SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
The Securities Exchange Act of 1934 (Amendment No. ________)
Filed by the Registrant [ X ] [ ] Confidential, for Use of the Commission Only
Filed by a party other than the Registrant [ ] (as permitted by Rule
14a-6(e)(2)) Check the appropriate box:
[ ] Preliminary Proxy Statement
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
ABRAXAS PETROLEUM CORPORATION
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(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ]Fee paid previously with preliminary materials.
[ ]Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
ABRAXAS PETROLEUM CORPORATION
500 North Loop 1604 East, Suite 100
San Antonio, Texas 78232
(210) 490-4788
April 25, 2002
Dear Stockholders:
You are cordially invited to attend the 2002 Annual Meeting of
Stockholders of Abraxas Petroleum Corporation to be held on Friday, May 24,
2002, at 9:00 a.m., at the Petroleum Club of San Antonio located at 8620 North
New Braunfels, San Antonio, Texas 78217. 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.
Whether or not you expect to attend the Annual Meeting, please mark,
sign and date the enclosed proxy and return it promptly in the enclosed
envelope.
Robert L. G. Watson
--------------------------------
Chairman of the Board, President
and Chief Executive Officer
ABRAXAS PETROLEUM CORPORATION
500 NORTH LOOP 1604 EAST, SUITE 100
SAN ANTONIO, TEXAS 78232
(210) 490-4788
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 24, 2002
To the Stockholders of Abraxas Petroleum Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Abraxas Petroleum Corporation ("Abraxas") will be held at the Petroleum Club of
San Antonio located at 8620 North New Braunfels, San Antonio, Texas 78217, on
Friday, May 24, 2002, at 9:00 A.M., local time, for the following purposes:
(1) To elect four directors to the Abraxas board of directors for
a term of three years. The following four individuals are
Abraxas' nominees for election:
C. Scott Bartlett, Jr.
Ralph F. Cox
Frederick M. Pevow, Jr.
Joseph A. Wagda
(2) To approve the appointment of Deloitte & Touche LLP as
Abraxas' independent auditors for the year ending December 31,
2002; and
(3) To transact such other business as may properly come before
the meeting or any adjournment thereof.
We cordially invite you to attend the Annual Meeting in person. To
assure your representation at the meeting, however, we urge you to mark, sign,
date and return the enclosed proxy card as soon as possible in the enclosed
postage-prepaid envelope.
Whether or not you expect to attend the Annual Meeting, please
complete, sign, date and promptly mail your proxy card in the envelope provided.
You may revoke your proxy at any time prior to the Annual Meeting, and, if you
attend the Annual Meeting, you may vote your shares of Abraxas stock in person.
The Abraxas board of directors has fixed the close of business on April
22, 2002, 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.
By Order of the Board of Directors
Stephen T. Wendel
SECRETARY
San Antonio, Texas
April 25, 2002
ABRAXAS PETROLEUM CORPORATION
500 North Loop 1604 East, Suite 100
San Antonio, Texas 78232
(210) 490-4788
PROXY STATEMENT
-----------------------
The board of directors of Abraxas Petroleum Corporation is soliciting
proxies to vote shares of common stock at the 2002 Annual Meeting of
Stockholders to be held at 9:00 a.m. on May 24, 2002, at the Petroleum Club of
San Antonio located at 8620 North New Braunfels, San Antonio, Texas 78217, and
at any adjournments thereof. This Proxy Statement and the accompanying Proxy are
being mailed to stockholders on or about April 25, 2002. 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 germane to the Annual Meeting during ordinary business hours at Abraxas'
executive offices, located at the address set forth above.
Record Date; Shares Entitled To Vote; Quorum
The board of directors has fixed the close of business on April 22,
2002 as the record date for Abraxas stockholders entitled to notice of and to
vote at the annual meeting. Holders of common stock are entitled to vote at the
annual meeting. As of the record date, there were 29,979,397 shares of Abraxas
common stock outstanding, which were held by approximately 1,579 holders of
record. Stockholders are entitled to one vote for each share of Abraxas common
stock held as of the record date.
The holders of a majority of the outstanding shares of Abraxas common
stock issued and entitled to vote at the annual meeting must be present in
person or by proxy to establish a quorum for business to be conducted at the
annual meeting. Abstentions and "non-votes" are treated as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum. "Non-votes" occur when a proxy:
o is returned by a broker or other stockholder who does not have
authority to vote;
o does not give authority to a proxy to vote; or
o withholds authority to vote on one or more proposals.
Votes Required
The votes required for each of the proposals is as follows:
Election of Directors. The four nominees for director who receive the
most votes will be elected. Therefore, if you do not vote for a particular
nominee or you indicate "withhold authority to vote" for a particular nominee on
your proxy card, your abstention will have no effect on the election of
directors.
Appointment of Independent Auditors. The proposal to approve the
appointment of Abraxas' independent auditors must receive the affirmative vote
of the holders of a majority of the shares of Abraxas common stock represented
and voting at the meeting. If you are an Abraxas stockholder and you are present
in person or represented by proxy at the meeting and abstain from voting or if
you do not instruct your broker on how to vote, it will have no effect on the
proposal because holders of shares who have abstained or for which brokers are
not able to vote will not be considered voting at the annual meeting and for
purposes of approving this proposal.
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Voting of Proxies
Votes cast in person or by proxy at the annual meeting will be
tabulated at the annual meeting. All valid, unrevoked proxies will be voted as
directed. In the absence of instructions to the contrary, properly executed
proxies will be voted in favor of each of the proposals listed in the notice of
annual meeting and for the election of the nominees for director set forth
herein.
If any matters other than those addressed on the proxy card are
properly presented for action at the annual meeting, the persons named in the
proxy will have the discretion to vote on those matters in their best judgment,
unless authorization is withheld.
How To Vote By Proxy; Revocability of Proxies
To vote by proxy, you must complete, sign, date and return the enclosed
proxy card in the enclosed envelope. Any Abraxas stockholder who delivers a
properly executed proxy may revoke the proxy at any time before it is voted.
Proxies may be revoked by:
o delivering a written revocation of the proxy to the Abraxas Secretary
before the annual meeting;
o signing and returning a later dated proxy to the Abraxas Secretary; or
o appearing at the annual meeting and voting in person.
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 its broker, bank or other nominee must bring a legal proxy from its broker,
bank or other nominee to the meeting in order to vote in person.
Deadline for Voting by Proxy
In order to be counted, votes cast by proxy must be received by mail
prior to the Annual Meeting.
Solicitation of Proxies
Proxies will be solicited by mail. Proxies may also be solicited
personally, or by telephone, fax, or other means by the directors, officers and
employees of Abraxas. Directors, officers and employees soliciting proxies will
receive no extra compensation, but may be reimbursed for related out-of-pocket
expenses. In addition to solicitation by mail, Abraxas will make arrangements
with brokerage houses and other custodians, nominees and fiduciaries to send the
proxy materials to beneficial owners. Abraxas will, upon request, reimburse
these brokerage houses, custodians and other persons for their reasonable
out-of-pocket expenses in doing so. The cost of solicitation of proxies will be
paid by Abraxas.
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PROPOSAL ONE
Election of Abraxas Directors
The Articles of Incorporation of Abraxas 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 of stockholders. At this year's
meeting, four directors are to be elected for a term of three years, to hold
office until the expiration of their terms in 2005 or until successors shall
have been elected and shall have qualified. The nominees for Class II directors
are C. Scott Bartlett, Jr., Ralph F. Cox, Frederick M. Pevow, Jr., and Joseph A.
