PetroQuest Energy Announces Second Quarter Results And Updates Operations And Hedging

PetroQuest Energy Announces Second Quarter Results And Updates Operations And
                                   Hedging

PR Newswire

LAFAYETTE, La., Aug. 6, 2013

LAFAYETTE, La., Aug. 6, 2013 /PRNewswire/ --PetroQuest Energy, Inc. (NYSE:
PQ) (the "Company") closed its previously announced acquisition of certain
shallow water Gulf of Mexico shelf oil and gas assets on July 3, 2013, and
accordingly, the operating results reported for the second quarter of 2013 do
not include the impact of such acquisition.

The Company announced today that it recorded net income available to common
stockholders for the quarter ended June 30, 2013 of $3,662,000, or $0.06 per
share, compared to second quarter 2012 net loss available to common
stockholders of $54,520,000, or $0.87 per share. For the first six months of
2013, the Company reported net income available to common stockholders of
$6,269,000, or $0.10 per share, compared to a net loss available to common
stockholders of $73,128,000, or $1.17 per share, for the 2012 period. During
the second quarter and six month periods of 2012, the Company recognized
non-cash ceiling test write-downs of $53,485,000 and $73,596,000,
respectively, as a result of the impact of low natural gas prices on the
future discounted net cash flows from its estimated proved reserves.

Discretionary cash flow for the second quarter of 2013 was $19,809,000, as
compared to $20,068,000 for the comparable 2012 period. For the first six
months of 2013, discretionary cash flow was $38,441,000 compared to
discretionary cash flow of $39,716,000 for the first six months of 2012. See
the attached schedule for a reconciliation of net cash flow provided by
operating activities to discretionary cash flow.

Production for the second quarter of 2013 was 8.7 Bcfe, compared to 8.4 Bcfe
for the comparable period of 2012. For the first six months of 2013,
production was 16.9 Bcfe, compared to 16.6 Bcfe for the comparable period of
2012. Adjusted for the Fayetteville asset divestiture in December 2012,
production during the second quarter and the first six months of 2013 was 9%
higher than each of the corresponding 2012 periods. The increase in production
during the 2013 periods is primarily due to additional La Cantera production
as well as higher liquids rich Woodford production.

Stated on an Mcfe basis, unit prices including the effects of hedges for the
second quarter of 2013 were $4.39 per Mcfe, as compared to $3.97 per Mcfe in
the second quarter of 2012. For the first six months of 2013, unit prices
including the effects of hedges, were $4.37 per Mcfe, as compared to $4.19 per
Mcfe for the first six months of 2012. Oil and gas sales during the second
quarter of 2013 were $38,076,000, as compared to $33,376,000, in the second
quarter of 2012. For the first six months of 2013, oil and gas sales were
$74,052,000 compared to oil and gas sales of $69,373,000 for the first six
months of 2012.

Lease operating expenses ("LOE") for the second quarter of 2013 decreased to
$8,837,000, as compared to $9,085,000 in the second quarter of 2012. LOE per
Mcfe was $1.02 for the second quarter of 2013, as compared to $1.08 in the
second quarter of 2012. For the first six months of 2013, lease operating
expenses decreased to $1.10 per Mcfe from $1.13 per Mcfe in the comparable
period of 2012. The decline in LOE during the 2013 periods is primarily the
result of a reduction in workovers attributable to repairs and maintenance.

Depreciation, depletion and amortization ("DD&A") on oil and gas properties
for the second quarter of 2013 was $1.64 per Mcfe, as compared to $1.84 per
Mcfe in the second quarter of 2012. For the first six months of 2013, DD&A on
oil and gas properties was $1.59 per Mcfe compared to $1.84 per Mcfe for the
comparable period of 2012. The decrease in the per unit DD&A rate is
primarily the result of ceiling test write-downs recognized during 2012.

Interest expense for the second quarter of 2013 increased to $3,116,000, as
compared to $2,413,000 in the second quarter of 2012. For the first six months
of 2013, interest expense was $5,980,000, compared to $4,683,000 for the
comparable period of 2012. The increase in interest expense was due to
increased borrowings outstanding under the bank credit facility.

Production taxes for the second quarter of 2013 were $1,481,000, as compared
to ($1,917,000) in the second quarter of 2012. For the first six months of
2013, production taxes were $2,509,000 compared to ($768,000) for the
comparable period of 2012. The increases during the 2013 periods as compared
to the corresponding 2012 periods were the result of recording a receivable of
$2,717,000 during the second quarter of 2012 for refunds relative to severance
tax previously paid on our Oklahoma horizontal wells.

