THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION

Each of the following subsidiaries, and any other subsidiary of Abraxas Petroleum Corporation that becomes a guarantor of certain of the securities registered hereby, is hereby deemed to be a registrant.

The address and telephone number of the principal executive offices of Abraxas Properties Incorporated, Sandia Operating Corp., Abraxas Operating, LLC, Abraxas General Partner, LLC, Abraxas Energy Investments, LLC and Abraxas Merger Sub, LLC is 18803 Meisner Drive, San Antonio, TX 78258, (210) 490-4788 and the agent for service at such address is Robert L.G. Watson.

We may offer, ~~and sale~~ from time to time, in one or more series:

We will provide the specific terms of upthe securities in supplements to ~~an aggregate of 7,049,617 shares of our common stock by the selling stockholders named in~~ this prospectus. ~~The selling stockholders~~This prospectus may be used to offer and sell ~~none, some or all of the shares offered~~securities only if it is accompanied by ~~this prospectus. We cannot predict when or in what amounts~~ a ~~selling stockholder may sell any of the shares offered by this prospectus. We will not receive any proceeds from any such sale by any selling stockholder.~~

~~Investing in our common stock involves risks. Please carefully read the information under the headings “Forward-Looking Statements” on page ii and “Risk Factors” beginning on page 5 of this~~ prospectus ~~before you invest in our common stock.~~

~~Our common stock trades on The American Stock Exchange under the symbol “ABP.” On June 12, 2007, the closing price of our common stock on The American Stock Exchange was $4.06.~~

supplement.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

You should rely only on the information contained or incorporated by reference in this prospectus. We have not authorized anyone to provide you with different information. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus.

This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission utilizing a “shelf” registration ~~process or continuous offering~~ process. Under this shelf ~~registration~~ process, ~~the selling stockholders~~we may ~~from time to time,~~ sell different types of the securities described in this prospectus in one or more ~~offerings.~~ offerings up to a total offering amount of $150,000,000.

This prospectus provides you with a general description of the securities ~~which~~we may ~~be offered by the selling stockholders.~~offer. Each time ~~a selling stockholder sells~~we sell securities, ~~the selling stockholder is required to~~we will provide ~~you with this prospectus and, in certain cases,~~ a prospectus supplement ~~containing~~that will contain specific information about the ~~selling stockholder~~terms of that offering and the ~~terms of the~~ securities ~~being offered. That prospectus supplement may include additional risk factors or other special considerations applicable to those securities. Any~~offered by us in that offering. The prospectus supplement may also add, update or change information contained in this prospectus. ~~If there is any inconsistency between the information in this prospectus and any prospectus supplement, you should rely on the information in that prospectus supplement.~~ You should read both this prospectus and any prospectus supplement together with additional information described under the heading “Where You Can Find More Information.”

You should rely only on the information contained in this prospectus, any prospectus supplement and the documents we have incorporated by reference. We have not authorized anyone to provide you with different information. You should not assume that the information in this prospectus, any accompanying prospectus supplement or any document incorporated by reference is accurate as of any date other than the date of such document.

Also, using our website, www.abraxaspetroleum.com, you can access electronic copies of documents we file with the SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K and any amendments to those reports. Information on our website is not incorporated by reference in this prospectus. Access to those electronic filings is available as soon as practical after filing with the SEC. You may also request a copy of those filings, including exhibits, at no cost by writing or telephoning our principal executive office, which is:

This prospectus is part of a registration statement that we have filed with the SEC relating to the securities offered hereby. As permitted by SEC rules, this prospectus does not contain all of the information we have included in the registration statement and the accompanying exhibits and schedules we file with the SEC. You may refer to the registration statement, exhibits and schedules for more information about us and such securities. The registration statement, exhibits and schedules are available at the SEC’s public reference room or through its Internet website at www.sec.gov.

The SEC allows us to “incorporate by reference” the information we have filed with it, which means that we can disclose important information to you by referring you to those documents. The information we incorporate by reference is an important part of this prospectus, and later information that we file with the SEC will automatically update and supersede this information. The following documents that we have filed with the SEC pursuant to the Exchange Act are incorporated herein by reference:

Notwithstanding the foregoing, information that we elect to furnish, but not file, or have furnished, but not filed, with the Commission in accordance with Commission rules and regulations is not incorporated into this Registration Statement and does not constitute a part hereof.

All documents filed by us pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act (excluding any information furnished pursuant to Item 2.02 or Item 7.01 on any current report on Form 8-K) subsequent to the date of this filing and prior to the termination of this offering shall be deemed to be incorporated in this prospectus and to be a part hereof from the date of the filing of such document. Any statement contained in a document incorporated by reference herein shall be deemed to be modified or superseded for all purposes to the extent that a statement contained in this prospectus, or in any other subsequently filed document which is also incorporated or deemed to be incorporated by reference, modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus.

We make forward-looking statements throughout this prospectus and the documents included or incorporated by reference in this prospectus. Whenever you read a statement that is not simply a statement of historical fact (such as statements including words like “believe,” “expect,” “anticipate,” “intend,” “plan,” “seek,” “estimate,” “could,” “potentially” or similar expressions), you must remember that these are forward-looking statements, and that our expectations may not be correct, even though we believe they are reasonable. The forward-looking information contained in this prospectus or in the documents included or incorporated by reference in this prospectus is generally located in the material set forth under the headings ~~“Summary,~~“About Abraxas,” “Risk Factors,” “Business,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” but may be found in other locations as well. These forward-looking statements generally relate to our plans and objectives for future operations and are based upon our management’s reasonable estimates of future results or trends. The factors that may affect our expectations regarding our operations include, among others, the following:

Except as otherwise required by law, we disclaim any duty to update any forward-looking statements, all of which are qualified by the statements in this section, to reflect events or circumstances after the date of this prospectus. See also “Where You Can Find More Information.”

This summary highlights selected information from this prospectus, but does not contain all information that may be important to you. This prospectus includes specific terms of this offering, information about our business and financial data. To understand all of the terms of this offering and for a more complete understanding of our business, you should carefully read this entire prospectus, particularly the section entitled “Risk ~~Factors”,~~Factors,” our annual report on Form 10-K for the year ended December 31, ~~2006~~2008 and our quarterly ~~report~~reports on Form 10-Q for the ~~quarter~~quarters ended March 31, ~~2007,~~2009, June 30, 2009 and September 30, 2009, including the consolidated financial statements and the notes to those financial statements included in those reports, all of which are incorporated by reference herein. The ~~term “Abraxas” refers only to Abraxas Petroleum Corporation and the~~ terms “Abraxas,” “we,” “us,” “our,” or the “Company,” refer to Abraxas Petroleum Corporation, together with its consolidated subsidiaries including Abraxas Energy Partners, L.P., unless the context otherwise requires. Except as otherwise noted, our consolidated financial, reserve and operating information includes the financial, reserve and operating information of Abraxas Energy Partners, L.P., which is consolidated for financial reporting purposes but is not wholly-owned by us. The terms “pro forma” or “on a pro forma basis” refer to what our business might have looked like if the transactions described under “Recent Developments” had occurred at the times indicated.subsidiaries. We have provided definitions for some of the ~~natural~~oil and gas ~~and crude oil~~ industry terms used in this prospectus in the section entitled “Glossary of Terms.”

We are an independent energy company primarily engaged ~~primarily~~ in the ~~acquisition,~~ development ~~exploration~~ and production of ~~natural gas~~oil and ~~crude oil. Our principal means of growth has been~~gas. Historically, we have grown through the acquisition and subsequent development and exploitation of producing ~~properties.~~properties, principally through the redevelopment of old fields utilizing new technologies such as modern log analysis and reservoir modeling techniques as well as 3-D seismic surveys, horizontal drilling and modern completion techniques. As a result of ~~our historical acquisition~~these activities, we believe that we have a number of development opportunities on our properties. In addition, ~~Abraxas intends~~we intend to expand upon ~~its~~our development activities with complementary exploration projects in our core areas of operation. Success in our development and exploration activities is critical toin the maintenance and growth of our current production levels and associated reserves.

Our core areas of operation are in South and West Texas and east central Wyoming. As described in more detail below under “Recent Developments,” in May 2007, Abraxas formed a new limited partnership, Abraxas Energy Partners, L.P., which we refer to as the Partnership, and contributed certain of Abraxas’ producing properties located in South and West Texas to the Partnership and received a 47.2% interest in the Partnership. As a result, Abraxas now owns a smaller base of producing properties with a large inventory of high impact proved undeveloped and probable locations in Wyoming and in West and South Texas. Abraxas believes that a single successful well could have a significant impact on production and reserves. On June 7, 2007, for example, Abraxas announced the successful completion of a horizontal well drilled in the Oates SW Field area of West Texas. At June 7, 2007, the well was producing an average of 4.5 MMcfepd which represents a production increase of 145% over Abraxas’ first quarter of 2007 daily production on a pro forma basis. The Partnership owns producing properties which are characterized by long-lived reserves and established production profiles with an emphasis on natural gas.

At December 31, 2006, we owned interests in 101,815 gross acres (87,554 net acres) and operated properties accounting for approximately 95% of our PV-10, affording us substantial control over the timing and incurrence of operating and capital expenditures. On a pro forma basis, at December 31, 2006, Abraxas owned interests in approximately 88,250 gross acres (76,150 net acres), and operated properties accounting for approximately 99% of its PV-10 and the Partnership owned interests in approximately 16,400 gross acres (13,500 net acres), and operated properties accounting for approximately 90% of its PV-10. At December 31, 2006, estimated total proved reserves were 98.8 Bcfe with an aggregate PV-10 of $161 million. On a pro forma basis, at December 31, 2006, Abraxas’ estimated total proved reserves were 33.4 Bcfe with an aggregate PV-10 of $45 million and the Partnership’s estimated total proved reserves were 65.4 Bcfe with an aggregate PV-10 of $116 million.

Abraxas’ business strategy is to provide long term growth in net asset value per share, through the growth and expansion of its natural gas and crude oil reserves and production. Abraxas focuses on adding reserve value through careful evaluation and aggressive pursuit of natural gas and crude oil drilling and acquisition opportunities. As a result, Abraxas has a substantial inventory of projects, any one of which could provide a basis for significant production and reserve increases.

~~Several of the key elements of our strategy are the following:~~

~~Exploit and Develop Existing Property Base~~. Abraxas seeks to maximize the value of its existing assets by developing and exploiting its properties with the lowest risk and the highest production and reserve growth potential. Abraxas continually performs field studies of its existing properties and re-evaluates exploitation and development opportunities using advanced technologies, such as modern log analysis, reservoir modeling, 3-D seismic and horizontal drilling.

~~Pursue Successful Exploration Projects~~. Abraxas seeks to complement the development of its existing assets with an active exploration program within its core areas of operation and in other areas with similar characteristics. Abraxas utilizes 3-D seismic data and other technical applications, as appropriate, to manage its exploration risk.

~~Pursue Strategic Acquisitions~~. Abraxas focuses its acquisition efforts in areas where it can apply its technical expertise. To leverage its regional knowledge base, Abraxas seeks to acquire large acreage positions with significant drilling potential in its core areas and/or areas that exhibit similar characteristics to its existing properties.

~~Focus on Operational Control and High Working Interest~~. Abraxas endeavors to operate the majority of its properties as this affords Abraxas the ability to control the timing of projects. Similarly, retaining a high working interest further reinforces control, as a minority interest owner cannot force an action that may not be deemed prudent.

~~Maintain Natural Gas Focus~~~~. Abraxas’ portfolio of producing properties is largely concentrated in natural gas.~~

~~On May 25, 2007, Abraxas completed a series of transactions which resulted in Abraxas’ refinancing and repaying all of its outstanding indebtedness. The following is a summary of these transactions.~~

Abraxas formed a limited partnership, Abraxas Energy Partners, L.P., which we refer to as the Partnership, pursuant to which Abraxas contributed certain assets located in South and West Texas to a wholly-owned subsidiary of the Partnership. The assets contributed had estimated proved reserves of approximately 65 Bcfe as of December 31, 2006 and accounted for approximately 85% of Abraxas’ daily production as of such date. Abraxas, through certain wholly-owned subsidiaries, owns an approximate 47.2% interest in the Partnership, consisting of 5,131,959 common units and 227,232 general partner units. The general partner of the Partnership, Abraxas General Partner, LLC, is a wholly-owned subsidiary of Abraxas.

The Partnership sold an approximate 52.8% interest, consisting of 6,002,408 common units at a purchase price of $16.66 per unit to various purchasers in a private placement. In connection with the private placement of the Partnership units, the Partnership entered into a registration rights agreement with regard to the limited partner units purchased by the investors. Under the registration rights agreement, as soon as practicable after May 25, 2007, the Partnership agreed (a) to prepare and file with the SEC a registration statement for (i) the initial public offering, or IPO, of the common units and (ii) a shelf registration statement for the resale of the common units by the investors and (b) to use its commercially reasonable efforts to cause the IPO registration statement and the shelf registration statement to be declared effective by February 14, 2008.

The Partnership entered into a $150 million senior secured revolving credit facility, of which $35 million was borrowed at closing, with Société Générale, as administrative agent and issuing lender, and the other lenders signatory thereto. Borrowing availability under the Partnership’s credit facility is subject to a borrowing base consistent with customary natural gas and crude oil lending transactions. Outstanding amounts under the Partnership’s credit facility bear interest at the reference rate announced from time to time by Société Générale plus 0.25% - 1.25% depending on utilization of the borrowing base or, if the Partnership elects, at the London Interbank Offered Rate plus 1.25% - 2.25%, depending on the utilization of the borrowing base. Subject to earlier termination rights and events of default, the Partnership’s credit facility’s stated maturity date is May 25, 2011. Interest is payable quarterly on reference rate advances and not less than quarterly on Eurodollar advances. Obligations under the Partnership’s credit facility are secured by a first priority perfected security interest, subject to certain permitted encumbrances, in all of the general partner’s, the Partnership’s and its subsidiary’s property and assets, other than the general partner’s general partner units.

Abraxas sold approximately $22.5 million of its common stock in a private placement offering to several purchasers of the Partnership units. The private placement consisted of 5,874,678 shares of common stock, at a purchase

price of $3.83 per share. The purchase price reflected the 10-day volume weighted average price of Abraxas’ common stock prior to closing. The purchasers of the common stock were also issued five-year warrants to purchase up to an additional 1,174,939 shares of common stock, at an exercise price of $3.83 per share.

Net proceeds from these transactions of approximately $147.3 million (including $35.0 million borrowed under the Partnership’s credit facility ) were used to refinance and repay all of Abraxas’ and its subsidiaries’ outstanding indebtedness (including accrued and unpaid interest due June 1, 2007) and pay preformation and transaction expenses with the excess proceeds dedicated by Abraxas to fund future drilling opportunities and for general corporate purposes.

Abraxas, the Partnership and the purchasers of the common units of the Partnership also entered into an Exchange and Registration Rights Agreement dated May 25, 2007. Under the terms of this agreement, in the event that the Partnership has not consummated its initial public offering by November 15, 2008, which we refer to as the Trigger Date, the investors will have the right to convert their common units obtained in the private placement offering into shares of common stock. Each common unit will be convertible into a number of shares of common stock equal to $16.66 divided by the volume weighted average price of the common stock for the ten (10) business day period immediately prior to the first business day following the Trigger Date times 0.9. If stockholder approval is required for such issuance, Abraxas has agreed to call a special meeting of the stockholders within 60 days of November 15, 2008, which we refer to as the Exchange Filing Date, and the executive officers and directors of Abraxas have agreed to vote the shares of common stock then held by them in favor of such issuance. Under this agreement, Abraxas also agreed within 30 days of the Trigger Date, to prepare and file with the Securities and Exchange Commission a registration statement, which we refer to as the Exchange Registration Statement, to enable the resale of the common stock, which we refer to as the Exchange Shares, by the investors or their transferees from time to time over any national stock exchange on which the common stock is then traded, or in privately-negotiated transactions. If the Exchange Registration Statement is not declared effective by the 120th day following the Trigger Date (which period would be extended to the 180th day following the Trigger Date under certain circumstances), then in addition to any other rights the investors may have under the Exchange and Registration Rights Agreement or under applicable law, Abraxas is required to pay an amount in cash as liquidated damages and not as a penalty, equal to 1.0% of the product of $3.83 times the number of Exchange Shares then held by such investor for each 30-day period until the Exchange Registrations Statement is declared effective.

In addition, Abraxas has received a commitment letter for a new $50 million credit facility with Société Générale, which we refer to as the new credit facility. Borrowing availability under the new credit facility will be subject to a borrowing base consistent with customary natural gas and crude oil lending transactions. It is expected that the initial borrowing base will be $6,500,000. Outstanding amounts under the new credit facility will bear interest at the reference rate announced from time to time by Société Générale plus 0.5% - 1.5% depending on utilization of the borrowing base or, if Abraxas elects, at the London Interbank Offered Rate plus 1.5% - 2.5%, depending on the utilization of the borrowing base. Subject to earlier termination rights and events of default, the new credit facility’s stated maturity date will be four years after the date it is consummated. Interest will be payable quarterly on reference rate advances and not less than quarterly on Eurodollar advances. Obligations under the new credit facility will be secured by a first priority perfected security interest, subject to certain permitted encumbrances, in all of Abraxas’ property and assets.

In connection with the private placement of Abraxas common stock and warrants, we agreed to prepare and file with the Securities and Exchange Commission, no later than June 25, 2007, a registration statement to enable the resale of the common stock by the selling stockholders or their transferees. Abraxas also agreed to use its commercially reasonable efforts to cause such registration statement to become effective prior to August 24, 2007 (subject to certain conditions) and to remain continuously effective for a period ending on the date that is the earlier of (i) the date on which the selling stockholder may sell all of the shares of common stock purchased pursuant to the private placement and then held by such selling stockholder without restriction under Rule 144(k), or (ii) such time as all of such shares of common stock purchased by such selling stockholder pursuant to the private placement have been sold or otherwise transferred pursuant to a registration statement or otherwise.

As a result of Abraxas’ obligations in connection with the private placement, Abraxas has filed a registration statement, of which this prospectus is a part, for the resale of a total of 7,049,617 shares of its common stock, consisting

~~of the 5,874,678 shares of its common stock issued in the private placement and the 1,174,939 shares of common stock issuable upon exercise of the warrants issued in the private placement.~~

Abraxas was originally incorporated in Texas in 1977 and re-incorporated in Nevada in 1990 when it became a public company. ~~Abraxas’~~Our common stock is listed on The ~~American~~NASDAQ Stock ~~Exchange~~Market under the symbol ~~“ABP.~~“AXAS.” ~~Abraxas’~~Our principal offices are located at ~~500 North Loop 1604 East, Suite 100,~~18803 Meisner Drive, San Antonio, Texas ~~78232,~~78258, and ~~its~~our telephone number is (210) 490-4788. ~~Abraxas’ internet address~~Information contained on our website, www.abraxaspetroleum.com, is ~~www.abraxaspetroleum.com.~~

At December 14, 2009, we had a total of $146.5 million of indebtedness under our credit facility. Our indebtedness could have important consequences to us, including:

Our ability to service our indebtedness will depend upon, among other things, our future financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory and other factors, some of which are beyond our control. If our operating results are not sufficient to service our current or future indebtedness, we will be forced to take actions such as reducing or delaying acquisitions and/or capital expenditures, selling assets, restructuring or refinancing our indebtedness or seeking additional debt or equity capital or bankruptcy protection. We may not be able to effect any of these remedies on satisfactory terms or at all.

A breach of the terms and conditions of the credit facility, including the inability to comply with the required financial covenants, could result in an event of default. If an event of default occurs (after any applicable notice and cure periods), the lenders would be entitled to terminate any commitment to make further extensions of credit under the credit facility and to accelerate the repayment of amounts outstanding (including accrued and unpaid interest and fees). Upon a default under the credit facility, the lenders could also foreclose against any collateral securing such obligations, which may be all or substantially all of our assets. If that occurred, we may not be able to continue to operate as a going concern.

