ABRAXAS PETROLEUM CORPORATION
                       500 North Loop 1604 East, Suite 100
                            San Antonio, Texas 78232
                                 (210) 490-4788

                                                               April 24, 2003

Dear Stockholders:

     You are cordially invited to attend the 2003 Annual Meeting of Stockholders
of Abraxas Petroleum  Corporation to be held on Thursday,  May 29, 2003, at 9:00
a.m., at the Petroleum Club of San Antonio  located at 8620 North New Braunfels,
San Antonio,  Texas 78217.  We hope that you will be able to attend the meeting.
Matters on which action will be taken at the meeting are  explained in detail in
the Notice and Proxy Statement following this letter.

     Whether or not you expect to attend the Annual  Meeting,  please mark, sign
and date the enclosed proxy and return it promptly in the enclosed envelope.





                                        Robert L. G. Watson
                                        Chairman of the Board, President
                                        and Chief Executive Officer

                                       1



                          ABRAXAS PETROLEUM CORPORATION
                       500 North Loop 1604 East, Suite 100
                            San Antonio, Texas 78232
                                 (210) 490-4788

                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

                             TO BE HELD MAY 29, 2003

To the Stockholders of Abraxas Petroleum Corporation:

         NOTICE IS HEREBY  GIVEN that the  Annual  Meeting  of  Stockholders  of
Abraxas Petroleum Corporation  ("Abraxas") will be held at the Petroleum Club of
San Antonio  located at 8620 North New Braunfels,  San Antonio,  Texas 78217, on
Thursday, May 29, 2003, at 9:00 a.m., local time, for the following purposes:

         (1)  To elect one director to the Abraxas board of directors for a term
              of three years.  Franklin A. Burke has been nominated for election
              by the board of directors:

         (2)  To  approve  the  appointment  of BDO  Seidman,  LLP  as  Abraxas'
              independent auditors for the year ending December 31, 2003; and

         (3)  To transact  such other  business as may properly  come before the
              meeting or any adjournment thereof.

         We  cordially  invite you to attend the  Annual  Meeting in person.  To
assure your  representation at the meeting,  however, we urge you to mark, sign,
date and return the  enclosed  proxy card as soon as  possible  in the  enclosed
postage-prepaid envelope.

         Whether  or not  you  expect  to  attend  the  Annual  Meeting,  please
complete, sign, date and promptly mail your proxy card in the envelope provided.
You may revoke your proxy at any time prior to the Annual  Meeting,  and, if you
attend the Annual Meeting, you may vote your shares of Abraxas stock in person.

         The Abraxas board of directors has fixed the close of business on April
21, 2003, as the record date for the determination of the stockholders  entitled
to notice of and to vote at the Annual Meeting and any adjournment thereof.

                                     By Order of the Board of Directors

                                     Stephen T. Wendel
                                     SECRETARY


San Antonio, Texas
April 24,  2003

                                        2

                          ABRAXAS PETROLEUM CORPORATION
                       500 North Loop 1604 East, Suite 100
                            San Antonio, Texas 78232
                                 (210) 490-4788


                                 PROXY STATEMENT

                             -----------------------

         The board of directors of Abraxas  Petroleum  Corporation is soliciting
proxies  to  vote  shares  of  common  stock  at  the  2003  Annual  Meeting  of
Stockholders  to be held at 9:00 a.m. on May 29, 2003, at the Petroleum  Club of
San Antonio located at 8620 North New Braunfels,  San Antonio,  Texas 78217, and
at any adjournments thereof. This Proxy Statement and the accompanying Proxy are
being mailed to  stockholders  on or about April 24, 2003. For ten days prior to
the Annual  Meeting,  a complete  list of  stockholders  entitled to vote at the
Annual  Meeting will be available for  examination  by any  stockholder  for any
purpose germane to the Annual Meeting during ordinary business hours at Abraxas'
executive offices, located at the address set forth above.

Record Date; Shares Entitled To Vote; Quorum

         The board of  directors  has fixed the close of  business  on April 21,
2003 as the record  date for Abraxas  stockholders  entitled to notice of and to
vote at the annual  meeting.  Holders of common  stock as of the record date are
entitled  to vote at the  annual  meeting.  As of the  record  date,  there were
35,630,115  shares of  Abraxas  common  stock  outstanding,  which  were held by
approximately 1,606 holders of record. Stockholders are entitled to one vote for
each share of Abraxas common stock held as of the record date.

         The holders of a majority of the  outstanding  shares of Abraxas common
stock  issued  and  entitled  to vote at the annual  meeting  must be present in
person or by proxy to  establish a quorum for  business to be  conducted  at the
annual  meeting.  Abstentions  and  "non-votes"  are  treated as shares that are
present and  entitled  to vote for  purposes of  determining  the  presence of a
quorum. "Non-votes" occur when a proxy:

         o  is  returned  by a  broker  or other  stockholder  who does not have
            authority to vote;

         o  does not give authority to a proxy to vote; or

         o  withholds authority to vote on one or more proposals.


Votes Required

         The votes required for each of the proposals is as follows:

         Election of  Directors.  The nominee for director who receives the most
votes will be elected. Therefore, if you do not vote for a particular nominee or
you indicate "withhold authority to vote" for a particular nominee on your proxy
card, your abstention will have no effect on the election of directors.

         Appointment  of  Independent  Auditors.  The  proposal  to approve  the
appointment of Abraxas'  independent  auditors must receive the affirmative vote
of the holders of a majority of the shares of Abraxas  common stock  represented
and voting at the meeting. If you are an Abraxas stockholder and you are present
in person or  represented  by proxy at the meeting and abstain from voting or if
you do not  instruct  your broker on how to vote,  it will have no effect on the
proposal  because  holders of shares who have abstained or for which brokers are
not able to vote will not be  considered  voting at the annual  meeting  and for
purposes of approving this proposal.

Voting of Proxies

         Votes  cast  in  person  or by  proxy  at the  annual  meeting  will be
tabulated at the annual meeting.  All valid,  unrevoked proxies will be voted as
directed.  In the absence of  instructions  to the contrary,  properly  executed
proxies will be voted in favor of each of the proposals  listed in the notice of
annual  meeting  and for the  election of the  nominee  for  director  set forth
herein.

                                        3

         If any  matters  other  than  those  addressed  on the  proxy  card are
properly  presented for action at the annual  meeting,  the persons named in the
proxy will have the  discretion to vote on those matters in their best judgment,
unless authorization is withheld.

How To Vote By Proxy; Revocability of Proxies

         To vote by proxy, you must complete, sign, date and return the enclosed
proxy card in the  enclosed  envelope.  Any Abraxas  stockholder  who delivers a
properly  executed  proxy may revoke  the proxy at any time  before it is voted.
Proxies may be revoked by:

         o  delivering  a  written  revocation  of  the  proxy  to  the  Abraxas
            Secretary before the annual meeting;

         o  signing and returning a later dated proxy to the Abraxas  Secretary;
            or

         o  appearing at the annual meeting and voting in person.

         Attendance at the annual meeting will not, in and of itself, constitute
revocation of a proxy. An Abraxas  stockholder whose shares are held in the name
of its broker,  bank or other  nominee must bring a legal proxy from its broker,
bank or other nominee to the meeting in order to vote in person.

Deadline for Voting by Proxy

         In order to be  counted,  votes cast by proxy must be  received by mail
prior to the Annual Meeting.

Solicitation of Proxies

         Proxies  will be  solicited  by mail.  Proxies  may  also be  solicited
personally, or by telephone, fax, or other means by the directors,  officers and
employees of Abraxas. Directors,  officers and employees soliciting proxies will
receive no extra compensation,  but may be reimbursed for related  out-of-pocket
expenses.  In addition to solicitation by mail,  Abraxas will make  arrangements
with brokerage houses and other custodians, nominees and fiduciaries to send the
proxy  materials to beneficial  owners.  Abraxas will,  upon request,  reimburse
these  brokerage  houses,  custodians  and other  persons  for their  reasonable
out-of-pocket  expenses in doing so. The cost of solicitation of proxies will be
paid by Abraxas.


                                        4


                                  PROPOSAL ONE


                          Election of Abraxas Directors

         The Articles of  Incorporation of Abraxas divide the board of directors
into three classes of directors  serving  staggered  three-year  terms, with one
class to be elected at each annual  meeting of  stockholders.  In January  2003,
Frederick  M.  Pevow,  Jr.  resigned  as a Class II  director  and the  board of
directors  filled the vacancy with the  appointment  of Dennis E. Logue to serve
the  remainder  of Mr.  Pevow's  term as a Class  II  director.  At this  year's
meeting,  one Class I director  is to be elected for a term of three  years,  to
hold office until the expiration of his term in 2006 or until a successor  shall
have been elected and shall have qualified.  The nominee for Class I director is
Franklin  A.  Burke.  The term of the Class III  directors  (Messrs.  Watson and
Phelps)  expires  in 2004,  and the  term of the  Class  II  directors  (Messrs.
Bartlett, Wagda, Cox and Logue) expires in 2005.

