ABRAXAS PETROLEUM CORPORATION The following is a discussion and analysis of our financial condition, results of operations, liquidity and capital resources and should be read in conjunction with our consolidated financial statements and the notes thereto, included in this Quarterly Report on Form 10-Q and the consolidated financial statements and notes thereto as of and for the year endedDecember 31, 2021 and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the year endedDecember 31, 2021 filed with theSEC onMarch 31, 2022 . Please see "Forward Looking Information" above.
Except as otherwise noted, all tabular amounts are in thousands, except per unit values.
Critical Accounting Policies
There have been no changes from the Critical Accounting Policies described in
our Annual Report on Form 10-K for the year ended
General We are an independent energy company primarily engaged in producing oil and gas in the Permian Basis. Historically, we have grown through the acquisition and subsequent development of producing properties, principally through the development of shale or tight oil reservoirs in areas known to be productive of oil and gas utilizing new technologies such as modern log analysis and reservoir modeling techniques as well as 3-D seismic surveys and horizontal drilling and stage fracturing. Moreover, we believe that we have a number of development opportunities on our properties. Restructuring
See Note 4 "Long-Term Debt - Restructuring" and Note 10 "Disposition of Assets and Restructuring" to the Consolidated Financial Statements.
Factors Affecting Our Financial Results
Our financial results depend upon many factors which significantly affect our results of operations including the following:
• commodity prices and the effectiveness of our hedging arrangements; • the level of total sales volumes of oil and gas;
• the availability of and our ability to raise additional capital resources and
provide liquidity to meet cash flow needs; and
• the level and success of exploration and development activity.
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Table of Contents Commodity Prices. The results of our operations are highly dependent upon the prices received for our oil and gas production. The prices we receive for our production are dependent upon spot market prices and differentials. Substantially all of our sales of oil and gas are made in the spot market, or pursuant to contracts based on spot market prices, and not pursuant to long-term, fixed-price contracts. Accordingly, the prices received for our oil and gas production are dependent upon numerous factors beyond our control. Factors that influence oil and gas prices include the global demand for and global supply of oil, NGL and gas. Significant declines in prices for oil and gas could have a material adverse effect on our financial condition, results of operations, cash flows and quantities of reserves recoverable on an economic basis.
Effects of Inflation and Pricing
As a result of the many uncertainties associated with the world political environment, worldwide supplies of oil, NGL and gas, the availability of other worldwide energy supplies and the relative competitive relationships of the various energy sources in the view of consumers, we are unable to predict what changes may occur in oil, NGL and gas prices in the future. In accordance with historical trends, we expect that the volatility of oil, NGL, and gas pricing will persist. The market price of oil and condensate, NGL and gas largely determines the amount of cash generated from operating activities, which will in turn impact our financial position.
Material changes in the prices we receive for the oil and natural gas that we produce will impact our operating revenues, cash flow, financial condition, estimates of future reserves.
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During the nine months endedSeptember 30, 2022 , the NYMEX future price for oil averaged$98.25 per Bbl as compared to$65.04 per Bbl in the same period of 2021. During the nine months endedSeptember 30, 2022 , the NYMEX future spot price for gas averaged$6.69 per MMBtu compared to$3.35 per MMBtu in the same period of 2021. Prices closed onSeptember 30, 2022 at$79.49 per Bbl of oil and$6.77 per MMBtu of gas, compared to closing onSeptember 30, 2021 at$75.03 per Bbl of oil and$5.87 per MMBtu of gas. OnNovember 7, 2022 , prices closed at$91.79 per Bbl of oil and$6.94 per MMBtu of gas. If commodity prices decline, our revenue and cash flow from operations will also likely decline. In addition, lower commodity prices could also reduce the amount of oil and gas that we can produce economically. If oil and gas prices decline, our revenues, profitability and cash flow from operations will also likely decrease which could cause us to alter our business plans. Such declines have required, and in future periods could also require us to write down the carrying value of our oil and gas assets which would also cause a reduction in net income. The prices that we receive are also impacted by basis differentials, which can be significant, and are dependent on actual delivery points. Finally, low commodity prices will likely cause a reduction of our proved reserves.
The realized prices that we receive for our production differ from NYMEX futures and spot market prices, principally due to:
• basis differentials which are dependent on actual delivery location; • adjustments for BTU content; • quality of the hydrocarbons; and • gathering, processing and transportation costs.
