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): August 5, 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 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On August 5, 2010, PetroQuest Energy, Inc. (the “Company”) announced net income available to common stockholders for the quarter ended June 30, 2010 of $5,248,000 or $0.08 per share, compared to second quarter 2009 net income available to common stockholders of $7,746,000, or $0.15 per share. For the first six months of 2010, the Company reported net income available to common stockholders of $34,965,000, or $0.56 per share, compared to net loss available to common stockholders of $59,211,000, or $1.20 per share, for the comparable 2009 period.

Discretionary cash flow for the second quarter of 2010 was $25,367,000, as compared to $37,788,000 for the comparable 2009 period. Net cash flow provided by operating activities totaled $13,610,000 and $24,512,000 during the second quarters of 2010 and 2009, respectively. For the first six months of 2010, discretionary cash flow was $66,131,000, compared to discretionary cash flow of $76,256,000 for the first six months of 2009. Net cash flow provided by operating activities totaled $66,318,000 and $45,494,000 during the first six months of 2010 and 2009, respectively. See the attached schedule for a reconciliation of net cash flow provided by operating activities to discretionary cash flow.

Production for the second quarter of 2010 was 7.3 Bcfe, compared to 8.6 Bcfe for the comparable period of 2009. For the first six months of 2010, production was 15.1 Bcfe, compared to 18.7 Bcfe for the comparable period of 2009. Production during the 2010 periods was negatively impacted by the reduced capital spending during 2009. Approximately 54% of the Company’s second quarter 2010 production was from long-lived basins. Stated on an Mcfe basis, unit prices including the effects of hedges, were 12% and 3% lower during the second quarter and six months ended June 30, 2010, respectively, as compared to the 2009 periods. Oil and gas sales during the second quarter of 2010 were $41,857,000, as compared to $55,376,000, in the second quarter of 2009. For the first six months of 2010, oil and gas sales were $89,402,000 compared to oil and gas sales of $114,610,000 for the first six months of 2009.

Lease operating expenses (“LOE”) for the second quarter of 2010 increased to $9,020,000, as compared to $8,373,000 in the second quarter of 2009. The increase in lease operating expenses for the second quarter of 2010 is primarily due to unanticipated maintenance costs. LOE per Mcfe was $1.23 for the second quarter of 2010, as compared to $0.98 in the second quarter of 2009. For the first six months of 2010, lease operating expenses increased to $1.24 per Mcfe from $1.05 per Mcfe in the comparable period of 2009. Although per unit lease operating expenses increased, absolute lease operating expenses during the first six months of 2010 decreased when compared to the 2009 period primarily due to the overall reduction in produced volumes as well as lower insurance costs.

Depreciation, depletion and amortization (“DD&A”) on oil and gas properties for the second quarter of 2010 was $1.84 per Mcfe, as compared to $2.11 per Mcfe in the second quarter of 2009. For the first six months of 2010, DD&A on oil and gas properties was $1.87 per Mcfe compared to $2.66 per Mcfe for the comparable period of 2009. The decline in DD&A per Mcfe for the six month period was the result of the ceiling test write-downs of a substantial portion of the Company’s proved oil and gas properties during 2009, the impact of the previously announced Woodford joint development agreement, and the addition of proved reserves at attractive development costs from the Company’s Woodford operated drilling program.

Interest expense for the second quarter of 2010 decreased to $2,379,000, as compared to $3,388,000 in the second quarter of 2009. For the first six months of 2010, interest expense was $4,189,000 compared to $6,564,000 for the comparable period of 2009. The decrease in interest expense is primarily due to the repayment of $130,000,000 of bank debt in the last half of 2009 and the first half of 2010.

General and administrative expenses during the quarter and six months ended June 30, 2010 totaled $5,816,000 and $10,325,000, respectively, as compared to expenses of $4,197,000 and $9,022,000 during the comparable 2009 periods. The increase in general and administrative expenses for the 2010 periods is primarily due to incentive compensation payments during the second quarter of 2010.

The following table sets forth certain information with respect to the oil and gas operations of the Company for the three and six month periods ended June 30, 2010 and 2009:

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	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2010		2009		2010		2009
Production:
Oil (Bbls)		154,285		138,788		298,926		313,599
Gas (Mcf)		6,406,710		7,728,284		13,266,573		16,775,499
Total Production (Mcfe)		7,332,420		8,561,012		15,060,129		18,657,093
Total Daily Production (MMcfe/d)		80.6		94.1		83.2		103.1
Sales:
Total oil sales	$	11,910,281	$	9,424,297	$	23,287,394	$	18,703,580
Total gas sales		29,946,896		45,951,367		66,114,527		95,906,225
Total oil and gas sales	$	41,857,177	$	55,375,664	$	89,401,921	$	114,609,805
Average sales prices:
Oil (per Bbl)	$	77.20	$	67.90	$	77.90	$	59.64
Gas (per Mcf)		4.67		5.95		4.98		5.72
Per Mcfe		5.71		6.47		5.94		6.14

The above sales and average sales prices include additions related to the settlement of gas hedges of $4,756,000 and $22,441,000 and the settlement of oil hedges of zero and $1,470,000 for the three months ended June 30, 2010 and 2009, respectively. The above sales and average sales prices include additions related to the settlement of gas hedges of $6,287,000 and $36,419,000 and the settlement of oil hedges of zero and $3,515,000 for the six months ended June 30, 2010 and 2009, respectively.

