UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
March 5, 2018
PETROQUEST ENERGY, INC.
(Exact name of registrant as specified in its charter)
|
| |
DELAWARE (State of Incorporation) 400 E. Kaliste Saloom Rd., Suite 6000 Lafayette, Louisiana (Address of principal executive offices) | 72-1440714 (I.R.S. Employer Identification No.)
70508 (Zip code) |
Commission File Number: 001-32681
Registrant’s telephone number, including area code: (337) 232-7028
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act. ☐
Item 2.02 Results of Operations and Financial Condition
On March 5, 2018, PetroQuest Energy, Inc. (the "Company") announced a loss for the quarter ended December 31, 2017 of $389,000, or $0.02 per share, compared to fourth quarter 2016 net loss to common stockholders of $9,659,000, or $0.46 per share. For the year ended December 31, 2017, the Company reported a net loss to common stockholders of $11,776,000, or $0.55 per share, compared to net loss to common shareholders of $96,245,000, or $5.24 per share, for the year ended December 31, 2016. The year ended December 31, 2016 included a ceiling test write-down of $40,304,000.
Net cash flow provided by (used in) operating activities for the fourth quarter of 2017 was $8,825,000 as compared to $(4,861,000) for the comparable 2016 period. Discretionary cash flow for the fourth quarter of 2017 was $16,880,000 as compared to $3,591,000 for the comparable 2016 period. Net cash flow provided by (used in) operating activities for the year ended of 2017 was $44,153,000 as compared to $(56,598,000) for the comparable 2016 period. For the year ended December 31, 2017, discretionary cash flow was $51,212,000 compared to $597,000 for 2016. See the attached schedule for a reconciliation of net cash flow provided by operating activities to discretionary cash flow.
Oil and gas sales during the fourth quarter of 2017 were $35,080,000 as compared to $16,429,000 in the fourth quarter of 2016. For the year ended December 31, 2017, oil and gas sales increased 62% to $108,287,000 as compared to $66,667,000 for the year ended December 31, 2016. Production for the year ended December 31, 2017 was 17% higher than 2016. Stated on an Mcfe basis, unit prices received during the fourth quarter and the year ended December 31, 2017 were 16% and 38% higher, respectively, as compared to the prices received during the comparable 2016 periods.
Lease operating expenses during 2017 totaled $33,162,000 as compared to $28,508,000 in 2016. Lease operating expenses for the fourth quarter of 2017 were $1.18 per Mcfe as compared to $1.43 per Mcfe in the fourth quarter of 2016. Lease operating expenses for the year ended December 31, 2017 were $1.20 per Mcfe as compared to $1.21 for the year ended December 31, 2016.
Depreciation, depletion and amortization (“DD&A”) on oil and gas properties for the fourth quarter of 2017 was $1.19 per Mcfe as compared to $1.11 per Mcfe in the fourth quarter of 2016. For the year ended December 31, 2017, DD&A on oil and gas properties decreased to $1.15 per Mcfe from $1.19 per Mcfe for 2016.
Interest expense for the fourth quarter of 2017 was $7,060,000, as compared to $7,522,000 in the fourth quarter of 2016. For the year ended December 31, 2017, interest expense was $28,836,000 compared to $30,019,000 for 2016.
Fourth quarter of 2017 general and administrative expense was $309,000 higher than the comparable 2016 period. For the year ended December 31, 2017, general and administrative expense was $10,180,000 lower than 2016. The decrease in general and administrative expense during the 2017 annual period was primarily the result of the inclusion of costs associated with the Company's two debt exchanges in 2016.
Production taxes for the fourth quarter of 2017 totaled $1,312,000, as compared to $(255,000) in the fourth quarter of 2016. For the year ended December 31, 2017, production taxes were $3,302,000, as compared to $354,000 for 2016. Production taxes during 2016 included $1,292,000 of production tax refunds on certain of our East Texas wells that qualified for a gas tax credit. In addition, the two-year severance tax exemption on our Thunder Bayou well expired in June 2017.
