PetroQuest Energy Announces Second Quarter Results; Updates Liquidity Status, Hedging And Operations

Aug 03, 2015, 16:01 ET from PetroQuest Energy, Inc.

LAFAYETTE, La., Aug. 3, 2015 /PRNewswire/ -- PetroQuest Energy, Inc. (the "Company") announced a net loss to common stockholders for the quarter ended June 30, 2015 of $61,083,000, or $0.94 per share, compared to second quarter 2014 net income available to common stockholders of $9,592,000, or $0.15 per share. For the first six months of 2015, the Company reported a net loss to common stockholders of $183,323,000, or $2.83 per share, compared to net income available to common stockholders of $19,635,000, or $0.30 per share, for the 2014 period. The net losses for the 2015 periods included non-cash ceiling test write-downs totaling $65,495,000 and $174,406,000 during the second quarter of 2015 and first six months of 2015, respectively.

During the second quarter of 2015, the Company sold the majority of its interest in its Woodford and Mississippian Lime properties for gross proceeds of $280 million.  As a result, the Company recorded a $21.5 million gain associated with the divested assets.

Discretionary cash flow for the second quarter of 2015 was $7,257,000, as compared to $35,153,000 for the comparable 2014 period.  For the first six months of 2015, discretionary cash flow was $17,863,000, as compared to discretionary cash flow of $69,641,000, for the first six months of 2014. 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 2015 was 9.7 Bcfe, compared to 10.7 Bcfe for the comparable period of 2014. For the first six months of 2015, production was 20.0 Bcfe, compared to 20.5 Bcfe for the comparable period of 2014. The reduction in production volumes during the 2015 periods is primarily attributable to the divestment of the Company's Arkoma assets in early June 2015. These assets contributed approximately 3.1  Bcfe and 4.5 Bcfe for the three months ended June 30, 2015 and 2014, respectively.

Stated on an Mcfe basis, unit prices including the effects of hedges for the second quarter of 2015 were $3.37  per Mcfe, as compared to $5.64 per Mcfe in the second quarter of 2014.  For the first six months of 2015, unit prices including the effects of hedges, were $3.29 per Mcfe, as compared to $5.88 per Mcfe for the first six months of 2014.

Oil and gas sales during the second quarter of 2015 were $32,550,000, as compared to $60,581,000 in the second quarter of 2014. For the first six months of 2015, oil and gas sales were $66,001,000 compared to oil and gas sales of $120,547,000 for the first six months of 2014.

Lease operating expenses ("LOE") for the second quarter of 2015 decreased to $11,191,000, as compared to $12,168,000 in the second quarter of 2014.  LOE per Mcfe was $1.16 for the second quarter of 2015, as compared to $1.13 in the second quarter of 2014. For the first six months of 2015, lease operating expenses decreased to $1.10 per Mcfe from $1.19 per Mcfe in the comparable period of 2014. The decrease in lease operating expenses during the 2015 periods is primarily due to lower expensed workover costs.

Depreciation, depletion and amortization ("DD&A") on oil and gas properties for the second quarter of 2015 was $1.86 per Mcfe, as compared to $1.99 per Mcfe in the second quarter of 2014. For the first six months of 2015, DD&A on oil and gas properties was $1.91 per Mcfe compared to $2.02 per Mcfe for the comparable period of 2014. The decrease in the per unit DD&A rate during the 2015 periods is primarily the result of the 2015 non-cash ceiling test write-downs totaling $174,406,000.

Interest expense for the second quarter of 2015 increased to $8,596,000, as compared to $7,380,000 in the second quarter of 2014. For the first six months of 2015, interest expense was $16,470,000, compared to $15,016,000 for the comparable period of 2014.  The increase in interest expense during the 2015 periods is primarily the result of $1,247,000 of lower capitalized interest on the Company's unevaluated properties during 2015 as compared to 2014.

General and administrative expenses during the quarter and six months ended June 30, 2015 totaled $6,519,000 and $11,858,000, respectively, as compared to expenses of $6,467,000 and $12,709,000 during the comparable 2014 periods.  Second quarter 2015 general and administrative expenses included $0.8 million of expenses related to the Arkoma asset sale. Capitalized general and administrative costs during the quarter ended June 30, 2015 totaled $2,357,000, as compared to $3,590,000 during the comparable 2014 period. The decrease in general and administrative expenses during the six months ended June 30, 2015 is primarily due to lower employee related costs.

