Abraxas Petroleum Corp. said Tuesday that its Canadian units, Canadian Abraxas Petroleum Ltd. and Grey Wolf Exploration Inc., have agreed to sell certain reserves and associated gas processing plants in Western Canada to a Canadian royalty trust for approximately $138 million.

San Antonio, TX-based Abraxas said it will use the net proceeds to reduce its debt. The company added that closing on the transactions is expected to come in 30 to 60 days. The deal includes about 60 Bcfe of net proved reserves and current production of 4,500 boe/d. On a purchase price basis, the deal equates to a purchase price of $2.30/Mcfe and over $30/Boe.

The company added that the transaction also represents a 7.0x multiple of earnings before interest, taxes, depreciation and amortization, based on annualizing actual results for the first nine months of 2002.

The sale does not mark a complete exit from Canada for the company, as Abraxas will retain some production and most of its undeveloped acreage in the country, including all of its interests in the Ladyfern area. Upon completion of the sale, portions of its undeveloped acreage may be developed with the buyer under a proposed farmout arrangement.

“We are continuing to explore various alternatives to reduce our debt including further asset sales, negotiating the restructuring and/or refinancing of existing debt, exchanging debt for equity, issuing additional debt or equity securities or otherwise raising additional funds,” said Bob Watson, Abraxas CEO.

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