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PetroQuest Energy Announces Third Quarter 2012 Results

November 7, 2012

LAFAYETTE, La., Nov. 7, 2012 /PRNewswire/ — PetroQuest Energy, Inc. (NYSE: PQ) announced today net loss available to common stockholders for the quarter ended September 30, 2012 of $38,639,000, or $0.62 per share, compared to third quarter 2011 net income available to common stockholders of $3,727,000, or $0.06 per share. For the first nine months of 2012, the Company reported net loss available to common stockholders of $111,767,000, or $1.79 per share, compared to net income available to common stockholders of $2,579,000, or $0.04 per share, for the first nine months of 2011. Net loss for the three and nine month 2012 periods included ceiling test writedowns totaling $35,391,000 and $108,987,000, respectively.

Discretionary cash flow for the third quarter of 2012 was $17,339,000, as compared to $21,099,000 for the comparable 2011 period. For the first nine months of 2012, discretionary cash flow was $57,055,000. Discretionary cash flow for the first nine months of 2011 was $73,219,000. See the attached schedule for a reconciliation of net cash flow provided by operating activities to discretionary cash flow.

Production for the third quarter of 2012 was 8.5 Bcfe, a 15% increase from the 7.4 Bcfe produced during the comparable period of 2011. Natural gas liquids production for the third quarter of 2012 increased 53% from the comparable period of 2011. For the first nine months of 2012, production was 25.1 Bcfe , compared to 22.2 Bcfe for the comparable period of 2011. Approximately 77% of the Company’s third quarter 2012 production was from long-lived basins.

Stated on an Mcfe basis, unit prices received during the third quarter and the first nine months of 2012 were 24% and 25% lower, respectively, than the comparable 2011 periods. Oil and gas sales during the third quarter of 2012 decreased 13% to $33,913,000, as compared to $38,980,000 in the third quarter of 2011. For the first nine months of 2012, oil and gas sales decreased 16% to $103,286,000 from $122,446,000 in the first nine months of 2011.

Lease operating expenses for the third quarter of 2012 were $1.13 per Mcfe as compared to $1.39 per Mcfe in the third quarter of 2011. For the first nine months of 2012, lease operating expenses per Mcfe decreased 17% to $1.13 from $1.36 in the comparable period of 2011. Per unit lease operating expenses decreased primarily due to the overall increase in produced volumes.

Depreciation, depletion and amortization (“DD&A”) on oil and gas properties for the third quarter of 2012 was $1.73 per Mcfe as compared to $1.94 per Mcfe in the third quarter of 2011. For the first nine months of 2012, DD&A per Mcfe decreased 6% to $1.80 per Mcfe from $1.92 per Mcfe for the comparable period of 2011. The decrease in DD&A during the third quarter of 2012, as compared to the third quarter of 2011, was primarily the result of the ceiling test write-downs recorded during the 2012 periods.

Interest expense for the third quarter of 2012 increased to $2,338,000, as compared to $2,299,000 in the third quarter of 2011. For the first nine months of 2012, interest expense was $7,021,000, compared to $7,248,000 for the comparable period of 2011.

General and administrative expenses increased $973,000 and $3,873,000 for the third quarter and nine months ended September 30, 2012, as compared to the respective 2011 periods. The increases during the 2012 periods are primarily due to higher employee related expenses, including non-cash share-based compensation costs totaling $5,609,000 during the first nine months of 2012 as compared to $2,985,000 during the 2011 period.

Production taxes for the third quarter of 2012 totaled $880,000, as compared to $1,446,000 in the third quarter of 2011. For the first nine months of 2012, production taxes were $112,000 compared to $2,070,000 for the comparable period of 2011. Production taxes for the nine month 2012 period decreased due to a receivable of $2,717,000 recorded in June 2012 related to severance tax refunds expected to be received over the next three years.

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, 2012 and 2011:

