PetroQuest Energy Announces Second Quarter Results And Updates Operations

LAFAYETTE, La., Aug. 4, 2014 /PRNewswire/ -- PetroQuest Energy, Inc. (NYSE: PQ) today announced results for the second quarter of 2014. The following compares certain second quarter 2014 metrics to those of the second quarter of 2013, highlighting the Company's continued growth driven by its successful drilling programs in Oklahoma and Texas, its acquisition of certain Gulf of Mexico assets in July 2013 ("Gulf of Mexico Acquisition") and stronger natural gas prices:

  • Oil production increased 99%
  • NGL production increased 32% (up 47% from first quarter 2014)
  • Net income increased 162%
  • Fourth consecutive quarter of discretionary cash flow growth; increased 77%
  • Oil and gas revenues up 59%

Net income available to common stockholders for the quarter ended June 30, 2014 was $9,592,000, or $0.15 per share, compared to second quarter 2013 net income available to common stockholders of $3,662,000, or $0.06 per share. For the first six months of 2014, the Company reported net income available to common stockholders of $19,635,000, or $0.30 per share, compared to net income available to common stockholders of $6,269,000, or $0.10 per share, for the 2013 period.

Discretionary cash flow for the second quarter of 2014 was $35,153,000, as compared to $19,809,000 for the comparable 2013 period. For the first six months of 2014, discretionary cash flow was $69,641,000, as compared to discretionary cash flow of $38,441,000 for the first six months of 2013. 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 2014 was 10.7 Bcfe, compared to 8.7 Bcfe for the comparable period of 2013. For the first six months of 2014, production was 20.5 Bcfe, compared to 16.9 Bcfe for the comparable period of 2013. Oil and NGL volumes made up approximately 28% of second quarter 2014 production as compared to 22% in the second quarter of 2013.

Stated on an Mcfe basis, unit prices including the effects of hedges for the second quarter of 2014 were $5.64 per Mcfe, as compared to $4.39 per Mcfe in the second quarter of 2013. For the first six months of 2014, unit prices including the effects of hedges, were $5.88 per Mcfe, as compared to $4.37 per Mcfe for the first six months of 2013. Oil and gas sales during the second quarter of 2014 were $60,581,000, as compared to $38,076,000 in the second quarter of 2013. For the first six months of 2014, oil and gas sales were $120,547,000 compared to oil and gas sales of $74,052,000 for the first six months of 2013.

Lease operating expenses ("LOE") for the second quarter of 2014 increased to $12,168,000, as compared to $8,837,000 in the second quarter of 2013. LOE per Mcfe was $1.13 for the second quarter of 2014, as compared to $1.02 in the second quarter of 2013. For the first six months of 2014, lease operating expenses increased to $1.19 per Mcfe from $1.10 per Mcfe in the comparable period of 2013. The increase in per unit lease operating expenses is primarily due to an increase in expensed workovers during the 2014 periods as compared to the 2013 periods.

Depreciation, depletion and amortization ("DD&A") on oil and gas properties for the second quarter of 2014 was $1.99 per Mcfe, as compared to $1.64 per Mcfe in the second quarter of 2013. For the first six months of 2014, DD&A on oil and gas properties was $2.02 per Mcfe compared to $1.59 per Mcfe for the comparable period of 2013. The increase in the per unit DD&A rate is primarily the result of the Gulf of Mexico Acquisition, which had a higher cost per unit as compared to our overall amortization base.

Interest expense for the second quarter of 2014 increased to $7,380,000, as compared to $3,116,000 in the second quarter of 2013. For the first six months of 2014, interest expense was $15,016,000, compared to $5,980,000 for the comparable period of 2013. The increase in interest expense was primarily the result of the issuance of $200 million of 10% senior notes due 2017 in July 2013 to finance the Gulf of Mexico Acquisition.

General and administrative expenses during the quarter and six months ended June 30, 2014 totaled $6,467,000 and $12,709,000, respectively, as compared to expenses of $6,351,000 and $11,067,000 during the comparable 2013 periods. General and administrative expenses included non-cash share based compensation expenses of $1,327,000 and $1,240,000 during the second quarters of 2014 and 2013, respectively, and $2,716,000 and $1,796,000 for the respective six month periods ended June 30, 2014 and 2013.