The following table sets forth certain information with respect to the oil and gas operations of the Company for the three and twelve months ended December 31, 2017 and 2016:
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| | | | | | | | | | | | | | | |
| | Three Months Ended December 31, | | Twelve Months Ended December 31, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| Production: | | | | | | | |
| Oil (Bbls) | 168,327 |
| | 124,728 |
| | 591,558 |
| | 502,201 |
|
| Gas (Mcf) | 6,392,489 |
| | 3,146,172 |
| | 19,610,964 |
| | 16,616,578 |
|
| Ngl (Mcfe) | 1,184,611 |
| | 740,163 |
| | 4,452,817 |
| | 3,870,947 |
|
| Total Production (Mcfe) | 8,587,062 |
| | 4,634,703 |
| | 27,613,129 |
| | 23,500,731 |
|
| Daily Production (MMcfe) | 93.3 |
| | 50.4 |
| | 75.7 |
| | 64.4 |
|
| Sales: | | | | | | | |
| Total oil sales | $ | 9,980,269 |
| | $ | 5,938,353 |
| | $ | 31,258,109 |
| | $ | 20,613,964 |
|
| Total gas sales | 20,080,820 |
| | 8,517,819 |
| | 60,922,072 |
| | 37,962,622 |
|
| Total ngl sales | 5,019,200 |
| | 1,972,424 |
| | 16,107,068 |
| | 8,090,292 |
|
| Total oil and gas sales | $ | 35,080,289 |
| | $ | 16,428,596 |
| | $ | 108,287,249 |
| | $ | 66,666,878 |
|
| Average sales prices: | | | | | | | |
| Oil (per Bbl) | $ | 59.29 |
| | $ | 47.61 |
| | $ | 52.84 |
| | $ | 41.05 |
|
| Gas (per Mcf) | 3.14 |
| | 2.71 |
| | 3.11 |
| | 2.28 |
|
| Ngl (per Mcfe) | 4.24 |
| | 2.66 |
| | 3.62 |
| | 2.09 |
|
| Per Mcfe | 4.09 |
| | 3.54 |
| | 3.92 |
| | 2.84 |
|
The above sales and average sales prices include increases (reductions) to revenue related to the settlement of gas hedges of $1,057,000 and $(232,000) for the three months ended December 31, 2017 and 2016, respectively. The above sales and average sales prices include increases to revenue related to the settlement of gas hedges of $1,461,000 and $1,811,000 for the twelve months ended December 31, 2017 and 2016, respectively.
First Quarter 2018 Guidance
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| |
| | Guidance for |
| Description | 1st Quarter 2018 |
| | |
| Production volumes (MMcfe/d) | 64 - 68 |
| | |
| Percent Gas | 76% |
| Percent Oil | 9% |
| Percent NGL | 15% |
| | |
| | |
| Expenses: | |
| Lease operating expenses (per Mcfe) | $1.00 - $1.10 |
| Production taxes (per Mcfe) | $0.20 - $0.25 |
| Depreciation, depletion and amortization (per Mcfe) | $1.10 - $1.20 |
| General and administrative (in millions)* | $3.4 - $3.9 |
| Interest expense (in millions)** | $7.3 - $7.5 |
| | |
| | |
| * Includes non-cash stock compensation estimate of $0.4 million | |
| ** Includes PIK interest of approximately $3.0 million | |
The Company is continuing to evaluate various joint venture structures in connection with planning its 2018 Cotton Valley drilling program. As a result, the Company expects to provide its 2018 capital expenditures guidance in conjunction with its first quarter 2018 earnings press release.
Management’s Comment
“Our fourth quarter 2017 results represent the culmination of a tremendous year as we accomplished numerous corporate goals including nearly doubling our fourth quarter 2016 production rate and growing our proved reserves and PV-10 by 35% and 89%, respectively,” said Charles T. Goodson, Chairman, Chief Executive Officer and President. “In addition, we established a 25,000 gross acre position in an area that we believe will ultimately be determined to be in the core of the Louisiana Austin Chalk oil trend. Our current plans call for us to spud our initial horizontal Austin Chalk well during the second quarter of 2018 and we are continuing to evaluate various joint venture structures in connection with our 2018 Cotton Valley development plan.”
