þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
DELAWARE | 72-1440714 | |
(State of Incorporation) | (I.R.S. Employer Identification No.) | |
400 E. Kaliste Saloom Rd., Suite 6000 | ||
Lafayette, Louisiana | 70508 | |
(Address of principal executive offices) | (Zip code) |
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o | Smaller reporting company o |
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Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32.1 | ||||||||
Exhibit 32.2 | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT |
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
(unaudited) | (Note 1) | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 50,641 | $ | 63,237 | ||||
Revenue receivable |
9,667 | 13,386 | ||||||
Joint interest billing receivable |
26,169 | 12,193 | ||||||
Other receivable |
13,906 | 13,795 | ||||||
Prepaid drilling costs |
1,007 | 789 | ||||||
Drilling pipe inventory |
5,986 | 11,711 | ||||||
Other current assets |
4,052 | 1,827 | ||||||
Total current assets |
111,428 | 116,938 | ||||||
Property and equipment: |
||||||||
Oil and gas properties: |
||||||||
Oil and gas properties, full cost method |
1,477,448 | 1,433,642 | ||||||
Unevaluated oil and gas properties |
81,162 | 54,851 | ||||||
Accumulated depreciation, depletion and amortization |
(1,222,663 | ) | (1,175,553 | ) | ||||
Oil and gas properties, net |
335,947 | 312,940 | ||||||
Gas gathering assets |
4,177 | 4,177 | ||||||
Accumulated depreciation and amortization of gas
gathering assets |
(1,645 | ) | (1,496 | ) | ||||
Total property and equipment |
338,479 | 315,621 | ||||||
Other assets, net of accumulated depreciation and amortization
of $7,221 and $6,435, respectively |
6,191 | 6,958 | ||||||
Total assets |
$ | 456,098 | $ | 439,517 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable to vendors |
$ | 42,377 | $ | 26,097 | ||||
Advances from co-owners |
12,297 | 7,963 | ||||||
Oil and gas revenue payable |
4,622 | 7,220 | ||||||
Accrued interest and preferred stock dividend |
6,073 | 6,575 | ||||||
Hedge liability |
| 1,089 | ||||||
Asset retirement obligation |
674 | 1,517 | ||||||
Other accrued liabilities |
5,200 | 7,380 | ||||||
Total current liabilities |
71,243 | 57,841 | ||||||
10% Senior Notes |
150,000 | 150,000 | ||||||
Asset retirement obligation |
24,684 | 23,075 | ||||||
Other liabilities |
490 | 439 | ||||||
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 62,020 and 61,565
shares, respectively |
62 | 62 | ||||||
Paid-in capital |
267,928 | 266,907 | ||||||
Accumulated other comprehensive income (loss) |
557 | (1,089 | ) | |||||
Accumulated deficit |
(58,867 | ) | (57,719 | ) | ||||
Total stockholders equity |
209,681 | 208,162 | ||||||
Total liabilities and stockholders equity |
$ | 456,098 | $ | 439,517 | ||||
1
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenues: |
||||||||||||||||
Oil and gas sales |
$ | 41,920 | $ | 41,857 | $ | 83,466 | $ | 89,402 | ||||||||
Gas gathering revenue |
58 | 61 | 122 | 130 | ||||||||||||
41,978 | 41,918 | 83,588 | 89,532 | |||||||||||||
Expenses: |
||||||||||||||||
Lease operating expenses |
10,206 | 9,020 | 19,709 | 18,715 | ||||||||||||
Production taxes |
(538 | ) | 1,599 | 624 | 2,947 | |||||||||||
Depreciation, depletion and amortization |
14,657 | 13,744 | 28,719 | 28,728 | ||||||||||||
Ceiling test writedown |
12,973 | | 18,907 | | ||||||||||||
Gas gathering costs |
3 | | 10 | 11 | ||||||||||||
General and administrative |
4,280 | 5,816 | 8,678 | 10,325 | ||||||||||||
Accretion of asset retirement obligation |
427 | 408 | 1,179 | 876 | ||||||||||||
Interest expense |
2,255 | 2,379 | 4,949 | 4,189 | ||||||||||||
44,263 | 32,966 | 82,775 | 65,791 | |||||||||||||
Gain on legal settlement |
| | | 12,400 | ||||||||||||
Other income |
197 | 94 | 277 | 11 | ||||||||||||
Income (loss) from operations |
(2,088 | ) | 9,046 | 1,090 | 36,152 | |||||||||||
Income tax expense (benefit) |
(330 | ) | 2,511 | (329 | ) | (1,380 | ) | |||||||||
Net income (loss) |
(1,758 | ) | 6,535 | 1,419 | 37,532 | |||||||||||
Preferred stock dividend |
1,287 | 1,287 | 2,567 | 2,567 | ||||||||||||
Net income (loss) available to common
stockholders |
$ | (3,045 | ) | $ | 5,248 | $ | (1,148 | ) | $ | 34,965 | ||||||
Earnings per common share: |
||||||||||||||||
Basic |
||||||||||||||||
Net income (loss) per share |
$ | (0.05 | ) | $ | 0.08 | $ | (0.02 | ) | $ | 0.56 | ||||||
Diluted |
||||||||||||||||
Net income (loss) per share |
$ | (0.05 | ) | $ | 0.08 | $ | (0.02 | ) | $ | 0.56 | ||||||
Weighted average number of common shares: |
||||||||||||||||
Basic |
61,917 | 61,425 | 61,793 | 61,335 | ||||||||||||
Diluted |
61,917 | 62,421 | 61,793 | 67,356 | ||||||||||||
2
Six Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 1,419 | $ | 37,532 | ||||
Adjustments to reconcile net income to net cash
provided by
operating activities: |
||||||||
Deferred tax benefit |
(329 | ) | (1,380 | ) | ||||
Depreciation, depletion and amortization |
28,719 | 28,728 | ||||||
Ceiling test writedown |
18,907 | | ||||||
Non-cash gain on legal settlement |
| (4,164 | ) | |||||
