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PetroQuest Energy, Inc. (PQ) today announced net income available to common stockholders for the quarter ended September 30, 2014 was $4,671,000, or $0.07 per share, compared to third quarter 2013 net income available to common stockholders of $383,000, or $0.01 per share. For the first nine months of 2014, the Company reported net income available to common stockholders of $24,306,000, or $0.37 per share, compared to net income available to common stockholders of $6,652,000, or $0.10 per share, for the 2013 period.

Discretionary cash flow for the third quarter of 2014 was $30,438,000, as compared to $26,717,000 for the comparable 2013 period.  For the first nine months of 2014, discretionary cash flow was $100,079,000, as compared to discretionary cash flow of $65,158,000 for the first nine 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 third quarter of 2014 was 11.6 Bcfe, compared to 10.9 Bcfe for the comparable period of 2013. Third quarter 2014 production was the highest quarterly production in the Company’s history. For the first nine months of 2014, production was 32.1 Bcfe, compared to 27.8 Bcfe for the comparable period of 2013.  Oil and NGL volumes made up approximately 30% of third quarter 2014 production as compared to 23% in the third quarter of 2013.

Oil volumes for the third quarter of 2014 were negatively impacted by extended downtime from a third party pipeline servicing Ship Shoal 238 and facilities work at West Delta 89 and La Cantera.  Ship Shoal 238 and West Delta 89 have been returned to full production.

Stated on an Mcfe basis, unit prices including the effects of hedges for the third quarter of 2014 were $4.88 per Mcfe, as compared to $5.10 per Mcfe in the third quarter of 2013.  For the first nine months of 2014, unit prices including the effects of hedges, were $5.52 per Mcfe, as compared to $4.66 per Mcfe for the first nine months of 2013. Oil and gas sales during the third quarter of 2014 were $56,486,000, as compared to $55,578,000 in the third quarter of 2013. For the first nine months of 2014, oil and gas sales were $177,033,000 compared to oil and gas sales of $129,630,000 for the first nine months of 2013.

Lease operating expenses (“LOE”) for the third quarter of 2014 increased to $13,019,000, as compared to $12,652,000 in the third quarter of 2013.  LOE per Mcfe decreased to $1.13 during the third quarter of 2014, as compared to $1.16 in the third quarter of 2013. For the first nine months of 2014, lease operating expenses increased to $1.17 per Mcfe from $1.12 per Mcfe in the comparable period of 2013. The increase in per unit lease operating expenses for the nine month period is primarily due to an increase in expensed workovers during the 2014 period as compared to the 2013 period.

Depreciation, depletion and amortization (“DD&A”) on oil and gas properties for the third quarter of 2014 was $1.89 per Mcfe, as compared to $2.03 per Mcfe in the third quarter of 2013. For the first nine months of 2014, DD&A on oil and gas properties was $1.98 per Mcfe compared to $1.76 per Mcfe for the comparable period of 2013. The  increase in the per unit DD&A rate for the nine month period is primarily the result of the July 2013 Gulf of Mexico acquisition, which had a higher cost per unit as compared to our overall amortization base.

Interest expense for the third quarter of 2014 decreased to $7,050,000, as compared to $8,071,000 in the third quarter of 2013. For the first nine months of 2014, interest expense was $22,066,000, compared to $14,051,000 for the comparable period of 2013. The increase in interest expense during the nine month 2014 period 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 nine months ended September 30, 2014 totaled $6,319,000 and $19,028,000, respectively, as compared to expenses of $9,132,000 and $20,199,000 during the comparable 2013 periods. General and administrative expenses during the 2013 periods included approximately $4 million in acquisition related costs associated with the Gulf of Mexico acquisition in July 2013. General and administrative expenses included non-cash sharebased compensation expenses of $1,309,000 and $1,325,000 during the third quarters of 2014 and 2013, respectively, and $4,025,000 and $3,105,000 for the respective nine month periods ended September 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 nine month periods ended September 30, 2014 and 2013:

Three Months Ended September 30,

Nine Months Ended September 30,

2014

2013

2014

2013

Production:

Oil (Bbls)

