PetroQuest Energy Announces Third Quarter 2011 Results

LAFAYETTE, La., Nov. 3, 2011 /PRNewswire/ -- PetroQuest Energy, Inc. (NYSE: PQ) announced today net income available to common stockholders for the quarter ended September 30, 2011 of  $3,727,000, or $0.06 per share, compared to third quarter 2010 net income available to common stockholders of $4,939,000, or $0.08 per share. For the first nine months of 2011, the Company reported net income available to common stockholders of $2,579,000, or $0.04 per share, compared to net income available to common stockholders of $39,904,000, or $0.63 per share, for the first nine months of 2010. Net income for the nine month 2011 period was impacted by $18.9 million in ceiling test writedowns recognized during the first six months of 2011.

Discretionary cash flow for the third quarter of 2011 was $21,099,000, as compared to $30,109,000 for the comparable 2010 period. For the first nine months of 2011, discretionary cash flow was $73,219,000. Discretionary cash flow for the first nine months of 2010 was $96,240,000. See the attached schedule for a reconciliation of net cash flow provided by operating activities to discretionary cash flow.

Production for the third quarter of 2011 was 7.4 Bcfe (80.9 MMcfe/d), compared to 7.9 Bcfe (86.4 MMcfe/d) for the comparable period of 2010. For the first nine months of 2011, production was 22.2 Bcfe (81.2 MMcfe/d), compared to 23.0 Bcfe (84.3 MMcfe/d) for the comparable period of 2010. Approximately 68% of the Company's third quarter 2011 production was from long-lived basins and 18% of third quarter 2011 production came from oil and natural gas liquids.

Stated on an Mcfe basis, unit prices received during the third quarter and the first nine months of 2011 were 10% and 6% lower, respectively, than the comparable 2010 periods. Oil and gas sales during the third quarter of 2011 decreased 16% to $38,980,000, as compared to $46,229,000 in the third quarter of 2010. For the first nine months of 2011, oil and gas sales decreased 10% to $122,446,000 from $135,631,000 in the first nine months of 2010.

Lease operating expenses for the third quarter of 2011 were $1.39 per Mcfe as compared to $1.23 per Mcfe in the third quarter of 2010. For the first nine months of 2011, lease operating expenses per Mcfe increased 10% to $1.36 from $1.24 in the comparable period of 2010.  Per unit lease operating expenses increased primarily due to the overall reduction in produced volumes and higher overall costs of materials and services.

Depreciation, depletion and amortization ("DD&A") on oil and gas properties for the third quarter of 2011 was $1.94 per Mcfe as compared to $1.82 per Mcfe in the third quarter of 2010.  For the first nine months of 2011, DD&A per Mcfe increased 4% to $1.92 per Mcfe from $1.85 per Mcfe for the comparable period of 2010.

Interest expense for the third quarter of 2011 decreased to $2,299,000, as compared to $3,147,000 in the third quarter of 2010. For the first nine months of 2011, interest expense was $7,248,000, compared to $7,336,000 for the comparable period of 2010.

General and administrative expenses decreased $591,000 and $2,238,000 for the third quarter and nine months ended September 30, 2011, as compared to the respective 2010 periods.  The decreases during the 2011 periods are primarily due to lower employee related expenses including non-cash stock compensation expense.

Production taxes for the third quarter of 2011 totaled $1,446,000, as compared to $361,000 in the third quarter of 2010.  For the first nine months of 2011, production taxes were $2,070,000 compared to $3,308,000 for the comparable period of 2010. Production taxes for the first nine months of 2011 included $2.4 million of refunds of taxes previously paid in Oklahoma and Texas and production taxes for the third quarter of 2010 included $1.2 million of refunds of taxes previously paid in Oklahoma.  

Capital expenditures during the nine months ended September 30, 2011 totaled approximately $132 million and were comprised of $28 million in acquisition costs, $91 million in drilling and completion costs and $13 million in capitalized interest and overhead.  The Company expects to finance its 2011 capital spending internally through cash flow from operations, cash on hand and $28 million in payments expected to be received during the fourth quarter of 2011 related to the Woodford joint venture.

The following table sets forth certain information with respect to the oil and gas operations of the Company for the three-and nine-month periods ended September 30, 2011 and 2010:

The above sales and average sales prices include increases to revenue related to the settlement of gas hedges of $478,000 and $4,550,000 and oil hedges of $178,000 and zero for the three months ended September 30, 2011 and 2010, respectively.  The above sales and average sales prices include increases (reductions) to revenue related to the settlement of gas hedges of $864,000 and $10,837,000 and oil hedges of ($211,000) and zero for the nine months ended September 30, 2011 and 2010, respectively.  

The following initiates guidance for the fourth quarter of 2011:

Management Statement

"Through the success of our increased operational activity focused on our resource basins, I am pleased to announce we are forecasting production growth during the fourth quarter. We have grown our Woodford production by 20% this year, and in connection with these results, expect to earn the full $28 million in payments available under the Woodford joint venture," said Charles T. Goodson, Chairman, Chief Executive Officer and President. "These payments support the success and benefits we and our partner derive from the Woodford JV.  This relationship, which began in May 2010, has now expanded across multiple resource plays, the latest being the Mississippian Lime, and illustrates how two vastly different companies can each benefit from a joint venture.  Our Tulsa team has done a great job executing our Woodford program and will now lead our Mississippian Lime development. This newly acquired property, along with our other core assets, will offer us attractive future growth opportunities."

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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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.

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SOURCE PetroQuest Energy, Inc.