PetroQuest Energy Announces Third Quarter 2013 Results; Updates Operations, Hedging And Borrowing Base Redetermination

 PetroQuest Energy Announces Third Quarter 2013 Results; Updates Operations,
                  Hedging And Borrowing Base Redetermination

PR Newswire

LAFAYETTE, La., Nov. 5, 2013

LAFAYETTE, La., Nov. 5, 2013 /PRNewswire/ --PetroQuest Energy, Inc. (NYSE:
PQ) today announced results for the third quarter ended September 30, 2013,
which include the effect of its acquisition of certain shallow water Gulf of
Mexico assets (the "Acquired Assets") for an adjusted purchase price of
approximately $188 million on July 3, 2013. The following bullets compare
certain of the Company's third quarter 2013 results to those of the second
quarter of 2013 highlighting the impact of the acquisition:

  oOil production increased 90%
  oDiscretionary cash flow increased 35%
  oTotal production increased 25%
  oOil revenue up 97% and total oil and gas revenue up 46%

Net income available to common stockholders for the quarter ended September
30, 2013 totaled $383,000, or $0.01 per share, compared to third quarter 2012
net loss available to common stockholders of $38,639,000, or $0.62 per share.
For the first nine months of 2013, the Company reported net income available
to common stockholders of $6,652,000, or $0.10 per share, compared to net loss
available to common stockholders of $111,767,000, or $1.79 per share, for the
first nine months of 2012. Net loss for the three and nine month 2012 periods
included ceiling test writedowns totaling $35,391,000 and $108,987,000,
respectively.

Discretionary cash flow for the third quarter of 2013 was $26,717,000, as
compared to $17,339,000 for the comparable 2012 period. For the first nine
months of 2013 and 2012, discretionary cash flow was $65,158,000 and
$57,055,000, respectively. See the attached schedule for a reconciliation of
net cash flow provided by operating activities to discretionary cash flow.

Production for the third quarter of 2013 was 10.9 Bcfe, a 28% increase from
the 8.5 Bcfe produced during the comparable period of 2012. Oil and natural
gas liquids production for the third quarter of 2013 increased 79% and 39%,
respectively, from the comparable period of 2012. Oil and natural gas liquids
production was approximately 23% of the total production for the third quarter
of 2013 as compared to 19% for the year-ago quarter. For the first nine
months of 2013, production was 27.8 Bcfe compared to 25.1 Bcfe for the
comparable period of 2012. 

Stated on an Mcfe basis, unit prices received during the third quarter and the
first nine months of 2013 were 28% and 13% higher, respectively, than the
comparable 2012 periods. Oil and gas sales during the third quarter of 2013
increased 64% to $55,578,000, as compared to $33,913,000 in the third quarter
of 2012. For the first nine months of 2013, oil and gas sales increased 26% to
$129,630,000 from $103,286,000 in the first nine months of 2012.

Lease operating expenses for the third quarter of 2013 were $1.16 per Mcfe as
compared to $1.13 per Mcfe in the third quarter of 2012. For the first nine
months of 2013, lease operating expenses per Mcfe were $1.12 as compared to
$1.13 in the comparable period of 2012.

Depreciation, depletion and amortization ("DD&A") on oil and gas properties
for the third quarter of 2013 was $2.03 per Mcfe as compared to $1.73 per Mcfe
in the third quarter of 2012. The increase in DD&A is primarily the result of
the impact of the purchase price of the Acquired Assets. For the first nine
months of 2013, DD&A per Mcfe was $1.76 as compared to $1.80 per Mcfe for the
comparable period of 2012. 

Interest expense for the third quarter of 2013 increased to $8,071,000, as
compared to $2,338,000 in the third quarter of 2012. For the first nine months
of 2013, interest expense was $14,051,000, compared to $7,021,000 for the
comparable period of 2012. The increase in interest expense was the result of
the issuance of $200 million of 10% senior notes due 2017, which were used to
finance the purchase of the Acquired Assets.