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, 2014 and 2013:


Three Months Ended June 30,


Six Months Ended June 30,


2014


2013


2014


2013

Production:








Oil (Bbls)

230,214


115,697


472,497


241,420

Gas (Mcf)

7,695,979


6,731,754


14,880,109


13,168,349

Ngl (Mcfe)

1,658,276


1,256,814


2,789,558


2,321,461

Total Production (Mcfe)

10,735,539


8,682,750


20,504,649


16,938,330

Average Daily Production (Mmcfe/d)

118.0


95.4


113.3


93.6

Sales:








Total oil sales

$    23,468,058


$ 12,024,212


$    47,608,714


$   25,168,522

Total gas sales

28,802,856


20,247,600


58,360,191


36,970,632

Total ngl sales

8,310,268


5,804,172


14,578,674


11,913,118

Total oil and gas sales

$     60,581,182


$ 38,075,984


$   120,547,579


$   74,052,272

Average sales prices:








Oil (per Bbl)

$            101.94


$        103.93


$            100.76


$          104.25

Gas (per Mcf)

3.74


3.01


3.92


2.81

Ngl (per Mcfe)

5.01


4.62


5.23


5.13

Per Mcfe

5.64


4.39


5.88


4.37

 

The above sales and average sales prices include decreases to revenue related to the settlement of gas hedges of ($2,170,000) and ($877,000) and oil hedges of ($672,000) and ($1,000) for the three months ended June 30, 2014 and 2013, respectively. The above sales and average sales prices include decreases to revenue related to the settlement of gas hedges of ($5,139,000) and ($345,000) and oil hedges of ($1,106,000) and ($146,000) for the six months ended June 30, 2014 and 2013, respectively.

The following initiates guidance for the third and fourth quarters of 2014:


Guidance for


Guidance for

Description

3rd Quarter 2014


4th Quarter 2014





Production volumes (MMcfe/d)

122 - 128


134 - 140





Percent Gas

72%


71%

Percent Oil

11%


11%

Percent NGL

17%


18%





Expenses:




   Lease operating expenses (per Mcfe)

$1.10 - $1.20


$1.05 - $1.10

   Production taxes (per Mcfe)

$0.10 - $0.15


$0.10 - $0.15

   Depreciation, depletion and amortization (per Mcfe)

$1.95 - $2.05


$1.90 - $2.00

   General and administrative (in millions) (1)

$6.0 - $6.5


$6.0 - $6.5

   Interest expense (in millions)

$7.0 - $7.5


$7.0 - $7.5





(1) Includes non-cash stock compensation estimate of $1.2 million in each of third and fourth quarters of 2014.

 

Operations Update

East Texas

The Company recently completed its PQ #13 (NRI – 75% - 4,697 foot lateral), PQ #14 (NRI – 75% - 4,622 foot lateral) and PQ #15 (NRI – 41% - 3,107 foot lateral) horizontal Cotton Valley wells. The PQ #13 well achieved a maximum 24-hour gross rate of 8,794 Mcf of gas, 583 barrels of natural gas liquids and 32 barrels of oil. The PQ #14 well achieved a maximum 24-hour gross rate of 9,810 Mcf of gas, 619 barrels of natural gas liquids and 55 barrels of oil. The PQ #15 well achieved a maximum 24-hour gross rate of 8,367 Mcf of gas and 504 barrels of natural gas liquids. In addition, the Company recently commenced completion operations on its PQ #11 (NRI– 41% - 4,402 foot lateral) well. This well is in the early stages of flowback and its maximum 24 hour rate is expected to be reported in the Company's next operations update press release.    

Woodford

The Company recently established production on three new wells in its West Relay field. These three wells (average NRI – 30%) achieved an average maximum 24-hour gross rate of 4,132 Mcf of gas and 626 barrels of natural gas liquids per well. In total, the Company has now completed fourteen wells in its West Relay field which have achieved an average maximum 24-hour gross rate of 3,649 Mcf of gas and 577 barrels of natural gas liquids per well. The Company has two rigs running in the West Relay field and is currently completing a three well pad. In addition, the Company is currently planning for potential activity in its Hoss field in the fourth quarter relative to its dry gas joint venture drilling program.

Gulf Coast

At the Thunder Bayou prospect, the Company is currently drilling at approximately 5,000 feet. The prospect has a proposed total depth of 21,000 feet, which the Company expects to reach during the fourth quarter of 2014. The Company has an approximate 50% working interest in this high impact prospect.

The Company's Eagle Crest discovery recently established initial production at 492 barrels of oil and 2,312 Mcf of gas per day. The Company has an approximate 47% net revenue interest in this project.

