OilVoice - Abraxas Provides Operational Update and Announces Additional Non-Core Divestitures

Abraxas Provides Operational Update and Announces Additional Non-Core Divestitures

Tuesday, March 16, 2010

Abraxas Petroleum Corporation provides an operational update and announces additional non-core divestitures.

Rocky Mountain:
In the Bakken/Three Forks oil play in the Williston Basin, Abraxas is in the process of spacing and permitting its first two operated wells in the play. Both wells are located in eastern McKenzie County, North Dakota and will be drilled on 1,280 acre spacing units - one well will target the middle Bakken formation and the other well will target the underlying Three Forks formation. It is anticipated that each well will have horizontal laterals of approximately 9,000 feet and that each well will be completed with 20 or more stages of fracture stimulation. The first well is currently scheduled to spud in June. Abraxas continues to acquire leases in western North Dakota and eastern Montana as it fills out its existing acreage blocks in anticipation of additional operated drilling in the last half of 2010.

In Divide County, North Dakota, Abraxas participated in what appears to be a successful Three Forks horizontal well for its 10.3% working interest. The well has been plagued with small mechanical issues, which combined with the shortage of oil field services in the area, has delayed completion. To date, the well has been fracture stimulated with 12 stages out of a planned 20. The remaining 8 stages are scheduled for March 18th. In the interim, the well has been flowing significant amounts of oil and gas while cleaning up fluid from the first 12 stages of fracture stimulation.

In Divide County, North Dakota, Abraxas committed for its 1.9% working interest in another Three Forks horizontal well to be drilled by one of the more active Bakken players.

Mid-Continent:
In Hemphill County, Texas, Abraxas participated for its 8.3% working interest in a successful Granite Wash horizontal well operated by a large independent active in the play. The well was drilled to a total measured depth of 15,800 feet, including a 5,000 foot lateral, and completed with a 12-stage fracture stimulation. The well has been on production for several weeks and is currently flowing approximately 17.0 MMcf of liquids-rich gas and 500 Bbl of condensate, or 3,333 Boepd. Net to Abraxas' interest, this production rate equates to approximately 200 Boepd plus natural gas liquids. Abraxas owns additional held-by-production acreage in this play.

Permian Basin:
In Nolan County, Texas, the Spires Ranch 202 #1 tested oil out of the Ellenburger and Caddo formations and a test of the Strawn formation is pending. Despite concerns about formation pressures, the oil recovery and updated 3-D seismic evaluation has provided Abraxas with sufficient encouragement to drill two (2) additional wells in the near future. One vertical well will test the Strawn, Caddo and Ellenburger formations and a second horizontal well will evaluate the Strawn formation. Abraxas owns a 100% working interest in this play.

Gulf Coast:
In the Eagle Ford shale play of South Texas, Abraxas continues to acquire acreage in geologically specific areas in anticipation of drilling its first Eagle Ford horizontal well later this year.

In Bee County, Texas, Abraxas drilled the Bradford #1 in the first quarter of 2010 to a total depth of 10,300 feet. Casing has been set in the well to test several zones in the Wilcox formation after encouraging open hole logs and formation tests. Abraxas owns a 40% working interest in this well.

In San Patricio County, Texas, Abraxas drilled two oil development wells in the first quarter of 2010. The Welder #86 and #87 were each drilled to a total depth of 8,700 feet. While drilling, both wells encountered a number of oil-prone horizons in the Frio formation and completion operations should be finished during the second quarter of 2010. Abraxas owns a 100% working interest in each of these wells.

Pursuant to our previously announced initiative to divest principally non-operated, non-core assets to generate cash for debt repayment and to accelerate our capital program, Abraxas has sold properties for total net proceeds of approximately $11.2 million, $5.4 million of which has been previously announced. In total, these properties produced approximately 142 Boepd (approximately 3% of Abraxas' daily net production) and had approximately 606 MBoe of proved reserves (approximately 2% of Abraxas' net proved reserves). The simple metrics equate to $78,385 per producing Boepd and $18.41 per proved Boe.

The first $10 million of net proceeds from non-core divestitures will be used to repay the term loan portion of our credit facility. After which, any net proceeds will be allocated approximately 50% for further debt reduction and 50% to accelerate the Company's capital program. The Company has identified an additional $20 to $30 million of similar non-core assets that it will attempt to divest on similar terms over the next several months.

"We are quite pleased with our leasehold position in the Bakken/Three Forks oil play in the Williston Basin and in the Eagle Ford shale play of South Texas as we have been successful in adding additional acreage in strategic areas. We look forward to operating our first well in each of these emerging plays this year. The Granite Wash well in the Texas Panhandle is perhaps the best well that we have participated in our 30-plus year history and we have additional acreage in this play," commented Bob Watson, Abraxas' President and CEO.