We must make ~~substantial~~ capital expenditures to develop ~~its~~our existing reserves and to discover new reserves. Historically, ~~Abraxas has~~we have financed our capital expenditures primarily with cash flow from operations, borrowings under credit facilities, ~~and~~ sales of producing properties, and ~~expects~~sales of debt and equity securities and we expect to continue to do so in the future. ~~Abraxas also anticipates receiving distributions of available cash from the Partnership. Abraxas~~We cannot assure you that itwe will have sufficient capital resources in the future to finance ~~its~~all of our planned capital expenditures.

Volatility in ~~natural~~oil and gas ~~and crude oil~~ prices, the timing of ~~both Abraxas’ and the Partnership’s~~our drilling programs and drilling results will affect ~~both Abraxas’ and the Partnership’s~~our cash flow from ~~operations as well as distributions of available cash by the Partnership to Abraxas.~~operations. Lower prices and/or lower production ~~of natural gas or crude oil~~ will also decrease revenues and cash flow, thus reducing the amount of financial resources available to meet ~~both Abraxas’ and the Partnership’s~~our capital requirements, including reducing the amount available to pursue our drilling opportunities. If ~~Abraxas’~~our cash flow from operations does not increase as a result of planned capital expenditures, ~~Abraxas’~~a greater percentage of our cash flow from operations will ~~first~~ be required ~~to satisfy~~for debt service ~~obligations~~ and ~~Abraxas’~~operating expenses and our planned capital expenditures would, by necessity, be decreased.

The borrowing base under ~~Abraxas’ new credit facility and under the Partnership’s~~our credit facility will be determined from time to time by the ~~lenders, consistent with their customary natural gas and crude oil lending practices.~~lenders. Reductions in estimates of ~~natural~~oil and gas ~~and crude oil~~ reserves could result in a reduction in the borrowing ~~bases,~~base, which would reduce the amount of financial resources available under ~~both Abraxas’ new credit facility and~~ the ~~Partnership’s~~ credit facility to meet ~~their respective~~our capital requirements. Such a reduction could be the result of lower commodity prices and/or production, inability to drill or unfavorable drilling results, ~~adverse~~ changes in ~~natural~~oil and gas ~~and crude oil~~ reserve engineering, the lenders’ inability to agree to an adequate borrowing base or adverse changes in the lenders’ practices regarding estimation of reserves.

If cash flow from operations or ~~the~~our borrowing ~~bases~~base decrease for any reason, ~~both Abraxas’ and the Partnership’s~~our ability to undertake ~~exploitation~~exploration and development activities ~~would~~could be adversely affected. As a result, ~~both Abraxas’ and the Partnership’s~~our ability to replace production may be limited. In addition, if ~~either of~~ the borrowing ~~bases~~base under the credit facility is reduced, ~~Abraxas and/or the Partnership~~we would be required to reduce our borrowings under the ~~level of borrowings~~credit facility so that such borrowings do not exceed the ~~applicable~~ borrowing base. This could further reduce the cash available to us for capital spending and, if ~~either Abraxas or the Partnership~~we did not have sufficient capital to reduce ~~its~~our borrowing level, ~~Abraxas and/or the Partnership~~we may be in default under ~~their respective~~the credit ~~facilities.~~

~~Abraxas has~~facility.

We have sold producing properties to provide itus with liquidity and capital resources in the past and ~~both Abraxas and the Partnership~~we may do so in the future. After any such sale, we would expect to utilize the proceeds to drill new wells on our remaining properties. If we cannot replace the production lost from properties sold with production from the remaining properties, ~~both Abraxas’ and the Partnership’s~~our cash flow from operations ~~including distributions of available cash from the Partnership,~~ will likely decrease, which in turn, would decrease the amount of cash available for additional capital spending.

~~Abraxas~~

Our future ~~natural~~oil and gas ~~and crude oil~~ production, and therefore ~~its~~our success, is highly dependent upon ~~its~~our ability to find, acquire and develop additional ~~natural gas and crude oil~~ reserves that are profitable to produce. The rate of production from ~~Abraxas’ natural~~our oil and gas ~~and crude oil~~ properties and our proved reserves will decline as our reserves are ~~produced unless Abraxas acquires~~produced. Unless we acquire additional properties containing proved reserves, ~~conducts~~conduct successful development and ~~exploitation~~exploration activities or, through engineering studies, ~~identifies~~identify additional behind-pipe zones or secondary recovery ~~reserves. Abraxas~~reserves, we cannot assure you that ~~its~~our exploration ~~exploitation~~ and development activities will result in increases in ~~its~~our proved reserves. Approximately 92% of the estimated ultimate recovery of our proved developed producing reserves as of December 31, 2008 had been produced. Based on the reserve information set forth in our reserve report as of December 31, 2008, our average annual estimated decline rate for our net proved developed producing reserves is 11% during the first five years, 8% in the next five years, and approximately 8% thereafter. These rates of decline are estimates and actual production declines could be materially higher. While ~~Abraxas has~~we have had some success in ~~pursuing these activities, Abraxas has~~finding, acquiring and developing additional reserves, we have not always been able to

fully replace the production volumes lost from natural field declines and prior property sales. For example, in 2006, we replaced only 7% of the reserves we produced. As ~~its~~our proved reserves and consequently ~~its~~our production decline, ~~Abraxas’~~our cash flow from operations, and the amount that ~~it is~~we are able to borrow under ~~its new~~our credit facility will also decline. In addition, approximately ~~71%~~46% of ~~Abraxas’ and 42% of the Partnership’s~~our total estimated proved reserves at December 31, ~~2006~~2008 were classified as undeveloped. By their nature, estimates of undeveloped reserves are less certain. Recovery of such reserves will require significant capital expenditures and successful drilling operations. ~~In addition, even~~Even if ~~Abraxas is~~we are successful in ~~its~~our development efforts, it could take several years for a significant portion of these undeveloped reserves to generate positive cash flow.

~~Abraxas~~

We cannot assure you that ~~any~~the new wells ~~Abraxas drills~~we drill will be productive or that ~~Abraxas~~we will recover all or any portion of ~~its~~our capital ~~investment employed in such drilling activities.~~investment. Drilling for ~~natural~~oil and gas ~~and crude oil~~ may be unprofitable. Dry holes and wells that are productive but do not produce sufficient net revenues after drilling, operating and other costs are unprofitable. The inherent risk of not finding commercially productive reservoirs will be compounded by the fact that ~~71%~~46% of ~~Abraxas’ and 42% of the Partnership’s~~our total estimated proved reserves atas of December 31, ~~2006~~2008 were classified as undeveloped. By their nature, estimates of undeveloped reserves are less certain. Recovery of such reserves will require significant capital expenditures and successful drilling operations. In addition, our properties may be susceptible to drainage from production by other operations on adjacent ~~properties, which could make previously commercially productive reservoirs unprofitable.~~properties. If the volume of ~~natural~~oil and gas ~~and crude oil~~ we produce decreases, our cash flow from operations ~~and the amount of any distributions that Abraxas may receive from the Partnership~~ will decrease.

Our drilling operations may be curtailed, delayed or cancelled as a result of a variety of factors that are beyond our control or not covered by insurance.

Our drilling operations are subject to a number of risks, including:

Any of these events could adversely affect our ability to conduct operations or cause substantial losses, including personal injury or loss of life, damage to or destruction of property, natural resources and equipment, pollution or other environmental contamination, loss of wells, regulatory penalties, suspension of operations, and attorney’s fees and other expenses incurred in the prosecution or defense of litigation.

We maintain insurance against some but not all of these risks. Additionally, we may elect not to obtain insurance if we believe that the cost of available insurance is excessive relative to the perceived risks presented. Losses could therefore occur for uninsurable or uninsured risks or in amounts in excess of existing insurance coverage. The occurrence of an event that is not fully covered by insurance could have a material adverse impact on our business activities, financial condition and results of operations.

Our credit facility ~~and the Partnership’s credit facility contain~~contains a number of significant covenants that, among other things, limit ~~both Abraxas’ and the Partnership’s~~our ability to:

In addition, ~~both Abraxas’ new~~our credit facility ~~and the Partnership’s credit facility require each of them~~requires us to maintain compliance with specified financial ~~ratios and satisfy certain financial condition tests. Both Abraxas’ and the Partnership’s~~covenants. Our ability to comply with these ~~ratios and financial condition tests~~covenants may be adversely affected by events beyond our control, and we cannot assure you that ~~either Abraxas or the Partnership will meet~~we can maintain compliance with these ~~ratios and financial condition tests.~~covenants. These financial ~~ratio restrictions and financial condition tests~~covenants could limit ~~both Abraxas’ and the Partnership’s~~our ability to obtain future financings, make needed capital expenditures, withstand a future downturn in our business or the economy in general or otherwise conduct necessary or desirable ~~corporate~~business activities.

A breach of any of these covenants ~~or either Abraxas’ or the Partnership’s inability to comply with the required financial ratios or financial condition tests~~ could result in a default under ~~Abraxas’ new credit facility and/or the~~

~~Partnership’s~~our credit facility. A default, if not cured or waived, could result in all of our indebtedness becoming immediately due and payable. If that should occur, we may not be able to pay all such debt or to borrow sufficient funds to refinance it. Even if new financing were then available, it may not be on terms that are acceptable or favorable to us.

The marketability of our production depends in part upon processing and transportation facilities. Transportation space on such gathering systems and pipelines is occasionally limited and at times unavailable due to repairs ~~maintenance~~ or improvements being made to such facilities or due to such space being utilized by other companies with priority transportation agreements. Our access to transportation options can also be ~~adversely~~ affected by U.S. ~~federal~~Federal and state regulation of ~~natural~~oil and gas ~~and crude oil~~ production and transportation, general economic conditions and changes in supply and ~~demand for such products.~~demand. These factors and the availability of markets ~~for our natural gas and crude oil production~~ are beyond our control. If market factors dramatically change, ~~significantly,~~ the financial impact on us could be substantial and ~~may~~ adversely affect our ability to produce and market ~~natural gas~~oil and ~~crude oil.~~

~~Hedging transactions have~~gas.

Our oil and gas is priced in the local markets where it is produced based on local or regional supply and demand factors. The prices we receive for our oil and gas are typically lower than the relevant benchmark prices, such as NYMEX. The difference between the benchmark price and the ~~Partnership enter into hedging arrangements~~price we receive is called a differential. Numerous factors may influence local pricing, such as refinery capacity, pipeline capacity and specifications, upsets in the midstream or downstream sectors of the industry, trade restrictions and governmental regulations. Additionally, insufficient pipeline capacity, lack of demand in any given operating area or other factors may cause the differential to increase in a particular area compared with other producing areas. For example, production increases from ~~time to time to~~competing Canadian and Rocky Mountain producers, combined with limited refining and pipeline capacity in the Rocky Mountain area, have gradually widened differentials in this area.

During 2008, differentials averaged $7.07 per Bbl of oil and $1.30 per Mcf of gas. Approximately 39% of our production during 2008 was from the Rocky Mountain and Mid-Continent regions. Historically, these regions have experienced wider differentials than our Permian Basin and Gulf Coast properties. As the percentage of our production from the Rocky Mountain and Mid-Continent regions increases, we expect that our price differentials will also increase. Increases in the differential between the benchmark prices for oil and gas and the wellhead price we receive could significantly reduce our revenues and our cash flow from operations.

To achieve more predictable cash flow and reduce our exposure to adverse fluctuations in ~~natural~~the prices of oil and gas and ~~crude~~to comply with the requirements under our credit facility, we enter into derivative contracts, which we sometimes refer to as hedging arrangements, for a significant portion of our oil and gas production that could result in both realized and unrealized derivative contract losses. We have entered into NYMEX-based fixed price commodity swap arrangements on approximately 85% of the oil and gas production from our estimated net proved developed producing reserves through December 31, 2012 and 70% for 2013 in order to comply with the requirements of our credit facility. Any new hedging arrangements will be priced at then-current market prices and may be significantly lower than the commodity

When our derivative contract prices are higher than market prices, we will incur realized and unrealized gains on our derivative contracts and when contract prices are lower than market prices, we will incur realized and unrealized losses. For the ~~years~~year ended December 31, ~~2004 and 2006, Abraxas~~2008, we recognized a realized loss on oil and gas derivative contracts of $9.3 million and an unrealized gain of $40.5 million. The realized loss resulted in a decrease in cash flow from ~~hedging activities of approximately $118,000 and $646,000, respectively. The Partnership’s credit facility requires the Partnership~~operations. We expect to continue to enter into similar hedging arrangements in the future to reduce our cash flow volatility. On July 29, 2009, we entered into hedging arrangements for ~~not less than 75% (nor more than 90%)~~specified volumes, which equate to approximately 85% of the ~~Partnership’s projected natural~~estimated oil and gas ~~and crude oil production. The Partnership entered into fixed price commodity swaps at current market prices on May 25, 2007 on approximately 75% of the Partnership’s projected~~production from our proved developed producing reserves ~~for the period from June 1, 2007 to~~through December 31, ~~2010. For more information on risks associated with the Partnership’s hedging activities, see “Risks Related to Abraxas’ Ownership of General Partner Units~~2012 and ~~Common Units of the Partnership – The Partnership’s derivative activities could increase cash flow volatility and adversely affect its ability to pay distributions.”~~

~~The following table sets forth Abraxas’ hedge position at June 1, 2007:~~

70% for 2013.

We cannot assure you that the ~~hedging transactions~~derivative contracts that we have entered into, or will enter into, will adequately protect us from financial loss in the future due to circumstances such as:

~~highly volatile natural gas and crude oil prices;~~

~~our natural gas and crude oil price production being less than expected; or~~

highly volatile oil and gas prices;

our production being less than expected; or

a counterparty to one of our hedging transactions defaulting on its contractual obligations.

The counterparties to our derivative contracts may be unable to perform their obligations to us which could adversely affect our cash flow.

At times when market prices are lower than our derivative contract prices, we are entitled to payments from our counterparties. The worldwide financial and credit crisis may adversely affect the ability of our counterparties to fulfill their obligations to us. If one of our ~~hedging transactions defaulting on its contractual obligations.~~

counterparties is unable or unwilling to make the required payments to us, it could adversely affect our cash flow.

Lower ~~natural~~oil and gas ~~and crude oil~~ prices increase the risk of ceiling limitation write-downs.

We use the full cost method to account for our ~~natural~~oil and gas ~~and crude oil~~ operations. Accordingly, we capitalize the cost to acquire, explore for and develop ~~natural~~oil and gas ~~and crude oil~~ properties. Under full cost accounting rules, the net capitalized cost of ~~natural~~oil and gas ~~and crude oil~~ properties may not exceed a “ceiling limit” which is based upon the present value of estimated future net cash flows from proved reserves, discounted at 10%. If net capitalized costs of ~~natural~~oil and gas ~~and crude oil~~ properties exceed the ceiling limit, we must charge the amount of the excess to earnings. This is called a “ceiling limitation write-down.” This charge does not impact cash flow from operating activities, but does reduce our

stockholders’ equity and earnings. The risk that we will be required to write-down the carrying value of ~~natural~~oil and gas ~~and crude oil~~ properties increases when ~~natural~~oil and gas ~~and crude oil~~ prices are ~~low.~~low, which could be further impacted by the new modernized oil and gas reporting disclosures which will require us to use an average

price over the prior 12-month period, rather than the year-end price on December 31, 2009. In addition, write-downs may occur if we experience substantial downward adjustments to our estimated proved reserves. An expense recorded in one period may not be reversed in a subsequent period even though ~~higher natural~~oil and gas ~~and crude oil~~ prices may have increased the ceiling applicable to the subsequent period.

~~Abraxas has incurred ceiling limitation write-downs~~

At December 31, 2008, our net capitalized costs of oil and gas properties exceeded the present value of our estimated proved reserves by $116.4 million resulting in ~~the past. At June 30, 2002, for example, Abraxas recorded~~ a ~~ceiling limitation~~ write-down of ~~$28.2~~$116.4 million. We cannot assure you that we will not experience additional ceiling limitation write-downs in the future.

Use of our net operating loss carryforwards may be limited.

At December 31, 2008, we had, subject to the limitation discussed below, $182.3 million of net operating loss carryforwards for U.S. tax purposes. These loss carryforwards will expire in varying amounts through 2028 if not otherwise used.

The use of our net operating loss carryforwards may be limited if an “ownership change” of over 50 percentage points occurs during any three-year period. Based on current estimates, we believe that we have not surpassed this threshold. With respect to any remaining net operating loss carryforwards following the recent merger of Abraxas ~~depends~~Energy Partners, L.P., which we refer to as Abraxas Energy, and Abraxas Petroleum, it is feasible that even a modest change of ownership (including, but not limited to, a shift in common stock ownership by one reasonably large stockholder or any offering of common stock) during the three-year period following the merger could trigger a significant limitation of the amount of such net operating loss carryforwards available to offset future taxable income.

Additionally, uncertainties exist as to the future utilization of the operating loss carryforwards under the criteria set forth under ACS 740-10. Therefore, we have established a valuation allowance of $66.9 million for deferred tax assets at December 31, 2006, $47.2 million at December 31, 2007 and $60.8 million at December 31, 2008.

We depend on ~~its~~our Chairman, President and CEO and the loss of his services could have an adverse effect on ~~its~~our operations.

~~Abraxas depends~~

We depend to a large extent on Robert ~~L. G.~~L.G. Watson, ~~its~~our Chairman of the Board, President and Chief Executive Officer, for our management and business and financial contacts. Mr. Watson may terminate his employment agreement with ~~Abraxas~~us at any time on 30 days notice, but, if he terminates without cause, he would not be entitled to the severance benefits provided under the terms of that agreement. Mr. Watson is not precluded from working for, with or on behalf of a competitor upon termination of his employment with ~~Abraxas.~~us. If Mr. Watson were no longer able or willing to act as ~~Abraxas’~~our Chairman, ~~President and Chief Executive Officer,~~ the loss of his services could have an adverse effect on our operations. In addition, in connection with the initial public offering by Abraxas’ previously wholly-owned subsidiary, Grey Wolf Exploration Inc., Abraxas, Grey Wolf and Mr. Watson agreed that Mr. Watson would continue to serve as Abraxas’ Chief Executive Officer and President and as the Chief Executive Officer and President of Grey Wolf, with Mr. Watson devoting two-thirds of his time to his positions and duties with Abraxas and one-third of his time to his position and duties with Grey Wolf. In consideration for receiving Mr. Watson’s services, Grey Wolf makes an annual payment to Abraxas of U.S. $100,000 and reimburses Abraxas for Mr. Watson’s expenses incurred in connection with providing such services.

~~Risks Related to Abraxas’ Ownership of General Partner Units and Common Units of the Partnership~~

The Partnership may not have sufficient cash flow from operations to pay the quarterly distributions on the general partner units and common units following establishment of cash reserves and payment of fees and expenses.

Under the terms of the Partnership’s partnership agreement, the amount of cash otherwise available for distribution will be reduced by the Partnership’s operating expenses and the amount of any cash reserve amounts that its general partner establishes to provide for future operations, future capital expenditures, future debt service requirements and future cash distributions to its unitholders, including Abraxas. The Partnership has informed Abraxas that the Partnership intends to reserve a substantial portion of its cash generated from operations to develop its natural gas and crude oil properties and to acquire additional natural gas and crude oil properties in order to maintain and grow the Partnership’s level of natural gas and crude oil reserves.

