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PetroQuest Energy Announces Third Quarter 2016 Results; Updates East Texas Joint Venture, Operations, Liquidity And Hedging

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LAFAYETTE, La., Oct. 31, 2016 /PRNewswire/ -- PetroQuest Energy, Inc. (the "Company") today announced a loss available to common stockholders for the quarter ended September 30, 2016 of $23,306,000, or $1.31 per share, compared to third quarter 2015 loss available to common stockholders of $51,910,000, or $3.19 per share. For the first nine months of 2016, the Company reported a loss available to common stockholders of $86,586,000, or $4.97 per share, compared to a loss available to common stockholders of $235,233,000, or $14.50 per share, for the 2015 period. The losses during the quarter and nine months ended September 30, 2016 and September 30, 2015 included non-cash ceiling test write-downs totaling $8,665,000 and $40,304,000, respectively, and $40,212,000 and $214,618,000, respectively.

Discretionary cash flow for the third quarter of 2016 was $207,000, as compared to $4,990,000 for the comparable 2015 period.  For the first nine months of 2016, discretionary cash flow was $(2,994,000), as compared to $22,853,000 for the first  nine months of 2015. See the attached schedule for a reconciliation of net cash flow provided by operating activities to discretionary cash flow. 

Production for the third quarter of 2016 was 5.2 Bcfe, compared to 7.4 Bcfe for the comparable period of 2015. For the first nine months of 2016, production was 18.9 Bcfe, compared to 27.5 Bcfe for the comparable period of 2015. The reduction in production volumes during the 2016 periods is primarily attributable to the sale of the Company's Arkoma assets in 2015, as well as the continued lack of capital expenditures.

Stated on an Mcfe basis, unit prices including the effects of hedges for the third quarter of 2016 were $3.27  per Mcfe, as compared to $3.62 per Mcfe in the third quarter of 2015. For the first nine months of 2016, unit prices including the effects of hedges, were $2.66 per Mcfe, as compared to $3.38 per Mcfe for the first nine months of 2015.

Oil and gas sales during the third quarter of 2016 were $17,094,000, as compared to $26,872,000 in the third quarter of 2015. For the first nine months of 2016, oil and gas sales were $50,238,000 as compared to oil and gas sales of $92,873,000 for the first nine months of 2015.

Lease operating expenses ("LOE") for the third quarter of 2016 decreased to $6,857,000, as compared to $10,070,000 in the third quarter of 2015.  Lease operating expenses decreased during the three months ended September 30, 2016 primarily as a result of the Company's 2015 Arkoma divestiture. LOE per Mcfe was $1.31 for the third quarter of 2016, as compared to $1.35 in the third quarter of 2015. For the first nine months of 2016, lease operating expenses were $1.16 per Mcfe compared to $1.17 per Mcfe in the first nine months of 2015.

Depreciation, depletion and amortization ("DD&A") on oil and gas properties for the third quarter of 2016 was $1.12 per Mcfe, as compared to $1.79 per Mcfe in the third quarter of 2015. For the first nine months of 2016, DD&A on oil and gas properties was $1.21 per Mcfe compared to $1.88 per Mcfe for the comparable period of 2015. The decrease in the per unit DD&A rate during the 2016 periods is primarily the result of recent ceiling test write-downs.

Interest expense for the third quarter of 2016 decreased to $7,737,000, as compared to $8,526,000 in the third quarter of 2015. Interest expense for the third quarter of 2016 included the non-cash write-off of approximately $1 million of deferred financing costs. During the three month period ended September 30, 2016, capitalized interest totaled $167,000, as compared to $724,000 during the 2015 period. For the first nine months of 2016, interest expense was $22,497,000, compared to $24,996,000 for the comparable period of 2015. During the nine month period ended September 30, 2016, capitalized interest totaled $722,000, as compared to $4,100,000 during the 2015 period. The decrease in interest expense during the 2016 periods is primarily attributable a lower debt balance after the completion of the Company's debt exchange in February 2016 as well as the repayment of the Company's bank debt in June 2015.  

General and administrative expenses during the quarter and nine months ended September 30, 2016 totaled $8,827,000 and $21,297,000, respectively, as compared to $4,686,000 and $16,544,000 during the comparable 2015 periods. Capitalized general and administrative expenses during the quarter and nine months  ended September 30, 2016 totaled $1,268,000, and $4,347,000, respectively, as compared to expenses of $1,926,000  and $6,522,000 during the comparable 2015 periods. General and administrative expenses for the three and the nine month 2016 periods included approximately $5,300,000 and $10,100,000 in expenses, respectively, related to the Company's two debt exchanges in 2016. 