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, 2015 and 2014:


Three Months Ended June 30,


Six Months Ended June 30,


2015


2014


2015


2014

Production:








Oil (Bbls)

151,223



230,214



298,437



472,497


Gas (Mcf)

7,167,270



7,695,979



15,082,774



14,880,109


Ngl (Mcfe)

1,584,284



1,658,276



3,160,826



2,789,558


Total Production (Mcfe)

9,658,892



10,735,539



20,034,222



20,504,649


     Avg. Daily Production (Mmcfe/d)

106.1



118.0



110.7



113.3


Sales:








Total oil sales

$

8,587,332



$

23,468,058



$

15,540,233



$

47,608,714


Total gas sales

19,927,230



28,802,856



41,577,325



58,360,191


Total ngl sales

4,035,571



8,310,268



8,883,616



14,578,674


Total oil and gas sales

$

32,550,133



$

60,581,182



$

66,001,174



$

120,547,579


Average sales prices:








Oil (per Bbl)

$

56.79



$

101.94



$

52.07



$

100.76


Gas (per Mcf)

2.78



3.74



2.76



3.92


Ngl (per Mcfe)

2.55



5.01



2.81



5.23


Per Mcfe

3.37



5.64



3.29



5.88


The above sales and average sales prices include increases (decreases) to revenue related to the settlement of gas hedges of $4,181,000 and ($2,170,000), oil hedges of ($288,000) and ($672,000) and Ngl hedges of  $136,000 and zero for the three months ended June 30, 2015 and 2014, respectively.  The above sales and average sales prices include increase (decreases) to revenue related to the settlement of gas hedges of $6,505,000 and ($5,139,000), oil hedges of ($261,000)  and ($1,106,000), and Ngl hedges of $157,000 and zero for the six months ended June 30, 2015 and 2014, respectively.

The following updates guidance for the third of 2015:


Guidance for

Description

3rd Quarter 2015



Production volumes (MMcfe/d)

75 - 81



Percent Gas

73%

Percent Oil

11%

Percent NGL

16%



Expenses:


Lease operating expenses (per Mcfe)

$1.30 - $1.40

Production taxes (per Mcfe)

$0.06 - $0.10

Depreciation, depletion and amortization (per Mcfe)

$2.20 - $2.30

General and administrative (in millions)*

$5.0 - $5.5

Interest expense (in millions)

$8.4 - $8.8





* Includes non-cash stock compensation estimate of $1.6 million


Liquidity Update
At June 30, 2015 the Company had a working capital surplus of approximately $80 million, including $141 million of cash, as compared to a working capital deficit of approximately $80 million at December 31, 2014.  In addition, the Company currently has zero borrowings outstanding under its $70 million bank credit facility. The Company is currently evaluating various deleveraging and refinancing options relative to its 10% Senior Notes due 2017.

Gas Hedging Update
As a result of its Arkoma asset sale, the Company recently terminated the following 2015 gas hedge contracts in order to comply with the covenants in its bank credit facility:

Production Period

Instrument Type

Daily Volumes

Price

Feb15 - Dec15

Swap

10,000 MMbtu

$2.93

Mar15 - Dec15

Swap

5,000 MMbtu

$2.97

After terminating the above transactions, the Company has approximately 10 Bcf of gas hedged for the remainder of 2015 at an average floor price of $3.51/Mcf.

Operations Update
In the Gulf Coast, the Company's Thunder Bayou discovery well (NRI - 37%) is currently producing at approximately 40,000 Mcfe/d.  The well is flowing on a 22/64th inch choke and all surface/down stream production facilities are performing as expected.

In East Texas, the Company's PQ #18 well (NRI - 38%) continues to exceed its pre-drill expectations and has achieved a 30 day average rate of approximately 8,400 Mcf/d of gas, 560 Bbls/d of Ngls and 31 Bbls/d of oil.  The three well 2015 program achieved average per well gross costs of $5.2 million with average gross proved reserves of 8.1 Bcfe per well. The Company is in the planning stages of bringing a rig back into its Carthage field before the end of 2015.