~~The amount of cash the Partnership actually generates will depend upon numerous factors related to its business that may be beyond its control, including among other things:~~

~~the amount of natural gas and crude oil it produces;~~

~~demand for and price of natural gas and crude oil;~~

~~continued drilling and development of natural gas and crude oil wells;~~

~~the level of the Partnership’s operating costs, including reimbursement of expenses to its general partner;~~

~~prevailing economic conditions; and~~

~~government regulation and taxation.~~

~~In addition, the actual amount of cash that the Partnership will have available for distribution will depend on other factors, including:~~

~~the level of its capital expenditures;~~

~~its ability to make borrowings under its credit facility to pay distributions;~~

~~sources of cash used to fund acquisitions;~~

~~debt service requirements and restrictions on distributions contained in its credit facility or future debt agreements;~~

~~fluctuations in its working capital needs;~~

~~general and administrative expenses;~~

~~cash settlement of hedging positions;~~

~~timing and collectibility of receivables; and~~

~~the amount of cash reserves, which the Partnership expects to be substantial, established by its general partner for the proper conduct of its business.~~

The Partnership is unlikely to be able to sustain its expected level of distributions without making accretive acquisitions or capital expenditures that maintain or grow its asset base. If the Partnership does not set aside sufficient cash reserves or make sufficient cash expenditures to maintain its asset base, it will be unable to pay distributions at the expected level from cash generated from operations and would likely reduce distributions.

Producing natural gas and crude oil reservoirs are characterized by declining production rates that vary based on reservoir characteristics and other factors. The rate of decline of the reserves and production from wells owned by the Partnership and included in Abraxas’ reserve report at December 31, 2006, will change if production from the Partnership’s existing wells declines in a different manner than has been estimated in such report and may change when the Partnership drills additional wells, makes acquisitions and under other circumstances. The Partnership’s future natural gas and crude oil reserves and production and its resulting cash flow and ability to make distributions depends on its success in developing and exploiting its current reserves efficiently and finding or acquiring additional recoverable reserves economically. The Partnership may not be able to develop, find or acquire additional reserves to replace its current and future production at acceptable costs, which would adversely affect its business, financial condition and results of operations and reduce cash available for distribution.

The Partnership is unlikely to be able to sustain its expected level of distributions without making accretive acquisitions or capital expenditures that maintain or grow its asset base. The Partnership will need to make substantial capital expenditures to maintain and grow its asset base, which will reduce cash available for distributions. Because the timing and amount of these capital expenditures fluctuate each quarter, the Partnership expects to reserve substantial amounts of cash each quarter to finance these expenditures over time. The Partnership may use the reserved cash to reduce indebtedness until it makes the capital expenditures. Over a longer period of time, if the Partnership does not set aside sufficient cash reserves or make sufficient expenditures to maintain its asset base, it will be unable to pay distributions at the expected level from cash generated from operations and would therefore expect to reduce cash distributions. If the Partnership does not make sufficient growth capital expenditures, it will be unable to sustain its business operations and therefore will be unable to maintain its proposed or current level of distributions and its business, financial condition and results of operations would be adversely affected.

To fund its growth capital expenditures, the Partnership will be required to use cash generated from operations, additional borrowings or the issuance of additional partnership interests, or some combination thereof.

Use of cash generated from operations by the Partnership will reduce cash available for distribution to Abraxas as a unitholder. The Partnership’s ability to borrow from its existing credit facility or to obtain additional bank financing or to access the capital markets for future equity or debt offerings may be limited by its financial condition at the time of any such borrowing, financing or offering and the covenants in its then-existing debt agreements, as well as by adverse market conditions resulting from, among other things, general economic conditions, operations and contingencies and uncertainties that are beyond the Partnership’s control. The Partnership’s failure to obtain the funds for necessary future capital expenditures could have a material adverse effect on its business, results of operations, financial condition and ability to pay distributions. Even if the Partnership is successful in obtaining the necessary funds, the terms of such

financings could limit its ability to pay distributions to unitholders, including Abraxas. In addition, incurring additional debt may significantly increase the Partnership’s interest expense and financial leverage, and issuing additional partnership interests may result in significant unitholder dilution thereby increasing the aggregate amount of cash required to maintain the then-current distribution rate, which could have a material adverse effect on the Partnership’s ability to pay distributions at the then-current distribution rate.

~~The amount of cash the Partnership has available for distribution to unitholders, including Abraxas, depends primarily on the Partnership’s cash flow and not solely on profitability.~~

The amount of cash the Partnership has available for distribution depends primarily on its cash flow, including cash from financial reserves and working capital or other borrowings, and not solely on profitability, which will be affected by non-cash items. As a result, the Partnership may make cash distributions during periods when it records losses and may not make cash distributions during periods when it records net income.

If the Partnership does not make acquisitions on economically acceptable terms, its future growth and ability to pay or increase distributions will be limited and acquisitions may decrease available cash.

The Partnership’s ability to grow and to increase distributions to unitholders depends in part on its ability to make acquisitions that result in an increase in pro forma available cash per unit. The Partnership may be unable to make such acquisitions because it is:

~~unable to identify attractive acquisition candidates or negotiate acceptable purchase contracts with them;~~

~~unable to obtain financing for these acquisitions on economically acceptable terms; or~~

~~outbid by competitors.~~

If the Partnership is unable to acquire properties containing proved reserves, its total level of proved reserves will decline as a result of production, and it will be limited in its ability to increase or possibly even to maintain its level of cash distributions.

~~Any acquisitions the Partnership completes will be subject to substantial risks that could reduce its ability to make distributions to unitholders, including Abraxas.~~

Even if the Partnership completes acquisitions that it believes will increase pro forma available cash per unit, these acquisitions may nevertheless result in a decrease in pro forma available cash per unit. Any acquisition involves potential risks, including, among other things:

~~the validity of the assumptions about reserves, future production, revenues and costs, including synergies;~~

~~an inability to integrate successfully the businesses acquired;~~

~~a decrease in the Partnership’s liquidity by using a significant portion of its available cash or borrowing capacity to finance acquisitions;~~

~~a significant increase in the Partnership’s interest expense or financial leverage if it incurs additional debt to finance acquisitions;~~

~~the assumption of known or unknown liabilities, losses or costs for which the Partnership is not indemnified or for which its indemnity is inadequate;~~

~~the diversion of management’s attention from other business concerns;~~

~~an inability to hire, train or retain qualified personnel to manage and operate the Partnership’s growing business and assets;~~

~~the incurrences of other significant charges, such as impairment of goodwill or other intangible assets, asset devaluation or restructuring charges; and~~

~~unforeseen difficulties encountered in operating in new geographic areas.~~

The Partnership’s decision to acquire a property will depend in part on the evaluation of data obtained from production reports and engineering studies, geophysical and geological analyses and seismic and other information, the results of which are often inconclusive and subject to various interpretations.

Also, the reviews of acquired properties are inherently incomplete because it generally is not feasible to perform an in-depth review of the individual properties involved in each acquisition. Even a detailed review of records and properties may not necessarily reveal existing or potential problems, nor will it permit a buyer to become sufficiently familiar with the properties to fully assess their deficiencies and potential. Inspections may not always be performed on every well, and environmental problems, such as ground water contamination, are not necessarily observable even when an inspection is undertaken.

~~If the Partnership’s acquisitions do not generate expected increases in pro forma available cash per unit, the Partnership will be less able to make distributions to unitholders, including Abraxas.~~

~~The Partnership’s derivative activities could increase cash flow volatility and adversely affect its ability to pay distributions.~~

To achieve more predictable cash flow and to reduce its exposure to adverse fluctuations in the prices of natural gas and crude oil, the Partnership currently and may in the future enter into derivative arrangements for a significant portion of its natural gas and crude oil production, which could result in both realized and unrealized hedging losses.

The Partnership’s commodity price exposure is related largely to the effectiveness and scope of its derivative activities. For example, the derivative instruments the Partnership utilizes are based on posted market prices, which may differ significantly from the actual prices realized. Furthermore, the Partnership has adopted a policy that requires, and its credit facility mandates, that it enter into derivative transactions related to only a portion of its expected production volumes and, as a result, the Partnership will continue to have direct commodity price exposure on the unhedged portion of its production volumes.

The Partnership’s actual future production may be significantly higher or lower than it estimates at the time it enters into derivative transactions for such period. If the actual production amount is higher than estimated, it will have greater commodity price exposure than intended. If the actual production amount is lower than the amount that is subject to derivative financial instruments, the Partnership might be forced to satisfy all or a portion of its derivative transactions without the benefit of the cash flow from the sale or purchase of the underlying physical commodity, resulting in a substantial diminution of its liquidity. As a result of these factors, the Partnership’s derivative activities may not be as effective as it intends in reducing the volatility of its cash flows, and in certain circumstances may actually increase the volatility of its cash flows and adversely affect the Partnership’s ability to make distributions to unitholders, including Abraxas.

Risks Related to Our Industry

Market conditions for ~~natural~~oil and gas, ~~and crude oil,~~ and particularly volatility of prices for ~~natural~~oil and gas, ~~and crude oil,~~ could adversely affect our revenue, cash flows, profitability and growth.

~~Both Abraxas’ and the Partnership’s~~

Our revenue, cash flows, profitability and future rate of growth depend substantially upon prevailing prices for ~~natural gas~~oil and ~~crude oil. Natural gas~~gas. Gas prices affect us more than ~~crude~~ oil prices because ~~most~~65% of our production and 72% of our reserves ~~are natural gas.~~were gas at December 31, 2008. Prices also affect the amount of cash flow available for capital expenditures and our ability to borrow money or raise additional capital. Lower prices may also make it uneconomical for us to increase or even continue current production levels of ~~natural gas~~oil and ~~crude oil.~~

gas.

Prices for ~~natural~~oil and gas ~~and crude oil~~ are subject to large fluctuations in response to relatively minor changes in the supply and demand for ~~natural~~oil and gas, ~~and crude oil,~~ market uncertainty and a variety of other factors beyond our control, including:

·changes in foreign and domestic supply and demand for ~~natural gas~~oil and ~~crude oil;~~

gas;

The current global recession has had a significant impact on commodity prices and ~~foreign governmental regulation; and~~

~~In addition to decreasing~~ our ~~revenue~~operations. If commodity prices remain depressed, our revenues, profitability and cash flow from operations ~~low or declining natural gas and crude oil prices~~may decrease which could ~~have additional material adverse effects on~~cause us ~~such as:~~

Estimates of ~~our~~ proved reserves and future net revenue are ~~uncertain and~~ inherently imprecise.

The process of estimating ~~natural~~oil and gas ~~and crude oil~~ reserves is complex involving decisions and assumptions in evaluating the available geological, geophysical, engineering and economic data. Accordingly, these estimates are imprecise. Actual future production, ~~natural~~oil and gas ~~and crude oil market~~ prices, revenues, taxes, ~~development costs and~~capital expenditures, operating expenses and quantities of recoverable ~~natural~~oil and gas ~~and crude oil~~ reserves most likely will vary from those estimated. Any significant variance ~~will~~could materially affect the estimated quantities and present value of our reserves set forth or incorporated by reference in this ~~report.~~prospectus. In addition, we may adjust estimates of proved reserves to reflect production history, results of exploration and development, prevailing ~~natural~~oil and gas ~~and crude oil~~ prices and other factors, many of which are beyond our control.

The estimates of our reserves are based upon various assumptions about future production levels, prices and costs that may not prove to be correct over time. In particular, estimates of ~~natural~~oil and gas ~~and crude oil~~ reserves, future net revenue from proved reserves and the PV-10 thereof for our ~~natural~~oil and gas ~~and crude oil~~ properties are based on the assumption that future ~~natural~~oil and gas ~~and crude oil~~ prices remain the same as ~~natural~~oil and gas ~~and crude oil~~ prices at December 31, ~~2006.~~2008. The sales prices as of such date used for purposes of such estimates were ~~$5.83~~$4.77 per Mcf of ~~natural~~ gas and ~~$56.42~~$41.84 per Bbl of ~~crude~~ oil. This compares with ~~$8.84~~$6.33 per Mcf of ~~natural~~ gas and ~~$56.92~~$87.30 per Bbl of ~~crude~~ oil as of December 31, ~~2005.~~2007. These estimates also assume that ~~Abraxas and the Partnership~~we will make future capital expenditures of approximately ~~$83.0~~$134.1 million in the aggregate primarily from 2009 through ~~2026, with the majority expected to be incurred from 2007 to 2012,~~2014, which are necessary to develop and realize the value of proved undeveloped reserves on our properties. In addition, approximately 46% of our total estimated proved reserves as of December 31, 2008 were classified as undeveloped. By their nature, estimates of undeveloped reserves are less certain than proved developed reserves. Any significant variance in actual results from these assumptions ~~will~~could also materially affect the estimated quantity and value of our reserves set forth or incorporated by reference in this ~~report.~~

prospectus.

As required by SEC ~~requirements,~~regulations, we base the estimated discounted future net cash flows from our proved reserves ~~are generally based~~ on prices and costs ~~as of~~in effect on the ~~end of the period~~day of the estimate. Actual future prices and costs may be materially higher or lower than the prices and costs as of the end of the year of the estimate. Any changes in consumption by natural gas purchasers or in governmental regulations or taxation will also affectHowever, actual future net cash ~~flows.~~ flows from our properties will be affected by factors such as:

The timing of both ~~the~~our production and ~~the~~our incurrence of expenses ~~from~~in connection with the development and production of ~~natural gas and crude oil~~our properties will affect the timing of actual future net cash flows from proved reserves, and thus their actual present value. In addition, the 10% discount factor we use when calculating discounted future net cash flow, which is required by the SEC, tomay not be ~~used in calculating discounted future net cash flows for reporting purposes, is not necessarily~~ the most ~~accurate~~appropriate discount ~~factor. The effective~~factor based on interest ~~rate at various times~~rates in effect from time to time and ~~the~~ risks associated with us or the ~~natural~~oil and gas ~~and crude oil~~ industry in ~~general~~general. Any material inaccuracies in our reserve estimates or underlying assumptions will materially affect the ~~accuracy~~quantities and present value of ~~the 10% discount factor.~~

our reserves, which could adversely affect our business, results of operations and financial condition.

Our ~~natural~~oil and gas ~~and crude oil~~ drilling and production activities are subject to numerous risks, many of which are beyond our control. These risks include the risk of fire, explosions, blow-outs, pipe failure, abnormally pressured

formations and environmental ~~hazards and terrorist attacks.~~hazards. Environmental hazards include oil spills, ~~natural~~ gas leaks, ruptures and discharges of toxic gases. In addition, title problems, weather conditions ~~and events~~ and mechanical difficulties or shortages or delays in delivery of drilling rigs and other equipment could negatively affect our operations. If any of these or other similar industry operating risks occur, we could have substantial losses. Substantial losses also may result from injury or loss of life, severe damage to or destruction of property, clean-up responsibilities, regulatory investigation and penalties and suspension of operations. In accordance with industry practice, we maintain insurance against some, but not all, of the risks described above. We cannot assure you that our insurance will be adequate to cover losses or liabilities.

Also, we cannot predict the continued availability of insurance at premium levels that justify its purchase.

We operate in a highly competitive environment. The principal resources necessary for the exploration and production of ~~natural~~oil and gas ~~and crude oil~~ are leasehold prospects under which ~~natural~~oil and gas ~~and crude oil~~ reserves may be discovered, drilling rigs and related equipment to explore for such reserves and knowledgeable personnel to conduct all phases of ~~natural~~oil and gas ~~and crude oil~~ operations. We must compete for such resources with both major ~~natural~~oil and gas ~~and crude oil~~ companies and independent operators. Many of these competitors have financial and other resources substantially greater than ours. ~~In the past, we have had difficulty securing drilling equipment in certain of our core areas.~~ Although we believe our current operating and financial resources are adequate to preclude any significant disruption of our operations in the immediate future, we cannot assure you that such ~~materials and~~ resources will be ~~readily~~ available ~~or available at economically viable costs.~~

to us.

Our industry is cyclical and, from time to time, there iscould be a shortage of drilling rigs, equipment, supplies, insurance or qualified personnel. During these periods, the costs and delivery times of rigs, equipment and supplies are substantially greater. In addition, the demand for, and ~~wage rates~~wages of, qualified drilling rig crews rise as the number of active rigs in service increases. ~~As a result of increasing levels of exploration~~When oil and ~~production in response to strong~~gas prices ~~of natural gas and crude oil,~~are high, the demand for oilfield services ~~has risen~~rises and the ~~costs~~cost of these services ~~are increasing. These increased costs of production may adversely affect our business, financial condition~~increases.

Matters regulated include permits for drilling operations, drilling and abandonment bonds, reports concerning operations, the spacing of wells and unitization and pooling of properties and taxation. At various times, regulatory agencies have imposed price controls and limitations on production. In order to conserve supplies of ~~natural~~oil and gas, ~~and crude oil,~~ these agencies have restricted the rates of flow ~~of natural~~from oil and gas ~~and crude oil~~ wells below actual production capacity. Federal, state and local laws regulate production, handling, storage, transportation and disposal of ~~natural~~oil and gas, ~~and crude oil,~~ by-products from ~~natural~~oil and gas ~~and crude oil~~ and other substances and materials produced or used in connection with ~~natural~~oil and gas ~~and crude oil~~ operations. To date, our expenditures related to complying with these laws and for remediation of existing environmental contamination have not been significant. We believe that we are in substantial compliance with all applicable laws and regulations. However, the

The Obama administration has proposed the outright elimination of ~~operations.~~

many of the key federal income tax benefits historically associated with the oil and gas industry. Although presented in very summary form, among other significant energy tax items, the administration’s budget appears to propose the complete elimination of (i) expensing of intangible drilling costs, and (ii) the “percentage depletion” method of deduction with respect to oil and gas wells. Although no legislation has been formally introduced, if this proposal (or others) is enacted into law, it could adversely affect our net earnings.

Additionally, Congress is currently considering legislation to amend the Safe Drinking Water Act to require the disclosure of chemicals used by the oil and gas industry in the hydraulic fracturing process. Hydraulic fracturing is an important and commonly used process in the completion of oil and gas wells. The sponsors of the bills have asserted that chemicals used in the fracturing process could adversely affect drinking water supplies. The proposed legislation would require the reporting and public disclosure of chemicals used in the fracturing process as well as additional levels of regulation that could lead to operational restrictions and delays and increased operating costs.

We are currently authorized to issue 200,000,000 shares of common stock with such rights as determined by our board of directors. We may in the future issue previously authorized and unissued securities, resulting in the dilution of the ownership interests of current stockholders. The potential issuance of any such additional shares of common stock may create downward pressure on the trading price of our common stock. We may also issue additional shares of common stock or other securities that are convertible into or exercisable for common stock for capital raising or other business purposes. Future sales of substantial amounts of common stock, or the perception that sales could occur, could have a material adverse effect on the price of our common stock.

We have never paid a cash dividend on ~~its~~our common stock and the terms of the ~~new~~ credit facility ~~will limit Abraxas’ ability to pay~~prohibit us from paying dividends on ~~the~~our common stock.

At ~~June 12, 2007, Abraxas~~December 14, 2009, we had ~~48,753,403~~76,156,751 shares of common stock outstanding of which ~~5,098,023~~5,774,877 shares were held by affiliates and, in addition, ~~2,289,116~~4,289,892 shares of common stock were subject to outstanding options granted under ~~certain~~ stock option plans (of which ~~1,759,116~~2,007,622 shares were vested at ~~June 12, 2007)~~December 14, 2009). ~~At June 12, 2007, Abraxas also had warrants to purchase 1,174,939 shares of common stock outstanding which were sold to the selling stockholders in the private placement.~~

All of the shares of common stock held by ~~our~~ affiliates are restricted or control securities under Rule 144 promulgated under the Securities ~~Act.~~Act of 1933, as amended. The shares of ~~the~~ common stock issuable upon exercise of ~~the~~ stock options have been registered under the Securities Act. Sales of shares of common stock under Rule 144 or another exemption under the Securities Act or pursuant to a registration statement could have a material adverse effect on the price of ~~the~~our common stock and could impair our ability to raise additional capital through the sale of equity securities.

