UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 4, 2011
PETROQUEST ENERGY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE | 001-32681 | 72-1440714 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
400 E. Kaliste Saloom Rd., Suite 6000 Lafayette, Louisiana |
70508 |
|
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: (337) 232-7028
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On May 4, 2011, PetroQuest Energy, Inc. (the Company) announced net income available to common
stockholders for the quarter ended March 31, 2011 of $1,897,000, or $0.03 per share, compared to
first quarter 2010 net income available to common stockholders of $29,717,000, or $0.46 per share.
During the first quarter of 2011, the Company recorded a non-cash ceiling test write-down of
approximately $5,934,000 as a result of the impact of lower natural gas prices on its net
discounted cash flows from its proved reserves.
Discretionary cash flow for the first quarter of 2011 was $25,111,000, as compared to $40,764,000
for the comparable 2010 period. Net cash flow provided by operating activities totaled $18,259,000
and $52,708,000 during the first quarters of 2011 and 2010, respectively. See the attached schedule
for a reconciliation of net cash flow provided by operating activities to discretionary cash flow.
Oil and gas sales during the first quarter of 2011 were $41,546,000, as compared to $47,545,000 in
the first quarter of 2010. Production for the first quarter of 2011 was 7,369,394 Mcfe, as
compared to 7,727,709 Mcfe in the first quarter of 2010. Oil production for the first quarter of
2011 increased 21% from the 2010 period. Approximately 59% of the Companys first quarter 2011
production was from long-lived areas, which is the highest percentage in the Companys history.
Stated on an Mcfe basis, unit prices received during the first quarter of 2011 were 8% lower than
the comparable 2010 period.
Lease operating expenses (LOE) for the first quarter of 2011 decreased to $9,503,000, as
compared to $9,695,000 in the first quarter of 2010. LOE per Mcfe was $1.29 in the first quarter
of 2011, as compared to $1.25 in the first quarter of 2010. The increase in per unit lease
operating expenses is primarily due to lower produced volumes.
Depreciation, depletion and amortization (DD&A) on oil and gas properties for the first quarter
of 2011 was $1.87 per Mcfe as compared to $1.91 per Mcfe in the first quarter of 2010. The decline
in DD&A is primarily the result of the impact of the Woodford joint venture and continued economic
reserve additions during the last year.
General and administrative expenses during the first quarter of 2011 totaled $4,398,000, as
compared to expenses of $4,509,000 during the 2010 period. The decrease in general and
administrative expenses is primarily due to lower non cash stock compensation.
Interest expense for the first quarter of 2011 increased to $2,694,000, as compared to $1,810,000
in the first quarter of 2010. The increase in interest expense is primarily due to the sale of
unevaluated acreage in May 2010 associated with the Woodford joint venture, which lowered the
amount of interest capitalized to oil and gas properties.
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The following table sets forth certain information with respect to the oil and gas operations of
the Company for the three-month periods ended March 31, 2011 and 2010:
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Production: |
||||||||
Oil (Bbls) |
175,264 | 144,641 | ||||||
Gas (Mcf) |
5,777,340 | 6,245,248 | ||||||
Ngl (Mcfe) |
540,470 | 614,615 | ||||||
Total Production (Mcfe) |
7,369,394 | 7,727,709 | ||||||
Total Daily Production (Mmcfe) |
81.9 | 85.9 | ||||||
Sales: |
||||||||
Total oil sales |
$ | 17,172,700 | $ | 11,377,113 | ||||
Total gas sales |
19,125,695 | 30,772,115 | ||||||
Total ngl sales |
5,247,610 | 5,395,516 | ||||||
Total oil and gas sales |
$ | 41,546,005 | $ | 47,544,744 | ||||
Average sales prices: |
||||||||
Oil (per Bbl) |
$ | 97.98 | $ | 78.66 | ||||
Gas (per Mcf) |
3.31 | 4.93 | ||||||
Ngl (per Mcfe) |
9.71 | 8.78 | ||||||
Per Mcfe |
5.64 | 6.15 |
The above sales and average sales prices include increases (reductions) to revenue related to the
settlement of gas hedges of $200,000 and $1,531,000 and oil hedges of ($100,000) and zero for the
three months ended March 31, 2011 and 2010, respectively.
Operations Update
The Company is in the completion phase on five operated Woodford horizontal wells, which are
expected to be brought online within the next month. In addition, the Company has reached total
depth on one additional operated Woodford horizontal well that is scheduled to be completed during
the second quarter. The Company continues to operate three rigs in the Woodford.
