Abraxas Petroleum Corporation

Management did not state Q3 revenue, EPS, or gross margin on this call. They said the 2019 capital program was essentially completed slightly ahead of schedule, with year-end spending expected to be about $89 million versus the guided $86 million budget. They also said the company had closed about $23 million in non-core asset sales and would have generated about $68 million in cash flow. Forwardly, they said the new second-lien loan creates approximately $41 million of current liquidity, blended cost of capital is approximately 8.5%, and there are no debt maturities until mid-2022. 2020 guidance was not provided; the board will review budget scenarios in December and announce the conclusion then.

Bob Watson framed the quarter around balance-sheet stabilization and liquidity improvement as the first step in maximizing shareholder value. He said the company needed to term out debt and reduce reliance on the RBL, and that the new second-lien financing gives Abraxas flexibility to run a conservative capital program within cash flow. His tone was cautiously optimistic, emphasizing that the stronger balance sheet should open the door to other shareholder-value initiatives, including ongoing evaluation of strategic alternatives.

Steve Harris handled the formal opening remarks and risk disclosure, while the financial detail came mainly from Bob Watson. The key financing points were the second-lien loan, about $41 million of current liquidity, an approximately 8.5% blended cost of capital, and no debt maturities until mid-2022. Management also said 2019 spending should end around $89 million, with about $23 million of asset-sale proceeds and about $68 million of cash flow, and that free cash flow in Q4 would be used to pay down debt and add liquidity.

Analysts asked about 2020 activity, including whether there would be more Delaware work and when the remaining six Bakken DUCs would be completed. Management said only three commitment wells are planned in the Delaware and that the six Bakken wells would be fracked when weather permits in spring. On M&A, management said the board, management, and advisors continue to evaluate numerous options and that the improved balance sheet and liquidity put the company in a better negotiating position. On hedging, management said the new loan has the same 80% PDP hedging limit as the first-lien facility and that they are currently hedged at the maximum until the next reserve report.