PetroQuest Reports Record Earnings in 2007



PetroQuest Energy, Inc. announced net income available to common shareholders for the quarter ended December 31, 2007 of $10,837,000, or $0.22 per share, compared to fourth quarter 2006 net income available to common shareholders of $311,000 or $0.01 per share. Net cash flow provided by operating activities before working capital changes for the fourth quarter of 2007 was $45,631,000, as compared to $26,290,000 for the comparable 2006 period. For the year ended December 31, 2007, the Company reported net income available to common shareholders of $39,245,000, or $0.79 per share, compared to net income available to common shareholders of $23,986,000, or $0.49 per share, for the year ended December 31, 2006. For the year ended December 31, 2007, net cash flow provided by operating activities before working capital changes was $190,122,000, compared to $132,500,000 for the comparable 2006 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 2007 increased 50% to $65,521,000 as compared to $43,668,000 in the fourth quarter of 2006. For the year ended December 31, 2007, oil and gas sales increased 32% to $256,223,000 as compared to $193,861,000 in the year ended December 31, 2006. Production for the fourth quarter and year ended December 31, 2007 was 23% and 22% higher, respectively, than production for the comparable periods of 2006. Stated on an Mcfe basis, unit prices received during the fourth quarter and the year ended December 31, 2007 were 22% higher and 8% higher, respectively, as compared to the prices received during the comparable 2006 periods.

Lease operating expenses for the fourth quarter of 2007 were $0.99 per Mcfe as compared to $1.57 per Mcfe in the fourth quarter of 2006. For the year ended December 31, 2007, lease operating expenses decreased 24% to $1.02 per Mcfe from $1.35 per Mcfe in the comparable period of 2006. Decreased unit costs were primarily the result of higher production in the 2007 periods and the absence of operating expenses related to certain higher cost Gulf of Mexico properties that were sold in November 2006.

Depreciation, depletion and amortization (DD&A) on oil and gas properties for the fourth quarter of 2007 was $3.76 per Mcfe as compared to $3.83 during the third quarter of 2007 and $3.45 per Mcfe in the fourth quarter of 2006. For the year ended December 31, 2007, DD&A on oil and gas properties increased 15% to $3.70 per Mcfe from $3.23 per Mcfe for the comparable period of 2006. The increases in DD&A are primarily due to increased costs to drill for, develop and acquire oil and gas reserves, and the costs of six non-commercial wells drilled in the Gulf Coast Basin during 2007.

General and administrative expenses increased $46,000 and $6,040,000 for the fourth quarter and year ended December 31, 2007, as compared to the respective 2006 periods. The increase during the twelve-month period is primarily due to non-cash share-based compensation expense related to SFAS 123®, which increased approximately $4,167,000 during the twelve months ended December 31, 2007 as compared to the 2006 period. Additional increases are due to the 31% increase in staffing during 2007 as our operational activity has increased in our longer-lived areas.

The company initiated production from its eleventh operated horizontal Woodford Shale well, and it had an initial production rate of approximately 2 MMcfe per day.

The company's Pelican Point prospect is currently drilling and is expected to reach total depth in approximately two weeks. The company has a 28% working interest in the well.

"We are very pleased to once again post record production, revenues, earnings and cash flows in 2007, and we are forecasting another company record year for production in 2008," said Charles T. Goodson, chairman, CEO and president. "Based upon our continued transition into long-lived basins, along with our outlook on commodity prices and production, we expect a record year of absolute reserve growth in excess of 30% from the drill bit alone in 2008."


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