Abraxas Reports Third Quarter 2006 Results With Six Consecutive Quarters of Production Growth Including a 25% Increase in Daily Production Over Third Quarter 2005.

SAN ANTONIO -- Abraxas Petroleum Corporation (AMEX:ABP) today reported financial and operating results for the quarter and nine months ended September 30, 2006 and provided an operational update.

Daily production from the third quarter of 2006 increased 3% over the second quarter of 2006 marking six consecutive quarters of production growth.

Results for the quarter ended September 30, 2006 included:

* Production of 2.0 Bcfe, a 25% increase over Q3 2005;

* Realized gas price of $5.43, a 33% decrease from Q3 2005 realized price of $8.15;

* Revenue of $13.2 million, a 7% decrease from Q3 2005;

* EBITDA (a) of $9.3 million, an 8% decrease from Q3 2005; and

* Cash flow (a) of $4.8 million, a 23% decrease from Q3 2005.

Results for the nine months ended September 30, 2006 included:

* Production of 5.8 Bcfe, a 36% increase over the same nine-month period of 2005;

* Revenue of $39.8 million, a 26% increase over the same nine-month period of 2005;

* EBITDA (a) of $27.9 million, a 38% increase over the same nine-month period of 2005; and

* Cash flow (a) of $15.4 million, a 53% increase over the same nine-month period of 2005.

(a) see reconciliation of non-GAAP financial measures below.

Net earnings in the third quarter of 2006 were $589,000, or $0.01 per share, compared to net earnings in the same quarter of 2005 of $3.8 million, or $0.09 per share, from continuing operations. Net earnings for the nine months ended September 30, 2006 were $2.8 million, or $0.07 per share, as compared to net earnings during the same nine-month period of 2005 of $2.8 million, or $0.07 per share, from continuing operations. Continuing operations represent financial and operating results from operations in the U.S. only as all of Grey Wolf Exploration Inc.'s historical performance and results are treated as discontinued operations as a result of the sale of Grey Wolf shares owned by Abraxas in Grey Wolf's initial public offering that closed on February 28, 2005. Abraxas currently owns less than 1% of the outstanding capital stock of Grey Wolf.

"I am pleased to announce that we continue to deliver our shareholders quarter over quarter production growth. We have achieved a 29% CAGR (compounded annual growth rate) since the first quarter of 2005. All of the production increases have been achieved exclusively through the drill bit, as we continue to explore and exploit the many opportunities that we have identified on our existing leasehold. Looking forward to 2007, we are currently in the process of preparing our capital expenditure budget and plan to announce the same in conjunction with our 2007 production and cost guidance before the end of November," commented Bob Watson, Abraxas' President and CEO.

Operations

In the Oates SW Field of West Texas:

* The La Escalera #5-1, a Lower Wolfcamp test, is scheduled to be fracture stimulated during the 4th quarter;

* The Hudgins #37-1H, a horizontal Devonian re-entry, has been placed on gas lift to further evaluate its natural productive capabilities; and

* The Manzanita State #1H, a horizontal Devonian re-entry, has been cleaned out and the lateral is currently scheduled to begin drilling in early 2007.

Abraxas owns a 100% working interest in all of the above-mentioned wells.

Conference Call

Abraxas invites you to participate in a conference call on Monday, November 6th, at 2:00 p.m. CT to discuss the contents of this release and respond to questions. Please dial 1-800-510-9691, passcode 34022891, 10 minutes before the scheduled start time, if you would like to participate in the call. The conference call will also be webcast live on the Internet and can be accessed directly on the Company's website at www.abraxaspetroleum.com under the Investor Relations section. In addition to the audio webcast replay, a podcast and transcript of the conference call will be posted on the Investor Relations section of the Company's website approximately 24 hours after the conclusion of the call, and will be accessible for at least 60 days.

Abraxas Petroleum Corporation is a San Antonio-based crude oil and natural gas exploitation and production company with operations in Texas and Wyoming.

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

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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 to cash flow and EBITDA; therefore, operating income (loss) is utilized as the starting point for these reconciliations.

Cash flow is defined as operating income (loss) plus depletion, depreciation and amortization expenses, 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.

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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 - see consolidated statements of operations for a reconciliation of net income (loss) to operating income (loss).

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