Accretion of asset retirement obligation |
1,179 | 876 | ||||||
Share based compensation expense |
1,917 | 3,752 | ||||||
Amortization costs and other |
308 | 787 | ||||||
Payments to settle asset retirement obligations |
(513 | ) | (5,389 | ) | ||||
Changes in working capital accounts: |
||||||||
Revenue receivable |
3,719 | 2,659 | ||||||
Joint interest billing receivable |
(13,976 | ) | (7,110 | ) | ||||
Prepaid drilling and pipe costs |
5,507 | 4,034 | ||||||
Accounts payable and accrued liabilities |
(3,358 | ) | 8,359 | |||||
Advances from co-owners |
18,235 | (423 | ) | |||||
Other |
(1,843 | ) | (1,943 | ) | ||||
Net cash provided by operating activities |
59,891 | 66,318 | ||||||
Cash flows used in investing activities: |
||||||||
Investment in oil and gas properties |
(69,006 | ) | (54,822 | ) | ||||
Proceeds from sale of unevaluated properties |
| 22,473 | ||||||
Proceeds from sale of oil and gas properties |
| 35,000 | ||||||
Net cash provided by (used in) investing activities |
(69,006 | ) | 2,651 | |||||
Cash flows used in financing activities: |
||||||||
Net payments for share based compensation |
(896 | ) | (228 | ) | ||||
Deferred financing costs |
(16 | ) | (104 | ) | ||||
Payment of preferred stock dividend |
(2,569 | ) | (2,565 | ) | ||||
Repayment of bank borrowings |
| (29,000 | ) | |||||
Net cash used in financing activities |
(3,481 | ) | (31,897 | ) | ||||
Net (decrease) increase in cash and cash equivalents |
(12,596 | ) | 37,072 | |||||
Cash and cash equivalents, beginning of period |
63,237 | 20,772 | ||||||
Cash and cash equivalents, end of period |
$ | 50,641 | $ | 57,844 | ||||
Supplemental disclosure of cash flow information: |
||||||||
Cash paid during the period for: |
||||||||
Interest |
$ | 8,291 | $ | 8,237 | ||||
Income taxes |
$ | 1 | $ | 3 | ||||
3
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net income (loss) |
$ | (1,758 | ) | $ | 6,535 | $ | 1,419 | $ | 37,532 | |||||||
Change in fair value of derivative instruments,
accounted for as hedges, net of tax benefit
(expense)
of ($330), $2,508, ($330), and ($1,383),
respectively |
2,374 | (4,266 | ) | 1,646 | 2,303 | |||||||||||
Comprehensive income |
$ | 616 | $ | 2,269 | $ | 3,065 | $ | 39,835 | ||||||||
4
5
Loss | Shares | Per | ||||||||||
For the Three Months Ended June 30, 2011 | (Numerator) | (Denominator) | Share Amount | |||||||||
BASIC EPS |
||||||||||||
Net loss available to common stockholders |
$ | (3,045 | ) | 61,917 | $ | (0.05 | ) | |||||
Effect of dilutive securities: |
||||||||||||
Stock options |
| | ||||||||||
Restricted stock |
| | ||||||||||
Series B preferred stock |
| | ||||||||||
DILUTED EPS |
$ | (3,045 | ) | 61,917 | $ | (0.05 | ) | |||||
Income | Shares | Per | ||||||||||
For the Three Months Ended June 30, 2010 | (Numerator) | (Denominator) | Share Amount | |||||||||
Net income available to common stockholders |
$ | 5,248 | 61,425 | |||||||||
Attributable to participating securities |
(145 | ) | | |||||||||
BASIC EPS |
$ | 5,103 | 61,425 | $ | 0.08 | |||||||
Net income available to common stockholders |
$ | 5,248 | 61,425 | |||||||||
Effect of dilutive securities: |
||||||||||||
Stock options |
| 381 | ||||||||||
Restricted stock |
| 615 | ||||||||||
DILUTED EPS |
$ | 5,248 | 62,421 | $ | 0.08 | |||||||
Loss | Shares | Per | ||||||||||
For the Six Months Ended June 30, 2011 | (Numerator) | (Denominator) | Share Amount | |||||||||
BASIC EPS |
||||||||||||
Net loss available to common stockholders |
$ | (1,148 | ) | 61,793 | $ | (0.02 | ) | |||||
Effect of dilutive securities: |
||||||||||||
Stock options |
| | ||||||||||
Restricted stock |
| | ||||||||||
Series B preferred stock |
| | ||||||||||
DILUTED EPS |
$ | (1,148 | ) | 61,793 | $ | (0.02 | ) | |||||
Income | Shares | Per | ||||||||||
For the Six Months Ended June 30, 2010 | (Numerator) | (Denominator) | Share Amount | |||||||||
Net income available to common stockholders |
$ | 34,965 | 61,335 | |||||||||
Attributable to participating securities |
(891 | ) | | |||||||||
BASIC EPS |
$ | 34,074 | 61,335 | $ | 0.56 | |||||||
Net income available to common stockholders |
$ | 34,965 | 61,335 | |||||||||
Effect of dilutive securities: |
||||||||||||
Stock options |
| 375 | ||||||||||
Restricted stock |
| 498 | ||||||||||
Series B preferred stock |
2,567 | 5,148 | ||||||||||
DILUTED EPS |
$ | 37,532 | 67,356 | $ | 0.56 | |||||||
6
7
Six Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
Asset retirement obligation, beginning of period |
$ | 24,592 | $ | 23,916 | ||||
Liabilities incurred |
100 | | ||||||
Liabilities settled |
(513 | ) | (6,478 | ) | ||||
Accretion expense |
1,179 | 876 | ||||||
Revisions in estimated cash flows |
| 567 | ||||||
Asset retirement obligation, end of period |
25,358 | 18,881 | ||||||
Less: current portion of asset retirement obligation |
(674 | ) | (1,941 | ) | ||||
Long-term asset retirement obligation |
$ | 24,684 | $ | 16,940 | ||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Stock options: |
||||||||||||||||
Incentive Stock Options |
$ | 74 | $ | 197 | $ | 157 | $ | 432 | ||||||||