The price of ~~Abraxas~~our common stock has been volatile and could continue to fluctuate substantially.

~~Abraxas~~

Our common stock is traded on The ~~American~~NASDAQ Stock ~~Exchange.~~Market. The market price of ~~the~~our common stock has been volatile and could fluctuate substantially based on a variety of factors, including the following:

~~fluctuations in commodity prices;~~

~~variations in results of operations;~~

~~legislative or regulatory changes;~~

fluctuations in commodity prices;

~~general trends in the industry;~~

~~market conditions; and~~

variations in results of operations;

~~analysts’ estimates and other events in the natural gas and crude oil industry.~~

legislative or regulatory changes;

~~Abraxas~~

general trends in the industry;

market conditions; and

analysts’ estimates and other events in the oil and gas oil industry.

We may issue shares of preferred stock with greater rights than our common stock.

Subject to the rules of The ~~American~~NASDAQ Stock ~~Exchange, Abraxas’~~Market, our articles of incorporation authorize ~~its~~our board of directors to issue one or more series of preferred stock and set the terms of the preferred stock without seeking any further approval from holders of ~~the~~our common stock. Any preferred stock that is issued may rank ahead of ~~the~~our common stock in terms of dividends, priority and liquidation premiums and may have greater voting rights than ~~the~~our common stock.

Anti-takeover provisions could make a third party acquisition of Abraxas difficult.

~~Abraxas’~~

Our articles of incorporation and bylaws provide for a classified board of directors, with each member serving a three-year term, and eliminate the ability of stockholders to call special meetings or take action by written consent. Each of the provisions in the articles of incorporation and bylaws could make it more difficult for a third party to acquire Abraxas without the approval of its board. In addition, the Nevada corporate statute also contains certain provisions that could make an acquisition by a third party more difficult.

An active market may not ~~develop~~continue for ~~its~~our common ~~stock.~~

~~The~~stock and we could face de-listing if our stock price declines.

Our common stock is quoted on The ~~American~~NASDAQ Stock ~~Exchange.~~Market. While there isare currently ~~one specialist~~three market makers in ~~the~~our common stock, ~~this specialist is~~these market makers are not obligated to continue to make a market in ~~the~~our common stock. In this event, the liquidity of ~~the~~our common stock could be adversely impacted and a stockholder could have difficulty obtaining accurate stock quotes.

~~Future issuance~~ If our stock price declines and remains below $1.00 per share for an extended period of ~~additional~~time, we could be de-listed from The NASDAQ Stock Market as the minimum threshold for a continued listing is $1.00 per share.

USE OF PROCEEDS

Unless we specify otherwise in the applicable prospectus supplement, the net proceeds we receive from the sale of the securities offered by this prospectus and any prospectus supplement will be used for general corporate purposes. General corporate purposes may include any of the following:

repaying debt;

providing working capital;

funding capital expenditures;

paying for possible acquisitions or the expansion of our business; or

repurchasing our capital stock.

We may temporarily invest the net proceeds we receive from any offering of securities or use the net proceeds to repay short-term debt until we can use them for their stated purposes.

DILUTION

Our net tangible book value at December 31, 2008 and September 30, 2009 was $0.24 and $(0.15) per share of common stock, respectively. Net tangible book value per share of common stock is determined by dividing our tangible net worth, which is tangible assets less liabilities, by the total number of shares of our common stock ~~could cause dilution of ownership interests and adversely affect the stock price.~~

Abraxas may in the future issue previously authorized and unissued securities, resulting in the dilution of the ownership interests of current stockholders and purchasers of common stock offered hereby. In addition, under the terms of the Exchange and Registration Rights Agreement, Abraxas may be required to issue additionaloutstanding. If we offer shares of the common stock. Abraxas is currently authorized to issue 200,000,000 shares of common stock with such rights as determined by its board of directors. The potential issuance of such additional shares of common stock may create downward pressure on the trading price of the common stock. Abraxas may also issue additional shares of the common stock or other securities that are convertible into or exercisable for shares of common stock for capital raising or other business purposes. Future sales of substantial amounts of common stock, or the perception that sales could occur, could have a material adverse effect on the price of our common ~~stock.~~

~~USE OF PROCEEDS~~

~~All~~stock, purchasers of ~~the shares of~~our common stock ~~covered by this~~in that offering may experience immediate dilution in net tangible book value per share. The prospectus ~~are being sold by the selling stockholders. See “Selling Stockholders.” Abraxas will not receive any proceeds from these sales~~supplement relating to an offering of shares of our common ~~stock.~~

stock will set forth the information regarding any dilutive effect of that offering.

RATIO OF EARNINGS TO FIXED CHARGES

The following table contains our consolidated ratio of earnings to fixed charges for the periods indicated. You should read these ratios in connection with our consolidated financial statements, including the notes to those statements, incorporated by reference in this prospectus.

Year Ended December 31,
Nine Months Ended September 30,
2004 2005 2006 2007 2008 2009
Ratio of earnings to fixed charges
1.15x 1.40x 1.04x 7.58x * *

* Earnings inadequate to cover fixed charges.

Earnings consist of income (loss) from continuing operations before income taxes plus fixed charges. Fixed charges consist of interest expenses and amortization of deferred financing fees. Our earnings were inadequate to cover fixed charges in 2008 by $52.4 million and in the nine months ended September 30, 2009 by $10.0 million. In 2004, 2005, 2006 and 2007, we had earnings of $22.7 million, $21.8 million, $19.0 million and $65.6 million, respectively, and fixed charges of $19.7 million, $15.6 million, $18.3 million, and $8.7 million, respectively, resulting in a ratio of earnings to fixed charges of 1.15x, 1.40x, 1.04x, and 7.58x, respectively.

DESCRIPTION OF DEBT SECURITIES

The following description of debt securities sets forth certain general terms and provisions of the debt securities to which this prospectus and any prospectus supplement may relate. The particular terms of any series of debt securities and the extent to which the general provisions may apply to a particular series of debt securities will be described in a prospectus supplement relating to that series. The debt securities will be issued under one or more separate indentures between us and a trustee to be named in the prospectus supplement. Senior debt securities will be issued under a senior indenture and subordinated debt securities will be issued under a subordinated indenture. Together the senior indenture and the subordinated indenture are called indentures.

Because we have included only a summary of the indenture terms, you must read the indentures in full to understand every detail of the terms of the debt securities. The summary is not complete. The forms of the indentures have been filed as exhibits to the registration statement to which this prospectus relates and you should read the indentures for provisions that may be important to you.

As used in this section of the prospectus and under the caption “Description of Capital Stock,” the terms “we,” “our” and “us” mean Abraxas Petroleum Corporation only, and not its subsidiaries.

General

Unless otherwise indicated in the applicable prospectus supplement, the debt securities will be our direct, unsecured obligations. The senior debt securities will rank equally with all of our other senior and unsubordinated debt. The subordinated debt securities will have a junior position to certain of our debt, as described in the subordinated securities themselves or under the supplemental indenture under which they are issued.

We conduct some of our operations through our subsidiaries. To the extent of such operations, holders of debt securities will have a position junior to the prior claims of creditors of our subsidiaries, including trade creditors, debtholders, secured creditors, taxing authorities and guarantee holders, and any preferred stockholders, except to the extent that we may ourself be a creditor with recognized and unsubordinated claims against any subsidiary.

If specified in the prospectus supplement, the debt securities will be general obligations of our subsidiaries that execute subsidiary guarantees. Unless otherwise specified in the prospectus supplement, such subsidiary guarantees will be unsecured obligations. See “– Subsidiary Guarantees.”

A prospectus supplement and a supplemental indenture relating to any series of debt securities being offered will include specific terms relating to the offering. These terms will include some or all of the following:

the title and type of the debt securities;

any limit upon the total principal amount of the debt securities;

the dates on which the principal and premium (if any) of the debt securities will be payable;

the interest rate or rates, or the method of determination thereof, that the debt securities will bear and the interest payment dates for the debt securities;

places where payments of the principal, premium, if any, and interest may be made on the debt securities;

any optional redemption periods;

any subordination and the terms thereof;

any sinking fund, amortization or other provisions that would obligate us to redeem, repurchase or repay some or all of the debt securities;

if other than US dollars, the currency or currencies, or the form of other securities or property in which principal of (and premium, if any) and/or interest on the debt securities will or may be payable;

any index or other method used to determine the amount of payment of principal of (and premium, if any) and/or interest on the debt securities;

whether any portion of the principal amount of such debt securities is payable upon declaration of the acceleration of the maturity thereof;

any additional means of satisfaction or discharge of the debt securities;

whether our subsidiaries will provide guarantees of the debt securities, and the terms of any subordination of such guarantee;

whether the debt securities will be secured or unsecured;

any deletions, modifications, or additions to the events of default or covenants pertaining to the debt securities or made for the benefit of the holders thereof;

whether the debt securities will be convertible or exchangeable and, if so, the provisions regarding convertibility or exchangeability of the debt securities;

whether the debt securities will be subject to certain optional interest rate reset provisions;

whether the debt securities will be issued as a global debt security and, in that case, the identity of the depository for the debt securities; and

any other terms of the debt securities.

Neither of the indentures limits the amount of debt securities that may be issued. Each indenture allows debt securities to be issued up to the principal amount that may be authorized by us and may be in any currency or currency unit designated by us.

Debt securities of a series may be issued in registered, bearer, coupon or global form.

The prospectus supplement for each series of debt securities will state whether the debt securities will be issued in registered form and whether the debt securities will be in denominations other than $1,000 each or multiples thereof.

Original Issue Discount

One or more series of debt securities offered by this prospectus may be sold at a substantial discount below their stated principal amount, bearing no interest or interest at a rate that at the time of issuance is below market rates. The federal income tax consequences and special considerations applicable to any series of debt securities generally will be described in the applicable prospectus supplement.

Subsidiary Guarantees

Our payment obligations under any series of the debt securities may be jointly and severally guaranteed by one or more of our subsidiaries. If a series of debt securities is so guaranteed by any of our subsidiaries, such subsidiaries will execute a supplemental indenture or notation of guarantee as further evidence of their guarantee. The applicable prospectus supplement will describe the terms of any guarantee by our subsidiaries.

The obligations of each subsidiary under its subsidiary guarantee may be limited to the maximum amount that will not result in such guarantee obligations constituting a fraudulent conveyance or fraudulent transfer under federal or state law, after giving effect to all other contingent and fixed liabilities of that subsidiary and any collections from or payments made by or on behalf of any other subsidiary guarantor in respect to its obligations under its subsidiary guarantee.

Each indenture may restrict consolidations or mergers with or into a subsidiary guarantor or provide for the release of a subsidiary from a subsidiary guarantee, as set forth in a related prospectus supplement, the applicable indenture, and any applicable related supplemental indenture.

If a series of debt securities is guaranteed by our subsidiaries and is designated as subordinate to our senior debt, then the guarantee by those subsidiaries will be subordinated to their senior debt and will be subordinated to any guarantees by those subsidiaries of our senior debt. See “– Subordination.”

Subordination

Under the subordinated indenture, payment of the principal, interest and any premium on the subordinated debt securities will generally be subordinated and junior in right of payment to the prior payment in full of any debt specified in the applicable prospectus supplement and supplemental indenture as being senior to the subordinated debt.

Consolidation, Merger or Sale

The indentures generally permit a consolidation or merger between us and another entity. They also permit the sale by us of all or substantially all of our property and assets. If this happens, the remaining or acquiring entity shall assume all of our responsibilities and liabilities under the indentures, including the payment of all amounts due on the debt securities and performance of the covenants in the indentures. However, we will consolidate or merge with or into any other entity or sell all or substantially all of our assets only according to the terms and conditions of the indentures. The remaining or acquiring entity will be substituted for us in the indentures with the same effect as if it had been an original party to the indentures. Thereafter, the successor entity may exercise our rights and powers under any indenture, in our name or in its own name. Any act or proceeding required or permitted to be done by our board of directors or any of our officers may be done by the board or officers of the successor entity. If we sell all or substantially all of our assets, upon compliance with these provisions, we shall be released from all of our liabilities and obligations under any indenture and under the debt securities.

Modification of Indentures

Under each indenture our rights and obligations and the rights of the holders may be modified with the consent of the holders of a majority in aggregate principal amount of the outstanding debt securities of each series affected by the modification. No modification of the principal or interest payment terms, and no modification reducing the percentage required for modifications, is effective against any holder without its consent. Certain of our rights and obligations not having an adverse effect on the rights of the holders may be modified without the consent of the holders of the debt securities.

Events of Default

Each of the indentures defines an event of default with respect to debt securities of any series as any of the following events:

failure to pay interest on any debt security for 30 days after it is due;

failure to pay the principal of or premium, if any, on any debt security when due;

failure to deposit any sinking fund payment for 30 days after it is due;

failure to perform any other covenant in the indenture that continues for 60 days after being given written notice;

certain events of bankruptcy, insolvency or reorganization; or

any other event of default included in any indenture or supplemental indenture.

An event of default for a particular series of debt securities does not necessarily constitute an event of default for any other series of debt securities issued under an indenture. The trustee may withhold notice to the holders of debt securities of any default (except in the payment of principal or interest) if it considers such withholding of notice to be in the best interests of the holders.

If an event of default for any series of debt securities occurs and continues, the trustee or the holders of at least 25% in aggregate principal amount of the debt securities of the series may declare the entire principal of all the debt securities of that series to be due and payable immediately. If an event of default occurs and is continuing with respect to all series of debt securities as a result of a failure to perform a covenant applicable to all securities or because of bankruptcy, insolvency or reorganization, the trustee or the holders of at least 25% in aggregate principal amount of all of the debt securities may declare the entire principal of all the debt securities to be due and payable immediately. If either of these events occurs, subject to certain conditions, the holders of a majority of the aggregate principal amount of the debt securities of that series (or of the debt securities of all series, as the case may be) can void the declaration. There is no automatic acceleration, even in the event of bankruptcy, insolvency or reorganization.

Other than its duties in case of a default, a trustee is not obligated to exercise any of its rights or powers under any indenture at the request, order or direction of any holders, unless the holders offer the trustee reasonable indemnity. If they provide this reasonable indemnification, the holders of a majority in principal amount of any series of debt securities may direct the time, method and place of conducting any proceeding or any remedy available to the trustee, or exercising any power conferred upon the trustee, for any series of debt securities.

Covenants

Under the indentures, we will:

pay the principal of, and interest and any premium on, the debt securities when due;

maintain a place of payment;

maintain our corporate existence;

deliver a report to the trustee at the end of each fiscal year reviewing our obligations under the indentures; and

deposit sufficient funds with any paying agent on or before the due date for any principal, interest or premium.

Equal and Ratable Securitization

Neither we nor any restricted subsidiary may secure senior debt securities of any series unless the debt securities of every other series of senior debt securities are also equally and ratably secured. The subordinated securities have no such restrictive covenant.

Payment and Transfer

Principal, interest and any premium on fully registered securities will be paid at designated places. Payment will be made by check mailed to the persons in whose names the debt securities are registered on days specified in the indentures or any prospectus supplement. Debt securities payments in other forms will be paid at a place designated by us and specified in a prospectus supplement.

Fully registered securities may be transferred or exchanged at the corporate trust office of the trustee or at any other office or agency maintained by us for such purposes without the payment of any service charge except for any tax or governmental charge.

Global Securities

Certain series of the debt securities may be issued as permanent global debt securities to be deposited with a depositary with respect to that series. Unless otherwise indicated in the prospectus supplement, the following is a summary of the depository arrangements applicable to debt securities issued in permanent global form and for which The Depositary Trust Company (“DTC”) acts as depositary.

Each global debt security will be deposited with, or on behalf of, DTC, as depositary, or its nominee and registered in the name of a nominee of DTC. Except under the limited circumstances described below, global debt securities are not exchangeable for definitive certificated debt securities.

Ownership of beneficial interests in a global debt security is limited to institutions that have accounts with DTC or its nominee (“participants”) or persons that may hold interests through participants. In addition, ownership of beneficial interests by participants in a global debt security will be evidenced only by, and the transfer of that ownership interest will be effected only through, records maintained by DTC or its nominee for a global debt security. Ownership of beneficial interests in a global debt security by persons that hold through participants will be evidenced only by, and the transfer of that ownership interest within that participant will be effected only through, records maintained by that participant. DTC has no knowledge of the actual beneficial owners of the debt securities. Beneficial owners will not receive written confirmation from DTC of their purchase, but beneficial owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the participants through which the beneficial owners entered the transaction. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of such securities in definitive form. Such laws may impair the ability to transfer beneficial interests in a global debt security.

Payment of principal of, and interest on, debt securities represented by a global debt security registered in the name of or held by DTC or its nominee will be made to DTC or its nominee, as the case may be, as the registered owner and holder of the global debt security representing those debt securities. We have been advised by DTC that upon receipt of any payment of principal of, or interest on, a global debt security, DTC will immediately credit accounts of participants on its book-entry registration and transfer system with payments in amounts proportionate to their respective beneficial interests in the principal amount of that global debt security as shown in the records of DTC. Payments by participants to owners of beneficial interests in a global debt security held through those participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the sole responsibility of those participants, subject to any statutory or regulatory requirements that may be in effect from time to time.

Neither we, any trustee nor any of our respective agents will be responsible for any aspect of the records of DTC, any nominee or any participant relating to, or payments made on account of, beneficial interests in a permanent global debt security or for maintaining, supervising or reviewing any of the records of DTC, any nominee or any participant relating to such beneficial interests.

A global debt security is exchangeable for definitive debt securities registered in the name of, and a transfer of a global debt security may be registered to, any person other than DTC or its nominee, only if:

DTC notifies us that it is unwilling or unable to continue as depositary for that global debt security or at any time DTC ceases to be registered under the Securities Exchange Act of 1934;

we determine in our discretion that the global debt security shall be exchangeable for definitive debt securities in registered form; or

a supplemental indenture shall so provide.

Any global debt security that is exchangeable pursuant to the preceding sentence will be exchangeable in whole for definitive debt securities in registered form, of like tenor and of an equal aggregate principal amount as the global debt security, in denominations specified in the applicable

prospectus supplement (if other than $1,000 and integral multiples of $1,000). The definitive debt securities will be registered by the registrar in the name or names instructed by DTC. We expect that these instructions may be based upon directions received by DTC from its participants with respect to ownership of beneficial interests in the global debt security.

Except as provided above, owners of the beneficial interests in a global debt security will not be entitled to receive physical delivery of debt securities in definitive form and will not be considered the holders of debt securities for any purpose under the indentures. No global debt security shall be exchangeable except for another global debt security of like denomination and tenor to be registered in the name of DTC or its nominee. Accordingly, each person owning a beneficial interest in a global debt security must rely on the procedures of DTC and, if that person is not a participant, on the procedures of the participant through which that person owns its interest, to exercise any rights of a holder under the global debt security or the indentures.

We understand that, under existing industry practices, in the event that we request any action of holders, or an owner of a beneficial interest in a global debt security desires to give or take any action that a holder is entitled to give or take under the debt securities or the indentures, DTC would authorize the participants holding the relevant beneficial interests to give or take that action, and those participants would authorize beneficial owners owning through those participants to give or take that action or would otherwise act upon the instructions of beneficial owners owning through them.

DTC has advised us that DTC is a limited purpose trust company organized under the laws of the State of New York, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code and a “clearing agency” registered under the Securities Exchange Act of 1934. DTC was created to hold securities of its participants and to facilitate the clearance and settlement of securities transactions among its participants in those securities through electronic book-entry changes in accounts of the participants, thereby eliminating the need for physical movement of securities certificates. DTC’s participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is owned by a number of its participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to DTC’s book-entry system is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. The rules applicable to DTC and its participants are on file with the Securities and Exchange Commission.

