Wednesday February 20, 2008
LAFAYETTE, La., Feb. 20 /PRNewswire-FirstCall/ -- PetroQuest Energy, Inc. (NYSE: PQ - News) announced today net income available to common shareholders for the quarter ended December 31, 2007 of $10,837,000, or $0.22 per share, compared to fourth quarter 2006 net income available to common shareholders of $311,000 or $0.01 per share. Net cash flow provided by operating activities before working capital changes for the fourth quarter of 2007 was $45,631,000, as compared to $26,290,000 for the comparable 2006 period. For the year ended December 31, 2007, the Company reported net income available to common shareholders of $39,245,000, or $0.79 per share, compared to net income available to common shareholders of $23,986,000, or $0.49 per share, for the year ended December 31, 2006. For the year ended December 31, 2007, net cash flow provided by operating activities before working capital changes was $190,122,000, compared to $132,500,000 for the comparable 2006 period. See the attached schedule for a reconciliation of net cash flow provided by operating activities to net cash flow provided by operating activities before working capital changes.
Oil and gas sales during the fourth quarter of 2007 increased 50% to $65,521,000 as compared to $43,668,000 in the fourth quarter of 2006. For the year ended December 31, 2007, oil and gas sales increased 32% to $256,223,000 as compared to $193,861,000 in the year ended December 31, 2006. Production for the fourth quarter and year ended December 31, 2007 was 23% and 22% higher, respectively, than production for the comparable periods of 2006. Stated on an Mcfe basis, unit prices received during the fourth quarter and the year ended December 31, 2007 were 22% higher and 8% higher, respectively, as compared to the prices received during the comparable 2006 periods.
Lease operating expenses for the fourth quarter of 2007 were $0.99 per Mcfe as compared to $1.57 per Mcfe in the fourth quarter of 2006. For the year ended December 31, 2007, lease operating expenses decreased 24% to $1.02 per Mcfe from $1.35 per Mcfe in the comparable period of 2006. Decreased unit costs were primarily the result of higher production in the 2007 periods and the absence of operating expenses related to certain higher cost Gulf of Mexico properties that were sold in November 2006.
Depreciation, depletion and amortization ("DD&A") on oil and gas properties for the fourth quarter of 2007 was $3.76 per Mcfe as compared to $3.83 during the third quarter of 2007 and $3.45 per Mcfe in the fourth quarter of 2006. For the year ended December 31, 2007, DD&A on oil and gas properties increased 15% to $3.70 per Mcfe from $3.23 per Mcfe for the comparable period of 2006. The increases in DD&A are primarily due to increased costs to drill for, develop and acquire oil and gas reserves, and the costs of six non-commercial wells drilled in the Gulf Coast Basin during 2007.
General and administrative expenses increased $46,000 and $6,040,000 for the fourth quarter and year ended December 31, 2007, as compared to the respective 2006 periods. The increase during the twelve-month period is primarily due to non-cash share-based compensation expense related to SFAS 123®, which increased approximately $4,167,000 during the twelve months ended December 31, 2007 as compared to the 2006 period. Additional increases are due to the 31% increase in staffing during 2007 as our operational activity has increased in our longer-lived areas.
The following table sets forth certain information with respect to the oil
and gas operations of the Company for the three-month periods and years ended
December 31, 2007 and 2006:
Three Months Ended Year Ended
December 31, December 31,
2007 2006 2007 2006
Production:
Oil (Bbls) 190,151 145,725 1,079,672 694,724
Gas (Mcf) 6,708,402 5,504,418 24,965,789 21,528,323
Total Production
(Mcfe) 7,849,308 6,378,768 31,443,821 25,696,667
Total Daily
Production (MMcfe/d) 85.3 69.3 86.1 70.4
Sales:
Total oil sales $16,245,905 $7,576,140 $76,138,234 $42,317,332
Total gas sales 49,274,914 36,091,717 180,084,794 151,544,026
Total oil and gas
sales $65,520,819 $43,667,857 $256,223,028 $193,861,358
Average sales
prices:
Oil (per Bbl) $85.44 $51.99 $70.52 $60.91
Gas (per Mcf) 7.35 6.56 7.21 7.04
Per Mcfe 8.35 6.85 8.15 7.54
The above sales and average sales prices include increases (reductions) related to gas hedges of $2,506,000 and $3,502,000 and oil hedges of ($946,000) and ($496,000) for the three months ended December 31, 2007 and 2006, respectively. The above sales and average sales prices include increases (reductions) related to gas hedges of $10,713,000 and $9,634,000 and oil hedges of ($791,000) and ($2,785,000) for the year ended December 31, 2007 and 2006, respectively.
