ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED March 31, 2016 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO ______ |
Nevada | 74-2584033 | |
(State of Incorporation) | (I.R.S. Employer Identification No.) |
18803 Meisner Drive, San Antonio, TX 78258 |
(Address of principal executive offices) (Zip Code) |
210-490-4788 |
(Registrant’s telephone number, including area code) |
Not Applicable |
(Former name, former address and former fiscal year, if changed since last report) |
Large accelerated filer o | Accelerated filer x |
Non-accelerated filer o (Do not mark if a smaller reporting company) | Smaller reporting company o |
• | the prices we receive for our production and the effectiveness of our hedging activities; |
• | the availability of capital including under our credit facility; |
• | our success in development, exploitation and exploration activities; |
• | declines in our production of oil and gas; |
• | our restrictive debt covenants; |
• | political and economic conditions in oil producing countries, especially those in the Middle East; |
• | price and availability of alternative fuels; |
• | our ability to procure services and equipment for our drilling and completion activities; |
• | our acquisition and divestiture activities; |
• | weather conditions and events; |
• | the proximity, capacity, cost and availability of pipelines and other transportation facilities; and |
• | other factors discussed elsewhere in this report |
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ITEM 4 - | |||
OTHER INFORMATION | |||
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ITEM 6 - | |||
March 31, | December 31, | |||||||
2016 | 2015 | |||||||
(Unaudited) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 483 | $ | 3,540 | ||||
Accounts receivable: | ||||||||
Joint owners, net | 507 | 1,552 | ||||||
Oil and gas production sales | 5,551 | 6,713 | ||||||
Other | 389 | 1,241 | ||||||
6,447 | 9,506 | |||||||
Derivative asset | 13,091 | 18,902 | ||||||
Other current assets | 699 | 726 | ||||||
Total current assets | 20,720 | 32,674 | ||||||
Property and equipment: | ||||||||
Oil and gas properties, full cost method of accounting: | ||||||||
Proved | 788,037 | 787,683 | ||||||
Other property and equipment | 41,466 | 41,444 | ||||||
Total | 829,503 | 829,127 | ||||||
Less accumulated depreciation, depletion, amortization and impairment | (645,652 | ) | (604,289 | ) | ||||
Total property and equipment, net | 183,851 | 224,838 | ||||||
Deferred financing fees, net | 1,477 | 1,642 | ||||||
Derivative asset | 5,892 | 8,463 | ||||||
Other assets | 255 | 255 | ||||||
Total assets | $ | 212,195 | $ | 267,872 |
March 31, | December 31, | |||||||
2016 | 2015 | |||||||
(Unaudited) | ||||||||
Liabilities and Stockholders' Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 9,651 | $ | 24,825 | ||||
Joint interest oil and gas production payable | 6,711 | 7,177 | ||||||
Accrued interest | 107 | 115 | ||||||
Other accrued expenses | 846 | 622 | ||||||
Derivative liability | 10 | — | ||||||
Current maturities of long-term debt | 6,350 | 2,330 | ||||||
Total current liabilities | 23,675 | 35,069 | ||||||
Long-term debt – less current maturities | 133,804 | 138,402 | ||||||
Other liabilities | 257 | 257 | ||||||
Derivative liability long-term | 356 | — | ||||||
Future site restoration | 9,671 | 9,679 | ||||||
Total liabilities | 167,763 | 183,407 | ||||||
Commitments and contingencies (Note 7) | ||||||||
Stockholders’ Equity: | ||||||||
Preferred stock, par value $.01 per share – authorized 1,000,000 shares; -0- shares issued and outstanding | — | — | ||||||
Common stock, par value $0.01 per share, authorized 200,000,000 shares; 106,387,103 and 106,346,001 issued and outstanding, respectively | 1,064 | 1,063 | ||||||
Additional paid-in capital | 314,698 | 313,852 | ||||||
Accumulated deficit | (271,330 | ) | (230,450 | ) | ||||
Total stockholders’ equity | 44,432 | 84,465 | ||||||
Total liabilities and stockholders’ equity | $ | 212,195 | $ | 267,872 |
Three Months Ended March 31, | ||||||||||
2016 | 2015 | |||||||||
Revenues: | ||||||||||
Oil and gas production revenues | $ | 9,541 | $ | 18,646 | ||||||
Other | 23 | 15 | ||||||||
9,564 | 18,661 | |||||||||
Operating costs and expenses: | ||||||||||
Lease operating | 4,751 | 6,293 | ||||||||
Production taxes | 1,175 | 1,800 | ||||||||
Rig expense | 79 | — | ||||||||
Depreciation, depletion, and amortization | 5,892 | 12,069 | ||||||||
Proved property impairment | 35,085 | — | ||||||||
General and administrative (including stock-based compensation of $807 and $810, respectively) | 2,725 | 3,034 | ||||||||
49,707 | 23,196 | |||||||||
Operating loss | (40,143 | ) | (4,535 | ) | ||||||
Other (income) expense: | ||||||||||
Interest income | — | (1 | ) | |||||||
Interest expense | 1,238 | 834 | ||||||||
Amortization of deferred financing fees | 164 | 157 | ||||||||
Gain on derivative contracts | (665 | ) | (4,827 | ) | ||||||
737 | (3,837 | ) | ||||||||
Loss from continuing operations before income tax | (40,880 | ) | (698 | ) | ||||||
Income tax (expense) benefit | — | — | ||||||||
Net loss from continuing operations | (40,880 | ) | (698 | ) | ||||||
Net loss from discontinued operations - net of tax | — | (20 | ) | |||||||
Net loss | $ | (40,880 | ) | $ | (718 | ) | ||||
Net loss per common share - basic | ||||||||||
Continuing operations | $ | (0.39 | ) | $ | (0.01 | ) | ||||
Discontinued operations | — | — | ||||||||
$ | (0.39 | ) | $ | (0.01 | ) | |||||
Net loss per common share - diluted | ||||||||||
Continuing operations | $ | (0.39 | ) | $ | (0.01 | ) | ||||
Discontinued operations | — | — | ||||||||
$ | (0.39 | ) | $ | (0.01 | ) | |||||
Weighted average shares outstanding: | ||||||||||
Basic | 104,709 | 104,415 | ||||||||
Diluted | 104,709 | 104,415 |
ABRAXAS PETROLEM CORPORATION | |||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
(Unaudited) | |||||||||
(in thousands) | |||||||||
Three Months Ended March 31, | |||||||||
2016 | 2015 | ||||||||
Operating Activities | |||||||||
Net loss | $ | (40,880 | ) | $ | (718 | ) | |||
Loss from discontinued operations | — | (20 | ) | ||||||
Loss from continuing operations | (40,880 | ) | (698 | ) | |||||
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||
Net gain on derivative contracts | (665 | ) | (4,827 | ) | |||||
Derivative contract settlements | 5,307 | 4,112 | |||||||
Monetization of derivative contracts | 4,360 | — | |||||||
Depreciation, depletion, and amortization | 5,892 | 12,069 | |||||||
Proved property impairment | 35,085 | — | |||||||
Amortization of deferred financing fees | 164 | 157 | |||||||
Accretion of future site restoration | 135 | 139 | |||||||
Stock-based compensation | 807 | 810 | |||||||
Non-cash director compensation | 40 | — | |||||||
Changes in operating assets and liabilities: | |||||||||
Accounts receivable | 3,059 | 9,083 | |||||||
Other assets | (227 | ) | 258 | ||||||
Accounts payable and accrued expenses | (15,567 | ) | (48,191 | ) | |||||
Net cash used in continuing operations | (2,490 | ) | (27,088 | ) | |||||
Net cash used in discontinued operations | — | (20 | ) | ||||||
Net cash used in operating activities | (2,490 | ) | (27,108 | ) | |||||
Investing Activities | |||||||||
Capital expenditures, including purchases and development of properties | (1,587 | ) | (12,400 | ) | |||||
Proceeds from the sale of oil and gas properties | 1,597 | — | |||||||
Net cash provided by (used in) investing activities | 10 | (12,400 | ) | ||||||
Financing Activities | |||||||||
Proceeds from long-term borrowings | 4,000 | 40,000 | |||||||
Payments on long-term borrowings | (4,578 | ) | (385 | ) | |||||
Deferred financing fees | 1 | (19 | ) | ||||||