Wagda. The term of the Class I director (Mr. Burke) expires in 2003 and the term
of the Class III directors (Messrs. Watson and Phelps) expires in 2004.
Assuming the presence of a quorum, the four nominees for director who
receive the most votes will be elected. The enclosed form of proxy provides a
means for stockholders to vote for or to withhold authority to vote for the
nominees for director. 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 election of the nominees for director.
Under applicable Nevada law, in determining whether this item has received the
requisite number of affirmative votes, abstentions and broker non-votes will not
be counted and will have no effect.
The board of directors recommends a vote "FOR" the election of the
nominees to the board of directors.
Directors and Executive Officers
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Name and Municipality of Residence Age Office Class
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Robert L. G. Watson, Chairman of the Board, President and Chief
San Antonio, Texas................................. 51 Executive Officer III
---------------------------------------------------------------------------------------------------------------
Chris E. Williford, Executive Vice President, Chief Financial
San Antonio, Texas................................. 50 Officer and Treasurer --
---------------------------------------------------------------------------------------------------------------
Robert W. Carington, Jr.,
San Antonio, Texas................................. 40 Executive Vice President --
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C. Scott Bartlett, Jr.,
Montclair, New Jersey.............................. 68 Director II
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Franklin A. Burke,
Doyleston, Pennsylvania............................ 68 Director I
---------------------------------------------------------------------------------------------------------------
Ralph F. Cox,
Ft. Worth, Texas................................... 69 Director II
---------------------------------------------------------------------------------------------------------------
Frederick M. Pevow, Jr.,
Houston, Texas..................................... 39 Director II
---------------------------------------------------------------------------------------------------------------
James C. Phelps,
San Antonio, Texas................................. 79 Director III
---------------------------------------------------------------------------------------------------------------
Joseph A. Wagda,
Danville, California............................... 58 Director II
---------------------------------------------------------------------------------------------------------------
Robert L. G. Watson has served as Chairman of the Board, President,
Chief Executive Officer and a director of Abraxas since 1977. Since May 1996,
Mr. Watson has also served as Chairman of the Board and a director of Grey Wolf
Exploration, Inc., a wholly-owned Canadian subsidiary of Abraxas. In November
1996, Mr. Watson was elected Chairman of the Board, President and as a director
of Canadian Abraxas, a wholly-owned Canadian subsidiary of Abraxas. Prior to
joining Abraxas, Mr. Watson was employed in various petroleum engineering
positions with Tesoro Petroleum Corporation, a crude oil and natural gas
exploration and production company, from 1972 through 1977, and DeGolyer and
MacNaughton, an independent petroleum engineering firm, from 1970 to 1972. 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.
Chris E. Williford was elected Vice President, Treasurer and Chief
Financial Officer of Abraxas in January 1993, and as Executive Vice President
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and a director of Abraxas in May 1993. In November 1996, Mr. Williford was
elected Vice President and Assistant Secretary of Canadian Abraxas. In December
1999, Mr. Williford resigned as a director of Abraxas. Prior to joining Abraxas,
Mr. Williford was Chief Financial Officer of American Natural Energy
Corporation, a crude oil and natural gas exploration and production company,
from July 1989 to December 1992 and President of Clark Resources Corp., a crude
oil and natural gas exploration and production company, from January 1987 to May
1989. Mr. Williford received a Bachelor of Science degree in Business
Administration from Pittsburgh State University in 1973.
Robert W. Carington, Jr. was elected Executive Vice President and a
director of Abraxas in July 1998. In December 1999, Mr. Carington resigned as a
director of Abraxas. Prior to joining Abraxas, Mr. Carington was a Managing
Director with Jefferies & Company, Inc. Prior to joining Jefferies & Company,
Inc. in January 1993, Mr. Carington was a Vice President at Howard, Weil,
Labouisse, Friedrichs, Inc. Prior to joining Howard, Weil, Labouisse,
Friedrichs, Inc., Mr. Carington was a petroleum engineer with Unocal Corporation
from 1983 to 1990.
C. Scott Bartlett Jr., a director of Abraxas since December 1999, has
over forty years of commercial banking experience, the most recent being with
National Westminster Bank USA, rising to the position of Executive Vice
President, Senior Lending Officer and Chairman of the Credit Policy Committee.
Mr. Bartlett currently serves on the boards of NVR, Inc. and Janus Hotels and
Resorts, Inc. and is active in securities arbitration. Mr. Bartlett attended
Princeton University, and has a certificate in Advanced Management from
Pennsylvania State University.
Franklin A. Burke, a director of Abraxas since June 1992, has served as
President and Treasurer of Venture Securities Corporation since 1971, where he
is in charge of research and portfolio management. He has also been a general
partner and director of Burke, Lawton, Brewer & Burke, a securities brokerage
firm, since 1964, where he is responsible for research and portfolio management.
Mr. Burke also serves as a director of Suburban Community Bank in Chalfont,
Pennsylvania. Mr. Burke received a Bachelor of Science degree in Finance from
Kansas State University in 1955, a Master's degree in Finance from University of
Colorado in 1960 and studied at the graduate level at the London School of
Economics from 1962 to 1963.
Ralph F. Cox, a director of Abraxas since December 1999, has over 45
years of oil and gas industry experience, over thirty of which was with Arco.
Mr. Cox retired from Arco in 1985 after having become Vice Chairman. Mr. Cox
then joined what is now Union Pacific Resources, retiring in 1989 as President
and Chief Operating Officer. Mr. Cox then joined Greenhill Petroleum Corporation
as President until leaving in 1994 to pursue his consulting business. Mr. Cox
has in the past and continues to serve on many boards including CH2M Hill
Companies, Waste Management and Fidelity Investments. Mr. Cox earned Petroleum
and Mechanical Engineering degrees from Texas A&M University with advanced
studies at Emory University.
Frederick M. Pevow, Jr., a director of Abraxas since December 1999, has
almost fifteen years of investment banking experience with firms such as Smith
Barney, Dillon Read, Salomon Smith Barney, and most recently CIBC World Markets
where he was Managing Director and headed the worldwide Investment Banking
practice covering the oilfield services and equipment industries. Mr. Pevow
currently pursues capital market transactions through Pevow & Associates, a
boutique investment and merchant-banking firm. Mr. Pevow holds an undergraduate
degree from the University of Texas with further studies at Rice University.
James C. Phelps, a director of Abraxas since December 1983, has been a
consultant to crude oil and natural gas exploration and production companies
such as Panhandle Producing Company and Tesoro Petroleum Corporation since April
1981. Mr. Phelps has served as a director of Grey Wolf since January 1996. From
April 1995 to May 1996, Mr. Phelps served as Chairman of the Board and Chief
Executive Officer of Grey Wolf, and from January 1996 to May 1996, he served as
President of Grey Wolf. From March 1983 to September 1984, he served as
President of Osborn Heirs Company, a privately owned crude oil exploration and
production company based in San Antonio. Mr. Phelps was President and Chief
Operating Officer of Tesoro Petroleum Corporation from 1971 to 1981 and prior to
that was Senior Vice President and Assistant to the President of Continental Oil
Company. He received a Bachelor of Science degree in Industrial Engineering and
a Master of Science degree in Industrial Engineering from Oklahoma State
University.
