ABRAXAS PETROLEUM CORPORATION

www.abraxaspetroleum.com

NEWS RELEASE

Abraxas Announces Second Quarter 2013 Results

SAN ANTONIO (August 8, 2013) – Abraxas Petroleum Corporation (NASDAQ:AXAS) today reported financial and operating results for the three and six months ended June 30, 2013.

Financial and Operating Results for the Three Months Ended June 30, 2013

The three months ended June 30, 2013 resulted in:

·   Production of 374 MBoe (4,109 Boepd)

·   Revenue of $21.5 million

·   Adjusted EBITDA(a) of $11.7 million inclusive of Raven Drilling

·   Adjusted discretionary cash flow(a) of $10.6 million inclusive of Raven Drilling

·   Net income of $7.9 million, or $0.08 per share

·   Adjusted net income, excluding certain non-cash items and inclusive of Raven Drilling(a) of $3.0 million, or $0.03 per share

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

Net income for the three months ended June 30, 2013 was $7.9 million, or $0.08 per share, compared to a net income of $10.9 million, or $0.12 per share, for the three months ended June 30, 2012.

Adjusted net income, excluding certain non-cash items, for the three months ended June 30, 2013 was $3.0 million, or $0.03 per share, compared to adjusted net income, excluding certain non-cash items, of $2.4 million or $0.03 per share for the three months ended June 30, 2012. For the three months ended June 30, 2013 and 2012, adjusted net income excludes the unrealized gain on derivative contracts of $7.5 million and $10.3 million, respectively.  Also excluded is a full cost impairment on Canadian assets of $2.0 million and $1.3 million for the quarters ended June 30, 2013 and June 30, 2012, respectively.  Included in adjusted net income for the quarters ended June 30, 2013 and June 30, 2012 is the net income from our subsidiary, Raven Drilling, LLC of $0.7 million and $0.5 million, respectively.

Pursuant to SEC regulation S-X, no income is recognized for Raven Drilling, LLC. Contractual drilling services performed in connection with properties in which Abraxas holds an ownership interest cannot be recognized as income, rather it is credited to the full cost pool and recognized through lower amortization as reserves are produced.

Unrealized gains or losses on derivative contracts are based on mark-to-market valuations which are non-cash in nature and may fluctuate drastically from 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 either 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 $96.56 on June 30, 2013; therefore, the mark-to-market valuation changed considerably period to period.

Comments

Bob Watson, Abraxas’ President and CEO commented, “During the first half of 2013 Abraxas successfully executed on numerous asset sales in an effort to refocus our portfolio and true up our balance sheet.  With those efforts now behind us, and those barrels removed from our production base, we now endeavor to deliver visible and profitable absolute production growth.”

Conference Call

Abraxas Petroleum Corporation (NASDAQ:AXAS) will host its second quarter 2013 earnings conference call at 11 AM ET on August 8, 2013. To participate in the conference call, please dial 888.680.0865 and enter the passcode 91202357.  Additionally, a live listen only webcast of the conference call can be accessed under the investor relations section of the Abraxas website at www.abraxaspetroleum.com.   A replay of the conference call will be available until September 8, 2013 by dialing 888.286.8010 and entering the passcode 28158543 or can be accessed under the investor relations section of the Abraxas website.

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

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 crude oil and natural gas.  In addition, Abraxas’ future crude oil and natural gas 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 context 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:

