PetroQuest Energy Inc (ticker: PQ) 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. Over the last several months, faith in PQ’s long-lived Gulf Coast assets was restored as PQ and partners announced the Thibodeaux #1 discovery well at the La Cantera prospect (17% NRI) in South Louisiana flowed at a gross daily rate of approximately 31 MMcfe/d (26% oil and liquids) – the high end of company expectations.
Reinforcing the potential of PQ’s Gulf Coast assets is early production results from PQ and partners second well at La Cantera, the Broussard Estates #2 well (17% NRI). The well flowed at a gross daily rate of approximately 51.5 MMcfe/d (29% oil and liquids) – higher than management expectations. After the Thibodeaux #1 well, PQ said the Broussard Estates #2 well would be able to accommodate 30% higher production. Turns out, the well is producing 11.2 MMcfe/d more than expected.
Combined, both wells are producing into a restricted pipeline at approximately 74.0 MMcfe/d (28% oil and liquids). PQ is evaluating options to expand downstream capacity that would increase production to approximately 96.6 MMcfe/d.
Research analysts peg the gross cost for drilling and completion of these wells at approximately $25 million per well. Needless to say, these Gulf projects could have tremendous positive implications for the company. As of September 30, 2012, PQ booked 105 Bcfe of gross proved reserves from the two producing wells with estimated gross discounted pre-tax cash flow of $264 million, using SEC pricing in effect at September 30, 2012. Success on the third well (Broussard Estates #3), which is currently being planned as a sidetrack to save 60% of the well costs, could result in additional proved reserve bookings. The well is tentatively planned for the first quarter of 2013. If this third well is successful, production from the La Cantera prospect could exceed 120 MMcfe/d.
To put this in perspective, PQ Management said the following in the news release: “From 2007 through 2011, we deployed $267 million in capital to our Gulf Coast properties, representing 29% of our total capital spend during that period. In return, our Gulf Coast assets have generated $547 million in cash flow from 2007 through 2011.”
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