         Assuming  the  presence  of a quorum,  the  nominee  for  director  who
receives the most votes will be elected.  The enclosed form of proxy  provides a
means for  stockholders  to vote for or to  withhold  authority  to vote for the
nominee for director.  If a stockholder  executes and returns a proxy,  but does
not specify how the shares  represented  by such  stockholder's  proxy are to be
voted,  such shares will be voted FOR the election of the nominee for  director.
Under applicable  Nevada law, in determining  whether this item has received the
requisite number of affirmative votes, abstentions and broker non-votes will not
be counted and will have no effect.

         The board of  directors  recommends  a vote "FOR" the  election  of the
nominee to the board of directors.


                        Directors and Executive Officers

         Set forth below are the names,  ages, years of service and positions of
the  executive  officers  and  directors  of  Abraxas.  The term of the  Class I
directors of Abraxas expires in 2003, the term of the Class II directors expires
in 2005 and the term of the Class III directors expires in 2004.




                                                                                                
Name and Municipality of Residence                   Age  Office                                         Class

Robert L. G. Watson,                                      Chairman of the Board, President and Chief
San Antonio, Texas..............................     52   Executive Officer                               III

Chris E. Williford,                                       Executive Vice President, Chief Financial
San Antonio, Texas..............................     52   Officer and Treasurer                           --

Robert W. Carington, Jr.,
San Antonio, Texas..............................     41   Executive Vice President                        --

C. Scott Bartlett, Jr.,
Montclair, New Jersey...........................     69   Director                                        II

Franklin A. Burke,
Doyleston, Pennsylvania.........................     69   Director                                         I

Ralph F. Cox,
Ft. Worth, Texas................................     70   Director                                        II

Dennis E. Logue
Norman, Oklahoma................................     59   Director                                        II

James C. Phelps,
San Antonio, Texas..............................     80   Director                                        III

Joseph A. Wagda,
Danville, California............................     59   Director                                        II



                                       5


Executive Officers

         Robert L. G.  Watson has served as  Chairman  of the Board,  President,
Chief  Executive  Officer and a director of Abraxas since 1977. From May 1996 to
January 2003,  Mr. Watson also served as Chairman of the Board and a director of
Grey Wolf  Exploration,  Inc.,  formerly a wholly-owned  Canadian  subsidiary of
Abraxas.  Since  January  2003,  he has  served as  Chairman  of the Board and a
director of a newly-formed  wholly-owned  Canadian  subsidiary  called Grey Wolf
Exploration,  Inc.  In November  1996,  Mr.  Watson was elected  Chairman of the
Board,  President and as a director of Canadian  Abraxas,  a former wholly owned
Canadian  subsidiary  of  Abraxas.  Prior to  joining  Abraxas,  Mr.  Watson was
employed  in various  petroleum  engineering  positions  with  Tesoro  Petroleum
Corporation,  a crude oil and natural gas  exploration  and production  company,
from 1972 through 1977, and DeGolyer and MacNaughton,  an independent  petroleum
engineering  firm,  from 1970 to 1972. Mr. Watson received a Bachelor of Science
degree in Mechanical  Engineering from Southern Methodist University in 1972 and
a Master of Business  Administration  degree from the University of Texas at San
Antonio in 1974.

         Chris E.  Williford  was elected Vice  President,  Treasurer  and Chief
Financial  Officer of Abraxas in January 1993,  and as Executive  Vice President
and a director  of Abraxas in May 1993.  In November  1996,  Mr.  Williford  was
elected Vice President and Assistant  Secretary of Canadian Abraxas. In December
1999, Mr. Williford resigned as a director of Abraxas. Prior to joining Abraxas,
Mr.   Williford  was  Chief  Financial   Officer  of  American   Natural  Energy
Corporation,  a crude oil and natural gas  exploration  and production  company,
from July 1989 to December 1992 and President of Clark Resources  Corp., a crude
oil and natural gas exploration and production company, from January 1987 to May
1989.  Mr.  Williford   received  a  Bachelor  of  Science  degree  in  Business
Administration from Pittsburgh State University in 1973.

         Robert W.  Carington,  Jr. was elected  Executive  Vice President and a
director of Abraxas in July 1998. In December 1999, Mr. Carington  resigned as a
director of Abraxas.  Prior to joining  Abraxas,  Mr.  Carington  was a Managing
Director with Jefferies & Company,  Inc.  Prior to joining  Jefferies & Company,
Inc. in January  1993,  Mr.  Carington  was a Vice  President  at Howard,  Weil,
Labouisse,   Friedrichs,   Inc.  Prior  to  joining  Howard,  Weil,   Labouisse,
Friedrichs, Inc., Mr. Carington was a petroleum engineer with Unocal Corporation
from 1983 to 1990.  Mr.  Carington  received a Bachelor of Science in Mechanical
Engineering   from  Rice   University   in  1983  and  a  Masters  of   Business
Administration from the University of Houston in 1990.

Director Nominee

         Franklin A. Burke, a director of Abraxas since June 1992, has served as
President and Treasurer of Venture  Securities  Corporation since 1971, where he
is in charge of research and  portfolio  management.  He has also been a general
partner and director of Burke,  Lawton,  Brewer & Burke, a securities  brokerage
firm, since 1964, where he is responsible for research and portfolio management.
Mr.  Burke also  serves as a director of Suburban  Community  Bank in  Chalfont,
Pennsylvania.  Mr. Burke  received a Bachelor of Science  degree in Finance from
Kansas State University in 1955, a Master's degree in Finance from University of
Colorado  in 1960 and  studied at the  graduate  level at the  London  School of
Economics from 1962 to 1963.

Directors with Terms Expiring in 2004 and 2005

         C. Scott Bartlett,  Jr., a director of Abraxas since December 1999, has
over forty years of commercial  banking  experience,  the most recent being with
National  Westminster  Bank  USA,  rising  to the  position  of  Executive  Vice
President,  Senior Lending Officer and Chairman of the Credit Policy  Committee.
Mr.  Bartlett  currently  serves on the boards of NVR, Inc. and Janus Hotels and
Resorts,  Inc. and is active in securities  arbitration.  Mr. Bartlett  attended
Princeton  University,  and  has  a  certificate  in  Advanced  Management  from
Pennsylvania State University.

         Ralph F. Cox, a director of Abraxas since  December  1999,  has over 45
years of oil and gas  industry  experience,  over thirty of which was with Arco.
Mr. Cox retired from Arco in 1985 after  having  become Vice  Chairman.  Mr. Cox
then joined what was known as Union Pacific  Resources  prior to its acquisition
by Anadarko  Petroleum  in July 2000,  retiring in 1989 as  President  and Chief
Operating  Officer.  Mr. Cox then  joined  Greenhill  Petroleum  Corporation  as
President until leaving in 1994 to pursue his consulting  business.  Mr. Cox has
in the past and continues to serve on many boards including CH2M Hill Companies,
and is a trustee for the Fidelity group of funds.  Mr. Cox earned  Petroleum and
Mechanical  Engineering  degrees from Texas A&M University with advanced studies
at Emory University.


                                       6


            Dennis E. Logue, a director of Abraxas since April 2003, is Dean and
Fred E. Brown Chair at the Michael F. Price College of Business at the
University of Oklahoma. Prior to joining Price College in 2001, he was the
Steven Roth Professor at the Amos Tuck School at Dartmouth College where he had
been since 1974. He is currently a director of Sallie Mae (GSE) and Waddell &
Reed Financial, Inc. He is also on the editorial boards of several scholarly
journals, including the Journal of Banking and Finance, the Journal of Portfolio
Management, and the Journal of Management Strategy Education. Mr. Logue holds
degrees from Fordham College, Rutgers, and Cornell University.

         James C. Phelps, a director of Abraxas since December 1983, has been a
consultant to crude oil and natural gas exploration and production companies
such as Panhandle Producing Company and Tesoro Petroleum Corporation since April
1981. Mr. Phelps served as a director of Old Grey Wolf from January 1996 to
January 2003. From April 1995 to May 1996, Mr. Phelps served as Chairman of the
Board and Chief Executive Officer of Old Grey Wolf, and from January 1996 to May
1996, he served as President of Old Grey Wolf. From March 1983 to September
1984, he served as President of Osborn Heirs Company, a privately owned crude
oil exploration and production company based in San Antonio. Mr. Phelps was
President and Chief Operating Officer of Tesoro Petroleum Corporation from 1971
to 1981 and prior to that was Senior Vice President and Assistant to the
President of Continental Oil Company. He received a Bachelor of Science degree
in Industrial Engineering and a Master of Science degree in Industrial
Engineering from Oklahoma State University.

         Joseph A. Wagda,  a director of Abraxas since  December  1999, has been
involved in a variety of business  activities  over a twenty-eight  year career.
Currently  Mr.  Wagda is  Chairman,  Chief  Executive  Officer and a director of
BrightStar Information Technology Group, Inc. He also is an attorney,  president
of Altamont Capital Management, Inc. and a director of Zierer Visa Service, Inc.
Mr. Wagda's  business  expertise  emphasizes  special  situation  consulting and
investing,  including  involvement  in  distressed  investments  and  turnaround
opportunities.  Previously,  Mr. Wagda was President and Chief Executive Officer
of American Heritage Group, Inc., a modular home builder,  and a Senior Managing
Director and co-founder of the Price Waterhouse  corporate finance practice.  He
also  served with the finance  staff of Chevron  Corporation  and in the general
counsel's  office at Ford Motor  Company.  Mr. Wagda  received an  undergraduate
degree  from  Fordham  College,  a  Masters  of  Business  Administration,  with
distinction, from the Johnson Graduate School of Management, Cornell University,
and a JD, with honors, from Rutgers University.