The following table sets forth our average differentials for the nine-month
periods ended
Oil - NYMEX Gas - NYMEX
2022 2021 2022 2021
Average realized price (1) $ 98.60 $ 60.82 $ 4.97 $ 2.06
Average NYMEX price 98.25 65.04 6.69 3.35
Differential $ 0.35 $ (4.22 ) $ (1.72 ) $ (1.29 ) (1) 2021 excludes the impact of derivative activities.
Production Volumes. Our proved reserves will decline as oil and gas is produced, unless we find, acquire or develop additional properties containing proved reserves. Based on the reserve information set forth in our reserve report as ofDecember 31, 2021 , our average annual estimated decline rate for our net proved developed producing reserves is 20%; 15%; 13%; 12% and 11% in 2022, 2023, 2024, 2025 and 2026, respectively, 9% in the following five years, and approximately 10% thereafter. These rates of decline are estimates and actual production declines could be materially different. 26
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We had capital expenditures during the nine months ended
The following table presents historical net production volumes for the three and
nine months ended
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Total production (MBoe) 216 516 608 1,541
Average daily production (Boepd) 2,350 5,605 2,228 5,664
% Oil 56 % 45 % 52 % 48 %
The following table presents our net oil, gas and NGL production, the average
sales price per Bbl of oil and NGL and per Mcf of gas produced and the average
cost of production per Boe of production sold, for the three and nine months
ended September 30, 2022 and 2021, by our major operating regions:
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Oil production (MBbls)
Rocky Mountain (2) - 108 - 360
Permian/Delaware Basin 104 122 318 383
Total 104 230 318 743
Gas production (MMcf)
Rocky Mountain (2) - 477 - 1,391
Permian/Delaware Basin 429 415 1,154 1,204
Total 429 892 1,154 2,595
NGL production (MBbls)
Rocky Mountain (2) - 107 - 283
Permian/Delaware Basin 41 30 98 82
Total 41 137 98 365
Total production (MBoe) (1) 216 516 608 1,541
Average sales price per Bbl of oil
(3)
Rocky Mountain (2) $ - $ 66.08 $ - $ 59.07
Permian/Delaware Basin 93.51 68.66 98.60 62.48
Composite 93.51 67.44 98.60 60.82
Average sales price per Mcf of gas
(2)
Rocky Mountain (2) $ - $ 2.48 $ - $ 1.62
Permian/Delaware Basin 5.67 2.97 4.97 2.57
Composite $ 5.67 2.71 $ 4.97 2.06
Average sales price per Bbl of NGL
Rocky Mountain (2) $ - $ 20.70 $ - $ 14.14
Permian/Delaware Basin 26.51 23.80 29.59 17.17
Composite 26.51 21.39 29.59 14.83
Average sales price per Boe (2) $ 61.25 $ 40.44 $ 65.68 $ 36.32
Average cost of production per Boe
produced (4)
Rocky Mountain (2) $ - $ 8.16 $ - $ 6.88
Permian/Delaware Basin 12.07 9.87 12.49 10.61
Composite 12.07 8.87 12.49 8.48
(1) Oil and gas were combined by converting gas to Boe on the basis of 6 Mcf of
gas to 1 Bbl of oil.
(2) Rocky Mountain properties were sold on January 3, 2022 .
(3) 2021 amounts are before the impact of hedging activities.
(4) Production costs include direct lease operating costs but exclude ad valorem
taxes and production taxes.
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Availability of Capital. As described more fully under "Liquidity and Capital Resources" below, our sources of capital are cash flow from operating activities and sales of properties, although we may not be able to complete any asset sales on terms acceptable to us, if at all. Our First Lien Credit Facility was settled and our Second Lien Credit Facility was converted to Class A Preferred Stock in connection with the Restructuring that took place onJanuary 3, 2022 . See Note 4 "Long-Term Debt Restructuring" and Note 10. "Disposition of Assets and Restructuring" to the Consolidated Financial Statements. We do not currently have a credit facility in place and have not formally established a capital budget for 2022.
Borrowings and Interest. At
Exploration and Development Activity. We believe that our high quality asset base, high degree of operational control and inventory of drilling projects position us to partner with other parties. AtDecember 31, 2021 , we operated properties accounting for virtually all of our PV-10, giving us substantial control over the timing and incurrence of operating and capital expenditures. 28
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Table of Contents Results of Operations
Selected Operating Data. The following table sets forth operating data from continuing operations for the periods presented.
