Abraxas Petroleum Corp. Annual Report 2021

FY2021 Annual Report · Abraxas Petroleum Corp.

Loading PDF…

2021 Annual Report
Proxy Statement
Form 10-K

ABRAXAS PETROLEUM CORPORATION
18803 Meisner Drive
San Antonio, Texas 78258
(210) 490-4788

April 1, 2022

Dear Stockholders:

You are invited to attend the 2022 Annual Meeting of Stockholders of Abraxas Petroleum Corporation to be held
virtually on May 11, 2022, at 3.00 p.m., central time. Due to the significant public health impact of the coronavirus pandemic
(COVID-19) and as a necessary precaution to protect the health, safety, and wellbeing of our officers, directors, and
stockholders, the meeting will be held in a virtual-only format. You will not be able to physically attend the meeting.

The meeting will be held via a live audio webcast. Instructions on how to attend the Annual Meeting are posted at
www.proxydocs.com/AXAS. Prior registration to attend the Annual Meeting at www.proxydocs.com/AXAS is required by
5:00 p.m. Eastern Time on May 10, 2022. Upon completing your registration, you will receive further instructions via email,
including your unique links that will allow you access to the meeting and will also permit you to submit questions. We
recommend that you log in at least fifteen minutes prior to the start of the meeting. Technical support will be available during
the virtual meeting. Further details will be provided to shareholders as part of the registration confirmation. We hope that you
will be able to attend the meeting. Matters on which action will be taken at the meeting are explained in detail in the notice
and proxy statement following this letter.

The annual report, notice of Annual Meeting, proxy statement and proxy card will be accessible by following the
instructions set forth in the Notice of Internet Availability of Proxy Materials, which will be mailed to our stockholders on or
about April 1, 2022. Proxy cards are being solicited on behalf of our Board of Directors.

Regardless of whether you plan to attend the Annual Meeting virtually, we hope you will read the proxy statement
carefully and vote your shares by promptly submitting a proxy by printing, signing, dating and mailing your proxy card to
Abraxas’ corporate office, located at the address set forth above, or by submitting your proxy by telephone or the Internet as
soon as possible. Instructions regarding telephone and Internet voting are included in the Notice of Internet Availability of
Proxy Materials and on the proxy card or voting instruction form (or, if applicable, your electronic delivery notice). Choosing
one of these voting options ensures your representation at the Annual Meeting.

If you have any questions or need assistance in voting your shares, please contact our proxy solicitor, Morrow

Sodali LLC toll free at (800) 662-5200.

Thank you for your continued support of Abraxas Petroleum Corporation.

Robert L.G. Watson
President and Chief Executive Officer

P
r
o
x
y
S
t
a
t
e
m
e
n
t

ABRAXAS PETROLEUM CORPORATION
18803 Meisner Drive
San Antonio, Texas 78258
(210) 490-4788
NOTICE OF VIRTUAL ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 11, 2022

To the Stockholders of Abraxas Petroleum Corporation:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Abraxas Petroleum Corporation (“Abraxas” or the “Company”)

will be held in a virtual-only meeting format, by live audio webcast, on May 11, 2022 at 3:00 p.m., central time, for the following purposes:

(1) To elect as director to the Abraxas Board of Directors the nominees named below for a term of three years:

• Brian L. Melton
• Damon Putman
• Daniel Baddeloo

(2) To ratify the appointment of Akin, Doherty, Klein & Feuge, PC as Abraxas’ independent registered public accounting firm for

the year ending December 31, 2022;

(3) To approve, on an advisory basis, the compensation of the Company’s named executive officers; and
(4) To transact any other business that has been properly brought before the meeting in accordance with the provisions of the

Company’s Amended and Restated Bylaws.

Your Board recommends that you vote FOR the nominees named in Proposal 1 and FOR Proposals 2, and 3.
We invite you to attend and participate in the Annual Meeting virtually. Instructions on how to attend the Annual Meeting are posted
at www.proxydocs.com/AXAS. Prior registration to attend the Annual Meeting at www.proxydocs.com/AXAS is required by 5:00 p.m.
Eastern Time on May 11, 2022. Upon completing your registration, you will receive further instructions via email, including your unique
links that will allow you access to the meeting and will also permit you to submit questions. Whether or not you expect to attend the
Annual Meeting virtually, we urge you to vote by telephone or the Internet as soon as possible by following the instructions provided in the
Notice of Internet Availability of Proxy Materials that will be mailed to our stockholders on or about April 1, 2022, or by printing, signing,
dating, and mailing your proxy card to Abraxas’ corporate office, located at the address set forth above. If you are a beneficial holder, you
may also vote your shares by telephone or the Internet using the instructions provided to you by your broker, bank or other nominee. You
may revoke your proxy at any time prior to the Annual Meeting, and, if you attend the virtual Annual Meeting, you may vote your shares of
Abraxas preferred stock or common stock electronically.

The Board of Directors has fixed the close of business on March 21, 2022 as the record date for the determination of the stockholders
entitled to notice of and to vote at the Annual Meeting and any adjournment thereof. Only stockholders of record at the close of business on
March 21, 2022 will be entitled to vote at the Annual Meeting and any adjournments or postponements thereof. A list of stockholders
entitled to vote at the Annual Meeting will be available for inspection at our offices, 18803 Meisner Drive, San Antonio, Texas 78258 for
ten days prior to the Annual Meeting. If you would like to review the stockholder list, please call our Investor Relations department at
(210) 490-4788 to schedule an appointment or, in light of COVID-19, make other arrangements to view the list.

All stockholders are cordially invited to attend the virtual Annual Meeting. If you have any questions about the proxy or require
assistance in voting your shares on the proxy card or voting instruction form, please contact the firm assisting us in the solicitation of
proxies, Morrow Sodali LLC, toll free at (800) 662-5200.

P
r
o
x
y
S
t
a
t
e
m
e
n
t

By Order of the Board of Directors,

Robert L. G. Watson
President and Chief Executive Officer

San Antonio, Texas
April 1, 2022

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of
Stockholders to be held May 11, 2022:
This proxy statement and our 2021 Annual Report on Form 10-K are available at
www.proxydocs.com/AXAS, which does not have “cookies” that identify
visitors to the site.

If you have any questions or require any assistance with voting your shares, please contact our proxy solicitor at the contact listed below:

470 West Avenue
Stamford, Connecticut 06902
(203) 658-9400 (Call Collect)
or
Call Toll-Free (800) 662-5200

TABLE OF CONTENTS

PROXY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Record Date; Shares Entitled To Vote; Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Votes Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Voting of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How to Vote By Proxy; Revocability of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deadline for Voting by Proxy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Important Information Regarding Delivery of Proxy Material
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Householding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PROPOSAL ONE
ELECTION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Director Nominee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Directors with Terms Expiring in 2022 and 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Composition of the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Meeting Attendance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Committees of the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Director Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board Leadership Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Code of Ethics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholder Communications with the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nominations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Management Sessions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SECURITIES HOLDINGS OF PRINCIPAL STOCKHOLDERS, DIRECTORS, NOMINEES AND OFFICERS . . . . . .
Equity Compensation Plan Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Delinquent Section 16(a) Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Discussion & Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SUMMARY COMPENSATION TABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

STOCK OWNERSHIP GUIDELINES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Policies Against Hedging and Pledging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

EMPLOYMENT AGREEMENTS AND POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN

CONTROL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
COMPENSATION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PROPOSAL TWO
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM . . . . . . . . . . .

AUDIT COMMITTEE REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PRINCIPAL AUDITOR FEES AND SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

AUDIT COMMITTEE PRE-APPROVAL POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1
1
1
2
3
4
4
4
5

6
6
6
7
8
8
8
9
9
9
10
10
10
11

12
13
13

14
15
15

22
22

23
23
26
26
26

P
r
o
x
y
S
t
a
t
e
m
e
n
t

PROPOSAL THREE
ADVISORY VOTE ON EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

STOCKHOLDER PROPOSALS FOR 2023 ABRAXAS ANNUAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ABRAXAS PETROLEUM CORPORATION

18803 Meisner Drive
San Antonio, Texas 78258
(210) 490-4788

PROXY STATEMENT

P
r
o
x
y
S
t
a
t
e
m
e
n
t

The Board of Directors of Abraxas Petroleum Corporation (“Abraxas” or the “Company”) is soliciting proxies to vote
shares of preferred stock and common stock at the 2022 Annual Meeting of Stockholders to be held at 3:00 p.m., central
time, on May 11, 2022, in a virtual-only meeting format, by live audio webcast, and at any adjournment thereof. Instructions
on how to attend the Annual Meeting are posted at www.proxydocs.com/AXAS. Prior registration to attend the Annual
Meeting at www.proxydocs.com/AXAS is required by 5:00 p.m. Eastern Time on May 10, 2022. Upon completing your
registration, you will receive further instructions via email, including your unique links that will allow you access to the
meeting and will also permit you to submit questions. A Notice of Internet Availability of Proxy Materials (the “Notice of
Internet Availability”) containing instructions on how to access and review this proxy statement and the accompanying
proxy, and how to access the proxy card to vote on the Internet or by telephone, is first being mailed to stockholders on or
about April 1, 2022. For ten days prior to the Annual Meeting, a complete list of stockholders entitled to vote at the Annual
Meeting will be available for examination by any stockholder for any purpose relevant to the Annual Meeting during regular
business hours at Abraxas’ corporate office, located at the address set forth above. If you would like to review the
stockholder list, please call our Investor Relations department at (210) 490-4788 to schedule an appointment or, in light of
COVID-19, make other arrangements to view the list.

Record Date; Shares Entitled To Vote; Quorum

The Board of Directors has fixed the close of business on March 21, 2022, as the record date for Abraxas stockholders
entitled to notice of and to vote at the Annual Meeting. Holders of preferred stock and common stock as of the record date
are entitled to vote at the Annual Meeting. As of the record date, there were 685,505 shares of Abraxas preferred stock,
which were held by AG Energy Funding, LLC (“AGEF”), and 8,421,910 shares of Abraxas common stock outstanding,
which were held by approximately [908] holders of record. The shares of preferred stock vote together with the common
stock as a single class, and each share of preferred stock entitles the holder thereof as of the record date to 69 votes, while
each share of common stock entitles the holder thereof as of the record date to one vote. Accordingly, AGEF holds shares of
preferred stock representing the right to vote approximately 85% of the total voting power of our capital stock.

The holders of a majority of the outstanding shares of Abraxas capital stock issued and entitled to vote at the Annual
Meeting must be present in person (including virtually) or by proxy to establish a quorum for business to be conducted at the
Annual Meeting. Abstentions and “broker non-votes” are treated as shares that are present and entitled to vote for purposes
of determining the presence of a quorum.

A “broker non-vote” occurs when you fail to provide your broker with voting instructions and the broker does not have
the discretionary authority to vote your shares on a particular proposal because the proposal is not a routine matter under
New York Stock Exchange rules. A broker non-vote may also occur if your broker fails to vote your shares for any reason.
Brokers cannot vote on their customers’ behalf on “non-routine” proposals such as Proposals One and Three. Because
brokers require their customers’ direction to vote on such non-routine matters, it is critical that stockholders provide their
brokers with voting instructions. Proposal Two, ratification of the appointment of our independent registered public
accounting firm, will be a “routine” matter for which your broker does not need your voting instruction in order to vote your
shares.

Votes Required

The votes required for each proposal is as follows:

Election of Directors. Each share of our preferred stock entitles the holder thereof to 69 votes, and each share of our
common stock entitles the holder thereof to one vote, with respect to the election of directors. Each director will be elected
by a majority of the votes cast with respect to such director. A “majority of the votes cast” means that the number of votes
cast “for” a director exceeds the number of votes cast “against” that director. Abstentions and “broker non-votes” are not
considered to be votes cast with respect to the election of directors. Under Nevada law, if the director is not elected at the

Annual Meeting, the director will continue to serve on the Board as a “holdover director.” As required by the Company’s
Amended and Restated Bylaws, each director has submitted an irrevocable letter of resignation as a director that becomes
effective if he or she is not elected by the stockholders and the Board accepts the resignation. If a director is not elected, the
Board will consider the director’s resignation and whether to accept or reject the resignation. In making its decision regarding
the tendered resignation, the Board of Directors may consider any factors or other information that it considers appropriate.
The Board of Directors will publicly disclose its determination.

If you sign and submit your proxy card or voting instruction form without specifying how you would like your shares
voted, your shares will be voted FOR the Board’s recommendations specified below under Proposal One–Election of
Directors, and in accordance with the discretion of the proxy holders with respect to any other matters that may be voted
upon at the Annual Meeting. Should the Company lawfully identify or nominate substitute or additional nominees before the
Annual Meeting, we will file supplemental proxy material that identifies such nominee(s), discloses whether such nominee(s)
has (have) consented to being named in the proxy material and to serve if elected and includes the relevant required
disclosures with respect to such nominee(s).

The Board of Directors recommends a vote “FOR” each of the nominees on the proxy card.

Appointment of Independent Registered Public Accounting Firm. Each share of our preferred stock entitles the holder
thereof to 69 votes, and each share of our common stock entitles the holder thereof to one vote, with respect to the
ratification of the appointment of Akin, Doherty, Klein & Feuge, PC as our independent registered public accounting firm.
The affirmative vote of holders of a majority of the shares of our preferred stock and common stock present at the Annual
Meeting in person (including virtually) or represented by proxy and entitled to vote on the matter will be considered to
determine the outcome of this proposal. Abstentions from voting will have the same effect as a vote against this proposal.
This proposal is a “routine” matter for which your broker does not need your voting instruction in order to vote your shares.
The outcome of this proposal is advisory in nature and is non-binding.

The Board of Directors recommends a vote “FOR” the ratification of the selection of Akin, Doherty, Klein &

Feuge, PC, as Abraxas’ independent registered public accounting firm for the fiscal year ending December 31, 2022.

Advisory Vote on Executive Compensation. Each share of our preferred stock entitles the holder thereof to 69 votes, and
each share of our common stock entitles the holder
in
a non-binding, advisory vote, of the compensation of our named executive officers. The affirmative vote of holders of a
majority of the shares of our preferred stock and common stock present at the Annual Meeting in person (including virtually)
or represented by proxy and entitled to vote on the matter will be considered to determine the outcome of this proposal.
Abstentions from voting will have the same effect as a vote against this proposal, and broker non-votes will have no effect on
the outcome of this proposal. Brokers, as nominees for the beneficial owner, may not exercise discretion in voting on this
matter and may only vote on this proposal as instructed by the beneficial owner of the shares. The outcome of this proposal is
advisory in nature and is non-binding.

to one vote, with respect

to the approval,

thereof

The Board of Directors recommends a vote “FOR” the approval of the compensation of our named executive

officers.

Voting of Proxies

If you are a stockholder whose shares are registered in your name, you may vote your shares by one of the following

three methods:

• Vote by Internet, by going to the web address www.proxyvoting.com/axas and following the instructions for

Internet voting shown on the proxy card and in the Notice of Internet Availability.

• Vote by Telephone, by dialing (800) 730-7360 and following the instructions for telephone voting shown on

the proxy card and in the Notice of Internet Availability.

• Vote by Proxy Card, by printing, completing, signing, dating and mailing your proxy card to Abraxas’

corporate office. If you vote by Internet or telephone, please do not mail your proxy card.

The deadline for voting electronically through the Internet or by telephone is 11:59 p.m., Eastern Time, on May 10,

2022.

P
r
o
x
y
S
t
a
t
e
m
e
n
t

If your shares are held in “street name” (through a broker, bank or other nominee), you may receive a separate voting
instruction form with this proxy statement, or you may need to contact your broker, bank or other nominee to determine
whether you will be able to vote electronically using the Internet or telephone.

PLEASE NOTE THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU WILL NOT BE PERMITTED TO VOTE IN
PERSON (INCLUDING VIRTUALLY) AT THE MEETING UNLESS YOU FIRST OBTAIN A LEGAL PROXY
ISSUED IN YOUR NAME FROM THE RECORD HOLDER. PLEASE SEE FURTHER INSTRUCTIONS BELOW.

The proxies identified on the proxy card will vote the shares of which you are stockholder of record in accordance with
your instructions. If you sign and return your proxy card without giving specific voting instructions, the proxies will vote
your shares “FOR” the nominated director and “FOR” Proposals Two and Three. The giving of a proxy will not affect your
right to vote in person (including virtually) if you decide to attend the virtual Annual Meeting.

Stockholder of Record. If your shares are registered directly in your name or with our transfer agent, American Stock
Transfer & Trust Company, LLC, you are considered the stockholder of record with respect to those shares and the Notice of
Internet Availability, containing instructions for how to access the proxy materials and a proxy card via the Internet, is being
sent directly to you by us. As a stockholder of record, you have the right to grant your voting proxy directly to us or to vote
your shares electronically at the virtual Annual Meeting. Instructions on how to attend the Annual Meeting are posted
at www.proxydocs.com/AXAS. Prior registration to attend the Annual Meeting at www.proxydocs.com/AXAS is required by
5:00 p.m. Eastern Time on May 10, 2022. Upon completing your registration, you will receive further instructions via email,
including your unique links that will allow you access to the meeting and will also permit you to submit questions.

Beneficial Holder. If your shares are held in a brokerage account or by a bank or other nominee, you are considered the
beneficial owner of the shares held in street name, and the Notice of Internet Availability is being forwarded to you by your
broker, bank or other nominee who is considered the stockholder of record with respect to those shares. As the beneficial
owner, you have the right to direct your broker on how to vote and are also invited to attend the meeting virtually.
Instructions on how to attend the Annual Meeting are posted at www.proxydocs.com/AXAS. Prior registration to attend the
Annual Meeting at www.proxydocs.com/AXAS is required by 5:00 p.m. Eastern Time on May 10, 2022. Upon completing
your registration, you will receive further instructions via email, including your unique links that will allow you access to the
meeting and will also permit you to submit questions. Additionally, since you are not the stockholder of record, in order to
vote these shares electronically at the virtual Annual Meeting you must obtain a legal proxy from your broker, bank or other
nominee. Your broker, bank or other nominee will provide a voting form for your use that contains instructions on how to
obtain a legal proxy from your broker, bank or other nominee. Once you have obtained the legal proxy, you must send a copy
of the legal proxy to our tabulator Morrow Sodali LLC via e-mail at AXAS.proxy@client.morrowsodali.com prior to
May 11, 2022. If you should have any questions, please call Morrow Sodali at 800-662-5200.

How to Vote By Proxy; Revocability of Proxies

To vote by proxy, you must print, mark, sign, date, and return the proxy card to Abraxas’ corporate office or vote
electronically through the Internet or by telephone. If you are a beneficial holder, you may also vote your shares by telephone
or the Internet using the instructions provided to you by your broker, bank or other nominee. Any Abraxas stockholder who
delivers a properly executed proxy may revoke the proxy at any time before it is voted.

Whether you vote by telephone, the Internet or by mail, you can change or revoke your proxy before it is voted at the

meeting by:

•

submitting a new proxy card bearing a later date;

voting again by telephone or the Internet at a later time;

giving written notice before the meeting to our Secretary at the address set forth on the cover of this proxy
statement stating that you are revoking your proxy; or

attending the meeting and voting your shares in person (including virtually).

Attendance at the Annual Meeting will not, in and of itself, constitute revocation of a proxy. An Abraxas stockholder
whose shares are held in the name of a broker, bank or other nominee must bring a legal proxy from his, her or its broker,
bank or other nominee to the meeting in order to vote in person (including virtually, following the instructions above).

Deadline for Voting by Proxy

In order to be counted, votes cast by proxy must be received prior to the Annual Meeting.

Solicitation of Proxies

The cost of soliciting proxies in the accompanying form will be borne by Abraxas. Proxies are being solicited by mail,
telephone, fax, email, town hall meetings, press releases, press interviews and the Company’s Investor Relations website. In
addition to solicitations by mail, a number of officers, directors and regular employees of ours may, at no additional expense
to us, solicit proxies in person or by telephone. We have hired Morrow Sodali LLC to assist in the solicitation of proxies at a
fee estimated not to exceed $8,000. In addition, we have agreed to reimburse Morrow Sodali LLC for its reasonable
out-of-pocket expenses. We will also make arrangements with brokerage firms, banks and other nominees to forward proxy
materials to beneficial owners of shares and will reimburse such nominees for their reasonable costs.

Our website address is included several times in this proxy statement as a textual reference only and the information in

the website is not incorporated by reference into this proxy statement.

Important Information Regarding Delivery of Proxy Material

The Securities and Exchange Commission has adopted rules regarding how companies must provide proxy materials to
their stockholders. These rules are often referred to as “notice and access,” under which a company may select either of the
following options for making proxy materials available to its stockholders:

•

the full set delivery option; or

the notice only option.

A company may use a single method for all of its stockholders, or use full set delivery for some while adopting the

notice only option for others.

Full Set Delivery Option

Under the full set delivery option, which we have elected NOT to use for the 2022 Annual Meeting, a company delivers
all proxy materials to its stockholders by mail as it would have done prior to the change in the rules. In addition to delivery of
proxy materials to stockholders, the company must post all proxy materials on a publicly-accessible website and provide
information to stockholders about how to access the website.

Notice Only Option

Under the notice only option, a company must post all proxy materials on a publicly accessible website. Instead of
delivering proxy materials to its stockholders, the company instead delivers a “Notice of Internet Availability of Proxy
Materials.” The notice includes, among other matters:

•

information regarding the date and time of the Annual Meeting of stockholders as well as the items to be
considered at the meeting;

information regarding the website where the proxy materials are posted; and

various means by which a stockholder can request paper or e-mail copies of the proxy materials.

If a stockholder requests paper copies of the proxy materials, these materials must be sent to the stockholder within

three business days and by first class mail.

In connection with its 2022 Annual Meeting of Stockholders, Abraxas has elected to use the notice only option.
Accordingly, the Notice of Internet Availability will be mailed to our stockholders on or about April 1, 2022. The Notice of
Internet Availability will provide instructions on how to access and review the proxy materials via the Internet and how to
access the proxy card to vote by the Internet or telephone. These proxy materials include the Notice of Annual Meeting of
Stockholders, proxy statement, proxy card and Annual Report on Form 10-K. Additionally, Abraxas has posted these
materials at www.proxydocs.com/AXAS. If you would like to receive a printed copy of the proxy materials, please follow the
instructions that are included in the Notice of Internet Availability for requesting such materials.

Householding

The Securities and Exchange Commission, or “SEC,” has adopted rules that permit companies and intermediaries (e.g.,
brokers) to satisfy the delivery requirements for proxy materials with respect to two or more stockholders sharing the same
address by delivering a single set of proxy materials or, as applicable, a single copy of the Notice of Internet Availability.
This process, which is commonly referred to as “householding,” potentially results in extra convenience for stockholders,
cost savings for companies and conservation of paper products. We have adopted this “householding” procedure.

If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate copy of the

Notice of Internet Availability or other proxy materials, you may:

•

send a written request to Investor Relations, Abraxas Petroleum Corporation, 18803 Meisner Drive, San
Antonio, Texas 78258 or call (210) 490-4788, if you are a stockholder of record; or

notify your broker, if you hold your shares in street name.

Upon receipt of your request, we will promptly deliver a separate copy of the Notice of Internet Availability to you. You may
also contact Investor Relations as described above if you are receiving multiple copies of our proxy materials and would like
to receive only one copy in the future.

P
r
o
x
y
S
t
a
t
e
m
e
n
t

PROPOSAL ONE

ELECTION OF DIRECTORS

Abraxas’ Articles of Incorporation divide the Board of Directors into three classes of directors serving staggered three-
year terms, with one class to be elected at each Annual Meeting. At this year’s meeting, three Class III directors are to be
elected for a term of three years to hold office until the expiration of his term in 2025, or until their respective successor has
been elected and duly qualified. The nominees for Class III directors are Brian L. Melton, Damon Putman, and Daniel
Baddeloo. Messrs. Melton, Putman and Baddeloo are currently directors. The director nominees named in this proxy
statement have agreed to serve as a director if elected, and we have no reason to believe that any of them will be unable to
serve. In the event that before the Annual Meeting any nominee named in this proxy statement should become unable or
unwilling to serve, the person named in the proxy will vote the shares represented by any proxy received by our Board of
Directors for such other person or persons as may thereafter be nominated for director by our Board of Directors.

Assuming the presence of a quorum, a director will be elected by a majority of the votes cast with respect to such
director. A “majority of the votes cast” means that the number of votes cast “for” a director exceeds the number of votes cast
“against” that director. Abstentions and “broker non-votes” are not considered to be votes cast with respect to the election of
directors. Under Nevada law, if the director is not elected at the Annual Meeting, the director will continue to serve on the
Board as a “holdover director.” As required by the Company’s Amended and Restated Bylaws, the director has submitted an
irrevocable letter of resignation as a director that becomes effective if he or she is not elected by the stockholders and the
Board accepts the resignation. If a director is not elected, the Board will consider the director’s resignation and whether to
accept or reject the resignation. In making its decision regarding the tendered resignation, the Board of Directors may
consider any factors or other information that it considers appropriate. The Board of Directors will publicly disclose its
determination.

The Board of Directors recommends a vote “FOR” the election of each of the nominees to the Board of Directors.

Board of Directors

The following table sets forth the names, ages, and positions of the directors of Abraxas. A summary of the background
and experience of each of those individuals is set forth after the table. The term of the Class III directors expires in 2022, but
if re-elected will expire in 2025, the term of the Class II director expires in 2023, and the term of the Class I director expires
in 2024.

Name

Age

Position(s) with the Company

Class

Todd Dittmann . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Robert L.G. Watson . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brian L. Melton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Damon Putman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Daniel Baddeloo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

President and Chief Executive Officer, Director

54 Chairman of the Board, Director
71
52 Director
43 Director
29 Director

I
II
III
III
III

Director Nominee

The Board unanimously recommends using the proxy card to vote FOR the Board’s nominees for Director.

Brian L. Melton has served as the Senior Vice President – Commercial & Business Development of NorthStar
Midstream (a private portfolio company of OakTree Capital) since September 2019. Prior to joining NorthStar, Mr. Melton
worked as Chief Commercial Officer for Blueknight Energy Partners (Nasdaq: “BKEP”, or “Blueknight”), a publicly traded
master limited partnership (MLP) that specializes in providing crude oil and asphalt terminalling from December 2013 until
September 2019. Prior to joining Blueknight, Mr. Melton served as Vice-President of Business Development / Corporate
Strategy for Crestwood Equity Partners, L.P. (NYSE: CEQP), Crestwood Midstream Energy Partners, L.P. (NYSE: CMLP),
and Inergy, L.P. (NYSE: NRGY) from September 2008 until December 2013. Crestwood and Inergy are publicly-traded
MLP’s that specialize in providing midstream crude oil, natural gas and natural gas liquids services to producers and
midstream providers in many of the major U.S. shale plays including the Bakken, Eagle Ford, Marcellus / Utica, Barnett,
Fayetteville, Haynesville and Niobrara U.S. shale regions. Prior to joining Inergy in 2008, Mr. Melton was a Director in the
Energy Corporate Investment Banking groups of Wachovia Securities and A.G. Edwards, prior to its merger with Wachovia

P
r
o
x
y
S
t
a
t
e
m
e
n
t

Securities in October of 2007. Mr. Melton joined A.G. Edwards in July 2000 and was a senior member of the energy
corporate finance team. From November 1995 until July 2000, Mr. Melton served as Director of Finance & Corporate
transportation and logistics company.
Planning with TransMontaigne Inc., a downstream refined products supply,
Mr. Melton has served on the Board of Directors of San Antonio, TX based exploration and production company Abraxas
Petroleum Corporation (OTCQX: AXAS) since October of 2009. Mr. Melton received a Bachelor of Science degree in
Management and a Master of Business Administration degree from Arkansas State University.

We believe that Mr. Melton’s operational and business experience (particularly in the U.S. shale plays in which the
Company operates), as well as Mr. Melton’s prior oil and gas investment banking experience help him bring unique insight
to our Board and that his financial experience is beneficial to our audit committee.

Damon Putman has served as a Managing Director in the energy investment group at Angelo Gordon which he joined
in 2013. Before joining Angelo Gordon, Mr. Putman was CFO of Torch Energy Advisors, a private energy company with
investments in the upstream, midstream and renewable energy sectors, and served as a member of its executive committee.
Prior to Torch, Mr. Putman was a Vice President at D.B. Zwirn & Co. focused on originating, evaluating and managing
investments in the energy sector. Additionally, Mr. Putman has also worked in the energy investment banking division at
Merrill Lynch and Jefferies and in the energy corporate lending group at Wells Fargo. Mr. Putman also currently serves on
the Board of Directors of two privately held exploration and production companies, Midland, TX. based Admiral Permian
Resources and Denver, CO. based Sundance Energy. Mr. Putman holds a B.B.A. degree in Finance from the University of
Texas, Austin

We believe that Mr. Putman’s experience in the upstream, midstream and renewable energy sectors as well as his

familiarity with energy finance from his previous banking experience will be valuable to the Company.

Daniel Baddeloo currently serves as a Vice President in the energy group at Angelo Gordon, which he joined in 2017.
Prior to 2017, Mr. Baddeloo worked in investment banking with Moelis & Company where he evaluated and executed M&A,
capital markets and debt restructuring transactions in the energy sector. Mr. Baddeloo also currently serves on the Board of
Directors of APR Holdings II LLC (dba Admiral Permian Resources), a private exploration and production company with
operations in the Permian Basin. Mr. Baddeloo holds a B.B.A degree in Finance from the University of Texas at Austin.

We believe that Mr. Baddeloo’s experience in M&A and capital markets transactions in the energy sector combined

with his other leadership positions are valuable assets to the Company.

Directors with Terms Expiring in 2023 and 2024.

Todd Dittmann, has served as Chairman of the Board since January 3, 2022, and currently serves as Managing Director
and executive committee member of Angelo Gordon, which he joined in 2013. Mr. Dittmann is a seasoned and experienced
investment professional who has spent more than 25 years in energy finance with investing and board experience in both
public and private companies. His experience includes the closing of approximately 150 debt, equity, M&A, derivative-
linked and other energy related transactions, most of which he completed as a principal investor or lead lender. Mr. Dittmann
has previously held roles with D.B. Zwirn & Co., Jefferies & Co. and the Chase Manhattan Bank. In addition, since October
2018 and through the present, Mr. Dittmann has served on the board of Murchison Oil and Gas a Dallas-based oil and gas
company focused on the Midland side of the Permian Basin. Moreover, from August 2020 through June 2021, Mr. Dittmann
had previously served on the board of the Company. Most recently, Mr. Dittmann has been serving on the board of Admiral
Permian Resources since December 2020, a Midland-based, private exploration and production company focused on the
Delaware side of the Permian Basin of Texas. Mr. Dittmann holds a B.B.A. degree with a concentration in finance and an
M.B.A. degree from the University of Texas, Austin and is a Chartered Financial Analyst.

Robert L.G. Watson has served President, Chief Executive Officer and a director of Abraxas since 1977, and was
Chairman of the Board during that same time period until January 3, 2022. Prior to forming Abraxas, Mr. Watson held
petroleum engineering positions with Tesoro Petroleum Corporation and DeGolyer and MacNaughton. Mr. Watson received
a Bachelor of Science degree in Mechanical Engineering from Southern Methodist University in 1972 and a Master of
Business Administration degree from the University of Texas at San Antonio in 1974. Mr. Watson has been involved in the
oil and gas industry for his entire business career and is the founder of Abraxas. He has developed a wide network of
personal and business relationships within the oil and gas industry. His strong engineering and financial background
combined with his many years of operational experience throughout changing conditions in the market and industry provide
him with the ability to successfully lead the Company.

Composition of the Board of Directors

The Company believes that its Board as a whole should encompass a diverse range of talent, skill, experience and
expertise enabling it to provide sound guidance with respect to the Company’s operations and business goals. In addition to
considering a candidate’s background and accomplishments, candidates are reviewed in the context of the current
composition of the Board and the evolving needs of the Company. The Company currently has only one director,
Mr. Melton, that qualifies as “independent” as determined in accordance with the listing standards of The NASDAQ Stock
Market and Rule 10A-3 of the Securities Exchange Act of 1934, as amended, or the Exchange Act.

The Board of Directors believes that it should be composed of directors with experience in areas relevant to the strategy
and operations of the Company, particularly in the oil and gas industry and complex business and financial dealings. The
nominees for election as a director at the Annual Meeting and each of the Company’s current directors holds or has held
senior executive positions in the oil and gas industry, the financial/banking community or with publicly-traded companies. In
these positions, we believe that the nominees and each current director has gained experience in core management skills,
such as strategic and financial planning, public company financial reporting, corporate governance, risk management, and
leadership development. Our directors also have experience serving on boards and board committees of other public
companies, as well as charitable organizations and private companies. The Board also believes that the nominees and each
current director has other key attributes that are important to an effective board: integrity and demonstrated high ethical
standards; sound judgment; analytical skills; the ability to engage management and each other in a constructive and
collaborative fashion; diversity of background, experience and thought; and the commitment to devote significant time and
energy to service on the Board and its Committees. With respect to each of our current directors and the director nominees,
their biographies on pages 6-7 detail their individual experience in the oil and gas industry, the financial/banking community
and/or with publicly-traded companies, together with their past and current board positions.

Meeting Attendance

During the fiscal year ended December 31, 2021, the Board of Directors held four regular meetings, the Audit
Committee held four regular meetings, a Special Committee of the Board related to the Company’s previously disclosed
restructuring of its then-existing indebtedness through a multi-part interdependent de levering transaction that occurred in
January 2022, held 12 meetings, and the Compensation Committee and the previously existing Nominating and Corporate
Governance Committee did not meet in 2021. During 2021, each then-serving director attended at least 75% of all Board and
applicable Committee meetings and, other than Mr. Watson, President and Chief Executive Officer, each director received
compensation for his or her service to Abraxas for his or her role as director. See “Executive Compensation – Compensation
of Directors.” Abraxas encourages, but does not require, directors to attend the Annual Meeting of stockholders; however,
such attendance allows for direct interaction between stockholders and members of the Board of Directors. At Abraxas’ 2021
Virtual Annual Meeting, all then-members of the Board were present.

Committees of the Board of Directors

Abraxas has standing Audit and Compensation Committees.

Set forth below is information regarding such committees and their membership as of the date of this proxy statement.

The Audit Committee is a separately-designated standing audit committee established in accordance with
Section 3(a)(58)(A) of the Exchange Act. During 2021, the Audit Committee consisted of Messrs. Melton (Chairman), Cox
and Dr. Meyer. The Audit Committee now consists of Messrs. Baddeloo (Chairman) and Melton. The Board of Directors has
determined that both Messrs. Baddeloo and Melton are audit committee financial experts as defined by SEC rules. The Audit
Committee Report, which appears on page 29, more fully describes the activities and responsibilities of the Audit
Committee. During 2021, Steven P. Harris, the Company’s Chief Financial Officer, Mr. Krog, and representatives from
ADKF, PC, the Company’s independent registered public accounting firm, along with the then-members of the Company’s
Audit Committee attended each meeting of the Audit Committee. In addition, the representatives from ADKF, PC and the
Audit Committee met in executive session at each meeting.

During 2021, the Compensation Committee consisted of Messrs. Cox (Chairman), Melton and Dr. Meyer. The
Compensation Committee now consists of Messrs. Putman (Chairman) and Melton. The Compensation Committee’s role is
to establish and oversee Abraxas’ compensation and benefit plans and policies, to administer its stock option plans, and to
annually review and approve all compensation decisions relating to Abraxas’ executive officers. The Compensation
Discussion & Analysis, which begins on page 15, more fully describes the activities and responsibilities of the Compensation

P
r
o
x
y
S
t
a
t
e
m
e
n
t

Committee. The Compensation Committee submits its decisions regarding executive compensation to the the Board for
approval. The agenda for meetings of the Compensation Committee is determined by its Chairman and the meetings are
regularly attended by Mr. Watson. At each meeting, the Compensation Committee also meets in executive session. The
Chairman reports the committee’s recommendations on executive compensation to the Board. The Company’s personnel
support the Compensation Committee in its duties and, along with Mr. Watson, may be delegated authority to fulfill certain
administrative duties regarding the Company’s compensation programs. The Compensation Committee has authority under
its charter to retain, approve fees for and terminate advisors, consultants and agents as it deems necessary to assist in the
fulfillment of its responsibilities. In May 2017, the Compensation Committee engaged Longnecker and Associates, which we
refer to as “L&A” or the “Compensation Consultant”, as its independent compensation consultant. The Committee did not
engage any outside compensation consultants in 2020 and 2021. For more information on the Compensation Committee’s
processes and procedures, please see “Executive Compensation – Compensation Discussion & Analysis – Our Compensation
Committee” and – “Elements of Executive Compensation.”

During 2021, the Nominating and Corporate Governance Committee consisted of Dr. Meyer (Chairman), and Messrs.
Cox and Melton. The primary function of the Nominating and Corporate Governance Committee was to develop and
maintain the corporate governance policies of Abraxas and to assist the Board in identifying, screening and recruiting
qualified individuals to become Board members and determining the composition of the Board and its committees, including
recommending nominees for the election at the annual meeting of stockholders or to fill vacancies on the Board. As of
January 3, 2022, the Nominating and Corporate Governance Committee was terminated, and the responsibilities of that
committee reverted back to the full Board.

Each of the Board’s committees has a written charter and copies of the charters are available for review on the

Company’s website at www.abraxaspetroleum.com.

Director Independence

The Board of Directors has determined that Mr. Melton is the only member of the Board of Directors that is
“independent,” as determined in accordance with the listing standards of The NASDAQ Stock Market and Rule 10A-3 of the
Exchange Act. The Board of Directors periodically conducts a self-evaluation on key Board and committee-related issues,
which has proven to be a beneficial tool in the process of continuous improvement in the Board’s functioning and
communication.

Board Leadership Structure

The Board of Directors believes that Todd Dittmann is best situated to serve as Chairman because of his strong industry
and investment experience, his ability to identify strategic priorities and develop and execute on strategy, and understanding
that AGEF holds shares of preferred stock representing the right to vote approximately 85% of the total voting power of our
capital stock. Mr. Melton is the only independent director of the Board.

Risk Management

The Board of Directors has an active role, as a whole and also at the committee level, in overseeing management of the
Company’s risks. The Board reviews quarterly information regarding the Company’s credit, liquidity and operations, as well
as the risks associated with each. The Company’s Compensation Committee is responsible for overseeing the management of
risks relating to the Company’s executive compensation plans and arrangements to ensure that the compensation programs
do not encourage excessive risk-taking. The Audit Committee oversees management of financial risks, as well as other
identified risks, including information technology. The Board as a whole manages the risks associated with the independence
of the Board of Directors and potential conflicts of interest. While each committee is responsible for evaluating specific risks
and overseeing the management of such risks, the entire Board of Directors is regularly informed through committee reports
about such risks.

The Board of Directors, together with the Compensation Committee and the Audit Committee, coordinate with each
other to provide company-wide oversight of our management and handling of risk. These committees report regularly to the
entire Board of Directors on risk-related matters and provide the Board of Directors with integrated insight about the
Company’s management of strategic, credit, interest rate, financial reporting, liquidity, compliance and operational risks.
While the Company has not developed a company-wide risk statement, the Board of Directors believes a well-balanced
operational risk profile with heavier weighting towards exploitation projects as opposed to exploratory projects, together with
a relatively conservative approach to managing liquidity, debt levels, and commodity price and interest rate risk contribute to
an effective oversight of the Company’s risks.

At meetings of the Board of Directors and its committees, directors receive regular updates from management regarding
risk management. Outside of formal meetings, the Board, its committees and individual Board members have regular access
to the executive officers of Abraxas.

Code of Ethics

In April 2004, the Board of Directors unanimously approved Abraxas’ Code of Ethics. This Code is a statement of
Abraxas’ high standards for ethical behavior, legal compliance and financial disclosure, and is applicable to all directors,
officers, and employees. Abraxas’ Code of Ethics is periodically reviewed by the Board of Directors and was last updated in
2018. A copy of the Code of Ethics can be found in its entirety on Abraxas’ website at www.abraxaspetroleum.com.
Additionally, should there be any changes to, or waivers from, Abraxas’ Code of Ethics, those changes or waivers will be
posted immediately on our website at the address noted above.

Stockholder Communications with the Board

The Board of Directors has implemented a process by which stockholders may communicate with the Board of
Directors. Any stockholder desiring to communicate with the Board of Directors may do so in writing by sending a letter
addressed to the Board of Directors, c/o Corporate Secretary. The Corporate Secretary has been instructed by the Board to
promptly forward any communications received to the members of the Board.

Nominations

Prior to 2022, the Company’s Nominating and Corporate Governance Committee was responsible for determining the
slate of director nominees for election by stockholders, which the committee recommended for consideration to the Board. In
connection with the Company’s previously disclosed restructuring of its then-existing indebtedness through a multi-part
interdependent de levering transaction that occurred in January 2022, the Board of Directors terminated the Nominating and
Corporate Governance Committee, and the Board of Directors is now responsible for determining the slate of director
nominees for election by stockholders. The decision to terminate the Nominating and Corporate Governance Committee was
driven in large part by the fact that AGEF now holds shares of preferred stock representing the right to vote approximately
85% of the total voting power of our capital stock. All director nominees are approved by the Board prior to annual proxy
material preparation and are required to stand for election by stockholders at the next annual meeting. For positions on the
Board created by a director’s leaving the Board prior to the expiration of his or her current term, whether due to death,
resignation, or other inability to serve, Article III of the Company’s Amended and Restated Bylaws provides that a director
elected by the Board to fill a vacancy shall be elected for the unexpired term of his predecessor in office.

The Board does not currently utilize the services of any third-party search firm to assist in the identification or
evaluation of Board member candidates. The Board may engage a third party to provide such services in the future, as it
deems necessary or appropriate at the time in question.

The Board determines the required selection criteria and qualifications of director nominees based upon the needs of the
Company at the time nominees are considered. A candidate must possess the ability to apply good business judgment and be
in a position to properly exercise his or her duties of loyalty and care. Candidates should also exhibit proven leadership
capabilities, high integrity and experience with a high level of responsibility within his or her chosen fields, and have the
ability to quickly understand complex principles of, but not limited to, business, finance and the oil and gas business. The
Board will consider these criteria for nominees identified by the Committee, by stockholders, or through some other source.
When current Board members are considered for nomination for re-election, the Board also takes into consideration their
prior Board contributions, performance and meeting attendance records.

The Board strives to nominate directors with a variety of complementary skills so that, as a group, the Board will
possess the appropriate talent, skills, experience and expertise to oversee the Company’s business. As part of this process, the
Committee evaluates how a particular candidate would strengthen and increase the diversity of the Board in terms of how
that candidate may contribute to the Board’s overall balance of perspectives, backgrounds, knowledge, experience, skill sets
and expertise in substantive matters pertaining to the Company’s business.

The Board will consider qualified candidates for possible nomination that are recommended by stockholders.
Stockholders wishing to make such a recommendation may do so by sending the required information to the Board, c/o
Corporate Secretary at the address listed above. Any such nomination must comply with the advance notice provisions of,

and provide all of the information required by, Abraxas’ Amended and Restated Bylaws. These provisions and required
information are summarized under “Stockholder Proposals for 2023 Abraxas Annual Meeting” beginning on page 32 of this
proxy statement.

The Board conducts a process of making a preliminary assessment of each proposed nominee based upon the resume
and biographical information, an indication of the individual’s willingness to serve and other background information. This
information is evaluated against the criteria set forth above as well as the specific needs of the Company at that time. Based
upon a preliminary assessment of the candidate(s), those who appear best suited to meet the needs of the Company may be
invited to participate in a series of interviews, which are used for further evaluation. The Board uses the same process for
evaluating all nominees, regardless of the original source of the information.

Non-Management Sessions

The Board regularly schedules executive sessions that exclusively involve non-management directors at the time of

each in-person Board meeting. Our Chairman, presides at all such executive sessions.

P
r
o
x
y
S
t
a
t
e
m
e
n
t

SECURITIES HOLDINGS OF PRINCIPAL STOCKHOLDERS

Based upon information received from the persons concerned, no person known to Abraxas beneficially owned, as of

April 1, 2022, more than five percent of the outstanding capital stock of Abraxas, except as follows:

Name and Address of Beneficial Owner
AG Energy Funding, LLC (1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
245 Park Avenue, 26th Floor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New York, NY 10167 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount and
Nature of
Beneficial
Ownership
of Preferred Stock

Voting
Percentage of
Capital Stock

685,505

85%

(1) AG Energy Funding, LLC (“AGEF”) owns all 685,505 shares of our issued and outstanding preferred stock. Our preferred stock votes together with the
common stock as a single class, and each share of preferred stock entitles the holder thereof to 69 votes, while each share of common stock entitles the
holder thereof to one vote. Accordingly, AGEF holds shares of preferred stock representing the right to vote approximately 85% of the total voting
power of our capital stock.

SECURITIES HOLDINGS OF DIRECTORS, NOMINEES AND OFFICERS

Based upon information received from the persons concerned, each director and nominee for director, each of the
executive officers and all directors and officers of Abraxas as a group, owned beneficially as of April 1, 2022, the number
and percentage of outstanding shares of common stock of Abraxas indicated in the following table. Abraxas’ Board has
adopted stock ownership guidelines. Except as otherwise noted below, the address for each of the beneficial owners is c/o
Abraxas Petroleum Corporation, 18803 Meisner Drive, San Antonio, Texas 78258. Please read “Executive Compensation –
Stock Ownership Guidelines.” None of the shares listed below have been pledged as security.

Name of Beneficial Owner

Number of Shares(1)

Percentage of Capital Stock (%)

Robert L.G. Watson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Steven P. Harris . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Peter A. Bommer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tod A. Clarke . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kenneth W. Johnson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
G. William Krog, Jr.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dennis E. Logue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brian L. Melton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Todd Dittmann . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Daniel Baddeloo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Damon Putman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All Officers and Directors as a Group (11 persons) . . . . . . . . . . . . . . . . . . . .

