8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 21, 2010

PETROQUEST ENERGY, INC.
(Exact name of registrant as specified in its charter)

DELAWARE	001-32681	72-1440714
(State or other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

400 E. Kaliste Saloom Rd., Suite 6000 Lafayette, Louisiana	70508
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (337) 232-7028

(Former name or former address if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

On May 24, 2010, PetroQuest Energy, L.L.C., a Louisiana limited liability company and wholly-owned subsidiary of PetroQuest Energy, Inc. (the “Company”), consummated the sale to WSGP Gas Producing, LLC, a Delaware limited liability company (“WSGP”), of an undivided 50% interest in the Company’s proven undeveloped reserves in the Woodford Shale (the “Working Interest”) as well as certain rights with respect to 50% of the Company’s undeveloped acreage in the Woodford Shale (the “Undeveloped Acreage”) pursuant to the terms of a Joint Development Agreement (the “Joint Development Agreement”), among the Company, WSGP, and NextEra Energy Gas Producing, LLC, a Delaware limited liability company (“NEGP”). WSGP and NEGP are subsidiaries of NextEra Energy Resources, LLC, a Delaware limited liability company. NEGP is a party to the Joint Development Agreement for the purpose of unconditionally guaranteeing the due and punctual payment of all monies due from WSGP under the Joint Development Agreement.

At closing, WSGP paid the Company $60 million in cash in consideration for the sale of the Working Interest and certain rights in the Undeveloped Acreage. The Joint Development Agreement provides for a drilling program with respect to the Company’s position in the Undeveloped Acreage in the Woodford Shale (the “Drilling Program”). WSGP will fund a portion of the Company’s share of future drilling costs for the Undeveloped Acreage under the Drilling Program. WSGP will pay the Company $14 million in cash as deferred purchase price for certain rights in the Undeveloped Acreage on November 30, 2011, and if certain performance metrics are achieved in the Drilling Program, WSGP will pay the Company an additional $14 million in cash on the later to occur of November 30, 2011 or the date on which the performance metrics are achieved.

Under the terms of the Joint Development Agreement, WSGP will pay a share of the Company’s costs and expenses associated with Phase 1 of the Drilling Program in an amount not to exceed $54 million. WSGP has an election to participate in Phase 2 of the Drilling Program and, if it so elects, to continue Phase 2 of the Drilling Program for subsequent six month periods by providing prior notice to the Company. Subject to certain non-participation and termination rights, WSGP may participate in Phase 2 by paying a share of the Company’s costs and expenses associated with Phase 2 of the Drilling Program in an amount not to exceed $92.6 million. The Company will serve as the initial operator under each operating agreement entered into pursuant to the Drilling Program. The Joint Development Agreement grants WSGP the right to non-consent to operations under the Drilling Program during both phases. For each well in the Undeveloped Acreage in which WSGP participates that is drilled and completed as part of the Drilling Program, WSGP will receive, effective as of the date which actual drilling operations commence for such well, an undivided 50% of the Company’s working interest and associated net revenue interest in and to such well and the drilling unit for such well.

Item 7.01. Regulation FD Disclosure.

On May 25, 2010, the Company issued a press release announcing the Joint Development Agreement. The press release is filed as Exhibit 99.1 to this Form 8-K and is incorporated herein by reference.

In accordance with General Instructions B.2 and B.6 of Form 8-K, the foregoing information, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall such information and Exhibit be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits:

99.1 Press Release dated May 25, 2010.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PETROQUEST ENERGY, INC.

Date: May 25, 2010

By: /s/ J. Bond Clement                               
J. Bond Clement
Executive Vice President,
Chief Financial Officer and Treasurer

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EX-99.1

Exhibit 99.1

NEWS RELEASE

For further information, contact: Matt Quantz, Manager — Corporate Communications
(337) 232-7028, www.petroquest.com

PETROQUEST ENERGY ANNOUNCES WOODFORD SHALE JOINT VENTURE

LAFAYETTE, LA — May 25, 2010 — PetroQuest Energy, Inc. (NYSE: PQ) announced today that the Company has entered into a joint venture agreement with WSGP Gas Producing, LLC and NextEra Energy Gas Producing, LLC (collectively referred to as “NextEra”), subsidiaries of NextEra Energy Resources, 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.

Management Statement
“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.”

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 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, 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.