The Company replaced 280% of production in 2005, predominantly from development drilling, at an all-in finding and development cost of $2.03 per Mcfe. The Company's proved reserve life index exceeds 17 years, when measured against 2005 production.
The present value, using a 10% discount rate, of the future net cash flows before income tax ("PV10") of the Company's proved oil and natural gas reserves is approximately $311.9 million using oil and natural gas prices of $56.92 and $8.84, respectively. Such prices were based on market prices for oil and natural gas on December 31, 2005, as adjusted for the Company's average basis differential.
The Company further engaged the independent reservoir-engineering firm of DeGolyer and MacNaughton to evaluate its probable and possible reserve potential, in addition to its proved reserve base. As of December 31, 2005, probable oil and natural gas reserves were estimated at 27.4 Bcfe with a PV10 of $63.4 million and possible oil and natural gas reserves were estimated at 171.5 Bcfe with a PV10 of $161.2 million. All reserve categories combined amount to 303.6 Bcfe and $536.5 million in PV10.
"The fact that we were able to replace 280% of our 2005 production at an attractive finding cost testifies to the quality of our assets and the ability of our technical team. This reserve replacement is truly significant considering 47% of our 2005 capital expenditures were related to the conversion of proved undeveloped or non-producing reserves to proved developed reserves. For the first time in many years, we had our independent engineering firm estimate our probable and possible reserves in order to provide greater transparency for our shareholders and provide support to our large inventory of projects on our existing leasehold," commented Bob Watson, Abraxas' President and CEO.
Abraxas Petroleum Corporation is a San Antonio-based crude oil and natural gas exploitation and production company with operations in Texas and Wyoming.
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