The following updates guidance for the first quarter of 2008:
Production volumes (MMcfe/d) 86-92
Percent gas 85%
Expenses:
Lease operating expenses (per Mcfe) $1.10-$1.20
Production taxes (per Mcfe) $0.32-$0.36
Depreciation, depletion and amortization (per Mcfe) $3.75-$3.85
General and administrative (in millions) $5.3-$5.8
Interest expense (in millions) $2.4-$2.8
Effective tax rate (all deferred) 37%
The following updates guidance for the full year of 2008:
Production volumes (MMcfe/d) 94-100
Percent gas 85%
Expenses:
Lease operating expenses (per Mcfe) $1.00-$1.10
Production taxes (per Mcfe) $0.33-$0.37
Depreciation, depletion and amortization (per Mcfe) $3.75-$3.85
General and administrative (in millions) $22-$23
Interest expense (in millions) $11-$12
Effective tax rate (all deferred) 37%
Operations Update
The Company initiated production from its eleventh operated horizontal Woodford Shale well, and it had an initial production rate of approximately 2 MMcfe per day.
The Company's Pelican Point prospect is currently drilling and is expected to reach total depth in approximately two weeks. The Company has a 28% working interest in the well.
Hedging Update
The Company initiated the following commodity hedging transaction in
February 2008:
Instrument
Production Period Type Daily Volumes Price
Natural Gas:
March - June 2008 Costless Collar 10,000 Mmbtu $8.25-8.75
After executing the above transaction, the Company has approximately 12.3 Bcfe of hedges for 2008.
Management Statement
"We are very pleased to once again post record production, revenues, earnings and cash flows in 2007, and we are forecasting another company record year for production in 2008," said Charles T. Goodson, Chairman, Chief Executive Officer and President. "Based upon our continued transition into long-lived basins, along with our outlook on commodity prices and production, we expect a record year of absolute reserve growth in excess of 30% from the drill bit alone in 2008."
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, East Texas, South Louisiana and the shallow waters of the Gulf of Mexico. PetroQuest 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, declines in the values of our properties resulting in 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 estimating quantities of proved oil and natural gas reserves, in prospect development and property acquisitions or dispositions and in projecting future rates of production, the timing of development expenditures and drilling of wells, hurricanes and other natural disasters, 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.
PETROQUEST ENERGY, INC.
Consolidated Statements of Income
(Unaudited)
(Amounts In Thousands, Except Per Share Data)
Three Months Ended Year Ended
December 31, December 31,
2007 2006 2007 2006
Revenues:
Oil and gas sales $65,521 $43,667 $256,223 $193,861
Gas gathering revenue and
other income 1,885 1,937 7,451 6,683
67,406 45,604 263,674 200,544
Expenses:
Lease operating expenses 7,780 9,997 31,965 34,735
Production taxes 2,082 2,022 7,859 6,576
Depreciation, depletion and
amortization 30,459 22,864 119,969 85,858
Gas gathering costs 932 995 4,120 3,637
General and administrative 5,108 5,062 21,162 15,122
Accretion of asset retirement
obligation 244 373 923 1,513
Interest expense 2,281 3,758 13,393 14,513
48,886 45,071 199,391 161,954
Income from operations 18,520 533 64,283 38,590
Income tax expense 6,383 222 23,664 14,604
Net income 12,137 311 40,619 23,986
Preferred stock dividend 1,300 - 1,374 -
Net income available to common
shareholders $10,837 $311 $39,245 $23,986
Earnings per common share:
Basic $0.22 $0.01 $0.82 $0.50
Diluted $0.22 $0.01 $0.79 $0.49
Weighted average number of common
shares:
Basic 48,373 47,780 48,108 47,537
Diluted 50,004 49,284 49,679 48,936
PETROQUEST ENERGY, INC.