Non-Qualified Stock
Options |
169 | 502 | 334 | 1,074 | ||||||||||||
Restricted stock |
642 | 1,071 | 1,426 | 2,246 | ||||||||||||
Share based compensation |
$ | 885 | $ | 1,770 | $ | 1,917 | $ | 3,752 | ||||||||
8
Instrument | Weighted | |||||||||
Production Period | Type | Daily Volumes | Average Price | |||||||
Natural Gas: |
||||||||||
July-December 2011 |
Costless Collar | 15,000 Mmbtu | $ | 4.17 4.90 | ||||||
July-December 2011 |
Swap | 10,000 Mmbtu | $ | 4.52 | ||||||
January-December
2012 |
Costless Collar | 10,000 Mmbtu | $ | 5.00 5.29 | ||||||
Crude Oil: |
||||||||||
July-December 2011 |
Costless Collar | 500 Bbls | $ | 90.00 97.78 |
Commodity Derivatives | ||||||
Balance Sheet | ||||||
Period | Location | Fair Value | ||||
June 30, 2011 |
Other current assets | $ | 527 | |||
June 30, 2011 |
Other assets | $ | 360 | |||
December 31, 2010 |
Hedge liability | $ | (1,089 | ) |
9
Amount of Gain (Loss) | Location of | Amount of Gain (Loss) | ||||||||
Recognized in Other | Gain (Loss) Reclassified | Reclassified into | ||||||||
Instrument | Comprehensive Income | into Income | Income | |||||||
Commodity Derivatives at June 30, 2011 |
$ | 2,374 | Oil and gas sales | $ | (103 | ) | ||||
Commodity Derivatives at June 30, 2010 |
$ | (4,266 | ) | Oil and gas sales | $ | 4,756 |
Amount of Gain | Location of | Amount of Gain (Loss) | ||||||||
Recognized in Other | Gain (Loss) Reclassified | Reclassified into | ||||||||
Instrument | Comprehensive Income | into Income | Income | |||||||
Commodity Derivatives at June 30, 2011 |
$ | 1,646 | Oil and gas sales | $ | (3 | ) | ||||
Commodity Derivatives at June 30, 2010 |
$ | 2,303 | Oil and gas sales | $ | 6,287 |
| Level 1: valuations consist of unadjusted quoted prices in active markets for identical
assets and liabilities and has the highest priority; |
| Level 2: valuations rely on quoted prices in markets that are not active or observable
inputs over the full term of the asset or liability; |
| Level 3: valuations are based on prices or third party or internal valuation models
that require inputs that are significant to the fair value measurement and are less
observable and thus have the lowest priority. |
Fair Value Measurements Using | ||||||||||||
Quoted Prices | Significant Other | Significant | ||||||||||
in Active | Observable | Unobservable | ||||||||||
Instrument | Markets (Level 1) | Inputs (Level 2) | Inputs (Level 3) | |||||||||
Commodity Derivatives: |
||||||||||||
At June 30, 2011 |
$ | | $ | 887 | $ | | ||||||
At December 31, 2010 |
$ | | $ | (1,089 | ) | $ | |
10
11
12
13
14
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Production: |
||||||||||||||||
Oil (Bbls) |
140,049 | 154,285 | 315,313 | 298,926 | ||||||||||||
Gas (Mcf) |
5,995,945 | 5,812,268 | 11,773,285 | 12,057,516 | ||||||||||||
Ngl (Mcfe) |
533,067 | 594,442 | 1,073,537 | 1,209,057 | ||||||||||||
Total Production (Mcfe) |
7,369,306 | 7,332,420 | 14,738,700 | 15,060,129 | ||||||||||||
Sales: |
||||||||||||||||
Total oil sales |
$ | 15,722,784 | $ | 11,910,281 | $ | 32,895,484 | $ | 23,287,394 | ||||||||
Total gas sales |
21,490,412 | 25,568,663 | 40,616,107 | 56,340,777 | ||||||||||||
Total ngl sales |
4,706,280 | 4,378,233 | 9,953,890 | 9,773,750 | ||||||||||||
Total oil and gas sales |
$ | 41,919,476 | $ | 41,857,177 | $ | 83,465,481 | $ | 89,401,921 | ||||||||
Average sales prices: |
||||||||||||||||
Oil (per Bbl) |
$ | 112.27 | $ | 77.20 | $ | 104.33 | $ | 77.90 | ||||||||
Gas (per Mcf) |
3.58 | 4.40 | 3.45 | 4.67 | ||||||||||||
Ngl (per Mcfe) |
8.83 | 7.37 | 9.27 | 8.08 | ||||||||||||
Per Mcfe |
5.69 | 5.71 | 5.66 | 5.94 |
15
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Stock options: |
||||||||||||||||
Incentive Stock Options |
$ | 74 | $ | 197 | $ | 157 | $ | 432 | ||||||||
Non-Qualified Stock Options |
169 | 502 | 334 | 1,074 | ||||||||||||
Restricted stock |
642 | 1,071 | 1,426 | 2,246 | ||||||||||||
Share based compensation |
$ | 885 | $ | 1,770 | $ | 1,917 | $ | 3,752 | ||||||||
16
17
18
19
Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Instrument | Weighted | |||||||||
Production Period | Type | Daily Volumes | Average Price | |||||||
Natural Gas: |
||||||||||
July-December 2011 |
Costless Collar | 15,000 Mmbtu | $ | 4.17 4.90 | ||||||
July-December 2011 |
Swap | 10,000 Mmbtu | $ | 4.52 | ||||||
January-December 2012 |
Costless Collar | 10,000 Mmbtu | $ | 5.00 5.29 | ||||||
Crude Oil: |
||||||||||
July-December 2011 |
Costless Collar | 500 Bbls | $ | 90.00 97.78 |
Item 4. | CONTROLS AND PROCEDURES |
i. | that the Companys disclosure controls and procedures are designed to ensure (a) that
information required to be disclosed by the Company in the reports it files or submits
under the Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the SECs rules and forms, and
(b) that such information is accumulated and communicated to the Companys management,
including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow
timely decisions regarding required disclosure; and |
ii. | that the Companys disclosure controls and procedures are effective. |
20