Exercise of stock options | — | 9 | |||||||
Net cash (used in) provided by financing activities | (577 | ) | 39,605 | ||||||
(Decrease) increase in cash and cash equivalents | (3,057 | ) | 97 | ||||||
Cash and cash equivalents at beginning of period | 3,540 | 3,772 | |||||||
Cash and cash equivalents at end of period | $ | 483 | $ | 3,869 | |||||
Supplemental disclosures of cash flow information: | |||||||||
Interest paid | $ | 1,110 | $ | 649 |
Three Months Ended March 31, | ||||||
2016 | 2015 | |||||
$ | 457 | $ | 417 |
Number of Shares | Weighted Average Option Exercise Price Per Share | Weighted Average Grant Date Fair Value Per Share | ||||||||||
Outstanding, December 31, 2015 | 6,808 | $ | 2.89 | $ | 2.06 | |||||||
Granted | 1,964 | $ | 0.97 | $ | 0.65 | |||||||
Exercised | — | $ | — | $ | — | |||||||
Cancelled | (100 | ) | $ | 5.19 | $ | 3.02 | ||||||
Outstanding, March 31, 2016 | 8,672 | $ | 2.43 | $ | 1.73 |
March 31, 2016 | December 31, 2015 | ||||||
Options exercisable | 4,823 | 4,305 |
Number of Shares (thousands) | Weighted Average Grant Date Fair Value Per Share | |||||||
Unvested, December 31, 2015 | 1,643 | $ | 3.44 | |||||
Granted | — | — | ||||||
Vested/Released | (1 | ) | 3.28 | |||||
Forfeited | — | — | ||||||
Unvested, March 31, 2016 | 1,642 | $ | 3.44 |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
$ | 350 | $ | 393 |
March 31, 2016 | December 31, 2015 | ||||||||
Beginning future site restoration obligation | $ | 9,679 | $ | 9,495 | |||||
New wells placed on production and other | — | 307 | |||||||
Deletions related to property disposals and plugging costs | (161 | ) | (793 | ) | |||||
Accretion expense | 135 | 565 | |||||||
Revisions and other | 18 | 105 | |||||||
Ending future site restoration obligation | $ | 9,671 | $ | 9,679 |
March 31, 2016 | December 31, 2015 | |||||||
Senior secured credit facility | $ | 134,000 | $ | 134,000 | ||||
Rig loan agreement | 2,107 | 2,620 | ||||||
Real estate lien note | 4,047 | 4,112 | ||||||
140,154 | 140,732 | |||||||
Less current maturities | (6,350 | ) | (2,330 | ) | ||||
$ | 133,804 | $ | 138,402 |
• | incur or guarantee additional indebtedness; |
• | transfer or sell assets; |
• | create liens on assets; |
• | engage in transactions with affiliates other than on an “arm’s length” basis; |
• | make any change in the principal nature of our business; and |
• | permit a change of control. |
• | 100% of the net proceeds from any sale of any of our properties occurring between April 1, 2016 and October 1, 2016 must be used to repay amounts outstanding under the credit facility; |
• | 100% of the net proceeds from any terminations of derivative contracts must be used to repay amounts outstanding under the credit facility; |
• | if the sum of our cash on hand plus liquid investments exceeds $10.0 million, then the amount in excess of $10.0 million must be used to pay amounts outstanding under the credit facility; and |
• | granting the lenders a security interest in at least 90% of the PV-10 of our proven reserves. |
Three Months Ended March 31, | |||||||||
2016 | 2015 | ||||||||
(In thousands, except per share data) | |||||||||
Numerator: | |||||||||
Net loss from continuing operations | $ | (40,880 | ) | $ | (698 | ) | |||
Net loss from discontinued operations | — | (20 | ) | ||||||
(40,880 | ) | (718 | ) | ||||||
Denominator: | |||||||||
Denominator for basic earnings per share – weighted-average common shares outstanding | 104,709 | 104,415 | |||||||
Effect of dilutive securities: Stock options and restricted shares | — | — | |||||||
Denominator for diluted earnings per share – adjusted weighted-average shares and assumed exercise of options and restricted shares | 104,709 | 104,415 | |||||||
Net loss per common share - basic | |||||||||
Continuing operations | $ | (0.39 | ) | $ | (0.01 | ) | |||
Discontinued operations | — | — | |||||||
$ | (0.39 | ) | $ | (0.01 | ) |
Net loss per common share - diluted | |||||||||
Continuing operations | $ | (0.39 | ) | $ | (0.01 | ) | |||
Discontinued operations | — | — | |||||||
$ | (0.39 | ) | $ | (0.01 | ) |
Oil - WTI | |||||||
Contract Periods | Daily Volume (Bbl) | Swap Price (per Bbl) | |||||
2016 April - September | 948 | $ | 84.10 | ||||
2016 October - December | 2,500 | $ | 43.25 | ||||
2017 | 1,908 | $ | 55.39 | ||||
2018 | 1,500 | $ | 46.39 |
Oil - WTI | |||||||||||||||
Contract Periods | Daily Volume (Bbl) | Floor (Long Put) | Ceiling (Short Call) | Short Put | |||||||||||
2016 | 1,000 | $ | 60.00 | $ | 71.00 | $ | 45.00 |
Oil - WTI | |||||||
Contract Periods | Daily Volume (Bbl) | Swap Price (per Bbl) | |||||
2016 April - September | 1,948 | $ | 39.04 | ||||
2016 October - December | 2,500 | $ | 43.25 | ||||
2017 | 1,908 | $ | 55.39 |
2018 | 1,500 | $ | 46.39 |
Fair Value of Derivative Instruments as of March 31, 2016 | ||||||||||||
Asset Derivatives | Liability Derivatives | |||||||||||
Derivatives not designated as hedging instruments | Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | ||||||||
Commodity price derivatives | Derivatives – current | $ | 13,091 | Derivatives – current | $ | 10 | ||||||
Commodity price derivatives | Derivatives – long-term | 5,892 | Derivatives – long-term | 356 | ||||||||
$ | 18,983 | $ | 366 |
Fair Value of Derivative Instruments as of December 31, 2015 | ||||||||||||
Asset Derivatives | Liability Derivatives | |||||||||||
Derivatives not designated as hedging instruments | Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | ||||||||
Commodity price derivatives | Derivatives – current | $ | 18,902 | Derivatives – current | $ | — | ||||||
Commodity price derivatives | Derivatives – long-term | 8,463 | Derivatives – long-term | — | ||||||||
$ | 27,365 | $ | — |
• | Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
• | Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. |
• | Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Balance as of March 31, 2016 | |||||||||||||
Assets: | ||||||||||||||||
NYMEX Fixed Price Derivative contracts | $ | — | $ | 16,070 | $ | — | $ | 16,070 | ||||||||
NYMEX Collars | — | — | 2,913 | 2,913 | ||||||||||||
Total Assets | $ | — | $ | 16,070 | $ | 2,913 | $ | 18,983 | ||||||||
Liabilities: | ||||||||||||||||
NYMEX Fixed Price Derivative contracts | $ | — | $ | 366 | $ | — | $ | 366 |
Total Liabilities | $ | — | $ | 366 | $ | — | $ | 366 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Balance as of December 31, 2015 | |||||||||||||
Assets: | ||||||||||||||||
NYMEX Fixed Price Derivative contracts | $ | — | $ | 21,731 | $ | — | $ | 21,731 | ||||||||
— | — | 5,634 | 5,634 | |||||||||||||
Total Assets | $ | — | $ | 21,731 | $ | 5,634 | $ | 27,365 | ||||||||
Liabilities: | ||||||||||||||||
NYMEX Fixed Price Derivative contracts | $ | — | $ | — | $ | — | $ | — | ||||||||
Total Liabilities | $ | — | $ | — | $ | — | $ | — |
Unobservable inputs at January 1, 2016 | $ | 5,634 | ||||
Changes in market value | (1,356 | ) | ||||
Settlements during the period | (1,365 | ) | ||||
Unobservable inputs at March 31, 2016 | $ | 2,913 |
• | the availability of and our ability to raise additional capital resources and provide liquidity to meet cash flow needs; |
• | basis differentials which are dependent on actual delivery location; |
• | adjustments for BTU content; |
• | quality of the hydrocarbons; and |
• | gathering, processing and transportation costs. |
Oil - NYMEX | Gas - NYMEX | ||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||
Average realized price (1) | $ | 26.21 | $ | 39.52 | $ | 0.99 | $ | 2.51 | |||||||||
Average NYMEX price | $ | 33.63 | $ | 48.59 | $ | 1.98 | $ | 2.82 | |||||||||
Differential | $ | (7.42 | ) | $ | (9.07 | ) | $ | (0.99 | ) | $ | (0.31 | ) |
