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PETROQUEST ENERGY, INC. (OTCMKTS:PTQEP) Files An 8-K Results of Operations and Financial Condition

ME Staff 8-k

PETROQUEST ENERGY, INC. (OTCMKTS:PTQEP) Files An 8-K Results of Operations and Financial Condition

Item 2.02 Results of Operations and Financial Condition

On May 3, 2017, PetroQuest Energy, Inc. (the “Company”)
announced results for the first quarter ended March 31, 2017. The
following are recent Company highlights:
Discretionary cash flow increased 156% from fourth quarter
2016 and 516% from first quarter 2016
Production increased 13% from fourth quarter 2016
Redemption of all remaining 2017 Senior Notes
Return to full compliance with NYSE continued listing
standards
Loss available to common stockholders for the quarter ended March
31, 2017>totaled $4,918,000, or $0.23>per share, compared to
first>quarter 2016>loss available to common stockholders of
$39,137,000, or $2.31>per share.
Discretionary cash flow for the first>quarter of 2017>was
$9,206,000, as compared to $(2,210,000)>for the comparable
2016>period, and $3,591,000>for the fourth quarter of 2016.
Net cash flow provided by operating activities for the first
quarter of 2017 was $9,206,000, as compared to $26,190,000>for
the comparable 2016 period, and $4,861,000>for the fourth
quarter of 2016. See the attached schedule for a reconciliation of
net cash flow provided by operating activities to discretionary
cash flow.
Production for the first>quarter of 2017>was 5.2>Bcfe,
compared to 7.6>Bcfe for the comparable period of 2016.>The
reduction in production volumes during the 2017 period is primarily
attributable to the sale of the remainder of the Company’s Arkoma
assets in April 2016, as well as a significant reduction in capital
spending during 2016.
Stated on an Mcfe basis, unit prices including the effects of
hedges for the first>quarter of 2017>were $3.98>>per
Mcfe, as compared to $2.27>per Mcfe in the first quarter of
2016. Despite lower production, as a result of 75% higher realized
pricing on an Mcfe basis, oil and gas sales during the
first>quarter of 2017>increased 20% to $20,772,000, as
compared to $17,320,000>in the first>quarter of 2016.>
Lease operating expenses (LOE) for the first>quarter of
2017>decreased to $7,076,000, as compared to $8,177,000>in
the first>quarter of 2016. LOE per Mcfe was $1.35>for the
first>quarter of 2017, as compared to $1.07>in the
first>quarter of 2016. The increase in per unit lease operating
expenses is primarily due to the Arkoma asset sale, which included
properties with a lower relative per unit cost, as well as the
impact of lower production resulting from reduced capital
expenditures during 2016.
Depreciation, depletion and amortization (DDA) on oil and gas
properties for the first>quarter of 2017>was $1.15>per
Mcfe, as compared to $1.30>per Mcfe in the first>quarter of
2016. The decrease in the per unit DDA rate is primarily the result
of recent ceiling test write-downs in 2016.
Interest expense for the first>quarter of 2017>decreased to
$7,258,000, as compared to $8,257,000>in the first>quarter of
2016. During the three>month period ended March 31, 2017,
capitalized interest totaled $305,000, as compared to
$309,000>during the 2016>period. The decrease in interest
expense during the 2017 period is primarily attributable to a lower
debt balance after the completion of the Company’s debt exchange
in February 2016.
General and administrative expenses for the quarter ended March 31,
2017 totaled $3,153,000, as compared to $8,599,000>for the
comparable 2016 period. Capitalized general and administrative
expenses during the quarter ended March 31, 2017 totaled
$1,334,000, as compared to $1,489,000>during the comparable 2016
period. The decrease in general and administrative expenses during
the quarter ended March 31, 2017 is primarily due to lower employee
related expenses and approximately $4,740,000 of expenses related
to the issuance of the Company’s 2021 Secured Senior Notes during
the first quarter of 2016.
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, 2017>and 2016:
Three Months Ended March 31,
Production:
Oil (Bbls)
132,678
139,989
Gas (Mcf)
3,524,966
5,547,477
Ngl (Mcfe)
904,206
1,246,632
Total Production (Mcfe)
5,225,240
7,634,043
Avg. Daily Production (MMcfe/d)
58.1
83.9
Sales:
Total oil sales
$
6,871,409
$
4,358,744
Total gas sales
10,662,342
10,718,208
Total ngl sales
3,238,546
2,242,762
Total oil and gas sales
$
20,772,297
$
17,319,714
Average sales prices:
Oil (per Bbl)
$
51.79
$
31.14
Gas (per Mcf)
3.02
1.93
Ngl (per Mcfe)
3.58
1.80
Per Mcfe
3.98
2.27
The above sales and average sales prices include increases
(decreases) to revenues related to the settlement of gas hedges of
($321,000)>and $1,032,000>for the three months ended March
31, 2017>and 2016, respectively.
Second and Third Quarter Production Guidance
The Company expects to begin completion operations on a three well
pad in East Texas within one week with initial flowback expected in
