PetroQuest Energy Announces Second Quarter Results And Updates Guidance And Hedging

Thu Aug 2, 2012 6:30am EDT

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PetroQuest Energy Announces Second Quarter Results And Updates Guidance And Hedging

PR Newswire

LAFAYETTE, La., Aug. 2, 2012 /PRNewswire/ -- PetroQuest Energy, Inc. (NYSE: PQ) announced today that the Company recorded a net loss available to common stockholders for the quarter ended June 30, 2012 of $54,520,000, or $0.87 per share, compared to second quarter 2011 net loss available to common stockholders of $3,045,000, or $0.05 per share. For the first six months of 2012, the Company reported a net loss available to common stockholders of $73,128,000, or $1.17 per share, compared to a net loss available to common stockholders of $1,148,000, or $0.02 per share, for the 2011 period. The Company recorded non-cash ceiling test write-downs of $53,485,000 and $73,596,000 during the second quarter and six month periods of 2012, 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 2012 was $20,068,000, as compared to $27,009,000 for the comparable 2011 period.  For the first six months of 2012, discretionary cash flow was $39,716,000, compared to discretionary cash flow of $52,120,000 for the first six months of 2011. 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 2012 was 8.4 Bcfe, compared to 7.4 Bcfe for the comparable period of 2011. For the first six months of 2012, production was 16.6 Bcfe, compared to 14.7 Bcfe for the comparable period of 2011. Stated on an Mcfe basis, unit prices including the effects of hedges for the second quarter of 2012 were $3.97 per Mcfe, as compared to $5.69 per Mcfe in the second quarter of 2011.  For the first six months of 2012, unit prices including the effects of hedges, were $4.19 per Mcfe, as compared to $5.66 per Mcfe for the first six months of 2012. Oil and gas sales during the second quarter of 2012 were $33,376,000, as compared to $41,920,000, in the second quarter of 2011. For the first six months of 2012, oil and gas sales were $69,373,000 compared to oil and gas sales of $83,466,000 for the first six months of 2011.

Lease operating expenses ("LOE") for the second quarter of 2012 decreased to $9,085,000, as compared to $10,206,000 in the second quarter of 2011.  LOE per Mcfe was $1.08 for the second quarter of 2012, as compared to $1.38 in the second quarter of 2011. For the first six months of 2012, lease operating expenses decreased to $1.13 per Mcfe from $1.34 per Mcfe in the comparable period of 2011. The decreases in lease operating expenses for the 2012 periods are primarily due to cost savings associated with the Company's Woodford saltwater disposal systems.

Depreciation, depletion and amortization ("DD&A") on oil and gas properties for the second quarter of 2012 was $1.84 per Mcfe, as compared to $1.95 per Mcfe in the second quarter of 2011. For the first six months of 2012, DD&A on oil and gas properties was $1.84 per Mcfe compared to $1.91 per Mcfe for the comparable period of 2011. The decrease in DD&A during the second quarter of 2012, as compared to the second quarter of 2011, was primarily the result of the ceiling test write-down recorded during the first quarter of 2012, as well as the impact of the Company's discovery at its Broussard Estates No. 2 well in south Louisiana in June 2012.

Interest expense for the second quarter of 2012 increased to $2,413,000, as compared to $2,255,000 in the second quarter of 2011. For the first six months of 2012, interest expense was $4,683,000, compared to $4,949,000 for the comparable period of 2011.  

Production taxes for the second quarter of 2012 were ($1,917,000), as compared to ($538,000) in the second quarter of 2011.  For the first six months of 2012, production taxes were ($768,000) compared to $624,000 for the comparable period of 2011.   During the second quarter of 2012, the Company recorded a receivable of $2.7 million for refunds expected to be received relative to severance tax previously paid on horizontal wells drilled in Oklahoma.

General and administrative expenses during the quarter and six months ended June 30, 2012 totaled $5,999,000 and $11,578,000, respectively, as compared to expenses of $4,280,000 and $8,678,000 during the comparable 2011 periods. The increase in general and administrative expenses for the 2012 periods is primarily due to higher employee related expenses, including non-cash stock compensation costs totaling  $3,838,000 during the first six months of 2012 as compared to $1,917,000 during the 2011 period.

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, 2012 and 2011:

 


Three Months Ended


Six Months Ended


June 30,


June 30,


2012

2011


2012

2011

Production:






  Oil (Bbls)

116,037

140,049


257,312

315,313

  Gas (Mcf)

6,945,466

5,995,945


13,674,781

11,773,285

  Ngl (Mcfe)

763,302

533,067


1,356,437

1,073,537

  Total Production (Mcfe)

8,404,990

7,369,306


16,575,090

14,738,700

  Total Daily Production (Mmcfe)

92.4

81.0


91.1

81.4







Sales:






  Total oil sales

$ 12,831,097

$ 15,722,784


$ 28,340,054

$ 32,895,484

  Total gas sales

15,457,658

21,490,412


30,737,611

40,616,107

  Total ngl sales

5,087,135

4,706,280


10,295,240

9,953,890

  Total oil and gas sales

$ 33,375,890

$ 41,919,476


$ 69,372,905

$ 83,465,481







Average sales prices:






  Oil (per Bbl)

$        110.58

$        112.27


$        110.14

$        104.33

  Gas (per Mcf)

2.23

3.58


2.25

3.45

  Ngl (per Mcfe)

6.66

8.83


7.59

9.27

  Per Mcfe

3.97

5.69


4.19

5.66







The above sales and average sales prices include increases (reductions) to revenue related to the settlement of gas hedges of $3,230,000 and $186,000, oil hedges of $415,000 and ($289,000) and NGL hedges of $232,000 and zero for the three months ended June 30, 2012 and 2011, respectively.  The above sales and average sales prices include increases (reductions) to revenue related to the settlement of gas hedges of $5,385,000 and $386,000, oil hedges of $362,000 and ($389,000) and NGL hedges of $232,000 and zero for the six months ended June 30, 2012 and 2011, respectively. 

The following initiates guidance for the third quarter of 2012:

 


Guidance for

Description

3rd Quarter 2012



Production volumes (MMcfe/d)

92 - 97



Percent Gas

80%

Percent Oil

8%

Percent NGL

12%



Expenses:


Lease operating expenses (per Mcfe)

$1.10 - $1.15

Production taxes (per Mcfe)

$0.10 - $0.15

Depreciation, depletion and amortization (per Mcfe)

$1.70 - $1.80

General and administrative (in millions)*

$5.5 - $6.0

Interest expense (in millions)

$2.4 - $2.7



*Includes non-cash stock compensation estimate of $1.8 million




The following updates guidance for the full year of 2012:

 


Guidance for

Description

Full Year 2012



Production volumes (MMcfe/d)

92 - 97



Percent Gas

79%

Percent Oil

9%

Percent NGL

12%







Expenses:


Lease operating expenses (per Mcfe)

$1.10 - $1.15

Production taxes (per Mcfe)

$0.04 - $0.06

Depreciation, depletion and amortization (per Mcfe)

$1.75 - $1.85

General and administrative (in millions)*

$22 - $23

Interest expense (in millions)

$9.5 - $10.5

2012 Capital Expenditures (in millions)

$110 - $115



*Includes non-cash stock compensation estimate of $6.8 million




 

Hedging Update

The Company recently initiated the following commodity hedging transactions:

 



Instrument





Production Period


Type


Daily Volumes


Price

Gas:







Jul 12 - Dec 12


Swap


20,000 Mmbtu


$2.73

2013


Three Way Collar


10,000 Mmbtu


$2.00 - $3.00 - $4.09








After executing the above transactions, the Company has approximately 8.0 Bcf of gas volumes hedged for the remainder of 2012 with an average floor price of $3.13 per Mcf and 3.7 Bcf of gas volumes hedged for 2013. 

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 Oklahoma, Texas, the Gulf Coast Basin, Arkansas and Wyoming.  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 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)

(unaudited)





June 30,

December 31,


2012

2011

ASSETS



Current assets:



        Cash and cash equivalents

$       9,599

$         22,263

        Revenue receivable

12,476

15,860

        Joint interest billing receivable

37,991

47,445

        Hedge asset

4,814

6,418

        Prepaid drilling costs

2,163

2,900

        Drilling pipe inventory

2,259

4,070

        Other current assets

3,399

2,965

Total current assets

72,701

101,921

Property and equipment:



        Oil and gas properties:



           Oil and gas properties, full cost method

1,666,929

1,600,546

           Unevaluated oil and gas properties

76,709

70,408

           Accumulated depreciation, depletion and amortization

(1,369,941)

(1,265,603)

                  Oil and gas properties, net

373,697

405,351

       Gas gathering assets

4,177

4,177

       Accumulated depreciation and amortization of gas gathering assets

(1,943)

(1,794)

Total property and equipment

375,931

407,734

Other assets, net of accumulated depreciation and amortization



        of $8,837 and $8,066, respectively

8,399

6,511

Total assets

$   457,031

$       516,166

LIABILITIES AND STOCKHOLDERS' EQUITY



Current liabilities:



        Accounts payable to vendors

$     61,711

$         50,750

        Advances from co-owners

22,526

33,867

        Oil and gas revenue payable

12,412

13,764

        Accrued interest and preferred stock dividend

6,166

6,167

        Asset retirement obligation

1,034

3,110

        Other accrued liabilities

4,898

8,250

Total current liabilities

108,747

115,908

Bank debt

17,500

-

10% Senior Notes

150,000

150,000

Asset retirement obligation

28,758

27,317

Hedge liability

317

-

Deferred income taxes

-

551

Commitments and contingencies



Stockholders' equity:



        Preferred stock, $.001 par value; authorized 5,000



         shares; issued and outstanding 1,495 shares

1

1

        Common stock, $.001 par value; authorized 150,000



         shares; issued and outstanding 62,380 and 62,148



         shares, respectively

62

62

        Paid-in capital

274,061

270,606

        Accumulated other comprehensive income

3,023

4,031

        Accumulated deficit

(125,438)