Defeasance

We will be discharged from our obligations on the debt securities of any series at any time if we deposit with the trustee sufficient cash or government securities to pay the principal, interest, any premium and any other sums due to the stated maturity date or a redemption date of the debt securities of the series. If this happens, the holders of the debt securities of the series will not be entitled to the benefits of the indenture except for registration of transfer and exchange of debt securities and replacement of lost, stolen or mutilated debt securities.

We must also obtain an opinion of counsel to the effect that as a result of the defeasance, holders of that series of debt securities will not recognize income, gain or loss for federal income tax purposes and will be subject to federal income tax on the same amount, in the same manner and at the same time as would have been the case if such defeasance had not occurred.

Meetings

Each indenture contains provisions describing how meetings of the holders of debt securities of a series may be convened. A meeting may be called at any time by the trustee, and also, upon request, by us or the holders of at least 20% in principal amount of the outstanding debt securities of a series. A notice of the meeting must always be given in the manner described under “Notices” below. Generally speaking, except for any consent that must be given by all holders of a series as described under “Modification of Indentures”

above, any resolution presented at a meeting of the holders of a series of debt securities may be adopted by the affirmative vote of the holders of a majority in principal amount of the outstanding debt securities of that series, unless the indenture allows the action to be voted upon to be taken with the approval of the holders of a different specific percentage of principal amount of outstanding debt securities of a series. In that case, the holders of outstanding debt securities of at least the specified percentage must vote in favor of the action. Any resolution passed or decision taken at any meeting of holders of debt securities of any series in accordance with the applicable indenture will be binding on all holders of debt securities of that series and any related coupons, unless, as discussed in “Modification of Indentures” above, the action is only effective against holders that have approved it. The quorum at any meeting called to adopt a resolution, and at any reconvened meeting, will be holders holding or representing a majority in principal amount of the outstanding debt securities of a series.

Governing Law

Each indenture and the debt securities will be governed by and construed in accordance with the laws of the State of New York.

Notices

Notices to holders of debt securities will be given by mail to the addresses of such holders as they appear in the security register.

Credit Facility

Our credit facility has a maximum commitment of $300.0 million and availability under the revolving portion of the credit facility is subject to a borrowing base. At December 14, 2009, $138.5 million was outstanding under the revolving portion of our credit facility. The borrowing base under the credit facility is currently $145.0 million and will be determined semi-annually by the lenders based upon our reserve reports, one of which must be prepared by our independent petroleum engineers and one of which may be prepared internally. The amount of the borrowing base will be calculated by the lenders based upon their valuation of our proved reserves utilizing these reserve reports and their own internal decisions. In addition, the lenders, in their sole discretion, will be able to make one additional borrowing base redetermination during any six-month period between scheduled redeterminations and we will be able to request one redetermination during any six-month period between scheduled redeterminations. The lenders will also be able to make a redetermination in connection with any sales of producing properties with a market value of 5% or more of our then-current borrowing base and in connection with any hedge termination which could reduce the collateral value by 5% or more. Our borrowing base of $145.0 million was determined based upon our reserve report dated June 1, 2009. Our borrowing base can never exceed the $300.0 million maximum commitment amount. Outstanding amounts under the revolving portion of the credit facility bear interest at (a) the greater of (1) the reference rate announced from time to time by Société Générale, (2) the Federal Funds Rate plus 0.5%, and (3) a rate determined by Société Générale as the daily one-month LIBOR plus, in each case, (b) 1.5%—2.75%, depending on the utilization of the borrowing base, or, if we elect, at the greater of (1) 2.0% and (2) LIBOR plus, in each case, 2.5%—3.75%, depending on the utilization of the borrowing base. At December 14, 2009, the interest rate on the revolving portion of the credit facility was 5.75%.

We have also borrowed $10.0 million under the term loan portion of the credit facility. Outstanding amounts under the term loan portion of the credit facility bear interest at (a) the greater of (1) the reference rate announced from time to time by Société Générale, (2) the Federal Funds Rate plus 0.5%, and (3) a rate determined by Société Générale as the daily one-month LIBOR plus, in each case, (b) 4.75%, or, if we elect, at the greater of (1) 2.0% and (2) LIBOR plus, in each case, 5.75%. At December 14, 2009, the interest rate on the term loan portion of the credit facility was 7.75%. The term loan portion of the credit facility is subject to amortization beginning on January 31, 2010. The first amortization installment of $1.0 million is due on January 31, 2010 and the second amortization installment of $3.0 million is due on March 31, 2010; thereafter, a quarterly amortization installment of $2.0 million is due at the end of each quarter until the term loan is repaid. At December 14, 2009, we had made a total of $2.0 million of principal payments on the term

loan. It is anticipated that the term loan will be repaid on or before December 31, 2010, after which, it may not be redrawn.

Subject to earlier termination rights and events of default, the stated maturity date of the credit facility is October 5, 2012. Interest is payable quarterly on reference rate advances and not less than quarterly on Eurodollar advances. We are permitted to terminate the credit facility and are able, from time to time, to permanently reduce the lenders’ aggregate commitment under the credit facility in compliance with certain notice and dollar increment requirements.

Each of our subsidiaries (other than Canadian Abraxas Petroleum Corporation) has guaranteed our obligations under the credit facility on a senior secured basis. Obligations under the credit facility are secured by a first priority perfected security interest, subject to certain permitted encumbrances, in all of our and our subsidiary guarantors’ material property and assets.

Under the credit facility, we are subject to customary covenants, including certain financial covenants and reporting requirements. We are required to maintain a current ratio as of the last day of each quarter of not less than 1.00 to 1.00 and an interest coverage ratio as of the last day of each quarter of not less than 2.50 to 1.00. We are also required to maintain a total debt to EBITDAX ratio as of the last day of each quarter of not more than 4.50 to 1.00 for the quarter ending September 30, 2009 through the quarter ending September 30, 2010, and not more than 4.00 to 1.00 thereafter. The current ratio is defined as the ratio of consolidated current assets to consolidated current liabilities. For the purposes of this calculation, current assets include the portion of the borrowing base which is undrawn but excludes any cash deposited with or at the request of a counter-party to a hedging arrangement and any assets representing a valuation account arising from the application of SFAS 133 (which relates to derivative instruments and hedging activities and is now referred to as ASC 815) and SFAS 143 (which relates to asset retirement obligations and is now referred to as ASC 410-20) and current liabilities exclude the current portion of long-term debt and any liabilities representing a valuation account arising from the application of SFAS 133 and SFAS 143. The coverage ratio is defined as the ratio of consolidated EBITDAX to consolidated interest expense for the four fiscal quarters ended on the calculation date after giving pro forma effect to the merger of Abraxas Energy and Abraxas Petroleum. For the purposes of this calculation, EBITDAX is consolidated net income plus interest expense, oil and gas exploration expenses, taxes, depreciation, amortization, depletion and other non-cash charges including non-cash charges resulting from the application of SFAS 123R (which relates to stock-based compensation and is now referred to as ASC 718), SFAS 133 and SFAS 143 plus all realized net cash proceeds arising from the settlement or monetization of any hedge contracts or upon the termination of any hedge contract minus all non-cash items of income which were included in determining consolidated net income, including all non-cash items resulting from the application of SFAS 133 and SFAS 143. Interest expense includes total interest, letter of credit fees and other fees and expenses incurred in connection with any debt. The total debt to EBITDAX ratio is defined as the ratio of total debt to consolidated EBITDAX for the four fiscal quarters ended on the calculation date after giving pro forma effect to the merger of Abraxas Energy and Abraxas Petroleum. For the purposes of this calculation, total debt is the outstanding principal amount of debt, excluding debt associated with the office building, and obligations with respect to surety bonds and hedge arrangements.

The credit facility also required that we enter into hedging arrangements for specified volumes, which equate to approximately 85% of the estimated oil and gas production from our net proved developed producing reserves through December 31, 2012 and 70% for 2013.

The following table sets forth our derivative contract position as of December 14, 2009:

Fixed Price Swap
OIL GAS
Contract Periods
Daily
Volume (Bbl)

Swap
Price

Daily Volume
(Mmbtu)

Swap
Price

Q4 2009 1,355 $ 68.90 13,981 $ 4.50
2010 1,158 73.28 11,258 5.73
2011 1,035 76.61 9,580 6.52
2012 946 70.89 8,303 6.77
2013 705 80.79 5,962 6.84

In addition to the foregoing and other customary covenants, the credit facility contains a number of covenants that, among other things, restrict our ability to:

incur or guarantee additional indebtedness;

transfer or sell assets;

create liens on assets;

engage in transactions with affiliates other than on an “arm’s-length” basis;

make any change in the principal nature of our business; and

permit a change of control.

The credit facility also contains customary events of default, including nonpayment of principal or interest, violations of covenants, cross default and cross acceleration to certain other indebtedness, bankruptcy and material judgments and liabilities.

DESCRIPTION OF CAPITAL STOCK

Common Stock

~~Abraxas is~~

We are currently authorized to issue up to 200,000,000 shares of common stock, par value $0.01 per share.

As of ~~June 12, 2007,~~December 14, 2009, there were ~~48,753,403~~76,156,751 shares of ~~the~~Abraxas common stock issued and outstanding. Holders of ~~the~~our common stock are entitled to cast one vote for each share held of record on all matters submitted to a vote of stockholders and are not entitled to cumulate votes for the election of directors. Holders of our common stock do not have preemptive rights to subscribe for additional shares of common stock issued by us.

Holders of ~~the~~our common stock are entitled to receive dividends as may be declared by the ~~Board~~board of ~~Directors~~directors out of funds legally available ~~therefor.~~

for that purpose.

Under the terms of ~~Abraxas’ new~~our credit facility, ~~Abraxas may not pay~~we are prohibited from paying dividends on shares of ~~the~~our common stock. In the event of liquidation, holders of ~~the~~our common stock are entitled to share pro rata in any distribution of ~~Abraxas’~~our assets remaining after payment of liabilities, subject to the preferences and rights of the holders of any outstanding shares of preferred stock. All of the outstanding shares of ~~the~~our common stock are fully paid and nonassessable.

Preferred Stock

~~Abraxas’~~

Our articles of incorporation authorize the issuance of up to 1,000,000 shares of preferred stock, par value $0.01 per share, in one or more series. The ~~Board of Directors is authorized, without any further action by~~following description discusses the ~~stockholders, to determine the dividend rights, dividend rate, conversion rights, voting rights, rights and~~general terms of ~~redemption, liquidation preferences, sinking fund~~the preferred stock that we may issue. The description of preferred stock set forth below and the description of the terms of a particular series of preferred stock set forth in the applicable prospectus supplement are not

complete and ~~other rights, preferences, privileges~~are qualified in their entirety by reference to our articles of incorporation and ~~restrictions~~to the certificate of designation relating to that series of preferred stock. The certificate of designation for any series of preferred stock will be filed with the Securities and Exchange Commission promptly after the offering of that series of preferred stock.

The particular terms of any series of preferred stock being offered by us under this shelf registration will be described in the ~~number~~prospectus supplement relating to that series of ~~shares constituting~~preferred stock. If so indicated in the prospectus supplement relating to a particular series of preferred stock, the terms of any such series ~~and~~of preferred stock may differ from the ~~designation thereof.~~terms set forth below. The ~~rights~~terms of the preferred stock may include:

the title of the series and the number of shares in the series;

the price at which the preferred stock will be offered;

the dividend rate or rates or method of calculating the rates, the dates on which the dividends will be payable, whether or not dividends will be cumulative or noncumulative and, if cumulative, the dates from which dividends on the preferred stock being offered will cumulate;

the voting rights, if any, of the holders of shares of the preferred stock being offered;

the provisions for a sinking fund, if any, and the provisions for redemption, if applicable, of the preferred stock being offered;

the liquidation preference per share;

the terms and conditions, if applicable, upon which the preferred stock being offered will be convertible into our common stock, including the conversion price, or the manner of calculating the conversion price, and the conversion period;

the terms and conditions, if applicable, upon which the preferred stock being offered will be exchangeable for debt securities, including the exchange price, or the manner of calculating the exchange price, and the exchange period;

any listing of the preferred stock being offered on any securities exchange;

whether interests in the shares of the series will be represented by depositary shares;

the relative ranking and preferences of the preferred stock being offered as to dividend rights and rights upon liquidation, dissolution or the winding up of our affairs;

any limitations on the issuance of any class or series of preferred stock ranking senior or equal to the series of preferred stock being offered as to dividend rights and rights upon liquidation, dissolution or the winding up of our affairs; and

any additional rights, preferences, qualifications, limitations and restrictions of the series.

Upon issuance, the shares of ~~common~~preferred stock will be ~~subject~~fully paid and nonassessable, which means that its holders will have paid their purchase price in full and we may not require them to ~~and may be adversely affected by, the rights~~pay additional funds. Holders of ~~holders of any~~ preferred stock ~~that may~~will not have any preemptive rights.

The transfer agent and registrar for the preferred stock will be ~~issued~~identified in the ~~future.~~

applicable prospectus supplement.

Option Plans

~~Abraxas’~~

The Abraxas Petroleum Corporation 2005 Employee Long-Term ~~Equity~~ Incentive Plan, or LTIP, authorizes ~~Abraxas~~us to grant incentive stock options, non-qualified stock options and shares of restricted stock to ~~its~~our executive officers, as well as to all ~~employees~~ of ~~Abraxas.~~our employees. Option grants generally have a term of 10 years and vest in equal increments over 4 years. Restricted stock grants vest in accordance with each individual grant agreement. Vesting is accelerated in certain events such as a change

of control. A total of ~~1,200,000~~5,200,000 shares of Abraxas

common stock are currently reserved under the ~~2005 Employee Long Term Equity Incentive Plan,~~LTIP, subject to adjustment following certain events, such as stock splits.

Pursuant to ~~Abraxas’~~Abraxas Petroleum’s 2005 ~~Non-Employee~~ Director ~~Long Term Equity Incentive~~ Plan, ~~Abraxas~~we also ~~grants~~grant non-qualified stock options and restricted stock to non-employee directors. This plan is administered by ~~the~~our compensation committee and provides that each year, at the first regular meeting of the ~~Board~~board of ~~Directors~~directors immediately following our annual stockholder’s meeting, each non-employee director shall be granted or issued awards of 10,000 shares of our common stock, for participation in ~~Board~~board and ~~Committee~~committee meetings during the previous calendar year. We also pay each ~~quarterly~~ director’s annual retainer ~~payment of $3,000~~fee, which is currently $12,000, in shares of restricted stock pursuant to the 2005 ~~Non-Employee~~ Director ~~Long Term Equity Incentive~~ Plan. The number of shares issued to each non-employee director is calculated each quarter by dividing one-quarter of the then-established annual retainer fee by the closing price of our common stock on the date of each quarterly board meeting. Fractional shares are not issued; therefore, any shortfall of the then-established annual retainer fee will be paid in cash after the last quarterly board meeting of each year. Any non-employee director who leaves the ~~Board~~board during the calendar year is not eligible for any restricted stock awards after leaving the ~~Board.~~

board. No non-employee director is entitled to awards for greater than 60,000 shares of Common Stock during any year plus the number of shares of restricted stock paid in consideration of the annual retainer.

The compensation committee also administers our 1993 Key Contributor Stock Option Plan, 1994 Long Term Incentive Plan, Directors Restricted Share Plan and Director Stock Option Plan, each of which is now expired, but under which we previously granted restricted stock, incentive stock options and non-qualified stock options as permitted by such plans.

The following table sets forth the number of options issued and outstanding, the amount of those options outstanding that are fully vested and the average exercise price per share of such options under the ~~2005 Employee Long-Term Equity Incentive Plan,~~LTIP, the 2005 ~~Non-Employee~~ Director ~~Long Term Equity Incentive~~ Plan, 1993 Key Contributor Stock Option Plan, 1994 Long Term Incentive Plan, Directors Restricted Share Plan and Director Stock Option Plan, as of December 31, ~~2006~~2008, as well as pursuant to the individual option ~~agreement:~~

agreements:

Plan Category
Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights
(a)
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights
(b)
Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
(c)
Equity compensation plans approved by security holders
2,006,713
$ 2.52
1,245,218
Equity compensation plans not approved by security holders
450,403 (1)
$ 1.27
0

~~__________________~~

~~(1)~~

Other than the amount of shares and the exercise price, the director options were generally granted upon the same terms. The director options expire no later than 10 years from the grant date, become vested and exercisable in one-third increments as of each of the first and second anniversaries of the grant date, and as of the earliest to occur of (i) the date on which the optionee is replaced as a director of Abraxas as a result of the expiration of the optionee’s term and not as a result of optionee’s death, disability, resignation or removal from Abraxas’ Board of Directors for cause in accordance with Abraxas’ articles of incorporation, and optionee’s successor as a director of Abraxas is duly elected and qualified, or (ii) the third anniversary of the grant date.

Plan Category	Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights (a)	Weighted Average Exercise Price of Outstanding Options, Warrants and Rights (b)	Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c)
Equity compensation plans approved by security holders	1,967,526	$3.14	1,503,072
Equity compensation plans not approved by security holders	422,252	$1.29	―

Anti-takeover Effects of Certain Provisions of the Articles of Incorporation and Bylaws

~~Abraxas’~~

Our articles of incorporation and bylaws provide for the ~~Board~~board of ~~Directors~~directors to be divided into three classes of directors serving staggered three-year terms. As a result, approximately one-third of the ~~Board~~board of ~~Directors~~directors will be elected each year. The articles of incorporation and bylaws provide that the ~~Board~~board of ~~Directors~~directors will consist of not less than three ~~nor~~or more than twelve members, with the exact number to be determined from time to time by the affirmative vote of a majority of directors then in office. The ~~Board~~board of ~~Directors,~~directors, and not the stockholders, has the authority to determine the number of directors. This provision could prevent any stockholder from obtaining majority

representation on ~~Abraxas’ Board of Directors~~the Abraxas board by enlarging the ~~Board~~board of ~~Directors~~directors and by filling the new directorships with the stockholder’s own nominees. In addition, directors may be removed by the stockholders only for cause.

~~The~~

Our articles of incorporation and bylaws provide that special meetings of ~~Abraxas’~~our stockholders may be called only by the Chairman of the ~~Board,~~board, the President or a majority of the members of the ~~Board~~board of ~~Directors.~~directors. This provision may make it more difficult for stockholders to take actions opposed by the ~~Board~~board of ~~Directors.~~

~~The~~directors.

Our articles of incorporation and bylaws provide that any action required to be taken or which may be taken by holders of our common stock must be effected at a duly called annual or special meeting of such holders, and may not be taken by any written consent of such stockholders. These provisions may have the effect of delaying consideration of a stockholder proposal until the next annual meeting unless a special meeting is called by the persons set forth above. The provisions of the articles of incorporation and bylaws prohibiting stockholder action by written consent could prevent the holders of a majority of the voting power of Abraxas from using the written consent procedure to take stockholder action and taking action by consent without giving all of our stockholders entitled to vote on a proposed action the opportunity to participate in determining such proposed action.

Anti-Takeover Statutes

Chapter 78 of the Nevada Revised Statutes, which we refer to as the Nevada GCL, contains two provisions, described below as “Combination Provisions” and the “Control Share Act,” that may make ~~the~~ unsolicited or hostile attempts to acquire control of a corporation through certain types of transactions more difficult.

