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PetroQuest Energy Announces First Quarter 2016 Results

May 2, 2016 4:30 PM EDT

LAFAYETTE, La., May 2, 2016 /PRNewswire/ -- PetroQuest Energy, Inc. (the "Company") today announced a net loss to common stockholders for the quarter ended March 31, 2016 of $39,137,000, or $0.58 per share, compared to first quarter 2015 net loss to common stockholders of $122,240,000, or $1.89 per share. The net losses for the first quarters of 2016 and 2015 included non-cash ceiling test write-downs totaling $18,857,000 and $108,911,000, respectively. 

Discretionary cash flow for the first quarter of 2016 was $(2,210,000), as compared to $10,606,000 for the comparable 2015 period.  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 2016 was 7.6 Bcfe, compared to 10.4 Bcfe for the comparable period of 2015. The reduction in production volumes during the 2016 period is primarily attributable to the sale of the Company's Arkoma assets in June 2015.

Stated on an Mcfe basis, unit prices including the effects of hedges for the first quarter of 2016 were $2.27  per Mcfe, as compared to $3.22 per Mcfe in the first quarter of 2015. Oil and gas sales during the first quarter of 2016 were $17,320,000, as compared to $33,451,000 in the first quarter of 2015.

Lease operating expenses ("LOE") for the first quarter of 2016 decreased to $8,177,000, as compared to $10,902,000 in the first quarter of 2015.  LOE per Mcfe was $1.07 for the first quarter of 2016, as compared to $1.05 in the first quarter of 2015. Per unit lease operating expenses increased during the 2016 quarter as a result of the Oklahoma sale in June 2015, which included gas properties that had lower per unit operating costs.

Depreciation, depletion and amortization ("DD&A") on oil and gas properties for the first quarter of 2016 was $1.30 per Mcfe, as compared to $1.96 per Mcfe in the first quarter of 2015. The decrease in the per unit DD&A rate during the 2016 period is primarily the result of ceiling test write-downs throughout 2015.

Interest expense for the first quarter of 2016 increased to $8,257,000, as compared to $7,874,000 in the first quarter of 2015. During the three month period ended March 31, 2016, capitalized interest totaled $309,000, as compared to $1,998,000 during the 2015 period. Capitalized interest was lower during the 2016 period as a result of the decline in the Company's unevaluated property balance due to the Oklahoma sale in 2015. The increase in interest expense during the 2016 period is primarily attributable to reduced capitalized interest, as well as approximately $400,000 of deferred financing costs that were written off in connection with the Company's debt exchange in February 2016.  

General and administrative expenses during the three months ended March 31, 2016 totaled $8,599,000, as compared to expenses of $5,339,000 during the comparable 2015 period. The increase in general and administrative expenses during the three months ended March 31, 2016 is primarily due to $4,740,000 of costs related to the issuance of the Company's 2021 Notes in February 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, 2016 and 2015:

Three Months Ended March 31,

2016

2015

Production:

Oil (Bbls)

139,989

147,214

Gas (Mcf)

5,547,477

7,915,504

Ngl (Mcfe)

1,246,632

1,576,540

Total Production (Mcfe)

7,634,043

10,375,330

 Avg. Daily Production (Mmcfe/d)

83.9

115.3

Sales:

Total oil sales

$   4,358,744

$   6,952,900

Total gas sales

10,718,208

21,650,095

Total ngl sales

2,242,762

4,848,046

Total oil and gas sales

$ 17,319,714

$ 33,451,041

Average sales prices:

Oil (per Bbl)

$          31.14

$          47.23

Gas (per Mcf)

1.93

2.74

Ngl (per Mcfe)

1.80

3.08

Per Mcfe

2.27

3.22

 

The above sales and average sales prices include increases to revenue related to the settlement of gas hedges of $1,032,000 and $2,324,000, oil hedges of $0 and $27,000 and Ngl hedges of  $0 and $21,000 for the three months ended March 31, 2016 and 2015, respectively. 

