participant. The Board has the
prerogative to adjust the bonus earned by any participant, including Messrs.
Watson, Williford, Patterson and Wendel, to take into account extraordinary
factors not contemplated by the bonus plan when the impact of such contributions
or factors cannot be adequately reflected by the bonus determined under the
methodology described above. In 1996, the goals for earnings per share, cash
flow per share and reserves were attained. The Board also took into account the
Company's consummation of three acquisitions and an offering of senior notes in
determining the amount of bonuses paid. As a result, Mr. Watson received an
aggregate bonus of $135,550 which included 3,767 shares of Common Stock, Mr.
Williford received an aggregate bonus of $72,000 which included 3,349 shares of
Common Stock, Mr. Patterson received an aggregate bonus of $35,000 which
included 1,628 shares of Common Stock and Mr. Wendel received an aggregate bonus
of $40,000 which included 1,860 shares of Common Stock.
12
<PAGE>
Long-Term Incentives. In 1994, the Board adopted the LTIP in order to
compensate executive and non-executive officers and employees who contribute
significantly to the operation of the Company. The LTIP makes available to the
Committee a number of incentive devices such as incentive stock options and
non-qualified stock options, stock appreciation rights, restricted stock,
performance units, performance shares and dividend units. The Committee adopts
administrative guidelines from time to time which define specific eligibility
criteria, the types of awards to be employed and the value of such awards.
Specific terms of each award, including minimum performance criteria which must
be met to receive payment, are provided in individual award agreements granted
to each award recipient. Award agreements also contain change in control
provisions. Option holdings and previous awards are not taken into account.
The Board believes that the LTIP has given the Company the flexibility
to structure awards to meet the Company's business needs. In making long-term
incentive awards under the LTIP, the Committee seeks to ensure that the total
compensation package, including cash compensation, is competitive with the
compensation paid by the companies included in the KPMG Survey, yet
substantially contingent upon the success of individual and corporate efforts to
produce attractive long-term returns to the Company's stockholders.
CEO Compensation. Prior to 1993, the Company was involved in an
aggressive acquisition program which enabled the Company to grow from a
relatively small crude oil and natural gas exploratory and production company to
one with a larger asset base. This acquisition program consumed all of the
Company's available cash flow. As a result, Mr. Watson did not receive any
compensation from the Company.
In light of the Company's establishing a larger asset foundation, on
April 12, 1993, the Board of Directors approved the recommendation of the
Committee regarding compensation for Mr. Watson. Effective April 1, 1993, Mr.
Watson began receiving annual cash compensation of $80,000 per year and a
quarterly award of fully-vested shares of Common Stock in an amount equal to
$12,500 divided by the closing "bid" price of the Common Stock on the last
business day of the quarter. In addition, the Board approved the award to Mr.
Watson of a total of 60,000 shares of Common Stock for services rendered to the
Company for the years 1988 through 1992.
Mr. Watson's salary in 1996 was based on the Committee's evaluation of
his performance and the Company's performance, after reviewing competitive
salary data from the companies included in the KPMG Survey and the Company's
budgetary constraints.
The Committee's determination of Mr. Watson's total salary was based
upon the salaries paid to chief executive officers of the companies included in
the KPMG Survey and the salary structure of the Company. Because the Committee
also desired to make part of the value of the compensation Mr. Watson received
contingent upon the value realized by the Company's stockholders, a significant
portion of Mr. Watson's annual compensation was paid in options to purchase
shares of Common Stock of the Company.
Policy on Deductibility of Compensation. In 1993, the federal tax laws
were amended to limit the deduction a publicly-held company is allowed for
13
<PAGE>
compensation paid to the chief executive officer and to the four most highly
compensated executive officers other than the chief executive officer.
Generally, amounts paid in excess of $1 million to a covered executive, other
than performance-based compensation, cannot be deducted. In order to constitute
performance-based compensation for purposes of the tax law, the performance
measures must be approved by the stockholders. Since the Company does not
anticipate that the compensation for any executive officer will exceed the $1
million threshold in the near term, stockholder approval necessary to maintain
the tax deductibility of compensation at or above that level is not being
requested. The Committee will reconsider this matter if compensation levels
approach this threshold, in light of the tax laws then in effect. The Committee
will consider ways to maximize the deductibility of executive compensation,
while retaining the discretion the Committee deems necessary to compensate
executive officers in a manner commensurate with performance and the competitive
environment for executive talent.
