PetroQuest Energy Announces First Quarter 2014 Results And Provides Operations And Hedging Update PR Newswire LAFAYETTE, La., May 6, 2014 LAFAYETTE, La., May 6, 2014 /PRNewswire/ --PetroQuest Energy, Inc. (NYSE: PQ) today announced results for the first quarter of 2014. The following compares certain first quarter 2014 metrics to those of the first quarter of 2013, highlighting the Company's recent growth driven by its acquisition of certain Gulf of Mexico assets in July 2013 ("Gulf of Mexico Acquisition") as well as stronger natural gas prices: oOil production increased 93% oNet income increased 285% oDiscretionary cash flow increased 85% oOil and gas revenues up 67% Net income available to common stockholders for the quarter ended March 31, 2014 was $10,043,000, or $0.15 per share, compared to first quarter 2013 net income available to common stockholders of $2,607,000, or $0.04 per share. Net income for the first quarter of 2014 exceeded net income for the entire year ended December 31, 2013. Discretionary cash flow for the first quarter of 2014 was $34,488,000, as compared to $18,632,000 for the comparable 2013 period. See the attached schedule for a reconciliation of net cash flow provided by operating activities to discretionary cash flow. Oil and gas sales during the first quarter of 2014 were $59,966,000, as compared to $35,976,000 in the first quarter of 2013. Production for the first quarter of 2014 was 9,769,110 Mcfe, as compared to 8,255,580 Mcfe in the first quarter of 2013. Oil and NGL volumes comprised approximately 26% of the Company's total production during the first quarter of 2014 as compared to 22% during the first quarter of 2013. Included in the increase in liquids production was a 93% increase in oil production since the first quarter of 2013. Stated on an Mcfe basis, unit prices received during the first quarter of 2014 were 41% higher than the comparable 2013 period, including a 58% increase in realized natural gas prices. Lease operating expenses ("LOE") for the first quarter of 2014 totaled $12,258,000, as compared to $9,719,000 in the first quarter of 2013. LOE per Mcfe was $1.25 in the first quarter of 2014, as compared to $1.18 in the first quarter of 2013. Depreciation, depletion and amortization ("DD&A") on oil and gas properties for the first quarter of 2014 was $2.06 per Mcfe as compared to $1.53 per Mcfe in the first quarter of 2013. Theincreasein the per unit DD&A rate is primarily the result of the Gulf of Mexico Acquisition, which had a higher cost per unit as compared to the Company's overall amortization base. General and administrative expenses during the first quarter of 2014 totaled $6,242,000, as compared to $4,716,000 during the 2013 period. The increase in general and administrative costs is primarily due to higher employee related costs including share based compensation during the 2014 period. Included in first quarter 2014 and 2013 general and administrative expenses were share based compensation costs of $1,762,000 and $698,000, respectively. Interest expense for the first quarter of 2014 increased to $7,636,000, as compared to $2,864,000 in the first quarter of 2013. The increase in interest expense was primarily the result of the issuance of $200 million of 10% senior notes due 2017 in July 2013 to finance the Gulf of Mexico Acquisition. The following table sets forth certain information with respect to the oil and gas operations of the Company for the three-month periods ended March 31, 2014 and 2013: Three Months Ended March 31, 2014 2013 Production: Oil (Bbls) 242,283 125,723 Gas (Mcf) 7,184,130 6,436,595 Ngl (Mcfe) 1,131,282 1,064,647 Total Production (Mcfe) 9,769,110 8,255,580 Average Daily Production (MMcfe) 108.5 91.7 Sales: Total oil sales $ 24,140,656 $ 13,144,310 Total gas sales 29,557,335 16,723,032 Total ngl sales 6,268,406 6,108,946 Total oil and gas sales $ 59,966,397 $ 35,976,288 Average sales prices: Oil (per Bbl) $ 99.64 $ 104.55 Gas (per Mcf) 4.11 2.60 Ngl (per Mcfe) 5.54 5.74 Per Mcfe 6.14 4.36 The above sales and average sales prices include increases (reductions) to revenue related to the settlement of gas hedges of ($2,969,000) and $532,000 and oil hedges of ($434,000) and ($145,000) for the three months ended March 31, 2014 and 2013, respectively. The following initiates guidance for the second quarter of 2014: Guidance for Description 2nd Quarter 2014 Production volumes (MMcfe/d) 116 - 120 Percent Gas 70% Percent Oil 14% Percent NGL 16% Expenses: Lease operating expenses (per Mcfe) $1.15 - $1.25 Production taxes (per Mcfe) $0.15 - $0.20 Depreciation, depletion and amortization (per Mcfe) $2.05 - $2.15 General and administrative (in millions) ^(1) $6.0 - $6.5 Interest expense (in millions) $7.5 - $8.0 ^(1)Includes non-cash stock compensation estimate of $1.3 mm Operations Update In the Woodford, the Company recently established production on three wells in its West Relay field. These three wells (average NRI – 31%) achieved an average per well maximum 24-hour gross rate of 3,476 Mcf of gas and 528 barrels of natural gas liquids. In addition, the Company recently completed two additional wells (NRI – 35%), which are in the early stages of flowback and has commenced drilling on a three well pad (NRI – 30%). The company expects first production from all five wells to be established at the end of this month. The Company plans to add a second rig to its West Relay program in July. Substantial improvement has been made on drilling time in the liquids rich Woodford shale. The Company's initial six wells in West Relay averaged 14 drilling days per well, while the most recent seven wells averaged 10 days per well. This compares to the average drilling time of the last 10 wells in the Company's North Relay field of 15 days. In East Texas, the Company expects to commence completion operations on a two well (PQ #10 & PQ #11 – NRI - 41%) horizontal Cotton Valley pad this week. In addition, the Company expects to complete its PQ #12 well (WI - 100%) in a couple of weeks; has recently reached total depth on its PQ #13 well (WI - 100%) and expects to spud its PQ#14 (WI -100%) and PQ#15 (WI – 55%) wells before month end. The Company has two rigs running in the trend and expects to drill six gross wells during 2014. In the Gulf Coast, the Company recently completed its Thunder Bayou sell-down program and has reached its goal of an approximate 50% working interest in the project. The Company has completed the surface location work and has contracted a rig with an estimated June 1, 2014 spud date. The Company recently commenced drilling its Eagle Crest prospect located in Assumption Parish. The well is currently drilling at 7,000 feet towards a proposed total depth of 10,700 feet. The Company has an approximate 50% working interest in this oil focused prospect. Hedging Update The Company recently initiated the following commodity hedging transaction: Instrument Production Period Type Daily Volumes Price Oil: July 2014 - Dec 2014 Swap 250 Bbls $100.90 ^(1) ^(1)^ LLS Index Management Statement "Our decision to focus within our three core areas has resulted in significant increases in production, reserves, cash flow and earnings," said Charles T. Goodson, Chairman, Chief Executive Officer and President. "Our latest results in the liquids rich Woodford reinforces our belief that this recently acquired 35,000 acre position provides us with a substantial inventory of predictable and low-risk rich gas drilling locations. When combined with our East Texas and high impact Gulf Coast Basin drilling activities, this year's capital program is expected to deliver record results as we work toward our goal of making 2014 a transformational year for the Company." 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, 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 acquisitions with our operations and realize the anticipated benefits from the acquisitions, any unexpected costs or delays in connection with the integration of the acquisitions, our ability to find oil and natural gas reserves that are economically recoverable, the volatility of oil and natural gas prices, 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 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) March 31, 2014 December 31, 2013 ASSETS Current assets: Cash and cash equivalents $ 11,991 $ 9,153 Revenue receivable 24,104 26,568 Joint interest billing receivable 23,872 26,556 Derivative asset 27 521 Prepaid drilling costs 520 477 Other current assets 8,176 8,132 Total current assets 68,690 71,407 Property and equipment: Oil and gas properties: Oil and gas properties, full cost 2,068,266 2,035,899 method Unevaluated oil and gas properties 102,707 98,387 Accumulated depreciation, depletion (1,573,147) (1,553,044) and amortization Oil and gas properties, net 597,826 581,242 Other property and equipment 14,251 13,993 Accumulated depreciation of other (9,226) (8,901) property and equipment Total property and equipment 602,851 586,334 Other assets, net of accumulated