94,810(2)
4,823
21,987(3)
10,983(4)
22,745(5)
12,979(6)
17,727(7)
10,001(8)
—(9)
—(10)
—(11)

196,055

*%
*
*
*
*
*
*
*
*
*
*
*%

Less than 1%

Includes 13,966 shares in a retirement account.
Includes 4,097 shares in a retirement account.
Includes 3,696 shares in a retirement account.
Includes 3,765 shares in a retirement account.
Includes 3,663 shares in a retirement account.
Includes 12,825 shares issuable upon exercise of vested options granted pursuant to the Directors Plan.
Includes 7,825 shares issuable upon exercise of vested options granted pursuant to the Directors Plan and 308 restricted shares subject to vesting.

*
(1) Unless otherwise indicated, all shares are held directly with sole voting and investment power.
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9) Mr. Dittmann joined the Abraxas’ Board of Directors on January 3, 2022.
(10) Mr. Baddeloo joined Abraxas’ Board of Directors on January February 16, 2022.
(11) Mr. Putman joined the Abraxas’ Board of Directors on January 3, 2022.

Equity Compensation Plan Information

The following table gives aggregate information regarding grants under all of Abraxas’ equity compensation plans

through December 31, 2021.

Plan Category

Equity compensation plans approved by security
holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Equity compensation plans not approved by

Number of Securities to be
Issued upon Exercise of
Outstanding Options,
Warrants and Rights

Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights

Number of Securities
Remaining Available for Future
Issuance under Equity
Compensation Plans

54,222

53.79

2,067,863

security holders . . . . . . . . . . . . . . . . . . . . . . . .

—

Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act requires Abraxas’ directors and executive officers and persons who own more than
10% of a registered class of Abraxas equity securities to file with the Securities and Exchange Commission and the
NASDAQ Stock Market initial reports of ownership and reports of changes in ownership of Abraxas common stock.
Officers, directors and greater than 10% stockholders are required by SEC regulations to furnish us with copies of all such
forms they file. Based solely on a review of the copies of such reports furnished to us and written representations that no
other reports were required, Abraxas believes that during 2021, all of its directors and executive officers complied on a
timely basis with all applicable filing requirements under Section 16(a) of the Exchange Act.

P
r
o
x
y
S
t
a
t
e
m
e
n
t

EXECUTIVE OFFICERS

The following table sets forth the names, ages and positions of the executive officers of Abraxas.

Name and Municipality of Residence

Age

Office

Robert L.G. Watson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

71 Chairman of the Board, President and Chief Executive

San Antonio, Texas

Officer

Steven P. Harris . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

48 Vice President – Chief Financial Officer

San Antonio, Texas

Peter A. Bommer

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

65 Vice President – Engineering

San Antonio, Texas

Tod A. Clarke . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

62 Vice President – Land

San Antonio, Texas

G. William Krog, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

68 Vice President – Chief Accounting Officer

San Antonio, Texas

Kenneth W. Johnson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

64 Vice President – Operations

San Antonio, Texas

Robert L.G. Watson has served President, Chief Executive Officer and a director of Abraxas since 1977, and was

Chairman of the Board during that same time period until January 3, 2022.

Steven P. Harris has served as Vice President – Chief Financial Officer since November 2018. Mr. Harris joined
Abraxas in June 2018 as Director, Finance and Capital Markets. Prior to joining Abraxas, from June 2017 to May 2018,
Mr. Harris was with Sundance Energy where he assisted Sundance’s Business Development and Investor Relations efforts.
From 2008 through 2017, Mr. Harris was a Managing Director and headed the U.S. Energy Investment Banking division of
Canaccord Genuity in Houston, Texas. Prior to joining Canaccord Genuity, Mr. Harris served in the Business Development
Group at El Paso Exploration and Production. Mr. Harris earned his Bachelor of Business Administration from the
University of Texas at Austin and a Master of Business Administration from the Rice University Jesse H. Jones Graduate
School of Management.

Peter A. Bommer has served as Vice President – Engineering since 2012 and as Manager of Special Projects since
2007. Prior to joining Abraxas, Mr. Bommer owned and ran the day-to-day operations of Bommer Engineering, a privately
held engineering firm, for over 25 years. Mr. Bommer received a Bachelor of Science in Petroleum Engineering degree from
the University of Texas in 1978 and a Master of Theology degree from Dallas Theological Seminary in 1999. Mr. Bommer
also holds the Professional Engineer designation.

Tod A. Clarke has served as Vice President – Land since August 2017. Mr. Clarke joined Abraxas in 2000 as Land
Manager. Prior to joining Abraxas, Mr. Clarke worked at Exxon USA for 15 years. Mr. Clarke received a Bachelor of
Science – Land Management degree from the University of Houston in 1984. Mr. Clarke also is a Certified Petroleum
Landman.

Kenneth W. Johnson has served as Vice President – Operations since September 2018. Mr. Johnson joined Abraxas in
2000 and most recently served as Regional Operations Manager. Prior to joining Abraxas, Mr. Johnson served as a consultant
to various operators in supervisory and operations management roles across the US including the Mid-Continent, Rockies,
and Gulf Coast regions.

G. William Krog, Jr. has served as Chief Accounting Officer since 2011 and Vice President – Chief Accounting Officer
since November 2017. Mr. Krog joined Abraxas in 1995 and most previously served as Information Systems / Financial
Reporting Director prior to being appointed Chief Accounting Officer. Prior to joining Abraxas, Mr. Krog was an
independent accountant in private practice. Mr. Krog received a Bachelor of Business Administration degree from the
University of Texas at Austin in 1976 and is a Certified Public Accountant.

P
r
o
x
y
S
t
a
t
e
m
e
n
t

EXECUTIVE COMPENSATION

Compensation Discussion & Analysis

We compensate our executive officers through a combination of base salary, annual incentive bonuses and long-term
equity based awards. The compensation is designed to be competitive with those of a peer group, which in 2019 was a group
of exploration and production companies originally provided by Longnecker & Associates, or L&A or the Compensation
Consultant, in 2014 and subsequently updated by the Compensation Committee due to bankruptcies and other corporate
events.

This section discusses the principles underlying our executive compensation policies and decisions, and the most
important factors relevant to an analysis of these policies and decisions. It provides qualitative information regarding the
manner and context in which compensation is awarded to and earned by our executive officers and places in perspective the
data presented in the tables and narrative that follow.

Our Compensation Committee

Our Compensation Committee approves, implements and monitors all compensation and awards to executive officers
including the Chief Executive Officer, the Chief Financial Officer and the other executive officers named in the Summary
Compensation Table below, whom we refer to as the named executive officers or NEOs. The Committee’s membership is
determined by the Board of Directors and is composed of two directors, with Mr. Melton being the only independent director
on the Committee. The Committee, in its sole discretion, has the authority to delegate any of its responsibilities to
subcommittees as it deems appropriate. During 2017, the Compensation Committee engaged L&A to assist in providing a
comprehensive assessment of our executive compensation programs. The Compensation Committee retains the sole authority
to select, retain, terminate, and approve fees and other retention terms of the relationship with L&A.

During 2017, the Compensation Consultant performed the following services for the Committee:

• Conducted an evaluation of the total compensation for each of the NEOs

•

Presented information related to current trends and regulatory developments affecting executive compensation
programs among the companies in our peer group;

• Assisted with the analysis and selection of peer group companies for compensation purposes and for comparative

total shareholder return, or TSR, purposes;

• Assessed the Company’s Annual Bonus Plan (as defined on page 17) metrics versus the companies in our peer

group; and

• Assessed the Company’s LTIP metrics versus the companies in our peer group.

The Committee has not utilized the services of the Compensation Consultant since 2017.

The Committee periodically approves and adopts, or makes recommendations to the Board regarding, Abraxas’
executive compensation decisions. In the first quarter of each year, Mr. Watson, the Chief Executive Officer, submits to the
Compensation Committee his recommendations for salary adjustments and long-term equity incentive awards based upon his
subjective evaluation of individual performance and his subjective judgment regarding each executive officer’s salary and
equity incentives, for each executive officer except himself. For more information on our Compensation Committee, please
refer to the discussion under “Proposal One – Election of Directors – Committees of the Board of Directors.”

The Committee reviews all components of compensation for our executive officers, including base salary, annual
incentive bonuses, long-term equity based awards, the dollar value to the executive and cost to Abraxas of all benefits and all
severance and Change in Control arrangements. Based on this review, the Compensation Committee has determined that the
compensation paid to our executive officers reflects our compensation philosophy and objectives.

Compensation Philosophy and Objectives

Our underlying philosophy in the development and administration of Abraxas’ annual and long-term compensation
plans is to align the interests of our executive officers with those of Abraxas’ stockholders. Key elements of this philosophy
are:

•

establishing compensation plans that deliver base salaries which are competitive with companies in our peer group,
within Abraxas’ budgetary constraints and commensurate with Abraxas’ salary structure;

rewarding outstanding performance; and

•

providing equity-based incentives to ensure motivation over the long-term to respond to Abraxas’ business
challenges and opportunities as owners rather than just as employees.

The compensation currently paid to Abraxas’ executive officers consists of three core elements: base salary, annual
bonuses under the Abraxas Petroleum Corporation Bonus Plan, as amended (the “Annual Bonus Plan”), and long-term equity
based awards granted pursuant to the LTIP.

We believe these elements support our underlying philosophy of aligning the interests of our executive officers with
those of Abraxas’ stockholders by providing the executive officers a competitive salary, an opportunity for annual bonuses,
and equity-based incentives to ensure motivation over the long-term. We view the three core elements of compensation as
related but distinct. Although we review total compensation, we do not believe that significant compensation derived from
one component of compensation should increase or reduce compensation from another component. We determine the
appropriate level for each component of compensation separately. We have not adopted any formal or informal policies or
guidelines for allocating compensation among long-term incentives and annual base salary and bonuses, between cash and
non-cash compensation, or among different forms of non-cash compensation. Abraxas’ Board has also adopted stock
ownership guidelines. Please read “Stock Ownership Guidelines” for more information.

Abraxas does not have any other deferred compensation programs or supplemental executive retirement plans, no
benefits are provided to Abraxas’ executive officers that are not otherwise available to all employees of Abraxas, and no
benefits are valued in excess of $10,000 per employee per year.

The advisory vote on executive compensation received the majority of the votes FOR the proposal in June 2021. The
Company considered the results of last year’s shareholder advisory vote and, given the affirmative vote, did not use this as
consideration to change executive compensation decisions and policies.

CEO Pay Ratio

We believe executive pay must be internally consistent and equitable to motivate our employees to create shareholder
value. We are committed to internal pay equity, and the Compensation Committee monitors the relationship between the pay
our executive officers receive and the pay our non-managerial employees receive. The Compensation Committee reviewed a
comparison of CEO pay (base salary and incentive pay) to the pay of all our employees in 2021. The compensation for our
CEO in 2021 was approximately 4.6 times the median pay of our full-time employees.

Our CEO to median employee pay ratio is calculated in accordance with SEC regulations. We identified the median
employee by examining the 2021 total cash compensation for all individuals, excluding our CEO, who were employed by us
on December 16, 2021, the last day of our payroll year. We included all employees, whether employed on a full-time, part-
time, or seasonal basis. We did not make any assumptions, adjustments, or estimates with respect to total cash compensation
and we did not annualize the compensation for any full-time employees that were not employed by us for all of 2021. We
believe the use of total cash compensation for all employees is a consistently applied compensation measure because we do
not widely distribute annual equity awards to employees.

After identifying the median employee based on total cash compensation, we calculated annual total compensation for
such employee using the same methodology we use for our named executive officers as set forth in the 2021 Summary
Compensation Table later in this proxy statement.

As illustrated in the table below, our 2021 CEO to median employee pay ratio was 3.9:1.

CEO to Median
Employee Pay Ratio
Median
Employee

President
and CEO

Base Salary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Equity Incentive Plan Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All Other Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$381,691
—
13,150(1)

$ 93,144
—
7,840(2)

$394,841

100,984

(1) This amount represents a $10,150 contribution by Abraxas to Mr. Watson’s 401(k) plan and a $3,000 contribution to Mr. Watson’s health savings

accounts for 2021.

(2) This amount represents a safety pay bonus of $6,680 in 2021.

P
r
o
x
y
S
t
a
t
e
m
e
n
t

Elements of Executive Compensation

Executive compensation consists of the following elements:

Base Salary. In determining base salaries for the executive officers of Abraxas, we aim to set base salaries at a level we
believe enables us to hire and retain individuals in a competitive environment and to reward individual performance and
contribution to our overall business goals. In addition, we take into consideration the responsibilities of each executive
officer and determine compensation appropriate for the positions held and expectations of services rendered during the year.
During 2019 we utilized a list of peer companies originally provided by L&A in 2014 and subsequently updated by the
Committee due to bankruptcies and other corporate events to analyze our salary structure. L&A originally identified, and the
Committee updated, potential peer candidates based on 1) companies of similar size, 2) other similar companies in the oil
and gas exploration industry, and 3) similar operations in comparable geographic areas. L&A then analyzed (and the
Committee updated) each company based on:

• Market capitalization;

• Revenue;

• Assets;

• Enterprise value; and

• Operational similarities.

In 2019, Abraxas’ salary range was set by reference to the salaries paid by the comparable companies considering the
responsibilities and expectations of each executive officer while remaining within Abraxas’ budgetary constraints. We
utilized salary information from the comparable companies to compare Abraxas’ salary structure with those other companies
that compete with Abraxas for executives but without targeting salaries to be higher, lower or approximately the same as
those companies. We believe that the base salary levels for our executive officers are consistent with the practices of the
comparable companies, and increases in base salary levels from time to time are designed to reflect competitive practices in
the industry, individual performance and the officer’s contribution to our overall business goals. Individual performance and
contribution to the overall business goals of Abraxas are subjective measures and evaluated by Mr. Watson and the
Compensation Committee and, with respect to Mr. Watson only, the Compensation Committee.

The Company did not conduct an analysis of the salaries paid by comparable companies in 2021. Rather, we evaluated
our current business activities and financial conditions, and the impact of the foregoing events on our future operations,
financial position and liquidity in the fiscal year ending December 31, 2021. In response to the economic uncertainty caused
by the pandemic and the upheaval in the oil and gas markets, we took measures to reduce our general and administrative
costs, which included reducing the salaries of our executive officers and reducing our work force. In setting Abraxas’ salary
range in 2022, we still considered the responsibilities of each executive officer and determined what compensation was
appropriate for the positions held and expectations of services rendered during the year, while staying within Abraxas’
tightened budgetary constraints.

The base salaries paid to our named executive officers in 2021 are set forth below in the Summary Compensation Table.
For 2021, base salaries, paid as cash compensation, were $6,539,271 with Mr. Watson receiving $394,841. We believe that
the base salaries paid achieved our objectives.

Annual Bonuses. Abraxas’ Annual Bonus Plan was initially adopted by our Board of Directors in 2003. In May 2017, in
connection with the Company’s annual compensation cycle, the Compensation Committee asked L&A to conduct a thorough
review of the Company’s grant practices under the Annual Bonus Plan. Under the terms of the Annual Bonus Plan as
approved by Abraxas’s stockholders at the annual meeting in 2014, the performance measures include:

•

increases in, or levels of, net asset value (after taking the risking of reserves into account);

net asset value per share;

pretax earnings;

earnings before interest and taxes;

earnings before interest, taxes, depreciation and amortization;

net income and/or earnings per share;

return on equity, return on assets or net assets, return on capital (including return on total capital or return on
invested capital);

•

share price or stockholder return performance (including, but not limited to, growth measures and total stockholder
return, which may be measured in absolute terms and/or in comparison to a group of peer companies or an index);

oil and gas reserve replacement, reserve growth and finding and development cost targets;

oil and gas production targets;

performance of investments in oil and gas properties;

cash flow measures (including, but not limited to, cash flows from operating activities, discretionary cash flows,
and cash flow return on investment, assets, equity, or capital); and

levels of operating and/or non-operating expenses.

On August 8, 2017, the Board of Directors, at the recommendation of the Compensation Committee, adjusted the eligibility,
metrics and payouts associated with the Annual Bonus Plan. The adjustments became effective on January 1, 2018.
Employees earning above $180,000,
including all NEOs, were eligible for participation in the Annual Bonus Plan.
Employees earning below $180,000 were eligible for participation at the discretion of the Compensation Committee. The
target payout ranged from 50-70% of the eligible employee’s base salary depending upon the employee’s role and
responsibilities. The target payout was multiplied by a target multiplier based on Company performance versus a given set of
performance measures established by the Compensation Committee. There were no new adjustments made in 2019, 2020 or
2021. The Company did not establish bonus metrics for 2022. There were no bonuses paid for 2020 or 2021.

Long-Term Equity Incentives

In May 2017, the Compensation Committee retained L&A to conduct a thorough review of the Company’s grant
practices under the Abraxas Petroleum Corporation Amended and Restated 2005 Employee Long-Term Equity Incentive
Plan (“LTIP”). In August 2017, the Board of Directors, at the recommendation of the Compensation Committee, adjusted the
eligibility, targeted vesting schedule and award requirements for the LTIP. The adjustments took effect on January 1, 2018.
There have been no changes to the LTIP since its inception.

Employees, including all of the NEOs, earning above $180,000 are eligible to participate in the LTIP. Employees
earning below $180,000 are eligible for participation at the discretion of the Compensation Committee. It is anticipated that
awards will largely be made up of restricted stock grants. The target award for participants is 50% of the employee’s yearly
salary, which can be adjusted at the Compensation Committee’s discretion. One-half of the target award vests annually over
three years. Vesting of the remaining half is based on the achievement of performance goals established by the Compensation
Committee.

LTIP. The LTIP, which was approved by our stockholders at the 2006 annual meeting and subsequently amended by our
stockholders, authorizes us to grant incentive stock options, non-qualified stock options and shares of restricted stock to our
executive officers, as well as to all employees of Abraxas. We use equity incentives as a form of long-term compensation
because it provides our executive officers an opportunity to acquire an equity interest in Abraxas and further aligns their
interest with those of our stockholders. Options grants generally have a term of 10 years and vest in equal increments over
four years. Restricted stock grants vest in accordance with each individual grant agreement. Vesting is accelerated in certain
events described under “Potential Payments Change in Control.”

The purposes of the LTIP are to employ and retain qualified and competent personnel and to promote the growth and
success of Abraxas, which can be accomplished by aligning the long-term interests of the executive officers with those of the
stockholders by providing the executive officers an opportunity to acquire an equity interest in Abraxas. All grants are made
with an exercise price of no less than 100% of the fair market value on the date of such grant.

As of December 31, 2021, a total of 183,639 shares of Abraxas common stock were reserved under the LTIP, subject to
adjustment following certain events, such as stock splits. The maximum annual award for any one employee is 250,000
shares of Abraxas common stock. If options, as opposed to restricted stock, are awarded, the exercise price shall be no less
than 100% of the fair market value on the date of the award, unless the employee is awarded incentive stock options and, at
the time of the award, owns more than 10% of the voting power of all classes of stock of Abraxas. Under this circumstance,
the exercise price shall be no less than 110% of the fair market value on the date of the award. Option terms and vesting
schedules are at the discretion of the Compensation Committee.

P
r
o
x
y
S
t
a
t
e
m
e
n
t

Employment Contracts. All previously reported employment contracts and change of control arrangements expired on

December 31, 2021 and were not extended.

Other Employee Benefits. Abraxas’ executive officers are eligible to participate in all of our employee benefit plans,
such as medical, dental, group life and long-term disability insurance, in each case on the same basis as other employees.
Abraxas’ executive officers are also eligible to participate in our 401(k) plan on the same basis as other employees. In 2008,
Abraxas adopted the safe harbor provision for its 401(k) plan which requires Abraxas to contribute a fixed match to each
participating employee’s contributions to the plan. The fixed match is set at the rate of dollar for dollar for the first 1% of
eligible pay contributed, then 50 cents on the dollar for each additional percentage point of eligible pay contributed, up to
5%. The fixed match is contributed in the form of Abraxas common stock. An employee’s eligible pay with respect to
calculating the fixed match is limited by IRS regulations. In addition, the Board of Directors, at its sole discretion, may
authorize Abraxas to make additional contributions to each participating employee’s plan. The employee contribution limit
for 2021 was $19,500 for employees under the age of 50 and $26,000 for employees 50 years of age or older. The Board of
Directors has also suggested a cap on the amount (or percentage) of Abraxas common stock that each employee should own
in their individual 401(k) account to encourage diversification. The maximum suggested percentage has been set at 20% and
each employee is encouraged to reduce his or her ownership of Abraxas common stock in his or her 401(k) account in the
event such employee is over the suggested limit.

Assessment of Compensation Policies and Practices

The Company and the Compensation Committee have conducted an in-depth risk assessment of the Company’s
compensation policies and practices in response to public and regulatory concerns about the link between incentive
compensation and excessive risk taking by companies. The Company and the Committee concluded that our compensation
program does not motivate imprudent risk taking. In this regard, the Committee believes that:

• The Company’s annual incentive compensation is based on performance metrics that promote a disciplined

approach towards the long-term goals of the Company;

• The Company does not offer significant short-term incentives that might drive high-risk investments at the expense

of the long-term value of the Company;

• The Company’s compensation programs are weighted towards offering long-term incentives that reward
sustainable performance, especially when considering the Company’s stock ownership guidelines for executive
officers;

• The Company’s compensation awards are capped at reasonable levels, as determined by a review of the
Company’s financial position and prospects, as well as the compensation offered by companies in our industry; and
• The Board’s high level of involvement in approving material investments and capital expenditures helps avoid

imprudent risk taking.

The Company’s compensation policies and practices were evaluated to ensure that they do not foster risk taking above
the level of risk associated with the Company’s business and the Company concluded that it has a balanced pay and
performance program and that the risks arising from its compensation policies and practices are not reasonably likely to have
a material adverse effect on the Company.

Impact of Regulatory Requirements

Deductibility of Executive Compensation. In evaluating compensation program alternatives,

the Compensation
Committee considered the potential impact on the Company of Section 162(m) of the Internal Revenue Code of 1986, as
amended. Prior to 2018, Section 162(m) limited to $1 million the amount that a publicly traded corporation, such as the
Company, may deduct for compensation paid in any year to its chief executive officer and certain other named executive
officers (“covered employees”). At the time the Compensation Committee made its compensation decisions, the tax law
provided that compensation which qualified as “performance-based” was excluded from the $1 million per covered employee
limit if, among other requirements, the compensation was payable only upon attainment of pre-established, objective
performance goals under a plan approved by our stockholders. However, this exception was repealed in the tax reform
legislation signed into law on December 22, 2017. As a result, it is uncertain whether compensation that the Compensation
Committee intended to structure as performance-based compensation under Section 162(m) will be deductible in the future.

Non-Qualified Deferred Compensation. On October 22, 2004, the American Jobs Creation Act of 2004 was signed into
law, changing the tax rules applicable to non-qualified deferred compensation arrangements. We believe we are in
compliance with the statutory provisions which were effective January 1, 2005 and the regulations which became effective
on January 1, 2009. If such compensation does not comply with the tax rules applicable to non-qualified deferred
compensation arrangements, then the benefits would be taxable in the first year they are not subject to a substantial risk of
forfeiture and are subject to certain additional adverse tax consequences.

Accounting for Stock-Based Compensation. On October 1, 2005 we began accounting for stock-based compensation in
accordance with the requirements of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) Topic 718 for all of our stock-based compensation plans. See the notes to our consolidated financial statements
included in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange
Commission for a discussion of all assumptions made in the calculation of this amount.

Policy on Recovery of Compensation. Our Chief Executive Officer and Chief Financial Officer are required to repay
certain bonuses and stock-based compensation they receive if we are required to restate our financial statements as a result of
misconduct as required by Section 304 of the Sarbanes-Oxley Act of 2002.

SUMMARY COMPENSATION TABLE

The following table sets forth a summary of compensation paid to each of our named executive officers for the last two

fiscal years.

Name and Principal Position

Year

Salary
($)(1)

Bonus
($)(2)

Stock
Awards
($)(3)

Option
Awards
($)(4)

Non-Equity
Incentive Plan
Compensation
($)(5)

All Other
Compensation
($)(6)

Total
($)(7)

Robert L.G. Watson . . . . . . . . . . . . . . . . . . . . . . .

President, Chief Executive Officer and
Chairman of the Board

2021 381,691 —
2020 382,094 —

Steven P. Harris . . . . . . . . . . . . . . . . . . . . . . . . . . 2021 228,119 —
2020 214,853 —

Vice President—Chief Financial Officer

Kenneth W. Johnson . . . . . . . . . . . . . . . . . . . . . . 2021 250,931 —
2020 236,042 —

Vice President—Operations

—
—

13,150
12,975

3,000
3,000

12,052
15,261

394,841
395,069

231,119
217,853

262,983
251,303

(1) The amounts in this column include any 401(k) plan account contributions made by the named executive officer.
(2) The amounts in this column reflect discretionary bonuses. There were no discretionary bonuses in 2020 or 2021.
(3) The amounts in this column reflect the aggregate grant date fair value of stock awards granted during a given year to the named executive officer

calculated in accordance with FASB ASC Topic 718. There were no stock awards in 2020 or 2021.

(4) The amounts in this column reflect the aggregate grant date fair value of options granted during a given year to the named executive officer calculated in

accordance with FASB ASC Topic 718. There were no grants in 2020 or 2021.

(5) The amounts included in this column for 2020 and 2021 include cash bonuses earned and paid under the Annual Bonus Plan. There were no bonuses

paid for 2020 or 2021.

(6) The amounts in this column represent contributions by Abraxas to the named executive officer’s 401(k) plan and health savings accounts for 2020 and

2021 as well as a $4,000 vehicle allowance for Mr. Johnson in 2020.

(7) The dollar value in this column for each named executive officer represents the sum of all compensation reflected in the previous columns.

P
r
o
x
y
S
t
a
t
e
m
e
n
t

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

The following table provides information concerning outstanding equity awards at December 31, 2021 for our named

executive officers.

Option Awards

Stock Awards

Number of
Securities
Underlying
Unexercised
Options (#)
(Exercisable)

Number of
Securities
Underlying
Unexercised
Options (#)
(Unexercisable)(1)

Option
Exercise
Price
($)

Option
Expiration
Date

Number of
Shares of Stock
That Have Not
Vested (#)(2)

Market
Value
of Shares of
Units of
Stock That
Have Not
Vested ($)(3)

Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units or
Other Rights
That Have Not
Vested (#)(2)

Equity Incentive
Plan Awards:
Market or
Payout Value
of
Unearned
Shares, Units
or
Other Rights
That Have Not
Vested ($)(3)

—
—

—

—
—

—

—
—

—

—
—

—

1,617
625
778
855

1,226
2,750
589
937

4,851
—
1,167
2,566

3,978
—
957
2,104

Name

Robert L.G. Watson . . . .
Steven P. Harris . . . . . . .

Kenneth W. Johnson . . .

(1) Options vest in twenty-five percent (25%) increments each year for four (4) years on the anniversary of the grant date.
(2) For awards granted before January 1, 2018, stock awards vest in 25% increments each year for four years on the anniversary of the grant date. Starting
January 1, 2018, the vesting schedule for all restricted stock awards changed to 33.3% each year for three years with the remainder vesting upon
achievement of performance goals established by the Compensation Committee.

(3) The market value was calculated based on the closing price of Abraxas’ common stock on December 31, 2021 of $0.82 per share multiplied by the

number of shares of stock that had not vested as of December 31, 2021.

Stock Ownership Guidelines

Abraxas’ Board has established stock ownership guidelines to strengthen the alignment of director and executive
officer interests with those of our stockholders. As of December 31, 2021, we had three non-employee directors and six
executive officers subject to the stock ownership guidelines. Under the guidelines below, each director and officer is
precluded from selling any shares of Abraxas common stock until the director or officer satisfies the ownership guidelines
set forth in the following table. Satisfaction of the ownership guidelines will fluctuate with the market value of Abraxas
common stock.

Position

Chief Executive Officer

All other Executive Officers

Non-employee Directors

Stock Ownership Guidelines

5x annual base salary

3x annual base salary

3x all fees received during the prior 12-month period,
including the value of common shares awarded in lieu
of cash payments at the time of issuance

Abraxas’ Board has discretion to review special situations; however, non-compliance without board approval can result
in the loss of future bonuses and discretionary stock-based compensation. As of December 31, 2021, the market value of
Abraxas common stock was $2.20 per share. As an example, Mr. Watson, our chief executive officer, is required to own
3,265,854 shares of Abraxas common stock to meet the stock ownership guidelines at this price. As of December 31, 2021,
none of the NEO’s or directors satisfied the minimum stock ownership guidelines.

Policies Against Hedging and Pledging Stock

Our NEOs and directors are prohibited from engaging in hedging transactions that are designed to hedge or offset a
decrease in market value of such person’s Common Stock in the Company. We believe that such conduct could cause an
NEO or director to no longer have the same objectives as the Company’s other stockholders because these types of
transactions could reduce the full risks of stock ownership. In addition, our NEOs and directors may not pledge Company
securities as collateral for any other loan.

P
r
o
x
y
S
t
a
t
e
m
e
n
t

The Company’s Code of Business Conduct and Ethics, which was updated in 2018 contains a policy on insider trading.
The policy states that employees, officers and directors who have access to confidential information are not permitted to use
or share that information for stock trading purposes or for any other purpose except the conduct of our business. All
non-public information about the Company should be considered confidential information. To use non-public information for
personal financial benefit or to “tip” others who might make an investment decision on the basis of this information is not
only unethical but also illegal. If you have any questions, please consult the Company’s policy on insider trading.

Potential Payments Upon Change in Control

Employment agreements with each of our named executive officers that contained “Change of Control” payments

expired on December 31, 2021 and have not been renewed.

Pursuant to Abraxas’ LTIP, All restrictions will lapse with respect to 100% of any restricted stock that has been granted
and such restricted stock shall become fully vested, subject to Section 4 and the terms of the Plan, upon the effective date of a
Change of Control (as defined in the LTIP). In order for such restricted stock to vest upon a Change of Control, the
participant must be continuously employed by the Company through the consummation of the Change of Control, provided,
however, that if any participant is terminated by the Company (or a subsidiary which is his or her employer) for reasons other
than Misconduct (as defined in the LTIP) within the 30 day period preceding consummation of the Change of Control, then
such participant shall be deemed to have been employed by the Company as of the Change of Control.

Abraxas has also established the Abraxas Petroleum Corporation Severance Plan, effective December 31, 2008, for all
employees who are not subject to an employment agreement. This plan provides severance benefits in the event of a change
in control and for certain other changes in conditions of employment. The affected employees would be entitled to receive
one month of base salary for each year of service with Abraxas, up to a maximum of 12 months.

Compensation of Directors

All compensation paid to directors is limited to non-employee directors. We use a combination of cash and stock-based

incentive compensation to attract and retain qualified individuals to serve on the Board.

Compensation. During 2021, each director was paid $1,000 for each board meeting attended and $1,000 for each
committee meeting attended. The chairman of the Audit Committee received an additional annual fee of $10,500, the
chairman of the Compensation Committee received an additional annual fee of $5,300 and the chairman of our former
Nominating and Governance Committee received an additional annual fee of $2,100. Directors were not paid a retainer in
2021.

Stock Options. Historically, Abraxas has awarded each director stock options, depending on each director’s length of
service, with exercise prices equal to the prevailing market prices at the time of issuance, ranging from $19.80 to $107.60 per
share. Each year at the first regular board meeting following the annual meeting, Abraxas awarded each director 1,250
options, in accordance with the terms of the Amended and Restated Abraxas Petroleum Corporation 2005 Non-Employee
Directors Long-Term Equity Incentive Plan (the “Directors Plan”). Option grants were discontinued beginning in 2019 and
replaced with restricted stock grants.

The Directors Plan currently reserves 270,698 shares of Abraxas common stock, subject to adjustment following certain
events, such as stock splits. The maximum annual award for any one director under the current Directors Plan is 5,000
shares. The exercise price of all options awarded is no less than 100% of the fair market value on the date of the award while
the option terms and vesting schedules are at the discretion of the Compensation Committee. Unless otherwise provided in
the applicable award agreement, vested awards granted under the Directors Plan shall expire, terminate, or otherwise be
forfeited as follows:

•

three months after the date the Company delivers a notice of termination of a participant’s active status, other
than in circumstances covered by the following three circumstances:

•

immediately upon termination for misconduct;

12 months after the date of death; and

36 months after the date on which the director ceased performing services as a result of retirement.

Restricted Stock. Beginning in 2019, Abraxas quit awarding stock options and instead granted shares of restricted stock.
Restricted stock was awarded in shares with a market value at the time of the grant equal to $12,000. The restricted shares
vest over a three year period, one third per year from the date of the grant. In 2019, each director was granted 462 shares at
the closing price on the date of the grant of $26.00. There were not any restricted stock awards awarded to directors in 2020.

The following table sets forth a summary of compensation for the fiscal year ended December 31, 2021 that Abraxas
paid to each director. Abraxas does not sponsor a pension benefits plan, a non-qualified deferred compensation plan or a
non-equity incentive plan for its directors; therefore, these columns have been omitted from the following table. Except for
reimbursement of travel expenses to attend board and committee meetings, no other or additional compensation for services
were paid to any of the directors.

Name

Director Compensation Table

Fees
Earned or Paid in
Cash
($)(1)

Restricted
Stock
Awards
($)(2)

Ralph F. Cox(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brian L. Melton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Angela A. Steffen Meyer(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Todd Dittmann . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Daniel Baddeloo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Damon Putman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18,625
26,125
15,625
—
—
—

—
—
—
—
—
—

Total
($)(3)

18,625
26,125
15,625
—
—
—

(1) This column represents the amounts paid in cash to each director.
(2) The amounts in this column reflect the aggregate grant date fair value of restricted stock granted in 2020 to each director calculated in accordance with
FASB ASC Topic 718. See the notes to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended
December 31, 2021 filed with the Securities and Exchange Commission for a discussion of all assumptions made in the calculation of this amount.

(3) The dollar value in this column for each director represents the sum of all compensation reflected in the previous columns.
(4) Ralph F. Cox and Angela A. Steffen Meyer resigned from their positions as directors as of January 3, 2022.

The following table provides information concerning outstanding equity awards at December 31, 2021 for our directors:

Outstanding Equity Awards at Fiscal Year End Table

Name

Ralph F. Cox (4)

. . . . . . . . . . . . . . . . . . . . . . . . . . . .

Brian L. Melton . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Angela A. Steffen Meyer (4) . . . . . . . . . . . . . . . . . . .

Todd Dittmann . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Daniel Baddeloo . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Damon Putman . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

OPTION AWARDS

STOCK AWARDS

Number of
Securities
Underlying
Unexercised
Options
(Exercisable)

Number of
Securities
Underlying
Unexercised
Options
(Unexercisable)(1)

Option
Exercise Price
($)

Number of
Shares of Stock
That Have Not
Vested (#)(2)

Market
Value
of Shares of
Units of
Stock That
Have Not
Vested ($)(3)

500
500
500
500
2,500
500
500
525
600
600
600
1.250
1.250
1.250
1.250

500
525
600
600
600
1,250
1,250
1,250
1,250

—

P
r
o
x
y
S
t
a
t
e
m
e
n
t

55.00
90.20
86.40
90.00
19.80
21.20
47.20
82.60
58.00
47.80
107.60
73.20
26.80
37.40
57.40

47.20
82.60
58.00
47.80
107.60
73.20
26.80
37.40
57.40

—

308

678

154

126

154

126

—

(1) The options awarded to each non-employee director at the first regular board meeting following the annual meeting vest immediately. Other option

awards vest in twenty-five percent (25%) increments each year for four (4) years on the anniversary of the grant date.

(2) For awards granted after January 1, 2018, the vesting schedule for all restricted stock awards changed to 33.3% each year for three years.
(3) The market value was calculated based on the closing price of Abraxas’ common stock on December 31, 2021 of $0.82 per share multiplied by the

number of shares of stock that had not vested as of December 31, 2021.

(4) Ralph F. Cox and Angela A. Steffen Meyer resigned from their positions as directors as of January 3, 2022.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

General

On February 21, 2007, the Board of Directors adopted a formal written related person transaction approval policy,
which sets out Abraxas’ policies and procedures for the review, approval, or ratification of “related person transactions.” For
these purposes, a “related person” is a director, nominee for director, executive officer, or holder of more than 5% of our
common stock, or any immediate family member of any of the foregoing. This policy applies to any financial transaction,
arrangement or relationship or any series of similar financial transactions, arrangements or relationships in which Abraxas is
a participant and in which a related person has a direct or indirect interest, other than the following:

•

payment of compensation by Abraxas to a related person for the related person’s service in the capacity or
capacities that give rise to the person’s status as a “related person;”

transactions available to all employees or all stockholders on the same terms;

purchases of supplies from Abraxas in the ordinary course of business at the same price and on the same terms as
offered to any other purchasers, regardless of whether the transactions are required to be reported in Abraxas’
filings with the SEC; and

transactions which when aggregated with the amount of all other transactions between the related person and
Abraxas involve less than $10,000 in a fiscal year.

Our Audit Committee is required to approve any related person transaction subject to this policy before commencement
of the related person transaction, provided that if the related person transaction is identified after it commences, it shall be
brought to the Audit Committee for ratification, amendment or rescission. The chairman of our Audit Committee has the
authority to approve or take other actions in respect of any related person transaction that arises, or first becomes known,
between meetings of the Audit Committee, provided that any action by the chairman must be reported to our Audit
Committee at its next regularly scheduled meeting.

Our Audit Committee will analyze the following factors, in addition to any other factors the members of the Audit

Committee deem appropriate, in determining whether to approve a related person transaction:

•

whether the terms are fair to Abraxas;

whether the transaction is material to Abraxas;

the role the related person has played in arranging the related person transaction;

the structure of the related person transaction; and

the interest of all related persons in the related person transaction.

Related Party Transactions

There have been no related party transactions since January 1, 2019.

Our Audit Committee may, in its sole discretion, approve or deny any related person transaction. Approval of a related
person transaction may be conditioned upon Abraxas and the related person following certain procedures designated by the
Audit Committee.

RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

PROPOSAL TWO

The Abraxas Board of Directors has selected Akin, Doherty, Klein & Feuge, PC (“ADKF”) to serve as Abraxas’
independent registered public accounting firm for the fiscal year ending December 31, 2022. Although stockholder
ratification is not required, the Board of Directors has directed that such appointment be submitted to the stockholders of
Abraxas for ratification at the Annual Meeting. Even if the selection is ratified, the Audit Committee, in its discretion, may
select a different independent registered public accounting firm at any time if the Audit Committee believes that such a
change would be in the best interests of our company and its stockholders. If our stockholders do not ratify the selection of
ADKF, the Audit Committee will take that fact into consideration, together with such other factors it deems relevant, in
determining its next selection of an independent registered public accounting firm.

ADKF provided audit services to Abraxas for the year ended December 31, 2021. A representative of ADKF will be
present at the Annual Meeting, will have an opportunity to make a statement if he or she desires to do so and will be
available to respond to appropriate questions.

Assuming the presence of a quorum, the affirmative vote of the holders of a majority of the shares of Common Stock
present at the Annual Meeting in person or represented by proxy and entitled to vote on the matter is necessary to ratify the
appointment of Abraxas’ independent registered public accounting firm. The enclosed proxy card provides a means for
stockholders to vote for the ratification of the selection of Abraxas’ independent registered public accounting firm, to vote
against it or to abstain from voting with respect to it. If a stockholder executes and returns a proxy, but does not specify how
the shares represented by such stockholder’s proxy are to be voted, such shares will be voted FOR the ratification of selection
of Abraxas’ independent registered public accounting firm. Abstentions will have the same legal effect as a vote against the
proposal. This proposal is a “routine” matter for which your broker does not need your voting instruction in order to vote
your shares.

P
r
o
x
y
S
t
a
t
e
m
e
n
t

The Board of Directors recommends a vote “FOR” the ratification of the selection of Akin, Doherty, Klein &

Feuge, PC, as Abraxas’ independent registered public accounting firm for the fiscal year ending December 31, 2022.

AUDIT COMMITTEE REPORT

The Audit Committee represents and assists the Board in fulfilling its responsibilities for general oversight of the
integrity of Abraxas’ financial statements, Abraxas’ compliance with legal and regulatory requirements, the independent
registered public accounting firm’s qualifications and independence, the performance of Abraxas’ internal audit function, and
risk assessment and risk management. The Audit Committee manages Abraxas’ relationship with its independent registered
public accounting firm (which report directly to the Audit Committee). The Audit Committee has the authority to obtain
advice and assistance from outside legal, accounting or other advisors as the Audit Committee deems necessary to carry out
its duties and receives appropriate funding, as determined by the Audit Committee, from Abraxas for such advice and
assistance.

Abraxas’ management is primarily responsible for Abraxas’ internal control and financial reporting process. Abraxas’
independent registered public accounting firm is responsible for performing an independent audit of Abraxas’ consolidated
financial statements and internal control over financial reporting, and issuing opinions on the conformity of those audited
financial statements with United States generally accepted accounting principles. The Audit Committee monitors Abraxas’
financial reporting process and reports to the Board on its findings.

In this context, the Audit Committee hereby reports as follows:

1. The Audit Committee has reviewed and discussed the audited financial statements with Abraxas’ management.

2. The Audit Committee has discussed with the independent registered public accounting firm the matters
required to be discussed under the applicable standards of the Public Company Accounting Oversight Board
(“PCAOB”).

3. The Audit Committee has received the written disclosures and the letter from the independent registered public
accounting firm required by applicable requirements of the PCAOB and the SEC regarding the independent registered
public accounting firms’ communications with the Audit Committee concerning independence, and has discussed with
the independent registered public accounting firm their independence.

4. Based on the review and discussions referred to in paragraphs (1) through (3) above, the Audit Committee
recommended to the Board, and the Board has approved, that the audited financial statements be included in Abraxas’
Annual Report on Form 10-K for the year ended December 31, 2021, and for filing with the Securities and Exchange
Commission.

This report is submitted by the members of the Audit Committee.

Daniel Baddeloo, Chairman
Brian L. Melton

PRINCIPAL AUDITOR FEES AND SERVICES

Audit Fees. The aggregate fees billed by ADKF for professional services rendered for the audit of Abraxas’ annual
financial statements for the years ended December 31, 2021 and 2020, the reviews of the condensed consolidated financial
statements included in Abraxas’ quarterly reports on Form 10-Q for the years ended December 31, 2021 and 2020, and the
preparation and delivery of consents, comfort letters and other similar documents, were $255,000 and $325,000, respectively.

Audit-Related Fees. The aggregate fees billed by ADKF for assurance and related services that were reasonably related
to the performance of the audit or review of Abraxas’ financial statements which are not reported in “audit fees” above, for
the years ended December 31, 2021 and 2020 were $0 and $0, respectively.

Tax Fees. The aggregate fees billed by ADKF for professional services rendered for tax compliance, tax advice or tax

planning for the years ended December 31, 2021 and 2020 were $140,000 and $0, respectively.

All Other Fees. The aggregate fees billed by ADKF for other services, exclusive of the fees disclosed above relating to
financial statement audit and audit-related services and tax compliance, advice or planning, for the years ended December 31,
2021 and, 2020, were $0 and $0, respectively.

Consideration of Non-audit Services Provided by the Independent Registered Public Accounting Firm. The Audit
Committee has considered whether the services provided for non-audit services are compatible with maintaining ADKF’s
independence, and has concluded that the independence of such firm has been maintained.

AUDIT COMMITTEE PRE-APPROVAL POLICY

The Audit Committee’s policy is to pre-approve all audit, audit-related and non-audit services provided by the
independent registered public accounting firm. These services may include audit services, audit-related services, tax services
and other services. The Audit Committee approved all of the fees described above. The Audit Committee may also
pre-approve particular services on a case-by-case basis. The independent registered public accounting firm is required to
periodically report to the Audit Committee regarding the extent of services provided by the independent registered public
accounting firm in accordance with such pre-approval. The Audit Committee may also delegate pre-approval authority to one
or more of its members. Such member(s) must report any decisions to the Audit Committee at the next scheduled meeting.

P
r
o
x
y
S
t
a
t
e
m
e
n
t

PROPOSAL THREE

ADVISORY VOTE ON EXECUTIVE COMPENSATION

Abraxas asks that you indicate your support for our executive compensation policies and practices as described in our
Compensation Discussion & Analysis, accompanying tables and related narrative contained in this proxy statement
beginning on page 15. Your vote is advisory and will not be binding on the Board of Directors; however, the Board of
Directors will review the voting results and take them into consideration when making future decisions regarding executive
compensation.

The Compensation Committee is responsible for executive compensation and works to structure a compensation plan
that reflects Abraxas’ underlying compensation philosophy of aligning the interests of our executive officers with those of
our stockholders. Key elements of this philosophy are:

•

rewarding outstanding performance; and

providing equity-based incentives to ensure motivation over the long-term to respond to Abraxas’ business
challenges and opportunities as owners rather than just as employees.

Based on the above, and pursuant to Section 14A of the Exchange Act, we request that stockholders approve the
compensation of our named executive officers as disclosed in the Compensation Discussion & Analysis, the compensation
tables and the related narrative discussion of this proxy statement.

Vote Required

Assuming the presence of a quorum, the affirmative vote of the holders of a majority of the shares of Common Stock
present in person (including virtually) or by proxy and entitled to vote on this proposal at the Annual Meeting is necessary to
approve this proposal. The form of proxy provides a means for stockholders to vote for the approval of this proposal. If a
stockholder executes and returns a proxy, but does not specify how the shares represented by such stockholder’s proxy are to
be voted, such shares will be voted FOR this proposal. Under applicable Nevada law, in determining whether this item has
received the requisite number of affirmative votes, broker non-votes will not be counted and will have no effect. Abstentions
are treated as present and entitled to vote and will have the same effect as a vote against this item.

As an advisory vote, this proposal is nonbinding. Although the vote is nonbinding, the Board and the Compensation
Committee value the opinions of our stockholders and will consider the outcome of the vote when making future
compensation decisions for our NEOs. We have held such advisory votes on executive compensation each year since 2011.

The Board of Directors recommends a vote “FOR” the advisory proposal to approve the compensation of our

NEOs.