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 Texas and Louisiana. 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; 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 multi-draw term loan facility; our ability to fund and
execute our Cotton Valley and Austin Chalk development programs as planned; our ability to increase recoveries in the Austin Chalk formation and to increase our overall oil production as planned; our estimates with respect to fracked Austin Chalk wells in Louisiana, including production EURs and costs; our estimates with respect to production, reserve replacement ratio and finding and development costs; our receipt of a cash refund with respect to our offshore bonds and the timing and amount of the same; our responsibility for offshore decommissioning liabilities for offshore interests we no longer own; 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 51% 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)
|
| | | | | | | |
| | December 31, 2017 | | December 31, 2016 |
| ASSETS | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 15,655 |
| | $ | 28,312 |
|
| Revenue receivable | 15,340 |
| | 10,294 |
|
| Joint interest billing receivable | 6,597 |
| | 7,632 |
|
| Other receivable | 7,750 |
| | — |
|
| Derivative asset | 1,174 |
| | — |
|
| Deposit for surety bonds | 8,300 |
| | — |
|
| Other current assets | 2,125 |
| | 2,353 |
|
| Total current assets | 56,941 |
| | 48,591 |
|
| Property and equipment: | | | |
| Oil and gas properties: | | | |
| Oil and gas properties, full cost method | 1,369,861 |
| | 1,323,333 |
|
| Unevaluated oil and gas properties | 21,854 |
| | 9,015 |
|
| Accumulated depreciation, depletion and amortization | (1,285,660 | ) | | (1,243,286 | ) |
| Oil and gas properties, net | 106,055 |
| | 89,062 |
|
| Other property and equipment | 9,353 |
| | 10,951 |
|
| Accumulated depreciation of other property and equipment | (8,843 | ) | | (10,109 | ) |
| Total property and equipment | 106,565 |
| | 89,904 |
|
| Other assets, net of accumulated amortization of $0 and $4,385, respectively | 792 |
| | 6,365 |
|
| Total assets | $ | 164,298 |
| | $ | 144,860 |
|
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
| Current liabilities: | | | |
| Accounts payable to vendors | $ | 36,179 |
| | $ | 25,265 |
|
| Advances from co-owners | 1,730 |
| | 2,330 |
|
| Oil and gas revenue payable | 19,344 |
| | 22,146 |
|
| Accrued interest | 1,724 |
| | 2,047 |
|
| Asset retirement obligation | 687 |
| | 4,160 |
|
| Derivative liability | 731 |
| | 3,947 |
|
| 10% Senior Unsecured Notes due 2017 | — |
| | 22,568 |
|
| Other accrued liabilities | 2,445 |
| | 3,938 |
|
| Total current liabilities | 62,840 |
| | 86,401 |
|
| Multi-draw Term Loan | 27,963 |
| | 7,249 |
|
| 10% Senior Secured Notes due 2021 | 9,821 |
| | 15,228 |
|
| 10% Senior Secured PIK Notes due 2021 | 271,577 |
| | 248,600 |
|
| Asset retirement obligation | 30,623 |
| | 32,450 |
|
| Other long-term liabilities | 10,409 |
| | 6,027 |
|
| 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 25,521 and 21,197 shares, respectively | 26 |
| | 21 |
|
| Paid-in capital | 313,244 |
| | 304,341 |
|
| Accumulated other comprehensive income (loss) | 278 |
| | (4,750 | ) |
| Accumulated deficit | (562,484 | ) | | (550,708 | ) |
| Total stockholders’ equity | (248,935 | ) | | (251,095 | ) |
| Total liabilities and stockholders’ equity | $ | 164,298 |
| | $ | 144,860 |
|
PETROQUEST ENERGY, INC.