Information Concerning Directors

         During the fiscal year ended  December 31, 2002,  the Abraxas  board of
directors held seven meetings. All directors attended each meeting. During 2002,
Abraxas'  directors other than Mr. Watson received  compensation  for service to
Abraxas as a director. See "--Compensation  Summary--Compensation of Directors."
Directors also received  reimbursement  of travel expenses to attend meetings of
the board of directors.

Committees of the Board of Directors

         The Audit  Committee of the Abraxas board of directors,  which consists
of Messrs.  Bartlett,  Burke,  Phelps, and Wagda, met two times during 2002. The
board  of  directors  has  determined  that  each of the  members  of the  Audit
Committee is independent as determined in accordance with the listing  standards
of the  American  Stock  Exchange.  In  addition,  the  board of  directors  has
determined  that C. Scott  Bartlett,  Jr., as defined by SEC rules,  is an audit
committee  financial  expert.  The  functions  of  the  Audit  Committee  are to
recommend  the  appointment  of  Abraxas'  independent  auditors,  to review the
arrangements  for and the  scope of the  annual  audit  and to  review  internal
accounting  controls.  The board of directors recently adopted a revised written
Audit Committee Charter,  attached hereto as Annex A, which more fully describes
the functions and responsibilities of the Audit Committee.

         The Compensation Committee of the board of directors, which consists of
Messrs.  Phelps  and  Cox  ,  met  twice  during  2002.  The  functions  of  the
Compensation  Committee are to review and make  recommendations  concerning  the
compensation of Abraxas' executive and non-executive  officers. The Compensation
Committee  also  administers  Abraxas' 1984  Incentive  Stock Option Plan,  1984
Nonqualified Stock Option Plan, 1993 Key Contributor Stock Option Plan, and 1994
Long Term Incentive Plan.

         The board of directors has not had a standing Nominating Committee
since 1999.


                                       7



         SECURITIES HOLDINGS OF PRINCIPAL STOCKHOLDERS,  DIRECTORS, NOMINEEs AND
OFFICERS

         Based upon information received from the persons concerned, each person
known to Abraxas to be the beneficial owner of more than five percent of the
outstanding shares of common stock of Abraxas, each director and nominee for
director, each of the named executive officers and all directors and officers of
Abraxas as a group, owned beneficially as of March 31, 2003, the number and
percentage of outstanding shares of common stock of Abraxas indicated in the
following table:


                                                                                  
Name and Address of Beneficial Owner                            Number of Shares (1)    Percentage (%)
Venture Securities Corp.
516 N. Bethlehem Pike
Spring House, PA 19477                                           2,274,740(2)                 6.38
Peter S. Lynch
82 Devonshire St. 58A
Boston, MA 02109                                                 2,873,000                    8.06
Robert L. G. Watson                                                934,195(3)                 2.58
Franklin A. Burke                                                1,713,720(4)                 4.81
James C. Phelps                                                    539,749(5)                 1.51
Chris E. Williford                                                 203,003(6)                    *
Lee T. Billingsley                                                 159,425(7)                    *
Robert W. Carington, Jr.                                           443,340(8)                 1.23
William H. Wallace                                                  51,775(9)                    *
C. Scott Bartlett, Jr.                                              87,000(10)                   *
Ralph F. Cox                                                       335,000(10)                   *
Joseph A. Wagda                                                     75,000(10)                   *
All Officers and Directors as a Group (10 persons)               4,542,207                   12.25
(3)(4)(5)(6)(7)(8)(9)(10)
------------------

*  Less than 1%

(1)  Unless otherwise  indicated,  all shares are held directly with sole voting
     and investment power.
(2)  Includes 1,188,154 shares with sole voting power held by Venture Securities
     and  Franklin  A. Burke,  a director of Abraxas,  the sole owner of Venture
     Securities, and 1,038,536 shares managed by Venture Securities on behalf of
     third parties.
(3)  Includes 41,353 shares  issuable upon exercise of options granted  pursuant
     to Abraxas  Petroleum  Corporation 1993 Key Contributor  Stock Option Plan,
     479,887 shares  issuable upon exercise of options  granted  pursuant to the
     Abraxas Petroleum  Corporation 1994 Long Term Incentive Plan and 300 shares
     in a retirement account. Does not include a total of 75,880 shares owned by
     the Robert L. G.  Watson,  Jr.  Trust and the Carey B.  Watson  Trust,  the
     trustees of which are Mr. Watson's  brothers and the beneficiaries of which
     are Mr. Watson's children. Mr. Watson disclaims beneficial ownership of the
     shares owned by these trusts.
(4)  Includes 25,750 shares  issuable upon exercise of options granted  pursuant
     to the Amended  and  Restated  Director  Stock  Option Plan (the  "Director
     Option Plan").
(5)  Includes  340,000 shares owned by Marie Phelps,  Mr.  Phelps' wife,  88,762
     shares  owned by JMRR LP, 2,000 shares  issuable  upon  exercise of options
     granted  pursuant to an option  agreement and 25,750  shares  issuable upon
     exercise of options granted pursuant to the Director Option Plan.
(6)  Includes 1,786 shares issuable upon exercise of options granted pursuant to
     the Abraxas Petroleum  Corporation 1984 Incentive Stock Option Plan, 18,214
     shares  issuable upon exercise of options  granted  pursuant to the Abraxas
     Petroleum  Corporation  1993 Key Contributor  Stock Option Plan and 160,000
     shares  issuable upon exercise of options  granted  pursuant to the Abraxas
     Petroleum Corporation 1994 Long Term Incentive Plan.
(7)  Includes 62,250 shares  issuable upon exercise of options granted  pursuant
     to the Abraxas  Petroleum  Corporation  1994 Long Term  Incentive  Plan and
     5,000 shares in a retirement account.
(8)  Includes  345,000 shares issuable upon exercise of options granted pursuant
     to the Abraxas Petroleum Corporation 1994 Long Term Incentive Plan.
(9)  Includes 46,750 shares  issuable upon exercise of options granted  pursuant
     to the Abraxas Petroleum Corporation 1994 Long Term Incentive Plan.
(10) Includes 75,000 shares issuable upon exercise of certain option agreements.

                                       8



Executive Compensation

         Compensation Committee Report on Executive Compensation

         The  Compensation  Committee is composed  entirely of directors who are
not employees of Abraxas.  The Committee is  responsible  for  establishing  and
administering the compensation  levels for Abraxas'  executive and non-executive
officers.  The members of the Compensation Committee believe that the ability to
attract and retain qualified  executive and  non-executive  officers and provide
appropriate  incentives  to Abraxas'  executive  and  non-executive  officers is
essential to the long-term success of Abraxas.

         In  determining  executive  compensation,  the  Committee  reviews  the
compensation programs, pay levels and business results of Abraxas as compared to
a peer group of oil and natural gas exploration and production companies,  which
includes those in the William M. Mercer 2002 Energy  Compensation Survey related
to U.S.  salaries  and those in the Towers  Perrin  2002 Energy  Industry  Total
Rewards Database related to Canadian salaries.

Compensation Philosophy and Objectives

         The  philosophy   underlying  the  development  and  administration  of
Abraxas'  annual and long-term  compensation  plans is to align the interests of
management with those of Abraxas' stockholders.  Key elements of this philosophy
are:

         Establishing  compensation  plans that deliver base salaries  which are
competitive  with the  companies in the peer group,  within  Abraxas'  budgetary
constraints and commensurate with Abraxas' performance as measured by operating,
financial and strategic objectives.

         Providing  equity-based  incentives  for  executive  and  non-executive
officers  to ensure that they are  motivated  over the  long-term  to respond to
Abraxas'  business  challenges and  opportunities  as owners rather than just as
employees.

         Rewarding   executive  and   non-executive   officers  for  outstanding
performance  particularly  where such performance is reflected by an increase in
the value of Abraxas common stock.

         The compensation currently paid to Abraxas' executive and non-executive
officers consists of base salary, various employee benefits (including medical
and life insurance and 401(k) plan benefits generally available to all employees
of Abraxas), annual cash bonuses and grants of stock options and awards under
Abraxas' 1994 Long Term Incentive Plan (the "LTIP").

Elements of the Executive Compensation Program

         Base Salaries.  The Committee believes that Abraxas' base salary levels
for executive officers are consistent with the practices of the companies in the
peer group.  Increases  in base salary  levels from time to time are designed to
reflect competitive  practices in the industry,  Abraxas' financial  performance
and individual performance of the officer.

         In the first quarter of each year, the Chief Executive  Officer submits
to  the  Committee   recommendations  for  salary  adjustments  based  upon  his
subjective  evaluation of individual  performance  and his  subjective  judgment
regarding  setting each  executive  and  non-executive  officer's  salary within
Abraxas'  salary  range.  This range is set by reference to the salaries paid by
the  companies  in the peer group  while  remaining  within  Abraxas'  budgetary
constraints. The companies in the peer group are used to compare Abraxas' salary
structure to that of other  companies  that compete with Abraxas for  executives
but without targeting salaries to be higher,  lower or approximately the same as
those of the companies in the peer group.  The  Committee  does not consider the
performance of any of the companies in the peer group in setting Abraxas' salary
structure.

