1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A-2
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 1, 2001 (December 21, 2000)
PETROQUEST ENERGY, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State of incorporation)
1-9020 72-1440714
(Commission File Number) (IRS Employer
Identification No.)
400 E. Kaliste Saloom Road, Suite 3000, Lafayette, Louisiana 70508
(Address of Registrant's principal executive offices)
Registrant's telephone number, including area code (337) 232-7028
Not Applicable
(Former name or former address, if changed since last report)
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ITEM 7. FINANCIAL STATEMENT AND EXHIBITS
(a) Financial Statements of Business Acquired
PETROQUEST ENERGY, INC.
STATEMENTS OF OIL AND GAS
REVENUE AND DIRECT OPERATING
AND PRODUCTION EXPENSES OF CERTAIN
ACQUIRED PROPERTIES FOR THE
YEAR ENDED DECEMBER 31, 1999 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 2000
TOGETHER WITH AUDITORS' REPORT
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
PetroQuest Energy, Inc.:
We have audited the accompanying statements of oil and gas revenue and direct
operating and production expenses relating to the Company's interest in certain
oil and gas producing properties (the Properties) for the year ended December
31, 1999 and for the nine months ended September 30, 2000. These statements are
the responsibility of management. Our responsibility is to express an opinion on
these statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the statement. We believe our
audit provides a reasonable basis for our opinion.
The accompanying statements were prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission (for inclusion
in a Form 8-K/A filed by PetroQuest Energy, Inc.) and is not intended to be a
complete presentation of the revenue and expenses of the Properties mentioned
above.
In our opinion, the statements referred to above present fairly, in all material
respects, the oil and gas revenue and direct operating and production expenses
of the Properties for the year ended December 31, 1999 and for the nine months
ended September 30, 2000, in conformity with accounting principles generally
accepted in the United States.
/s/ ARTHUR ANDERSEN LLP
New Orleans, Louisiana,
February 21, 2001
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PETROQUEST ENERGY, INC.'S INTEREST IN
CERTAIN OIL AND GAS PRODUCING PROPERTIES
STATEMENTS OF OIL AND GAS REVENUE AND
DIRECT OPERATING AND PRODUCTION EXPENSES
Nine Months Ended Year Ended
September 30, 2000 December 31, 1999
-------------------- --------------------
OIL AND GAS REVENUE $ 1,125,286 $ 4,152,237
LESS: Direct operating and production
expenses (including production taxes) 918,420 2,633,680
-------------------- --------------------
REVENUE IN EXCESS OF DIRECT
OPERATING AND PRODUCTION EXPENSES $ 206,866 $ 1,518,557
==================== ====================
See accompanying notes to financial statements.
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PETROQUEST ENERGY, INC.'S INTEREST IN CERTAIN
OIL AND GAS PRODUCING PROPERTIES
NOTES TO STATEMENTS OF OIL AND GAS REVENUE AND
DIRECT OPERATING AND PRODUCTION EXPENSES
1. BASIS OF PRESENTATION:
PetroQuest Energy, Inc. (the Company), acquired interests in certain oil and gas
producing properties (the Properties) owned by Mobil Exploration & Production
Southeast Inc. (the Operator), Northstar Offshore, LLC and Forest Oil
Corporation (collectively, the Sellers), which acquisitions closed on December
22, 2000, October 16, 2000, February 9, 2001, respectively. The net purchase
price, subject to future adjustments as provided by the purchase and sale
agreements, was approximately $7.5 million in cash.
The accompanying statements of oil and gas revenue and direct operating and
production expenses, which are prepared on the accrual basis of accounting,
relate to the interests in producing oil and gas properties described above and
may not be representative of future operations. The statements do not include
federal and state income taxes, interest, depletion, depreciation and
amortization or general and administrative expenses because such amounts would
not be indicative of those expenses which would be incurred by the Company. The
statements include oil and gas revenue and direct operating and production
expenses, including production taxes of $12,340 and $180 in 1999 and 2000,
respectively.
Generally, the oil production from the acquired interests was sold to other
affiliates of the Sellers who resold to other parties. Substantially all of the
revenue from oil production in the accompanying statements ($1,394,868 and
$727,435 in 1999 and 2000) represents the internal transfer price realized from
sales to such affiliates during the periods.
