LAFAYETTE, La., May 3 /PRNewswire-FirstCall/ -- PetroQuest Energy, Inc. (NYSE: PQ - News) announced today that the Company achieved record net income for the quarter ended March 31, 2007 of $10,814,000 or $0.22 per share, compared to first quarter 2006 net income of $9,149,000 or $0.19 per share. Net cash flow provided by operating activities before working capital changes for the first quarter of 2007 was $48,241,000, as compared to $33,933,000 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 first quarter of 2007 increased 32% to $61,884,000 as compared to $47,016,000 in the first quarter of 2006. Production for the first quarter of 2007 was a Company record and was 32% higher than production for the comparable period of 2006. The 132% increase in oil production was the result of our Ship Shoal 72 Field coming back on- line in December 2006 and producing at a record rate during the current quarter. Stated on an Mcfe basis, unit prices received during the first quarter of 2007 were 1% lower than the comparable 2006 period.
Lease operating expenses for the first quarter of 2007 were $0.90 per Mcfe as compared to $1.20 per Mcfe in the first quarter of 2006. Decreased unit costs during the current quarter were primarily the result of the Company record production in the current quarter and the absence of operating expenses related to high cost properties that were sold in November 2006. In addition, depreciation, depletion and amortization ("DD&A") on oil and gas properties for the first quarter of 2007 was $3.48 per Mcfe as compared to $3.12 per Mcfe in the first quarter of 2006. The increase in DD&A is primarily due to increased costs to drill for, develop and acquire oil and gas reserves. General and administrative expenses during the first quarter of 2007 increased 140% to $5,180,000 as compared to $2,155,000 in the first quarter of 2006. The primary reason for the increase is due to non-cash expense related to SFAS 123® which increased approximately $2,700,000 during the current quarter.
The following initiates guidance for the second quarter of 2007:
Guidance for
Description 2nd Quarter 2007
Production volumes (MMcfe/d) 80 - 85
Percent gas 75%
Expenses:
Lease operating expenses (per Mcfe) $1.10 - $1.20
Production taxes (per Mcfe) $0.33 - $0.37
Depreciation, depletion and
amortization (per Mcfe) $3.60 - $3.70
General and administrative
(in millions) $5 - $6
Interest expense (in millions) $3.5 - $4.0
Effective tax rate (all deferred) 37%
The following updates guidance for the full year of 2007:
Guidance for
Description Full Year 2007
Production volumes (MMcfe/d) 80 - 85
Percent gas 75%
Expenses:
Lease operating expenses (per Mcfe) $1.05 - $1.15
Production taxes (per Mcfe) $0.33 - $0.37
Depreciation, depletion and
amortization (per Mcfe) $3.50 - $3.60
General and administrative
(in millions) $21 - $22
Interest expense (in millions) $16 - $17
Effective tax rate (all deferred) 37%
The above sales and average sales prices include increases (reductions) related to gas hedges of $2,523,000 and $1,039,000 and oil hedges of $210,000 and ($677,000) for the three months ended March 31, 2007 and 2006, respectively.
The following initiates guidance for the second quarter of 2007:
Guidance for
Description 2nd Quarter 2007
Production volumes (MMcfe/d) 80 - 85
Percent gas 75%
Expenses:
Lease operating expenses (per Mcfe) $1.10 - $1.20
Production taxes (per Mcfe) $0.33 - $0.37
Depreciation, depletion and
amortization (per Mcfe) $3.60 - $3.70
General and administrative
(in millions) $5 - $6
Interest expense (in millions) $3.5 - $4.0
Effective tax rate (all deferred) 37%
The following updates guidance for the full year of 2007:
Guidance for
Description Full Year 2007
Production volumes (MMcfe/d) 80 - 85
Percent gas 75%
Expenses:
Lease operating expenses (per Mcfe) $1.05 - $1.15
Production taxes (per Mcfe) $0.33 - $0.37
Depreciation, depletion and
amortization (per Mcfe) $3.50 - $3.60
General and administrative
(in millions) $21 - $22
Interest expense (in millions) $16 - $17
Effective tax rate (all deferred) 37%
Operations Update
Drilling activity during the first quarter of 2007 included two successful horizontal Woodford Shale wells in the Arkoma Basin, four successful horizontal coalbed methane wells in the Arkoma Basin and seven successful wells in East Texas.
A total of six successful wells were drilled in the Arkoma Basin during the first quarter of 2007 resulting in an 86% success rate. As previously disclosed, the Company has completed its second operated horizontal well in the Woodford Shale, which has averaged approximately 1.7 MMcfe per day over the last 20 days. The Company has reached total depth in its third operated horizontal Woodford well and the well is expected to be completed during the next seven days. Drilling continues in the Arkoma Basin with one operated rig drilling horizontal wells targeting the Woodford Shale as well as other non- operated activity.
PetroQuest participated in the drilling and completion of seven wells in the East Texas Basin during the first quarter of 2007. The Company drilled its first well at its Toms prospect during the first quarter and is currently constructing facilities for the field. The second well in the Toms prospect has been drilled and is currently in the completion phase. Initial production from these wells is expected during the second quarter.
In the Gulf Coast Basin, the Company's Atchafalaya prospect is currently drilling and is expected to reach total depth in approximately one week. The Company has a 23% working interest in this well.