The following table sets forth certain information with respect to the oil and gas operations of the Company for the three and nine month periods ended September 30, 2016 and 2015:

 


Three Months Ended September 30,


Nine Months Ended September 30,


2016


2015


2016


2015

Production:








Oil (Bbls)

123,165


123,102


377,473


421,539

Gas (Mcf)

3,650,109


5,395,789


13,470,406


20,478,563

Ngl (Mcfe)

838,294


1,297,566


3,130,784


4,458,392

Total Production (Mcfe)

5,227,393


7,431,967


18,866,028


27,466,189

   Avg. Daily Production (MMcfe/d)

56.8


80.8


68.9


100.2

Sales:








Total oil sales

$   5,380,110


$   6,073,709


$ 14,675,611


$ 21,613,942

Total gas sales

9,873,068


17,737,112


29,444,803


59,314,437

Total ngl sales

1,840,764


3,060,948


6,117,868


11,944,564

Total oil and gas sales

$ 17,093,942


$ 26,871,769


$ 50,238,282


$ 92,872,943

Average sales prices:








Oil (per Bbl)

$          43.68


$          49.34


$          38.88


$          51.27

Gas (per Mcf)

2.70


3.29


2.19


2.90

Ngl (per Mcfe)

2.20


2.36


1.95


2.68

Per Mcfe

3.27


3.62


2.66


3.38

 

The above sales and average sales prices include increases (decreases) to revenues related to the settlement of gas hedges of ($144,000) and $3,603,000, oil hedges of zero and $299,000 and Ngl hedges of zero and $191,000 for the three months ended September 30, 2016 and 2015, respectively.  The above sales and average sales prices include increases to revenues related to the settlement of gas hedges of $2,043,000  and $10,108,000, oil hedges of zero and $38,000, and Ngl hedges of zero and $348,000 for the nine months ended September 30, 2016 and 2015, respectively.

The following provides guidance for the fourth quarter of 2016:

 


Guidance for

Description

4th Quarter 2016



Production volumes (MMcfe/d)

42 - 46



Percent Gas

69 %

Percent Oil

15 %

Percent NGL

16 %



Expenses:


Lease operating expenses (per Mcfe)

$1.40 - $1.50

Production taxes (per Mcfe)

$0.08 - $0.11

Depreciation, depletion and amortization (per Mcfe)

$1.15 - $1.25

General and administrative (in millions)*

$3.5- $4.0

Interest expense (in millions)**

$7.0 - $7.5





* Includes non-cash stock compensation estimate of approximately $0.5 million


** Includes non-cash interest expense of approximately $6 million


 

East Texas Joint Venture
The Company continues to make progress toward a joint venture in the Cotton Valley and expects to close the joint venture and spud the first well thereunder before the end of 2016. During the first quarter of 2016, the Company sold a portion of its 100% owned 6,400 gross acre Cotton Valley position to a potential joint venture partner for $7 million.  The Company expects to re-acquire this acreage for $5 million prior to closing the joint venture.

Thunder Bayou Update
In the Gulf Coast, the Company's Thunder Bayou well is currently flowing from the initial completion in the lower section of the Cris R-2 formation (48 net feet of pay) at approximately 18 MMcfe/d (NRI-37%).  The daily production rate of the well continues to decline as expected. As a result, the Company's production guidance for the fourth quarter of 2016 assumes the well will be shut-in for the month of December due to the Company's planned recompletion into the upper section of the Cris R-2 formation (154 net feet of pay).  Thunder Bayou is forecasted to be back online in January 2017.

Liquidity Update
The Company recently enhanced its liquidity position through a new $50 million multidraw term loan and the issuance of debt in the Company's September 2016 debt exchange that includes a payment-in-kind feature that is expected to provide approximately $33 million of cash interest savings over the next 18 months.  During the third quarter of 2016, the Company's cash balance declined from approximately $69 million at June 30, 2016 to approximately $34 million at September 30, 2016.  The primary uses of cash during the third quarter of 2016 were $21 million for accrued interest and fees related to the debt exchange, $4 million in capital expenditures and payments to reduce accounts payable to vendors.  In October 2016, the Company borrowed $10 million under its multidraw term loan for additional working capital needs including payments to reduce accounts payable to vendors.