depreciation and amortization of 8,783 9,449 $6,216 and $5,689, respectively Total assets $ 680,324 $ 667,190 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable to vendors $ 42,713 $ 47,341 Advances from co-owners 7,002 969 Oil and gas revenue payable 29,710 22,664 Accrued interest and preferred 4,224 12,909 stock dividend Asset retirement obligation 3,390 3,113 Derivative liability 4,541 1,617 Other accrued liabilities 9,810 8,924 Total current liabilities 101,390 97,537 Bank debt 75,000 75,000 10% Senior Notes 350,000 350,000 Asset retirement obligation 45,780 45,423 Other long-term liability 180 135 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 64 64 and outstanding 64,035 and 63,664 shares, respectively Paid-in capital 282,965 280,711 Accumulated other comprehensive (4,514) (1,096) loss Accumulated deficit (170,542) (180,585) Total stockholders' equity 107,974 99,095 Total liabilities and stockholders' $ 680,324 $ equity 667,190 PETROQUEST ENERGY, INC. Consolidated Statements of Operations (Amounts in Thousands, Except Per Share Data) Three Months Ended, March 31, 2014 March 31, 2013 Revenues: Oil and gas sales $ 59,966 $ 35,976 Expenses: Lease operating expenses 12,258 9,719 Production taxes 1,477 1,028 Depreciation, depletion and 20,428 12,871 amortization General and administrative 6,242 4,716 Accretion of asset retirement 791 332 obligation Interest expense 7,636 2,864 48,832 31,530 Other income (expense): Other income 189 227 Derivative expense — (437) 189 (210) Income from operations 11,323 4,236 Income tax expense — 349 Net income 11,323 3,887 Preferred stock dividend 1,280 1,280 Net income available to common $ 10,043 $ 2,607 stockholders Earnings per common share: Basic Net income per share $ $ 0.15 0.04 Diluted Net income per share $ $ 0.15 0.04 Weighted average number of common shares: Basic 63,846 62,834 Diluted 63,902 63,029 PETROQUEST ENERGY, INC. Consolidated Statements of Cash Flows (Amounts in Thousands) Three Months Ended, March 31, 2014 March 31, 2013 Cash flows from operating activities: Net income $ 11,323 $ 3,887 Adjustments to reconcile net income to net cash provided by operating activities: Deferred tax expense — 349 Depreciation, depletion and 20,428 12,871 amortization Accretion of asset retirement 791 332 obligation Share based compensation expense 1,389 556 Amortization costs and other 557 200 Non-cash derivative expense — 437 Payments to settle asset retirement (718) (72) obligations Changes in working capital accounts: Revenue receivable 2,464 2,592 Prepaid drilling and pipe costs (43) 778 Joint interest billing receivable 2,684 6,331 Accounts payable and accrued 246 (27,344) liabilities Advances from co-owners 6,033 10,742 Other 135 (2,539) Net cash provided by operating 45,289 9,120 activities Cash flows used in investing activities: Investment in oil and gas properties (41,792) (31,275) Investment in other property and (205) (49) equipment Sale of oil and gas properties — 19,652 Net cash used in investing activities (41,997) (11,672) Cash flows used in financing activities: Net proceeds (payments) for share 911 (84) based compensation Deferred financing costs (81) (21) Payment of preferred stock dividend (1,284) (1,284) Proceeds from bank borrowings 5,000 25,000 Repayment of bank borrowings (5,000) (15,000) Net cash provided by (used in) (454) 8,611 financing activities Net increase in cash and cash 2,838 6,059 equivalents Cash and cash equivalents, beginning 9,153 14,904 of period Cash and cash equivalents, end of $ 11,991 $ 20,963 period Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 18,131 $ 7,845 Income taxes $ — $ 41 PETROQUEST ENERGY, INC. Non-GAAP Disclosure Reconciliation (Amounts In Thousands) Three Months Ended March 31, 2014 2013 Net income $ 11,323 $ 3,887 Reconciling items: Deferred tax expense - 349 Depreciation, depletion and amortization 20,428 12,871 Accretion of asset retirement obligation 791 332 Share based compensation expense 1,389 556 Non-cash derivative expense - 437 Amortization costs and other 557 200 Discretionary cash flow 34,488 18,632 Changes in working capital accounts 11,519 (9,440) Settlement of asset retirement obligations (718) (72) Net cash flow provided by operating activities $ 45,289 $ 9,120 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. Note: 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
PetroQuest Energy Announces First Quarter 2014 Results And Provides Operations And Hedging Update
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