170,014

219,402

642,511

460,822

Gas (Mcf)

8,153,145

8,351,200

23,033,254

21,519,550

Ngl (Mcfe)

2,397,236

1,238,719

5,186,794

3,560,179

Total Production (Mcfe)

11,570,465

10,906,331

32,075,114

27,844,661

    Avg. Daily Production (Mmcfe/d)

125.8

118.5

117.5

102.0

Sales:

Total oil sales

$ 16,670,934

$ 23,663,415

$   64,279,648

$   48,831,937

Total gas sales

29,109,608

25,009,383

87,469,799

61,980,015

Total ngl sales

10,705,208

6,905,048

25,283,882

18,818,166

Total oil and gas sales

$ 56,485,750

$ 55,577,846

$ 177,033,329

$ 129,630,118

Average sales prices:

Oil (per Bbl)

$          98.06

$        107.85

$          100.04

$          105.97

Gas (per Mcf)

3.57

2.99

3.80

2.88

Ngl (per Mcfe)

4.47

5.57

4.87

5.29

Per Mcfe

4.88

5.10

5.52

4.66

The above sales and average sales prices include increases (reductions) to revenue related to the settlement of gas hedges of $337,000 and $767,000, Ngl hedges of $28,000 and $5,000 and oil hedges of ($125,000) and ($538,000) for the three months ended September 30, 2014 and 2013, respectively.  The above sales and average sales prices include increases (reductions) to revenue related to the settlement of gas hedges of ($4,802,000) and $422,000, Ngl hedges of $28,000 and $5,000, and oil hedges of ($1,231,000) and ($684,000) for the nine months ended September 30, 2014 and 2013, respectively.

Operations Update

East Texas

The Company drilled and completed 6 gross horizontal Cotton Valley wells in 2014.  The following table summarizes the extended gross production (MMcfe/d) from each well:

2014 Wells

 Reported 24 Hour Rate

30 Day Average Rate

60 Day Average Rate

90 Day Average Rate

PQ #10

10,711

9,913

9,117

8,959

PQ #11

7,897

6,737

N/A

N/A

PQ #12

11,741

10,177

8,775

7,659

PQ #13

12,294

13,800

13,439

13,683 *

PQ #14

13,522

14,548

13,672

12,073 *

PQ #15

11,392

13,615

13,518

13,144 *

* PQ #13 – 82 day average rate, PQ #14 – 84 day average rate, PQ #15 – 78 day average rate

The Company recently completed its PQ #11 horizontal Cotton Valley well (NRI – 42%). The well achieved a maximum 24-hour gross rate of 5,758 Mcf of gas and 357 barrels of natural gas liquids. During completion operations a mechanical issue was discovered in the lateral section of the casing.  Several attempts were made to resolve the issue, but were not entirely successful.  As a result, the Company believes that only 10 of the 14 stages are effectively contributing in this well.

Based on the production profile exceeding Company expectations, the Company recently moved a rig back into the Carthage field and expects to commence the drilling of its PQ#16 (WI – 100%) well this week.

Woodford

The Company recently established production on three new wells in its West Relay field.  These three wells (average NRI – 37%) achieved an average maximum 24-hour gross rate of 2,100 Mcf of gas and 365 barrels of natural gas liquids per well. The Company estimates that the average per well gross cost for these three wells was approximately $3.9 million compared to the average per well gross cost of approximately $5 million for its North Relay field development.  In addition, the Company recently completed a four well pad (average WI – 44%) which is in the early stages of flowback. The Company plans to bring on 13 wells during the fourth quarter in addition to the three wells reported above.  The Company has two rigs running in its liquids rich West Relay field and one rig running in its Hoss field relative to its dry gas joint venture drilling program.

Gulf Coast

At the Thunder Bayou prospect, the Company is currently drilling at approximately 18,000 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.

