PETROQUEST ENERGY, INC. (OTCMKTS:PTQEP) Files An 8-K Results of Operations and Financial ConditionItem 2.02 Results of Operations and Financial Condition
On August 2, 2017, PetroQuest Energy, Inc. (the "Company") announced a loss for the quarter ended June30, 2017 of $3,385,000, or $0.16 per share, compared to second quarter 2016 loss of $24,143,000, or $1.38 per share. For the first six months of 2017, the Company reported a loss of $8,303,000, or $0.39 per share, compared to a loss of $63,280,000, or $3.67 per share, for the 2016 period. The losses during the quarter and six months ended June 30, 2016 included non-cash ceiling test write-downs of $12,782,000 and $31,639,000, respectively.
Net cash flow provided by (used in) operating activities totaled $281,000 and $124,000 during the second quarters of 2017 and 2016, respectively. Discretionary cash flow for the second quarter of 2017 was $11,384,000, as compared to $(991,000) for the comparable 2016 period. Net cash flow provided by (used in) operating activities totaled $13,694,000 and $(26,066,000) during the first six months of 2017 and 2016, respectively. For the first six months of 2017, discretionary cash flow was $20,590,000, as compared to $(3,201,000) for the first six months of 2016. See the attached schedule for a reconciliation of net cash flow provided by operating activities to discretionary cash flow.
Production for the second quarter of 2017 was 6.3 Bcfe, compared to 6.0 Bcfe for the comparable period of 2016. For the first six months of 2017, production was 11.5 Bcfe, compared to 13.6 Bcfe for the comparable period of 2016. The reduction in production volumes for the first six months of 2017 compared to the first six months of 2016 was primarily due to the Company's East Hoss field divestiture in Oklahoma in April 2016 as well as normal production declines at its Gulf Coast fields.
Stated on an Mcfe basis, unit prices including the effects of hedges for the second quarter of 2017 were $3.83 per Mcfe, as compared to $2.64 per Mcfe in the second quarter of 2016. For the first six months of 2017, unit prices including the effects of hedges, were $3.90 per Mcfe, as compared to $2.43 per Mcfe for the first six months of 2016.
Oil and gas sales during the second quarter of 2017 were $24,251,000, as compared to $15,824,000 in the second quarter of 2016. For the first six months of 2017, oil and gas sales were $45,023,000 as compared to oil and gas sales of $33,144,000 for the first six months of 2016.
Lease operating expenses (“LOE”) for the second quarter of 2017 increased to $7,113,000, as compared to $6,864,000 in the second quarter of 2016. LOE per Mcfe was $1.12 for the second quarter of 2017, as compared to $1.14 in the second quarter of 2016. Lease operating expenses for the first six months of 2017 decreased to $14,189,000, as compared to $15,041,000 in the first six months of 2016. For the first six months of 2017, lease operating expenses were $1.23 per Mcfe compared to $1.10 per Mcfe in the first six months of 2016.
Depreciation, depletion and amortization (“DD&A”) on oil and gas properties for the second quarter of 2017 was $1.07 per Mcfe, as compared to $1.17 per Mcfe in the second quarter of 2016. For the first six months of 2017, DD&A on oil and gas properties was $1.10 per Mcfe compared to $1.24 per Mcfe for the comparable period of 2016. The decrease in the per unit DD&A rate during the 2017 periods is primarily the result of ceiling test write-downs during 2016 as well as the success of our East Texas drilling program.
Interest expense for the second quarter of 2017 increased to $7,147,000, as compared to $6,503,000 in the second quarter of 2016. During the three month period ended June30, 2017, capitalized interest totaled $403,000, as compared to $247,000 during the 2016 period. For the first six months of 2017, interest expense was $14,405,000, compared to $14,760,000 for the comparable period of 2016. During the six month period ended June30, 2017, capitalized interest totaled $708,000, as compared to $555,000 during the 2016 period. Capitalized interest was higher during the 2017 periods as a result of an increase in unevaluated properties.
General and administrative expenses during the quarter and six months ended June 30, 2017 totaled $4,314,000 and $7,467,000, respectively, as compared to $3,871,000 and $12,470,000 during the comparable 2016 periods. Capitalized general and administrative expenses during the quarter and six months ended June 30, 2017 totaled $2,010,000 and $3,344,000, respectively, as compared to expenses of $1,634,000 and $3,188,000, respectively, during the comparable 2016 periods. The decrease in general and administrative expenses during the first six months of 2017 as compared to the comparable period in 2016 is primarily due to $4,808,000 of costs related to the Company's debt exchange in February 2016.
