Petroquest Energy (PQ) 8-K Results of Operations and Financial Condition

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):
May 9, 2005

PETROQUEST ENERGY, INC.

(Exact name of registrant as specified in its charter)

DELAWARE	72-1440714
(State of Incorporation)	(I.R.S. Employer Identification No.)
400 E. Kaliste Saloom Rd., Suite 6000
Lafayette, Louisiana	70508
(Address of Principal Executive Offices)	(Zip Code)

Commission File Number: 0-019020

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:

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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TABLE OF CONTENTS

	Item 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
SIGNATURE

Item 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

LAFAYETTE, LA – May 9, 2005 — PetroQuest Energy, Inc. (NASDAQ: PQUE) announced today net income for the quarter ended March 31, 2005 of $4,187,000 or $0.09 per share, compared to first quarter 2004 net income of $3,172,000 or $0.07 per share. Net cash flow provided by operating activities totaled $11,439,000 and $10,454,000 during the first quarters of 2005 and 2004, respectively. Net cash flow provided by operating activities before working capital changes for the first quarter of 2005 was $15,512,000, as compared to $13,470,000 for the comparable 2004 period. See the attached schedule for a reconciliation of net cash flow provided by operating activities to net cash flow provided by operating activities before working capital changes.

Oil and gas sales during the first quarter of 2005 increased 20% to $21,672,000 as compared to $18,133,000 in the first quarter of 2004. Production for the first quarter of 2005 was 3% higher than production for the comparable period of 2004. Stated on an Mcfe basis, unit prices received during the first quarter were 16% higher than the prices received during the comparable 2004 period.

Lease operating expenses for the first quarter of 2005 were $1.16 per Mcfe as compared to $0.84 per Mcfe in the first quarter of 2004. In addition, depreciation, depletion and amortization on oil and gas properties for the first quarter of 2005 was essentially unchanged from the first quarter of 2004.

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, 2005 and 2004:

	Three Months Ended
	March 31,
	2005		2004
Production:
Oil (Bbls)		181,399		178,479
Gas (Mcf)		2,249,113		2,161,740
Total Production (Mcfe)		3,337,507		3,232,614
Sales:
Total oil sales	$	7,872,569	$	5,803,603
Total gas sales		13,798,937		12,328,973
Total oil and gas sales		21,671,506		18,132,576
Average sales prices:
(Including hedges)
Oil (per Bbl)	$	43.40	$	32.52
Gas (per Mcf)		6.14		5.70
Per Mcfe		6.49		5.61

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The following updates guidance for the second quarter of 2005:

	Guidance for
Description	2nd Quarter 2005
Production volumes (MMcfe/d)		47 - 52
Percent gas		65	%
Expenses:
Lease operating expenses (per Mcfe)	$	1.20 - $1.30
Production taxes (per Mcfe)	$	0.09 - $0.11
Depreciation, depletion and amortization (per Mcfe)	$	2.50 - $2.60
General and administrative (in millions)	$	1.55 - $1.65
Interest expense (in millions)	$	5.5 - $6.0	(1)
Effective tax rate (all deferred)		35	%

(1) Includes a possible $3 million pre-tax, non-cash charge related to the write-off of deferred financing costs if we repay borrowings under our credit facilities as previously disclosed.

The following updates guidance for the year ended December 31, 2005:

	Guidance for
Description	Full year 2005
Production volumes (MMcfe/d)		52.0 - 57.5
Percent gas		70	%
Expenses:
Lease operating expenses (per Mcfe)	$	1.00 - $1.10
Production taxes (per Mcfe)	$	0.12 - $0.14
Depreciation, depletion and amortization (per Mcfe)	$	2.50 - $2.60
General and administrative (in millions)	$	6 - $7
Interest expense (in millions)	$	13 - $14	(1)
Effective tax rate (all deferred)		35	%

(1) Includes a possible $3 million pre-tax, non-cash charge related to the write-off of deferred financing costs if we repay borrowings under our credit facilities as previously disclosed.

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 Gulf Coast Basin, Texas and Oklahoma. PetroQuest trades on the Nasdaq National Market under the ticker symbol “PQUE.”

Forward-Looking Statements
This press 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. These forward-looking statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected. Among those risks, trends and uncertainties are

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our estimate of the sufficiency of our existing capital sources, our ability to raise additional capital to fund cash requirements for future operations, the uncertainties involved in estimating quantities of proved oil and natural gas reserves, in prospect development and property acquisitions and in projecting future rates of production, the timing of development expenditures and drilling of wells, and the operating hazards attendant to the oil and gas business. In particular, careful consideration should be given to cautionary statements made in the various reports PetroQuest has filed with the Securities and Exchange Commission. PetroQuest undertakes no duty to update or revise these forward-looking statements.