General and administrative expenses during the quarter and six months ended
June 30, 2013 totaled $6,351,000 and $11,067,000, respectively, as compared to
expenses of $5,999,000 and $11,578,000 during the comparable 2012 periods.
General and administrative expenses for the quarter ended June 30, 2013
included $996,000 of transaction costs associated with the Gulf of Mexico
acquisition closed on July 3, 2013.

The following table sets forth certain information with respect to the oil and
gas operations of the Company for the three and six month periods ended June
30, 2013 and 2012:

                         Three Months Ended June 30, Six Months Ended June 30,
                         2013        2012            2013         2012
Production (1) :
Oil (Bbls)               115,697     116,037         241,420      257,312
Gas (Mcf)                6,731,754   6,945,466       13,168,349   13,674,781
Ngl (Mcfe)               1,256,814   763,302         2,321,461    1,356,437
Total Production (Mcfe)  8,682,750   8,404,990       16,938,330   16,575,090
Total Daily Production  95,415      92,363          93,582       91,072
(Mcfe/d)
Sales:
Total oil sales          $         $  12,831,097 $           $ 
                         12,024,212                  25,168,522  28,340,054
Total gas sales          20,247,600  15,457,658      36,970,632   30,737,611
Total ngl sales          5,804,172   5,087,135       11,913,118   10,295,240
Total oil and gas sales  $         $  33,375,890 $           $ 
                         38,075,984                  74,052,272  69,372,905
Average sales prices:
Oil (per Bbl)            $      $          $       $     
                         103.93     110.58          104.25       110.14
Gas (per Mcf)            3.01        2.23            2.81         2.25
Ngl (per Mcfe)           4.62        6.66            5.13         7.59
Per Mcfe                 4.39        3.97            4.37         4.19

    Production during the three and six month 2012 periods included 523,353
(1) Mcfe (5,083 Mcfe/d) and 985,880 Mcfe (5,417 Mcfe/d), respectively from
    Fayetteville Shale assets divested in December 2012.

The above sales and average sales prices include increases (decreases) to
revenue related to the settlement of gas hedges of ($877,000) and $3,230,000,
Ngl hedges of zero and $232,000 and oil hedges of ($1,000) and $415,000 for
the three months ended June 30, 2013 and 2012, respectively. The above sales
and average sales prices include increases (reductions) to revenue related to
the settlement of gas hedges of ($345,000) and $5,385,000, Ngl hedges of
zero and $232,000, and oil hedges of ($146,000) and $362,000 , respectively.

The following initiates guidance for the third quarter of 2013:

                                                       Guidance for
Description                                            3rd Quarter 2013
Production volumes (MMcfe/d)                           117 - 125
Percent Gas                                            75%
Percent Oil                                            14%
Percent NGL                                            11%
Expenses:
 Lease operating expenses (per Mcfe)                 $1.15 - $1.25
 Production taxes (per Mcfe)                         $0.10 - $0.15
 Depreciation, depletion and amortization (per Mcfe) $2.00 - $2.10
 General and administrative (in millions) ^(1)       $8.0 - $9.0
 Interest expense (in millions)                      $7.5 - $8.0

(1) Includes non-cash stock compensation estimate of $1.4 million and
estimated transaction costs of $2.5 million.

The following updates guidance for 2013:

                                                         Guidance for
Description                                              2013
Production volumes (MMcfe/d)                             105 - 110
Percent Natural Gas                                      75%
Percent Oil                                              12%
Percent NGL                                              13%
Expenses:
 Lease operating expenses (per Mcfe)                 $1.15 - $1.25
 Production taxes (per Mcfe)                         $0.10 - $0.15
 Depreciation, depletion and amortization (per Mcfe) $1.80 - $1.90
 General and administrative (in millions) ^(1)       $24 - $26
 Interest expense (in millions)                      $21 - $22
 2013 Capital Expenditures (in millions) ^(2)           $100 - $110

(1) Includes non-cash stock compensation estimate of $4.3 million and
estimated transaction costs of $3.5 million.
(2) Excludes acquisition costs for the Gulf of Mexico properties.

Operations Update
In the Gulf of Mexico, the Company has modified production equipment on one of
its wells at its recently acquired West Delta 89 field. As a result, the
Company has increased the gross daily production from this well (NRI -51%) by
approximately 550 barrels of oil. In addition, the Company expects to
recomplete two wells at the West Delta 89 field in approximately 2-3 weeks
after evaluating whether these wells have depleted the currently completed
zone. Additionally, the Company has two wells at Ship Shoal 238 that have
been completed and are awaiting pipeline interconnect, which is scheduled to
occur in approximately one week. The Company estimates that its recently
acquired properties are currently producing 1,300 barrels of oil, net per day
and 18,000 Mcf of gas, net per day. The Company expects that once the two
recompletions at West Delta 89 have been performed and the pipeline
interconnect has been completed at Ship Shoal 238 the total production from
the recently acquired properties will be approximately 2,100 barrels of oil,
net per day and 24,000 Mcf of gas, net per day.