P
r
o
x
y
S
t
a
t
e
m
e
n
t

STOCKHOLDER PROPOSALS FOR 2023 ABRAXAS ANNUAL MEETING

Abraxas intends to hold its next annual meeting during the second quarter of 2023 (the “2023 Annual Meeting”),
according to its normal schedule. In order to be included in the proxy material for the 2023 Annual Meeting, Abraxas must
receive eligible proposals from stockholders intended to be presented at the annual meeting a reasonable time before the
Company begins to print and send its proxy materials or the Notice of Internet Availability. Consistent with past practices,
the Company suggests that such proposals be received on or before December 5, 2022, directed to the Abraxas Secretary at
the address indicated on the first page of this proxy statement. In accordance with amendments to the federal proxy rules that
the SEC adopted on November 17, 2021, stockholders should be aware of certain changes to the process and requirements
for nominating directors in contested director elections, which will apply for purposes of our 2023 annual meeting.

According to our Amended and Restated Bylaws, Abraxas must receive timely written notice of any stockholder
nominations and proposals to be properly brought before the 2023 Annual Meeting. To be timely, such notice must be
delivered to the Abraxas Secretary at the principal executive offices set forth on the first page of this proxy statement
between February 10, 2023 and the close of business on March 13, 2023.

The written notice must set forth, as to the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made: (i) the name and address of such stockholder, as they appear on Abraxas’ books,
and of such beneficial owner, if any; (ii) (a) the class or series and number of Abraxas shares which are, directly or indirectly,
owned beneficially and of record by such stockholder and such beneficial owner; (b) any option, warrant, convertible
security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or
mechanism at a price related to any class or series of Abraxas shares or with a value derived in whole or in part from the
value of any class or series of Abraxas shares, whether or not such instrument or right shall be subject to settlement in the
underlying class or series of Abraxas capital stock or otherwise (a “Derivative Instrument”) directly or indirectly owned
beneficially by such stockholder and any other direct or indirect opportunity to profit or share in any profit derived from any
increase or decrease in the value of Abraxas shares; (c) any proxy, contract, arrangement, understanding, or relationship
pursuant to which such stockholder has a right to vote any shares of any Abraxas security; (d) any short interest in any
Abraxas security (a person shall be deemed to have a short interest in a security if such person, directly or indirectly, through
any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit
derived from any decrease in the value of the subject security); (e) any rights to dividends on the Abraxas shares owned
beneficially by such stockholder that are separated or separable from the underlying Abraxas shares; (f) any proportionate
interest in Abraxas shares or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which
such stockholder is a general partner or, directly or indirectly, beneficially owns an interest in a general partner; and (g) any
performance-related fees (other than an asset-based fee) that such stockholder is entitled to, based on any increase or
decrease in the value of Abraxas shares or Derivative Instruments, if any, as of the date of such notice including, without
limitation, any such interests held by members of such stockholder’s immediate family sharing the same household (which
information shall be supplemented by such stockholder and beneficial owner, if any, not later than 10 days after the record
date for the meeting to disclose such ownership as of the record date); and (iii) any other information relating to such
stockholder and beneficial owner, if any, that would be required to be disclosed in a proxy statement or other filings required
to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in a
contested election pursuant to Section 14 of the Exchange Act, and the rules and regulations promulgated thereunder.

If the notice relates to any business other than a nomination of a director or directors that the stockholder proposes to
bring before the meeting, the notice must set forth (i) a brief description of the business desired to be brought before the
meeting, the reasons for conducting such business at the meeting and any material interest of such stockholder and beneficial
owner, if any, in such business, and (ii) a description of all agreements, arrangements and understandings between such
stockholder and beneficial owner, if any, and any other person or persons (including their names) in connection with the
proposal of such business by such stockholder.

In addition to the satisfying the foregoing advance notice requirements under our Amended and Restated Bylaws, to
comply with the universal proxy rules under the Exchange Act, as amended, stockholders who intend to solicit proxies in
support of director nominees other than Abraxas’ nominees must provide notice that sets forth the information required by
Rule 14a-19 under the Exchange Act and that is postmarked or transmitted electronically to Abraxas no later than March 13,
2022.

As to each person, if any, whom the stockholder proposes to nominate for election or reelection to the Board of
Directors, the notice must set forth: (i) all information relating to such person that would be required to be disclosed in a
proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a

contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder
(including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if
elected); and (ii) a description of all direct and indirect compensation and other material monetary agreements, arrangements
and understandings during the past three years, and any other material relationships, between or among such stockholder and
beneficial owner, if any, and their respective affiliates and associates, or others acting in concert therewith, on the one hand,
and each proposed nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the
other hand, including, without limitation all information that would be required to be disclosed pursuant to Rule 404
promulgated under Regulation S-K (or any successor rule) if the stockholder making the nomination and any beneficial
owner on whose behalf the nomination is made, if any, or any affiliate or associate thereof or person acting in concert
therewith, were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such
registrant, and include a completed, dated and signed questionnaire, representation and agreement.

To be eligible to be a nominee for election or reelection as a director of Abraxas, a person must deliver (in accordance
with the time periods prescribed above for delivery of notice) to the Secretary at the principal executive offices of Abraxas a
written questionnaire with respect to the background and qualification of such person and the background of any other person
or entity on whose behalf the nomination is being made (which questionnaire shall be provided by the Secretary upon written
request) and a written representation and agreement (in the form provided by the Secretary upon written request) that such
person (i) is not and will not become a party to (a) any agreement, arrangement or understanding with, and has not given any
commitment or assurance to, any person or entity as to how such person, if elected as a director of Abraxas, will act or vote
on any issue or question (a “Voting Commitment”) that has not been disclosed to Abraxas or (b) any Voting Commitment
that could limit or interfere with such person’s ability to comply, if elected as a director of Abraxas, with such person’s
fiduciary duties under applicable law, (ii) is not and will not become a party to any agreement, arrangement or understanding
with any person or entity other than Abraxas with respect to any direct or indirect compensation, reimbursement or
indemnification in connection with service or action as a director that has not been disclosed therein, and (iii) in such
person’s individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, would be
in compliance, if elected as a director of Abraxas, and will comply with all applicable publicly disclosed corporate
governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of Abraxas. Abraxas
may also require any proposed nominee to furnish such other information as may reasonably be required by Abraxas to
determine the eligibility of such proposed nominee to serve as an independent director of Abraxas or that could be material to
a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee.

In the event that the 2023 Annual Meeting is more than 30 days from May 11, 2023 (the anniversary of the 2022 Annual
Meeting), the dates for submission of proposals to be included in the proxy materials and for business to be properly brought
before the 2023 Annual Meeting have changed according to Abraxas’ Amended and Restated Bylaws and Regulation 14A
under the Exchange Act. A copy of Abraxas’ Amended and Restated Bylaws setting forth the advance notice provisions and
requirements for submission of stockholder nominations and proposals may be obtained from the Abraxas Secretary at the
address indicated on the first page of this proxy statement.

OTHER MATTERS

No business other than the matters set forth in this proxy statement is expected to come before the meeting, but should
any other matters requiring a stockholder’s vote arise, including a question of adjourning the meeting, the persons named in
the accompanying proxy will vote thereon according to their best judgment in the interests of Abraxas. If a nominee for
office of director should withdraw or otherwise become unavailable for reasons not presently known, the persons named as
proxies may vote for another person in his place in what they consider the best interests of Abraxas.

Upon the written request of any person whose proxy is solicited hereunder, Abraxas will furnish without charge
to such person a copy of its annual report filed with the Securities and Exchange Commission on Form 10-K,
including financial statements and schedules thereto, for the fiscal year ended December 31, 2021. Such written
request is to be directed to Investor Relations, 18803 Meisner Drive, San Antonio, Texas 78258.

San Antonio, Texas
April 1, 2022

By Order of the Board of Directors

Robert L.G. Watson
President and Chief Executive Officer

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)

È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2021
‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File Number 001-16071
ABRAXAS PETROLEUM CORPORATION
(Exact name of Registrant as specified in its charter)

Nevada

(State or Other Jurisdiction of
Incorporation or Organization)

74-2584033

(I.R.S. Employer Identification Number)

18803 Meisner Drive
San Antonio, TX 78258
(Address of principal executive offices)
(210) 490-4788
Registrant’s telephone number, including area code
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

Title of each class:
Common Stock, par value $.01 per share

Trading Symbol
AXAS
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

Name of each exchange on which
registered:
OTCQX

F
o
r
m
1
0
-
K

None

Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities

Act. Yes ‘ No È

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the

Exchange Act. Yes ‘ No È

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes È No ‘

Indicate by check mark if the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit such files). Yes È No ‘

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer
or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act (check one):
Large accelerated filer ‘
Non-accelerated filer ‘

Accelerated filer ‘
Smaller reporting company È
Emerging Growth Company ‘

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the
Exchange Act. ‘

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report. ‘

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange

Act). Yes ‘ No È

As of June 30, 2021, the last day of the registrant’s most recently completed second fiscal quarter, the aggregate market
value of the common stock held by non-affiliates of the registrant was $26,530,865 based on the closing sale price as
reported on the OTCQX.

As of March 18, 2022, there were 8,421,910 shares of common stock outstanding.

Documents Incorporated by Reference:

Document

Portions of the registrant’s Proxy Statement relating to
the 2022 Annual Meeting of Stockholders to be held on
May 11, 2022.

Parts Into Which Incorporated

Part III

ABRAXAS PETROLEUM CORPORATION
FORM 10-K
TABLE OF CONTENTS

Part I
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1.
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3.
Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity

Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6.
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . .
Item 7A. Quantitative and Qualitative Disclosure about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . .
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part III
Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . .
Item 12.
Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . . . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 14.

Part IV
Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 16.

Page

6
17
34
34
40
40

41
41
42
54
55
55
55
56
56

57
57
57
57
57

58
60

We make forward-looking statements throughout this report. Whenever you read a statement that is not simply a
statement of historical fact (such as statements including words like “believe,” “expect,” “anticipate,” “intend,” “will,”
“plan,” “seek,” “may,” “estimate,” “could,” “potentially” or similar expressions), you must remember that these are forward-
looking statements, and that our expectations may not be correct, even though we believe they are reasonable. The forward-
looking information contained in this report is generally located in the material set forth under the headings “Business,”
“Properties,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
but may be found in other locations as well. These forward-looking statements generally relate to our plans and objectives for
future operations and are based upon our management’s reasonable estimates of future results or trends. The factors that may
affect our expectations regarding our operations include, among others, the following:

•

the prices we receive for our production and the effectiveness of our hedging activities, if any;

the availability of capital including under any applicable credit facilities;

our success in development, exploitation and exploration activities;

declines in our production of oil and gas;

the proximity, capacity, cost and availability of pipelines and other transportation facilities;

limits on our growth and our ability to finance our operations, fund our capital needs and respond to changing
conditions;

our ability to make planned capital expenditures;

ceiling test write-downs resulting, and that could result in the future, from lower oil and gas prices;

global or national health concerns, including the outbreak of pandemic or contagious disease, such as the
coronavirus (COVID-19);

political and economic conditions in oil producing countries, especially those in the Middle East;

price and availability of alternative fuels;

our ability to procure services and equipment for our drilling and completion activities;

our acquisition and divestiture activities;

weather conditions and events; and

other factors discussed elsewhere in this report.

Initial production, or IP, rates, for both our wells and for those wells that are located near our properties, are limited data
points in each well’s productive history. These rates are sometimes actual rates and sometimes extrapolated or normalized
rates. As such, the rates for a particular well may change as additional data becomes available. Peak production rates are not
necessarily indicative or predictive of future production rates, expected ultimate recovery, or EUR, or economic rates of
return from such wells and should not be relied upon for such purposes. Equally, the way we calculate and report peak IP
rates and the methodologies employed by others may not be consistent, and thus the values reported may not be directly and
meaningfully comparable. Lateral lengths described are indicative only. Actual completed lateral lengths depend on various
considerations such as lease-line offsets. Abraxas standard length laterals, sometimes referred to as 5,000 foot laterals, are
laterals with completed length generally between 4,000 feet and 5,500 feet. Mid-length laterals, sometimes referred to as
7,500 foot laterals, are laterals with completed length generally between 6,500 feet and 8,000 feet. Long laterals, sometimes
referred to as 10,000 foot laterals, are laterals with completed length generally longer than 8,000 feet.

F
o
r
m
1
0
-
K

GLOSSARY OF TERMS

Unless otherwise indicated in this report, gas volumes are stated at the legal pressure base of the state or area in which
the reserves are located at 60 degrees Fahrenheit. Oil and gas equivalents are determined using the ratio of six Mcf of gas to
one barrel of oil.

The following definitions shall apply to the technical terms used in this report.

Terms used to describe quantities of oil and gas:

“Bbl”—barrel or barrels.

“Bcf”—billion cubic feet of gas.

“Bcfe”—billion cubic feet of gas equivalent.

“Boe”—barrels of oil equivalent.

“Boepd”—barrels of oil equivalents per day.

“MBbl”—thousand barrels.

“MBoe”—thousand barrels of oil equivalent.

“Mcf”—thousand cubic feet of gas.

“Mcfe”—thousand cubic feet of gas equivalent.

“MMBbl”—million barrels.

“MMBoe”—million barrels of oil equivalent.

“MMBtu”—million British Thermal Units of gas.

“MMcf”—million cubic feet of gas.

“MMcfe”—million cubic feet of gas equivalent.

“NGL”—natural gas liquids measured in barrels.

Terms used to describe our interests in wells and acreage:

“Developed acreage” means acreage which consists of leased acres spaced or assignable to productive wells.

“Development well” is a well drilled within the proved area of an oil or gas reservoir to the depth or stratigraphic
horizon (rock layer or formation) noted to be productive for the purpose of extracting reserves.

“Dry hole” is an exploratory or development well found to be incapable of producing either oil or gas in sufficient
quantities to justify completion.

“Exploratory well” is a well drilled to find and produce oil or gas in an unproved area, to find a new reservoir in a
field previously found to be producing in another reservoir, or to extend a known reservoir.

“Gross acres” are the number of acres in which we own a working interest.

“Gross well” is a well in which we own an interest.

“Net acres” are the sum of fractional ownership working interests in gross acres (e.g., a 50% working interest in a
lease covering 320 gross acres is equivalent to 160 net acres).

“Net well” is the sum of fractional ownership working interests in gross wells.

“Productive well” is an exploratory or a development well that is not a dry hole.

“Undeveloped acreage” means those leased acres on which wells have not been drilled or completed to a point that
would permit the production of economic quantities of oil and gas, regardless of whether or not such acreage
contains proved reserves.

Terms used to assign a present value to or to classify our reserves:

“Developed oil and gas reserves*” Developed oil and gas reserves are reserves of any category that can be
expected to be recovered:

(i) Through existing wells with existing equipment and operating methods or in which the cost of the required
equipment is relatively minor compared to the cost of a new well; and

(ii) Through installed extraction equipment and infrastructure operational at the time of the reserves estimate
if the extraction is by means not involving a well.

“Proved developed non-producing reserves*” are those quantities of oil and gas reserves that are developed
behind pipe in an existing well bore, from a shut-in well bore or that can be recovered through improved recovery
only after the necessary equipment has been installed, or when the costs to do so are relatively minor. Shut-in
reserves are expected to be recovered from (1) completion intervals which are open at the time of the estimate but
which have not started producing, (2) wells that were shut-in for market conditions or pipeline connections, or
(3) wells not capable of production for mechanical reasons. Behind-pipe reserves are expected to be recovered
from zones in existing wells that will require additional completion work or future recompletion prior to the start of
production.

“Proved developed reserves*” Reserves that can be expected to be recovered through existing wells with existing
equipment and operating methods.

“Proved oil and gas reserves*” Reserves that geological and engineering data demonstrate with reasonable
certainty to be recoverable in future years from known reservoirs under existing economic and operating
conditions.

“Proved undeveloped reserves” or “PUDs*” Reserves that are expected to be recovered from new wells on
undrilled acreage or from existing wells, in each case where a relatively major expenditure is required.

“PV-10” means estimated future net revenue, discounted at a rate of 10% per annum, before income taxes and with
no price or cost escalation or de-escalation, calculated in accordance with guidelines promulgated by the Securities
and Exchange Commission (“SEC”). PV-10 is considered a non-GAAP financial measure under SEC regulations
because it does not include the effects of future income taxes, as is required in computing the standardized measure
of discounted future net cash flows. We believe that PV-10 is an important measure that can be used to evaluate the
relative significance of our oil and gas properties and that PV-10 is widely used by securities analysts and investors
when evaluating oil and gas companies. Because many factors that are unique to each individual company impact
the amount of future income taxes to be paid, the use of a pre-tax measure provides greater comparability of assets
when evaluating companies. We believe that most other companies in the oil and gas industry calculate PV-10 on
the same basis. PV-10 is computed on the same basis as the standardized measure of discounted future net cash
flows but without deducting income taxes.

“Standardized Measure” means estimated future net revenue, discounted at a rate of 10% per annum, after income
taxes and with no price or cost escalation or de-escalation, calculated in accordance with Accounting Standards
Codification (“ASC”) 932, “Disclosures About Oil and Gas Producing Activities.”

“Undeveloped oil and gas reserves*” Undeveloped oil and gas reserves are reserves of any category that are
expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major
expenditure is required for recompletion.

F
o
r
m
1
0
-
K

* This definition is an abbreviated version of
complete

S-X.

For

the

Regulation

of
retrieveECFR?gp=1&SID=7aa25d3cede06103c0ecec861362497d&ty=HTML&h=L&n=pt17.3.210&
r=PART#se17.3.210_14_610

definition,

see:

the complete definition set

forth in Rule 4-10(a)
http://www.ecfr.gov/cgi-bin/

Information contained in this report represents the consolidated operations of Abraxas Petroleum Corporation. The
terms “Abraxas,” “we,” “us,” “our,” or the “Company,” refer to Abraxas Petroleum Corporation, together with its
consolidated subsidiaries including Raven Drilling, LLC which is a wholly owned subsidiary that owns a drilling rig. Unless
otherwise noted, all disclosures are for Continuing Operations.

Part I

Item 1. Business

General

We are an independent energy company primarily engaged in the acquisition, exploration, development and production
of oil and gas. At December 31, 2021, our estimated net proved reserves were 14.8 MMBoe, of which 100% were classified
as proved developed, 46% were oil and 97% of which (on a Boe basis) were operated by us. Our daily net production for the
year ended December 31, 2021 was 5,545 Boepd, of which 47% was oil. Abraxas Petroleum Corporation was incorporated in
Nevada in 1990. Our address is 18803 Meisner Drive, San Antonio, Texas 78258 and our phone number is (210) 490-4788.

COVID-19 Overview

In the first quarter of 2020, a new strain of coronavirus (“COVID-19”) emerged, creating a global health emergency that
has been classified by the World Health Organization as a pandemic. As a result of the COVID-19 pandemic, consumer
demand for both oil and gas decreased as a direct result of travel restrictions placed by governments in an effort to curtail the
spread of COVID-19 and its variants. In addition, in March 2020, members of Organization of Petroleum Exporting
Countries (“OPEC”) failed to agree on production levels, which caused an increased supply of oil and gas and led to a
substantial decrease in oil prices and an increasingly volatile market. OPEC agreed to cut global petroleum output but did not
go far enough to offset the impact of COVID-19 on demand. As a result of this decrease in demand and increase in supply,
the price of oil and gas decreased, which has affected our liquidity. Since that time, demand and the price of oil and gas have
increased, but uncertainty related to the pandemic caused by COVID-19 and its variant strains persists.

In early March 2020, global oil and natural gas prices declined sharply, rising in recent months, especially in connection
with the war in Ukraine, but may decline again. The full impact of COVID-19 and its variants continues to evolve as of the
date of this report. As such, it is uncertain as to the full magnitude that will have on the Company. Management is actively
monitoring the global situation and the impact on the Company’s future operations, financial position and liquidity in fiscal
year 2022.

Our oil and gas assets were located in two operating regions, the Permian/Delaware Basin, and the Rocky Mountain as
of December 31, 2021. The following table sets forth certain information related to our properties as of and for the year
ended December 31, 2021:

. . . . . . . . . . . . . . . . . . . . .
Permian/Delaware Basin(1)
Rocky Mountain(2)(4)
. . . . . . . . . . . . . . . . . . . . . . . . . .
Total United States . . . . . . . . . . . . . . . . . . . . . . . . . . .

105
73
178

79.84% 24,438
59.22% 5,668
71.40% 30,106

Gross
Producing
Wells

Average
Working
Interest

Total Net
Acres

Estimated Net Proved
Reserves at
December 31, 2021(3)

Net Production for
the Year Ended
December 31, 2021

(Mboe)

8,813
6,010
14,823

%
Oil

(Mboe)

45%
874
49% 1,150
62% 2,024

%
Oil

57%
40%
47%

(1) Our properties in the Permian/Delaware Basin region are primarily located in Ward and Winkler Counties, Texas and produce oil and gas primarily

from the Bone Spring and Wolfcamp formations.

(2) Our properties in the Rocky Mountain region are primarily located in the Williston Basin of North Dakota and Montana. In this region, our wells

produce oil and gas from various reservoirs, primarily the Bakken, Three Forks and Red River formations.

(3) Net proved reserves excludes proved undeveloped reserves due to the Company’s inability to fund the drilling and completion activities within the next

five years.

(4) All of our Rocky Mountain properties were sold on January 3, 2022. See Note 14 “Subsequent Events.”

Strategy and Recent Activity

Our business strategy is to focus our capital and resources on our core operated basins, improve financial flexibility and

profitably grow production and reserves. Key elements of our business strategy include:

Focus our capital and resources on our core operated basins. During 2021, our core basins consisted of the Permian/
Delaware Basin (Bone Spring and Wolfcamp) and Williston Basin (Bakken and Three Forks). In connection with the

restructuring that occurred on January 3, 2022, our Williston Basin assets were sold. See Note 14 “Subsequent
Events.” Given the disparity which has existed during the past several years and which continues currently between oil and
gas prices, the economics of drilling oil wells is far superior to drilling gas wells. Due to declines in oil prices, during the first
half of 2020, we suspended our planned capital expenditures for 2020. This suspension of our capital expenditure budget is
subject to change depending upon a number of factors, including the availability and costs of drilling and service equipment
and crews, economic and industry conditions at the time of drilling, prevailing and anticipated prices for oil and gas, the
availability of sufficient capital resources including under any credit facilities, the results of our exploitation efforts, our
financial results and our ability to obtain permits for drilling locations. Due to the capital spending constraints imposed by
our then-existing credit facilities, we did not adopt a 2021 drilling budget. As part of our efforts to focus our property
portfolio, we also seek to sell assets we have deemed non-core. These include assets with a low working interest that are
non-operated and/or that fall outside of our core basins. Any proceeds from these asset sales were used to reduce our
indebtedness and/or be redeployed into our core operating basins.

Financial flexibility. Our primary source of capital is cash flows from operations. As of December 31, 2021, we
had $71.4 million outstanding on our Third Amended and Restated First Lien Credit Facility, dated June 11, 2014 (as amended,
modified, or supplemented, the “First Lien Credit Facility”), by and among the Company, the financial institutions party thereto
as lenders, Société Générale, as “Issuing Lender” and administrative agent, with no availability, and $134.9 million under the
$100,000,000 Term Loan Credit Agreement, dated November 13, 2019 (as amended, modified, or supplemented, the “Second
Lien Credit Facility”), by and among the Company, the financial institutions party thereto as lenders, and Angelo Gordon
Energy Servicer, LLC, as administrative agent, and we generated approximately $33.8 million of cash flows from operations for
the year ended December 31, 2021. Additionally, any excess cash, as defined in the First Lien Credit Facility, was used to
reduce the balance and simultaneously reduce the borrowing base to the then-new outstanding balance. In connection with the
restructuring that was completed on January 3, 2022 our First Lien Credit Facility was retired and our Second Lien Credit
Facility was converted to Series A Preferred Stock. See Note 14 “Subsequent Events.”

We have also sold producing properties from time to time in order to provide us with financial flexibility. In January
2019, we announced that we had engaged Petrie Partners to assist us in identifying and assessing our options for our Bakken
properties. In October 2019, we announced that we had broadened the engagement of Petrie Partners to include a more
thorough review of our business and strategic plans, competitive positioning and potential alternative transactions that might
further enhance shareholder value. Petrie’s expanded mandate to assess our options was a broad one, which included
potential sales of assets, merger or acquisition transactions, additional financing alternatives or other strategic transactions.
We closed on the sale of our Bakken properties on January 3, 2022. See Note 14 “Subsequent Events.”

Profitably grow production and reserves. We have a substantial low-decline legacy production base as evidenced by our
approximate 21-year average reserve life as of year-end 2021. Our capital would be deployed largely into unconventional oil
assets with relatively predictable production profiles, yet steep initial decline rates. Therefore, the economics of these oil
wells are highly dependent on both near term commodity prices and strong operational cost control. Cost savings achieved
through efficiencies of using our own rig in the Williston Basin, and heightened focus on cost control in all of our operated
positions both contributed to our historical success in adding low-cost barrels to our production base.

F
o
r
m
1
0
-
K

Further Recent Activity

Pursuant to the Exchange Agreement, dated as of January 3, 2022, between the Company and AG Energy Funding, LLC
(“AGEF”) and certain other agreements entered into by the Company on January 3, 2022, the Company, we effectuated a
restructuring of the Company’s then-existing indebtedness through a multi-part interdependent de levering transaction
consisting of: (i) an Asset Purchase and Sale Agreement pursuant to which the Company 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 ($73.3 million after customary closing adjustments), (the
“Sale”), (ii) the pay down of the indebtedness and other obligations of the Company Abraxas and its subsidiaries under the
First Lien Credit Facility and administrative agent and certain specified secured hedges from the proceeds of the Sale and, to
the extent necessary, other cash of the Company; and (iii), a debt for equity exchange of the indebtedness and other
obligations of the Company Abraxas and its subsidiaries under the $100,000,000 Second Lien Credit Facility, and all related
loan and security documents (the “Exchange” and, together with the transactions referred to in clauses (i) and (ii), the
“Restructuring”). See Note 14 “Subsequent Events.”

the Certificate, any proceeds distributed to the Company’s stockholders or otherwise received in respect of the capital stock
of the Company in a merger or other liquidity event will be allocated among the Series A Preferred Stock and the Company’s
common stock as follows: (1) first, 100% to the Series A Preferred Stock until the Series A Preferred Stock has received
$100 million of proceeds in the aggregate (the “Tier One Preference Amount”), (2) second, 95% to the Series A Preferred
Stock and 5% to the Company’s common stock until the Series A Preferred Stock has received $137.1 million, plus a 6.0%
annual rate of return thereon from the date hereof; (3) thereafter, 75% to the Series A Preferred Stock and 25% to the
Company’s common stock. The Exchange Agreement entered into in connection with the Restructuring also provides for the
potential funding by AGEF of an additional amount up to $12.0 million, if agreed to by AGEF and the disinterested members
of the Company’s Board of Directors. Any such additional amount funded would result in an increase to the Tier One
Preference Amount equal to 1.5 x the amount of such additional funding. The shares of Series A Preferred Stock vote
together as a single class with the Company’s common stock, and each share of Series A Preferred Stock entitles the holder
thereof to 69 votes. Accordingly, AGEF’s ownership of the Series A Preferred Stock entitle it to approximately 85% of the
voting power of the Company’s current outstanding capital stock.

Todd Dittmann, Damon Putman and Daniel Baddeloo, each of whom are employees of AGEF were appointed

to Abraxas’ Board of Directors.

2022 Budget and Drilling Activities

Due to the capital spending constraints, we have not adopted a drilling budget for 2022. As discussed under
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, during 2021 our level of
indebtedness and the then existing commodity price environment presented challenges to our ability to comply with certain
covenants in our then-existing credit facilities and under applicable auditing standards the independent accountants’’ opinion
on our financial statements for the year ended December 31, 2020 contains an explanatory paragraph regarding the
Company’s ability to continue as a “going concern”. Due to the Company’s continued lack of adequate capital do develop its
proved undeveloped reserves, as of December 31, 2021, those reserves were written-off for financial reporting purposes. If
and when the Company has adequate capital resources to fund the projects the reserves will be reinstated.

Markets and Customers

The revenue generated by our operations is highly dependent upon the prices we receive for our oil and gas.
Historically, the markets for oil and gas have been volatile and are likely to continue to be volatile in the future. The prices
we receive for our oil and gas production are subject to wide fluctuations and depend on numerous factors beyond our
control including seasonality, the condition of the world wide economy (particularly the manufacturing sector), foreign
imports, political conditions in other petroleum producing countries, the actions of OPEC, domestic regulation, legislation
and policies, and the outbreak of pandemic or contagious diseases, such as the recent COVID-19 coronavirus. Decreases in
the prices we receive for our oil and gas have had, and could have in the future, an adverse effect on the carrying value of our
proved reserves, our revenue, profitability and cash flow from operations. Refer to “Risk Factors—Risks Related to Our
Industry—Market conditions for oil and gas and particularly volatility of prices for oil and gas, could adversely affect our
revenue, cash flows from operations, profitability and growth” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Critical Accounting Policies” for more information relating to the effects that
decreases in oil and gas prices have on us. To help mitigate the impact of commodity price volatility, we have at times
hedged a portion of our production through the use of fixed price swaps and basis differential swap contracts. See
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—General—Commodity Prices
and Hedging Arrangements” and Note 11 of the notes to our consolidated financial statements for more information
regarding our derivative activities.

Substantially all of our oil and gas is sold at current market prices under short-term arrangements, as is customary in the
industry. During the year ended December 31, 2021, four purchasers of production accounted for approximately 83% of our
oil and gas sales. During the year ended December 31, 2020, four purchasers of production accounted for approximately 73%
of our oil and gas sales. We believe that there are numerous other purchasers available to buy our oil and gas and that the loss
of any of these purchasers would not materially affect our ability to sell our oil and gas. Furthermore, the largest purchasers
of our oil and gas have changed from year to year.

Regulation of Oil and Gas Activities

The exploration, production and transportation of all types of hydrocarbons are subject to significant governmental
regulations. Our properties are affected from time to time in varying degrees by political developments and federal, state and

local laws and regulations. In particular, oil and gas production operations and economics are, or in the past have been,
affected by industry specific price controls, taxes, conservation, safety, environmental and other laws relating to the
petroleum industry, and by changes in such laws and by periodically changing administrative regulations.

Federal, state and local laws and regulations govern oil and gas activities. Operators of oil and gas properties are
required to have a number of permits in order to operate such properties, including operator permits and permits to dispose of
salt water. In addition, under federal law, operators of oil and gas properties are required to possess certain certificates and
permits in order to operate such properties. We possess all material requisite permits required by Federal, state and other
local authorities in which we operate properties.

Development and Production

The operations of our properties are subject to various types of regulation at the federal, state and local levels. These
types of regulations include requiring the operator of oil and gas properties to possess permits for the drilling and
development of wells, post bonds in connection with various types of activities, and file reports concerning operations. Most
states, and some counties and municipalities in which we operate, regulate one or more of the following:

•

the location of wells;

the method of drilling and casing wells;

the flaring of gas;

the method of completing and fracture stimulating wells;

the surface use and restoration of properties upon which wells are drilled;

the plugging and abandoning of wells; and

the notice to surface owners and other third parties.

F
o
r
m
1
0
-
K

Some states regulate the size and shape of development and spacing units or proration units for oil and gas properties.
Some states allow forced pooling or unitization of tracts to facilitate exploration while other states rely on voluntary pooling
of lands and leases. In some instances, forced pooling or unitization may be implemented by third parties and may reduce our
interest in the unitized properties. In addition, state conservation laws establish maximum allowable rates of production from
oil and gas wells, generally prohibit the venting or flaring of gas and impose requirements regarding the ratability of
production. These laws and regulations may limit the amount of oil and gas we can produce from our wells or limit the
number of wells or the locations at which our wells can be drilled. Moreover, each state generally imposes a production or
severance tax with respect to the production and sale of oil, gas and NGLs within its jurisdiction.

Operations on Federal or Indian oil and gas leases must comply with numerous regulatory restrictions, including various
non-discrimination statutes, and certain of such operations must be conducted pursuant to certain on-site security regulations
and other permits issued by various tribal and federal agencies, including the Bureau of Land Management and the Office of
Natural Resources Revenue, which we refer to as ONRR, (formerly Minerals Management Service). ONRR establishes the
basis for royalty payments due under federal oil and gas leases through regulations issued under applicable statutory
authority. State regulatory authorities establish similar standards for royalty payments due under state oil and gas leases. The
basis for royalty payments established by ONRR and the state regulatory authorities is generally applicable to all federal and
state oil and gas leases. Accordingly, we believe that the impact of royalty regulation on the operations of our properties
should generally be the same as the impact on our competitors. We believe that the operations of our properties are in
material compliance with all applicable regulations as they pertain to Federal or Indian oil and gas leases.

The failure to comply with these rules and regulations can result in substantial penalties, including lease suspension or
termination in certain cases. The regulatory burden on the oil and gas industry increases our cost of doing business and,
consequently, affects our profitability. Our competitors in the oil and gas industry are subject to the same regulatory
requirements and restrictions that affect us.

Regulation of Transportation and Sale of Gas in the United States

Historically, the transportation and sale for resale of gas in interstate commerce have been regulated pursuant to the
Natural Gas Act of 1938, as amended, which we refer to as NGA, the Natural Gas Policy Act of 1978, as amended, which we
refer to as NGPA, and regulations promulgated thereunder by the Federal Energy Regulatory Commission, which we refer to

as FERC, and its predecessors. In the past, the federal government has regulated the prices at which gas could be sold.
Deregulation of wellhead gas sales began with the enactment of the NGPA. In 1989, Congress enacted the Natural Gas
Wellhead Decontrol Act, as amended, which we refer to as the Decontrol Act. The Decontrol Act removed all NGA and
NGPA price and non-price controls affecting wellhead sales of gas effective January 1, 1993. While sales by producers of
gas can currently be made at unregulated market prices, Congress could reenact price controls in the future.

Since 1985, FERC has endeavored to make gas transportation more accessible to gas buyers and sellers on an open and
non-discriminatory basis. FERC has stated that open access policies are necessary to improve the competitive structure of the
interstate gas pipeline industry and to create a regulatory framework that will put gas sellers into more direct contractual
relations with gas buyers by, among other things, unbundling the sale of gas from the sale of transportation and storage
services. Beginning in 1992, FERC issued Order No. 636 and a series of related orders, which we refer to collectively as
Order No. 636, to implement its open access policies. As a result of the Order No. 636 program, the marketing and pricing of
gas have been significantly altered. The interstate pipelines’ traditional role as wholesalers of gas has been eliminated and
replaced by a structure under which pipelines provide transportation and storage service on an open access basis to others
who buy and sell gas. FERC continues to regulate the rates that interstate pipelines may charge for such transportation and
storage services. Although FERC’s orders do not directly regulate gas producers, they are intended to foster increased
competition within all phases of the gas industry.

In 2000, FERC issued Order No. 637 and subsequent orders, which we refer to, collectively, as Order No. 637, which
imposed a number of additional reforms designed to enhance competition in gas markets. Among other things, Order No. 637
effected changes in FERC regulations relating to scheduling procedures, capacity segmentation, penalties, rights of first
refusal and information reporting. Most major aspects of Order No. 637 have been upheld on judicial review, and most
pipelines’ tariff filings to implement the requirements of Order No. 637 have been accepted by the FERC and placed into
effect.

The Energy Policy Act of 2005, which we refer to as EP Act 2005, gave FERC increased oversight and penalty
authority regarding market manipulation and enforcement. EP Act 2005 amended the NGA to prohibit market manipulation
and also amended the NGA and the NGPA to increase civil and criminal penalties for any violations of the NGA, NGPA and
any rules, regulations or orders of FERC to up to $1,000,000 per day, per violation. In addition, FERC issued a final rule
effective January 26, 2006, regarding market manipulation, which makes it unlawful for any entity, in connection with the
purchase or sale of gas or transportation service subject to FERC jurisdiction, to defraud, make an untrue statement, or omit a
material fact or engage in any practice, act, or course of business that operates or would operate as a fraud. This final rule
works together with FERC’s enhanced penalty authority to provide increased oversight of the gas marketplace.

The gas industry historically has been very heavily regulated; therefore, there is no assurance that the less stringent
regulatory approach currently pursued by FERC will continue. However, we do not believe that any action taken will affect
us in a way that materially differs from the way it affects other gas producers, gatherers and marketers.

Generally, intrastate gas transportation is subject to regulation by state regulatory agencies, although FERC does
regulate the rates, terms, and conditions of service provided by intrastate pipelines that transport gas subject to FERC’s NGA
jurisdiction pursuant to Section 311 of the NGPA. The basis for state regulation of intrastate gas transportation and the
degree of regulatory oversight and scrutiny given to intrastate gas pipeline rates and services varies from state to state.
Insofar as such regulation within a particular state will generally affect all intrastate gas shippers within the state on a
comparable basis, we believe that the regulation of similarly situated intrastate gas transportation in any states in which we
operate and ship gas on an intrastate basis will not affect the operations of our properties in any way that is materially
different from the effect of such regulation on our competitors.

Gas Gathering in the United States

Section 1(b) of the NGA exempts gas gathering facilities from the jurisdiction of the FERC. FERC has developed tests
for determining which facilities constitute jurisdictional
transportation facilities under the NGA and which facilities
constitute gathering facilities exempt from FERC’s NGA jurisdiction. From time to time, FERC reconsiders its test for
defining non-jurisdictional gathering. FERC has also permitted jurisdictional pipelines to “spin down” exempt gathering
facilities into affiliated entities that are not subject to FERC jurisdiction, although FERC continues to examine the
circumstances in which such a “spin down” is appropriate and whether it should reassert jurisdiction over certain gathering
companies and facilities that previously had been “spun down.” We cannot predict the effect that FERC’s activities in this
regard may have on the operations of our properties, but we do not expect these activities to affect the operations in any way
that is materially different from the effect thereof on our competitors.

State regulation of gathering facilities generally includes various safety, environmental, and in some circumstances,
non-discriminatory take or service requirements, but does not generally entail rate regulation. In the United States, gas
gathering has received greater regulatory scrutiny at both the state and federal levels in the wake of the interstate pipeline
restructuring under FERC Order 636. For example, the Texas Railroad Commission enacted a Natural Gas Transportation
Standards and Code of Conduct to provide regulatory support for the state’s more active review of rates, services and
practices associated with the gathering and transportation of gas by an entity that provides such services to others for a fee, in
order to prohibit such entities from unduly discriminating in favor of their affiliates.

Regulation of Transportation of Oil in the United States

Sales of oil, condensate and gas liquids are not currently regulated and are made at negotiated prices. The transportation
of oil in common carrier pipelines is subject to rate regulation. FERC regulates interstate oil pipeline transportation rates
under the Interstate Commerce Act. In general, interstate oil pipeline rates must be cost-based, although settlement rates
agreed to by all shippers are permitted and market-based rates may be permitted in certain circumstances. Effective
January 1, 1995, FERC implemented regulations establishing an indexing system (based on inflation) for transportation rates
for oil that allowed for an increase or decrease in the cost of transporting oil to the purchaser. A review of these regulations
by FERC in 2000 was successfully challenged on appeal by an association of oil pipelines. On remand, FERC, in February
2003, increased the index slightly, effective July 2001. Intrastate oil pipeline transportation rates are subject to regulation by
state regulatory commissions. The basis for intrastate oil pipeline regulations, and the degree of regulatory oversight and
scrutiny given to intrastate oil pipeline rates varies from state to state. Insofar as effective interstate and intrastate rates are
equally applicable to all comparable shippers, we believe that the regulation of oil transportation rates will not affect the
operations of our properties in any way that is materially different from the effect of such regulation on our competitors.

Further, interstate and intrastate common carrier oil pipelines must provide service on a non-discriminatory basis. Under
this open access standard, common carriers must offer service to all shippers requesting service on the same terms and under
the same rates. When oil pipelines operate at full capacity, access is governed by prorationing provisions set forth in the
pipelines’ published tariffs. Accordingly, we believe that access to oil pipeline transportation services generally will be
available to us to the same extent as to our competitors.

All of our oil is sold on lease, at which time custody transfers, either by truck or pipeline. We are not able to determine
how much of our sold oil is ultimately shipped to market centers using rail transportation facilities owned and operated by
third parties. The U.S. Department of Transportation’s (“U.S. DOT”) Pipeline and Hazardous Materials Safety
Administration (“PHMSA”) establishes safety regulations relating to transportation of oil by rail transportation. In addition,
third party rail operators are subject to the regulatory jurisdiction of the Surface Transportation Board of the U.S. DOT, the
Federal Railroad Administration (“FRA”) of the DOT, the U.S. Occupational Safety and Health Administration, as well as
other federal regulatory agencies. Additionally, various state and local agencies have jurisdiction over disposal of hazardous
waste and seek to regulate movement of hazardous materials in ways not preempted by federal law.

F
o
r
m
1
0
-
K

In response to rail accidents occurring between 2002 and 2008, the U.S. Congress passed the Rail Safety and
Improvement Act of 2008, which implemented regulations governing different areas related to railroad safety. Recently, in
response to train derailments occurring in 2013, U.S. regulators have been implementing or considering new rules to address
the safety risks of transporting oil by rail. On January 23, 2014, the National Transportation Safety Board (“NTSB”) issued a
series of recommendations to the FRA and PHMSA to address safety risks, including (i) requiring expanded hazardous
material route planning for railroads to avoid populated and other sensitive areas, (ii) developing an audit program to ensure
rail carriers that carry petroleum products have adequate response capabilities to address worst-case discharges of the entire
quantity of product carried on a train, and (iii) auditing shippers and rail carriers to ensure they are properly classifying
hazardous materials in transportation and that they have adequate safety and security plans in place. Additionally, on
February 25, 2014 the DOT issued an emergency order requiring all persons, prior to offering oil into transportation, to
ensure such product is properly tested and classed and to assure all shipments by rail of oil be handled as a Packing Group I
or II hazardous material.

We do not currently own or operate rail transportation facilities or rail cars; however, the adoption of any regulations
that impact the testing or handling of shipments of oil by rail transportation could increase our costs of doing business and
limit our ability to transport and sell our oil at favorable prices at market centers throughout the United States, the
consequences of which could have a material adverse effect on our financial condition, results of operations and cash flows
from operations. At this time, it is not possible to estimate the potential impact on our business if new federal or state rail
transportation regulations are enacted.

Environmental Matters

Oil and gas operations are subject to numerous federal, state and local laws and regulations controlling the generation,
use, treatment, storage and disposal of materials and the discharge of materials into the environment or otherwise relating to
the protection of the environment. These laws and regulations may:

•

require the acquisition of a permit or other authorization before construction or drilling commences;

impose design, construction and permitting requirements on facilities in conjunction with oil and gas operations,
including the construction of pollution control devices;

require protective measures to prevent certain fluids from coming into contact with ground water;

restrict the types, quantities and concentrations of various substances that can be released into the environment in
connection with drilling, production, and gas processing activities;

suspend, limit or prohibit construction, drilling and other activities in certain lands lying within wilderness,
wetlands, and areas inhabited by threatened or endangered species and other protected areas;

require remedial measures to mitigate pollution from historical and on-going operations such as the use of pits and
plugging of abandoned wells;

require disclosure of chemicals injected into wells in conjunction with hydraulic fracturing operations;

restrict injection of liquids into subsurface strata that may contaminate groundwater or increase seismic activity;

restrict the availability of water necessary for hydraulic fracturing operations;

impose substantial penalties for violations of environmental rules or pollution resulting from our operations;

curtail production in association with permit limits; and

curtail or prohibit production for exceeding gas flaring limits.

Environmental permits that

the operators of properties are required to possess may be subject

to revocation,
modification, and renewal by issuing authorities. Governmental authorities have the power to enforce compliance with their
regulations and permits, and violations are subject to injunction, civil fines, and even criminal penalties. Our management
believes that we are in substantial compliance with current environmental laws and regulations, and that we will not be
required to make material capital expenditures to comply with existing laws. Nevertheless, changes in existing environmental
laws and regulations or interpretations thereof could have a significant impact on our operations as well as the oil and gas
industry in general, and thus we are unable to predict the ultimate cost and effects of future changes in environmental laws
and regulations.

We are not currently involved in any administrative, judicial or legal proceedings arising under federal, state, or local
environmental protection laws and regulations, or under federal or state common law, which would have a material adverse
effect on our respective financial positions or results of operations. Moreover, we maintain insurance against the costs of
clean-up operations, but we are not fully insured against all such risks. A serious incident of pollution may result in the
suspension or cessation of operations in the affected area.

The following is a discussion of the current relevant environmental laws and regulations that relate to our operations.

Comprehensive Environmental Response, Compensation and Liability Act. The Comprehensive Environmental
Response, Compensation and Liability Act, also known as Superfund, and which we refer to as “CERCLA”, and comparable
state statutes impose strict joint, and several liability, without regard to fault or legality of conduct, on certain classes of
persons who are considered to have contributed to the release of a “hazardous substance” into the environment. These
persons include among others, the current and former owners or operators of a disposal site or sites where a release occurred
and companies that arranged for the transportation or disposal of the hazardous substances released at the site. Under
CERCLA, such persons or companies may be retroactively liable for the costs of cleaning up the hazardous substances that
have been released into the environment, for damages to natural resources, and for the costs of certain health studies.
CERCLA authorizes the Environmental Protection Agency(“EPA”), and in some cases third parties, to take actions in
response to threats to the public health or the environment and to seek to recover from the responsible classes of persons the
costs they incur. In addition, it is not uncommon for neighboring land owners and other third parties to file claims for
personal injury, property damage, and recovery of response costs allegedly caused by the hazardous substances released into
the environment.

In the course of our ordinary operations, certain wastes may be generated that may fall within CERCLA’s definition of a
“hazardous substance.” We may be liable under CERCLA or comparable state statutes for all or part of the costs required to
clean up sites at which these wastes have been disposed. Although CERCLA contains a “petroleum exclusion” from the
definition of “hazardous substance,” state laws affecting our operations impose cleanup liability relating to petroleum and
petroleum related products, including oil cleanups.

