PetroQuest Energy Announces Second Quarter 2016 Results

LAFAYETTE, La., Aug. 1, 2016 /PRNewswire/ -- PetroQuest Energy, Inc. (the "Company") today announced a loss available to common stockholders for the quarter ended June 30, 2016 of $24,143,000, or $1.38 per share, compared to second quarter 2015 loss available to common stockholders of $61,083,000, or $3.77 per share. For the first six months of 2016, the Company reported a loss available to common stockholders of $63,280,000, or $3.67 per share, compared to a loss available to common stockholders of $183,323,000, or $11.31 per share, for the 2015 period. The losses during the quarter and six months ended June 30, 2016 and June 30, 2015 included non-cash ceiling test write-downs totaling $12,782,000 and $31,639,000, respectively, and $65,495,000 and $174,406,000, respectively.

Discretionary cash flow for the second quarter of 2016 was $(991,000), as compared to $7,257,000 for the comparable 2015 period.  For the first six months of 2016, discretionary cash flow was $(3,201,000), as compared to $17,863,000, for the first six months of 2015. See the attached schedule for a reconciliation of net cash flow provided by operating activities to discretionary cash flow.

Production for the second quarter of 2016 was 6.0 Bcfe, compared to 9.7 Bcfe for the comparable period of 2015. For the first six months of 2016, production was 13.6 Bcfe, compared to 20.0 Bcfe for the comparable period of 2015. The reduction in production volumes during the 2016 periods is primarily attributable to the sale of the Company's Arkoma assets in June of 2015 and April of 2016 as well as substantially reduced capital spending as compared to 2015.

Stated on an Mcfe basis, unit prices including the effects of hedges for the second quarter of 2016 were $2.64  per Mcfe, as compared to $3.37 per Mcfe in the second quarter of 2015. For the first six months of 2016, unit prices including the effects of hedges, were $2.43 per Mcfe, as compared to $3.29 per Mcfe for the first six months of 2015.

Oil and gas sales during the second quarter of 2016 were $15,824,000, as compared to $32,550,000 in the second quarter of 2015. For the first six months of 2016, oil and gas sales were $33,144,000 as compared to oil and gas sales of $66,001,000 for the first six months of 2015.

Lease operating expenses ("LOE") for the second quarter of 2016 decreased to $6,864,000, as compared to $11,191,000 in the second quarter of 2015.  Lease operating expenses decreased during the three months ended June 30, 2016 primarily as result of the Company's 2015 Oklahoma divestiture. LOE per Mcfe was $1.14 for the second quarter of 2016, as compared to $1.16 in the second quarter of 2015. For the first six months of 2016, lease operating expenses were $1.10 per Mcfe compared to $1.10 per Mcfe in the first six months of 2015.

Depreciation, depletion and amortization ("DD&A") on oil and gas properties for the second quarter of 2016 was $1.17 per Mcfe, as compared to $1.86 per Mcfe in the second quarter of 2015. For the first six months of 2016, DD&A on oil and gas properties was $1.24 per Mcfe compared to $1.91 per Mcfe for the comparable period of 2015. The decrease in the per unit DD&A rate during the 2016 periods is primarily the result of ceiling test write-downs during the second half of 2015 totaling $92,156,000.

Interest expense for the second quarter of 2016 decreased to $6,503,000, as compared to $8,596,000 in the second quarter of 2015. During the three month period ended June 30, 2016, capitalized interest totaled $247,000, as compared to $1,379,000 during the 2015 period. For the first six months of 2016, interest expense was $14,760,000, compared to $16,470,000 for the comparable period of 2015. During the six month period ended June 30, 2016, capitalized interest totaled $555,000, as compared to $3,376,000 during the 2015 period. The decrease in interest expense during the 2016 periods is primarily attributable a lower debt balance after the completion of the Company's debt exchange in February 2016 as well as the repayment of the Company's bank debt in June 2015.  