Oil - WTI | ||||||||
Contract Periods | Daily Volume (Bbl) | Swap Price (per Bbl) | ||||||
2016 April - September | 948 | $ | 84.10 | |||||
2016 October - December | 2,500 | $ | 43.25 | |||||
2017 | 1,908 | $ | 55.39 | |||||
2018 | 1,500 | $ | 46.39 |
Oil - WTI | |||||||||||||||
Contract Periods | Daily Volume (Bbl) | Floor (Long Put) | Ceiling (Short Call) | Short Put | |||||||||||
2016 | 1,000 | $ | 60.00 | $ | 71.00 | $ | 45.00 |
Oil - WTI | ||||||||
Contract Periods | Daily Volume (Bbl) | Swap Price (per Bbl) | ||||||
2016 April - September | 1,948 | $ | 39.04 | |||||
2016 October - December | 2,500 | $ | 43.25 | |||||
2017 | 1,908 | $ | 55.39 | |||||
2018 | 1,500 | $ | 46.39 |
Three months ended March 31, | |||||||
2016 | 2015 | ||||||
Total production (MBoe) | 538 | 593 | |||||
Average daily production (Boepd) | 5,916 | 6,590 | |||||
% Oil/ NGL | 76 | % | 78 | % |
Three Months Ended March 31, | |||||||||
2016 | 2015 | ||||||||
Operating revenue (1): | |||||||||
Oil sales | $ | 8,565 | $ | 15,917 | |||||
Gas sales | 773 | 2,004 | |||||||
NGL sales | 203 | 725 | |||||||
Other | 23 | 15 |
Total operating revenues | $ | 9,564 | $ | 18,661 | |||||
Operating loss | $ | (40,143 | ) | $ | (4,535 | ) | |||
Oil sales (MBbls) | 327 | 403 | |||||||
Gas sales (MMcf) | 778 | 798 | |||||||
NGL sales (MBbls) | 82 | 57 | |||||||
Oil equivalents (MBoe) | 538 | 593 | |||||||
Average oil sales price (per Bbl)(1) | $ | 26.21 | $ | 39.52 | |||||
Average gas sales price (per Mcf)(1) | $ | 0.99 | $ | 2.51 | |||||
Average NGL sales price (per Bbl) | $ | 2.48 | $ | 12.63 | |||||
Average oil equivalent sales price (Boe) (1) | $ | 17.72 | $ | 31.44 |
(1) | Revenue and average sales prices are before the impact of hedging activities. |
• | the development and exploration of existing properties, including drilling and completion costs of wells; |
• | acquisition of interests in additional oil and gas properties; and |
• | production and transportation facilities. |
Three Months Ended March 31, | |||||||||
2016 | 2015 | ||||||||
(In thousands) | |||||||||
Expenditure category: | |||||||||
Exploration/Development | $ | 1,565 | $ | 12,212 | |||||
Facilities and other | 22 | 188 | |||||||
Total | $ | 1,587 | $ | 12,400 |
Three Months Ended March 31, | |||||||||
2016 | 2015 | ||||||||
(In thousands) | |||||||||
Net cash used in operating activities | $ | (2,490 | ) | $ | (27,088 | ) | |||
Net cash provided by (used in) investing activities | 10 | (12,400 | ) | ||||||
Net cash (used in) provided by financing activities | (577 | ) | 39,605 | ||||||
Total | $ | (3,057 | ) | $ | 117 |
• | Long-term debt, and |
• | Operating leases for office facilities. |
Payments due in twelve month periods ending: | ||||||||||||||||||||
Contractual Obligations (In thousands) | Total | March 31, 2017 | March 31, 2018-2019 | March 31, 2020-2021 | Thereafter | |||||||||||||||
Long-term debt (1) | $ | 140,154 | $ | 6,350 | $ | 130,517 | $ | 564 | $ | 2,723 | ||||||||||
Interest on long-term debt (2) | 9,824 | 4,131 | 5,197 | 260 | 236 | |||||||||||||||
Lease obligations (3) | 32 | 32 | — | — | — | |||||||||||||||
Total | $ | 150,010 | $ | 10,513 | $ | 135,714 | $ | 824 | $ | 2,959 |
(1) | These amounts represent the balances outstanding under our credit facility, the rig loan agreement and the real estate lien note. These payments assume that we will not borrow additional funds. |
(2) | Interest expense assumes the balances of long-term debt at the end of the period and current effective interest rates. |
(3) | Lease on office space in Dickinson, North Dakota, which expires on October 31, 2016, office space in Lusk, Wyoming, which will expire on December 31, 2016 and office space in Denver, Colorado which will expire on December 31, 2016. |
March 31, 2016 | December 31, 2015 | |||||||
(In thousands) | ||||||||
Credit facility | $ | 134,000 | $ | 134,000 | ||||
Rig loan agreement | 2,107 | 2,620 | ||||||
Real estate lien note | 4,047 | 4,112 | ||||||
140,154 | 140,732 | |||||||
Less current maturities | (6,350 | ) | (2,330 | ) | ||||
$ | 133,804 | $ | 138,402 |
• | incur or guarantee additional indebtedness; |
• | transfer or sell assets; |
• | create liens on assets; |
• | engage in transactions with affiliates other than on an “arm’s length” basis; |
• | make any change in the principal nature of our business; and |
• | permit a change of control. |
• | 100% of the net proceeds from any sale of any of our properties occurring between April 1, 2016 and October 1, 2016 must be used to repay amounts outstanding under the credit facility; |
• | 100% of the net proceeds from any terminations of derivative contracts must be used to repay amounts outstanding under the credit facility; |
• | if the sum of our cash on hand plus liquid investments exceeds $10.0 million, then the amount in excess of $10.0 million must be used to pay amounts outstanding under the credit facility; and |
• | granting the lenders a security interest in at least 90% of the PV-10 of our proven reserves. |
(a) | Exhibits |
Exhibit 31.1 | Certification - Robert L.G. Watson, CEO | |||
Exhibit 31.2 | Certification - Geoffrey R. King, CFO | |||
Exhibit 32.1 | Certification pursuant to 18 U.S.C. Section 1350 - Robert L.G. Watson, CEO | |||
Exhibit 32.2 | Certification pursuant to 18 U.S.C. Section 1350 - Geoffrey R. King, CFO |
Date | May 10, 2016 | By: /s/Robert L.G. Watson | |
ROBERT L.G. WATSON, | |||
President and | |||
Principal Executive Officer |
Date | May 10, 2016 | By: /s/Geoffrey R. King | |
GEOFFREY R. KING, | |||
Vice President and | |||
Principal Financial Officer |
Date | May 10, 2016 | By: /s/G. William Krog, Jr. | |
G. WILLIAM KROG, JR., | |||
Principal Accounting Officer |
1. | I have reviewed this quarterly |
2. | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report. |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
1. | I have reviewed this quarterly report on Form 10-Q of Abraxas Petroleum Corporation. |
2. | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report. |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Document and Entity Information - shares |
3 Months Ended | |
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Mar. 31, 2016 |
May. 05, 2016 |
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Document and Entity Information [Abstract] | ||
Entity Registrant Name | ABRAXAS PETROLEUM CORP | |
Entity Central Index Key | 0000867665 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2016 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 106,387,103 |
CONSOLIDATED BALANCE SHEET (Parenthetical) - $ / shares |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Stockholders’ Equity: | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 1,000,000 | 1,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 200,000,000 | 200,000,000 |
Common stock, shares issued (in shares) | 106,387,103 | 106,436,001 |
Common stock, shares outstanding (in shares) | 106,387,103 | 106,346,001 |
CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2016 |
Mar. 31, 2015 |
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Operating costs and expenses: | ||
Stock-based compensation | $ 807 | $ 810 |