The following provides guidance for the second quarter of 2016: 

Guidance for

Description

2nd Quarter 2016

Production volumes (MMcfe/d)

61 - 65

Percent Gas

72 %

Percent Oil

11 %

Percent NGL

17 %

Expenses:

Lease operating expenses (per Mcfe)

$1.25 - $1.35

Production taxes (per Mcfe)

$0.04 - $0.07

Depreciation, depletion and amortization (per Mcfe)

$1.35 - $1.45

General and administrative (in millions)*

$3.6 - $4.0

Interest expense (in millions)

$6.4 - $6.9

* Includes non-cash stock compensation estimate of approximately $0.6 million

 

Operations Update

In the Gulf Coast, the Company's Thunder Bayou well is currently flowing at approximately 30 MMcfe/d (NRI-37%) and its production profile continues to exceed the Company's original expectations. Based on continued outperformance in the lowest interval, the Company now expects to recomplete into the upper section of the Cris R-2 formation (154 net feet of pay) during the third quarter of 2016. The Company's second quarter production guidance incorporates anticipated declines at Thunder Bayou relative to the timing of the third quarter recompletion.  In the Gulf of Mexico, the Company expects to commence a three well recompletion program at its Ship Shoal 72 field at the end of second quarter.  The Company estimates this program  will cost approximately $600,000 and contribute approximately 3 MMcfe/d of production during the third quarter of 2016.

Borrowing Base Update

The Company currently has no borrowings outstanding under its Credit Facility and is undergoing a borrowing base redetermination.  Due in part to the April 2016 sale of the East Hoss assets in Oklahoma, the Company expects that the borrowing base and aggregate commitments under the Credit Facility will be reduced.  Until the ongoing borrowing base redetermination is complete, the Company has agreed to not request any borrowings or issue any letters of credit pursuant to the Credit Facility.

Management's Comment

"During the first quarter we took several positive steps, building upon efforts started with our June 2015 Woodford sale, aimed at repairing our balance sheet," said Charles T. Goodson, Chairman, Chief Executive Officer and President. "The debt exchange reduced fixed charges, improved our leverage profile and extended debt maturities, while the recent non-core asset sales increased cash on hand."

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 PetroQuest 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 ability to reduce leverage or refinance our remaining 2017 Notes; our estimate of the sufficiency of our existing capital sources, including availability under our bank credit facility and the result of any borrowing base redetermination; our ability to post additional collateral to satisfy our offshore decommissioning obligations; 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 bank credit 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 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; 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; and our ability to pay dividends on our Series B Preferred Stock. In particular, careful consideration should be given to cautionary statements made in the various reports PetroQuest has filed with the SEC. PetroQuest undertakes no duty to update or revise these forward-looking statements.

PETROQUEST ENERGY, INC.

Consolidated Balance Sheets

(Amounts in Thousands)

March 31, 2016

December 31, 2015

ASSETS

Current assets:

Cash and cash equivalents

$     53,365

$   148,013

Revenue receivable

7,318

6,476

Joint interest billing receivable

38,665

49,374

Derivative asset

1,277

1,508

Other current assets

6,119

3,874

Total current assets

106,744

209,245

Property and equipment:

Oil and gas properties:

Oil and gas properties, full cost method

1,310,800

1,310,891

Unevaluated oil and gas properties

11,751

12,516

Accumulated depreciation, depletion and amortization

(1,186,262)

(1,157,455)

      Oil and gas properties, net

136,289

165,952

Other property and equipment

11,252

11,229

Accumulated depreciation of other property and equipment

(8,925)

(8,737)

Total property and equipment

138,616

168,444

Other assets, net of accumulated depreciation and amortization of $3,922 and $3,842, respectively

1,533

1,630

Total assets

$   246,893

$   379,319

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable to vendors

$     76,815

$     97,999

Advances from co-owners

4,097

16,118

Oil and gas revenue payable

23,108

18,911

Accrued interest and preferred stock dividend

2,942

12,795

Asset retirement obligation

5,545

6,015

Accrued acquisition cost

4,409

Other accrued liabilities

3,915

2,537

Total current liabilities

116,422

158,784

10% Senior Unsecured Notes due 2017

134,583

347,008

10% Senior Secured Notes due 2021

157,039

Asset retirement obligation

37,155

36,541

Other long-term liabilities

1,349

53

Commitments and contingencies

Stockholders' deficit:

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 70,104 and 65,641 shares, respectively

70

66

Paid-in capital

293,072

290,382

Accumulated other comprehensive income

802

947

Accumulated deficit

(493,600)

(454,463)

Total stockholders' deficit

(199,655)

(163,067)

Total liabilities and stockholders' deficit

$   246,893

$   379,319

 

PETROQUEST ENERGY, INC.