Joseph A. Wagda, a director of Abraxas since December 1999, has had a
varied twenty-five year career involving the financial and legal aspects of
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private and corporate business transactions. Currently Mr. Wagda is Chairman,
Chief Executive Officer and a director of BrightStar Information Technology
Group, Inc., and is also an attorney and president of Altamont Capital
Management, Inc. Mr. Wagda's business expertise emphasizes special situation
consulting and investing, including involvement in distressed investments and
venture capital opportunities. Previously, Mr. Wagda was a senior managing
director and co-founder of the Price Waterhouse corporate finance practice. He
also served with the finance staff of Chevron Corporation and in the general
counsel's office at Ford Motor Company. Mr. Wagda received an undergraduate
degree from Fordham College, a Masters of Business Administration, with
distinction, from the Johnson Graduate School of Management, Cornell University,
and a JD, with honors, from Rutgers University.
Information Concerning Directors
During the fiscal year ended December 31, 2001, the Abraxas board of
directors held eleven meetings. All directors attended each meeting. During
2001, Abraxas' directors other than Mr. Watson received compensation for service
to Abraxas as a director. See "--Compensation Summary--Compensation of
Directors" beginning on page 12. Directors also received reimbursement of travel
expenses to attend meetings of the board of directors.
Committees of the Board of Directors
The Audit Committee of the Abraxas board of directors, which consists
of Messrs. Bartlett, Burke, Phelps, and Wagda, met two times during 2001. The
functions of the Audit Committee are to recommend the appointment of Abraxas'
independent auditors, to review the arrangements for and the scope of the annual
audit and to review internal accounting controls.
The Compensation Committee of the board of directors, which consists of
Messrs. Phelps, Cox and Pevow, met three times during 2001. The functions of the
Compensation Committee are to review and make recommendations concerning the
compensation of Abraxas' executive and non-executive officers. The Compensation
Committee also administers Abraxas' 1984 Incentive Stock Option Plan, 1984
Nonqualified Stock Option Plan, 1993 Key Contributor Stock Option Plan, and 1994
Long Term Incentive Plan.
The board of directors has not had a standing Nominating Committee
since 1999.
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SECURITIES HOLDINGS OF PRINCIPAL STOCKHOLDERS,
DIRECTORS, NOMINEES AND OFFICERS
Based upon information received from the persons concerned, each person
known to Abraxas to be the beneficial owner of more than five percent of the
outstanding shares of Common Stock of Abraxas, each director and nominee for
director, each of the named executive officers and all directors and officers of
Abraxas as a group, owned beneficially as of March 31, 2002, the number and
percentage of outstanding shares of Common Stock of Abraxas indicated in the
following table:
---------------------------------------------------------- -------------------------- -------------------
Name and Address of Beneficial Owner Number of Shares (1) Percentage (%)
---------------------------------------------------------- -------------------------- -------------------
Longwood Investment Advisors, Inc. 2,045,700 6.82
Three Radnor Corp. Center
1000 Matsonford Road, Suite 300
Radnor, PA 19087
---------------------------------------------------------- -------------------------- -------------------
Robert L. G. Watson 891,783 (2) 2.9
---------------------------------------------------------- -------------------------- -------------------
Franklin A. Burke 1,350,480 (3) 4.5
---------------------------------------------------------- -------------------------- -------------------
James C. Phelps 543,480 (4) 1.8
---------------------------------------------------------- -------------------------- -------------------
Chris E. Williford 188,003 (5) *
---------------------------------------------------------- -------------------------- -------------------
Lee T. Billingsley 137,425 (6) *
---------------------------------------------------------- -------------------------- -------------------
Robert W. Carington, Jr. 353,340 (7) 1.2
---------------------------------------------------------- -------------------------- -------------------
William H. Wallace 41,775 (8) *
---------------------------------------------------------- -------------------------- -------------------
C. Scott Bartlett, Jr. 62,000 (9) *
---------------------------------------------------------- -------------------------- -------------------
Ralph F. Cox 310,000 (9) 1.0
---------------------------------------------------------- -------------------------- -------------------
Frederick M. Pevow, Jr. 50,000 (9) *
---------------------------------------------------------- -------------------------- -------------------
Joseph A. Wagda 50,000 (9) *
---------------------------------------------------------- -------------------------- -------------------
All Officers and Directors as a Group (11 persons) 3,978,286 12.8
(2)(3)(4)(5)(6)(7)(8)(9)
---------------------------------------------------------- -------------------------- -------------------
* Less than 1%
(1) Unless otherwise indicated, all shares are held directly with sole
voting and investment power.
(2) Includes 41,353 shares issuable upon exercise of options granted
pursuant to Abraxas Petroleum Corporation 1993 Key Contributor Stock
Option Plan, 439,794 shares issuable upon exercise of options granted
pursuant to the Abraxas Petroleum Corporation 1994 Long Term Incentive
Plan and 300 shares in a retirement account. Does not include a total
of 75,880 shares owned by the Robert L. G. Watson, Jr. Trust and the
Carey B. Watson Trust, the trustees of which are Mr. Watson's brothers
and the beneficiaries of which are Mr. Watson's children. Mr. Watson
disclaims beneficial ownership of the shares owned by these trusts.
(3) Includes 8,900 shares issuable upon exercise of options granted
pursuant to the Abraxas Petroleum Corporation 1984 Non-Qualified Stock
Option Plan and 25,300 shares issuable upon exercise of options granted
pursuant to the Amended and Restated Director Stock Option Plan (the
"Director Option Plan").
(4) Includes 340,000 shares owned by Marie Phelps, Mr. Phelps' wife, 88,762
shares owned by JMRR LP, 2,000 shares issuable upon exercise of options
granted pursuant to an option agreement, 21,250 shares issuable upon
exercise of options granted pursuant to the Director Option Plan, and
8,231 shares issuable upon exercise of a stock option agreement with
Abraxas.
(5) Includes 1,786 shares issuable upon exercise of options granted
pursuant to the Abraxas Petroleum Corporation 1984 Incentive Stock
Option Plan, 18,214 shares issuable upon exercise of options granted
pursuant to the Abraxas Petroleum Corporation 1993 Key Contributor
Stock Option Plan and 145,000 shares issuable upon exercise of options
granted pursuant to the Abraxas Petroleum Corporation 1994 Long Term
Incentive Plan.
(6) Includes 62,250 shares issuable upon exercise of options granted
pursuant to the Abraxas Petroleum Corporation 1994 Long Term Incentive
Plan and 5,000 shares in a retirement account.
(7) Includes 255,000 shares issuable upon exercise of options granted
pursuant to the Abraxas Petroleum Corporation 1994 Long Term Incentive
Plan.
(8) Includes 36,750 shares issuable upon exercise of options granted
pursuant to the Abraxas Petroleum Corporation 1994 Long Term Incentive
Plan.
(9) Includes 50,000 shares issuable upon exercise of certain options
agreements.
6
Executive Compensation
Compensation Committee Report on Executive Compensation
The Compensation Committee is composed entirely of directors who are
not employees of Abraxas. The Committee is responsible for establishing and
administering the compensation levels for Abraxas' executive and non-executive
officers. The members of the Compensation Committee believe that the ability to
attract and retain qualified executive and non-executive officers and provide
appropriate incentives to Abraxas' executive and non-executive officers is
essential to the long-term success of Abraxas.
In determining executive compensation, the Committee reviews the
compensation programs, pay levels and business results of Abraxas as compared to
those crude oil and natural gas exploration and production companies included in
the William M. Mercer 2001 Energy Compensation Survey.
Compensation Philosophy and Objectives
The philosophy underlying the development and administration of
Abraxas' annual and long-term compensation plans is to align the interests of
management with those of Abraxas' stockholders. Key elements of this philosophy
are:
o Establishing compensation plans that deliver base salaries which
are competitive with the companies included in the Mercer Survey,
within Abraxas' budgetary constraints and commensurate with
Abraxas' performance as measured by operating, financial and
strategic objectives.
o Providing equity-based incentives for executive and non-executive
officers to ensure that they are motivated over the long-term to
respond to Abraxas' business challenges and opportunities as
owners rather than just as employees.
o Rewarding executive and non-executive officers for outstanding
performance particularly where such performance is reflected by an
increase in the value of Abraxas common stock.