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Operating revenue (1):(2)
Oil sales $ 9,733 $ 15,506 $ 31,307 $ 45,199
Gas sales 2,434 2,415 5,733 5,344
NGL sales 1,077 2,933 2,913 5,416
Other 8 11 20 19
Total operating revenues $ 13,252 $ 20,865 $ 39,973 $ 55,978
Operating income $ 2,523 $ 8,829 $ 14,669 $ 19,728
Oil sales (MBbls) 104 230 318 743
Gas sales (MMcf) 429 892 1,154 2,595
NGL sales (MBbls) 41 137 98 365
Oil equivalents (MBoe) 216 516 608 1,541
Average oil sales price (per
Bbl)(1) $ 93.51 $ 67.44 $ 98.60 $ 60.82
Average gas sales price (per
Mcf)(1) $ 5.67 $ 2.71 $ 4.97 $ 2.06
Average NGL sales price (per Bbl) $ 26.51 $ 21.39 $ 29.59 $ 14.83
Average oil equivalent sales price
(Boe) (1) $ 61.25 $ 40.44 $ 65.68 $ 36.32
___________________
(1) 2021 revenue and average sales prices are before the impact of hedging
activities.
(2) 2021 amounts include activity from our
sold on January 3, 2022 Comparison of Three Months Ended
Operating Revenue. During the three months endedSeptember 30, 2022 , operating revenue decreased to$13.3 million from$20.9 million for the same period of 2021. The decrease in revenue was primarily due to lower sales volumes offset by higher commodity prices. Higher realized prices for all products added$4.2 million to operating revenue for the three months endedSeptember 30, 2022 . Lower sales volumes negatively impacted revenue by$11.8 million . Lower sales volumes were primarily due to the sale of our Bakken properties inNorth Dakota onJanuary 3, 2022 . Sales from the Bakken properties contributed 295 MBoe and$10.6 million to revenue in the third quarter of 2021. Oil sales volumes decreased to 104 MBbl during the three months endedSeptember 30, 2022 from 230 MBbl for the same period of 2021. The decrease in oil sales volume was primarily due to the sale of our Bakken properties onJanuary 3, 2022 , which contributed 108 MBbls in the third quarter of 2021. Gas sales volumes decreased to 429 MMcf for the three months endedSeptember 30, 2022 from 892 MMcf for the same period of 2021. The decrease in gas volumes was primarily due to the sale of our Bakken properties onJanuary 3, 2022 , which contributed 477 MMcf in the third quarter of 2021. Lease Operating Expenses ("LOE"). LOE for the three months endedSeptember 30, 2022 decreased to$2.6 million from$4.6 million for the same period of 2021. The decrease in LOE was primarily due to sale of our Bakken properties onJanuary 3, 2022 , which incurred$2.4 million in LOE in the third quarter of 2021. LOE per Boe for the three months endedSeptember 30, 2022 was$12.07 compared to$8.94 for the same period of 2021. The increase per Boe was due primarily to higher cost of services in 2022 as compared to 2021. Production and Ad Valorem Taxes. Production and ad valorem taxes for the three months endedSeptember 30, 2022 decreased to$1.1 million from$1.6 million for the same period of 2021. Production and ad valorem taxes for the three months endedSeptember 30, 2022 were 8% of total oil, gas and NGL sales compared to 7% for the same period of 2021. 29
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General and Administrative ("G&A") Expense. G&A expenses, excluding stock-based
compensation, increased to $2.3 million for the three months ended September
30, 2022 from $1.7 million for the same period of 2021. G&A per Boe, excluding
stock-based compensation, was $10.45 for the quarter ended September 30,
2022 compared to $3.24 for the same period of 2021. The increase in G&A was
primarily due to higher legal and professional fees in 2022, as well as
severance paid in connection with staff reductions in 2022. The increase in G&A
per Boe, excluding stock based compensation, was primarily due to lower sale
volumes for the three months ended September 30, 2022 compared to the same
period of 2021 as well as higher overall costs.
Stock-Based Compensation. Options granted to employees and directors are valued
at the date of grant and expense is recognized over the options' vesting period.
