UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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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):
October 29, 2004
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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:
[ ] 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))
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ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Lafayette, Louisiana - October 29, 2004 - PetroQuest Energy, Inc.
(NASDAQ: PQUE) announced today net income for the quarter ended September 30,
2004 of $3,940,000 or $0.08 per share, compared to third quarter 2003 net income
of $229,000 or $0.01 per share. Net cash flow provided by operating activities
for the third quarter of 2004 was $25,935,000 as compared to $4,331,000 for the
comparable 2003 period. Net cash flow provided by operating activities before
working capital changes for the third quarter of 2004 was $16,330,000, as
compared to $5,788,000 for the comparable 2003 period. For the first nine months
of 2004, the Company reported net income of $11,349,000 or $0.25 per share. The
Company reported net income of $1,524,000 or $0.03 per share for the first nine
months of 2003. Net income for the first nine 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 nine months of
2004, net cash flow provided by operating activities was $49,472,000 and net
cash flow provided by operating activities before working capital changes was
$46,163,000. Net cash flow provided by operating activities and net cash flow
provided by operating activities before working capital changes for the first
nine months of 2003 were $17,382,000 and $22,836,000, 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 third quarter of 2004 increased 130% to $22,516,000
as compared to $9,800,000 in the third quarter of 2003. For the first nine
months of 2004, oil and gas sales increased 77% to $62,084,000 from $35,014,000
in the first nine months of 2003. Production for the third quarter and first
nine months of 2004 was 87% and 53% higher, respectively, than production for
the comparable periods of 2003. Stated on an Mcfe basis, unit prices received
during the third quarter and first nine months of 2004 were 23% and 16% higher,
respectively, than the prices received during the comparable 2003 periods.
Lease operating expenses for the third quarter of 2004 decreased 2% to $1.08 per
Mcfe from $1.10 per Mcfe in the third quarter of 2003. For the first nine months
of 2004, lease operating expenses decreased 16% to $0.90 per Mcfe from $1.07 per
Mcfe in the comparable period of 2003. In addition, depreciation, depletion and
amortization on oil and gas properties for the third quarter of 2004 decreased
16% to $2.52 per Mcfe from $3.00 per Mcfe in the third quarter of 2003. For the
first nine months of 2004, depreciation, depletion and amortization on oil and
gas properties decreased 14% to $2.48 per Mcfe from $2.89 per Mcfe for the
comparable period of 2003.
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Drilling activity during the quarter included wells at our Chianti and Shiraz
Prospects, and six horizontal coalbed methane wells in the Arkoma Basin.
The well at the Company's Chianti Prospect, located in the Ship Shoal 72 Field,
has been drilled to a total depth of 10,578 feet. It logged 12 feet (TVD) of net
productive sands with no water level. The well is expected to begin producing by
late December at a gross rate of approximately 2,200 Mcfe per day. PetroQuest
has an approximate 61% net revenue interest in the well.
At its approximate 47% net revenue interest owned Shiraz Prospect, also in the
Ship Shoal 72 Field, the Company has drilled the well to a total depth of 11,210
feet encountering approximately 40 feet (TVD) of net productive sands. This well
is expected to begin producing in early January at a gross rate of approximately
3,200 Mcfe per day.
The drilling program in Pittsburg County, Oklahoma continued in the third
quarter with six additional wells drilled and completed. A total of ten wells
have been drilled and completed in the field during the first nine months of
2004. After a dewatering period, which is estimated to take approximately twelve
weeks, production is expected to average approximately 200-300 Mcf per day per
well. PetroQuest owns an average approximate 55% net revenue interest in these
wells.
The Company is currently drilling its Jambalaya Prospect at Vermilion 287.
Additionally, drilling is in progress on the first operated well in Southeast
Carthage Field and drilling continues in the Arkoma Basin. Current plans are to
spud the File and Bisque Prospects within the next two weeks. Later in the
fourth quarter, the Company expects to spud the Cracklin Prospect, another well
in Southeast Carthage Field and two wells per month in the Arkoma Basin.
