PetroQuest Energy Announces Second Quarter Results LAFAYETTE, La., Aug. 2 /PRNewswire-FirstCall/ -- PetroQuest Energy, Inc. (Nasdaq: PQUE - News) announced today net income for the quarter ended June 30, 2005 of $3,865,000 or $0.08 per share, compared to second quarter 2004 net income of $4,237,000 or $0.09 per share. Net income for the second quarter includes the pre-tax write-off of $2,400,000 of deferred financing costs in conjunction with the repayment of amounts outstanding under its credit facilities. Net cash flow provided by operating activities before working capital changes for the second quarter of 2005 was $20,847,000, as compared to $16,363,000 for the comparable 2004 period. For the first six months of 2005, the Company reported net income of $8,052,000 or $0.17 per share. The Company reported net income of $7,409,000 or $0.16 per share for the first six months of 2004. For the first six months of 2005, net cash flow provided by operating activities before working capital changes was $36,359,000. Net cash flow provided by operating activities before working capital changes for the first six months of 2004 was $29,833,000. A reconciliation of net cash flow provided by operating activities to net cash flow provided by operating activities before working capital changes is attached in this release. Oil and gas sales during the second quarter of 2005 increased 40% to $29,977,000 as compared to $21,436,000 in the second quarter of 2004. For the first six months of 2005, sales increased 31% to $51,649,000 from $39,568,000 in the first six months of 2004. Stated on an Mcfe basis, unit prices received during the second quarter and first six months of 2005 were 12% and 14% higher, respectively, than the prices received during the comparable 2004 periods. Lease operating expenses for the second quarter of 2005 increased 42% to $1.09 per Mcfe from $0.77 per Mcfe in the second quarter of 2004. For the first six months of 2005, lease operating expenses increased 40% to $1.12 per Mcfe from $0.80 per Mcfe in the comparable period of 2004. The increase in lease operating expenses during the current year was the result of the significant increase in the number of producing wells and a general increase in field service costs. Depreciation, depletion and amortization for the second quarter of 2005 increased 4% to $2.60 per Mcfe from $2.51 per Mcfe in the second quarter of 2004. For the first six months of 2005, depreciation, depletion and amortization increased 2% to $2.54 per Mcfe from $2.49 per Mcfe for the comparable period of 2004. Drilling Update During the quarter, PetroQuest operated the drilling and completion of three more wells in its Southeast Carthage Field which brings the 2005 total to six wells drilled and completed in this field. Additionally, PetroQuest operated the drilling and completion of eight coal bed methane wells in the Arkoma Basin, and participated in five additional successful non-operated coal bed methane wells. During the first half of 2005, PetroQuest has participated in 19 wells in the Arkoma Basin. Since entering East Texas and the Arkoma Basin, PetroQuest has achieved a 100% success rate in both areas. The Company's Gumbo Prospect was drilled to a total depth of 12,900 feet encountering approximately 54 feet TVD of net productive sand in the primary objective. This well began producing in June at a gross rate of approximately 8,000 Mcfe per day. PetroQuest owns an approximate 27% NRI in the well. As previously announced, the Company is completing its Pebble Beach Prospect in the Gulf of Mexico. The well is expected to begin producing during September at a gross rate of approximately 15,000 Mcfe per day. PetroQuest owns an approximate 27% NRI in the well. The Company's Spanish Bay and Augusta Prospects have been drilled to their respective total depths and have been determined to be commercially non-productive. Drilling continues in the Company's 10 to 12 well 2005 program in Southeast Carthage Field and the 40+ well 2005 program in the Arkoma Basin. The Company plans to keep two operated rigs in the Arkoma Basin during the second half of the year and plans to participate in multiple outside operated wells. The Company is currently drilling its Oakbourne Prospect (20% working interest) and its Pelican Point Prospect (25% working interest) both of which are in South Louisiana. During the third quarter, the Company plans to spud its Chicory (38% working interest) and Cayenne (50% working interest) Prospects. 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, 2005 and 2004: Three Months Ended Six Months Ended June 30, June 30, 2005 2004 2005 2004 Production: Oil (Bbls) 217,156 246,052 398,555 424,531 Gas (Mcf) 3,252,510 2,160,311 5,501,623 4,322,051 Total Production (Mcfe) 4,555,446 3,636,623 7,892,953 6,869,237 Sales: Total oil sales $9,747,130 $8,507,123 $17,619,699 $14,310,726 Total gas sales $20,229,581 $12,928,781 $34,028,518 $25,257,755 Total oil and gas sales $29,976,711 $21,435,906 $51,648,217 $39,568,481 Average sales prices: (Including hedges) Oil (per Bbl) $44.89 $34.57 $44.21 $33.71 Gas (per Mcf) $6.22 $5.98 $6.19 $5.84 Per Mcfe $6.58 $5.89 $6.54 $5.76 The following initiates guidance for the third quarter of 2005: Guidance for Description 3rd Quarter 2005 Production volumes (MMcfe/d) 49 - 53 Percent gas 70% Expenses: Lease operating expenses (per Mcfe) $1.20 - $1.30 Production taxes (per Mcfe) $0.22 - $0.26 Depreciation, depletion and amortization (per Mcfe) $2.50 - $2.60 General and administrative (in millions) $2.0 - $2.2 Interest expense (in millions) $3.3 - $3.7 Effective tax rate (all deferred) 35% The following updates guidance for the year ended December 31, 2005: Guidance for Description Full year 2005 Production volumes (MMcfe/d) 50 - 55 Percent gas 70% Expenses: Lease operating expenses (per Mcfe) $1.05 - $1.15 Production taxes (per Mcfe) $0.18 - $0.22 Depreciation, depletion and amortization (per Mcfe) $2.50 - $2.60 General and administrative (in millions) $7 - $8 Interest expense (in millions) $12 - $13 (A) Effective tax rate (all deferred) 35% (A) Includes a $2.4 million pre-tax charge related to the write-off of deferred financing costs in conjunction with the notes offering consummated during the second quarter. Conference call Company management will be hosting a conference call with investors that will be broadcast live over the Internet on August 2, 2005 at 9:30 a.m. Eastern time. To access this call, log on to the Company's website at http://www.petroquest.com . 