PetroQuest Energy, Inc. (the "Company") today announced a loss for
the quarter ended June 30, 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.
Discretionary cash flow for the second quarter
of 2017 was $11,384,000, as compared to $(991,000) for the
comparable 2016 period. 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 June 30,
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
June 30, 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 June 30,
2017 and 2016:
| |
Three Months Ended June 30, |
|
Six Months Ended June 30, |
| |
2017 |
|
2016 |
|
2017 |
|
2016 |
| 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 June 30,
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 UpdateThe 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 UpdateIn 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“Our second
quarter results build upon the growth profile initiated with the
restart of our Cotton Valley drilling program in late 2016.
Since the fourth quarter of 2016, revenues are up 50%,
discretionary cash flow is up over 200% and production is up
38%. Each of these metrics indicates the progress made
through the first half of the year towards our goal of reducing our
relative leverage through organic production and cash flow growth,”
said Charles T. Goodson, Chairman, Chief Executive Officer and
President. "This scale of financial and operational inflection in
such a short time frame is only possible with high quality
assets. Our most recent Cotton Valley pad, with a cumulative
IP-24 hour gross daily rate of over 38 MMcfe at an all in cost of
approximately $14 million, reinforces the asset quality we are
developing to achieve our goals."
About the CompanyPetroQuest
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 StatementsThis 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) |
| |
| |
June 30, 2017 |
|
December 31, 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 |
966 |
|
|
— |
|
| 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 |
457 |
|
|
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 |
1 |
|
|
1 |
|
| Common stock, $.001 par
value; authorized 150,000 shares; issued and outstanding 21,219 and
21,197 shares, respectively |
21 |
|
|
21 |
|
| Paid-in capital |
305,232 |
|
|
304,341 |
|
| Accumulated other
comprehensive income (loss) |
320 |
|
|
(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 |
| |
June 30, 2017 |
|
June 30, 2016 |
|
June 30, 2017 |
|
June 30, 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 |
570 |
|
|
(48 |
) |
|
878 |
|
|
290 |
|
| 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 |
553 |
|
|
618 |
|
|
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 |
) |
|
52 |
|
|
(327 |
) |
| Loss from
operations |
(2,289 |
) |
|
(22,383 |
) |
|
(5,922 |
) |
|
(59,940 |
) |
| Income tax (benefit)
expense |
(189 |
) |
|
475 |
|
|
(189 |
) |
|
561 |
|
| 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 |
| |
June 30, 2017 |
|
June 30, 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 |
) |
|
561 |
|
| 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 |
825 |
|
|
925 |
|
| Amortization costs and
other |
450 |
|
|
810 |
|
| 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 |
689 |
|
|
24 |
|
| 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 |
32 |
|
|
52 |
|
| 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, |
| |
2017 |
|
2016 |
2017 |
|
2016 |
| Net loss |
$ |
(2,100 |
) |
|
$ |
(22,858 |
) |
$ |
(5,733 |
) |
|
$ |
(60,501 |
) |
| Reconciling items: |
|
|
|
|
|
|
| Deferred
tax expense (benefit) |
(189 |
) |
|
475 |
|
(189 |
) |
|
561 |
|
|
Depreciation, depletion and amortization |
6,841 |
|
|
7,193 |
|
12,958 |
|
|
17,331 |
|
| Ceiling
test writedown |
— |
|
|
12,782 |
|
— |
|
|
31,639 |
|
| Accretion
of asset retirement obligation |
553 |
|
|
618 |
|
1,100 |
|
|
1,226 |
|
| Non-cash
share based compensation expense |
400 |
|
|
483 |
|
825 |
|
|
925 |
|
| Non-cash
PIK Interest |
5,667 |
|
|
— |
|
11,179 |
|
|
— |
|
|
Amortization costs and other |
212 |
|
|
248 |
|
450 |
|
|
810 |
|
| Costs
incurred to issue 2021 Notes |
— |
|
|
68 |
|
— |
|
|
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 |
$ |
281 |
|
|
$ |
124 |
|
$ |
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.
For further information, contact:
Matt Quantz, Manager – Corporate Communications
(337) 232-7028, www.petroquest.com