Restrictions on Certain Combinations between Nevada Resident Corporations and Interested ~~Stockholders.~~

Stockholders

The Nevada GCL includes certain provisions (the “Combination Provisions”) prohibiting certain “combinations” (generally defined to include certain mergers, disposition of assets transactions, and share issuance or transfer transactions) between a resident domestic corporation and an “interested stockholder” (generally defined to be the beneficial owner of 10% or more of the voting power of the outstanding shares of the corporation), except those combinations which are approved by the board of directors before the interested stockholder first obtained a 10% interest in the corporation’s stock. There are additional exceptions to the prohibition, which apply to combinations if they occur more than three years after the interested stockholder’s date of acquiring shares. The Combination Provisions apply unless the corporation elects against their application in its original articles of incorporation or an amendment thereto or timely elected against their application in its bylaws no later than October 31, 1991. ~~Abraxas’~~Our articles of incorporation and bylaws do not currently contain a provision rendering the Combination Provisions inapplicable.

Nevada Control Share ~~Act.~~

Act

Nevada Revised Statutes 78.378 through ~~78.403,~~78.3793, inclusive, which we refer to as the Control Share Act, ~~imposes~~impose procedural hurdles on and ~~curtails~~curtail greenmail practices of corporate raiders. The Control Share Act temporarily disenfranchises the voting power of “control shares” of a person or group (“Acquiring Person”) purchasing a “controlling interest” in an “issuing corporation” (as defined in the Nevada GCL) not opting out of the Control Share Act. In this regard, the Control Share Act will apply to an “issuing corporation” unless, before an acquisition is made, the articles of incorporation or bylaws in effect on the tenth day following the acquisition of a controlling interest provide that it is inapplicable. ~~Abraxas’~~Our articles of incorporation and bylaws do not currently contain a provision rendering the Control Share Act inapplicable.

Under the Control Share Act, an “issuing corporation” is a corporation organized in Nevada which has 200 or more stockholders, at least 100 of whom are stockholders of record and residents of Nevada, and which does business in Nevada directly or through an affiliated company. ~~Abraxas’~~Our status at the time of the occurrence of a transaction governed by the Control Share Act (assuming that our articles of incorporation or bylaws have not theretofore been amended to include an opting out provision) would determine whether the Control Share Act is applicable.

The Control Share Act requires an Acquiring Person to take certain procedural steps before such Acquiring Person can obtain the full voting power of the control shares. “Control shares” are the shares of a corporation (1) acquired or offered to be acquired which will enable the Acquiring Person to own a “controlling interest,” and (2) acquired within 90 days immediately preceding that date. A “controlling interest” is defined as the ownership of

shares which would enable the Acquiring Person to exercise certain graduated amounts (beginning with one-fifth) of all voting power of the corporation. The Acquiring Person may not vote any control shares without first obtaining approval from the stockholders not characterized as “interested stockholders” (as defined below).

To obtain voting rights in control shares, the Acquiring Person must file a statement at the registered office of the issuer (“Offeror’s Statement”) setting forth certain information about the acquisition or intended acquisition of stock. The Offeror’s Statement may also request a special meeting of stockholders to determine the voting rights to be accorded to the Acquiring Person. A special stockholders’ meeting must then be held at the Acquiring Person’s expense within 30 to 50 days after the Offeror’s Statement is filed. If a special meeting is not requested by the Acquiring Person, the matter will be addressed at the next regular or special meeting of stockholders.

At the special or annual meeting at which the issue of voting rights of control shares will be addressed, “interested stockholders” may not vote on the question of granting voting rights to control the corporation or its parent unless the articles of incorporation of the issuing corporation provide otherwise. Our articles of incorporation do not currently contain a provision allowing for such voting power.

If full voting power is granted to the Acquiring Person by the disinterested stockholders, and the Acquiring Person has acquired control shares with a majority or more of the voting power, then (unless otherwise provided in the articles of incorporation or bylaws in effect on the tenth day following the acquisition of a controlling interest) all stockholders of record, other than the Acquiring Person, who have not voted in favor of authorizing voting rights for the control shares, must be sent a “dissenter’s notice” advising them of the fact and of their right to receive “fair value” for their shares. Our articles of incorporation and bylaws do not provide otherwise. By the date set in the dissenter’s notice, which may not be less than 30 ~~nor~~or more than 60 days after the dissenter’s notice is delivered, any such stockholder may demand to receive from the corporation the “fair value” for all or part of his shares. “Fair value” is defined in the Control Share Act as “not less than the highest price per share paid by the Acquiring Person in an acquisition.”

The Control Share Act permits a corporation to redeem the control shares in the following two instances, if so provided in the articles of incorporation or bylaws of the corporation in effect on the tenth day following the acquisition of a controlling interest: (1) if the Acquiring Person fails to deliver the Offeror’s Statement to the corporation within 10 days after the Acquiring Person’s acquisition of the control shares; or (2) an Offeror’s Statement is delivered, but the control shares are not accorded full voting rights by the stockholders. Our articles of incorporation and bylaws do not address this matter.

Transfer Agent and Registrar

The transfer agent and registrar for ~~the~~our common stock is American Stock Transfer & Trust Company.

~~SELLING STOCKHOLDERS~~

DESCRIPTION OF WARRANTS

We are registering the shares to permit the selling stockholders and their pledgees, donees, transferees and other successors-in-interest that receive their shares from the selling stockholders as a gift, partnership distribution or other non-sale related transfer after the date of this prospectus to resell the shares when and as they deem appropriate. The following table sets forth:

~~the name of each Selling Stockholder,~~

~~the number and percent of shares of our common stock that each Selling Stockholder beneficially owned prior to the offering for resale of the shares under this prospectus, including~~may issue warrants to purchase ~~common~~debt or equity securities. We may issue warrants independently or together with any offered securities. The warrants may be attached to or separate from those offered securities. We may issue the warrants under warrant agreements to be entered into between us and a bank or trust company, as warrant agent, all as described in the applicable prospectus supplement.

The prospectus supplement relating to any warrants that we may offer will contain the specific terms of the warrants. These terms may include the following:

· the title of the warrants;

the designation, amount and terms of the securities for which the warrants are exercisable;

the designation and terms of the other securities, if any, with which the warrants are to be issued and the number of warrants issued with each other security;

the price or prices at which the warrants will issued;

the aggregate number of warrants;

any provisions for adjustment of the number or amount of securities receivable upon exercise of the warrants or the exercise price of the warrants;

the price or prices at which the securities purchasable upon exercise of the warrants may be purchased;

if applicable, the date on and after which the warrants and the securities purchasable upon exercise of the warrants will be separately transferable;

the date on which the right to exercise the warrants will commence, and the date on which the right will expire;

the maximum or minimum number of warrants that may be exercised at any time;

information with respect to book-entry procedures, if any; and

any other terms of the warrants, including terms, procedures and limitations relating to the exchange and exercise of the warrants.

Further terms of the warrants and the applicable warrant agreement will be set forth in the applicable prospectus supplement.

DESCRIPTION OF DEPOSITARY SHARES

We may, at our option, elect to offer fractional shares of preferred stock, rather than full shares of preferred stock. If we do, we will issue to the public receipts for depositary shares, and ~~options~~each of these depositary shares will represent a fraction of a share of a particular series of preferred stock.

Description of Depositary Shares

The shares of any series of preferred stock underlying the depositary shares will be deposited under a deposit agreement between us and a bank or trust company selected by us to be the depositary. Subject to the terms of the deposit agreement, each owner of a depositary share will be entitled, in proportion to the applicable fractional interest in shares of preferred stock underlying that depositary share, to all the rights and preferences of the preferred stock underlying that depositary share.

The depositary shares will be evidenced by depositary receipts issued pursuant to the deposit agreement. Depositary receipts will be issued to those persons who purchase ~~common~~the fractional interests in the preferred stock underlying the depositary shares, in accordance with the terms of the offering. The following summary of the deposit agreement, the depositary shares and the depositary receipts is not complete. You should refer to the forms of the deposit agreement and depositary receipts that may be filed as exhibits to the registration statement in the event we issue depositary shares.

Dividends and Other Distributions

The depositary will distribute all cash dividends or other cash distributions received in respect of the preferred stock to the record holders of depositary shares relating to that preferred stock in proportion to the number of depositary shares owned by those holders.

If there is a distribution other than in cash, the depositary will distribute property received by it to the record holders of depositary shares that are ~~exercisable within 60 days~~entitled to receive the distribution, unless the depositary determines that it is not feasible to make the distribution. If this occurs, the depositary may, with our approval, sell the property and distribute the net proceeds from the sale to the applicable holders.

Redemption of Depositary Shares

If a series of preferred stock underlying the depositary shares is subject to redemption, the depositary shares will be redeemed from the proceeds received by the depositary resulting from the redemption, in whole or in part, of that series of preferred stock held by the depositary. The redemption price per depositary share will be equal to the applicable fraction of the redemption price per share payable with respect to that series of the preferred stock. Whenever we redeem shares of preferred stock that are held by the depositary, the depositary will redeem, as of the same redemption date, the number of ~~this prospectus,~~

depositary shares representing the shares of preferred stock so redeemed. If fewer than all the depositary shares are to be redeemed, the depositary shares to be redeemed will be selected by lot or pro rata as determined by the depositary.

After the date fixed for redemption, the depositary shares called for redemption will no longer be outstanding, and all rights of the holders of those depositary shares will cease, except the right to receive any money, securities, or other property upon surrender to the depositary of the depositary receipts evidencing those depositary shares.

Voting the Preferred Stock

Upon receipt of notice of any meeting at which the holders of preferred stock are entitled to vote, the depositary will mail the information contained in the notice of meeting to the record holders of the depositary shares underlying that preferred stock. Each record holder of those depositary shares on the record date (which will be the same date as the record date for the preferred stock) will be entitled to instruct the depositary as to the exercise of the voting rights pertaining to the amount of the preferred stock underlying that holder’s depositary shares. The depositary will try, as far as practicable, to vote the number of shares of ~~the common~~preferred stock ~~that~~underlying those depositary shares in accordance with such instructions, and we will agree to take all action which may be ~~offered for resale for~~deemed necessary by the ~~account of each Selling Stockholder under this prospectus, and~~

depositary in order to enable the ~~number and percent of~~depositary to do so. The depositary will not vote the shares of ~~the common~~preferred stock to ~~be beneficially owned by each Selling Stockholder after~~ the ~~offering~~extent it does not receive specific instructions from the holders of depositary shares underlying the preferred stock.

Amendment and Termination of the ~~resale~~Depositary Agreement

The form of depositary receipt evidencing the depositary shares ~~(assuming all~~and any provision of the ~~offered resale shares are sold~~deposit agreement may be amended at any time by ~~each Selling Stockholder).~~

~~The number of shares in~~agreement between us and the ~~column “Number of Shares Being Offered” represents all~~depositary. However, any amendment that materially and adversely alters the rights of the holders of depositary shares ~~that each Selling Stockholder may offer under this prospectus. Abraxas does~~will not ~~know how long each Selling Stockholder will hold~~be effective unless the ~~shares before selling them or how many shares they will sell and we currently have no agreements, arrangements or understandings with~~amendment has been approved by the ~~stockholders regarding the sale~~holders of ~~any~~at least a majority of the ~~resale shares.~~depositary shares then outstanding. The ~~shares offered by this prospectus~~deposit agreement may be ~~offered from time to time~~terminated by ~~each Selling Stockholder listed below.~~

~~This table is prepared solely based on information supplied to~~ us or by the ~~listed Selling Stockholder, any Schedules 13D~~depositary only if (i) all outstanding depositary shares have been redeemed or ~~13G~~(ii) there has been a final distribution of the underlying preferred stock in connection with our liquidation, dissolution or winding up and ~~Forms 3 and 4,~~the preferred stock has been distributed to the holders of depositary receipts.

We will pay all transfer and other ~~public documents filed with~~taxes and governmental charges arising solely from the ~~SEC, and assumes the sale of all~~existence of the ~~resale shares.~~

~~SELLING STOCKHOLDERS~~

Name
Shares of Common Stock Beneficially Owned Prior to Offering
Percentage
Number of Shares Being Offered
Shares of Common Stock Beneficially Owned After the Offering
Percentage
Lehman Brothers MLP Opportunity Fund L.P. (1)
1,566,581
3.19%
1,566,581
0
0
Michael J. Cannon (1)
1,566,581
3.19%
1,566,581
0
0
Kyriacos A. Loupis (1)
1,566,581
3.19%
1,566,581
0
0
Jeffrey P. Wood (1)
1,566,581
3.19%
1,566,581
0
0
Citigroup Global Markets, Inc. (2)
1,566,581
3.19%
1,566,581
0
0
Brendan O’Dea (2)
1,566,581
3.19%
1,566,581
0
0
Third Point Offshore Fund, Ltd. (3)
1,042,403
2.13%
1,042,403
0
0
Third Point Ultra Ltd. (3)
139,425
*
139,425
0
0
Third Point Partners LP (3)
138,800
*
138,800
0
0
Third Point Partners Qualified LP (3)
128,460
*
128,460
0
0
Third Point LLC (3)
1,449,088
2.96%
1,449,088
0
0
Daniel S. Loeb (3)
1,449,088
2.96%
1,449,088
0
0
Fiduciary/Claymore Opportunity Fund (4)
685,380
1.40%
685,380
0
0
Energy Income and Growth Fund (4)
293,734
*
293,734
0
0
FAMCO MLP Partners, LLC, Series ABP-1 (4)
195,822
*
195,822
0
0
Hartz Capital MLP, LLC (5)
195,824
*
195,824
0
0
Edward J. Stern (5)
195,824
*
195,824
0
0
Ronald J. Bangs (5)
195,824
*
195,824
0
0
Jonathan B. Schindel (5)
195,824
*
195,824
0
0
Valley Energy Investment Fund U.S., L.P. (6)
1,096,607
2.24%
1,096,607
0
0

* Less than 1%

~~______________~~

~~(1)~~

Michael J. Cannon, Kyriacos A. Loupis and Jeffrey P. Wood in their capacity as portfolio managers, share voting and investment control over the shares held by Lehman Brothers MLP Opportunity Fund L.P. Eachdepositary arrangements. We will pay charges of ~~Messers. Wood, Cannon and Loupis disclaims beneficial ownership of all of such shares. The address of Lehman Brothers MLP Opportunity Fund L.P. is 399 Park Avenue, 9~~^th ~~Floor, New York, NY 10022.~~

~~(2)~~

Brendan O’Dea in his capacity as director, has voting and investment control over the shares held by Citigroup Global Markets, Inc. Mr. O’Dea disclaims beneficial ownership of all of such shares. The address of Citigroup Global Markets, Inc. is 390 Greenwich Street, 3^rd Floor, New York, NY 10013. Citigroup Global Markets, Inc. is a broker-dealer registered pursuant to Section 15(b) of the Exchange Act and is a member of the NASD. Citigroup Global Markets, Inc. (i) purchased the securities for its own account, not as a nominee or agent, in the ordinary course of business and with no intention of selling or otherwise distributing any transaction in violation of securities laws and (ii) at the time of purchase, Citigroup Global Markets, Inc. did not have any

~~agreement or understanding, direct or indirect, with any other person to sell or otherwise distribute~~ the ~~securities purchased.~~

~~(3)~~

Third Point LLC, and Daniel S. Loeb in his capacity as the CEO of Third Point LLC, have voting and investment control over the shares held by Third Point Offshore Fund, Ltd., Third Point Ultra Ltd., Third Point Partners LP and Third Point Partners Qualified LP. Third Point LLC is the investment advisor for Third Point Offshore Fund, Ltd., Third Point Ultra Ltd., Third Point Partners LP and Third Point Partners Qualified L.P. Third Point LLC and Mr. Loeb disclaim beneficial ownership of all of such shares. The address of Third Point LLC is 390 Park Avenue, 18^th ~~Floor, New York, NY 10022.~~

~~(4)~~

An investment committee of Fiduciary Asset Management, LLC (“FAMCO”), whose members may change from time to time, has voting and investment control over the shares held by Fiduciary/Claymore Opportunity Fund, Energy Income and Growth Fund and FAMCO MLP Partners, LLC, Series ABP-1. The members of the investment committee disclaim beneficial ownership of all such shares. On April 13, 2007, Piper Jaffray Companies (“PJC”), a broker-dealer registered pursuant to Section 15(b) of the Exchange Act and a member of the NYSE and FAMCO, announced the acquisition of FAMCO by PJC. According to the announcement, the transaction is expected to close in the third quarter of 2007, subject to certain regulatory approvals and customary closing conditions. The address of Fiduciary/Claymore Opportunity Fund, Energy Income and Growth Fund and FAMCO MLP Partners, LLC, Series ABP-1 is 8112 Maryland Avenue, Suite 400, St. Louis, MO 63105.

~~(5)~~

Edward J. Stern, Ronald J. Bangs and Jonathan B. Schindel, in their capacity as officers of Hartz Capital, Inc., which is the sole manager of Hartz Capital MLP, LLC, share voting and investment control over the shares held by Hartz Capital MLP, LLC. Each of Messers. Bangs and Schindel disclaims beneficial ownership of all of such shares. The address of Hartz Capital MLP, LLC is 400 Plaza Drive, Secaucus, NJ 07094.

~~(6)~~

An investment committee composed of employees of Merrill Lynch & Co., whose members may change from time to time, has voting and investment control over the shares held by Valley Energy Investment Fund U.S., L.P. The members of the investment committee disclaim beneficial ownership of all such shares. The address of Valley Energy Investment Fund U.S., L.P. is 20 East Greenway Plaza, Suite 950, Houston, TX 77046.

~~PLAN OF DISTRIBUTION~~

The common stock is being registered to permit public secondary trading of these securities by the selling stockholders from time to time after the date of this prospectus. Abraxas has agreed, among other things, to bear all expenses (other than underwriting discounts and selling commissions)bank depositary in connection with the ~~registration and sale~~initial deposit of the ~~common~~preferred stock ~~covered by this prospectus. Abraxas will not receive~~and any redemption of the ~~proceeds from the offering~~preferred stock. Holders of ~~the common stock by the selling stockholders.~~

We have been advised by the selling stockholders that the selling stockholders may sell all or a portion of the common stock beneficially owned by them and offered hereby from time to time on any exchange on which the securities are listed on terms to be determined at the times of such sales. The selling stockholders may also make private sales directly or through a broker or brokers. Alternatively, the selling stockholders may from time to time offer the common stock beneficially owned by them through underwriters, dealers or agents, who may receive compensation in the form of underwriting discounts, commissions or concessions from the selling stockholders and the purchasers of the common stock for whom they may act as agent. The aggregate proceeds to the selling stockholders from the sale of the common stockdepositary shares will ~~be the purchase price of such common stock less discounts and commissions, if any.~~

The common stock may be sold from time to time in one or more transactions at fixed offering prices, which may be changed, or at varying prices determined at the time of sale or at negotiated prices. These prices will be determined by the holders of such securities or by agreement between these holders and underwriters or dealers who may receive fees or commissions in connection therewith. These transactions may include block transactions or crosses. Crosses are transactions in which the same broker acts as an agent on both sides of the transaction. In connection with sales of the common stock or otherwise, the selling stockholders may enter into hedging transactions with broker-dealers or others, which may in turn engage in short sales of the common stock in the course of hedging the positions they assume. The selling stockholders may also sell the common stock short and deliver the common stock to close out short positions, or loan or pledge the common stock to broker-dealers or others that in turn may sell such securities. The selling stockholders may pledge or grant a security interest in some or all of the common stock owned by them and if a

selling stockholder defaults in the performance of its secured obligations, the pledgees or secured parties may offer and sell such selling stockholder’s pledged common stock from time to time pursuant to this prospectus. The selling stockholders also maypay other transfer and ~~donate shares of the common stock in~~ other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling stockholders for purposes of the prospectus. The selling stockholders may sell short the common stocktaxes and ~~may deliver this prospectus in connection with such short sales~~governmental charges and use the shares of the common stock covered by the prospectus to cover such short sales. In addition, any shares of the common stock covered by this prospectus that qualify for sale pursuant to Rule 144 or any other ~~available exemption from registration under~~charges, including a fee for the ~~Securities Act may be sold under Rule 144 or such other available exemption.~~

~~At the time a particular offering~~withdrawal of shares of preferred stock upon surrender of depositary receipts, as are expressly provided in the ~~common stock covered~~depositary agreement to be payable by ~~this prospectus is made, a~~such holders.