General and administrative expenses increased $3,169,000 and $2,658,000 for
the third quarter and nine months ended September 30, 2013, as compared to the
respective 2012 periods. General and administrative expenses for the 2013
periods included approximately $2,900,000 in acquisition costs related to the
purchase of the Acquired Assets. In addition, during the third quarter of
2013, the Company recognized approximately $1,000,000 in general and
administrative expenses associated with benefits due under the compensation
agreements of the Company's Executive Vice President & General Counsel, who
passed away unexpectedly in September 2013.

Production taxes for the third quarter of 2013 totaled $1,248,000, as compared
to $880,000 in the third quarter of 2012. For the first nine months of 2013,
production taxes were $3,757,000 compared to $112,000 for the comparable
period of 2012. Production taxes during 2012 were lower as a result of
recording a receivable of $2,717,000 during the second quarter of 2012 for
refunds relative to production taxes previously paid on Oklahoma horizontal
wells.

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

                    Three Months Ended September  Nine Months Ended September
                    30,                           30,
                    2013            2012          2013           2012
Production:
Oil (Bbls)          219,402         122,645       460,822        379,958
Gas (Mcf)           8,351,200       6,888,569     21,519,550     20,563,350
Ngl (Mcfe)          1,238,719       894,138       3,560,179      2,250,569
Total Production    10,906,331      8,518,577     27,844,661     25,093,667
(Mcfe)
Total Daily         118.5           92.6          102.0          91.6
Production (MMcfe)
Sales:
Total oil sales     $              $            $            $  
                    23,663,415     13,287,548   48,831,937    41,627,602
Total gas sales     25,009,383      15,583,994    61,980,015     46,321,605
Total ngl sales     6,905,048       5,041,274     18,818,166     15,336,515
 Total oil and gas $              $            $             $ 
sales               55,577,846     33,912,816   129,630,118   103,285,722
Average sales
prices:
Oil (per Bbl)       $          $        $        $      
                    107.85         108.34       105.97        109.56
Gas (per Mcf)       2.99            2.26          2.88           2.25
Ngl (per Mcfe)      5.57            5.64          5.29           6.81
Per Mcfe            5.10            3.98          4.66           4.12

The above sales and average sales prices include increases (decreases) to
revenue related to the settlement of gas hedges of $767,000 and $1,482,000,
Ngl hedges of $5,000 and $312,000 and oil hedges of ($538,000) and $491,000
for the three months ended September 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 $422,000 and $6,867,000, Ngl hedges
of $5,000 and $544,000, and oil hedges of ($684,000) and $853,000 for the nine
months ended September 30, 2013 and 2012, respectively.

The following initiates guidance for the fourth quarter of 2013:

                                                    Guidance for
Description                                         4th Quarter 2013
Production volumes (MMcfe/d)                        110 - 120
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)*           $5.0 - $6.0
Interest expense (in millions)                      $7.5 - $8.0
2013 Capital Expenditures (in millions)**          $100 - $110
* Includes non-cash stock compensation estimate of $1.1 million
**Excludes acquisition costs for the Acquired Assets

Production volumes forecasted for the fourth quarter have been negatively
impacted by maintenance on one of the three producing La Cantera wells,
downtime due to Tropical Storm Karen in October and downstream third party
pipeline work at West Delta 89. Production from La Cantera has been fully
restored and the pipeline work at West Delta 89 has been completed.

2014 Guidance
The Company reiterates its previously issued production and capital
expenditure guidance for 2014. The Company expects to provide updated
guidance, including detailed cost guidance for 2014, in connection with the
announcement of its final 2013 proved reserves.

Operations Update
In the Gulf Coast, the Company's Tokay prospect located at its Ship Shoal 72
field has reached total depth. The Company has an approximate 80% net revenue
interest in the well, which encountered six separate pay intervals and logged
a total of 209 net feet of pay. The well was recently completed and is
expected to achieve a maximum 24 hour gross production rate of 400 - 600 Bbls
of oil per day.

The Company expects to spud its Sawgrass prospect in approximately three
weeks. This liquids rich onshore prospect is located in Terrebonne Parish, LA
and is expected to reach total depth at the end of the year. The Company has
an approximate 57% working interest in this well. 