In Oklahoma, the Company recently commenced production from eight new horizontal Woodford wells in its East Hoss field related to its dry gas joint venture.  These wells (avg NRI - 15%) achieved an average maximum 24 hour gross rate of approximately 4,100 Mcf of gas. In addition, the Company has commenced completion operations on eight new wells of which several appear to be the best performing wells in the joint venture.  The Company has two rigs running in the East Hoss field.

Management Statement
"With our improved liquidity position that includes $141 million of cash and a $70 million undrawn revolver we have the flexibility to navigate this low price environment for an extended period of time," said Charles T. Goodson, Chairman, Chief Executive Officer and President. "Given the outstanding performance we have seen from our Cotton Valley wells and attractive rates of return at current commodity prices, we are evaluating plans to resume our Cotton Valley drilling program during the fourth quarter. Lastly, our Thunder Bayou well is performing above expectations and we remain excited about the condensate rates and ultimate 3P reserves of this project."

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, Oklahoma, 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 PetroQuest 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 estimate of the sufficiency of our existing capital sources, including availability under our senior secured bank credit facility and the result of any borrowing base redetermination, our ability to raise additional capital to fund cash requirements for future operations, the effects of a financial downturn or negative credit market conditions on our liquidity, business and financial condition, 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 ability to find oil and natural gas reserves that are economically recoverable, the uncertainties involved in prospect development and property acquisitions or dispositions and in projecting future rates of production or future reserves, our ability to realize the anticipated benefits from our joint ventures or divestitures, the timing of development expenditures and drilling of wells, hurricanes, tropical storms 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 SEC. PetroQuest undertakes no duty to update or revise these forward-looking statements.

Click here for more information: "http://www.petroquest.com/news.html?=BizID=1690&1=1"

 

PETROQUEST ENERGY, INC.

Consolidated Balance Sheets

(Amounts in Thousands)






June 30,
 2015


December 31,
 2014

ASSETS




Current assets:




Cash and cash equivalents

$

141,016



$

18,243


Revenue receivable

7,750



16,485


Joint interest billing receivable

49,112



46,778


Other receivable

13,915




Derivative asset

6,247



8,631


Prepaid drilling costs

102



847


Other current assets

6,735



5,566


Total current assets

224,877



96,550


Property and equipment:




Oil and gas properties:




Oil and gas properties, full cost method

1,279,721



2,222,753


Unevaluated oil and gas properties

29,743



109,119


Accumulated depreciation, depletion and amortization

(1,040,886)



(1,648,060)


Oil and gas properties, net

268,578



683,812


Other property and equipment

15,087



14,953


Accumulated depreciation of other property and equipment

(10,998)



(10,313)


Total property and equipment

272,667



688,452


Other assets, net of accumulated depreciation and amortization of $8,997 and $7,847, respectively

5,528



5,893


Total assets

$

503,072



$

790,895


LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable to vendors

$

62,761



$

102,954


Advances from co-owners

30,665



12,819


Oil and gas revenue payable

24,192



22,333


Accrued interest and preferred stock dividend

12,832



12,764


Asset retirement obligation

1,405



2,756


Derivative liability

572




Accrued acquisition cost

5,655



17,690


Other accrued liabilities

6,722



5,394


Total current liabilities

144,804



176,710


Bank debt



75,000


10% Senior Notes

350,000



350,000


Asset retirement obligation

53,218



52,214


Other long-term liability

510



62


Commitments and contingencies




Stockholders' equity (deficit):




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 64,957 and 64,721 shares, respectively

65



65


Paid-in capital

288,767



285,957


Accumulated other comprehensive income

3,564



5,420


Accumulated deficit

(337,857)



(154,534)


Total stockholders' equity (deficit)

(45,460)



136,909


Total liabilities and stockholders' equity (deficit)

$

503,072



$

790,895


 

PETROQUEST ENERGY, INC.