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 June30, 2017 and 2016:
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||
|
Production: |
||||||||
|
Oil (Bbls) |
147,723 |
114,319 |
280,401 |
254,308 |
||||
|
Gas (Mcf) |
4,357,390 |
4,272,820 |
7,882,356 |
9,820,297 |
||||
|
Ngl (Mcfe) |
1,080,100 |
1,045,858 |
1,984,306 |
2,292,490 |
||||
|
Total Production (Mcfe) |
6,323,828 |
6,004,592 |
11,549,068 |
13,638,635 |
||||
|
Avg. Daily Production (MMcfe/d) |
69.5 |
66.0 |
63.8 |
75.4 |
||||
|
Sales: |
||||||||
|
Total oil sales |
$ |
7,299,518 |
$ |
4,936,757 |
$ |
14,170,927 |
$ |
9,295,501 |
|
Total gas sales |
13,750,945 |
8,853,527 |
24,413,287 |
19,571,735 |
||||
|
Total ngl sales |
3,200,165 |
2,034,342 |
6,438,711 |
4,277,104 |
||||
|
Total oil and gas sales |
$ |
24,250,628 |
$ |
15,824,626 |
$ |
45,022,925 |
$ |
33,144,340 |
|
Average sales prices: |
||||||||
|
Oil (per Bbl) |
$ |
49.41 |
$ |
43.18 |
$ |
50.54 |
$ |
36.55 |
|
Gas (per Mcf) |
3.16 |
2.07 |
3.10 |
1.99 |
||||
|
Ngl (per Mcfe) |
2.96 |
1.95 |
3.24 |
1.87 |
||||
|
Per Mcfe |
3.83 |
2.64 |
3.90 |
2.43 |
The above sales and average sales prices include increases to revenues related to the settlement of gas hedges of $108,000 and $1,155,000 for the three months ended June30, 2017 and 2016, respectively. The above sales and average sales prices include increases (decreases) to revenues related to the settlement of gas hedges of ($214,000) and $2,187,000 for the six months ended June 30, 2017 and 2016, respectively.
A portion of the Company's production remains impacted by shut-ins associated with ongoing third party pipeline repairs in the Gulf of Mexico. The Company estimates that approximately 6 MMcfe/d of net production is currently shut-in as well as untested production from a recently recompleted Ship Shoal 72 well. The exact timing of the production restoration is uncertain at this time. The following provides guidance for the third quarter of 2017 and assumes shut-in production will not be restored during the third quarter of 2017. The Company's previous production guidance of 85-90 MMcfe/d assumed production would be restored August 1, 2017:
|
Guidance for |
|
|
Description |
3rd Quarter 2017 |
|
Production volumes (MMcfe/d) |
80 – 84 |
|
Percent Gas |
71% |
|
Percent Oil |
12% |
|
Percent NGL |
17% |
|
Expenses: |
|
|
Lease operating expenses (per Mcfe) |
$1.10 – $1.20 |
|
Production taxes (per Mcfe) |
$0.12 – $0.17 |
|
Depreciation, depletion and amortization (per Mcfe) |
$1.10 – $1.20 |
|
General and administrative (in millions)* |
$3.5 – $4.0 |
|
Interest expense (in millions)** |
$7.3 – $7.5 |
|
* Includes non-cash stock compensation estimate of approximately $0.3 million |
|
|
** Includes non-cash interest expense of approximately $6.0 million |
Operations Update
The Company recently commenced completion operations on a two well pad (PQ #26 & #27 – average WI: 76%) in the northern area of its Cotton Valley joint venture acreage. These two wells have an average lateral length of approximately 6,600 feet and are being completed utilizing higher proppant concentrations (average ~1,150 lbs/lateral foot) similar to the Company's recent record PQ#25 well (IP-24 hour gross rate – 18.3 MMcfe/d). In addition, the Company is nearing total depth on its PQ #28 well (WI: 75%), a 5,000 foot lateral, and expects to commence completion operations in approximately 4-5 weeks.
NYSE Update
In connection with regaining compliance with the New York Stock Exchange’s (NYSE) continued listing standards, on July 27, 2017 the Company submitted a required business plan to the NYSE. Assuming the NYSE accepts the plan, the Company will be subject to quarterly monitoring for compliance with the business plan and the Company's common stock will continue to trade on the NYSE, subject to the Company's compliance with other NYSE continued listing requirements.
