Abraxas Petroleum Corporation and Abraxas Energy Partners have entered into a letter of intent with the holders of 96% of the common units of Abraxas Energy not held by a wholly-owned subsidiary of Abraxas Petroleum, pursuant to which Abraxas Energy will merge into Abraxas Petroleum.

The letter of intent provides for Abraxas Petroleum to acquire the outstanding common units of Abraxas Energy not currently held by a wholly-owned subsidiary of Abraxas Petroleum for $6.00 per common unit payable in shares of Abraxas Petroleum common stock. The number of shares of Abraxas Petroleum common stock will range from 4.25 to 6.00 per common unit of Abraxas Energy. The share range equates to $1.00 to $1.41 per share of Abraxas Petroleum and will be determined based on the 20-day trading average prior to a special meeting of Abraxas Petroleum stockholders. The letter of intent provides for a 90-day lock-up period followed by a multi-year staggered lock-up period. The letter of intent also provides for a standstill by the private investors on their rights under the existing exchange and registration rights agreement and a standstill by Abraxas Energy on its initial public offering.

The transaction is subject to entry into a definitive merger agreement and a voting, registration rights and lock-up agreement, negotiation of a new credit facility, approval by the Abraxas Petroleum board of directors, the Abraxas Energy board of directors, the holders of a majority of the outstanding Abraxas Petroleum common stock and 80% of the outstanding Abraxas Energy common units, and other usual and customary closing conditions.

"The merger transaction should greatly enhance the value of the combined entity for investors of both Abraxas Petroleum and Abraxas Energy. The merger will allow the combined entity to increase its drilling activity by reinvesting a greater portion of its cash flow into organic growth projects throughout all of our core regions which encompass the entire central portion of the United States from North Dakota to the Gulf Coast. We believe that the merger will simplify our organizational structure, reduce general and administrative expenses, provide greater transparency, and create a more attractive investment opportunity with increased liquidity and a larger public float. We have been in discussions with our bank group and we are optimistic that the debt of the combined entity can be re-financed solely with senior debt," commented Bob Watson, Abraxas' President and CEO.

Tags: Abraxas Petroleum Corporation