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 Gulf Coast Basin, Texas and Oklahoma. PetroQuest trades on the Nasdaq National Market under the ticker symbol "PQUE". 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 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 and in projecting future rates of production, the timing of development expenditures and drilling of wells, 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 Six Months Ended June 30, June 30, 2005 2004 2005 2004 Revenues: Oil and gas sales $29,977 $21,436 $51,649 $39,568 Interest and other income 302 61 373 131 30,279 21,497 52,022 39,699 Expenses: Lease operating expenses 4,965 2,784 8,847 5,506 Production taxes 762 420 1,136 864 Depreciation, depletion and amortization 11,859 9,132 20,054 17,073 General and administrative 1,819 1,833 3,508 3,127 Accretion of asset retirement obligation 205 170 405 401 Interest expense 4,723 665 5,685 1,346 Derivative expense (benefit) --- (9) --- --- 24,333 14,995 39,635 28,317 Income from operations 5,946 6,502 12,387 11,382 Income tax expense 2,081 2,265 4,335 3,973 Net income $3,865 $4,237 $8,052 $7,409 Earnings per common share: Basic $0.08 $0.10 $0.17 $0.17 Diluted $0.08 $0.09 $0.17 $0.16 Weighted average number of common shares: Basic 46,969 44,588 46,158 44,573 Diluted 48,205 46,104 47,840 45,912 PETROQUEST ENERGY, INC. Consolidated Balance Sheets (unaudited) (Amounts in Thousands) June 30, December 31, 2005 2004 ASSETS Current assets: Cash and cash equivalents $78,604 $1,529 Oil and gas revenue receivable 11,278 9,392 Joint interest billing receivable 5,307 3,655 Other current assets 1,924 1,017 Total current assets 97,113 15,593 Oil and gas properties: Oil and gas properties, full cost method 440,375 363,756 Unevaluated oil and gas properties 22,650 16,380 Accumulated depreciation, depletion and amortization (188,047) (168,453) Oil and gas properties, net 274,978 211,683 Other assets, net of accumulated depreciation and amortization of $9,756 and $5,967, respectively 9,975 4,341 Total assets $382,066 $231,617 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable to vendors $20,458 $24,176 Advances from co-owners 14,120 2,265 Hedging liability 11,824 4,536 Other accrued liabilities 14,425 9,045 Total current liabilities 60,827 40,022 Bank debt --- 38,500 10 3/8% Senior Notes 148,249 --- Asset retirement obligation 17,874 15,238 Deferred income taxes 18,095 14,606 Other accrued liabilities 4,634 1,974 Commitments and contingencies --- --- Stockholders' equity: Common stock, $.001 par value; authorized 75,000 shares; issued and outstanding 47,137 and 44,685 shares, respectively 47 45 Paid-in capital 117,015 112,387 Accumulated other comprehensive loss (5,803) (4,231) Retained earnings 21,128 13,076 Total stockholders' equity 132,387 121,277 Total liabilities and stockholders' equity $382,066 $231,617 PETROQUEST ENERGY, INC. Consolidated Statements of Cash Flows (unaudited) (Amounts in Thousands) Six Months Ended June 30, 2005 2004 Cash flows from operating activities: Net income $8,052 $7,409 Adjustments to reconcile net income to net cash provided by operating activities: Deferred tax expense 4,335 3,973 Depreciation, depletion and amortization 20,054 17,073 Accretion of asset retirement obligation 405 401 Amortization of debt issuance costs 841 820 Compensation expense 213 272 Write-off of debt issuance costs 2,439 --- Amortization of bond discount 20 --- Derivative mark to market --- (115) Changes in working capital accounts: Accounts receivable (1,886) (3,294) Joint interest billing receivable (1,652) (611) Other assets (5,056) (143) Accounts payable and accrued liabilities (6,430) (3,309) Advances from co-owners 11,855 1,306 Net cash provided by operating activities 33,190 23,782 Cash flows from investing activities: Investment in oil and gas properties (65,167) (24,151) Net cash used in investing activities (65,167) (24,151) Cash flows from investing activities: Proceeds from exercise of options 546 64 Proceeds from issuance of 10 3/8% senior notes 148,229 --- Proceeds from bank borrowings 34,500 11,000 Repayment of bank borrowings (73,000) (10,000) Deferred financing costs (5,274) (245) Issuance of common stock, net of expenses 4,051 --- Net cash provided by financing activities 109,052 819 Net increase in cash and cash equivalents 77,075 450 Cash and cash equivalents, beginning of period 1,529 779 Cash and cash equivalents, end of period $78,604 $1,229 Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $1,561 $817 Income taxes $--- $--- Non-GAAP Disclosure Reconciliation (Amounts In Thousands) Three Months Ended Six Months Ended June 30, June 30, 2005 2004 2005 2004 Net cash flow provided by operating activities $21,751 $13,328 $33,190 $23,782 Changes in working capital accounts (904) 3,035 3,169 6,051 Net cash flow provided by operating activities before working capital changes $20,847 $16,363 $36,359 $29,833 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. Source: PetroQuest Energy, Inc.