UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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):

February 14, 2007

PETROQUEST ENERGY, INC.

(Exact name of registrant as specified in its charter)

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)

Commission File Number: 0-019020

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

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 February 14, 2007, PetroQuest Energy, Inc. (the “Company”) announced net income for the quarter ended December 31, 2006 of $311,000 or $0.01 per share, compared to fourth quarter 2005 net income of $8,320,000 or $0.17 per share. Net cash flow provided by operating activities before working capital changes for the fourth quarter of 2006 was $26,542,000, as compared to $27,709,000 for the comparable 2005 period. For the fourth quarter of 2006, net cash flow provided by operating activities was $7,776,000, compared to $9,813,000 for the comparable 2005 period. For the year ended December 31, 2006, the Company reported net income of $23,986,000 or $0.49 per share compared to net income of $21,417,000 or $0.44 per share for the year ended December 31, 2005. For the year ended December 31, 2006, net cash flow provided by operating activities before working capital changes was $132,752,000, compared to $83,183,000 for the comparable 2005 period. For the year ended December 31, 2006, net cash flow provided by operating activities was $119,622,000, compared to $73,190,000 for the comparable 2005 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 2006 increased 15% to $43,668,000 as compared to $38,044,000 in the fourth quarter of 2005. For the year ended December 31, 2006, oil and gas sales increased 61% to $193,861,000 as compared to $120,552,000 in the year ended December 31, 2005. Production for the fourth quarter and year ended December 31, 2006 was 49% and 60% higher, respectively, than production for the comparable periods of 2005. Stated on an Mcfe basis, unit prices received during the fourth quarter and the year ended December 31, 2006 were 23% lower and flat, respectively, as compared to the prices received during the comparable 2005 periods.

Lease operating expenses for the fourth quarter of 2006 were $1.57 per Mcfe as compared to $1.29 per Mcfe in the fourth quarter of 2005. For the year ended December 31, 2006, lease operating expenses increased 3% to $1.35 per Mcfe from $1.31 per Mcfe in the comparable period of 2005. Increased unit costs during the current quarter were primarily the result of the extended shut-in of the Ship Shoal 72 field and the corresponding costs to restore service to the main field pipeline. In addition, depreciation, depletion and amortization (“DD&A”) on oil and gas properties for the fourth quarter of 2006 was $3.45 per Mcfe as compared to $2.97 per Mcfe in the fourth quarter of 2005. For the year ended December 31, 2006, DD&A on oil and gas properties increased 22% to $3.23 per Mcfe from $2.65 per Mcfe for the comparable period of 2005. 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, 2006 and 2005:

	Three Months Ended December 31,				Year Ended December 31,Ended
	2006		2005		2006		2005
Production:
Oil (Bbls)		145,725		128,832		694,724		665,400
Gas (Mcf)		5,504,418		3,510,543		21,528,323		12,058,377
Total Production (Mcfe)		6,378,768		4,283,535		25,696,667		16,050,777

Sales:
Total oil sales	$	7,576,140	$	6,115,775	$	42,317,332	$	30,446,897
Total gas sales		36,091,717		31,928,556		151,544,026		90,105,054
Total oil and gas sales		43,667,857		38,044,331		193,861,358		120,551,951

Average sales prices:
Oil (per Bbl)	$	51.99	$	47.47	$	60.91	$	45.76
Gas (per Mcf)		6.56		9.10		7.04		7.47
Per Mcfe		6.85		8.88		7.54		7.51

The above sales and average sales prices include increases (reductions) related to gas hedges of $3,502,000 and ($7,600,000) and oil hedges of ($496,000) and ($1,543,000) for the three months ended December 31, 2006 and 2005, respectively. The above sales and average sales prices include increases (reductions) related to gas hedges of $9,634,000 and ($10,242,000) and oil hedges of ($2,785,000) and ($5,572,000) for the year ended December 31, 2006 and 2005, respectively.