Except as may be provided otherwise in the applicable prospectus supplement, ~~if required, will be distributed which will set forth~~upon surrender of depositary receipts at the ~~aggregate number of shares~~principal office of the ~~common stock being offered and~~bank depositary, subject to the terms of the ~~offering, including~~depositary agreement, the ~~name~~owner of the depositary shares may demand delivery of the number of whole shares of preferred stock and all money and other property, if any, represented by those depositary shares. Partial shares of preferred stock will not be issued. If the depositary receipts delivered by the holder evidence a number of depositary shares in excess of the number of depositary shares representing the number of whole shares of preferred stock to be withdrawn, the bank depositary will deliver to such holder at the same time a new depositary receipt evidencing the excess number of depositary shares. Holders of preferred stock thus withdrawn may not thereafter deposit those shares under the depositary agreement or ~~names~~receive depositary receipts evidencing depositary shares therefore.

The depositary may resign at any time by delivering a notice to us of its election to do so. We may remove the depositary at any time. Any such resignation or removal will take effect upon the appointment of a successor depositary and its acceptance of its appointment. The successor depositary must be appointed within 60 days after delivery of the notice of resignation or removal.

The depositary will forward to holders of depository receipts all reports and communications from us that we deliver to the depositary and that we are required to furnish to the holders of the preferred stock.

Neither we nor the depositary will be liable if either of us is prevented or delayed by law or any circumstance beyond our control in performing our respective obligations under the deposit agreement. Our obligations and those of the depositary will be limited to the performance in good faith of our respective duties under the deposit agreement. Neither we nor the depositary will be obligated to prosecute or defend any legal proceeding in respect of any ~~underwriters, dealers, brokers~~depositary shares or ~~agents, if any,~~preferred stock unless satisfactory indemnity is furnished. We and ~~any discounts, commissions~~the depositary may rely upon written advice of counsel or ~~concessions allowed~~accountants, or ~~reallowed~~upon information provided by persons presenting preferred stock for deposit, holders of depositary receipts or other persons believed to be ~~paid~~competent and on documents believed to ~~brokers~~be genuine.

We may issue rights to purchase debt securities, preferred stock, common stock or ~~dealers.~~

~~Selling stockholders~~other securities that are being registered hereunder. These rights may be issued independently or together with any other security offered hereby and may or may not be transferable by the stockholder receiving the rights in such offering. In connection with any offering of such rights, we may enter into a standby arrangement with one or more underwriters ~~dealers, brokers~~ or ~~agents who participate~~other purchasers pursuant to which the underwriters or other purchasers may be required to purchase any securities remaining unsubscribed for after such offering.

Each series of rights will be issued under a separate rights agreement which we will enter into with a bank or trust company, as rights agent, all as set forth in the ~~distribution~~applicable prospectus supplement. The rights agent will act solely as our agent in connection with the certificates relating to the rights and will not assume any obligation or relationship of agency or trust with any holders of rights certificates or beneficial owners of rights. We will file the ~~common stock may be deemed~~rights agreement and the rights certificates relating to ~~be “underwriters” within the meaning~~each series of rights with the Securities ~~Act~~ and ~~any profits on the sale of the common stock~~Exchange Commission, and incorporate them by ~~them and any discounts, commissions or concessions received by any such underwriters, dealers, brokers or agents may be deemed~~reference as an exhibit to ~~be underwriting discounts and commissions under the Securities Act.~~

The selling stockholders and any other person participating in such distribution will be subject to applicable provisions of the Securities Exchange Act and the rules and regulations thereunder, including, without limitation, Regulation M which may limit the timing of purchases and sales of the common stock by the selling stockholders and any other such person. Furthermore, Regulation M under the Securities Exchange Act may restrict the ability of any person engaged in a distribution of the common stock being distributed for a period of up to five business days prior to the commencement of such distribution. All of the foregoing may affect the marketability of the common stock and the ability of any person or entity to engage in market-making activities with respect to the common stock.

~~Abraxas will use its reasonable efforts to keep~~ the registration statement of which this prospectus is a part ~~effective until~~on or before the ~~earliest~~time we issue a series of ~~(a)~~rights.

The applicable prospectus supplement will describe the ~~date all~~specific terms of any offering of rights for which this prospectus is being delivered, including the following:

The description in the applicable prospectus supplement of any rights that we may offer will not necessarily be complete and will be qualified in its entirety by reference to the applicable rights certificate, which will be filed with the Securities and Exchange Commission.

As specified in the applicable prospectus supplement, we may issue units consisting of one or more debt securities, shares of common stock, shares of preferred stock, depositary shares or warrants or any combination of such securities, including guarantees of any securities.

The applicable prospectus supplement will specify the following terms of any units in respect of which this prospectus is being delivered:

We may sell securities pursuant to this prospectus (a) through underwriters or dealers, (b) through agents, (c) directly to one or more purchasers, including our affiliates and stockholders in a rights offering, or (d) through a combination of any such methods of sale. The prospectus supplement relating to any offering of securities may include the following information:

If we use underwriters in the sale, the underwriters will acquire the securities for their own accounts. The underwriters may resell the securities from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. Underwriters may offer securities to the public either through underwriting syndicates represented by one or more managing underwriters or directly by one or more firms acting as underwriters. Unless we inform you otherwise in the prospectus supplement, the obligations of the underwriters to purchase the securities will be subject to certain conditions, and the underwriters will be obligated to purchase all the offered securities if they purchase any of them. The underwriters may change from time to time any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers.

During and after an offering through underwriters, the underwriters may purchase and sell the securities in the open market. These transactions may include overallotment and stabilizing transactions and purchases to cover syndicate short positions created in connection with the offering. The underwriters may also impose a penalty bid, which means that selling concessions allowed to syndicate members or other broker-dealers for the offered securities sold for their account may be reclaimed by the syndicate if the offered securities are repurchased by the syndicate in stabilizing or covering transactions. These activities may stabilize, maintain or otherwise affect the market price of the offered securities, which may be higher than the price that might otherwise prevail in the open market. If commenced, the underwriters may discontinue these activities at any time.

If we use dealers in the sale of securities, we will sell the securities to them as principals. They may then resell those securities to the public at varying prices determined by the dealers at the time of resale. We will include in the prospectus supplement the names of the dealers and the terms of the transaction.

Pursuant to a requirement by the Financial Industry Regulatory Authority, or FINRA, the maximum commission or discount to be received by any FINRA member or independent broker / dealer may not be greater than eight percent (8%) of the gross proceeds received by us for the sale of any securities being registered pursuant to Rule 415 under the Securities Act.

If more than 10% of the net proceeds of any offering of securities made under this prospectus will be received by FINRA members participating in the offering or affiliates or associated persons of such FINRA members, the offering will be conducted in accordance with the National Association of Securities Dealers Conduct Rule 2710(h).

We may sell the securities directly. In this case, no underwriters or agents would be involved. We may sell securities upon the exercise of rights that we may issue to our security holders which may or may not be transferable. In any distribution of rights to our stockholders, if all of the underlying securities are not subscribed for, we may sell the unsubscribed securities directly to third parties or we may engage underwriters, dealers or agents, including standby underwriters, to sell the unsubscribed securities. We may

We may sell the securities through agents we designate from time to time. Unless we inform you otherwise in the prospectus supplement, any agent will agree to use its reasonable best efforts to solicit purchases for the period of its appointment.

Underwriters, dealers and agents that participate in the distribution of our securities may be underwriters as defined in the Securities Act, and any discounts or commissions they receive and any profit they make on the resale of the offered securities may be treated as underwriting discounts and commissions under the Securities Act. Any underwriters or agents will be identified and their compensation described in a ~~registration statement or otherwise~~prospectus supplement. We may indemnify underwriters, dealers and ~~(b) the expiration of 180 days following the holding period applicable to such securities held by persons that are not our affiliates under Rule 144(k)~~agents against certain civil liabilities, including liabilities under the Securities Act, or ~~any successor provision, subject~~make contributions to ~~certain permitted exceptions.~~

~~LEGAL MATTERS~~

~~The validity~~payments they may be required to make relating to those liabilities. Our underwriters, dealers, and agents, or their affiliates, may be customers of, engage in transactions with, or perform services for us in the ~~issuance~~ordinary course of ~~the common stock covered~~business.

Each series of securities offered by this prospectus may be a new issue of securities with no established trading market. Any underwriters to whom securities offered by this prospectus are sold by us for public offering and sale may make a market in the securities offered by this prospectus, but the underwriters will not be obligated to do so and may discontinue any market making at any time without notice. No assurance can be given as to the liquidity of the trading market for any securities offered by this prospectus.

Representatives of the underwriters through whom our securities are sold for public offering and sale may engage in over-allotment, stabilizing transactions, syndicate short covering transactions and penalty bids in accordance with Regulation M under the Exchange Act. Over-allotment involves syndicate sales in excess of the offering size, which creates a syndicate short position. Stabilizing transactions permit bids to purchase the offered securities so long as the stabilizing bids do not exceed a specified maximum.

Syndicate covering transactions involve purchases of the offered securities in the open market after the distribution has been completed in order to cover syndicate short positions. Penalty bids permit the representative of the underwriters to reclaim a selling concession from a syndicate member when the offered securities originally sold by such syndicate member are purchased in a syndicate covering transaction to cover syndicate short positions. Such stabilizing transactions, syndicate covering transactions and penalty bids may cause the price of the offered securities to be higher than it would otherwise be in the absence of such transactions. These transactions may be effected on a national securities exchange and, if commenced, may be discontinued at any time.

The financial statements and management’s report on the effectiveness of internal control over financial reporting, incorporated by reference in this prospectus have been audited by BDO Seidman, LLP, an independent registered public accounting firm, to the extent and for the periods set forth in their report

The historical reserve information prepared by DeGolyer and MacNaughton included or incorporated by reference in this prospectus has been included herein in reliance upon the authority of such firm as experts with respect to matters contained in such reserve reports.

~~WHERE YOU CAN FIND MORE INFORMATION~~

Abraxas’ SEC filings are available to the public over the Internet at the SEC’s web site at www.sec.gov. You may also read and copy any document we file at the SEC’s public reference rooms located at 100 F. Street, N.E., Washington D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms and their copy charges.

Also, using Abraxas’ website, www.abraxaspetroleum.com, you can access electronic copies of documents we file with the SEC, including Abraxas’ annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K and any amendments to those reports. Information on Abraxas’ website is not incorporated by reference in this prospectus. Access to those electronic filings is available as soon as practical after filing with the SEC. You may also request a copy of those filings, including exhibits, at no cost by writing, emailing or telephoning Abraxas’ principal executive office, which is:

~~500 North Loop 1604 East, Suite 100~~

~~San Antonio, Texas 78232~~

~~Attn: Chris Williford~~

~~(210) 490-4788~~

The SEC allows us to “incorporate by reference” the information we have filed with it, which means that we can disclose important information to you by referring you to those documents. The information we incorporate by reference is an important part of this prospectus, and later information that we file with the SEC will automatically update and supersede this information. The following documents Abraxas filed with the SEC pursuant to the Exchange Act are incorporated herein by reference:

~~Abraxas’ Annual Report on Form 10-K for the fiscal year ended December 31, 2006, filed with the Commission on March 14, 2007;~~

~~The amendment to Abraxas’ Annual Report on Form 10-K for the fiscal year ended December 31, 2006, filed on Form 10-K/A Number 1 filed with the Commission on April 30, 2007;~~

~~Abraxas’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2007, filed with the Commission on May 15, 2007;~~

~~Abraxas’ Current Report on Form 8-K filed with the Commission on May 31, 2007; and~~

The description of Abraxas’ common stock contained in Abraxas’ Registration Statement on Form 8-A, filed on August 17, 2000, including any amendments or reports filed for the purpose of updating such description.

Notwithstanding the foregoing, information that Abraxas elects to furnish, but not file, or has furnished, but not filed, with the Commission in accordance with Commission rules and regulations is not incorporated into this Registration Statement and does not constitute a part hereof.

All documents filed by Abraxas pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act (excluding any information furnished pursuant to Item 2.02 or Item 7.01 on any current report on Form 8-K) subsequent to the date of this filing and prior to the termination of this offering shall be deemed to be incorporated in this prospectus and to be a part hereof from the date of the filing of such document. Any statement contained in a document incorporated by reference herein shall be deemed to be modified or superseded for all purposes to the extent that a statement contained in this prospectus, or in any other subsequently filed document which is also incorporated or deemed to be incorporated

~~by reference, modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus.~~

GLOSSARY OF TERMS

Unless otherwise indicated in this prospectus, ~~natural~~ gas volumes are stated at the legal pressure base of the State or area in which the reserves are located at 60 degrees Fahrenheit. ~~Natural gas~~Gas equivalents are determined using the ratio of six Mcf of ~~natural~~ gas to one barrel of ~~crude~~ oil, condensate or NGLs.

The following definitions shall apply to the technical terms used in this prospectus.

The following statement sets forth the estimated amounts of expenses, other than underwriting discounts, to be borne by us in connection with the offering described in this Registration Statement:

~~Securities and Exchange Commission Registration Fee~~

~~$879~~

~~Printing and Engraving Expenses~~

~~$1,000~~

~~Accounting Fees and Expenses~~

~~$13,000~~

~~Legal Fees and Expenses~~

~~$25,000~~

Securities and Exchange Commission Registration Fee	$	8,380
Printing and Engraving Expenses	$	1,000
Accounting Fees and Expenses	$	5,000
Legal Fees and Expenses	$	20,000
Miscellaneous Expenses	$	5,000
Total Expenses	$	39,370

~~Listing Fee~~

~~$45,000~~

~~Miscellaneous Expenses~~

~~$9,000~~

~~Total Expenses~~

~~$93,879~~

Item 15. Indemnification of Directors ~~And~~and Officers

~~Chapter 78~~

Our articles of ~~the Nevada Revised Statutes (the “Nevada Statute”) contains provisions~~incorporation contain a provision that ~~eliminate~~eliminates the personal monetary liability of directors and officers to us and our stockholders asfor a ~~result~~breach of ~~any act or failure~~fiduciary duties to ~~act in his capacity as a director or officer.~~the extent currently allowed under the Nevada GCL. To the extent certain claims against directors or officers are limited to equitable remedies, ~~these~~this provision of our articles of incorporation may reduce the likelihood of derivative litigation and may discourage stockholders or management from initiating litigation against directors or officers for breach of their duty of care. Additionally, equitable remedies may not be effective in many situations. If a stockholder’s only remedy is to enjoin the completion of the ~~Board~~board of ~~Director’s~~director’s action, this remedy would be ineffective if the stockholder did not become aware of a transaction or event until after it had been completed. In such a situation, it is possible that we and our stockholders would have no effective remedy against the directors or officers.

Liability for monetary damages has not been eliminated for acts or omissions which involve intentional misconduct, fraud or a knowing violation of law or payment of an improper dividend in violation of section 78.300 of the Nevada ~~Statute.~~GCL. The limitation of liability also does not eliminate or limit director liability arising in connection with causes of action brought under the Federal securities laws.

The Nevada ~~Statute~~GCL permits a corporation to indemnify certain persons, including officers and directors, who are (or are threatened to be made) parties ~~to actions, suits or proceedings~~ against all expenses (including attorneys’ fees) actually and reasonably incurred by, or imposed upon, him in connection with the defense by reason of his being or having been a director or officer if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was ~~unlawful; provided, however, that indemnification may not be made for any claim, issue or matter as to which such a person~~unlawful, except where he has been adjudged by a court of competent jurisdiction (and after exhaustion of all ~~appeals therefrom,~~appeals) to be liable tofor gross negligence or willful misconduct in the ~~corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court~~performance of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper. The indemnification pursuant to the Nevada Statute and advancement of expenses authorized in or ordered by a court pursuant to the Nevada Statute does not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under the articles of incorporation or any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, for either an action in his official capacity or an action in another capacity while holding his office, except that indemnification, unless ordered by a court or for the advancement of expenses made pursuant to the Nevada Statute, may not be made to or on behalf of any director or officer if a final adjudication establishes that his acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action. Indemnification continues for a person who has ceased to be a director, officer, employee or

~~II-1~~

~~agent and inures to the benefit of the heirs, executors and administrators of such a person. Abraxas’~~duty. Our bylaws provide indemnification to the same extent allowed pursuant to the foregoing provisions of the Nevada ~~Statute.~~

GCL.

Nevada corporations also are authorized to obtain insurance to protect officers and directors from certain liabilities, including liabilities against which the corporation cannot indemnify its directors and officers. ~~Abraxas~~We currently ~~has~~have a directors’ and officers’ liability insurance policy in effect providing $10.0 million in coverage and an additional $1.0 million in coverage for certain employment related claims.

~~Abraxas has~~

We have entered into indemnity agreements with each of ~~its~~our directors and officers. These agreements provide for indemnification to the extent permitted by the Nevada ~~Statute.~~

GCL.

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Item 16. Exhibits

The following Exhibits either are filed as part of this registration statement or incorporated by reference to documents previously filed or will be filed by amendment. Exhibit numbers correspond to the exhibits required by Item 601 of Regulation S-K.

Number	Description
~~3.1~~ **1.1	Form of Equity Underwriting Agreement.
**1.2	Form of Debt Underwriting Agreement.
3.1	Articles of Incorporation of Abraxas. (Filed as Exhibit 3.1 to Abraxas’ Registration Statement on Form S-4, No. 33-36565 (the “S-4 Registration Statement”)) .
3.2	Articles of Amendment to the Articles of Incorporation of Abraxas dated October 22, 1990. (Filed as Exhibit 3.3 to the S-4 Registration Statement).
3.3	Articles of Amendment to the Articles of Incorporation of Abraxas dated December 18, 1990. (Filed as Exhibit 3.4 to the S-4 Registration Statement).
3.4	Articles of Amendment to the Articles of Incorporation of Abraxas dated June 8, 1995. (Filed as Exhibit 3.4 to Abraxas’ Registration Statement on Form S-3, No. 333-00398 (the “S-3 Registration Statement”)).
3.5	Articles of Amendment to the Articles of Incorporation of Abraxas dated as of August 12, 2000. (Filed as Exhibit 3.5 to Abraxas’ Annual Report of Form 10-K filed April 2, 2001).
3.6	Amended and Restated Bylaws of Abraxas. (Filed as Exhibit ~~3.6~~3.1 to Abraxas’ ~~Annual~~Current Report on Form ~~10-K~~8-K filed ~~April 5, 2002)~~November 17, 2008).
4.1	Specimen Common Stock Certificate of Abraxas. (Filed as Exhibit 4.1 to the S-4 Registration Statement).
4.2	Specimen Preferred Stock Certificate of Abraxas. (Filed as Exhibit 4.2 to Abraxas’ Annual Report on Form 10-K filed on March 31, 1995).
4.3	Form of Warrant dated May 25, 2007. (Filed as Exhibit 10.7 to Abraxas’ Current Report on Form 8-K filed with the Commission on May 31, 2007).
4.4	Form of Senior Indenture (incorporated by reference to Exhibit 4.3 to the Registrant’s Registration Statement on Form S-3, No. 333-132971 filed April 4, 2006).
4.5	Form of Subordinated Indenture (incorporated by reference to Exhibit 4.4 to the Registrant’s Registration Statement on Form S-3, No. 333-132971 filed April 4, 2006).
*5.1	Opinion of Jackson Walker L.L.P.
*12.1	Statement regarding Computation of Ratio of Earnings to Fixed Changes.
*23.1	Consent of BDO Seidman, LLP. ~~(Filed herewith).~~
*23.2	Consent of DeGolyer and MacNaughton.
*23.3	Consent of Jackson Walker L.L.P. (Filed with Exhibit 5.1).