This report is submitted by the members of the Committee:
Richard M. Kleberg, III
James C. Phelps
Richard M. Riggs
Compensation Committee Interlocks and Insider Participation
Mr. Phelps, a member of the Committee during 1996, served as Chief
Executive Officer of Grey Wolf from April 1995 to May 1996 and as President of
Cascade from January 1996 to May 1996.
Messrs. Phelps and Riggs were founders of Grey Wolf and were granted
options to purchase shares of the capital stock of Grey Wolf and Cascade. See
"Certain Transactions."
Compensation Summary
The following table sets forth a summary of compensation for the fiscal
years ended December 31, 1994, 1995 and 1996 paid by the Company to Robert L.G.
Watson, the Chairman of the Board, President and Chief Executive Officer of the
Company, Chris E. Williford, the Executive Vice President, Chief Financial
Officer and Treasurer of the Company, and Stephen T. Wendel, the Company's Vice
President-Land and Marketing and to Robert E. Patterson, the Company's Vice
President of Operations for the fiscal year ended December 31, 1996. Abraxas did
not have any executive officers other than Messrs. Watson and Williford whose
total annual salary and bonus exceeded $100,000 for the years ended December 31,
1994, and 1995 and Messrs. Watson, Williford, Patterson and Wendel for the year
ended December 31, 1996.
14
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Compensation
------------------
Annual Compensation Awards
-------------------------------------------------------------------------------------
Options
Name and Principal /SARs
Position Year Salary ($) Bonus ($) (#)
------------------------- -------- ---------------- -------------- ------------------
<S> <C> <C> <C> <C>
Robert L. G. Watson, 1994 $157,763(1)(2) ---- ----
Chairman of the Board 1995 $108,281(1)(3) ---- 60,000
and President 1996 $133,187 $135,550 (4) 140,000
Chris E. Williford, 1994 $101,028 ---- ----
Executive Vice 1995 $115,795(5) ---- 20,000
President, 1996 $121,315 $72,000 (6) 40,000
Chief Financial Officer
and Treasurer
Robert E. Patterson, 1996 $124,615 $35,000 (7) 60,000
Vice President of
Operations
Stephen T. Wendel, 1994 $58,628 ---- ----
Vice President - Land 1995 $63,210 ---- 20,000
and Marketing 1996 $76,577 $40,000 (8) 18,660
</TABLE>
(1) Mr. Watson received repayments of loans to Abraxas of $287,940 during
1994 and $354,677 during 1995.
(2) Includes $50,000 of stock awards and $105,000 of salary.
(3) Includes $1,093 of stock awards and $107,188 of salary.
(4) Includes $95,000 in cash and $40,550 of stock awards.
(5) Includes $8,607 of stock awards and $107,188 of salary.
(6) Includes $36,000 in cash and $36,000 in stock awards.
(7) Includes $17,500 in cash and $17,500 in stock awards.
(8) Includes $20,000 in cash and $20,000 in stock awards.
15
<PAGE>
Grants of Stock Options and Stock Appreciation Rights During the Fiscal Year
Ended December 31, 1996
Pursuant to the Abraxas Petroleum Corporation 1984 Incentive Stock
Option Plan (the "ISO Plan"), the Abraxas Petroleum Corporation 1993 Key
Contributor Stock Option Plan (the "1993 Plan") and the Abraxas Petroleum
Corporation 1994 Long Term Incentive Plan (the "LTIP"), the Company grants to
employees and officers of the Company (including directors of the Company who
are also employees) incentive stock options and non-qualified stock options. The
ISO Plan, the 1993 Plan and the LTIP are administered by the Compensation
Committee which, based upon the recommendation of the Chief Executive Officer,
determines the number of shares subject to each option.