The following initiates guidance for the third quarter of 2010:

	Guidance for
Description	3rd Quarter 2010
Production volumes (MMcfe/d)		83-88
Percent gas		88	%
Expenses:
Lease operating expenses (per Mcfe)	$	1.20 - $1.30
Production taxes (per Mcfe)	$	0.20 - $0.25
Depreciation, depletion and amortization (per Mcfe)	$	1.85 - $1.95
General and administrative (in millions)	$	5.0 - $5.5
Interest expense (in millions)	$	2.3 - $2.7

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The following updates guidance for the full year of 2010:

	Guidance for
Description	Full Year 2010
Production volumes (MMcfe/d)		82 - 89
Percent gas		88	%
Expenses:
Lease operating expenses (per Mcfe)	$	1.20 - $1.30
Production taxes (per Mcfe)	$	0.20 - $0.25
Depreciation, depletion and amortization (per Mcfe)	$	1.85 - $1.95
General and administrative (in millions)	$	20.5 - $21.5
Interest expense (in millions)	$	9 - $10
2010 Capital Expenditures (in millions)	$	100 - $110

Operations Update

The Company completed two Woodford operated horizontal wells during late July, PQ37 (2,522 foot lateral) and PQ38 (3,727 foot lateral). Both wells are in the early stages of flowback and have not had sufficient time to establish a clean 24 hour initial production rate. However, due to the shorter than average lateral length, the Company expects both wells to achieve a 24 hour initial production rate of 2,000 — 4,000 Mcf per day. In addition to the above completions, the Company has reached total depth on PQ39 (4,723 foot lateral), is near total depth on PQ40 and expects to drill one additional well utilizing the pad of PQ40. The Company expects to complete all three wells during the fourth quarter. In addition, the Company has procured a second Woodford rig and expects to commence drilling operations in September, with a third rig expected to begin operations in late 2010. The Company estimates that its current net production from its Oklahoma properties is approximately 30 MMcfe per day.

In the Gulf Coast Basin, the Company’s Southern Hills prospect, located in its onshore South Louisiana South Chauvin field, reached total depth and has encountered approximately 64 net feet of pay from two objectives. Production from the lower objective is expected to commence in approximately one week at an initial gross rate of approximately 4,000 — 5,000 Mcfe per day. Upon depletion of the lower objective, which is expected to occur in 2011, the Company expects to recomplete and produce from the upper objective at an initial gross rate of approximately 10,000 — 12,000 Mcfe per day. The Company has an approximate 36% net revenue interest in the well.

Management’s Comment

“We are extremely pleased with our recent Woodford results and the closing of our previously announced joint venture,” said Charles T. Goodson, Chairman, Chief Executive Officer and President. “The joint venture builds upon our already strong liquidity position and enhances our future Woodford drilling economics.”

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.

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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, including the impact of the oil spill in the Gulf of Mexico on our present and future operations, 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”

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

	June 30,			December 31,
	2010			2009
ASSETS
Current assets:
Cash and cash equivalents	$	57,844		$	20,772
Revenue receivable		13,798			16,457
Joint interest billing receivable		18,902			11,792
Hedging asset		6,482			2,796
Prepaid drilling costs		1,070			2,383
Drilling pipe inventory		16,576			19,297
Other current assets		3,453			1,619
Total current assets		118,125			75,116
Property and equipment:
Oil and gas properties:
Oil and gas properties, full cost method		1,366,573			1,296,177
Unevaluated oil and gas properties		62,279			108,079
Accumulated depreciation, depletion and amortization		(1,145,600	)		(1,082,381	)
Oil and gas properties, net		283,252			321,875
Gas gathering assets		4,177			4,848
Accumulated depreciation and amortization of gas gathering assets		(1,347	)		(1,198	)
Total property and equipment		286,082			325,525
Long-term receivable		19,029			5,731
Other assets, net of accumulated depreciation and amortization of $9,342 and $8,342, respectively		3,388			4,087
Total assets	$	426,624		$	410,459
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable to vendors	$	36,119		$	27,113
Advances from co-owners		3,239			3,662
Oil and gas revenue payable		7,755			7,886
Accrued interest and preferred stock dividend		3,018			3,133
Asset retirement obligation		1,941			4,517
Other accrued liabilities		4,938			4,106
Total current liabilities		57,010			50,417
Bank debt		—			29,000
10 3/8% Senior Notes		149,413			149,267
Asset retirement obligation		16,940			19,399
Other liabilities		364			271
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 61,434 and 61,177 shares, respectively		61			61
Paid-in capital		263,505			259,981
Accumulated other comprehensive income		4,071			1,768
Accumulated deficit		(64,741	)		(99,706	)
Total stockholders’ equity		202,897			162,105
Total liabilities and stockholders’ equity	$	426,624		$	410,459

