Abraxas Petroleum Corporation (NASDAQ:AXAS) Q3 2019 Earnings Conference Call November 18, 2019 3:00 PM ET
Steve Harris – Chief Financial Officer
Bob Watson – President & Chief Executive Officer
Peter Bommer – Vice President, Engineering
Conference Call Participants
Noel Parks – Coker Palmer
Ladies and gentlemen, thank you for standing by and welcome to the Q3 2019 Abraxas Petroleum Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there we will a question-and-answer session. [Operator Instructions]
I would now like to hand the conference over to your speaker today Steve Harris, CFO. Thank you. Please go ahead, sir.
Thank you, Gigi, and welcome to the Abraxas Petroleum third quarter 2019 earnings conference call. With me are Bob Watson, President and CEO. In addition, we have our Chief Accounting Officer and our VPs of Operations and Land available to answer any questions you may have after Bob’s overview.
As a reminder, today’s call is being taped and a webcast replay will be available immediately after the conclusion of the call. I would like to remind everyone that any statements made during this call that are not statements of historical fact are considered forward-looking statements and that actual results could vary materially from those contained in these statements.
Factors that could cause our actual results to vary are described in our filings with the Securities and Exchange Commission, I would encourage everyone to review these risk factors contained in the filings and in our press releases.
So with that, I’d like to turn the call over to Bob.
Thanks Steve. Good afternoon. Realizing that our commercial bank’s reserve based loan redeterminations period-to-period can be volatile for a number of reasons, and at the current time are being very conservative; and as part of our strategy to maximize shareholder value, we determined our first step needed to be balance sheet stabilization and increasing liquidity. We needed to term out some of our debt and reduce our reliance on our RBL.
After several months of delicate negotiations, we were successful in bringing in a second lien lender who cooperated with our group of commercial banks to develop a second lien loan that fits nicely under our RBL, creates a blended cost of capital of approximately 8.5% and creates approximately $41 million of current liquidity.
As we now have no debt maturities until mid-2022, we can move forward with a conservative capital program designed to stay within cash flow or actually generate free cash flow at current commodity prices and keeping oil production flat, if not grow slightly in the years ahead. This puts the Company in a much better position to review and act upon other initiatives to create shareholder value.
As previously mentioned, the Company has very few drilling obligations in both of our basins to maintain the asset base in 100% held by production status. Our board will be meeting in December to review a number of budget scenarios going forward, with the intent of maximizing our overall corporate objectives. We will report the conclusion and subsequent 2020 guidance at that time.
Our capital program for all of 2019 was essentially completed slightly ahead of schedule at the end of third quarter and [indiscernible] slightly less than our guided 2019 budget of $86 million, leaving tag-ins and minor capital expenditures for the fourth quarter. The free cash flow generated during Q4 will be used to pay down debt and grow additional liquidity.
Our year-end looks like spending approximately $89 million. We’ve closed on approximately $23 million in non-core assets sales, and we will have generated approximately $68 million in cash flow. I’ll leave you to do the math.