The Company continues to move forward with finalizing drilling plans for its
Thunder Bayou prospect, located approximately two miles north of its La
Cantera discovery. The Company is in discussions with potential partners to
determine the final participation levels in the project and is evaluating
drilling rigs and related service providers with expectations to spud this
potentially high impact well near the end of the year or in early January
2014. The Company expects to have an approximate 50% working interest in the
Thunder Bayou prospect.

During the third quarter, the operator experienced a substantial delay in
receiving final regulatory approvals to commence production from two oil wells
(NRI - 18%) at Ship Shoal 238. The Company originally expected production to
commence in mid-August. However, final permits were not received until
mid-September and production was initiated at the end of September at a 24
hour gross rate of approximately 1,400 Boe/d (90% oil), limited by the need
for additional facility modifications. The Company is in the process of
upgrading the topside production equipment on the non-operated host platform.
Once work is completed in approximately four weeks, the Company expects the
total gross production rate from these two wells will increase to its original
estimate of approximately 3,000 Boe/d (90% oil).

At West Delta 89, the Company previously forecasted two recompletions to be
online by the end of August 2013. During September, the Company successfully
completed the first of the two scheduled recompletions. While performing the
second recompletion, the Company encountered a down-hole obstruction which has
significantly delayed the commencement of production from the larger of the
two recompletions. The Company expects to finish the recompletion within two
weeks and initiate production which was previously scheduled for September.

In the Woodford, the Company has commenced drilling on its first pad on the
recently acquired rich gas acreage on the western portion of its leasehold
position. The five well pad (avg NRI-39%) is expected to be completed in late
January 2014 as part of the expected 50 gross well Woodford drilling campaign
for 2014. The Company continues to successfully add to its rich gas acreage
position and has now acquired in excess of 25,000 net JV acres during 2013,
bringing its total rich gas acreage to approximately 30,000 net JV acres.

In East Texas, the Company is actively preparing for a significant increase to
its horizontal Cotton Valley program. Permitting and drilling location
preparation have commenced at several of the proposed 2014 sites. The Company
expects to take delivery of an operated rig in January of 2014 with drilling
to commence shortly thereafter. The Company expects to drill 8 to 10
horizontal Cotton Valley wells in 2014 compared to one well in 2013.

In the Mississippian Lime, the Company recently commenced its Pawnee County
3-D seismic survey. The Company expects to receive this data set in late
January 2014. The future development plans will be decided after thoroughly
analyzing well results with the Kay and Pawnee seismic data packages. In
addition, the Company is currently participating in a non-operated
Mississippian Lime well in Kay County and is monitoring industry Woodford
Shale drilling results in the area. 

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

                   Instrument
Production Period  Type        Daily Volumes  Price
Oil:
Sept 13 - Dec 13   Swap        100 Bbls       $106.85 ^(1)
2014               Swap        200 Bbls       $101.00 ^(2)
2014               Swap        100 Bbls       $102.15 ^(2)
Jan 14 – June 14   Swap        200 Bbls       $101.30 ^(2)
Gas:
2014               Swap        10,000 Mmbtu   $4.00
NGL:
Sept 13 - Dec 13   Swap        150 Bbls       $92.42 ^(3)
(1) WTI Index
(2) LLS Index
(3) Pentane

The Company has approximately 124,000 barrels of oil, 4.1 Bcf of gas and
14,000 barrels of NGLs hedged for the remainder of 2013 at an average floor
price of $102.45 /Bbl, $3.63/Mcf and $92.42/Bbl, respectively. In addition,
the Company has approximately 310,000 barrels of oil and 7.3 Bcf of gas hedged
for 2014 at an average floor price of $97.91/Bbl and $4.04/Mcf, respectively.

Borrowing Base Update
The Company's lenders have completed their semi-annual redetermination of the
borrowing base under the revolving credit facility. The bank group reaffirmed
the Company's recently increased borrowing base of $200 million, subject to
the aggregate commitments of the lenders, which presently total $150 million
at the Company's request. The next re-determination of the borrowing base is
expected to occur on or before March 31, 2014.

