UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
February 28, 2013
PETROQUEST ENERGY, INC.
(Exact name of registrant as specified in its charter)
| DELAWARE | 72-1440714 | |
| (State of Incorporation) | (I.R.S. Employer Identification No.) | |
| 400 E. Kaliste Saloom Rd., Suite 6000 Lafayette, Louisiana |
70508 | |
| (Address of Principal Executive Offices) | (Zip Code) | |
Commission File Number: 001-32681
Registrant’s telephone number, including area code: (337) 232-7028
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:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | 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 February 28, 2013, PetroQuest Energy, Inc. (the “Company”) announced a net loss available to common stockholders for the quarter ended December 31, 2012 of $25,451,000, or $0.41 per share, compared to fourth quarter 2011 net income available to common stockholders of $2,830,000, or $0.04 per share. For the year ended December 31, 2012, the Company reported a net loss available to common shareholders of $137,218,000, or $2.20 per share, compared to net income available to common shareholders of $5,409,000, or $0.08 per share, for the year ended December 31, 2011. Net loss for the three and twelve months ended December 31, 2012 included ceiling test writedowns totaling $28,113,000 and $137,100,000, respectively.
Discretionary cash flow for the fourth quarter of 2012 was $20,393,000 as compared to $20,176,000 for the comparable 2011 period. Net cash flow provided by operating activities totaled $20,915,000 and $26,777,000 during the fourth quarters of 2012 and 2011, respectively. For the year ended December 31, 2012, discretionary cash flow was $77,448,000 compared to $93,395,000 for 2011. Net cash flow provided by operating activities totaled $88,591,000 and $117,890,000 during the years ended December 31, 2012 and 2011, 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 fourth quarter of 2012 were $38,147,000 as compared to $38,040,000 in the fourth quarter of 2011. For the year ended December 31, 2012, oil and gas sales decreased 12% to $141,433,000 as compared to $160,486,000 for the year ended December 31, 2011. Production for the fourth quarter and year ended December 31, 2012 was higher by 11% and 13%, respectively, than production for the comparable periods of 2011. Stated on an Mcfe basis, unit prices received during the fourth quarter and the year ended December 31, 2012 were lower by 9% and 22%, respectively, as compared to the prices received during the comparable 2011 periods.
Lease operating expenses for the fourth quarter of 2012 were $1.18 per Mcfe as compared to $1.06 per Mcfe in the fourth quarter of 2011. For the year ended December 31, 2012, lease operating expenses totaled $1.15 per Mcfe as compared to $1.28 per Mcfe in 2011. For the year ended December 31, 2012, per unit lease operating expenses decreased primarily due to the overall increase in produced volumes.
Depreciation, depletion and amortization (“DD&A”) on oil and gas properties for the fourth quarter of 2012 was $1.61 per Mcfe as compared to $1.81 per Mcfe in the fourth quarter of 2011. For the year ended December 31, 2012, DD&A on oil and gas properties decreased to $1.75 per Mcfe from $1.89 per Mcfe for the comparable period of 2011. The decrease in DD&A for the year ended December 31, 2012 was primarily the result of the non-cash ceiling test write-downs recorded throughout 2012.
Interest expense for the fourth quarter of 2012 increased to $2,787,000, as compared to $2,400,000 in the fourth quarter of 2011. For the year ended December 31, 2012, interest expense was $9,808,000, compared to $9,648,000 for 2011.
Fourth quarter of 2012 general and administrative expenses were $1,352,000 lower than the comparable 2011 period. Fourth quarter 2011 costs included higher incentive compensation expenses than the 2012 period. For the year ended December 31, 2012, general and administrative expenses were $2,521,000 higher than 2011. The increase in general and administrative expenses for the year ended 2012 was primarily due to higher non-cash share-based compensation costs totaling $6,910,000 in 2012 versus $4,833,000 in 2011.
Production taxes for the fourth quarter of 2012 totaled $773,000, as compared to $1,030,000 in the fourth quarter of 2011. For the year ended December 31, 2012, production taxes were $885,000, as compared to $3,100,000 for the comparable period of 2011. Production taxes for the year ended December 31, 2012 decreased due to a receivable of $2,717,000 recorded in June 2012 related to severance tax refunds expected to be received over the next three years.