Geoffrey King/Vice President – Chief Financial Officer

Telephone 210.490.4788

gking@abraxaspetroleum.com

www.abraxaspetroleum.com

ABRAXAS PETROLEUM CORPORATION

CONSOLIDATED

FINANCIAL HIGHLIGHTS

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Financial Results (In thousands except per share data):
Revenues	$	21,494		$	15,938		$	42,690		$	32,331
Adjusted EBITDA(a)		11,723			9,926			23,197			18,044
Adjusted Discretionary cash flow(a)		10,553			8,117			20,916			26,945
Net income		7,866			10,903			8,461			11,720
Net income per share – diluted	$	0.08		$	0.12		$	0.09		$	0.13
Adjusted net income, excluding certain non-cash items(a)		3,039			2,432			5,370			4,169
Adjusted net income, excluding certain non-cash  items(a), per share – diluted	$	0.03		$	0.03		$	0.06		$	0.05
Weighted average shares outstanding – diluted		93,361			93,263			93,311			93,448
Production:
Crude oil per day (Bopd)		2,094			1,735			2,100			1,673
Natural gas per day (Mcfpd)		9,825			11,307			10,162			10,895
Natural gas liquids (Bblpd)		377			320			368			276
Crude oil equivalent per day (Boepd)		4,109			3,940			4,162			3,764
Crude oil equivalent (MBoe)		373.9			358.5			753.3			685.1
Crude oil equivalent per day (Boepd) (b)		4,109			4,272			4,162			4,044
Crude oil equivalent (MBoe) (b)		373.9			388.7			753.3			735.9
Realized Prices, net of realized hedging activity:
Crude oil ($ per Bbl)	$	86.48		$	69.31		$	86.11		$	70.86
Natural gas ($ per Mcf)		3.51			5.24			3.26			5.42
Natural gas liquids ($ per Bbl)		31.46			37.53			33.12			40.20
Crude oil equivalent ($ per Boe)		55.35			48.61			54.34			50.12
Expenses:
Lease operating ($ per Boe)	$	16.49		$	15.01		$	16.76		$	16.52
Production taxes (% of oil and gas revenue)		8.9	%		9.3	%		9.0	%		9.2	%
General and administrative, excluding stock-based compensation ($ per Boe)		5.69			4.69			5.56			4.53
Cash interest ($ per Boe)		2.93			3.21			2.83			3.25
Depreciation, depletion and amortization ($ per Boe)		15.45			15.00			16.31			14.91

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

(b)   Includes Abraxas’ equity interest in Blue Eagle’s production which

was dissolved effective August 31, 2012.

BALANCE SHEET DATA

(In thousands)	June 30, 2013		December 31, 2012
Cash	$	2,432	$	2,061
Working capital (a)		6,547		(27,391	)
Property and equipment – net		188,347		212,832
Total assets		260,093		240,607
Long-term debt		131,023		124,101
Stockholders’ equity		55,999		46,700
Common shares outstanding		92,799		92,733

(a)   Excludes current maturities of long-term debt and current derivative assets and liabilities in accordance with our loan covenants

ABRAXAS PETROLEUM CORPORATION

CONSOLIDATED

STATEMENTS OF OPERATIONS

(In thousands except per share data)	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Revenues:
Oil and gas production	$	21,478		$	15,934		$	42,641		$	32,313
Other		16			4			49			18
		21,494			15,938			42,690			32,331
Operating costs and expenses:
Lease operating		6,166			5,382			12,628			11,316
Production and ad valorem taxes		1,911			1,489			3,838			2,985
Depreciation, depletion, and amortization		5,776			5,380			12,285			10,218
Impairment		1,977			1,306			1,977			1,306
General and administrative (including stock-based compensation of $669, $722, $1,142 and $1,199)		2,797			2,404			5,327			4,305
		18,627			15,961			36,055			30,130
Operating income (loss)		2,867			(23	)		6,635			2,201
Other (income) expense:
Interest income		-			(1	)		(1	)		(2	)
Interest expense		1,259			1,270			2,467			2,465
Amortization of deferred financing fees		343			266			676			296
(Gain) Loss on derivative contracts - realized		783			(914	)		1,708			(866	)
(Gain) Loss on derivative contracts - unrealized		(7,485	)		(10,296	)		(6,864	)		(9,420	)
Earnings from equity method investment		—			(1,251	)		—			(2,034	)
Other		14			—			101			42
		(5,086	)		(10,926	)		(1,913	)		(9,519	)
Net income before income tax	$	7,953		$	10,903		$	8,548		$	11,720
Income tax expense		87			—			87			—
Net income	$	7,866		$	10,903		$	8,461		$	11,720
Net income per common share - basic	$	0.09		$	0.12		$	0.09		$	0.13
Net income per common share - diluted	$	0.08		$	0.12		$	0.09		$	0.13
Weighted average shares outstanding:
Basic		92,351			91,808			92,323			91,775
Diluted		93,361			93,263			93,311			93,448

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.  Discretionary cash flow and EBITDA are non-GAAP financial measures as defined under SEC rules. Abraxas' discretionary 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 discretionary cash flow and EBITDA exclude some, but not all items that affect net income and may vary among companies, the discretionary cash flow and EBITDA presented below may not be comparable to similarly titled measures of other companies.  Management believes that operating income (loss) calculated in accordance with GAAP is the most directly comparable measure to discretionary cash flow; therefore, operating income (loss) is utilized as the starting point for the discretionary cash flow reconciliation.