Consolidated Balance Sheets
(Unaudited)
(Amounts in Thousands)
December 31,
2007 2006
ASSETS
Current assets:
Cash and cash equivalents $16,909 $4,795
Revenue receivable 22,820 21,767
Joint interest billing receivable 22,936 20,072
Hedging asset - 10,527
Prepaid drilling costs 1,448 4,886
Other current assets 3,984 2,143
Total current assets 68,097 64,190
Property and equipment:
Oil and gas properties:
Oil and gas properties, full cost method 907,083 695,116
Unevaluated oil and gas properties 80,297 51,567
Accumulated depreciation, depletion and
amortization (432,530) (314,869)
Oil and gas properties, net 554,850 431,814
Gas gathering assets 22,040 19,072
Accumulated depreciation and amortization
of gas gathering assets (6,640) (3,562)
Total property and equipment 570,250 447,324
Other assets, net of accumulated depreciation
and amortization of $11,238 and $11,719,
respectively 6,000 6,776
Total assets $644,347 $518,290
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable to vendors $78,273 $34,790
Advances from co-owners 12,870 13,391
Oil and gas revenue payable 5,771 6,935
Accrued interest and preferred stock dividend 3,320 2,453
Asset retirement obligation 5,280 9,028
Other accrued liabilities 6,326 5,484
Total current liabilities 111,840 72,081
Bank debt - 47,000
10 3/8% Senior Notes 148,755 148,537
Asset retirement obligation 12,171 11,211
Deferred income taxes 69,160 49,646
Other liabilities 104 104
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value;
authorized 5,000 shares; issued and
outstanding 1,495 and 0, respectively 1 -
Common stock, $.001 par value; authorized
75,000 shares; issued and outstanding 48,414
and 47,788 shares, respectively 48 48
Paid-in capital 204,979 124,552
Accumulated other comprehensive income (loss) (435) 6,632
Retained earnings 97,724 58,479
Total stockholders' equity 302,317 189,711
Total liabilities and stockholders' equity $644,347 $518,290
PETROQUEST ENERGY, INC.
Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in Thousands)
Year Ended December 31,
2007 2006 2005
Cash flows from operating activities:
Net income $40,619 $23,986 $21,417
Adjustments to reconcile net
income to net cash provided by
operating activities:
Deferred tax expense 23,664 14,604 12,477
Amortization of debt issuance costs 969 943 1,390
Compensation expense - - 213
Depreciation, depletion and
amortization 119,969 85,858 43,747
Write-off of debt issuance costs - - 2,575
Amortization of bond discount 218 197 111
Share-based compensation expense 9,818 5,651 -
Accretion of asset retirement
obligation 923 1,513 1,253
Payments to settle asset retirement
obligations (6,058) (252) -
Changes in working capital accounts:
Revenue receivable (1,053) 725 (13,100)
Joint interest billing receivable (2,864) (2,505) (13,912)
Accounts payable and accrued
liabilities 37,050 (13,552) 14,255
Other assets (602) (1,743) (448)
Advances from co-owners (521) 7,517 3,609
Other 1,597 (3,572) (397)
Net cash provided by operating
activities 223,729 119,370 73,190
Cash flows from investing activities:
Investment in oil and gas properties (233,436) (175,277) (171,980)
Sale of oil and gas properties 1,277 22,023 -
Investment in gas gathering assets (2,968) (6,363) (10,861)
Net cash used in investing activities (235,127) (159,617) (182,841)
Cash flows from financing activities:
Net (payments for) proceeds from
share based compensation (99) 1,461 972
Proceeds from preferred stock offering 74,750 - -
Costs of preferred stock offering (4,041) - -
Proceeds from bank borrowings 23,000 48,000 44,500
Repayment of bank borrowings (70,000) (11,000) (73,000)
Proceeds from issuance of 10 3/8%
Senior Notes - - 148,229
Deferred financing costs (98) (122) (5,876)
Net cash provided by financing activities 23,512 38,339 114,825
Net increase (decrease) in cash and
cash equivalents 12,114 (1,908) 5,174
Cash and cash equivalents at beginning
of period 4,795 6,703 1,529
Cash and cash equivalents at end of
period $16,909 $4,795 $6,703
Supplemental disclosure of cash flow
information
Cash paid during the period for:
Interest $19,238 $17,572 $9,628
Income taxes $- $- $75
PETROQUEST ENERGY, INC.
Non-GAAP Disclosure Reconciliation
(Amounts In Thousands)
Three Months Ended Year Ended
December 31, December 31,
2007 2006 2007 2006
Net cash flow provided by operating
activities $56,241 $7,524 $223,729 $119,370
Changes in working capital accounts (10,610) 18,766 (33,607) 13,130
Net cash flow provided by operating
activities before working capital
changes $45,631 $26,290 $190,122 $132,500
Note: Management believes that net cash flow provided by operating
activities before working capital changes 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. Net cash flow provided by operating activities
before working capital changes 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 net cash flow provided by
operating activities before working capital changes is not a term
defined by GAAP, it might not be comparable to similarly titled
measures used by other companies.