Hedging Update
The Company recently initiated the following hedging transaction:

 

Production Period

Type

Daily Volumes

Price

Gas:




2017

Swap

5,000 MMBtu

$ 3.25

 

Management's Comment
"The debt exchange completed in September 2016 has resulted in a significant opportunity for our team, on behalf of all of our stakeholders, to capitalize on the value of our attractive properties in East Texas and Gulf Coast as commodity prices continue to improve," said Charles T. Goodson, Chairman, Chief Executive Officer and President. "The planned recompletion of our Thunder Bayou well should be a near-term catalyst of increased cash flow in the first quarter of 2017 and beyond.  We expect to finalize our East Texas joint venture in the coming weeks, on terms attractive to both the investors and the Company, and expect to spud our first well before year-end.  We look forward to 2017 as a year of renewed and significant growth in production, with all capital expenditures expected to be funded by cash flow."

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 consummate a drilling joint venture in East Texas and initiate our Cotton Valley drilling program before the end of the year; our ability to hedge future production to reduce our exposure to price volatility in the current commodity pricing market; 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 multidraw term loan facility and restrictive debt covenants; 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; 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 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=1690&1=1"

 

PETROQUEST ENERGY, INC.

Consolidated Balance Sheets

(Amounts in Thousands)



September 30,
2016


December 31,
2015

ASSETS




Current assets:




Cash and cash equivalents

$             33,774


$           148,013

Revenue receivable

11,850


6,476

Joint interest billing receivable

22,217


49,374

Derivative asset


1,508

Other current assets

4,247


3,874

Total current assets

72,088


209,245

Oil and gas properties:




Oil and gas properties, full cost method

1,325,114


1,310,891

Unevaluated oil and gas properties

8,058


12,516

Accumulated depreciation, depletion and amortization

(1,237,490)


(1,157,455)

Oil and gas properties, net

95,682


165,952

Other property and equipment

11,252


11,229

Accumulated depreciation of other property and equipment

(10,199)


(8,737)

Total property and equipment

96,735


168,444

Other assets, net of accumulated amortization of $0 and $3,842, respectively

5,546


1,630

Total assets

$           174,369


$           379,319

LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable to vendors

$             46,166


$             97,999

Advances from co-owners

377


16,118

Oil and gas revenue payable

29,906


18,911

Accrued interest

397


11,720

Asset retirement obligation

1,132


6,015

Derivative liability

228


Accrued acquisition costs

5,000


4,409

10% Senior Unsecured Notes due 2017

22,538


Other accrued liabilities

2,481


3,612

Total current liabilities

108,225


158,784

10% Senior Unsecured Notes due 2017


347,008

10% Senior Secured Notes due 2021

15,286


10% Senior Secured PIK Notes due 2021

243,106


Asset retirement obligation

40,593


36,541

Other long-term liabilities

3,969


53

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 21,115 and 16,410 shares, respectively

21


16

Paid-in capital

304,445


290,432

Accumulated other comprehensive (loss) income

(228)


947

Accumulated deficit

(541,049)


(454,463)

Total stockholders' equity

(236,810)


(163,067)

Total liabilities and stockholders' equity

$           174,369


$           379,319

 

PETROQUEST ENERGY, INC.

Consolidated Statements of Operations

(Amounts in Thousands, Except Per Share Data)



Three Months Ended


Nine Months Ended


September 30,


September 30,


2016


2015


2016


2015

Revenues:










Oil and gas sales

$                 17,094


$                 26,872


$                 50,238


$                 92,873

Expenses:










Lease operating expenses

6,857


10,070


21,898


32,163



Production taxes

319


399


609


2,303



Depreciation, depletion and amortization

6,030


13,687


23,361


52,686



Ceiling test write-down

8,665


40,212


40,304


214,618



General and administrative

8,827


4,686


21,297


16,544



Accretion of asset retirement obligation

670


825


1,896


2,507



Interest expense

7,737


8,526


22,497


24,996




39,105


78,405


131,862


345,817

Other income (expense):








Gain on sale of oil and gas properties


828



22,359

Other income (expense)

(28)


88


(355)


285




(28)


916


(355)