The following updates guidance for the first quarter of 2007:

Description	Guidance for 1st Quarter 2007

Production volumes (MMcfe/d)	79 - 84

Percent gas	70%

Expenses:
Lease operating expenses (per Mcfe)	$1.05 - $1.15
Production taxes (per Mcfe)	$0.30 - $0.34
Depreciation, depletion and amortization (per Mcfe)	$3.40 - $3.50
General and administrative (in millions)	$5.5 - $6.0
Interest expense (in millions)	$3.5 - $4.0

Effective tax rate (all deferred)	37%

The following updates guidance for the full year of 2007:

Description	Guidance for Full Year 2007

Production volumes (MMcfe/d)	79 - 85

Percent gas	75%

Expenses:
Lease operating expenses (per Mcfe)	$1.10 - $1.20
Production taxes (per Mcfe)	$0.33 - $0.37
Depreciation, depletion and amortization (per Mcfe)	$3.50 - $3.60
General and administrative (in millions)	$21 - $22
Interest expense (in millions)	$16 - $17

Effective tax rate (all deferred)	37%

Operations Update

As previously announced, the Company began producing its first horizontal Woodford Shale well earlier this month at a rate of approximately 3.5 MMcfe per day. Production tubing has been installed in the well and it is expected to begin producing today at approximately 3 MMcfe per day.

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 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 ability to find oil and natural gas reserves that are economically recoverable, the volatility of oil and natural gas prices, declines in the values of our properties resulting in 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 estimating quantities of proved oil and natural gas reserves, in prospect development and property acquisitions or dispositions and in projecting future rates of production, 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.

PETROQUEST ENERGY, INC.

Consolidated Statements of Income

(Unaudited)

(Amounts In Thousands, Except Per Share Data)

	Three Months Ended December 31				Year Ended December 31
	2006		2005		2006		2005
Revenues:
Oil and gas sales	$	43,667	$	38,044	$	193,861	$	120,552
Gas gathering revenue and other income		1,937		2,652		6,683		4,042
		45,604		40,696		200,544		124,594

Expenses:
Lease operating expenses		9,997		5,524		34,735		20,972
Production taxes		2,022		1,547		6,576		3,764
Depreciation, depletion and amortization		22,864		13,208		85,858		43,747
Gas gathering costs		995		751		3,637		1,246
General and administrative		5,062		2,268		15,122		7,347
Accretion of asset retirement obligation		373		424		1,513		1,253
Interest expense		3,758		3,230		14,513		12,371
		45,071		26,952		161,954		90,700

Income from operations		533		13,744		38,590		33,894

Income tax expense		222		5,424		14,604		12,477

Net income	$	311	$	8,320	$	23,986	$	21,417

Earnings per common share:
Basic	$	0.01	$	0.18	$	0.50	$	0.46
Diluted	$	0.01	$	0.17	$	0.49	$	0.44

Weighted average number of common shares:
Basic		47,780		47,307		47,537		46,714
Diluted		49,284		48,712		48,936		48,242

PETROQUEST ENERGY, INC.

Consolidated Balance Sheets

(Unaudited)

(Amounts in Thousands)

	December 31,
	2006			2005
ASSETS
Current assets:
Cash and cash equivalents	$	4,795		$	6,703
Revenue receivable		21,767			22,492
Joint interest billing receivable		20,072			17,567
Hedging asset		10,527			-
Other current assets		7,029			3,441
Total current assets		64,190			50,203

Property and equipment:
Oil and gas properties:
Oil and gas properties, full cost method		695,116			523,212
Unevaluated oil and gas properties		51,567			52,745
Accumulated depreciation, depletion and amortization		(314,869	)		(210,774	)
Oil and gas properties, net		431,814			365,183
Gas gathering assets		19,072			10,861
Accumulated depreciation and amortization of gas gathering assets		(3,562	)		(1,055	)
Total property and equipment		447,324			374,989