The following table sets forth certain information with respect to the oil and gas operations of the Company for the three-month periods and years ended December 31, 2012 and 2011:
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Production: |
||||||||||||||||
| Oil (Bbls) |
140,632 | 126,639 | 520,590 | 572,096 | ||||||||||||
| Gas (Mcf) |
6,902,878 | 6,615,872 | 27,466,228 | 24,462,933 | ||||||||||||
| Ngl (Mcfe) |
1,116,205 | 629,523 | 3,366,774 | 2,287,846 | ||||||||||||
| Total Production (Mcfe) |
8,862,875 | 8,005,229 | 33,956,542 | 30,183,355 | ||||||||||||
| Total Daily Production (Mmcfe) |
96.3 | 87.0 | 92.8 | 82.7 | ||||||||||||
| Sales: |
||||||||||||||||
| Total oil sales |
$ | 15,008,184 | $ | 13,660,565 | $ | 56,635,786 | $ | 60,064,426 | ||||||||
| Total gas sales |
17,213,657 | 18,182,671 | 63,535,262 | 78,664,373 | ||||||||||||
| Total ngl sales |
5,925,721 | 6,196,692 | 21,262,236 | 21,756,917 | ||||||||||||
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| Total oil and gas sales |
$ | 38,147,562 | $ | 38,039,928 | $ | 141,433,284 | $ | 160,485,716 | ||||||||
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| Average sales prices: |
||||||||||||||||
| Oil (per Bbl) |
$ | 106.72 | $ | 107.87 | $ | 108.79 | $ | 104.99 | ||||||||
| Gas (per Mcf) |
2.49 | 2.75 | 2.31 | 3.22 | ||||||||||||
| Ngl (per Mcfe) |
5.31 | 9.84 | 6.32 | 9.51 | ||||||||||||
| Per Mcfe |
4.30 | 4.75 | 4.17 | 5.32 | ||||||||||||
The above sales and average sales prices include increases (reductions) to revenue related to the settlement of gas hedges of $(21,000) and $1,745,000 and oil hedges of $676,000 and $19,000 and ngl hedges of $178,000 and $0 for the quarters ended December 31, 2012, and 2011, respectively. The above sales and average sales prices include increases (reductions) to revenue related to the settlement of gas hedges of $6,846,000 and $2,609,000 and oil hedges of $1,529,000 and $(192,000) and ngl hedges of $722,000 and $0 for the years ended December 31, 2012 and 2011, respectively.
The following initiates guidance for the first quarter of 2013:
| Description | Guidance for 1st Quarter 2013 | |
| Production volumes (MMcfe/d) |
87 - 92 | |
| Percent Gas |
80% | |
| Percent Oil |
9% | |
| Percent NGL |
11% | |
| Expenses: |
||
| Lease operating expenses (per Mcfe) |
$1.15 - $1.25 | |
| Production taxes (per Mcfe) |
$0.10 - $0.15 | |
| Depreciation, depletion and amortization (per Mcfe) |
$1.50 - $1.60 | |
| General and administrative (in millions)* |
$5.5 - $6.0 | |
| Interest expense (in millions) |
$2.6 - $2.9 |
| * | Includes non-cash stock compensation estimate of $1.4 million |
The following initiates guidance for 2013:
| Description | Guidance for 2013 | |
| Production volumes (MMcfe/d) |
90 - 95 | |
| Percent Gas |
80% | |
| Percent Oil |
8% | |
| Percent NGL |
12% | |
| Expenses: |
||
| Lease operating expenses (per Mcfe) |
$1.15 - $1.25 | |
| Production taxes (per Mcfe) |
$0.10 - $0.15 | |
| Depreciation, depletion and amortization (per Mcfe) |
$1.50 - $1.60 | |
| General and administrative (in millions)* |
$21 - $23 | |
| Interest expense (in millions) |
$10 - $12 | |
| 2013 Capital Expenditures (in millions) |
$80 - $100 |
| * | Includes non-cash stock compensation estimate of $4.5 million |
Woodford Update
In the Woodford, the Company recently completed eight wells in the liquids rich area of its leasehold position. Six of these wells have established maximum 24 hour gross rates and two wells remain in the initial production stage. The six well group had an average lateral length of 5,360 feet and achieved a maximum 24 hour gross daily rate of 3,738 Mcf of gas and 201 barrels of natural gas liquids. The Company continues to realize cost savings in the trend due to increased drilling efficiencies and lower service costs. The Company estimates that its cost to drill and complete these recent wells was approximately 10%—15% lower than its 2012 average Woodford well cost. The Company is continuing to achieve ongoing cost savings. In addition, the Company recently closed an additional acreage acquisition in the liquids rich portion of the trend bringing the total acreage acquired since November of 2012 to approximately 7,000 acres. The Company estimates that its total JV Woodford acreage position is in excess of 60,000 acres.