The Company's acquisition of the Properties is subject to an overriding royalty
interest of 5%, retained by the Operator, on any new well drilled or new zones
encountered, as defined by the purchase and sale agreement, up to aggregate
payments of $3 million; and, on certain production, as defined, there is no
limitation on the aggregate royalty payments.
During 1999 and 2000 the production from existing wells included in the
properties was generally in decline. While the Sellers incurred costs during
1999 to maintain or increase production levels, existing wells in the Properties
were temporarily shut-in.
Routine operation of the Properties was performed by a contract operator during
the periods presented. Amounts included in direct operating and production
expenses related to this contract were $1,757,000 and $831,000 in 1999 and 2000,
respectively.
Costs related to salaries and certain benefits for operating employees of the
Operator which were allocated, in part, to the Properties were $179,000 and
$5,000 in 1999 and 2000, respectively, and are included in direct operating and
production expenses.
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of revenue and expenses during
the reported periods. Actual results could differ from those estimates.
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2. SUPPLEMENTAL INFORMATION ON OIL AND GAS RESERVES (UNAUDITED):
The Company's internal reserve engineers prepared an estimate of the future net
oil and gas reserves of the Properties as of December 31, 2000. The following
reserve quantity information has been derived from this estimate, as adjusted
for production and unit prices. There are numerous uncertainties inherent in
estimating quantities of proved reserves and in projecting the future rates of
production and timing of development expenditures. The following reserve data
represent estimates only and should not be construed as the current market value
of the property or the cost that would be incurred to obtain equivalent
reserves.
Estimated quantities of proved net reserves include only those quantities that
can be expected to be commercially recoverable at prices and costs in effect at
the effective date of the acquisition, under existing regulatory practices and
with conventional equipment and operating methods. Proved developed reserves
represent only those reserves expected to be recovered through existing wells
with existing equipment and operating methods. Proved undeveloped reserves
include those reserves expected to be recovered from new wells on undrilled
acreage or from existing wells on which relatively major expenditures are
required for recompletion.
An analysis of the estimated changes in quantities of proved reserves for the
year ended December 31, 1999 and for the nine months ended September 30, 2000 is
shown below:
Estimated Quantities of Proved Reserves
Gas (Mmcf) Oil (Mbbl)
------------ ------------
Proved Reserves:
January 1, 1999 3,749 346
Production (1,261) (78)
Extensions and other 3,937 491
------------ ------------
December 31, 1999 6,425 759
Production (92) (25)
------------ ------------
September 30, 2000 6,333 734
============ ============
Proved Developed Reserves:
December 31, 1999 2,494 273
============ ============
September 30, 2000 2,402 248
============ ============
The following is a summary of a standardized measure of discounted future net
cash flows related to the proved oil and gas reserves of the Properties. For
these calculations, estimated future cash flows from estimated future production
or proved reserves were computed using oil and gas prices as of the end of each
period presented. Future development and production costs attributable to the
proved reserves were estimated assuming that existing conditions would continue
over the economic life of
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the Properties, and costs were not escalated for the future. The Properties are
not a separate tax paying entity. Accordingly, the standardized measure of
discounted future net cash flows from proved reserves is presented before
deduction of federal income taxes. The information presented below should not be
viewed as an estimate of the fair value of the Properties, nor should it be
considered indicative of any future trends.
Standardized Measure of Discounted Future Net Cash Flows ($000s)
September 30, 2000 December 31, 1999
------------------ -----------------
Future cash inflows $ 49,791 $ 34,394
Future production, development and
abandonment costs (27,702) (28,620)
--------------- ---------------
Future net cash flows 22,089 5,774
10% annual discount for estimated timing of
cash flows (1,828) 670
--------------- ---------------
Standardized measure of discounted future
net cash flows relating to proved reserves $ 20,261 $ 6,444
=============== ===============
An analysis of the sources of changes in the standardized measure of discounted
future net cash flows relating to proved reserves on the pricing basis described
above of the Properties for the year ended December 31, 1999 and for the nine
months ended September 30, 2000 is shown below:
Nine Months Ended Year Ended
September 30, 2000 December 31, 1999
------------------ -----------------
Standardized measure, beginning of year $ 6,444 $ 2,346
Sales of oil and gas, net of production expenses (207) (1,519)
Accretion of discount 644 235
Net change in sales price and production costs 13,380 2,996
Extensions and other -- 2,386
----------------- -----------------
Standardized measure, end of year $ 20,261 $ 6,444
================= =================
The weighted average prices of oil and gas used with the above tables at
December 31, 1999 were $25.60 per barrel and $2.33 per Mcf, respectively, and at
September 30, 2000 were $29.71 per barrel and $4.42 per Mcf, respectively.
