Abraxas Petroleum (AXAS) Spuds First Austin Chalk-Targeting Well; Trims CapEx Outlook

Abraxas Petroleum Corporation (Nasdaq: AXAS) announced the spudding of the Company’s first well targeting the Austin Chalk at Jourdanton, updated the status of the Company’s potential joint venture, provided a capital expenditure update and announced the departure of the Vice President of Exploration.

Austin Chalk – Atascosa County

Abraxas spudded the Company’s first well targeting the Austin Chalk, the Bulls Eye 101H, on June 16, 2016. The Company recently set surface casing to 4,670 feet. Gross drilling and completion costs for Abraxas’ first 5,700 foot lateral Austin Chalk well are estimated at $5.8 million. Abraxas expects to complete this well in August 2016 and expects first production by September 2016.

Abraxas recently elected to terminate discussions with the previously disclosed potential joint venture candidate after being unable to reach an agreement on acceptable terms in a timely manner. Abraxas will continue to explore other joint venture opportunities on this asset.

Capital Expenditure Update

Abraxas recently received bids for the Company’s upcoming fracture stimulation of the Stenehjem 10H-15H, which is scheduled to take place in the coming weeks. Bids were approximately 50% lower than originally projected costs based on Abraxas’ most recent stimulation in November 2015. Therefore, Abraxas now expects total capital expenditures associated with drilling and completion, inclusive of one Austin Chalk well, two Wolfcamp/Bone Spring wells and the seven gross Bakken completions, to be approximately $24 million. Currently Abraxas has approximately $7 million of offers outstanding, primarily targeting working interest owners in the Company’s existing units in the Permian Basin. Correspondingly, Abraxas is adjusting the Company’s yearly capital expenditure guidance to $30-$40 million. Production guidance remains 6,000-6,400 boepd for 2016.

*** The company previously saw CapEx at $40 million.

Departure of Vice President of Exploration

On June 20, 2016, Lee T. Billingsley, Abraxas’ Vice President of Exploration, notified the Company of his intention to resign effective July 5, 2016 to pursue a business opportunity with his son.

Bob Watson, President and CEO of Abraxas, commented, “During our recent capital raise, Abraxas announced that we were already building in a contingency plan of drilling an Austin Chalk well without a joint venture partner. Although we are disappointed we could not come to an agreement with this potential partner in a timely manner, drilling this well on our own will give our shareholders more upside exposure compared to the reduced working interest in the joint venture. Moreover, since we began the joint venture process, additional well results in an analogous environment have substantiated and given us additional confidence in our play concept. We also find ourselves in a much more favorable commodity price environment and financial position. We look forward to updating the street in the near future on the result of this well.

“We would also like to thank Lee Billingsley for his nearly 18 years of service to Abraxas. He will be missed by all employees and we wish him nothing but success as he embarks on a new venture with his son.”

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