Hedging Update
The Company recently initiated the following commodity hedging transactions:
| Production Period | Instrument Type |
Daily Volumes | Price | |||||||||
| Gas: |
||||||||||||
| Mar 13—Dec 13 |
Swap | 5,000 MMbtu | $ | 3.50 | ||||||||
| 2014 |
Swap | 10,000 MMbtu | $ | 4.08 | ||||||||
After executing the above transactions, the Company has approximately 3.7 Bcf of gas hedged for 2014. In addition, the Company has approximately 84,000 barrels of oil and 10.3 Bcf of gas hedged for 2013. Based on the mid-point of 2013 production guidance, the Company estimates it has hedged 38% of its 2013 estimated gas production at an average price of $3.48/Mcf.
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. PetroQuest’s 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”
PETROQUEST ENERGY, INC.
Consolidated Balance Sheets
(Amounts in Thousands)
| December 31, 2012 |
December 31, 2011 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 14,904 | $ | 22,263 | ||||
| Revenue receivable |
17,742 | 15,860 | ||||||
| Joint interest billing receivable |
42,595 | 47,445 | ||||||
| Other receivable |
9,208 | — | ||||||
| Derivative asset |
830 | 6,418 | ||||||
| Prepaid drilling costs |
1,698 | 2,900 | ||||||
| Drilling pipe inventory |
707 | 4,070 | ||||||
| Other current assets |
1,900 | 2,965 | ||||||
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| Total current assets |
89,584 | 101,921 | ||||||
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| Property and equipment: |
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| Oil and gas properties: |
||||||||
| Oil and gas properties, full cost method |
1,734,477 | 1,600,546 | ||||||
| Unevaluated oil and gas properties |
71,713 | 70,408 | ||||||
| Accumulated depreciation, depletion and amortization |
(1,472,244 | ) | (1,265,603 | ) | ||||
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| Oil and gas properties, net |
333,946 | 405,351 | ||||||
| Other property and equipment |
12,370 | 10,627 | ||||||
| Accumulated depreciation of other property and equipment |
(7,607 | ) | (6,414 | ) | ||||
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| Total property and equipment |
338,709 | 409,564 | ||||||
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| Other assets, net of accumulated amortization of $4,240 and $3,446, respectively |
5,110 | 4,681 | ||||||
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| Total assets |
$ | 433,403 | $ | 516,166 | ||||
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| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable to vendors |
$ | 58,960 | $ | 50,750 | ||||
| Advances from co-owners |
20,459 | 33,867 | ||||||
| Oil and gas revenue payable |
26,175 | 13,764 | ||||||
| Accrued interest and preferred stock dividend |
6,190 | 6,167 | ||||||
| Asset retirement obligation |
2,351 | 3,110 | ||||||
| Derivative liability |
233 | — | ||||||
| Other accrued liabilities |
6,535 | 8,250 | ||||||
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| Total current liabilities |
120,903 | 115,908 | ||||||
| Bank debt |
50,000 | — | ||||||
| 10% Senior Notes |
150,000 | 150,000 | ||||||
| Asset retirement obligation |
24,909 | 27,317 | ||||||
| Deferred income taxes |
— | 551 | ||||||
| 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 62,768 and 62,148 shares, respectively |
63 | 62 | ||||||
| Paid-in capital |
276,534 | 270,606 | ||||||
| Accumulated other comprehensive income |
521 | 4,031 | ||||||
| Accumulated deficit |
(189,528 | ) | (52,310 | ) | ||||
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| Total stockholders’ equity |
87,591 | 222,390 | ||||||
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| Total liabilities and stockholders’ equity |
$ | 433,403 | $ | 516,166 | ||||
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PETROQUEST ENERGY, INC.