Consolidated Statements of Operations
(Amounts in Thousands, Except Per Share Data)
|
| | | | | | | | | | | | | | | |
| | Three Months Ended December 31, | | Twelve Months Ended December 31, |
| | 2017 | �� | 2016 | | 2017 | | 2016 |
| Revenues: | | | | | | | |
| Oil and gas sales | $ | 35,080 |
| | $ | 16,429 |
| | $ | 108,287 |
| | $ | 66,667 |
|
| Expenses: | | | | | | | |
| Lease operating expenses | 10,110 |
| | 6,610 |
| | 33,162 |
| | 28,508 |
|
| Production taxes | 1,312 |
| | (255 | ) | | 3,302 |
| | 354 |
|
| Depreciation, depletion and amortization | 10,300 |
| | 5,359 |
| | 32,053 |
| | 28,720 |
|
| Ceiling test write-down | — |
| | — |
| | — |
| | 40,304 |
|
| General and administrative | 5,052 |
| | 4,743 |
| | 15,860 |
| | 26,040 |
|
| Accretion of asset retirement obligation | 581 |
| | 619 |
| | 2,252 |
| | 2,515 |
|
| Interest expense | 7,060 |
| | 7,522 |
| | 28,836 |
| | 30,019 |
|
| | 34,415 |
| | 24,598 |
| | 115,465 |
| | 156,460 |
|
| Other expense | (444 | ) | | (205 | ) | | (408 | ) | | (560 | ) |
| Income (loss) | 221 |
| | (8,374 | ) | | (7,586 | ) | | (90,353 | ) |
| Income tax expense (benefit) | (675 | ) | | — |
| | (949 | ) | | 543 |
|
| Net income (loss) | 896 |
| | (8,374 | ) | | (6,637 | ) | | (90,896 | ) |
| Preferred stock dividend | 1,285 |
| | 1,285 |
| | 5,139 |
| | 5,349 |
|
| Net loss available to common stockholders | $ | (389 | ) | | $ | (9,659 | ) | | $ | (11,776 | ) | | $ | (96,245 | ) |
| Loss per common share: | | | | | | | |
| Basic | | | | | | | |
| Net loss per share | $ | (0.02 | ) | | $ | (0.46 | ) | | $ | (0.55 | ) | | $ | (5.24 | ) |
| Diluted | | | | | | | |
| Net loss per share | $ | (0.02 | ) | | $ | (0.46 | ) | | $ | (0.55 | ) | | $ | (5.24 | ) |
| Weighted average number of common shares: | | | | | | | |
| Basic | 21,662 |
| | 21,161 |
| | 21,330 |
| | 18,354 |
|
| Diluted | 21,662 |
| | 21,161 |
| | 21,330 |
| | 18,354 |
|
PETROQUEST ENERGY, INC.
Consolidated Statements of Cash Flows
(Amounts in Thousands)
|
| | | | | | | |
| | Year Ended |
| | December 31, |
| | 2017 | | 2016 |
| Cash flows provided by (used in) operating activities: | | | |
| Net loss | $ | (6,637 | ) | | $ | (90,896 | ) |
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | | | |
| Deferred tax expense (benefit) | (949 | ) | | 543 |
|
| Depreciation, depletion and amortization | 32,053 |
| | 28,720 |
|
| Ceiling test writedown | — |
| | 40,304 |
|
| Accretion of asset retirement obligation | 2,252 |
| | 2,515 |
|
| Share based compensation expense | 1,447 |
| | 1,444 |
|
| Amortization costs and other | 554 |
| | 2,106 |
|
| Non-cash PIK interest | 22,895 |
| | 5,722 |
|
| Payments to settle asset retirement obligations | (3,364 | ) | | (3,169 | ) |
| Costs incurred to issue 2021 Notes and 2021 PIK Notes | — |
| | 10,139 |
|
| Gain on extinguishment of debt | (403 | ) | | — |
|
| Changes in working capital accounts: | | | |
| Revenue receivable | (5,046 | ) | | (3,818 | ) |
| Joint interest billing receivable | 610 |
| | 41,400 |
|
| Accounts payable and accrued liabilities | 2,970 |
| | (72,760 | ) |
| Advances from co-owners | (600 | ) | | (13,788 | ) |
