8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

August 16, 2010

Date of Report (Date of earliest event reported)

ABRAXAS PETROLEUM CORPORATION

(Exact name of registrant as specified in its charter)

Nevada	0-16071	74-2584033
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification Number)

18803 Meisner Drive

San Antonio, Texas 78258

(210) 490-4788

(Address of principal executive offices and Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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Item 2.02 Results of Operations and Financial Condition

On August 16, 2010 Abraxas issued a press release announcing its Second Quarter 2010 results.  The full text of the news release is attached hereto.

The information in this Report (including Exhibit 99.1) is furnished pursuant to Item 7.01 and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of the Section. The information in this Report will not be deemed an admission as to the materiality of any information required to be disclosed solely to satisfy the requirements of Regulation FD.

Item 9.01 Financial Statements and Exhibits.

(e)           Exhibits.

99.1   News Release

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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 hereunto duly authorized.

ABRAXAS PETROLEUM CORPORATION

By:   /s/ Chris E. Williford                                                                

Chris E. Williford

Executive Vice President, Chief Financial

Officer and Treasurer

Dated: August 16, 2010

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EX-99.1

ABRAXAS PETROLEUM CORPORATION

www.abraxaspetroleum.com

Exhibit 99.1

NEWS RELEASE

Abraxas Reports Second Quarter 2010 Results

SAN ANTONIO (August 16, 2010) – Abraxas Petroleum Corporation (NASDAQ:AXAS) today reported financial and operating results for the three and six months ended June 30, 2010 and provided an operational update.

Financial and Operating Results

The three months ended June 30, 2010 resulted in:

·   Production of 370 MBoe (4,065 Boepd);

·   Revenue of $14.9 million;

·   EBITDA(a) of $7.7 million;

·   Cash flow(a) of $5.0 million;

·   Net income of $5.3 million, or $0.07 per share; and

·   Adjusted net loss(a) of $641,000, or $0.01 per share, excluding certain non-cash items.

(a)   See reconciliation of non-GAAP financial measures below.

Net income for the quarter ended June 30, 2010 was $5.3 million, or $0.07 per share, compared to net loss of $10.0 million, or $0.20 per share, for the same period in 2009.  Adjusted net loss, excluding unrealized gains on derivative contracts, for the quarter ended June 30, 2010 was $641,000, or $0.01 per share, compared to adjusted net income, excluding unrealized losses on derivative contracts and non-controlling interest, of $766,000, or $0.02 per share, for the same period in 2009.

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 ASC 815, “Derivatives and Hedging,” as amended and interpreted, and require Abraxas to either record an unrealized gain or loss based on the calculated value difference from the previous period-end valuation.

Operational Update

Rocky Mountain:

·   In McKenzie County, North Dakota, Abraxas’ first horizontal operated well in the Bakken/Three Forks oil play is currently drilling the curve at a total measured depth of approximately 10,500 feet.  The first well will target the Three Forks formation and the second well will target the middle Bakken formation.  Abraxas owns an approximate 60% working interest in the first well and an approximate 70% working interest in the second well.

Canada:

·   In the Twining area of Alberta, Canadian Abraxas (“Canaxas”) has reached total depth on its first horizontal well targeting the Pekisko formation and has recently spudded the second horizontal well.  The first well is scheduled to be fracture stimulated in late August.  Two successful wells will earn Canaxas approximately ten sections, or 6,400 net acres.  Canaxas owns a 100% working interest in each of these wells.

18803 Meisner Drive

San Antonio, Texas 78258

Phone: 210.490.4788    Fax: 210.918.6675

Comments

“From an operational standpoint, the second quarter of 2010 was relatively slow as we prepared for our 2nd half of 2010 drilling program which got underway in July.  We look forward to results from our Canadian wells in the third quarter; however, we expect completion delays on our operated wells in the Bakken/Three Forks oil play in the Williston Basin as the area has experienced a significant increase in the number of drilling rigs running and an increase in the number of stages on a given frac job.  As a result, frac crews and equipment are in short supply.  Nonetheless, we will continue to work with the various service providers and expect that once the wells are drilled, we will be much better positioned to secure fra c dates,” commented Bob Watson, Abraxas’ President and CEO.