Basis of Presentation |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization and Significant Accounting Policies | Basis of Presentation The accounting policies followed by Abraxas Petroleum Corporation and its subsidiaries (the “Company”) are set forth in the notes to the Company’s audited consolidated financial statements in the Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on March 15, 2016. Such policies have been continued without change. Also, refer to the notes to those financial statements for additional details of the Company’s financial condition, results of operations, and cash flows. All material items included in those notes have not changed except as a result of normal transactions in the interim, or as disclosed within this report. The accompanying interim condensed consolidated financial statements have not been audited by our independent registered public accountants, and in the opinion of management, reflect all adjustments necessary for a fair presentation of the financial position and results of operations. Any and all adjustments are of a normal and recurring nature. Although management believes the unaudited interim related disclosures in these condensed consolidated financial statements are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in annual audited consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the SEC. The results of operations and the cash flows for the period ended March 31, 2016 are not necessarily indicative of the results to be expected for the full year. The condensed consolidated financial statements included herein should be read in conjunction with the consolidated audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. Consolidation Principles The terms “Abraxas,” “Abraxas Petroleum,” “we,” “us,” “our” or the “Company” refer to Abraxas Petroleum Corporation and all of its subsidiaries, including Raven Drilling, LLC (“Raven Drilling”). Rig Accounting In accordance with SEC Regulation S-X, no income is to be recognized in connection with contractual drilling services performed in connection with properties in which the Company or its affiliates hold an ownership, or other economic interest. Any income not recognized as a result of this limitation is to be credited to the full cost pool and recognized through lower amortization as reserves are produced. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassification of prior period balances Certain amounts in the prior period presented have been reclassified to conform to the current period financial statement presentation. These reclassifications have no effect on previously reported net income. New Accounting Standards and Disclosures In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-06, Derivatives and hedging (Topic 815): Contingent put and call options in debt instruments, which clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. The amendment will be effective prospectively for reporting periods beginning on or after December 31, 2016, and early adoption is permitted. The Company is currently assessing the impact of the ASU on the Company;s condensed consolidated financial statements.In March 2016, the FASB issued ASU No. 2016-08, Revenue from contracts with customers (Topic 606): Principal versus agent considerations (reporting revenue gross versus net), which clarifies the implementation guidance on principle versus agent considerations. The amendment will be effective prospectively for reporting periods beginning on or after December 31, 2017, and early adoption is not permitted. The Company is currently assessing the impact of the ASU on the Company's condensed consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to employee share-based payment accounting, which includes provisions intended to simplify various aspects related to how share-based compensation payments are accounted for and presented in the financial statements. This amendment will be effective prospectively for reporting periods beginning on or after December 15, 2016, and early adoption is permitted. The Company is currently assessing the impact of the ASU on the Company's condensed consolidated fianancial statements. Stock-based Compensation and Option Plans Stock Options The Company currently utilizes a standard option-pricing model (i.e., Black-Scholes) to measure the fair value of stock options granted to employees and directors. The following table summarizes the Company’s stock-based compensation expense related to stock options for the periods presented:
The following table summarizes the Company’s stock option activity for the three months ended March 31, 2016 (shares in thousands):
Additional information related to stock options at March 31, 2016 and December 31, 2015 is as follows:
As of March 31, 2016, there was approximately $4.5 million of unamortized compensation expense related to outstanding stock options that will be recognized in 2016 through 2019. Restricted Stock Awards Restricted stock awards are awards of common stock that are subject to restrictions on transfer and to a risk of forfeiture if the awardee terminates employment with the Company prior to the lapse of the restrictions. The fair value of such stock was determined using the closing price on the grant date and compensation expense is recorded over the applicable vesting periods. The following table summarizes the Company’s restricted stock activity for the three months ended March 31, 2016:
The following table summarizes the Company’s stock-based compensation expense related to restricted stock for the periods presented:
As of March 31, 2016, there was approximately $3.0 million of unamortized compensation expense relating to outstanding restricted shares that will be recognized in 2016 through 2019. Oil and Gas Properties The Company follows the full cost method of accounting for oil and gas properties. Under this method, all direct costs and certain indirect costs associated with acquisition of properties and successful as well as unsuccessful exploration and development activities are capitalized. Depreciation, depletion, and amortization of capitalized oil and gas properties and estimated future development costs, excluding unproved properties, are based on the unit-of-production method based on proved reserves. Net capitalized costs of oil and gas properties, less related deferred taxes, are limited by country, to the lower of unamortized cost or the cost ceiling, defined as the sum of the present value of estimated future net revenues from proved reserves based on unescalated prices discounted at 10 percent, plus the cost of properties not being amortized, if any, plus the lower of cost or estimated fair value of unproved properties included in the costs being amortized, if any, less related income taxes. Costs in excess of the present value of estimated net revenue from proved reserves discounted at 10% are charged to proved property impairment expense. No gain or loss is recognized upon sale or disposition of oil and gas properties for full cost accounting companies with proceeds accounted for as an adjustment of capitalized cost. An exception to this rule occurs when the adjustment to the full cost pool results in a significant alteration of the relationship between capitalized cost and proved reserves. The Company applies the full cost ceiling test on a quarterly basis on the date of the latest balance sheet presented. At March 31, 2016, our net capitalized costs of oil and gas properties exceeded the cost ceiling of our estimated proved reserves by approximately $35.1 million, resulting in the recognition of a proved property impairment of $35.1 million for the quarter ended March 31, 2016. Based on the first-day-of-the-month prices over the twelve months ended May 1, 2016, we anticipate recording additional write-downs in the carrying value of our oil and gas properties during the second quarter of 2016 of approximately $44.4 million. Impairment calculations did not consider the positive impact of our commodity derivative positions as generally accepted accounting principles only allow the inclusion of derivatives designated as cash