PetroQuest Energy (NYSE: PQ) reported Q3’11 net income of $3.7 million, or $0.06 per share, compared to Q3’10 net income of $4.9 million, or $0.08 per share. Total Q3’11 revenues were $39.0 million, compared to Q3’10 revenues of $46.3 million.

For the first nine months of 2011, PQ reported net income of $2.6 million, or $0.04 per share, compared to net income of $39.9 million, or $0.63 per share during the same period in 2010. Total revenues for the first nine months of 2011 were $122.6 million, compared to $135.8 million over the same period in 2010.

PQ’s Q3’11 production averaged 80.9 MMcfepd, compared to 86.4 MMcfepd over the same period in 2010. For the first nine months of 2011, the company reported production of 81.2 MMcfepd, compared to 84.3 MMcfepd over the same period in 2010.

OAG360 Comments
Operations Update:

Oil and NGLs accounted for 50% of PetroQuest’s Q3’11 revenue, despite representing less than 20% of its production stream. Liquids will represent an even greater cut of production moving forward as PQ increases production in several liquids rich plays. A surprise contributor to PQ’s liquids portfolio is the La Cantera discovery in the company’s Gulf Coast assets, which will augment the decline in PQ’s gassy GOM production with liquids-rich production when it turns to sales in late 2012. PetroQuest announced its La Cantera discovery on July 18, 2011.

PQ’s Oklahoma assets in the Woodford and Mississippi Lime will provide a further boost to the company’s revenue as production results continue to impress. PQ owns 2,000 net acres on the liquids rich Western side of the Arkoma basin. Here, PQ number 52 is producing 1,200 Btu gas, which translates to a 70% uplift in its realized gas price. The company is currently working with a mid-stream partner to set-up processing facilities in Oklahoma that will enable NGLS to be separated from gas.

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Over the last several months, PQ acquired an additional 4,000 net acres to strengthen its position in the Mississippi LIme. The company’s current position in the play now totals 28,000 net acres, all acquired at an average per acre cost of $571. PQ anticipates spudding its first well in the play in Paynee County during late Q4’11 or early Q1’12.
PQ continues to have strong well results in the Cotton Valley formation. The company recently completed two horizontal wells which turned to sales at an average 24-hour IP rate of 3.5 MMcf and 250 Bbls of NGLs. PQ also recently completed two vertical wells in the Cotton Valley, which turned to sales at an average 24-hour IP rate of 4.7 MMcf and 290 Bbls of NGLs. PetroQuest has 48,000 net acres that it believes is prospective to drill and produce horizontally from the Cotton Valley formation.

Regarding spending and funding, the company said: “Capital expenditures during the nine months ended September 30, 2011 totaled approximately $132 million and were comprised of $28 million in acquisition costs, $91 million in drilling and completion costs and $13 million in capitalized interest and overhead. The Company expects to finance its 2011 capital spending internally through cash flow from operations, cash on hand and $28 million in payments expected to be received during the fourth quarter of 2011 related to the Woodford joint venture.”

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