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Abraxas Announces $11 Million Second Quarter Profit On Sequential Twelve Percent Increase In Production Despite Lower Oil Prices

Stocks in this article: AXAS

Unrealized gains or losses on derivative contracts are based on mark-to-market valuations which are non-cash in nature and may fluctuate drastically period to period. As commodity prices fluctuate, these derivative contracts are valued against current market prices at the end of each reporting period in accordance with Accounting Standards Codification 815, “Derivatives and Hedging,” as amended and interpreted, and require Abraxas to record an unrealized gain or loss based on the calculated value difference from the previous period-end valuation. For example, NYMEX oil prices on June 30, 2012 were $84.96 per barrel compared to $103.02 on March 31, 2012.

Operational Update:

Rocky Mountain – North Dakota / Montana

In McKenzie County, the Company owned drilling rig is preparing to spud the Jore Federal 2-11 3H in which Abraxas owns an approximate 76 percent working interest, after successfully drilling the Ravin 26-35 2H and Ravin 26-35 3H to total depths of approximately 21,000 feet including approximate 10,000 foot laterals. Abraxas owns an approximate 49 percent working interest in the Ravin wells. These three wells, all located on the same pad, are scheduled to be fraced in late September or early October, with production shortly thereafter.

Elsewhere in the Bakken/Three Forks play, during the second quarter of 2012, 5 gross (.08 net) non operated wells came on line and at quarter end 1 gross (.01 net) non operated well was completing. Additionally, we have recently agreed to participate in 5 gross (.11 net) wells that have yet to spud.

Rocky Mountain – Wyoming

In Campbell County, the Hedgehog State 16-2H, a horizontal well in the Turner formation in which we own a 100 percent working interest continues to produce approximately 395 BOEPD (35 percent oil and 13 percent natural gas liquids) with little decline.

West Texas – Spires Ranch

In a continuation of the horizontal Strawn Lime play initiated by Abraxas several years ago, the Spires Ranch 89–1H well is currently drilling the lateral at a measured depth of 7,424 feet toward an objective depth of 10,400 feet including a 3,400 foot lateral section. Abraxas owns a 100 percent working interest in the approximate 5,500 acres Spires Ranch lease.

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