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PetroQuest Energy (NYSE:PQ) is an independent oil and natural gas company engaged in the exploration, development, acquisition and production of oil and natural gas reserves in Oklahoma, Texas, the Gulf Coast Basin, Arkansas and Wyoming. Over the last several years, the company has diversified its asset base from long-lived assets on the Gulf Coast, to emerging liquids rich plays in the Mid-Continent, Texas, and Wyoming. However, faith in the long-lived Gulf Coast assets was restored in March 2012, as PQ and partners announced the Thibodeaux #1 discovery well at the La Cantera prospect (17% NRI) in South Louisiana.

At the time of announcement, the well flowed at a gross daily rate of approximately 31 MMcfe/d (26% oil and liquids) – the high end of company expectations. In its Q1’12 news release PQ reported the well is currently flowing at a gross daily rate of approximately 600 barrels of oil, 950 barrels of natural gas liquids and 27,000 Mcf of gas. This was PetroQuest’s largest discovery in the company’s history.

Recent Earnings Announcement:

On May 3, 2012, PQ reported a Q1’12 net loss of $18,608,000, or a loss of $0.30 per share, compared to Q1’11 net income of $1,897,000, or $0.03 per share. Oil and gas sales during Q1’12 were $35,997,000, as compared to $41,546,000 in Q1’11. Production for the quarter was 8,170,100 Mcfe, as compared to 7,369,394 Mcfe in the same quarter last year. Average daily production fell right in line with company’s guidance at 89.8 MMcfe/d.

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Mississippian Lime Joint Venture Expanded:

In March 2012, PQ announced a joint venture extension into the Mississippian which provided a further source of liquidity for the company. In addition to Phase 1 of its joint venture in the Woodford Shale, PQ will now be carried on $92.6 million of drill costs in both its Mississippian and Woodford acreage for Phase 2. Following this announcement, PQ reported on May 3, 2012 it sold an additional 50% working interest across its Mississippian Lime acreage for $6.1 million. Management said on the earnings conference call that the deal represented roughly 9,000 acres. Based on these figures, the acreage was sold for approximately $678 per acre. Pro forma, PQ has approximately 25,000 net acres in the play and plans to drill 15 to 18 Mississippian Lime wells during 2012, up from its original plan of 12 to 15 wells. During Q2’12, PQ expects to provide initial production rates for three Mississippian Lime wells.

Based on comments made on the company’s earnings conference call, PQ views its joint venture partnership as a long-term working relationship, instead of just a play-by-play partnership. The opportunity for PQ to expand into new plays and programs as they arise is very valuable as it provides additional avenues for resources and funding. The expansion of the joint venture in Oklahoma expands PQ’s footprint from the Southeast corner of Oklahoma to the North Central portion. The initial partnership – which comprised only Woodford assets –now includes operations in the Eagle Ford, Niobrara, and the Mississippian Lime.

Woodford Operational Update:

In addition, during Q1’12, PQ commenced production from 11 operated Woodford horizontal wells (23% NRI). The Woodford shale objective is another primary focus of PQ in the state of Oklahoma. NextEra and PQ are currently completing six liquids rich Woodford wells and expects to complete an additional three liquids rich Woodford wells on the western section of its leasehold position during Q2’12. The partnership now expects to drill 25 to 30 liquids rich Woodford wells during 2012 versus its original plan of 20 to 25 wells.


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Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.