Item 1. | LEGAL PROCEEDINGS |
Item 1A. | RISK FACTORS |
| relatively minor changes in the supply of or the demand for oil and natural
gas; |
| the condition of the United States and worldwide economies; |
| market uncertainty; |
| the level of consumer product demand; |
| weather conditions in the United States, such as hurricanes; |
| the actions of the Organization of Petroleum Exporting Countries; |
| domestic and foreign governmental regulation and taxes, including price
controls adopted by the Federal Energy Regulatory Commission; |
| political conditions or hostilities in oil and natural gas producing
regions, including the Middle East and South America; |
| the price and level of foreign imports of oil and natural gas; and |
| the price and availability of alternate fuel sources. |
21
| it may be more difficult for us to satisfy our obligations with respect to
our outstanding indebtedness, including 10% senior notes due 2017, which we refer to as
our 10% notes, and any failure to comply with the obligations of any of our debt
agreements, including financial and other restrictive covenants, could result in an
event of default under the agreements governing such indebtedness; |
| the covenants contained in our debt agreements limit our ability to borrow
money in the future for acquisitions, capital expenditures or to meet our operating
expenses or other general corporate obligations and may limit our flexibility in
operating our business; |
| we will need to use a substantial portion of our cash flows to pay interest
on our debt, approximately $15 million per year for interest on our 10% notes alone,
and to pay quarterly dividends, if declared by our Board of Directors, on our Series B
Preferred Stock of approximately $5.1 million per year, which will reduce the amount of
money we have for operations, capital expenditures, expansion, acquisitions or general
corporate or other business activities; |
| the amount of our interest expense may increase because certain of our
borrowings in the future may be at variable rates of interest, which, if interest rates
increase, could result in higher interest expense; |
| we may have a higher level of debt than some of our competitors, which may
put us at a competitive disadvantage; |
| we may be more vulnerable to economic downturns and adverse developments in
our industry or the economy in general, especially extended or further declines in oil
and natural gas prices; and |
| our debt level could limit our flexibility in planning for, or reacting to,
changes in our business and the industry in which we operate. |
22
Item 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Total Number of | Maximum Number (or | |||||||||||||||
Shares | Approximate Dollar | |||||||||||||||
Purchased as | Value) of Shares that | |||||||||||||||
Part of Publicly | May be Purchased | |||||||||||||||
Total Number of | Average Price | Announced | Under the Plans or | |||||||||||||
Shares Purchased (1) | Paid Per Share | Plan or Program | Programs | |||||||||||||
April 1 April 30, 2011 |
13,039 | $ | 8.65 | | | |||||||||||
May 1 May 31, 2011 |
| | | | ||||||||||||
June 1 June 30, 2011 |
| | | | ||||||||||||
Total |
13,039 | $ | 8.65 | | |
(1) | All shares repurchased were surrendered by employees to pay tax withholding upon the
vesting of
restricted stock awards. |
Item 3. | DEFAULTS UPON SENIOR SECURITIES |
Item 4. | (REMOVED AND RESERVED) |
Item 5. | OTHER INFORMATION |
Item 6. | EXHIBITS |
23
PETROQUEST ENERGY, INC. |
||||
Date: August 5, 2011 | /s/ J. Bond Clement | |||
J. Bond Clement | ||||
Executive Vice President, Chief Financial Officer and Treasurer (Authorized Officer and Principal Financial Officer) |
||||
24
1. | I have reviewed this Form 10-Q of PetroQuest Energy, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report; |
4. | The registrants other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of directors (or persons performing the equivalent
functions): |
/s/ Charles T. Goodson
|
||
Chief Executive Officer |
||
August 5, 2011 |
1. | I have reviewed this Form 10-Q of PetroQuest Energy, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report; |
4. | The registrants other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of directors (or persons performing the equivalent
functions): |
/s/ J. Bond Clement
|
||
Chief Financial Officer |
||
August 5, 2011 |
/s/ Charles T. Goodson
|
||
Chief Executive Officer |
||
August 5, 2011 |
/s/ J. Bond Clement
|
||
Chief Financial Officer |
||
August 5, 2011 |
Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Per Share data |
Jun. 30, 2011
|
Dec. 31, 2010
|
---|---|---|
ASSETS | Â | Â |
Accumulated depreciation and amortization | $ 7,221 | $ 6,435 |
Stockholders' equity: | Â | Â |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 5,000 | 5,000 |
Preferred stock, shares issued | 1,495 | 1,495 |
Preferred stock, shares outstanding | 1,495 | 1,495 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 150,000 | 150,000 |
Common stock, shares issued | 62,020 | 62,020 |
Common stock, shares outstanding | 61,565 | 61,565 |