General and administrative expenses during the quarter and six months ended June 30, 2016 totaled $3,871,000 and $12,470,000, respectively, as compared to $6,519,000 and $11,858,000 during the comparable 2015 periods. Capitalized general and administrative costs during the quarter and six months  ended June 30, 2016 totaled $1,634,000, and $3,188,000, respectively, as compared to costs of $2,357,000  and $4,597,000 during the comparable 2015 periods. The decrease in general and administrative expenses during the quarter ended June 30, 2016 is primarily due to lower employee related costs. General and administrative expenses for the six month 2016 period included $4.8 million in costs related to the Company's debt exchange in February 2016.

The following table sets forth certain information with respect to the oil and gas operations of the Company for the three and six month periods ended June 30, 2016 and 2015:

The above sales and average sales prices include increases (decreases) to revenues related to the settlement of gas hedges of $1,155,000 and $4,181,000, oil hedges of zero and ($288,000) and Ngl hedges of zero and $136,000 for the three months ended June 30, 2016 and 2015, respectively.  The above sales and average sales prices include increase (decreases) to revenues related to the settlement of gas hedges of $2,187,000  and $6,505,000, oil hedges of zero and ($261,000), and Ngl hedges of zero and $157,000 for the six months ended June 30, 2016 and 2015, respectively.

The following provides guidance for the third quarter of 2016:

Balance Sheet/Liquidity Update
The Company continues to analyze a variety of options to address its liquidity needs, to extend the maturity on its 2017 Notes, and to reduce its overall financial leverage while maintaining a focus on reducing costs and preserving liquidity.  To assist the Board of Directors and management team in evaluating these options, the Company has retained Jefferies LLC and Seaport Global as its financial advisors and Porter Hedges LLP as its legal advisor.

Management's Comment
"Our second quarter 2016 results reflect the impact of our cost cutting efforts. When compared to the second quarter of 2015, we realized an approximately 36% reduction in cash costs, or nearly $11 million," said Charles T. Goodson, Chairman, Chief Executive Officer and President. "We continue to work on capturing additional cost savings throughout our organization.  In addition, we have retained advisors to assist us in evaluating certain high-priority projects, most notably extending the maturity on our remaining 2017 Notes."

About the Company
PetroQuest Energy, Inc. is an independent energy company engaged in the exploration, development, acquisition and production of oil and natural gas reserves in the Texas, Louisiana and the shallow waters of the Gulf of Mexico.  PetroQuest's common stock trades on the New York Stock Exchange under the ticker PQ.

Forward-Looking Statements
This news release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact included in this news release are forward-looking statements. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, these statements are based upon assumptions and anticipated results that are subject to numerous uncertainties and risks. Actual results may vary significantly from those anticipated due to many factors, including the volatility of oil and natural gas prices and significantly depressed oil prices since the end of 2014; our indebtedness and the significant amount of cash required to service our indebtedness; our ability to improve our liquidity position and refinance or restructure our indebtedness, including our remaining 2017 Notes; the potential need to sell assets or seek bankruptcy protection; our estimate of the sufficiency of our existing capital sources, including availability under our bank credit facility and the result of any borrowing base redetermination; our ability to post additional collateral to satisfy our offshore decommissioning obligations; our ability to hedge future production to reduce our exposure to price volatility in the current commodity pricing market; ceiling test write-downs resulting, and that could result in the future, from lower oil and natural gas prices; our ability to raise additional capital to fund cash requirements for future operations; limits on our growth and our ability to finance our operations, fund our capital needs and respond to changing conditions imposed by our bank credit facility and restrictive debt covenants; our ability to find, develop and produce oil and natural gas reserves that are economically recoverable and to replace reserves and sustain production; approximately 50% of our production being exposed to the additional risk of severe weather, including hurricanes, tropical storms and flooding, and natural disasters; losses and liabilities from uninsured or underinsured drilling and operating activities; changes in laws and governmental regulations as they relate to our operations; the operating hazards attendant to the oil and gas business; the volatility of our stock price; and our ability to meet the continued listing standards of the New York Stock Exchange with respect to our common stock or to cure any deficiency with respect thereto. In particular, careful consideration should be given to cautionary statements made in the various reports the Company has filed with the SEC. The Company undertakes no duty to update or revise these forward-looking statements.

SOURCE PetroQuest Energy, Inc.