         Annual Cash Bonuses.  In 1994, the board of directors adopted an annual
cash bonus plan which  established  certain  criteria  for the payment of annual
cash  bonuses to all officers of Abraxas at or above the Vice  President  level.
The plan was amended in 1997 and again in 1999. Under the plan as amended,  each
participant  is given an annual bonus  opportunity  based on the  achievement of
certain goals. For Messrs. Watson, Williford and Carington, the base bonus could
be as high as 35% of base salary if all goals are attained.  For Messrs. Wallace
and Dr.  Billingsley,  the bonus  could be as high as 25% of base  salary if all
goals are  attained.  The amount of the  bonuses  to be paid to Messrs.  Watson,


                                       9

Williford, Carington and Wallace and Dr. Billingsley, if any, will be based upon
attaining   goals  set  by  the  board  of   directors   after   assessing   the
recommendations of management for EBITDA,  General and Administrative  expenses,
Reserve  Replacement  percentage  and  Finding  Costs,  with each  factor  being
weighted  equally  in the  calculation.  If all  performance  goals  are  met or
exceeded,  additional  bonuses of up to 25% of base salary can be earned by each
participant.  The board has the  prerogative  to adjust the bonus  earned by any
participant,  including Messrs. Watson, Williford, Carington and Wallace and Dr.
Billingsley,  to take into account extraordinary factors not contemplated by the
bonus plan when the impact of such contributions or factors cannot be adequately
reflected by the bonus  determined  under the  methodology  described  above. In
2002, the goal for General and Administrative  expense was met and the following
bonuses were paid:

                Name                              Bonus Amount

                Robert L.G. Watson                    $24,592
                Chris E. Williford                     14,848
                Robert W. Carington, Jr.               19,488
                Lee T. Billingsley                      9,792
                William H. Wallace                      9,792

         Long-Term  Incentives.  In 1994, the board adopted the LTIP in order to
compensate  executive and  non-executive  officers and employees who  contribute
significantly  to the  operation  of Abraxas.  Up to an  aggregate  of 5,000,000
shares of Abraxas  common stock are available for issuance  under the LTIP.  The
LTIP makes  available  to the  Committee a number of  incentive  devices such as
incentive  stock options and  non-qualified  stock options,  stock  appreciation
rights,  restricted stock,  performance  units,  performance shares and dividend
units.  The Committee adopts  administrative  guidelines from time to time which
define specific eligibility criteria, the types of awards to be employed and the
value  of  such  awards.   Specific  terms  of  each  award,  including  minimum
performance  criteria,  which must be met to receive  payment,  are  provided in
individual  award agreements  granted to each award recipient.  Award agreements
also contain change in control  provisions.  Option holdings and previous awards
are not taken into account.

         The board  believes that the LTIP has given Abraxas the  flexibility to
structure awards to meet Abraxas' business needs. In making long-term  incentive
awards under the LTIP, the Committee seeks to ensure that the total compensation
package, including cash compensation,  is competitive with the compensation paid
by the companies  included in the Mercer Survey and the Towers Perrin  Database,
yet  substantially  contingent  upon the  conclusion of individual and corporate
efforts to produce attractive long-term returns to Abraxas stockholders.

         CEO  Compensation.  Mr.  Watson's  salary  in  2002  was  based  on the
Committee's  evaluation  of his  performance  and  Abraxas'  performance,  after
reviewing  competitive  salary  data from the  companies  included in the Mercer
Survey,  the Towers Perrin Database,  and Abraxas'  budgetary  constraints.  The
Committee's  determination  of Mr.  Watson's  total  salary  was based  upon the
salaries  paid to chief  executive  officers  of the  companies  included in the
Mercer Survey, the Towers Perrin Database, and the salary structure of Abraxas.

         Policy on Deductibility of Compensation.  In 1993, the federal tax laws
were  amended to limit the  deduction  a  publicly-held  company is allowed  for
compensation  paid to the chief  executive  officer  and to the four most highly
compensated   executive   officers  other  than  the  chief  executive  officer.
Generally,  amounts paid in excess of $1 million to a covered  executive,  other
than performance-based compensation,  cannot be deducted. In order to constitute
performance-based  compensation  for  purposes of the tax law,  the  performance
measures must be approved by the stockholders. Since Abraxas does not anticipate
that the  compensation  for any  executive  officer  will  exceed the $1 million
threshold in the near term,  stockholder  approval necessary to maintain the tax
deductibility of compensation at or above that level is not being requested. The
Compensation  Committee  will  reconsider  this  matter if  compensation  levels
approach  this  threshold,  in  light  of the  tax  laws  then  in  effect.  The
Compensation  Committee  will  consider  ways to maximize the  deductibility  of
executive  compensation,  while retaining the discretion necessary to compensate
executive officers in a manner commensurate with performance and the competitive
environment for executive talent.

         This report is submitted by the members of the Compensation Committee.

                                             James C. Phelps, Chairman
                                             Ralph F. Cox


                                       10


Compensation Summary

         The following table sets forth a summary of compensation for the fiscal
years  ended  December  31,  2000,  2001 and 2002 paid by Abraxas to Robert L.G.
Watson,  Abraxas' Chairman of the Board,  President and Chief Executive Officer,
Chris E. Williford,  Abraxas' Executive Vice President,  Chief Financial Officer
and Treasurer,  Robert W. Carington, Jr., Abraxas' Executive Vice President, Lee
T. Billingsley, Abraxas' Vice President--Exploration, and to William H. Wallace,
Abraxas' Vice President--Operations.




                           Summary Compensation Table



                                                                                                       Long Term
                                                                                                      Compensation
                                                                                                        Awards -
        Name and Principal Position                   Year             Salary($)        Bonus($)       Securities
                                                      ----             ---------        --------      Underlying
                                                                Annual Compensation                   Options (#)
        -------------------------------------------------------------------------------------------------------------
                                                                                                 
        Robert  L. G. Watson,                         2000              $259,615         $29,175             962,562(1)
        Chairman of the Board,                        2001              $259,615         $27,388              60,000
        President and Chief Executive Officer         2002              $271,442         $24,592              90,000
        -------------------------------------------------------------------------------------------------------------
        Chris E. Williford,                           2000              $155,769         $17,505             392,701(1)
        Executive Vice President,                     2001              $155,769         $16,433              20,000
        Chief Financial Officer and Treasurer         2002              $163,653         $14,848              43,000
        -------------------------------------------------------------------------------------------------------------
        Robert  W. Carington, Jr.,                    2000              $207,629         $23,340             549,456(1)
        Executive Vice President                      2001              $207,629         $21,910              20,000
                                                      2002              $215,577         $19,488              55,000
        -------------------------------------------------------------------------------------------------------------
        Lee T. Billingsley                            2000              $134,077         $22,004              97,972(1)
        Vice President--                              2001              $134,077         $10,331              15,000
        Exploration                                   2002              $156,885          $9,792              22,000
        -------------------------------------------------------------------------------------------------------------
        William H. Wallace,                           2000              $131,577          $9,425              97,972(1)
        Vice President--                              2001              $131,577         $10,331              15,000
        Operations                                    2002              $156,885          $9,792              22,000
        -------------------------------------------------------------------------------------------------------------
-------------------


(1)      In March 2002, each named officer  voluntarily  forfeited a substantial
         number of options to purchase  Abraxas common stock,  which were issued
         in 2000.  The exercise  price for the  forfeited  options was $5.03 per
         share,  and the named officers each  forfeited the following  number of
         options: Mr. Watson - 842,562; Mr. Williford - 352,701; Mr. Carington -
         509,456;  Mr.  Billingsley - 97,972; Mr. Wallace - 97,972. See note (1)
         to the Option Exercises table on the following page.

Grants of Stock  Options and Stock  Appreciation  Rights  During the Fiscal Year
Ended December 31, 2002

         Pursuant to the Abraxas  Petroleum  Corporation  1984  Incentive  Stock
Option  Plan  (the "ISO  Plan"),  the  Abraxas  Petroleum  Corporation  1993 Key
Contributor  Stock  Option Plan (the "1993  Plan"),  and the  Abraxas  Petroleum
Corporation  1994 Long Term Incentive  Plan (the "LTIP"),  Abraxas grants to its
employees  and  officers  (including  its  directors  who  are  also  employees)
incentive stock options and non-qualified stock options.  The ISO Plan, the 1993
Plan, and the LTIP are administered by the Compensation  Committee which,  based
upon the recommendation of the Chief Executive Officer, determines the number of
shares subject to each option.