Discretionary cash flow is defined as operating income (loss) plus depreciation, depletion and amortization expenses, non-cash expenses and impairments, cash portion of other income (expense) less cash interest. Adjusted discretionary cash flow is defined as discretionary cash flow, plus gas derivative monetization and cash flow from Raven Drilling’s operations. Accounting rules do not permit the inclusion of the net income and other components of Raven Drilling’s operations to be included in our consolidated results of operations and cash flow, instead, the results of Raven Drilling’s operations are credited to the full cost pool. Accordingly, for purposes of Adjusted Discretionary cash flow, Raven Drilling’s cash flow is added back. The following table provides a reconciliation of discretionary cash flow and adjusted discretionary cash flow to operating income (loss) for the periods presented.

(In thousands)	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Operating income (loss)	$	2,867		$	(23	)	$	6,635		$	2,201
Depreciation, depletion and amortization		5,776			5,380			12,285			10,218
Impairment		1,977			1,306			1,977			1,306
Stock-based compensation		669			722			1,142			1,199
Realized gain (loss) on derivative contracts		(783	)		914			(1,708	)		866
Cash interest		(1,095	)		(1,150	)		(2,131	)		(2,228	)
Discretionary cash flow	$	9,411		$	7,149		$	18,200		$	13,562
Gas derivative monetization		—			—			—			12,364
Cash flow from Raven Drilling operations		1,142			968			2,716			1,019
Adjusted Discretionary cash flow	$	10,553		$	$ 8,117		$	20,916		$	26,945

EBITDA is defined as net income plus interest expense, depreciation, depletion and amortization expenses, deferred income taxes and other non-cash items.  Adjusted EBITDA includes all of the components of EBITDA plus Raven Drilling’s EBITDA. Accounting rules do not permit the inclusion of the net income and other components of Raven Drilling’s operations to be included in our consolidated results of operations, instead, the results of Raven Drilling’s operations are credited to the full cost pool. Accordingly, for purposes of Adjusted EBITDA, Raven Drilling’s EBITDA is added back. Adjusted EBITDA does not include approximately $12.4 million from the monetization of our gas hedges settled in the first quarter 2012, which is allowed in EBITDA for purposes of our credit facility covenants. The following table provides a reconciliation of EBITDA and Adjusted EBITDA to net income for the periods presented.

(In thousands)	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Net income	$	7,866		$	10,903		$	8,461		$	11,720
Net interest expense		1,259			1,269			2,466			2,463
Income tax expense		87			—			87			—
Depreciation, depletion and amortization		5,776			5,380			12,285			10,218
Amortization of deferred financing fees		343			266			676			296
Stock-based compensation		669			722			1,142			1,199
Impairment		1,977			1,306			1,977			1,306
Unrealized  (gain)  loss on derivative contracts		(7,485	)		(10,296	)		(6,864	)		(9,420	)
Realized (gain) loss on interest derivative contract		—			584			—			1,161
Earnings from equity method investment		—			(1,251	)		—			(2,034	)
Other non-cash items		14			—			101			42
EBITDA	$	10,506		$	8,883		$	20,331		$	16,951
Raven Drilling EBITDA		1,217			1,043			2,866			1,093
Adjusted EBITDA	$	11,723		$	9,926		$	23,197		$	18,044

This release also includes a discussion of “adjusted net income, 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, excluding ceiling test impairment and unrealized changes in derivative contracts and net income related to Raven Drilling, LLC capitalized to the full cost pool, to net income for the periods presented.  Management believes that net income calculated in accordance with GAAP is the most directly comparable measure to adjusted net income, excluding certain non-cash items.

(In thousands)	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Net income	$	7,866		$	10,903		$	8,461		$	11,720
Impairment		1,977			1,306			1,977			1,306
Net income related to Raven Drilling		681			519			1,796			563
Unrealized (gain) loss on derivative contracts		(7,485	)		(10,296	)		(6,864	)		(9,420	)
Adjusted net income, excluding certain non-cash items	$	3,039		$	2,432		$	5,370		$	4,169
Net income per share – diluted	$	0.08		$	0.12		$	0.09		$	0.13
Adjusted net income, excluding certain non-cash items, per share – diluted	$	0.03		$	0.03		$	0.06		$	0.05