Management Statement
"We are extremely excited about our 2014 Cotton Valley results to date, which have significantly exceeded our pre-drill expectations in terms of IP rates and estimated ultimate recoveries," said Charles T. Goodson, Chairman, Chief Executive Officer and President. "As a result of this performance, we are initiating efforts to begin planning a significantly more active drilling program in 2015. Additionally, ongoing execution in our Woodford and Gulf Coast basins has us positioned to continue the recent growth in all of our core basins."

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 Arkoma Basin, 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. Forward-looking statements can be identified by words such as "anticipate," "intend," "plan," "believe," "project," "estimate" and similar references to future periods. These forward-looking statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected.  Among those risks, trends and uncertainties are our ability to integrate our acquisitions with our operations and realize the anticipated benefits from the acquisitions, any unexpected costs or delays in connection with the acquisitions, our ability to find oil and natural gas reserves that are economically recoverable, our ability to realize the anticipated benefits from the Fleetwood joint venture, the volatility of oil and natural gas prices, the uncertain economic conditions in the United States and globally, the declines in the values of our properties that have resulted in and may in the future result in additional ceiling test write-downs, our ability to replace reserves and sustain production, our estimate of the sufficiency of our existing capital sources, our ability to raise additional capital to fund cash requirements for future operations, the uncertainties involved in prospect development and property acquisitions or dispositions and in projecting future rates of production or future reserves, the timing of development expenditures and drilling of wells, hurricanes and other natural disasters, changes in laws and regulations as they relate to our operations, including our fracking operations or our operations in the Gulf of Mexico, and the operating hazards attendant to the oil and gas business.  In particular, careful consideration should be given to cautionary statements made in the various reports PetroQuest has filed with the Securities and Exchange Commission. PetroQuest undertakes no duty to update or revise these forward-looking statements.

PETROQUEST ENERGY, INC.

Consolidated Balance Sheets (unaudited)

(Amounts in Thousands)



June 30, 2014


December 31, 2013

ASSETS




Current assets:




Cash and cash equivalents

$          30,901


$                     9,153

Revenue receivable

26,113


26,568

Joint interest billing receivable

17,967


26,556

Derivative asset

22


521

Prepaid drilling costs

343


477

Other current assets

7,532


8,132

Total current assets

82,878


71,407

Property and equipment:




Oil and gas properties:




Oil and gas properties, full cost method

2,111,889


2,035,899

Unevaluated oil and gas properties

126,571


98,387

Accumulated depreciation, depletion and amortization

(1,594,875)


(1,553,044)

Oil and gas properties, net

643,585


581,242

Other property and equipment

14,511


13,993

Accumulated depreciation of other property and equipment

(9,571)


(8,901)

Total property and equipment

648,525


586,334

Derivative asset

164


Other assets, net of accumulated depreciation and amortization of $6,753 and $5,689, respectively

8,017


9,449

Total assets

$        739,584


$                 667,190

LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable to vendors

$          42,730


$                   47,341

Advances from co-owners

16,407


969

Oil and gas revenue payable

35,676


22,664

Accrued interest and preferred stock dividend

12,780


12,909

Asset retirement obligation

2,959


3,113

Derivative liability

3,840


1,617

Other accrued liabilities

11,738


8,924

Accrued acquisition cost

14,000


Total current liabilities

140,130


97,537

Bank debt

72,500


75,000

10% Senior Notes

350,000


350,000

Asset retirement obligation

46,893


45,423

Other long-term liability

220


135

Accrued acquisition cost

10,000


Commitments and contingencies




Stockholders' equity:




Preferred stock, $.001 par value; authorized 5,000 shares; issued and outstanding 1,495 shares

1


1

Common stock, $.001 par value; authorized 150,000 shares; issued and outstanding 64,179 and 63,664 shares, respectively

64


64

Paid-in capital

284,380


280,711

Accumulated other comprehensive loss

(3,654)


(1,096)

Accumulated deficit

(160,950)


(180,585)

Total stockholders' equity

119,841


99,095

Total liabilities and stockholders' equity

$        739,584


$                 667,190

 

PETROQUEST ENERGY, INC.

