Abraxas Announces Q4 and Year 2003 Financial Results.

Energy Editors/Business Editors

SAN ANTONIO--(BUSINESS WIRE)--March 9, 2004

Abraxas Petroleum Corporation (AMEX:ABP) today reported financial and operating results for the fourth quarter and the year-ended December 31, 2003. With production of 7.9 Bcfe for the year generating revenues of $39.0 million, the Company realized net income of $55.9 million ($1.55 per share on a dilutive basis). Not including the gain of $68.9 million the Company realized from the sale of its Canadian subsidiaries in January of 2003, continuing operations showed a net loss of $13.0 million ($0.36 per share). This compares to a loss of $118.5 million ($3.95 per share) in 2002. Abraxas lost $1.7 million ($.05 per share) in Q4 2003 compared to a loss of $5.7 million ($0.19 per share) in the same quarter of 2002.

In January of 2003, the Company completed a series of financial transactions that ultimately reduced the Company's debt from approximately $300 million at December 31, 2002 to approximately $168 million (with debt at face value) at December 31, 2003 and reduced cash interest costs from approximately $34 million in 2002 to approximately $4 million in 2003. Subsequent to year-end 2003, the Company amended its senior credit agreement, increasing its size, reducing its costs, and providing additional operational flexibility.

The most significant operating items affecting 2003 results included:

-- Capital spending of approximately $18 million during 2003

participating in 24 wells with a 95% success rate;

-- Continuation of development activities that resulted in

replacing 218% of 2003 production and increasing reserves 15.9

Bcfe (prior to production) from year-end 2002 at a finding and

development cost of $1.15 per Mcfe;

-- Realized price per Mcfe of $4.81 in 2003 compared to $2.73 for

2002; and

-- Daily production rates increasing by 26% from the beginning of

2003 (on retained assets) to December 31, 2003.

The Company also issued the following details related to its year-end reserves to clarify its previous announcement on March 2, 2004:

                                 Bcfe        %
                               --------  ---------
Proved Developed Producing        56.7       46.7
Proved Developed Non-Producing     9.6        8.0
                               --------  ---------
   Total Proved Developed         66.3       54.7
Proved Undeveloped                54.8       45.3
                               --------  ---------
   Total Proved                  121.1      100.0

In addition, the Company announced its current hedge positions, which include a series of price floors for approximately 40% of its projected production through September 2004. These floors, comprised of a combination of oil and natural gas contracts over these months, provide a floor of approximately $22.50 per barrel for the oil contracts and $4.21 per Mcf for the natural gas contracts. These instruments do not restrict the Company from receiving any prices above these floor levels.

Abraxas CEO, Bob Watson, commented, "2003 was an eventful year for Abraxas as we completed several transactions in January resulting in significant impact on our balance sheet and our operations going forward. Our retained assets in Canada, coupled with our growing inventory of U.S. projects allowed us to continue our development success and demonstrate a meaningful increase in production and reserves as we exited 2003. As we entered 2004, the Company participated in the drilling of two horizontal wells in the Ladyfern area of British Columbia. These wells have recently been tested at a combined rate of 11.1 MMcfpd (1.4 MMcfpd net to our interest) with initial production expected by the end of March. We look forward to continuing this development success in 2004 and beyond. Our new amended credit facility provides further flexibility in managing our assets and maximizing value to our shareholders. We realize there is still more work ahead to improve our balance sheet in 2004 enabling us to continue to reduce debt and to accelerate development of assets, which now include over 170 identified projects that represent potential reserves not currently booked in our year-end reserve total. With the continuing strength of the commodity markets and our improving operational outlook, 2004 looks like a continued year of growth for Abraxas."

As a result of final 2003 financial results and current market conditions, Abraxas has updated its operating and financial guidance for year 2004 as follows:

Production:
   Bcfe (approximately 80% gas)              8 - 9
Price Differentials (Pre Hedge):
   $ Per Bbl                                  0.86
   $ Per Mcf                                  0.64
   Lifting Costs, $ Per Mcfe                  1.29
G&A, $ Per Mcfe                               0.60
Capital Expenditures ($ Millions)            10.00

The Company estimated January 2004 production at approximately 22.8 Mcfe per day.

Abraxas invites your participation in a conference call on Wednesday, March 10th, at 9:00 a.m. CT to discuss the contents of this release and respond to questions. Please call 1-800-946-0719 between 8:50 a.m. and 9:00 a.m. CT, confirmation code 786241, if you would like to participate in the call. There will be a replay of the conference call available by calling 1-888-203-1112, confirmation code 786241, beginning approximately 11:00 a.m. CT Wednesday, March 10th, through midnight CT Tuesday, March 16th.

Abraxas Petroleum Corporation is a San Antonio based crude oil and natural gas exploitation and production company. The Company operates in Texas, Wyoming and western Canada.

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

                     ABRAXAS PETROLEUM CORPORATION
                           YEAR-END RESULTS

                               Three Months       Twelve Months
(In thousands except per    Ended December 31,  Ended December 31,
 share data)

                               2003   2002(a)    2003      2002(a)
                              ------  -------  -------    --------
           Operations Data:
Revenues                      $9,048  $17,217  $39,019     $54,320
EBITDA                         4,858   10,748   23,451      31,629
Cash Flow (Before Working
 Capital Changes)              3,459    1,256   13,923      (3,597)
Net Income (Loss)             (1,734)  (5,700)  55,920(c) (118,527)(b)
Net Income (Loss) Per
 Share (Basic)                  (.05)    (.19)    1.58       (3.95)
Weighted Ave. Shares
 Outstanding                    35.8     30.0     35.4        30.0

