PetroQuest Energy Arkoma Basin Acreage

PetroQuest Energy has acquired from a private company its interest in natural gas properties located in the Arkoma Basin of Oklahoma for approximately $13.5 million. The Company expects to allocate approximately $2 million of the purchase price to unevaluated acreage. In this transaction, PetroQuest estimates it is acquiring approximately 8.8 Bcf of proved reserves, of which 47% are proved developed producing and 100% are natural gas. Development costs for the proved undeveloped reserves are estimated at $0.74 per Mcf. The acquisition will initially add approximately 1.5 MMcf per day to the Company's production. The purchase was funded by PetroQuest's revolver under its senior bank credit facility, the borrowing base of which was increased from $25 million to $38 million. The acquisition of the properties is subject to a 12.5% election to participate by the Company's partners in an area of mutual interest, which includes the acquired properties.

"This acquisition expands our existing operations in the Arkoma Basin, adding approximately 6,000 net acres adjacent to our current acreage position and approximately 28 miles of pipeline and infrastructure in Pittsburg County, Oklahoma. This brings our total ownership to over 12,000 net acres and 36 miles of pipeline in the area. The reserve to production ratio of the properties acquired is approximately 16 years based on current production, which will increase PetroQuest's overall reserve to production ratio," said Charles T. Goodson, Chairman, Chief Executive Officer and President. "We are excited about the activity in this core area having drilled and completed 10 wells since May 2004. We plan to add a second rig and drill approximately 50 horizontal coalbed methane wells in the Hartshorne Coal Formation by the end of 2005 on our acreage position. Also, we have identified thus far approximately 25 probable and possible reserve locations, including coalbed methane and other prospective horizons."

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