We currently own or lease, and have in the past owned or leased, numerous properties that for many years have been
used for the exploration and production of oil and gas. Although we have utilized standard industry operating and disposal
practices at the time, hydrocarbons or other wastes may have been disposed of or released on or under the properties we
owned or leased or on or under other locations where such wastes have been taken for disposal. In addition, many of these
properties have been operated by third parties whose treatment and disposal or release of hydrocarbons or other wastes was
not under our control. These properties and the wastes disposed thereon may be subject to CERCLA, RCRA (as defined
below), and analogous state laws. Under these laws, we could be required to remove or remediate previously disposed
wastes, including wastes disposed or released by prior owners or operators; to clean up contaminated property, including
contaminated groundwater; or to perform remedial operations to prevent future contamination.

Oil Pollution Act of 1990. Federal regulations also require certain owners and operators of facilities that store or
otherwise handle oil to prepare and implement spill response plans relating to the potential discharge of oil into surface
waters. The Federal Oil Pollution Act, which we refer to as OPA, and analogous state laws, contain numerous requirements
relating to prevention of, reporting of, and response to oil spills into waters of the United States. A failure to comply with
OPA’s requirements or inadequate cooperation during a spill response action may subject a responsible party to civil or
criminal enforcement actions. We are not aware of any action or event that would subject us to liability under OPA, and we
believe that compliance with OPA’s financial responsibility and other operating requirements will not have a material
adverse effect on our financial position or results of operations.

Resource Conservation and Recovery Act. The Resource Conservation and Recovery Act, which we refer to as
“RCRA”, is the principal federal statute governing the treatment, storage and disposal of hazardous and non-hazardous solid
wastes. RCRA imposes stringent requirements and liability for failure to meet such requirements, on persons who generate or
transport regulated waste materials and also on persons who own or operate a waste treatment, storage or disposal facility.
Analogous state laws also impose requirements associated with the management such wastes. At present, RCRA includes a
statutory exemption that allows most oil and gas exploration and production wastes to be classified and regulated as
non-hazardous wastes. A similar exemption is contained in many of the state counterparts to RCRA. At various times in the
past, proposals have been made to amend RCRA to rescind the exemption that excludes oil and gas exploration and
production wastes from regulation as hazardous wastes. Repeal or modification of the exemption by administrative,
legislative or judicial process, or modification of similar exemptions in applicable state statutes, would increase the volume
of hazardous waste we are required to manage and dispose and would cause us to incur increased operating expenses. Also,
in the ordinary course of our operations, we generate small amounts of ordinary industrial wastes, such as paint wastes, waste
solvents and waste oils that may be regulated as hazardous wastes. We believe that our operations comply in all material
respects with the requirements of RCRA and its state counterparts.

F
o
r
m
1
0
-
K

Naturally Occurring Radioactive Materials, which we refer to as “NORM”, are materials not covered by the Atomic
Energy Act, whose radioactivity is enhanced by technological operations such as mineral extraction or processing through
exploration and production conducted by the oil and gas industry. NORM wastes are regulated under the RCRA framework,
but primary responsibility for NORM regulation has been a state function. Standards have been developed for worker
protection;
treatment, storage and disposal of NORM waste; management of waste piles, containers and tanks; and
limitations upon the release of NORM contaminated land for unrestricted use. We believe that the operations of our
properties are in material compliance with all applicable NORM standards established by the various states in which we
operate wells.

Clean Water Act. The Clean Water Act, which we refer to as the “CWA”, and analogous state laws, impose
restrictions and controls on the discharge of pollutants, including spills and leaks of oil and other substances, into waters of
the United States. The discharge of pollutants into regulated waters is prohibited, except in accordance with the terms of a
permit issued by EPA or an analogous state agency. The CWA regulates storm water run-off from oil and gas facilities and
requires a storm water discharge permit for certain activities. Such a permit requires the regulated facility to monitor and
sample storm water run-off from its operations. The CWA and regulations implemented thereunder also prohibit discharges
of dredged and fill material in wetlands and other waters of the United States unless authorized by an appropriately issued
permit. Spill prevention, control and countermeasure requirements of the CWA require appropriate containment berms and

similar structures to help prevent the contamination of waters of the United States in the event of a petroleum hydrocarbon
tank spill, rupture or leak. The reach and scope of the CWA, and the determination of what water bodies and land areas are
regulated as waters of the U.S., is the subject of various rules adopted by EPA and the U.S. Army Corps of Engineers which
we refer to as the WOTUS Rules, and on-going federal court litigation arising out of the rules and recent amendments. The
WOTUS Rules, litigation over the rules, and the associated regulatory uncertainty, could impact our operations by subjecting
new land and waters to regulation, and increase our cost of operations. The CWA and comparable state statutes provide for
civil, criminal and administrative penalties for unauthorized discharges of oil and other pollutants and impose liability on
parties responsible for those discharges for the costs of cleaning up any environmental damage caused by the release and for
resource damages resulting from the release. We believe that the operations of our properties comply in all material respects
with the requirements of the CWA and state statutes enacted to control water pollution.

Safe Drinking Water Act. Our operations also produce wastewaters that are disposed via underground injection wells.
These activities are regulated by the Safe Drinking Water Act, which we refer to as the “SDWA”, and analogous state and
local laws. Underground injection is the subsurface placement of fluid through a well, such as the reinjection of brine
produced and separated from oil and gas production., or the flow-back of hydraulic fracturing fluids. The main goal of the
SDWA is the protection of usable aquifers. The primary objective of injection well operating requirements is to ensure the
mechanical integrity of the injection apparatus and to prevent migration of fluids from the injection zone into underground
sources of drinking water. Injection well operations are strictly controlled, and certain wastes, absent an exemption, cannot
be injected into underground injection control wells. In most states, no underground injection may take place except as
authorized by permit or rule. In addition, subsurface injection of water or other produced fluids from drilling or hydraulic
fracturing processes have come under increased public and governmental scrutiny. Some jurisdictions, Texas for example,
have adopted new and more stringent rules for injection wells aimed at reducing the potential for earthquakes associated with
injection activities, including new restrictions on siting of such injection wells. We currently own and operate various
underground injection wells and rely on third-party owned injection wells. Failure to comply with our permits could subject
us to civil and/or criminal enforcement. More stringent regulations of injection wells could additionally increase our cost of
operations. We believe that we are in compliance in all material respects with the requirements of applicable state
underground injection control programs and our permits.

Clean Air Act. The Clean Air Act, which we refer to as the CAA, and state air pollution laws and regulations provide a
framework for national, state and local efforts to protect air quality. The operation of our properties utilize equipment that
emits air pollutants which may be subject to federal and state air pollution control laws. These laws require utilization of air
emissions abatement equipment to achieve prescribed emissions limitations and ambient air quality standards, as well as
operating permits for existing equipment and construction permits for new and modified equipment. In the past few years,
EPA has adopted new more restrictive regulations governing air emissions from oil and gas operations, including regulations
which restrict emissions of methane, volatile organic compounds and hazardous air pollutants.

Permits and related compliance obligations under the CAA, as well as changes to state implementation plans for
controlling air emissions in regional non-attainment areas may require us to incur future capital expenditures in connection
with the addition or modification of existing air emission control equipment and strategies. In addition, some oil and gas
facilities may be included within the categories of hazardous air pollutant sources, which are subject to more stringent
regulation under the CAA. Failure to comply with these requirements could subject us to monetary penalties, injunctions,
conditions or restrictions on operations and enforcement actions. We may be required to incur capital expenditures in the
future for air pollution control equipment in connection with obtaining and maintaining operating permits and approvals for
air emissions. We believe that we are in compliance in all material respects with the requirements of applicable federal and
state air pollution control laws.

Hydraulic Fracturing. Most of our current operations depend on the use of hydraulic fracturing to enhance production
from oil and gas wells. This technology involves the injection of fluids—usually consisting mostly of water but typically
including small amounts of chemical additives—as well as sand, or other proppants, into a well under high pressure in order
to create fractures in the rock that allow oil or gas to flow more freely to the wellbore. Many of our newer wells would not be
economical without the use of hydraulic fracturing to stimulate the formation to enhance production from the well. Hydraulic
fracturing operations have historically been overseen by state regulators as part of their oil and gas regulatory programs, but
where these operations occur on federal or tribal lands they are subject to regulation by the U.S. Department of the Interior,
Bureau of Land Management (“BLM”). In addition to federal legislative and regulatory actions, some states and local
governments have considered imposing, or have adopted various conditions and restrictions on hydraulic fracturing
operations, including but not limited to requirements regarding chemical disclosure, casing and cementing of wells,
withdrawal of water for use in hydraulic fracturing, baseline testing of nearby water wells, and restrictions on the type of

additives that may be used in hydraulic fracturing operations. In some states, including Texas, water use may also be
regulated and potentially curtailed by local groundwater management districts which could impact the availability of water
for hydraulic fracturing. If these types of restrictions are widely adopted, we could be subject to increased costs and possibly
limits on the productivity of certain wells, and these laws could make it easier for third parties to initiate litigation against us
in the event of perceived problems with water wells in the vicinity of an oil or gas well or other alleged environmental
problems. Additional information concerning hydraulic fracturing is included under Item 1A “Risk Factors.”

Climate Change and Greenhouse Gas Regulation. Scientific studies have indicated that emissions of certain gases may
be contributing to warming of the Earth’s atmosphere. In response to these studies, many nations have agreed to limit
emissions of “greenhouse gases” or “GHGs” pursuant to efforts spearheaded by the United Nations. Reports from numerous
global and domestic governmental agencies tasked with researching, evaluating, and mitigating the impact of climate change,
such as the Sixth Assessment Report of the United Nations Intergovernmental Panel on Climate Change, released in part in
August 2021 and February 2022 with a full release expected in September 2022, and, the Fourth National Climate
Assessment report of the U.S. Global Change Research Program, released in full in November 2018, have pointed to GHG
emissions as the main driver of atmospheric warming and that climate change is accelerating. Methane, a primary component
of natural gas, and carbon dioxide, a byproduct of the burning of oil, gas, and refined petroleum products, are considered
GHGs. We expect continuing debate, especially in the political arena, over how to address climate change and what policies
and regulations are necessary to address the issue. It is possible that domestic and international regulations addressing
climate change will have adverse effects on the market for oil, gas and other fossil fuel products as well as adverse effects on
the business and operations of companies engaged in the exploration for, and production of, oil, gas and other fossil fuel
products. Given widely divergent political views on climate change regulation, we are unable to predict the timing, scope and
effect of any proposed or future legislation, investigations, laws, regulations or treaties regarding climate change and GHG
emissions, but the direct and indirect costs of such measures (if enacted) could materially and adversely affect our operations,
financial condition and results of operations. In addition, several states and local governments have adopted, or are
considering adopting, regulations or ordinances to reduce emissions of GHGs. Restrictions on emissions of methane or
carbon dioxide that may be imposed in various states could adversely affect our operations and demand for our products. The
various efforts to regulate the emissions of GHGs (including lawsuits pending in United States federal courts) may affect the
cost of our operations, may affect the public’s perception of our industry, and may reduce demand for our products.

An example of the uncertainty in regulations comes from the BLM flaring rule. In November 2016, BLM issued a final
rule to further restrict venting and flaring of gas from oil and gas operations on public lands. Then, BLM issued a stay of
these requirements in December 2017. In September 2018, BLM published a final rule to modify and rescind substantial
portions of the flaring rule. The rescission was challenged by litigation filed in the U.S. District Court for the Northern
District of California. In July 2020, the California federal court vacated the revised rule, focusing on the rulemaking process
and not the content of rule itself. That court stayed its vacatur of the revised rule until October 13, 2020, however, to give the
parties in a similar Wyoming litigation time to move forward in their proceedings regarding the 2016 Rule. Shortly
thereafter, the Wyoming federal district court struck down the rule, however, the fight over methane emission regulation
remains heated. If any laws restricting flaring of gas become effective, we would have to curtail production from the affected
wells and would incur additional costs of compliance as well as increased monitoring and recordkeeping for some of our
facilities.

F
o
r
m
1
0
-
K

Any of the climate change regulatory and legislative initiatives described above could have a material adverse effect on
our business, financial condition, and results of operations. Additional information concerning climate change is included
under Item 1A. “Risk Factors.”

National Environmental Policy Act. Oil and gas exploration and production activities on federal lands are subject to the
National Environmental Policy Act, which we refer to as NEPA. NEPA requires federal agencies, including the Department
of the Interior, to evaluate major agency actions having the potential to significantly impact the environment. In the course of
such evaluations, an agency will prepare an Environmental Assessment that assesses the potential direct, indirect and
cumulative impacts of a proposed project and, if necessary, will prepare a more detailed Environmental Impact Statement
that may be made available for public review and comment. If we were to conduct any exploration and production activities
on federal lands in the future, those activities may need to obtain governmental permits that are subject to the requirements of
NEPA. This process has the potential to delay the development of oil and gas projects and increase the cost of such
operations.

Endangered Species Act. The Endangered Species Act, which we refer to as the ESA, restricts activities that may affect
endangered or threatened species or their habitats. While some of our properties may be located in areas that may be

designated as habitat for endangered or threatened species, we believe that we are in substantial compliance with the
ESA. Looking forward, we expect more listings of such species to occur, in light of renewed efforts by certain environmental
activists to use the ESA as a mechanism to restrict land development and energy production. Such listings could include
habitat in areas where we operate or plan to operate, or which could adversely affect our ability to secure needed sand, water
or other materials for our operations or to transport oil or gas via pipeline to our customers. Further, some of the species
could become subject to voluntary rangeland conservation plans that could affect our operations of sources of materials. Such
listing of additional species, or the discovery of previously unidentified endangered or threatened species, or the adoption of
conservation plans, could cause us to incur additional costs or become subject to operating restrictions, construction delays,
or bans on operating in the affected areas.

Abandonment Costs. All of our oil and gas wells will require proper plugging and abandonment at some time in the
future. We have posted bonds with most regulatory agencies to ensure compliance with our plugging responsibility. Plugging
and abandonment operations and associated reclamation of the surface site are important components of our environmental
management system. We plan accordingly for the ultimate disposition of properties that are no longer producing.

Title to Properties

As is customary in the oil and gas industry, we make only a cursory review of title to undeveloped oil and gas leases at
the time we acquire them. However, before drilling commences, we make a thorough title search, and any material defects in
title are remedied prior to the time actual drilling of a well begins. To the extent title opinions or other investigations reflect
title defects, we, rather than the seller/lessor of the undeveloped property, are typically obligated to cure any title defect at
our expense. If we were unable to remedy or cure any title defect of a nature such that it would not be prudent to commence
drilling operations on the property, we could suffer a loss of our entire investment in the property. We believe that we have
good title to our properties, some of which are subject to immaterial encumbrances, easements and restrictions. The oil and
gas properties we own are also typically subject to royalty and other similar non-cost bearing interests customary in the
industry. We do not believe that any of these encumbrances or burdens will materially affect our ownership or use of our
properties.

Competition

We operate in a highly competitive environment. The principal resources necessary for the exploration and production
of oil and gas are leasehold prospects under which oil and gas reserves may be discovered, drilling rigs and related
equipment and services to explore for such reserves and knowledgeable personnel to conduct all phases of oil and gas
operations. We must compete for such resources with both major oil and gas companies and independent operators. Many of
these competitors have financial and other resources substantially greater than ours. Although we believe our current
operating and financial resources are adequate to preclude any significant disruption of our near-term operations, we cannot
assure you that such materials and resources will be available to us in the future.

Employees

As of March 18, 2022, we had 42 full-time employees. We retain independent geological, land, marketing, engineering
and health and safety consultants from time to time and expect to continue to do so in the future. We operate on the
fundamental philosophy that people are our most valuable asset as every person who works for us has the potential to impact
our success. Identifying quality talent is at the core of everything we do and our success is dependent upon our ability to
attract, develop and retain highly qualified employees. Our core values include honesty/integrity, treating people fairly, high
performance, efficient and effective processes, open communication and being respected in our local communities. These
values establish the foundation on which the culture is built and represent the key expectations we have of our employees.
We believe our culture and commitment to our employees creates an environment that allows us to attract and retain our
qualified talent, while simultaneously providing significant value to the Company and its stockholders by helping our
employees attain their highest level of creativity and efficiency.

Available Information

We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange
Commission (“SEC”). You may read and copy any document we file with the SEC at the SEC’s public reference room at 100
F Street, NE, Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for information on the public
reference room. The SEC maintains an internet web site that contains annual, quarterly and current reports, proxy statements
and other information that issuers (including Abraxas) file electronically with the SEC. The SEC’s web site is www.sec.gov.

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other reports
and amendments filed with the SEC are available free of charge on our web site at www.abraxaspetroleum.com in the
Investor Relations section as soon as practicable after such reports are filed. Information on our web site is not incorporated
by reference into this Form 10-K and should not be considered part of this report or any other filing that we make with the
SEC.

Item 1A. Risk Factors

Risks Related to Our Business

Depressed oil and/or gas prices would have a material and adverse effect on us.

Our financial results and the value of our properties are highly dependent on the general supply and demand for oil, gas
and NGL, which impact the prices we ultimately realize on our sales of these commodities. In addition to the impact on our
results of operations, future declines in oil and gas prices could cause us to write down the value of our estimated proved
reserves. Oil and natural gas prices remain volatile, and as a result, we could record impairments in future periods, the
amount of which will be dependent upon many factors such as future prices of oil, gas and NGL, increases or decreases in
our reserve base, changes in estimated costs and expenses, and oil and gas property acquisitions.

Prices in 2021 have improved from the sharp decline at the beginning of March 2020, and price volatility continued into
2021, improving in late 2021. Prices improved significantly in the first part of 2022, however future deterioration in
commodity prices could materially and adversely impact our business by resulting in, or exacerbating, the following effects:

•

reducing the amount of oil, gas and NGL that we can produce economically;

limiting our financial flexibility, liquidity and access to sources of capital, such as equity and debt;

reducing our revenues, cash flows from operations and profitability;

causing us to decrease our capital expenditures or maintain reduced capital spending for an extended period,
resulting in lower future production of oil, gas and NGL; and

reducing the carrying value of our properties, resulting in additional noncash write-downs.

Market prices and our realized prices have been volatile and are likely to continue to be volatile in the future due to

numerous factors beyond our control. These factors include:

•

the level of demand;

domestic and global supplies of oil, NGL and gas;

the price and quantity of imported and exported oil, NGL and gas;

the actions of other oil exporting nations;

weather conditions and changes in weather patterns;

the availability, proximity and capacity of appropriate transportation facilities, gathering, processing and
compression facilities, storage facilities and refining facilities;

global or national health concerns, including the outbreak of pandemic or contagious disease, such as the
coronavirus (COVID-19);

worldwide economic and political conditions, including political instability or armed conflict in oil and gas
producing regions, competition for markets and political initiatives disfavoring fossil fuels;

the price and availability of, and demand for, competing energy sources, including alternative energy sources;

the nature and extent of governmental regulation, including environmental regulation, regulation of derivatives
transactions and hedging activities, tax laws and regulations and laws and regulations with respect to the import
and export of oil, gas and related commodities;

the level and effect of trading in commodity futures markets, including trading by commodity price speculators and
others, and;

the effect of worldwide energy conservation measures.

F
o
r
m
1
0
-
K

Our cash flows from operations depend to a great extent on the prevailing prices for oil and gas, as well as our hedges to
offset declines in price. Prolonged or substantial declines in oil and/or gas prices would materially and adversely affect our
liquidity, the amount of cash flows we have available for our capital expenditures and other operating expenses, our ability to
access the credit and capital markets and our results of operations.

The marketability of our production depends largely upon the availability, proximity and capacity of oil and gas gathering
systems, pipelines, storage and processing facilities.

The marketability of our production depends in part upon processing, storage and transportation facilities, which are
also known as midstream facilities, owned and operated by third parties. Transportation space on such gathering systems and
pipelines is limited and at times unavailable due to repairs or improvements being made to such facilities or due to such
space being utilized by other companies with priority transportation agreements. Our access to transportation options can also
be affected by federal and state regulation of oil and gas production and transportation, general economic conditions and
changes in supply and demand. These factors and the availability of markets are beyond our control. If adequate
transportation and storage options are not available to us, the financial impact on us could be substantial and adversely affect
our ability to produce and market our oil and gas. For example, rapid production growth in the Permian Basin has strained
the available midstream infrastructure there with adverse effects on our operations.

In addition to causing production curtailments and reducing the price we receive for the oil, gas and NGL we produce,
given environmental impacts, including GHG production, regulatory agencies have adopted policies to reduce the volume of
flared gas, the number of wells flaring, and the duration of flaring. While these regulations have not had a material adverse
effect on us to date, these current regulations relating to flaring gas or the adoption of additional regulations could cause us to
shut-in production or curtail the drilling of new wells either of which could have a material adverse effect on us.

We rely on third parties to continue to construct additional midstream facilities and related infrastructure to
accommodate our growth, and the ability and willingness of those parties to do so is subject to a variety of risks.

For example:

•

Decreases in commodity prices in recent years have resulted in reduced investment in midstream facilities by some
third parties;

Various interest groups have protested the construction of new pipelines, and particularly pipelines near water
bodies, in various places throughout the country, and protests have at times physically interrupted pipeline
construction activities; and

Some companies in our industry have sought to reject volume commitment agreements with midstream providers
in bankruptcy proceedings, and the risk that such efforts will succeed, or that upstream energy company
counterparties will otherwise be unable or unwilling to satisfy their volume commitments, may have the effect of
reducing investment in midstream infrastructure.

We have pursued a variety of strategies to alleviate some of the risks associated with the midstream services and
facilities upon which we rely, including seeking alternative sources for processing and transporting gas that we produce.
There can be no assurance that the strategies we pursue will be successful or adequate to meet our needs.

Lower oil and/or gas prices may also reduce the amount of oil and/or gas that we can produce economically.

Substantial declines in oil and/or gas prices may render uneconomic a significant portion of our exploration,
development and exploitation projects, which may result in our having to make significant downward adjustments to our
estimated proved reserves. As a result, a prolonged or substantial decline in oil and/or gas prices has historically caused, and
would likely in the future cause, a material and adverse effect on our future business, financial condition, results of
operations, liquidity and ability to finance capital expenditures. Additionally, if we experience significant sustained decreases
in oil and gas prices such that the expected future cash flows from our oil and gas properties falls below the net book value of
our properties, we may be required to write down the value of our oil and gas properties. Any such asset impairments could
materially and adversely affect our results of operations and, in turn, the trading price of our common stock and ultimately
affect our listing on any public market.

We may not be able to fund the capital expenditures that will be required for us to increase reserves and production.

We must make capital expenditures to develop our existing reserves and to discover new reserves. Historically, we have
financed our capital expenditures primarily with cash flows from operations, borrowings under credit facilities, sales of

properties, monetizing derivative contracts and sales of debt and equity securities and we expect to continue to utilize these
sources in the future to the extent available. We cannot assure you that we will have sufficient capital resources in the future
to finance all of our planned capital expenditures, additionally, any future credit facilities, could place restrictions on our
capital expenditures.

Volatility in oil and gas prices, the timing of our drilling programs and drilling results will affect our cash flows from
operations. Lower prices and/or lower production could also decrease revenues and cash flows from operations, thus
reducing the amount of financial resources available to meet our capital requirements, including reducing the amount
available to pursue our drilling opportunities. If our cash flows from operations does not increase as a result of capital
expenditures, a greater percentage of our cash flows from operations will be required for any applicable debt service and
operating expenses and our capital expenditures would, by necessity, be decreased.

If cash flows from operations or our borrowing base, if applicable, decrease, our ability to undertake exploration and

development activities could be adversely affected. As a result, our ability to replace production may be limited.

If we cannot replace the production from the properties sold with production from our remaining properties, our cash
flows from operations will likely decrease, which in turn, could decrease the amount of cash available for additional capital
spending.

Restrictive debt covenants could limit our growth and our ability to finance our operations, fund our capital needs,
respond to changing conditions and engage in other business activities that may be in our best interests.

Our First Lien Credit Facility and our Second Lien Credit Facility contained a number of significant covenants that,

among other things, limited our ability to:

•

incur or guarantee additional indebtedness and issue certain types of preferred stock or redeemable stock;

transfer or sell assets;

create liens on assets;

pay dividends or make other distributions on capital stock or make other restricted payments,
including
repurchasing, redeeming or retiring capital stock or subordinated debt or making certain investments or
acquisitions;

engage in transactions with affiliates;

make any change in the principal nature of our business;

permit a change of control; or

consolidate, merge or transfer all or substantially all of our assets.

F
o
r
m
1
0
-
K

In addition, our credit facilities required us to maintain compliance with specified financial covenants. Any future credit
facilities we obtain could contain similar or even more restrictive covenants and our ability to comply with such covenants
may be adversely affected by events beyond our control, and we cannot assure you that we would be able to maintain
compliance with such covenants. These financial covenants could limit our ability pursuant to the credit agreements to obtain
future advances, make needed capital expenditures or otherwise conduct necessary or desirable business activities. Even if
new financing becomes available, it may not be on terms acceptable or favorable to us.

Lower oil and gas prices increase the risk of ceiling limitation write-downs.

We use the full cost method to account for our oil and gas operations. Accordingly, we capitalize the cost to acquire,
explore for and develop our oil and gas properties. Under full cost accounting rules, the net capitalized cost of our oil and gas
properties may not exceed a “ceiling limit” which is based upon the present value of estimated future net cash flows from our
proved reserves, discounted at 10%. If the net capitalized costs of our oil and gas properties exceed the ceiling limit, we must
charge the amount of the excess to earnings. This is called a “ceiling limitation write-down.” This charge does not impact
cash flows from operating activities, but it does reduce our stockholders’ equity and earnings. The risk that we will be
required to write-down the carrying value of our oil and gas properties increases when oil and gas prices are low, which
could be further impacted by the SEC’s oil and gas reporting disclosures, which require us to use an average price over the
prior 12-month period, rather than the year-end price, when calculating the PV-10. In addition, write-downs may occur if we

experience substantial downward adjustments to our estimated proved reserves. An expense recorded in one period may not
be reversed in a subsequent period even though oil and gas prices may have increased the ceiling applicable in the
subsequent period.

At December 31, 2020, the net capitalized costs of our oil and gas properties exceeded the present value of estimated
future cash flows from our proved reserves, resulting in recognition of an impairment of $187.0 million for the year ended
December 31, 2020. At December 31, 2021 the net capitalized costs of our oil and gas properties did not exceed the present
value of estimated future cash flows from our proved reserves.

An increase in the differential between NYMEX and the reference or regional index price used to price our oil and gas
would reduce our cash flows from operations.

Our oil and gas are priced in the local markets where it is produced based on local or regional supply and demand
factors. The prices we receive for our oil and gas are typically lower than the relevant benchmark prices, such as
NYMEX. The difference between the benchmark price and the price we receive is called a differential. Numerous factors
location to market, product quality, pipeline capacity and
may influence local pricing, such as refinery capacity,
specifications, upsets in the midstream or downstream sectors of the industry,
trade restrictions and governmental
regulations. Additionally, insufficient pipeline capacity, lack of demand in any given operating area or other factors may
cause the differential to increase in a particular area compared with other producing areas.

During 2021, our differentials averaged $ (4.13) per Bbl of oil and $ (1.21) per Mcf of gas. Approximately 48% of our
oil production during 2021 was from the Rocky Mountain region and approximately 52% from the Permian region. Increases
in the differential between the benchmark prices for oil and gas and the realized price we receive could significantly reduce
our revenues and our cash flow from operations.

The Company’s expectations for future drilling activities will be realized over several years, making them susceptible to
uncertainties that could materially alter the occurrence or timing of such activities.

The Company has identified drilling locations and prospects for future drilling opportunities, including development and
exploratory drilling activities. These drilling locations and prospects represent a significant part of the Company’s future
drilling plans. For example, the Company’s proved reserves as of December 31, 2021 included proved developed reserves
that are behind pipe of 308 MBbls of oil, 103 MBbls of NGL and 2,187 MMcf of gas. Due to the continued lack of adequate
capital to develop its proved undeveloped reserves, those reserves were removed for 2020 and 2021. If and when the
Company has the capital to complete the undeveloped reserves, they will be reinstated in the Company’s total proved
reserves. The Company’s ability to drill and develop these locations depends on a number of factors, including the
availability of capital, regulatory approvals, negotiation of agreements with third parties, commodity prices, costs, access to
and availability of equipment, services, resources and personnel and drilling results. There can be no assurance that the
Company will drill these locations or that the Company will be able to produce oil or gas reserves from these locations or any
other potential drilling locations. Changes in the laws or regulations on which the Company relies in planning and executing
its drilling programs could adversely impact the Company’s ability to successfully complete those programs. For example,
under current Texas laws and regulations the Company may receive permits to drill, and may drill and complete, certain
horizontal wells that traverse one or more units and/or leases; a change in those laws or regulations could adversely impact
the Company’s ability to drill those wells. Because of these uncertainties, the Company cannot give any assurance as to the
timing of these activities or that they will ultimately result in the realization of proved reserves or meet the Company’s
expectations for success. As such, the Company’s actual drilling activities may materially differ from the Company’s current
expectations, which could have a significant adverse effect on the Company’s proved reserves, financial condition and results
of operations.

We may be unable to acquire or develop additional reserves, in which case our results of operations and financial
condition could be adversely affected.

Our future oil and gas production, and therefore our success, is highly dependent upon our ability to find, acquire and
develop additional reserves that are profitable to produce. The rate of production from our oil and gas properties and our
proved reserves will decline as our reserves are produced. Unless we acquire additional properties containing proved
reserves, conduct successful development and exploration activities or, through engineering studies, identify additional
behind-pipe zones or secondary recovery reserves, we cannot assure you that our exploration and development activities will
result in increases in our proved reserves. Based on the reserve information set forth in our reserve report as of December 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 higher. We have not
always been able to fully replace the production volumes lost from natural field declines and prior property sales. As our
proved reserves and consequently our production decline, our cash flow from operations, and the amount that we are able to
borrow under our credit facilities could also decline.

We may not find any commercially productive oil and gas reservoirs.

Drilling involves numerous risks, including the risk that the new wells we drill will be unproductive or that we will not
recover all or any portion of our capital investment. Drilling for oil and gas may be unprofitable. Wells that are productive
but do not produce sufficient net revenues after drilling, operating and other costs are unprofitable. By their nature, estimates
of undeveloped reserves are less certain. Recovery of such reserves will require significant capital expenditures and
successful drilling and completion operations. Due to the lack of adequate capital to develop its proved undeveloped
reserves, such reserves have been removed for 2020 and 2021. If the volume of oil and gas we produce decreases, our cash
flows from operations may decrease.

The results of our drilling in unconventional formations, principally in emerging plays with limited drilling and
production history using long laterals and modern completion techniques, are subject to more uncertainties than our
drilling program in the more established plays and may not meet our expectations for reserves or production.

We drill wells in unconventional formations in several emerging plays. Part of our drilling strategy to maximize
recoveries from these formations involves the drilling of long horizontal laterals and the use of modern completion
techniques of multi-stage fracture stimulations that have proven to be successful in other basins. Risks that we face include
landing our well bore in the desired drilling zone, staying in the desired drilling zone, running casing the entire length of the
well bore and being able to run tools and recover equipment the entire length of the well bore during completion. Our
experience with horizontal drilling and multi-stage fracture stimulations of these formations to date, as well as the industry’s
is relatively limited. The ultimate success of these drilling and
drilling and production history in these formations,
completion strategies and techniques will be better evaluated over time as more wells are drilled and longer term production
profiles are established. In addition, based on reported decline rates in these emerging plays as well as the industry’s
experience in these formations, we estimate that the average monthly rates of production may decline as much as 95% during
the first twelve months of production. Actual decline rates may differ significantly. Accordingly, the results of our drilling in
these unconventional formations are more uncertain than drilling results in other more established plays with longer reserve
and production histories.

We may not be able to keep pace with technological developments in our industry.

The oil and gas industry is characterized by rapid and significant technological advancements and introductions of new
products and services using new technologies. As others use or develop new technologies, we may be placed at a competitive
disadvantage, and competitive pressures may force us to implement those new technologies at substantial cost. In addition,
other oil and gas companies may have greater financial, technical and personnel resources that allow them to enjoy
technological advantages and may in the future allow them to implement new technologies before we can. We may not be
able to respond to these competitive pressures and implement new technologies on a timely basis or at an acceptable cost. If
one or more of the technologies we use now or in the future were to become obsolete or if we are unable to use the most
advanced commercially available technology, our business, financial condition and results of operations could be materially
adversely affected.

We may not adhere to our proposed drilling schedule.

Our final determination of whether to drill any scheduled or budgeted wells will be dependent on a number of factors,

including:

•

prevailing and anticipated prices for oil and gas;

the availability and costs of drilling and service equipment and crews;

economic and industry conditions at the time of drilling;

the availability of sufficient capital resources;

F
o
r
m
1
0
-
K

•

the results of our exploitation efforts;

the acquisition, review and interpretation of seismic data;

our ability to obtain permits for and to access drilling locations;

continuous drilling obligations; and

lease expirations.

Although we have identified numerous drilling locations, we may not be able to drill those locations within our expected
time frame or at all. In addition, our drilling schedule may vary from our expectations because of future uncertainties. For
example, we have in the past, and may be required in the future, to delay drilling or completing wells in order to protect them
from fracture stimulation of other wells in the same area.

We cannot control the activities on the properties we do not operate and are unable to ensure their proper operation and
profitability.

We currently do not operate all of the properties in which we have an interest. Non-operated properties represented
approximately 3.8% of our estimated net proved reserves on a Boe basis at December 31, 2021. As a result, we have limited
ability to exercise influence over and control the risks associated with operation of these properties. The failure of an
operator to adequately perform operations, an operator’s breach of the applicable agreements or an operator’s failure to act in
our best interests could reduce our production and revenues. The success and timing of our drilling and development
activities on properties operated by others therefore depends upon a number of factors outside of our control, including:

•

the operator could refuse to initiate exploitation or development projects and if we proceed with any of those
projects, we may not receive any funding from the operator with respect to that project;

the operator may initiate exploitation or development projects on a different schedule than we would prefer;

the operator may propose greater capital expenditures than we wish, including expenditures to drill more wells or
build more facilities on a project than we have funds for, which may mean that we cannot participate in those
projects and thus, not participate in the associated revenue stream; and

the operator may not have sufficient expertise or resources.

Any of these events could significantly and adversely affect our anticipated exploitation and development activities.

Weather conditions and other factors could adversely affect our ability to conduct drilling activities.

Our operations could be adversely affected by weather conditions and wildlife restrictions on federal leases. Severe
weather conditions limit and may temporarily halt the ability to operate during such conditions. These constraints and the
resulting shortages or high costs could delay or temporarily halt our oil and gas operations and materially increase our
operating and capital costs, which could have a material adverse effect on our business, financial condition and results of
operations.

The lack of availability or high cost of drilling rigs, equipment, supplies, personnel and oil field services could adversely
affect our ability to execute our exploitation and development plans on a timely basis and within our budget.

Our industry is cyclical and, from time to time, there has been a shortage of drilling rigs, equipment, supplies, oil field
services or qualified personnel. During these periods, the costs and delivery times of rigs, equipment and supplies are
substantially greater. In addition, the demand for, and wage rates of, qualified drilling rig crews rise as the number of active
rigs in service increases. During times and in areas of increased activity, the demand for oilfield services will also likely rise,
and the costs of these services will likely increase, while the quality of these services may suffer. If the lack of availability or
high cost of drilling rigs, equipment, supplies, oil field services or qualified personnel were particularly severe in any of our
areas of operation, we could be materially and adversely affected. Delays could also have an adverse effect on our results of
operations, including the timing of the initiation of production from new wells.

Our drilling operations may be curtailed, delayed or cancelled as a result of a variety of factors that are beyond our
control.

Our drilling operations are subject to a number of risks, including:

•

unexpected drilling conditions;

•

facility or equipment failure or accidents;

adverse weather conditions;

title problems;

delays due to protection from fracture stimulations of nearby wells,

unusual or unexpected geological formations;

fires, blowouts and explosions; and

uncontrollable pressures or flows of oil or gas or well fluids.

Any of these events could adversely affect our ability to conduct operations or cause substantial losses, including
personal injury or loss of life, damage to or destruction of property, natural resources and equipment, pollution or other
environmental contamination, loss of wells, regulatory penalties, suspension of operations, and attorney’s fees and other
expenses incurred in the prosecution or defense of litigation.

We do not insure against all potential operating risks. We might incur substantial losses from, and be subject to
substantial liability claims for, uninsured or underinsured risks related to our oil and gas operations.

We do not insure against all risks. Our oil and gas exploitation and production activities are subject to hazards and risks
associated with drilling for, producing and transporting oil and gas, and any of these risks can cause substantial losses
resulting from:

•

environmental hazards, such as uncontrollable flows of oil, gas, brine, well fluids, toxic gas or other pollution into
the environment, including groundwater, underground migration and surface spills or mishandling of chemical
additives;

abnormally pressured formations;

mechanical difficulties, such as stuck oil field drilling and service tools and casing collapse;

leaks of gas, oil, condensate, NGL and other hydrocarbons or losses of these hydrocarbons as a result of accidents
during drilling and completion operations, or in the gathering and transportation of hydrocarbons, malfunctions of
pipelines, measurement equipment or processing or other facilities in the Company’s operations or at delivery
points to third parties;

fires and explosions;

personal injuries and death;

regulatory investigations and penalties; and

natural disasters.

We might elect not to obtain insurance if we believe that the cost of available insurance is excessive relative to the risks
presented. In addition, pollution and environmental risks generally are not fully insurable. Losses and liabilities arising from
uninsured and underinsured events or in amounts in excess of existing insurance coverage could have a material adverse
effect on our business, financial condition or results of operations.

Hydraulic fracturing, the process used for extracting oil and gas from shale and other formations, could be the subject of
further regulation that could impact the timing and cost of development.

Hydraulic fracturing is the primary completion method used to extract reserves located in many of the unconventional
oil and gas plays. Hydraulic fracturing involves the injection of water, sand and chemicals under pressure, usually down
tubing or casing that is cemented in the wellbore, into hydrocarbon-bearing formations at depth to stimulate oil and gas
production. We use this completion technique on substantially all of our wells. Depending on the legislation that may
ultimately be enacted or the regulations that may be adopted at the federal and state levels, exploration, exploitation and
production activities that entail hydraulic fracturing could be subject to additional regulation and permitting requirements.
Some states, including Texas, have implemented disclosure requirements related to chemicals used in hydraulic fracturing,
and while the BLM has rescinded its rules governing hydraulic fracturing on federal and tribal lands (which action itself
is subject to pending litigation), we anticipate further regulation of hydraulic fracturing and related activities by states and

F
o
r
m
1
0
-
K

local governments. Individually or collectively, such existing and new legislation or regulation could lead to operational
delays or increased operating costs and could result in additional burdens that could increase the costs and delay the
development of unconventional oil and gas resources from formations which are not commercial without the use of hydraulic
fracturing. This could have an adverse effect on our business, financial condition and results of operations.

Hydraulic fracturing is typically regulated by state oil and gas commissions; however, the EPA has asserted federal
regulatory authority over hydraulic fracturing involving diesel fuels under the Underground Injection Control Program
established under the Safe Drinking Water Act, or SDWA, and published permitting guidance and an interpretive memorandum
addressing the performance of such activities. In addition, the U.S. Congress, from time to time, has considered adopting
legislation intended to provide for federal regulation of hydraulic fracturing and to require disclosure of the chemicals used in
the hydraulic-fracturing process. In the event that a new federal level of legal restrictions relating to the hydraulic fracturing
process is adopted in areas where we currently or in the future plan to operate, we may incur additional costs to comply with
such federal requirements that may be significant in nature, become subject to additional permitting requirements and
experience added delays or curtailment in the pursuit of exploration, development or production activities.

Some states, including Texas, have adopted, and other states are considering adopting, regulations that could impose
new or more stringent permitting, disclosures, and/or well-construction requirements on hydraulic-fracturing operations. In
addition to state laws, local land use restrictions, such as city ordinances, may restrict or prohibit drilling in general or
hydraulic fracturing in particular. In some states, including Texas, water use may also be regulated and potentially curtailed
by local groundwater management districts which could impact water available for hydraulic fracturing. We believe that we
follow applicable standard industry practices and legal requirements for groundwater protection in our hydraulic fracturing
activities. Nonetheless, in the event state or local restrictions are adopted in areas where we are currently conducting, or in
the future plan to conduct operations, we may incur additional costs to comply with such requirements that may be
significant in nature, experience delays or curtailment in the pursuit of exploration, development, or production activities,
and perhaps be limited or precluded in the drilling of wells or in the amounts that we are ultimately able to produce from our
reserves.

See “Item 1. Business—Environmental Matters—Hydraulic Fracturing” above for additional discussion related to

environmental risks associated with our hydraulic fracturing activities.

Our operations are substantially dependent on the availability of water. Restrictions on our ability to obtain water may
have an adverse effect on our financial condition, results of operations and cash flows from operations.

Water is an essential component of both the drilling and hydraulic fracturing processes. Historically, we have been able
to purchase water from local land owners and other sources for use in our operations. Over the past few years, extreme
drought conditions persisted in West and South Texas. Although conditions have improved, we cannot guarantee what
conditions may occur in the future. Severe drought conditions can result in local water districts taking steps to restrict the use
of water subject to their jurisdiction for drilling and hydraulic fracturing in order to protect the local water supply. If we are
unable to obtain water to use in our operations from local resources, we may be unable to economically produce oil and gas,
which could have an adverse effect on our financial condition, results of operations and cash flows from operations.

Studies noting a connection between increased seismic activity and the injection of wastewater from oil and gas
operations could result in new laws or regulations which would increase our cost of operations.

Some studies have noted an increase in localized frequency of seismic activity associated with underground
injection wastewater from oil and gas operations. If the results of these studies are confirmed, new legislative and regulatory
initiatives could require additional monitoring, restrict the injection of produced water in certain disposal wells or modify or
curtail hydraulic fracturing operations. These actions could lead to operational delays, increased compliance costs or
otherwise adversely impact our operations.

We face various risks associated with the trend toward increased anti-development activity.

As new technologies have been applied to our industry, we have seen significant growth in oil and gas supply in recent
years, particularly in the U.S. With this expansion of oil and gas development activity, opposition toward oil and gas drilling and
development activity has been growing both in the U.S. and globally. Companies in the oil and gas industry, such as us, can be
the target of opposition to development from certain stakeholder groups. These anti-development efforts could be focused on:

•

limiting oil and gas development;

•

reducing access to federal and state owned lands;

delaying or canceling certain projects such as offshore drilling, shale development, and pipeline construction;

limiting or banning the use of hydraulic fracturing;

denying air-quality permits for drilling; and

advocating for increased regulations on shale drilling and hydraulic fracturing.

Future anti-development efforts could result in the following:

•

blocked development;

denial or delay of drilling permits;

shortening of lease terms or reduction in lease size;

restrictions on installation or operation of gathering or processing facilities;

restrictions on the use of certain operating practices, such as hydraulic fracturing;

reduced access to water supplies or restrictions on water disposal;

reduce access to sand, or other proppants, required for hydraulic fracturing;

limited access or damage to or destruction of our property;

legal challenges or lawsuits;

increased regulation of our business;

damaging publicity and reputational harm;

increased costs of doing business;

reduction in demand for our products; and

other adverse effects on our ability to develop our properties and expand production.

F
o
r
m
1
0
-
K

Costs associated with responding to these initiatives or complying with any new legal or regulatory requirements
resulting from these activities could be substantial and not adequately provided for, could have a material adverse effect on
our business, financial condition and results of operations. In addition, the use of social media channels can be used to cause
rapid, widespread reputational harm.

The adoption of derivatives legislation and regulations related to derivative contracts could have an adverse impact on our
ability to hedge risks associated with our business.

Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act establishes
federal oversight and regulation of over-the-counter, or OTC, derivatives and requires the Commodity Futures Trading
Commission, or CFTC, and the SEC to enact further regulations affecting derivative contracts, including the derivative
contracts we use to hedge our exposure to price volatility through the OTC market. Although the CFTC and the SEC have
issued final regulations in certain areas, final rules in other areas and the scope of relevant definitions and/or exemptions still
remain to be finalized. In connection with one of its rulemaking proceedings, in December 2013, the CFTC proposed
position-limits regulations for certain futures and option contracts in various commodities (including gas) and for swaps that
are their economic equivalents. The proposed regulations were supplemented with certain exemptions and guidance in
June 2016 and later reproposed in December 2016 (collectively, the “Position Limit Proposals”). The Position Limit
Proposals were eventually withdrawn and replaced by a new notice of proposed rulemaking on February 27, 2020, which was
ultimately modified and adopted as a final rule, effective March 15, 2021 (the “Position Limit Final Rule”). Certain specified
types of hedging and spread positions are exempt from the position limits set forth in the Position Limit Final Rule, provided
that such hedging and spread positions satisfy the CFTC’s requirements for “bona fide hedging” transactions or “spread
transactions,” as applicable. Similarly, the CFTC’s proposed rule regarding the capital that a swap dealer, or major swap
participant, is required to post with respect to its swap business went through several versions from 2011 to 2019 until the
CFTC issued a final rule on September 15, 2020. The final rule imposes certain minimum capital requirements and financial
reporting requirements on swap dealers and major swap participants and provides specific capital deductions for market risk
and credit risk for swaps and security-based swaps entered into by futures commission merchants. In January 2016, the

CFTC issued a final rule on margin requirements for uncleared swap transactions, which included an exemption for
commercial end-users, entering into uncleared swaps in order to hedge commercial risks affecting their business, from any
requirement to post margin to secure such swap transactions (the “CFTC Margin Rule”). In 2017 and 2019, the CFTC issued
two no-action letters concerning the minimum transfer amount under the CFTC Margin Rule. After receiving feedback from
swap market participants that expressed support for the adoption of regulations consistent with the no-action letters, the
CFTC amended the CFTC Margin Rule and adopted a new final rule that became effective on February 24, 2021. In addition,
on July 19, 2012, the CFTC issued a final rule authorizing an exception for commercial end-users using swaps to hedge their
commercial risks from the otherwise applicable mandatory obligation under the Dodd-Frank Act
to clear all swap
transactions through a registered derivatives clearing organization and to trade all such swaps on a registered exchange. The
Dodd-Frank Act also imposes recordkeeping and reporting obligations on counterparties to swap transactions and other
regulatory compliance obligations. All of the above regulations and requirements could increase the costs to us of entering
into, and lessen the availability of, derivative contracts to hedge or mitigate our exposure to volatility in oil, gas and NGL
prices and other commercial risks affecting our business.