The Company's Pelican Point #2 prospect is currently drilling and is expected to reach total depth in approximately five weeks. The Company has a 25% working interest in the well.
The Company's Bandon Dunes prospect is currently drilling and is expected to reach total depth during the second quarter. The Company has a 28% working interest in the well.
The Company's Poppy Hills prospect in the Gulf of Mexico began producing during April and is currently producing at a gross rate of approximately 14 MMcfe per day. The Company has an approximate 11% NRI in this well.
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 press 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 Balance Sheets
(unaudited)
(Amounts in Thousands)
March 31, December 31,
2007 2006
ASSETS
Current assets:
Cash and cash equivalents $7,179 $4,795
Revenue receivable 20,795 21,767
Joint interest billing receivable 16,721 20,072
Hedging asset 1,203 10,527
Prepaid drilling costs 1,642 4,886
Other current assets 6,826 2,143
Total current assets 54,366 64,190
Property and equipment:
Oil and gas properties:
Oil and gas properties, full cost method 744,942 695,116
Unevaluated oil and gas properties 55,320 51,567
Accumulated depreciation, depletion
and amortization (341,296) (314,869)
Oil and gas properties, net 458,966 431,814
Gas gathering assets 19,571 19,072
Accumulated depreciation and
amortization of gas gathering assets (4,312) (3,562)
Total property and equipment 474,225 447,324
Other assets, net of accumulated
depreciation and amortization of
$12,057 and $11,719, respectively 6,825 6,776
Total assets $535,416 $518,290
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable to vendors $41,445 $32,049
Advances from co-owners 12,966 13,391
Oil and gas revenue payable 7,919 6,935
Accrued interest 6,227 2,453
Asset retirement obligation 8,968 9,028
Other accrued liabilities 7,355 8,225
Total current liabilities 84,880 72,081
Bank debt 40,000 47,000
10 3/8% senior notes 148,589 148,537
Asset retirement obligation 11,687 11,211
Deferred income taxes 52,734 49,646
Other liabilities 104 104
Commitments and contingencies
Stockholders' equity:
Common stock, $.001 par value;
authorized 75,000 shares; issued
and outstanding 47,788 shares 48 48
Paid-in capital 127,323 124,552
Accumulated other comprehensive income 758 6,632
Retained earnings 69,293 58,479
Total stockholders' equity 197,422 189,711
Total liabilities and stockholders'
equity $535,416 $518,290
PETROQUEST ENERGY, INC.
Consolidated Statements of Income
(unaudited)
(Amounts in Thousands, Except Per Share Data)
Three Months Ended
March 31,
2007 2006
Revenues:
Oil and gas sales $61,884 $47,016
Gas gathering revenue and other income 2,124 1,342
64,008 48,358
Expenses:
Lease operating expenses 6,937 6,951
Production taxes 2,130 1,570
Depreciation, depletion and amortization 27,613 18,719
Gas gathering costs 950 717
General and administrative 5,180 2,155
Accretion of asset retirement obligation 215 370
Interest expense 3,632 3,372
46,657 33,854
Income from operations 17,351 14,504
Income tax expense 6,537 5,355
Net income $10,814 $9,149
Earnings per common share:
Basic $0.23 $0.19
Diluted $0.22 $0.19
Weighted average number of common shares:
Basic 47,788 47,326
Diluted 49,451 48,718
PETROQUEST ENERGY, INC.
Consolidated Statements of Cash Flows
(unaudited)
(Amounts in Thousands)
Three Months Ended
March 31,
2007 2006
Cash flows from operating activities:
Net income $10,814 $9,149
Adjustments to reconcile net income to net
cash provided by operating activities:
Deferred tax expense 6,537 5,355
Depreciation, depletion and amortization 27,613 18,719
Accretion of asset retirement obligation 215 370
Amortization of debt issuance costs 239 233
Amortization of bond discount 52 47
Share based compensation expense 2,771 60
Changes in working capital accounts:
Revenue receivable 972 (5,388)
Joint interest billing receivable 3,351 (1,060)
Accounts payable and accrued liabilities 18,120 12,824
Advances from co-owners (425) (3,475)
Other assets and liabilities (1,812) (6,860)
Net cash provided by operating activities 68,447 29,974
Cash flows from investing activities:
Investment in oil and gas properties (58,214) (46,086)
Investment in gas gathering assets (499) (3,596)
Other (336) ---
Net cash used in investing activities (59,049) (49,682)
Cash flows from financing activities:
Proceeds from exercise of options --- 13
Deferred financing costs (14) (15)
Repayment of bank borrowings (7,000) ---
Proceeds from bank borrowings --- 15,000
Net cash provided by (used in)
financing activities (7,014) 14,998
Net increase (decrease) in cash and
cash equivalents 2,384 (4,710)
Cash and cash equivalents, beginning
of period 4,795 6,703
Cash and cash equivalents, end of period $7,179 $1,993
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest $918 $161
Income taxes $--- $---
PETROQUEST ENERGY, INC.
Non-GAAP Disclosure Reconciliation
(Amounts In Thousands)
Three Months Ended
March 31,
2007 2006
Net cash flow provided by operating
activities $68,447 $29,974
Changes in working capital accounts (20,206) 3,959
Net cash flow provided by operating
activities before working capital changes $48,241 $33,933
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.