In East Texas, the Companys second Classic operated horizontal Cotton Valley well (NRI-20%) was
recently completed and achieved an initial 24 hour gross daily production rate of approximately
3,800 Mcf of gas and 250 barrels of liquids. This initial rate was curtailed on a 28/64th inch
choke to prevent this well from shutting-in existing production in the area. Once additional
gathering facilities are in place during the third quarter, the Company expects line pressures to
be reduced and field production will be restored. The Company recently spud its third Classic
operated horizontal Cotton Valley well (WI-29%) and the Companys first Chevron operated
horizontal Cotton Valley well (WI-50%) has reached total depth. Additionally, the Companys first
operated horizontal Cotton Valley well (WI-50%) is nearing total depth and the Company expects
completion activities on these wells will commence during the summer.
In South Texas, the Companys first operated Eagle Ford Shale well (WI-50%) located in Dimmit
County has reached total depth and casing has been set. The Company expects to commence completion
activities on the well during the second quarter. In addition, the Companys second operated Eagle
Ford Shale well (WI-50%) located in La Salle County is expected to spud this week.
In the
Niobrara, the Companys third well, the Hester (WI-25%), is nearing total depth and
completion operations are expected to commence in the second quarter. In addition, the Company
recently spud its fourth well, the Davis (WI-25%), and expects to reach total depth in
approximately four weeks.
Additionally, the Companys first SM Energy Company operated well (WI-12.5%) has reached total
depth and is expected to be completed in the second quarter.
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In the Gulf Coast Basin, the Company is currently drilling at 13,150 feet at its La Cantera
prospect (WI-23%) and is expecting to reach total depth during the third quarter. In addition, the
Companys first well in its multi-well Ship Shoal 72 sidetrack drilling program targeting oil
reservoirs is expected to spud in June.
In conjunction with the first phase of the Ship Shoal 72 sidetrack drilling program, the Company
will have to temporarily shut-in three producing Ship Shoal 72 wells. As a result, the Company
estimates that its second quarter production volumes will be reduced by approximately 700-1,000
Mcfe per day, of which 90% is expected to be oil. Additionally, the Company has experienced
downtime during April at three offshore fields due to maintenance of topside facilities or
downstream repairs, but production at all fields has been restored at this time.
The following initiates guidance for the second quarter of 2011:
Guidance for | ||||
Description | 2nd Quarter 2011 | |||
Production volumes (MMcfe/d) |
78 - 82 | |||
Percent Gas |
80 | % | ||
Percent Oil |
12 | % | ||
Percent NGL |
8 | % | ||
Expenses: |
||||
Lease operating expenses (per Mcfe) |
$ | 1.20 - $1.30 | ||
Production taxes (per Mcfe) |
$ | 0.20 - $0.25 | ||
Depreciation, depletion and amortization (per Mcfe) |
$ | 1.90 - $2.00 | ||
General and administrative (in millions) |
$ | 4.5 - $5.0 | ||
Interest expense (in millions) |
$ | 2.5 - $2.7 |
The following updates guidance for the full year of 2011:
Guidance for | ||||
Description | Full Year 2011 | |||
Production volumes (MMcfe/d) |
80 - 88 | |||
Percent Gas |
78 | % | ||
Percent Oil |
15 | % | ||
Percent NGL |
7 | % | ||
Expenses: |
||||
Lease operating expenses (per Mcfe) |
$ | 1.20 - $1.30 | ||
Production taxes (per Mcfe) |
$ | 0.20 - $0.25 | ||
Depreciation, depletion and amortization (per Mcfe) |
$ | 1.90 - $2.00 | ||
General and administrative (in millions) |
$ | 20 - $21 | ||
Interest expense (in millions) |
$ | 10 - $11 | ||
2011 Capital Expenditures (in millions) |
$ | 115 - $125 |
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Management Statement
We are excited about the plan for the remainder of 2011 and the ensuing years to come as we expect
to sustain an activity level that should deliver double digit reserve growth while keeping our
budget within cash flow, said Charles T. Goodson, Chairman, Chief Executive Officer and President.
This plan utilizes our multi-basin joint venture and focuses on the liquids rich portion of our
existing inventory.
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, Wyoming, Texas,
South Louisiana and the shallow waters of the Gulf of Mexico. PetroQuests common stock 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 and significantly depressed natural gas
prices since the middle of 2008, the uncertain economic conditions in the United States and
globally, the declines in the values of our properties that have resulted in and may in the future
result in additional 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
prospect development and property acquisitions or dispositions and in projecting future rates of
production or future reserves, the timing of development expenditures and drilling of wells,
hurricanes and other natural disasters, changes in laws and regulations as they relate to our
operations, including our fracing operations in shale plays or our operations in the Gulf of
Mexico, 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.