The table below contains certain information concerning stock options
granted to Messrs. Watson, Williford, Patterson and Wendel during 1996:
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL YEAR
- ------------------------------------------------------------------------------------------------------
% of Total Potential Realizable Value
Options Exercise at Assumed Annual Rates of
Options Granted to Price Per Expiration Stock Price Appreciation
Name Granted Employees Share Date for Option Term
=============== ============= ============== ============== ============= ============== =============
5% 10%
<S> <C> <C> <C> <C> <C> <C>
Robert L. G. 40,000(1) 13.25 $5.00 03/07/06 $325,779 $ 518,748
Watson 100,000(1) 33.14 $7.50 11/20/06 $1,221,671 $1,945,307
Chris E. 20,000(1) 6.63 $5.00 03/07/06 $162,890 $ 259,374
Williford 20,000(1) 6.63 $7.50 11/20/06 $244,344 $ 389,061
Robert E. 40,000(1) 13.25 $6.75 01/02/06 $439,802 $ 700,310
Patterson 10,000(1) 3.32 $5.00 03/07/06 $ 81,445 $ 129,687
10,000(1) 3.32 $7.50 11/20/06 $122,172 $ 194,531
Stephen T. 10,660(1) 3.54 $5.00 03/07/06 $ 86,722 $ 138,260
Wendel 8,000(1) 2.66 $7.50 11/20/06 $ 97,760 $ 155,600
</TABLE>
(1) One-fourth of the options become exercisable on each of the first four
anniversaries of the date of grant.
16
<PAGE>
The table below contains certain information concerning exercises of
stock options during the fiscal year ended December 31, 1996 by Messrs. Watson,
Williford, Patterson and Wendel and the fiscal year end value of unexercised
options held by Messrs. Watson, Williford, Patterson and Wendel.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Fiscal 1996
and Fiscal Year End Option Values
Value of
Number of Unexercised
Unexercised in-the-Money
Options on Options on
December 31, December 31,
1996 (#) 1996 ($)
Shares Acquired Value Exercisable/ Exercisable/
Name By Exercise (#) Realized ($) Unexercisable Unexercisable
- ---- ------------------ ----------- ------------- -------------
<S> <C> <C> <C> <C>
Robert L. G. Watson -0- -0- 15,000/85,000 $46,875/$573,125
Chris E. Williford -0- -0- 20,000/60,000 $62,500/$207,500
Robert E. Patterson -0- -0- 0/60,000 $0/$197,500
Stephen T. Wendel -0- -0- 16,840/36,160 $56,375/$125,655
</TABLE>
Long Term Incentive Plan Awards During the Fiscal Year Ended December 31, 1996
The Company did not make any awards to any of Messrs. Watson,
Williford, Patterson and Wendel under a long term incentive plan during the
fiscal year ended December 31, 1996.
Employment Agreements
The Company has entered into Employment Agreements (the "Employment
Agreements") with each of Messrs. Watson, Williford, Patterson and Wendel,
pursuant to which each of Messrs. Watson, Williford, Patterson and Wendel will
receive compensation as determined from time to time by the Board in its sole
discretion. The Employment Agreements terminate on December 31, 1997 except that
the term of the Employment Agreements may be automatically extended for an
additional year if by December 1 of the prior year neither the Company nor
Messrs. Watson, Williford, Patterson or Wendel, as the case may be, has given
notice that it does not wish to extend the term. Except in the event of a change
in control, at all times during the term of the Employment Agreements, each of
Messrs. Watson's, Williford's, Patterson's and Wendel's employment is at will
and may be terminated by the Company for any reason without notice or cause. If
a change in control occurs during the term of the Employment Agreement or any
extension thereof, the expiration date of Mr. Watson's Employment Agreement is
automatically extended to a date no earlier than four years following the
effective date of such change in control, the expiration date of Mr. Williford's
Employment Agreement is automatically extended to a date no earlier than three
years following the effective date of such change in control and the expiration
date of each of Mr. Patterson's and Mr. Wendel's Employment Agreement is
automatically extended to a date no earlier than two years following the
17
<PAGE>
effective date of such change in control. If, following a change in control,
Messrs. Watson's, Williford's, Patterson's or Wendel's employment is terminated
other than for Cause (as defined in each of the Employment Agreements) or
Disability (as defined in each of the Employment Agreements), by reason of
Messrs. Watson's, Williford's, Patterson's or Wendel's death or retirement or by
Messrs. Watson, Williford, Patterson or Wendel, as the case may be, other than
for Good Reason (as defined in each of the Employment Agreements), then Mr.