                      Three Months Ended September 30, Nine Months Ended September 30,
                      -------------------------------- -------------------------------
                                                  2012                            2011             2012         2011
                                                  ----                            ----             ----         ----
    Production:
       Oil (Bbls)                                          122,645                         130,144           379,958      445,457
       Gas (Mcf)                                         6,888,569                       6,073,776        20,563,350   17,847,061
       Ngl (Mcfe)                                          894,138                         584,786         2,250,569    1,658,323
       Total
        Production
        (Mcfe)                                           8,518,577                       7,439,426        25,093,667   22,178,126
       Total Daily
        Production
        (Mmcfe)                                               92.6                            80.9              91.6         81.2
    Sales:
       Total oil
        sales                                          $13,287,548                     $13,508,377       $41,627,602  $46,403,861
       Total gas
        sales                                           15,583,994                      19,865,595        46,321,605   60,481,702
       Total ngl
        sales                                            5,041,274                       5,606,335        15,336,515   15,560,225
                                                         ---------                       ---------        ----------   ----------
       Total oil and
        gas sales                                      $33,912,816                     $38,980,307      $103,285,722 $122,445,788
                                                       ===========                     ===========      ============ ============
    Average sales
     prices:
       Oil (per Bbl)                                       $108.34                         $103.80           $109.56      $104.17
       Gas (per Mcf)                                          2.26                            3.27              2.25         3.39
       Ngl (per Mcfe)                                         5.64                            9.59              6.81         9.38
       Per Mcfe                                               3.98                            5.24              4.12         5.52

The above sales and average sales prices include increases to revenue related to the settlement of gas hedges of $1,482,000 and $478,000, oil hedges of $491,000 and $178,000 and Ngl hedges of $312,000 and zero for the three months ended September 30, 2012 and 2011, respectively. The above sales and average sales prices include increases (reductions) to revenue related to the settlement of gas hedges of $6,867,000 and $864,000, oil hedges of $853,000 and ($211,000) and Ngl hedges of $544,000 and zero for the nine months ended September 30, 2012 and 2011, respectively.

The following initiates guidance for the fourth quarter of 2012:

                                                Guidance for
    Description                         4th Quarter 2012
                                        ----------------

    Production volumes (MMcfe/d)                  94 - 98

    Percent Gas                                                  77%
    Percent Oil                                                   9%
    Percent NGL                                                  14%

    Expenses:
    Lease operating expenses (per
     Mcfe)                                            $1.05 - $1.15
    Production taxes (per Mcfe)                       $0.10 - $0.15
    Depreciation, depletion and
     amortization (per Mcfe)                          $1.60 - $1.70
    General and administrative (in
     millions)*                                         $5.5 - $6.0
    Interest expense (in millions)                      $2.6 - $2.9

      2012 Capital Expenditures (in
       millions)                                        $130 - $135

    * Includes non-cash stock
     compensation estimate of $1.4
     million

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, Wyoming, Texas, South Louisiana and the shallow waters of the Gulf of Mexico. PetroQuest’s common stock trades on the New York Stock Exchange under the ticker PQ.

Forward-Looking Statements
This news 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 ability to find oil and natural gas reserves that are economically recoverable, the volatility of oil and natural gas prices and significantly depressed natural gas prices since the middle of 2008, the uncertain economic conditions in the United States and globally, the declines in the values of our properties that have resulted in and may in the future result in additional ceiling test write-downs, our ability to replace reserves and sustain production, our estimate of the sufficiency of our existing capital sources, our ability to raise additional capital to fund cash requirements for future operations, the uncertainties involved in prospect development and property acquisitions or dispositions and in projecting future rates of production or future reserves, the timing of development expenditures and drilling of wells, hurricanes and other natural disasters, changes in laws and regulations as they relate to our operations, including our fracing operations in shale plays or our operations in the Gulf of Mexico, 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.

Click here for more information: “http://www.petroquest.com/news.html?=BizID=1690&1=1

                                                         PETROQUEST ENERGY, INC.
                                                       Consolidated Balance Sheets
                                                          (Amounts in Thousands)