The compensation currently paid to Abraxas' executive and non-executive
officers consists of base salary, various employee benefits (including medical
and life insurance and 401(k) plan benefits generally available to all employees
of Abraxas), annual cash bonuses and grants of stock options and awards under
Abraxas' 1994 Long Term Incentive Plan (the "LTIP").
Elements of the Executive Compensation Program
Base Salaries. The Committee believes that Abraxas' base salary levels
for executive officers are consistent with the practices of the companies
included in the Mercer Survey. Increases in base salary levels from time to time
are designed to reflect competitive practices in the industry, Abraxas'
financial performance and individual performance of the officer.
In the first quarter of each year, the Chief Executive Officer submits
to the Committee recommendations for salary adjustments based upon his
subjective evaluation of individual performance and his subjective judgment
regarding setting each executive and non-executive officer's salary within
Abraxas' salary range. This range is set by reference to the salaries paid by
the companies included in the Mercer Survey while remaining within Abraxas'
budgetary constraints. The companies included in the Mercer Survey are used to
compare Abraxas' salary structure to that of other companies that compete with
Abraxas for executives but without targeting salaries to be higher, lower or
approximately the same as those of the companies included in the Mercer Survey.
The Committee does not consider the performance of any of the companies included
in the Mercer Survey in setting Abraxas' salary structure.
Annual Cash Bonuses. In 1994, the board of directors adopted an annual
cash bonus plan which established certain criteria for the payment of annual
cash bonuses to all officers of Abraxas at or above the Vice President level.
7
The plan was amended in 1997 and again in 1999. Under the plan as amended, each
participant is given an annual bonus opportunity based on the achievement of
certain goals. For Messrs. Watson, Williford and Carington, the base bonus could
be as high as 35% of base salary if all goals are attained. For Messrs. Wallace
and Dr. Billingsley, the bonus could be as high as 25% of base salary if all
goals are attained. The amount of the bonuses to be paid to Messrs. Watson,
Williford, Carington and Wallace and Dr. Billingsley, if any, will be based upon
attaining goals set by the board of directors after assessing the
recommendations of management for EBIDTA, General and Administrative expenses,
Reserve Replacement percentage, and Finding Costs, with each factor being
weighted equally in the calculation. If all performance goals are met or
exceeded, additional bonuses of up to 25% of base salary can be earned by each
participant. The board has the prerogative to adjust the bonus earned by any
participant, including Messrs. Watson, Williford, Carington and Wallace and Dr.
Billingsley, to take into account extraordinary factors not contemplated by the
bonus plan when the impact of such contributions or factors cannot be adequately
reflected by the bonus determined under the methodology described above. In
2001, the goal for General and Administrative expense was met and the following
bonuses were paid:
Name Bonus Amount
Robert L.G. Watson............................... $27,388
Chris E. Williford............................... 16,433
Robert W. Carington, Jr.......................... 21,910
Lee T. Billingsley............................... 10,331
William H. Wallace............................... 10,331
Long-Term Incentives. In 1994, the board adopted the LTIP in order to
compensate executive and non-executive officers and employees who contribute
significantly to the operation of Abraxas. In 1997 and 1998, the board amended
the LTIP in order to increase the number of shares of common stock which may be
issued thereunder to an aggregate of 1,550,000 shares. In 2000, the board
adopted the 2000 Long Term Incentive Plan. In 2001, the board amended the LTIP
in order to increase the number of shares of common stock which may be issued
thereunder to an aggregate of 5,000,000 shares and terminated the 2000 Long Term
Incentive Plan. The LTIP makes available to the Committee a number of incentive
devices such as incentive stock options and non-qualified stock options, stock
appreciation rights, restricted stock, performance units, performance shares and
dividend units. The Committee adopts administrative guidelines from time to time
which define specific eligibility criteria, the types of awards to be employed
and the value of such awards. Specific terms of each award, including minimum
performance criteria which must be met to receive payment, are provided in
individual award agreements granted to each award recipient. Award agreements
also contain change in control provisions. Option holdings and previous awards
are not taken into account.
The board believes that the LTIP has given Abraxas the flexibility to
structure awards to meet Abraxas' business needs. In making long-term incentive
awards under the LTIP, the Committee seeks to ensure that the total compensation
package, including cash compensation, is competitive with the compensation paid
by the companies included in the Mercer Survey, yet substantially contingent
upon the conclusion of individual and corporate efforts to produce attractive
long-term returns to Abraxas stockholders.
CEO Compensation. Mr. Watson's salary in 2001 was based on the
Committee's evaluation of his performance and Abraxas' performance, after
reviewing competitive salary data from the companies included in the Mercer
Survey and Abraxas' budgetary constraints. The Committee's determination of Mr.
Watson's total salary was based upon the salaries paid to chief executive
officers of the companies included in the Mercer Survey and the salary structure
of Abraxas.
Policy on Deductibility of Compensation. In 1993, the federal tax laws
were amended to limit the deduction a publicly-held company is allowed for
compensation paid to the chief executive officer and to the four most highly
compensated executive officers other than the chief executive officer.
Generally, amounts paid in excess of $1 million to a covered executive, other
than performance-based compensation, cannot be deducted. In order to constitute
performance-based compensation for purposes of the tax law, the performance
measures must be approved by the stockholders. Since Abraxas does not anticipate
that the compensation for any executive officer will exceed the $1 million
threshold in the near term, stockholder approval necessary to maintain the tax
deductibility of compensation at or above that level is not being requested.
Compensation Committee will reconsider this matter if compensation levels
8
approach this threshold, in light of the tax laws then in effect. The
Compensation Committee will consider ways to maximize the deductibility of
executive compensation, while retaining the discretion the necessary to
compensate executive officers in a manner commensurate with performance and the
competitive environment for executive talent.
This report is submitted by the members of the Compensation Committee:
James C. Phelps, Chairman
Ralph F. Cox
Frederick M. Pevow, Jr.
Compensation Summary
The following table sets forth a summary of compensation for the fiscal
years ended December 31, 1999, 2000, and 2001 paid by Abraxas to Robert L.G.
Watson, Abraxas' Chairman of the Board, President and Chief Executive Officer,
Chris E. Williford, Abraxas' Executive Vice President, Chief Financial Officer
and Treasurer, Robert W. Carington, Jr., Abraxas' Executive Vice President, Lee
T. Billingsley, Abraxas' Vice President--Exploration, and to William H. Wallace,
Abraxas' Vice President--Operations.
