Current PQ Stock Info

“This well has the highest sustained deliverability in the Gulf Coast, and we believe in the United States” – PetroQuest

PetroQuest (ticker: PQ) released its fourth quarter and year-end 2016 operations and financial updates today, which continued to demonstrate the impressive results the company is seeing from its Thunder Bayou well.

“Based on current run rate and utilizing the fourth quarter cash margin, which reflects the lower liquids yield from the bottom zone, this one well will generate approximately $60,000 of field level cash flow per day or more than $20 million per year net to PetroQuest,” said PetroQuest President and CEO Charles Goodson during the company’s conference call.

The well is producing more liquids than PQ originally anticipated it would, leaving potential upside to how much cash Thunder Bayou will generate moving forward as well. The company was initially modeling 20 to 24 barrels of liquid per MMcf, but is now seeing 36 barrels for ever million cubic feet of gas coming out of the well. Given the high quality of the oil, which PQ management put at 50 API during its Q4 conference call, the liquids produced from the well could push realized prices on the well over $3.00 per Mcf moving forward.

“We anticipate that the current production will be relatively stable for several years and will generate substantial cash flow,” said Goodson. “This well has the highest sustained deliverability in the Gulf Coast, and we believe in the United States.”

PetroQuest Gulf Coast assets

Capital from Thunder Bayou will help develop tight sand assets in the Cotton Valley

While the results from Thunder Bayou are impressive, PetroQuest’s focus moving forward will be on its tight sand assets in the Cotton Valley. The company is currently testing a number of new initiatives in the region to drive improved well results including longer laterals, tighter spacing, micro-seismic and pad drilling, the company’s management said during the call.

PetroQuest plans to drill eight to 10 Cotton Valley wells over the course of 2017, which it believes will drive sequential production growth for the company.

Goodson made the point of underlining the fact that the Cotton Valley assets differ from shale plays in their porosity and permeability, meaning the company does not require the same kind of high-intensity fracs as other plays.

“We’re seeing Haynesville fracs with 10-times as much proppant as what we’re using,” said Goodson. “Because it is a tight sand versus a shale, the Cotton Valley should never require fracs that come anywhere near the massive amount of proppant required in the shales. This fact alone makes us much less susceptible to service cost inflation.”

PetroQuest Cotton Valley production and costs

Management said during the conference call that it would explore higher-intensity frac jobs, but that the increases would not be orders of magnitude larger than what they are currently doing, unlike changing completion designs in many shale plays.

The company plans to operate within cash flow, and may even spend less than cash flow, depending on commodity prices, management said during the call.


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