PetroQuest Energy Announces Third Quarter Results Friday October 28, 7:30 am ET LAFAYETTE, La., Oct. 28 /PRNewswire-FirstCall/ -- PetroQuest Energy, Inc. (Nasdaq: PQUE - News) announced today net income for the quarter ended September 30, 2005 of $5,045,000 or $0.10 per share, compared to third quarter 2004 net income of $3,940,000 or $0.08 per share. Net cash flow provided by operating activities before working capital changes for the third quarter of 2005 was $19,115,000, as compared to $16,330,000 for the comparable 2004 period. For the first nine months of 2005, the Company reported net income of $13,097,000 or $0.27 per share. The Company reported net income of $11,349,000 or $0.25 per share for the first nine months of 2004. For the first nine months of 2005, net cash flow provided by operating activities before working capital changes was $55,474,000. Net cash flow provided by operating activities before working capital changes for the first nine months of 2004 was $46,163,000. 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 third quarter of 2005 increased 37% to $30,859,000 as compared to $22,516,000 in the third quarter of 2004. For the first nine months of 2005, sales increased 33% to $82,508,000 from $62,084,000 in the first nine months of 2004. On an Mcfe basis, production for the quarter and nine months ended September 30, 2005 increased 2% and 10% over the respective 2004 periods. Stated on an Mcfe basis, unit prices received during the third quarter and first nine months of 2005 were 34% and 20% higher, respectively, than the prices received during the comparable 2004 periods. Lease operating expenses for the third quarter of 2005 increased 57% to $1.70 per Mcfe from $1.08 per Mcfe in the third quarter of 2004. For the first nine months of 2005, lease operating expenses increased 46% to $1.31 per Mcfe from $0.90 per Mcfe in the comparable period of 2004. The increase in lease operating expenses during the current year was the result of the increase in the number of producing wells, a general increase in field service costs and the major hurricanes during the current year. Depreciation, depletion and amortization on oil and gas properties for the third quarter of 2005 increased 3% to $2.59 per Mcfe from $2.52 per Mcfe in the third quarter of 2004. For the first nine months of 2005, depreciation, depletion and amortization on oil and gas properties increased 2% to $2.53 per Mcfe from $2.48 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 nine wells drilled and completed in this field. Additionally, PetroQuest operated the drilling and completion of 14 coal bed methane wells in the Arkoma Basin, and participated in 10 additional successful non-operated coal bed methane wells. During the first nine months of 2005, PetroQuest has participated in 43 wells in the Arkoma Basin. Since entering East Texas and the Arkoma Basin, PetroQuest has achieved a 100% success rate in both areas. As previously announced, the Company is completing its Pebble Beach Prospect in the Gulf of Mexico. The well is expected to begin producing during late December at a gross rate of approximately 15,000 Mcfe per day. PetroQuest owns an approximate 27% NRI in the well. Hurricanes Katrina and Rita have delayed the initial production of this prospect. Drilling continues in the Company's 10 to 15 well 2005 program in Southeast Carthage Field with two rigs currently running, and the 60 well 2005 program in the Arkoma Basin. The Company plans to keep two operated rigs in the Arkoma Basin during the fourth quarter and plans to participate in multiple outside operated wells. The Company is currently drilling its Pelican Point Prospect (25% working interest), its Chicory Prospect (38% working interest) and its Cayenne Prospect (50% working interest) in South Louisiana. The Company is drilling its Poppy Hills Prospect (25% working interest) in the Gulf of Mexico. The Company expects to resume drilling on its Oakbourne Prospect (20% working interest) during the fourth quarter of 2005. The following table sets forth certain information with respect to the oil and gas operations of the Company for the three- and nine-month periods ended September 30, 2005 and 2004: Three Months Ended Nine Months Ended September 30, September 30, 2005 2004 2005 2004 Production: Oil (Bbls) 138,013 218,906 536,568 643,437 Gas (Mcf) 3,046,211 2,481,218 8,547,834 6,803,269 Total Production (Mcfe) 3,874,289 3,794,654 11,767,242 10,663,891 Sales: Total oil sales $ 6,711,423 $ 8,013,842 $24,331,122 $22,324,568 Total gas sales $24,147,980 $14,502,074 $58,176,498 $39,759,829 Total oil and gas sales $30,859,403 $22,515,916 $82,507,620 $62,084,397 Average sales prices: (Including hedges) Oil (per Bbl) $48.63 $36.61 $45.35 $34.70 Gas (per Mcf) $7.93 $5.84 $6.81 $5.84 Per Mcfe $7.97 $5.93 $7.01 $5.82 The above sales and average sales prices include reductions related to gas hedges of $1,563,000 and $119,000 and oil hedges of $1,688,000 and $1,295,000 for the three months ended September 30, 2005 and 2004, respectively. The above sales and average sales prices include reductions related to gas hedges of $2,641,000 and $486,000 and oil hedges of $4,029,000 and $2,468,000 for the nine months ended September 30, 2005 and 2004, respectively. The following initiates guidance for the fourth quarter of 2005: Guidance for Description 4th Quarter 2005 Production volumes (MMcfe/d) 40 - 45 Percent gas 73% Expenses: Lease operating