Summary Compensation Table
Long Term
Compensation
Awards -
Securities
Underlying Options
Name and Principal Position Year Salary($) Bonus($) (#)
---- --------- --------
Annual Compensation
-------------------------------------------------------------------------------------------------------------
Robert L. G. Watson, 1999 $259,615 $43,750 4,688(1)
Chairman of the Board, 2000 $259,615 $29,175 962,562(2)
President and Chief 2001 $259,615 $27,388 60,000
Executive Officer
-------------------------------------------------------------------------------------------------------------
Chris E. Williford, 1999 $155,769 $26,250 0
Executive Vice President, 2000 $155,769 $17,505 392,701(2)
Chief Financial Officer 2001 $155,769 $16,433 20,000
and Treasurer
-------------------------------------------------------------------------------------------------------------
Robert W. Carington, Jr., 1999 $207,629 $35,000 0
Executive Vice President 2000 $207,629 $23,340 549,456(2)
2001 $207,629 $21,910 20,000
-------------------------------------------------------------------------------------------------------------
Lee T. Billingsley 1999 $124,615 $22,500 30,000
Vice President-- 2000 $134,077 $22,004 97,972(2)
Exploration 2001 $147,327 $10,331 15,000
-------------------------------------------------------------------------------------------------------------
William H. Wallace, 1999 $109,440 $13,750 30,000
Vice President-- 2000 $131,577 $9,425 97,972(2)
Operations 2001 $147,327 $10,331 15,000
-------------------------------------------------------------------------------------------------------------
(1) On January 7, 1999, Mr. Watson was granted options to purchase 4,688
Grey Wolf common shares at an exercise price of C$3.20 per share.
Pursuant to the Grey Wolf exchange offer consummated in September 2001,
such options were exchanged for options to purchase 2,812 shares of
Abraxas common stock at $3.39 per share.
(2) In March 2002, each named officer voluntarily forfeited a substantial
number of options to purchase Abraxas common stock, which were issued
in 2000. The exercise price for the forfeited options was $5.03 per
share, and the named officers each forfeited the following number of
options: Mr. Watson - 842,562; Mr. Williford - 352,701; Mr. Carington -
509,456; Mr. Billingsley - 97,972; Mr. Wallace - 97,972. See note (1)
to the Option Exercises table on page 10.
9
Grants of Stock Options and Stock Appreciation Rights During the Fiscal
Year Ended December 31, 2001
Pursuant to the Abraxas Petroleum Corporation 1984 Incentive Stock
Option Plan (the "ISO Plan"), the Abraxas Petroleum Corporation 1993 Key
Contributor Stock Option Plan (the "1993 Plan"), and the Abraxas Petroleum
Corporation 1994 Long Term Incentive Plan (the "LTIP"), Abraxas grants to its
employees and officers (including its directors who are also employees)
incentive stock options and non-qualified stock options. The ISO Plan, the 1993
Plan, and the LTIP are administered by the Compensation Committee which, based
upon the recommendation of the Chief Executive Officer, determines the number of
shares subject to each option.
The table below contains certain information concerning stock options
granted to Messrs. Watson, Williford, Carington and Wallace and Dr. Billingsley
during 2001:
Option Grants in Fiscal Year
Name Potential Realizable
Number of Value at Assumed
Securities Exercise Annual Rates of Stock
Underlying % of Total Price Per Price Appreciation
Options Options Share for
granted Granted to (Price at Expiration Option Term
(1) Employees Grant) Date 5% 10%
------------------------------------------------------------------------------------------------------------------
Robert L.G. Watson......... 60,000 14.79 $4.83 3/23/11 $182,400 $462,000
------------------------------------------------------------------------------------------------------------------
Chris E. Williford......... 20,000 4.93 $4.83 3/23/11 $60,800 $154,000
------------------------------------------------------------------------------------------------------------------
Robert W. Carington, Jr.... 20,000 4.93 $4.83 3/23/11 $60,800 $154,000
------------------------------------------------------------------------------------------------------------------
Lee T. Billingsley......... 15,000 3.70 $4.83 3/23/11 $45,600 $115,500
------------------------------------------------------------------------------------------------------------------
William H. Wallace......... 15,000 3.70 $4.83 3/23/11 $45,600 $115,500
------------------------------------------------------------------------------------------------------------------
(1) One-fourth of the options become exercisable on each of the first four
anniversaries of the date of grant.
Aggregated Option Exercises in Fiscal 2000 and Fiscal Year End Option
Values
The table below contains certain information concerning exercises of
stock options during the fiscal year ended December 31, 2001, by Messrs. Watson,
Williford, Carington and Wallace and Dr. Billingsley and the fiscal year end
value of unexercised options held by Messrs. Watson, Williford, Carington and
Wallace and Dr. Billingsley.
Option Exercises in Fiscal Year
Name Number of Unexercised Value of Unexercisable
Shares Value Options on December 31, In-the-Money Options on
Acquired By Realized 2001(#) December 31, 2001 ($)
Exercise(#) ($) Exercisable/Unexercisable(1) Exercisable/Unexercisable
----------------------------------------------------------------------------------------------------------------
Robert L. G. Watson.......... 0 0 675,075 / 1,483,125 0/0
----------------------------------------------------------------------------------------------------------------
Chris E. Williford........... 0 0 248,175 / 567,701 0/0
----------------------------------------------------------------------------------------------------------------
Robert W. Carington, Jr...... 0 0 377,364 / 889,456 0/0
----------------------------------------------------------------------------------------------------------------
Lee T. Billingsley........... 0 0 82,993 / 200,972 0/0
----------------------------------------------------------------------------------------------------------------
William H. Wallace........... 0 0 56,868 / 163,472 0/0
----------------------------------------------------------------------------------------------------------------
1) In March 2002, a significant number of stock options granted in 2000
were voluntarily forfeited by the named officers. All forfeited options
had an exercise price in excess of the market price on the date of
forfeiture. Such forfeitures reduce the total number of
exercisable/unexercisable options held by each named officer as
follows: Mr. Watson--464,435/851,203; Mr. Williford - 160,000/303,175;
Mr. Carington - 250,000/507,364; Mr. Billingsley - 58,500/127,493; Mr.
Wallace - 32,375/89,993.
Employment Agreements
Abraxas has entered into employment agreements with each of Messrs.
Watson, Williford, Carington and Wallace and with Dr. Billingsley pursuant to
which each of Messrs. Watson, Williford, Carington and Wallace and Dr.
Billingsley will receive compensation as determined from time to time by the
board in its sole discretion.
10
The employment agreements for Messrs. Watson, Williford, and Carington
are scheduled to terminate on December 21, 2002, and shall be automatically
extended for additional one-year terms unless Abraxas gives the officer 120 days
notice prior to the expiration of the original term or any extension thereof of
its intention not to renew the employment agreement. If, during the term of the
employment agreements for each of such officers, the officer's employment is
terminated by Abraxas other than for cause or disability, by the officer other
than by reason of such officer's death or retirement, or by the officer, for
"good reason" (as defined in each officer's respective employment agreement),
then such officer will be entitled to receive a lump sum payment equal to the
greater of (a) his annual base salary for the last full year during which he was
employed by Abraxas or (b) his annual base salary for the remainder of the term
of each of their respective employment agreements.
If a change of control occurs during the term of the employment
agreement for Mr. Watson, Mr. Williford or Mr. Carington, and if subsequent to
such change of control, such officer's employment is terminated by Abraxas other
than for cause or disability, by reason of the officer's death or retirement or
by such officer, for good reason, then such officer will be entitled to the
following, as applicable:
Mr. Watson
(1) if such termination occurs prior to the end of the first year of
the initial term of his employment agreement, a lump sum payment
equal to five times his annual base salary;
(2) if such termination occurs after the end of the first year of the
initial term of his employment agreement but prior to the end of
the second year of the initial term of his employment agreement, a
lump sum payment equal to four times his annual base salary;
(3) if such termination occurs after the end of the second year of the
initial term of his employment agreement but prior to the end of
the third year of the initial term of his employment agreement, a
lump sum payment equal to three times his annual base salary; and
(4) if such termination occurs after the end of the third year of the
initial term of his employment agreement a lump sum payment equal
to 2.99 times his annual base salary.