The Company's non-operated Galveston Island prospects (WI – 20%) logged pay,
but were determined to be non-commercial. The Company estimates that its
total net cost for these two wells was approximately $1.5 million. 

In the Gulf Coast, the Company recently commenced production from its third
well at its La Cantera field, the Broussard Estates #3 (NRI – 17%). The well
is currently flowing at a gross daily rate of approximately 28,000 Mcf of gas,
660 barrels of natural gas liquids and 540 barrels of oil. The Company's
mid-stream partner has completed the installation of a four mile pipeline to
the north, which has resolved the previous takeaway capacity constraints from
the field. As a result, the Company's total gross daily production from its
three La Cantera wells (NRI – 17%) is approximately 102,000 Mcf of gas, 2,400
barrels of natural gas liquids and 2,000 barrels of oil. In addition, the
Company's mid-stream partner is currently upgrading its processing plant,
which is expected to be completed in November of 2013. Once the upgraded
processing plant is online, the Company expects to increase its natural gas
liquids recoveries from La Cantera.

The Company's Thunder Bayou prospect located approximately two miles north of
the La Cantera project is expected to spud during the fourth quarter of 2013.
The Company has fully evaluated the recent 3-D seismic shoot and is currently
working on drilling and development plans for this potentially high impact
project. The Company is scheduled to have its unitization hearing this month
to finalize the drilling unit. In addition, the Company's two liquids focused
prospects, Tokay (WI -75%) and Sawgrass (WI-35%) are expected to spud in
September and October, respectively.

In the Woodford, the Company has two dry gas wells (NRI – 39%) that have
reached total depth and are expected to be completed in approximately three
weeks. The Company is in the process of mobilizing a rig to the liquids rich
area of its leasehold position. In addition, the Company expects to have a
second rig in this part of the trend by early fourth quarter of 2013 and a
third rig by the first quarter of 2014. In total, the Company expects to
drill approximately 50 gross wells in 2014, which is a 213% increase from its
expected 2013 gross well count of 16 wells. The Company continues to acquire
additional acreage in the liquids portion of the trend and has increased its
position by over 400% during 2013. The Company estimates that it has added
approximately 17,000 net JV acres year to date growing its liquids rich
leasehold position to approximately 21,000 net JV acres. In addition, the
Company has recently completed shooting a 3-D seismic survey on a portion of
this acreage. 

In East Texas, the Company's PQ #9 well (NRI – 76%) that was completed in
early April and achieved a 24 hour max rate of 6,353 Mcf of gas and 458
barrels of natural gas liquids is currently producing at a gross daily rate of
5,298 Mcf of gas and 382 barrels of natural gas liquids. The Company is in
the process of selecting a rig for this trend and expects to reinitiate its
horizontal Cotton Valley program during the fourth quarter of 2013. In total,
the Company expects to drill 8-10 gross wells in 2014.

In the Mississippian Lime, the Company recently received its 3-D seismic data
from its Kay County survey and has commenced the evaluation process of the
newly acquired data. In addition, the Company is expected to commence its
Pawnee County 3-D seismic survey in approximately 4-5 weeks. The Company will
evaluate these data sets and determine development plans after incorporating
both PetrQuest and industry well results with the seismic data.

Hedging Update
The Company recently initiated the following oil hedging transactions:

                       Instrument
Production Period      Type        Daily Volumes  Price
Oil:
Jul 13 - Dec 13        Swap        250 Bbls       $98.80 ^(1)
Aug 13 - Dec 13        Swap        250 Bbls       $103.70 ^(1)
Sep 13 - Dec 13        Swap        250 Bbls       $106.25 ^(2)
2014                   Swap        100 Bbls       $95.15 ^(1)
2014                   Swap        100 Bbls       $100.45 ^(2)
 (1) WTI Index
 (2) LLS Index

The Company has approximately 172,000 barrels of oil and 6.9 Bcf of gas hedged
for the remainder of 2013 at an average floor price of $101.73 /Bbl and
$3.63/Mcf, respectively. In addition, the Company has approximately 164,000
barrels of oil and 3.6 Bcf of gas hedged for 2014 at an average floor price of
$94.86/Bbl and $4.08/Mcf, respectively.