         The table below contains certain  information  concerning stock options
granted to Messrs. Watson, Williford,  Carington and Wallace and Dr. Billingsley
during 2002:


                                       11





                          Option Grants in Fiscal Year

Name                                  Number of      % of Total      Exercise    Expiration  Potential Realizable
                                                                                               Value at Assumed
                                      Securities                                             Annual Rates of Stock
                                      Underlying                     Price Per                Price Appreciation
                                       Options         Options         Share                          for
                                       granted       Granted to      (Price at                    Option Term
                                         (1)          Employees       Grant)        Date            5% 10%
-------------------------------------------------------------------------------------------------------------------
                                                                                       
Robert L.G. Watson.........             90,000          17.2           $0.65     11/22/12     $36,900    $93,600
-------------------------------------------------------------------------------------------------------------------
Chris E. Williford.........             43,000           8.2           $0.65     11/22/12     $17,630    $44,720
-------------------------------------------------------------------------------------------------------------------
Robert W. Carington, Jr....             55,000          10.5           $0.65     11/22/12     $22,550    $57,200
-------------------------------------------------------------------------------------------------------------------
Lee T. Billingsley.........             22,000           4.2           $0.65     11/22/12      $9,020    $22,880
-------------------------------------------------------------------------------------------------------------------
William H. Wallace.........             22,000           4.2           $0.65     11/22/12      $9,020    $22,880
-------------------------------------------------------------------------------------------------------------------
------------------------------


(1)      One-fourth of the options become  exercisable on each of the first four
         anniversaries of the date of grant.

Aggregated Option Exercises in Fiscal 2002 and Fiscal Year End Option Values

         The table below contains certain  information  concerning  exercises of
stock options during the fiscal year ended December 31, 2002, by Messrs. Watson,
Williford,  Carington  and Wallace and Dr.  Billingsley  and the fiscal year end
value of unexercised options held by Messrs.  Watson,  Williford,  Carington and
Wallace and Dr.  Billingsley.  Effective  January 23, 2003, the Abraxas board of
directors  approved  a  reduction  in the  exercise  price to $0.66 per share of
one-half of all  options to purchase  Abraxas  common  stock held by Mr.  Watson
(320,282 options), and a reduction in the exercise price of all of stock options
previously  issued  to  other  Abraxas  employees   (approximately  1.8  million
options).




                         Option Exercises in Fiscal Year

Name                                   Shares     Value      Number of Unexercised      Value of Unexercised
                                                            Options on December 31,    Options on December 31,
                                    Acquired By  Realized           2002(#)                   2002 ($)
                                    Exercise(#)    ($)    Exercisable/Unexercisable(1)Exercisable/Unexercisable
----------------------------------------------------------------------------------------------------------------
                                                                                     
Robert L. G. Watson..........            0          0           521,240/205,285                  0/0
----------------------------------------------------------------------------------------------------------------
Chris E. Williford...........            0          0           180,000/78,000                   0/0
----------------------------------------------------------------------------------------------------------------
Robert W. Carington, Jr......            0          0           345,000/90,000                   0/0
----------------------------------------------------------------------------------------------------------------
Lee T. Billingsley...........            0          0            84,250/40,750                   0/0
----------------------------------------------------------------------------------------------------------------
William H. Wallace...........            0          0            46,750/40,750                   0/0
----------------------------------------------------------------------------------------------------------------
----------------------

(1)      In March 2002, a significant  number of stock  options  granted in 2000
         were voluntarily forfeited by the named officers. All forfeited options
         had an  exercise  price in  excess of the  market  price on the date of
         forfeiture.    Such   forfeitures   reduced   the   total   number   of
         exercisable/unexercisable  options  held by each  named  officer to the
         following at the  forfeiture  date:  Mr.  Watson--464,435/176,128;  Mr.
         Williford  -  160,000/55,000;  Mr.  Carington  -  250,000/130,000;  Mr.
         Billingsley - 58,500/44,500; Mr. Wallace - 32,375/33,125.



                                       12


Securities Authorized for Issuance Under Equity Compensation Plans.

         The following chart gives aggregate  information regarding grants under
all equity compensation plans of the Company through December 31, 2002.



                      Equity Compensation Plan Information

                                                                                         Number of securities
                                                                                        remaining available for
                                   Number of securities to       Weighted-average        future issuance under
                                   be issued upon exercise      exercise price of      equity compensation plans
                                   of outstanding options,     outstanding options,       (excluding securities
                                     warrants and rights       warrants and rights      reflected in column (a))
          Plan Category                      (a)                       (b)                        (c)
                                                                                      
Equity compensation plan
approved by security holders              3,003,340                   $1.94                    2,161,366

Equity compensation plans not
approved by security holders
                                          1,252,000                   $2.89                        -



Employment Agreements

         Abraxas has entered  into  employment  agreements  with each of Messrs.
Watson,  Williford,  Carington and Wallace and with Dr. Billingsley  pursuant to
which  each  of  Messrs.  Watson,  Williford,  Carington  and  Wallace  and  Dr.
Billingsley  will receive  compensation  as determined  from time to time by the
board in its sole discretion.

         The employment agreements for Messrs. Watson,  Williford, and Carington
are  scheduled to terminate  on December  21, 2003,  and shall be  automatically
extended for additional one-year terms unless Abraxas gives the officer 120 days
notice prior to the expiration of the original term or any extension  thereof of
its intention not to renew the employment agreement.  If, during the term of the
employment  agreements  for each of such officers,  the officer's  employment is
terminated by Abraxas other than for cause or  disability,  by the officer other
than by reason of such  officer's  death or retirement,  or by the officer,  for
"Good Reason" (as defined in each officer's  respective  employment  agreement),
then such  officer  will be entitled to receive a lump sum payment  equal to the
greater of (a) his annual base salary for the last full year during which he was
employed by Abraxas or (b) his annual base salary for the  remainder of the term
of each of their respective employment agreements.

         If a  change  of  control  occurs  during  the  term of the  employment
agreement for Mr. Watson,  Mr. Williford or Mr. Carington,  and if subsequent to
such change of control, such officer's employment is terminated by Abraxas other
than for cause or disability,  by reason of the officer's death or retirement or
by such  officer,  for Good  Reason,  then such  officer will be entitled to the
following, as applicable:

         Mr. Watson:


                  (1) if such  termination  occurs prior to the end of the first
                  year of the initial term of his employment  agreement,  a lump
                  sum payment equal to five times his annual base salary;
                  (2) if such termination occurs after the end of the first year
                  of the initial term of his  employment  agreement but prior to
                  the  end  of  the  second  year  of the  initial  term  of his
                  employment  agreement,  a lump sum payment equal to four times
                  his annual base salary;
                  (3) if such  termination  occurs  after the end of the  second
                  year of the initial term of his employment agreement but prior
                  to the  end of the  third  year  of the  initial  term  of his
                  employment agreement,  a lump sum payment equal to three times
                  his annual base salary; and
                  (4) if such termination occurs after the end of the third year
                  of the  initial  term of his  employment  agreement a lump sum
                  payment equal to 2.99 times his annual base salary.

         Mr. Williford or Mr. Carington:

                                       13

                  (1) if such  termination  occurs prior to the end of the first
                  year  of  the  initial  term  of  the   officer's   employment
                  agreement,  a  lump  sum  payment  equal  to  four  times  the
                  officer's annual base salary;
                  (2) if such termination occurs after the end of the first year
                  of the initial term of the officer's  employment agreement but
                  prior to the end of the second year of the initial term of the
                  employment agreement,  a lump sum payment equal to three times
                  the officer's annual base salary; and
                  (3) if such  termination  occurs  after the end of the  second
                  year  of  the  initial  term  of  the   officer's   employment
                  agreement,  a  lump  sum  payment  equal  to  2.99  times  the
                  officer's annual base salary.

         Abraxas has entered into employment agreements with Mr. Wallace and Dr.
Billingsley  pursuant  to which each of Mr.  Wallace  and Dr.  Billingsley  will
receive  compensation  as determined  from time to time by the board in its sole
discretion.  The  employment  agreements,  originally  scheduled to terminate on
December 31, 1998 for Dr.  Billingsley  and  December 31, 2000 for Mr.  Wallace,
were automatically  extended and will terminate on December 31, 2003, and may be
automatically extended for an additional year if by December 1 of the prior year
neither  Abraxas  nor Mr.  Wallace or Dr.  Billingsley,  as the case may be, has
given notice to the contrary. Except in the event of a change in control, at all
times during the term of the employment  agreements,  each of Mr.  Wallace's and
Dr. Billingsley's employment is at will and may be terminated by Abraxas for any
reason without notice or cause. If a change in control occurs during the term of
the employment  agreement or any extension  thereof,  the expiration date of Mr.
Wallace's and Dr. Billingsley's  employment agreement is automatically  extended
to a date no earlier  than three  years  following  the  effective  date of such
change in control.  If,  following a change in control,  either Mr. Wallace's or
Dr.  Billingsley's  employment is terminated other than for Cause (as defined in
each of the  employment  agreements)  or  Disability  (as defined in each of the
Employment Agreements), by reason of Mr. Wallace's or Dr. Billingsley's death or
retirement or by Mr.  Wallace or Dr.  Billingsley,  as the case may be, for Good
Reason (as defined in each of the  employment  agreements),  then the terminated
officer will be entitled to receive a lump sum payment  equal to three times his
annual base salary.

         If any  lump sum  payment  to  Messrs.  Watson,  Williford,  Carington,
Wallace or Dr. Billingsley would individually or together with any other amounts
paid or payable  constitute an "excess parachute  payment" within the meaning of
Section 280G of the Internal  Revenue Code of 1986, as amended,  and  applicable
regulations  there  under,  the  amounts  to be paid will be  increased  so that
Messrs. Watson, Williford,  Carington,  Wallace or Dr. Billingsley,  as the case
may be, will be entitled to receive the amount of  compensation  provided in his
contract after payment of the tax imposed by Section 280G.