Watson will be entitled to receive a lump sum payment equal to four times his
annual base salary, Mr. Williford will be entitled to receive a lump sum payment
equal to three times his annual base salary and Mr. Patterson and Mr. Wendel
will each be entitled to receive a lump sum payment equal to two times his
annual base salary. If any such lump sum payment would individually or together
with any other amounts paid or payable constitute an "excess parachute payment"
within the meaning of Section 280G of the Internal Revenue Code of 1986, as
amended ("Section 280G"), and applicable regulations thereunder (the "Code"),
the amounts to be paid will be increased so that Messrs. Watson, Williford,
Patterson or Wendel, as the case may be, will be entitled to receive the amount
of compensation provided in his contract after payment of the tax imposed by
Section 280G.
Report on Repricing of Options
On March 7, 1996, the Committee approved a plan pursuant to which the
exercise price of each outstanding stock option granted to employees of the
Company prior to January 1, 1996, including options granted to Messrs.
Watson, Williford and Wendel, were reduced to $6.75 per share.
The Committee believed that repricing the existing options was in the
best interests of the Company and its stockholders. In the view of the
Committee, the decline of the market price of the Company's Common Stock
substantially impaired the effectiveness of the existing options as a means of
attracting and retaining qualified executive and non-executive officers and
providing appropriate incentives to the Company's executive and non-executive
officers. In addition, the Committee believed that a significant portion of the
decline in the market price was the result of market factors that affected the
stocks of the companies included in the KPMG Survey.
18
<PAGE>
The following table sets forth certain information concerning repricing
of stock options held by any executive officer during the period commencing on
May 7, 1991 (the date on which the Company became a reporting company pursuant
to the Securities Exchange Act of 1934, as amended) and ending on December 31,
1996.
<TABLE>
<CAPTION>
Length of
Original
Market Price Exercise Option Term
Number of Securities of Stock at Price at Remaining at
Underlying Options Time of Time of Date of
Date of Repriced or Amended Repricing or Repricing or New Exercise Repricing or
Name Repricing Old New Amendment Amendment Price Amendment
- -------------- --------- -------- ------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert L. G. 03/07/96 60,000 60,000 $6.75 $9.50 $6.75 95 Mos
Watson,
Chairman of
the Board,
President and
Chief
Executive
Officer
Chris E. 03/07/96 6,252 6,252 $6.75 $7.50 $6.75 75 Mos
Williford, 13,748 13,748 $6.75 $9.75 $6.75 76 Mos
Executive Vice 20,000 20,000 $6.75 $9.50 $6.75 95 Mos
President,
Chief
Financial
Officer and
Treasurer
Robert E. __ __ __ __ __ __ __
Patterson,
Vice President
of Operations
Stephen T. 03/07/96 10,000 10,000 $6.75 $9.75 $6.75 76 Mos
Wendel, 03/07/96 20,000 20,000 $6.75 $9.50 $6.75 95 Mos
Vice President
- - Land and
Marketing
</TABLE>
This report is submitted by the members of the Committee:
Richard M. Kleberg, III
James C. Phelps
Richard M. Riggs
19
<PAGE>
Performance Graph
Set forth below is a performance graph comparing yearly cumulative
total stockholder return on the Company's Common Stock with (a) the monthly
index of stocks included in the Standard and Poor's 500 Index and (b) the
Principal Financial Services, Inc. monthly index (the "PFS Index") of stocks of
crude oil and natural gas exploration and production companies with a market
capitalization of less than $100 million (the "Comparable Companies"). The
Comparable Companies are: Adams Resources & Energy, Inc.; Alamco, Inc.; Arch
Petroleum, Inc.; Basin Exploration, Inc.; Bellwether Exploration Company; Callon
Petroleum Company; COHO Energy, Inc.; Columbus Energy Corporation; Equity Oil
Company; Harcor Energy, Inc.; Howell Corporation; Maynard Oil Company; McFarland
Energy, Inc.; Offshore Energy Development Corporation; PetroCorp Incorporated;
Prima Energy Corporation; Wainoco Oil Corporation; and Wiser Oil Company.
All of these cumulative total returns are computed assuming the
reinvestment of dividends at the frequency with which dividends were paid during
the applicable years. The years compared are 1991, 1992, 1993, 1994, 1995 and
1996 with 1991 beginning on May 7, 1991, the first day that the Company's Common
Stock was traded on NASDAQ.
