LAFAYETTE, La., Aug. 7 /PRNewswire-FirstCall/ -- PetroQuest Energy, Inc. (NYSE: PQ - News) announced today net income for the quarter ended June 30, 2007 of $9,630,000 or $0.19 per share, compared to second quarter 2006 net income of $7,982,000 or $0.16 per share. Net cash flow provided by operating activities before working capital changes for the second quarter of 2007 was $48,790,000, as compared to $34,829,000 for the comparable 2006 period. For the first six months of 2007, the Company reported net income of $20,444,000 or $0.41 per share. The Company reported net income of $17,131,000 or $0.35 per share for the first six months of 2006. For the first six months of 2007, net cash flow provided by operating activities before working capital changes was $97,031,000. Net cash flow provided by operating activities before working capital changes for the first six months of 2006 was $68,762,000. 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 second quarter of 2007 increased 30% to $64,831,000 as compared to $49,868,000 in the second quarter of 2006. Production for the second quarter of 2007 was 20% higher than production for the comparable period of 2006. Stated on an Mcfe basis, unit prices received during the second quarter of 2007 were 9% higher than the comparable 2006 period. For the first six months of 2007, oil and gas sales increased 31% to $126,714,000 from $96,884,000 in the first six months of 2006. Production for the first six months of 2007 was 26% higher than production for the comparable period of 2006. Stated on an Mcfe basis, unit prices received during the first six months of 2007 were 4% higher than the prices received during the comparable 2006 period.
Lease operating expenses for the second quarter of 2007 decreased to $1.06 per Mcfe as compared to $1.35 per Mcfe in the second quarter of 2006. For the first six months of 2007, lease operating expenses decreased 23% to $0.98 per Mcfe from $1.28 per Mcfe in the comparable period of 2006. Decreased unit costs were primarily the result of higher production in the current periods and the absence of operating expenses related to high cost Gulf of Mexico properties that were sold in November 2006. Depreciation, depletion and amortization ("DD&A") on oil and gas properties for the second quarter of 2007 was $3.73 per Mcfe as compared to $3.01 per Mcfe in the second quarter of 2006. For the first six months of 2007, DD&A increased 18% to $3.60 per Mcfe from $3.06 per Mcfe for the comparable period of 2006. The increase in DD&A is primarily due to increased costs to drill for, develop and acquire oil and gas reserves along with two commercially unproductive wells during 2007. General and administrative expenses increased $1,980,000 and $5,005,000 for the second quarter and six months ended June 30, 2007, as compared to the respective 2006 periods. The increases are primarily due to non-cash expense related to SFAS 123®, which increased approximately $1,728,000 and $4,439,000 during the quarter and six months ended June 30, 2007, respectively, as compared to the 2006 periods.
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, 2007 and 2006:
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
Production:
Oil (Bbls) 286,692 187,449 646,473 342,423
Gas (Mcf) 6,103,848 5,408,047 11,636,162 10,285,010
Total Production (Mcfe) 7,824,000 6,532,741 15,515,000 12,339,548
Sales:
Total oil sales $19,510,894 $12,254,099 $41,098,794 $21,019,667
Total gas sales 45,319,729 37,613,962 85,615,423 75,864,315
Total oil and gas
sales 64,830,623 49,868,061 126,714,217 96,883,982
Average sales prices:
Oil (per Bbl) $68.06 $65.37 $63.57 $61.39
Gas (per Mcf) 7.42 6.96 7.36 7.38
Per Mcfe 8.29 7.63 8.17 7.85
The above sales and average sales prices include increases (reductions) related to gas hedges of $1,318,000 and $2,328,000 and oil hedges of $22,200 and ($808,000) for the three months ended June 30, 2007 and 2006, respectively. The above sales and average sales prices include additions (reductions) related to gas hedges of $3,841,000 and $3,367,000 and oil hedges of $232,200 and ($1,485,000) for the six months ended June 30, 2007 and 2006, respectively.