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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 nine-month periods ended
September 30, 2004 and 2003:
<Table>
<Caption>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -----------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
Production:
Oil (Bbls) 218,906 166,385 643,437 584,249
Gas (Mcf) 2,481,218 1,031,679 6,803,269 3,483,927
Total Production (Mcfe) 3,794,654 2,029,989 10,663,891 6,989,421
Sales:
Total oil sales $ 8,013,842 $ 4,552,094 $ 22,324,568 $ 16,801,189
Total gas sales $ 14,502,074 $ 5,247,711 $ 39,759,829 $ 18,212,501
Average sales prices:
Oil (per Bbl) $ 36.61 $ 27.36 $ 34.70 $ 28.76
Gas (per Mcf) $ 5.84 $ 5.09 $ 5.84 $ 5.23
Per Mcfe $ 5.93 $ 4.83 $ 5.82 $ 5.01
</Table>
The following updates guidance for the fourth quarter of 2004:
<Table>
<Caption>
Guidance for
Description 4th Quarter 2004
- ----------- -----------------
Production volumes (MMcfe/d) 33 - 35
Percent gas 65%
Expenses:
Lease operating expenses (per Mcfe) $1.10-$1.20
Production taxes (per Mcfe) $0.14-$0.15
Depreciation, depletion and amortization (per Mcfe) $2.30-$2.40
General and administrative (in millions) $1.45-$1.65
Interest expense (in millions) $0.80-$0.90
Effective tax rate (all deferred) 35%
</Table>
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
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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)
<Table>
<Caption>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
Revenues:
Oil and gas sales $ 22,516 $ 9,800 $ 62,084 $ 35,014
Interest and other income 56 57 187 108
---------- ---------- ---------- ----------
22,572 9,857 62,271 35,122
---------- ---------- ---------- ----------
Expenses:
Lease operating expenses 4,087 2,235 9,593 7,501
Production taxes 300 289 1,164 623
Depreciation, depletion and amortization 9,701 6,197 26,774 20,549
General and administrative 1,589 1,171 4,716 3,519
Accretion of asset retirement obligation 210 169 611 445
Interest expense 622 30 1,968 283
Derivative expense 2 (586) 2 1,163
---------- ---------- ---------- ----------
16,511 9,505 44,828 34,083
---------- ---------- ---------- ----------
Income from operations 6,061 352 17,443 1,039
Income tax expense 2,121 123 6,094 364
---------- ---------- ---------- ----------
Income before cumulative effect of
change in accounting principle $ 3,940 $ 229 $ 11,349 $ 675
Cumulative effect of change in
accounting principle -- -- -- 849
---------- ---------- ---------- ----------
Net income $ 3,940 $ 229 $ 11,349 $ 1,524
========== ========== ========== ==========
Earnings per common share:
Basic
Income before cumulative effect of
change in accounting principle $ 0.09 $ 0.01 $ 0.25 $ 0.02
Cumulative effect of change in
accounting principle -- -- -- 0.02
---------- ---------- ---------- ----------
Net income $ 0.09 $ 0.01 $ 0.25 $ 0.04
========== ========== ========== ==========
Diluted
Income before cumulative effect of
change in accounting principle $ 0.08 $ 0.01 $ 0.25 $ 0.01
Cumulative effect of change in
accounting principle -- -- -- 0.02
---------- ---------- ---------- ----------
Net income $ 0.08 $ 0.01 $ 0.25 $ 0.03
========== ========== ========== ==========
Weighted average number of common shares:
Basic 44,631 44,333 44,593 43,366
========== ========== ========== ==========
Diluted 46,905 44,729 46,243 44,167
========== ========== ========== ==========
</Table>
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PETROQUEST ENERGY, INC.
Non-GAAP Disclosure Reconciliation
(Amounts In Thousands)
<Table>
<Caption>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ------------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
Net cash flow provided by operating activities $ 25,935 $ 4,331 $ 49,472 $ 17,382
Changes in working capital accounts (9,605) 1,457 (3,309) 5,454
------------ ------------ ------------ ------------
Net cash flow provided by operating activities before
working capital changes $ 16,330 $ 5,788 $ 46,163 $ 22,836
============ ============ ============ ============
</Table>
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: October 29, 2004 By: /s/ DANIEL G. FOURNERAT
-----------------------------------------
Daniel G. Fournerat
Senior Vice President, General Counsel
and Secretary
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