Management Statement
"Our Tokay discovery builds upon our recent Gulf Coast successes and
reinforces our strategic vision that successful Gulf Coast exploitation
activities, combined with our fully developed, producing Gulf of Mexico
acquisition, will generate substantial free cash flow to be deployed to
develop of our onshore assets," said Charles T. Goodson, Chairman, Chief
Executive Officer and President. "The minor start up issues that we have
experienced have no impact on reservoir quality, reserve estimates or our
outlook on our 2014 liquids production profile, which we are forecasting to
average approximately 3,000 barrels of oil per day and 3,800 barrels of NGLs
per day, and we expect to have the acquired Gulf of Mexico assets fully
integrated in short order."

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 we anticipate 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 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
(Amounts in Thousands)
                                        September 30, 2013   December 31, 2012
ASSETS
Current assets:
Cash and cash equivalents               $           $        
                                        19,409              14,904
Revenue receivable                      31,561               17,742
Joint interest billing receivable       27,212               42,595
Other receivable                        —                    9,208
Derivative asset                        2,323                830
Prepaid drilling costs                  963                  1,698
Other current assets                    7,411                2,607
Total current assets                    88,879               89,584
Property and equipment:
Oil and gas properties:
Oil and gas properties, full cost       2,003,907            1,734,477
method
Unevaluated oil and gas properties      87,117               71,713
Accumulated depreciation, depletion and (1,530,928)          (1,472,244)
amortization
Oil and gas properties, net             560,096              333,946
Other property and equipment            13,340               12,370
Accumulated depreciation of other       (8,512)              (7,607)
property and equipment
Total property and equipment            564,924              338,709
Derivative asset                        305                  —
Other assets, net of accumulated
depreciation and amortization of $5,166 9,783                5,110
and $4,240, respectively
Total assets                            $            $       
                                        663,891             433,403
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable to vendors             $           $        
                                        31,353              58,960
Advances from co-owners                 7,144                20,459
Oil and gas revenue payable             45,438               26,175
Accrued interest and preferred stock    4,175                6,190
dividend
Asset retirement obligation             1,502                2,351
Derivative liability                    525                  233
Other accrued liabilities               9,616                6,535
Total current liabilities               99,753               120,903
Bank debt                               75,000               50,000
10% Senior Notes                        350,000              150,000
Asset retirement obligation             41,350               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 and   63                   63
outstanding 63,353 and 62,768 shares,
respectively
Paid-in capital                         279,260              276,534
Accumulated other comprehensive income  1,340                521
Accumulated deficit                     (182,876)            (189,528)
Total stockholders' equity              97,788               87,591
Total liabilities and stockholders'     $            $       
equity                                  663,891             433,403



PETROQUEST ENERGY, INC.
Consolidated Statements of Operations
(unaudited)
(Amounts in Thousands, Except Per Share Data)
                      Three Months Ended            Nine Months Ended
                      September 30,  September 30,  September 30,  September
                      2013           2012           2013           30, 2012
Revenues:
Oil and gas sales     $        $        $        $     
                         55,578     33,913     129,630         103,286
Gas gathering revenue 9              38             68             119
                      55,587         33,951         129,698        103,405
Expenses:
Lease operating       12,652         9,658          31,208         28,408
expenses
Production taxes      1,248          880            3,757          112
Depreciation,
depletion and         22,475         15,032         49,882         46,024
amortization
Ceiling test          —              35,391         —              108,987
write-down
General and           9,132          5,963          20,199         17,541
administrative
Accretion of asset    543            525            1,203          1,542
retirement obligation
Interest expense      8,071          2,338          14,051         7,021
                      54,121         69,787         120,300        209,635
Other income
(expense):
Other income          176            257            432            529
Derivative income     45             (340)          202            (715)
(expense)
                      221            (83)           634            (186)
Income (loss) from    1,687          (35,919)       10,032         (106,416)
operations
Income tax expense    17             1,435          (474)          1,496
(benefit)
Net income (loss)     1,670          (37,354)       10,506         (107,912)
Preferred stock       1,287          1,285          3,854          3,855
dividend
Net income (loss)     $        $        $        $     
available to common              (38,639)       6,652      (111,767)
stockholders          383
Earnings per common
share:
Basic
Net income (loss) per $        $        $        $     
share                              (0.62)      0.10       
                      0.01                                         (1.79)
Diluted
Net income (loss) per $        $        $        $     
share                              (0.62)      0.10       
                      0.01                                         (1.79)
Weighted average
number of common
shares:
Basic                 63,096         62,492         62,936         62,356
Diluted               63,242         62,492         63,105         62,356



