PetroQuest Energy Reports Record 2005 Year-End and 4Q Results

PetroQuest Energy, Inc. (NYSE: PQ) reported net income for the quarter ended December 31, 2005 of $8,320,000 or $0.17 per share, compared to fourth quarter 2004 net income of $4,999,000 or $0.11 per share. Net cash flow provided by operating activities before working capital changes for the fourth quarter of 2005 was $27,709,000, as compared to $16,696,000 for the comparable 2004 period. For the year ended December 31, 2005, the Company reported net income of $21,417,000 or $0.44 per share compared to net income of $16,348,000 or $0.35 per share for the year ended December 31, 2004. For the year ended December 31, 2005, net cash flow provided by operating activities before working capital changes was $83,183,000, compared to $62,859,000 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 fourth quarter of 2005 increased 69% to $38,044,000 as compared to $22,511,000 in the fourth quarter of 2004. For the year ended December 31, 2005, oil and gas sales increased 43% to $120,552,000 as compared to $84,595,000 in the year ended December 31, 2004. Production for the fourth quarter and year ended December 31, 2005 was 21% and 13% higher, respectively, than production for the comparable periods of 2004. Stated on an Mcfe basis, unit prices received during the fourth quarter and the year ended December 31, 2005 were 40% and 26% higher, respectively, than the prices received during the comparable 2004 periods.

Lease operating expenses for the fourth quarter of 2005 were $1.29 per Mcfe as compared to $1.00 per Mcfe in the fourth quarter of 2004. For the year ended December 31, 2005, lease operating expenses increased 41% to $1.31 per Mcfe from $0.93 per Mcfe in the comparable period of 2004. Increased unit costs during the current year was the result of the increase in the number of producing wells, a general increase in field service costs and the production downtime and repairs associated with the major hurricanes during the current year. In addition, depreciation, depletion and amortization ("DD&A") on oil and gas properties for the fourth quarter of 2005 was $2.97 per Mcfe as compared to $2.40 per Mcfe in the fourth quarter of 2004. For the year ended December 31, 2005, DD&A on oil and gas properties increased 8% to $2.65 per Mcfe from $2.46 per Mcfe for the comparable period of 2004. The increase in DD&A during the current year is primarily due to increased costs to drill for, develop and acquire oil and gas reserves.



    The following table sets forth certain information with respect to the oil
and gas operations of the Company for the three-month periods and years ended
December 31, 2005 and 2004:

                              Three Months Ended            Year Ended
                                  December 31,              December 31,
                               2005         2004         2005         2004
    Production:
      Oil (Bbls)             128,832      174,968      665,400      818,405
      Gas (Mcf)            3,510,543    2,501,806   12,058,377    9,305,075
      Total Production
       (Mcfe)              4,283,535    3,551,614   16,050,777   14,215,505

    Sales:
      Total oil sales     $6,115,775   $6,571,982  $30,446,897  $28,896,550
      Total gas sales    $31,928,556  $15,938,968  $90,105,054  $55,698,797

    Average sales prices:
    (Including hedges)
      Oil (per Bbl)           $47.47       $37.56       $45.76       $35.31
      Gas (per Mcf)            $9.10        $6.37        $7.47        $5.99
      Per Mcfe                 $8.88        $6.34        $7.51        $5.95

The above sales and average sales prices include reductions related to gas hedges of $7,600,000 and $578,000 and oil hedges of $1,543,000 and $1,728,000 for the three months ended December 31, 2005 and 2004, respectively. The above sales and average sales prices include reductions related to gas hedges of $10,242,000 and $1,064,000 and oil hedges of $5,572,000 and $4,197,000 for the year ended December 31, 2005 and 2004, respectively.


    The following updates guidance for the first quarter of 2006:


                                                  Guidance for
    Description                                 1st Quarter 2006

    Production volumes (MMcfe/d)                     56 - 61

    Percent gas                                        75%

    Expenses:
      Lease operating expenses (per Mcfe)         $1.15 - $1.25
      Production taxes (per Mcfe)                 $0.28 - $0.32
      Depreciation, depletion and
       amortization (per Mcfe)                    $2.70 - $2.80
      General and administrative (in millions)     $2.2 - $2.5
      Interest expense (in millions)               $3.5 - $4.0

    Effective tax rate (all deferred)                  37%


    The following updates guidance for the full year of 2006:

                                                  Guidance for
    Description                                  Full Year 2006

    Production volumes (MMcfe/d)                     62 - 69

    Percent gas                                        75%

    Expenses:
      Lease operating expenses (per Mcfe)         $1.10 - $1.20
      Production taxes (per Mcfe)                 $0.24 - $0.28
      Depreciation, depletion and
       amortization (per Mcfe)                    $2.70 - $2.80
      General and administrative (in millions)      $10 - $11
      Interest expense (in millions)                $16 - $17

    Effective tax rate (all deferred)                  37%


    Operations Update

The Company's Grayhawk Prospect in the Gulf of Mexico was drilled to a total depth of approximately 18,200 feet, logging 132 feet total vertical depth of net productive sands. The well is expected to begin producing during the summer months, and the Company has an approximate 18% net revenue interest.

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 Arkoma Basin, East Texas, South Louisiana and the shallow waters of the Gulf of Mexico. PetroQuest trades on the New York Stock Exchange under the ticker symbol "PQ".

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