Current PQ Stock Info

Thunder Bayou Production Expected to Commence Q2 2015 at 25-30 MMcfe/day gross

On December 9, 2014, PetroQuest Energy (ticker: PQ) announced results from its Thunder Bayou Prospect (50% working interest and 37% net revenue interest) located in Vermilion Parish, Louisiana.

The onshore well encountered 490 gross feet (202 net) of pay within the primary Cris R2 objective and casing has been set to 20,350 feet. The company is currently drilling to the proposed depth of 21,500 feet to test the Cris R3 objective and encountered other pay sands in the upper and mid Cris R levels that will require further evaluation. Any reserves logged this year will be booked in the company’s Q4’14 results.

Production from the Thunder Bayou well is expected to commence in Q2’15 at a gross rate of 25 to 30 MMcfe/d. By way of comparison, the company’s average net production in the most recent quarter was 125.8 MMcfe/d.

La Cantera was First

PQ has placed three wells online in its La Cantera project, located two miles to the south of Thunder Bayou. The La Cantera has produced more than 70 Bcfe from the Cris R2 sand since its completion in March 2012 and has generated more than $60 million in field level cash flows net to PQ.

Initial production from its first well returned a gross daily rate of 36 MMcfe/d. Two subsequent wells were placed online with IP rates of 52 and 35 MMcfe/d. PetroQuest held net revenue interest of 15% in the projects – which is less than half of its interest in Thunder Bayou.

Charles Goodson, Chairman, President and Chief Executive Officer of Petro Quest Energy, said the PQ team has achieved a 73% success rate in the basin in the last ten years. In the release, he added, “Early expectations are that Thunder Bayou is a project similar in scale to La Cantera, where gross total project finding and development costs are expected to be less than $1.00 per Mcfe and each of the three wells drilled have paid out in less than one year.”

Goodson’s expectations for Thunder Bayou appear to be on target.

In an exclusive interview about the discovery, Oil & Gas 360® asked PetroQuest Manager of Corporate Communications Matt Quantz about Thunder Bayou.

OAG 360®: What was the overall timeline for Thunder Bayou?

PQ’s Matt Quantz:  “We started leasing before we got La Cantera down. At that time we only had part of La Cantera under 3D seismic, but our guys saw the well was correlating to the other wells in the area. Concept to sales—a little over four years.”

OAG 360®: How do these wells stack up to other onshore Louisiana wells?

PQ’s Matt Quantz: “We knew the Thunder Bayou well had a 30-40% chance of success with the discovery two miles to the south. That’s as high as a 20,000-foot well in southern Louisiana could get.”

OAG 360®: What is the structure for selling the gas from Thunder Bayou?

PQ’s Matt Quantz:  “We already sell gas from La Cantera to a partner called PSI. The takeaway and processing is already built out. At Thunder Bayou we will test the well to understand the liquids component. We’ll design the processing facility, and we need to see if the bottom zone comes in—the Cris R3. We expect to be selling the gas in the second quarter of 2015.”

OAG 360®: What is the cost structure at Thunder Bayou?

PQ’s Matt Quantz: “Thunder Bayou is not in a marsh like La Cantera. We had to pour 100 yards of concrete there; but this should be a fraction of that. Overall, all-in costs at Thunder Bayou were approximately $20 million to drill the well and for the processing facility completion it will be around $10 million. Our part is 50% of those costs and we have a 37% net revenue interest in the well.”

A Game Changer

PQ management had identified the Thunder Bayou well as one of its key goals earlier in the year and in its Q3’14 conference call, it explained that successful testing could “single-handedly recharge [PQ’s] Gulf Coast basin high margin cash flow.” 

During the call, Todd Zehnder, Chief Operating Officer, said: “If this project is successful, it will be the proverbial game changer and will significantly alter next year’s production and cash flow profile.”

PQ’s History in the Gulf Coast

From the outset, PetroQuest has worked in the Gulf Coast. Between its commencement of operations in 1985 and 2002, PQ was focused exclusively on the Gulf Coast Basin with onshore properties in southern Louisiana and offshore properties in the shallow waters of the Gulf of Mexico shelf.

In 2003, the company began implementation of its strategic goal to diversify reserves and production into longer life and lower risk onshore properties which included expanding its drilling program across multiple basins. During the past decade, these moves have put PQ into longer life basins in Oklahoma and Texas, and the company’s reputation was established as a highly successful operator with a 95% drilling success rate on 918 gross wells.

But its Gulf Coast operations continue to be its bread and butter.

In July of 2013, PQ closed a Gulf of Mexico acquisition for an aggregate cash purchase price of $189 million, acquiring assets that included 16 gross wells located on seven platforms. These assets contributed 4.5 Bcfe of production in 2013 and added 30.5 Bcfe of estimated proved reserves as of Dec. 31, 3013. PQ reported that in the first nine months of 2014 its assets from the Gulf of Mexico Acquisition produced 6.7 Bcfe, including 375,000 barrels of oil and increased its Gulf Coast Basin acreage position to almost 47,000 net acres. 

PetroQuest Webcast Tomorrow

PetroQuest is scheduled to present tomorrow morning at the Capital One Securities Conference in New Orleans, Louisiana. Click here for the webcast.

An Oil & Gas 360® Company Profile Tearsheet with PetroQuest’s updated financial and operational metrics is available for download.

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