Other assets, net of accumulated depreciation and amortization of $11,719 and $10,353, respectively		6,776			6,278

Total assets	$	518,290		$	431,470

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable to vendors	$	32,049		$	41,462
Advances from co-owners		13,391			5,874
Oil and gas revenue payable		6,935			8,090
Hedging liability		-			15,987
Asset retirement obligation		9,028			2,350
Other accrued liabilities		10,678			8,192
Total current liabilities		72,081			81,955

Bank debt		47,000			10,000
10 3/8% Senior Notes		148,537			148,340
Asset retirement obligation		11,211			19,257
Deferred income taxes		49,646			27,139
Other liabilities		104			242

Commitments and contingencies
Stockholders' equity:
Common stock, $.001 par value; authorized 75,000 shares; issued and outstanding 47,788 and 47,325 shares, respectively		48			47
Paid-in capital		124,552			117,441
Accumulated other comprehensive income (loss)		6,632			(7,444	)
Retained earnings		58,479			34,493
Total stockholders' equity		189,711			144,537

Total liabilities and stockholders' equity	$	518,290		$	431,470

PETROQUEST ENERGY, INC.

Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in Thousands)

	Year Ended December 31,
	2006			2005			2004
Cash flows from operating activities:
Net income	$	23,986		$	21,417		$	16,348
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred tax expense		14,604			12,477			8,511
Amortization of debt issuance costs		943			1,390			1,678
Compensation expense		-			213			272
Depreciation, depletion and amortization		85,858			43,747			35,435
Derivative mark to market		-			-			(218	)
Write-off of debt issuance costs		-			2,575			-
Amortization of bond discount		197			111			-
Share-based compensation expense		5,651			-			-
Accretion of asset retirement obligation		1,513			1,253			833
Changes in working capital accounts:
Revenue receivable		725			(13,100	)		(2,871	)
Joint interest billing receivable		(2,505	)		(13,912	)		(1,080	)
Accounts payable and accrued liabilities		(13,552	)		14,255			12,521
Other assets		(1,743	)		(448	)		(619	)
Advances from co-owners		7,517			3,609			(487	)
Other		(3,572	)		(397	)		(13	)

Net cash provided by operating activities		119,622			73,190			70,310

Cash flows from investing activities:
Investment in oil and gas properties		(175,529	)		(171,980	)		(80,142	)
Sale of oil and gas properties		22,023			-			-
Investment in gas gathering assets		(6,363	)		(10,861	)		-

Net cash used in investing activities		(159,869	)		(182,841	)		(80,142	)

Cash flows from financing activities:
Proceeds from exercise of options and warrants		1,460			972			170
Proceeds from bank borrowings		48,000			44,500			39,000
Repayment of bank borrowings		(11,000	)		(73,000	)		(28,000	)
Proceeds from issuance of 10 3/8% senior notes		-			148,229			-
Deferred financing costs		(121	)		(5,876	)		(588	)

Net cash provided by financing activities		38,339			114,825			10,582

Net increase (decrease) in cash and cash equivalents		(1,908	)		5,174			750
Cash and cash equivalents at beginning of period		6,703			1,529			779
Cash and cash equivalents at end of period	$	4,795		$	6,703		$	1,529

Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest	$	17,572		$	9,628		$	1,752
Income taxes	$	-		$	75		$	-

PETROQUEST ENERGY, INC.

Non-GAAP Disclosure Reconciliation

(Amounts In Thousands)

	Three Months Ended December 31,				Year Ended December 31,
	2006		2005		2006		2005
Net cash flow provided by operating activities	$	7,776	$	9,813	$	119,622	$	73,190
Changes in working capital accounts		18,766		17,896		13,130		9,993
Net cash flow provided by operating activities before working capital changes	$	26,542	$	27,709	$	132,752	$	83,183

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.

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: February 14, 2007	By:	/s/ Daniel G. Fournerat
		Daniel G. Fournerat
		Executive Vice President, General Counsel and Secretary