Compensation of Directors

         Stock Options.  In 1999, each of Messrs.  Bartlett,  Cox and Wagda were
each granted  options to purchase  75,000  shares of common stock at an exercise
price of $0.98 per share.

         Other Compensation.  During 2002, each director who was not an employee
of Abraxas or its  affiliates,  received an annual fee of $8,000 plus $1,000 for
each  board  meeting  attended  and $500 for each  committee  meeting  attended.
Aggregate  fees  paid  to  directors  in  2002  were  $131,500.  Except  for the
foregoing,  the directors of Abraxas received no other compensation for services
as  directors,  except for  reimbursement  of travel  expenses  to attend  board
meetings.

Section 16(a) Compliance

         Section  16(a) of the  Exchange  Act requires  Abraxas'  directors  and
executive  officers and persons who own more than 10% of a  registered  class of
Abraxas equity  securities to file with the  Securities and Exchange  Commission
and the AMEX initial reports of ownership and reports of changes in ownership of
Abraxas common stock. Officers,  directors and greater than 10% stockholders are
required  by SEC  regulation  to furnish  us with  copies of all such forms they
file. Based solely on a review of the copies of such reports furnished to us and
written  representations  that no other reports were required,  Abraxas believes
that all its directors and executive  officers  during 2002 complied on a timely
basis  with  all  applicable  filing  requirements  under  Section  16(a) of the
Exchange Act.

                                       14


Performance Graph

         Set forth below is a  performance  graph  comparing  yearly  cumulative
total stockholder  return on the Abraxas common stock with (a) the monthly index
of stocks  included in the  Standard and Poor's 500 Index and (b) the CIBC World
Markets  Index  (the  "CIBC  Index")  of  stocks of crude  oil and  natural  gas
exploration and production  companies with a market  capitalization of less than
$300 million (the "Comparable  Companies").  The Comparable Companies are: Adams
Resources & Energy, Inc.; Mission Resources;  Callon Petroleum Company; Columbus
Energy  Corporation;  Goodrich Petroleum  Corporation;  Magnum Hunter Resources,
Inc.;  The  Meridian  Resource  Corporation;   PetroCorp  Incorporated;   Plains
Resources, Inc.; Prima Energy Corporation; Unit Corporation;  Venus Exploration,
Inc.; and Wiser Oil Company.

         All of these cumulative  total returns are computed  assuming the value
of the  investment in Abraxas common stock and each index as $100.00 on December
31,  1997,  and the  reinvestment  of  dividends  at the  frequency  with  which
dividends  were paid during the applicable  years.  The years compared are 1998,
1999, 2000, 2001 and 2002.


                                Performance Graph

         [OBJECT OMITTED]
                               S&P        Small-cap
                     ABP        500        index
                ------------ ---------- -----------
      Dec-97         100%        100%       100%
      Mar-98          57         114         95
      Jun-98          62         117         89
      Sep-98          47         105         67
      Dec-98          30         127         50
      Mar-99          12         133         53
      Jun-99           8         141         70
      Sep-99          15         132         74
      Dec-99           6         151         64
      Mar-00          15         154         83
      Jun-00          10         150        111
      Sep-00          26         148        130
      Dec-00          30         136        148
      Mar-01          35         120        126
      Jun-01          21         126        117
      Sep-01          13         107         92
      Dec-01           9         118        100
      Mar-02           9         118         73
      Jun-02           5         102         67
      Sep-02           5          84         65
      Dec-02           4          91         57

                         Dec-97  Dec-98  Dec-99   Dec-00   Dec-01   Dec-02
      S&P 500             100      127     151      136      118       91
      Small Cap Index     100       50      64      148      100       57
      ABP                 100       30       6       30        9        4


Audit Committee Report

         The Audit Committee  reviews Abraxas'  financial  reporting  process on
behalf of the board of directors.  Management has the primary responsibility for
the  financial  statements  and the reporting  process,  including the system of
internal  controls.  The independent  auditors are responsible for performing an
independent audit of Abraxas'  consolidated  financial  statements in accordance
with generally accepted accounting principles and to issue a report thereon. The
Committee reviews and oversees these processes,  including  oversight of (i) the
integrity of Abraxas' financial statements,  (ii) Abraxas' independent auditors'
qualifications and independence,  (iii) the performance of Abraxas'  independent
auditors and (iv) Abraxas' compliance with legal and regulatory requirements.

         In this context, the Committee met and held discussions with management
and the  independent  auditors.  Management  represented  to the Committee  that
Abraxas'  consolidated  financial  statements  were prepared in accordance  with
accounting principles generally accepted in the United States, and the Committee
reviewed and discussed the consolidated financial statements with management and
the  independent  auditors.  The Committee also  discussed with the  independent
auditors the matters required to be discussed by Statement on Auditing Standards
No. 61 (Codification of Statements on Auditing Standards, AU 380), as amended.

                                       15


         In addition,  the Committee discussed with the independent auditors the
auditors'  independence  from Abraxas and its  management,  and the  independent
auditors  provided to the Committee the written  disclosures and letter required
by the  Independence  Standards Board Standard No. 1  (Independence  Discussions
With Audit Committees).

         The Committee  also discussed  with Abraxas'  independent  auditors the
overall  scope and  plans for their  respective  audit.  The  Committee  met the
independent  auditors,  with and  without  management  present,  to discuss  the
results of their  examinations,  the evaluations of Abraxas' internal  controls,
and the overall quality of Abraxas' financial reporting.

         Audit  Fees.  The  aggregate  fees  billed  for  professional  services
rendered  by Deloitte & Touche LLP for the audit of  Abraxas'  annual  financial
statements  for the  year  ended  December  31,  2002,  and the  reviews  of the
condensed  financial  statements included in Abraxas' quarterly Reports on Forms
10-Q for the year ended December 31, 2002, were $316,492.

         Financial  Information Systems Design and Implementation Fees. Deloitte
& Touche  LLP did not  perform  any  financial  information  systems  design  or
implementation work on behalf of Abraxas for the year ended December 31, 2002.

         All Other  Fees.  The  aggregate  fees  billed for all other  services,
exclusive of the fees  disclosed  above  relating to financial  statement  audit
services,  rendered by Deloitte & Touche LLP during the year ended  December 31,
2002, were $509,454,  related primarily to various tax issues,  and the exchange
offer related to Abraxas'  second lien notes,  which was  consummated on January
23, 2003.

         Consideration  of  Non-audit   Services  Provided  by  the  Independent
Auditors.  The Audit Committee has considered  whether the services provided for
non-audit  services  are  compatible  with  maintaining  Deloitte & Touche LLP's
independence,  and has  concluded  that the  independence  of such firm has been
maintained.

         Based on the reviews and discussions  referred to above,  the Committee
recommended  to the board of  directors,  and the board has  approved,  that the
audited financial  statements be included in Abraxas' Annual Report on Form 10-K
for the year ended  December  31,  2002,  for  filing  with the  Securities  and
Exchange Commission. The Committee and the board also have recommended,  subject
to  shareholder  approval,  the selection of Abraxas'  independent  auditors for
fiscal year 2003.

Dated:  March 31, 2003

                                      Audit Committee

                                      C. Scott Bartlett, Jr., Chairman
                                      James C. Phelps
                                      Franklin A. Burke
                                      Joseph A. Wagda

Certain Transactions

         Wind River Resources Corporation,  all of the capital stock of which is
owned by Mr. Watson, owns a twin-engine airplane.  The airplane is available for
business use by  employees  of Abraxas  from time to time at Wind River's  cost.
Abraxas  paid Wind River a total of $345,000  for use of the plane  during 2002.
Abraxas has adopted a policy that transactions, including loans, between Abraxas
and its officers,  directors,  principal  stockholders,  or affiliates of any of
them,  will be on terms no less  favorable to Abraxas than can be obtained on an
arm's length basis in  transactions  with third  parties and must be approved by
the vote of at least a majority of the disinterested directors.

                                  PROPOSAL TWO


                          Ratification of Selection of
                              Independent Auditors

                                       16


         The Abraxas board of directors  has selected BDO Seidman,  LLP to serve
as independent auditors of Abraxas for the fiscal year ending December 31, 2003.
Although  stockholder  ratification is not required,  the board of directors has
directed that such  appointment be submitted to the  stockholders of Abraxas for
ratification  at the annual  meeting.  Deloitte & Touche LLP has provided  audit
services  to Abraxas for the years ended  December  31, 2001 and 2002.  The year
ending December 31, 2003 will be the first year that BDO Seidman, LLP is engaged
to supply audit services to Abraxas.  A representative of BDO Seidman,  LLP will
be  present  at the  Annual  Meeting,  and will  have an  opportunity  to make a
statement  if he or she  desires  to do so and will be  available  to respond to
appropriate  questions.  No  representative  of  Deloitte  & Touche  LLP will be
present at the annual meeting.