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(b) Pro Forma Financial Information
PetroQuest Energy, Inc. (the Company), acquired interests in certain oil and gas
producing properties (the Property Acquisition) owned by Mobil Exploration &
Production Southeast Inc. (the Operator), Northstar Offshore, LLC and Forest Oil
Corporation (collectively, the Sellers), which acquisitions closed on December
22, 2000, October 16, 2000, February 9, 2001, respectively. The net purchase
price, subject to future adjustments as provided by the purchase and sale
agreements, was approximately $7.5 million in cash. The consideration was funded
by borrowings under a new facility with a 10% interest rate and contained a $1
million commitment fee paid to the lender.
The following unaudited condensed pro forma combined balance sheet assumes that
the Property Acquisition occurred on September 30, 2000 and reflects the
historical consolidated balance sheet of the Company giving pro forma effect to
this transaction using the purchase method of accounting. The unaudited
condensed pro forma combined balance sheet should be read in conjunction with
the historical statements and related notes of the Company.
Condensed Consolidated Pro Forma Combined Balance Sheet
September 30, 2000
Pro Forma
PetroQuest Pro Forma Combined
Historical Adjustments PetroQuest
------------ ------------ ------------
ASSETS
Current Assets
Cash 5,538 (1,000)(3) 4,538
Oil and Gas Revenues Receivable 3,991 3,991
Joint Interest Billing Receivable 10,693 10,693
Other Current Assets 782 782
------------ ------------ ------------
Total Current Assets 21,004 (1,000) 20,004
Oil and Gas Properties
Oil and Gas Properties, Full Cost Method 72,360 2,406(5) 74,766
Unevaluated Oil and Gas Properties 7,098 4,812(5) 11,910
Accumulated DD&A (39,272) (39,272)
------------ ------------ ------------
Oil and Gas Properties (evaluated), Net 40,186 7,218 47,404
Plugging and Abandonment Escrow 435 435
Other Assets 435 1,000(3) 1,435
------------ ------------ ------------
Total Assets 62,060 7,218 69,278
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and Accrued Liabilities 18,075 18,075
Advances from Co-Owners 6,418 6,418
Current Portion of Long-term Debt 405 405
------------ ------------ ------------
Total Current Liabilities 24,898 0 24,898
Commitments and Contingencies 0 0
Long-term Debt 1,060 7,218(4) 8,278
Other Liabilities 749 749
Stockholders' Equity
Common Stock 30 30
Paid-in-Capital 61,426 61,426
Accumulated Deficit (26,103) (26,103)
------------ ------------ ------------
Total Stockholders' Equity 35,353 0 35,353
------------ ------------ ------------
Total Liabilities 62,060 7,218 69,278
============ ============ ============
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The following unaudited condensed pro forma combined statement of operations for
the year ended December 31, 1999 and nine months ended September 30, 2000
assumes that the Property Acquisition occurred as of January 1, 1999. The pro
forma results of operations are not necessarily indicative of the results of
operations that would actually have been attained if the transactions had
occurred as of January 1, 1999. These statements should be read in conjunction
with the historical financial statements and related notes of the Company and
the Statements of Oil and Gas Revenues and Direct Operating and Production
Expenses of the properties acquired included herein.