Consolidated Statements of Operations (Unaudited) (USD $)
In Thousands, except Per Share data |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
|
Revenues: | Â | Â | Â | Â |
Oil and gas sales | $ 41,920 | $ 41,857 | $ 83,466 | $ 89,402 |
Gas gathering revenue | 58 | 61 | 122 | 130 |
Total revenues | 41,978 | 41,918 | 83,588 | 89,532 |
Expenses: | Â | Â | Â | Â |
Lease operating expenses | 10,206 | 9,020 | 19,709 | 18,715 |
Production taxes | (538) | 1,599 | 624 | 2,947 |
Depreciation, depletion and amortization | 14,657 | 13,744 | 28,719 | 28,728 |
Ceiling test write down | 12,973 | Â | 18,907 | Â |
Gas gathering costs | 3 | Â | 10 | 11 |
General and administrative | 4,280 | 5,816 | 8,678 | 10,325 |
Accretion of asset retirement obligation | 427 | 408 | 1,179 | 876 |
Interest expense | 2,255 | 2,379 | 4,949 | 4,189 |
Total expenses | 44,263 | 32,966 | 82,775 | 65,791 |
Gain on legal settlement | Â | Â | Â | 12,400 |
Other income | 197 | 94 | 277 | 11 |
Income (loss) from operations | (2,088) | 9,046 | 1,090 | 36,152 |
Income tax expense (benefit) | (330) | 2,511 | (329) | (1,380) |
Net income (loss) | (1,758) | 6,535 | 1,419 | 37,532 |
Preferred stock dividend | 1,287 | 1,287 | 2,567 | 2,567 |
Net income (loss) available to common stockholders | $ (3,045) | $ 5,248 | $ (1,148) | $ 34,965 |
Basic | Â | Â | Â | Â |
Net income (loss) per share | $ (0.05) | $ 0.08 | $ (0.02) | $ 0.56 |
Diluted | Â | Â | Â | Â |
Net income (loss) per share | $ (0.05) | $ 0.08 | $ (0.02) | $ 0.56 |
Weighted average number of common shares: | Â | Â | Â | Â |
Basic | 61,917 | 61,425 | 61,793 | 61,335 |
Diluted | 61,917 | 62,421 | 61,793 | 67,356 |
Document and Entity Information (USD $)
|
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2011
|
Aug. 01, 2011
|
Jun. 30, 2010
|
|
Document and Entity Information [Abstract] | Â | Â | Â |
Entity Registrant Name | PETROQUEST ENERGY INC | Â | Â |
Entity Central Index Key | 0000872248 | Â | Â |
Document Type | 10-Q | Â | Â |
Document Period End Date | Jun. 30, 2011 | ||
Amendment Flag | false | Â | Â |
Document Fiscal Year Focus | 2011 | Â | Â |
Document Fiscal Period Focus | Q2 | Â | Â |
Current Fiscal Year End Date | --12-31 | Â | Â |
Entity Well-known Seasoned Issuer | No | Â | Â |
Entity Voluntary Filers | No | Â | Â |
Entity Current Reporting Status | Yes | Â | Â |
Entity Filer Category | Accelerated Filer | Â | Â |
Entity Public Float | Â | Â | $ 291,000,000 |
Entity Common Stock, Shares Outstanding | Â | 63,131,265 | Â |
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Asset Retirement Obligation
|
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Jun. 30, 2011
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Asset Retirement Obligation [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Asset Retirement Obligation |
Note 5 — Asset Retirement Obligation
The Company accounts for asset retirement obligations in accordance with ASC Topic 410-20,
which requires recording the fair value of an asset retirement obligation associated with tangible
long-lived assets in the period incurred. Asset retirement obligations associated with long-lived
assets included within the scope of ASC Topic 410-20 are those for which there is a legal
obligation to settle under existing or enacted law, statute, written or
oral contract or by legal construction under the doctrine of promissory estoppel. The Company
has legal obligations to plug, abandon and dismantle existing wells and facilities that it has
acquired and constructed.
The following table describes all changes to the Company’s asset retirement obligation
liability (in thousands):
|
Gain on Legal Settlement
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Gain on Legal Settlement [Abstract] | Â |
Gain on Legal Settlement |
Note 10 — Gain on Legal Settlement
In January 2010, the Company recorded a gain relative to a $9 million cash settlement received
from a lawsuit that was originally filed by the Company in 2008 relating to disputed interests in
certain oil and gas assets purchased in 2007. In addition to the cash proceeds received, the
Company was assigned additional working interests in certain producing properties. The Company
recorded an additional $4.2 million gain representing the estimated fair market value of those
interests on the effective date of the settlement.
|
Basis of Presentation
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Basis of Presentation [Abstract] | Â |
Basis of Presentation |
Note 1 — Basis of Presentation
The consolidated financial information for the three and six month periods ended June 30, 2011
and 2010, respectively, have been prepared by the Company and were not audited by its independent
registered public accountants. In the opinion of management, all normal and recurring adjustments
have been made to present fairly the financial position, results of operations, and cash flows of
the Company at June 30, 2011 and for all reported periods. Results of operations for the interim
periods presented are not necessarily indicative of the operating results for the full year or any
future periods.