Management’s Comment
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 Texas, 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. All statements other than statements of historical fact included in this news release are forward-looking statements. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, these statements are based upon assumptions and anticipated results that are subject to numerous uncertainties and risks. Actual results may vary significantly from those anticipated due to many factors, including the volatility of oil and natural gas prices and significantly depressed oil prices since the end of 2014; our indebtedness and the significant amount of cash required to service our indebtedness; our estimate of the sufficiency of our existing capital sources, including availability under our new multi-draw term loan facility; our ability to post additional collateral to satisfy our offshore decommissioning obligations; our ability to execute our 2017 drilling and recompletion program as planned and to increase our production; our ability to hedge future production to reduce our exposure to price volatility in the current commodity pricing market; our ability to find, develop and produce oil and natural gas reserves that are economically recoverable and to replace reserves and sustain and/or increase production; ceiling test write-downs resulting, and that could result in the future, from lower oil and natural gas prices; our ability to raise additional capital to fund cash requirements for future operations; limits on our growth and our ability to finance our operations, fund our capital needs and respond to changing conditions imposed by our multi-draw term loan facility and restrictive debt covenants; more than 50% of our production being exposed to the additional risk of severe weather, including hurricanes, tropical storms and flooding, and natural disasters; losses and liabilities from uninsured or underinsured drilling and operating activities; changes in laws and governmental regulations as they relate to our operations; the operating hazards attendant to the oil and gas business; the volatility of our stock price; and our ability to meet the continued listing standards of the New York Stock Exchange with respect to our common stock or to cure any deficiency with respect thereto. In particular, careful consideration should be given to cautionary statements made in the various reports the Company has filed with the SEC. The Company undertakes no duty to update or revise these forward-looking statements.
PETROQUEST ENERGY, INC.
Consolidated Balance Sheets
(Amounts in Thousands)
|
June30, 2017 |
December31, 2016 |
|||
|
ASSETS |
||||
|
Current assets: |
||||
|
Cash and cash equivalents |
$ |
19,772 |
$ |
28,312 |
|
Revenue receivable |
9,605 |
10,294 |
||
|
Joint interest billing receivable |
5,268 |
7,632 |
||
|
Derivative asset |
||||
|
Other current assets |
3,612 |
2,353 |
||
|
Total current assets |
39,223 |
48,591 |
||
|
Oil and gas properties: |
||||
|
Oil and gas properties, full cost method |
1,344,653 |
1,323,333 |
||
|
Unevaluated oil and gas properties |
14,867 |
9,015 |
||
|
Accumulated depreciation, depletion and amortization |
(1,258,254 |
) |
(1,243,286 |
) |
|
Oil and gas properties, net |
101,266 |
89,062 |
||
|
Other property and equipment |
9,336 |
10,951 |
||
|
Accumulated depreciation of other property and equipment |
(8,654 |
) |
(10,109 |
) |
|
Total property and equipment |
101,948 |
89,904 |
||
|
Other assets |
7,402 |
6,365 |
||
|
Total assets |
$ |
148,573 |
$ |
144,860 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||
|
Current liabilities: |
||||
|
Accounts payable to vendors |
$ |
28,725 |
$ |
25,265 |
|
Advances from co-owners |
4,545 |
2,330 |
||
|
Oil and gas revenue payable |
18,692 |
22,146 |
||
|
Accrued interest |
1,851 |
2,047 |
||
|
Asset retirement obligation |
2,759 |
4,160 |
||
|
Derivative liability |
3,947 |
|||
|
10% Senior Unsecured Notes due 2017 |
22,568 |
|||
|
Other accrued liabilities |
1,051 |
3,938 |
||
|
Total current liabilities |
58,080 |
86,401 |
||
|
Multi-draw Term Loan |
27,605 |
7,249 |
||
|
10% Senior Secured Notes due 2021 |
15,008 |
15,228 |
||
|
10% Senior Secured PIK Notes due 2021 |
259,816 |
248,600 |
||
|
Asset retirement obligation |
33,759 |
32,450 |
||
|
Other long-term liabilities |
7,742 |
6,027 |
||
|
Stockholders’ equity: |
||||
|
Preferred stock, $.001 par value; authorized 5,000 shares; issued and outstanding 1,495 shares |
||||
|
Common stock, $.001 par value; authorized 150,000 shares; issued and outstanding 21,219 and 21,197 shares, respectively |
||||
|
Paid-in capital |
305,232 |
304,341 |
||
|
Accumulated other comprehensive income (loss) |
(4,750 |
) |
||
|
Accumulated deficit |
(559,011 |
) |
(550,708 |
) |
|
Total stockholders’ equity |
(253,437 |
) |
(251,095 |
) |
|
Total liabilities and stockholders’ equity |
$ |
148,573 |
$ |
144,860 |
PETROQUEST ENERGY, INC.