flow hedges. Further write-downs in subsequent quarters are reasonably likely to occur if the trailing 12-month commodity prices continue to fall as compared to the commodity prices used in prior quarters. For the period ended March 31, 2015, our net capitalized costs of oil and gas properties did not exceed the present value of our estimated proved reserves. Restoration, Removal and Environmental Liabilities The Company is subject to extensive federal, state and local environmental laws and regulations. These laws regulate the discharge of materials into the environment and may require the Company to remove or mitigate the environmental effects of the disposal or release of petroleum substances at various sites. Environmental expenditures are expensed or capitalized depending on their future economic benefit. Expenditures that relate to an existing condition caused by past operations and that have no future economic benefit are expensed. Liabilities for expenditures of a non-capital nature are recorded when environmental assessments and/or remediation is probable, and the costs can be reasonably estimated. Such liabilities are generally undiscounted unless the timing of cash payments for the liability or component is fixed or reliably determinable. The Company accounts for future site restoration obligations based on the guidance of ASC 410 which addresses accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. ASC 410 requires that the fair value of a liability for an asset's retirement obligation be recorded in the period in which it is incurred and the corresponding cost capitalized by increasing the carrying amount of the related long-lived asset. The liability is accreted to its then present value each period, and the capitalized cost is depreciated over the estimated useful life of the related asset. For all periods presented, we have included estimated future costs of abandonment and dismantlement in our full cost amortization base and amortize these costs as a component of our depletion expense in the accompanying condensed consolidated financial statements. The following table summarizes the Company’s future site restoration obligation transactions for the three months ended March 31, 2016 and the year ended December 31, 2015:
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Income Taxes |
3 Months Ended |
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Mar. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company records income taxes using the liability method. Under this method, Deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using the tax rates and laws expected to be in effect when the differences are expected to reverse. For the three months ended March 31, 2016, there was no income tax benefit due to the fact we are in a loss position and have recorded a full valuation allowance against our net deferred taxes. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of March 31, 2016, the Company did not have any accrued interest or penalties related to uncertain tax positions. The tax years 2012 through 2015 remain open to examination by the tax jurisdictions to which the Company is subject. At December 31, 2015, the Company had, subject to the limitation discussed below, $192.9 million of net operating loss carryforwards for U.S. tax purposes. The loss carryforward will expire in varying amounts through 2035, if not utilized. Uncertainties exist as to the future utilization of the operating loss carryforwards therefore, we have established a valuation allowance of $103.7 million for deferred tax assets at December 31, 2015. |
Long-Term Debt |
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Long-Term Debt | Long-Term Debt The following is a description of the Company’s debt as of March 31, 2016 and December 31, 2015, respectively:
Credit Facility We have a senior secured credit facility with Société Générale, as administrative agent and issuing lender, and certain other lenders, which we refer to as the credit facility. As of March 31, 2016, $134.0 million was outstanding under the credit facility. The credit facility has a maximum commitment of $300.0 million and availability is subject to a borrowing base. The borrowing base is determined semi-annually by the lenders based upon our reserve reports, one of which must be prepared by our independent petroleum engineers and one of which may be prepared internally The amount of the borrowing base is calculated by the lenders based upon their valuation of our proved reserves securing the facility utilizing these reserve reports and their own internal decisions. In addition, the lenders, in their sole discretion, are able to make one additional borrowing base redetermination during any six-month period between scheduled redeterminations and we are able to request one redetermination during any six-month period between scheduled redeterminations. The borrowing base will be automatically reduced in connection with any sales of producing properties with a market value of 5% or more of our then-current borrowing base and in connection with any hedge termination which could reduce the collateral value by 5% or more. Our borrowing base can never exceed the $300.0 million maximum commitment amount. At March 31, 2016, we had a borrowing base of $165.0 million. On April 22, 2016, the credit facility was amended, which we refer to as the April 2016 Amendment, to set the borrowing base to $130.0 million in connection with the April 1 redetermination. In order to effectuate the reduction, we liquidated a portion of our hedge contracts and entered into new hedges for similar volumes. In connection with the hedge monetization (see Note 5), we received approximately $10.0 million of proceeds, which were used to repay borrowings under the credit facility. As part of the amendment, Societe Generale also waived any potential violation which the hedge liquidation could have caused. Unless the redetermination scheduled to occur with the delivery of our internal engineering report on or about August 31, 2016, which we refer to as the Fall 2016 Scheduled Redetermination, has become effective prior to October 1, 2016 the borrowing base will be automatically reduced to $120.0 million on October 1, 2016 unless it has been otherwise redetermined. Effective April 1, 2016, in connection with the amendment discussed below; outstanding amounts under the credit facility bear interest (x) at any time an event of default exists, at 3% per annum plus the amounts set forth below, (y) between April 1, 2016 to the earlier of October 1, 2016 and the effective date of the Fall 2016 Scheduled Redetermination, 0.25% per annum plus the rates set forth below and (z) at all other times, at (a) the greater of (1) the reference rate announced from time to time by Société Générale, (2) the Federal Funds Rate plus 0.5%, and (3) a rate determined by Société Générale as the daily one-month LIBOR plus, in each case, (b) 0.75%-1.75%, depending on the utilization of the borrowing base, or, if we elect, LIBOR plus, in each case, 1.75%-2.75% depending on the utilization of the borrowing base. At March 31, 2016, the interest rate on the credit facility was approximately 2.93% assuming LIBOR borrowings. Subject to earlier termination rights and events of default, the stated maturity date of the credit facility is June 30, 2018. Interest is payable quarterly on reference rate advances and not less than quarterly on LIBOR advances. We are permitted to terminate the credit facility and are able, from time to time, to permanently reduce the lenders’ aggregate commitment under the credit facility in compliance with certain notice