         On April 22, 2003, the board of directors  engaged the accounting  firm
of BDO  Seidman,  LLP as  Abraxas'  certifying  accountant  for the  year  ended
December  31, 2003.  The decision to approve the  dismissal of Deloitte & Touche
LLP and engagement of BDO Seidman,  LLP was approved by the Audit  Committee and
the entire  board of  directors.  Deloitte & Touche  LLP was  notified  of their
dismissal on April 22, 2003.

         The reports of Deloitte & Touche LLP on Abraxas'  financial  statements
for the two fiscal  years ended  December  31, 2001 and 2002 did not contain any
adverse  opinion or  disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope or accounting principles.

         In connection with the audits of Abraxas' financial statements for each
of the two  fiscal  years  ended  December  31,  2001 and  2002,  there  were no
disagreements   with  Deloitte  &  Touche  LLP  on  any  matters  of  accounting
principles,  financial statement disclosure or audit scope and procedures which,
if not resolved to the  satisfaction of Deloitte & Touche LLP, would have caused
the firm to make  reference to the matter in its report.  During each of the two
fiscal years ended December 31, 2001 and 2002,  there were no reportable  events
as described in Item 304(a)(1)(v) of Regulation S-K.

         Assuming the presence of a quorum,  the affirmative vote of the holders
of a majority  of the shares of common  stock  present in person or by proxy and
entitled to vote on this item at the annual  meeting is necessary to approve the
appointment  of  Abraxas'  independent  auditors.  The  enclosed  form of  proxy
provides a means for  stockholders to vote for the  ratification of selection of
independent  auditors, to vote against it or to abstain from voting with respect
to it. If a stockholder  executes and returns a proxy,  but does not specify how
the shares represented by such stockholder's  proxy are to be voted, such shares
will be voted FOR the ratification of selection of independent  auditors.  Under
applicable  Nevada  law,  in  determining  whether  this item has  received  the
requisite number of affirmative votes, abstentions and broker non-votes will not
be counted and will have no effect.

         The board of directors  recommends a vote "FOR" the ratification of the
selection of BDO Seidman,  LLP as independent auditors of Abraxas for the fiscal
year ending December 31, 2003.


                                       17


              STOCKHOLDER PROPOSALS FOR 2004 ABRAXAS ANNUAL MEETING

         Abraxas  intends  to hold  its  next  annual  meeting  in May of  2004,
according to its normal schedule.  In order to be included in the proxy material
for the  2004  Annual  Meeting,  Abraxas  must  receive  eligible  proposals  of
stockholders  intended  to be  presented  at the  annual  meeting  on or  before
December 26, 2003, directed to the Abraxas Secretary at the address indicated on
the first page of this proxy statement.

         According to our Bylaws,  Abraxas must receive timely written notice of
any stockholder nominations and proposals to be properly brought before the 2004
Annual  Meeting.  To be timely,  such  notice must be  delivered  to the Abraxas
Secretary at the principal executive offices set forth on the first page of this
proxy  statement  not later  than the close of  business  on March 30,  2004 nor
earlier  than March 1, 2004.  The  written  notice must set forth (a) as to each
person whom the stockholder  proposes to nominate for election or re-election as
a  director,  all  information  relating  to such  person that is required to be
disclosed in  solicitations  of proxies for election of directors in an election
contest, or is otherwise required, in each case pursuant to Regulation 14A under
the  Securities  Exchange Act of 1934, as amended;  (b) as to any other business
that the stockholder  proposes to bring before the meeting,  a brief description
of the  business  desired to be brought  before the  meeting,  the  reasons  for
conducting  such  business  at the  meeting  and any  material  interest in such
business of such  stockholder and the beneficial  owner, if any, on whose behalf
the proposal is made;  and (c) as to the  stockholder  giving the notice and the
beneficial owner, if any, on whose behalf the nomination or proposal is made (i)
the name and address of such  stockholder,  as they appear on the  Corporation's
books,  and of such beneficial  owner and (ii) the class and number of shares of
the Corporation  which are owned  beneficially and of record by such stockholder
and such beneficial owner.

         In the event that the 2004 Annual Meeting is more than 30 days from May
29, 2004 (the anniversary of the 2003 Annual Meeting),  the dates for submission
with the proxy  materials  and to be properly be brought  before the 2004 Annual
Meeting  will  change  according  to the  Bylaws  and  Regulation  14A under the
Exchange Act. A copy of the Bylaws of Abraxas  setting forth the advance  notice
provisions  and  requirements  for  submission of  stockholder  nominations  and
proposals may be obtained from the Abraxas Secretary at the address indicated on
the first page of this proxy statement.

                                  OTHER MATTERS

         No  business  other  than the  matters  set forth in this  document  is
expected to come before the meeting,  but should any other  matters  requiring a
stockholder's  vote arise,  including a question of adjourning the meeting,  the
persons  named in the  accompanying  Proxy will vote thereon  according to their
best judgment in the interests of Abraxas. If the nominee for office of director
should withdraw or otherwise become unavailable for reasons not presently known,
the persons  named as proxies  may vote for another  person in his place in what
they consider the best interests of Abraxas.

         Upon the  written  request  of any  person  whose  proxy  is  solicited
hereunder,  Abraxas  will  furnish  without  charge to such person a copy of its
annual report filed with the United States Securities and Exchange Commission on
Form 10-K,  including financial statements and schedules thereto, for the fiscal
year ended  December  31, 2002.  Such  written  request is to be directed to the
attention  of Chris E.  Williford,  500 North  Loop 1604 East,  Suite  100,  San
Antonio, Texas 78232.



                                         By Order of the Board of Directors


                                         Stephen T. Wendel
                                         SECRETARY
San Antonio, Texas
April 24, 2003


                                       18

                                  FORM OF PROXY
                                      FRONT

                          ABRAXAS PETROLEUM CORPORATION
                       500 North Loop 1604 East, Suite 100
                            San Antonio, Texas 78232
                                 (210) 490-4788


           This Proxy is Solicited on behalf of the Board of Directors

         The undersigned shareholder of Abraxas Petroleum Corporation,  a Nevada
corporation  (the  "Company"),  hereby  appoints  Robert L. G. Watson,  Chris E.
Williford and Robert W. Carington,  Jr., and each of them, as Proxies, each with
the power to  appoint  his or her  substitute,  and  hereby  authorizes  them to
represent  and to vote, as designated  below,  all the shares of Abraxas  common
stock which the  undersigned  may be  entitled to vote at the Annual  Meeting of
Stockholders to be held on May 29, 2003, and any adjournment  thereof,  with all
powers which the undersigned would possess if personally present.

         The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement of Abraxas dated April 24, 2003.



                   CONTINUED AND TO BE SIGNED ON REVERSE SIDE


                                       19

                                      BACK

         This proxy when properly  executed will be voted in the manner directed
herein by the undersigned stockholder.  If no direction is made, this proxy will
be voted "FOR" the election of Directors and "FOR" the Approval of Proposal 2 .

                                            FOR      WITHHELD
1. ELECTION OF                              [ ]         [ ] Nominee:
DIRECTOR NOMINATED                                          Franklin A. Burke
BY BOARD OF DIRECTORS


2. PROPOSAL TO APPROVE THE APPOINTMENT OF BDO SEIDMAN, LLP AS AUDITORS OF
ABRAXAS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2003

     [  ]  FOR                 [  ]  AGAINST              [  ]  ABSTAIN


3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.

CHECK HERE FOR ADDRESS CHANGE  [  ]  NEW ADDRESS:
                                                --------------------------------
                                     -------------------------------------------
                                     -------------------------------------------
                                     -------------------------------------------

         Please  sign  exactly as name  appears  below.  When shares are held by
joint  tenants,  both  should  sign.  When  signing as  attorney,  as  executor,
administrator,  trustee  or  guardian,  please  give  full  title as such.  If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.


DATED:  ______________, 2003
                                    --------------------------------------------
                                    Signature


PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY USING THE
                                    --------------------------------------------
ENCLOSED ENVELOPE.                  Signature if held jointly




                                       20

                                     ANNEX A

                          ABRAXAS PETROLEUM CORPORATION

                             Audit Committee Charter

The audit  committee  of the board of directors  shall be comprised  entirely of
directors  who are  independent  of management  and the Company.  Members of the
audit committee shall be considered independent if they meet the requirements of
Section  10A(m)(3) of the Securities  Exchange Act of 1934 (the "Exchange  Act")
and the rules and  regulations  of any exchange on which Abraxas  securities are
listed or quoted and the  Securities  and  Exchange  Commission.  Members of the
audit  committee  may  receive  no  compensation  from the  Company  other  than
directors'  fees and shall not  serve on the  audit  committee  of more than two
other public companies. All audit committee members will be financially literate
and at least one member will be an "audit committee financial expert" as defined
and required by federal rules and  regulations  and the rules of any exchange on
which Abraxas securities are listed or quoted.

STATEMENT OF POLICY

The audit  committee  shall  provide  assistance  to the directors in fulfilling
their responsibility to the shareholders, potential shareholders, and investment
community relating to corporate accounting,  reporting practices of the Company,
and the quality and integrity of financial reports of the Company.  In so doing,
it is the  responsibility  of the  audit  committee  to  maintain  free and open
communication between the directors, the independent auditors, and the financial
management of the Company.