Consolidated Statements of Operations

(Amounts in Thousands, Except Per Share Data)






Three Months Ended


Six Months Ended


June 30,


June 30,


2015


2014


2015


2014

Revenues:








Oil and gas sales

$

32,550



$

60,581



$

66,001



$

120,547


Expenses:








Lease operating expenses

11,191



12,168



22,093



24,426


Production taxes

948



1,492



1,904



2,969


Depreciation, depletion and amortization

18,345



21,702



38,999



42,130


Ceiling test write-down

65,495





174,406




General and administrative

6,519



6,467



11,858



12,709


Accretion of asset retirement obligation

823



708



1,682



1,499


Interest expense

8,596



7,380



16,470



15,016



111,917



49,917



267,412



98,749


Gain on sale of oil and gas properties

21,531





21,531




Other income

40



215



197



404


Income (loss) from operations

(57,796)



10,879



(179,683)



22,202


Income tax expense

2,000





1,073




Net income (loss)

(59,796)



10,879



(180,756)



22,202


Preferred stock dividend

1,287



1,287



2,567



2,567


Income (loss) available to common stockholders

$

(61,083)



$

9,592



$

(183,323)



$

19,635


Earnings per common share:








Basic








Net income (loss) per share

$

(0.94)



$

0.15



$

(2.83)



$

0.30


Diluted








Net income (loss) per share

$

(0.94)



$

0.15



$

(2.83)



$

0.30


Weighted average number of common shares:








Basic

64,891



64,103



64,833



63,940


Diluted

64,891



64,167



64,833



63,996


 

PETROQUEST ENERGY, INC.

Consolidated Statements of Cash Flows

(Amounts in Thousands)




Six Months Ended


June 30,


2015


2014

Cash flows from operating activities:




Net income (loss)

$

(180,756)



$

22,202


Adjustments to reconcile net income (loss) to net cash provided by operating activities:




Deferred tax expense

1,073




Depreciation, depletion and amortization

38,999



42,130


Ceiling test writedown

174,406




Accretion of asset retirement obligation

1,682



1,499


Share-based compensation expense

2,828



2,716


Amortization costs and other

1,162



1,094


Payments to settle asset retirement obligations

(1,186)



(1,149)


Gain on sale of oil and gas properties

(21,531)




Changes in working capital accounts:




Revenue receivable

8,735



455


Prepaid drilling costs

745



134


Joint interest billing receivable

(1,171)



8,589


Accounts payable and accrued liabilities

(36,051)



8,614


Advances from co-owners

17,846



15,438


Other

(1,155)



1,022


Net cash provided by operating activities

5,626



102,744


Cash flows provided by (used in) investing activities:




Investment in oil and gas properties

(62,451)



(76,993)


Investment in other property and equipment

(134)



(468)


Sale of oil and gas properties

257,698



600


Net cash provided by (used in) investing activities

195,113



(76,861)


Cash flows used in financing activities:




Net payments for share based compensation

432



1,039


Deferred financing costs

(829)



(109)


Payment of preferred stock dividend

(2,569)



(2,565)


Proceeds from bank borrowings

70,000



10,000


Repayment of bank borrowings

(145,000)



(12,500)


Net cash used in financing activities

(77,966)



(4,135)


Net increase in cash and cash equivalents

122,773



21,748


Cash and cash equivalents, beginning of period


18,243



9,153


Cash and cash equivalents, end of period

$

141,016



$

30,901


Supplemental disclosure of cash flow information:




Cash paid (received) during the period for:




Interest

$

18,626



$

18,700


Income taxes (refunds)

$

(26)



$


 

PETROQUEST ENERGY, INC.

Non-GAAP Disclosure Reconciliation

(Amounts In Thousands)






Three Months Ended


Six Months Ended


June 30,


June 30,


2015


2014


2015


2014

Net income (loss)

$

(59,796)



$

10,879



$

(180,756)



$

22,202


Reconciling items:








Deferred tax expense

2,000





1,073




Depreciation, depletion and amortization

18,345



21,702



38,999



42,130


Ceiling test writedown

65,495





174,406




Gain on Asset Sale

(21,531)





(21,531)




Accretion of asset retirement obligation

823



708



1,682



1,499


Non-cash share based compensation expense

1,350



1,327



2,828



2,716


Amortization costs and other

571



537



1,162



1,094


Discretionary cash flow

7,257



35,153



17,863



69,641


Changes in working capital accounts

(24,570)



22,733



(11,051)



34,252


Settlement of asset retirement obligations

(292)



(431)



(1,186)



(1,149)


Net cash flow provided by (used in) operating activities

$

(17,605)



$

57,455



$

5,626



$

102,744


 

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.



RELATED LINKS

http://www.petroquest.com