Note 2. Joint Venture

On August 18, 2010, Abraxas Petroleum and its wholly-owned subsidiary, Abraxas Operating, LLC, contributed 8,333 net acres in the Eagle Ford Shale play to Blue Eagle Energy, LLC ("Blue Eagle") and received a $25.0 million equity interest in Blue Eagle pursuant to the terms of the Subscription and Contribution Agreement among Abraxas Petroleum, Abraxas Operating, Blue Eagle and Rock Oil Company, LLC ("Rock Oil") formerly known as Blue Stone Oil & Gas, LLC. Simultaneously, Rock Oil contributed $25.0 million in cash to Blue Eagle for a $25.0 million equity interest. Blue Eagle was dissolved effective August 31, 2012.

Through August 31, 2012 we accounted for the joint venture under the equity method of accounting in accordance with ASC 323. Under this method, Abraxas' share of net income (loss) from the joint venture is reflected as an increase (decrease) in its investment account in "Investment in joint venture" and was also recorded as equity investment income (loss) in "Equity in (income) loss of joint venture." For the three months ended March 31, 2012 we reported income of $0.8 million related to Blue Eagle.

The following is condensed financial data from Blue Eagle's March 31, 2012 financial statements:

	Three Months Ended
Statement of Operations:	March 31, 2012

Revenue	$	3,821
Operating expenses		2,128
Other (income) expense		(1	)
Net income	$	1,694