                                                                     September 30,           December 31,
                                                                              2012                        2011
                                                                              ----                        ----
                                 ASSETS
    Current assets:
    Cash and cash equivalents                                                         $5,703                     $22,263
    Revenue receivable                                                      15,719                      15,860
    Joint interest billing receivable                                       26,641                      47,445
    Derivative asset                                                           955                       6,418
    Prepaid drilling costs                                                   2,482                       2,900
    Drilling pipe inventory                                                  1,597                       4,070
    Other current assets                                                     2,962                       2,965
                                                                             -----                       -----
    Total current assets                                                    56,059                     101,921
                                                                            ------                     -------
    Property and equipment:
    Oil and gas properties:
    Oil and gas properties, full cost method                             1,707,498                   1,600,546
    Unevaluated oil and gas properties                                      78,828                      70,408
    Accumulated depreciation, depletion and
     amortization                                                       (1,420,630)                (1,265,603)
                                                                        ----------                  ----------
    Oil and gas properties, net                                            365,696                     405,351
    Gas gathering assets                                                     4,177                       4,177
    Accumulated depreciation and amortization of gas
     gathering assets                                                       (2,017)                     (1,794)
                                                                            ------                      ------
    Total property and equipment                                           367,856                     407,734
                                                                           -------                     -------
    Other assets, net of accumulated depreciation
     and amortization of $9,259 and $8,066,
     respectively                                                            8,133                       6,511
                                                                             -----                       -----
    Total assets                                                                    $432,048                    $516,166
                                                                                    ========                    ========
                  LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
    Accounts payable to vendors                                                      $56,424                     $50,750
    Advances from co-owners                                                 25,065                      33,867
    Oil and gas revenue payable                                             14,533                      13,764
    Accrued interest and preferred stock dividend                            2,417                       6,167
    Derivative liability                                                       426                           -
    Asset retirement obligation                                              1,034                       3,110
    Other accrued liabilities                                                5,657                       8,250
                                                                             -----                       -----
    Total current liabilities                                              105,556                     115,908
    Bank debt                                                               35,000                           -
    10% Senior Notes                                                       150,000                     150,000
    Asset retirement obligation                                             29,241                      27,317
    Derivative liability                                                       289                           -
    Deferred income taxes                                                        -                         551
    Commitments and contingencies
    Stockholders' equity:
    Preferred stock, $.001 par value; authorized
     5,000 shares; issued and outstanding 1,495
     shares                                                                      1                           1
    Common stock, $.001 par value; authorized
     150,000 shares; issued and outstanding 62,720
     and 62,148 shares, respectively                                            63                          62
    Paid-in capital                                                        275,375                     270,606
    Accumulated other comprehensive income                                     600                       4,031
    Accumulated deficit                                                   (164,077)                    (52,310)
                                                                          --------                     -------
    Total stockholders' equity                                             111,962                     222,390
                                                                           -------                     -------
    Total liabilities and stockholders' equity                                      $432,048                    $516,166
                                                                                    ========                    ========

                                                           PETROQUEST ENERGY, INC.
                                                    Consolidated Statements of Operations
                                                                 (unaudited)
                                                (Amounts in Thousands, Except Per Share Data)

                                                Three Months Ended September
                                                            30,                          Nine Months Ended September 30,
                                              -----------------------------              -------------------------------
                                                   2012                2011                   2012                 2011
                                                   ----                ----                   ----                 ----
    Revenues:
    Oil and gas sales                                      $33,913                         $38,980                        $103,286  $122,446
    Gas gathering revenue                            38                  49                    119                  161
                                                    ---                 ---                    ---                  ---
                                                 33,951              39,029                103,405              122,607
                                                 ------              ------                -------              -------
    Expenses:
    Lease operating expenses                      9,658              10,376                 28,408               30,085
    Production taxes                                880               1,446                    112                2,070
    Depreciation, depletion and amortization     15,032              14,696                 46,024               43,415
    Ceiling test write-down                      35,391                   -                108,987               18,907
    General and administrative                    5,963               4,990                 17,541               13,668
    Accretion of asset retirement obligation        525                 433                  1,542                1,612
    Interest expense                              2,338               2,299                  7,021                7,248
                                                  -----               -----                  -----                -----
                                                 69,787              34,240                209,635              117,005
                                                 ------              ------                -------              -------
    Other income (expense):
    Other income (expense)                          257                 (40)                   529                  237
    Derivative expense                             (340)                  -                   (715)                   -
                                                   ----                 ---                   ----                  ---
                                                    (83)                (40)                  (186)                 237
                                                    ---                 ---                   ----                  ---
    Income (loss) from operations               (35,919)              4,749              (106,416)                5,839
    Income tax expense (benefit)                  1,435                (265)                 1,496                 (594)
                                                  -----                ----                  -----                 ----
    Net income (loss)                           (37,354)              5,014              (107,912)                6,433
    Preferred stock dividend                      1,285               1,287                  3,855                3,854
                                                  -----               -----                  -----                -----
    Net income (loss)  available to common
     stockholders                                         $(38,639)                         $3,727                       $(111,767)   $2,579
                                                          ========                          ======                       =========    ======
    Earnings per common share:
    Basic
    Net income (loss) per share                             $(0.62)                          $0.06                          $(1.79)    $0.04
                                                            ======                           =====                          ======     =====
    Diluted
    Net income (loss) per share                             $(0.62)                          $0.06                          $(1.79)    $0.04
                                                            ======                           =====                          ======     =====
    Weighted average number of common shares:
    Basic                                        62,492              62,041                 62,356               61,876
                                                 ======              ======                 ======               ======
    Diluted                                      62,492              62,415                 62,356               62,278
                                                 ======              ======                 ======               ======

