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Current PQ Stock Info

PetroQuest Energy (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.

Woodford Wells Beat Type Curve

In an operations update on April 7, 2014, PetroQuest announced six wells were placed online in its 35,000-acre Woodford expansion project which consists of a five well pad and a one well pad. The five well pad (39% net revenue interest) produced an average 24-hour rate of 3,961 Mcfe/d per well and is currently producing at a cumulative total of 24,500 Mcfe/d in less than 30 days online. The single well pad (21% NRI) produced a maximum 24-hour rate of 4,660 Mcfe/d. The average BTU content rate, type curve and pre-drill expectations are all higher than results from the nearby North Relay area.

Charles Goodson, Chairman, President and Chief Executive Officer of PetroQuest Energy, provided more details at a conference on April 8, 2014. “The shales are thicker than we anticipated, probably about 150 feet thick,” he said. “It resulted in flow rates are about 50% better than we anticipated.”

The new operations are roughly eight miles away from the company’s nearest well in its legacy acreage, which consist of roughly 60,000 acres and are to the east of the expansion. The expansion drilling is being used to de-risk the legacy assets – a process management believes is about 75% complete.

One more pad consisting of four wells is currently being completed in the West Relay with production expected for May 2014. A total of 50 gross Woodford wells are expected to be drilled in 2014, an accelerated drilling schedule compared to years past supported by an additional rig in Q2’14.

Production Review

Petroquest believes its current production in Q1’14 is 107 – 109 MMcfe/d (74% gas).  The production is a slight decrease from its previously forecasted rate of 112 – 117 MMcfe/d. However, the six wells in the West Relay field were brought online one month later than expected which factored in Q1’14 production rates. Gulf Coast operations also experienced 18 days of downtime (13 days of shut-in) due to infrastructure servicing by a third-party operator. The operations have since continued at a nominal pace of 8,190 Mcfe/d, which almost directly correlates to the differential in high-end production and guidance.

Management said the company’s current flow rates are now exceeding the top end of its stated guidance, which as at least 5% greater than production in Q4’13. The company reiterated 2014’s exit rate is expected to be 125 – 140 MMcfe/d.

Based on added production and the results from the Woodford wells, PQ expects to produce a total of 48 Bcfe (131 MMcfe/d) in 2014 – 26% greater than 2013’s totals of 38 Bcfe (104.2 MMcfe/d). Despite the Woodford wells exceeding expectations, PQ chose not to update its reserve base. As of Q4’13, PQ holds an estimated 302 Bcfe of proved reserves with a PV-10 value of $479 million – still nearly double the reserves at year-end 2012. Expenditures for the year remain at $150 million and intend to increase PQ’s well count by 80% on a year-over-year basis.

Remaining Assets Update

PetroQuest is transitioning from gas to liquids-rich opportunities, specifically in the Woodford, as part of its goal to increase oil and NGL production. Management expects liquids production to reach 7 MBOEPD by the end of 2014 and account for 30% of its production stream.

In Texas, PQ expects a two-well pad (55% working interest) in the Cotton Valley to be completed in May 2014. The first horizontal well recently reached total depth, and a newly-added second rig has commenced drilling on another horizontal. The company expects to drill six gross operated wells in its 2014 Cotton Valley operations. Goodson said the hydrocarbons are “very dry, and (PQ) can drill more wells once gas prices come back.” The company estimates the Bossier Shale holds 200 – 300 potential drilling locations.

Operations along the Gulf Coast, in addition to acquisitions in the area, were credited with PQ’s production jump in late 2013. The company expects to spud its first Thunder Bayou well (59% WI) in June 2014 and believes its Eagle Crest prospect (50% WI) will spud in May. Cash flow received from the Gulf Coast is being reinvested into PQ’s Woodford program, which will receive roughly half of all expenditures for 2014.

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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.