PETROQUEST ENERGY, INC.
Consolidated Statements of Cash Flows
(unaudited)
(Amounts in Thousands)
                                      Nine Months Ended
                                      September 30, 2013   September 30, 2012
Cash flows from operating activities:
Net income (loss)                     $            $      
                                      10,506               (107,912)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Deferred tax expense (benefit)        (474)                1,496
Depreciation, depletion and           49,882               46,024
amortization
Ceiling test writedown                —                    108,987
Accretion of asset retirement         1,203                1,542
obligation
Share based compensation expense      3,105                5,609
Amortization costs and other          1,138                594
Non-cash derivative (income) expense  (202)                715
Payments to settle asset retirement   (2,415)              (2,519)
obligations
Changes in working capital accounts:
Revenue receivable                    (13,819)             141
Prepaid drilling and pipe costs       735                  2,891
Joint interest billing receivable     13,612               20,312
Accounts payable and accrued          (11,781)             1,464
liabilities
Advances from co-owners               (13,315)             (8,802)
Other                                 (5,266)              (2,866)
Net cash provided by operating        32,909               67,676
activities
Cash flows used in investing
activities:
Investment in oil and gas properties  (261,707)            (121,428)
Investment in other property and      (970)                —
equipment
Sale of oil and gas properties        18,915               837
Sale of unevaluated oil and gas       —                    6,083
properties
Net cash used in investing activities (243,762)            (114,508)
Cash flows provided by financing
activities:
Net payments for share based          (379)                (840)
compensation plans
Deferred financing costs              (487)                (33)
Payment of preferred stock dividend   (3,854)              (3,855)
Proceeds from issuance of 10% Senior  200,000              —
Notes
Deferred financing costs of 10%       (4,922)              —
Senior Notes
Proceeds from bank borrowings         62,000               72,500
Repayment of bank borrowings          (37,000)             (37,500)
Net cash provided by financing        215,358              30,272
activities
Net increase (decrease) in cash and   4,505                (16,560)
cash equivalents
Cash and cash equivalents, beginning  14,904               22,263
of period
Cash and cash equivalents, end of     $            $         
period                                19,409               5,703
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest                              $            $        
                                      19,479               15,628
Income taxes                          $           $         
                                        11                15





PETROQUEST ENERGY, INC.
Non-GAAP Disclosure Reconciliation
(Amounts In Thousands)
                              Three Months Ended   Nine Months Ended September
                              September 30,        30,
                              2013      2012       2013         2012
Net income (loss)             $  1,670 $ (37,354) $ 10,506     $ (107,912)
Reconciling items:
Deferred tax expense          17        1,435      (474)        1,496
(benefit)
Depreciation, depletion and   22,475    15,032     49,882       46,024
amortization
Ceiling test writedown        -         35,391     -            108,987
Non-cash derivative (income)  (45)      340        (202)        715
expense
Accretion of asset retirement 543       525        1,203        1,542
obligation
Share based compensation      1,325     1,771      3,105        5,609
expense
Amortization expense and      732       199        1,138        594
other
Discretionary cash flow       26,717    17,339     65,158       57,055
Changes in working capital    (12,102)  8,138      (29,834)     13,140
accounts
Settlement of asset           (2,321)   (69)       (2,415)      (2,519)
retirement obligations
Net cash provided by          $ 12,294  $ 25,408  $ 32,909     $  67,676
operating activities

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.

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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