and dollar increment requirements. Each of our subsidiaries has guaranteed our obligations under the credit facility on a senior secured basis. Obligations under the credit facility are secured by a first priority perfected security interest, subject to certain permitted encumbrances, in all of our and our subsidiary guarantors’ material property and assets, other than Raven Drilling. In connection with April 2016 Amendment, we also agreed to grant our lenders a security interest in our headquarters building (in addition to the lien granted to the lender under our building loan described below) and two ranches we own, none of which had previously secured our obligations under the credit facility. Under the credit facility, we are subject to customary covenants, including certain financial covenants and reporting requirements. We are required to maintain a current ratio, as of the last day of each quarter of not less than 1.00 to 1.00 and an interest coverage ratio of not less than 2.50 to 1.00. We are also required as of the last day of each quarter to maintain a total debt to EBITDAX ratio of not more than 4.00 to 1.00. The current ratio is defined as the ratio of consolidated current assets to consolidated current liabilities. For the purposes of this calculation, current assets include the portion of the borrowing base which is undrawn but excludes any cash deposited with a counter-party to a hedging arrangement and any assets representing a valuation account arising from the application of ASC 815 and ASC 410-20 and current liabilities exclude the current portion of long-term debt and any liabilities representing a valuation account arising from the application of ASC 815 and ASC 410-20. The interest coverage ratio is defined as the ratio of consolidated EBITDAX to consolidated interest expense for the four fiscal quarters ended on the calculation date. For the purposes of this calculation, EBITDAX is defined as the sum of consolidated net income plus interest expense, oil and gas exploration expenses, income, franchise or margin taxes, depreciation, amortization, depletion and other non-cash charges including non-cash charges resulting from the application of ASC 718, ASC 815 and ASC 410-20 plus all realized net cash proceeds arising from the settlement or monetization of any hedge contracts plus expenses incurred in connection with the negotiation, execution, delivery and performance of the credit facility plus expenses incurred in connection with any acquisition permitted under the credit facility plus expenses incurred in connection with any offering of senior unsecured notes, subordinated debt or equity plus up to $1.0 million of extraordinary expenses in any 12-month period plus extraordinary losses minus all non-cash items of income which were included in determining consolidated net income, including all non-cash items resulting from the application of ASC 815 and ASC 410-20. Interest expense includes total interest, letter of credit fees and other fees and expenses incurred in connection with any debt. The total debt to EBITDAX ratio is defined as the ratio of total debt to consolidated EBITDAX for the four fiscal quarters ended on the calculation date. For the purposes of this calculation, total debt is the outstanding principal amount of debt, excluding debt associated with the office building, Raven Drilling’s rig loan and obligations with respect to surety bonds and derivative contracts. At March 31, 2016 we were in compliance with all of our debt covenants. As of March 31, 2016, the interest coverage ratio was 11.67 to 1.00, the total debt to EBITDAX ratio was 3.07 to 1.00, and our current ratio was 2.23 to 1.00. The credit facility contains a number of covenants that, among other things, restrict our ability to:
In addition, in connection with the April 2016 Amendment, we also agreed to certain additional covenants including:
The credit facility also contains customary events of default, including nonpayment of principal or interest, violations of covenants, cross default and cross acceleration to certain other indebtedness, bankruptcy and material judgments and liabilities. Rig Loan Agreement On September 19, 2011, Raven Drilling entered into a rig loan agreement, secured by our Oilwell 2,000 HP diesel electric drilling rig (the “Collateral”). The original principal amount of the note was $7.0 million and bears interest at 4.26%. The note is payable in monthly interest and principal payments in the amount of $179,695. Subject to earlier prepayment provisions and events of default, the stated maturity date of the note is February 14, 2017. As of March 31, 2016 and December 31, 2015, $2.1 million and $2.6 million, respectively, were outstanding under the rig loan agreement. The Company has guaranteed Raven Drilling’s obligations under the rig loan agreement and associated note. Obligations under the rig loan agreement are secured by a first priority perfected security interest, subject to certain permitted encumbrances, in the Collateral. Real Estate Lien Note We have a real estate lien note secured by a first lien deed of trust on the property and improvements which serves as our corporate headquarters. The note bears interest at a fixed rate of 4.25% and is payable in monthly installments of $34,354. Beginning August 20, 2018, the interest rate will adjust to the bank's then current prime rate plus 1.00% with a maximum rate of 7.25%. The maturity date of the note is July 20, 2023. As of March 31, 2016 and December 31, 2015, $4.0 million and $4.1 million, respectively, were outstanding on the note. |
Earnings per Share |
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Earnings per Share | Earnings per Share The following table sets forth the computation of basic and diluted earnings per share:
Basic earnings per share, excluding any dilutive effects of stock options and unvested restricted stock, is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted loss per share is computed similar to basic; however diluted loss per share reflects the assumed conversion of all potentially dilutive securities. For the three months ended March 31, 2016, 1,642 potential shares related to unvested restricted shares were excluded from the calculation of diluted loss per share since their inclusion would have been anti-dilutive due to losses incurred in the periods. |
Hedging Program and Derivatives |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Hedging Program and Derivatives | Hedging Program and Derivatives The derivative instruments we utilize are based on index prices that may and often do differ from the actual oil and gas prices realized in our operations. Our derivative contracts do not qualify for hedge accounting as prescribed by ASC 815; therefore, fluctuations in the market value of the derivative contracts are recognized in earnings during the current period. There are no netting agreements relating to these derivative contracts and there is no policy to offset. The following table sets forth the summary position of our derivative contracts as of March 31, 2016: Fixed price swaps:
Collar contracts combined with short puts (three-way collar)
On April 1, 2016, the Company monetized all of its April - September 2016 derivative contract positions for approximately $10.0 million, and simultaneously entered into new derivative contracts for the period April - September 2016 for 1,948Bbl per day at a fixed swap price of $39.04. Proceeds from the monetization were used to repay borrowings under the Company's credit facility. The following table sets forth the summary position of our derivative contracts after the above transactions.