Management Statement
"With the closing of the Gulf of Mexico acquisition in July, we view the third
quarter of 2013 as an inflection point in our oil production and associated
cash flow. We have taken advantage of the recent rally in crude prices by
layering in multiple hedging contracts at more attractive prices than we used
in our valuation of the assets," said Charles T. Goodson, Chairman, Chief
Executive Officer and President. " On a pro forma basis, the acquired assets
would have provided a 60% increase to our first quarter 2013 EBITDA on daily
production of 967 barrels of oil and 19 MMcfe of gas. Over the next several
weeks, we expect to increase oil production from the acquired assets to 2,100
barrels per day, which should translate into a material cash flow
contribution."

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, Wyoming, Texas, South 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. These forward-looking statements
are subject to certain risks, trends and uncertainties that could cause actual
results to differ materially from those projected. Among those risks, trends
and uncertainties are our ability to integrate our recently completed
acquisitions with our operations and realize the anticipated benefits from the
acquisitions, any unexpected costs or delays in connection with the
acquisitions, our ability to find oil and natural gas reserves that are
economically recoverable, the volatility of oil and natural gas prices and
significantly depressed natural gas prices since the middle of 2008, the
uncertain economic conditions in the United States and globally, 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 estimate of the sufficiency of our existing
capital sources, our ability to raise additional capital to fund cash
requirements for future operations, the uncertainties involved in prospect
development and property acquisitions or dispositions and in projecting future
rates of production or future proved, probable and possible reserves, the
timing of development expenditures and drilling of wells, hurricanes and other
natural disasters, changes in laws and regulations as they relate to our
operations, including our fracing operations in shale plays 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
(unaudited)
(Amounts in Thousands)
                                     Three Months Ended    Twelve Months Ended
                                     June 30, 2013         December 31, 2012
ASSETS
Current assets:
Cash and cash equivalents            $           $         
                                      8,113               14,904
Revenue receivable                   14,007                17,742
Joint interest billing receivable    32,281                42,595
Other receivable                     —                     9,208
Derivative asset                     1,999                 830
Prepaid drilling costs               2,499                 1,698
Other current assets                 6,182                 2,607
Total current assets                 65,081                89,584
Property and equipment:
Oil and gas properties:
Oil and gas properties, full cost    1,791,459             1,734,477
method
Unevaluated oil and gas properties   68,910                71,713
Accumulated depreciation, depletion  (1,508,820)           (1,472,244)
and amortization
Oil and gas properties, net          351,549               333,946
Other property and equipment         12,627                12,370
Accumulated depreciation of other    (8,144)               (7,607)
property and equipment
Total property and equipment         356,032               338,709
Derivative asset                     388                   —
Other assets, net of accumulated
depreciation and amortization of     5,065                 5,110
$4,647 and $4,240, respectively
Deposit on acquired assets           5,000                 —
Total assets                         $            $         
                                     431,566              433,403
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable to vendors          $           $         
                                     39,923                58,960
Advances from co-owners              11,911                20,459
Oil and gas revenue payable          26,042                26,175
Accrued interest and preferred stock 6,209                 6,190
dividend
Asset retirement obligation          3,823                 2,351
Derivative liability                 205                   233
Other accrued liabilities            6,408                 6,535
Total current liabilities            94,521                120,903
Bank debt                            65,000                50,000
10% Senior Notes                     150,000               150,000
Asset retirement obligation          25,487                24,909
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value;
authorized 5,000 shares; issued and  1                     1
outstanding 1,495 shares
Common stock, $.001 par value;
authorized 150,000 shares; issued    63                    63
and outstanding 62,993 and 62,768
shares, respectively
Paid-in capital                      278,335               276,534
Accumulated other comprehensive      1,418                 521
income
Accumulated deficit                  (183,259)             (189,528)
Total stockholders' equity           96,558                87,591
Total liabilities and stockholders'  $            $         
equity                               431,566              433,403