early June. In the Gulf Coast, the Company had planned to
recomplete a well at its Ship Shoal 72 field in May with initial
production expected in June. Due to timing of rig availability,
this recompletion is now scheduled for June with initial production
in July. As a result of the limited impact that these operations
will have on second quarter production, the Company is guiding
production for the second quarter of 2017 at 62-65 MMcfe/d.
With a full quarter of production expected from the three well
Cotton Valley pad, along with the anticipated impact of the Ship
Shoal 72 recompletion, the Company is guiding production for the
third quarter of 2017 at 80-84 MMcfe/d (72% gas, 11% oil and 17%
NGL). The mid-point of the third quarter 2017 production guidance
would represent a 64% increase from the average daily production
for the fourth quarter of 2016.
The following provides guidance for the second quarter of 2017:
Guidance for
Description
2nd Quarter 2017
Production volumes (MMcfe/d)
62 – 65
Percent Gas
67%
Percent Oil
14%
Percent NGL
19%
Expenses:
Lease operating expenses (per Mcfe)
$1.20 – $1.30
Production taxes (per Mcfe)
$0.09 – $0.12
Depreciation, depletion and amortization (per Mcfe)
$1.20 – $1.30
General and administrative (in millions)*
$3.50 – $4.00
Interest expense (in millions)**
$7.30 – $7.50
* Includes non-cash stock compensation estimate of
approximately $0.3 million
** Includes non-cash interest expense of approximately
$5.7 million
Hedging Update
The Company recently initiated the following hedging transaction:
Production Period
Type
Daily Volumes
Price
Gas:
Jan 18 – March 18
Swap
5,000 MMBtu
$3.40
After executing the above transaction, the Company has
approximately 9.2 Bcf and 3.2 Bcf of gas volumes hedged for 2017
and the first quarter of 2018, respectively, with average floor
prices of approximately $3.22 per Mcf and $3.24 per Mcf,
respectively.
Operations Update
In East Texas, the Company recently established production on its
PQ #22 well (NRI 39%), which is located on the PQ/CVX acreage. The
well achieved a maximum 24 hour rate of approximately 11,000 Mcfe/d
(7,000 Mcf/d of gas, 530 Bbls/d of natural gas liquids and 70
Bbls/d of oil). The Company estimates the drilling and completion
cost of PQ#22 was approximately $800/lateral foot.
The Company recently reached total depth on the final well of a
three well pad (PQ #23-25 – avg WI 75%). The middle well (PQ #24)
will test a secondary Cotton Valley bench (E-Sand). In addition,
the Company plans to obtain micro-seismic data as well as utilize
varying sizes of proppant per well in connection with this upcoming
three well program. The micro-seismic work should provide
significant data on frack heights and propagation in order to
benefit future completion operations. The Company expects to drill
and complete 8 wells in East Texas during 2017 and plans to have a
three well pad in progress at the end of the year.
In South Louisiana, the Company’s Thunder Bayou well is currently
flowing at approximately 61,000 Mcfe/d (NRI – 37%). The production
mix consists of approximately 39,000 Mcf/d of gas, 1,500 Bbls/d of
oil and 2,200 Bbls/d of
natural gas liquids. The Company estimates that Thunder Bayou
generated approximately $2.3 million in field level cash flow, net
to the Company, during March 2017 after be completed in February
2017.
Managements Comment
Our accelerating cash flow and production profiles during the first
quarter of 2017 clearly indicate we have returned to growth as we
reported sequential quarterly increases of 156% and 13%,
respectively, said Charles T. Goodson, Chairman, Chief Executive
Officer and President. Since the first quarter of 2016, we have
refinanced or repaid all of our $350 million of 10% Senior Notes
due 2017, secured an East Texas joint venture, commenced our Cotton
Valley drilling program and recompleted Thunder Bayou resulting in
a 61 MMcfe/d current production rate. These milestones were made
possible due to the quality of our assets and people and the
flexibility exhibited by our stakeholders.
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. 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. 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; approximately 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 continue 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.
Click here for more information:
http://www.petroquest.com/news.html?=BizID=16901=1
PETROQUEST ENERGY, INC.
Consolidated Balance Sheets
>>(Amounts in Thousands)
March 31, 2017
December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents
$
28,191
$
28,312
Revenue receivable
9,269
10,294
Joint interest billing receivable
7,172
7,632
Derivative asset
Other current assets
3,794
2,353
Total current assets
48,594
48,591
Oil and gas properties:
Oil and gas properties, full cost method
1,331,930
1,323,333
Unevaluated oil and gas properties
11,909
9,015
Accumulated depreciation, depletion and amortization
(1,249,300