Consolidated Statements of Operations
(Amounts in Thousands, Except Per Share Data)
| Three Months Ended December 31, | Years Ended December 31, | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Revenues: |
||||||||||||||||
| Oil and gas sales |
$ | 38,147 | $ | 38,040 | $ | 141,433 | $ | 160,486 | ||||||||
| Gas gathering revenue |
39 | 53 | 158 | 214 | ||||||||||||
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| 38,186 | 38,093 | 141,591 | 160,700 | |||||||||||||
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| Expenses: |
||||||||||||||||
| Lease operating expenses |
10,482 | 8,486 | 38,890 | 38,571 | ||||||||||||
| Production taxes |
773 | 1,030 | 885 | 3,100 | ||||||||||||
| Depreciation, depletion and amortization |
14,665 | 14,828 | 60,689 | 58,243 | ||||||||||||
| Ceiling test write-down |
28,113 | — | 137,100 | 18,907 | ||||||||||||
| General and administrative |
5,416 | 6,768 | 22,957 | 20,436 | ||||||||||||
| Accretion of asset retirement obligation |
536 | 437 | 2,078 | 2,049 | ||||||||||||
| Interest expense |
2,787 | 2,400 | 9,808 | 9,648 | ||||||||||||
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| 62,772 | 33,949 | 272,407 | 150,954 | |||||||||||||
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| Other income (expense): |
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| Other income (expense) |
77 | (1,245 | ) | 606 | (1,008 | ) | ||||||||||
| Derivative income (expense) |
482 | — | (233 | ) | — | |||||||||||
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| 559 | (1,245 | ) | 373 | (1,008 | ) | |||||||||||
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| Income (loss) from operations |
(24,027 | ) | 2,899 | (130,443 | ) | 8,738 | ||||||||||
| Income tax expense (benefit) |
140 | (1,216 | ) | 1,636 | (1,810 | ) | ||||||||||
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| Net income (loss) |
(24,167 | ) | 4,115 | (132,079 | ) | 10,548 | ||||||||||
| Preferred stock dividend |
1,284 | 1,285 | 5,139 | 5,139 | ||||||||||||
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| Net income (loss) available to common stockholders |
$ | (25,451 | ) | $ | 2,830 | $ | (137,218 | ) | $ | 5,409 | ||||||
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| Earnings per common share: |
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| Basic |
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| Net income (loss) per share |
$ | (0.41 | ) | $ | 0.04 | $ | (2.20 | ) | $ | 0.08 | ||||||
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| Diluted |
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| Net income (loss) per share |
$ | (0.41 | ) | $ | 0.04 | $ | (2.20 | ) | $ | 0.08 | ||||||
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| Weighted average number of common shares: |
||||||||||||||||
| Basic |
62,764 | 62,115 | 62,459 | 61,937 | ||||||||||||
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| Diluted |
62,764 | 62,462 | 62,459 | 62,325 | ||||||||||||
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PETROQUEST ENERGY, INC.