4th Quarter 2014 Guidance

The Company previously initiated fourth quarter 2014 guidance assuming La Cantera facility work would be completed in September and total gross field production would be restored to approximately 110 MMcfe/d (16.5 MMcfe/d, net).  Continued facility work has resulted in a reduction to fourth quarter estimated La Cantera volumes to 60 MMcfe/d (7.5 MMcfe/d, net).  While La Cantera  production volumes are forecasted to be reduced during the fourth quarter of 2014, the Company does not expect this to impact its original estimate for reserve recovery.  In addition, initial production was later than expected on two recent pads in the Company’s West Relay field. As a result, the Company provides the following update to fourth quarter guidance:

Guidance for

Description

4th Quarter 2014

Production volumes (MMcfe/d)

122 – 128

Percent Gas

70%

Percent Oil

10%

Percent NGL

20%

Expenses:

   Lease operating expenses (per Mcfe)

$1.10 – $1.20

   Production taxes (per Mcfe)

$0.10 – $0.15

   Depreciation, depletion and amortization (per Mcfe)

$1.90 – $2.00

   General and administrative (in millions) (1)

$6.0 – $6.5

   Interest expense (in millions)

$7.0 – $7.5

(1) Includes non-cash stock compensation estimate of $1.1 million.

Management Statement

“Our 2014 Cotton Valley results have greatly exceeded our pre-drill expectations and we are looking forward to a more robust drilling program in this area for the foreseeable future,” said Charles T. Goodson, Chairman, Chief Executive Officer and President. “With only six Cotton Valley wells contributing to this year’s program, we grew our total Carthage estimated proved reserves and production by 94% and 195%, respectively, from December 31, 2013, which speaks volumes for the growth potential of this liquids rich asset.  Additionally, we are nearing total depth on our Thunder Bayou prospect which could have a significant impact on the Company’s 2015 growth profile.”

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

 

PETROQUEST ENERGY, INC.

Consolidated Balance Sheets (unaudited) (Amounts in Thousands)

September 30,

 2014

December 31,

 2013

ASSETS

Current assets:

Cash and cash equivalents

$

5,403

$

9,153

Revenue receivable

24,215

26,568

Joint interest billing receivable

25,163

26,556

Derivative asset

1,387

521

Prepaid drilling costs

522

477

Other current assets

6,823

8,132

Total current assets

63,513

71,407

Property and equipment:

Oil and gas properties:

Oil and gas properties, full cost method

2,151,119

2,035,899

Unevaluated oil and gas properties

128,217

98,387

Accumulated depreciation, depletion and amortization

(1,624,980)

(1,553,044)

Oil and gas properties, net

654,356

581,242

Other property and equipment

14,887

13,993

Accumulated depreciation of other property and equipment

(9,952)

(8,901)

Total property and equipment

659,291

586,334

Derivative asset

132

Other assets, net of accumulated amortization of $7,295 and $5,689, respectively

6,501

9,449

Total assets

$

729,437

$

667,190

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable to vendors

$

47,979

$

47,341

Advances from co-owners

16,850

969

Oil and gas revenue payable

27,224

22,664

Accrued interest and preferred stock dividend

4,090

12,909

Asset retirement obligation

1,426

3,113

Derivative liability

106

1,617

Accrued acquisition cost

9,920

Other accrued liabilities

11,744

8,924

Total current liabilities

119,339

97,537

Bank debt

72,500

75,000

10% Senior Notes

350,000

350,000

Asset retirement obligation

47,398

45,423

Derivative liability

14

Accrued acquisition cost

10,000

Other long-term liability

127

135

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 64,412 and 63,664 shares, respectively

64

64

Paid-in capital

285,394

280,711

Accumulated other comprehensive income (loss)

879

(1,096)

Accumulated deficit

(156,279)

(180,585)

Total stockholders’ equity

130,059

99,095

Total liabilities and stockholders’ equity

$

729,437

$

667,190

 

 

PETROQUEST ENERGY, INC.