22,644











Loss from operations

(22,039)


(50,617)


(81,979)


(230,300)



Income tax expense (benefit)

(18)


6


543


1,079

Net loss

(22,021)


(50,623)


(82,522)


(231,379)

Preferred stock dividend

1,285


1,287


4,064


3,854

Loss available to common stockholders

$               (23,306)


$               (51,910)


$               (86,586)


$             (235,233)

Loss per common share:









Basic










Net loss per share

$                   (1.31)


$                   (3.19)


$                   (4.97)


$                 (14.50)


Diluted










Net loss per share

$                   (1.31)


$                   (3.19)


$                   (4.97)


$                 (14.50)

Weighted average number of common shares:










Basic

17,736


16,259


17,412


16,225



Diluted

17,736


16,259


17,412


16,225

 

PETROQUEST ENERGY, INC.

Consolidated Statements of Cash Flows

(Amounts in Thousands)



Nine Months Ended


September 30,


2016


2015

Cash flows from operating activities:




Net loss

$               (82,522)


$             (231,379)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:




Deferred tax expense

543


1,079

Depreciation, depletion and amortization

23,361


52,686

Ceiling test writedown

40,304


214,618

Accretion of asset retirement obligation

1,896


2,507

Share-based compensation expense

1,361


4,022

Amortization costs and other

1,990


1,679

Payments to settle asset retirement obligations

(2,884)


(1,826)

Gain on sale of oil and gas properties


(22,359)

Costs incurred to issue 2021 Notes and 2021 PIK Notes

10,073


Changes in working capital accounts:




Revenue receivable

(5,374)


7,818

Joint interest billing receivable

26,800


20,147

Accounts payable and accrued liabilities

(45,904)


(36,630)

Advances from co-owners

(15,741)


12,031

Other

(5,640)


(414)

Net cash (used in) provided by operating activities

(51,737)


23,979

Cash flows provided by investing activities:




Investment in oil and gas properties

(22,084)


(75,818)

Investment in other property and equipment

(23)


(430)

Sale of oil and gas properties

24,832


271,891

Net cash provided by investing activities

2,725


195,643

Cash flows used in financing activities:




Net proceeds for share based compensation

130


422

Deferred financing costs

(373)


(861)

Payment of preferred stock dividend

(1,285)


(3,854)

Redemption of 2017 Notes

(53,626)


Costs incurred to issue 2021 Notes and 2021 PIK Notes

(10,073)


Proceeds from bank borrowings


70,000

Repayment of bank borrowings


(145,000)

Net cash used in financing activities

(65,227)


(79,293)

Net (decrease) increase in cash and cash equivalents

(114,239)


140,329

Cash and cash equivalents, beginning of period

148,013


18,243

Cash and cash equivalents, end of period

$                 33,774


$               158,572

Supplemental disclosure of cash flow information:




Cash paid during the period for:




Interest

$                 33,114


$                 36,137

Income taxes

$                      (18)


$                      (26)

 

PETROQUEST ENERGY, INC.

Non-GAAP Disclosure Reconciliation

(Amounts In Thousands)



Three Months Ended


Nine Months Ended


September 30,


September 30,


2016


2015


2016


2015

Net loss

$ (22,021)


$ (50,623)


$ (82,522)


$ (231,379)

Reconciling items:








Deferred tax expense (benefit)

(18)


6


543


1,079

Depreciation, depletion and amortization

6,030


13,687


23,361


52,686

Ceiling test writedown

8,665


40,212


40,304


214,618

Gain on Asset Sale


(828)



(22,359)

Accretion of asset retirement obligation

670


825


1,896


2,507

Non-cash share based compensation expense

436


1,194


1,361


4,022

Amortization costs and other

1,180


517


1,990


1,679

Costs incurred to issue 2021 Notes

5,265



10,073


Discretionary cash flow

207


4,990


(2,994)


22,853

Changes in working capital accounts

(25,509)


14,003


(45,859)


2,952

Settlement of asset retirement obligations

(369)


(640)


(2,884)


(1,826)

Net cash flow provided by (used in) operating activities

$ (25,671)


$  18,353


$ (51,737)


$    23,979





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.

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/petroquest-energy-announces-third-quarter-2016-results-updates-east-texas-joint-venture-operations-liquidity-and-hedging-300354260.html

SOURCE PetroQuest Energy, Inc.

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