Abraxas Reports Improved Second Quarter Financial Results and Operational Update

Business Wire, August 13, 2001

Business Editors & Energy Writers

SAN ANTONIO--(BUSINESS WIRE)--Aug. 13, 2001

Abraxas Petroleum Corporation (AMEX:ABP) today announced that successful drilling, cost effective operations, and improved prices all contributed to Abraxas meeting analysts' guidance results.

For the quarter ended June 30, 2001, a 75% improvement, compared to the prior year period, in both cash flow (after interest) and losses resulted in $.28 cash flow per share and $.05 net loss per share. The Company is also working aggressively to both restructure its debt to bring interest costs down and improve its balance sheet as well as continue to reduce operating costs. All of which augurs well for Abraxas' future.

Bob Watson, Company CEO, commented, "In south Texas we drilled a successful offset to our previously announced Dimon No. 1 well confirming our 3D seismic interpretation and setting up additional offset locations. This well, the Pettus No. 3, is currently producing at 3 MMcfe per day with 3000 lbs. of flowing tubing pressure."

Watson commented on other U.S. operations, "In west Texas two Montoya wells are now producing from our drilling agreement with EOG Resources Inc. (NYSE:EOG) and two more wells are expected to be drilling in the second half. On our 100% owned Oates S.W. Montoya play, 3D seismic has been interpreted and one or two old well bores have been identified as re-entry candidates to test the Montoya and Devonian formations in this field at a much lower cost than drilling new wells. Operations will commence on the first of these re-entry candidates shortly. In Wyoming, the interpretation of our 3D seismic survey is complete and four zones have been identified that are potentially productive in our Brooks Draw area. Permitting has begun on two vertical wells that will allow us to confirm the 3D seismic interpretation and test multiple zones."

On Canadian operations, Watson stated, "Based on our 3D seismic acquired over the winter, over 50 locations have been identified in our core areas of Caroline and Pouce Coupe. Drilling has commenced in both areas since break-up in June and we have successfully drilled and evaluated 4 wells, with 2 wells currently drilling. Operations have been slowed by an extremely wet summer in Alberta but the first of these wells is expected to be on production in each of these areas shortly. In Ladyfern, we were successful in a recent lease sale in acquiring additional acreage within our 3D seismic survey that could add up to 2 additional locations to the 4 locations planned for this winter drilling season. Firm capacity has been contracted for on a planned pipeline expansion in anticipation of our drilling program this winter."

As previously announced, Abraxas commenced its tender on Aug. 1 for the remaining shares of its 48.3% owned Canadian subsidiary Grey Wolf Exploration Inc. (TSE:GWX). The tender will expire on Sept. 5, 2001, unless extended or withdrawn. The Company also completed approximately $10 million of asset sales in Canada during the quarter and in the third quarter expects to close on another approximate $10 million of non-core asset sales in Canada. These asset sales combined with the tender for Grey Wolf are another step in the restructuring of the Company's balance sheet that will improve liquidity and earnings going forward and allow Abraxas to continue to improve its cost structure while focusing on its portfolio of drilling projects in its core areas. For the balance of 2001, the Company expects to continue its successful exploitation activities in the United States and in Canada and looks forward to its winter drilling program in the Ladyfern area. At the same time the Company will continue to review ways to improve its balance sheet and pare costs in order to maintain liquidity and enhance shareholder value.

Abraxas invites your participation in a conference call on Tuesday, Aug. 14, at 10:30 am CDT to discuss the contents of this release and respond to questions. Please call 800/289-0436 between 10:20 and 10:30 am CDT, confirmation code 456060, if you would like to participate in the call. There will be a replay of the conference call available by calling 888/203-1112, confirmation code 456060, approximately 12:30 pm CDT Tuesday, Aug. 14, through 5:00 pm CDT Tuesday, Aug. 21.

This press release does not constitute an offer to sell or a solicitation of an offer to exchange the securities of Abraxas for the securities of Grey Wolf. Any such offer or solicitation will be subject to certain customary conditions and will be made only by Abraxas' prospectus and other exchange offer materials, which have been filed with the SEC and have been mailed to Grey Wolf's stockholders. Grey Wolf's Stockholders are urged to read these documents because they contain important information about the offer. The documents are also available at no charge from the SEC'S Web site, www.sec.gov, and from Abraxas Petroleum Corporation at 500 North Loop 1604 East, Suite 100, San Antonio, Texas 78232.

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).