In addition to options, restricted shares of our common stock have been granted
and are valued at the date of grant and expense is recognized over their vesting
period. For the three months ended September 30, 2022 , stock-based compensation
was $3.0 million compared to $0.3 million for the period ended September 30,
2021 . The increase in stock based was due to the vesting of restricted stock
awards made in May 2022 that vested in September 2022 as a result of the change
of control that occurred when Biglari Holdings acquired the Preferred
Shares from AGEF. As of September 30, 2022 all of our stock-based compensation
related to stock options, restricted stock and performance based shares had been
fully amortized.
Depreciation, Depletion and Amortization ("DD&A") Expense. DD&A expense,
excluding accretion of future site restoration, for the three months ended
September 30, 2022 decreased to $1.6 million from $3.8 million for the same
period of 2021. The decrease was primarily due to lower production volumes
offset by a lower full cost pool as a result of the impairments recorded in
2020, the sale of the Bakken assets as well as lower future development costs
included in the September 30, 2022 internal reserve report. DD&A expense per
Boe for the three months ended September 30, 2022 was $7.48 compared to $7.25 in
the same period of 2021.
Ceiling Limitation Write-Down. We record the carrying value of our oil and gas
properties using the full cost method of accounting for oil and gas properties.
Under this method, we capitalize the cost to acquire, explore for and develop
oil and gas properties. Under the full cost accounting rules, the net
capitalized cost of oil and gas properties less related deferred taxes, are
limited by country, to the lower of the unamortized cost or the cost ceiling,
defined as the sum of the present value of estimated unescalated future revenues
from proved reserves, discounted at 10%, plus the cost of properties not being
amortized, if any, plus the lower of cost or estimated fair value of unproved
properties included in the costs being amortized, if any, less related income
taxes. If the net capitalized cost of oil and gas properties exceeds the ceiling
limit, we are subject to a ceiling limitation write-down to the extent of such
excess. A ceiling limitation write-down is a charge to earnings which does not
impact cash flow from operating activities. However, such write-downs do impact
the amount of our stockholders' equity and reported earnings. As of September
30, 2022 and September 30, 2021 , our net capitalized costs of oil and gas
properties did not exceed the cost ceiling of our estimated proved reserves.
The risk that we will be required to write-down the carrying value of our oil
and gas assets increases when oil and gas prices are depressed or volatile. In
addition, write-downs may occur if we have substantial downward revisions in our
estimated proved reserves. We cannot assure you that we will not experience
additional write-downs in the future.
Interest (Income) Expense. Interest income for the three months ended September
30, 2022 decreased to $0.03 million compared to expense of $8.1 million for the
same period of 2021. The decrease in interest expense in 2022 was due to the
settlement of our First Lien Credit Facility and the conversion of our Second
Lien Credit Facility into preferred stock on January 3, 2022 . See Note
4 Long-Term Debt - Restructuring and Note 10. " Disposition of Assets and
Restructuring" to the Consolidated Financial Statements. Interest expense for
the three months ended September 30, 2022 , relates to the real estate lien note
that was paid in full in August 2022 .
Loss (Gain) on Derivative Contracts. As of January 1, 2022 we are not party to
any derivative agreements. Derivative gains or losses were determined by actual
derivative settlements during the period and on the periodic mark to market
valuation of derivative contracts in place at period end. For the three months
ended September 30, 2021 , we recognized a loss on our commodity derivative
contracts of $0.3 million .
Income Tax Expense. The Company has recorded full valuation allowances against
our deferred tax asset for net operating losses. The Company released a portion
of the valuation allowances during the three and nine months ended September 30,
2022 , which resulted in not having an income tax expense during the respective
periods.
