PetroQuest has entered into a joint venture agreement with WSGP and NextEra, whereby NextEra acquired a 50% interest in the Company's undeveloped Woodford acreage position as well as 50% of the Company's Woodford proved undeveloped reserves. The Company received $60 million in cash at closing and will receive an additional $14 million in cash on November 30, 2011. If certain performance metrics are achieved the Company will receive an additional $14 million in cash on November 30, 2011. Additionally, NextEra will fund a share of the Company's future drilling costs under a two phase program.
During Phase 1 of the drilling program, NextEra will fund a share of the Company's cost to drill and develop undeveloped Woodford acreage up to a value of $54 million, net to PetroQuest's interest. After reaching the Phase 1 funding limit, NextEra can elect to participate in Phase 2 of the joint venture drilling program. If NextEra participates in Phase 2, it will fund a share of the Company's drilling costs up to an additional $92.6 million, with elections to continue participation every six months. Both phases of the drilling program contain well-by-well non-consent provisions on behalf of NextEra.
As a result of the entry into the Woodford joint venture, the Company expects to add a second operated rig during the next 60 days and third operated rig during the fourth quarter. The estimated impact to the Company's 2010 capital expenditures budget and production guidance is not expected to be material. As previously mentioned, the Company will continue to monitor natural gas prices and will adjust the pace of development accordingly.
"We are very excited about our partnership with one of the country's premier energy companies and are looking forward to accelerating the pace of our Woodford development, as well as pursuing additional opportunities in other basins," said Charles T. Goodson, Chairman, Chief Executive Officer and President. "This transaction further enhances our already strong liquidity profile and accelerates the monetization of the long-term development of our acreage position that we have worked so hard to assemble."
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