Grey Wolf Exploration Closes IPO

Grey Wolf Exploration Inc. (TSX:GWE) reports the closing of its initial public offering. At closing, a total of 17,800,000 common shares were issued at a price of $2.80 per common share for gross proceeds of $49,840,000. In addition, Abraxas Petroleum Corporation, Grey Wolf's sole shareholder ("Abraxas"), sold an aggregate of 9,100,000 common shares of Grey Wolf, offered on a secondary basis (the "Secondary Offering") at a price of $2.80 per common share for gross proceeds of $25,480,000. As a result of these offerings, a total of 26,900,000 common shares were issued or sold.

The net proceeds from the Offering have been partially used by Grey Wolf to repay inter-company debt owing to Abraxas and to repay the outstanding balance of a term loan. The remaining net proceeds of the Offering will be used to eliminate Grey Wolf's working capital deficiency. Common shares of Grey Wolf will begin trading on the Toronto Stock Exchange today under the symbol "GWE".

Abraxas has granted the underwriters the option (the "Over-Allotment Option") to purchase up to an additional 3,902,360 common shares at $2.80 per common share for a period of 30 days from closing. In the event that the Over-Allotment Option is exercised in full, the total gross proceeds of the Secondary Offering will be $36,406,608. Grey Wolf will not receive any of the proceeds from the exercise of the Over-Allotment Option.

At closing, Abraxas holds an approximate 12.7 percent ownership interest in Grey Wolf. Should the underwriters elect to exercise the Over-Allotment Option in full, Abraxas will have no further ownership interest in Grey Wolf.

The offering was led by CIBC World Markets Inc. on behalf of a syndicate of underwriters that included BMO Nesbitt Burns Inc., GMP Securities Ltd., and Canaccord Capital Corporation.

Grey Wolf is an Alberta-based oil and natural gas company involved in the development and production of natural gas and crude oil in the Western Canadian Sedimentary Basin. As of September 30, 2004, Grey Wolf had proved plus probable reserves of approximately 5.55 million barrels of oil equivalent. Grey Wolf has current working interest production of more than 2,000 barrels of oil equivalent per day, approximately 75 percent of which is comprised of natural gas.

The securities offered have not been registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. A prospectus related to these securities has been filed with securities commissions or similar authorities in each of the provinces and territories of Canada. This news release shall not constitute an offer to buy these securities in any state of the United States or province or territory of Canada.