Abraxas Petroleum Corporation Announces Additional Montoya Acreage Acquisition, Updates Drilling Projects and Anticipated Increases in Oil and Natural Gas Production.

Business Editors and Energy Writers

SAN ANTONIO--(BUSINESS WIRE)--Jan. 9, 2001

Abraxas Petroleum Corporation (AMEX:ABP) Chairman and CEO, Robert L. G. Watson, commented on the Company's current operations in the United States including the acquisition of up to 13,000 acres in the Montoya Trend in west Texas and on current operations in Canada while attending the Goldman Sachs Global Energy Conference in New York.

In west Texas, the Company previously announced that the first well under its joint participation agreement with EOG Resources (NYSE:EOG), the Caprito 99-9H, had an IP of 13.5 Mmcfpd from the Montoya formation and EOG is currently drilling a second horizontal well. The Company believes that there could be up to 18 additional locations on the acreage subject to this agreement. In addition, Abraxas has acquired a 100% working interest in up to 13,000 acres and 53 miles of 2-D seismic in Pecos County that is prospective in both the Montoya and Devonian formations for approximately $675,000. The Company plans to evaluate existing seismic to confirm several potential drilling locations that have been identified.

In Wyoming, the Company currently has three wells producing over 300 Bopd plus associated gas and two additional wells which are being completed in the Turner Sandstone. The Company recently completed the acquisition of 23 square miles of 3-D seismic and expects processing to be completed in the first quarter. Abraxas has acquired over 62,000 net acres in this play and, if successful, could have as many as 190 potential locations based on 320 acre spacing.

In the Caroline (Sundre) area of Alberta, Canada, Abraxas and its 49% owned public subsidiary, Grey Wolf Exploration Inc. (TSE:GWX.TO) control almost 100% of the working interest in the existing wells and 100% of the natural gas gathering system and gas plant. The Company has drilled 5 wells and completed 7 workovers in this field. It is currently expanding the gas plant and gathering system to allow for increased production from the current approximately 10 Mmcfpd up to 20 Mmcfpd. The current facility upgrades should be completed in the next 30 days. With additional success, the gas plant can be repermitted to approximately 30 Mmcfpd capacity. The Company plans to acquire 80 square miles of 3-D seismic in the Caroline (Sundre) area this winter to help confirm additional drilling locations.

In the Pouce Coupe area of Alberta, Canada, Abraxas is currently drilling its fifth well targeting the Montney and Gething formations. The first two wells are on production in the Montney and had combined IP's of over 5 Mmcfpd. Once the latest three wells are tied into the Company's gathering system, they should add 3-4 Mmcfpd to existing production in this area. The Company also has planned a 3-D seismic program this winter covering 20 square miles to help confirm additional locations identified on its acreage.

In the Northwest Territories of Canada, Abraxas and Grey Wolf control over 316,000 net acres in the MacKenzie Valley area offsetting the Norman Wells Field. The Company is seeking a partner to carry the costs of the next phase of exploration. In a recent federal government lease sale in the MacKenzie Valley area, bidding was very active on the blocks, many of which directly offset the Company's acreage.

Abraxas Petroleum Corporation is a San Antonio-based crude oil and natural gas exploration and production company that also processes natural gas. It operates in Texas, Wyoming and western Canada.

For additional information about the Company, please visit our Web site, www.abraxaspetroleum.com, for the most current and updated information. The Web site is updated daily in order to comply with the SEC Regulation FD (Fair Disclosure).

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.