The following initiates guidance for the third quarter of 2007:
Guidance for
Description 3rd Quarter 2007
Production volumes (MMcfe/d) 82 - 87
Percent gas 80%
Expenses:
Lease operating expenses (per Mcfe) $1.10 - $1.20
Production taxes (per Mcfe) $0.25 - $0.29
Depreciation, depletion and amortization (per Mcfe) $3.70 - $3.80
General and administrative (in millions) $5.8 - $6.2
Interest expense (in millions) $3.6 - $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) 82 - 87
Percent gas 75%
Expenses:
Lease operating expenses (per Mcfe) $1.00 - $1.10
Production taxes (per Mcfe) $0.27 - $0.31
Depreciation, depletion and amortization (per
Mcfe) $3.70 - $3.80
General and administrative (in millions) $22 - $23
Interest expense (in millions) $15 - $16
Effective tax rate (all deferred) 37%
Operations Update
Drilling activity during the second quarter of 2007 included three successful horizontal Woodford Shale wells in the Arkoma Basin, four successful horizontal coalbed methane wells in the Arkoma Basin and five successful wells in East Texas.
A total of seven successful wells were drilled in the Arkoma Basin during the second quarter of 2007 resulting in an 88% success rate. The Company completed its third and fourth operated horizontal wells in the Woodford Shale during the second quarter, and is currently drilling its fifth operated horizontal Woodford well. Drilling continues in the Arkoma Basin with one operated rig drilling horizontal wells targeting the Woodford Shale as well as other non-operated activity. Current plans are to add a second operated rig during the third quarter which will accelerate the development of this core area.
PetroQuest participated in the drilling and completion of five wells in the East Texas Basin during the second quarter of 2007. Additionally, the Company expanded its leasehold position in East Texas by approximately 5,500 net acres through an ownership in a horizontal drilling program. The first well is expected to spud during the third quarter and is targeting oil in the Buda formation.
In the Gulf Coast Basin, the Company's Fricasse prospect has been drilled and approximately 95 feet of net productive sands were logged in this well. The well is being completed and is expected to begin producing during the next week. The Company has a 31% net revenue interest (NRI) in this well.
The Company's Bandon Dunes prospect has been drilled and logged approximately 126 feet of net productive sands. The Company has a 19% NRI in the well and first production is expected to commence during the fourth quarter.
The Company's Kosati Pines prospect has reached total depth and should complete logging operations this week. The Company has a 25% working interest in this prospect.
The Company's Atchafalaya prospect was drilled to total depth and has been determined to be commercially non-productive. The Company has a 23% working interest in this prospect.
Hedging Update
The Company initiated the following commodity hedging transactions during
July 2007:
Instrument
Production Period Type Daily Volumes Price
Natural Gas:
2008 Costless Collar 5,000 Mmbtu $7.50 - 9.18
Crude Oil:
August - December 2007 Costless Collar 500 Bbls $70 - 75.25
2008 Costless Collar 400 Bbls $70 - 75.55
After executing the above transactions, the Company has approximately 11.1 Bcfe and 2.7 Bcfe of hedges for 2007 and 2008, respectively.
