PetroQuest Energy Announces First Quarter 2011 Results

LAFAYETTE, La., May 4, 2011 /PRNewswire/ -- PetroQuest Energy, Inc. (NYSE: PQ) announced today that the Company recorded net income available to common stockholders for the quarter ended March 31, 2011 of $1,897,000, or $0.03 per share, compared to first quarter 2010 net income available to common stockholders of $29,717,000, or $0.46 per share. During the first quarter of 2011, the Company recorded a non-cash ceiling test write-down of approximately $5,934,000 as a result of the impact of lower natural gas prices on its net discounted cash flows from its proved reserves.

Discretionary cash flow for the first quarter of 2011 was $25,111,000, as compared to $40,764,000 for the comparable 2010 period.  See the attached schedule for a reconciliation of net cash flow provided by operating activities to discretionary cash flow.

Oil and gas sales during the first quarter of 2011 were $41,546,000, as compared to $47,545,000 in the first quarter of 2010. Production for the first quarter of 2011 was 7,369,394 Mcfe, as compared to 7,727,709 Mcfe in the first quarter of 2010. Oil production for the first quarter of 2011 increased 21% from the 2010 period. Approximately 59% of the Company's first quarter 2011 production was from long-lived areas, which is the highest percentage in the Company's history. Stated on an Mcfe basis, unit prices received during the first quarter of 2011 were 8% lower than the comparable 2010 period.

Lease operating expenses ("LOE") for the first quarter of 2011 decreased to $9,503,000, as compared to $9,695,000 in the first quarter of 2010. LOE per Mcfe was $1.29 in the first quarter of 2011, as compared to $1.25 in the first quarter of 2010. The increase in per unit lease operating expenses is primarily due to lower produced volumes.

Depreciation, depletion and amortization ("DD&A") on oil and gas properties for the first quarter of 2011 was $1.87 per Mcfe as compared to $1.91 per Mcfe in the first quarter of 2010. The decline in DD&A is primarily the result of the impact of the Woodford joint venture and continued economic reserve additions during the last year.

General and administrative expenses during the first quarter of 2011 totaled $4,398,000, as compared to expenses of $4,509,000 during the 2010 period. The decrease in general and administrative expenses is primarily due to lower non cash stock compensation.

Interest expense for the first quarter of 2011 increased to $2,694,000, as compared to $1,810,000 in the first quarter of 2010.  The increase in interest expense is primarily due to the sale of unevaluated acreage in May 2010 associated with the Woodford joint venture, which lowered the amount of interest capitalized to oil and gas properties.

The following table sets forth certain information with respect to the oil and gas operations of the Company for the three-month periods ended March 31, 2011 and 2010:

The above sales and average sales prices include increases (reductions) to revenue related to the settlement of gas hedges of $200,000 and $1,531,000 and oil hedges of ($100,000) and zero for the three months ended March 31, 2011 and 2010, respectively.  

Operations Update

The Company is in the completion phase on five operated Woodford horizontal wells, which are expected to be brought online within the next month. In addition, the Company has reached total depth on one additional operated Woodford horizontal well that is scheduled to be completed during the second quarter.  The Company continues to operate three rigs in the Woodford.

In East Texas, the Company's second Classic operated horizontal Cotton Valley well (NRI-20%) was recently completed and achieved an initial 24 hour gross daily production rate of approximately 3,800 Mcf of gas and 250 barrels of liquids. This initial rate was curtailed on a 28/64th inch choke to prevent this well from shutting-in existing production in the area.  Once additional gathering facilities are in place during the third quarter, the Company expects line pressures to be reduced and field production will be restored.  The Company recently spud its third Classic operated horizontal Cotton Valley well (WI-29%) and the Company's first Chevron operated horizontal Cotton Valley well (WI-50%) has reached total depth.  Additionally, the Company's first operated horizontal Cotton Valley well (WI-50%) is nearing total depth and the Company expects completion activities on these wells will commence during the summer.    

In South Texas, the Company's first operated Eagle Ford Shale well (WI-50%) located in Dimmit County has reached total depth and casing has been set. The Company expects to commence completion activities on the well during the second quarter. In addition, the Company's second operated Eagle Ford Shale well (WI-50%) located in La Salle County is expected to spud this week.

In the Niobrara, the Company's third well, the Hester (WI–25%), is nearing total depth and completion operations are expected to commence in the second quarter. In addition, the Company recently spud its fourth well, the Davis (WI – 25%), and expects to reach total depth in approximately four weeks. Additionally, the Company's first SM Energy Company operated well (WI-12.5%) has reached total depth and is expected to be completed in the second quarter.  

In the Gulf Coast Basin, the Company is currently drilling at 13,150 feet at its La Cantera prospect (WI-23%) and is expecting to reach total depth during the third quarter. In addition, the Company's first well in its multi-well Ship Shoal 72 sidetrack drilling program targeting oil reservoirs is expected to spud in June.  

In conjunction with the first phase of the Ship Shoal 72 sidetrack drilling program, the Company will have to temporarily shut-in three producing Ship Shoal 72 wells. As a result, the Company estimates that its second quarter production volumes will be reduced by approximately 700-1,000 Mcfe per day, of which 90% is expected to be oil. Additionally, the Company has experienced downtime during April at three offshore fields due to maintenance of topside facilities or downstream repairs, but production at all fields has been restored at this time.

The following initiates guidance for the second quarter of 2011:

The following updates guidance for the full year of 2011:

Management Statement

"We are excited about the plan for the remainder of 2011 and the ensuing years to come as we expect to sustain an activity level that should deliver double digit reserve growth while keeping our budget within cash flow," said Charles T. Goodson, Chairman, Chief Executive Officer and President. "This plan utilizes our multi-basin joint venture and focuses on the liquids rich portion of our existing inventory."

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, Wyoming, Texas, South 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.  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 find oil and natural gas reserves that are economically recoverable, the volatility of oil and natural gas prices and significantly depressed natural gas prices since the middle of 2008, 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 fracing operations in shale plays 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.

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SOURCE PetroQuest Energy, Inc.