Consolidated Statements of Operations

(unaudited)

(Amounts in Thousands, Except Per Share Data)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2014

2013

2014

2013

Revenues:

Oil and gas sales

$

56,486

$

55,578

$

177,033

$

129,630

Expenses:

Lease operating expenses

13,019

12,652

37,445

31,208

Production taxes

1,709

1,248

4,678

3,757

Depreciation, depletion and amortization

22,294

22,475

64,424

49,882

General and administrative

6,319

9,132

19,028

20,199

Accretion of asset retirement obligation

724

543

2,223

1,203

Interest expense

7,050

8,071

22,066

14,051

51,115

54,121

149,864

120,300

Other income:

Other income

198

185

602

500

Derivative income

45

202

198

230

602

702

Income from operations

5,569

1,687

27,771

10,032

Income tax expense (benefit)

(389)

17

(389)

(474)

Net income

5,958

1,670

28,160

10,506

Preferred stock dividend

1,287

1,287

3,854

3,854

Net income available to common stockholders

$

4,671

$

383

$

24,306

$

6,652

Earnings per common share:

Basic

Net income per share

$

0.07

$

0.01

$

0.37

$

0.10

Diluted

Net income per share

$

0.07

$

0.01

$

0.37

$

0.10

Weighted average number of common shares:

Basic

64,265

63,096

64,073

62,936

Diluted

64,352

63,242

64,128

63,105

 

 

PETROQUEST ENERGY, INC.

Consolidated Statements of Cash Flows

(unaudited)

(Amounts in Thousands)

Nine Months Ended

September 30,

2014

2013

Cash flows from operating activities:

Net income

$

28,160

$

10,506

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

Deferred tax benefit

(389)

(474)

Depreciation, depletion and amortization

64,424

49,882

Accretion of asset retirement obligation

2,223

1,203

Non-cash share-based compensation expense

4,025

3,105

Amortization costs and other

1,636

1,138

Non-cash derivative income

(202)

Payments to settle asset retirement obligations

(2,902)

(2,415)

Changes in working capital accounts:

Revenue receivable

2,353

(13,819)

Prepaid drilling costs

(45)

735

Joint interest billing receivable

1,279

13,612

Accounts payable and accrued liabilities

6,561

(11,781)

Advances from co-owners

15,881

(13,315)

Other

2,655

(5,266)

Net cash provided by operating activities

125,861

32,909

Cash flows from investing activities:

Investment in oil and gas properties

(133,048)

(261,707)

Investment in other property and equipment

(860)

(970)

Sale of oil and gas properties

8,564

18,915

Sale of unevaluated oil and gas properties

1,640

Net cash used in investing activities

(123,704)

(243,762)

Cash flows from financing activities:

Net proceeds (payments) for share based compensation

651

(379)

Deferred financing costs

(204)

(487)

Payment of preferred stock dividend

(3,854)

(3,854)

Proceeds from issuance of 10% Senior Notes

200,000

Deferred financing costs of 10% Senior Notes

(4,922)

Proceeds from bank borrowings

10,000

62,000

Repayment of bank borrowings

(12,500)

(37,000)

Net cash provided by (used in) financing activities

(5,907)

215,358

Net increase (decrease) in cash and cash equivalents

(3,750)

4,505

Cash and cash equivalents, beginning of period

9,153

14,904

Cash and cash equivalents, end of period

$

5,403

$

19,409

Supplemental disclosure of cash flow information:

Cash paid during the period for:

Interest

$

36,606

$

19,479

Income taxes

$

132

$

11

 

 

PETROQUEST ENERGY, INC.

Non-GAAP Disclosure Reconciliation

(Amounts In Thousands)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2014

2013

2014

2013

Net income

$

5,958

$

1,670

$

28,160

$

10,506

Reconciling items:

      Deferred tax expense (benefit)

(389)

17

(389)

(474)

      Depreciation, depletion and amortization

22,294

22,475

64,424

49,882

      Non-cash derivative income

(45)

(202)

      Accretion of asset retirement obligation

724

543

2,223

1,203

      Non-cash share based compensation expense

1,309

1,325

4,025

3,105

      Amortization costs and other

542

732

1,636

1,138

Discretionary cash flow

30,438

26,717

100,079

65,158

      Changes in working capital accounts

(5,568)

(12,102)

28,684

(29,834)

      Settlement of asset retirement obligations

(1,753)

(2,321)

(2,902)

(2,415)

Net cash flow provided by operating activities

$

23,117

$

12,294

$

125,861

$

32,909

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.