Mr. Williford or Mr. Carington:
------------------------------
(1) if such termination occurs prior to the end of the first year of
the initial term of the officer's employment agreement, a lump sum
payment equal to four times the officer's annual base salary;
(2) if such termination occurs after the end of the first year of the
initial term of the officer's employment agreement but prior to
the end of the second year of the initial term of the employment
agreement, a lump sum payment equal to three times the officer's
annual base salary; and
(3) if such termination occurs after the end of the second year of the
initial term of the officer's employment agreement, a lump sum
payment equal to 2.99 times the officer's annual base salary.
Abraxas has entered into employment agreements with Mr. Wallace and Dr.
Billingsley pursuant to which each of Mr. Wallace and Dr. Billingsley will
receive compensation as determined from time to time by the board in its sole
discretion. The employment agreements, originally scheduled to terminate on
December 31, 1998 for Dr. Billingsley and December 31, 2000 for Mr. Wallace,
were automatically extended and will terminate on December 31, 2002, and may be
automatically extended for an additional year if by December 1 of the prior year
neither Abraxas nor Mr. Wallace or Dr. Billingsley, as the case may be, has
given notice to the contrary. Except in the event of a change in control, at all
times during the term of the employment agreements, each of Mr. Wallace's and
Dr. Billingsley's employment is at will and may be terminated by Abraxas for any
reason without notice or cause. If a change in control occurs during the term of
the employment agreement or any extension thereof, the expiration date of Mr.
Wallace's and Dr. Billingsley's employment agreement is automatically extended
to a date no earlier than three years following the effective date of such
change in control. If, following a change in control, either Mr. Wallace's or
Dr. Billingsley's employment is terminated other than for Cause (as defined in
each of the employment agreements) or Disability (as defined in each of the
11
Employment Agreements), by reason of Mr. Wallace's or Dr. Billingsley's death or
retirement or by Mr. Wallace or Dr. Billingsley, as the case may be, for Good
Reason (as defined in each of the employment agreements), then the terminated
officer will be entitled to receive a lump sum payment equal to three times his
annual base salary.
If any lump sum payment to Messrs. Watson, Williford, Carington,
Wallace or Dr. Billingsley would individually or together with any other amounts
paid or payable constitute an "excess parachute payment" within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended, and applicable
regulations there under, the amounts to be paid will be increased so that
Messrs. Watson, Williford, Carington, Wallace or Dr. Billingsley, as the case
may be, will be entitled to receive the amount of compensation provided in his
contract after payment of the tax imposed by Section 280G.
Compensation Committee Interlocks and Insider Participation
In January 1996, Abraxas invested $3.0 million in Grey Wolf Exploration
Ltd., a privately held Canadian corporation, which, in turn, invested these
proceeds in newly-issued shares of Cascade Oil & Gas, Ltd., an Alberta-based
corporation whose common shares were traded on The Alberta Stock Exchange. In
November 1997, Grey Wolf Ltd. merged with Cascade, which later changed its name
to Grey Wolf Exploration Inc. and in 2001 became a wholly-owned subsidiary of
Abraxas. Grey Wolf manages the operations of Canadian Abraxas pursuant to a
management agreement between Canadian Abraxas and Grey Wolf. Under the
management agreement, Canadian Abraxas reimburses Grey Wolf for reasonable costs
or expenses attributable to Canadian Abraxas and for administrative expenses
based upon the percentage that Canadian Abraxas' gross revenue bears to the
total gross revenue of Canadian Abraxas and Grey Wolf.
Mr. Phelps, a member of the Compensation Committee of the Abraxas board
of directors during 2001, served as a director of Grey Wolf during 2001. Mr.
Phelps served as Chief Executive Officer of Grey Wolf Ltd. from April 1995 to
May 1996 and as President of Cascade from January 1996 to May 1996. Mr. Phelps
also served as a director of Grey Wolf Ltd. until 1997 when Grey Wolf Ltd. was
merged into Cascade. Mr. Phelps has served as a director of Grey Wolf and its
predecessor, Cascade, since 1997.
Mr. Watson, Abraxas' President, Chief Executive Officer and Chairman of
the Board, served as Chairman of the board, Chief Executive Officer and a
director of Grey Wolf during 2001.
Compensation of Directors
Non-Qualified Stock Option Plan. Messrs. Burke and Phelps have
previously been granted options to purchase 8,900 shares of common stock under
the Abraxas 1984 Non-Qualified Stock Option Plan (the "Non-Qualified Plan").
There are currently outstanding options to purchase 8,900 shares of Abraxas
common stock under the Non-Qualified Plan. Mr. Burke holds an option to purchase
8,900 Abraxas shares of common stock at an exercise price of $2.06 per share.
Stock Options. In 1999, each of Messrs. Bartlett, Cox, Pevow and Wagda
were each granted options to purchase 75,000 shares of common stock at an
exercise price of $0.98 per share.
Other Compensation. During 2001, each director who was not an employee
of Abraxas or its affiliates, received an annual fee of $8,000 plus $1,000 for
each board meeting attended and $500 for each committee meeting attended.
Aggregate fees paid to directors in 2001 were $122,000. Except for the
foregoing, the directors of Abraxas received no other compensation for services
as directors, except for reimbursement of travel expenses to attend board
meetings.
Report on Repricing of Options
On March 25, 1999, the board of directors approved a plan pursuant to
which the price of each outstanding stock option granted to employees and
directors of Abraxas with an exercise price greater than $2.06 per share was
reduced to $2.06 per share. However, all options repriced for Messrs. Watson,
Williford, and Carington were not exercisable until Abraxas' common stock closed
12
daily trading at a price greater than or equal to $4.12 per share for 10 days
out of any 30 day trading period. This threshold was satisfied on January 4,
2001.
On March 25, 1998, the board of directors approved a plan pursuant to
which the price of each outstanding stock option granted to employees and
directors of Abraxas with an exercise price greater than $7.44 per share was
reduced to $7.44 per share.
On March 7, 1996, the Committee approved a plan pursuant to which the
exercise price of each outstanding stock option granted to employees of Abraxas
prior to January 1, 1996, including options granted to Messrs. Watson, Williford
and Wendel, were reduced to $6.75 per share.
The Committee believed that repricing the existing options was in the
best interests of Abraxas and its stockholders. In the view of the Committee,
the decline of the market price of the Abraxas common stock substantially
impaired the effectiveness of the existing options as a means of attracting and
retaining qualified executive and non-executive officers and providing
appropriate incentives to the Abraxas executive and non-executive officers. In
addition, the Committee believed that a significant portion of the decline in
the market price was the result of market factors that affected the stocks of
the companies included in the Mercer Survey.
The following table sets forth certain information concerning repricing
of stock options held by any current executive officer during the period
commencing on May 7, 1991 (the date on which Abraxas became a reporting company
pursuant to the Securities Exchange Act of 1934, as amended), and ending on
December 31, 2001.