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Comparison of Nine Months Ended
Operating Revenue. During the nine months endedSeptember 30, 2022 , operating revenue decreased to$40.0 million from$56.0 million for the same period of 2021. The decrease in revenue was primarily due to lower sales volumes offset by higher commodity prices. Higher realized prices for all products added$24.9 million to operating revenue for the nine months endedSeptember 30, 2022 . Lower sales volumes negatively impacted revenue by$40.9 million . Lower sales volumes were primarily due to the sale of our Bakken properties inNorth Dakota onJanuary 3, 2022 . Sales from the Bakken properties contributed 875 MBoe and$27.5 million to revenue in the first nine months of 2021. Oil sales volumes decreased to 318 MBbl during the nine months endedSeptember 30, 2022 from 743 MBbl for the same period of 2021. The decrease in oil sales volume was primarily due to the sale of our Bakken properties onJanuary 3, 2022 , which contributed 360 MBbls during the nine months endedSeptember 30, 2021 , as well as natural field declines and no new production during the first nine months of 2022. Gas sales volumes decreased to 1,154 MMcf for the nine months endedSeptember 30, 2022 from 2,595 MMcf for the same period of 2021. The decrease in gas volumes was primarily due to the sale of our Bakken properties onJanuary 3, 2022 , which contributed 1,391 MMcf in the nine months endedSeptember 30, 2021 . Lease Operating Expenses ("LOE"). LOE for the nine months endedSeptember 30, 2022 decreased to$7.7 million from$13.1 million for the same period of 2021. The decrease in LOE was primarily due to the sale of our Bakken properties onJanuary 3, 2022 , which incurred$6.0 million in LOE in the nine months endedSeptember 30, 2021 . LOE per Boe for the nine months endedSeptember 30, 2022 was$12.66 compared to$8.48 for the same period of 2021. The increase per Boe was due primarily to higher cost of services in 2022 as compared to 2021, as well as lower sales volumes in 2022. Production and Ad Valorem Taxes. Production and ad valorem taxes for the nine months endedSeptember 30, 2022 decreased to$3.4 million from$4.6 million for the same period of 2021. Production and ad valorem taxes for the nine months endedSeptember 30, 2022 were 9% of total oil, gas and NGL sales for the nine months endedSeptember 30, 2022 as compared to 8% for the same period of 2021. 31
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General and Administrative Expense. G&A expenses, excluding stock-based compensation, was$5.8 million for the nine months endedSeptember 30, 2022 compared to$5.5 million for the same period of 2021. G&A per Boe, excluding stock-based compensation, was$9.46 for the nine months endedSeptember 30, 2022 compared to$3.55 for the same period of 2021. The increase in G&A was primarily due to higher legal and professional fees as well as severance paid in connection with staff reductions. The increase in G&A per Boe, excluding stock based compensation, was primarily due to lower sales volumes for the nine months endedSeptember 30, 2022 compared to the same period of 2021. Stock-Based Compensation. Options granted to employees and directors are valued at the date of grant and expense is recognized over the options' vesting period. In addition to options, restricted shares of our common stock have been granted and are valued at the date of grant and expense is recognized over their vesting period. For the nine months endedSeptember 30, 2022 , stock-based compensation was$3.3 million compared to$0.8 million for the period endedSeptember 30, 2021 . The increase in stock based compensation was due to the vesting of restricted stock awards made inMay 2022 that vested inSeptember 2022 as a result of the change of control that occurred when Biglari Holdings acquired the Preferred Shares from AGEF. As ofSeptember 30, 2022 all stock- based compensation related to stock options, restricted stock and performance based shares had been fully amortized. Depreciation, Depletion and Amortization Expense. DD&A expense, excluding accretion of future site restoration, for the nine months endedSeptember 30, 2022 decreased to$4.7 million from$11.7 million for the same period of 2021. The decrease was primarily due to lower production volumes offset by a lower full cost pool as a result of the impairments recorded in 2020, the sale of our Bakken assets onJanuary 3, 2022 as well as lower future development cost included in theSeptember 30, 2022 internal reserve report. DD&A expense per Boe for the nine months endedSeptember 30, 2022 was$7.69 compared to$7.59 in the same period of 2021. Ceiling Limitation Write-Down. We record the carrying value of our oil and gas properties using the full cost method of accounting for oil and gas properties. Under this method, we capitalize the cost to acquire, explore for and develop oil and gas properties. Under the full cost accounting rules, the net capitalized cost of oil and gas properties less related deferred taxes, are limited by country, to the lower of the unamortized cost or the cost ceiling, defined as the sum of the present value of estimated unescalated future revenues from proved reserves, discounted at 10%, plus the cost of properties not being amortized, if any, plus the lower of cost or estimated fair value of unproved properties included in the costs being amortized, if any, less related income taxes. If the net capitalized cost of oil and gas properties exceeds the