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PETROQUEST ENERGY, INC.
Consolidated Statements of Income
(unaudited)
(Amounts in Thousands, Except Per Share Data)

	Three Months Ended
	March 31,
	2005		2004
Revenues:
Oil and gas sales	$	21,672	$	18,133
Interest and other income		71		70
		21,743		18,203
Expenses:
Lease operating expenses		3,882		2,722
Production taxes		374		444
Depreciation, depletion and amortization		8,195		7,942
General and administrative		1,689		1,294
Accretion of asset retirement obligation		200		231
Interest expense		962		681
Derivative expense		—		9
		15,302		13,323
Income from operations		6,441		4,880
Income tax expense		2,254		1,708
Net income	$	4,187	$	3,172
Earnings per common share:
Basic	$	0.09	$	0.07
Diluted	$	0.09	$	0.07
Weighted average number of common shares:
Basic		45,338		44,558
Diluted		47,475		45,721

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PETROQUEST ENERGY, INC.
Consolidated Balance Sheets
(unaudited)
(Amounts in Thousands)

	March 31,			December 31,
	2005			2004
ASSETS
Current assets:
Cash and cash equivalents	$	1,839		$	1,529
Oil and gas revenue receivable		11,446			9,392
Joint interest billing receivable		9,708			3,655
Other current assets		1,605			1,017
Total current assets		24,598			15,593
Oil and gas properties:
Oil and gas properties, full cost method		387,322			363,756
Unevaluated oil and gas properties		17,385			16,380
Accumulated depreciation, depletion and amortization		(176,545	)		(168,453	)
Oil and gas properties, net		228,162			211,683
Other assets, net of accumulated depreciation and amortization of $6,532 and $5,967, respectively		3,896			4,341
Total assets	$	256,656		$	231,617
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable to vendors	$	25,098		$	24,176
Advances from co-owners		7,508			2,265
Hedging liability		8,416			4,536
Other accrued liabilities		9,967			9,045
Total current liabilities		50,989			40,022
Long-term debt		51,000			38,500
Long-term hedging liability		2,847			1,974
Asset retirement obligation		14,090			15,238
Deferred income taxes		15,197			14,606
Commitments and contingencies		—			—
Stockholders’ equity:
Common stock, $.001 par value; authorized 75,000 shares; issued and outstanding 46,270 and 44,685 shares, respectively		46			45
Paid-in capital		112,545			112,387
Accumulated other comprehensive loss		(7,321	)		(4,231	)
Retained earnings		17,263			13,076
Total stockholders’ equity		122,533			121,277
Total liabilities and stockholders’ equity	$	256,656		$	231,617

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PETROQUEST ENERGY, INC.
Consolidated Statements of Cash Flows
(unaudited)
(Amounts in Thousands)

	Three Months Ended
	March 31,
	2005			2004
Cash flows from operating activities:
Net income	$	4,187		$	3,172
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred tax expense		2,254			1,708
Depreciation, depletion and amortization		8,195			7,942
Accretion of asset retirement obligation		200			231
Amortization of debt issuance costs		463			409
Compensation expense		213			57
Derivative mark to market		—			(49	)
Changes in working capital accounts:
Accounts receivable		(2,054	)		1,124
Joint interest billing receivable		(6,053	)		(568	)
Other assets		(625	)		(221	)
Accounts payable and accrued liabilities		(584	)		(3,997	)
Advances from co-owners		5,243			646
Net cash provided by operating activities		11,439			10,454
Cash flows from investing activities:
Investment in oil and gas properties		(23,673	)		(8,313	)
Net cash used in investing activities		(23,673	)		(8,313	)
Cash flows from financing activities:
Proceeds from exercise of options		127			64
Deferred financing costs		(83	)		(234	)
Proceeds from borrowings		12,500			4,000
Repayment of debt		—			(5,500	)
Net cash provided by (used in) financing activities		12,544			(1,670	)
Net increase in cash and cash equivalents		310			471
Cash balance and cash equivalents, beginning of period		1,529			779
Cash balance and cash equivalents, end of period	$	1,839		$	1,250
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	679		$	379
Income taxes	$	—		$	—

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Non-GAAP Disclosure Reconciliation
(Amounts In Thousands)

	Three Months Ended
	March 31,
	2005		2004
Net cash flow provided by operating activities	$	11,439	$	10,454
Changes in working capital accounts		4,073		3,016
Net cash flow provided by operating activities before working capital changes	$	15,512	$	13,470

Note:  Management believes that net cash flow provided by operating activities before working capital changes 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. Net cash flow provided by operating activities before working capital changes 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 net cash flow provided by operating activities before working capital changes is not a term defined by GAAP, it might not be comparable to similarly titled measures used by other companies.

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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 thereunto duly authorized.

	PETROQUEST ENERGY, INC.
Date: May 9, 2005	By:	/s/ Daniel G. Fournerat
		Daniel G. Fournerat
		Senior Vice President, General Counsel and Secretary

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