The balance sheet at December 31, 2010 has been derived from the audited financial statements
at that date. Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted in the United
States have been condensed or omitted. These consolidated financial statements should be read in
conjunction with the audited financial statements and related notes thereto included in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2010.
Unless the context otherwise indicates, any references in this Quarterly Report on Form 10-Q
to “PetroQuest” or the “Company” refer to PetroQuest Energy, Inc. (Delaware) and its wholly-owned
consolidated subsidiaries, PetroQuest Energy, L.L.C. (a single member Louisiana limited liability
company), PetroQuest Oil & Gas, L.L.C. (a single member Louisiana limited liability company), TDC
Energy LLC (a single member Louisiana limited liability company) and Pittrans, Inc. (an Oklahoma
corporation).
|
Ceiling Test
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Ceiling Test [Abstract] | Â |
Ceiling Test |
Note 7 — Ceiling Test
The Company uses the full cost method to account for its oil and gas operations. Accordingly,
the costs to acquire, explore for and develop oil and gas properties are capitalized. Capitalized
costs of oil and gas properties, net of accumulated DD&A and related deferred taxes, are limited to
the estimated future net cash flows from proved oil and gas reserves, including the effects of cash
flow hedges in place, discounted at 10%, plus the lower of cost or fair value of unproved
properties, as adjusted for related income tax effects (the full cost ceiling). If capitalized
costs exceed the full cost ceiling, the excess is charged to ceiling test write down of oil and gas
properties in the quarter in which the excess occurs.
At June 30, 2011, the prices used in computing the estimated future net cash flows from the
Company’s estimated proved reserves, including the effect of hedges in place at June 30, 2011,
averaged $3.56 per Mcfe and $94.00 per barrel. As a result of higher estimated future development
costs and low natural gas prices and their negative impact on certain of the Company’s longer-lived
estimated proved reserves and estimated future net cash flows, the Company recognized a ceiling
test write-down of $13.0 million during the three months ended June 30, 2011. The Company’s cash
flow hedges in place at June 30, 2011 reduced the ceiling test write-down by approximately $3.9
million.
At March 31, 2011, the prices used in computing the estimated future net cash flows from the
Company’s proved reserves, including the effect of hedges in place at March 31, 2011, averaged
$3.45 per Mcfe and $85.38 per barrel. As a result of lower natural gas prices and their negative
impact on certain of the Company’s longer-lived estimated proved reserves and estimated future net
cash flows, the Company recognized a ceiling test write-down of $5.9 million during the three
months ended March 31, 2011. The Company’s cash flow hedges in place at March 31, 2011 reduced the
ceiling test write-down by approximately $1.6 million.
|
Derivative Instruments
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Derivative Instruments [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments |
Note 8 — Derivative Instruments
The Company seeks to reduce its exposure to commodity price volatility by hedging a portion of
its production through commodity derivative instruments. The Company accounts for commodity
derivatives in accordance with ASC Topic 815. When the conditions for hedge accounting specified
in ASC Topic 815 are met, the Company may designate its commodity derivatives as cash flow hedges.
The changes in fair value of derivative instruments that qualify for hedge accounting treatment are
recorded in other comprehensive income (loss) until the hedged oil or natural gas quantities are
produced. If a hedge becomes ineffective because the hedged production does not occur, or the
hedge otherwise does not qualify for hedge accounting treatment, the changes in the fair value of
the derivative would be recorded in the income statement as derivative income or expense. At June
30, 2011, the Company’s outstanding derivative instruments were considered effective cash flow
hedges.
Oil and gas sales include additions (reductions) related to the settlement of gas hedges of
$186,000 and $4,756,000 and oil hedges of ($289,000) and zero for the three months ended June 30,
2011 and 2010, respectively. For the six month periods ended June 30, 2011 and 2010, oil and gas
sales include additions (reductions) related to the settlement of gas hedges of $386,000 and
$6,287,000 and oil hedges of ($389,000) and zero, respectively.
As of June 30, 2011, the Company had entered into the following oil and gas contracts
accounted for as cash flow hedges:
At June 30, 2011, the Company recognized a net asset of approximately $0.9 million related to
the estimated fair value of these derivative instruments. Based on estimated future commodity
prices as of June 30, 2011, the Company would realize a $0.3 million gain, net of taxes, during the
next 12 months. These gains are expected to be reclassified based on the schedule of oil and gas
volumes stipulated in the derivative contracts.
All of the Company’s derivative instruments at June 30, 2011 were designated as hedging
instruments under ASC Topic 815. The following tables reflect the fair value of the Company’s
derivative instruments in the consolidated financial statements (in thousands):
Effect of Derivative Instruments on the Consolidated Balance Sheet at June 30, 2011 and December
31, 2010:
Effect of Derivative Instruments on the Consolidated Statement of Operations for the three months
ended June 30, 2011 and 2010:
Effect of Derivative Instruments on the Consolidated Statement of Operations for the six
months ended June 30, 2011 and 2010:
As defined in ASC Topic 820, fair value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs to
valuation techniques used to measure fair value. As presented in the tables below, this hierarchy
consists of three broad levels:
The Company classifies its commodity derivatives based upon the data used to determine fair
value. The Company’s derivative instruments at June 30, 2011 were in the form of costless collars
and swaps based on NYMEX pricing. The fair value of these derivatives is derived using an
independent third-party’s valuation model that utilizes market-corroborated inputs that are
observable over the term of the derivative contract. The Company’s fair value calculations also
incorporate an estimate of the counterparties’ default risk for derivative assets and an estimate
of the Company’s default risk for derivative liabilities. As a result, the Company designates its
commodity derivatives as Level 2 in the fair value hierarchy.