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

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2010		2009			2010			2009
Revenues:
Oil and gas sales	$	41,857	$	55,376		$	89,402		$	114,610
Gas gathering revenue		61		(115	)		130			100
		41,918		55,261			89,532			114,710
Expenses:
Lease operating expenses		9,020		8,373			18,715			19,506
Production taxes		1,599		846			2,947			3,020
Depreciation, depletion and amortization		13,744		18,374			28,728			50,193
Ceiling test writedown		—		—			—			103,582
Gas gathering costs		—		88			11			167
General and administrative		5,816		4,197			10,325			9,022
Accretion of asset retirement obligation		408		472			876			1,124
Interest expense		2,379		3,388			4,189			6,564
		32,966		35,738			65,791			193,178
Gain on legal settlement		—		—			12,400			—
Gain on sale of assets		—		—			—			485
Other income (expense)		94		(2,339	)		11			(5,309	)
Income (loss) from operations		9,046		17,184			36,152			(83,292	)
Income tax expense (benefit)		2,511		8,151			(1,380	)		(26,648	)
Net income (loss)		6,535		9,033			37,532			(56,644	)
Preferred stock dividend		1,287		1,287			2,567			2,567
Net income (loss) available to common stockholders	$	5,248	$	7,746		$	34,965		$	(59,211	)
Earnings per common share:
Basic
Net income (loss) per share	$	0.08	$	0.15		$	0.56		$	(1.20	)
Diluted
Net income (loss) per share	$	0.08	$	0.15		$	0.56		$	(1.20	)
Weighted average number of common shares:
Basic		61,425		49,631			61,335			49,489
Diluted		62,421		50,188			67,356			49,489

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

	Six Months Ended
	June 30,
	2010			2009
Cash flows from operating activities:
Net income (loss)	$	37,532		$	(56,644	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Deferred tax benefit		(1,380	)		(26,648	)
Depreciation, depletion and amortization		28,728			50,193
Ceiling test writedown		—			103,582
Non-cash gain on legal settlement		(4,164	)		—
Gain on sale of assets		—			(485	)
Accretion of asset retirement obligation		876			1,124
Inventory impairment		—			861
Share based compensation expense		3,752			3,525
Amortization costs and other		787			748
Payments to settle asset retirement obligations		(5,389	)		(591	)
Changes in working capital accounts:
Revenue receivable		2,659			6,699
Joint interest billing receivable		(7,110	)		12,871
Prepaid drilling and pipe costs		4,034			9,910
Accounts payable and accrued liabilities		8,359			(51,864	)
Advances from co-owners		(423	)		(5,149	)
Other		(1,943	)		(2,638	)
Net cash provided by operating activities		66,318			45,494
Cash flows from (used in) investing activities:
Investment in oil and gas properties		(68,822	)		(30,811	)
Proceeds from sale of unevaluated properties		36,473			—
Proceeds from sale of oil and gas properties		35,000			4,772
Net cash provided by (used in) investing activities		2,651			(26,039	)
Cash flows from (used in) financing activities:
Net payments for share based compensation		(228	)		(234	)
Deferred financing costs		(104	)		(63	)
Net proceeds from common stock offering		—			38,030
Payment of preferred stock dividend		(2,565	)		(2,569	)
Repayment of bank borrowings		(29,000	)		—
Net cash provided by (used in) financing activities		(31,897	)		35,164
Net increase in cash and cash equivalents		37,072			54,619
Cash and cash equivalents, beginning of period		20,772			23,964
Cash and cash equivalents, end of period	$	57,844		$	78,583
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	8,237		$	10,509
Income taxes	$	3		$	—

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2010			2009			2010			2009
Net income (loss)	$	6,535		$	9,033		$	37,532		$	(56,644	)
Reconciling items:
Deferred tax expense (benefit)		2,511			8,151			(1,380	)		(26,648	)
Gain on sale of assets		—			—			—			(485	)
Non-cash gain on legal settlement		—			—			(4,164	)		—
Depreciation, depletion and amortization		13,744			18,374			28,728			50,193
Ceiling test writedown		—			—			—			103,582
Accretion of asset retirement obligation		408			472			876			1,124
Share based compensation expense		1,770			1,345			3,752			3,525
Amortization costs and other		399			377			787			748
Inventory impairment		—			36			—			861
Discretionary cash flow		25,367			37,788			66,131			76,256
Changes in working capital accounts		(6,885	)		(12,731	)		5,576			(30,171	)
Settlement of asset retirement obligations		(4,872	)		(545	)		(5,389	)		(591	)
Net cash flow provided by operating activities	$	13,610		$	24,512		$	66,318		$	45,494

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.

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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: August 5, 2010	By:	/s/ J. Bond Clement
		J. Bond Clement
		Executive Vice President, Chief Financial Officer and Treasurer

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