Option Repricing Table
Number of Securities Underlying Options Repriced or Amended
Length of
Market Original
Price Exercise Option
of Stock at Price at Term
Time of Time of Remaining at
Repricing Repricing New Date of
Date of or or Exercise Repricing or
Name Repricing Old New Amendment Amendment Price Amendment
----------------------------------------------------------------------------------------------------------------
Robert L.G. Watson, 03/07/96 60,000 60,000 $6.75 $9.50 $6.75 95 Mos
Chairman of the 03/25/98 100,000 100,000 $7.44 $7.50 $7.44 104 Mos
Board, President 03/25/98 100,000 100,000 $7.44 $10.75 $7.44 108 Mos
and Chief 03/25/98 100,000 100,000 $7.44 $14.38 $7.44 116 Mos
Executive Officer 03/25/99 60,000 60,000 $2.06 $6.75 $2.06 71 Mos
03/25/99 40,000 40,000 $2.06 $5.00 $2.06 84 Mos
03/25/99 100,000 100,000 $2.06 $7.44 $2.06 92 Mos
03/25/99 100,000 100,000 $2.06 $7.44 $2.06 96 Mos
03/25/99 100,000 100,000 $2.06 $7.44 $2.06 105 Mos
03/25/99 40,000 40,000 $2.06 $5.56 $2.06 116 Mos
----------------------------------------------------------------------------------------------------------------
Chris E. Williford, 03/07/96 6,252 6,252 $6.75 $7.50 $6.75 75 Mos
Executive Vice 03/07/96 13,748 13,748 $6.75 $9.75 $6.75 76 Mos
President, Chief 03/07/96 20,000 20,000 $6.75 $9.50 $6.75 95 Mos
Financial Officer 03/25/98 20,000 20,000 $7.44 $7.50 $7.44 104 Mos
and Treasurer 03/25/98 40,000 40,000 $7.44 $10.75 $7.44 108 Mos
03/25/98 5,000 45,000 $7.44 $14.38 $7.44 116 Mos
03/25/99 20,000 20,000 $2.06 $6.75 $2.06 51 Mos
03/25/99 20,000 20,000 $2.06 $6.75 $2.06 71 Mos
03/25/99 20,000 20,000 $2.06 $5.00 $2.06 84 Mos
03/25/99 20,000 20,000 $2.06 $7.44 $2.06 92 Mos
03/25/99 40,000 40,000 $2.06 $7.44 $2.06 96 Mos
03/25/99 15,000 15,000 $2.06 $7.44 $2.06 105 Mos
03/25/99 20,000 20,000 $2.06 $5.56 $2.06 116 Mos
13
----------------------------------------------------------------------------------------------------------------
Robert W. 03/25/99 300,000 300,000 $2.06 $8.75 $2.06 110 Mos
Carington, Jr., 03/25/99 20,000 20,000 $2.06 $5.56 $2.06 114 Mos
Executive Vice
President
----------------------------------------------------------------------------------------------------------------
Lee T. Billingsley, 03/25/99 50,000 50,000 $2.06 $8.75 $2.06 115 Mos
Vice President-- 03/25/99 8,000 8,000 $2.06 $5.56 $2.06 116 Mos
Exploration
----------------------------------------------------------------------------------------------------------------
William H. 03/25/99 2,000 2,000 $2.06 $6.25 $2.06 82 Mos
Wallace, 03/25/99 2,000 2,000 $2.06 $5.00 $2.06 84 Mos
Vice President-- 03/25/99 4,000 4,000 $2.06 $7.44 $2.06 92 Mos
Production 03/25/99 2,500 2,500 $2.06 $7.44 $2.06 106 Mos
03/25/99 10,000 10,000 $2.06 $5.56 $2.06 116 Mos
----------------------------------------------------------------------------------------------------------------
This report is submitted by the members of the Committee:
James C. Phelps, Chairman
Ralph F. Cox
Frederick M. Pevow, Jr.
Section 16(a) Compliance
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 AMEX 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 regulation 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, the Company
believes that all its directors and executive officers during 2001 complied on a
timely basis with all applicable filing requirements under Section 16(a) of the
Exchange Act, except that Mr. James C. Phelps failed to timely report one
transaction on a Form 4, which was filed late.
Performance Graph
Set forth below is a performance graph comparing yearly cumulative
total stockholder return on the Abraxas common stock with (a) the monthly index
of stocks included in the Standard and Poor's 500 Index and (b) the CIBC World
Markets Index (the "CIBC Index") of stocks of crude oil and natural gas
exploration and production companies with a market capitalization of less than
$300 million (the "Comparable Companies"). The Comparable Companies are: Adams
Resources & Energy, Inc.; Basin Exploration, Inc.; Callon Petroleum Company;
Columbus Energy Corporation; Goodrich Petroleum Corporation; Howell Corporation;
Key Production Company, Inc.; Magnum Hunter Resources, Inc.; Maynard Oil
Company; The Meridian Resource Corporation; PetroCorp Incorporated; Plains
Resources, Inc.; Prima Energy Corporation; Unit Corporation; Venus Exploration,
Inc.; and Wiser Oil Company.
All of these cumulative total returns are computed assuming the value
of the investment in Abraxas common stock and each index as $100.00 on December
31, 1996, and the reinvestment of dividends at the frequency with which
dividends were paid during the applicable years. The years compared are 1997,
1998, 1999, 2000, and 2001.
14
Performance Graph
[OBJECT OMITTED]
S&P Small-Cap
ABP 500 Index
------ --------- -----------
Dec-95 100% 100% 100%
Mar-96 86% 105% 102%
Jun-96 104% 109% 118%
Sep-96 92% 112% 127%
Dec-96 100% 100% 100%
Mar-97 111% 102% 99%
Jun-97 130% 119% 109%
Sep-97 147% 128% 120%
Dec-97 149% 131% 98%
Mar-98 85% 149% 94%
Jun-98 92% 153% 87%
Sep-98 70% 137% 66%
Dec-98 44% 166% 49%
Mar-99 18% 174% 52%
Jun-99 12% 185% 68%
Sep-99 23% 173% 73%
Dec-99 9% 198% 63%
Mar-00 23% 202% 82%
Jun-00 15% 196% 109%
Sep-00 39% 194% 127%
Dec-00 44% 178% 145%
Mar-01 52% 157% 124%
Jun-01 32% 165% 115%
Sep-01 20% 141% 90%
Dec-01 13% 155% 98%
Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 Dec-01
S&P
500 100 131 166 198 178 155
Small Cap Index 100 98 49 63 145 98
ABP 100 149 44 9 44 13
Audit Committee Report
The Audit Committee of the Abraxas board of directors is responsible
for providing independent, objective oversight of Abraxas' accounting functions
and internal controls. The Audit Committee is composed of four directors, each
of whom is independent as defined by the American Stock Exchange's listing
standards. The Audit Committee operates under a written charter approved by the
Board of Directors. A copy of the charter is on file with the Securities and
Exchange Commission and may be obtained online at www.sec.gov.
Management is responsible for Abraxas' internal controls and financial
reporting process. The independent auditors are responsible for performing an
independent audit of Abraxas' consolidated financial statements in accordance
with generally accepted auditing standards and to issue a report thereon. The
Audit Committee's responsibility is to monitor and oversee these processes.
In connection with these responsibilities, the Audit Committee met with
management and Deloitte & Touche LLP, Abraxas' independent auditors, to review
and discuss the December 31, 2001 financial statements. The Audit Committee also
discussed with Deloitte & Touche LLP the matters required by Statement on
Auditing Standards No. 61 (Communication with Audit Committees). The Audit
Committee also received written disclosures from Deloitte & Touche LLP required
by Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees), and the Audit Committee discussed with Deloitte & Touche LLP
that firm's independence.
Audit Fees. The aggregate fees billed for professional services
rendered by Deloitte & Touche LLP for the audit of Abraxas' annual financial
statements for the year ended December 31, 2001, and the reviews of the
condensed financial statements included in Abraxas' quarterly Reports on Forms
10-Q for the year ended December 31, 2001, were $228,400.
15
All Other Fees. The aggregate fees billed for all other services,
exclusive of the fees disclosed above relating to financial statement audit
services, rendered by Deloitte & Touche LLP during the year ended December 31,
2001, were $300,200, related primarily to various tax issues, potential merger
activities and hedge accounting treatment.
