Filed by Abraxas Petroleum Corporation
                                                   (Commission File No. 0-19118)
                          Pursuant to Rule 425 Under the Securities Act of 1933,
                                                                     as amended,
                                        And Deemed Filed Pursuant to Rule 14a-12
                                      Under the Securities Exchange Act of 1934,
                                                                     as amended.
                                    Subject Company:  Grey Wolf Exploration Inc.
                                                        (no Commission File No.)

                                  NEWS RELEASE

           ABRAXAS ANNOUNCES SUCCESSFUL DRILLING IN CANADIAN GAS PLAYS

SAN ANTONIO,  TX (Aug.  21,  2001) - Abraxas  Petroleum  Corporation  (AMEX:ABP)
announces  that the first of five  development  wells is  onstream  in the Pouce
Coupe  area of Canada at a rate of 2.7 MMcfe per day.  Four  other  wells are in
various  stages of completion in Pouce Coupe and the Caroline area with one well
drilling in each area. The Company expects similar results from these wells with
reserves  expected to average 3 to 5 Bcfe per well.  None of the seven locations
are currently  booked as proved or probable  reserves by the  Company's  outside
engineering firms. Abraxas has identified over forty additional locations in the
Caroline and Pouce Coupe areas based on the recent  drilling and the 3-D seismic
surveys  completed in each area this past winter.  The Company has one rig under
contract in each area and anticipates drilling one well per month in Pouce Coupe
and one well every six weeks in Caroline for the foreseeable future. Abraxas and
its consolidated  Canadian  subsidiary,  Grey Wolf  Exploration Inc.  (TSE:GWX),
combined have an average 85% working interest in the seven wells but have a 100%
working interest in the majority of the subsequent drilling locations.

THIS PRESS RELEASE DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION  OF AN
OFFER TO EXCHANGE THE SECURITIES OF ABRAXAS FOR THE SECURITIES OF GREY WOLF. ANY
SUCH OFFER OR SOLICITATION WILL BE SUBJECT TO CERTAIN  CUSTOMARY  CONDITIONS AND
WILL BE MADE ONLY BY ABRAXAS'  PROSPECTUS AND OTHER  EXCHANGE  OFFER  MATERIALS,
WHICH  HAVE  BEEN  FILED  WITH  THE SEC AND  HAVE  BEEN  MAILED  TO GREY  WOLF'S
STOCKHOLDERS. GREY WOLF'S STOCKHOLDERS ARE URGED TO READ THESE DOCUMENTS BECAUSE
THEY CONTAIN  IMPORTANT  INFORMATION  ABOUT THE OFFER.  THE  DOCUMENTS  ARE ALSO
AVAILABLE  AT NO CHARGE FROM THE SEC'S WEB SITE,  WWW.SEC.GOV,  AND FROM ABRAXAS
PETROLEUM CORPORATION AT 500 NORTH LOOP 1604 EAST, SUITE 100, SAN ANTONIO, TEXAS
78232.

Abraxas Petroleum  Corporation is a San Antonio-based  crude oil and natural gas
exploitation and production company that also processes natural gas. The Company
operates in Texas, Wyoming and western Canada. For additional  information about
the   Company,    please   visit   our   web   site,    www.abraxaspetroleum.com
http://www.abraxaspetroleum.com>  for the most current and updated  information.
The web site is  updated  daily in order to comply  with the SEC  Regulation  FD
(Fair Disclosure).

Safe Harbor for  forward-looking  statement:  Statements in this release looking
forward in time involve  known and unknown  risks and  uncertainties,  which may
cause the Company's actual results in future periods to be materially  different
from any future performance suggested in this release. Such factors may include,
but may not be  necessarily  limited to,  changes in the prices  received by the
Company for crude oil and natural gas. In addition,  the Company's  future crude
oil and natural gas production is highly  dependent upon the Company's  level of
success in  acquiring  or finding  additional  reserves.  Further,  the  Company
operates in an industry  sector where the value of securities is highly volatile
and may be  influenced  by  economic  and other  factors  beyond  the  Company's
control.  In the context of  forward-looking  information  provided  for in this
release,  reference is made to the  discussion  of risk factors  detailed in the
Company's filing with the Securities and Exchange  Commission during the past 12
months.

FOR MORE INFORMATION CONTACT:
Janice Herndon/Manager Corp. Communications
Telephone 210-490-4788
jherndon@abraxaspetroleum.com
www.abraxaspetroleum.com