It is not possible at this time to predict when the CFTC will issue final rules applicable to position limits or capital
requirements. Moreover, our ability to satisfy the CFTC’s requirements for the various exemptions available for a commercial
end-user using swaps to hedge or mitigate its commercial risks may affect whether we are required to comply with margin and
certain clearing and trade-execution requirements in connection with our derivative activities. If we do not qualify for the
commercial end-user exception, we may be required to post margin or clear certain transactions, which could reduce our
liquidity and cash available for capital expenditures and our ability to hedge may be impacted. When a final rule on capital
requirements is issued, the Dodd-Frank Act may require our current swap counterparties to post additional capital as a result of
entering into uncleared derivatives with us, which could increase the costs to us of entering into, and lessen the availability of us
to, derivative contracts. The Dodd-Frank Act may also require our current counterparties to spin off some of their derivatives
activities to separate entities, which may not be as creditworthy as the current counterparties, and may cause some entities to
cease their current business as hedge providers. These changes could reduce the liquidity of the derivatives markets thereby
reducing the ability of commercial end-users to have access to derivative contracts to hedge or mitigate their exposure to
volatility in oil, gas, and NGL prices. The Dodd-Frank Act and any new regulations could significantly increase the cost of
derivative contracts (including through requirements to post collateral which could adversely affect our available capital for
other commercial operations purposes), materially alter the terms of future swaps relative to the terms of our existing bilaterally
negotiated derivative contracts, and reduce the availability of derivatives to protect us against commercial risks we encounter.

In addition, federal banking regulators have adopted new capital requirements for certain regulated financial institutions in
connection with the Basel III Accord. The Federal Reserve Board also issued proposed regulations on September 30, 2016,
proposing to impose higher risk-weighted capital requirements on financial institutions active in physical commodities, such as
oil and gas. If and when these proposed regulations are fully implemented, financial institutions subject to these higher capital
requirements may require that we provide cash or other collateral with respect to our obligations under the financial derivatives
and other contracts we may enter into with such financial institutions in order to reduce the amount of capital such financial
institutions may have to maintain. Alternatively, financial
to these capital requirements may price
transactions so that we will have to pay a premium to enter into derivatives and other physical commodity transactions in an
amount that will compensate the financial institutions for the additional capital costs relating to such derivatives and physical
commodity transactions. Rules implementing the Basel III Accord and higher risk-weighted capital requirements could
materially reduce our liquidity and increase the cost of derivative contracts and other physical commodity contracts (including
through requirements to post collateral, which could adversely affect our available capital for other commercial operations
purposes). In addition, certain foreign jurisdictions may adopt or implement laws and regulations relating to margin and central
clearing requirements, which in each case may affect our counterparties and the derivatives markets generally.

institutions subject

If we reduce our use of derivative contracts as a result of any of the foregoing regulations or requirements, our results of
operations may become more volatile and cash flows less predictable, which could adversely affect our ability to plan for and
fund capital expenditures. Finally, the legislation was intended, in part, to reduce the volatility of oil, gas, and NGL prices,
which some legislators attributed to speculative trading in derivatives and commodity instruments related to oil, gas, and
NGL. Our revenues could therefore be adversely affected if a consequence of the legislation and regulations is to lower
commodity prices. Any of these consequences could have a material adverse effect on our financial position, results of
operations, or cash flows from operations.

If we were to experience an ownership change, we could be limited in our ability to use net operating losses arising prior
to the ownership change to offset future taxable income. In addition, our ability to use net operating loss carry forwards
to reduce future tax payments may be limited if our taxable income does not reach sufficient levels.

As of December 31, 2021, we had pre 2018 net operating loss carryforwards or NOLs, for federal income tax purposes
of $245.2 million and post 2018 NOLs of $190.8 million. If we were to experience an “ownership change,” as determined
under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), our ability to offset taxable income
arising after the ownership change with NOLs arising prior to the ownership change would be limited, possibly substantially.
An ownership change would establish an annual limitation on the amount of our pre-change NOLs we could utilize to offset
our taxable income in any future taxable year to an amount generally equal to the value of our stock immediately prior to the
ownership change multiplied by the long-term tax-exempt rate. In general, an ownership change will occur if there is a
cumulative increase in our ownership of more than 50 percentage points by one or more “5% shareholders” (as defined in the
Code) at any time during a rolling three-year period.

As a result of the Tax Cuts and Jobs Act of 2017, and The Coronavirus Aid, Relief, and Economic Security Act of 2020,
NOLs arising before January 1, 2018, and NOLs arising after January 1, 2018, are subject to different rules. Our pre-2018
NOLs will expire in varying amounts from 2023 through 2037, if not utilized; and can offset 100% of future taxable income
for regular tax purposes. Our NOLs arising in 2018, 2019 and 2020 can generally be carried back five years, carried forward
indefinitely and can offset 100% of future taxable income for tax years before January 1, 2021 and up to 80% of future
taxable income for tax years after December 31, 2020. Any NOLs arising on or after January 1, 2021, cannot be carried back,
can generally be carried forward indefinitely and can offset up to 80% of future taxable income. Our ability to use our NOLs
during this period will be dependent on our ability to generate taxable income, and the NOLs could expire before we generate
sufficient taxable income.

Cyber-attacks targeting systems and infrastructure used by the oil and gas industry may adversely impact our operations.

Our business has become increasingly dependent on digital technologies to conduct certain exploration, development
and production activities. We depend on digital technology to estimate quantities of oil and gas reserves, process and record
financial and operating data, analyze seismic and drilling information, and communicate with our employees and third-party
partners. Unauthorized access to our seismic data, reserves information or other proprietary information could lead to data
corruption, communication interruption, or other operational disruptions in our exploration or production operations. In
addition, computer technology controls nearly all of the oil and gas distribution systems in the United States and abroad,
which are necessary to transport our production to market. A cyber-attack directed at oil and gas distribution systems could
damage critical distribution and storage assets or the environment, delay or prevent delivery of production to markets and
make it difficult or impossible to accurately account for production and settle transactions.

While we have not experienced significant cyber-attacks, we may suffer such-attacks in the future. Further, as cyber-
attacks continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance
our protective measures or to investigate and remediate any vulnerability to cyber-attacks.

F
o
r
m
1
0
-
K

We rely on independent experts and technical or operational service providers over whom we may have limited control.

We use independent contractors to provide us with certain technical assistance and services. We rely upon the owners
and operators of rigs and drilling equipment, and upon providers of field services, to drill and develop our prospects to
production. We also rely upon the services of other third parties to explore and/or analyze our prospects to determine a
method in which the prospects may be developed in a cost-effective manner. Our limited control over the activities and
business practices of these service providers, any inability on our part to maintain satisfactory commercial relationships with
them or their failure to provide quality services could materially adversely affect our business, results of operations and
financial condition.

We depend on our President and CEO and the loss of his services could have an adverse effect on our operations.

We depend to a large extent on Robert L.G. Watson, our President and Chief Executive Officer, for our
management, business and financial contacts. Mr. Watson may terminate his employment agreement with us at any
time. Mr. Watson is not precluded from working for, with or on behalf of a competitor upon termination of his employment
with us. If Mr. Watson were no longer able or willing to act as President and Chief Executive Officer, the loss of his services
could have an adverse effect on our operations.

Risks Related to Our Industry

Market conditions for oil and gas, and particularly volatility of prices for oil and gas, could adversely affect our revenue,
cash flows from operations, profitability and growth.

Our revenue, cash flows from operations, profitability and future rate of growth depend substantially upon prevailing prices
for oil and gas. Prices also affect the amount of cash flows available for capital expenditures and our ability to borrow money or
raise additional capital. Lower prices may also make it uneconomical for us to increase or even continue current production
levels of oil and gas. At the beginning of 2019, OPEC members and some nonmembers, including Russia, renewed pledges to
reduce planned production in an effort to draw down a global oversupply and to rebalance supply and demand. As a result of a
decrease in global demand for oil and natural gas due to the recent coronavirus outbreak, at the beginning of March 2020,
negotiations to extend this pledge were unsuccessful. As a result, Saudi Arabia announced a significant reduction in its export
prices and Russia announced that all agreed oil production cuts between members of OPEC and Russia would expire on April 1,
2020. Following these announcements, global oil and natural gas prices declined sharply. Subsequently further negotiations in
April 2020 resulted in an agreement to reduce production volumes in an effort to stabilize global oil prices. While prices have
recovered from the lows in March 2020, they remained at depressed levels until the war in Ukraine in 2022 elevated prices with
many countries enacting sanctions against Russia. We expect ongoing oil price volatility.

Prices for oil and gas are subject to large fluctuations in response to relatively minor changes in the supply and demand

for oil and gas, market uncertainty and a variety of other factors beyond our control, including:

•

changes in foreign and domestic supply and demand for oil and gas;

political stability and economic conditions in oil producing countries, particularly in the Middle East, including
Saudi Arabia and Russia;

weather conditions;

global or national health concerns, including the outbreak of pandemic or contagious disease;

price and level of foreign imports;

terrorist activity;

availability of pipeline and other secondary capacity;

general economic conditions;

domestic and foreign governmental regulation; and

the price and availability of alternative fuel sources.

Events beyond our control, including a global or domestic health crisis, may result in unexpected adverse operating and
financial results. In response to the COVID-19 pandemic governments around the world, including U.S. federal, state, and
local governments, have imposed restrictions intended to limit the extent and spread of the virus, including travel restrictions,
quarantines and business closures. These and other actions could, among other things, impact the ability of our employees
and contractors to perform their duties, cause increased technology and security risk due to extended and company-wide
telecommuting and lead to disruptions in our permitting activities and critical business relationships. Additionally, the
COVID-19 outbreak and governmental restrictions have significantly impacted economic activity and markets and have
dramatically reduced current and anticipated demand for oil and natural gas, adversely impacting the prices we receive for
our production. The severity and duration of the current COVID-19 outbreak and the potential for future outbreaks are
uncertain and difficult to predict. COVID-19 or another similar outbreak may negatively impact our business in numerous
ways, including, but not limited to, the following:

•

reducing our revenues if the outbreak results in a substantial or prolonged decrease in demand for oil and natural
gas due to an economic downturn or recession;

disrupting our operations if our employees or contractors are unable to work due to illness or if our field operations
are suspended or temporarily shut-down or restricted due to measures designed to contain the outbreak;

disrupting the operations of our midstream service providers, on whom we rely for the gathering, processing and
transportation of our production, due to measures designed to contain the outbreak, and/or the difficult economic
environment may lead to capital spending constraints, bankruptcy, the closing of facilities or inability to maintain
infrastructure, which may adversely affect our ability to market our production, increase our costs, lower the prices we
receive, or result in the shut-in of our producing wells or a delay or discontinuation of our development plans; and

•

the disruption and instability in the financial markets and the uncertainty in the general business environment may
affect our ability to access capital, monetize assets and successfully execute our plans.

The COVID-19 pandemic may also have the effect of heightening many of the other risks set forth in this Item 1A,
“Risk Factors”. Any of these factors could have a material adverse effect on our business, operations, financial results and
liquidity. Recently, oil and natural gas have declined to historically low levels and we have reduced our planned capital
expenditures, delayed our drilling and completion plans and have begun shutting-in most of our producing wells, among
other responses. We are unable to predict the ultimate adverse impact of COVID-19 on our business, which will depend on
numerous evolving factors and future developments, including the length of time that the pandemic continues, its ongoing
effect on the demand for oil and natural gas and the response of the overall economy and the financial markets after
governmental restrictions are eased.

Estimates of proved reserves and future net revenue are inherently imprecise.

The process of estimating oil and gas reserves in accordance with SEC requirements is complex and involves decisions
and assumptions in evaluating the available geological, geophysical, engineering and economic data. Accordingly, these
estimates are imprecise. Actual future production, oil and gas prices, revenues, taxes, capital expenditures, operating
expenses and quantities of recoverable oil and gas reserves most likely will vary from those estimated. Any significant
variance could materially affect the estimated quantities and present value of our reserves. In addition, we may adjust
estimates of proved reserves to reflect production history, results of exploration and development, prevailing oil and gas
prices and other factors, many of which are beyond our control.

The estimates of our reserves as of December 31, 2021 are based upon various assumptions about future production
levels, prices and costs that may not prove to be correct over time. In particular, estimates of oil and gas reserves, future net
revenue from proved reserves and the present value of our oil and gas properties are based on the assumption that future oil
and gas prices remain the same as the twelve month first-day-of-the-month average oil and gas prices for the year ended
December 31, 2021. The average realized sales prices used for purposes of such estimates were $62.00 per Bbl of oil
and $1.56 per Mcf of gas. The December 31, 2021 estimates also assume that we will make future capital expenditures of
approximately $5.6 million in the aggregate primarily from 2022 through 2026 which are necessary to develop and realize
the value of proved reserves on our properties. We cannot assure you that we will have sufficient capital in the future to make
these capital expenditures. Any significant variance in actual results from these assumptions could also materially affect the
estimated quantity and value of our reserves set forth or incorporated by reference in this report.

The present value of future net cash flows from our proved reserves is not necessarily the same as the current market
value of our estimated reserves. Any material inaccuracies in our reserve estimates or underlying assumptions will
materially affect the quantities and present value of our reserves, which could adversely affect our business, results of
operations and financial condition.

As required by SEC regulations, we based the estimated discounted future net cash flows from our proved reserves as
of December 31, 2021 on the twelve month first-day-of-the-month average oil and gas prices for the year ended December
31, 2021 and costs in effect on December 31, 2021, the date of the estimate. However, actual future net cash flows from our
properties will be affected by factors such as:

F
o
r
m
1
0
-
K

•

supply of and demand for our oil and gas;

actual prices we receive for our oil and gas;

our actual operating costs;

the amount and timing of our capital expenditures;

the amount and timing of our actual production; and

changes in governmental regulations or taxation.

In addition, the 10% discount factor we use when calculating discounted future net cash flows, which is required by the
SEC, may not be the most appropriate discount factor based on interest rates in effect from time to time and risks associated
with us or the oil and gas industry in general. Any material inaccuracies in our reserve estimates or underlying assumptions
will materially affect the quantities and present value of our reserves, which could adversely affect our business, results of
operations and financial condition.

Our operations are subject to the numerous risks of oil and gas drilling and production activities.

Our oil and gas drilling and production activities are subject to numerous risks, many of which are beyond our
control. These risks include the risk of fire, explosions, blow-outs, pipe failure, abnormally pressured formations and
environmental hazards. Environmental hazards include oil and saltwater spills, gas leaks, ruptures, discharges of toxic gases,
underground migration and surface spills or mishandling of any toxic fracture fluids, including chemical additives. In
addition, title problems, weather conditions and mechanical difficulties or shortages or delays in delivery of drilling rigs and
other equipment could negatively affect our operations. If any of these or other similar industry operating risks occur, we
could have substantial losses. Substantial losses also may result from injury or loss of life, severe damage to or destruction of
property, clean-up responsibilities, environmental damage, regulatory investigation and penalties and suspension of
operations. In accordance with industry practice, we maintain insurance against some, but not all, of the risks described
above. We cannot assure you that our insurance will be adequate to cover losses or liabilities. Also, we cannot predict the
continued availability of insurance at premium levels that justify its purchase.

We operate in a highly competitive industry which may adversely affect our operations.

We operate in a highly competitive environment. The principal resources necessary for the exploration and production
of oil and gas are leasehold prospects under which oil and gas reserves may be discovered, drilling rigs and related
equipment to explore for such reserves and knowledgeable personnel to conduct all phases of operations. We must compete
for such resources with both major oil and gas companies and independent operators. Many of these competitors have
financial and other resources substantially greater than ours. Although we believe our current operating and financial
resources are adequate to preclude any significant disruption of our operations, we cannot assure you that such resources will
be available to us in the future.

Our oil and gas operations are subject to various U.S. federal, state and local regulations that materially affect our
operations.

In the oil and gas industry, matters regulated include permits for drilling and completion operations, drilling and
abandonment bonds, reports concerning operations, the spacing of wells and unitization and pooling of properties, the
disposal of wastes and taxation. At various times, regulatory agencies have imposed price controls and limitations on
production. In order to conserve supplies of oil and gas, these agencies have at times restricted the rates of flow from oil and
gas wells below actual production capacity. U.S. federal, state and local laws regulate production, handling, storage,
transportation and disposal of oil and gas by-products and other substances and materials produced or used in connection
with oil and gas operations. To date, our expenditures related to complying with these laws and for remediation of existing
environmental contamination have not been significant. We believe that we are in substantial compliance with all applicable
laws and regulations. However, the requirements of such laws and regulations are frequently changed. We cannot predict the
ultimate cost of compliance with these requirements or their effect on our operations.

Recently enacted federal legislation will affect our tax position concerning tax deductions currently available with respect
to oil and gas drilling may adversely affect our net earnings.

In December 2017, Congress enacted the budget reconciliation act commonly referred to as the Tax Cuts and Jobs Act,
or TCJA. The law made significant changes to U.S. federal income tax laws, including reducing the corporate income tax
rate from 35 percent to 21 percent, repealing the corporate alternative minimum tax, or AMT, partially limiting the
deductibility of interest expense and NOLs, eliminating the deduction for certain U.S. production activities and allowing the
immediate deduction of certain new investments in lieu of depreciation expense over time. Congress subsequently enacted
Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) in March 2020, Consolidated Appropriations Act
(“CAA”) in December 2020, American Rescue Plan Act (“ARPA”) in March 2021, which may have temporarily or
permanently modified some of the TCJA changes.

Congress has recently considered, is considering, and may continue to consider, legislation that, if adopted in its
proposed or similar form, would deprive some companies involved in oil and gas exploration and production activities in
certain U.S. federal income tax incentives and deductions currently available to such companies. These changes include, but
are not limited to (i) the repeal of the percentage depletion allowance for oil and gas properties, (ii) the elimination of current
deductions for intangible drilling and development costs, (iii) the elimination of the deduction for certain domestic
production activities and (iv) an extension of the amortization period for certain geological and geophysical expenditures.

It is unclear whether these or similar changes will be enacted and, if enacted, how soon any such changes could become
effective and whether such changes may apply retroactively. Although we are unable to predict whether any of these or other

proposals will ultimately be enacted, the passage of any legislation as a result of these proposals or any other similar changes
to U.S. federal income tax laws could eliminate or postpone certain tax deductions that are currently available to us, and any
such change could negatively affect our financial condition and results of operations.

Climate change and regulations related to GHGs could have an adverse effect on our operations and on the demand for
oil and gas.

Scientific studies have indicated that emissions of certain gases may be contributing to warming of the Earth’s
atmosphere. Reports from numerous global and domestic governmental agencies tasked with researching, evaluating, and
mitigating the impact of climate change, such as the Sixth Assessment Report of the United Nations Intergovernmental Panel
on Climate Change, released in part in August 2021 and February 2022 with a full release expected in September 2022, and
the Fourth National Climate Assessment of the U.S. Global Change Research Program, released in full in November
2018, have pointed to GHG emissions as the main driver of atmospheric warming and that climate change is accelerating.
Methane, a primary component of natural gas, and carbon dioxide, a byproduct of the burning of oil, gas, and refined
petroleum products, are considered GHGs. We expect continuing debate, especially in the political arena, over how to
address climate change and what policies and regulations are necessary to address the issue.

In response to various scientific studies, governments have begun adopting domestic and international climate change
regulations that require reporting and reduction of emissions of GHGs. It is possible that international efforts spear-headed by
the United Nations and subsequent domestic and international regulations will have adverse effects on the market for oil, gas
and other fossil fuel products as well as adverse effects on the business and operations of companies engaged in the exploration
for, and production of, oil, gas and other fossil fuel products. In the United States, at the state level and local level, several states
and localities, either individually or through multi-state regional initiatives, have begun implementing legal measures to reduce
emissions of GHGs, such as establishing regional GHG “cap-and-trade” programs. Federally, President Joe Biden has made the
reduction of GHG emissions one of the Nation’s central ambitions, with the United States rejoining the Paris Agreement in
February 2021, under which it pledged to reduce GHG emissions by roughly 25% from 2005 levels by 2025, and then bolstering
that commitment in September 2021 when the United States co-launched the Global Methane Pledge with the European Union,
pursuant to which it pledged to reduce global methane emissions by at least 30% from 2020 levels by 2030. Various climate
change legislative measures have been considered by the U.S. Congress, and the appropriate scope and urgency of regulatory
measures to address the impact of GHG emissions will continue to be a broad-spectrum policy issue. Although we are unable to
predict the timing, scope and effect of any currently proposed or future legislation, investigations, laws, regulations or treaties
regarding climate change and GHG emissions, but the direct and indirect costs of such measures (if enacted) could materially
and adversely affect our operations, financial condition and results of operations.

Any laws or regulations that may be adopted to restrict or reduce emissions of GHGs could require us to incur increased
operating and compliance costs, or could reduce the demand for the oil and gas that we produce which could result, in our
financial condition and results of operations being adversely affected.

In addition, abnormal weather patterns associated with climate change, including severe rainfall events, volatile storms,
flooding, droughts, and wildfires, could threaten our production operations and adversely affect our facilities, the scheduling
of deliveries, or the cost of supplies needed to run our business

EPA’s ground-level ozone standards may result in more stringent regulation of air emissions from, and adverse economic
impacts on, our operations.

Effective December 2015, the EPA adopted a final rule under the Clean Air Act, lowering the National Ambient Air
Quality Standard (NAAQS) for ground-level ozone from 75 parts per billion to 70 parts per billion under both the primary
and secondary standards designed to provide protection of public health and welfare, respectively. The EPA has since issued
new area designations with respect to ground-level ozone, and in November 2018, the agency issued final requirements for
implementation that apply to state and local agencies. In December 2020, the EPA published a final decision in which it
retained the NAAQS of 70 ppb. Since then, the EPA has faced several legal challenges by states and other non-governmental
entities to its final decision. On October 29, 2021, the EPA announced that it would reconsider the agency’s 2020 decision to
retain the 2015 ozone standards and expects for its reconsideration to be complete by the end of 2023. Areas of the country
that do not meet the 2015 standard and were thus reclassified as areas of nonattainment are more costly and difficult for
operators due to the additional reporting and monitoring requirements imposed on existing sources of emissions,, including
those associated with our operations. Moreover, more stringent regulations on constructing new or modified emission sources
may require, among other things, installation of new emission controls on some of our equipment, result in longer permitting
timelines, and significantly increase our capital expenditures and operating costs.

F
o
r
m
1
0
-
K

Proposed legislation and regulation under consideration regarding rail transportation could increase our operating costs,
reduce our liquidity, delay our operations or otherwise alter the way we conduct our business.

We presently sell all of our oil production at the lease, either by truck or pipeline, where custody transfers to the
purchaser, accordingly it is unknown to us how much of the oil production is ultimately shipped by rail. In response to recent
train derailments occurring in the United States, U.S. regulators have considered and implemented rules to address the safety
risks of transporting oil by rail. In January, 2014, the NTSB issued a series of recommendations to address safety risks,
including (i) requiring expanded hazardous material route planning for railroads to avoid populated and other sensitive areas,
(ii) developing an audit program to ensure rail carriers that carry petroleum products have adequate response capabilities to
address worst-case discharges of the entire quantity of product carried on a train, and (iii) auditing shippers and rail carriers
to ensure they are properly classifying hazardous materials in transportation and that they have adequate safety and security
plans in place. In May 2015, the DOT adopted a final rule, developed by PHMSA and FRA, that implemented enhanced tank
car and braking standards, designated new operational protocols for trains transporting large volumes of flammable liquids,
and established new sampling and testing requirements for energy products placed into transport. Among other deadlines, the
DOT’s 2015 rule gave U.S. crude oil transporters until January 1, 2018 to phase out or upgrade DOT-111 tank cars. In
February 2019, PHMSA, in coordination with FRA, issued a final rule, effective April 1, 2019, that required rail carriers to
submit and have approved a comprehensive oil spill response plan for responding to a worst-case discharge of oil or to the
substantial threat of discharge. The implementation of these or other regulations that result in new requirements addressing
the type, design, specifications or construction of rail cars used to transport oil could result in severe transportation capacity
constraints during the period in which new rail cars are retrofitted or constructed to meet new specifications.

We do not currently own or operate rail transportation facilities or rail cars; however, the adoption of any regulations
that impact the testing or rail transportation of oil could increase our costs of doing business and limit our ability to transport
and sell our oil at favorable prices at market centers throughout the United States, the consequences of which could have a
material adverse effect on our financial condition, results of operations and cash flows from operations.

Risks Related to Our Capital Stock

Future issuance of additional shares of common stock or Series A Preferred Stock could cause dilution of ownership
interests and adversely affect our stock price.

We are currently authorized to issue 20,000,000 shares of common stock and 1,000,000 shares of our preferred stock
with such rights as determined by our board of directors. Of our 1,000,000 authorized shares of preferred stock, we are
currently authorized to issue 685,505 shares of preferred stock designated as Series A Preferred Stock. On January 3, 2022
(the “Initial Issuance Date”), we issued all 685,505 shares of our Series A Preferred Stock to a single stockholder.

In the future, and subject to the voting and consent restrictions set forth in the certificate of designation establishing the
Series A Preferred Stock (the “Preferred Stock Certificate”), we may increase our authorized shares of common stock or
preferred stock or issue previously authorized and unissued securities, resulting in the dilution of the ownership interests of
current stockholders. The potential issuance of any such additional shares of common stock may create downward pressure
on the trading price of our common stock. We may also issue additional shares of common stock or other securities that are
convertible into or exercisable for common stock for capital raising or other business purposes. Future sales of substantial
amounts of common stock or preferred stock, or the perception that sales could occur, could have a material adverse effect on
the price of our common stock.

Without the affirmative vote or consent of the holders of at least a majority in voting power of the shares of Series A
Preferred Stock outstanding at the time, voting together as a separate class, we cannot authorize, create, increase the
authorized amount of, or issue any class or series of shares of our capital stock that ranks senior to or on parity with the
Series A Preferred Stock.

Pursuant to the terms of the Preferred Stock Certificate, so long as any shares of Series A Preferred Stock remain
outstanding, we are prohibited from authorizing or creating, or increasing the authorized amount of, or issuing any class or
series of our capital stock that ranks senior to or on parity with the Series A Preferred Stock (including additional shares of
Series A Preferred Stock) as to dividend rights, redemption rights or distribution rights, or creating, authorizing, or issuing
any obligation or security convertible into or evidencing the right to purchase any shares of our capital stock that ranks senior
to or on parity with the Series A Preferred Stock (including the Series A Preferred Stock) without the affirmative vote or
consent of the holders of at least a majority in voting power of the shares of Series A Preferred Stock outstanding at the time,
voting together as a separate class.

Currently, all of our Series A Preferred Stock is held of record by a single stockholder, AG Energy Funding, LLC, a

Delaware limited liability company (“AGEF”).

We will not pay dividends on our common stock for the foreseeable future. Our ability to declare or pay dividends on, or
purchase, redeem or otherwise acquire, shares of our common stock will be subject to certain restrictions in the event that
we fail to pay dividends on our preferred stock.

We currently anticipate that we will retain all future earnings, if any, to finance the growth and development of our
business. We do not intend to pay cash dividends in the foreseeable future. In addition, our credit facilities prohibit us from
paying dividends and making other cash distributions.

In the event we desire to pay cash dividends, our ability to declare or pay dividends on shares of our common stock will
be restricted by the order of priority for distributions set forth in Section 3 of the Preferred Stock Certificate. As described in
the Preferred Stock Certificate, the Series A Preferred Stock, with respect to all dividends or distributions of any kind or
character to our stockholders, ranks: (i) senior to our common stock and each other class or series of our capital stock
established after the Initial Issuance Date, the terms of which do not expressly provide that such class or series ranks senior
to or on a parity with the Series A Preferred Stock as to dividend rights, redemption rights or distribution rights; (ii) on a
parity with any class or series of our capital stock established after the Initial Issue Date, the terms of which expressly
provide that such class or series will rank on parity with the Series A Preferred Stock as to dividend rights, redemption rights
or distribution rights; and (iii) junior to our existing and future indebtedness and liabilities.

As of January 3, 2022, we have issued all 685,505 shares of our Series A Preferred Stock to AGEF. Shares of our
preferred stock vote together as a single class with our common stock, and each share of preferred stock entitles the holder
thereof to 69 votes. As such, AGEF’s Series A Preferred Stock ownership entitles it to approximately 85% of the voting
power of our outstanding capital stock.

Shares eligible for future sale may depress our stock price.

At December 31, 2021, we had 8,421,910 shares of common stock outstanding of which 208,020 shares were held by
affiliates and, in addition, 54,222 shares subject to outstanding options granted under stock option plans, all of which were
vested at December 31, 2021.

As of January 3, 2022, we had 685,505 shares of our preferred stock outstanding, all of which is held by AGEF.

All of the of the shares of common stock held by affiliates are restricted or are control securities under Rule 144
promulgated under the Securities Act. The shares of common stock issuable upon exercise of stock options have been
registered under the Securities Act. Sales of shares of common stock under Rule 144 or another exemption under the
Securities Act or pursuant to a registration statement could have a material adverse effect on the price of our common stock
and could impair our ability to raise additional capital through the sale of equity securities.

F
o
r
m
1
0
-
K

The price of our common stock has been volatile and could continue to fluctuate substantially.

Our common stock is traded on the highest tier of the over-the-counter market (the “OTCQX”. The market price of our

common stock has been volatile and could fluctuate substantially based on a variety of factors, including the following:

• fluctuations in commodity prices;

• variations in results of operations;

• legislative or regulatory changes;

• general trends in the oil and gas industry;

• sales of common stock or other actions by our stockholders;

• additions or departures of key management personnel;

• commencement of or involvement in litigation;

• speculation in the press or investment community regarding our business;

• an inability to maintain the listing of our common stock on a national securities exchange;

• market conditions; and

• analysts’ estimates and other events in the oil and gas industry.

We may issue shares of preferred stock with greater rights than our common stock.

Subject to market listing rules, our articles of incorporation authorize our board of directors to issue one or more series
of preferred stock and set the terms of the preferred stock without seeking any further approval from holders of our common
stock. Any preferred stock that is issued may rank ahead of our common stock in terms of dividends, priority and liquidation
premiums and may have greater voting rights than our common stock.

As of January 3, 2022, we have issued 685,505 shares of our Series A Preferred Stock to AGEF. The Series A Preferred
Stock has the terms set forth in the Company’s filed Preferred Stock Certificate of Designation. Pursuant to that certificate,
any proceeds distributed to the Company’s stockholders or otherwise received in respect of the capital stock of the Company
in a merger or other liquidity event will be allocated among the Series A Preferred Stock and the Company’s common stock
as follows: (1) first, 100% to the Series A Preferred Stock until the Series A Preferred Stock has received $100 million of
proceeds in the aggregate (the “Tier One Preference Amount”), (2) second, 95% to the Series A Preferred Stock and 5% to
the Company’s common stock until the Series A Preferred Stock has received $137.1 million, plus a 6.0% annual rate of
return thereon from the date hereof; (3) thereafter, 75% to the Series A Preferred Stock and 25% to the Company’s common
stock. The Exchange Agreement entered into in connection with the Restructuring also provides for the potential funding by
AGEF of an additional amount up to $12.0 million, if agreed to by AGEF and the disinterested members of the Company’s
Board of Directors. Any such additional amount funded would result in an increase to the Tier One Preference Amount equal
to 1.5 x the amount of such additional funding. The shares of Series A Preferred Stock vote together as a single class with the
Company’s common stock, and each share of Series A Preferred Stock entitles the holder thereof to 69 votes. Accordingly,
AGEF’s ownership of the Series A Preferred Stock entitle it to approximately 85% of the voting power of the Company’s
current outstanding capital stock.

Anti-takeover provisions could make a third party acquisition of us difficult.

Our articles of incorporation and bylaws provide for a classified board of directors, with each member serving a three-
year term, and eliminate the ability of stockholders to call special meetings or take action by written consent. Each of the
provisions in our articles of incorporation and bylaws could make it more difficult for a third party to acquire us without the
approval of our board. In addition, the Nevada corporate statute also contains certain provisions that could make an
acquisition by a third party more difficult.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Exploratory and Developmental Acreage

Our principal oil and gas properties consist of producing and non-producing oil and gas leases, including reserves of oil
and gas in place. The following table sets forth our developed and undeveloped acreage and fee mineral acreage as of
December 31, 2021.

Developed
Acreage

Undeveloped
Acreage

Fee Mineral
Acreage(1)

Permian/Delaware Basin . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rocky Mountain(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18,234
5,442

13,673
3,892

12,723
2,907

Gross
Acres

Net
Acres

Gross
Acres

Net
Acres

8,374
1,676

Gross
Acres

9,556
1,720

Net
Acres

2,391
100

Total
Net
Acres(2)

24,438
5,668

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

23,676

17,565

15,630

10,050

11,276

2,491

30,106

(1) Fee mineral acreage represents fee simple absolute ownership of the mineral estate or fraction thereof.
(2)
(3) All Rocky Mountain properties were sold in January 2022. See Note 14 “Subsequent Events.”

Includes 640 net acres in the Permian Basin region that are included in both developed and fee mineral acres.

The following table sets forth Abraxas’ net undeveloped acreage subject to expiration by year:

2022

2023

2024

2025

2026

Permian/Delaware Basin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rocky Mountain(1)

5 — — —
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — — —

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5 — — —

Productive Wells

The following table sets forth our gross and net productive wells, expressed separately for oil and gas, as of

December 31, 2021:

Permian/Delaware Basin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rocky Mountain(1)

(1) All Rocky Mountain properties were sold in January 2022. See Note 14 “Subsequent Events.”

Productive Wells

Oil

Gross

62
64
126

Net

53
38
91

Gas

Gross

Net

43
9
52

31
5
36

Reserves Information

The estimation and disclosure requirements we employ conform to the definition of proved reserves with the
Modernization of Oil and Gas Reporting rules, which were issued by the SEC in 2008. This accounting standard requires that
the average first-day-of-the-month price during the 12-month period preceding the end of the year be used when estimating
reserve quantities and permits the use of reliable technologies to determine proved reserves, if those technologies have been
demonstrated to result in reliable conclusions about reserves volumes.

The Company’s proved oil and gas reserves have been estimated by an independent petroleum engineering firm,
DeGolyer & MacNaughton, as of December 31, 2020 and 2021, assisted by the engineering and operations departments of
the Company. For the year ended December 31, 2021, DeGolyer & MacNaughton, of Dallas, Texas estimated reserves for
our Permian/Delaware Basin comprising approximately 60% of the PV-10 of our proved oil and gas reserves. Proved
reserves for the remaining 40% of our properties, primarily our Rocky Mountain properties that were sold in January
2022, were estimated by Abraxas personnel because we determined that it was not practical for DeGolyer & MacNaughton to
prepare reserves estimates for these properties as they are located in a widely dispersed geographic area and have relatively
low value, or were subsequently sold. DeGolyer & MacNaughton’s reserve report as of December 31, 2021 included a total
of 65 properties and our internal report included 142 properties, including 67 Bakken properties sold in January 2022. See
Note 14 “Subsequent Events”.

F
o
r
m
1
0
-
K

The technical personnel responsible for preparing the reserve estimates at DeGolyer & MacNaughton meet the
requirements regarding qualifications, independence, objectivity, and confidentiality set forth in the Standards Pertaining to
the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers.
DeGolyer & MacNaughton is an independent firm of petroleum engineers, geologists, geophysicists, and petrophysicists.
They do not own an interest in any of our properties and are not employed on a contingent fee basis. All reports by
DeGolyer & MacNaughton were developed utilizing their own geological and engineering data, supplemented by data
provided by Abraxas. The report of DeGolyer & MacNaughton, dated February 4, 2022, which contains further discussions
of the reserve estimates and evaluations prepared by DeGolyer & MacNaughton as well as the qualifications of DeGolyer &
MacNaughton’s technical personnel responsible for overseeing such estimates and evaluations is attached as Exhibit 99.1 to
this report.

Estimates of reserves at December 31, 2021 were assisted by the engineering department of Abraxas which is directly
responsible for Abraxas’ reserve evaluation process. The Vice President of Engineering manages this department and is the
primary technical person responsible for this process. The Vice President of Engineering holds a Bachelor of Science degree
in Petroleum Engineering and is a Registered Professional Engineer in the State of Texas; he has 42 years of experience in
reserve evaluations. The operations department of Abraxas also assisted in the process. Reserve information as well as

models used to estimate such reserves are stored on secured databases. Non-technical inputs used in reserve estimation
models, including oil and gas prices, production costs, future capital expenditures and Abraxas’ net ownership percentages,
were obtained from other departments within Abraxas.

Oil and gas reserves and the estimates of the present value of future net revenues therefrom were determined based on
prices and costs as prescribed by SEC and Financial Accounting Standards Board, or FASB, guidelines. Reserve calculations
involve the estimate of future net recoverable reserves of oil and gas and the timing and amount of future net revenues to be
received therefrom. Such estimates are not precise and are based on assumptions regarding a variety of factors, many of
which are variable and uncertain. Proved oil and gas reserves are the estimated quantities of oil and gas that geological and
engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under
existing economic and operating conditions. Proved developed oil and gas reserves are those expected to be recovered
through existing wells with existing equipment and operating methods. Proved reserves were estimated in accordance with
guidelines established by the SEC and the FASB, which require that reserve estimates be prepared under existing economic
and operating conditions with no provision for price and cost escalations or de-escalations except by contractual
arrangements. For the year ended December 31, 2021, commodity prices over the prior 12-month period and year end costs
were used in estimating future net cash flows.

The following table sets forth certain information regarding estimates of our oil and gas reserves as of December 31,

2021. All of our reserves are located in the United States.

Summary of Oil, NGL and Gas Reserves
As of December 31, 2021

Oil
(MBbls)

NGL
(MBbls)

Gas
(MMcf)

Oil
equivalents
(MBoe)

Reserve Category

Proved

Developed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undeveloped . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,883
—

2,914
—

30,158
—

14,823
—

Total Proved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,883

2,914

30,158

14,823

As of December 31, 2021, we did not recognize any proved undeveloped reserves. During 2021, our proved

undeveloped reserves are excluded from our total proved reserves primarily due to capital constraints.

Our estimates of proved developed reserves at December 31, 2020 and 2021, and estimates of future net cash flows and

discounted future net cash flows from proved reserves are presented in the Supplemental Information.

We have not filed information with a federal authority or agency with respect to our estimated total proved reserves at
December 31, 2021. We report gross proved reserves of operated properties in the United States to the U.S. Department of
Energy on an annual basis; these reported reserves are derived from the same data used to estimate and report proved
reserves in this report.

The process of estimating oil and gas reserves is complex and involves decisions and assumptions in evaluating the
available geological, geophysical, engineering and economic data. Accordingly, these estimates are imprecise. Actual future
production, oil and gas prices, revenues, taxes, capital expenditures, operating expenses and quantities of recoverable oil and
gas reserves most likely will vary from those estimated. Any significant variance could materially affect the estimated
quantities and present value of our reserves set forth or incorporated by reference in this report. We may also adjust estimates
of reserves to reflect production history, results of exploration and development, prevailing oil and gas prices and other
factors, many of which are beyond our control. In particular, estimates of oil and gas reserves, future net revenue from
reserves and the PV-10 thereof for the oil and gas properties described in this report are based on the assumption that future
oil and gas prices remain the same as oil and gas prices utilized in the December 31, 2021 report. The average realized sales
prices used for purposes of such estimates were $62.00 per Bbl of oil and $1.56 per Mcf of gas. It is also assumed that we
will make future capital expenditures of approximately $5.6 million in the aggregate primarily in the years 2022 through
2026, which are necessary to develop and realize the value of proved reserves on our properties. Any significant variance in
actual results from these assumptions could also materially affect the estimated quantity and value of reserves set forth
herein.

You should not assume that the present value of future net revenues referred to in this report is the current market value
of our estimated oil and gas reserves. In accordance with SEC requirements, the estimated discounted future net cash flows

from proved reserves are calculated using the average first-day-of-the-month price over the prior 12-month period. Costs
used in the estimated discounted future net cash flows are costs as of the end of the period. Because we use the full cost
method to account for our oil and gas operations, we are susceptible to significant non-cash charges during times of volatile
commodity prices because the full cost pool may be impaired when prices are low. This is known as a “ceiling limitation
write-down.” This charge does not impact cash flows from operating activities but does reduce our stockholders’ equity and
reported earnings. We have experienced ceiling limitation write-downs in the past and we cannot assure you that we will not
experience additional ceiling limitation write-downs in the future. As of December 31, 2021 the net capitalized costs of oil
and gas properties did not exceed the present value of our estimated proved reserves. As of December 31, 2021, the
Company’s net capitalized costs of oil and gas properties did not exceed the present value of our estimated proved reserves.

For more information regarding the full cost method of accounting, you should read the information under

“Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies.”

Actual future prices and costs may be materially higher or lower than the prices and costs used in the reserve report.
Any changes in consumption by gas purchasers or in governmental regulations or taxation will also affect actual future net
cash flows. The timing of both the production and the expenses from the development and production of oil and gas
properties will affect the timing of actual future net cash flows from proved reserves and their present value. In addition, the
10% discount factor, which is required by the SEC to be used in calculating discounted future net cash flows for reporting
purposes, is not necessarily the most accurate discount factor. Our effective interest rate on borrowings at various times and
the risks associated with us or the oil and gas industry in general will affect the accuracy of the 10% discount factor.

Proved Undeveloped Reserves

Due to the unavailability of capital, the Company did not recognize PUD in 2020 or 2021.

Reconciliation of Standardized Measure to PV-10

PV-10 is the estimated present value of the future net revenues from our proved oil and gas reserves before income
taxes discounted using a 10% discount rate. PV-10 is considered a non-GAAP financial measure under SEC regulations
because it does not include the effects of future income taxes, as is required in computing the standardized measure of
discounted future net cash flows. We believe that PV-10 is an important measure that can be used to evaluate the relative
significance of our oil and gas properties and that PV-10 is widely used by securities analysts and investors when evaluating
oil and gas companies. Because many factors that are unique to each individual company impact the amount of future income
taxes to be paid, the use of a pre-tax measure provides greater comparability of assets when evaluating companies. We
believe that most other companies in the oil and gas industry calculate PV-10 on the same basis. PV-10 is computed on the
same basis as the standardized measure of discounted future net cash flows but without deducting income taxes.

The following table provides a reconciliation of the standardized measure of discounted future net cash flows to PV-10

at December 31, 2020 and 2021:

F
o
r
m
1
0
-
K

Standardized measure of discounted future net cash flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Present value of future income taxes discounted at 10% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$106,684
—

$153,275
—

PV-10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$106,684

$153,275

December 31,

2020

2021

(In thousands)

Oil and Gas Production, Sales Prices and Production Costs

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 two years ended
December 31, 2020 and 2021, by our major operating regions:

Oil Production (Bbl)
Permian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rocky Mountain(4)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gas Production (Mcf)
Permian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rocky Mountain(4)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NGL Production (Bbl)
Permian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rocky Mountain(4)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Years Ended December 31,

2020

2021

596,680
536,032

1,132,712

498,225
458,829

957,054

689,684
1,444,753

1,593,725
1,838,495

2,134,437

3,432,220

67,586
245,469
313,055

109,970
348,874
458,844

Total Production (Boe)(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,801,507

1,150,118

Average sales price per Bbl of oil(2)
Permian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rocky Mountain(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Composite . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average sales price per Mcf of gas
Permian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rocky Mountain(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Composite . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average sales price per Bbl of NGL
Permian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rocky Mountain(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Composite . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average sales price per Boe(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average cost of production per Boe produced(3)
Permian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rocky Mountain(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Composite . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$
$

$
$
$
$

$
$
$

38.36
35.58
37.05

0.49
0.17
0.27

2.42
1.08
1.37
23.86

12.14
7.03
9.24

$
$
$

$
$
$
$

$
$
$

65.57
62.25
63.98

2.81
2.27
2.52

19.83
17.59
18.09
38.95

10.85
7.33
8.85

(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) Before the impact of hedging activities.
(3) Production costs include direct lease operating costs but exclude ad valorem taxes and production taxes.
(4) All Rocky Mountain properties were sold January 3, 2022. See Note 14 “Subsequent Events.”

Within the above major operating regions, the Rocky Mountain and the Permian/Delaware regions represented more
than 15% of our proved reserves as of December 31, 2021. The following is a summary, by product sold, for each primary
field in these regions, which represented 15% or more of our total proved reserves as of December 31, 2021, for the
two years ended December 31, 2020 and 2021

Rocky Mountain Region(3)
Oil production (Bbls)
Bakken/Three Forks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gas production (Mcf)
Bakken/Three Forks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NGL production (Bbls)
Bakken/Three Forks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average sales price per Bbl of oil(1)
Bakken/Three Forks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average sales price of per Mcf of gas
Bakken/Three Forks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average sales price per Bbl of NGL
Bakken/Three Forks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average cost of production per Boe produced(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Permian Region
Oil production (Bbls) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wolfcamp
Gas Production (Mcf) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wolfcamp
NGL production (Bbls)
Wolfcamp
Average sales price per Bbl of oil(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wolfcamp
Average sales price of per Mcf of gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wolfcamp
Average sales price per Bbl of NGL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wolfcamp
Average cost of production per Boe produced(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1) Before the impact of hedging activities.
(2) Production costs include direct lease operating costs but exclude ad valorem taxes and production taxes.
(3) All Rocky Mountain properties were sold January 3, 2022. See Note 14 “Subsequent Events.”

Years Ended December 31,

2020

2021

509,518

452,181

1,428,355

1,824,851

244,835

384,627

$
$

35.78

0.17

1.08
5.96

$
$

62.36

2.27

17.60
6.86

538,086

451,840

375,507

438,701

55,706

62,417

38.64

0.14

1.70

12.97

65.70

2.35

18.95

13.26

Drilling Activities

The Company did not drill or complete any wells during the two years ended December 31, 2021:.