Consideration of Non-audit Services Provided by the Independent
Auditors. The Audit Committee has considered whether the services provided for
non-audit services are compatible with maintaining Deloitte & Touche LLP's
independence, and has concluded that the independence of such firm has been
maintained.
Based upon the Audit Committee's discussions with management and
Deloitte & Touche LLP, and the Audit Committee's review of the representations
of management and such firm, the Audit Committee recommended that the board of
directors include the audited consolidated financial statements in Abraxas'
Annual Report on Form 10-K for the year ended December 31, 2001, to be filed
with the United States Securities and Exchange Commission
Dated: March 30, 2002
Audit Committee
C. Scott Bartlett, Jr., Chairman
James C. Phelps
Frank A. Burke
Joseph A. Wagda
16
Certain Transactions
Wind River Resources Corporation ("Wind River"), all of the capital
stock of which is owned by Mr. Watson, owns a twin-engine airplane. The airplane
is available for business use by employees of Abraxas from time to time at Wind
River's cost. Abraxas paid Wind River a total of $314,000 for use of the plane
during 2001.
Grey Wolf owns a 10% interest in certain producing properties owned by
Canadian Abraxas and in Canadian Abraxas' natural gas processing plants and
manages the operations of Canadian Abraxas pursuant to a management agreement
between Canadian Abraxas and Grey Wolf. Under the management agreement, Canadian
Abraxas reimburses Grey Wolf for reasonable costs or expenses attributable to
Canadian Abraxas and for administrative expenses based upon the percentage that
Canadian Abraxas' gross revenue bears to the total gross revenue of Canadian
Abraxas and Grey Wolf. In 2001, Canadian Abraxas paid $1.7 million to Grey Wolf
pursuant to the management agreement.
Abraxas has adopted a policy that transactions, including loans,
between Abraxas and its officers, directors, principal stockholders, or
affiliates of any of them, will be on terms no less favorable to Abraxas than
can be obtained on an arm's length basis in transactions with third parties and
must be approved by the vote of at least a majority of the disinterested
directors.
PROPOSAL TWO
Ratification of Selection of
Independent Auditors
The Abraxas board of directors has selected Deloitte & Touche LLP to
serve as independent auditors of Abraxas for the fiscal year ending December 31,
2002. 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. Deloitte & Touche LLP has served as the
independent auditors of Abraxas since August 17, 2000. A representative of
Deloitte & Touche LLP 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.
On August 17, 2000, the Board of Directors of Abraxas engaged the
accounting firm of Deloitte & Touche LLP as Abraxas' certifying accountant for
the year ended December 31, 2000. The decision to approve the dismissal of Ernst
& Young LLP and engagement of Deloitte & Touche LLP was approved by the Audit
Committee of the Board of Directors and the Board of Directors of Abraxas. Ernst
& Young LLP was notified of their dismissal on August 18, 2000.
The reports of Ernst & Young LLP on Abraxas' financial statements for
the two fiscal years ended December 31, 1998 and 1999 did not contain any
adverse opinion or disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope or accounting principles.
In connection with the audits of Abraxas' financial statements for each
of the two fiscal years ended December 31, 1998 and 1999, and in the subsequent
interim periods through August 18, 2000, there were no disagreements with Ernst
& Young LLP on any matters of accounting principles, financial statement
disclosure or audit scope and procedures which, if not resolved to the
satisfaction of Ernst & Young LLP, would have caused the firm to make reference
to the matter in their report.
Assuming the presence of a quorum, the affirmative vote of the holders
of a majority of the shares of common stock present in person or by proxy and
entitled to vote on this item at the annual meeting is necessary to approve the
appointment of Abraxas' independent auditors. The enclosed form of proxy
provides a means for stockholders to vote for the ratification of selection of
independent auditors, 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
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will be voted FOR the ratification of selection of independent auditors. Under
applicable Nevada law, in determining whether this item has received the
requisite number of affirmative votes, abstentions and broker non-votes will not
be counted and will have no effect.
The board of directors recommends a vote "FOR" the ratification of the
selection of Deloitte & Touche LLP as independent auditors of Abraxas for the
fiscal year ending December 31, 2002.
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STOCKHOLDER PROPOSALS FOR 2003 ABRAXAS ANNUAL MEETING
Abraxas intends to hold its next annual meeting in May of 2003,
according to its normal schedule. In order to be included in the proxy material
for the 2003 Annual Meeting, Abraxas must receive eligible proposals of
stockholders intended to be presented at the annual meeting on or before
December 26, 2002, directed to the Abraxas Secretary of at the address indicated
on the first page of this proxy statement.
According to our Bylaws, Abraxas must receive timely written notice of
any stockholder nominations and proposals to be properly brought before the 2003
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 not later than the close of business on February 24, 2003 nor
earlier than January 27, 2003. The written notice must set forth (a) as to each
person whom the stockholder proposes to nominate for election or re-election as
a director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors in an election
contest, or is otherwise required, in each case pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended, and Rule 14a-11 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); (b) as to any other
business that the stockholder proposes to bring before the meeting, 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 in
such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) 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 the
Corporation's books, and of such beneficial owner and (ii) the class and number
of shares of the Corporation which are owned beneficially and of record by such
stockholder and such beneficial owner.
In the event that the 2003 Annual Meeting is more than 30 days from May
24, 2003 (the anniversary of the 2002 Annual Meeting), the dates for submission
with the proxy materials and to be properly be brought before the 2003 Annual
Meeting will change according to the Bylaws and Regulation 14A under the
Exchange Act. A copy of the Bylaws of Abraxas 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 document 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 any of the nominees 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 United States Securities and Exchange Commission on
Form 10-K, including financial statements and schedules thereto, for the fiscal
year ended December 31, 2001. Such written request is to be directed to the
attention of Stephen T. Wendel, 500 North Loop 1604 East, Suite 100, San
Antonio, Texas 78232.
By Order of the Board of Directors
Stephen T. Wendel
SECRETARY
San Antonio, Texas
April 25, 2002
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FORM OF PROXY
FRONT
ABRAXAS PETROLEUM CORPORATION
500 North Loop 1604 East, Suite 100
San Antonio, Texas 78232
(210) 490-4788
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Abraxas Petroleum Corporation, a Nevada
corporation (the "Company"), hereby appoints Robert L. G. Watson, Chris E.
Williford and Robert W. Carington, Jr., and each of them, as Proxies, each with
the power to appoint his or her substitute, and hereby authorizes them to
represent and to vote, as designated below, all the shares of Abraxas common
stock which the undersigned may be entitled to vote at the Annual Meeting of
Stockholders to be held on May 24, 2002, and any adjournment thereof, with all
powers which the undersigned would possess if personally present.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement of Abraxas dated April 25, 2002.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
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BACK
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this
proxy will be voted "FOR" the election of Directors and "FOR" the
Approval of Proposal 2 .
FOR WITHHELD
1. ELECTION OF [ ] [ ] Nominees:
DIRECTORS Ralph F. Cox
For, except vote C. Scott Bartlett, Jr.
withheld from the Frederick M. Pevow, Jr.
Following nominee(s): Joseph A. Wagda
2. PROPOSAL TO APPROVE THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS
AUDITORS OF ABRAXAS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2002
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
CHECK HERE FOR ADDRESS CHANGE [ ] NEW ADDRESS:___________________________
_______________________________________
_______________________________________
_______________________________________
Please sign exactly as name appears below. When shares are held by
joint tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give full title as such. If
a corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name
by authorized person.
DATED: ______________, 2002 __________________________________________
Signature
PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE. __________________________________________
Signature if held jointly
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