S&P 500 PFS INDEX ABRAXAS
May-91 100 100 100
Jun-91 95 97 60
Sep-91 100 110 55
Dec-91 108 102 115
Mar-92 105 94 135
Jun-92 105 92 135
Sep-92 108 112 130
Dec-92 112 135 150
Mar-93 134 112 145
Jun-93 134 166 180
Sep-93 140 150 230
Dec-93 141 142 205
Mar-94 135 143 215
Jun-94 135 145 240
Sep-94 140 153 215
Dec-94 139 136 185
Mar-95 133 101 178
Jun-95 145 99 175
Sep-95 156 101 161
Dec-95 164 99 125
Mar-96 166 104 108
Jun-96 172 114 130
Sep-96 176 122 115
Dec-96 190 144 198
20
<PAGE>
Compensation of Directors
Non-Qualified Stock Option Plan. Each director of the Company, other
than Messrs. Watson, Williford, Carter and Gershen, has previously been granted
options to purchase 8,900 shares of Common Stock under the Company's 1984
Non-Qualified Stock Option Plan (the "Non-Qualified Plan"). There are currently
outstanding options to purchase 8,900 shares of Common Stock under the
Non-Qualified Plan. Mr. Burke holds an option to purchase 8,900 shares of Common
Stock at an exercise price of $6.75 per share.
Restricted Share Plan for Directors. Pursuant to the Director Share
Plan, each director of the Company, other than Messrs. Watson and Williford, is
entitled to receive a grant of shares of Common Stock for attendance at regular
and special meetings of the Board of Directors. Each eligible director of the
Company was issued 400 shares of Common Stock during 1994 as an initial grant
under the Director Share Plan and thereafter receives a number of shares of
Common Stock equal to the product of 1,000 times the Capitalization Factor (as
defined in the Director Share Plan) divided by the Average Stock Price (as
defined in the Director Share Plan) as of the date of a meeting of the Board.
For 1996, each of the directors received the number of shares of Common Stock
set forth opposite his name under the Director Share Plan:
Number of
Name Shares
Franklin M. Burke 695
Harold D. Carter 493
Robert D. Gershen 695
Richard M. Kleberg 958
James C. Phelps 1,698
Paul A. Powell 796
Richard M. Riggs 1,698
Abraxas Petroleum Corporation Director Stock Option Plan. Pursuant to
the Director Stock Option Plan, each member of the Company's Board of Directors,
other than Messrs. Watson and Williford, was granted an option to acquire 8,000
shares at a price of $6.75 per share on June 1, 1996. Directors who join the
Board for the first time after June 1, 1996 will be granted an option to acquire
8,000 shares of Common Stock on the date they become Directors. Options vest
evenly over a four year period commencing on the first anniversary date of the
grant and each option expires on the tenth anniversary of the date of the grant.
Other Compensation. The directors of the Company received no other
compensation for services as directors, except for reimbursement of travel
expenses to attend Board meetings.
21
<PAGE>
CERTAIN TRANSACTIONS
Messrs. Watson, Phelps and Riggs were founders of Grey Wolf
and in April 1995 purchased 900,000 shares of the capital stock of Grey Wolf
(initially representing 39% of the outstanding shares) for an aggregate of
CDN$90,000 (or CDN$0.10 per share) in cash. In January 1996, the Company
purchased 20,325,096 shares of the capital stock of Grey Wolf (representing 78%
of the outstanding shares) for an aggregate of approximately CDN$4.1 million (or
CDN$.20 per share) in cash. Messrs. Phelps, Riggs and Watson currently own 6.5%
of the issued and outstanding capital stock of Grey Wolf.
Messrs. Phelps and Riggs own options to purchase in the aggregate up to
1,000,000 shares of capital stock of Cascade at an exercise price of CDN$.20 per
share, and Mr. Watson owns options to purchase up to 800,000 shares of Cascade's
capital stock at an exercise price of CDN$.34 per share. Cascade currently has
61,365,000 shares of capital stock outstanding.
Wind River Resources Corporation ("Wind River"), all of the capital
stock of which is owned by Mr. Watson, owns a twin-engine airplane. The airplane
is available for business use by employees of the Company from time to time at
Wind River's cost. The Company paid Wind River a total of $101,421 for use of
the plane during 1996.
Abraxas has adopted a policy that transactions, including loans,
between Abraxas and its officers, directors, principal stockholders, or
affiliates of any of them, will be on terms no less favorable to Abraxas than
can be obtained on an arm's length basis in transactions with third parties and
must be approved by the vote of at least a majority of the disinterested
directors.