Conference Call

Abraxas invites you to participate in a conference call on Tuesday, August 17, 2010, at 10:00 a.m. CT (11:00 a.m. ET) to discuss the contents of this release and respond to questions.  Please dial 1.888.680.0860, passcode 87046533, 10 minutes before the scheduled start time, if you would like to participate in the call.  The conference call will also be webcast live on the Internet and can be accessed directly on the Company’s website at www.abraxaspetroleum.com under Investor Relations.  In addition to the audio webcast replay, a transcript of the conference call will be posted on the Investor Relations section of the Company’s website approximately 24 hours after the conclusion of the call, and will be accessible for at least 60 days.

Abraxas Petroleum Corporation is a San Antonio based crude oil and natural gas exploration and production company with operations across the Rocky Mountain, Mid-Continent, Permian Basin and Gulf Coast regions of the United States.

Safe Harbor for forward-looking statements:  Statements in this release looking forward in time involve known and unknown risks and uncertainties, which may cause Abraxas’ 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 Abraxas for natural gas and crude oil.  In addition, Abraxas’ future natural gas and crude oil production is highly dependent upon Abraxas’ level of success in acquiring or finding additional reserves.  Further, Abraxas operates in an industry sector where the value of securities is highly volatile and may be influenced by economic and other factors beyond Abraxas’ control.  In the c ontext of forward-looking information provided for in this release, reference is made to the discussion of risk factors detailed in Abraxas’ filings with the Securities and Exchange Commission during the past 12 months.

FOR MORE INFORMATION CONTACT:

Barbara M. Stuckey/Vice President - Corporate Finance

Telephone 210.490.4788

bstuckey@abraxaspetroleum.com

www.abraxaspetroleum.com

ABRAXAS PETROLEUM CORPORATION

FINANCIAL HIGHLIGHTS

·           (UNAUDITED)

·

(In thousands except per share data):	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
Financial Results:
Revenues	$	14,909	$	12,368	$	31,035	$	23,218
EBITDA(a)	7,675		11,870		15,346		21,830
Cash flow(a)	4,990		8,326		9,886		15,281
Net income (loss)	5,300		(10,032)		16,483		(5,582)
Net income (loss) per share – basic	$	0.07	$	(0.20)	$	0.22	$	(0.11)
Weighted average shares outstanding – basic	75,850		49,564		75,824		49,628
Production:
Crude oil per day (Bopd)	1,420		1,613		1,392		1,602
Natural gas per day (Mcfpd)	15,872		17,400		15,924		17,706
Crude oil equivalent per day (Boepd)	4,065		4,513		4,046		4,553
Crude oil equivalent (MBoe)	369.9		410.7		732.4		824.1
Realized Prices, net of realized hedging activity:
Crude oil ($ per Bbl)	$	66.31	$	67.04	$	66.88	$	63.88
Natural gas ($ per Mcf)	5.03		5.84		5.10		5.68
Crude oil equivalent ($ per Boe)	42.78		46.49		43.08		44.55
Expenses:
Lease operating ($ per Boe)	$	13.63	$	11.42	$	13.14	$	11.22
Production taxes (% of oil and gas revenue)	10.4%		10.7%		10.6%		11.5%
General and administrative, excluding stock-based compensation ($ per Boe)	4.47		3.10		4.76		3.80
Cash interest ($ per Boe)	5.72		7.07		5.89		6.45
Depreciation, depletion and amortization ($ per Boe)	11.98		10.98		11.84		10.91

(a)   See reconciliation of non-GAAP financial measures below.

BALANCE SHEET DATA

(In thousands)	June 30, 2010			December 31, 2009
Cash	$	2,594		$	1,861
Working capital (a)	229			(2,568)
Property and equipment – net	145,066			156,156
Total assets	173,859			176,236
Long-term debt	144,317			143,592
Stockholders’ equity	(1,090)		)	(18,363)
Common shares outstanding	76,370			76,232

(a)   Excludes current maturities of long-term debt and current derivative assets and liabilities.

ABRAXAS PETROLEUM CORPORATION

STATEMENTS OF OPERATIONS

(UNAUDITED)

