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PetroQuest Energy Announces Record 2005 Year-End and Fourth Quarter Results

Posted on: Friday, 17 February 2006, 06:00 CST

LAFAYETTE, La., Feb. 17 /PRNewswire-FirstCall/ -- PetroQuest Energy, Inc. announced today 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".

Forward-Looking Statements

This press 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 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 estimating quantities of proved oil and natural gas reserves, in prospect development and property acquisitions and in projecting future rates of production, the timing of development expenditures and drilling of wells, 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.

PETROQUEST ENERGY, INC. Consolidated Statements of Income (unaudited) (Amounts In Thousands, Except Per Share Data) Three Months Ended Twelve Months Ended December 31, December 31, 2005 2004 2005 2004 Revenues: Oil and gas sales $38,044 $22,511 $120,552 $84,595 Interest and other income 1,901 86 2,796 273 39,945 22,597 123,348 84,868 Expenses: Lease operating expenses 5,524 3,568 20,972 13,161 Production taxes 1,547 385 3,764 1,549 Depreciation, depletion and amortization 13,208 8,661 43,747 35,435 General and administrative 2,268 1,496 7,347 6,212 Accretion of asset retirement obligation 424 222 1,253 833 Interest expense 3,230 849 12,371 2,817 Derivative expense --- --- --- 2 26,201 15,181 89,454 60,009 Income from operations 13,744 7,416 33,894 24,859 Income tax expense 5,424 2,417 12,477 8,511 Net income $8,320 $4,999 $21,417 $16,348 Earnings per common share: Basic $0.18 $0.11 $0.46 $0.37 Diluted $0.17 $0.11 $0.44 $0.35 Weighted average number of common shares: Basic 47,307 44,685 46,714 44,616 Diluted 48,712 47,023 48,242 46,438 PETROQUEST ENERGY, INC. Consolidated Balance Sheets (Unaudited) (Amounts in Thousands) December 31, 2005 2004 ASSETS Current assets: Cash and cash equivalents $6,703 $1,529 Revenue receivable 22,492 9,392 Joint interest billing receivable 17,567 3,655 Other current assets 3,441 1,017 Total current assets 50,203 15,593 Property and equipment: Oil and gas properties: Oil and gas properties, full cost method 523,212 363,756 Unevaluated oil and gas properties 52,745 16,380 Accumulated depreciation, depletion and amortization (210,774) (168,453) Oil and gas properties, net 365,183 211,683 Gas gathering assets 10,861 --- Accumulated depreciation and amortization of gas gathering assets (1,055) --- Total property and equipment 374,989 211,683 Other assets, net of accumulated depreciation and amortization of $10,353 and $5,967, respectively 6,278 4,341 Total assets $431,470 $231,617 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable to vendors $41,462 $24,176 Advances from co-owners 5,874 2,265 Oil and gas revenue payable 8,090 2,930 Hedging liability 15,987 4,536 Other accrued liabilities 10,542 6,115 Total current liabilities 81,955 40,022 Bank debt 10,000 38,500 10 3/8% Senior Notes 148,340 --- Asset retirement obligation 19,257 15,238 Deferred income taxes 27,139 14,606 Other liabilities 242 1,974 Commitments and contingencies Stockholders' equity: Common stock, $.001 par value; authorized 75,000 shares; issued and outstanding 47,325 and 44,685 shares, respectively 47 45 Paid-in capital 117,441 112,387 Accumulated other comprehensive loss (7,444) (4,231) Retained earnings 34,493 13,076 Total stockholders' equity 144,537 121,277 Total liabilities and stockholders' equity $431,470 $231,617 PETROQUEST ENERGY, INC. Consolidated Statements of Cash Flows (Unaudited) (Amounts in Thousands) Year Ended December 31, 2005 2004 2003 Cash flows from operating activities: Net income $21,417 $16,348 $3,640 Adjustments to reconcile net income to net cash provided by operating activities: Deferred tax expense 12,477 8,511 1,690 Amortization of debt issuance costs 1,390 1,678 531 Compensation expense 213 272 381 Depreciation, depletion and amortization 43,747 35,435 27,098 Derivative mark to market --- (218) (258) Write-off of debt issuance costs 2,575 --- --- Amortization of bond discount 111 --- --- Cumulative effect of change in accounting principle --- --- (849) Accretion of asset retirement obligation 1,253 833 682 Changes in working capital accounts: Revenue receivable (13,100) (2,871) (20) Joint interest billing receivable (13,912) (1,080) (409) Accounts payable and accrued liabilities 14,255 12,521 1,416 Other assets (448) (619) (273) Advances from co-owners 3,609 (487) 1,811 Other (397) (13) (1,250) Net cash provided by operating activities 73,190 70,310 34,190 Cash flows from investing activities: Investment in oil and gas properties (176,031) (80,142) (54,126) Investment in gas gathering assets (10,861) --- --- Net cash used in investing activities (186,892) (80,142) (54,126) Cash flows from financing activities: Proceeds from exercise of options and warrants 972 170 2,111 Proceeds from bank borrowings 44,500 39,000 39,600 Repayment of bank borrowings (73,000) (28,000) (21,100) Proceeds from issuance of 10 3/8% senior notes 148,229 --- --- Deferred financing costs (5,876) (588) (1,027) Issuance of common stock, net of expenses 4,051 --- (6) Net cash provided by financing activities 118,876 10,582 19,578 Net increase (decrease) in cash and cash equivalents 5,174 750 (358) Cash and cash equivalents at beginning of period 1,529 779 1,137 Cash and cash equivalents at end of period $6,703 $1,529 $779 Supplemental disclosure of cash flow information Cash paid during the period from: Interest $9,628 $1,752 $435 Income taxes $75 $--- $--- PETROQUEST ENERGY, INC. Non-GAAP Disclosure Reconciliation (Amounts In Thousands) Three Months Ended Twelve Months Ended December 31, December 31, 2005 2004 2005 2004 Net cash flow provided by operating activities $9,813 $20,838 $73,190 $70,310 Changes in working capital accounts 17,896 (4,142) 9,993 (7,451) Net cash flow provided by operating activities before working capital changes $27,709 $16,696 $83,183 $62,859 Note: Management believes that net cash flow provided by operating activities before working capital changes 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. Net cash flow provided by operating activities before working capital changes 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 net cash flow provided by operating activities before working capital changes is not a term defined by GAAP, it might not be comparable to similarly titled measures used by other companies.

PetroQuest Energy, Inc.

CONTACT: W. Todd Zehnder, Vice President - Corporate Communications ofPetroQuest Energy, Inc., +1-337-232-7028

Web site: http://www.petroquest.com/

Source: PRNewswire-FirstCall

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