expenses (per Mcfe) $1.60 - $1.70 Production taxes (per Mcfe) $0.45 - $0.55 Depreciation, depletion and amortization (per Mcfe) $2.60 - $2.70 General and administrative (in millions) $2.0 - $2.5 Interest expense (in millions) $3.4 - $3.6 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) 40 - 45 Percent gas 73% Expenses: Lease operating expenses (per Mcfe) $1.40 - $1.50 Production taxes (per Mcfe) $0.25 - $0.35 Depreciation, depletion and amortization (per Mcfe) $2.60 - $2.70 General and administrative (in millions) $7.0 - $7.5 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 October 28, 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 Nine Months Ended September 30, September 30, 2005 2004 2005 2004 Revenues: Oil and gas sales $ 30,859 $ 22,516 $ 82,508 $ 62,084 Interest and other income 522 56 895 187 31,381 22,572 83,403 62,271 Expenses: Lease operating expenses 6,601 4,087 15,448 9,593 Production taxes 1,081 300 2,217 1,164 Depreciation, depletion and amortization 10,485 9,701 30,539 26,774 General and administrative 1,571 1,589 5,079 4,716 Accretion of asset retirement obligation 424 210 829 611 Interest expense 3,456 622 9,141 1,968 Derivative expense (benefit) --- 2 --- 2 23,618 16,511 63,253 44,828 Income from operations 7,763 6,061 20,150 17,443 Income tax expense 2,718 2,121 7,053 6,094 Net income $ 5,045 $ 3,940 $ 13,097 $ 11,349 Earnings per common share: Basic $ 0.11 $ 0.09 $ 0.28 $ 0.25 Diluted $ 0.10 $ 0.08 $ 0.27 $ 0.25 Weighted average number of common shares: Basic 47,213 44,631 46,514 44,593 Diluted 48,576 46,905 48,086 46,243 PETROQUEST ENERGY, INC. Consolidated Balance Sheets (unaudited) (Amounts in Thousands) September 30, December 31, 2005 2004 ASSETS Current assets: Cash and cash equivalents $ 39,844 $ 1,529 Oil and gas revenue receivable 12,521 9,392 Joint interest billing receivable 10,221 3,655 Other current assets 6,990 1,017 Total current assets 69,576 15,593 Oil and gas properties: Oil and gas properties, full cost method 477,661 363,756 Unevaluated oil and gas properties 39,608 16,380 Accumulated depreciation, depletion and amortization (198,072) (168,453) Oil and gas properties, net 319,197 211,683 Other assets, net of accumulated depreciation and amortization of $10,615 and $5,967, respectively 15,204 4,341 Total assets $ 403,977 $ 231,617 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable to vendors $ 27,776 $ 24,176 Advances from co-owners 8,993 2,265 Hedging liability 30,329 4,536 Oil and gas revenue payable 11,839 2,930 Accrued interest on 10 3/8% Senior Note 6,016 --- Other accrued liabilities 8,918 6,115 Total current liabilities 93,871 40,022 Bank debt --- 38,500 10 3/8% Senior Notes 148,294 --- Asset retirement obligation 18,338 15,238 Deferred income taxes 13,792 14,606 Long-term hedging liability 4,724 1,974 Other accrued liabilities 227 --- Commitments and contingencies --- --- Stockholders' equity: Common stock, $.001 par value; authorized 75,000 shares; issued and outstanding 47,291 and 44,685 shares, respectively 47 45 Paid-in capital 117,352 112,387 Accumulated other comprehensive loss (18,841) (4,231) Retained earnings 26,173 13,076 Total stockholders' equity 124,731 121,277 Total liabilities and stockholders' equity $ 403,977 $ 231,617 PETROQUEST ENERGY, INC. Consolidated Statements of Cash Flows (unaudited) (Amounts in Thousands) Nine Months Ended September 30, 2005 2004 Cash flows from operating activities: Net income $ 13,097 $ 11,349 Adjustments to reconcile net income to net cash provided by operating activities: Deferred tax expense 7,053 6,094 Depreciation, depletion and amortization 30,539 26,774 Accretion of asset retirement obligation 829 611 Amortization of debt issuance costs 1,239 1,232 Compensation expense 213 272 Write-off of debt issuance costs 2,439 --- Amortization of bond discount 65 --- Derivative mark to market --- (169) Changes in working capital accounts: Accounts receivable (3,129) (1,057) Joint interest billing receivable (6,566) (1,296) Other assets (6,290) (115) Accounts payable and accrued liabilities 17,160 7,171 Advances from co-owners 6,728 (1,394) Net cash provided by operating activities 63,377 49,472 Cash flows from investing activities: Investment in gas gathering assets (9,650) --- Investment in oil and gas properties (124,532) (42,360) Net cash used in investing activities (134,182) (42,360) Cash flows from financing activities: Proceeds from exercise of options 883 170 Proceeds from bank borrowings 34,500 13,000 Repayment of bank borrowings (73,000) (19,500) Proceeds from issuance of 10 3/8% senior notes 148,229 --- Deferred financing costs (5,543) (358) Issuance of common stock, net of expenses 4,051 --- Net cash provided by financing activities 109,120 (6,688) Net increase in cash and cash equivalents 38,315 424 Cash and cash equivalents, beginning of period 1,529 779 Cash and cash equivalents, end of period $ 39,844 $ 1,203 Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 1,593 $ 1,250 Income taxes $ --- $ --- Non-GAAP Disclosure Reconciliation (Amounts In Thousands) Three Months Ended Nine Months Ended September 30, September 30, 2005 2004 2005 2004 Net cash flow provided by operating activities $ 30,187 $ 25,935 $ 63,377 $ 49,472 Changes in working capital accounts (11,072) (9,605) (7,903) (3,309) Net cash flow provided by operating activities before working capital changes $ 19,115 $ 16,330 $ 55,474 $ 46,163 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.