(In thousands except per share data)	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
Revenues:
Oil and gas production revenues	$	14,646	$	12,119	$	30,509	$	22,715
Rig revenues	259		247		520		500
Other	4		2		6		3
	14,909		12,368		31,035		23,218
Operating costs and expenses:
Lease operating	5,040		4,688		9,627		9,245
Production taxes	1,525		1,297		3,227		2,609
Depreciation, depletion, and amortization	4,433		4,507		8,674		8,994
Rig operations	193		211		390		399
General and administrative (including stock-based compensation of $537, $329, $847 and $596)	2,191		1,601		4,332		3,730
	13,382		12,304		26,250		24,977
Operating income (loss)	1,527		64		4,785		(1,759)
Other (income) expense:
Interest income	(2)		(6)		(4)		(11)
Interest expense	2,252		3,051		4,586		5,607
Amortization of deferred financing fees	513		374		1,322		586
(Gain) loss on derivative contracts (unrealized of $(5,941), $20,889, $(17,636) and $14,459)	(6,550)		14,560		(17,527)		1,695
Financing fees	—		—		—		362
Other	14		2,208		(75)		2,229
	(3,773)		20,187		(11,698)		10,468
Net income (loss) before non-controlling interest	5,300		(20,123)		16,483		(12,227)
Non-controlling interest	—		10,091		—		6,645
Net income (loss)	$	5,300	$	(10,032)	$	16,483	$	(5,582)
Net income (loss) per common share - basic	$	0.07	$	(0.20)	$	0.22	$	(0.11)
Net income (loss) per common share - diluted	$	0.07	$	(0.20)	$	0.21	$	(0.11)
Weighted average shares outstanding:
Basic		75,850		49,564	75,824		49,628
Diluted		77,148		49,564	77,052		49,628

ABRAXAS PETROLEUM CORPORATION

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

To fully assess Abraxas’ operating results, management believes that, although not prescribed under generally accepted accounting principles ("GAAP"), discretionary cash flow and EBITDA are appropriate measures of Abraxas' ability to satisfy capital expenditure obligations and working capital requirements.  Cash flow and EBITDA are non-GAAP financial measures as defined under SEC rules. Abraxas' cash flow and EBITDA should not be considered in isolation or as a substitute for other financial measurements prepared in accordance with GAAP or as a measure of the Company's profitability or liquidity.  As cash flow and EBITDA exclude some, but not all items that affect net income and may vary among companies, the cash flow and EBITDA presented below may not be comparable to similarly titled measures of other compan ies.  Management believes that operating income calculated in accordance with GAAP is the most directly comparable measure to cash flow and EBITDA; therefore, operating income is utilized as the starting point for these reconciliations.

Cash flow is defined as operating income (loss) plus depletion, depreciation and amortization expenses, non-cash expenses and impairments, cash portion of other income (expense) and cash interest. The following table provides a reconciliation of cash flow to operating income for the periods presented.

(In thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
Operating income (loss)	$	1,527	$	64	$	4,785	$	(1,759))
Depreciation, depletion and amortization	4,433		4,507		8,674		8,994
Stock-based compensation	537		329		847		596
Realized gain (loss) on derivative contracts	609		6,329		(109)		12,764
Cash interest	(2,116))		(2,903))		(4,311))		(5,314))
Cash flow	$	4,990	$	8,326	$	9,886	$	15,281

EBITDA is defined as net income (loss) plus interest expense, depletion, depreciation and amortization expenses, deferred income taxes and other non-cash items.  The following table provides a reconciliation of EBITDA to operating income for the periods presented – see consolidated statements of operations for a reconciliation of net income (loss) to operating income.

(In thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
Operating income (loss)	$	1,527	$	64	$	4,785	$	(1,759)
Depreciation, depletion and amortizati	4,433		4,507		8,674		8,994
Stock-based compensation	537		329		847		596
Realized gain (loss) on derivative contracts(a)	1,178		6,970		1,040		13,999
EBITDA	$	7,675	$	11,870	$	15,346	$	21,830

(a)   Excludes realized gain (loss) associated with interest rate derivative contract.

 This release also includes a discussion of “adjusted net income (loss), excluding certain non-cash items”, which is a non-GAAP financial measure as defined under SEC rules.  The following table provides a reconciliation of adjusted net income (loss), excluding non-cash change in derivative fair value, to net income (loss) for the periods presented.  Management believes that net income (loss) calculated in accordance with GAAP is the most directly comparable measure to adjusted net income (loss), excluding certain non-cash items.

(In thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
Net income (loss)	$	5,300	$	(10,032)	$	16,483	$	(5,582)
Non-controlling interest	—		(10,091))		—		(6,645))
Loss (gain) on unrealized derivative contracts	(5,941))		20,889		(17,636))		14,459
Adjusted net income (loss), excluding certain non-cash items	$	(641))	$	766	$	(1,153)	$	2,232
Net income (loss) per share – basic	0.07		(0.20)		0.22		(0.11))
Adjusted net income (loss), excluding certain non-cash items, per share – basic	$	(0.01))	$	0.02	$	(0.02)	$	0.04