The following table illustrates the impact of derivative contracts on the Company’s balance sheet:
Gains and losses from derivative activities are reflected as “Gain on derivative contracts” in the accompanying Condensed Consolidated Statements of Operations. |
Financial Instruments |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Instruments | Financial Instruments Assets and liabilities measured at fair value are categorized into one of three different levels depending on the observability of the inputs employed in the measurement. The three levels are defined as follows:
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The Company is further required to assess the creditworthiness of the counter-party to the derivative contract. The results of the assessment of non-performance risk, based on the counter-party’s credit risk, could result in an adjustment of the carrying value of the derivative instrument. The following tables sets forth information about the Company’s assets and liabilities measured at fair value on a recurring basis as of March 31, 2016 and December 31, 2015, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (in thousands):
The Company’s derivative contracts consist of NYMEX-based fixed price swaps and three-way collar contracts. Under fixed price swaps, we receive a fixed price for our production and pay a variable market price to the contract counter-party. Three-way collar contracts combine a long put, a short put and a short call. Under a collar, we pay the counterparty if the market price is above the ceiling price (short call) and the counterparty pays us if the market price is below the floor price (long put). The use of the long put combined with a short put allows us to sell a call at a higher price, thus establishing a higher ceiling and limits our exposure to future settlement payments while also restricting our downward risk to the difference between the long put and the short put if the price drops below the price of the short put. This allows us to settle our contracts for the market price plus the spread between the short put and the long put in a case where the market price has fallen below the short put fixed price. The NYMEX-based fixed price derivative contracts and three-way collars are indexed to NYMEX futures contracts, which are actively traded, for the underlying commodity and are commonly used in the energy industry. A number of financial institutions and large energy companies act as counter-parties to these type of derivative contracts. As the fair value of these derivative contracts is based on a number of inputs, including contractual volumes and prices stated in each derivative contract, current and future NYMEX commodity prices, and quantitative models that are based upon readily observable market parameters that are actively quoted and can be validated through external sources, we have characterized these derivative contracts as Level 2. In order to verify the third party valuation, we enter the various inputs into a model and compare our results to the third party for reasonableness. The fair value of the collar instruments are based on inputs that are not as observable as the fixed price swaps. In addition to the actively quoted market price, variables such as time value, volatility and other unobservable inputs are used. Accordingly, these instruments have been classified as Level 3. The following is additional information for the Company's recurring fair value measurements using significant unobservable inputs (Level 3 inputs) for the three months ended March 31, 2016.
Nonrecurring Fair Value Measurements The Company follows the provisions of ASC 820-10 for nonfinancial assets and liabilities measured at fair value on a nonrecurring basis. As it relates to the Company, ASC 820-10 applies to certain nonfinancial assets and liabilities as may be acquired in a business combination and thereby measured at fair value and the initial recognition of future site restoration obligations for which fair value is used. The future site restoration obligation estimates are derived from historical costs as well as management’s expectation of future cost environments. As there is no corroborating market activity to support the assumptions used, the Company has designated these liabilities as Level 3. A reconciliation of the beginning and ending balances of the Company’s future site restoration is presented in Note 1. Other Financial Instruments The carrying amounts of our cash, cash equivalents, restricted cash, accounts receivable and accounts payable approximate fair value because of the short-term maturities and/or liquid nature of these assets and liabilities. The carrying value of our debt approximates fair value as the interest rates are market rates and this debt is considered Level 2. |
Contingencies - Litigation |
3 Months Ended |
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Mar. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies From time to time, the Company is involved in litigation relating to claims arising out of its operations in the normal course of business. At March 31, 2016, the Company was not involved in any legal proceedings that are expected, individually or in the aggregate, to have a material adverse effect on its financial position or results of operations. |
Basis of Presentation (Policies) |
3 Months Ended |
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Mar. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Operations | Consolidation Principles The terms “Abraxas,” “Abraxas Petroleum,” “we,” “us,” “our” or the “Company” refer to Abraxas Petroleum Corporation and all of its subsidiaries, including Raven Drilling, LLC (“Raven Drilling”). |
Rig Accounting | Rig Accounting In accordance with SEC Regulation S-X, no income is to be recognized in connection with contractual drilling services performed in connection with properties in which the Company or its affiliates hold an ownership, or other economic interest. Any income not recognized as a result of this limitation is to be credited to the full cost pool and recognized through lower amortization as reserves are produced. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Reclassifications of Prior Period Balances | Reclassification of prior period balances Certain amounts in the prior period presented have been reclassified to conform to the current period financial statement presentation. These reclassifications have no effect on previously reported net income. |
New Accounting Standards and Disclosures | New Accounting Standards and Disclosures In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-06, Derivatives and hedging (Topic 815): Contingent put and call options in debt instruments, which clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. The amendment will be effective prospectively for reporting periods beginning on or after December 31, 2016, and early adoption is permitted. The Company is currently assessing the impact of the ASU on the Company;s condensed consolidated financial statements.In March 2016, the FASB issued ASU No. 2016-08, Revenue from contracts with customers (Topic 606): Principal versus agent considerations (reporting revenue gross versus net), which clarifies the implementation guidance on principle versus agent considerations. The amendment will be effective prospectively for reporting periods beginning on or after December 31, 2017, and early adoption is not permitted. The Company is currently assessing the impact of the ASU on the Company's condensed consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to employee share-based payment accounting, which includes provisions intended to simplify various aspects related to how share-based compensation payments are accounted for and presented in the financial statements. This amendment will be effective prospectively for reporting periods beginning on or after December 15, 2016, and early adoption is permitted. The Company is currently assessing the impact of the ASU on the Company's condensed consolidated fianancial statements. |
Share-Based Payments | Stock Options The Company currently utilizes a standard option-pricing model (i.e., Black-Scholes) to measure the fair value of stock options granted to employees and directors. |
Restricted Stock Awards | Restricted Stock Awards Restricted stock awards are awards of common stock that are subject to restrictions on transfer and to a risk of forfeiture if the awardee terminates employment with the Company prior to the lapse of the restrictions. The fair value of such stock was determined using the closing price on the grant date and compensation expense is recorded over the applicable vesting periods. |