Pro Forma Combined Statement of Operations
Year Ended December 31, 1999
Property Pro Forma
PetroQuest Acquisition Pro Forma Combined
Historical Historical Adjustments PetroQuest
------------ ------------ ------------ ------------
Revenues:
Oil and Gas Sales 8,516 4,152 12,668
Interest Income 91 91
------------ ------------ ------------ ------------
Total Revenues 8,607 4,152 0 12,759
Expenses
Lease Operating Expenses 2,638 2,621 5,259
Production Taxes 406 12 418
DD&A 4,472 1,557(1) 6,029
General and Administrative Expenses 1,625 250(2) 1,875
Other (224) (224)
------------ ------------ ------------ ------------
Net Income (Loss) Before Income Taxes (310) 1,519 (1,807) (598)
Income Tax Expense 0 0
------------ ------------ ------------ ------------
Net Income (Loss) (310) 1,519 (1,807) (598)
============ ============ ============ ============
Earnings Per Common Share:
Basic (0.01) (0.03)
Diluted (0.01) (0.03)
Weighted average common shares:
Basic 21,528 21,528
Diluted 21,528 21,528
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Pro Forma Combined Statement of Operations
Nine Months Ended September 30, 2000
Property Pro Forma
PetroQuest Acquisition Pro Forma Combined
Historical Historical Adjustments PetroQuest
------------ ------------ ------------ ------------
Revenues:
Oil and Gas Sales 12,937 1,125 14,062
Interest Income 205 205
------------ ------------ ------------ ------------
Total Revenues 13,142 1,125 0 14,267
Expenses
Lease Operating Expenses 1,837 918 2,755
Production Taxes 626 626
DD&A 3,988 506(1) 4,494
General and Administrative Expenses 1,993 188(2) 2,181
Other 13 13
------------ ------------ ------------ ------------
Net Income (Loss) Before Income Taxes 4,685 207 (694) 4,198
Income Tax Expense 0 0
------------ ------------ ------------ ------------
Net Income (Loss) 4,685 207 (694) 4,198
============ ============ ============ ============
Earnings Per Common Share:
Basic 0.18 0.16
Diluted 0.17 0.15
Weighted average common shares:
Basic 25,835 25,835
Diluted 27,906 27,906
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PETROQUEST ENERGY, INC.
NOTES TO CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
A. ACQUISITION OF LOUISIANA PROPERTY
PetroQuest Energy, Inc. (the Company), acquired interests in certain oil and gas
producing properties (the Property Acquisition) owned by Mobil Exploration &
Production Southeast Inc. (the Operator), Northstar Offshore, LLC and Forest Oil
Corporation (collectively, the Sellers), which acquisitions closed on December
22, 2000, October 16, 2000, February 9, 2001, respectively. The net purchase
price, subject to future adjustments as provided by the purchase and sale
agreements, was approximately $7.5 million in cash. The consideration was funded
by borrowings under a new facility with a 10% interest rate and contained a $1
million commitment fee paid to the lender.
The following pro forma adjustments have been made to the accompanying
historical revenues and direct operating and production expenses of the
properties for the year ended December 31, 1999 and nine months ended September
20, 2000 and the balance sheet as of September 30, 2000:
1. To adjust depreciation, depletion and amortization expense to reflect
the estimated pro forma combined rate.
2. To adjust general and administrative expenses to reflect increase costs
associated with the Property Acquisition, net of estimated amounts
capitalized.
3. Payment of lender's fee on secured borrowing made to finance the
acquisition. This amount is treated as deferred financing costs
amortized in interest expense.
4. Secured borrowing obtained to finance the acquisition.
5. To record the purchase price of the acquired interest, allocating a
portion to unevaluated costs.
B. BASIS OF PRESENTATION
The accompanying unaudited condensed pro forma combined balance sheet assumes
that the Property Acquisition occurred on September 30, 2000 and reflects the
September 30, 2000 historical consolidated balance sheet of the Company giving
pro forma effect to this transaction. The unaudited condensed pro forma combined
balance sheet should be read in conjunction with the historical statements and
related notes of the Company.
The accompanying unaudited condensed pro forma combined statement of operations
for the year ended December 31, 1999 and nine months ended September 30, 2000
assumes that the Property Acquisition occurred as of January 1, 1999. The pro
forma results of operations are not necessarily indicative of the results of
operations that would actually have been attained if the transaction had
occurred as of January 1, 1999. These statements should be read in conjunction
with the historical statements and related notes of the Company and the
Statements of Oil and Gas Revenues and Direct Operating and Production Expenses
of the acquired properties.