           Production:
Crude Oil (BPD)                  781      834      689         801
NGL (BPD)                         64      649      102         663
Natural Gas (MCFPD)           16,523   40,877   16,957      42,336
MMCFEPD                         21.6     49.8     21.7        51.1

  Prices (net of hedge
   impact):
Crude Oil ($/BBL)             $29.73   $30.16   $30.32      $24.34
NGL's ($/BBL)                  25.49    22.26    24.47       17.94
Natural Gas ($/MCF)             4.30     3.47     4.78        2.55
Price per MCFE                  4.44     3.65     4.81        2.73

            Expenses:
Lease Operating ($/MCFE)       $1.23     $.88    $1.21        $.82
General & Administrative
 ($/MCFE)                        .82      .50      .67         .37
Cash Interest ($/MCFE)           .54     1.82      .55        1.83
Total Interest ($/MCFE)         2.06     1.82     2.14        1.83
D/D/A ($/MCFE)                  1.48     1.21     1.33        1.42

(a) 2002 Results include impact from Canadian operations sold in
    January, 2003

(b) Net loss for 2002 includes a $116 million proved property
    impairment due to lower realized prices at period end

(c) Includes gain on sale of Canadian subsidiaries of $68.9 million



                     Balance Sheet Data (In $000s)
                                  December 31, 2003  December 31, 2002
Cash                                           $493            $4,882
Working Capital (Deficit)                    (2,444)          (65,609)
Plant/Property/Equipment, Net               111,563           150,394
Total Assets                                126,437           181,425

Long-Term Debt                              184,649           236,943
Shareholders Equity (Deficit)               (72,203)         (142,254)
Common Shares Outstanding (Millions)           35.9              30.0


                     ABRAXAS PETROLEUM CORPORATION
                 CONSOLIDATED STATEMENTS OF OPERATIONS

                                            Year Ended December 31
                                        ------------------------------
                                           2001      2002      2003
                                        ---------- ---------- --------
                                           (In thousands except per
                                                  share data)
Revenues:
 Oil and gas production revenues          $73,201    $50,862  $38,105
 Gas processing revenues                    2,438      2,420      133
 Rig revenues                                 756        635      663
 Other                                        848        403      118
                                         --------- ---------- --------
                                           77,243     54,320   39,019
Operating costs and expenses:
 Lease operating and production taxes      18,616     15,240    9,599
 Depreciation, depletion, and
  amortization                             32,484     26,539   10,803
 Proved property impairment                 2,638    115,993        -
 Rig operations                               702        567      609
 General and administrative                 6,445      6,884    5,360
 Stock-based compensation                  (2,767)         -    1,106
                                         --------- ---------- --------
                                           58,118    165,223   27,477
                                         --------- ---------- --------
Operating income (loss)                    19,125   (110,903)  11,542

Other (income) expense:
 Interest income                              (78)       (92)     (30)
 Amortization of deferred financing fees    2,268      2,095    1,678
 Interest expense                          31,523     34,150   16,955
 Financing costs                                -        967    4,406
 Loss on sale of equity investment            845          -        -
 Gain on sale of foreign subsidiaries           -          -  (68,933)
 Other                                        207        201      774
                                         --------- ---------- --------
                                           34,765     37,321  (45,150)
                                         --------- ---------- --------
Income (loss) before cumulative effect
 of accounting change and taxes           (15,640)  (148,224)  56,692

Income tax expense (benefit):
 Current                                      505          -        -
 Deferred                                   1,897    (29,697)     377
Minority interest in income of foreign
 subsidiary (2001 prior to purchase)        1,676          -        -
Cumulative effect of accounting change          -          -      395
                                         --------- ---------- --------
Net income (loss)                        $(19,718) $(118,527) $55,920
                                         ========= ========== ========

Basic earnings (loss) per common share:
Net earnings (loss)                        $(0.76)    $(3.95)   $1.59
Cumulative effect of accounting change          -          -    (0.01)
                                         --------- ---------- --------
Net income (loss) per common share -
 basic                                     $(0.76)    $(3.95)   $1.58
                                         ========= ========== ========

Diluted earnings (loss) per common
 share:
Net earnings (loss)                        $(0.76)    $(3.95)   $1.56
Cumulative effect of accounting change          -          -    (0.01)
                                         --------- ---------- --------
Net income (loss) per common share  -
 diluted                                   $(0.76)    $(3.95)   $1.55
                                         ========= ========== ========

             Reconciliation of Non-GAAP Financial Measures

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

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

                                  Three Months        Twelve Months
                               Ended December 31,  Ended December 31,
                                 2003     2002      2003      2002
                               --------- --------  -------- ----------
Operating income (loss)          $1,275   $5,221   $11,542  $(110,903)
Depletion, depreciation and
 amortization                     2,943    5,529    10,803     26,539
Non-cash stock based comp.
 expense                            640      ---     1,106        ---
Proved Property Impairment          ---       (2)      ---    115,993
Financing Costs                    (224)    (967)   (4,406)      (967)
Other Expense                      (102)    (201)     (774)      (201)
Cash interest                    (1,073)  (8,324)   (4,348)   (34,058)
   Cash Flow                     $3,459   $1,256   $13,923    $(3,597)

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

                                  Three Months        Twelve Months
                               Ended December 31,  Ended December 31,
                                 2003     2002      2003      2002
                               --------- --------  -------- ----------
Operating income (loss)          $1,275   $5,221   $11,542  $(110,903)
Depletion, depreciation and
 amortization                     2,943    5,529    10,803     26,539
Proved Property Impairment          ---       (2)      ---    115,993
Non-cash stock based comp.
 expense                            640      ---     1,106        ---
   EBITDA                        $4,858  $10,748   $23,451    $31,629