Consolidated Statements of Operations

(Amounts in Thousands, Except Per Share Data)

Three Months Ended

March 31,

2016

2015

Revenues:

Oil and gas sales

$  17,320

$    33,451

Expenses:

Lease operating expenses

8,177

10,902

Production taxes

338

956

Depreciation, depletion and amortization

10,138

20,654

Ceiling test write-down

18,857

108,911

General and administrative

8,599

5,339

Accretion of asset retirement obligation

608

859

Interest expense

8,257

7,874

54,974

155,495

Other income:

Other income

97

157

Loss from operations

(37,557)

(121,887)

Income tax expense (benefit)

86

(927)

Net loss

(37,643)

(120,960)

Preferred stock dividend

1,494

1,280

Loss available to common stockholders

$ (39,137)

$ (122,240)

Loss per common share:

Basic

Net loss per share

$     (0.58)

$       (1.89)

Diluted

Net loss per share

$     (0.58)

$       (1.89)

Weighted average number of common shares:

Basic

67,824

64,774

Diluted

67,824

64,774

 

PETROQUEST ENERGY, INC.

Consolidated Statements of Cash Flows

(Amounts in Thousands)

Three Months Ended

March 31,

2016

2015

Cash flows from operating activities:

Net loss

$ (37,643)

$ (120,960)

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

Deferred tax expense (benefit)

86

(927)

Depreciation, depletion and amortization

10,138

20,654

Ceiling test writedown

18,857

108,911

Accretion of asset retirement obligation

608

859

Share-based compensation expense

442

1,478

Amortization costs and other

562

591

Payments to settle asset retirement obligations

(464)

(894)

Costs incurred to issue 2021 Notes

4,740

Changes in working capital accounts:

Revenue receivable

(842)

2,794

Joint interest billing receivable

10,709

14,439

Accounts payable and accrued liabilities

(20,413)

(24,561)

Advances from co-owners

(12,021)

22,182

Other

(949)

(1,335)

Net cash provided by (used in) operating activities

(26,190)

23,231

Cash flows used in investing activities:

Investment in oil and gas properties

(15,812)

(36,033)

Investment in other property and equipment

(23)

(80)

Sale of oil and gas properties

7,000

Net cash used in investing activities

(8,835)

(36,113)

Cash flows provided by (used in) financing activities:

Net proceeds for share based compensation

65

405

Deferred financing costs

(38)

(273)

Payment of preferred stock dividend

(1,284)

(1,284)

Redemption of 2017 Notes

(53,626)

Costs incurred to issue 2021 Notes

(4,740)

Proceeds from bank borrowings

15,000

Repayment of bank borrowings

(5,000)

Net cash provided by (used in) financing activities

(59,623)

8,848

Net decrease in cash and cash equivalents

(94,648)

(4,034)

Cash and cash equivalents, beginning of period

148,013

18,243

Cash and cash equivalents, end of period

$  53,365

$    14,209

Supplemental disclosure of cash flow information:

Cash paid during the period for:

Interest

$  16,781

$    17,943

Income taxes

$         —

$           20

 

 PETROQUEST ENERGY, INC.

Non-GAAP Disclosure Reconciliation

(Amounts In Thousands)

Three Months Ended

March 31,

2016

2015

Net loss

$ (37,643)

$ (120,960)

Reconciling items:

Deferred tax expense (benefit)

86

(927)

Depreciation, depletion and amortization

10,138

20,654

Ceiling test writedown

18,857

108,911

Accretion of asset retirement obligation

608

859

Non-cash share based compensation expense

442

1,478

Amortization costs and other

562

591

Costs incurred to issue 2021 Notes

4,740

Discretionary cash flow

(2,210)

10,606

Changes in working capital accounts

(23,516)

13,519

Settlement of asset retirement obligations

(464)

(894)

Net cash flow provided by (used in) operating activities

$ (26,190)

$    23,231

 

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-first-quarter-2016-results-300261109.html

SOURCE PetroQuest Energy, Inc.



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