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Number

Description

*24.1

Power of Attorney of Craig S. Bartlett, Jr.

~~II-2~~

*24.2	Power of Attorney of Franklin A. Burke.
*24.3	Power of Attorney of Harold D. Carter.
*24.4	Power of Attorney of Ralph F. Cox.
*24.5	~~Power of Attorney of Barry J. Galt.~~
*24.6	Power of Attorney of Dennis E. Logue.
*24.6	Power of Attorney of Brian L. Melton.
*24.7	Power of Attorney of Paul A. Powell, Jr . Jr.
*24.8	Power of Attorney of Edward P. Russell.
**25.1	Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 for the Senior Indenture and the Subordinated Indenture.

________________

Filed ~~herewith~~

herewith.

**	To be filed by amendment.

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Item 17. Undertakings

~~Insofar~~

The undersigned registrants hereby undertake:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement (other than as ~~indemnification~~provided in the proviso and instructions to Item 512(a) of Regulation S-K): (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided, however, that paragraphs (1)(i), (ii) and (iii) of this section do not apply if the Registration Statement is on Form S-3 and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrants pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.

(2) That, for ~~liabilities arising~~the purpose of determining any liability under the Securities Act of 1933, ~~may~~each such post-effective amendment shall be ~~permitted~~deemed to ~~directors, officers~~be a new registration statement relating to the securities offered therein, and ~~controlling persons~~the offering of such securities at that time shall be deemed to be the ~~registrant, the registrant has been advised that in the opinion~~initial bona fide offering thereof.

(3) To remove from registration by means of ~~the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that~~ a ~~claim for indemnification against such liabilities (other than the payment by the registrant~~post-effective amendment any of expenses incurred or paid by a director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered which remain unsold at the ~~registrant will, unless~~termination of the offering.

(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser: (i) if the registrants are relying on Rule 430B: (A) Each prospectus filed by the registrants pursuant to Rule 424(b)(3) shall be deemed to be part of the Registration Statement as of the date the filed prospectus was deemed part of and included in the ~~opinion~~Registration Statement; and (B) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of ~~its counsel~~a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the ~~matter has been settled~~purpose of providing the information required by ~~controlling precedent, submit~~section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the Registration Statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of 314 securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the Registration Statement relating to the securities in the Registration Statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a ~~court~~purchaser with a time of ~~appropriate jurisdiction~~contract of sale prior to such effective date, supersede or modify any statement that was made in the ~~question whether~~registration statement or prospectus that was part of the registration statement or made in any such ~~indemnification by~~document immediately prior to such effective date; or (ii) if the registrants are subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is ~~against public policy~~first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as ~~expressed~~to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was

II-4

made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

(5) That, for the purpose of determining liability of the registrants under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned registrants undertake that in a primary offering of securities of the undersigned registrants pursuant to this Registration Statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrants will be a seller to the purchaser and will be ~~governed~~considered to offer or sell such securities to such purchaser: (i) Any preliminary prospectus or prospectus of the undersigned registrants relating to the offering required to be filed pursuant to Rule 424; (ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrants or used or referred to by the ~~final adjudication~~undersigned registrants; (iii) The portion of ~~such issue.~~

~~The~~any other free writing prospectus relating to the offering containing material information about the undersigned ~~registrant hereby undertakes:~~

~~(1)~~

To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement (other than as provided in the proviso and instructions to Item 512(a) of Regulation S-K) (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; and (iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

registrants or their securities provided by or on behalf of the undersigned registrants; and (iv) Any other communication that is an offer in the offering made by the undersigned registrants to the purchaser.

~~(2)~~

That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

~~(3)~~

~~To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.~~

~~(4)~~

(6) That, for purposes of determining any liability under the Securities Act of 1933, each filing of each ~~filing of the~~ registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual ~~report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual~~

~~II-3~~

report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

~~(5)~~

For the purpose of determining liability under the Securities Act of 1933 to any purchaser, if the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness; provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

~~II-4~~

(7) (i) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrants pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of this registration statement as of the time it was declared effective.

(ii) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(8) The undersigned registrants hereby undertake to file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act (“Act”) in accordance with the rules and regulations prescribed by the Commission under Section 305(b)2 of the Act.

(9) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrants, the registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrants of expenses incurred or paid by a director, officer or controlling person of the registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrants will, unless in the opinion of their counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

(10) The undersigned registrants hereby undertake to supplement the prospectus, after the expiration of the subscription period, to set forth the results of the subscription offer, the transactions by the underwriters during the subscription period, the amount of unsubscribed securities to be purchased by the underwriters, and the terms of any subsequent reoffering thereof. If any public offering by the underwriters is to be made on terms differing from those set forth on the cover page of the prospectus, a post-effective amendment will be filed to set forth the terms of such offering.

II-5

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the ~~Registrant~~registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this ~~Registration Statement~~registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, State of Texas, on ~~June 14, 2007.~~

December 16, 2009.

ABRAXAS PETROLEUM CORPORATION

(Registrant)

By:

/s/ Robert L. G. Watson

Robert L. G. Watson, Chairman of the Board,

President and Chief Executive Officer

II-6

Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:

Signature	Name and Title	Date
/s/ Robert L. G. Watson Robert L. G. Watson	Chairman of the Board, President and Chief Executive Officer, (Principal Executive Officer) and Director	~~June 14, 2007~~ December 16, 2009
/s/ Chris E. Williford Chris E. Williford	Executive Vice President, Treasurer, and Chief Financial Officer (Principal Financial and Accounting Officer)	~~June 14, 2007~~ December 16, 2009
* Craig S. Bartlett, Jr.	Director	~~June 14, 2007~~ December 16, 2009
* Franklin A. Burke	Director	~~June 14, 2007~~ December 16, 2009
* Harold D. Carter	Director	~~June 14, 2007~~ December 16, 2009
* Ralph F. Cox	Director	~~June 14, 2007~~ December 16, 2009
* ~~Barry J. Galt~~	~~Director~~	~~June 14, 2007~~
* Dennis E. Logue	Director	~~June 14, 2007~~ December 16, 2009
* Brian L. Melton	Director	December 16, 2009
* Paul A. Powell, Jr.	Director	~~June 14, 2007~~ December 16, 2009
* Edward P. Russell	Director	December 16, 2009

* By:

/s/ Chris E. Williford

Chris E. Williford

Attorney-in-Fact

II-7

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Antonio, Texas, on December 16, 2009.

ABRAXAS PROPERTIES INCORPORATED

By:

~~Chris E. Williford~~

~~Attorney-in-Fact~~

~~II-5~~

~~EXHIBIT INDEX~~/s/ Robert L.G. Watson

Robert L.G. Watson

President

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the date indicated.

~~EXHIBIT~~ ~~NUMBER~~ Signature	Name and Title	~~DESCRIPTION~~ Date
~~5.1~~ /s/ Robert L.G. Watson Robert L.G. Watson	President (Principal Executive Officer) and Director of Abraxas Properties Incorporated	December 16, 2009
/s/ Chris E. Williford Chris E. Williford	Vice President (Principal Financial and Accounting Officer) and Director of Abraxas Properties Incorporated	December 16, 2009
/s/ Barbara M. Stuckey Barbara M. Stuckey	Vice President and Director of Abraxas Properties Incorporated	December 16, 2009

II-8

SIGNATURES

SANDIA OPERATING CORP.

By: /s/ Robert L.G. Watson

Robert L.G. Watson

President

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the date indicated.

Signature	Name and Title	Date
/s/ Robert L.G. Watson Robert L.G. Watson	President (Principal Executive Officer) and Director of Sandia Operating Corp.	December 16, 2009
/s/ Chris E. Williford Chris E. Williford	Vice President (Principal Financial and Accounting Officer) and Director of Sandia Operating Corp.	December 16, 2009
/s/ Barbara M. Stuckey Barbara M. Stuckey	Vice President and Director of Sandia Operating Corp.	December 16, 2009

II-9

SIGNATURES

ABRAXAS OPERATING, LLC

By: /s/ Robert L.G. Watson

Robert L.G. Watson

Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the date indicated.

Signature	Name and Title	Date
/s/ Robert L.G. Watson Robert L.G. Watson	Chief Executive Officer (Principal Executive Officer) and Manager of Abraxas Operating, LLC.	December 16, 2009
/s/ Chris E. Williford Chris E. Williford	Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) and Manager of Abraxas Operating, LLC.	December 16, 2009
/s/ Barbara M. Stuckey Barbara M. Stuckey	President and Secretary and Manager of Abraxas Operating, LLC.	December 16, 2009

II-10

SIGNATURES

ABRAXAS GENERAL PARTNER, LLC

By: /s/ Robert L.G. Watson

Robert L.G. Watson

Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the date indicated.

Signature	Name and Title	Date
/s/ Robert L.G. Watson Robert L.G. Watson	Chief Executive Officer (Principal Executive Officer) and Director of Abraxas General Partner, LLC.	December 16, 2009
/s/ Chris E. Williford Chris E. Williford	Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) and Director of Abraxas General Partner, LLC.	December 16, 2009
/s/ Barbara M. Stuckey Barbara M. Stuckey	President and Assistant Secretary and Director of Abraxas General Partner, LLC.	December 16, 2009

II-11

SIGNATURES

ABRAXAS ENERGY INVESTMENTS, LLC

By: /s/ Robert L.G. Watson

Robert L.G. Watson

Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the date indicated.

Signature	Name and Title	Date
/s/ Robert L.G. Watson Robert L.G. Watson	Chief Executive Officer (Principal Executive Officer) and Manager of Abraxas Energy Investments, LLC.	December 16, 2009
/s/ Chris E. Williford Chris E. Williford	Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) and Manager of Abraxas Energy Investments, LLC.	December 16, 2009
/s/ Barbara M. Stuckey Barbara M. Stuckey	President and Secretary and Manager of Abraxas Energy Investments, LLC.	December 16, 2009

II-12

SIGNATURES

ABRAXAS MERGER SUB, LLC

By: /s/ Robert L.G. Watson

Robert L.G. Watson

President

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the date indicated.

Signature	Name and Title	Date
/s/ Robert L.G. Watson Robert L.G. Watson	President (Principal Executive Officer) and Manager of Abraxas Merger Sub, LLC.	December 16, 2009
/s/ Chris E. Williford Chris E. Williford	Treasurer (Principal Financial and Accounting Officer) and Manager of Abraxas Merger Sub, LLC.	December 16, 2009
/s/ Barbara M. Stuckey Barbara M. Stuckey	Secretary and Manager of Abraxas Merger Sub, LLC.	December 16, 2009

II-13

EXHIBIT INDEX

Exhibit

Number Description

1.1**

Form of Equity Underwriting Agreement.

1.2**

Form of Debt Underwriting Agreement.

3.1	Articles of Incorporation of Abraxas. (Filed as Exhibit 3.1 to Abraxas’ Registration Statement on Form S-4, No. 33-36565 (the “S-4 Registration Statement”)).

3.2	Articles of Amendment to the Articles of Incorporation of Abraxas dated October 22, 1990. (Filed as Exhibit 3.3 to the S-4 Registration Statement).

3.3	Articles of Amendment to the Articles of Incorporation of Abraxas dated December 18, 1990. (Filed as Exhibit 3.4 to the S-4 Registration Statement).

3.4	Articles of Amendment to the Articles of Incorporation of Abraxas dated June 8, 1995. (Filed as Exhibit 3.4 to Abraxas’ Registration Statement on Form S-3, No. 333-00398 (the “S-3 Registration Statement”)).

3.5	Articles of Amendment to the Articles of Incorporation of Abraxas dated as of August 12, 2000. (Filed as Exhibit 3.5 to Abraxas’ Annual Report on Form 10-K filed April 2, 2001).

3.6	Amended and Restated Bylaws of Abraxas. (Filed as Exhibit 3.1 to Abraxas’ Current Report on Form 8-K filed November 17, 2008).

4.1	Specimen Common Stock Certificate of Abraxas. (Filed as Exhibit 4.1 to the S-4 Registration Statement).

4.2	Specimen Preferred Stock Certificate of Abraxas. (Filed as Exhibit 4.2 to Abraxas’ Annual Report on Form 10-K filed on March 31, 1995).

4.3	Form of Warrant dated May 25, 2007. (Filed as Exhibit 10.7 to Abraxas’ Current Report on Form 8-K filed with the Commission on May 31, 2007).

4.4	Form of Senior Indenture (incorporated by reference to Exhibit 4.3 to the Registrant’s Registration Statement on Form S-3 No. 333-132971 filed April 4, 2006).

4.5	Form of Subordinated Indenture (incorporated by reference to Exhibit 4.4 to the Registrant’s Registration Statement on Form S-3 No. 333-132971 filed April 4, 2006).

5.1*	Opinion of Jackson Walker L.L.P.

~~23.1~~

12.1*

Statement regarding Computation of Ratio of Earnings to Fixed Charges.

23.1*

Consent of BDO Seidman, ~~LLP~~

LLP.

~~23.2~~

23.2*

Consent of DeGolyer and ~~MacNaughton~~

MacNaughton.

~~24.1~~

23.3*

Consent of Jackson Walker L.L.P. (Filed with Exhibit 5.1).

24.1*

Power of Attorney of Craig S. Bartlett, Jr.

~~24.2~~

24.2*

Power of Attorney of Franklin A. ~~Burke~~

Burke.

~~24.3~~

24.3*

Power of Attorney of Harold D. ~~Carter~~

Carter.

~~24.4~~

24.4*

Power of Attorney of Ralph F. ~~Cox~~

Cox.

~~24.5~~ 24.5*		~~Power of Attorney of Barry J. Galt~~
~~24.6~~		Power of Attorney of Dennis E. ~~Logue~~ Logue.

~~24.7~~

24.6*

Power of Attorney of Brian L. Melton.

24.7*

Power of Attorney of Paul A. Powell, Jr.

~~II-6~~

24.8*

Power of Attorney of Edward P. Russell.

25.1**

Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 for the Senior Indenture and the Subordinated Indenture.

_______________

II-14

*	Filed herewith.

**	To be filed by amendment.

II-15

Nevada		74-2584033
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

~~500 North Loop 1604 East~~	Robert L. G. Watson
~~Suite 100~~	~~500 North Loop 1604 East~~ President and Chief Executive Officer
	Abraxas Petroleum Corporation
18803 Meisner Drive	18803 Meisner Drive
San Antonio, Texas ~~78232~~ 78258	~~Suite 100~~
~~(210) 490-4788~~	San Antonio, Texas ~~78232~~ 78258
~~(Address, including zip code, and telephone~~	(210) 490-4788	(210) 490-4788
~~number, including area code, of registrant’s principal executive offices)~~	(~~Name,~~ Address, including zip code, and telephone number, including
area code, of registrants’ principal executive offices)	(Name, address, including zip code, and telephone number, including area code, of agent for service)

Large accelerated filer o	Accelerated filer x
Non-accelerated filer o	Smaller reporting company o

Title of Each Class of Securities to be Registered	Amount to be Registered	Proposed Maximum Offering Price per Unit (1)	Proposed Maximum Aggregate Offering Price (1)	Amount of Registration Fee

Debt Securities (2)
Common Stock, par value $.01 per share (3)
Preferred Stock, par value $.01 per share (3)(4)(5)(6)
Depositary Shares (5)
Warrants (6)
Guarantees (7)
Rights (8)
Units (2)(3)(4)(5)(6)(7)(8)
Total	$150,000,000(1)	100%	$150,000,000(1)	$8,370(9)

Exact Name as Specified in their Charters	Jurisdiction of Incorporation or Organization	I.R.S. Employer Identification Number
Abraxas Properties Incorporated	Texas	74-2368968
Sandia Operating Corp.	Texas	74-2468708
Abraxas Operating, LLC	Texas	26-0177172
Abraxas General Partner, LLC	Delaware	26-0177051
Abraxas Energy Investments, LLC	Texas	26-0177116
Abraxas Merger Sub, LLC	Delaware	27-1020645

WHERE YOU CAN FIND MORE INFORMATION	22 i

FORWARD-LOOKING INFORMATION	iii

ABOUT ABRAXAS	1

RIKS FACTORS	2

USE OF PROCEEDS	12

DILUTION	12

RATIO OF EARNINGS TO FIXED CHARGES	12

DESCRIPTION OF DEBT SECURITIES	13

DESCRIPTION OF CAPITAL STOCK	21

DESCRIPTION OF WARRANTS	25

DESCRIPTION OF DEPOSITARY SHARES	26

DESCRIPTION OR RIGHTS	28

DESCRIPTION OF UNITS	29

PLAN OF DISTRIBUTION	29

LEGAL MATTERS	31

EXPERTS	31

GLOSSARY OF TERMS	32

PART II INFORMATION NOT REQUIRED IN PROSPECTUS	II-1

SIGNATURES	II-6

~~Time Period~~	~~Notional Quantities~~	~~Price~~
~~July 2007~~	~~10,000 MMbtu of production per day~~	~~Floor of $4.25~~
~~August 2007~~	~~10,000 MMbtu of production per day~~	~~Floor of $5.00~~
~~September 2007~~	~~10,000 MMbtu of production per day~~	~~Floor of $5.50~~

	Year Ended December 31,					Nine Months Ended September 30,
	2004	2005	2006	2007	2008	2009
Ratio of earnings to fixed charges
Ratio of earnings to fixed charges	1.15x	1.40x	1.04x	7.58x	*	*

		Fixed Price Swap
		OIL				GAS
Contract Periods		Daily Volume (Bbl)		Swap Price		Daily Volume (Mmbtu)		Swap Price
	Q4 2009		1,355	$	68.90		13,981	$	4.50
	2010		1,158		73.28		11,258		5.73
	2011		1,035		76.61		9,580		6.52
	2012		946		70.89		8,303		6.77
	2013		705		80.79		5,962		6.84

Name	Shares of Common Stock Beneficially Owned Prior to Offering	Percentage	Number of Shares Being Offered	Shares of Common Stock Beneficially Owned After the Offering	Percentage
Lehman Brothers MLP Opportunity Fund L.P. (1)	1,566,581	3.19%	1,566,581	0	0
Michael J. Cannon (1)	1,566,581	3.19%	1,566,581	0	0
Kyriacos A. Loupis (1)	1,566,581	3.19%	1,566,581	0	0
Jeffrey P. Wood (1)	1,566,581	3.19%	1,566,581	0	0
Citigroup Global Markets, Inc. (2)	1,566,581	3.19%	1,566,581	0	0
Brendan O’Dea (2)	1,566,581	3.19%	1,566,581	0	0
Third Point Offshore Fund, Ltd. (3)	1,042,403	2.13%	1,042,403	0	0
Third Point Ultra Ltd. (3)	139,425	*	139,425	0	0
Third Point Partners LP (3)	138,800	*	138,800	0	0
Third Point Partners Qualified LP (3)	128,460	*	128,460	0	0
Third Point LLC (3)	1,449,088	2.96%	1,449,088	0	0
Daniel S. Loeb (3)	1,449,088	2.96%	1,449,088	0	0
Fiduciary/Claymore Opportunity Fund (4)	685,380	1.40%	685,380	0	0
Energy Income and Growth Fund (4)	293,734	*	293,734	0	0
FAMCO MLP Partners, LLC, Series ABP-1 (4)	195,822	*	195,822	0	0
Hartz Capital MLP, LLC (5)	195,824	*	195,824	0	0
Edward J. Stern (5)	195,824	*	195,824	0	0
Ronald J. Bangs (5)	195,824	*	195,824	0	0
Jonathan B. Schindel (5)	195,824	*	195,824	0	0
Valley Energy Investment Fund U.S., L.P. (6)	1,096,607	2.24%	1,096,607	0	0