(52,310)

Total stockholders' equity

151,709

222,390

Total liabilities and stockholders' equity

$   457,031

$       516,166




 

 

 

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

2011


2012

2011

Revenues:






        Oil and gas sales

$    33,376

$    41,920


$    69,373

$    83,466

        Gas gathering revenue 

37

55


81

112


33,413

41,975


69,454

83,578







Expenses:






        Lease operating expenses

9,085

10,206


18,750

19,709

        Production taxes

(1,917)

(538)


(768)

624

        Depreciation, depletion and amortization

15,762

14,657


30,992

28,719

        Ceiling test write-down

53,485

12,973


73,596

18,907

        General and administrative

5,999

4,280


11,578

8,678

        Accretion of asset retirement obligation

517

427


1,017

1,179

        Interest expense 

2,413

2,255


4,683

4,949


85,344

44,260


139,848

82,765







Other income (expense):






       Other income

123

197


272

277

       Derivative expense

(375)

-


(375)

-


(252)

197


(103)

277







Income (loss) from operations

(52,183)

(2,088)


(70,497)

1,090







        Income tax expense (benefit)

1,049

(330)


61

(329)







Net income (loss)

(53,232)

(1,758)


(70,558)

1,419







Preferred stock dividend

1,288

1,287


2,570

2,567







Net loss available to common stockholders

$   (54,520)

$     (3,045)


$   (73,128)

$     (1,148)







Earnings per common share:






  Basic






       Net loss per share

$       (0.87)

$       (0.05)


$       (1.17)

$       (0.02)

  Diluted






       Net loss per share

$       (0.87)

$       (0.05)


$       (1.17)

$       (0.02)







Weighted average number of common shares:






        Basic

62,363

61,917


62,289

61,793

        Diluted

62,363

61,917


62,289

61,793







 

 

 

PETROQUEST ENERGY, INC.

Consolidated Statements of Cash Flows

(unaudited)

(Amounts in Thousands)




Six Months Ended


June 30,


2012

2011

Cash flows from operating activities:



Net income (loss)

$ (70,558)

$      1,419

Adjustments to reconcile net income (loss) to net cash provided by



  operating activities:



        Deferred tax expense (benefit)

61

(329)

        Depreciation, depletion and amortization

30,992

28,719

        Ceiling test writedown

73,596

18,907

        Accretion of asset retirement obligation

1,017

1,179

        Share based compensation expense

3,838

1,917

        Amortization costs and other

395

308

        Non-cash derivative expense

375

-

Payments to settle asset retirement obligations

(2,450)

(513)

Changes in working capital accounts:



        Revenue receivable

3,384

3,719

        Prepaid drilling and pipe costs

2,548

5,507

        Joint interest billing receivable

8,962

(13,976)

        Accounts payable and accrued liabilities

4,602

(3,358)

        Advances from co-owners

(11,341)

18,235

        Other

(3,153)

(1,843)

Net cash provided by operating activities

42,268

59,891

Cash flows used in investing activities:



        Investment in oil and gas properties

(75,825)

(69,006)

        Sale of oil and gas properties

275

-

        Sale of unevaluated oil and gas properties

6,083

-

Net cash used in investing activities

(69,467)

(69,006)

Cash flows used in financing activities:



        Net payments for share based compensation

(383)

(896)

        Deferred financing costs

(12)

(16)

        Payment of preferred stock dividend

(2,570)

(2,569)

        Proceeds from bank borrowings

45,000

-

        Repayment of bank borrowings

(27,500)

-

Net cash provided by (used in) financing activities

14,535

(3,481)

Net decrease in cash and cash equivalents

(12,664)

(12,596)

Cash and cash equivalents, beginning of period

22,263

63,237

Cash and cash equivalents, end of period

$    9,599

$    50,641

Supplemental disclosure of cash flow information:



        Cash paid during the period for:



                Interest

$    7,871

$      8,291

                Income taxes

$         15

$             1




 

 

 

PETROQUEST ENERGY, INC.

Non-GAAP Disclosure Reconciliation

(Amounts In Thousands)








Three Months Ended


Six Months Ended



June 30,


June 30,



2012

2011


2012

2011

Net loss


$     (53,232)

$     (1,758)


$  (70,558)

$      1,419








Reconciling items:







      Deferred tax expense (benefit)


1,049

(330)


61

(329)

      Depreciation, depletion and amortization


15,762

14,657


30,992

28,719

      Ceiling test writedown


53,485

12,973


73,596

18,907

      Non-cash derivative expense


375

-


375

-

      Accretion of asset retirement obligation


517

427


1,017

1,179

      Share based compensation expense


1,915

885


3,838

1,917

      Amortization costs and other


197

155


395

308

Discretionary cash flow


20,068

27,009


39,716

52,120

      Changes in working capital accounts


9,917

14,623


5,002

8,284

      Settlement of asset retirement obligations


(1,668)

-


(2,450)

(513)








Net cash flow provided by operating activities


$         28,317

$       41,632


$     42,268

$     59,891









 


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.

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