March 4, 2015 - 5:49 PM EST
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PetroQuest Energy Announces 2014 Year-End And Fourth Quarter Results; Updates East Texas Operations And Hedging

LAFAYETTE, La., March 4, 2015 /PRNewswire/ -- PetroQuest Energy, Inc. (NYSE: PQ) announced today net income available to common stockholders for the quarter ended December 31, 2014 of $1,745,000, or $0.03 per share, compared to fourth quarter 2013 net income available to common stockholders of $2,291,000, or $0.04  per share.  For the year ended December 31, 2014, the Company reported net income available to common stockholders of $26,051,000, or $0.39 per share, compared to net income available to common shareholders of $8,943,000, or $0.14 per share, for the year ended December 31, 2013.

Discretionary cash flow for the fourth quarter of 2014 was $26,382,000 as compared to $27,898,000 for the comparable 2013 period.  For the year ended December 31, 2014, discretionary cash flow was $126,461,000 compared to $93,056,000 for 2013. See the attached schedule for a reconciliation of net cash flow provided by operating activities to discretionary cash flow.

Oil and gas sales during the fourth quarter of 2014 were $47,988,000 as compared to $53,174,000 in the fourth quarter of 2013.  For the year ended December 31, 2014, oil and gas sales increased 23% to $225,021,000 as compared to $182,804,000 for the year ended December 31, 2013.   Production for the year ended December 31, 2014 was 14% higher than 2013.  Stated on an Mcfe basis, unit prices received during the fourth quarter and the year ended December 31, 2014 were lower by 18% and higher by 8%, respectively, as compared to the prices received during the comparable 2013 periods.

Lease operating expenses for the fourth quarter of 2014 were $0.99 per Mcfe as compared to $1.23 per Mcfe in the fourth quarter of 2013. The decrease in lease operating expenses during the fourth quarter of 2014 compared to the fourth quarter of 2013 is primarily due to a transportation credit associated with the Company's offshore properties as well as a higher percentage of production coming from its onshore assets.  Lease operating expenses for the year ended December 31, 2014 were $1.12 per Mcfe as compared to $1.15 for the year ended December 31, 2013. The decrease in per unit lease operating expenses during the 2014 period is primarily due to increased production from the Company's onshore properties which typically incur lower per unit lease operating expenses.

Depreciation, depletion and amortization ("DD&A") on oil and gas properties for the fourth quarter of 2014 was $2.05 per Mcfe as compared to $2.07 per Mcfe in the fourth quarter of 2013.  For the year ended December 31, 2014, DD&A on oil and gas properties increased to $1.99 per Mcfe from $1.82 per Mcfe for the comparable period of 2013.

Interest expense for the fourth quarter of 2014 was $7,215,000, as compared to $7,835,000 in the fourth quarter of 2013. For the year ended December 31, 2014, interest expense was $29,281,000 compared to $21,886,000 for 2013. The increase in interest expense for the annual 2014 period was primarily a result of interest related to the debt incurred to finance the Gulf of Mexico acquisition in July 2013. 

Fourth quarter of 2014 general and administrative expense was $2,471,000 lower than the comparable 2013 period. The decline in general and administrative expense during fourth quarter of 2014 was the result of reduced incentive compensation costs as compared to the fourth quarter of 2013. For the year ended December 31, 2014, general and administrative expenses were $3,642,000 lower than 2013.  General and administrative expenses during 2013 included $4,018,000 associated with the Gulf of Mexico acquisition.

Production taxes for the fourth quarter of 2014 totaled $1,249,000, as compared to $193,000 in the fourth quarter of 2013. The increase in production taxes during the fourth quarter of 2014 compared to the fourth quarter of 2013 is primarily due to production tax refunds received from Texas during the 2013 period. For the year ended December 31, 2014, production taxes were $5,927,000, as compared to $3,950,000 for the comparable period of 2013. The increase in total production taxes was primarily due to increased production from onshore properties subject to severance taxes as well as an increase in Louisiana severance tax rates effective July 2014.