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)
June 30, December 31,
2007 2006
ASSETS
Current assets:
Cash and cash equivalents $1,659 $4,795
Revenue receivable 25,221 21,767
Joint interest billing receivable 20,231 20,072
Hedging asset 4,304 10,527
Prepaid drilling costs 3,333 4,886
Other current assets 5,427 2,143
Total current assets 60,175 64,190
Property and equipment:
Oil and gas properties:
Oil and gas properties, full cost method 801,756 695,116
Unevaluated oil and gas properties 58,509 51,567
Accumulated depreciation, depletion and
amortization (370,286) (314,869)
Oil and gas properties, net 489,979 431,814
Gas gathering assets 19,529 19,072
Accumulated depreciation and amortization
of gas gathering assets (5,082) (3,562)
Total property and equipment 504,426 447,324
Other assets, net of accumulated
depreciation and amortization of $12,417
and $11,719, respectively 6,815 6,776
Total assets $571,416 $518,290
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable to vendors $50,650 $34,790
Advances from co-owners 14,226 13,391
Oil and gas revenue payable 6,374 6,935
Accrued interest 2,444 2,453
Asset retirement obligation 9,010 9,028
Other accrued liabilities 6,610 5,484
Total current liabilities 89,314 72,081
Bank debt 50,000 47,000
10 3/8% senior notes 148,643 148,537
Asset retirement obligation 12,331 11,211
Deferred income taxes 59,755 49,646
Other liabilities 104 104
Commitments and contingencies
Stockholders' equity:
Common stock, $.001 par value;
authorized 75,000 shares; issued
and outstanding 48,190 and 47,788 shares,
respectively 48 48
Paid-in capital 129,586 124,552
Accumulated other comprehensive income 2,712 6,632
Retained earnings 78,923 58,479
Total stockholders' equity 211,269 189,711
Total liabilities and stockholders'
equity $571,416 $518,290
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,
2007 2006 2007 2006
Revenues:
Oil and gas sales $64,830 $49,868 $126,714 $96,884
Gas gathering revenue and
other income 1,930 1,628 4,054 2,970
66,760 51,496 130,768 99,854
Expenses:
Lease operating expenses 8,319 8,827 15,256 15,778
Production taxes 2,054 1,212 4,184 2,782
Depreciation, depletion and
amortization 30,051 20,352 57,664 39,071
Gas gathering costs 1,344 927 2,294 1,644
General and administrative 5,324 3,344 10,504 5,499
Accretion of asset retirement
obligation 226 383 441 753
Interest expense 3,938 3,627 7,570 6,999
51,256 38,672 97,913 72,526
Income from operations 15,504 12,824 32,855 27,328
Income tax expense 5,874 4,842 12,411 10,197
Net income $9,630 $7,982 $20,444 $17,131
Earnings per common share:
Basic $0.20 $0.17 $0.43 $0.36
Diluted $0.19 $0.16 $0.41 $0.35
Weighted average number of common
shares:
Basic 47,978 47,394 47,883 47,360
Diluted 49,690 48,900 49,556 48,809
PETROQUEST ENERGY, INC.
Consolidated Statements of Cash Flows
(unaudited)
(Amounts in Thousands)
Six Months Ended
June 30,
2007 2006
Cash flows from operating activities:
Net income $20,444 $17,131
Adjustments to reconcile net income
to net cash provided by operating
activities:
Deferred tax expense 12,411 10,197
Depreciation, depletion and amortization 57,664 39,071
Accretion of asset retirement obligation 441 753
Amortization of debt issuance costs 479 467
Amortization of bond discount 106 96
Share based compensation expense 5,486 1,047
Changes in working capital accounts:
Accounts receivable (3,454) 1,622
Joint interest billing receivable (159) 418
Accounts payable and accrued liabilities 20,411 5,515
Advances from co-owners 835 4,155
Other assets (2,444) (5,324)
Net cash provided by operating activities 112,220 75,148
Cash flows from investing activities:
Investment in oil and gas properties (116,916) (91,434)
Investment in gas gathering assets (457) (5,218)
Other (509) -
Net cash used in investing activities (117,882) (96,652)
Cash flows from financing activities:
Proceeds from exercise of options 534 390
Deferred financing costs (24) (101)
Purchase of restricted stock (984) -
Repayment of bank borrowings (12,000) -
Proceeds from bank borrowings 15,000 23,000
Net cash provided by financing activities 2,526 23,289
Net increase (decrease) in cash and
cash equivalents (3,136) 1,785
Cash and cash equivalents, beginning of
period 4,795 6,703
Cash and cash equivalents, end of period $1,659 $8,488
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest $9,757 $8,407
Income taxes $- $-
PETROQUEST ENERGY, INC.
Non-GAAP Disclosure Reconciliation
(Amounts In Thousands)
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
Net cash flow provided by
operating activities $43,773 $45,174 $112,220 $75,148
Changes in working capital
accounts 5,017 (10,345) (15,189) (6,386)
Net cash flow provided by operating
activities before working capital
changes $48,790 $34,829 $97,031 $68,762
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.