Click here for more information: http://www.petroquest.com/news.html?=BizID=1690&1=1
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PETROQUEST ENERGY, INC.
Consolidated Balance Sheets
(Amounts in Thousands)
(unaudited)
Consolidated Balance Sheets
(Amounts in Thousands)
(unaudited)
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 55,022 | $ | 63,237 | ||||
Revenue receivable |
13,346 | 13,386 | ||||||
Joint interest billing receivable |
21,486 | 12,193 | ||||||
Other receivable |
13,851 | 13,795 | ||||||
Prepaid drilling costs |
2,451 | 789 | ||||||
Drilling pipe inventory |
7,386 | 11,711 | ||||||
Other current assets |
4,195 | 1,827 | ||||||
Total current assets |
117,737 | 116,938 | ||||||
Property and equipment: |
||||||||
Oil and gas properties: |
||||||||
Oil and gas properties, full cost method |
1,453,952 | 1,433,642 | ||||||
Unevaluated oil and gas properties |
59,426 | 54,851 | ||||||
Accumulated depreciation, depletion and amortization |
(1,195,295 | ) | (1,175,553 | ) | ||||
Oil and gas properties, net |
318,083 | 312,940 | ||||||
Gas gathering assets |
4,177 | 4,177 | ||||||
Accumulated depreciation and amortization of gas gathering assets |
(1,571 | ) | (1,496 | ) | ||||
Total property and equipment |
320,689 | 315,621 | ||||||
Other assets, net of accumulated depreciation and amortization
of $6,824 and $6,435, respectively |
6,143 | 6,958 | ||||||
Total assets |
$ | 444,569 | $ | 439,517 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||
Current liabilities: |
||||||||
Accounts payable to vendors |
$ | 33,312 | $ | 26,097 | ||||
Advances from co-owners |
12,077 | 7,963 | ||||||
Oil and gas revenue payable |
4,529 | 7,220 | ||||||
Accrued interest and preferred stock dividend |
2,446 | 6,575 | ||||||
Hedge liability |
1,817 | 1,089 | ||||||
Asset retirement obligation |
674 | 1,517 | ||||||
Other accrued liabilities |
5,096 | 7,380 | ||||||
Total current liabilities |
59,951 | 57,841 | ||||||
10% Senior Notes |
150,000 | 150,000 | ||||||
Asset retirement obligation |
24,257 | 23,075 | ||||||
Other liabilities |
474 | 439 | ||||||
Commitments and contingencies |
||||||||
Stockholders equity: |
||||||||
Preferred stock, $.001 par value; authorized 5,000
shares; issued and outstanding 1,495 shares |
1 | 1 | ||||||
Common stock, $.001 par value; authorized 150,000
shares; issued and outstanding 61,834 and 61,565
shares, respectively |
62 | 62 | ||||||
Paid-in capital |
267,463 | 266,907 | ||||||
Accumulated other comprehensive loss |
(1,817 | ) | (1,089 | ) | ||||
Accumulated deficit |
(55,822 | ) | (57,719 | ) | ||||
Total stockholders equity |
209,887 | 208,162 | ||||||
Total liabilities and stockholders equity |
$ | 444,569 | $ | 439,517 | ||||
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PETROQUEST ENERGY, INC.
Consolidated Statements of Operations
(unaudited)
(Amounts in Thousands, Except Per Share Data)
Consolidated Statements of Operations
(unaudited)
(Amounts in Thousands, Except Per Share Data)
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Revenues: |
||||||||
Oil and gas sales |
$ | 41,546 | $ | 47,545 | ||||
Gas gathering revenue |
64 | 69 | ||||||
41,610 | 47,614 | |||||||
Expenses: |
||||||||
Lease operating expenses |
9,503 | 9,695 | ||||||
Production taxes |
1,162 | 1,348 | ||||||
Depreciation, depletion and amortization |
14,062 | 14,984 | ||||||
Ceiling test writedown |
5,934 | | ||||||
Gas gathering costs |
7 | 11 | ||||||
General and administrative |
4,398 | 4,509 | ||||||
Accretion of asset retirement obligation |
752 | 468 | ||||||
Interest expense |
2,694 | 1,810 | ||||||
38,512 | 32,825 | |||||||
Gain on legal settlement |
| 12,400 | ||||||
Other income (expense) |
80 | (83 | ) | |||||
Income from operations |
3,178 | 27,106 | ||||||
Income tax expense (benefit) |
1 | (3,891 | ) | |||||
Net income |
3,177 | 30,997 | ||||||
Preferred stock dividend |
1,280 | 1,280 | ||||||
Net income available to common stockholders |
$ | 1,897 | $ | 29,717 | ||||
Earnings per common share: |
||||||||
Basic |
||||||||
Net income per share |
$ | 0.03 | $ | 0.47 | ||||
Diluted |
||||||||
Net income per share |
$ | 0.03 | $ | 0.46 | ||||
Weighted average number of common shares: |
||||||||
Basic |
61,668 | 61,243 | ||||||
Diluted |
63,018 | 67,382 | ||||||
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PETROQUEST ENERGY, INC.