| Other | (1,629 | ) | | (5,060 | ) |
| Net cash provided by (used in) operating activities | 44,153 |
| | (56,598 | ) |
| Cash flows (used in) provided by investing activities: | | | |
| Investment in oil and gas properties | (64,613 | ) | | (30,366 | ) |
| Investment in other property and equipment | (54 | ) | | (24 | ) |
| Sale of oil and gas properties | 10,707 |
| | 25,482 |
|
| Net cash used in investing activities | (53,960 | ) | | (4,908 | ) |
| Cash flows used in financing activities: | | | |
| Net payments for share based compensation | (26 | ) | | 11 |
|
| Deferred financing costs | (174 | ) | | (3,156 | ) |
| Payment of preferred stock dividend | — |
| | (1,285 | ) |
| Proceeds from borrowings | 20,000 |
| | 10,000 |
|
| Redemption of 2017 Notes | (22,650 | ) | | (53,626 | ) |
| Costs incurred to issue 2021 Notes and 2021 PIK Notes | — |
| | (10,139 | ) |
| Net cash used in financing activities | (2,850 | ) | | (58,195 | ) |
| Net decrease in cash and cash equivalents | (12,657 | ) | | (119,701 | ) |
| Cash and cash equivalents, beginning of period | 28,312 |
| | 148,013 |
|
| Cash and cash equivalents, end of period | $ | 15,655 |
| | $ | 28,312 |
|
| Supplemental disclosure of cash flow information: | | | |
| Cash paid (received) during the period for: | | | |
| Interest | $ | 7,432 |
| | $ | 33,206 |
|
| Income taxes | $ | (94 | ) | | $ | (18 | ) |
PETROQUEST ENERGY, INC.
Non-GAAP Disclosure Reconciliation
(Amounts In Thousands)
|
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Twelve Months Ended |
| | December 31, | | December 31, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| Net income (loss) | $ | 896 |
| | $ | (8,374 | ) | | $ | (6,637 | ) | | $ | (90,896 | ) |
| Reconciling items: | | | | | | | |
| Deferred tax expense (benefit) | (675 | ) | | — |
| | (949 | ) | | 543 |
|
| Depreciation, depletion and amortization | 10,300 |
| | 5,359 |
| | 32,053 |
| | 28,720 |
|
| Ceiling test write-down | — |
| | — |
| | — |
| | 40,304 |
|
| Accretion of asset retirement obligation | 581 |
| | 619 |
| | 2,252 |
| | 2,515 |
|
| Non-cash share based compensation expense | 266 |
| | 83 |
| | 1,447 |
| | 1,444 |
|
| Costs incurred to issue 2021 Notes and 2021 PIK Notes | — |
| | 66 |
| | — |
| | 10,139 |
|
| Non-cash PIK interest | 5,922 |
| | 5,722 |
| | 22,895 |
| | 5,722 |
|
| Amortization costs and other | (7 | ) | | 116 |
| | 554 |
| | 2,106 |
|
| Gain on extinguishment of debt | (403 | ) | | — |
| | (403 | ) | | — |
|
| Discretionary cash flow | 16,880 |
| | 3,591 |
| | 51,212 |
| | 597 |
|
| Changes in working capital accounts | (6,968 | ) | | (8,167 | ) | | (3,695 | ) | | (54,026 | ) |
| Settlement of asset retirement obligations | (1,087 | ) | | (285 | ) | | (3,364 | ) | | (3,169 | ) |
| Net cash flow provided by (used in) operating activities | $ | 8,825 |
| | $ | (4,861 | ) | | $ | 44,153 |
| | $ | (56,598 | ) |
| |
| 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. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: March 5, 2018
PETROQUEST ENERGY, INC.
/s/ J. Bond Clement
J. Bond Clement
Executive Vice President, Chief Financial Officer and Treasurer