The following table summarizes the net valuation of the Company’s derivatives subject to fair
value measurement on a recurring basis as of June 30, 2011 and December 31, 2010 (in thousands):
|
Share-Based Compensation
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6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Share-Based Compensation [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Compensation |
Note 6 — Share-Based Compensation
The Company accounts for share-based compensation in accordance with ASC Topic 718.
Share-based compensation expense is reflected as a component of the Company’s general and
administrative expense. A detail of share-based compensation for the periods ended June 30, 2011
and 2010 is as follows (in thousands):
|
Consolidated Statements of Comprehensive Income (Unaudited) (USD $)
In Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
|
Consolidated Statements of Comprehensive Income [Abstract] | Â | Â | Â | Â |
Net income (loss) | $ (1,758) | $ 6,535 | $ 1,419 | $ 37,532 |
Change in fair value of derivative instruments, accounted for as hedges, net of tax benefit (expense) of ($330), $2,508, ($330), and ($1,383), respectively | 2,374 | (4,266) | 1,646 | 2,303 |
Comprehensive income | $ 616 | $ 2,269 | $ 3,065 | $ 39,835 |
Convertible Preferred Stock
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Convertible Preferred Stock [Abstract] | Â |
Convertible Preferred Stock |
Note 2 — Convertible Preferred Stock
The Company has 1,495,000 shares of 6.875% Series B cumulative convertible perpetual preferred
stock (the “Series B Preferred Stock”) outstanding.
The following is a summary of certain terms of the Series B Preferred Stock:
Dividends. The Series B Preferred Stock accumulates dividends at an annual rate of 6.875% for
each share of Series B Preferred Stock. Dividends are cumulative from the date of first issuance
and, to the extent payment of dividends is not prohibited by the Company’s debt agreements, assets
are legally available to pay dividends and the Company’s board of directors or an authorized
committee of the board declares a dividend payable, the Company pays dividends in cash, every
quarter.
Mandatory conversion. The Company may, at its option, cause shares of the Series B Preferred
Stock to be automatically converted at the applicable conversion rate, but only if the closing sale
price of the Company’s common stock for 20 trading days within a period of 30 consecutive trading
days ending on the trading day immediately preceding the date the Company gives the conversion
notice equals or exceeds 130% of the conversion price in effect on each such trading day.
Conversion rights. Each share of Series B Preferred Stock may be converted at any time, at
the option of the holder, into 3.4433 shares of the Company’s common stock (which is based on an
initial conversion price of approximately $14.52 per share of common stock, subject to adjustment)
plus cash in lieu of fractional shares, subject to the Company’s right to settle all or a portion
of any such conversion in cash or shares of the Company’s common stock. If the Company elects to
settle all or any portion of its conversion obligation in cash, the conversion value and the number
of shares of the Company’s common stock it will deliver upon conversion (if any) will be based upon
a 20 trading day averaging period.
Upon any conversion, the holder will not receive any cash payment representing accumulated and
unpaid dividends on the Series B Preferred Stock, whether or not in arrears, except in limited
circumstances. The conversion rate is equal to $50 divided by the conversion price at the time.
The conversion price is subject to adjustment upon the occurrence of certain events. The
conversion price on the conversion date and the number of shares of the Company’s common stock, as
applicable, to be delivered upon conversion may be adjusted if certain events occur.
|
Earnings Per Share
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Jun. 30, 2011
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Earnings Per Share [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share |
Note 3 — Earnings Per Share
A reconciliation between basic and diluted earnings per share computations (in thousands,
except per share amounts) is as follows:
Restricted stock and stock options totaling approximately 1,144,000 and 1,235,000 shares,
respectively, and common shares issuable upon the assumed conversion of the Series B preferred
stock totaling 5,148,000 shares were not included in the computation of diluted earnings per share
for the three and six month periods ended June 30, 2011 because the inclusion would have been
anti-dilutive as a result of the net loss reported for the periods.
Common shares issuable upon the assumed conversion of the Series B preferred stock totaling
5,148,000 shares were not included in the computation of diluted earnings per share for the three
month period ended June 30, 2010 because the inclusion would have been anti-dilutive. Options to
purchase 2,150,000 shares of common stock were outstanding during the three and six month periods
ended June 30, 2010, and were not included in the
computation of diluted earnings per share because the options’ exercise prices were in excess
of the average market price of the common shares.
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Income Taxes
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6 Months Ended |
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Jun. 30, 2011
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Income Taxes [Abstract] | Â |
Income Taxes |
Note 11 — Income Taxes
The Company typically provides for income taxes at a statutory rate of 35% adjusted for
permanent differences expected to be realized, primarily statutory depletion, non-deductible stock
compensation expenses and state income taxes. As a result of the ceiling test write-downs
recognized during prior years, the Company has incurred a cumulative three-year loss. Because of
the impact the cumulative loss has on the determination of the recoverability of deferred tax
assets through future earnings, the Company assessed the realizability of its deferred tax assets
based on the future reversals of existing deferred tax liabilities. Accordingly, the Company
established a valuation allowance for a portion of the deferred tax asset. The valuation allowance
was $2 million and $3.2 million as of June 30, 2011 and December 31, 2010, respectfully.
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Long-Term Debt
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6 Months Ended |
---|---|
Jun. 30, 2011
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Long-Term Debt [Abstract] | Â |
Long-Term Debt |
Note 4 — Long-Term Debt
On August 19, 2010, PetroQuest Energy, Inc. issued $150 million in principal amount of 10%
Senior Notes due 2017 (the “Notes”) in a public offering. The net proceeds of the offering,
together with cash on hand, were used to fund the tender offer and consent solicitation and
redemption of the Company’s 103/8% Senior Notes due 2012.