Consolidated Statements of Cash Flows
(unaudited)
(Amounts in Thousands)
Consolidated Statements of Cash Flows
(unaudited)
(Amounts in Thousands)
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 3,177 | $ | 30,997 | ||||
Adjustments to reconcile net income to net cash provided by
operating activities: |
||||||||
Deferred tax expense (benefit) |
1 | (3,891 | ) | |||||
Depreciation, depletion and amortization |
14,062 | 14,984 | ||||||
Ceiling test writedown |
5,934 | | ||||||
Non-cash gain on legal settlement |
| (4,164 | ) | |||||
Accretion of asset retirement obligation |
752 | 468 | ||||||
Share based compensation expense |
1,032 | 1,982 | ||||||
Amortization costs and other |
153 | 388 | ||||||
Payments to settle asset retirement obligations |
(513 | ) | (517 | ) | ||||
Changes in working capital accounts: |
||||||||
Revenue receivable |
40 | 583 | ||||||
Joint interest billing receivable |
(9,293 | ) | (481 | ) | ||||
Accounts payable and accrued liabilities |
(1,430 | ) | 8,624 | |||||
Advances from co-owners |
4,114 | 3,105 | ||||||
Other |
230 | 630 | ||||||
Net cash provided by operating activities |
18,259 | 52,708 | ||||||
Cash flows used in investing activities: |
||||||||
Investment in oil and gas properties |
(24,701 | ) | (25,587 | ) | ||||
Net cash used in investing activities |
(24,701 | ) | (25,587 | ) | ||||
Cash flows used in financing activities: |
||||||||
Net payments for share based compensation |
(476 | ) | (221 | ) | ||||
Deferred financing costs |
(13 | ) | (2 | ) | ||||
Payment of preferred stock dividend |
(1,284 | ) | (1,284 | ) | ||||
Repayment of bank borrowings |
| (19,000 | ) | |||||
Net cash used in financing activities |
(1,773 | ) | (20,507 | ) | ||||
Net increase (decrease) in cash and cash equivalents |
(8,215 | ) | 6,614 | |||||
Cash and cash equivalents, beginning of period |
63,237 | 20,772 | ||||||
Cash and cash equivalents, end of period |
$ | 55,022 | $ | 27,386 | ||||
Supplemental disclosure of cash flow information: |
||||||||
Cash paid during the period for: |
||||||||
Interest |
$ | 8,003 | $ | 171 | ||||
Income taxes |
$ | 1 | $ | | ||||
8
PETROQUEST ENERGY, INC.
Non-GAAP Disclosure Reconciliation
(Amounts In Thousands)
Non-GAAP Disclosure Reconciliation
(Amounts In Thousands)
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Net income |
$ | 3,177 | $ | 30,997 | ||||
Reconciling items: |
||||||||
Deferred tax expense (benefit) |
1 | (3,891 | ) | |||||
Non-cash gain on legal settlement |
| (4,164 | ) | |||||
Depreciation, depletion and amortization |
14,062 | 14,984 | ||||||
Ceiling test writedown |
5,934 | | ||||||
Accretion of asset retirement obligation |
752 | 468 | ||||||
Share based compensation expense |
1,032 | 1,982 | ||||||
Amortization costs and other |
153 | 388 | ||||||
Discretionary cash flow |
25,111 | 40,764 | ||||||
Changes in working capital accounts |
(6,339 | ) | 12,461 | |||||
Settlement of asset retirement obligations |
(513 | ) | (517 | ) | ||||
Net cash flow provided by operating activities |
$ | 18,259 | $ | 52,708 | ||||
Note:
|
Management believes that discretionary cash flow 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 companys ability to generate cash used to internally fund exploration and development activities and to service debt. Discretionary cash flow 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 discretionary cash flow is not a term defined by GAAP, it might not be comparable to similarly titled measures used by other companies. |
9
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
PETROQUEST ENERGY, INC. |
||||
Date: May 4, 2011 | By: | /s/ J. Bond Clement | ||
J. Bond Clement | ||||
Executive Vice President, Chief Financial Officer and Treasurer | ||||
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