                                       PETROQUEST ENERGY, INC.
                                Consolidated Statements of Cash Flows
                                             (unaudited)
                                        (Amounts in Thousands)

                                                        Nine Months Ended September
                                                                     30,
                                                        ----------------------------
                                                          2012                   2011
                                                          ----                   ----
    Cash flows from operating activities:
    Net income (loss)                                            $(107,912)             $6,433
    Adjustments to reconcile net income (loss)
     to net cash provided by operating
     activities:
    Deferred tax expense
     (benefit)                                           1,496                   (594)
    Depreciation, depletion
     and amortization                                   46,024                 43,415
    Ceiling test writedown                             108,987                 18,907
    Accretion of asset
     retirement obligation                               1,542                  1,612
    Share based compensation
     expense                                             5,609                  2,985
    Amortization costs and
     other                                                 594                    461
    Non-cash derivative
     expense                                               715                      -
    Payments to settle asset
     retirement obligations                             (2,519)                  (551)
    Changes in working capital accounts:
    Revenue receivable                                     141                  8,087
    Prepaid drilling and pipe
     costs                                               2,891                  3,164
    Joint interest billing
     receivable                                         20,312                (34,646)
    Accounts payable and
     accrued liabilities                                 1,464                 26,914
    Advances from co-owners                             (8,802)                17,926
    Other                                               (2,866)                (3,000)
                                                        ------                 ------
    Net cash provided by
     operating activities                               67,676                 91,113
                                                        ------                 ------
    Cash flows used in investing activities:
    Investment in oil and gas
     properties                                       (121,428)             (141,687)
    Sale of oil and gas
     properties                                            837                      -
    Sale of unevaluated oil
     and gas properties                                  6,083                 14,461
                                                         -----                 ------
    Net cash used in
     investing activities                             (114,508)             (127,226)
                                                      --------               --------
    Cash flows used in financing activities:
    Net payments for share
     based compensation                                   (840)                  (977)
    Deferred financing costs                               (33)                   (24)
    Payment of preferred
     stock dividend                                     (3,855)                (3,854)
    Proceeds from bank
     borrowings                                         72,500                 22,000
    Repayment of bank
     borrowings                                        (37,500)               (22,000)
                                                       -------                -------
    Net cash provided by
     (used in) financing
     activities                                         30,272                 (4,855)
                                                        ------                 ------
    Net decrease in cash and
     cash equivalents                                  (16,560)               (40,968)
    Cash and cash
     equivalents, beginning
     of period                                          22,263                 63,237
                                                        ------                 ------
    Cash and cash
     equivalents, end of
     period                                                         $5,703             $22,269
                                                                    ======             =======
    Supplemental disclosure of cash flow
     information:
    Cash paid during the period for:
    Interest                                                       $15,628             $15,870
                                                                   =======             =======
    Income taxes                                                       $15                 $51
                                                                       ===                 ===

                                             PETROQUEST ENERGY, INC.
                                       Non-GAAP Disclosure Reconciliation
                                             (Amounts In Thousands)

                           Three Months Ended                Nine Months Ended
                              September 30,                    September 30,
                          2012       2011     2012        2011
                          ----       ----     ----        ----
    Net income (loss)            $(37,354)                        $5,014               $(107,912)  $6,433

    Reconciling items:
    Deferred tax
     expense (benefit)   1,435                (265)                1,496         (594)
    Depreciation,
     depletion and
     amortization       15,032              14,696                46,024       43,415
    Ceiling test
     writedown          35,391                   -               108,987       18,907
    Accretion of asset
     retirement
     obligation            525                 433                 1,542        1,612
    Share based
     compensation
     expense             1,771               1,068                 5,609        2,985
    Amortization
     expense and other     539                 153                 1,309          461
    Discretionary cash
     flow               17,339              21,099                57,055       73,219
                        ------              ------                ------       ------
    Changes in working
     capital accounts    8,138              10,161                13,140       18,445
    Settlement of asset
     retirement
     obligations           (69)                (38)               (2,519)        (551)
                           ---                 ---                ------         ----

    Net cash provided
     by operating
     activities                   $25,408                        $31,222                 $67,676  $91,113
                                  =======                        =======                 =======  =======

    Note:               Management believes that
                        discretionary cash flow 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.
                        Discretionary cash flow 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
                        discretionary cash flow is not a
                        term defined by GAAP, it might
                        not be comparable to similarly
                        titled measures used by other
                        companies.

SOURCE PetroQuest Energy, Inc.


Source: PR Newswire