Consolidated Statements of Cash Flows
(Amounts in Thousands)
| December 31, 2012 |
December 31, 2011 |
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| Cash flows from operating activities: |
||||||||
| Net income (loss) |
$ | (132,079 | ) | $ | 10,548 | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||
| Deferred tax expense (benefit) |
1,636 | (1,810 | ) | |||||
| Depreciation, depletion and amortization |
60,689 | 58,243 | ||||||
| Ceiling test writedown |
137,100 | 18,907 | ||||||
| Accretion of asset retirement obligation |
2,078 | 2,049 | ||||||
| Share based compensation expense |
6,910 | 4,833 | ||||||
| Amortization costs and other |
881 | 625 | ||||||
| Non-cash derivative expense |
233 | — | ||||||
| Payments to settle asset retirement obligations |
(2,627 | ) | (905 | ) | ||||
| Changes in working capital accounts: |
||||||||
| Revenue receivable |
(1,882 | ) | (2,474 | ) | ||||
| Prepaid drilling and pipe costs |
4,479 | 5,530 | ||||||
| Joint interest billing receivable |
3,981 | (35,252 | ) | |||||
| Accounts payable and accrued liabilities |
20,916 | 34,599 | ||||||
| Advances from co-owners |
(13,408 | ) | 25,904 | |||||
| Other |
(316 | ) | (2,907 | ) | ||||
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| Net cash provided by operating activities |
88,591 | 117,890 | ||||||
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| Cash flows used in investing activities: |
||||||||
| Investment in oil and gas properties |
(147,771 | ) | (194,536 | ) | ||||
| Investment in other property and equipment |
(1,743 | ) | — | |||||
| Sale of oil and gas properties |
837 | 14,000 | ||||||
| Sale of unevaluated oil and gas properties |
8,889 | 28,461 | ||||||
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| Net cash used in investing activities |
(139,788 | ) | (152,075 | ) | ||||
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| Cash flows used in financing activities: |
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| Net payments for share based compensation |
(981 | ) | (1,133 | ) | ||||
| Deferred financing costs |
(42 | ) | (517 | ) | ||||
| Payment of preferred stock dividend |
(5,139 | ) | (5,139 | ) | ||||
| Proceeds from bank borrowings |
102,500 | 22,000 | ||||||
| Repayment of bank borrowings |
(52,500 | ) | (22,000 | ) | ||||
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| Net cash provided by (used in) financing activities |
43,838 | (6,789 | ) | |||||
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| Net decrease in cash and cash equivalents |
(7,359 | ) | (40,974 | ) | ||||
| Cash and cash equivalents, beginning of period |
22,263 | 63,237 | ||||||
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| Cash and cash equivalents, end of period |
$ | 14,904 | $ | 22,263 | ||||
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| Supplemental disclosure of cash flow information: |
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| Cash paid during the period for: |
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| Interest |
$ | 16,026 | $ | 16,017 | ||||
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| Income taxes |
$ | 105 | $ | 51 | ||||
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PETROQUEST ENERGY, INC.
Non-GAAP Disclosure Reconciliation
(Amounts In Thousands)
| Three Months Ended December 31, |
Years Ended December 31, |
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| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Net income (loss) |
$ | (24,167 | ) | $ | 4,115 | $ | (132,079 | ) | $ | 10,548 | ||||||
| Reconciling items: |
||||||||||||||||
| Deferred tax expense (benefit) |
140 | (1,216 | ) | 1,636 | (1,810 | ) | ||||||||||
| Depreciation, depletion and amortization |
14,665 | 14,828 | 60,689 | 58,243 | ||||||||||||
| Ceiling test writedown |
28,113 | — | 137,100 | 18,907 | ||||||||||||
| Accretion of asset retirement obligation |
536 | 437 | 2,078 | 2,049 | ||||||||||||
| Share based compensation expense |
1,301 | 1,848 | 6,910 | 4,833 | ||||||||||||
| Non-cash derivative (income) expense |
(482 | ) | — | 233 | — | |||||||||||
| Amortization expense and other |
287 | 164 | 881 | 625 | ||||||||||||
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| Discretionary cash flow |
20,393 | 20,176 | 77,448 | 93,395 | ||||||||||||
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| Changes in working capital accounts |
630 | 6,955 | 13,770 | 25,400 | ||||||||||||
| Settlement of asset retirement obligations |
(108 | ) | (354 | ) | (2,627 | ) | (905 | ) | ||||||||
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| Net cash provided by operating activities |
$ | 20,915 | $ | 26,777 | $ | 88,591 | $ | 117,890 | ||||||||
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| 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 company’s 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. |
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.
Date: February 28, 2013
PETROQUEST ENERGY, INC.
| By: | /s/ J. Bond Clement |
J. Bond Clement
Executive Vice President, Chief Financial Officer and Treasurer