ceiling limit, we are subject to a ceiling limitation write-down to the extent of such excess. A ceiling limitation write-down is a charge to earnings which does not impact cash flow from operating activities. However, such write-downs do impact the amount of our stockholders' equity and reported earnings. As ofSeptember 30, 2022 andSeptember 30, 2021 , our net capitalized costs of oil and gas properties did not exceed the cost ceiling of our estimated proved reserves. The risk that we will be required to write-down the carrying value of our oil and gas assets increases when oil and gas prices are depressed or volatile. In addition, write-downs may occur if we have substantial downward revisions in our estimated proved reserves. We cannot assure you that we will not experience additional write-downs in the future. Interest Expense. Interest expense for the nine months endedSeptember 30, 2022 decreased to$0.1 million compared to$21.7 million for the same period of 2021. The decrease in interest expense in 2022 was due to the settlement of our First Lien Credit Facility and the conversion of our Second Lien Credit Facility into preferred stock onJanuary 3, 2022 . See Note 4 " Long-Term Debt - Restructuring and Note 10." Disposition of Assets and Restructuring" to the Consolidated Financial Statements. Loss (Gain) on Derivative Contracts. As ofJanuary 1, 2022 we are not party to any derivative agreements. Derivative gains or losses were determined by actual derivative settlements during the period and on the periodic mark to market valuation of derivative contracts in place at period end. For the nine months endedSeptember 30, 2021 , we recognized a loss on our commodity derivative contracts of$32.9 million , including a loss of$7.1 million related to the termination of existing contracts during the second quarter of 2021. Income Tax Expense. The Company has recorded full valuation allowances against our deferred tax asset for net operating losses. The Company released a portion of the valuation allowances during the three and nine months endedSeptember 30, 2022 , which resulted in not having an income tax expense during the respective periods. 32
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Liquidity and Capital Resources
General. The oil and gas industry is a highly capital intensive and cyclical business. Our capital requirements are driven principally by our obligations to fund production and transportation facilities. Working Capital (Deficit). AtSeptember 30, 2022 , our current assets of$34.4 million exceed our current liabilities of$12.0 million , resulting in a working capital surplus of$22.4 million . This compares to a working capital deficit of$216.0 million atDecember 31, 2021 . Current assets as ofSeptember 30, 2022 primarily consisted of cash of$25.1 million , accounts receivable of$5.4 million assets held for sale of$3.1 million , and other current assets of$0.9 million . Current liabilities atSeptember 30, 2022 primarily consisted of trade payables of$8.3 million , including$5.9 million in post-closing costs related to the sale of our NorthDakota Bakken properties onJanuary 3, 2022 , revenues due third parties of$3.0 million and other accrued expenses of$0.8 million .
Capital Expenditures. Capital expenditures for the nine months ended
The table below sets forth the components of these capital expenditures:
Nine Months Ended September 30,
2022 2021
(In thousands)
Expenditure category:
Exploration/Development $ 1,060 $ 850
Facilities and other 24 6
Total $ 1,084 $ 856 During the nine months ended
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Sources of Capital. The net funds provided by and/or used in each of the operating, investing and financing activities are summarized in the following table and discussed in further detail below:
Nine Months Ended September 30,
2022 2021
(In thousands)
Net cash provided by operating activities $ 22,636 $ 19,876
Net cash provided by (used in) investing activities 71,600 (483 )
Net cash used in financing activities (79,169 ) (13,117 )
Total $ 15,067 $ 6,276
Operating activities for the nine months ended September 30, 2022 provided $22.6
million in cash compared to providing $19.9 million in the same period of 2021.
Higher net income and changes in operating assets and liabilities accounted for
most of these funds. Investing activities provided $71.6 million during the nine
months ended September 30, 2022 , primarily from sales of oil and gas properties
in North Dakota as well as various non-oil and gas assets on January 3,
2022 . Investing activities used $0.5 million during the nine months ended
September 30, 2021 , primarily for the development of our existing
properties. Financing activities used $79.2 million for the nine months ended
September 30, 2022 primarily for the settlement of the First Lien Credit
Facility in connection with the Restructuring, compared to using $13.1 million
for the same period of 2021,primarily for the reduction of long-term debt. See
Note 4 " Long-Term Debt - Restructuring" and Note 10 "Disposition of Assets and
Restructuring" to the Consolidated Financial Statements.
We maintain a reserve for costs associated with future site restoration related
to the retirement of tangible long-lived assets. At September 30, 2022 , our
reserve for these obligations totaled $3.0 million for which no contractual
commitments exist. For additional information relating to this obligation, see
Note 1 of the Notes to Condensed Consolidated Financial Statements.