Present Activities

Due to our lack of capital resources, we did not drill or complete any wells in 2020 or 2021.

Office Facilities

Our executive and administrative offices are located at 18803 Meisner Drive, San Antonio, Texas 78258, and consist of

approximately 21,000 square feet. We own the building which is subject to a real estate lien note.

Other Properties

We own 1.5 acres of land and an office building in Ward County, Texas. We owned a lot in Niobrara County,
Wyoming, which was sold in January 2022. . We owned 582 acres of land, with shop and office, in McKenzie County, North
Dakota. We own 15 vehicles which are used in the field by employees. We also own a workover rig, which is used for
servicing our wells. Raven Drilling owns a 2000 HP drilling rig. In North Dakota, we owned three houses and a man-camp to
house rig crews. All of our North Dakota assets were sold on January 3, 2022. See Note 14 “Subsequent Events.”

F
o
r
m
1
0
-
K

Item 3. Legal Proceedings

From time to time, we are involved in litigation relating to claims arising out of our operations in the normal course of
business. At December 31, 2021, we were not engaged in any legal proceedings that are expected, individually or in the
aggregate, to have a material adverse effect on our financial condition.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity

Part II

Securities

Market Information

Our common stock is traded on the OTCQX Stock Market under the symbol “ AXAS.” The following table sets forth

certain information as to the high and low sales price quoted for our common stock.

Period
2020

First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter

2021 First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter

High

Low

$ 8.40
11.00
5.20
5.60

$ 4.99
3.57
4.10
2.00

$1.80
2.20
2.80
1.41

$2.23
1.85
1.23
0.55

2022 First Quarter (Through March 18, 2022) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 4.94

$0.56

Holders

As of March 18, 2022, we had 8,421,910 shares of common stock outstanding held by approximately 112 stockholders

of record, and 685,505 shares of Series A Preferred Stock outstanding held by one stockholder of record.

Dividends

We have not paid any cash dividends on our common stock and it is not presently determinable when, if ever, we will
pay cash dividends in the future. In addition, our credit facilities prohibited the payment of cash dividends on our common
stock.

Item 6. Selected Financial Data

The following selected financial data is derived from our Consolidated Financial Statements as of and for the years
ended December 31, 2017 through 2021. The data should be read in conjunction with our Consolidated Financial Statements
and Notes thereto and other financial information included herein. See “Financial Statements and Supplementary Data” in
Item 8. All share and per share amounts reflect the retroactive treatment of the Reverse Stock Split, see Note 3 to our
Consolidated Financial Statements.

F
o
r
m
1
0
-
K

2017

2018

2019

2020

2021

Year Ended December 31,

Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 86,264
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,006
Net (loss) income from operations . . . . . . . . . . . . . . . . . . . . $ 16,006
2.00
Net (loss) income per common share—Diluted . . . . . . . . . . $
Weighted average shares outstanding—Diluted . . . . . . . . . .
8,142
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $273,806
Long-term debt, excluding current maturities . . . . . . . . . . . $ 87,354
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . $106,308

(1)
(2)

Includes proved property impairment of $51.3 million.
Includes proved property impairment of $187.0 million.

(In thousands, except per share data)
$ 78,858
$ 43,043
$129,146
$ (65,004)
$ (44,567)
$(184,522)
$ (65,004)(1) $(184,522)(2) $ (44,567)
(5.30)
$
8,408
$ 130,476
$
2,205
$(116,588)

(22.01)
8,382
$ 157,761
$
2,515
$ (72,967)

(7.80)
8,315
$354,631
$192,718
$103,819

$149,167
$ 57,821
$ 57,821
6.80
$
8,384
$424,741
$181,942
$166,510

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion of our consolidated financial condition, results of operations, liquidity and capital
resources. This discussion should be read in conjunction with our Consolidated Financial Statements and the Notes thereto.
See “Financial Statements and Supplementary Data” in Item 8.

General

We are an independent energy company primarily engaged in the acquisition, exploration, exploitation, development
and production of oil and gas in the United States. Historically, we have grown through the acquisition and subsequent
development and exploitation of producing properties, principally through the redevelopment of old fields utilizing new
technologies such as modern log analysis and reservoir modeling techniques as well as 3-D seismic surveys and horizontal
drilling. As a result of these activities, we believe that we have a number of development opportunities on our properties. In
addition, we intend to expand upon our development activities with complementary acreage acquisitions in our core areas of
operation. Success in our development and exploration activities is critical in the maintenance and growth of our current
production levels and associated reserves.

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;

the level of and interest rates on borrowings; and

the level and success of exploration and development activity.

Commodity Prices and Hedging Arrangements. 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,
differentials and the effectiveness of our derivative contracts, which we sometimes refer to as hedging arrangements.
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. 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.

Oil and gas prices have been volatile, and this volatility is expected to continue. 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 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. The market price of oil, NGL and gas in
2022 will impact the amount of cash generated from operating activities, which will in turn impact our financial position. As
of March 18, 2022, the NYMEX oil and gas price was $104.70 per Bbl of oil and $4.86 per Mcf of gas, respectively.

During 2021, the NYMEX future price for oil averaged $68.11 per barrel as compared to $39.57 per barrel in 2020 and
the NYMEX future spot price for gas averaged $3.73 per Mcf compared to $2.13 per Mcf in 2020. Prices closed
on December 31, 2021 at $75.21 per Bbl of oil and $3.73 per Mcf of gas. If commodity prices decline from these levels, our
revenue and cash flows 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
flows from operations will also likely decrease which could cause us to alter our business plans, including reducing our
drilling activities. Such declines will require us to write down the carrying value of our oil and gas assets which will also
cause a reduction in net income.

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 years ended December 31, 2020 and 2021:

Oil

Gas

2020

2021

2020

2021

Average realized price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average NYMEX price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$37.05
$39.57

$63.98
$68.11

$ 0.27 $ 2.52
$ 3.73
$ 2.13

Differential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (2.52) $ (4.13) $(1.86) $(1.21)

(1) Average realized prices are before the impact of hedging activities.

The Company’s derivative contracts as of December 31, 2020 and during 2021 consisted of NYMEX-based fixed price
swaps and basis differential swaps. Under fixed price swaps, we receive a fixed price for our production and pay a variable
market price to the contract counter-party. All derivative contracts were cancelled or expired in 2021.

In April 2021, we received notice that certain of our hedging agreements were being terminated as a result of events of
default under the First Lien Credit Facility, and we voluntarily terminated most of our other hedging arrangements. As a
result of the settlement of the terminated hedges, we had outstanding obligations of $8.0 million. The settlement values of the
terminated hedges were determined at various dates between April 15 and April 30, 2021. These obligations were added to
the balance of the First Lien Credit Facility and accrued interest at the default interest rate of 8.75%, until they were repaid.
Our remaining hedging agreement expired on December 31, 2021.

Production Volumes. Our proved reserves will decline as oil and gas is produced, unless we find, acquire or develop
additional properties containing proved reserves or conduct successful exploration and development activities. Based on
the reserve information set forth in our reserve report as of December 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 higher. While we have had some success in finding, acquiring and developing
additional reserves, we have not always been able to fully replace the production volumes lost from natural field declines and
property sales. Our ability to acquire or find additional reserves in the future will be dependent, in part, upon the amount of
available funds for acquisition, exploration and development projects.

In addition to our ability to successfully drill wells, we must also market our production which depends substantially on
the availability, proximity and capacity of gathering systems, pipelines and processing facilities, which are also known as
midstream facilities, owned and operated by third parties. If adequate midstream facilities and services are not available to us
on a timely basis and at acceptable costs, our production and results of operations could be adversely affected. Our principal
areas of operation have experienced substantial development in recent years, and this has made it more difficult for providers
of midstream infrastructure and services to keep pace with the corresponding increases in field-wide production. The ultimate
timing and availability of adequate infrastructure is not within our control and we could experience capacity constraints for
extended periods of time that would negatively impact our ability to meet our production targets. Weather, regulatory
developments and other factors also affect the adequacy of midstream infrastructure.

We had cash capital expenditures during 2021 of approximately $0.9 million. Due to lack of capital we suspended our
planned capital expenditures for 2021. This suspension of our capital expenditure budget is subject to change depending
upon a number of factors, including the availability and costs of drilling and service equipment and crews, economic and
industry conditions at the time of drilling, prevailing and anticipated prices for oil and gas, the availability of sufficient
capital resources the results of our exploitation efforts, our financial results and our ability to obtain permits for drilling
locations.

The following table presents historical net production volumes for the years ended December 31, 2020 and 2021:

Total Production (Mboe) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average daily production (Boepd) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
% Oil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2020

2021

1,801
4,922

2,023
5,545

63% 47%

F
o
r
m
1
0
-
K

Availability of Capital. As described more fully under “Liquidity and Capital Resources” below, our sources of capital
are cash flows from operating activities, cash on hand, proceeds from the sale of properties, monetizing of derivative
instruments, and if an appropriate opportunity presents itself, the sale of debt or equity securities, although we may not be
able to complete any financing on terms acceptable to us, if at all.

Borrowings and Interest. At December 31, 2021, we had a total of $71.4 million outstanding under our First Lien
Credit Facility, $134.9 million under our Second Lien Credit Facility, and total indebtedness of $218.8 million, including a
$10.0 million exit fee. Our First Lien Credit Facility was settled in January 2022 with proceeds from a property sale of the
same date. On January 3, 2022 our Second Lien Credit Facility and exit fee were converted to preferred stock, resulting in
the Company having no debt, except the Real Estate Lien note on our headquarters building

Exploration and Development Activity. We believe that our asset base, high degree of operational control and inventory
of drilling projects position us for future growth. At December 31, 2021, we operated properties comprising approximately
97% of the Boe’s of our estimated net proved reserves, giving us substantial control over the timing and incurrence of
operating and capital expenditures. We have identified numerous additional drilling locations on our existing leaseholds, the
successful development of which we believe could significantly increase our production and proved reserves. Over the five
years ended December 31, 2021, we drilled or participated in 92 gross (42.8 net) wells all of which were commercially
productive.

Our future oil and gas production, and therefore our success,

is highly dependent upon our ability to find,
finance, acquire and develop additional reserves that are profitable to produce. The rate of production from our oil and gas
properties and our proved reserves will decline as our reserves are produced unless we acquire additional properties
containing proved reserves, conduct
through engineering
studies identify additional behind-pipe zones or secondary recovery reserves. We cannot assure you that our exploration and
development activities will result in increases in our proved reserves. If our proved reserves decline in the future, our
production may also decline and, consequently, our cash flows from operations will decline. We may be unable to acquire or
develop additional reserves, in which case our results of operations and financial condition could be adversely affected.

successful development and exploration activities or,

Results of Operations

Operating revenue(1):
Oil sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gas sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NGL sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31,

2020

2021

(in thousands)

$ 41,969
586
429
59

$61,228
8,656
8,952
22

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 43,043

$78,858

Operating (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Oil sales (MBbls) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gas sales (MMcf) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NGL sales (MBbls)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Oil equivalents (MBoe) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average oil sales price (per Bbl)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average gas sales price (per Mcf) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average NGL price (per Bbl)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average oil equivalent sales price (per Boe) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(199,418)
1,133
2,134
313
1,801
37.05
0.27
1.37
23.86

$
$
$
$

$30,484
957
3,432
495
2,023
$ 63.98
$
2.52
$ 18.09
$ 38.95

(1) Revenue and average sales prices are before the impact of hedging activities, if applicable.

Comparison of Year Ended December 31, 2021 to Year Ended December 31, 2020

Revenue. During the year ended December 31, 2021, revenue increased to $78.9 million from $43.0 million in 2020.
Higher commodity prices for all products in 2021 contributed $41.8 million to revenue. Lower oil sales volumes negatively
impacted revenue by $6.5 million, partially offset by higher gas and NGL volumes which contributed $0.6 million to
revenue.

Oil sales volumes decreased to 957 MBbls for the year ended December 31, 2021 from 1,133 MBbls for the same period
of 2020. The decrease in oil sales volumes was primarily due to natural field declines and the sale of various non-operated
properties in 2021, partially offset by wells that were shut-in in early 2020 due to low prices being back on production in
2021. No new wells were brought on line in 2021. Gas sales volumes increased to 3,432 MMcf for the year ended December
31, 2021 compared to 2,134 MMcf for the year ended December 31, 2020. NGL sales increased to 495 MBbls for the year
ended December 31, 2021 compared to 313 MBbls for the same period of 2020. The increase in gas and NGL volumes was
primarily due to wells that were shut in during early 2020 being back on production in 2021.

Lease Operating Expenses (“LOE”). LOE for the year ended December 31, 2021 increased to $17.9 million from $16.5
million in 2020. The increase in LOE was primarily due to the increased cost of wells brought back on production that were
shut in during the first part of 2020. LOE per Boe for the year ended December 31, 2021 was $8.85 compared to $9.14 for
the same period of 2020. The decrease in LOE per Boe was attributable to higher sales volumes in 2021 as compared to
2020.

Production and Ad Valorem Taxes. Production and ad valorem taxes for the year ended December 31, 2021 increased
to $6.2 million from $4.6 million in 2020. The increase was primarily due to higher realized prices and sales volumes in 2021
as compared to 2020. Production and ad valorem taxes as a percentage of oil and gas revenue were 8% in 2021 compared to
11% for the same period of 2020. The decrease in ad valorem taxes as a percentage of revenue was primarily due
increased production in Texas, which has a lower tax rate.

General and Administrative (“G&A”) Expense. G&A expense, excluding stock-based compensation, decreased to
$7.2 million for the year ended December 31, 2021 from $7.5 million in 2020. G&A expense per Boe was $3.54 for the year
ended December 31, 2021 compared to $4.15 for the same period of 2020. The reduction in total G&A expense was
primarily due to a reduction in personnel in the corporate office, as well as reductions in salaries. Officer salaries were
reduced by 20% effective March 1, 2020, and our CEO took an additional 20% reduction in salary effective April 1, 2020.
The decrease per Boe was primarily due to higher sales volumes.

Stock-Based Compensation. Restricted stock, stock options and performance based restricted stock granted to
employees and directors are valued at the date of grant and expense is recognized over the securities vesting period. Stock-
based compensation decreased to $0.9 million for the year ended December 31, 2021 compared to $1.3 million for the same
period of 2020. The decrease was primarily due to the cancellation, forfeiture, and expiration of stock options as well as a
significant portion of stock grants having been fully amortized with no awards having been granted in 2020 or 2021.

Depreciation, Depletion, and Amortization (“DD&A”) Expenses. DD&A expense excluding accretion of future site
restoration, decreased to $15.3 million for the year ended December 31, 2021 from $24.4 million in 2020. The decrease was
primarily due to lower future development cost included in the December 31, 2021 reserve report, due to the exclusion of the
development cost of PUDs. The full cost pool was also reduced by significant impairments in 2020. DD&A expense per Boe
for the year ended December 31, 2021 was $7.57 compared to $13.56 in the same period of 2020. The decrease in DD&A
expense per Boe was primarily due to a lower full cost pool as the result of the impairment incurred as of December 31, 2019
and in 2020.

Interest Expense. Interest expense increased to $35.8 million in 2021 from $21.3 million for 2020. The increase was
primarily due to higher debt levels in 2021 as compared to 2020, as well as higher overall interest rates in 2021 as compared
to 2020. In 2021, the interest rate on our First Lien Credit facility averaged 6.2% as compared to 3.6% in 2020. The average
interest rate on the Second Lien Credit Facility for the year ended December 31, 2021 was 16.4% as compared to 15.8% in
2020. $22.2 million of interest on the Second Lien Credit Facility was paid in kind in 2021 compared to $12.7 million in
2020. Default interest was charged on both the First Lien and Second Lien Credit Facilities beginning in April 2021 as a
result of the default that occurred.

Income Taxes. Due to losses in the periods and loss carry forwards, we did not recognize any income tax expense for

the years ended December 31, 2021 and 2020.

(Gain) loss on Derivative Contracts. Derivative gains or losses are determined by actual derivative settlements during
the period and by periodic mark to market valuation of derivative contracts in place. We have elected not to apply hedge
accounting to our derivative contracts as prescribed by Accounting Standards Codification 815, Derivatives and Hedging
“ASC 815”, therefore, fluctuations in the market value of the derivative contracts are recognized in earnings during the
current period. Our derivative contracts consisted of fixed price swaps and basis differential swaps in 2021 and 2020. The net

F
o
r
m
1
0
-
K

estimated value of our commodity derivative contracts was a liability of approximately $0.4 million as of December 31,
2021. When our derivative contract prices are higher than prevailing market prices, we recognize gains and conversely, when
our derivative contract prices are lower than prevailing market prices, we incur losses. For the year ended December 31,
2021, we incurred a loss of $33.0 million, including a loss of $7.1 million related to cancelled contracts. For the year ended
December 31, 2020, we recognized a gain on our derivative contracts of $42.9 million.

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 net 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
the amount of our
does not
stockholders’ equity and reported earnings. For the year ended December 31, 2021, the net capitalized cost of our oil and gas
properties did not exceed the future net revenues from our estimated proved reserves. For the year ended December 31, 2020,
the net capitalized cost of our oil and gas properties exceeded the future net revenues from our estimated proved reserves
resulting in the recording of an impairment of $187.0 million during 2020. The year-end amounts were calculated in
accordance with SEC rules utilizing the twelve month first-day-of-the-month average oil and gas prices utilized for the year
ended 2021 which were $62.00 per Bbl of oil and $1.56 per Mcf of gas as adjusted to reflect the expected realized prices for
our oil and gas reserves. The twelve month first-day-of-the-month average oil and gas prices utilized for the year ended
2020 were $39.54 per Bbl of oil and $2.03 per Mcf of gas as adjusted to reflect the expected realized prices for our oil and
gas reserves.

impact cash flows from operating activities. However, such write-downs do impact

Working Capital (Deficit). At December 31, 2021, our current liabilities of $240.0 million exceeded our current
assets of $24.1 million resulting in a working capital deficit of $216.0 million. This compares to a working capital deficit of
$195.3 million at December 31, 2020. Current assets at December 31, 2021 primarily consisted of cash of $10.0, accounts
receivable of $13.5 million, and other current assets of $0.5 million. Current liabilities at December 31, 2021 primarily
consisted of trade payables of $4.7 million, revenues due third parties of $13.3 million, current maturities of long-term debt
of $212.7 million, the then-current amount of our derivative liability of $0.4 million and termination fee for derivative
contracts of $8.0 million, and accrued expenses of $0.8 million.

Capital Expenditures. Capital expenditures in 2020 and 2021 were $5.4 million and $1.3 million, respectively. The

table below sets forth the components of these capital expenditures:

Expenditure category:
Exploration/Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Facilities and other

Years Ended December 31,

2020

2021

(in thousands)

$5,238
—
162

$5,400

$1,145
—
180

$1,325

During 2020 and 2021 capital expenditures were primarily expenditures on our existing properties. We also performed
extensive workovers on several wells in 2020. The level of capital expenditures will vary during future periods depending on
economic and industry conditions and commodity prices. Should the prices of oil and gas decline and if our costs of
operations increase or if our production volumes decrease, our cash flows from operations will decrease which may result in
a reduction of capital expenditure. Due to capital expenditure limits imposed by our credit facilities, we have not adopted a
capital drilling budget for 2022. If we cannot incur significant capital expenditure, we will not be able to offset oil and gas
production decreases caused by natural field declines.

Sources and Uses 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:

Years Ended December 31,

2020

2021

(in thousands)

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash (used in) investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash (used in) provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 15,985
(12,557)
(653)

$ 33,751
(518)
(25,974)

$ 2,775

$ 7,259

Operating activities for the year ended December 31, 2021 provided $33.8 million in cash compared to $16.0 million in
2020. The increase was primarily due to lower net loss due to higher commodity prices and production volumes. Investing
activities used $0.5 million in 2021 primarily for the development of our existing properties. Cash expenditures for the year
ended December 31, 2021 included a decrease of $2.2 million in the future site restoration account related to properties sold,
and proceeds from sales on non-oil and gas and oil and gas properties of $0.9 million and an increase in accounts payable
related to capital expenditures of $0.05 million resulting in accrual based capital expenditures incurred during the
period of $1.3 million.

Operating activities for the year ended December 31, 2020 provided $16.0 million in cash. The reduction from 2019
was primarily due to lower net income due to lower commodity prices and lower production volumes. Investing activities
used $12.6 million in 2020, primarily for the development of our existing properties. Cash expenditures for the year
ended December 31, 2020 included a decrease in the accounts payable balance related to capital expenditures of $7.2 million,
resulting in accrual based capital expenditures incurred during the period of $5.4 million.

Future Capital Resources. Our principal sources of capital going forward, are cash flows from operations, proceeds
from the sale of properties and if an opportunity presents itself, the sale of debt or equity securities, although we may not be
able to complete financing on terms acceptable to us, if at all.

Cash from operating activities is dependent upon commodity prices and production volumes. A decrease in commodity
prices from current levels would likely reduce our cash flows from operations. This could cause us to alter our business plans,
including reducing our exploration and development plans. Unless we otherwise expand and develop reserves, our production
volumes may decline as reserves are produced. In the future we may continue to sell producing properties, which could further
reduce our production volumes. To offset the loss in production volumes resulting from natural field declines and sales of
producing properties, we must conduct successful exploration and development activities, acquire additional producing
properties or identify and develop additional behind-pipe zones or secondary recovery reserves. We believe our numerous
drilling opportunities will allow us to increase our production volumes; however, our drilling activities are subject to numerous
risks, including the risk that no commercially productive oil and gas reservoirs will be found. If our proved reserves decline in
the future, our production will also decline and, consequently, our cash flows from operations will decline.

F
o
r
m
1
0
-
K

Contractual Obligations. We are committed to making cash payments in the future on the following types of agreements:

•

Long-term debt

Below is a schedule of the future payments that we are obligated to make based on agreements in place as of

December 31, 2021:

Contractual Obligations
(In thousands)

Long-term debt(1),(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on long-term debt(2),(4)
. . . . . . . . . . . . . . . . . . . . . . .
Paid in kind interest on long-term debt(3) . . . . . . . . . . . . . . .
Lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

$226,844
2,781
22,133
218

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$251,976

$249,543

Payments due in the twelve month periods ended:

December 31,
2022

December 31,
2023-2024

December 31,
2025-2026

Thereafter

$224,639
2,723
22,133
48

$2,205
58
—
68

$2,331

$—
—
—
8

$ 8

$—
—
—
94

$94

(1) These amounts represent the balances outstanding under our credit facilities and the real estate lien note. These payments assume that we will not

borrow additional funds.

Interest expense assumes the balances of long-term debt at December 31, and current effective interest rates at that time.

(2)
(3) Represents interest expense paid in kind on our Second Lien Credit Facility. Accrued interest was added to the outstanding balance and was payable at

maturity.

(4) Our First Lien Credit Facility was retired, and our Second Lien Credit Facility was converted to Series A Preferred Stock on January 3, 2022, in

connection with the restructuring and change in control that occurred on the same date.

We maintain a reserve for costs associated with the retirement of tangible long-lived assets. At December 31, 2021, our
reserve for these obligations totaled $4.7 million for which no contractual commitments exist. For additional information
relating to this obligation, see Note 1 of the Notes to Consolidated Financial Statements.

Off-Balance Sheet Arrangements. At December 31, 2021, we had no existing off-balance sheet arrangements, as
defined under SEC 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 December 31, 2021, we were not engaged in any legal proceedings that are expected,
individually or in the aggregate, to have a material adverse effect on us.

Long-Term Indebtedness.

Long-term debt consisted of the following:

Years Ended December 31,

2020

2021

(In thousands)

First Lien Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Lien Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exit fee—Second Lien Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate lien note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 95,000
112,695
10,000
2,810

$ 71,400
134,907
10,000
2,515

Less current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred financing fees and debt issuance cost—net

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

220,505
(202,751)

218,822
(212,688)

17,754
(15,239)

6,134
(3,929)

Total long-term debt, net of deferred financing fees and debt issuance costs . . . . . . . . . . . . . . . . . . . .

2,515

2,205

The following sections regarding the First Lien Credit Facility and Second Lien Credit Facility are qualified in their
entirety by the disclosure contained in Item 1. Business, Recent Activity, which is expressly incorporated in the sections
below. Due to certain covenant violations as of December 31, 2020, and the then-potential for future violations, all of the
debt related to our credit facilities has been classified as current liabilities. In connection with the restructuring that was
completed on January 3, 2022, our First Lien Credit Facility was retired and our Second Lien Credit Facility was converted
to Series A Preferred Stock. See Note 14 “Subsequent Events.”

First Lien Credit Facility

Prior to January 3, 2022 the Company had a senior secured First Lien Credit Facility with Société Générale, as
administrative agent and issuing lender, and certain other lenders. As of December 31, 2021, $71.4 million was outstanding
under the First Lien Credit Facility.

Outstanding amounts under the First Lien Credit Facility accrued interest at a rate per annum equal to (a)(i) for
borrowings that we elected to accrue interest at the reference rate at the greater of (x) the reference rate announced from time
to time by Société Générale, (y) the federal funds rate plus 0.5%, and (z) daily one-month LIBOR plus, in each case,
1.5%-2.5%, depending on the utilization of the borrowing base, and (ii) for borrowings that we elected to accrue interest
at the Eurodollar rate, LIBOR plus 2.5%-3.5% depending on the utilization of the borrowing base, and (b) at any time an
event of default existed, 3.0% plus the amounts set forth above. At December 31, 2021, the interest rate on the First Lien
Credit Facility was approximately 8.75%.

Subject to earlier termination rights and events of default, the stated maturity date of the First Lien Credit Facility
was May 16, 2022. Interest was payable quarterly on reference rate advances and not less than quarterly on LIBOR advances.
The Company was permitted to terminate the First Lien Credit Facility and was able, from time to time, to permanently
reduce the lenders’ aggregate commitment under the First Lien Credit Facility in compliance with certain notice and dollar
increment requirements.

Each of the Company’s subsidiaries guaranteed our obligations under the First Lien Credit Facility on a senior secured
basis. Obligations under the First Lien Credit Facility were secured by a first priority perfected security interest, subject to
certain permitted encumbrances, in all of the Company and its subsidiary guarantors’ material property and assets. As of
December 31, 2020,
least 90% of the PV-9 of the
Company’s proven reserves and 95% of the PV-9 of the Company’s PDP reserves.

the collateral was required to include properties comprising at

Under the amended First Lien Credit Facility, the Company was subject to customary covenants, including financial
covenants and reporting covenants. The amendment to the First Lien Credit Facility dated June 25, 2020 (the “1L
Amendment”) modified certain provisions of the First Lien Credit Facility, including (i) the addition of monthly
mandatory prepayments from excess cash (defined as available cash minus certain cash set-asides and a $3.0 million
working capital reserve) with corresponding reductions to the borrowing base; (ii) the elimination of scheduled
redeterminations (which were previously made every six months) and interim redeterminations (which were previously
made at the request of the lenders no more than once in the six month period between scheduled redeterminations) of the
borrowing base; (iii) the replacement of total debt leverage ratio and minimum asset ratio covenants with a first lien debt
leverage ratio covenant (comparing the outstanding debt of the First Lien Credit Facility to the consolidated EBITDAX of
the Company and requiring that the ratio not exceed 2.75 to 1.00 as of the last day of each fiscal quarter) and a minimum
first lien asset coverage ratio covenant (comparing the sum of, without duplication, (A) the PV-15 of producing and
developed proven reserves of the Company, (B) the PV-9 of the Company’s hydrocarbon hedge agreements and (C) the
PV-15 of proved reserves of the Company classified as “drilled uncompleted” (up to 20% of the sum of (A), (B) and (C))
to the outstanding debt of the First Lien Credit Facility and requiring that the ratio exceed 1.15 to 1.00 as of the last day of
each fiscal quarter ending on or before December 31, 2020, and 1.25 to 1.00 for fiscal quarters ending thereafter); (iv) the
elimination of current ratio and interest coverage ratio covenants; (v) additional restrictions on (A) capital expenditures
(limiting capital expenditures to $3.0 million in any four fiscal quarter period (commencing with the four fiscal quarter
period ended June 30, 2020 and calculated on an annualized basis for the 1, 2 and 3 quarter periods ending on June 30,
2020, September 30, 2020 and December 31, 2020, respectively, subject
including capital
expenditures financed with the proceeds of newly permitted, structurally subordinated debt and capital expenditures made
when (1) the first lien asset coverage ratio is at least 1.60 to 1.00, (2) the Company is in compliance with the first lien
leverage ratio, (3) the amounts outstanding under the First Lien Credit Facility are less $50.0 million, (4) no default exists
under the First Lien Credit Facility and (5) and all representations and warranties in the First Lien Credit Facility and the
related credit documents are true and correct in all material respects), (B) outstanding accounts payable (limiting all
outstanding and undisputed accounts payable to $7.5 million, undisputed accounts payable outstanding for more than 60
days to $2.0 million and undisputed accounts payable outstanding for more than 90 days to $1.0 million and (C) general
and administrative expenses (limiting cash general and administrative expenses the Company could make or become
legally obligated to make in any four fiscal quarter period to $9.0 million for the four fiscal quarter period ended June 30,
2020, $8.25 million for the four fiscal quarter period ended September 30, 2020, $6.9 million for the four fiscal quarter
period ended December 31, 2020, and $6.5 million for the fiscal quarter from March 31, 2021 through December 31, 2021
and $5.0 million thereafter; in all cases, general and administrative expense excluded up to $1.0 million in certain legal
and professional fees; and (vi) permission for up to an additional $25.0 million in structurally subordinated debt to finance
capital expenditures. Under the 1L Amendment, the borrowing base was adjusted to $102.0 million. Prior to retirement,
the borrowing base was reduced by any mandatory prepayments from excess cash flow.

to certain exceptions,

As of December 31, 2021, we were not in compliance with the financial covenants under the First Lien Credit Facility,
as amended. In connection with the restructuring that was completed on January 3, 2022, our First Lien Credit Facility was
retired and our Second Lien Credit Facility was converted to Series A Preferred Stock. See Note 14 “Subsequent Events.”

The First Lien Credit Facility contained a number of covenants that, among other things, restricted our ability to:

•

incur or guarantee additional indebtedness;

transfer or sell assets;

pay dividends or make other distributions on capital stock or make other restricted payments;

F
o
r
m
1
0
-
K

•

engage in transactions with affiliates other than on an “ arm’s length” basis;

make any change in the principal nature of our business; and

permit a change in control

The First Lien Credit Facility also contained customary events of default, including nonpayment of principal or interest,
violations of covenants, cross default and cross acceleration to certain other indebtedness, bankruptcy and material judgments
and liabilities.

Events of default occurred, or were reasonably likely to occur, under the First Lien Credit Facility as a result of (i) our
failure to timely deliver audited financial statements without a “going concern” or like qualification for the fiscal year ended
December 31, 2020, (ii) our inability to comply with the first lien debt to consolidated EBITDAX ratio for the fiscal quarter
ended December 31, 2020, (iii) our failure to cause certain deposit accounts to be subject to control agreements in favor of
the administrative agent for the First Lien Credit Facility, and (iv) certain cross-defaults that have occurred, or could have
occurred, as a result of the events of default under the First Lien Credit Agreement and corresponding cross-defaults under
the Second Lien Credit Facility and cross-defaults or similar termination events under our hedging contracts.

Second Lien Credit Facility

On November 13, 2019, we entered into the Term Loan Credit Agreement, with Angelo Gordon Energy Servicer, LLC,
as administrative agent, and certain other lenders party thereto, which we refer to as the Second Lien Credit Facility. The
Second Lien Credit facility was amended on June 25, 2020. Prior to January 3, 2022, the Second Lien Credit Facility had a
maximum commitment of $100.0 million. On November 13, 2019, $95.0 million of the net proceeds obtained from the
Second Lien Credit Facility were used to permanently reduce the borrowings outstanding on the First Lien Credit Facility. As
of December 31, 2021, the outstanding balance on the Second Lien Credit Facility was $144.9 million, which included
a $10.0 million exit fee. In connection with the restructuring that was completed on January 3, 2022, our First Lien Credit
Facility was retired and our Second Lien Credit Facility was converted to Series A Preferred Stock. See Note 14 “Subsequent
Events.”

The stated maturity date of the Second Lien Credit Facility was November 13, 2022. Prior to the latest amendments of
the Second Lien Credit Facility, accrued interest was payable quarterly on reference rate loans and at the end of each three-
month interest period on Eurodollar loans. We were permitted to prepay the loans in whole or in part, in compliance with
certain notice and dollar increment requirements.

Each of our subsidiaries had guaranteed our obligations under the Second Lien Credit Facility. Obligations under the
Second Lien Credit Facility were secured by a first priority perfected security interest, subject to certain permitted liens,
including those securing the indebtedness under the First Lien Credit Facility to the extent permitted by the Intercreditor
Agreement, of even date with the Second Lien Credit Facility, among us, our subsidiaries, Angelo Gordon Energy Servicer,
LLC and Société Générale, in all of our subsidiary guarantors’ material property and assets. As of December 31, 2020, the
collateral was required to include properties comprising at least 90% of the PV-9 of the Company’s proven reserves and 95%
of the PV-9 of the Company’s PDP reserves.

Under the amended Second Lien Credit Facility, the Company was subject to customary covenants, including financial
covenants and reporting covenants. The amendment to the Second Lien Credit Facility dated June 25, 2020 (the “2L
Amendment”) modified certain provisions of the Second Lien Credit Facility, including (i) a requirement that, while the
obligations under the First Lien Credit Facility were outstanding, scheduled payments of accrued interest under the Second
Lien Credit Facility would be paid in the form of capitalized interest; (ii) an increase in the interest rate by 200bps for interest
payable in cash and 500bps for interest payable in kind; (iii) modification of the minimum asset ratio covenant to be the sum
of, without duplication, (A) the PV-15 of producing and developed proven reserves of the Company, (B) the PV-9 of the
Company’s hydrocarbon hedge agreements and (C) the PV-15 of proved reserves of the Company classified as “drilled
uncompleted” (up to 20% of the sum of (A), (B) and (C)) to the total outstanding debt of the Company and requiring that the
ratio not exceed 1.45 to 1.00 as of the last day of each fiscal quarter ending between September 30, 2021 to December 31,
2021, and 1.55 to 1.00 for fiscal quarters ending thereafter); (iv) modification of the total leverage ratio covenant to set the
first test date to occur on September 30, 2021; (v) modification of the then-current ratio to eliminate the exclusion of certain
valuation accounts associated with hedge contracts from current assets and from current liabilities, (vi) additional restrictions
on (A) capital expenditures (limiting capital expenditures to those expenditures set forth in a plan of development approved
by Angelo Gordon Energy Servicer, LLC, subject to certain exceptions, including capital expenditures financed with the

proceeds of newly permitted, structurally subordinated debt), (B) outstanding accounts payable (limiting all outstanding and
undisputed accounts payable to $7.5 million, undisputed accounts payable outstanding for more than 60 days to $2.0 million
and undisputed accounts payable outstanding for more than 90 days to $1.0 million and (C) general and administrative
expenses (limiting cash general and administrative expenses the Company could make or become legally obligated to make
in any four fiscal quarter period to $9.0 million for the four fiscal quarter period ended June 30, 2020, $8.25 million for the
four fiscal quarter period ended September 30, 2020, $6.5 million for fiscal quarter period from March 31, 2021 through
December 31, 2021 and $5.0 million thereafter.

As of December 31, 2021, we were not in compliance with the financial covenants under the Second Lien Credit
Facility, as amended. However, in connection with the restructuring that was completed on January 3, 2022 our First Lien
Credit Facility was retired and our Second Lien Credit Facility was converted to Series A Preferred Stock. See Note 14
“Subsequent Events.”

The Second Lien Credit Facility contained a number of covenants that, among other things, restricted our ability to:

•

incur or guarantee additional indebtedness;

transfer or sell assets;

create liens on assets;

pay dividends or make other distributions on capital stock or make other restricted payments;

engage in transactions with affiliates other than on an “arm’s length” basis;

make any change in the principal nature of our business; and

permit a change of control

The Second Lien Credit Facility also contained customary events of default, including nonpayment of principal or
interest, violation of covenants, cross default and cross acceleration to certain other indebtedness, bankruptcy and material
judgments and liabilities.

Events of default occurred under the Second Lien Credit Facility as a result of (i) the Company’s failure to timely
deliver audited financial statements without a “going concern” or like qualification for the fiscal year ended December 31,
2020, (ii) the Company’s failure to cause certain deposit accounts to be subject to control agreements in favor of the
administrative agent for the Second Lien Credit Facility, (iii) the failure of the Company to meet certain hedging
requirements, (iv) the Company’s inability to comply with the total leverage ratio for the fiscal quarter ended September 30,
2021, (v) the Company’s inability to comply with minimum asset coverage ratio for the fiscal quarter ended September 30,
2021, and (vi) certain cross-defaults that occurred, or could have occurred, as a result of the occurrence of events of default
under the First Lien Credit Facility and corresponding cross-defaults or similar termination events under our hedging
contracts. Additional events of default occurred as of September 30, 2021, as a result of our failure to comply with certain
financial covenants under the Second Lien Credit Facility, as amended.

F
o
r
m
1
0
-
K

On April 16, 2021, we received a Notice of Default and Reservation of Rights (the “Notice of Default”) from Angelo
Gordon stating that we defaulted under the Second Lien Credit Facility, and that, as a result, the lenders accelerated our
obligations due thereunder and reserved their rights to pursue additional remedies in the future.

The Notice of Default described certain events of default that occurred under the Second Lien Credit Facility as a result
of (i) our failure to file timely our Form 10-K for the fiscal year ended December 31, 2020, (ii) our failure to timely deliver
audited financial statements without a “going concern” or like qualification for the fiscal year ended December 31, 2020, and
(iii) other defaults under our revolving credit facility.

The Notice of Default declared that our obligations under the Second Lien Credit Facility were immediately due and
payable, in each case without presentment, demand, protest or other requirements of any kind, and began to bear interest at
the rate applicable to such amount under the Second Lien Credit Facility, plus an additional 3%. Additionally, the
administrative agent and the lenders reserved their right to exercise further rights, powers and remedies under the Second
Lien Credit Facility, at any time or from time to time, with respect to any of the events of default described above.

agreement was finalized on August 11, 2020 at which time the Company issued a warrant to the lender to purchase a total of
33,445,792 shares of common stock at an exercise price of $0.01 per share. On October 19, 2020, the Company effected a
reverse stock split of the Company’s authorized, issued and outstanding shares of common stock at a ratio of 1-for-20, thus
the warrant was adjusted to provide that the lender may purchase a total of 1,672,290 shares of common stock at an exercise
price of $0.20 per share. The warrant was exercisable immediately in whole or in part, on or before five years from the
issuance date. The fair value of the warrant and exit fee were recorded as debt issuance costs, presented in the consolidated
balance sheets as a deduction from the carrying amount of the note payable, and were being amortized over the loan term.
The Exit Fee was due and payable in cash on the earliest to occur of maturity of the obligation under the Second Lien Credit
Agreement or the earlier acceleration or payment in full of the same. The 2L Amendment, including the impact of the Exit
Fee and Warrant Agreement finalized on August 11, 2020, resulted in the 2L Amendment meeting the criteria of debt
extinguishment under the guidance of ASC 470: Debt. Accordingly, all debt issuance cost, including the original discount, of
the original Second Lien Credit Facility, were charged to debt extinguishment loss in the accompanying Condensed
Consolidated Statement of Operation in the amount of $4.1 million. Subsequently, pursuant to a waiver letter dated
November 22, 2021 from AGEF to Abraxas, AGEF waived, relinquished, and abandoned all of its rights, title, and interest to
the Warrant and any Common Stock underlying the Warrant for no consideration.

Real Estate Lien Note

We have 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 outstanding principal accrues interest at a fixed rate of 4.9%. The note is payable in monthly
installments of principal and interest in the amount of $35,672. The maturity date of the note is July 20, 2023. As
of December 31, 2020, and 2021, $2.8 million and $2.5 million, respectively, were outstanding on the note.

Net Operating Loss Carryforwards

At December 31, 2021, we had, subject to the limitation discussed below, $245.20 million of pre 2021 NOLs for U.S.
tax purposes and a $190.8 million NOL for 2021. Our pre-2018 NOLs will expire in varying amounts from 2023 through
2037, if not utilized; and can offset 100% of future taxable income for regular tax purposes. Any NOLs arising in 2018, 2019
and 2020 can generally be carried back five years, carried forward indefinitely and can offset 100% of future taxable income
for tax years before January 1, 2021 and up to 80% of future taxable income for tax years after December 31, 2020. Any
NOLs arising on or after January 1, 2021, cannot be carried back and can generally be carried forward indefinitely and can
offset up to 80% of future taxable income for regular tax purposes, (the alternative minimum tax no longer applies to
corporations after January 1, 2018).

Uncertainties exist as to the future utilization of the operating loss carryforwards under the criteria set forth under ASC
740-10 “Income Taxes”. Therefore, we have established a valuation allowance of $0.00 million for deferred tax assets at
December 31, 2021.

Related Party Transactions

We have adopted a policy that transactions between us and our officers, directors, principal stockholders, or affiliates of
any of them, will be on terms no less favorable to us than can be obtained on an arm’s length basis in transactions with third
parties and must be approved by our audit committee. There were no related party transactions in 2020 or 2021.

Critical Accounting Policies

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”)
requires that management apply accounting policies and make estimates and assumptions that affect results of operations and
the reported amounts of assets and liabilities in the financial statements. The following represents those policies that
management believes are particularly important to the financial statements and that require the use of estimates and
assumptions to describe matters that are inherently uncertain.

Full Cost Method of Accounting for Oil and Gas Activities. SEC Regulation S-X Rule 4-10 and ASC 932 defines the
financial accounting and reporting standards for companies engaged in oil and gas activities. Two methods are prescribed:
the successful efforts method and the full cost method. We have chosen to follow the full cost method under which all costs
associated with property acquisition, exploration and development are capitalized. We also capitalize internal costs that can
be directly identified with our acquisition, exploration and development activities but do not include any costs related to

production, general corporate overhead or similar activities. Sales of oil and gas properties are treated as a reduction of the
full cost pool with no gain or loss being recognized, except under certain circumstances. Under the successful efforts method,
geological and geophysical costs and costs of carrying and retaining undeveloped properties are charged to expense as
incurred. Costs of drilling exploratory wells that do not result in proved reserves are charged to expense. Depreciation,
depletion, amortization and impairment of oil and gas properties are generally calculated on a well by well or lease or field
basis versus the “full cost” pool basis. Additionally, gain or loss may be recognized on sales of oil and gas properties under
the successful efforts method. As a result, our financial statements will differ from those of companies that apply the
successful efforts method since we will generally reflect a higher level of capitalized costs as well as a higher depreciation,
depletion and amortization rate on our oil and gas properties.

At the time it was adopted, management believed that the full cost method would be preferable, as earnings tend to be
less volatile than under the successful efforts method. However, the full cost method makes us susceptible to significant
non-cash charges during times of volatile commodity prices because the full cost pool may be impaired when prices are low.
These charges are not recoverable when prices return to higher levels. We have experienced this situation several times over
the years, including a $187.0 million impairment recorded as of December 31, 2020. Our oil and gas reserves have a
relatively long life. However, temporary drops in commodity prices can have a material impact on our business including
impact from impairment testing procedures associated with the full cost method of accounting as discussed below.

Under full cost accounting rules, the net capitalized cost of oil and gas properties, less related deferred taxes, may not
exceed a “ceiling limit” which is based upon the present value of estimated future net cash flows from proved reserves on a
pool by pool basis, discounted at 10%, plus the lower of cost or fair market value of unproved properties and the cost of
properties not being amortized, less income taxes. If net capitalized costs of oil and gas properties exceed the ceiling limit,
we must charge the amount of the excess to earnings. This is called a “ceiling limitation write-down.” This charge does not
impact cash flows from operating activities, but does reduce our stockholders’ equity and reported earnings. The risk that we
will be required to write down the carrying value of oil and gas properties increases when oil and gas prices are depressed. In
addition, write-downs may occur if we experience substantial downward adjustments to our estimated proved reserves. An
expense recorded in one period may not be reversed in a subsequent period even though higher oil and gas prices may have
increased the ceiling applicable to the subsequent period. We apply the full cost ceiling test on a quarterly basis on the date of
the latest balance sheet presented. Given the recent decline in oil prices, it is likely that we will incur future impairments.

Estimates of Proved Oil and Gas Reserves. Estimates of our proved reserves included in this report are prepared in

accordance with GAAP and SEC guidelines. The accuracy of a reserve estimate is a function of:

•

the quality and quantity of available data;

the interpretation of that data;

the accuracy of various mandated economic assumptions; and

the judgment of the persons preparing the estimate.

Our proved oil and gas reserves have been estimated by our independent petroleum engineering firm, DeGolyer &
MacNaughton, as of December 31, 2020 and 2021, estimates prepared by other third parties may be higher or lower than
those included herein. Because these estimates depend on many assumptions, all of which may substantially differ from
future actual results, reserve estimates will be different from the quantities of oil and gas that are ultimately recovered. In
addition, results of drilling, testing and production after the date of an estimate may justify material revisions to the estimate.

You should not assume that the present value of future net cash flows is the current market value of our estimated
proved reserves. In accordance with SEC requirements, we based the estimated discounted future net cash flows from proved
reserves on costs on the date of the estimate and for the years ended December 31, 2020 and 2021 oil and gas prices were
based on the average 12-month first-day-of-the-month pricing. Actual future prices and costs may be materially higher or
lower than the prices and costs used in the estimate.

The estimates of proved reserves materially impact DD&A expense and the ceiling test calculation. If the estimates of
proved reserves decline, the rate at which we record DD&A expense will increase and we may be required to record future
impairments of the full cost pool, reducing future net income. Such a decline may result from lower market prices, which
may make it uneconomic to drill for and produce higher cost fields.

F
o
r
m
1
0
-
K

Asset Retirement Obligations. The estimated costs of restoration and removal of facilities are accrued. The fair value of
a liability for an asset’s retirement obligation is recorded in the period in which it is incurred and the corresponding cost is
capitalized by increasing the carrying amount of the related long-lived asset. The liability is accreted to its then present value
each period, and the capitalized cost is depreciated over the useful life of the related asset. For all periods presented, we have
included estimated future costs of abandonment and dismantlement in our full cost amortization base and we amortize these
costs as a component of our depletion expense.