Consolidated Statements of Operations

(unaudited)

(Amounts in Thousands, Except Per Share Data)



Three Months Ended

Six Months Ended


June 30, 2014

June 30, 2013

June 30, 2014

June 30, 2013

Revenues:





Oil and gas sales

$       60,581

$       38,076

$     120,547

$       74,052






Expenses:





Lease operating expenses

12,168

8,837

24,426

18,556

Production taxes

1,492

1,481

2,969

2,509

Depreciation, depletion and amortization

21,702

14,536

42,130

27,407

General and administrative

6,467

6,351

12,709

11,067

Accretion of asset retirement obligation

708

328

1,499

660

Interest expense

7,380

3,116

15,016

5,980


49,917

34,649

98,749

66,179

Other income:





Other income

215

88

404

315

Derivative income

594

157


215

682

404

472

Income from operations

10,879

4,109

22,202

8,345

Income tax benefit

(840)

(491)

Net income

10,879

4,949

22,202

8,836

Preferred stock dividend

1,287

1,287

2,567

2,567

Income available to common stockholders

$         9,592

$         3,662

$       19,635

$         6,269

Earnings per common share:





Basic





Net income per share

$           0.15

$           0.06

$           0.30

$           0.10

Diluted





Net income per share

$           0.15

$           0.06

$           0.30

$           0.10

Weighted average number of common shares:





Basic

64,103

62,963

63,940

62,899

Diluted

64,167

63,130

63,996

63,084

     

PETROQUEST ENERGY, INC.

Consolidated Statements of Cash Flows

(unaudited)

 (Amounts in Thousands)



Six Months Ended


June 30, 2014


June 30, 2013

Cash flows from operating activities:




Net income

$       22,202


$         8,836

Adjustments to reconcile net income to net cash provided by operating activities:




Deferred tax expense benefit


(491)

Depreciation, depletion and amortization

42,130


27,407

Accretion of asset retirement obligation

1,499


660

Share-based compensation expense

2,716


1,780

Amortization costs and other

1,094


406

Non-cash derivative income


(157)

Payments to settle asset retirement obligations

(1,149)


(94)

Changes in working capital accounts:




Revenue receivable

455


3,735

Prepaid drilling and pipe costs

134


(801)

Joint interest billing receivable

8,589


10,314

Accounts payable and accrued liabilities

8,614


(19,195)

Advances from co-owners

15,438


(8,548)

Other

1,022


(3,237)

Net cash provided by operating activities

102,744


20,615

Cash flows from investing activities:




Investment in oil and gas properties

(76,993)


(52,740)

Investment in other property and equipment

(468)


(257)

Deposit on acquisition


(5,000)

Sale of oil and gas properties

371


18,914

Sale of unevaluated oil and gas properties

229


Net cash used in investing activities

(76,861)


(39,083)

Cash flows from financing activities:




Net proceeds for share based compensation

1,039


20

Deferred financing costs

(109)


(774)

Payment of preferred stock dividend

(2,565)


(2,569)

Proceeds from bank borrowings

10,000


40,000

Repayment of bank borrowings

(12,500)


(25,000)

Net cash provided by (used in) financing activities

(4,135)


11,677

Net increase (decrease) in cash and cash equivalents

21,748


(6,791)

Cash and cash equivalents, beginning of period

9,153


14,904

Cash and cash equivalents, end of period

$       30,901


$         8,113

Supplemental disclosure of cash flow information:




Cash paid during the period for:




Interest

$       18,700


$         8,321

Income taxes

$              —


$              40

 

PETROQUEST ENERGY, INC.

Non-GAAP Disclosure Reconciliation

(Amounts In Thousands)




Three Months Ended


Six Months Ended



June 30,


June 30,



2014

2013


2014

2013

Net income (loss)


$ 10,879

$   4,949


$   22,202

$   8,836








Reconciling items:







      Deferred tax expense (benefit)


-

(840)


-

(491)

      Depreciation, depletion and amortization


21,702

14,536


42,130

27,407

      Non-cash derivative (income) expense


-

(594)


-

(157)

      Accretion of asset retirement obligation


708

328


1,499

660

      Non-cash share based compensation expense


1,327

1,224


2,716

1,780

      Amortization costs and other


537

206


1,094

406

Discretionary cash flow


35,153

19,809


69,641

38,441

      Changes in working capital accounts


22,733

(8,292)


34,252

(17,732)

      Settlement of asset retirement obligations


(431)

(22)


(1,149)

(94)








Net cash flow provided by operating activities


$ 57,455

$ 11,495


$ 102,744

$ 20,615

 

Note: 

Management believes that discretionary cash flow is relevant and useful information, which is commonly used by analysts, investors and other interested parties in the oil and gas industry as a financial indicator of an oil and gas company's ability to generate cash used to internally fund exploration and development activities and to service debt.  Discretionary cash flow is not a measure of financial performance prepared in accordance with generally accepted accounting principles ("GAAP") and should not be considered in isolation or as an alternative to net cash flow provided by operating activities.  In addition, since discretionary cash flow is not a term defined by GAAP, it might not be comparable to similarly titled measures used by other companies.

 

SOURCE PetroQuest Energy, Inc.



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