At June 30, 2011, the estimated fair value of the Notes was $158.2 million, based upon a
market quote provided by an independent broker. The Notes have numerous covenants including
restrictions on liens, incurrence of indebtedness, asset sales, dividend payments and other
restricted payments. Interest is payable semi-annually on March 1 and September 1. At June 30,
2011, $5 million had been accrued in connection with the September 1, 2011 interest payment and the
Company was in compliance with all of the covenants contained in the Notes.
The Company and PetroQuest Energy, L.L.C. (the “Borrower”) have a Credit Agreement (as
amended, the “Credit Agreement”) with JPMorgan Chase Bank, N.A., Calyon New York Branch, Bank of
America, N.A., Wells Fargo Bank, N.A., and Whitney National Bank. The Credit Agreement provides
the Company with a $300 million revolving credit facility that permits borrowings based on the
available borrowing base as determined in accordance with the Credit Agreement. The Credit
Agreement also allows the Company to use up to $25 million of the borrowing base for letters of
credit. The credit facility matures on October 2, 2013. As of June 30, 2011 the Company had no
borrowings outstanding under (and no letters of credit issued pursuant to) the Credit Agreement and
availability of $100 million.
The borrowing base under the Credit Agreement is based upon the valuation of the reserves
attributable to the Company’s oil and gas properties as of January 1 and July 1 of each year. The
current borrowing base is $100 million effective April 1, 2011. The next borrowing base
redetermination is scheduled to occur by September 30, 2011. The Company or the lenders may
request two additional borrowing base redeterminations each year. Each time the borrowing base is
to be re-determined, the administrative agent under the Credit Agreement will propose a new
borrowing base as it deems appropriate in its sole discretion, which must be approved by all
lenders if the borrowing base is to be increased, or by lenders holding two-thirds of the amounts
outstanding under the Credit Agreement if the borrowing base remains the same or is reduced.
The Credit Agreement is secured by a first priority lien on substantially all of the assets of
the Company and its subsidiaries, including a lien on all equipment and at least 85% of the
aggregate total value of the Company’s oil and gas properties. Outstanding balances under the
Credit Agreement bear interest at the alternate base rate (“ABR”) plus a margin (based on a sliding
scale of 1.625% to 2.625% depending on borrowing base usage) or the adjusted LIBO rate
(“Eurodollar”) plus a margin (based on a sliding scale of 2.5% to 3.5% depending on borrowing base
usage). The alternate base rate is equal to the highest of (i) the JPMorgan Chase prime rate, (ii)
the Federal Funds Effective Rate plus 0.5% or (iii) the adjusted LIBO rate plus 1%. For the
purposes of the definition of alternative base rate only, the adjusted LIBO rate is equal to the
rate at which dollar deposits of $5,000,000 with a one month maturity are offered by the principal
London office of JPMorgan Chase Bank, N.A. in immediately available funds in the London interbank
market. For all other purposes, the adjusted LIBO rate is equal to the rate at which Eurodollar
deposits in the London interbank market for one, two, three or six months (as selected by the
Company) are quoted, as adjusted for statutory reserve requirements for Eurocurrency liabilities.
Outstanding letters of credit are charged a participation fee at a per annum rate equal to the
margin applicable to Eurodollar loans, a fronting fee and customary administrative fees. In
addition, the Company pays commitment fees of 0.5%.
The Company and its subsidiaries are subject to certain restrictive financial covenants under
the Credit Agreement, including a maximum ratio of total debt to EBITDAX, determined on a rolling
four quarter basis, of 3.0 to 1.0 and a minimum ratio of consolidated current assets to
consolidated current liabilities of 1.0 to 1.0, all as defined in the Credit Agreement. The Credit
Agreement also includes customary restrictions with respect to debt, liens, dividends,
distributions and redemptions, investments, loans and advances, nature of business, international
operations and foreign subsidiaries, leases, sale or discount of receivables, mergers or
consolidations, sales of properties, transactions with affiliates, negative pledge agreements, gas
imbalances and swap agreements. As of June 30, 2011, the Company was in compliance with all of the
covenants contained in the Credit Agreement.
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Consolidated Statements of Comprehensive Income (Unaudited) (Parenthetical) (USD $)
In Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2011
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Jun. 30, 2010
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Jun. 30, 2011
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Jun. 30, 2010
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Consolidated Statements of Comprehensive Income [Abstract] | Â | Â | Â | Â |
Tax benefit (expense) of derivative instruments | $ (330) | $ 2,508 | $ (330) | $ (1,383) |
Woodford Shale Joint Development Agreement
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Woodford Shale Joint Development Agreement [Abstract] | Â |
Woodford Shale Joint Development Agreement |
Note 9 — Woodford Shale Joint Development Agreement
In May 2010, PetroQuest Energy, L.L.C. entered into a joint development agreement with WSGP
Gas Producing LLC (WSGP), a subsidiary of NextEra Energy Resources, LLC, whereby WSGP acquired 50%
of the Company’s Woodford proved undeveloped reserves as well as the right to earn 50% of the
Company’s undeveloped Woodford acreage position through a two phase drilling program. The Company
received $57.4 million in cash at closing, net of $2.6 million in fees incurred in relation to the
transaction, and recorded a long-term receivable for an additional $14 million to be received on
November 30, 2011. The Company recorded the total consideration of
approximately $71 million as an adjustment to capitalized costs with no gain or loss
recognized. If certain production performance metrics are achieved, the Company will receive an
additional $14 million during the drilling program. Additionally, WSGP will fund a share of the
future drilling costs under a drilling program.
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