Imperial Capital Sees Decision to Curtail Capex As Good For Abraxas Petroleum

In a report published Friday, Imperial Capital analyst Kim Pacanovsky reiterated an In-Line rating and $3.00 price target on Abraxas Petroleum Corp. (NASDAQ: AXAS).

In the report, Imperial Capital noted, "We are maintaining our In-Line rating on AXAS shares and our one-year price target of $3, about 12% below the recent share price. On 3/4/15 AXAS announced 2014 results and discussed 2015 expectations. We believe that AXAS' decision to dramatically reduce its activity in 2015 with a $53mn capex budget should enable to the firm to improve its balance sheet by generating free cash flow and that it will not be forced to access the capital markets unless opportunities arise to expand its acreage position in its two core areas.

"We expect production to be lumpy during the year with the majority of production coming online during late spring/early summer 2015 as the firm continues to defer completions until service costs decline further and better weather in North Dakota can boost efficiencies. AXAS also has the unanticipated optionality of returning to the rich natural gas-oriented Powder River Basin, which the firm had previously hoped to monetize, as it believes it possesses returns comparable to the firm's operations in the Williston Basin."

Abraxas Petroleum closed on Thursday at $3.12.