)
(1,243,286
)
Oil and gas properties, net
94,539
89,062
Other property and equipment
9,315
10,951
Accumulated depreciation of other property and equipment
(8,560
)
(10,109
)
Total property and equipment
95,294
89,904
Other assets
6,364
6,365
Total assets
$
150,252
$
144,860
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Accounts payable to vendors
$
30,808
$
25,265
Advances from co-owners
3,879
2,330
Oil and gas revenue payable
22,639
22,146
Accrued interest
2,047
Asset retirement obligation
3,291
4,160
Derivative liability
1,729
3,947
10% Senior Unsecured Notes due 2017
22,568
Other accrued liabilities
3,211
3,938
Total current liabilities
66,431
86,401
Multi-draw Term Loan
27,429
7,249
10% Senior Secured Notes due 2021
15,174
15,228
10% Senior Secured PIK Notes due 2021
254,130
248,600
Asset retirement obligation
32,958
32,450
Other long-term liabilities
6,491
6,027
Commitments and contingencies
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 21,214 and 21,197 shares,
respectively
Paid-in capital
304,805
304,341
Accumulated other comprehensive loss
(1,562
)
(4,750
)
Accumulated deficit
(555,626
)
(550,708
)
Total stockholders equity
(252,361
)
(251,095
)
Total liabilities and stockholders equity
$
150,252
$
144,860
PETROQUEST ENERGY, INC.
Consolidated Statements of Operations
(Amounts in Thousands, Except Per Share Data)
Three Months Ended
March 31,
Revenues:
Oil and gas sales
$
20,772
$
17,320
Expenses:
Lease operating expenses
7,076
8,177
Production taxes
Depreciation, depletion and amortization
6,117
10,138
Ceiling test write-down
18,857
General and administrative
3,153
8,599
Accretion of asset retirement obligation
Interest expense
7,258
8,257
24,459
54,974
Other income:
Other income
Loss from operations
(3,633
)
(37,557
)
Income tax expense
Net loss
(3,633
)
(37,643
)
Preferred stock dividend
1,285
1,494
Loss available to common stockholders
$
(4,918
)
$
(39,137
)
Loss per common share:
Basic
Net loss per share
$
(0.23
)
$
(2.31
)
Diluted
Net loss per share
$
(0.23
)
$
(2.31
)
Weighted average number of common shares:
Basic
21,208
16,956
Diluted
21,208
16,956
PETROQUEST ENERGY, INC.
Consolidated Statements of Cash Flows
>>(Amounts in Thousands)
Three Months Ended
March 31,
Cash flows from operating activities:
Net loss
$
(3,633
)
$
(37,643
)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Deferred tax expense
Depreciation, depletion and amortization
6,117
10,138
Non-cash PIK Interest
5,512
Ceiling test writedown
18,857
Accretion of asset retirement obligation
Share-based compensation expense
Amortization costs and other
Payments to settle asset retirement obligations
(402
)
(464
)
Costs incurred to issue 2021 Notes
4,740
Changes in working capital accounts:
Revenue receivable
1,025
(842
)
Joint interest billing receivable
10,709
Accounts payable and accrued liabilities
3,037
(20,413
)
Advances from co-owners
1,549
(12,021
)
Other
(1,462
)
(949
)
Net cash provided by (used in) operating activities
13,413
(26,190
)
Cash flows used in investing activities:
Investment in oil and gas properties
(10,898
)
(15,812
)
Investment in other property and equipment
(16
)
(23
)
Sale of oil and gas properties
7,000
Net cash used in investing activities
(10,914
)
(8,835
)
Cash flows used in financing activities:
Net proceeds from share based compensation
Deferred financing costs
(10
)
(38
)
Payment of preferred stock dividend
(1,284
)
Redemption of 2017 Notes
(22,650
)
(53,626
)
Costs incurred to issue 2021 Notes
(4,740
)
Proceeds from borrowings
20,000
Net cash used in financing activities
(2,620
)
(59,623
)
Net decrease in cash and cash equivalents
(121
)
(94,648
)
Cash and cash equivalents, beginning of period
28,312
148,013
Cash and cash equivalents, end of period
$
28,191
$
53,365
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest
$
2,975
$
16,781
Income taxes
$
$
>PETROQUEST ENERGY, INC.
Non-GAAP Disclosure Reconciliation
(Amounts In Thousands)
Three Months Ended
Three Months Ended
March 31,
December 31,
Net loss
$
(3,633
)
$
(37,643
)
$
(8,374
)
Reconciling items:
Deferred tax expense (benefit)
Depreciation, depletion and amortization
6,117
10,138
5,359
Ceiling test writedown
18,857
Accretion of asset retirement obligation
Non-cash share based compensation expense
Non-cash PIK interest
5,512
5,722
Amortization costs and other
Costs incurred to issue 2021 Senior Secured Notes
4,740
Discretionary cash flow
9,206
(2,210
)
3,591
Changes in working capital accounts
4,609
(23,516
)
(8,167
)
Settlement of asset retirement obligations
(402
)
(464
)
(285
)
Net cash flow provided by (used in) operating activities
$
13,413
$
(26,190
)
$
(4,861
)
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.

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. PETROQUEST ENERGY, INC. (OTCMKTS:PTQEP) Recent Trading Information
PETROQUEST ENERGY, INC. (OTCMKTS:PTQEP) closed its last trading session 00.00 at 18.25 with 438,430 shares trading hands.

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