PETROQUEST ENERGY, INC.
Consolidated Statements of Operations
(unaudited)
(Amounts in Thousands, Except Per Share Data)
                           Three Months Ended        Six Months Ended
                           June 30,    June 30, 2012 June 30,    June 30, 2012
                           2013                      2013
Revenues:
Oil and gas sales          $        $          $        $   
                           38,076      33,376        74,052      69,373
Gas gathering revenue      26          37            59          81
                           38,102      33,413        74,111      69,454
Expenses:
Lease operating expenses   8,837       9,085         18,556      18,750
Production taxes           1,481       (1,917)       2,509       (768)
Depreciation, depletion    14,536      15,762        27,407      30,992
and amortization
Ceiling test write-down    —           53,485        —           73,596
General and administrative 6,351       5,999         11,067      11,578
Accretion of asset         328         517           660         1,017
retirement obligation
Interest expense           3,116       2,413         5,980       4,683
                           34,649      85,344        66,179      139,848
Other income (expense):
Other income               62          123           256         272
Derivative income          594         (375)         157         (375)
(expense)
                           656         (252)         413         (103)
Income (loss) from         4,109       (52,183)      8,345       (70,497)
operations
Income tax expense         (840)       1,049         (491)       61
(benefit)
Net income (loss)          4,949       (53,232)      8,836       (70,558)
Preferred stock dividend   1,287       1,288         2,567       2,570
Net income (loss)          $       $           $       $  
available to common        3,662       (54,520)      6,269       (73,128)
stockholders
Earnings per common share:
Basic
Net income (loss) per      $      $         $      $    
share                      0.06        (0.87)        0.10        (1.17)
Diluted
Net income (loss) per      $      $         $      $    
share                      0.06        (0.87)        0.10        (1.17)
Weighted average number of
common shares:
Basic                      62,963      62,363        62,899      62,289
Diluted                    63,130      62,363        63,084      62,289



PETROQUEST ENERGY, INC.
Consolidated Statements of Cash Flows
(unaudited)
(Amounts in Thousands)
                                         Six Months Ended
                                         June 30, 2013      June 30, 2012
Cash flows from operating activities:
Net income (loss)                        $    8,836     $   (70,558)
Adjustments to reconcile net income
(loss) to net cash provided by operating
activities:
Deferred tax expense (benefit)           (491)              61
Depreciation, depletion and amortization 27,407             30,992
Ceiling test writedown                   —                  73,596
Accretion of asset retirement obligation 660                1,017
Share based compensation expense         1,780              3,838
Amortization costs and other             406                395
Non-cash derivative (income) expense     (157)              375
Payments to settle asset retirement      (94)               (2,450)
obligations
Changes in working capital accounts:
Revenue receivable                       3,735              3,384
Prepaid drilling and pipe costs          (801)              2,548
Joint interest billing receivable        10,314             8,962
Accounts payable and accrued liabilities (19,195)           4,602
Advances from co-owners                  (8,548)            (11,341)
Other                                    (3,237)            (3,153)
Net cash provided by operating           20,615             42,268
activities
Cash flows used in investing activities:
Investment in oil and gas properties     (52,740)           (75,825)
Investment in other property and         (257)              —
equipment
Deposit on acquired properties           (5,000)            —
Sale of oil and gas properties           18,914             275
Sale of unevaluated oil and gas          —                  6,083
properties
Net cash used in investing activities    (39,083)           (69,467)
Cash flows used in financing activities:
Net payments for share based             20                 (383)
compensation
Deferred financing costs                 (774)              (12)
Payment of preferred stock dividend      (2,569)            (2,570)
Proceeds from bank borrowings            40,000             45,000
Repayment of bank borrowings             (25,000)           (27,500)
Net cash provided by financing           11,677             14,535
activities
Net decrease in cash and cash           (6,791)            (12,664)
equivalents
Cash and cash equivalents, beginning of  14,904             22,263
period
Cash and cash equivalents, end of period $     8,113   $     9,599
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest                                 $     8,321   $     7,871
Income taxes                             $        40 $        15



PETROQUEST ENERGY, INC.
Non-GAAP Disclosure Reconciliation
(Amounts In Thousands)
                                    Three Months Ended    Six Months Ended
                                    June 30,              June 30,
                                    2013      2012        2013      2012
Net income (loss)                   $  4,949 $ (53,232)  $  8,836 $ (70,558)
Reconciling items:
 Deferred tax expense          (840)     1,049       (491)     61
(benefit)
 Depreciation, depletion and   14,536    15,762      27,407    30,992
amortization
 Ceiling test writedown        -         53,485      -         73,596
 Non-cash derivative (income)  (594)     375         (157)     375
expense
 Accretion of asset            328       517         660       1,017
retirement obligation
 Share based compensation      1,224     1,915       1,780     3,838
expense
 Amortization costs and other  206       197         406       395
Discretionary cash flow             19,809    20,068      38,441    39,716
 Changes in working capital    (8,292)   9,917       (17,732)  5,002
accounts
 Settlement of asset           (22)      (1,668)     (94)      (2,450)
retirement obligations
Net cash flow provided by           $ 11,495  $ 28,317   $ 20,615  $ 42,268
operating activities

         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
Note: 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.



SOURCE PetroQuest Energy, Inc.

Website: http://www.petroquest.com
Contact: Matt Quantz, Manager - Corporate Communications, (337) 232-7028,
www.petroquest.com
 
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