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Off-Balance Sheet Arrangements. AtSeptember 30, 2022 , we had no existing off-balance sheet arrangements, as defined underSEC regulations, that have, or are reasonably likely to have a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Contingencies. From time to time, we are involved in litigation relating to
claims arising out of our operations in the normal course of business. At
Long-Term Indebtedness.
Long-term debt consisted of the following (in thousands):
September 30, 2022 December 31, 2021
First Lien Credit Facility $ - $ 71,400
Second Lien Credit Facility - 134,907
Exit fee - Second Lien Credit Facility - 10,000
Real estate lien note - 2,515
Total long term debt - 218,822
Less current maturities - (212,688 )
- 6,134
Deferred financing fees and debt issuance cost, net - (3,929 )
Total long-term debt, net of deferred financing fees
and debt issuance costs $ - $ 2,205
Restructuring
Pursuant to the Exchange Agreement, dated as of January 3, 2022 , between Abraxas
and AGEF and certain other agreements entered into by Abraxas on January 3,
2022 , we effectuated a restructuring of our then-existing indebtedness through a
multi-part interdependent de levering transaction consisting of: (i) an Asset
Purchase and Sale Agreement pursuant to which Abraxas sold to Lime Rock
Resources V-A, L.P. certain oil, gas, and mineral properties in the Williston
Basin region of North Dakota and other related assets belonging to the Company
and its subsidiaries for $87,200,000 in cash ($70.3 million after customary
closing adjustments) (the "Sale"), (ii) the pay down of the indebtedness and
other obligations of Abraxas and its subsidiaries under the First Lien Credit
Facility, by and among Abraxas, the financial institutions party thereto as
lenders, and Société Générale, as "Issuing Lender" and administrative agent and
certain specified secured hedges from the proceeds of the Sale and, to the
extent necessary, other cash of Abraxas; and (iii), a debt for equity exchange
of the indebtedness and other obligations of Abraxas and its subsidiaries under
the Second Lien Credit Facility, by and among Abraxas, the financial
institutions party thereto as lenders, and Angelo Gordon Energy Servicer, LLC ,
as administrative agent and all related loan and security documents (the
"Exchange" and, together with the transactions referred to in clauses (i) and
(ii), the "Restructuring").
On September 13, 2022 , AGEF and Biglari Holdings entered into the Sale and
Assignment. Following Biglari Holdings' acquisition of the Preferred Shares in
the Sale and Assignment, a change in control of the Company occurred. Biglari
Holdings' ownership of the Preferred Shares resulted in its beneficial
ownership, both directly and indirectly, of the approximately 85% of the
Company's voting securities that AGEF owned prior to effecting the Sale and
Assignment.
Subsequent to Sale and Assignment, Biglari Holdings proposed the Second
Exchange, pursuant to which the Company would issue Biglari Holdings 90,631,287
shares of the Company's common stock in exchange for the Preferred Shares. On
October 26, 2022 , the Second Exchange Agreement was consummated by the following
transactions: (i) the Company caused 90,631,287 shares of common stock to be
registered in the name of Biglari Holdings with the Company's transfer agent in
book-entry form, and (ii) Biglari Holdings assigned and transferred the
Preferred Shares to the Company, constituting all of the Series A Preferred
Stock of the Company then outstanding, by delivering a Stock Power and
Assignment to the Company. The Company cancelled the Preferred Shares and the
Preferred Stock Certificate of Designation, such that only common stock of the
Company remains outstanding. The foregoing description of the Second Exchange
and the Second Exchange Agreement is a summary only, does not purport to be
complete, and is qualified in its entirety by reference to the complete text of
the Second Exchange Agreement, which is filed as Exhibit 10.1 to the Company's
Current Report on Form 8-K filed on October 3, 2022 , and is incorporated by
reference herein.
As a result of the Sale and Assignment and Second Exchange, the Company is a
consolidated subsidiary of Biglari Holdings, and Biglari Holdings has the power
to exert significant control over the Company by controlling both 90% of the
voting power of the Company's outstanding capital stock and a majority of the
Company's Board.
See Note 4 "Long-Term Debt - Restructuring" and Note 10 "Disposition of Assets and Restructuring" to the Consolidated Financial Statements.
Real EstateLien Note
We had a real estate lien note secured by a first lien deed of trust on the
property and improvements which serves as our corporate headquarters. The real
estate lien note was paid in full on
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