Accounting for Derivatives. Gains or losses are determined by actual derivative settlements during the period and on
the periodic mark to market valuation of derivative contracts in place. The derivative instruments we utilize are based on
index prices that may and often do differ from the actual oil and gas prices realized in our operations. We have elected not to
apply hedge accounting to our derivative contracts. As a result, fluctuations in the market value of the derivative contract are
recognized in earnings during the current period. In 2020 and 2021 derivative contracts consisted of fixed price swaps
and basis differential swaps. Due to the volatility of oil and gas prices, our financial condition and results of operations can
be significantly impacted by changes in the market value of our derivative instruments. As of December 31, 2020, and 2021,
the net market value of our commodity derivatives was a net asset of $ 19.4 million and a net liability of $0.4 million,
respectively. All of the Company’s derivative contracts were terminated or expired during 2021.

Recently Issued Accounting Standards

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 840): Facilitation of the Effects of
Reference Rate Reform on Financial Reporting” (“ASU 2020-04”), which provides companies with optional guidance to ease
the potential accounting burden associated with transitioning away from reference rates (e.g., London Interbank Offered Rate
(“LIBOR”)) that are expected to be discontinued. ASU 2020-04 allows, among other things, certain contract modifications,
such as those within the scope of Topic 470 on debt, to be accounted as a continuation of the existing contract. This ASU was
effective upon the issuance and its optional relief can be applied through December 31, 2022. The Company will consider
this optional guidance prospectively, if applicable.

In May 2020, the SEC adopted final rules that amend the financial statement requirements for significant business
acquisitions and dispositions. Among other changes, the final rules modify the significance tests and improve the disclosure
requirements for acquired or to be acquired businesses and related pro forma financial information, the periods those
financial statements must cover, and the form and content of the pro forma financial information. The final rules do not
modify requirements for the acquisition and disposition of significant amounts of assets that do not constitute a business. The
final rules are effective January 1, 2021, but earlier compliance is permitted. The Company will consider these final rules and
update its disclosures, as applicable.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Commodity Price Risk

As an independent oil and gas producer, our revenue, cash flows from operations, other income and profitability, reserve
values, access to capital and future rate of growth are substantially dependent upon the prevailing prices of oil and gas.
Declines in commodity prices will adversely affect our financial condition, liquidity, ability to obtain financing and operating
results. Lower commodity prices may reduce the amount of oil and gas that we can produce economically. Prevailing prices
for such commodities are subject to wide fluctuation in response to relatively minor changes in supply and demand and a
variety of additional factors beyond our control, such as global, political and economic conditions. Historically, prices
received for our oil and gas production have been volatile and unpredictable, and such volatility is expected to continue.
Most of our production is sold at market prices. Generally, if the commodity indices fall, the price that we receive for our
production will also decline. Therefore, the amount of revenue that we realize is partially determined by factors beyond our
control. Assuming the production levels we attained during the year ended December 31, 2021, a 10% decline in oil and gas
prices would have reduced our operating revenue and cash flows by approximately $7.8 million for the year. If commodity
prices remain at their current levels the impact on operating revenues and cash flows, could be much more significant.
However, we do have derivative contracts in place that will mitigate the impact of low commodity prices.

Derivative Instrument Sensitivity

At December 31, 2021,

contracts was
a liability of approximately $0.4 million. The fair market value of our commodity derivative contracts is sensitive to changes
in the market price for oil and gas. When our derivative contract prices are higher than prevailing market prices, we

fair market value of our commodity derivative

aggregate

the

recognize gains and conversely, when our derivative contract prices are lower than prevailing market prices, we incur losses.
As of December 31, 2021, we did not have any derivative contracts. The fair market value represents the December 2021
settlement, paid in January 2022.

Interest Rate Risk

We were subject to interest rate risk associated with borrowings under our First Lien Credit Facility and our Second
Lien Credit facility. As of December 31, 2021, we had $71.4 million of outstanding indebtedness under our First Lien Credit
Facility and $134.9 of outstanding indebtedness under our Second Lien Credit Facility, each with a variable interest rate. At
December 31, 2021, the interest rate on the First Lien Credit Facility was approximately 8.75% . An increase in the interest
rate of 1% would have increased our interest expense by $0.7 million on an annual basis, based on the outstanding balance at
December 31, 2021. At December 31, 2021, the interest rate on the Second Lien Credit Facility was 18.75% . An increase of
1% would have increased our interest expense by $1.3 million on an annual basis, based on the outstanding balance at
December 31, 2020. In connection with the restructuring that was completed on January 3, 2022, our First Lien Credit
Facility was retired and our Second Lien Credit Facility was converted to Series A Preferred Stock. See Note 14 “Subsequent
Events.”

Item 8. Financial Statements and Supplementary Data

For the financial statements and supplementary data required by this Item 8, see the Index to Consolidated Financial

Statements.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None

Item 9A. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer (our
principal executive officer) and our Chief Financial Officer (our principal financial officer), we evaluated the effectiveness of
our disclosure controls and procedures (as defined under Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”)). Based on this evaluation, the Chief Executive Officer and our Chief Financial
Officer concluded that disclosure controls and procedures as of December 31, 2021 were effective, as of the end of the
reporting period covered by this report, our disclosure controls over financial reporting are effective.

Changes in Internal Controls

There were no changes in our internal control over financial reporting during the fourth quarter of 2021 that materially

affected, or are reasonably likely to materially affect, our internal control over financial reporting.

F
o
r
m
1
0
-
K

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting.
Internal control over financial reporting is a process designed by, or under the supervision of, the Company’s principal
executive and principal financial officers and implemented by the Company’s Board of Directors, management and other
personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles and includes those policies and
procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the Company are being made only in accordance with authorizations of management and
directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including our principal executive officer and
principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting
based on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on our evaluation, our management concluded that our internal control
over financial reporting was effective as of December 31, 2021.

The effectiveness of our internal control over financial reporting as of December 31, 2021 has not been audited.

Item 9B. Other Information

None.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

There is incorporated in this Item 10 by reference to that portion of our definitive proxy statement for the 2022 Annual
Meeting of Stockholders which appears therein under the caption “Election of Directors—Board of Directors,” “—Code of
Ethics,” “—Committees of the Board of Directors.” and Executive Officers.

Item 11. Executive Compensation

There is incorporated in this Item 11 by reference that portion of our definitive proxy statement for the 2022 Annual
Meeting of Stockholders which appears therein under the captions “Election of Directors—Committees of the Board of
Directors” and “Executive Compensation.”

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

There is incorporated in this Item 12 by reference that portion of our definitive proxy statement for the 2022 Annual
Meeting of Stockholders which appears therein under the captions “Securities Holdings of Principal Stockholders,” and
“Securities Holdings of Directors, Nominees and Officers.”

Item 13. Certain Relationships and Related Party Transactions, and Director Independence

There is incorporated in this Item 13 by reference that portion of our definitive proxy statement for the 2022 Annual
Meeting of Stockholders which appears therein under the captions “Certain Relationships and Related Party Transactions”
and “Election of Directors – Director Independence.”

Item 14. Principal Accountant Fees and Services

There is incorporated in this Item 14 by reference that portion of our definitive proxy statement for the 2022 Annual

Meeting of Stockholders which appears therein under the caption “Principal Auditor Fees and Services.”

F
o
r
m
1
0
-
K

Item 15. Exhibits and Financial Statement Schedules

(a)1. Consolidated Financial Statements

PART IV

Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets at December 31, 2020 and 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for the years ended December 31, 2020 and 2021 . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2020 and 2021 . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2021 . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements

Page

F-2
F-4
F-6
F-7
F-8
F-9

(a)2. Financial Statement Schedules

All schedules have been omitted because they are not required, not applicable, or the information required is included in

the Consolidated Financial Statements or related notes thereto.

(a)3. Exhibits

The following Exhibits have previously been filed by the Registrant or are included following the Index to Exhibits.

Exhibit
Number

Description

3.1

3.2

3.3

3.4

3.5

3.6

3.7

3.8

3.9

3.10

3.11

3.12

Articles of Incorporation of Abraxas dated August 30, 1990. (Filed as Exhibit 3.1 to our Registration Statement
on Form S-4, No. 33-36565. (the “S-4 Registration Statement”)).

Articles of Amendment to the Articles of Incorporation of Abraxas dated October 22, 1990. (Filed as Exhibit 3.3
to the S-4 Registration Statement).

Articles of Amendment to the Articles of Incorporation of Abraxas dated December 18, 1990. (Filed as Exhibit
3.4 to the S-4 Registration Statement).

Articles of Amendment to the Articles of Incorporation of Abraxas dated June 8, 1995. (Filed as Exhibit 3.4 to
our Registration Statement on Form S-3, No. 333-00398).

Articles of Amendment to the Articles of Incorporation of Abraxas dated as of August 12, 2000. (Filed as Exhibit
3.5 to our Annual Report on Form 10-K filed on April 2, 2001).

Certificate of Correction dated February 24, 2011 (Filed as Exhibit 3.6 to our Annual Report on Form 10-K filed
on March 15, 2012).

Certificate of Withdrawal dated March 16, 2015. (Filed as Exhibit 3.6 to our Current Report on Form 8-K filed
March 17, 2015).

Certificate of Amendment to Articles of Incorporation dated May 9, 2017. (Filed as Exhibit 3.1 to our Current
Report on Form 8-K filed on May 10, 2017).

Certificate of Change Pursuant to NRS 78.209 dated October 19, 2020. (Filed as Exhibit 3.1 to our Current
Report on Form 8-K filed on October 16, 2020).

Certificate of Designation of Series A Preferred Stock dated January 3, 2022. (Filed as Exhibit 3.1 to our Current
Report on Form 8-K filed January 3, 2022).

Amended and Restated Bylaws of Abraxas. (Filed as Exhibit 3.1 to our Current Report on Form 8-K filed on
December 18, 2018).

Amendment to Bylaws of Abraxas dated January 3, 2022. (Filed as Exhibit 3.2 to our Current Report on Form
8-K filed January 3, 2022).

4.1

Specimen Common Stock Certificate of Abraxas. (Filed as Exhibit 4.1 to the S-4 Registration Statement).

Exhibit
Number

Description

4.2

4.3

*10.1

*10.2

*10.3

*10.5

*10.6

*10.7

*10.8

*10.9

*10.10

*10.11

10.12

10.13

10.14

14.1

21.1

23.1

23.2

31.1

31.2

Specimen Preferred Stock Certificate of Abraxas. (Filed as Exhibit 4.2 to our Annual Report on Form 10-K filed
on March 31, 1995).

Certificate of Designation of Series A Preferred Stock dated January 3, 2022. (Filed as Exhibit 4.1 to our Current
Report on Form 8-K filed January 3, 2022).

Abraxas Petroleum Corporation 401(k) Profit Sharing Plan. (Filed as Exhibit 10.4 to our Registration Statement
on Form S-4, No. 333-18673 filed on December 23, 1996).

Form of Indemnity Agreement between Abraxas and each of its directors and officers. (Filed as Exhibit 10.4 to
our Annual Report on Form 10-K filed March 14, 2007).

Form of Employment Agreement for Executive Officers (Filed as Exhibit 10.1 to our Current Report on Form
8-K filed on December 18, 2018).

Amended and Restated Abraxas Petroleum Corporation Non-Employee Directors Long-Term Equity Incentive
Plan. (Filed as Appendix B to our Proxy Statement filed on April 2, 2015).

Form of Stock Option Agreement under the Abraxas Petroleum Corporation Amended and Restated 2005
Non-Employee Directors Long-Term Equity Incentive Plan. (Filed as Exhibit 10.2 to our Current Report on
Form 8-K filed June 6, 2005).

Abraxas Petroleum Corporation Senior Management Incentive Bonus Plan 2006. (Filed as Exhibit 10.17 to our
Annual Report on Form 10-K filed March 23, 2006).

Amended and Restated Abraxas Petroleum Corporation 2005 Employee Long-Term Equity Incentive Plan.
(Filed as Appendix A to our Proxy Statement filed on April 3, 2017).

Form of Employee Stock Option Agreement under the Amended and Restated Abraxas Petroleum Corporation
2005 Employee Long-Term Equity Incentive Plan. (Filed as Exhibit 10.2 to our Current Report on Form 8-K
filed May 26, 2006).

Form of Restricted Stock Agreement under the Amended and Restated Abraxas Petroleum Corporation 2005
Employee Long-Term Equity Incentive Plan (Filed as Exhibit 10.1 to our Annual Report on Form 10-K filed on
March 13, 2015).

Form of Restricted Stock Award Agreement under Abraxas Petroleum Corporation Amended and Restated 2005
Employee Long-Term Equity Incentive Plan. (Filed as Exhibit 10.1 to our Current Report on Form 8-K filed on
April 6, 2018).

Promissory Note dated November 13, 2008 by Abraxas Properties Incorporated and Abraxas Petroleum
Corporation, payable to the order of Plains Capital Bank, as Lender. (Filed as Exhibit 10.1 to our Current Report
on Form 10-Q filed on August 8, 2014.)

Second Modification, Renewal and Extension of Promissory Note and Deed of Trust Liens by and between
Plains Capital Bank, Abraxas Properties Corporation and Abraxas Petroleum Corporation effective March 13,
2013. (Previously filed as Exhibit 10.2 to our Current Report on Form 10-Q filed on August 8, 2014).

Third Modification, Renewal and Extension of Promissory Note and Deed of Trust Liens by and between Plains
Capital Bank, Abraxas Properties Incorporated and Abraxas Petroleum Corporation effective as of July 13, 2013.
(Previously filed as Exhibit 10.3 to our Current Report on Form 10-Q filed on August 8, 2014).

Abraxas Petroleum Corporation Code of Business Conduct and Ethics. (Filed as Exhibit 14.1 to our Annual
Report on Form 10-K filed March 22, 2006).

Subsidiaries of Abraxas. (Previously filed as Exhibit 21.1 to our Annual Report on Form 10-K filed on March 15,
2016).

Consent of ADKF PC (Filed herewith).

Consent of DeGolyer and MacNaughton. (Filed herewith)

Certification—Chief Executive Officer. (Filed herewith).

Certification—Chief Financial Officer. (Filed herewith).

F
o
r
m
1
0
-
K

Exhibit
Number

Description

32.1

32.2

99.1

Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith).

Certification by Chief Financial Officer pursuant
Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith).

to 18 U.S.C. Section 1350, as adopted pursuant

DeGolyer and MacNaughton’s report with respect to oil and reserves of Abraxas Petroleum. (Filed herewith).

101.INS

Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because
its XBRL tags are embedded within the Inline XBRL document)

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Management Compensatory Plan or Agreement.

Item 16. 10-K Summary

None

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Abraxas Petroleum Corporation

Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets at December 31, 2020 and 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for the years ended December 31, 2020 and 2021 . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2020 and 2021 . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2021 . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

F-2
F-4
F-6
F-7
F-8
F-9

F
o
r
m
1
0
-
K

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and
Stockholders of Abraxas Petroleum Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Abraxas Petroleum Corporation (the Company) as of
December 31, 2021 and 2020, and the related consolidated statements of operations, stockholders’ equity, and cash flows for
the years then ended, and the related notes (collectively referred to as the consolidated financial statements). In our opinion,
the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of
December 31, 2021 and 2020 and the results of its operations and its cash flows for each of the years in the two-year period
ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm
registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit
of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal
control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our
audits also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our
opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or
disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex
judgments. Communication of the critical audit matter does not alter in any way our opinion on the financial statements,
taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the
critical audit matter or on the accounts or disclosures to which it relates.

Impact of estimated oil and gas reserves related to proved oil and gas properties on depletion expense and the ceiling test
calculation

The Company calculates depletion expense for its proved oil and gas properties using the units-of-production method
whereby capitalized costs, including estimated future development costs and asset retirement costs, are amortized over total
estimated proved reserves. Additionally, the Company is required to perform a ceiling test calculation on a quarterly basis to
evaluate impairment of its proved oil and gas properties. For the year ended December 31, 2021, the Company recorded
depletion expense related to proved oil and gas properties of $15.3 million.

We identified the impact of the estimate of proved oil and gas reserves used in the determination of depletion expense
and the ceiling test calculation as a critical audit matter. There is a high degree of subjectivity in evaluating the estimate of
proved oil and gas reserves as auditor judgment was required to evaluate the assumptions used by the Company related to
forecasts of production, future operating costs and future development costs, and oil and gas prices inclusive of market
differentials.

F-2

To address this critical audit matter we performed the following procedures. (1) We evaluated the level of knowledge,
skill, and ability of the Company’s reservoir engineering specialists and their relationship to the Company, made inquiries of
those reservoir engineers regarding the process followed and judgments made to estimate the Company’s proved reserve
volumes, and read the reserve report prepared by the Company’s specialists. (2) To the extent key, sensitive inputs and
assumptions used to determine proved reserve volumes and other cash flow inputs and assumptions are derived from the
Company’s accounting records, such as historical pricing differentials, operating costs, estimated capital costs and working
and net revenue interests, we tested management’s process for determining the assumptions, including examining the
underlying support, on a sample basis.

/s/ ADKF, P.C.

We have served as the Company’s auditor since 2020.

San Antonio, Texas
March 31, 2022

F
o
r
m
1
0
-
K

F-3

ABRAXAS PETROLEUM CORPORATION

CONSOLIDATED BALANCE SHEETS

ASSETS

December 31,

2020

2021

(In thousands, except per
share/share data)

Assets
Current assets:

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable:
Joint owners, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Oil and gas production sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other

Total accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative asset—short-term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment

2,775

10,034

1,255
8,794
—

10,049
9,639
1,588

24,051

1,117
12,280
150

13,547
—
498

24,079

Proved oil and gas properties, full cost method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,167,333
39,456

1,165,707
39,337

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation, depletion, amortization and impairment . . . . . . . . . . . . . . . .

1,206,789
(1,083,843)

1,205,044
(1,099,075)

Total property and equipment—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative asset—long term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

122,946
228
10,281
255

105,969
173
—
255

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

157,761

130,476

See accompanying notes to consolidated financial statements.

F-4

ABRAXAS PETROLEUM CORPORATION

CONSOLIDATED BALANCE SHEETS (CONTINUED)

LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities and Stockholders’ Equity
Current liabilities:

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Joint interest oil and gas production payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative liabilities—short-term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Termination of derivative contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Right of use liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current maturities of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt—less current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paycheck protection program loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Right of use liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Future site restoration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,

2020

2021

(In thousands)

6,074
8,795
86
230
480
—
53
202,751
850

219,319
2,515
1,384
150
7,360

4,678
13,347
477
347
442
8,022
40
212,688
—

240,041
2,205
—
110
4,708

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

230,728

247,064

Commitments and contingencies (Note 8)

Stockholders’ Deficit

Preferred stock, par value $0.01 per share—authorized 1,000,000 shares; -0- shares issued and
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock, par value $0.01 per share, authorized 20,000,000 shares; 8,421,910 issued and
outstanding at December 31, 2020 and 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

84
429,476
(502,527)

84
430,422
(547,094)

Total stockholders’ deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(72,967)

(116,588)

Total liabilities and stockholders’ deficit

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 157,761

$ 130,476

F
o
r
m
1
0
-
K

See accompanying notes to consolidated financial statements.

F-5

ABRAXAS PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31,

2020

2021

(In thousands, except per share data)

Revenues:

Oil
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Natural gas liquids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 41,969
586
429
59

Total Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

43,043

Operating costs and expenses

Lease operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Production and ad valorem taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rig expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation, depletion, amortization and accretion . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proved property impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative (including stock-based compensation of $946 and $1,312,
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

respectively)

16,458
4,632
762
24,846
186,980

8,783

Total operating costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

242,461

Operating (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(199,418)

Other (income) expense:

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred financing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred finance fees and warrant cancelation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on debt extinguishment (PPP loan)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on debt extinguishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) loss on derivative contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of non-oil and gas assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total other (income) expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(39)
21,281
2,565
—
—
4,108
(42,880)
—
69

(14,896)

(Loss) before income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax (expense) benefit

(184,522)
—

$ 61,228
8,656
8,952
22

78,858

17,914
6,223
478
15,643
—

8,116

48,374

30,484

(15)
35,773
4,804
4,212
(2,716)
—
33,022
(29)
—

75,051

(44,567)
—

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(184,522)

$(44,567)

Net loss per common share—basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net loss per common share—diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(22.01)

(5.30)

Weighted average shares outstanding

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,382
8,382

8,408
8,408

See accompanying notes to consolidated financial statements.

F-6

ABRAXAS PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands except number of shares)

Common Stock

Amount

Balance at December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warrant issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock issued, net of forfeitures . . . . . . . . . . . . . . .

8,436,498
—
—
—

$84
—
—
—
(14,588) —

Additional
Paid in
Capital

$421,740

Accumulated
Deficit

Total

$(318,005) $ 103,819
(184,522)
6,424
1,312
—

— (184,522)
—
—
—

6,424
1,312
—

Balance at December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,421,910

—

84
—
—

429,476

946

(502,527)
(44,567)
—

(72,967)
(44,567)
946

Balance at December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,421,910

$84

$430,422

$(547,094) $(116,588)

F
o
r
m
1
0
-
K

See accompanying notes to consolidated financial statements.

F-7

ABRAXAS PETROLEUM CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Operating Activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net (loss) to net cash provided by operating activities:

Loss (gain) on sale of non-oil and gas assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss (gain) on derivative contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash settlements received (paid) on derivative contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation, depletion and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proved property impairment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred financing fees and issuance discount
Non-cash financing fees and warrant cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accretion of future site restoration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on debt extinguishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt forgiveness PPP loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plugging cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash hedge termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities:

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other

Years Ended December 31,

2020

2021

$(184,522) $(44,567)

—
(42,880)
16,006
24,432
186,980
3,926
—
414
4,108
—
(236)
12,695
—
1,312

9,596
(394)
(15,304)
(148)

(29)
33,022
(3,197)
15,312
—
8,781
194
330
—
(1,384)
(342)
24,705
9,943
946

(3,498)
(8,851)
3,151
(765)

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investing Activities
Capital expenditures, including purchase and development of properties . . . . . . . . . . . . . . . . . . . . . .
Proceeds from the sale of oil and gas properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from the sale of non-oil and gas assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash (used) in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing Activities
Proceeds from long-term borrowings—First Lien Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from PPP loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred financing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15,985

33,751

(12,557)
—
—

(12,557)

(887)
141
228

(518)

8,000
1,384
(9,059)
(978)

—
—
(25,816)
(158)

Net cash (used) in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(653)

(25,974)

Increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,775
—

7,259
2,775

Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,775

$ 10,034

Supplemental disclosure of cash flow information:

Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$

Non-cash investing and financing activities

7,174

$ 6,463
—

— $

Change in asset retirement obligation cost and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset retirement obligations associated with dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in capital expenditures included in accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$
$ (7,157 ) $

(22) $
204
(216) $ (2,845)
5

See accompanying notes to consolidated financial statements.

F-8

ABRAXAS PETROLEUM CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Significant Accounting Policies

Nature of Operations

We are an independent energy company primarily engaged in the acquisition, exploitation, development and production
of oil and gas in the United States. Our oil and gas assets are located primarily in two operating regions in the United States:
the Rocky Mountains and Permian/Delaware Basin.

The terms “Abraxas,” “Abraxas Petroleum,” “we,” “us,” “our” or the “Company” refer to Abraxas Petroleum

Corporation and all of its subsidiaries, including Raven Drilling LLC (“Raven Drilling”).

Rig Accounting

In accordance with SEC Regulation S-X, no income is recognized in connection with contractual drilling services
performed in connection with properties in which the Company or its affiliates holds an ownership, or other economic
interest. Any income not recognized as a result of this limitation is credited to the full cost pool and recognized through
lower amortization as reserves are produced. During 2020 and 2021 the drilling rig was idle, accordingly the cost of the rig
was charged to the statement of operations.

Use of Estimates

The consolidated financial statements of the Company have been prepared by management in accordance with
accounting principles generally accepted in the United States of America (“GAAP”). The preparation of consolidated
financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could
differ from those estimates.

The most significant estimates pertain to proved oil, gas and NGL reserves and related cash flow estimates used in
impairment tests of oil and gas properties, the fair value of assets and liabilities acquired in business combinations, derivative
contracts, the provision for income taxes including uncertain tax positions, stock based compensation, asset retirement
obligations, accrued oil and gas revenues and expenses, as well as estimates of expenses related to depreciation, depletion,
amortization and accretion. Actual results could differ from those estimates.

The process of estimating oil and gas reserves in accordance with SEC requirements is complex and involves decisions
and assumptions in evaluating the available geological, geophysical, engineering and economic data. Accordingly, these
estimates are imprecise. Actual future production, oil and gas prices, differentials, revenues, taxes, capital expenditures,
operating expenses and quantities of recoverable oil and gas reserves most likely will vary from those estimated. Any
significant variance could materially affect the estimated quantities and present value of our reserves. In addition, we may
adjust estimates of proved reserves to reflect production history, results of exploration and development, our ability to fund
estimated development cost, prevailing oil and gas prices and other factors, many of which are beyond our control.

Reclassifications

Certain reclassifications have been made to the prior year financial statements to conform to the current period
presentation. These reclassifications were to share and per share data related to the 1 for 20 reverse stock split effective
October 19, 2020 and had no effect on our previously reported results of operations.

Concentration of Credit Risk

Financial instruments which potentially expose the Company to credit risk consist principally of trade receivables and
derivative contracts. Accounts receivable are generally from companies with significant oil and gas marketing or operating
activities. The Company performs ongoing credit evaluations and, generally, requires no collateral from its customers. The
counterparties to our derivative contracts are the same financial
institutions from which we have outstanding debt;
accordingly, we believe our exposure to credit risk to these counterparties is currently mitigated in part by this, as well as the
current overall financial condition of the counterparties.

F-9

F
o
r
m
1
0
-
K

The Company maintains any cash and cash equivalents in excess of federally insured limits in prominent financial

institutions considered by the Company to be of high credit quality.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, demand deposits and short-term investments with original maturities of

three months or less.

Accounts Receivable

Accounts

receivable

approximately
$0.1 million at December 31, 2020 and 2021 . The allowance for doubtful accounts is determined based on the Company’s
historical losses, as well as a review of certain accounts. Accounts are charged off when collection efforts have failed and the
account is deemed uncollectible.

allowance

accounts

doubtful

reported

net

are

for

Industry Segment and Geographic Information

The Company operates in one industry segment, which is the exploration, development and production of oil and gas
with all of the Company’s operational activities being conducted in the U.S. The Company’s current operational activities
and the Company’s consolidated revenues are generated from markets exclusively in the U.S., and the Company has no long
lived assets located outside the U.S.

Oil and Gas Properties

The Company follows the full cost method of accounting for oil and gas properties. Under this method, certain direct
costs and indirect costs associated with acquisition of properties and successful as well as unsuccessful exploration and
development activities are capitalized. Depreciation, depletion, and amortization of capitalized oil and gas properties and
estimated future development costs, excluding unproved properties, are based on the unit-of-production method based on
proved reserves. Net capitalized costs of oil and gas properties, less related deferred taxes, are limited by country, to the
lower of unamortized cost or the cost ceiling, defined as the sum of the present value of estimated future net revenues from
proved reserves based on unescalated prices 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. Costs in excess of the present value of estimated future net revenues are charged to proved property
impairment expense. No gain or loss is recognized upon sale or disposition of oil and gas properties for full cost accounting
companies with proceeds accounted for as an adjustment of capitalized cost. An exception to this rule occurs when the
adjustment to the full cost pool results in a significant alteration of the relationship between capitalized cost and proved
reserves. The Company applies the full cost ceiling test on a quarterly basis on the date of the latest balance sheet presented.
The impairment calculations do not consider the impact of our commodity derivative positions as generally accepted
accounting principles only allow the inclusion of derivatives designated as cash flow hedges. As of December 31, 2020, our
capitalized cost of oil and gas properties exceeded the future net revenue from our estimated proved reserves resulting in the
recognition of an impairment of $187.0 million. As of December 31, 2021, our capitalized cost of oil and gas properties
did not exceed the future net revenue from our estimated proved reserves.

Other Property and Equipment

Other property and equipment are recorded at cost. Depreciation of other property and equipment is provided over the
estimated useful lives using the straight-line method. Major renewals and improvements are recorded as additions to the
property and equipment accounts. Repairs that do not improve or extend the useful lives of assets are expensed.

Estimates of Proved Oil and Gas Reserves

Estimates of our proved reserves included in this report are prepared in accordance with GAAP and SEC guidelines.

The accuracy of a reserve estimate is a function of:

•

the quality and quantity of available data;

the interpretation of that data;

the accuracy of various mandated economic assumptions; and

the judgment of the persons preparing the estimate.

F-10

Our proved reserve information included in this report was based on studies performed by our independent petroleum
engineers assisted by the engineering and operations departments of Abraxas. Estimates prepared by other third parties may
be higher or lower than those included herein. Because these estimates depend on many assumptions, all of which may
substantially differ from future actual results, reserve estimates will be different from the quantities of oil and gas that are
ultimately recovered. In addition, results of drilling, testing and production after the date of an estimate may cause material
revisions to the estimate.

In accordance with SEC requirements, we based the estimated discounted future net cash flows from proved reserves on
the average of oil and gas prices based on the unweighted average 12 month first-day-of-month pricing. Future prices and
costs may be materially higher or lower than these prices and costs which would impact the estimated value of our reserves.

The estimates of proved reserves materially impact depreciation, depletion and amortization, or DD&A expense. If the
estimates of proved reserves decline, the rate at which we record DD&A expense will increase, reducing future net income.
Such a decline may result from lower commodity prices, which may make it uneconomic to drill for and produce higher cost
fields.

Derivative Instruments and Hedging Activities

The Company enters into agreements to hedge the risk of future oil and gas price fluctuations. Such agreements are
typically in the form of fixed price commodity and basis swaps, which limit the impact of price fluctuations with respect to
the Company’s sale of oil and gas. While it is never management’s intention to hold or issue derivative instruments for
speculative trading purposes, conditions could arise where actual production is less than estimated which could result in over
hedged volumes.

All derivative instruments are recorded on the Consolidated Balance Sheets at fair value as either short-term or long-
term assets or liabilities based on their anticipated settlement date. The derivative instruments the Company utilizes are based
on index prices that may and often do differ from the actual oil and gas prices realized in its operations. These variations
often result in a lack of adequate correlation to enable these derivative instruments to qualify for hedge accounting rules as
prescribed by Accounting Standards Codification (“ASC”) 815. Accordingly, the Company does not account for its
derivative instruments as cash flow hedges for financial reporting purposes. Therefore, changes in fair value of these
derivative instruments are recognized in earnings and included in net gains (losses) on commodity derivative contracts in the
Consolidated Statements of Operations.

Fair Value of Financial Instruments

The Company includes fair value information in the notes to consolidated financial statements when the fair value of its
financial instruments is materially different from the carrying value. The carrying value of those financial instruments that
are classified as current, except for derivative instruments, approximates fair value because of the short maturity of these
instruments. For noncurrent financial instruments, the Company uses quoted market prices or, to the extent that there are no
available quoted market prices, market prices for similar instruments.

F
o
r
m
1
0
-
K

Share-Based Payments

Options granted are valued at the date of grant and expense is recognized over the vesting period. The Company
currently utilizes a standard option pricing model (Black-Scholes) to measure the fair value of stock options granted to
employees and directors. Restricted stock awards are awards of common stock that are subject to restrictions on transfer and
to a risk of forfeiture if the awardee terminates employment with the Company prior to the lapse of the restrictions. The value
of such restricted stock is determined using the market price on the grant date and expense is recorded over the vesting
period. For the years ended December 31, 2020 and 2021, stock-based compensation was approximately $1.3 million and
$0.9 million, respectively.

Restoration, Removal and Environmental Liabilities

The Company is subject to extensive federal, state and local environmental laws and regulations. These laws regulate
the discharge of materials into the environment and may require the Company to remove or mitigate the environmental
effects of the disposal or release of petroleum substances at various sites. Environmental expenditures are expensed or
capitalized depending on their future economic benefit. Expenditures that relate to an existing condition caused by past
operations and that have no future economic benefit are expensed.

F-11

Liabilities for expenditures of a noncapital nature are recorded when environmental assessments and/or remediation is
probable, and the costs can be reasonably estimated. Such liabilities are generally undiscounted unless the timing of cash
payments for the liability or component are fixed or reliably determinable.

The fair value of a liability for an asset’s retirement obligation is recorded in the period in which it is incurred and the
corresponding cost capitalized by increasing the carrying amount of the related long-lived asset. The liability is accreted to
its then present value each period and the capitalized cost is depreciated over the estimated useful life of the related asset. For
all periods presented, we have included estimated future costs of abandonment and dismantlement
in our full cost
amortization base and we amortize these costs as a component of our depletion expense in the accompanying consolidated
financial statements. Each year, the Company reviews, and to the extent necessary, revises its asset retirement obligation
estimates.

The following table (in thousands) summarizes changes in the Company’s future site restoration obligations during the

two years ended December 31:

Beginning future site restoration obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New wells placed on production and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deletions related to property disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deletions related to plugging costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accretion expense and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revisions and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2020

2021

$7,420
43
(216)
(235)
414
(66)

$ 7,360
1
(2,845)
(342)
330
204

Ending future site restoration obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$7,360

$ 4,708

Revenue Recognition and Major Purchasers

The Company recognizes oil and gas revenue from its interest in producing wells as oil and gas is sold from those wells,

net of royalties, control of the product has transferred to the purchaser and collectability is reasonably assured.

During 2020 four purchasers accounted for 73% of oil and gas revenues. During 2021, four purchasers accounted for

83% of oil and gas revenues.

Deferred Financing Fees

Deferred financing fees are being amortized on the effective yield basis over the term of the related debt.

Income Taxes

Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to be in effect with
respect to taxable income in the years in which those temporary differences are expected to be recovered or settled.
Uncertainties exist as to the future utilization of the operating loss carryforwards. Therefore, we have established a valuation
allowance of $0.00 million for deferred tax assets at December 31, 2021.

Accounting for Uncertainty in Income Taxes

Evaluation of a tax position is a two-step process. The first step is to determine whether it is more-likely-than-not that a
tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the
technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to
determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount
of benefit that is greater than 50% likely of being realized upon ultimate settlement.

Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the
first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-
likely-than-not criteria should be de-recognized in the first subsequent reporting period in which the threshold is no longer
met. Penalties and interest are classified as income tax expense. The Company had no uncertain income tax positions as of
December 31, 2021.

F-12

Adoption of New Accounting Standards

2. Revenue from Contracts with Customers

Revenue Recognition

Sales of oil, gas and NGL are recognized at the point in time when control of the product is transferred to the customer
and collectability is reasonably assured. The Company’s contracts’ pricing provisions are tied to a market index, with certain
adjustments based on, among other factors, physical location, quality of the oil or gas, and prevailing supply and demand
conditions. As a result, the price of the oil, gas and NGL fluctuates to remain competitive with other available oil, gas and
NGL supplies in the market. The Company believes that the pricing provisions of our oil, gas and NGL contracts are
customary in the industry.

Oil sales

The Company’s oil sales contracts are generally structured such that it sells its oil production to a purchaser at a
contractually specified delivery point at or near the wellhead. The crude oil production is priced on the delivery date based
upon prevailing index prices less certain deductions related to oil quality, physical location and transportation costs incurred
by the purchaser subsequent to delivery. The Company recognizes revenue when control transfers to the purchaser upon
delivery at or near the wellhead at the net price received from the purchaser. Payment terms as customarily and normally paid
on the twentieth day of the month following production.

Gas and NGL Sales

Under the Company’s gas processing contracts, it delivers wet gas to a midstream processing entity at the wellhead or
the inlet of the midstream processing entity’s system. There are no performance obligations related to these contracts. The
midstream processing entity processes the gas and remits proceeds to the Company based upon either (i) the resulting sales
price of NGL and residue gas received by the midstream processing entity from third party customers or (ii) the prevailing
index prices for NGL and residue gas in the month of delivery to the midstream processing entity. Gathering, processing,
transportation and other expenses incurred by the midstream processing entity are typically deducted from the proceeds that
the Company receives.

In these scenarios, the Company evaluates whether it is the principal or the agent in the transaction. With respect to the
Company’s gas purchase contracts, the Company has concluded that it is the agent, and thus, the midstream processing entity
is its customer. Accordingly, the Company recognizes revenue upon delivery to the midstream processing entity based on the
net amount of the proceeds received from the midstream processing entity.

Imbalances

The Company had no material gas imbalances at December 31, 2020 and 2021.

F-13

F
o
r
m
1
0
-
K

Disaggregation of Revenue

The Company is focused on the development of oil and natural gas properties primarily located in the following
operating regions in the United States: (i) the Permian/Delaware Basin and (ii) Rocky Mountain. Revenue attributable to
each of those regions is disaggregated in the table below.

Operating Region

Permian/Delaware Basin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rocky Mountain(1)

$22,891
$19,078

$335
$251

$163
$266

$32,666
$28,562

$4,474
$4,182

$2,181
$6,771

Years Ended December 31,

2020

Oil

Gas

NGL

Oil

2021

Gas

NGL

(1) All Rocky Mountain assets were sold January 3, 2022.

Significant Judgments

Principal versus agent

The Company engages in various types of transactions in which midstream entities process the Company’s gas and
subsequently market resulting NGL and residue gas to third-party customers on behalf of the Company, such as the
Company’s percentage-of-proceeds and gas purchase contracts. These types of transactions require judgment to determine
whether we are the principal or the agent in the contract and, as a result, whether revenues are recorded gross or net.

Transaction price allocated to remaining performance obligations

A significant number of the Company’s product sales are short-term in nature with a contract term of one year or less.
For those contracts, the Company has utilized the practical expedient in ASC Topic 606-10-50-14 exempting the Company
from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part
of a contract that has an original expected duration of one year or less.

For product sales that have a contract term greater than one year, the Company has utilized the practical expedient in
ASC Topic 606-10-50-14(a) which states the Company is not required to disclose the transaction price allocated to remaining
performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation.
Under these sales contracts, each unit of product generally represents a separate performance obligation; therefore, future
volumes are wholly unsatisfied, and disclosure of the transaction price allocated to remaining performance obligations is not
required.

Contract balances

Under the Company’s product sales contracts, the Company is entitled to payment from purchasers once its performance
obligations have been satisfied upon delivery of the product, at which point payment is unconditional. The Company records
invoiced amounts as “Accounts receivable—Oil and gas production sales” in the accompanying condensed consolidated
balance sheet.

To the extent actual volumes and prices of oil and natural gas are unavailable for a given reporting period because of
timing or information not received from third parties, the expected sales volumes and prices for those properties are
estimated and also recorded as “Accounts receivable—Oil and gas production sales” in the accompanying condensed
consolidated balance sheets. In this scenario, payment is also unconditional, as the Company has satisfied its performance
obligations through delivery of the relevant product. As a result, the Company has concluded that its product sales do not
give rise to contract assets or liabilities under ASU 2014-09. At December 31, 2020 and December 31, 2021, our receivables
from contracts with customers were $8.8 million and $12.3 million, respectively.

Prior-period performance obligations

The Company records revenue in the month production is delivered to the purchaser. However, settlement statements
for certain gas and NGL sales may not be received for 30 to 60 days after the date production is delivered, and as a result, the
Company is required to estimate the amount of production that was delivered to the midstream purchaser and the price that
will be received for the sale of the product. Additionally, to the extent actual volumes and prices of oil are unavailable for a
given reporting period because of timing or information not received from third party purchasers, the expected sales volumes
and prices for those barrels of oil are also estimated.

F-14

The Company records the differences between its estimates and the actual amounts received for product sales in the
month that payment is received from the purchaser. Any identified differences between its revenue estimates and actual
revenue received historically have not been significant. For the year ended December 31, 2021, revenue recognized in the
reporting period related to performance obligations satisfied in prior reporting periods was not material.

3. Reverse Stock Split

On October 19, 2020 the Company effected a 1-for-20 reverse stock split of its issued and outstanding shares of
common stock, $0.01 par value (the “ Reverse Stock Split”). The Company effected the Reverse Stock Split pursuant to the
Company’s filing of a Certificate of Change with the Secretary of State of the State of Nevada on September 29, 2020. Under
Nevada law, no amendment to the Company’s Articles of Incorporation was required in connection with the Reverse Stock
Split. The Company was authorized to issue 400,000,000 shares of Common Stock. As a result of the Reverse Stock Split,
the Company will be authorized to issue 20,000,000 shares of Common Stock. As a result of the Reverse Stock Split,
168,069,305 outstanding shares of the Company’s common stock were exchanged for approximately 8,453,466 shares of the
Company’s common stock (subject to adjustment due to the effect of rounding fractional shares into whole shares). Under
the terms of the Reverse Stock Split, fractional shares issuable to stockholders were rounded up to the nearest whole share.
The Reverse Stock Split will not have any effect on the stated par value of the Common Stock. All per share amounts and
number of shares in the condensed consolidated financial statements and related notes have been retroactively restated to
reflect the Reverse Stock Split, resulting in the transfer of $1.6 million from common stock to additional paid in capital at
September 30, 2020 and December 31, 2019.

Additionally on the effective date of the Reverse Stock Split, all options, warrants and other convertible securities of the
Company outstanding immediately prior to the Reverse Stock Split were adjusted by dividing the number of shares of
common stock into which the options, warrants and other convertible securities are exercisable or convertible by 20, and
multiplying the exercise or conversion price thereof by 20, all in accordance with the terms of the plans, agreements or
arrangements governing such options, warrants and other convertible securities and subject to rounding to the nearest whole
share.

4. Long-Term Debt

The following sections regarding the First Lien Credit Facility and Second Lien Credit Facility are qualified in their
entirety by the disclosure contained in Note 14. “Subsequent Events”, Restructuring, which is expressly incorporated in the
sections above. Due to certain of covenant violations under our credit facilities as of December 31, 2020 and 2021, all of the
debt related to our credit facilities has been classified as current liabilities. In connection with the restructuring that was
completed on January 3, 2022, our First Lien Credit Facility was retired and our Second Lien Credit Facility was converted
to Series A Preferred Stock. See Note 14 “Subsequent Events.”

The following is a description of the Company’s debt as of December 31, 2020 and 2021, respectively:

F
o
r
m
1
0
-
K

First Lien Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Lien Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exit fee—Second Lien Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate lien note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred financing fees and debt issuance cost—net

. . . . . . . . . . . . . . . . . . . . . . . . . . . .

Years Ended December 31,

2020

2021

(In thousands)

$ 95,000
112,695
10,000
2,810

220,505
(202,751)

17,754
(15,239)

$ 71,400
134,907
10,000
2,515

218,822
(212,688)

6,134
(3,929)

Total long-term debt, net of deferred financing fees and debt issuance costs . . . . . . . . . .

2,515

2,205

F-15

Maturities of long-term debt are as follows:

Years ending December 31, (In thousands)
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter

$216,617
2,205

—
—
—

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$218,822

First Lien Credit Facility

The Company had a senior secured First Lien Credit Facility with Société Générale, as administrative agent and issuing
lender, and certain other lenders. As of December 31, 2021, $71.4 million was outstanding under the First Lien Credit
Facility.

Each of the Company’s subsidiaries guaranteed our obligations under the First Lien Credit Facility on a senior secured
basis. Obligations under the First Lien Credit Facility were secured by a first priority perfected security interest, subject to
certain permitted encumbrances, in all of the Company and its subsidiary guarantors’ material property and assets. As of
December 30, 2020,
least 90% of the PV-9 of the
Company’s proven reserves and 95% of the PV-9 of the Company’s PDP reserves.

the collateral was required to include properties comprising at

F-16

1.00, (2) the Company is in compliance with the first lien leverage ratio, (3) the amounts outstanding under the First Lien
Credit Facility are less $50.0 million, (4) no default exists under the First Lien Credit Facility and (5) and all representations
and warranties in the First Lien Credit Facility and the related credit documents are true and correct in all material respects),
(B) outstanding accounts payable (limiting all outstanding and undisputed accounts payable to $7.5 million, undisputed
accounts payable outstanding for more than 60 days to $2.0 million and undisputed accounts payable outstanding for more
than 90 days to $1.0 million and (C) general and administrative expenses (limiting cash general and administrative expenses
the Company may make or become legally obligated to make in any four fiscal quarter period to $9.0 million for the four
fiscal quarter period ended June 30, 2020, $8.25 million for the four fiscal quarter period ended September 30, 2020,
$6.9 million for the four fiscal quarter period ended December 31, 2020, and $6.5 million for the fiscal quarter from March
31, 2021 through December 31, 2021 and $5.0 million thereafter;
in all cases, general and administrative expense
excluded up to $1.0 million in certain legal and professional fees; and (vi) permission for up to an additional $25.0 million in
structurally subordinated debt to finance capital expenditures. Under the 1L Amendment, the borrowing base was adjusted to
$102.0 million. Prior to retirement, the borrowing base was reduced by any mandatory prepayments from excess cash flow.

The First Lien Credit Facility contained a number of covenants that, among other things, restricted our ability to:

•

incur or guarantee additional indebtedness;

transfer or sell assets;

pay dividends or make other distributions on capital stock or make other restricted payments;

engage in transactions with affiliates other than on an “arm’s length” basis;

make any change in the principal nature of our business; and

permit a change in control

As of December 31, 2021, we were not in compliance with the financial covenants under the First Lien Credit Facility,

as amended.

In connection with the restructuring that was completed on January 3, 2022, our First Lien Credit Facility was retired
and our Second Lien Credit Facility was converted to Series A Preferred Stock. See Note 14 “Subsequent Events.”

