SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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): July 30, 2004 (July 30, 2004)
PETROQUEST ENERGY, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State of incorporation)
1-9020 76-1440714
(Commission File Number) (IRS Employer
Identification No.)
400 E. Kaliste Saloom Road, Suite 6000, 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)
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
a. Financial Statement of Business Acquired
None.
b. Pro Forma Financial Information
None.
c. Exhibits
None.
ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Lafayette, Louisiana - July 30, 2004 - PetroQuest Energy, Inc. (NASDAQ: PQUE)
announced today net income for the quarter ended June 30, 2004 of $4,237,000 or
$0.09 per share, compared to a net loss for the second quarter 2003 of
$1,698,000 or $(0.04) per share. Net cash flow provided by operating activities
for the second quarter of 2004 was $13,317,000 as compared to $6,363,000 for the
comparable 2003 period. Net cash flow provided by operating activities before
working capital changes for the second quarter of 2004 was $16,363,000, as
compared to $5,046,000 for the comparable 2003 period. For the first six months
of 2004, the Company reported net income of $7,409,000 or $0.16 per share. The
Company reported net income of $1,295,000 or $0.03 per share for the first six
months of 2003. Net income for the first six months of 2003 includes an after
tax gain of $849,000 for the cumulative effect of a change in accounting
principle related to the adoption of Statement of Accounting Standards No. 143,
"Accounting For Asset Retirement Obligations." For the first six months of 2004,
net cash flow provided by operating activities was $23,537,000 and net cash flow
provided by operating activities before working capital changes was $29,833,000.
Net cash flow provided by operating activities and net cash flow provided by
operating activities before working capital changes for the first six months of
2003 were $13,051,000 and $17,048,000, respectively. 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 second quarter of 2004 increased 137% to
$21,436,000 as compared to $9,060,000 in the second quarter of 2003. For the
first six months of 2004, sales increased 57% to $39,568,000 from $25,214,000 in
the first six months of 2003. Stated on a Mcfe basis, unit prices received
during the second quarter and first six months of 2004 were 26% and 13% higher,
respectively, than the prices received during the comparable 2003 periods.
Lease operating expenses for the second quarter of 2004 decreased 40% to $0.77
per Mcfe from $1.29 per Mcfe in the second quarter of 2003. For the first six
months of 2004, lease operating expenses decreased 25% to $0.80 per Mcfe from
$1.06 per Mcfe in the comparable period of 2003. In addition, depreciation,
depletion and amortization for the second quarter of 2004 decreased 17% to $2.51
per Mcfe from $3.02 per Mcfe in the second quarter of 2003. For the
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first six months of 2004, depreciation, depletion and amortization decreased 14%
to $2.49 per Mcfe from $2.89 per Mcfe for the comparable period of 2003.
Drilling activity during the quarter included wells at our Roux, Beignet and
Boudin prospects as well as six horizontal coalbed methane wells in the
Hartshorne Coal Formation in the Arkoma Basin.
The well at the Company's Roux prospect, located at East Cameron Block 129, has
been drilled to a total depth of 7,733 feet. It logged 80 feet (TVD) of net
productive sands. The well began producing in late June and is currently
producing at a gross rate of approximately 3,400 Mcfe per day. PetroQuest has an
approximate 27% net revenue interest in the well.
The well at the Beignet Prospect, located in Vermilion Parish, Louisiana, has
been drilled to a total depth of 17,200 feet. The primary objective of the well
was determined to be non-productive; however, 16 feet of apparent gas pay was
encountered in a sand immediately above the primary objective. Current plans are
to complete the well in this interval and to test it to determine its
commerciality. PetroQuest has an approximate 18% working interest in the well.
At its approximate 23% net revenue interest owned Boudin Prospect at Ship Shoal
225, the Company has drilled to a total depth of 10,914 feet encountering
approximately 165 feet (TVD) of net productive sands. This well is expected to
begin producing in early August at a gross rate of approximately 10,600 Mcfe per
day.
Six coalbed methane wells with an average working interest of 78% have been
drilled and completed in the Hartshorne Coal Formation in Pittsburg County,
Oklahoma. Subsequent to dewatering, which is estimated to take approximately 8
weeks, production is expected to average approximately 250 Mcf per day per well.
The Company has an interest in 22 sections in this area and an average working
interest of 40%. Ten more wells (57% average working interest) are planned for
this year with 72 thereafter on existing acreage. Reserves are expected to
average approximately 700 MMcf per well. Also, on the PetroQuest acreage, there
is additional potential in the Spiro and Cromwell Sands.
In addition, as an update to information provided in our first quarter press
release, we have completed the infrastructure for the discovery at the Tasso
Prospect at High Island 201. It began producing in late June and is currently
producing at a gross rate of approximately 30,000 Mcfe per day. The Company has
an approximate 7.5% net revenue interest in this well.