Consolidated Statements of Operations
(Amounts in Thousands, Except Per Share Data)
|
Three Months Ended |
Three Months Ended |
Six Months Ended |
Six Months Ended |
|||||||||
|
June30, 2017 |
June30, 2016 |
June30, 2017 |
June30, 2016 |
|||||||||
|
Revenues: |
||||||||||||
|
Oil and gas sales |
$ |
24,251 |
$ |
15,824 |
$ |
45,023 |
$ |
33,144 |
||||
|
Expenses: |
||||||||||||
|
Lease operating expenses |
7,113 |
6,864 |
14,189 |
15,041 |
||||||||
|
Production taxes |
(48 |
) |
||||||||||
|
Depreciation, depletion and amortization |
6,841 |
7,193 |
12,958 |
17,331 |
||||||||
|
Ceiling test write-down |
12,782 |
31,639 |
||||||||||
|
General and administrative |
4,314 |
3,871 |
7,467 |
12,470 |
||||||||
|
Accretion of asset retirement obligation |
1,100 |
1,226 |
||||||||||
|
Interest expense |
7,147 |
6,503 |
14,405 |
14,760 |
||||||||
|
26,538 |
37,783 |
50,997 |
92,757 |
|||||||||
|
Other income (expense) |
(2 |
) |
(424 |
) |
(327 |
) |
||||||
|
Loss from operations |
(2,289 |
) |
(22,383 |
) |
(5,922 |
) |
(59,940 |
) |
||||
|
Income tax (benefit) expense |
(189 |
) |
(189 |
) |
||||||||
|
Net loss |
(2,100 |
) |
(22,858 |
) |
(5,733 |
) |
(60,501 |
) |
||||
|
Preferred stock dividend |
1,285 |
1,285 |
2,570 |
2,779 |
||||||||
|
Loss available to common stockholders |
$ |
(3,385 |
) |
$ |
(24,143 |
) |
$ |
(8,303 |
) |
$ |
(63,280 |
) |
|
Loss per common share: |
||||||||||||
|
Basic |
||||||||||||
|
Net loss per share |
$ |
(0.16 |
) |
$ |
(1.38 |
) |
$ |
(0.39 |
) |
$ |
(3.67 |
) |
|
Diluted |
||||||||||||
|
Net loss per share |
$ |
(0.16 |
) |
$ |
(1.38 |
) |
$ |
(0.39 |
) |
$ |
(3.67 |
) |
|
Weighted average number of common shares: |
||||||||||||
|
Basic |
21,215 |
17,539 |
21,212 |
17,248 |
||||||||
|
Diluted |
21,215 |
17,539 |
21,212 |
17,248 |
PETROQUEST ENERGY, INC.