Second Lien Credit Facility

On November 13, 2019, we entered into the Term Loan Credit Agreement, with Angelo Gordon Energy Servicer, LLC,
as administrative agent, and certain other lenders party thereto, which we refer to as the Second Lien Credit Facility. The
Second Lien Credit facility was amended on June 25, 2020. The Second Lien Credit Facility had a maximum commitment of
$100.0 million. On November 13, 2019, $95.0 million of the net proceeds obtained from the Second Lien Credit Facility
were used to permanently reduce the borrowings outstanding on the First Lien Credit Facility. As of December 31, 2021, the
outstanding balance on the Second Lien Credit Facility was $144.9 million, which included a $10.0 million exit fee. In
connection with the restructuring that was completed on January 3, 2022, our First Lien Credit Facility was retired and our
Second Lien Credit Facility was converted to Series A Preferred Stock. See Note 14 “Subsequent Events.”

F-17

F
o
r
m
1
0
-
K

Under the amended Second Lien Credit Facility, the Company was subject to customary covenants, including financial
covenants and reporting covenants. The amendment to the Second Lien Credit Facility dated June 25, 2020 (the “2L
Amendment”) modified certain provisions of the Second Lien Credit Facility, including (i) a requirement that, while the
obligations under the First Lien Credit Facility were outstanding, scheduled payments of accrued interest under the Second
Lien Credit Facility would be paid in the form of capitalized interest; (ii) an increase in the interest rate by 200bps for interest
payable in cash and 500bps for interest payable in kind; (iii) modification of the minimum asset ratio covenant to be the sum
of, without duplication, (A) the PV-15 of producing and developed proven reserves of the Company, (B) the PV-9 of the
Company’s hydrocarbon hedge agreements and (C) the PV-15 of proved reserves of the Company classified as “drilled
uncompleted” (up to 20% of the sum of (A), (B) and (C)) to the total outstanding debt of the Company and requiring that the
ratio not exceed 1.45 to 1.00 as of the last day of each fiscal quarter ending between September 30, 2021 to December 31,
2021, and 1.55 to 1.00 for fiscal quarters ending thereafter); (iv) modification of the total leverage ratio covenant to set the
first test date to occur on September 30, 2021; (v) modification of the current ratio to eliminate the exclusion of certain
valuation accounts associated with hedge contracts from current assets and from current liabilities, (vi) additional restrictions
on (A) capital expenditures (limiting capital expenditures to those expenditures set forth in a plan of development approved
by Angelo Gordon Energy Servicer, LLC, subject to certain exceptions, including capital expenditures financed with the
proceeds of newly permitted, structurally subordinated debt), (B) outstanding accounts payable (limiting all outstanding and
undisputed accounts payable to $7.5 million, undisputed accounts payable outstanding for more than 60 days to $2.0 million
and undisputed accounts payable outstanding for more than 90 days to $1.0 million and (C) general and administrative
expenses (limiting cash general and administrative expenses the Company could make or become legally obligated to make
in any four fiscal quarter period to $9.0 million for the four fiscal quarter period ended June 30, 2020, $8.25 million for the
four fiscal quarter period ended September 30, 2020, $6.5 million for fiscal quarter period from March 31, 2021 through
December 31, 2021 and $5.0 million thereafter.

The Second Lien Credit Facility contained a number of covenants that, among other things, restricted our ability to:

•

incur or guarantee additional indebtedness;

transfer or sell assets;

create liens on assets;

pay dividends or make other distributions on capital stock or make other restricted payments;

engage in transactions with affiliates other than on an “arm’s length” basis;

make any change in the principal nature of our business; and

permit a change of control

Events of default occurred under the Second Lien Credit Facility as a result of (i) the Company’s failure to timely
deliver audited financial statements without a “going concern” or like qualification for the fiscal year ended December 31,
2020, (ii) its failure to cause certain deposit accounts to be subject to control agreements in favor of the administrative agent
for the Second Lien Credit Facility, (iii) the failure of the Company to meet certain hedging requirements, (iv) the
Company’s inability to comply with the total leverage ratio for the fiscal quarter ended September 30, 2021, (v) the
Company’s inability to comply with minimum asset coverage ratio for the fiscal quarter ended September 30, 2021, and
(vi) certain cross-defaults that occurred, or could have occurred, as a result of the occurrence of events of default under the
First Lien Credit Facility and corresponding cross-defaults or
termination events under our hedging
contracts. Additional events of default occurred as of September 30, 2021, as a result of our failure to comply with certain
financial covenants under the Second Lien Credit Facility, as amended.

similar

F-18

The Notice of Default declared that our obligations under the Second Lien Credit Facility are immediately due and
payable, in each case without presentment, demand, protest or other requirements of any kind, and began to bear interest at
the rate applicable to such amount under the Second Lien Credit Facility, plus an additional 3%. Additionally, the
administrative agent and the lenders reserved their right to exercise further rights, powers and remedies under the Second
Lien Credit Facility, at any time or from time to time, with respect to any of the events of default described above.

In connection with the amendment to the Second Lien Credit Facility on June 25, 2020, the Company entered into an
Exit Fee and Warrant Agreement subject to NASDAQ approval for the issuance of the issuance of certain warrants. This
agreement was finalized on August 11, 2020 at which time the Company issued a warrant to the lender to purchase a total of
33,445,792 shares of common stock at an exercise price of $0.01 per share. On October 19, 2020, the Company effected a
reverse stock split of the Company’s authorized, issued and outstanding shares of common stock at a ratio of 1-for-20, thus
the warrant was adjusted to provide that the lender may purchase a total of 1,672,290 shares of common stock at an exercise
price of $0.20 per share. The warrant was exercisable immediately in whole or in part, on or before five years from the
issuance date. The fair value of the warrant and exit fee were recorded as debt issuance costs, presented in the consolidated
balance sheets as a deduction from the carrying amount of the note payable, and were being amortized over the loan term.
The exit fee was due and payable in cash on the earliest to occur of maturity of the obligation under the Second Lien Credit
Agreement or the earlier acceleration or payment in full of the same. The 2L Amendment, including the impact of the Exit
Fee and Warrant Agreement finalized on August 11, 2020, resulted in the 2L Amendment meeting the criteria of debt
extinguishment under the guidance of ASC 470: Debt. Accordingly, all debt issuance cost, including the original discount, of
the original Second Lien Credit Facility, were charged to debt extinguishment loss in the accompanying Condensed
Consolidated Statement of Operation in the amount of $4.1 million. Subsequently, pursuant to a waiver letter dated
November 22, 2021 from AGEF to Abraxas, AGEF waived, relinquished, and abandoned all of its rights, title, and interest to
the Warrant and any Common Stock underlying the Warrant for no consideration. The Company recorded a loss on the
cancellation of the Warrant of approximately $2.5 million.

Real Estate Lien Note

5. Property and Equipment

The major components of property and equipment, at cost, are as follows:

Estimated
Useful life
Years

December 31,

2020

2021

(In thousands)

F
o
r
m
1
0
-
K

Oil and gas properties(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Drilling rig . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
3-39
15

$ 1,167,333
15,348
24,108

$ 1,165,707
15,257
24,080

Accumulated depreciation, depletion, amortization and impairment

. . .

1,206,789
(1,083,843)

1,205,044
(1,099,075)

Net Property and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

122,946

105,969

(1) Oil and gas properties are amortized utilizing the units of production method.

6. Stock-Based Compensation and Option Plans

The Company’s Amended and Restated 2005 Employee Long-Term Equity Incentive Plan reserves 1,683,639 shares of
Abraxas common stock, subject to adjustment following certain events. Awards may be in options or shares of restricted
stock. Options have a term not to exceed 10 years. Options issued under this plan vest according to a vesting schedule as
determined by the compensation committee of the Company’s board of directors. Vesting may occur upon (1) the attainment
of one or more performance goals or targets established by the committee, (2) the optionee’s continued employment or
service for a specified period of time, (3) the occurrence of any event or the satisfaction of any other condition specified by
the committee, or (4) a combination of any of the foregoing.

F-19

Stock Options

The Company grants options to its officers, directors, and other employees under various stock option and incentive

plans. There were no options granted in 2020 or 2021

The following table is a summary of the Company’s stock option activity for the three years ended December 31:

Options
(000s)

Weighted average
exercise price

Weighted
average
remaining life

Intrinsic
value
per share

Options outstanding December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Options outstanding December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Options outstanding December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . .

Exercisable at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

297
(101)

196
(141)

$49.41
48.96

$49.69
48.11

53.79

3.3

$0.00

Other information pertaining to the Company’s stock option activity for the three years ended December 31:

Weighted average grant date fair value of stock options granted (per share) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total fair value of options vested (000’s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total intrinsic value of options exercised (000’s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2020

2021

$ — $—
$275
$—
$ — $—

As of December 31, 2021, there was no compensation cost related to non-vested awards. For the years ended
December 31, 2020, we recognized $0.1 million in stock based-based compensation expense relating to options. No expense
was recognized in 2021.

The following table represents the range of stock option prices and the weighted average remaining life of outstanding

options as of December 31, 2021:

Range of stock option prices

19.40 – 29.99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30.00 – 39.99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
40.00 – 49.99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
50.00 – 59.99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
60.00 – 69.99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
70.00 – 79.99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
80.00 – 89.99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
90.00 – 99.99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100.00 – 125.60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Outstanding Options

Number
Outstanding

Weighted
average
remaining
life

12,700
5,350
6,228
8,900
7,594
6,500
1,500
3,000
2,450

54,222

2.9
5.4
1.4
4.2
2.2
2.6
5.5
5.9
2.3

3.3

Weighted
average
exercise
price

$ 22.61
$ 37.47
$ 47.79
$ 57.16
$ 63.24
$ 73.57
$ 86.40
$ 90.10
$107.97

$ 53.79

Exercisable

Weighted
average
remaining
life

Number
Outstanding

12,700
5,350
6,228
8,900
7,594
6,500
1,500
3,000
2,450

54,222

2.9
5.4
1.4
4.2
2.2
2.6
5.5
5.9
2.3

3.3

Weighted
average
exercise
price

$ 22.61
$ 37.47
$ 47.79
$ 57.16
$ 63.24
$ 73.57
$ 86.40
$890.10
$107.67

$ 53.79

Restricted Stock Awards

Restricted stock awards are awards of common stock that are subject to restrictions on transfer and to a risk of forfeiture
if the awardee terminates employment with the Company prior to the lapse of the restrictions. The value of such stock is
determined using the market price on the grant date. Compensation expense is recorded over the applicable restricted stock
vesting periods. As of December 31, 2021, the total compensation cost related to non-vested awards not yet recognized was
approximately $0.1 million, which will be recognized in the first quarter of 2022. For the years ended December 31,
2020 and 2021, we recognized $0.9 million and $0.6 million, respectively, in stock-based compensation expense related to
restricted stock awards.

F-20

The following table is a summary of the Company’s restricted stock activity for the three years ended December 31,

2021:

Number of
Shares

Weighted
average
grant date
fair value

Unvested December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested/Released . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Unvested December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested/Released . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Unvested December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . .

89
—
(33)
(15)

41
—
(24)
(3)

$31.67
—
32.11
31.52

$31.37
—
33.23
32.07

$27.97

Performance Based Restricted Stock Awards

Effective on April 1, 2018, the Company issued performance-based shares of restricted stock to certain officers and
employees under the Abraxas Petroleum Corporation Amended and Restated 2005 Employee Long-Term Equity Incentive
Plan. The shares will vest over a three year period upon the achievement of performance goals based on the Company’s Total
Shareholder Return (“TSR”) as compared to a peer group of companies. The number of shares which would vest depends
upon the rank of the Company’s TSR as compared to the peer group at the end of the three-year vesting period, and can range
from zero percent of the initial grant up to 200% of the initial grant. No shares vested in 2020 or 2021 due to not achieving
the performance goals.

The table below provides a summary of Performance Based Restricted Stock as of the date indicated (shares in

thousands):

Unvested December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested/Released . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Unvested December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested/Released . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Unvested December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Number
of
Shares

Weighted
average
grant date
fair value

57
—
—
(13)

44
—
—
(16)

33.86
—
—
34.29

$33.73
—
—
45.73

$26.80

F
o
r
m
1
0
-
K

Compensation expense associated with the performance based restricted stock is based on the grant date fair value of a
single share as determined using a Monte Carlo Simulation model which utilizes a stochastic process to create a range of
potential future outcomes given a variety of inputs. As the Compensation Committee intends to settle the performance based
restricted stock awards with shares of the Company’s common stock, the awards are accounted for as equity awards and the
expense is calculated on the grant date assuming a 100% target payout and amortized over the life of the awards.

As of December 31, 2021,

the total compensation cost related to non-vested awards not yet recognized was
approximately $0.1 million, which will be recognized in the first quarter of 2022. For each of the years ended December 31,
2020 and 2021, we recognized $0.2 million in stock-based compensation expense related to performance based restricted
stock awards.

Director Stock Awards

The 2005 Directors Plan (as amended and restated) reserves 70,000 shares of Abraxas common stock, subject to
adjustment following certain events. The 2005 Directors Plan provides that each year, at the first regular meeting of the board

F-21

of directors immediately following Abraxas’ annual stockholder’s meeting, each non-employee director shall be granted or
issued awards restricted stock with a value at the date of the grant of $12,000, for participation in board and committee
meetings during the previous calendar year. This grant did not take place in 2020.

The maximum annual award for any one person is 1,250 shares of Abraxas common stock or options for common
stock. If options, as opposed to shares, are awarded, the exercise price shall be no less than 100% of the fair market value on
the date of the award while the option terms and vesting schedules are at the discretion of the committee.

At December 31, 2021, the Company had approximately 1.9 million shares reserved, under its Employee and Directors
plans, for future issuance for conversion of its stock options, and incentive plans for the Company’s directors, employees and
consultants.

7. Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the
Company’s deferred tax liabilities and assets are as follows:

Deferred tax liabilities:
Hedge contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other

Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets:
US full cost pool
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depletion carryforward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. net operating loss carryforward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alternative minimum tax credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hedge contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest disallowed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

As of December 31,

2020

2021

(In thousands)

4,299
2,137

6,436

—
2,855

2,855

$ 35,500
461
84,927
—
—
2,818

24,464
470
96,120
—
100
5,781

Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance for deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

123,706
(117,270)

126,935
(124,080)

Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,436

2,855

Net deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

— $

—

Significant components of the provision (benefit) for income taxes are as follows:

Current:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Years Ended December 31,

2020

2021

(In thousands)

$—
—
$—

$—
$—

$—
—
$—

$—
$—

F-22

At December 31, 2021, the Company had, $245.20 million of pre 2018 NOLs for U.S. tax purposes and $190.8 million
of post 2017 NOLs for U.S. tax purposes. Our pre-2018 NOLs will expire in varying amounts from 2022 through 2037, if not
utilized; and can offset 100% of future taxable income for regular tax purposes. Any NOLs arising in 2018, 2019 and 2020
can generally be carried back five years, carried forward indefinitely and can offset 100% of future taxable income for tax
years before January 1, 2021 and up to 80% of future taxable income for tax years after December 31, 2020. Any NOLs
arising on or after January 1, 2021, cannot be carried back and can generally be carried forward indefinitely and can offset up
to 80% of future taxable income for regular tax purposes, (the alternative minimum tax no longer applies to corporations
after January 1, 2018).

The use of our NOLs will be limited if there is an “ownership change” in our common stock, generally a cumulative
ownership change exceeding 50% during a three year period, as determined under Section 382 of the Internal Revenue Code.
As of December 31, 2021, we have not had an ownership change as defined by Section 382. Given historical losses,
uncertainties exist as to the future utilization of the NOL carryforwards, therefore, the Company has established a valuation
allowance of $117.27 million at December 31, 2020 and $124.1 million at December 31, 2021.

The reconciliation of income tax computed at the U.S. federal statutory tax rates to income tax expense is:

Years Ended December 31,

2020

2021

(in thousands)

Tax benefit at U.S. Statutory rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in deferred tax asset valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alternative minimum tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Permanent differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return to provision estimated revision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State income taxes, net of federal effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 38,749
(37,193)
—
—
(276)
(3,069)
1,789
—

$ 9,359
(7,007)
—
(3,421)
368
—
688
13

—

$ —

As of December 31, 2020 and 2021, the Company did not have any accrued interest or penalties related to uncertain tax
positions. The tax years 2014 through 2021 remain open to examination by the tax jurisdictions to which the Company is
subject.

New tax legislation, commonly referred to as the Tax Cuts and Jobs Act (H.R. 1), was enacted on December 22, 2017.
Since our federal deferred tax asset was fully offset by a valuation allowance, the reduction in the U.S. corporate income tax
rate to 21% did not materially affect the Company’s financial statements. Significant provisions that may impact income
taxes in future years include: the repeal of the corporate Alternative Minimum Tax, the limitation on the current deductibility
of net interest expense in excess of 30% of adjusted taxable income for levered balance sheets, (for tax years 2019 & 2020,
the CARES Act temporarily adjusted the limitation in excess of 50% of adjusted taxable income for levered balance sheets at
the taxpayer’s discretionary election), a limitation on utilization of net operating losses generated after tax year 2017 to 80%
of taxable income, the unlimited carryforward of net operating losses generated after tax year 2017, temporary 100%
expensing of certain business assets, additional limitations on certain general and administrative expenses, and changes in
determining the excessive compensation limitation. Currently, we do not anticipate paying cash federal income taxes in the
near term due to any of the legislative changes, primarily due to the availability of our net operating loss carryforwards.
Future interpretations relating to the recently enacted U.S. federal income tax legislation which vary from our current
interpretation and possible changes to state tax laws in response to the recently enacted federal legislation may have a
significant effect on this projection.

F
o
r
m
1
0
-
K

8. Commitments and Contingencies

Litigation and Contingencies

From time to time, the Company is involved in litigation relating to claims arising out of its operations in the normal
course of business. At December 31, 2021, the Company was not engaged in any legal proceedings that are expected,
individually or in the aggregate, to have a material adverse effect on the Company.

F-23

9. Earnings per Share

The following table sets forth the computation of basic and diluted earnings per share:

Years Ended December 31,

2020

2021

Numerator:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Denominator for basic earnings per share—weighted-average common shares outstanding . . . . . .
Effect of dilutive securities: Stock options, restricted shares and performance based shares . . . . . .

$(184,522)
8,382
—

$(44,567)
8,408
—

Denominator for diluted earnings per share—adjusted weighted-average shares and assumed

exercise of options, restricted shares and performance based shares . . . . . . . . . . . . . . . . . . . . . . .

8,382

8,408

Net loss per common share—basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss per common share—diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$

(22.01)
(22.01)

$
$

(5.30)
(5.30)

Basic earnings per share, excluding any dilutive effects of stock options and unvested restricted stock, is computed by
dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding
for the period. Diluted income (loss) per share is computed similar to basic; however diluted income (loss) per share reflects
the assumed conversion of all potentially dilutive securities.

10. Benefit Plans

The Company has a defined contribution plan (401(k) plan) covering all eligible employees. For 2020, in accordance
with the safe harbor provisions of the Plan, the Company contributed $142,820. The Company contributed $123,639 to the
plan for 2021, and will contribute an additional $1,637 in 2022 for 2021. The Company adopted the safe harbor provisions
which requires it to contribute a fixed match to each participating employee’s contribution to the plan. The fixed match is set
at the rate of dollar for dollar on the first 1% of eligible pay contributed, then 50 cents on the dollar for each additional
percentage point of eligible pay contributed, up to 5%. Each employee’s eligible pay with respect to calculating the fixed
match is limited by IRS regulations. In addition, the Board of Directors, at its sole discretion, may authorize the Company to
make additional contributions to each participating employee. The employee contribution limit for 2020 and 2021 was
$19,500 for employees under the age of 50 and $26,000 for employees 50 years of age or older.

11. Hedging Program and Derivatives

As of December 31, 2021 the Company is not party to any hedge agreements. The liability as of December 31, 2021

relates to the December 2021 contract settlement.

The following table illustrates the impact of derivative contracts on the Company’s balance sheet:

Derivatives not designated as hedging instruments

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Fair Value Derivative Contracts as of December 31, 2020

Asset Derivatives

Liability Derivatives

Commodity price derivatives . . . . . . . . . . . . . . . . Derivatives—current
Commodity price derivatives . . . . . . . . . . . . . . . . Derivatives—long-term

$ 9,639 Derivatives—current
10,281 Derivatives—long-term

$19,920

$480
—

$480

Derivatives not designated as hedging instruments

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Fair Value Derivative Contracts as of December 31, 2021

Asset Derivatives

Liability Derivatives

Commodity price derivatives . . . . . . . . . . . . . . . . Derivatives—current

$ — Derivatives—current

$ —

$442

Gains and losses from derivative activities are reflected as “Loss (gain) on derivative contracts” in the accompanying
Consolidated Statements of Operations. The net estimated value of our commodity derivative contracts was a liability of
approximately $0.4 million as of December 31, 2021. For the year-ended December 31, 2021, we recognized a
loss of $33.0 million related to our derivative contracts, including a loss or $7.1 million related to cancelled contracts. For the
year ended December 31, 2020, we recognized a gain on our derivative contracts of approximately $42.9 million.

F-24

12. Financial Instruments

There is a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy categorizes
assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs
employed in the measurement. The three levels are defined as follows:

•

Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in
active markets.

Level 2—inputs to the valuation methodology include quoted prices for similar assets and liabilities in active
markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the
full term of the financial instrument.

Level 3—inputs to the valuation methodology are unobservable and significant to the fair value measurement.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is
significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair
value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The Company is
further required to assess the creditworthiness of the counter-party to the derivative contract. The results of the assessment of
non-performance risk, based on the counter-party’s credit risk, could result in an adjustment of the carrying value of the
derivative instrument. The following tables sets forth information about the Company’s assets and liabilities measured at fair
value on a recurring basis as of December 31, 2020 and 2021, and indicate the fair value hierarchy of the valuation
techniques utilized by the Company to determine such fair value (in thousands):

Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Balance as of
December 31,
2020

Assets:
NYMEX fixed price derivative contracts . . . . . . . . . . . . . . . . . . . . . . .

Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Liabilities:
NYMEX fixed price derivative contracts . . . . . . . . . . . . . . . . . . . . . . .

Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$—

$19,920

480

$—

$19,920

480

Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Balance as of
December 31,
2021

Assets:
NYMEX fixed price derivative contracts . . . . . . . . . . . . . . . . . . . . . . .
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Liabilities:
NYMEX fixed price derivative contracts . . . . . . . . . . . . . . . . . . . . . . .
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$—
$—

$ —
$ —

$442
$442

$—
$—

$ —
$ —

$442
$442

The Company’s derivative contracts during the years ended December 31, 2021 and December 31, 2020 consisted of
NYMEX-based fixed price commodity swaps and basis differential swaps. The NYMEX-based fixed price derivative
contracts were indexed to NYMEX futures contracts, which are actively traded, for the underlying commodity and are
commonly used in the energy industry. A number of financial institutions and large energy companies act as counter-parties
to these type of derivative contracts. As the fair value of these derivative contracts is based on a number of inputs, including

F
o
r
m
1
0
-
K

F-25

contractual volumes and prices stated in each derivative contract, current and future NYMEX commodity prices, and
quantitative models that are based upon readily observable market parameters that are actively quoted and can be validated
through external sources, we have characterized these derivative contracts as Level 2.

Nonrecurring Fair Value Measurements

Non-financial assets and liabilities measured at fair value on a nonrecurring basis included certain non-financial assets
and liabilities as may be acquired in a business combination and thereby measured at fair value and the initial recognition of
asset retirement obligations for which fair value is used. The assessment considers the following factors, among others: intent
to drill, remaining lease term, geological and geophysical evaluations, drilling results and activity, the assignment of proved
reserves, the economic viability of development if proved reserves were assigned and other current market conditions.
During any period in which these factors indicate an impairment, the cumulative drilling costs incurred to date for such
property and all or a portion of the associated leasehold costs are transferred to the full cost pool and are then subject to
amortization.

The asset retirement obligation estimates are derived from historical costs as well as management’s expectation of
future cost environments. As there is no corroborating market activity to support the assumptions used, the Company has
designated these liabilities as Level 3. A reconciliation of the beginning and ending balances of the Company’s asset
retirement obligation is presented in Note 1.

Other Financial Instruments

The carrying amounts of our cash, cash equivalents, restricted cash, accounts receivable and accounts payable
approximate fair value because of the short-term maturities and/or liquid nature of these assets and liabilities. The carrying
value of our debt approximates fair value as the interest rates are market rates and this debt is considered Level 2.

13. Lease Accounting Standard

Nature of Leases

We lease certain real estate, field equipment and other equipment under cancelable and non-cancelable leases to support

our operations. A more detailed description of our significant lease types is included below.

Real Estate Leases

We rented a residence in North Dakota from a third party for living accommodations for certain field employees. Our
real estate lease was non-cancelable with a term of five years, through August 31, 2024. We have concluded our real
estate agreements represent operating leases with a lease term that equals the primary non-cancelable contract term. Upon
completion of the primary term, both parties have substantive rights to terminate the lease. As a result, enforceable rights and
obligations do not exist under the rental agreements subsequent to the primary term. The North Dakota residential lease was
assigned to a third-party on January 3, 2022. See Note 14 “Subsequent Events.”

Field Equipment

We rent compressors and coolers from third parties in order to facilitate the downstream movement of our production
from our drilling operations to market. Our compressor and cooler arrangements are typically structured with a
non-cancelable primary term of one year and continue thereafter on a month-to-month basis subject to termination by either
party with thirty days’ notice. These leases are considered short term and are not capitalized. We have a small number
of compressor leases that are longer than twelve months. We have concluded that our compressor and cooler rental
agreements represent operating leases with a lease term that equals the primary non-cancelable contract term. Upon
completion of the primary term, both parties have substantive rights to terminate the lease. As a result, enforceable rights and
obligations do not exist under the rental agreement subsequent to the primary term. We enter into daywork contracts for
drilling rigs with third parties to support our drilling activities. Our drilling rig arrangements are typically structured with a
term that is in effect until drilling operations are completed on a contractually specified well or well pad. Upon mutual
agreement with the contractor, we typically have the option to extend the contract term for additional wells or well pads by
providing thirty days’ notice prior to the end of the original contract term. We have concluded that our drilling rig
arrangements represent short-term operating leases. The accounting guidance requires us to make an assessment at contract
commencement if we are reasonably certain that we will exercise the option to extend the term. Due to the continuously

F-26

evolving nature of our drilling schedules and the potential volatility in commodity prices in an annual period, our strategy to
enter into shorter term drilling rig arrangements allows us the flexibility to respond to changes in our operating and economic
environment. We exercise our discretion in choosing to extend or not extend contracts on a rig by rig basis depending on the
conditions present at the time the contract expires. At the time of contract commencement, we have determined we cannot
conclude with reasonable certainty if we will choose to extend the contract beyond its original term. Pursuant to the full cost
method, these costs are capitalized as part of natural gas and oil properties on our balance sheet when paid.

Discount Rate

Our leases typically do not provide an implicit rate. Accordingly, we are required to use our incremental borrowing rate
in determining the present value of lease payments based on the information available at commencement date. Our
incremental borrowing rate reflects the estimated rate of interest that we would pay to borrow on a collateralized basis over a
similar term an amount equal to the lease payments in a similar economic environment. We use the implicit rate in the
limited circumstances in which that rate is readily determinable.

Practical Expedients and Accounting Policy Elections

Certain of our lease agreements include lease and non-lease components. For all existing asset classes with multiple
component types, we have utilized the practical expedient that exempts us from separating lease components from non-lease
components. Accordingly, we account for the lease and non-lease components in an arrangement as a single lease
component. In addition, for all of our existing asset classes, we have made an accounting policy election not to apply the
lease recognition requirements to our short-term leases (that is, a lease that, at commencement, has a lease term of 12 months
or less and does not include an option to purchase the underlying asset that we are reasonably certain to exercise).
Accordingly, we recognize lease payments related to our short-term leases in our statement of operations on a straight-line
basis over the lease term which has not changed from our prior recognition. To the extent that there are variable lease
payments, we recognize those payments in our statement of operations in the period in which the obligation for those
payments is incurred. None of our current leases contain variable payments. Refer to “Nature of Leases” above for further
information regarding those asset classes that include material short-term leases.

The components of our total lease expense for the years ended December 31, 2020 and December 31, 2021, the majority

of which is included in lease operating expense, are as follows:

For the Year Ended
December 31,

2020

2021

(in thousands)

Operating lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term lease expense(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 114
2,183

65
1,913

Total lease expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,297

$1,978

Short-term lease costs(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 973

$ —

(1) Short-term lease expense represents expense related to leases with a contract term of 12 months or less.
(2) These short-term lease costs are related to leases with a contract term of 12 months or less which are related to drilling

rigs and are capitalized as part of natural gas and oil properties on our balance sheet.

Supplemental balance sheet information related to our operating leases is included in the table below:

Operating lease Right of Use asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liability—current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liabilities—long-term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$228
$ 53
$150

$173
$ 40
$110

For the Year Ended
December 31,

2020

2021

(in thousands)

F
o
r
m
1
0
-
K

F-27

Our weighted average remaining lease term and weighted average discount rate for our operating leases are as

follows:

Weighted Average Remaining Lease Term (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted Average Discount Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

For the Year Ended
December 31,

2020

2021

(in thousands)

10.68

12.46

Our lease liabilities with enforceable contract terms that are greater than one year mature as follows:

2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less imputed interest

Total lease liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Supplemental cash flow information related to our operating leases is included in the table below:

Operating
Leases

(in thousands)
40
41
28
4
4
94

211
(61)

$150

For the Year Ended
December 31,

2020

2021

(in thousands)

Cash paid for amounts included in the measurement of lease liabilities . . . . . . . . . . . . . . . . .
. . . . . . . . . . . .
Right of Use assets added in exchange for lease obligations (since adoption)

$114
$125

$65
$—

14. Subsequent Events

Restructuring

Pursuant to the Exchange Agreement, dated as of January 3, 2022, between Abraxas and AG Energy Funding,
LLC (“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 ($73.3 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”).

AGEF was issued 685,505 shares of Series A Preferred Stock of the Company in the Exchange. The Series A Preferred
Stock has the terms set forth in the Company’s filed Preferred Stock Certificate of Designation (the “Certificate). Pursuant to
the Certificate, any proceeds distributed to the Company’s stockholders or otherwise received in respect of the capital stock
of the Company in a merger or other liquidity event will be allocated among the Series A Preferred Stock and the Company’s
common stock as follows: (1) first, 100% to the Series A Preferred Stock until the Series A Preferred Stock has received
$100 million of proceeds in the aggregate (the “Tier One Preference Amount”), (2) second, 95% to the Series A Preferred

F-28

Stock and 5% to the Company’s common stock until the Series A Preferred Stock has received $137.1 million, plus a 6.0%
annual rate of return thereon from the date hereof; (3) thereafter, 75% to the Series A Preferred Stock and 25% to the
Company’s common stock. The Exchange Agreement entered into in connection with the Restructuring also provides for the
potential funding by AGEF of an additional amount up to $12.0 million, if agreed to by AGEF and the disinterested members
of the Company’s Board of Directors. Any such additional amount funded would result in an increase to the Tier One
Preference Amount equal to 1.5 x the amount of such additional funding. The shares of Series A Preferred Stock vote
together as a single class with the Company’s common stock, and each share of Series A Preferred Stock entitles the holder
thereof to 69 votes. Accordingly, AGEF’s ownership of the Series A Preferred Stock entitle it to approximately 85% of the
voting power of the Company’s current outstanding capital stock.

Todd Dittmann, Damon Putman and Daniel Baddeloo, each of whom are employees of AGEF, were appointed to

Abraxas’ Board of Directors.

Change In Majority of Board of Directors

Todd Dittmann, Damon Putman and Daniel Baddeloo, each of whom are employees of AGEF were appointed as

members of the Board of Directors in January 2022.

15. Events of Default

In connection with the completion of our financial statements for the year ended December 31, 2020, the Company
tested its financial ratios for the fiscal quarter ended December 31, 2020 and determined that it was not in compliance the
first lien debt to consolidated EBITDAX ratio covenant under the First Lien Credit Facility. Our failure to comply with such
covenant contributed to our independent accountant’s including an explanatory paragraph with regard to the Company’s
ability to continue as a “going concern” in issuing their opinion on our financial statements for the year ended December 31,
2020. The ”going concern” opinion resulted in an additional event of default under the First Lien Credit Facility and the
Second Lien Credit Facility. Additional events of default occurred as of September 30, 2021, as a result of our failure to
comply with certain financial covenants under the Second Lien Credit Facility, as amended. However, in connection with the
restructuring that was completed on January 3, 2022, our First Lien Credit Facility was retired and our Second Lien Credit
Facility was converted to Series A Preferred Stock. See Note 14 “Subsequent Events.”

First Lien Credit Facility

Events of default have occurred under the First Lien Credit Facility as a result of (i) the Company’s failure to timely
deliver audited financial statements without a “going concern” or like qualification for the fiscal year ended December 31,
2020, (ii) its inability to comply with the first lien debt to consolidated EBITDAX ratio for the fiscal quarter ended
December 31, 2020, (iii) our failure to cause certain deposit accounts to be subject to control agreements in favor of the
administrative agent for the First Lien Credit Facility, and (iv) certain cross-defaults that occurred, or may occur, as a result
of the events of default under the First Lien Credit Agreement and corresponding cross-defaults under the Second Lien
Credit Facility and cross-defaults or similar termination events under our hedging contracts. In connection with the
restructuring that was completed on January 3, 2022, our First Lien Credit Facility was retired and our Second Lien Credit
Facility was converted to Series A Preferred Stock. See Note 14 “Subsequent Events.”

F
o
r
m
1
0
-
K

Second Lien Credit Facility

Events of default occurred under the Second Lien Credit Facility as a result of (i) the Company’s failure to timely
deliver audited financial statements without a “going concern” or like qualification for the fiscal year ended December 31,
2020, (ii) its failure to cause certain deposit accounts to be subject to control agreements in favor of the administrative agent
for the Second Lien Credit Facility, (iii) the failure of the Company to meet certain hedging requirements, (iv) the
Company’s inability to comply with the total leverage ratio for the fiscal quarter ended September 30, 2021, (v) the
Company’s inability to comply with minimum asset coverage ratio for the fiscal quarter ended September 30, 2021, and
(vi) certain cross-defaults that occurred, or may could have occurred, as a result of the occurrence of events of default under
the First Lien Credit Facility and corresponding cross-defaults or similar
termination events under our hedging
contracts. Additional events of default occurred as of September 30, 2021, as a result of our failure to comply with certain
financial covenants under the Second Lien Credit Facility, as amended.

On April 16, 2021, we received a Notice of Default and Reservation of Rights (the “Notice of Default”) from Angelo
Gordon stating that we have defaulted under the Second Lien Credit Facility, and that, as a result, the lenders have
accelerated our obligations due thereunder and have reserved their rights to pursue additional remedies in the future.

F-29

The Notice of Default declared that our obligations under the Second Lien Credit Facility were immediately due and
payable, in each case without presentment, demand, protest or other requirements of any kind, and we began to bear interest
at the rate applicable to such amount under the Second Lien Credit Facility, plus an additional 3%. Additionally, the
administrative agent and the lenders reserved their right to exercise further rights, powers and remedies under the Second
Lien Credit Facility, at any time or from time to time, with respect to any of the events of default described above. In
connection with the restructuring that was completed on January 3, 2022, our First Lien Credit Facility was retired and our
Second Lien Credit Facility was converted to Series A Preferred Stock. See Note 14 “Subsequent Events.”

Hedging Contracts

Effective April 12, 2021, Morgan Stanley Capital Group, Inc. (“Morgan Stanley”), a hedge counterparty to several of
our hedging contracts sent us notice of events of default and early termination with respect to the hedging contracts to which
they are a counterparty. The notice indicated Morgan Stanley’s election to exercise termination rights under the hedge
contract, which Morgan Stanley asserted arose as a result of the occurrence of events of default under the First Lien Credit
Facility, of which Morgan Stanley is a lender, holding approximately 3.7% of the outstanding obligations under the First
Lien Credit Facility. The termination value of the hedging agreements with Morgan Stanley as of the effective date of the
notice was approximately $9.2 million. We subsequently voluntarily terminated most of our other hedging arrangements. As
a result of the settlement of the terminated hedges, we had outstanding obligations of $9.2 million, including the $8.4 million
to Morgan Stanley. These obligations were added to the outstanding balance of the First Lien Credit Facility and accrued
interest at the default rate until repaid. Our other hedging agreements were also terminated. As of December 31, 2021, we no
longer had any hedging agreements in place.

16. Supplemental Oil and Gas Disclosures (Unaudited)

The accompanying tables present information concerning the Company’s oil and gas producing activities “Disclosures
about Oil and Gas Producing Activities.” Capitalized costs relating to oil and gas producing activities are as follows as of
December 31, 2020 and 2021:

Years Ended December 31,

(in thousands)

2020

2021

Proved oil and gas properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unproved properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,167,333
—

$ 1,165,707
—

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .

Accumulated depreciation, depletion, amortization and impairment

1,167,333
(1,060,649)

1,165,707
(1,074,144)

Net capitalized costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

106,684

91,563

Cost incurred in oil and gas property acquisition and development activities were as follows for the years ended

December 31, 2020 and 2021 (in thousands):

Development costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exploration costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$5,238
—
—

$1,145
—
—

2020

2021

$5,238

$1,145

F-30

Results of operations from oil and gas producing activities were as follows for the years ended December 31, 2020 and

2021:

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Production costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation, depletion and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accretion of future site restoration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proved property impairment

$ 42,984
(21,090)
(22,679)
(414)
(186,980)

$ 78,836
(24,137)
(13,495)
(330)
—

Results of operations from oil and gas producing activities (excluding corporate overhead and

interest costs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(188,179) $ 40,874

Depletion rate per barrel of oil equivalent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12.58

6.67

2020

2021

Estimated Quantities of Proved Oil and Gas Reserves

Reserve estimates are inherently imprecise and estimates of new discoveries are more imprecise than those of producing
oil and gas properties. Accordingly, the estimates are expected to change as future information becomes available. The
estimates have been predominately prepared by independent petroleum reserve engineers. Proved oil and gas reserves are the
estimated quantities of oil and gas that geological and engineering data demonstrate with reasonable certainty to be
recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed oil
and gas reserves are those expected to be recovered through existing wells with existing equipment and operating methods.
All of the Company’s proved reserves are located in the continental United States.

Proved reserves were estimated in accordance with guidelines established by the SEC and the FASB, which require that
reserve estimates be prepared under existing economic and operating conditions with no provision for price and cost
escalations except by contractual arrangements; therefore, the unweighted average prior 12-month first-day-of-the-month
commodity prices and year-end costs were used in estimating reserve volumes and future net cash flows for the periods
presented.

The following table presents the Company’s estimate of its net proved developed and undeveloped oil and gas reserves

as of December 31, 2020 and 2021:

Total

Oil

NGL

Gas

Oil
Equivalents

(MBbl)

(MMcf)

(Mboe)

Proved Developed Reserves:

December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9,538

3,187

24,318

16,778

December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,883

2,914

30,158

14,823

Proved Undeveloped Reserves:

December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves

The Company’s proved oil and gas reserves have been estimated by the independent petroleum engineering firm,
DeGolyer & MacNaughton, assisted by the engineering and operations departments of the Company as of December 31,
2020 and December 31, 2021. The following information has been prepared in accordance with SEC rules and accounting
standards based on the 12-month first-day-of-the-month unweighted average prices in accordance with provisions of the
FASB’s Accounting Standards Update No. 2010-03, “Extractive Activities—Oil and Gas (Topic 932).” Future cash inflows
were reduced by estimated future production and development costs based on year-end costs to determine pre-tax cash
inflows. Future net cash flows have not been adjusted for commodity derivative contracts outstanding at the end of each year.
Future income taxes were computed by applying the statutory tax rate to the excess of pre-tax cash inflows over the tax basis
and net operating losses associated with the properties. Since prices used in the calculation are average prices for 2020, and
2021, the standardized measure could vary significantly from year to year based on the market conditions that occurred
during a given year.

F-31

F
o
r
m
1
0
-
K

The technical personnel responsible for preparing the reserve estimates at DeGolyer & MacNaughton meet the
requirements regarding qualifications, independence, objectivity, and confidentiality set forth in the Standards Pertaining to
the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers.
DeGolyer & MacNaughton is an independent firm of petroleum engineers, geologists, geophysicists, and petrophysicists;
they do not own an interest in our properties and are not employed on a contingent fee basis. All reports by DeGolyer &
MacNaughton were developed utilizing studies performed by DeGolyer & MacNaughton and assisted by the Engineering
and Operations departments of Abraxas. Reserves are estimated by independent petroleum engineers. The report of
DeGolyer & MacNaughton dated February 4, 2022, contains further discussions of the reserve estimates and evaluations
prepared by DeGolyer & MacNaughton as well as the qualifications of DeGolyer & MacNaughton’s technical personnel
responsible for overseeing such estimates and evaluations is attached as Exhibit 99.1 to this report.

Estimates of proved reserves at December 31, 2020 and 2021 were based on studies performed by our independent
petroleum engineers assisted by the Engineering and Operations departments of Abraxas. The Engineering department is
directly responsible for Abraxas’ reserve evaluation process. The Vice President of Engineering is the manager of this
department and is the primary technical person responsible for this process. The Vice President of Engineering holds a
Bachelor of Science degree in Petroleum Engineering and has 42 years of experience in reserve evaluations. The Vice
President of Engineering is a Registered Professional Engineer in the State of Texas. The operations department of Abraxas
assisted in the process.

The projections should not be viewed as realistic estimates of future cash flows, nor should the “standardized measure”
be interpreted to represent the fair market value of the Company’s proved oil and gas reserves. An estimate of fair market
value would also take into account, among other factors, the recovery of reserves not classified as proved, anticipated future
changes in prices and costs, and a discount factor more representative of the time value of money and the risks inherent in
reserve estimates.

Future net cash inflows after income taxes were discounted using a 10% annual discount rate to arrive at the
Standardized Measure. The table below sets forth the Standardized Measure of our proved oil and gas reserves for the years
ended December 31, 2020 and 2021 :

Future cash inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Future production costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Future development costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Future income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$345,869
(166,781)
(6,291)
—

$485,982
(222,309)
(5,623)
—

Future net cash flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discount

172,797
$(66,113)

258,050
$(104,775)

Standardized Measure of discounted future net cash relating to proved reserves . . . . . . . . . . . . . . . .

$106,684

$153,275

Years Ended December 31,

(in thousands)

2020

2021

F-32

Exhibit Index

4.1

23.1

23.3

31.1

31.2

32.1

32.2

99.1

Description of Securities. (Filed herewith),

Consent of ADKF P.C. (Filed herewith).

Consent of DeGolyer and MacNaughton. (Filed herewith).

Certification—Chief Executive Officer. (Filed herewith).

Certification—Chief Financial Officer. (Filed herewith).

Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith).

Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith).

DeGolyer and MacNaughton’s report with respect to oil and reserves of Abraxas Petroleum. (Filed herewith).

101.INS

Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because
its XBRL tags are embedded within the Inline XBRL document)

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Management Compensatory Plan or Agreement.

F
o
r
m
1
0
-
K

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly

caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ABRAXAS PETROLEUM CORPORATION

By:

/s/ Robert L.G. Watson

By:

/s/ Steven P. Harris

By:

/s/ G. William Krog, Jr.

President and Principal
Executive Officer

Vice President and Chief
Financial Officer Principal
Financial Officer

Vice President and Chief
Accounting Officer
Principal Accounting
Officer

DATED: March 31, 2022

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following

persons on behalf of the Registrant and in the capacities and on the date indicated.

Signature

Name and Title

/s/ Robert L.G. Watson

Robert L.G. Watson

/s/ Steven P. Harris

Steven P. Harris

/s/ G. William Krog, Jr.

G. William Krog, Jr.

/s/ Todd Dittmann

Todd Dittmann

/s/ Brian L. Melton

Brian L. Melton

/s/ Damon Putman

Damon Putman

/s/ Daniel Baddeloo
Daniel Baddeloo

President (Principal Executive Officer) and
Director

Vice President, CFO (Principal Financial
Officer)

Date

March 31, 2022

Vice President, Chief Accounting Officer
(Principal Accounting Officer)

March 31, 2022

Chairman of the Board, Director

March 31, 2022

Director

March 31, 2022

CORPORATE INFORMATION

DIRECTORS

Daniel Baddeloo(1)
Vice President-Energy Group-Angelo Gordon
Houston, Texas

Todd Dittmann(3)
Chairman of the Board
Managing Director-Angelo Gordon
Houston, Texas

Brian L. Melton
Senior Vice President Commercial & Business Development
Northstar Midstream
The Woodlands, Texas

Damon Putman(1)
Managing Director-Energy Group-Angelo Gordon
Houston, Texas

Robert L.G. Watson
President / Chief Executive Officer,
Abraxas Petroleum Corporation
San Antonio, Texas

1 Audit Committee - Chair
2 Compensation Committee - Chair
3 Nominating & Governance Committee - Chair

Web Address
www.abraxaspetroleum.com

Corporate Office
18803 Meisner Drive
San Antonio, Texas 78258
Phone: 210.490.4788

Legal Counsel
Dykema Gossett, PLLC
San Antonio, Texas

Independent Public Accountants
Akin, Doherty, Klein & Feuge, PC
San Antonio, Texas

Independent Reservoir Engineers
DeGolyer and MacNaughton
Dallas, Texas

Stock Exchange Listing
The OTCQX
Ticker Symbol: AXAS

Transfer Agent
American Stock Transfer & Trust Company
6201 15th Avenue
Brooklyn, New York 11219
Phone: 800.937.5449

Annual Stockholders Meeting
Audio Webcast
www.proxydocs.com/AXAS
May 11, 2022 3:00 p.m. CT
Abraxas Petroleum Corporation
San Antonio, Texas

OFFICERS

Robert L.G. Watson
President / Chief Executive Officer

Steven P. Harris
Vice President / Chief Financial Officer

Peter A. Bommer
Vice President—Engineering

Tod A. Clarke
Vice President—Land

G. William Krog, Jr.
Vice President—Chief Accounting Officer

Kenneth W. Johnson
Vice President—Operations

Abraxas Petroleum Corporation
18803 Meisner Drive
San Antonio, Texas 78258
Phone: 210.490.4788