In the opinion of management, these condensed pro forma combined financial
statements include all adjustments necessary for a fair presentation of the
condensed unaudited pro forma combined financial statements. Accounting policies
used in the preparation of the pro forma statements are those disclosed in the
Company's historical consolidated financial statements. In preparing these pro
forma statements, no adjustments have been made to reflect transactions that
have occurred since the dates of the pro forma financial statements. The
condensed unaudited pro forma combined financial statements should be read in
conjunction with the description of the Property Acquisition elsewhere in this
document and the historical financial statements of the Company.
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(c) Exhibits
10.1* Credit Agreement dated as of December 21, 2000, by and among
PetroQuest Energy One, L.L.C., a Louisiana limited liability
company, PetroQuest Energy, Inc., a Louisiana corporation,
PetroQuest Energy, Inc., a Delaware corporation, and Hibernia
National Bank, a national banking association.
10.2* Credit Agreement made as of December 21, 2000, by and among
PetroQuest Energy, Inc., a Louisiana corporation, PetroQuest
Energy One, L.L.C., a Louisiana limited liability company,
PetroQuest Energy, Inc., a Delaware corporation, and EnCap
Energy Capital Fund III, L.P.
10.3* Revolving Note dated December 21, 2000 in the principal amount
of $50,000,000.00 payable to Hibernia National Bank.
10.4* Promissory Note dated December 21, 2000 in the principal
amount of $10,000,000 payable to EnCap Energy Capital Fund
III, L.P.
10.5* Continuing Guaranty made as of December 21, 2000, by
PetroQuest Energy, Inc., a Delaware corporation, in favor of
Hibernia National Bank.
10.6* Guaranty made as of December 21, 2000, by PetroQuest Energy,
Inc., a Delaware corporation, in favor of EnCap Energy Capital
Fund III, L.P.
10.7* Subordination Agreement effective as of December 21, 2000, by
and among Hibernia National Bank, EnCap Energy Capital Fund
III, L.P., PetroQuest Energy, Inc., a Louisiana corporation,
PetroQuest Energy One, L.L.C., a Louisiana limited liability
company, and PetroQuest Energy, Inc., a Delaware corporation.
23.1 Consent of Independent Public Accountants.
99.1* Press Release dated December 22, 2000.
99.2* Press Release dated December 26, 2000.
* Previously filed
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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 hereunto duly authorized.
Date: March 1, 2001 PETROQUEST ENERGY, INC.
By: /s/ Michael O. Aldridge
-------------------------------------
Michael O. Aldridge
Senior Vice President, Chief Financial
Officer and Secretary
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INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
10.1* Credit Agreement dated as of December 21, 2000, by and among
PetroQuest Energy One, L.L.C., a Louisiana limited liability
company, PetroQuest Energy, Inc., a Louisiana corporation,
PetroQuest Energy, Inc., a Delaware corporation, and Hibernia
National Bank, a national banking association.
10.2* Credit Agreement made as of December 21, 2000, by and among
PetroQuest Energy, Inc., a Louisiana corporation, PetroQuest
Energy One, L.L.C., a Louisiana limited liability company,
PetroQuest Energy, Inc., a Delaware corporation, and EnCap
Energy Capital Fund III, L.P.
10.3* Revolving Note dated December 21, 2000 in the principal amount
of $50,000,000.00 payable to Hibernia National Bank.
10.4* Promissory Note dated December 21, 2000 in the principal
amount of $10,000,000 payable to EnCap Energy Capital Fund
III, L.P.
10.5* Continuing Guaranty made as of December 21, 2000, by
PetroQuest Energy, Inc., a Delaware corporation, in favor of
Hibernia National Bank.
10.6* Guaranty made as of December 21, 2000, by PetroQuest Energy,
Inc., a Delaware corporation, in favor of EnCap Energy Capital
Fund III, L.P.
10.7* Subordination Agreement effective as of December 21, 2000, by
and among Hibernia National Bank, EnCap Energy Capital Fund
III, L.P., PetroQuest Energy, Inc., a Louisiana corporation,
PetroQuest Energy One, L.L.C., a Louisiana limited liability
company, and PetroQuest Energy, Inc., a Delaware corporation.
23.1 Consent of Independent Public Accountants.
99.1* Press Release dated December 22, 2000.
99.2* Press Release dated December 26, 2000.
* Previously filed