Estimates of Proved Oil and Gas Reserves | Oil and Gas Properties The Company follows the full cost method of accounting for oil and gas properties. Under this method, all direct costs and certain indirect costs associated with acquisition of properties and successful as well as unsuccessful exploration and development activities are capitalized. Depreciation, depletion, and amortization of capitalized oil and gas properties and estimated future development costs, excluding unproved properties, are based on the unit-of-production method based on proved reserves. Net capitalized costs of oil and gas properties, less related deferred taxes, are limited by country, to the lower of unamortized cost or the cost ceiling, defined as the sum of the present value of estimated future net revenues from proved reserves based on unescalated prices discounted at 10 percent, plus the cost of properties not being amortized, if any, plus the lower of cost or estimated fair value of unproved properties included in the costs being amortized, if any, less related income taxes. Costs in excess of the present value of estimated net revenue from proved reserves discounted at 10% are charged to proved property impairment expense. No gain or loss is recognized upon sale or disposition of oil and gas properties for full cost accounting companies with proceeds accounted for as an adjustment of capitalized cost. An exception to this rule occurs when the adjustment to the full cost pool results in a significant alteration of the relationship between capitalized cost and proved reserves. The Company applies the full cost ceiling test on a quarterly basis on the date of the latest balance sheet presented. At March 31, 2016, our net capitalized costs of oil and gas properties exceeded the cost ceiling of our estimated proved reserves by approximately $35.1 million, resulting in the recognition of a proved property impairment of $35.1 million for the quarter ended March 31, 2016. Based on the first-day-of-the-month prices over the twelve months ended May 1, 2016, we anticipate recording additional write-downs in the carrying value of our oil and gas properties during the second quarter of 2016 of approximately $44.4 million. Impairment calculations did not consider the positive impact of our commodity derivative positions as generally accepted accounting principles only allow the inclusion of derivatives designated as cash flow hedges. Further write-downs in subsequent quarters are reasonably likely to occur if the trailing 12-month commodity prices continue to fall as compared to the commodity prices used in prior quarters. |
Restoration, Removal and Environmental Liabilities | Restoration, Removal and Environmental Liabilities The Company is subject to extensive federal, state and local environmental laws and regulations. These laws regulate the discharge of materials into the environment and may require the Company to remove or mitigate the environmental effects of the disposal or release of petroleum substances at various sites. Environmental expenditures are expensed or capitalized depending on their future economic benefit. Expenditures that relate to an existing condition caused by past operations and that have no future economic benefit are expensed. Liabilities for expenditures of a non-capital nature are recorded when environmental assessments and/or remediation is probable, and the costs can be reasonably estimated. Such liabilities are generally undiscounted unless the timing of cash payments for the liability or component is fixed or reliably determinable. The Company accounts for future site restoration obligations based on the guidance of ASC 410 which addresses accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. ASC 410 requires that the fair value of a liability for an asset's retirement obligation be recorded in the period in which it is incurred and the corresponding cost capitalized by increasing the carrying amount of the related long-lived asset. The liability is accreted to its then present value each period, and the capitalized cost is depreciated over the estimated useful life of the related asset. For all periods presented, we have included estimated future costs of abandonment and dismantlement in our full cost amortization base and amortize these costs as a component of our depletion expense in the accompanying condensed consolidated financial statements. |
Basis of Presentation (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock Options Activity and Related Compensation Expense | The following table summarizes the Company’s stock-based compensation expense related to stock options for the periods presented:
The following table summarizes the Company’s stock option activity for the three months ended March 31, 2016 (shares in thousands):
Additional information related to stock options at March 31, 2016 and December 31, 2015 is as follows:
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Schedule of Unvested Restricted Stock Activity and Related Compensation Expense | The following table summarizes the Company’s restricted stock activity for the three months ended March 31, 2016:
The following table summarizes the Company’s stock-based compensation expense related to restricted stock for the periods presented:
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Asset Retirement Obligations | The following table summarizes the Company’s future site restoration obligation transactions for the three months ended March 31, 2016 and the year ended December 31, 2015:
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Long-Term Debt (Tables) |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term Debt | The following is a description of the Company’s debt as of March 31, 2016 and December 31, 2015, respectively:
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Earnings per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation of Basic and Diluted Net Income (Loss) Per Share | The following table sets forth the computation of basic and diluted earnings per share:
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Hedging Program and Derivatives (Tables) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Contract Position | The following table sets forth the summary position of our derivative contracts as of March 31, 2016: Fixed price swaps:
Collar contracts combined with short puts (three-way collar)
On April 1, 2016, the Company monetized all of its April - September 2016 derivative contract positions for approximately $10.0 million, and simultaneously entered into new derivative contracts for the period April - September 2016 for 1,948Bbl per day at a fixed swap price of $39.04. Proceeds from the monetization were used to repay borrowings under the Company's credit facility. The following table sets forth the summary position of our derivative contracts after the above transactions.
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Impact of Derivative Contracts on Balance Sheet | The following table illustrates the impact of derivative contracts on the Company’s balance sheet:
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Financial Instruments (Tables) |
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets and Liabilities Measured at Fair Value | The following tables sets forth information about the Company’s assets and liabilities measured at fair value on a recurring basis as of March 31, 2016 and December 31, 2015, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (in thousands):
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Schedule of Reciuring Fair Value Measurements Using Significant Unobservable Inputs | dditional information for the Company's recurring fair value measurements using significant unobservable inputs (Level 3 inputs) for the three months ended March 31, 2016.
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Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
Dec. 31, 2014 |
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Operating Loss Carryforwards [Line Items] | |||
Income tax (expense) benefit | $ 0 | $ 0 | |
Deferred Tax Assets, Operating Loss Carryforwards, Domestic | $ 192,900 | ||
Deferred Tax Assets, Valuation Allowance | $ 103,700 |
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