22
<PAGE>
PROPOSAL TWO
APPOINTMENT OF AUDITORS
The Board of Directors has appointed the firm of Ernst & Young LLP
("Ernst & Young") to examine the financial statements of the Company for the
1997 fiscal year. Representatives of Ernst & Young are expected to be present at
the Annual Meeting of Stockholders with the opportunity to make a statement if
they desire to do so and are expected to be available to respond to appropriate
questions.
Approval of the appointment of auditors is not a matter which is
required to be submitted to a vote of stockholders, but the Board of Directors
considers it appropriate for the stockholders to express or withhold their
approval of the appointment. If stockholder approval should be withheld, the
Board of Directors would consider an alternative appointment for the succeeding
fiscal year. The Board of Directors recommends that the stockholders approve the
appointment of Ernst & Young.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 1998 Annual
Meeting must be received in writing by the Company at its principal executive
offices not later than December 20, 1997. The Company's principal executive
offices are located at 500 North Loop 1604 East, Suite 100, San Antonio, Texas
78232.
PROXY SOLICITATION
The cost of soliciting proxies will be borne by the Company. Proxies
may be solicited through the mail and through telephonic or telegraphic
communications to, or meetings with, stockholders or their representatives by
directors, officers and other employees of the Company who will receive no
additional compensation therefor.
The Company requests persons such as brokers, nominees and fiduciaries
holding stock in their names for others, or holding stock for others who have
the right to give voting instructions, to forward proxy materials to their
principals and to request authority for the execution of the proxy, and the
Company will reimburse such persons for their reasonable expenses.
OTHER MATTERS
No business other than the matters set forth in this Proxy Statement is
expected to come before the meeting, but should any other matters requiring a
vote of stockholders arise, including a question of adjourning the meeting, the
persons named in the accompanying Proxy will vote thereon according to their
best judgment in the interests of the Company. If any of the nominees for office
of director should withdraw or otherwise become unavailable for reasons not
presently known, the persons named as proxies may vote for another person in his
place in what they consider the best interests of the Company.
23
<PAGE>
Upon the written request of any person whose proxy is solicited
hereunder, the Company will furnish without charge to such person a copy of its
annual report filed with the Securities and Exchange Commission on Form 10-K,
including financial statements and schedules thereto, for the fiscal year ended
December 31, 1996. Such written request is to be directed to the attention of
Stephen T. Wendel, 500 North Loop 1604 East, Suite 100, San Antonio, Texas
78232.
By Order of the Board of Directors
Stephen T. Wendel
Secretary
Dated: April 18, 1997
24
<PAGE>
FORM OF PROXY
FRONT
ABRAXAS PETROLEUM CORPORATION
500 North Loop 1604 East, Suite 100
San Antonio, Texas 78232
This Proxy is Solicited on behalf of the Board of Directors
The undersigned shareholder of Abraxas Petroleum Corporation, a Nevada
corporation (the "Company"), hereby appoints Robert L. G. Watson, Chris
Williford and Stephen T. Wendel, and each of them, as Proxies, each with the
power to appoint his or her substitute, and hereby authorizes them to represent
and to vote, as designated below, all the shares of common stock of the Company
which the undersigned may be entitled to vote at the Annual Meeting of
Stockholders to be held on May 23, 1997 and any adjournment thereof, with all
powers which the undersigned would possess if personally present.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement of the Company dated April 18, 1997.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
BACK
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this
proxy will be voted "FOR" the election of Directors and "FOR" the
Approval of Proposals 2 and 3.
1. ELECTION OF DIRECTORS
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary below) [ ] listed below [ ]
(INSTRUCTION: To withhold authority to vote for any individual
nominee, strike a line through the nominee's name in the
list below.)
Richard M. Kleberg III, Paul A. Powell, Jr. and Richard M. Riggs
2. PROPOSAL TO APPROVE THE APPOINTMENT OF ERNST & YOUNG AS AUDITORS OF THE
COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
CHECK HERE FOR ADDRESS CHANGE [ ] NEW ADDRESS:_______________________
___________________________________
___________________________________
___________________________________
Please sign exactly as name appears below. When shares are held by
joint tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give full title as such. If
a corporation, please sign in full corporate name by President or other
authorized officer.
If a partnership, please sign in partnership name by authorized person.
DATED: ______________, 1997 __________________________
Signature
PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY USING THE __________________________
ENCLOSED ENVELOPE. Signature if held jointly