The following table sets forth certain information with respect to the oil and gas operations of the Company for the three and twelve months ended December 31, 2014 and 2013:


Three Months Ended December 31,


Twelve Months Ended December 31,


2014


2013


2014


2013

Production:








Oil (Bbls)

159,998


220,158


802,509


680,980

Gas (Mcf)

7,994,417


7,706,293


31,027,671


29,225,843

Ngl (Mcfe)

2,295,516


1,194,044


7,482,310


4,754,223

Total Production (Mcfe)

11,249,921


10,221,285


43,325,035


38,065,946

Daily Production (MMcfe)

122.3


111.1


118.7


104.3

Sales:








Total oil sales

$

13,896,729


$

21,644,128


$

78,176,377


$

70,476,065

Total gas sales

27,143,468


25,469,355


114,613,267


87,449,370

Total ngl sales

6,947,208


6,060,077


32,231,090


24,878,243

Total oil and gas sales

$

47,987,405


$

53,173,560


$

225,020,734


$

182,803,678

Average sales prices:








Oil (per Bbl)

$

86.86


$

98.31


$

97.41


$

103.49

Gas (per Mcf)

3.40


3.31


3.69


2.99

Ngl (per Mcfe)

3.03


5.08


4.31


5.23

Per Mcfe

4.27


5.20


5.19


4.80

The above sales and average sales prices include increases to revenue related to the settlement of gas hedges of $565,000 and $677,000, oil hedges of $2,128,000 and $452,000, and Ngl hedges of $268,000 and $56,000 for the three months ended December 31, 2014 and 2013, respectively. The above sales and average sales prices include increases (reductions) to revenue related to the settlement of gas hedges of ($4,237,000) and $1,098,000, oil hedges of $897,000 and ($232,000), and Ngl hedges of $296,000 and $61,000 for the twelve months ended December 31, 2014 and 2013, respectively.

Hedging Update

The Company recently initiated the following commodity hedging transactions:



Instrument





Production Period


Type


Daily Volumes


Price

Gas:







March 15 - Dec 15


Swap


5,000 Mmbtu


$2.97








Oil:







March 15 - Dec 15


Swap


250 Bbls


$59.35 *








NGL (Propane):







March 15 - Dec 15


Swap


250 Bbls


$25.62


* LLS Index

After executing the above transactions, the Company has approximately 20.7 Bcf of gas volumes, at an average price of $3.44 per Mcf, approximately 160,000 barrels of oil volumes at an average price of $56.56 per barrel, and 76,500 barrels of propane volumes at an average price of $25.62 hedged for 2015.

Guidance

The following initiates guidance for the first quarter of 2015:


Guidance for

Description

1st Quarter 2015



Production volumes (MMcfe/d)

113 - 117



Percent Gas

77%

Percent Oil

9%

Percent NGL

14%



Expenses:


Lease operating expenses (per Mcfe)

$1.05 - $1.15

Production taxes (per Mcfe)

$0.08 - $0.12

Depreciation, depletion and amortization (per Mcfe)

$1.90 - $2.00

General and administrative (in millions)*

$5.0 - $5.5

Interest expense (in millions)

$7.0 - $7.5





* Includes non-cash stock compensation estimate of $1.4 million


Operations Update

In East Texas, the Company last week completed its PQ #16 and #17 horizontal Cotton Valley wells (NRI - 77%). To date, the PQ #16 well has achieved a maximum 24-hour gross rate of 8,364 Mcf of gas, 485 barrels of natural gas liquids and 82 barrels of oil.  The PQ #17 well has achieved a maximum 24-hour gross rate of 8,466 Mcf of gas, 471 barrels of natural gas liquids and 55 barrels of oil.  Both wells are on their seventh day of production and continue to strengthen as maximum rate is normally reached approximately 30 days from initial flowback.  In addition, the Company is currently drilling the lateral section of its PQ #18 horizontal Cotton Valley well (WI - 45%).