Consolidated Statements of Cash Flows
(Amounts in Thousands)
|
Six Months Ended |
Six Months Ended |
|||||
|
June30, 2017 |
June30, 2016 |
|||||
|
Cash flows from operating activities: |
||||||
|
Net loss |
$ |
(5,733 |
) |
$ |
(60,501 |
) |
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
||||||
|
Deferred tax (benefit) expense |
(189 |
) |
||||
|
Depreciation, depletion and amortization |
12,958 |
17,331 |
||||
|
Ceiling test writedown |
31,639 |
|||||
|
Accretion of asset retirement obligation |
1,100 |
1,226 |
||||
|
Share-based compensation expense |
||||||
|
Amortization costs and other |
||||||
|
Non-cash interest expense on PIK Notes |
11,179 |
|||||
|
Payments to settle asset retirement obligations |
(1,357 |
) |
(2,515 |
) |
||
|
Costs incurred to issue 2021 Notes |
4,808 |
|||||
|
Changes in working capital accounts: |
||||||
|
Revenue receivable |
||||||
|
Joint interest billing receivable |
2,239 |
30,814 |
||||
|
Accounts payable and accrued liabilities |
(8,368 |
) |
(31,260 |
) |
||
|
Advances from co-owners |
2,215 |
(15,541 |
) |
|||
|
Other |
(2,314 |
) |
(4,387 |
) |
||
|
Net cash provided by (used in) operating activities |
13,694 |
(26,066 |
) |
|||
|
Cash flows (used in) provided by investing activities: |
||||||
|
Investment in oil and gas properties |
(21,661 |
) |
(18,166 |
) |
||
|
Investment in other property and equipment |
(37 |
) |
(28 |
) |
||
|
Sale of oil and gas properties |
2,207 |
24,909 |
||||
|
Net cash (used in) provided by investing activities |
(19,491 |
) |
6,715 |
|||
|
Cash flows used in financing activities: |
||||||
|
Net proceeds from share based compensation |
||||||
|
Deferred financing costs |
(125 |
) |
(100 |
) |
||
|
Payment of preferred stock dividend |
(1,284 |
) |
||||
|
Redemption of 2017 Notes |
(22,650 |
) |
(53,626 |
) |
||
|
Costs incurred to issue 2021 Notes |
(4,808 |
) |
||||
|
Proceeds from borrowings |
20,000 |
|||||
|
Net cash used in financing activities |
(2,743 |
) |
(59,766 |
) |
||
|
Net decrease in cash and cash equivalents |
(8,540 |
) |
(79,117 |
) |
||
|
Cash and cash equivalents, beginning of period |
28,312 |
148,013 |
||||
|
Cash and cash equivalents, end of period |
$ |
19,772 |
$ |
68,896 |
||
|
Supplemental disclosure of cash flow information: |
||||||
|
Cash paid during the period for: |
||||||
|
Interest |
$ |
3,743 |
$ |
16,783 |
||
|
Income taxes |
$ |
$ |
PETROQUEST ENERGY, INC.
Non-GAAP Disclosure Reconciliation
(Amounts In Thousands)
|
Three Months Ended |
Six Months Ended |
|||||||||||
|
June 30, |
June 30, |
|||||||||||
|
Net loss |
$ |
(2,100 |
) |
$ |
(22,858 |
) |
$ |
(5,733 |
) |
$ |
(60,501 |
) |
|
Reconciling items: |
||||||||||||
|
Deferred tax expense (benefit) |
(189 |
) |
(189 |
) |
||||||||
|
Depreciation, depletion and amortization |
6,841 |
7,193 |
12,958 |
17,331 |
||||||||
|
Ceiling test writedown |
12,782 |
31,639 |
||||||||||
|
Accretion of asset retirement obligation |
1,100 |
1,226 |
||||||||||
|
Non-cash share based compensation expense |
||||||||||||
|
Non-cash PIK Interest |
5,667 |
11,179 |
||||||||||
|
Amortization costs and other |
||||||||||||
|
Costs incurred to issue 2021 Notes |
4,808 |
|||||||||||
|
Discretionary cash flow |
11,384 |
(991 |
) |
20,590 |
(3,201 |
) |
||||||
|
Changes in working capital accounts |
(10,148 |
) |
3,166 |
(5,539 |
) |
(20,350 |
) |
|||||
|
Settlement of asset retirement obligations |
(955 |
) |
(2,051 |
) |
(1,357 |
) |
(2,515 |
) |
||||
|
Net cash flow provided by (used in) operating activities |
$ |
$ |
$ |
13,694 |
$ |
(26,066 |
) |
|
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. |
About PETROQUEST ENERGY, INC. (OTCMKTS:PTQEP)
PetroQuest Energy, Inc. is an oil and gas company. The Company is engaged in exploratory, development and acquisition activities. The Company has approximately 30 gross exploratory wells and over 30 gross development wells. The Company has reserves in various areas, including East Texas, Gulf Coast Basin and Oklahoma Woodford. Its annual production from East Texas area is approximately 114.1 billions of cubic feet equivalent (Bcfe); Gulf Coast Basin is over 43.9 Bcfe, and Oklahoma Woodford is approximately 20.0 Bcfe. The net production from its East Texas assets averages over 30.4 millions of cubic feet equivalent (MMcfe) per day. Production from Gulf Coast Basin area totals approximately 37.8 MMcfe per day. The average daily production from its Oklahoma-Woodford properties totals over 25 MMcfe per day. The Company sells its oil and natural gas production under fixed or floating market contracts.