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The following table sets forth certain information with respect to the oil and
gas operations of the Company for the three- and six-month periods ended June
30, 2004 and 2003:
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
------------ ----------- ------------ ------------
Production:
Oil (Bbls) 246,052 183,034 424,531 417,864
Gas (Mcf) 2,160,311 845,931 4,322,051 2,452,248
Total Production (Mcfe) 3,636,623 1,944,135 6,869,237 4,959,432
Sales:
Total oil sales $ 8,507,123 $ 5,013,976 $ 14,310,726 $ 12,249,095
Total gas sales $ 12,928,781 $ 4,046,220 $ 25,257,755 $ 12,964,789
Total oil and gas sales $ 21,435,906 $ 9,060,196 $ 39,568,481 $ 25,213,884
Average sales prices:
Oil (per Bbl) $34.57 $27.39 $33.71 $29.31
Gas (per Mcf) $5.98 $4.78 $5.84 $5.29
Per Mcfe $5.89 $4.66 $5.76 $5.08
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The following initiates guidance for the third and fourth quarter of 2004:
Guidance for Guidance for
Description 3rd Quarter 2004 4th Quarter 2004
- ----------- ---------------- ----------------
Production volumes (MMcfe/d) 40-42 42-44
Percent gas 60% 65%
Expenses:
Lease operating expenses (per Mcfe) $0.85-$0.95 $0.85-$0.95
Production taxes (per Mcfe) $0.12-$0.13 $0.12-$0.13
Depreciation, depletion and amortization (per Mcfe) $2.45-$2.55 $2.35-$2.45
General and administrative (in millions) $1.50-$1.70 $1.50-$1.70
Interest expense (in millions) $0.75-$0.85 $0.75-$0.85
Effective tax rate (all deferred) 35% 35%
PetroQuest Energy, Inc. is an independent energy company engaged in the
exploration, development, acquisition and production of oil and natural gas
reserves in the Arkoma Basin, East Texas, South Louisiana and the shallow waters
of the Gulf of Mexico.
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 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 Operations
(unaudited)
(Amounts In Thousands, Except Per Share Data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- --------------------
2004 2003 2004 2003
------- ------- ------- -------
Revenues:
Oil and gas sales $21,436 $ 9,060 $39,568 $25,214
Interest and other income 61 41 131 52
------- ------- ------- -------
21,497 9,101 39,699 25,266
------- ------- ------- -------
Expenses:
Lease operating expenses 2,784 2,504 5,506 5,266
Production taxes 420 125 864 335
Depreciation, depletion and amortization 9,132 5,878 17,073 14,351
General and administrative 1,833 1,126 3,127 2,348
Accretion of asset retirement obligation 170 136 401 276
Interest expense 665 230 1,346 254
Derivative effects (benefit) (9) 1,714 - 1,749
------- ------- ------- -------
14,995 11,713 28,317 24,579
------- ------- ------- -------
Income (loss) from operations 6,502 (2,612) 11,382 687
Income tax expense (benefit) 2,265 (914) 3,973 241
------- ------- ------- -------
Income (loss) before cumulative effect of
change in accounting principle $ 4,237 $(1,698) $ 7,409 $ 446
Cumulative effect of change in accounting principle - - - 849
------- ------- ------- -------
Net income (loss) $ 4,237 $(1,698) $ 7,409 $ 1,295
======= ======= ======= =======
Earnings (loss) per common share:
Basic
Income (loss) before cumulative effect of
change in accounting principle $ 0.10 $ (0.04) $ 0.17 $ 0.01
Cumulative effect of change in
accounting principle - - - 0.02
------- ------- ------- -------
Net income (loss) $ 0.10 $ (0.04) $ 0.17 $ 0.03
======= ======= ======= =======
Diluted
Income (loss) before cumulative effect of
change in accounting principle $ 0.09 $ (0.04) $ 0.16 $ 0.01
Cumulative effect of change in
accounting principle - - - 0.02
------- ------- ------- -------
Net income (loss) $ 0.09 $ (0.04) $ 0.16 $ 0.03
======= ======= ======= =======
Weighted average number of common shares:
Basic 44,588 42,895 44,573 42,874
======= ======= ======= =======
Diluted 46,104 42,895 45,912 43,880
======= ======= ======= =======
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PETROQUEST ENERGY, INC.
Non-GAAP Disclosure Reconciliation
(Amounts In Thousands)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- ---------------------
2004 2003 2004 2003
------- ------- ------- -------
Net cash flow provided by operating activities $13,317 $ 6,363 $23,537 $13,051
Changes in working capital accounts 3,046 (1,317) 6,296 3,997
------- ------- ------- -------
Net cash flow provided by operations before
working capital changes $16,363 $ 5,046 $29,833 $17,048
======= ======= ======= =======
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.
[SIGNATURE PAGE FOLLOWS]
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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: July 30, 2004 PETROQUEST ENERGY, INC.
By: /s/ Daniel G. Fournerat
--------------------------------------
Daniel G. Fournerat
Senior Vice President, General Counsel
and Secretary
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