Management's Comment

"Operationally, 2014 was a tremendous year for the Company, as we made the single largest discovery in our history with Thunder Bayou, generated top tier horizontal Cotton Valley results, and derisked a substantial portion of our 30,000 acre liquids rich West Relay field," said Charles T. Goodson, Chairman, Chief Executive Officer and President. "While the recent pullback in commodity prices has caused us to reduce this year's capital expenditure budget, we are still forecasting production growth during 2015, supported by our Thunder Bayou discovery expected to be on-line in the second quarter, our Woodford programs and three horizontal Cotton Valley wells."

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.   All statements other than statements of historical fact included in this news release are forward-looking statements. Although PetroQuest believes that the expectations reflected in these forward-looking statements are reasonable, these statements are based upon assumptions and anticipated results that are subject to numerous uncertainties and risks. Actual results may vary significantly from those anticipated due to many factors, including the volatility of oil and natural gas prices and significantly depressed oil prices since the end of 2014, our estimate of the sufficiency of our existing capital sources, including availability under our bank credit facility and the result of any borrowing base redetermination, our ability to raise additional capital to fund cash requirements for future operations, the effects of a financial downturn or negative credit market conditions on our liquidity, business and financial condition, 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 ability to find oil and natural gas reserves that are economically recoverable, the uncertainties involved in prospect development and property acquisitions or dispositions and in projecting future rates of production or future reserves, our ability to realize the anticipated benefits from our joint ventures, the timing of development expenditures and drilling of wells, hurricanes, tropical storms 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

(Amounts in Thousands)



December 31,
 2014


December 31,
 2013

ASSETS




Current assets:




Cash and cash equivalents

$

18,243


$

9,153

Revenue receivable

16,485


26,568

Joint interest billing receivable

46,778


26,556

Derivative asset

8,631


521

Prepaid drilling costs

847


477

Other current assets

5,566


8,132

Total current assets

96,550


71,407

Property and equipment:




Oil and gas properties:




Oil and gas properties, full cost method

2,222,753


2,035,899

Unevaluated oil and gas properties

109,119


98,387

Accumulated depreciation, depletion and amortization

(1,648,060)


(1,553,044)

Oil and gas properties, net

683,812


581,242

Other property and equipment

14,953


13,993

Accumulated depreciation of other property and equipment

(10,313)


(8,901)

Total property and equipment

688,452


586,334

Other assets, net of accumulated amortization of $7,847 and $5,689, respectively

5,893


9,449

Total assets

$

790,895


$

667,190

LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable to vendors

$

102,954


$

47,341

Advances from co-owners

12,819


969

Oil and gas revenue payable

22,333


22,664

Accrued interest and preferred stock dividend

12,764


12,909

Asset retirement obligation

2,756


3,113

Derivative liability


1,617

Accrued acquisition costs

17,690


Other accrued liabilities

5,394


8,924

Total current liabilities

176,710


97,537

Bank debt

75,000


75,000

10% Senior Notes

350,000


350,000

Asset retirement obligation

52,214


45,423

Other long-term liability

62


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 64,721 and 63,664 shares, respectively

65


64

Paid-in capital

285,957


280,711

Accumulated other comprehensive income (loss)

5,420


(1,096)

Accumulated deficit

(154,534)


(180,585)

Total stockholders' equity

136,909


99,095

Total liabilities and stockholders' equity

$

790,895


$

667,190

 

PETROQUEST ENERGY, INC.

Consolidated Statements of Operations

(Amounts in Thousands, Except Per Share Data)



Three Months Ended
December 31,


 

Twelve Months Ended
December 31,


2014


2013


2014


2013

Revenues:








Oil and gas sales

$

47,988


$

53,174


$

225,021


$

182,804

Expenses:








Lease operating expenses

11,152


12,535


48,597


43,743

Production taxes

1,249


193


5,927


3,950

Depreciation, depletion and amortization

23,394


21,563


87,818


71,445

General and administrative

3,842


6,313


22,870


26,512

Accretion of asset retirement obligation

735


550


2,958


1,753

Interest expense

7,215


7,835


29,281


21,886


47,587


48,989


197,451


169,289

Other income (expense):








Other income

77


154


679


654

Derivative income


31



233


77


185


679


887

Income from operations

478


4,370


28,249


14,402

Income tax expense (benefit)