MEETINGS

The  audit  committee  shall  meet  as  often  as may  be  deemed  necessary  or
appropriate in its judgment,  but at least quarterly each year, and at such time
and places as the audit  committee  shall  determine.  The audit committee shall
meet separately, at least quarterly, with the auditors and management to discuss
any  matters  that  the  auditors  or  management  wish to  bring  to the  audit
committee's attention.

OUTSIDE ADVISORS

The audit  committee  shall have the  authority to retain such outside  counsel,
accountants,  experts and other  advisors as it deems  appropriate to assist the
audit committee in the  performance of its functions.  The Company shall provide
for appropriate  funding,  as determined by the audit committee,  for payment of
compensation to the independent  auditor for the purpose of rendering or issuing
an audit report, to any advisor employed by the audit committee and for ordinary
administrative expenses of the audit committee that are necessary or appropriate
in carrying out its duties.

RESPONSIBILITIES

In carrying out its responsibilities,  the audit committee believes its policies
and  procedures  should  remain  flexible,  in order to best  react to  changing
conditions  and to ensure to the directors and  shareholders  that the corporate
accounting  and reporting  practices of the Company are in  accordance  with all
requirements and are of the highest quality.

In carrying out these responsibilities, the audit committee shall:

         o  Obtain the full board of  directors'  approval  of this  Charter and
            review and  reassess  this Charter as  conditions  dictate (at least
            annually).

         o  Have the sole  authority and  responsibility  to appoint,  evaluate,
            retain and, where appropriate,  replace the independent  auditors to
            be  selected,   subject  to  shareholders  approval,  to  audit  the
            financial statements of the Company and its divisions.

         o  Have the sole authority and  responsibility for the compensation and
            oversight  of  the  work  of  the  independent  auditors  (including
            resolution of disagreements  between  management and the independent





            auditor regarding financial  reporting) for the purpose of preparing
            or issuing an audit report or performing other audit review services
            for the Company.  The  independent  auditor shall report directly to
            the audit committee.

         o  Meet with the independent  auditors and financial  management of the
            Company to review and  pre-approve  the scope of the proposed  audit
            and timely quarterly reviews for the current year and the procedures
            to  be  utilized,   the  adequacy  of  the   independent   auditor's
            compensation,  and at the conclusion  thereof,  review such audit or
            review, including any comments or recommendations of the independent
            auditors.

         o  Establish   policies  and  procedures  for  the  engagement  of  the
            independent  auditors  to provide  permissible  non-audit  services,
            subject  to  the  de  minimus   exceptions  for  non-audit  services
            described in Section  10A(i)(l)(B)  of the Exchange Act, which shall
            include  pre-approval  of  permissible   non-audit  services  to  be
            provided by the  independent  auditors.  The audit  committee  shall
            approve in advance  all  non-audit  services  to be  provided by the
            independent auditors.

         o  Review and evaluate the lead partner of the independent auditor team
            and ensure the rotation of the audit partners as required by law.

         o  Discuss with the  independent  auditors  the matters  required to be
            discussed by Statement on Auditing  Standards No. 61 relating to the
            conduct of the audit, including any difficulties  encountered in the
            course  of  the  audit  work,  any  restrictions  on  the  scope  of
            activities or access to requested  information,  and any significant
            disagreements with management.

         o  Review  at least  annually  with the  independent  auditors  and the
            Company's  financial  and  accounting  personnel,  the  adequacy and
            effectiveness  of  the  accounting  and  financial  controls  of the
            Company,  and elicit any recommendations for the improvement of such
            internal  controls or  particular  areas where new or more  detailed
            controls or procedures are desirable.  Particular emphasis should be
            given to the adequacy of internal  controls to expose any  payments,
            transactions,   or  procedures  that  might  be  deemed  illegal  or
            otherwise  improper.  Further,  the  committee  periodically  should
            review Company policy statements to determine their adherence to the
            code of conduct.

         o  Establish  procedures  for the receipt,  retention  and treatment of
            complaints  regarding  accounting,  internal  accounting controls or
            auditing  matters,   including   procedures  for  the  confidential,
            anonymous submission by employees of concerns regarding questionable
            accounting or auditing matters.

         o  Review and discuss with management and the independent  auditors the
            adequacy and  effectiveness of the Company's  legal,  regulatory and
            ethical compliance programs.

         o  Obtain from the independent auditor assurance that Section 10A(b) of
            the Exchange Act has not been implicated.

         o  Periodically  review the Company's policies and Code of Ethics, with
            particular  focus on related  party  transactions  and  conflicts of
            interest involving,  directly or indirectly, the principal executive
            officer,   principal  financial  officer  and  principal  accounting
            officer, and consider whether changes are needed.

         o  Evaluate,  decide whether to approve and monitor on an ongoing basis
            any related party transactions covered by the Company's policies and
            Code of Ethics and make decisions  regarding the grant of any waiver
            of or deviation from the Company's policies and Code of Ethics.

         o  Obtain reports from management and the independent  auditor that the
            Company  and  its  subsidiary/foreign  affiliated  entities  are  in
            conformity with applicable legal requirements.




         o  Review  reports   received  from  regulators  and  other  legal  and
            regulatory  matters that may have a material effect on the financial
            statements or related Company compliance policies.

         o  Inquire of management and the independent auditors about significant
            risks or  exposures  and  assess the steps  management  has taken to
            minimize such risks to the Company.

         o  Review  and  discuss  the  financial   statements   with   financial
            management and the  independent  auditors prior to the filing of the
            Company's  Form 10-K and Form 10-Q (or prior to the press release of
            results, if possible) to determine that the independent  auditors do
            not take  exception to the  disclosure  and content of the financial
            statements  therein,  and discuss any other  matters  required to be
            communicated  to the  committee  by the  auditors.  The chair of the
            committee  may  represent  the entire  committee  for the purpose of
            review.

         o  Review and discuss the financial  statements contained in the annual
            report to shareholders with management and the independent  auditors
            to determine  that the  independent  auditors are satisfied with the
            disclosure  and content of the financial  statements to be presented
            to the  shareholders.  Review  with  financial  management  and  the
            independent  auditors  the  results  of  their  timely  analysis  of
            significant  financial  reporting  issues and  practices,  including
            changes in, or adoptions of,  accounting  principles  and disclosure
            practices, and discuss any other matters required to be communicated
            to the  committee  by  the  auditors.  Also  review  with  financial
            management and the  independent  auditors their  judgments about the
            quality,  not just acceptability,  of accounting  principles and the
            clarity of the financial disclosure practices used or proposed to be
            used, and particularly, the degree of aggressiveness or conservatism
            of  the   organization's   accounting   principles   and  underlying
            estimates,  and other  significant  decisions  made in preparing the
            financial statements.

         o  Discuss with  management  the  Company's  earnings  press  releases,
            including the use of "pro forma" or "adjusted" non-GAAP information,
            as well as financial  information and earnings  guidance provided to
            analysts and rating agencies. Such discussions may be done generally
            (consisting  of discussing  the types of information to be disclosed
            and the types of presentations to be made).

         o  Provide sufficient  opportunity for the independent auditors to meet
            with  the  members  of  the  audit  committee   without  members  of
            management  present.  Among  the  items  to be  discussed  in  these
            meetings are the independent  auditors'  evaluation of the Company's
            financial  and  accounting  personnel and the  cooperation  that the
            independent auditors received during the course of audit.

         o  Review  accounting,  financial,  and human  resources and succession
            planning relative thereto.

         o  Report the results of the annual audit to the board of directors. If
            requested by the board,  invite the  independent  auditors to attend
            the full  board of  directors  meeting  to assist in  reporting  the
            results of the annual audit or to answer other directors'  questions
            (alternatively,   the  other   directors,   particularly  the  other
            independent directors,  may be invited to attend the audit committee
            meeting during which the results of the annual audit are reviewed).

         o  On an annual basis,  obtain from the independent  auditors a written
            communication  delineating all their  relationships and professional
            services as required by Independent  Standards Board Standard No. 1,
            Independence Discussions with Audit Committees.  In addition, review
            with the independent  auditors the nature and scope of any disclosed
            relationships  of professional  services and take, or recommend that
            the board of  directors  take,  appropriate  action  to  ensure  the
            continuing independence of the auditors.

         o  Submit the  minutes of all  meetings of the audit  committee  to, or
            discuss the matters  discussed at each  committee  meeting with, the
            board of directors.

         o  Investigate any matter brought to its attention  within the scope of
            its  duties,  with the  power to  retain  outside  counsel  for this
            purpose if, in its judgment, that is appropriate.






         o  Review and discuss with management and the independent  auditors the
            Company's  internal controls (with particular  emphasis on the scope
            and  performance  of the internal  audit  function),  and review and
            discuss with the internal auditors the results of the internal audit
            program.

         o  Review and discuss the Company's disclosure controls and procedures,
            and the quarterly assessments of such controls and procedures by the
            chief executive officer and chief financial officer.

LIMITATION OF AUDIT COMMITTEE'S ROLE

While the audit committee has the  responsibilities and powers set forth in this
Charter,  it is not the duty of the audit committee to plan or conduct audits or
to  determine  that the  Company's  financial  statements  and  disclosures  are
complete and accurate and are in accordance with generally  accepted  accounting
principles and applicable rules and regulations.  These are the responsibilities
of management and the independent auditor.