Last August, I spoke about why San Antonio-based Abraxas Petroleum
Although the article ruffled a few feathers, the fact was that growth prospects weren't very convincing, even though the company holds acreages in various shale plays. However, all this may be changing, with management deciding to allot 75% of its 2012 capital budget to develop its Bakken/Three Forks and the Niobrara holdings.
Bakken to play savior?
Out of a total $70 million, the Bakken/Three Forks holdings have been allotted a lion's share. The company plans to develop 20 gross wells (six net wells) in 2012, which should have a major impact on production volumes. Currently, Abraxas operates eight wells here.
It shouldn't really come as a surprise that I'm bullish about the Bakken. I think these reserves can transform smaller independent upstream companies. One of the leading examples: the once struggling Kodiak Oil & Gas
I'm not saying Abraxas is on the same road to success, and I remained concerned over its relative a truck load of debt. But total debt has dropped 11% in 2011 from the previous year. And management's move to focus solely on the Bakken reserves is a step in the right direction to me.
Foolish bottom line
For Abraxas, boosting production is the only way to increase cash flows. And the company seems to be on track. In addition, management is trying to increase the percentage proportion of liquids (crude oil and natural gas liquid) production, which should again positively affect cash flows. This year holds out a lot of hope for the company. Stay abreast of the latest news on Abraxas Petroleum by adding the company to your personalized Watchlist. It's free!
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Fool contributor Isac Simon owns no shares of any of the companies mentioned in this article. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.