(2,552)


794


(2,941)


320

Net income

3,030


3,576


31,190


14,082

Preferred stock dividend

1,285


1,285


5,139


5,139

Net income available to common stockholders

$

1,745


$

2,291


$

26,051


$

8,943

Earnings per common share:








Basic








Net income per share

$

0.03


$

0.04


$

0.39


$

0.14

Diluted








Net income per share

$

0.03


$

0.04


$

0.39


$

0.14

Weighted average number of common shares:








Basic

64,593


62,459


64,204


63,054

Diluted

64,593


62,459


64,225


63,208

 

PETROQUEST ENERGY, INC.

Consolidated Statements of Cash Flows

(Amounts in Thousands)



Year Ended


December 31,


2014


2013

Cash flows from operating activities:




Net income

$

31,190


$

14,082

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




Deferred tax expense (benefit)

(2,941)


320

Depreciation, depletion and amortization

87,818


71,445

Accretion of asset retirement obligation

2,958


1,753

Share based compensation expense

5,248


4,216

Amortization costs and other

2,188


1,473

Non-cash derivative income


(233)

Payments to settle asset retirement obligations

(3,623)


(3,335)

Changes in working capital accounts:




Revenue receivable

10,083


(8,826)

Prepaid drilling and pipe costs

(370)


1,221

Joint interest billing and other receivable

(20,276)


15,685

Accounts payable and accrued liabilities

50,243


(12,865)

Advances from co-owners

11,850


(19,490)

Other

3,840


(5,592)

Net cash provided by operating activities

178,208


59,854

Cash flows used in investing activities:




Investment in oil and gas properties

(174,633)


(298,824)

Investment in other property and equipment

(926)


(1,679)

Sale of oil and gas properties

8,610


19,913

Sale of unevaluated oil and gas properties

3,298


487

Net cash used in investing activities

(163,651)


(280,103)

Cash flows used in financing activities:




Net payments for share based compensation

(75)


(38)

Deferred financing costs

(253)


(320)

Payment of preferred stock dividend

(5,139)


(5,139)

Proceeds from bank borrowings

17,500


73,000

Repayment of bank borrowings

(17,500)


(48,000)

Proceeds from issuance of 10% Senior Notes


200,000

Costs to issue 10% Senior Notes


(5,005)

Net cash provided by (used in) financing activities

(5,467)


214,498

Net increase (decrease) in cash and cash equivalents

9,090


(5,751)

Cash and cash equivalents, beginning of period

9,153


14,904

Cash and cash equivalents, end of period

$

18,243


$

9,153

Supplemental disclosure of cash flow information:




Cash paid during the period for:




Interest

$

37,174


$

20,101

Income taxes

$

270


$

12

 

PETROQUEST ENERGY, INC.

Non-GAAP Disclosure Reconciliation

(Amounts In Thousands)



Three Months Ended


Twelve Months Ended


December 31,


December 31,


2014


2013


2014


2013

Net income

$

3,030


$

3,576


$

31,190


$

14,082

Reconciling items:








      Deferred tax expense (benefit)

(2,552)


794


(2,941)


320

      Depreciation, depletion and amortization

23,394


21,563


87,818


71,445

      Non-cash derivative income


(31)



(233)

      Accretion of asset retirement obligation

735


550


2,958


1,753

      Non-cash share based compensation expense

1,223


1,111


5,248


4,216

      Amortization costs and other

552


335


2,188


1,473

Discretionary cash flow

26,382


27,898


126,461


93,056

      Changes in working capital accounts

26,686


(33)


55,370


(29,867)

      Settlement of asset retirement obligations

(721)


(920)


(3,623)


(3,335)

Net cash flow provided by operating activities

$

52,347


$

26,945


$

178,208


$

59,854



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.

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/petroquest-energy-announces-2014-year-end-and-fourth-quarter-results-updates-east-texas-operations-and-hedging-300045786.html

SOURCE PetroQuest Energy, Inc.


Source: PR Newswire (March 4, 2015 - 5:49 PM EST)

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